CMBC Community Bancorp

Community Bancorp Inc. (the "Company") (NASDAQ:CMBC), a Southern California based community bank holding company with $888.4 million in total assets, today announced record financial results for the quarter ended March 31, 2006. Net income increased 41.0% for the first quarter 2006 to $3.6 million compared to $2.5 million for the same period last year. Earnings per share (EPS) increased 23.9% for the first quarter 2006 to $0.57 per diluted share compared to $0.46 per diluted share for the same period in 2005. Return on average tangible equity (ROTE) increased to 26.39% for the first quarter of 2006 compared to 21.29% for the same period in 2005. Return on average assets (ROA) was 1.59% for the first quarter of 2006 compared to 1.49% for the same period last year. Factors contributing to the quarter-over-quarter increase in net income included the Rancho Bernardo Bank acquisition, strong loan and deposit growth and an increase in the net interest margin. -0- *T FIRST QUARTER RESULTS (unaudited) (dollars in First First Fourth thousands, Quarter Quarter Quarter except per share data) 2006 2005 % Change 2005 % Change ------- ------- --------- ------- --------- Diluted EPS $0.57 $0.46 23.91% $0.62 -8.06% Net Income $3,581 $2,539 41.04% $3,842 -6.79% Return on Average Assets (ROA) 1.59% 1.49% 6.34% 1.73% -8.19% Return on Average Tangible Equity (ROTE) 26.39% 21.29% 23.99% 31.41% -15.97% Net Interest Margin 6.10% 5.66% 7.77% 6.01% 1.50% Efficiency Ratio 59.67% 59.75% -0.13% 55.69% 7.15% *T "The results for the first quarter 2006 continue to build upon our success during 2005, showing strong growth in both our balance sheet and earnings," stated Michael J. Perdue, President and CEO. "We continue to gain momentum in all of our markets, including east San Diego County as well as our Riverside County markets where we opened our twelfth branch in Corona during the month of March. We remain committed to our strategic vision of being the premier community banking institution in Southern California. Our financial results in the first quarter reflect our continued strong profitability which led to an increased dividend to $0.125 for the first quarter 2006, a 25% increase from last year's first quarter dividend. "We experienced strong loan demand contributing to a 23% increase in gross loans from the same period in 2005. The continued improvement in our deposit mix has also contributed to our improved performance from last year. Average non-interest bearing demand deposits have increased significantly, rising 45% to $165.5 million for the first quarter 2006 compared to $114.1 million for the same period in 2005. As a result of our performance, combined with the increase in market interest rates, our net interest income increased 48% for the first quarter 2006 over 2005, and our net interest margin increased 44 basis points from 5.66% in the first quarter 2005 to 6.10% in the first quarter 2006," continued Perdue. Loan production was strong, increasing 15.7% to $142.4 million for the first quarter 2006 compared to $123.1 million for the same period in 2005. Of these totals, commercial and other loan originations were 72.4% of the total production, or $103.0 million, while SBA loan originations were 27.6% of the total production. Overall, SBA loan production declined 12.6% from $45.1 million in the first quarter 2005 to $39.4 million in the first quarter 2006 however SBA 7a production increased 54.0% to $18.6 million compared to $12.1 million for the same period last year. Cash and cash equivalents declined $13.4 million compared to December 31, 2005 due to a reduction in federal funds sold of $14.2 million. Compared to the fourth quarter 2005, overall loan production increased 25.6% from $113.4 million to $142.4 million. However, due to higher than expected payoff activity in the quarter loan totals declined $4.4 million from $737.1 million as of December 31, 2005 to $732.7 million as of March 31, 2006. As a result of strong core deposit production in the quarter, deposits increased $8.0 million compared to December 31, 2005 despite runoff of $22.3 million in the wholesale CD portfolio in the quarter. As a result of the decrease in cash, increase in deposits, and increase in equity, short term borrowings declined $31.8 million