FOOT Foothill Independent Bancorp (MM)

Foothill Independent Bancorp (NASDAQ:FOOT), the holding company for Foothill Independent Bank, today reported that a continued focus on building core deposits while keeping operating expenses in check resulted in record profits for both the third quarter and first nine months of 2005. Net income increased 18% to $2.82 million, or $0.31 per diluted share, in the quarter ended September 30, 2005, compared to $2.39 million, or $0.27 per share, in the third quarter a year ago. For the first nine months of 2005, net income grew 20% to $8.19 million, or $0.91 per diluted share, compared to $6.81 million, or $0.76 per diluted share, in the first nine months of last year. All per share data has been adjusted to reflect the 5-for-4 stock split issued in May 2005. Annualized return on average equity (ROE) improved to 16.0% in the third quarter of 2005, up from 15.2% in the same quarter last year, and to 16.4% in the first nine months of this year, compared to 14.7% for the first nine months of 2004. Annualized return on average assets (ROA) grew to 1.41% for the third quarter, up from 1.28% in the same period of 2004, and to 1.36% for the first nine months of 2005, compared to 1.24% in the nine-month period ended September 30, 2004. "A number of factors contributed to our record profits in both the third quarter and first nine months of 2005, but they can be summed up as the successful execution of banking fundamentals," stated George Langley, President and CEO. "We are gathering low-cost deposits and using those funds to underwrite high-quality loans and to build our securities portfolio. As a result, we have maintained excellent credit quality and our net interest margin has shown meaningful improvement for both the quarter and nine months ended September 30, 2005." Foothill's net interest margin increased to 5.15% in the third quarter, compared to 4.88% in the third quarter a year ago. For the first nine months of 2005, the net interest margin expanded to 5.07%, up from 4.82% for the first nine months of 2004. "In order to keep our cost of funds down, we allowed some time deposits to run off and replaced them with lower-cost retail deposits," Langley said. "As a result, our deposit mix has improved over the past year, and at the end of September 2005, core deposits had grown to 91% of total deposits." Core deposits, which consist of no-cost demand and low-cost savings and money market deposits, increased by $46.4 million during the 12 months ended September 30, 2005, to $650 million, while time deposits have decreased by $4.67 million in the same period to $61.6 million. Total deposits increased 6% to $712 million at September 30, 2005, compared to $670 million a year earlier. "Our success in growing our deposit base, principally through the addition of no-cost and low-cost core deposits, enabled us to increase our loan volume and build our securities portfolio, as well as to increase our net interest margin," Langley said. Gross loans increased 6% to $510 million at the end of the third quarter of 2005, up from $479 million at the end of the same quarter last year; total securities grew 12% to $192 million at September 30, 2005, compared to $171 million a year earlier; and total assets grew 6% to $794 million, compared to $747 million at the end of September last year. Asset quality has remained outstanding, as well. Non-performing loans (NPLs) declined to $117,000 at September 30, 2005, from $141,000 at September 30, 2004. At the end of the third quarter of 2005, NPLs represented just 0.02% of total loans compared to 0.03% of total loans at the end of September last year. With no repossessed assets on the books, non-performing assets (NPAs) have remained equal to NPLs, and were 0.01% of total assets at the end of September 2005, compared to 0.02% of assets at the end of the third quarter of 2004. For the first nine months of 2005, Foothill recorded a net recovery of $31,000, versus a net recovery of $34,000 during the first nine months of last year. At September 30, 2005, the reserve for loan losses was $5.05 million, representing 0.99% of gross loans and far exceeding NPAs. "Foothill has a long history of excellent credit quality," Langley said. "As a result, we have been able to grow our reserves without having to make any additional loan loss provisions. In addition to our remarkably low credit costs, we have been able to limit the increases in operating expenses. As a result, our efficiency ratio has improved, indicating our ability to generate increased revenues without a corresponding increase in operating expenses, and more importantly, the majority of our incremental revenue growth has flowed directly to the bottom line." Relative to the same periods last year, revenues grew by 8% in the third quarter and 13% for the nine months ended September 30, 2005. For the quarter ended September 30, 2005, revenues were $10.6 million, compared to $9.8 million a year ago. For the first nine months of 2005, revenues were $31.9 million, versus $28.2 million