Foothill Independent Bancorp Reports Record Earnings in Second Quarter of 2005; Net Profits up 25% and Earnings Per Share Total

Share Name	Share Symbol	Market	Type
Foothill Independent Bancorp (MM)	NASDAQ:FOOT	NASDAQ	Common Stock

Foothill Independent Bancorp (NASDAQ:FOOT)
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Foothill Independent Bancorp (NASDAQ:FOOT), the holding company for Foothill Independent Bank, today reported record profits in both the second quarter and first half of 2005, aided by a growing loan portfolio and substantial net interest margin expansion. Net income increased 25% to $2.77 million, or $0.31 per diluted share in the quarter ended June 30, 2005, compared to $2.21 million, or $0.25 per diluted share in the second quarter a year ago. For the first six months of 2005, net income grew 22% to $5.38 million, or $0.60 per diluted share, compared to $4.41 million, or $0.49 per diluted share in the first half of last year. "Our balance sheet management has contributed to three consecutive quarters of net interest margin expansion," stated George Langley, President and CEO. "We have continued to build our low-cost deposit base, keeping our cost of funds relatively stable. However as interest rates have increased, so have the yields on the adjustable rate loans in our portfolio. We may see further margin expansion as long as interest rates continue to rise at a reasonable pace." Foothill's net interest margin increased to 5.21% in the second quarter, compared to 4.87% in the immediately preceding quarter of 2005 and 4.65% in the second quarter a year ago. For the first half of 2005, net interest margin increased to 5.04% up from 4.79% for the first half of 2004. Performance measures all improved, reflecting Foothill's increases in profitability over the last year. Annualized return on average equity (ROE) improved to 16.5% in the second quarter of 2005, up from 14.5% in the same quarter last year. For the six months ended June 30, 2005, ROE improved to 16.3%, compared to 14.4% in the first half of 2004. Annualized return on average assets (ROA) grew to 1.37% for the second quarter, up from 1.20% in the same period of 2004, and to 1.33% for the first half of 2005, compared to 1.23% in the six-month period ended June 30, 2004. The efficiency ratio improved to 62.1% in the quarter and 62.0% for the six-month period ended June 30, 2005, from 63.7% and 64.3%, respectively, in 2004, due to the increases in net interest income in the three and six month periods ended June 30, 2005. "Excellent asset quality has become a hallmark of Foothill over the years," Langley said. "We have remained diligent with our underwriting standards, keeping credit costs at the absolute minimum." Non-performing loans (NPLs) and non-performing assets (NPAs), which are equal, were basically flat from a year ago at $186,000. NPLs represented just 0.04% of total loans at June 30, 2005, unchanged from a year ago. NPAs were 0.02% of assets at the end of the second quarter of 2005, also unchanged from the middle of last year. Foothill recorded net loan recoveries of $11,000 during the first six months of 2005, compared to net recoveries of $42,000 during the first six months last year. The reserve for loan losses remained at $5.03 million at June 30, 2005, representing 0.98% of gross loans and far exceeding NPAs. "We are managing the growth in our loan portfolio to minimize risk while still generating record profits," Langley said. "Reflecting the continued success of our strategy to build core deposits, our securities portfolio is up 20% from a year ago, although down slightly since the end of the first quarter. Deploying some of the capital that is currently committed to securities into higher-yielding loans, while at the same time maintaining credit quality, continue to be priorities for us." Total securities grew to $195 million, compared to $162 million at the end of the second quarter last year. Gross loans increased 8% to $513 million at the end of June 2005, up from $474 million at June 30, 2004. Assets increased 7% to $799 million at June 30, 2005, compared to $744 million a year earlier. Total deposits increased 7% to $717 million at June 30, 2005, compared to $671 million a year earlier. Core deposits, which consist of no-cost demand and low-cost savings and money market deposits, increased by $38 million over last year to $640 million at June 30, 2005. "During the second quarter of 2005, we advanced our strategy to improve our net interest margin by allowing some of our higher