SAN DIEGO, Jan. 20 /PRNewswire/ -- Bank of Commerce (Nasdaq: BCOM) today
reported record fourth quarter and full year profits for 1998. For the year,
the Bank's profits increased 57% to a record $13.2 million, or $.85 per
diluted share, compared to $8.5 million, or $.56 per diluted share, in 1997.
Bank of Commerce's 1998 return on average equity was 24.9% compared to
21.0% in 1997 and its return on average assets was 1.92% compared to 1.46% in
1997. For the fourth quarter, Bank of Commerce's profits increased 41% to
$4.1 million or $.26 per diluted share compared to $2.9 million or $.19 per
diluted share in the fourth quarter a year ago. For the fourth quarter, ROE
was 28.0% and ROA was 2.46%. Results reflect the pooling transaction for the
Rancho Vista National Bank merger, the 2-for-1 split paid December 10, 1997,
and the 5-for-2 split on BCOM common shares paid May 5, 1997.
"In 1998, we accelerated the expansion of our franchise, opening ten new
loan production offices (LPO) in Texas, Illinois, Georgia, Utah, New Mexico,
Washington and California. We also broadened our full service branch network
with the acquisition of Rancho Vista National Bank with $127 million in assets
and three full service branches," stated Peter Q. Davis, Chairman and Chief
Executive Officer. "This expansion contributed to our closing the year with
five straight years of increased profits and helped us set another record for
profitability in 1998."
"As the number one bank Small Business Administration (SBA) lender
nationwide, we increased our SBA lending 26% in 1998 producing $242.6 million
in new loans. We plan to continue expanding our SBA network by adding up to
8 new LPO's in new markets during 1999," stated David H. Batram, Senior
Executive Vice President. Currently, Bank of Commerce operates in 11 states
with 32 loan production offices or full service branches."
SBA loans contributed to increased profitability in two ways during 1998.
The loans held in the Bank's portfolio contributed to an 18% increase in net
interest income after provision for credit losses in 1998. In addition, the
Bank stepped up loan sales in the year more than doubling gain on sale of SBA
loans and generating a $15.5 million pre-tax profit. "We manage our SBA loan
portfolio carefully to balance long-term income streams with short-term market
factors. In 1998, prepayment speeds on SBA loans rose and sale premiums
contracted. As a result, we chose to accelerate sales of seasoned loans to
lock-in the unrealized premiums in these loans," Davis said. The Bank sold
$174.3 million in SBA loans or 72% of its total originated and brokered loans
in 1998 compared to $62.0 million or 32% of its SBA production in 1997.
At December 31, 1998, the fair value of the bank's SBA portfolio exceeded
the book carrying value by approximately $17.3 million (pre-tax) or $0.68 per
share (after tax). Under Generally Accepted Accounting Principals (GAAP), the
Bank's SBA loan portfolio is carried on its balance sheet at amortized cost.
The fair value of the portfolio, based on representative market prices, is
currently higher than the book carrying value. When the bank sells SBA loans,
it recognizes the premiums (or discounts) as gain (or loss) on sale at that
time.
"In the second half of 1998, we focused on improving our cost of funds,"
stated Davis. "As a result, net interest income for the year improved
primarily due to margin improvement in the second half of the year." Net
interest income after provision for possible credit losses increased 18.2% in
1998 to $35.5 million compared to $30.0 million in 1997. Net interest margin
in 1998 was 5.67% compared to 5.75% in 1997. Net interest income in the
fourth quarter increased 7% to $8.9 million compared to $8.3 million in the
like quarter a year ago. Fourth quarter net interest margin was
5.89% compared to 5.54 % in the fourth quarter of 1997.
Non-interest income, excluding gains from the sale of SBA loans, increased
56% in 1998 to $6.4 million compared to $4.1 million in 1997. Fourth quarter
non-interest income increased to $2.6 million from $1.2 million in the fourth
quarter a year ago. Operating (non-interest) expense in 1998 increased 30% to
$34.2 million from $26.3 million reflecting the significant growth of the
Bank's lending and full service branch network. In the fourth quarter
operating expense grew 4% to $8.9 million from $8.6 million in the fourth
quarter a year ago. "We have successfully improved our efficiency ratio this
year to 59.5% from 64.1% in 1997. The improvement for the fourth quarter was
even more significant, dropping to 54.6% from 64.1% in the like period a year
ago," said Davis.
Bank of Commerce's portfolio of SBA loans serviced for other investors
totaled $347 million at December 31, 1998, a 47% increase over the
$236 million serviced a year ago. Loans serviced for other investors
generated $443,000 in net fee income in the fourth quarter and $1.5 million
for the full year ended December 31, 1998. Asset quality remains high, with
total non-performing assets net of SBA guaranteed loans, at $3.2 million, or
0.49% of assets, at December 31, 1998 compared to $3.3 million, or 0.49% a
year ago.
"The growth generated during the year is not apparent on the balance sheet
due to the increase in SBA loan sales and the pooling treatment of the Rancho
Vista merger, in which their assets and liabilities are combined with ours for
all prior periods. In addition, we reduced our assets and liabilities to
implement our plans for reducing our cost of funds," Davis explained. At
December 31, 1998, assets showed a decline of 6.1% to $638 million compared to
$680 million at the end of 1997. Deposits dropped 8.4% to $572 million from
$624 million a year ago and net loans dropped 7.3% to $439 million from
$474 million at the end of 1997. Shareholder equity increased 30% to
$61.0 million and book value, excluding approximately $0.68 per share (after
tax) of unrealized fair value of the bank's SBA loan portfolio. Book value
rose to $4.20 per share at December 31, 1998 from $3.32 one year earlier.