in the same period last year. "Our revenue growth is attributable to the substantial increase in net interest income," Langley said. "Our balance sheet management, low-cost deposit base, and the rising interest rate environment enabled us to increase interest income by $1.29 million in the third quarter this year over the third quarter of last year. By comparison, interest expense increased by only $219,000 in the third quarter this year over the third quarter last year. In the nine months ended September 30, 2005, interest income increased by $4.82 million, while interest expense increased by $703,000, compared to the same nine months of 2004." As a result, net interest income increased by 13% to $9.42 million in the third quarter of 2005, compared to $8.35 million in the same quarter of 2004. For the nine-month period ended September 30, 2005, net interest income grew 17% to $28.0 million, from $23.9 million a year ago. Other operating income was $1.23 million in the third quarter this year, compared to $1.44 million in the third quarter of 2004. In the nine months ended September 30, 2005, other operating income was $3.85 million, compared to $4.28 million in the same period last year. Non-interest expense (also referred to as operating expense) increased by 4% to $6.22 million in the third quarter this year, compared to $6.0 million in the third quarter of last year, and grew 10% to $19.2 million for the nine months ended September 30, 2005, from $17.5 million in the same period last year. Despite those increases, our efficiency ratios improved to 59.0% in the quarter and 61.0% for the nine months ended September 30, 2005, from 63.1% and 63.9%, respectively, in the same corresponding periods of 2004. "The increase in operating expenses, particularly in the third quarter, was primarily due to additional accounting and legal expenses and Sarbanes-Oxley costs; however, they were somewhat offset by a decline in salary and benefit costs," Langley said. "In the fourth quarter, I expect to see a somewhat greater year-over-year increase in operating expenses as we have recently bolstered our sales force and I anticipate greater commission expenses going forward. However, the benefits of these new hires, in terms of achieving increases in interest income, are expected to outweigh these costs." Shareholders' equity grew to $68.3 million at September 30, 2005, compared to $64.1 million a year earlier. Book value increased to $8.03 per share at the end of the third quarter, from $7.64 per share at September 30, 2004. Capital ratios continue to be above the "Well-Capitalized" guidelines established by the regulatory agencies. The Tier 1 Leverage Ratio was 9.78% and the Total Risk-based Capital Ratio was 14.17% at September 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 could lead to an increase in loan write-offs, which would reduce our earnings and could adversely affect our financial condition. -- 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 Ended September 30, Percent --------------------- Change 2005 2004 ---------- ---------- ------- Interest Income Interest on loans & leases $8,815 $7,893 Interest on securities 1,668 1,414 Interest on federal funds sold 280 141 Interest other 10 36 ---------- ---------- Total Interest Income 10,773 9,484 14% Interest Expense Deposits 1,213 1,033 Interest on borrowings 141 102 ---------- ---------- Total Interest Expense 1,354 1,135 19% ---------- ---------- Net interest Income 9,419 8,349 13% Provision for loan losses -- 78 ---------- ---------- Net interest income after loan loss provision 9,419 8,271 14% Other Operating Income Fees on deposits 995 1,264 Gain on sales of SBA loans -- -- Other 234 180 ---------- ---------- Total Other Operating Income 1,229 1,444 -15% Operating Expenses Salaries and employee benefits 2,858 3,298 Occupancy and equipment 1,231 1,069 Other 2,133 1,629 ---------- ---------- Total Other Operating Expenses 6,222 5,996 4% ---------- ---------- Income before taxes 4,426 3,719 19% Income taxes 1,611 1,325 ---------- ---------- NET INCOME $2,815 $2,394 18% ========== ========== Per Share Data(1) Earnings per common share - Basic $0.33 $0.29 14% ========== ========== Weighted average shares outstanding - Basic 8,504,769 8,399,951 ========== ========== Earnings per common share - Diluted $0.31 $0.27 15% ========== ========== Weighted average shares outstanding - Diluted 9,025,686 8,919,805 ========== ========== Nine Months Ended September 30, Percent --------------------- Change 2005 2004 ---------- ---------- ------- Interest Income Interest on loans & leases $26,097 $22,985 Interest on securities 5,110 3,764 Interest on federal funds sold 680 307 Interest other 83 90 ---------- ---------- Total Interest Income 31,970 27,146 18% Interest Expense Deposits 3,368 2,949 Interest on borrowings 570 286 ---------- ---------- Total Interest Expense 3,938 3,235 22% ---------- ---------- Net interest Income 28,032 23,911 17% Provision for loan losses -- 78 ---------- ---------- Net interest income after loan loss provision 28,032 