Community Bancorp (NASDAQ:CMBC)
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Community Bancorp Inc. (the "Company") (NASDAQ:CMBC) a
Southern California based community bank holding company with $896.8
million in total assets, today announced financial results for the six
months and quarter ended June 30, 2006.
Net income increased 20.1% for the six months ended June 30, 2006
to $6.5 million compared to $5.4 million for the same period last
year. Diluted earnings per share (EPS) increased 6.2% for the six
months ended June 30, 2006 to $1.03 compared to $0.97 for the same
period in 2005, reflecting the 639,000 share increase resulting from
the Rancho Bernardo Bank acquisition. For the quarter ended June 30,
2006, net income increased 1.3% to $2.9 million compared to $2.8
million for the quarter ended June 30, 2005. Diluted EPS declined to
$0.45 for the second quarter 2006 compared to $0.51 for the same
period last year reflecting the additional shares outstanding.
Return on average tangible equity (ROTE) increased to 23.13% for
the six months ended June 30, 2006 compared to 22.04% for the same
period in 2005. For the second quarter 2006, ROTE was 20.02% compared
to 22.76% for the second quarter 2005. Return on average assets (ROA)
was 1.44% for the six months ended June 30, 2006 compared to 1.52% for
the same period last year. For the second quarter in 2006, ROA was
1.29% compared to 1.54% for the second quarter 2005.
Factors contributing to these results included the Rancho Bernardo
Bank acquisition, an increase in the net interest margin, and
continued strong credit quality offset by a 29.4% decrease in other
operating income.
LOANS AND DEPOSITS
Despite strong loan production of $243.8 million for the six
months ended June 30, 2006, the company experienced higher than
expected principal payoffs on commercial real estate and construction
loans, which resulted in total gross loans increasing $8.0 million or
1.1% to $748.4 million as of June 30, 2006 compared to $740.4 million
as of December 31, 2005. Total gross loans increased 15.4%, or $100.1
million compared to June 30, 2005 including the loans acquired in the
Rancho Bernardo acquisition of $80.6 million. Commercial and other
loan originations were 70% of the total production while SBA loan
originations were 30% of the total production for the six months ended
June 30, 2006. Of the $74.0 million in SBA originations, SBA 504
originations contributed 56% of the total, or $41.3 million, while SBA
7a originations made up the remaining 44%, or $32.7 million.
Retail deposits increased 1.0% to $650.3 million as of June 30,
2006 compared to $643.9 million as of December 31, 2005 while total
deposits declined $11.1 million due to the planned runoff of wholesale
deposits which contributed to the lack of balance sheet growth during
2006. Total deposits increased 10.4% compared to June 30, 2005 with
the most significant growth being in non-interest bearing deposits
which grew at 29.8% over the same period last year.
NET INTEREST INCOME AND NET INTEREST MARGIN
During the quarter ended June 30, 2006 the Company experienced
continued net interest margin expansion with the margin increasing 17
bps to 6.27% compared to 6.10% for the first quarter of 2006. Compared
to the same period last year, the net interest margin expanded 66 bps
as a result of the Company's improved deposit mix combined with the
increase in market interest rates.
During the six months ended June 30, 2006, net interest income
after loan loss provision increased 44.7% to $24.8 million over the
$17.2 million for the same period last year. Total interest income was
$34.5 million, a 51.7% increase over the $22.8 million for the same
period in 2005. The increase was primarily the result of the 26.5%
increase in average interest earning assets and increases in the yield
on those assets.
Total interest expense for the six months ended June 30, 2006
increased 99.1% to $9.7 million compared to $4.9 million for the same
period in 2005. Interest expense increased due to the 20.9% increase
in average interest bearing liabilities combined with an increase in
the cost of those liabilities as a result of increases in market
interest rates. Average transaction accounts increased significantly,
rising 32.7% to $407.1 million for the six months ended June 30, 2006
compared to $306.9 million for the same period in 2005.