priced, longer term time deposits and more expensive money market deposits to run off," Langley said. "We used some brokered deposits to meet short-term liquidity needs, so time deposits were 13% higher than at June 30 last year." Core deposits represented 89% of total deposits at June 30, 2005, compared to 90% of total deposits at June 30, 2004. Reflecting balance sheet management, low-cost deposit base, and rising interest rate environment, interest income grew by $2.3 million over the second quarter of last year, while interest expense increased by only $321,000. As a result, net interest income increased 25% to $9.66 million in the second quarter of 2005, compared to $7.70 million in the same quarter of 2004. For the six-month period ended June 30, 2005, net interest income grew 20% to $18.6 million, compared to $15.6 million a year ago. Other operating income decreased to $1.34 million in the quarter, from $1.42 million in the second quarter of 2004 and in the six months ended June 30, 2005 decreased to $2.62 million from $2.83 million in the first half of 2004. Non-interest expenses increased 19% to $6.73 million in the second quarter this year, compared to $5.67 million in the second quarter of last year. For the six months ended June 30, 2005, such expenses increased 13% to $13.0 million, from $11.5 million in the first six months of last year. Those increases were the result of increased salaries, performance bonuses, and additional accounting and legal costs. However, despite those increases, the efficiency ratio improved to 62.1% in the quarter and to 62.0% for the six-month period ended June 30, 2005, from 63.7% and 64.3%, respectively, in the same corresponding periods of 2004, as net interest income grew at a greater rate than did non-interest expense. Shareholders' equity grew to $67.7 million at June 30, 2005, compared to $61.3 million a year earlier. Book value increased to $7.98 per share at the end of the second quarter this year. By comparison, book value per share at June 30, 2004, retroactively adjusted for a 5-for-4 stock split effective on May 25, 2005, was $7.30 per share. Capital ratios continue to be above the "Well-Capitalized" guidelines established by the regulatory agencies. The Tier 1 Leverage Ratio was 9.42% and the Total Risk-based Capital Ratio was 13.83% at June 30, 2005. About Foothill Independent Bancorp Foothill Independent Bancorp is a one-bank holding company that owns and operates Foothill Independent Bank. The Bank currently operates 12 commercial banking offices in Los Angeles, San Bernardino and Riverside Counties. Foothill Independent Bank has consistently earned the highest ratings for safety and soundness from such bank rating firms as Findley Reports, Bauer Financial Services, and Veribanc. Forward Looking Information This Release contains forward-looking statements within the meaning of the Securities Acts of 1933 and 1934, as amended. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often include the words "believe," "expect," "anticipate," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements set forth our expectations or beliefs regarding our future financial condition or future financial performance, which are based on current information. Our actual results in future periods could differ significantly from our current estimates, expectations and beliefs, as set forth in this Release, due to a number of risks and uncertainties that could affect our business or operating results. Those risks and uncertainties include, but are not limited to: -- The risk of increased competition from other financial institutions, which could require us to reduce the interest rates we are able to charge on loans or to increase the interest we must pay to attract or maintain deposits, either or both of which could lead to reductions in our net interest margin or net earnings. -- The risk of adverse changes in national economic conditions or changes in Federal Reserve Board monetary policies, which could lead to reductions in interest rates and in our net interest margins and to declines in loan demand or a weakening in the financial ability of borrowers to meet their loan obligations to us. -- The risk of a significant decline in real property values in Southern California which, because approximately 90% of our loans are secured by real property, could result in a deterioration in the performance of our loan portfolio and, as a result, could require us to increase the provisions we must make for potential loan losses and lead to increase in loan