Business Bancorp Reports 30% Increase in Second Quarter 2003 Profits.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. , Calif. & 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)--July 24, 2003 Business Bancorp (NasdaqNM:BZBC), the parent 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 profits increased 30%, fueled by solid demand for commercial banking services and ongoing attention to operating efficiencies. Second quarter net income increased 30% to $1.7 million, or $0.38 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, compared to $1.3 million, or $0.30 per diluted share, in the second quarter 2002. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. net income grew 29% to $3.2 million, or $0.74 per diluted share, from $2.5 million, or $0.58 per share in the first six months of 2002. Per share results have been adjusted to reflect the 5% stock dividend paid June June: see month. 28, 2003. "Our second quarter financial results clearly demonstrate the benefits gained from the year-long integration process we completed last year, and we are beginning to see those anticipated synergies from the merger completed at the end of 2001," said Alan A`lan´ n. 1. A wolfhound. J. Lane, Chief Executive Officer. Asset quality, return on equity and return on assets Return on assets (ROA) Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets). all improved from the second quarter of last year, and earnings per share growth again comfortably exceeded our target of 15% to 19% in 2003. We also posted growth of 6% for deposits, with a 14% increase in non-interest bearing deposits and a 6% increase in low-cost savings, money market and NOW accounts. Loans were relatively flat, with commercial real estate loans growing 19%, offsetting declines in other loan categories.
Financial Target Scorecard
----------------------------------------------------------------------
2Q03 Results 2003 Target 2002 Results
----------------------------------------------------------------------
EPS Growth 27% 15% to 19% 22%
Return on Equity 11.22% 11.5% or better 10.64%
Return on Assets 1.03% 1.05% or better 0.93%
Nonperforming 0.50% or better
Assets/Assets 0.28% 0.32%
Net Charge-Offs /Loans 2 bp 15 bp 3 bp
Deposit Growth (period 7% to 10%
end) 6.1% 2%
Loan Growth (period end) -0.7% 8% -3%
----------------------------------------------------------------------
"We are continuing to improve and expand our franchise as opportunities arise. Last October October: see month. we opened the Ontario Ontario, city, United States Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. branch, and in the first half of the year we've we've Contraction of we have. we've have added a number of business development officers and business relationship managers," 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. . "While by no means robust , commercial lending demand has stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. and shows hints of improvement." Operating Results Revenues (net interest income before provision plus non-interest income) increased 3% to $9.0 million compared to $8.7 million in the second quarter a year ago. Net interest income before provision for loan losses was down 3% to $7.4 million. Other income in 2Q03 increased 53% to $1.6 million, with fee income growing 19% to $935,000, reflecting the growth of business services. "Service fees from deposit accounts increased 19%, adding $148,000 as new product introductions are being well-received by our customers and as fee offsets decline from lower interest rates," noted Hall. Gains on sales of loans, real estate and investments totaled $338,000 in the quarter compared to $48,000 in the second quarter a year ago. For the first six months of 2003, revenues increased 2% to $17.5 million from $17.2 million in the first six months of 2002. Year-to-date, net interest income declined 2% to $14.7 million from $15.0 million in the first half of 2002. Other income increased 33% to $2.8 million in the first half of 2003 from $2.2 million in the first half of 2002. Service fees increased 16%, generating $249,000 in incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. revenue in the first half. Gains from sale of loans, real estate and investments added $463,000 to first half revenues, compared to $48,000 in the year ago period. "With more than 80% of our deposits in low-interest Adj. 1. low-interest - (used of loans) charging a relatively small percentage of the amount borrowed high-interest - (used of loans) charging a relatively large percentage of the amount borrowed or non-interest bearing accounts, and with approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 60% of our loans that adjust with the market, declining interest rates are taking a toll on margin," said Patrick E. Phelan Phelan may refer to:
"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. dropped 4% to $6.2 million in 2Q03 from $6.5 million in 2Q02, which included $285,000 in costs from the merger process. Year-to-date, operating expenses declined 6% to $12.1 million from $12.8 million in the first half of 2002. "Higher expenses from the new Ontario office and increases in business development staff offset some of the expense reductions achieved last year. As we lease out the building in which the Ontario branch is located, we anticipate occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy expenses will fall next quarter and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. will improve, as well," said Phelan. The bank's efficiency ratio improved to 69.2% in 2Q03 from 74.4% in 2Q02 and was 69.3% year-to-date compared to 74.9% in the first half of 2002. Balance Sheet Highlights (at June 30, 2003 compared to June 30, 2002) Business Bancorp's assets were up 6% to $664 million from $627 million a year ago. Gross loans were down 1% to $395 million as growth in commercial real estate loans was offset by a reduction in other loan categories. Commercial real estate, which accounted for 68% of the total loan portfolio, grew 19%. Real estate construction loans totaled $66 million, off 14% from record levels last year and now account for 17% of the portfolio Asset quality is strong, with non-performing assets totaling $1.8 million, or 0.28% of total assets, compared to $2.7 million, or 0.43% of assets a year ago. "Although Southern California's economy has recovered much faster than 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 , we are seeing excellent performance in both geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. areas of our portfolio. About 90% of our loan portfolio is secured by real estate, which provides solid security and a strong motivation for borrowers to meet their obligations," commented Hall. The allowance for loan losses improved to 1.4% of total loans compared to 1.2% a year ago. Deposits increased 6% to $553 million, with non-interest bearing deposits growing 14% and accounting for 35% of total deposits. Time certificates, both conventional and jumbo, dropped 7% to $95 million from $102 million a year ago. "We are continuing to focus on attracting business transaction accounts and believe the combination of a complete and convenient suite of business banking products and excellent customer service are helping us gain market share," Lane said. 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 9% to $60 million, or $14.85 per share. Tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. book value increased 18% to $9.45 per share at quarter-end from $7.99 at the end of 2Q02. In 2002, the company repurchased 374,000 shares for a total of $4.9 million. For the first six months of 2003, the company repurchased 153,000 shares for a total of $2.9 million. About Business Bancorp Business Bancorp, parent of Business Bank of California, completed a merger of equals with MCB (Memory Control Block) An identifier (16 bytes) that DOS places in front of each block of memory it allocates. Financial, parent of Metro The code name for Microsoft's XPS document format. See XML Paper Specification. Commerce Bank, in December December: see month. 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 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, 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:
1 City (1990 pop. 226,505), seat of Riverside co., S Calif.; inc. 1883. One of the fastest growing U.S. cities in the late 20th cent., it is famous for its orange industry. , 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 Petaluma (pĕtəl  `mə), city (1990 pop. 43,184), Sonoma co., W Calif.; inc. 1858. , 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 Hayward, city (1990 pop. 111,498), Alameda co., W Calif.; settled 1851, inc. 1876. It is an important commercial and distribution center for farm products. Manufactures include wire, plastics, metal and paper products, textiles, machinery, and motor vehicles. . 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. Include your name, phone, facsimile, e-mail and mailing address. 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 ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge 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 and the effect thereof on margins, the demand for leased office space in California, loan portfolio performance and other factors detailed in the company's SEC filings.
