Business Bancorp Posts Record 2002 Profits; EPS Increased 38% to $0.40 in 4Q02; up 22% to $1.39 in Full Year.Business Editors SAN RAFAEL San Rafael (săn rəfĕl`), residential city (1990 pop. 48,404), seat of Marin co., W Calif., a suburb of San Francisco on the northern shore of San Francisco Bay; inc. 1913. & SAN BERNARDINO San Bernardino, city, United States San Bernardino (săn bûr'nədē`nō), city (1990 pop. 164,164), seat of San Bernardino co., S Calif., at the foot of the San Bernardino Mts.; inc. 1854. , Calif.--(BUSINESS WIRE)--Jan. 29, 2003 Business Bancorp (NasdaqNM:BZBC), the parent company of Business Bank of California The Bank of California was founded in San Francisco, California on July 5, 1864 by William Chapman Ralston. It was the first commercial bank in the Western United States, the second-richest bank in the nation, and considered instrumental in developing the American Old West. , today reported its merger of equals last year generated record profits in its fourth quarter and full year with improving efficiencies, strong margins and solid asset quality. Earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share (EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. ) in the fourth quarter increased 38% to $0.40 compared to $0.29 in the fourth quarter of 2001. For the full year, EPS increased 22% to $1.39 from $1.14 in 2001. At the end of 2001, Business Bancorp's merger with MCB (Memory Control Block) An identifier (16 bytes) that DOS places in front of each block of memory it allocates. Financial was accounted for as a purchase transaction. Per share results have been adjusted to reflect the 5% stock dividend paid June June: see month. 28, 2002. Merger Update "Over 15 months ago, we announced the merger of two small independent business banks, one serving the Bay Area in Northern California Northern California, sometimes referred to as NorCal, is the northern portion of the U.S. state of California. The region contains the San Francisco Bay Area, the state capital, Sacramento; as well as the substantial natural beauty of the redwood forests, the northern and the other serving Southern California's Inland Empire In·land Empire A region of the northwest United States between the Cascade Range and the Rocky Mountains, comprising eastern Washington, eastern Oregon, northern Idaho, and western Montana. Farming, lumbering, and mining are important to the area. . We started 2002 as one company, and the process of merging the operations, systems and products into a single cohesive cohesive, n the capability to cohere or stick together to form a mass. whole was largely accomplished during the year. Having invested significant time, money and effort into the integration process, we believe the financial performance this year provides only a glimpse of the success of those efforts," said Alan A`lan´ n. 1. A wolfhound. J. Lane, Chief Executive Officer. "In 2002, we focused our efforts on identifying the best practices in our two organizations and applying them systematically into a single system-wide process," said Charles Charles, archduke of Austria Charles, 1771–1847, archduke of Austria; brother of Holy Roman Emperor Francis II. Despite his epilepsy, he was the ablest Austrian commander in the French Revolutionary and Napoleonic wars; however, he was handicapped by O. Hall, President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "Our people, assisted by the merger team from Sheshunoff, completed the process on time and on budget. We've we've Contraction of we have. we've have implemented the majority of the process improvements and will continue to refine our systems to improve efficiencies and profitability." "We achieved five of the seven goals we established for 2002, including those measuring profitability and asset quality," commented Patrick E. Phelan Phelan may refer to:
Financial Objectives Scorecard
2002 Target 2002 Results 2003 Target
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EPS Growth 11% to 17% 22% 15% to 19%
Return on Equity 10.0% or better 10.64% 11.5% or better
Return on Assets 0.85% or better 0.93% 1.05% or better
Nonperforming Assets/Assets 0.50% or better 0.32% 0.50% or better
Net Charge-Offs /Loans 10 to 15 bp 3 bp 15 bp
Deposit Growth (period end) 5% to 10% 2% 7% to 10%
Loan Growth (period end) 10% -3% 8%
----------------------------------------------------------------------