write-offs, which would reduce our earnings and could adversely affect our financial condition. -- The risk that natural disasters, such as earthquakes or fires, which are not uncommon in Southern California, or localized economic downturns, could adversely affect our operating results. -- The risk of changes in federal and state bank regulatory policies that might have the effect of reducing yields on earning assets or increasing our operating costs. -- The risk that growth initiatives, such as the addition of new branches or possible acquisitions of other banks, would result in increased operating costs and declines in our earnings, and -- The risk that we may have to reduce or eliminate cash dividends due to the occurrence of any of the foregoing events. Certain of those risks and uncertainties, as well as others, are described more fully in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the Securities and Exchange Commission. Readers of this Release are urged to read the cautionary statements, which are set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Factors That Could Affect Our Future Financial Performance" in Part II of that Report. Due to these uncertainties and risks, readers are cautioned not to place undue reliance on forward-looking statements contained in this Release, which speak only as of this date. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. -0- *T FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in Thousands, Except Per Share Amount) Three Months Six Months Ended Per- Ended Per- June 30, cent June 30, cent --------------------- Change --------------------- Change 2005 2004 2005 2004 ---------- ---------- ------ ---------- ---------- ------ Interest Income Interest on loans & leases $9,014 $7,446 $17,282 $15,092 Interest on securities 1,795 1,223 3,442 2,350 Interest on federal funds sold 228 84 400 166 Interest other 26 30 73 54 ---------- ---------- ---------- ---------- Total Interest Income 11,063 8,783 26% 21,197 17,662 20% Interest Expense Deposits 1,096 992 2,155 1,916 Interest on borrowings 309 92 429 184 ---------- ---------- ---------- ---------- Total Interest Expense 1,405 1,084 30% 2,584 2,100 23% ---------- ---------- Net interest Income 9,658 7,699 25% 18,613 15,562 20% Provision for loan losses -- -- -- -- ---------- ---------- ---------- ---------- Net interest income after loan loss provision 9,658 7,699 25% 18,613 15,562 20% Other Operating Income Fees on deposits 1,106 1,290 2,144 2,557 Gain on sales of SBA loans -- 3 13 5 Other 233 123 464 272 ---------- ---------- ---------- ---------- Total Other Operating Income 1,339 1,416 -5% 2,621 2,834 -8% Operating Expenses Salaries and employee benefits 3,121 2,825 6,064 5,603 Occupancy and equipment 1,063 1,010 2,106 2,125 Other 2,550 1,831 4,798 3,781 ---------- ---------- ---------- ---------- Total Other Operating Expenses 6,734 5,666 19% 12,968 11,509 13% Income before taxes 4,263 3,449 8,266 6,887 Income taxes 1,498 1,242 2,890 2,476 NET INCOME $2,765 $2,207 25% $5,376 $4,411 22% ========== ========== ========== ========== Per Share Data (1) Earnings per common share - Basic $0.33 $0.26 27% $0.64 $0.52 23% ========== ========== ========== ========== Weighted average shares outstanding - Basic 8,468,801 8,402,166 8,447,598 8,399,240 ========== ========== ========== ========== Earnings per common share - Diluted $0.31 $0.25 24% $0.60 $0.49 22% ========== ========== ========== ========== Weighted average shares outstanding - Diluted 8,989,684 8,906,607 9,004,818 8,936,213 ========== ========== ========== ========== (1) Per share data for the three and six month periods ended June 30, 2004 have been retroactively adjusted to reflect a 5-for-4 stock split that was effectuated on May 25, 2005. FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Unaudited) (Dollars in Thousands, Except Per Share Amount) June 30, Percentage ----------------- Change 2005 2004 --------- --------- ---------- ASSETS: Noninterest earning demand deposits and cash on hand $35,437 $39,253 Federal funds sold and overnight repurchase agreements 27,000 36,700 Interest-earning deposits 1,487 8,218 --------- --------- Total Cash and Cash Equivalents 63,924 84,171 -24% Securities available for sale 187,648 155,601 Securities held to maturity 7,781 6,872 --------- --------- Total Securities 195,429 162,473 20% Loans and leases receivable 513,416 473,833 8% Reserve For loan losses (5,027) (4,989) --------- --------- Loans & Leases Receivable, Net 508,389 468,844 8% Accrued interest receivable 3,255 2,717 Other