compared to December 31, 2005. INTEREST INCOME AND EXPENSE During the first quarter of 2006, net interest income after loan loss provision increased 47.8% over the same period last year. Total interest income was $17.0 million, a 59.6% increase over the $10.6 million for the same period in 2005. The increase was the result of the 32.0% increase in average interest earning assets and increases in the yield on those assets. Total interest expense for the first quarter 2006 increased to $4.7 million compared to $2.0 million for the same period in 2005. Interest expense increased due to the 27.4% increase in average interest bearing liabilities combined with an increase in the cost of those liabilities due to an increase in market interest rates. Average transaction accounts increased significantly, rising 33.5% to $398.7 million for the first quarter 2006 compared to $298.6 million for the same period in 2005. OTHER OPERATING INCOME Other operating income decreased 4.6% to $2.5 million for the first quarter of 2006 compared to $2.6 million during the same period last year due to a decrease in the gain on sale of loans and a decline in loan servicing fees. SBA 7a loan sales totaled $15.5 million and SBA 504 loan sales totaled $6.3 million for the first quarter of 2006 compared to $18.4 million in SBA 7a and $1.5 million in SBA 504 loans for the same period in 2005. The change in mix of loans sold resulted in a decrease in gain on sale revenue during the first quarter of 2006 to $1.7 million compared to $1.8 million for the same period in 2005. The decreases in gain on sale and in loan servicing fees were partially offset by increases in customer service charges and other fee income. OTHER OPERATING EXPENSES Other operating expenses increased 31.3% to $8.8 million for the first quarter of 2006 compared to $6.7 million for the same period last year. The increase in non-interest expense was due to significant growth, including the acquisition of Rancho Bernardo Community Bank, with the addition of one banking office and the addition of a de novo banking office in Corona, CA. Additional increases were as a result of the expensing of stock options associated with the adoption of Statement of Financial Accounting Standard No. 123 (revised 2004) at $64,000 for the quarter, and the expensing of restricted stock grants at $87,000 for the quarter which fully vested in February. As of March 31, 2006, the Company had 259 full time equivalent employees, compared to 198 as of March 31, 2005. The Company's efficiency ratio remained steady at 59.67% for the first quarter of 2006 compared to 59.75% for the same period in 2005. RESERVES AND ASSET QUALITY As of March 31, 2006, the reserve for loan losses increased to $9.9 million compared to $7.9 million as of March 31, 2005. The reserve for loan losses as a percentage of total gross loans was 1.34% as of March 31, 2006 compared to 1.33% as of March 31, 2005. The reserve for loan losses as a percentage of total gross loans net of government guarantees was 1.39% as of both March 31, 2006 and March 31, 2005. The Company had net loan recoveries to average net loans of 0.04% for the quarter ended March 31, 2006 compared to net loan recoveries of 0.06% for the same period in 2005. Non-performing loans totaled $4.5 million as of March 31, 2006 compared to $3.9 million as of March 31, 2005. Net of government guarantees, non-performing loans totaled $2.4 million, or 0.33% of total gross loans, as of March 31, 2006 compared to $1.0 million, or 0.17% of total gross loans, as of March 31, 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 declined to 6.53% as of March 31, 2006 compared to 6.89% as of March 31, 2005 due to the significant growth in assets, including the acquisition of Rancho Bernardo Community Bank. GENERAL INFORMATION Community Bancorp is a bank holding company with $888.4 million in assets as of March 31, 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. -0- *T CONSOLIDATED BALANCE SHEETS Percentage ------------------------------ change (unaudited) (dollars in from March December March thousands) Mar 31, 31, 31, 31, 2005 2006 2005 2005 ---------- --------- --------- --------- ASSETS: Cash and cash equivalents $24,316 $37,752 $36,640 Investments and interest bearing deposits in financial