Operating Results Net interest income after provision for loan losses totaled $29.3 million in 2002 compared to $16.4 million in 2001, and was $7.1 million in 4Q02 compared to $4.4 million in 4Q01. In 2002, other income increased 19% to $4.8 million, including total gains on sales of loans, real estate and securities of $548,000, compared to $4.1 million with total gains of $910,000 in 2001. In the fourth quarter, other income was $1.5 million, including $363,000 in total gains, compared to $1.1 million with total gains of $217,000 in the fourth quarter of 2001. Net interest margin improved 19 basis points to 5.40% in the fourth quarter compared to the year ago period, but declined 28 basis points from the third quarter of 2002. "The Fed's decision to cut interest rates by 50 basis points in November November: see month. , took back much of the margin expansion from earlier in the year," Hall explained. "In the current interest rate environment and with more than 80% of our deposit base in non-interest bearing or nominal yield Nominal Yield The interest rate stated on the face of a bond, it represents the percentage of interest to be paid by the issuer on the face value of the bond. Notes: This is sometimes referred to as the coupon rate. accounts, interest rate cuts have a much greater short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. impact on yields than on costs, which results in margin compression." Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $24.9 million in 2002, up 51% from $16.5 million in 2001. Fourth quarter operating expenses increased 31% to $5.9 million compared to $4.5 million in 4Q01. Because the merger closed on the last day of 2001, expenses for prior year periods do not include costs from the Northern California franchise. Current year results include expenses of $685,000, of which $28,000 was booked in the fourth quarter, in pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta costs associated with the merger and the on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" integration effort. "The merger-related expenses are largely behind us now, and we anticipate continued gains in operational efficiencies as the new policies, procedures and services take root," said Patrick E. Phelan, Chief Financial Officer. "The following table provides further information to facilitate side-by-side comparisons of our results with those of a year ago. In future quarters, this table should not be necessary."
Cash Operating Fourth Quarter Full Year
Earnings 2002 2001 2002 2001
-------------------- --------------------
GAAP Net Income $1,668 $635 $5,751 $2,507
Provision for
Income Taxes 1,026 349 3,504 1,395
-------------------- --------------------
Income Before Tax 2,694 984 9,255 3,902
Less: Gains on Sale
of Investments (224) (164) (266) (816)
Add: Sheshunoff
Expenses 28 - 685 -
Add: Amortization
of Intangibles 85 163 341 654
-------------------- --------------------
Pre-tax Cash
Operating
Earnings 2,583 983 10,015 3,740
Provision for
Income Taxes (984) (351) (3,792) (1,337)
-------------------- --------------------
Cash Operating
Earnings $1,599 $632 $6,223 $2,403
==================== ====================
Cash Operating
Earnings Per
Share (1)
Basic $0.41 $0.30 37.5% $1.58 $1.13 40.0%
Diluted $0.38 $0.29 33.6% $1.50 $1.09 37.4%
Weighted average
common shares
outstanding 3,931,979 2,135,772 3,940,663 2,130,564
Weighted average
common and common
equivalent shares
outstanding 4,162,553 2,196,781 4,142,789 2,198,590
(1) Defined as reported net income excluding after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. net merger-related charges, gains on sales of investment securities and amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . Balance Sheet Highlights (at December December: see month. 31, 2002 compared to December 31, 2001) At year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. , Business Bancorp's assets were $ 630.4 million, level with the total assets of the newly merged institutions a year ago. Gross loans were down 3% at $378.1 million as growth in commercial real estate loans was offset by reduction in construction and consumer loans. Commercial real estate accounted for 67% of the portfolio. Real estate construction lending was temporarily slowed as a new team of experienced construction lenders integrated into the bank's Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, lending operation. "Construction lending tends to turn over more quickly than other loans due to the nature of that business, and we anticipate the new team will begin to replace the maturing construction loans in short order," Lane noted. Construction loans fell 10% to $60 million, or 16% of the loan portfolio, compared to $67 million, or 17% of the portfolio a year ago. Asset quality returned to historically high performance measures. Non-performing assets totaled $2.0 million, or 0.32% of total assets at 12/31/02, compared to $2.0 million, or 0.32% of assets at 12/31/01, versus $5.2 million, or 0.85% of assets at 9/30/02. "At the end of the third quarter of 2002, we had a single $3.4-million commercial real estate secured loan that we placed on non-accrual status, which has been renegotiated with a substantial principal payment. We see the uptick Uptick A transaction occurring at price above its previous transaction. In order for