real estate owned -- -- Premises and equipment 4,684 4,872 Federal Home Loan Bank (FHLB) stock, at cost 4,214 3,389 Federal Reserve Bank (FRB) stock, at cost 348 351 Other assets 18,408 17,482 --------- --------- TOTAL ASSETS $798,651 $744,299 7% ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: LIABILITIES: Non-interest bearing demand deposits $288,273 $250,988 Savings & NOW deposits 166,788 160,407 Money market deposits 185,211 190,612 Time deposits 77,159 68,493 --------- --------- Total Deposits 717,431 670,500 7% Accrued employee benefits 3,547 3,239 Accrued interest and other liabilities 1,705 1,013 Other debt 8,248 8,248 --------- --------- Total Liabilities 730,931 683,000 7% STOCKHOLDERS' EQUITY: Common stock $0.001 par value- authorized: 25,000,000 shares; issued and outstanding: 8,490,628 and 8,398,484 shares, respectively 7 7 Additional paid-in capital 68,240 67,458 Retained earnings 579 (4,458) Accumulated other comprehensive income net of taxes (1,106) (1,708) --------- --------- Total Stockholders' Equity 67,720 61,299 10% --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $798,651 $744,299 7% ========= ========= FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED FINANCIAL RATIOS AND OTHER CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except per share amounts) Three Months Six Months Ended Ended June 30, June 30, --------------- -------------- 2005 2004 2005 2004 ------- ------ ------ ------ Financial Ratios: Return on average assets(1) 1.37%(1) 1.20%(1) 1.33% 1.23% Return on average equity(1) 16.48%(1) 14.54%(1) 16.31% 14.43% Efficiency ratio(1) 62.13% 63.74% 62.03% 64.25% Annualized operating expense/average assets(1) 3.33%(1) 3.09%(1) 3.22% 3.20% Net interest margin 5.21%(1) 4.65%(1) 5.04% 4.79% Tier 1 capital ratio(1) 9.42% 9.62% 9.42% 9.62% Risk adjusted capital ratio(1) 13.83% 13.94% 13.83% 13.94% Other Consolidated Financial Data Provision for loan losses $-- $-- $-- $-- Net charge-offs (recoveries) $(12) $(35) $(11) $(42) (1) These ratios have been annualized. At June 30, ------------------- 2005 2004 --------- --------- (Dollars in thousands, Other Consolidated Financial Data (continued) except per share amounts) ------------------- Net loans and leases $508,389 $468,844 Non-performing/non-accrual loans(1) Amounts $186 $185 As a percentage of gross loans 0.04% 0.04% Real estate owned - loans $-- $-- Total non-performing assets Amounts $186 $185 As a percentage of total assets 0.02% 0.02% Loan loss reserves Amounts $5,027 $4,989 As a percentage of gross loans 0.98% 1.05% Book value per share $7.98 $7.30(2) (1) Non-Accrual loans are loans that have made no payments of principal or interest for more than 90 days. (2) Retroactively adjusted for a 5-for-4 stock split effectuated on May 25, 2005. FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES AVERAGE BALANCES (Unaudited) (Dollars in Thousands, Except Per Share Amount) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- ASSETS Earning assets: Interest-earning deposits $4,082 $7,820 $6,328 $7,204 Federal funds sold and overnight repurchase agreements 31,114 35,548 29,811 35,136 Investment securities 199,909 157,154 199,208 148,537 Loans and leases (net of unearned income) 514,656 470,848 512,121 467,112 --------- --------- --------- --------- Total earning assets 749,761 671,370 747,468 657,989 Loan loss reserve (5,022) (4,979) (5,020) (4,961) Non-earning assets 64,782 66,606 63,712 65,864 --------- --------- --------- --------- Total Assets $809,521 $732,997 $806,160 $718,892 ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: Deposits: Savings and interest bearing transaction accounts $359,423 $343,503 $367,906 $334,463 Certificates of deposit, $100,000 or more 34,073 30,109 37,169 30,233 Other time deposits 38,915 40,938 36,768 42,217 --------- --------- --------- --------- Total interest-bearing deposits 432,411 414,550 441,843 406,913 Other interest-bearing liabilities 31,124 8,000 19,860 8,000 --------- --------- --------- --------- Total interest bearing liabilities 463,535 422,550 461,703 414,913 Non-interest liabilities: Demand deposits 273,382 244,820 272,939 237,386 Other non-interest liabilities 5,470 4,880 5,602 5,447 --------- --------- --------- --------- Total liabilities 742,387 672,250 740,244 657,746 Stockholders' equity 67,134 60,747 65,916 61,146 --------- --------- --------- --------- Total Liabilities and Stockholders' Equity $809,521 $732,997 $806,160 $718,892 *T

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FOOT Foothill Independent Bancorp (MM)