OTHER OPERATING INCOME
Other operating income decreased 29.4% to $3.7 million during the
six months ended June 30, 2006 compared to $5.3 million during the six
months ended June 30, 2005 due primarily to the one-time $908,000
realized loss from the termination of the Company's interest rate
swap, which was used to hedge its fixed rate trust preferred debt,
combined with a decrease in gain on sale of loans of $589,000. As a
result of the rise in interest rates and the Company's interest rate
outlook, the Company believed that the swap would no longer benefit
net interest income and therefore elected to terminate the swap during
the second quarter of 2006. SBA 504 and 7a loan sales totaled $42.1
million for the first six months of 2006 compared to $45.2 million for
the same period in 2005. Additionally, during the quarter the Company
recorded a combined impairment on its servicing asset and I/O Strip of
$504,000 which was partially offset by gains of $207,000 from the sale
of its merchant card portfolio.
OTHER OPERATING EXPENSES
Other operating expenses increased 30.5% to $17.7 million for the
six months ended June 30, 2006 compared to $13.6 million for the six
months ended June 30, 2005. The increase in non-interest expense was
due to significant growth and expansion, including the acquisition of
Rancho Bernardo Community Bank, with one banking office, and the
addition of a de novo banking office in Corona, CA. The Company's
efficiency ratio was 61.94% for the first six months of 2006 compared
to 58.84% for the same period in 2005. For the second quarter 2006,
the efficiency ratio was 64.35% compared to 57.99% for the same period
last year.
ASSET QUALITY
As of June 30, 2006, the reserve for loan losses increased to $9.8
million compared to $8.4 million as of June 30, 2005. The reserve for
loan losses as a percentage of total gross loans improved to 1.31% as
of June 30, 2006 compared to 1.29% as of June 30, 2005. The reserve
for loan losses as a percentage of total gross loans net of government
guarantees remained constant at 1.36% as of June 30, 2006 and June 30,
2005. During the first six months of 2006, the Company did not record
a provision for loan losses compared to a $731,000 provision for the
same period in 2005.
Non-performing loans totaled $5.8 million as of June 30, 2006
compared to $3.6 million as of December 31, 2005 and $7.9 million as
of June 30, 2005. Non-performing loans as a percentage of gross loans
were 0.77% as of June 30, 2006 compared to 0.49% as of December 31,
2005 and 1.22% as of June 30, 2005. Net of government guarantees,
non-performing loans totaled $3.6 million, or 0.49% of total gross
loans, as of June 30, 2006 compared to $2.1 million, or 0.28% of total
gross loans, as of December 31, 2005 and $5.0 million, or 0.78% of
total gross loans, as of June 30, 2005.
The Company had net loan recoveries of $7,000 for the six months
ended June 30, 2006 compared to net loan recoveries of $153,000 for
the same period in 2005.
CAPITAL RATIOS
The Company's and Bank's capital ratios continue to be above the
well-capitalized guidelines established by bank regulatory agencies.
The Company's tangible equity to tangible assets increased to 6.78% as
of June 30, 2006 compared to 5.89% as of December 31, 2005 and 6.66%
as of June 30, 2005 due to the significant growth in equity.
FIRST COMMUNITY BANCORP MERGER
On May 16, 2006, First Community Bancorp (NASDAQ:FCBP) announced
the signing of a definitive agreement and plan of merger to acquire
the Company for approximately $277.0 million in consideration of First
Community Common Stock and cash for outstanding Community Bancorp
share-based compensation. First Community Bancorp is a bank holding
company with $4.6 billion in assets as of June 30, 2006, with two
wholly-owned banking subsidiaries, Pacific Western National Bank and
First National Bank. The merger of the two institutions is expected to
be complete in the fourth quarter of 2006.
GENERAL INFORMATION
Community Bancorp is a bank holding company with $896.8 million in
assets as of June 30, 2006, with a wholly owned banking subsidiary,
Community National Bank, headquartered in Escondido, California. The
bank's primary focus is community banking, providing commercial
banking services including commercial, real estate and SBA loans to
small and medium sized businesses. The bank serves San Diego County
and southwest Riverside County with twelve community banking offices
in Bonsall, Corona, El Cajon, Encinitas, Escondido, Fallbrook, La
Mesa, Murrieta, Rancho Bernardo, Santee, Temecula and Vista, and has
additional SBA loan production offices that originate loans throughout
Arizona, California and Nevada.