Bank of Commerce is the nation's leading SBA bank lender and the largest
publicly held independent bank headquartered in San Diego County. The bank
operates 22 loan production offices in California, Arizona, Nevada,
Washington, Oregon, Colorado, Texas, Illinois, New Mexico, Utah, and Georgia.
In addition, Bank of Commerce operates 10 full service branches in San Diego
and Orange counties. On January 19, BCOM closed at $16.50 per share. Bank of
Commerce will host an analyst conference call on Wednesday, January 20, 1999
at 1:45 PDT (4:45 EDT). To participate, dial in 5 to 10 minutes prior to the
call at 415-908-4715 and request the Bank of Commerce Conference Call.
Statements concerning future performance, developments or events,
concerning expectations for growth and market forecasts, and any other
guidance on future periods, constitute forward-looking statements which are
subject to a number of risks and uncertainties which might cause actual
results to differ materially from stated expectations. These factors include
but are not limited to the effect of interest rate changes, changes in SBA
policy or funding, competition in the financial services market for both
deposits and loans, the ability of the bank to profitably expand into new
regions, secondary market valuation for and liquidity of SBA loans, and
general economic conditions.
FINANCIAL HIGHLIGHTS
(in thousands except per share)
(unaudited)
Year ended December 31, Quarter ended December 31,
INCOME STATEMENT 1998 1997 % change 1998 1997 % change
Interest Income $57,422 $51,144 12.3% $13,439 $14,188 -5.3%
Interest Expense 21,850 20,608 6.0% 4,530 5,829 -22.3%
Provision for
Credit losses 60 496 -87.9% 0 40 -100.0%
Net Interest Income
after Provision 35,512 30,040 18.2% 8,909 8,319 7.1%
Gain on Sale of
SBA loans 15,467 6,239 147.9% 4,776 3,852 24.0%
Other Non-Interest
Income 6,427 4,121 56.0% 2,585 1,186 118.0%
Non-Interest
Expense 34,231 26,341 30.0% 8,910 8,594 3.7%
Income Tax 9,933 $5,609 77.1% 3,286 1,868 75.9%
Net Income $13,242 $8,450 56.7% $4,074 $2,895 40.7%
Basic Earnings
per Share $0.92 $0.64 44.4% $0.28 $0.21 35.7%
Diluted Earnings
per Share $0.85 $0.56 51.3% $0.26 $0.19 40.3%
Basic Average
Shares Outstanding 14,405 13,270 8.6% 14,527 14,005 3.7%
Diluted Average
Shares Outstanding 15,649 15,104 3.6% 15,617 15,566 0.3%
Cash Dividends
per Common Share $0.130 $0.093 39.8% $0.040 $0.030 33.3%
BALANCE SHEET December 31,
1998 1997 % change
Total Assets $638,167 $679,556 -6.1%
Loans receivable, gross 442,173 476,631 -7.2%
Allowance for loan loss (2,977) (2,958) 0.6%
Loans receivable, net 439,196 473,673 -7.3%
SBA Guaranteed Loans 158,510 197,998 -19.9%
SBA Unguaranteed Loans 156,999 156,050 0.6%
Total SBA Loans 315,509 354,048 -10.9%
Investment Securities 45,401 51,749 -12.3%
Deposits 571,942 624,382 -8.4%
Loans to Deposits 77.31% 76.34% --
Shareholder's Equity $61,033 $46,914 30.1%
Book Value per Common Share $4.20 $3.32 26.3%
December 31,
Loan Servicing Portfolio 1998 1997 % change
Balance at end of quarter $346,961 $236,326 46.8%
Balance at beginning of year 236,326 203,696 16.0%
Fee income for quarter 443 399 11.0%
Fee Income year to date $1,450 $1,570 -7.6%
Financial Ratios (annualized)
Year ended, Quarter ended
December 31, December 31,
1998 1997 1998 1997
Return on average assets 1.92% 1.46% 2.46% 1.77%
Return on average equity 24.90% 20.99% 27.98% 25.74%
Average equity to average
assets 7.71% 6.94% 8.77% 6.87%
Efficiency ratio 59.50% 64.13% 54.61% 64.18%
Operating expenses to
average assets 4.96% 4.52% 5.35% 5.25%
Net interest margin 5.67% 5.75% 5.89% 5.54%
December 31,
Allowance for Loan Loss 1998 1997 % change
Balance beginning of period $2,958 $2,976 -0.6%
Provision for credit losses 60 496 -87.9%
Net chargeoffs (recoveries) 41 514 -92.0%
Balance end of period $2,977 $2,958 0.6%
Allowance to net loans,
excluding SBA guaranteed 1.06% 1.07%
Allowance to nonperforming
loans, excluding SBA
guaranteed 140.6% 119.4%
December 31,
Nonperforming Assets 1998 1997 % change
Loans 90 days past due
and accruing $27 $155 -82.6%
Non-accrual loans 1,144 1,772 -35.4%
Restructured loans 947 550 72.2%
Total nonperforming loans 2,118 2,477 -14.5%
Other real estate owned 1,038 864 20.1%
Total nonperforming assets $3,156 $3,341 -5.5%
Total nonperforming assets
to total assets 0.49% 0.49%
(A) SBA guaranteed portions
excluded: $-- $1,291
Total nonperforming assets
gross of guarantees $3,156 $4,632
Gross nonperforming to
total assets 0.49% 0.68%
SOURCE Bank of Commerce
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http://www.bankofcommerce.net
Company News On-Call:
http://www.prnewswire.com/comp/123798.html or fax,
800-758-5804, ext. 123798
CONTACT:
Peter Q. Davis, Chairman & CEO of Bank of
Commerce, 619-232-2096
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