INCOME STATEMENT
($ in thousands, except share and per share data)
For the Three Months
Ended
June 30, March 31, June 30,
2003 2003 2002
---------- ---------- ----------
Interest income $8,861 $8,808 $9,667 -8.3%
Interest expense 1,460 1,515 2,004 -27.1%
---------- ---------- ----------
Net interest income 7,401 7,293 7,663 -3.4%
Provision for loan losses 100 100 200 -50.0%
---------- ---------- ----------
Net interest income after
provision for loan
losses 7,301 7,193 7,463 -2.2%
Other Income:
Service feess on deposit
accounts 935 901 787 18.8%
Gain on sale of SBA loans 308 124 48 541.7%
Gain on sale of other real
estate owned 30 1 -
Gain / (loss) on sales of
investments - - -
Other 328 222 212 54.7%
---------- ---------- ----------
Total other income 1,601 1,248 1,047 52.9%
Other Expenses:
Salaries and employee benefits 3,384 3,301 3,065 10.4%
Occupancy 671 635 532 26.1%
Other 2,175 1,982 2,880 -24.5%
---------- ---------- ----------
Total other expenses 6,230 5,918 6,477 -3.8%
---------- ---------- ----------
Income before income taxes 2,672 2,523 2,033 31.4%
Income tax expense 1,006 945 756 33.1%
---------- ---------- ----------
Net income $1,666 $1,578 $1,277 30.5%
========== ========== ==========
PER SHARE DATA:
Net income per share
Basic $0.41 $0.38 $0.31 30.9%
Diluted $0.38 $0.36 $0.30 27.6%
Common dividends declared per
share $0.01 $0.01 $0.01 0.0%
Book value $14.85 $14.43 $13.40 10.8%
Tangible book value $9.45 $9.14 $7.99 18.3%
Weighted average common shares
outstanding 4,072,295 4,139,977 4,084,823 -0.3%
Weighted average common and
common equivalent
shares outstanding 4,382,900 4,388,682 4,286,514 2.2%
Common shares outstanding at
period end 4,021,403 4,124,374 4,097,160 -1.8%
For the Six Months
Ended
Jun 30 Jun 30
2003 2002
---------- ----------
Interest income $17,669 $19,216 -8.1%
Interest expense 2,975 4,208 -29.3%
---------- ----------
Net interest income 14,694 15,008 -2.1%
Provision for loan losses 200 300 -33.3%
---------- ----------
Net interest income after
provision for loan
losses 14,494 14,708 -1.5%
Other Income:
Service feess on deposit
accounts 1,836 1,587 15.7%
Gain on sale of SBA loans 432 48 800.0%
Gain on sale of other real
estate owned 31 -
Gain / (loss) on sales of
investments - -
Other 550 515 6.8%
---------- ----------
Total other income 2,849 2,150 32.5%
Other Expenses:
Salaries and employee benefits 6,685 6,424 4.1%
Occupancy 1,306 1,128 15.8%
Other 4,157 5,297 -21.5%
---------- ----------
Total other expenses 12,148 12,849 -5.5%
---------- ----------
Income before income taxes 5,195 4,009 29.6%
Income tax expense 1,951 1,501 30.0%
---------- ----------
Net income $3,244 $2,508 29.3%
========== ==========
PER SHARE DATA:
Net income per share
Basic $0.79 $0.60 31.7%
Diluted $0.74 $0.58 27.5%
Common dividends declared per
share $0.02 $0.02 0.0%
Book value $14.85 $13.40 10.8%
Tangible book value $9.45 $7.99 18.3%
Weighted average common shares
outstanding 4,105,786 4,161,288 -1.3%
Weighted average common and
common equivalent
shares outstanding 4,385,613 4,354,693 0.7%
Common shares outstanding at
period end 4,021,403 4,097,160 -1.8%
BALANCE SHEET
($ in thousands, except share and per share data)
Jun 30 Mar 31 Dec 31
2003 2003 2002
-------------- ---------- ---------
Assets:
Cash and due from banks $33,083 $35,170 $32,531
Investments 194,424 172,181 181,821
Loans:
Real estate - construction 65,602 64,003 59,854
Commercial real estate 267,979 256,871 253,105
Real estate - other 19,826 16,774 25,951
Commercial 37,640 34,858 33,441
Consumer and other 5,140 5,731 6,791
Deferred loan fees, net (1,393) (1,061) (1,042)
-------------- ---------- ---------
Total loans 394,794 377,176 378,100
Allowance for loan losses (5,566) (5,562) (5,442)
-------------- ---------- ---------
Total loans, net 389,228 371,614 372,658
Goodwill and other intangible
assets 21,741 21,826 21,911
Other assets 25,191 25,763 22,010
-------------- ---------- ---------
Total assets $663,667 $626,554 $630,931
============== ========== =========
Liabilities and Stockholders'
Equity:
Liabilities:
Deposits:
Noninterest-bearing $192,767 $183,094 $184,728
NOW, MMDA and Savings 265,301 253,677 244,364
Time certificates, $100,000
and over 60,260 60,999 64,510
Other time certificates 34,620 35,462 37,237
-------------- ---------- ---------
Total deposits 552,948 533,232 530,839
Other borrowings 33,725 17,325 23,625
Trust preferred securities 13,446 13,454 13,462
Other liabilities 3,822 3,035 4,559