an uptick to occur, a transaction price must be followed by an increased transaction price. in non-performing loans A non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms. as more of a third-quarter anomaly Abnormality or deviation. Pronounced "uh-nom-uh-lee," it is a favorite word among computer people when complex systems produce output that is inexplicable. See software conflict and anomaly detection. , and anticipate continued strong performance in our portfolio," Hall said. The allowance for loan losses improved to 1.44% of total loans at year-end compared to 1.17% a year ago. Deposits increased 2% to $531 million, with non-interest bearing deposits growing 18% and accounting for 35% of total deposits. Time certificates, both conventional and jumbo, dropped 15% to $102 million from $120 million a year ago. "We've benefited from the current investment market dynamics, including the outflow of funds from the stock market and a flight to quality by individual investors. Our efforts are focused on attracting transaction accounts rather than more costly time deposits," Lane noted. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. grew 7% to $58 million, or $14.82 per share. Tangible book value increased 15% to $9.22 at year-end from $8.01 at the end of 2001. In 2002, the company repurchased 339,000 shares for a total of $4.9 million. About Business Bancorp Business Bancorp, parent of Business Bank of California, completed a merger of equals with MCB Financial, parent of Metro Commerce Bank, in December 2001. The bank now has assets of more than $600 million and operates 15 branches offering retail banking, commercial, construction, and SBA SBA abbr. Small Business Administration Noun 1. SBA - an independent agency of the United States government that protects the interests of small businesses and ensures that they receive a fair share of government lending. The bank operates in the Southern California cities of Corona Corona, city, United States Corona (kərō`nə), city (1990 pop. 76,095), Riverside co., S Calif.; inc. 1896. The city developed as a primary citrus fruit producer and shipping center. There is also light manufacturing. , Hemet Hemet (hĕm`ĭt), city (1990 pop. 36,094), Riverside co., S Calif., in the San Jacinto valley; inc. 1910. Hemet and the surrounding area saw extensive growth in the 1970s and 80s, due to increased local agribusiness and the development of the , Hesperia Hesperia may refer to:
Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. , Phelan, Riverside, Redlands Redlands, city (1990 pop. 60,394), San Bernardino co., S Calif., in the San Bernardino Valley; inc. 1888. Industries include software research and development and the manufacture of metal foil, furniture, and electrical equipment. , Upland Upland, city (1990 pop. 63,374), San Bernardino co., S Calif., in a citrus-fruit region at the foot of the San Gabriel Mts.; inc. 1906. Citrus fruits and grapes are packed and processed in the city. Paint, orchard heaters, auto parts, and feed products are also made. and San Bernardino, and in the Northern California cities of San Rafael, Petaluma, San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden , South San Francisco South San Francisco, city (1990 pop. 54,312), San Mateo co., W Calif.; inc. 1908. South San Francisco has several industrial parks; its manufactures include medical supplies and equipment, foods, paint, paper products, consumer goods, and clothing. , and Hayward. The branches are strongly focused on providing high quality, personalized per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. services to small businesses, professionals and consumers. For further information on the company, visit our website at www.businessbank.com or e-mail your request to pphelan@businessbank.com or info@businessbank.com. Include your name, phone, facsimile, e-mail and mailing address. The company will host its annual investors conference call on January 30, 2003 at 9:00 a.m. PST PST Paroxysmal supraventricular tachycardia, see there (12:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. ) The statements contained in this release that are not historical facts are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. based on management's current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance that future developments affecting the company will be those anticipated by management. Actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve risks and uncertainties, including the bank's ability to efficiently operate in two geographically distant markets, its ability to gain additional benefits from its merger with MCB Financial, the impact of current events on the California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). economy, changes in interest rates, loan portfolio performance and other factors detailed in the company's SEC filings.