institutions 60,393 61,710 33,531 Loans held for investment 20% 561,958 582,745 468,154 Less allowance for loan losses (9,856) (9,773) (7,917) --------- --------- --------- Net loans held for investment 552,102 572,972 460,237 Loans held for sale 37% 170,705 154,327 124,710 Premises and equipment, net 7,063 6,971 6,802 Other real estate owned and repossessed assets 233 68 1,631 Accrued interest and other assets 15,680 16,124 14,196 Income tax receivable and deferred tax asset, net 5,925 6,730 5,937 Servicing assets, net 3,929 3,833 4,301 Interest-only strips, at fair value 2,733 2,622 1,992 Goodwill 45,309 45,441 18,286 --------- --------- --------- Total assets 25% $888,388 $908,550 $708,263 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Interest bearing 17% $545,340 $545,517 $467,141 Non-interest bearing 44% 173,222 164,956 119,967 --------- --------- --------- Total deposits 22% 718,562 710,473 587,108 Short term borrowing 20,540 52,290 27,000 Long term debt 35,575 37,203 18,248 Accrued expenses and other liabilities 13,326 12,326 10,065 --------- --------- --------- Total liabilities 23% 788,003 812,292 642,421 --------- --------- --------- Stockholders' equity Common stock, $0.625 par value; authorized 10,000,000 shares, issued and outstanding; 6,032,363 at March 31, 2006, 5,939,397 at December 31, 2005 and 5,263,123 at March 31, 2005 3,770 3,705 3,289 Additional paid-in capital 63,042 61,696 39,779 Accumulated other comprehensive loss, net of income taxes (582) (386) (210) Deferred compensation - restricted stock - (85) - Retained earnings 34,155 31,328 22,984 --------- --------- --------- Total stockholders' equity 52% 100,385 96,258 65,842 --------- --------- --------- Total liabilities and stockholders' equity 25% $888,388 $908,550 $708,263 ========= ========= ========= CONSOLIDATED STATEMENT OF OPERATIONS ------------------------------------ (unaudited) (dollars in thousands, Qtly Three Months Ended except per share data) % March 31, Change 2006 2005 INTEREST INCOME ------ ----------- -------------- Interest on loans $16,192 $10,202 Interest on fed funds sold 32 73 Interest-earning deposits with banks 4 8 Interest on other investments 740 351 ------------ -------------- Total Interest Income 60% 16,968 10,634 INTEREST EXPENSE Deposits 3,572 1,604 Other borrowed money 1,141 418 ------------ -------------- Total Interest Expense 133% 4,713 2,022 Net interest income 42% 12,255 8,612 Provision for loan losses - 318 ------------ -------------- Net Interest Income After Loan Loss Provision 48% 12,255 8,294 OTHER OPERATING INCOME Net gain on sale of loans 1,666 1,830 Loan servicing fees, net 106 224 Customer service charges 321 238 Other fee income 371 291 ------------ -------------- Total Other Operating Income -5% 2,464 2,583 OTHER OPERATING EXPENSES Salaries and employee benefits 5,239 3,730 Occupancy 668 545 Depreciation 344 301 Other 2,532 2,113 ------------ -------------- Total Other Operating Expenses 31% 8,783 6,689 ------------ -------------- Income before income taxes 5,936 4,188 Income tax 2,355 1,649 ------------ -------------- NET INCOME 41% $3,581 $2,539 ============ ============== Per Share Data Basic earnings per share 22% $0.60 $0.49 ============ ============== Diluted earnings per share 24% $0.57 $0.46 ============ ============== Average shares for basic earnings per share 5,972,455 5,227,333 Average shares for diluted earnings per share 6,269,044 5,542,680 SUPPLEMENTAL DATA ----------------- (unaudited)(dollars in thousands, except Quarter ended per share data) March 31, --------------- 2006 2005 ------- ------- Annualized return on average assets 1.59% 1.49% Annualized return on average equity 14.37% 15.59% Annualized return on average tangible equity 26.39% 21.29% Efficiency ratio 59.67% 59.75% Annualized net interest margin 6.10% 5.66% Book value per share $16.64 $12.51 Tangible book value per share $9.13 $9.04 Dividends per share $0.125 $0.10 NON-PERFORMING ASSETS At At --------------------- March 31, December 31, --------------- --------- 2006 2005 2005 ------- ------- --------- Non-accrual loans $4,501 $3,887 $3,647 Loans past due 90 days or more - - - Restructured loans 16 - - ------- ------- --------- Total non-performing loans 4,517 3,887 3,647 OREO & other repossessed assets 233 1,631 68 ------- ------- --------- Total non-performing assets $4,750 $5,518 $3,715 ======= ======= ========= Total non-performing loans/gross loans 0.61% 0.65% 0.49% Total non-performing assets/total assets 0.53% 0.78% 0.41% Total non-performing loans net of guarantees/gross loans 0.33% 0.17% 0.28% Total non-performing assets net of guarantees/total assets 0.30% 0.37% 0.24% ALLOWANCE FOR LOAN LOSSES Quarter ended ------------------------- March 31, --------------- 2006 2005 ------- ------- Balance at beginning of period $9,773 $7,508 Provision for loan losses - 318 Net recoveries 83 91 ------- ------- Balance at end of period $9,856 $7,917 ======= ======= Loan loss allowance/gross loans 1.34% 1.33% Loan loss allowance/gross loans net of guarantees 1.39% 1.39% Loan loss allowance/loans held for investment 1.75% 1.69% Loan loss allowance/non-performing loans 218.20% 203.68% Loan loss allowance/non-performing assets 207.49% 143.48% Loan loss allowance/non-performing loans, net of guarantees 410.67% 788.55% Loan loss allowance/non-performing assets, net of guarantees 374.33% 300.46% Net recoveries to average loans (annualized) 0.04% 0.06% CAPITAL RATIOS At At -------------- March 31, December 31, --------------- --------- 2006 2005 2005 ------- ------- --------- Holding Company Ratios Total capital (to risk-weighted assets) 12.32% 10.80% 11.79% Tier 1 capital (to risk-weighted assets) 10.96% 9.55% 10.55% Tier 1 capital (to average assets) 10.31% 9.39% 10.18% Tangible equity to tangible assets 6.53% 6.89% 5.89% Bank only Ratios Total capital (to risk-weighted assets) 12.04% 10.55% 11.49% Tier 1 capital (to risk-weighted assets) 10.79% 9.30% 10.25% Tier 1 capital (to average assets) 10.14% 9.13% 9.91% For the three months ended March 31, 2006 ---------------------------------- (unaudited) (dollars in thousands) Average Interest Average Balance Earned/Paid Rate/Yield --------- ------------ ----------- Average assets: Securities and time deposits at other banks $63,707 $744 4.74% Fed funds sold 2,859 32 4.56% Loans: Commercial 52,846 1,048 8.04% Real Estate 646,188 14,230 8.93% Aircraft 28,820 486 6.84% Consumer 19,963 428 8.70% --------- ------------ Total loans 747,817 16,192 8.78% --------- ------------ Total earning assets 814,383 16,968 8.45% Non earning assets 87,437 --------- Total average assets $901,820 ========= Average liabilities and stockholders' equity: Interest bearing deposits: Savings and interest bearing accounts $233,248 $771 1.34% Time deposits 311,951 2,801 3.64% --------- ------------ Total interest bearing deposits 545,199 3,572 2.66% Short term borrowing 44,506 489 4.46% Long term debt 36,595 652 7.22% --------- ------------ Total interest bearing liabilities 626,300 4,713 3.05% Demand deposits 165,477 Accrued expenses and other liabilities 10,389 Net stockholders' equity 99,654 --------- Total average liabilities and stockholders' equity $901,820 $12,255 ========= ============ Net interest spread 5.40% =========== Net interest margin 6.10% =========== For the three months ended March 31, 2005 ---------------------------------- (unaudited) (dollars in thousands) Average Interest Average Balance Earned/Paid Rate/Yield --------- ------------ ----------- Average assets: Securities and time deposits at other banks $36,868 $359 3.95% Fed funds sold 11,715 73 2.53% Loans: Commercial 39,630 647 6.62% Real Estate 481,994 8,726 7.34% Aircraft 29,380 488 6.74% Consumer 17,292 341 8.00% --------- ------------ Total loans 568,296 10,202 7.28% --------- ------------ Total earning assets 616,879 10,634 6.99% Non earning assets 63,062 --------- Total average assets $679,941 ========= Average liabilities and stockholders' equity: Interest bearing deposits: Savings and interest bearing accounts $184,468 $254 0.56% Time deposits 268,445 1,350 2.04% --------- ------------ Total interest bearing deposits 452,913 1,604 1.44% Short term borrowing 20,820 132 2.57% Long term debt 17,687 286 6.56% --------- ------------ Total interest bearing liabilities 491,420 2,022 1.67% Demand deposits 114,090 Accrued expenses and other liabilities 9,300 Net stockholders' equity 65,131 --------- Total average liabilities and stockholders' equity $679,941 $8,612 ========= ============ Net interest spread 5.32% =========== Net interest margin 5.66% =========== *T