FORWARD LOOKING STATEMENTS
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, loan production, balance sheet management,
expanded net interest margin, the ability to control costs and
expenses, interest rate changes and financial policies of the United
States government (including the Small Business Administration), and
general economic conditions. Additional information on these and other
factors that could affect financial results are included in its
Securities and Exchange Commission filings. The Company disclaims any
obligation to update any such factors or to publicly announce the
results of any revisions to any forward-looking statements contained
herein to reflect future events or developments.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This press release may be deemed to be solicitation material in
respect of the proposed acquisition of Community Bancorp. First
Community and Community Bancorp intend to file a registration
statement including a joint proxy statement/prospectus and other
documents regarding the proposed acquisition with the SEC. Before
making any voting or investment decision, investors and security
holders of either Community Bancorp or First Community are urged to
carefully read the entire registration statement and proxy statement,
when they become available, as well as any amendments or supplements
to these documents, because they will contain important information
about the proposed acquisition. A definitive proxy statement will be
sent to the shareholders of each institution seeking any required
shareholder approvals. Investors and security holders will be able to
obtain the registration statement and proxy statement free of charge
from First Community or Community Bancorp by writing to the addresses
provided for each company set forth below.
Investors and security holders are urged to carefully review and
consider each of First Community's and Community Bancorp's public
filings with the SEC, including but not limited to their Annual
Reports on Form 10-K for the year ended December 31, 2005 and
Quarterly Reports on Form 10-Q for the reporting periods of 2006. The
documents filed by First Community with the SEC may be obtained free
of charge at First Community's website at
www.firstcommunitybancorp.com or at the SEC's website at www.sec.gov.
These documents may also be obtained free of charge from First
Community by requesting them in writing to First Community Bancorp c/o
Pacific Western National Bank, 275 North Brea Boulevard, Brea, CA
92821; Attention: Investor Relations, or by telephone at 714-671-6800.
The documents filed by Community Bancorp with the SEC may be
obtained free of charge at Community Bancorp's website at
www.mycnbonline.com or at the SEC's website at www.sec.gov. These
documents may also be obtained free of charge from Community Bancorp
by requesting them in writing to Community Bancorp Inc., 900
Canterbury Place, Suite 300, Escondido, CA 92025, Attention: Investor
Relations, or by telephone at Phone: 760-432-1110.
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CONSOLIDATED BALANCE SHEETS
---------------------------
(unaudited)
(dollars in thousands)
Percentage
change from
June 30, June 30, Dec. 31, June 30,
2005 2006 2005 2005
---------- --------- --------- ---------
ASSETS:
Cash and cash equivalents $21,308 $37,752 $25,309
Investments and interest bearing
deposits in financial institutions 59,767 61,710 55,569
Loans held for investment 13% 567,830 582,745 504,658
Less allowance for loan losses (9,780) (9,773) (8,392)
--------- --------- ---------
Net loans held for
investment 558,050 572,972 496,266
Loans held for sale 27% 177,556 154,327 139,363
Premises and equipment, net 6,743 6,971 6,683
Other real estate owned and
repossessed assets 233 68 68
Accrued interest and other assets 14,989 16,124 15,037
Income tax receivable and deferred
tax asset, net 6,418 6,730 7,213