FINANCIAL SUMMARY
INCOME STATEMENT
(Dollars in
thousands,
except share Three Months Ended Twelve Months Ended
and per Dec 31, Sept 30, Dec 31, Dec. 31, Dec. 31,
share data) 2002 2002 2001 2002 2001
---------- ---------- ---------- ---------- ---------
Interest income $9,156 $9,716 $6,253 $38,088 $25,095
Interest expense 1,687 1,895 1,873 7,790 8,510
---------- ---------- ---------- ---------- ---------
Net interest
income 7,469 7,821 4,380 30,298 16,585
Provision for
loan losses 400 300 25 1,000 225
---------- ---------- ---------- ---------- ---------
Net interest
income after
provision for
loan losses 7,069 7,521 4,355 29,298 16,360
Other Income:
Service fees on
deposit accounts 879 806 692 3,272 2,507
Gain on sale of
SBA loans 138 96 40 282 40
Gain on sale of
other real
estate owned - - 12 - 53
Gain / (loss) on
sales of
investments 225 41 165 266 817
Other 262 251 211 1,028 653
---------- ---------- ---------- ---------- ---------
Total other
income 1,504 1,194 1,120 4,848 4,070
Other Expenses:
Salaries and
employee
benefits 3,125 2,995 2,276 12,544 8,481
Occupancy 614 630 320 2,372 1,072
Other 2,139 2,539 1,895 9,975 6,975
---------- ---------- ---------- ---------- ---------
Total other
expenses 5,878 6,164 4,491 24,891 16,528
Income before
income taxes 2,695 2,551 984 9,255 3,902
Income tax
expense 1,027 976 349 3,504 1,395
---------- ---------- ---------- ---------- ---------
Net income $1,668 $1,575 $635 $5,751 $2,507
========== ========== ========== ========== =========
PER SHARE DATA:
Net income per share
Basic $0.42 $0.40 $0.30 $1.46 $1.18
Diluted $0.40 $0.38 $0.29 $1.39 $1.14
Common dividends
declared per
share $0.01 $0.01 $0.01 $0.04 $0.02
Book value $14.82 $14.58 $13.30 $14.82 $13.30
Tangible book
value $9.22 $8.92 $8.01 $9.22 $8.01
Weighted average
common shares
outstanding 3,931,979 3,904,620 2,135,772 3,940,663 2,130,564
Weighted average
common and common
equivalent shares
outstanding 4,162,553 4,112,555 2,196,781 4,142,789 2,198,590
Common shares
outstanding at
period end 3,944,923 3,909,052 4,102,811 3,944,923 4,102,811
BALANCE SHEET Dec 31, Sept 30, June 30, Mar 31, Dec 31,
(Dollars in thousands) 2002 2002 2002 2002 2001
---- ---- ---- ---- ----
Assets:
Cash and due from
banks $32,531 $26,909 $34,931 $31,604 $34,665
Investments 181,821 159,876 157,621 153,786 173,040
Loans:
Real estate --
construction 59,854 77,624 76,234 68,238 66,812
Commercial real
estate 253,105 245,198 226,108 214,380 218,782
Real estate - other 25,951 25,043 40,766 18,733 19,280
Commercial 33,441 35,588 43,832 73,371 70,104
Consumer and other 6,791 10,087 11,841 10,472 14,578
Deferred loan fees,
net (1,042) (1,000) (1,064) (1,193) (1,109)
Total loans 378,100 392,540 397,717 384,001 388,447
------- --------- --------- -------- --------
Allowance for loan
losses (5,442) (5,028) (4,851) (4,672 ) (4,557)
Total loans, net 372,658 387,512 392,866 379,329 383,890
Goodwill and other
intangible
assets 22,055 22,083 22,152 22,130 21,675
Other assets 21,320 21,564 19,402 18,771 17,980
-------- --------- --------- --------- -------
Total assets $630,385 $617,944 $626,972 $605,620 $631,250
======== ========= ========= ========= ========
Liabilities and
Stockholders' Equity:
Liabilities:
Deposits:
Noninterest-