-------------- ---------- ---------
Total liabilities 603,941 567,046 572,485
Stockholders' equity 59,726 59,508 58,446
-------------- ---------- ---------
Total liabilities and
stockholders' equity $663,667 $626,554 $630,931
============== ========== =========
Sept 30 Jun 30 Annual
2002 2002 Change
----------- ---------- ---------
Assets:
Cash and due from banks $26,909 $34,931 -5.3%
Investments 159,876 157,621 23.3%
Loans:
Real estate - construction 77,624 76,234 -13.9%
Commercial real estate 245,198 226,108 18.5%
Real estate - other 25,043 40,766 -51.4%
Commercial 35,588 43,832 -14.1%
Consumer and other 10,087 11,841 -56.6%
Deferred loan fees, net (1,000) (1,064) 30.9%
----------- ----------
Total loans 392,540 397,717 -0.7%
Allowance for loan losses (5,028) (4,851) 14.7%
----------- ----------
Total loans, net 387,512 392,866 -0.9%
Goodwill and other intangible
assets 22,083 22,152 -1.9%
Other assets 21,564 19,402 29.8%
----------- ----------
Total assets $617,944 $626,972 5.9%
=========== ==========
Liabilities and Stockholders'
Equity:
Liabilities:
Deposits:
Noninterest-bearing $177,205 $168,474 14.4%
NOW, MMDA and Savings 248,725 251,060 5.7%
Time certificates, $100,000
and over 58,282 61,025 -1.3%
Other time certificates 38,693 40,549 -14.6%
----------- ----------
Total deposits 522,905 521,108 6.1%
Other borrowings 20,725 33,925 -0.6%
Trust preferred securities 13,471 13,479 -0.2%
Other liabilities 3,926 3,575 6.9%
----------- ----------
Total liabilities 561,027 572,087 5.6%
Stockholders' equity 56,917 54,885 8.8%
----------- ----------
Total liabilities and
stockholders' equity $617,944 $626,972 5.9%
=========== ==========
SUPPLEMENT DATA
($ in thousands, except share and per share data)
Three months ended
June 30, March 31, June 30,
2003 2003 2002
PROFITABILITY RATIOS:
Return on average
assets 1.03% 1.02% 0.83%
Return on average
equity 11.22% 10.78% 9.59%
Net interest
margin 5.21% 5.32% 5.56%
Efficiency ratio 69.21% 69.29% 74.36%
Efficiency ratio
excluding
interest on
trust
preferred
securities 66.67% 66.65% 71.55%
AVERAGE BALANCES:
Average
investments $185,210 $175,789 $160,608
Average loans, net
of unearned
income $385,050 $379,898 $392,040
Average interest
earning assets $570,258 $555,687 $552,648
Average assets $646,377 $625,808 $620,791
Average deposits $549,282 $527,370 $533,343
Average interest
bearing
liabilities $395,203 $380,893 $394,502
Average equity $59,550 $59,367 $53,401
Six months ended
June 30, June 30,
2003 2002
PROFITABILITY
RATIOS:
Return on average
assets 1.03% 0.81%
Return on average
equity 11.00% 9.36%
Net interest
margin 5.26% 5.47%
Efficiency ratio 69.25% 74.89%
Efficiency ratio
excluding
interest on
trust
preferred
securities 66.66% 72.03%
AVERAGE BALANCES:
Average
investments $180,525 $162,611
Average loans, net
of unearned
income $382,488 $391,066
Average interest
earning assets $563,013 $553,677
Average assets $636,149 $620,871
Average deposits $538,387 $526,972
Average interest
bearing
liabilities $388,088 $398,441
Average equity $59,459 $54,053
Jun 30 Mar 31 Dec 31
2003 2003 2002
--------------- ------------ -------------
CREDIT QUALITY
DATA:
Non-accrual loans $782 $222 $797
Loans 90 days or
more past due and
still accruing 119 122 249
--------------- ------------ -------------
Total
nonperforming
loans 901 344 1,046
Other real estate
owned 940 965 995
--------------- ------------ -------------
Total
nonperforming
assets $1,841 $1,309 $2,041
Nonperforming loans
/ total loans 0.23% 0.09% 0.28%
Nonperforming
assets / total
assets 0.28% 0.21% 0.32%
Allowance for loan
losses / total
loans 1.41% 1.47% 1.44%
Quarterly net loan
charge-offs
(recoveries) $96 $(21) $(14)
OTHER PERIOD END
STATISTICS:
Stockholders' (b)
equity / total
assets 9.00% 9.50% 9.26%
Loan to deposit
ratio 71.40% 70.73% 71.23%
Non-interest
bearing deposits
/ total deposits 34.86% 34.34% 34.80%
Sept 30 Jun 30
2002 2002
-------------- -----------
CREDIT QUALITY
DATA:
Non-accrual loans $4,194 $1,775
Loans 90 days or
more past due and
still accruing 29 54
-------------- -----------
Total
nonperforming
loans 4,223 1,829
Other real estate
owned 1,005 885
-------------- -----------
Total
nonperforming
assets $5,228 $2,714
Nonperforming loans
/ total loans 1.08% 0.46%
Nonperforming
assets / total
assets 0.85% 0.43%
Allowance for loan
losses / total
loans 1.28% 1.22%
Quarterly net loan
charge-offs
(recoveries) $123 $22
OTHER PERIOD END
STATISTICS:
Stockholders' (b)
equity / total
assets 9.21% 8.75%
Loan to deposit
ratio 75.07% 76.32%
Non-interest
bearing deposits
/ total deposits 33.89% 32.33%
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