Servicing assets, net 3,734 3,833 4,436
Interest-only strips, at fair value 2,533 2,622 2,030
Goodwill 45,491 45,441 18,226
--------- --------- ---------
Total assets 16% $896,822 $908,550 $770,200
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Interest bearing 5% $529,998 $545,517 $503,080
Non-interest bearing 30% 169,373 164,956 130,448
--------- --------- ---------
Total deposits 10% 699,371 710,473 633,528
Short term borrowing 47,540 52,290 40,000
Long term debt 36,250 37,203 18,017
Accrued expenses and other
liabilities 10,439 12,326 10,316
--------- --------- ---------
Total liabilities 13% 793,600 812,292 701,861
--------- --------- ---------
Stockholders' equity
Common stock, $0.625 par value; authorized
10,000,000 shares, issued and outstanding;
6,067,816 at June 30, 2006, 5,939,397
at December 31, 2005, and 5,282,147
at June 30, 2005 3,792 3,705 3,301
Additional paid-in capital 63,877 61,696 39,955
Accumulated other comprehensive loss,
net of income taxes (713) (386) (199)
Deferred compensation - restricted stock - (85) -
Retained earnings 36,266 31,328 25,282
--------- --------- ---------
Total stockholders'
equity 51% 103,222 96,258 68,339
--------- --------- ---------
Total liabilities and
stockholders' equity 16% $896,822 $908,550 $770,200
========= ========= =========
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
(unaudited)
(dollars in thousands, except per share data)
Qtly Three Months Ended 6 mo. Six Months Ended
% June 30, % June 30,
Change 2006 2005 Change 2006 2005
------ ---- ---- ------ ---- ----
INTEREST INCOME
Interest on loans $16,796 $11,607 $32,988 $21,809
Interest on fed
funds sold 21 76 53 149
Interest-earning
deposits with banks 4 8 8 16
Interest on other
investments 734 438 1,475 789
--------- --------- --------- ---------
Total Interest
Income 45% 17,555 12,129 52% 34,524 22,763
INTEREST EXPENSE
Deposits 3,773 2,266 7,346 3,870
Other borrowed
money 1,193 574 2,334 992
--------- --------- --------- ---------
Total Interest
Expense 75% 4,966 2,840 99% 9,680 4,862
Net interest
income 36% 12,589 9,289 39% 24,844 17,901
Provision for
loan losses - 413 - 731
--------- --------- --------- ---------
Net Interest Income
After Loan Loss
Provision 42% 12,589 8,876 45% 24,844 17,170
OTHER OPERATING INCOME
Net gain on sale
of loans 1,452 1,877 3,118 3,707
Loan servicing
fees, net (30) 255 76 479
Customer service
charges 279 260 599 498
Gain on OREO and other
repossessed assets - 157 - 157
Loss on swap (908) - (908) -
Gain on affordable
housing partnership 111 - 111 -
Other fee income 374 172 746 463
--------- --------- --------- ---------
Total Other
Operating
Income -53% 1,278 2,721 -29% 3,742 5,304
OTHER OPERATING EXPENSES
Salaries and
employee benefits 5,070 3,858 10,308 7,588
Occupancy 682 576 1,350 1,121
Depreciation 356 330 699 631
Other 2,815 2,109 5,348 4,222
--------- --------- --------- ---------
Total Other
Operating
Expenses 30% 8,923 6,873 31% 17,705 13,562
--------- --------- --------- ---------
Income before
income taxes 4,944 4,724 10,881 8,912
Income tax 2,076 1,893 4,431 3,542
--------- --------- --------- ---------
NET INCOME 1% $2,868 $2,831 20% $6,450 $5,370
========= ========= ========= =========
Per Share Data
Basic earnings
per share -13% $0.47 $0.54 5% $1.07 $1.02
========= ========= ========= =========
Diluted earnings
per share -12% $0.45 $0.51 6% $1.03 $0.97
========= ========= ========= =========
Average shares for
basic earnings
per share 6,044,358 5,268,996 6,008,706 5,248,279
Average shares for
diluted earnings
per share 6,303,873 5,564,696 6,286,706 5,561,324
SUPPLEMENTAL DATA
-----------------
(unaudited)
(dollars in thousands, except per share data)
Quarter ended Year to date
June 30, ended June 30,
--------------- -----------------
2006 2005 2006 2005
------- ------- --------- -------
Annualized return on average assets 1.29% 1.54% 1.44% 1.52%
Annualized return on average equity 11.18% 16.64% 12.76% 16.13%
