CMBC Community Bancorp

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. -0- *T 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% =========== *T