bearing $184,486 $177,205 $168,474 $165,239 $155,935
NOW, MMDA and
Savings 244,364 248,725 251,060 249,311 242,605
Time certificates,
$100,000 and over 64,510 58,282 61,025 68,968 76,635
Other time
certificates 37,237 38,693 40,549 42,133 42,911
--------- --------- --------- --------- --------
Total deposits 530,597 522,905 521,108 525,651 518,086
Other borrowings 23,625 20,725 33,925 10,193 40,224
Other liabilities 4,255 3,926 3,575 3,970 4,888
--------- --------- --------- --------- --------
Total liabilities 558,477 547,556 558,608 539,814 563,198
Trust preferred
securities 13,462 13,471 13,479 13,487 13,495
Stockholders' equity 58,446 56,917 54,885 52,319 54,557
--------- --------- --------- --------- --------
Total liabilities
and stockholders'
equity $630,385 $617,944 $626,972 $605,620 $631,250
========= ========= ========= ========= ========
SUPPLEMENTAL DATA
(Dollars in thousands, Three Months Ended Twelve Months Ended
except share and Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
per share data) 2002 2002 2001 2002 2001
--------- --------- --------- -------- -------
PROFITABILITY RATIOS:
Return on average
assets 1.06% 1.01% 0.66% 0.93% 0.72%
Return on average
equity 11.57% 11.17% 9.63% 10.64% 9.90%
Net interest
margin (a) 5.40% 5.68% 5.21% 5.54% 5.50%
Efficiency ratio 65.51% 68.37% 81.65% 70.82% 80.02%
Efficiency ratio
excluding interest
on trust preferred
securities 63.08% 65.85% 77.73% 68.16% 76.97%
AVERAGE BALANCES:
Average investments $173,553 $159,967 $148,454 $162,611 $124,645
Average loans, net of
unearned income $382,874 $392,765 $199,509 $391,066 $187,941
Average interest
earning assets $556,427 $552,732 $347,963 $553,677 $312,586
Average assets $626,043 $619,113 $383,676 $620,871 $349,344
Average deposits $535,638 $531,201 $311,570 $526,972 $285,953
Average interest
bearing
liabilities $378,822 $386,151 $228,783 $398,441 $222,972
Average equity $57,210 $55,949 $26,173 $54,053 $ 25,315
(a) Computed on a fully taxable
equivalent basis
Dec 31, Sept 30, June 30, Mar 31, Dec 31,
2002 2002 2002 2002 2001
--------- --------- --------- --------- -----
CREDIT QUALITY DATA:
Non-accrual loans $797 $4,194 $1,775 $878 $1,947
Loans 90 days or more
past due and still
accruing 249 29 54 33 18
--------- --------- --------- --------- -----
Total nonperforming
loans 1,046 4,223 1,829 911 1,965
Other real estate owned 995 1,005 885 885 72
--------- --------- --------- --------- -----
Total nonperforming
assets $2,041 $5,228 $2,714 $1,796 $2,037
Quarterly net loan
charge-offs
(recoveries) $(14) $123 $22 $(15) $(110)
Nonperforming loans to
total loans 0.28% 1.08% 0.46% 0.24% 0.51%
Nonperforming assets to
total assets 0.32% 0.85% 0.43% 0.30% 0.32%
Allowance for loan
losses to total loans 1.44% 1.28% 1.22% 1.22% 1.17%
CAPITAL RATIOS:
Stockholders' equity to
total assets 9.27% 9.21% 8.75% 8.64% 8.64%
Total risk-based capital
ratio 12.05% 11.30% 10.68% 10.49% 11.17%
Tier 1 risk-based capital
ratio 10.81% 10.16% 9.61% 9.43% 9.57%
Tier 1 leverage ratio 7.86% 7.53% 7.25% 7.00% 6.88%
OTHER PERIOD END STATISTICS:
Loan to deposit ratio 71.26% 75.07% 76.32% 73.05% 74.98%
Non-interest bearing
deposits to total
deposits 34.77% 33.89% 32.33% 31.44% 30.10%
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