Annualized return on average
tangible equity 20.02% 22.76% 23.13% 22.04%
Efficiency ratio 64.35% 57.99% 61.94% 58.84%
Annualized net interest margin 6.27% 5.61% 6.18% 5.64%
Book value per share $17.01 $12.94
Tangible book value per share $9.51 $9.49
Dividends per share $0.125 $0.10 $0.25 $0.20
NON-PERFORMING ASSETS At June 30, At Dec. 31,
--------------------- 2006 2005 2005
------- ------- ---------
Non-accrual loans $5,765 $7,910 $3,647
Loans past due 90 days or more - - -
Restructured loans 4 - -
------- ------- ---------
Total non-performing loans 5,769 7,910 3,647
OREO & other repossessed assets 233 68 68
------- ------- ---------
Total non-performing assets $6,002 $7,978 $3,715
======= ======= =========
Total non-performing loans/
gross loans 0.77% 1.22% 0.49%
Total non-performing assets/
total assets 0.67% 1.04% 0.41%
Total non-performing loans net of
guarantees/gross loans 0.49% 0.78% 0.28%
Total non-performing assets net of
guarantees/total assets 0.43% 0.66% 0.24%
ALLOWANCE FOR LOAN LOSSES Quarter ended Year to date
------------------------- June 30, ended June 30,
2006 2005 2006 2005
------- ------- --------- -------
Balance at beginning of period $9,856 $7,917 $9,773 $7,508
Provision for loan losses - 413 - 731
Net recoveries / (charge offs) (76) 62 7 153
------- ------- --------- -------
Balance at end of period $9,780 $8,392 $9,780 $8,392
======= ======= ========= =======
Loan loss allowance/gross loans 1.31% 1.29%
Loan loss allowance/gross loans net
of guarantees 1.36% 1.36%
Loan loss allowance/loans held for
investment 1.72% 1.66%
Loan loss allowance/non-performing
loans 169.53% 106.09%
Loan loss allowance/non-performing
assets 162.95% 105.19%
Loan loss allowance/non-performing
loans, net of guarantees 268.46% 166.91%
Loan loss allowance/non-performing
assets, net of guarantees 252.32% 164.68%
Net recoveries / (charge offs) to
average loans (annualized) -0.04% 0.04% 0.00% 0.05%
CAPITAL RATIOS
-------------- At June 30, At Dec. 31,
2006 2005 2005
------- ------- ----------
Holding Company Ratios
Total capital
(to risk-weighted assets) 12.83% 10.45% 11.79%
Tier 1 capital
(to risk-weighted assets) 11.53% 9.23% 10.55%
Tier 1 capital
(to average assets) 10.94% 9.10% 10.18%
Tangible equity to tangible
assets 6.78% 6.66% 5.89%
Bank only Ratios
Total capital
(to risk-weighted assets) 12.51% 10.17% 11.49%
Tier 1 capital
(to risk-weighted assets) 11.26% 8.95% 10.25%
Tier 1 capital
(to average assets) 10.68% 8.82% 9.91%
--------------------------------
For the three months ended June 30, 2006
(unaudited) --------------------------------
(dollars in thousands) Average Interest Average
Balance Earned/Paid Rate/Yield
--------- ------------ -----------
Average assets:
Securities and time deposits at
other banks $62,406 $738 4.75%
Fed funds sold 1,725 21 4.88%
Loans:
Commercial 50,230 1,054 8.42%
Real Estate 645,198 14,863 9.24%
Aircraft 27,634 467 6.78%
Consumer 18,656 412 8.86%
--------- ------------
Total loans 741,718 16,796 9.08%
--------- ------------
Total earning assets 805,849 17,555 8.74%
Non earning assets 86,763
---------
Total average assets $892,612
=========
Average liabilities and
stockholders' equity:
Interest bearing deposits:
Savings and interest bearing
accounts $242,863 $910 1.50%
Time deposits 287,641 2,863 3.99%
--------- ------------
Total interest bearing
deposits 530,504 3,773 2.85%
Short term borrowing 41,665 513 4.94%
Long term debt 35,559 680 7.67%
--------- ------------
Total interest bearing liabilities 607,728 4,966 3.28%
Demand deposits 172,650
Accrued expenses and other
liabilities 9,666
Net stockholders' equity 102,568
---------
Total average liabilities and
stockholders' equity $892,612 $12,589
========= ============
Net interest spread 5.46%
=========
Net interest margin 6.27%
=========
--------------------------------
For the six months ended June 30, 2006
(unaudited) --------------------------------
(dollars in thousands) Average Interest Average
Balance Earned/Paid Rate/Yield
--------- ------------ -----------
Average assets:
Securities and time deposits at
other banks $63,056 $1,483 4.74%
Fed funds sold 2,292 53 4.66%
Loans:
Commercial 51,538 2,103 8.23%
Real Estate 645,693 29,092 9.09%
Aircraft 28,227 953 6.81%
Consumer 19,310 840 8.77%
--------- ------------
Total loans 744,768 32,988 8.93%
--------- ------------
Total earning assets 810,116 34,524 8.59%
Non earning assets 87,100
---------
Total average assets $897,216
=========
Average liabilities and
stockholders' equity:
Interest bearing deposits:
Savings and interest bearing
accounts $238,055 $1,682 1.42%
Time deposits 299,796 5,664 3.81%
--------- ------------
Total interest bearing
deposits 537,851 7,346 2.75%
Short term borrowing 43,086 1,002 4.69%
Long term debt 36,077 1,332 7.45%
--------- ------------
Total interest bearing liabilities 617,014 9,680 3.16%
Demand deposits 169,064
Accrued expenses and other
liabilities 10,028
Net stockholders' equity 101,110
---------
Total average liabilities
stockholders' equity $897,216 $24,844
========= ============
Net interest spread 5.43%
=========
Net interest margin 6.18%
=========
--------------------------------
For the three months ended June 30, 2005
(unaudited) --------------------------------
(dollars in thousands) Average Interest Average
Balance Earned/Paid Rate/Yield
--------- ------------ -----------
Average assets:
Securities and time deposits at
other banks $44,159 $446 4.04%
Fed funds sold 10,513 76 2.92%
Loans:
Commercial 42,473 736 6.95%
Real Estate 519,797 10,024 7.73%
Aircraft 29,920 503 6.75%
Consumer 16,941 344 8.15%
--------- ------------
Total loans 609,131 11,607 7.64%
--------- ------------
Total earning assets 663,803 12,129 7.33%
Non earning assets 70,141
---------
Total average assets $733,944
=========
Average liabilities and
stockholders' equity:
Interest bearing deposits:
Savings and interest bearing
accounts $188,150 $320 0.68%
Time deposits 289,873 1,946 2.69%
--------- ------------
Total interest bearing
deposits 478,023 2,266 1.90%
Short term borrowing 33,441 254 3.04%
Long term debt 17,837 320 7.17%
--------- ------------
Total interest bearing liabilities 529,301 2,840 2.15%
Demand deposits 127,045
Accrued expenses and other
liabilities 9,565
Net stockholders' equity 68,033
---------
Total average liabilities and
stockholders' equity $733,944 $9,289
========= ============
Net interest spread 5.18%
===========
Net interest margin 5.61%
===========
--------------------------------
For the six months ended June 30, 2005
(unaudited) --------------------------------
(dollars in thousands) Average Interest Average
Balance Earned/Paid Rate/Yield
--------- ------------ -----------
Average assets:
Securities and time deposits at
other banks $40,513 $805 4.01%
Fed funds sold 11,114 149 2.71%
Loans:
Commercial 41,051 1,383 6.79%
Real Estate 500,896 18,749 7.55%
Aircraft 29,650 992 6.75%
Consumer 17,116 685 8.09%
--------- ------------
Total loans 588,713 21,809 7.47%
--------- ------------
Total earning assets 640,340 22,763 7.17%
Non earning assets 66,602
---------
Total average assets $706,942
=========
Average liabilities and
stockholders' equity:
Interest bearing deposits:
Savings and interest bearing
accounts $186,309 $574 0.62%
Time deposits 279,159 3,296 2.38%
--------- ------------
Total interest bearing
deposits 465,468 3,870 1.68%
Short term borrowing 27,130 387 2.88%
Long term debt 17,762 605 6.87%
--------- ------------
Total interest bearing liabilities 510,360 4,862 1.92%
Demand deposits 120,567
Accrued expenses and other
liabilities 9,433
Net stockholders' equity 66,582
---------
Total average liabilities
stockholders' equity $706,942 $17,901
========= ============
Net interest spread 5.25%
===========
Net interest margin 5.64%
===========
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