23,833 18% Other Operating Income Fees on deposits 3,139 3,821 Gain on sales of SBA loans 13 5 Other 698 452 ---------- ---------- Total Other Operating Income 3,850 4,278 -10% Operating Expenses Salaries and employee benefits 8,922 8,654 Occupancy and equipment 3,337 3,194 Other 6,931 5,657 ---------- ---------- Total Other Operating Expenses 19,190 17,505 10% ---------- ---------- Income before taxes 12,692 10,606 20% Income taxes 4,501 3,801 ---------- ---------- NET INCOME $8,191 $6,805 20% ========== ========== Per Share Data(1) Earnings per common share - Basic $0.97 $0.81 20% ========== ========== Weighted average shares outstanding - Basic 8,466,865 8,399,479 ========== ========== Earnings per common share - Diluted $0.91 $0.76 20% ========== ========== Weighted average shares outstanding - Diluted 9,016,978 8,925,191 ========== ========== (1) Per share data for the three- and nine-month periods ended September 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) September 30, Percentage ------------------- Change 2005 2004 --------- --------- ---------- ASSETS: Noninterest-earning demand deposits and cash on hand $33,998 $32,561 Federal funds sold and overnight repurchase agreements 29,900 32,900 Interest-earning deposits 1,485 8,021 --------- --------- Total Cash and Cash Equivalents 65,383 73,482 -11% Securities available for sale 184,686 164,720 Securities held to maturity 7,450 6,316 --------- --------- Total Securities 192,136 171,036 12% Loans and leases receivable 509,861 478,903 6% Reserve For loan losses (5,047) (4,981) --------- --------- Loans & Leases Receivable, Net 504,814 473,922 7% Accrued interest receivable 3,391 2,900 Other real estate owned -- -- Premises and equipment 4,553 4,806 Federal Home Loan Bank (FHLB) stock, at cost 4,256 3,428 Federal Reserve Bank (FRB) stock, at cost 348 351 Other assets 19,189 17,478 --------- --------- TOTAL ASSETS $794,070 $747,403 6% ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: LIABILITIES: Noninterest-bearing demand deposits $288,813 $250,050 Savings & NOW deposits 174,818 162,000 Money market deposits 186,733 191,865 Time deposits 61,560 66,231 --------- --------- Total Deposits 711,924 670,146 6% Accrued employee benefits 3,641 3,326 Accrued interest and other liabilities 1,946 1,502 Other debt 8,248 8,248 --------- --------- Total Liabilities 725,759 683,222 6% STOCKHOLDERS' EQUITY: Common stock $0.001 par value- authorized: 25,000,000 shares; issued and outstanding: 8,510,297 and 8,402,234 shares, respectively 7 7 Additional paid-in capital 68,361 67,474 Retained earnings 2,117 (2,938) Accumulated other comprehensive income net of taxes (2,174) (362) --------- --------- Total Stockholders' Equity 68,311 64,181 6% --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $794,070 $747,403 6% ========= ========= FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED FINANCIAL RATIOS AND OTHER CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------- 2005 2004 2005 2004 --------- --------- -------- -------- Financial Ratios: Return on average assets(1) 1.41% 1.28% 1.36% 1.24% Return on average equity(1) 16.04% 15.20% 16.44% 14.69% Efficiency ratio(1) 59.01% 63.10% 61.01% 63.85% Annualized operating expense/average assets(1) 3.13% 3.20% 3.19% 3.20% Net interest margin(1) 5.15% 4.88% 5.07% 4.82% Tier 1 capital ratio 9.78% 9.66% 9.78% 9.66% Risk adjusted capital ratio 14.17% 14.08% 14.17% 14.08% Other Consolidated Financial Data Provision for loan losses $-- $78 $-- $78 Net charge-offs (recoveries) $(20) $8 $(31) $(34) (1) These ratios have been annualized. At September 30, ------------------------------- 2005 2004 -------------- ---------------- (Dollars in thousands, Other Consolidated Financial Data except per share amounts) (continued) ------------------------------- Net loans and leases $508,814 $473,922 Non-performing/non-accrual loans(1) Amounts $117 $141 As a percentage of gross loans 0.02% 0.03% Real estate owned - loans $-- $-- Total non-performing assets Amounts $117 $141 As a percentage of total assets 0.01% 0.02% Loan loss reserves Amounts $5,047 $4,981 As a percentage of gross loans 0.99% 1.04% Book value per share $8.03 $7.64(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 Nine Months Ended September 30, September 30, ------------------- ------------------- 2005 2004 2005 2004 --------- ------------------- --------- ASSETS Earning assets: Interest-earning deposits $1,316 $8,196 $4,639 $7,537 Federal funds sold and overnight repurchase agreements 32,190 41,111 30,612 37,142 Investment securities 196,914 168,401 198,435 155,206 Loans and leases (net of unearned income) 510,330 475,594 511,517 469,960 --------- --------- --------- --------- Total earning assets 740,750 693,302 745,203 669,845 Loan loss reserve (5,026) (4,992) (5,022) (4,971) Non-earning assets 60,135 61,089 62,397 64,374 --------- --------- --------- --------- Total Assets $795,859 $749,399 $802,578 $729,248 ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: Deposits: Savings and interest bearing transaction accounts $358,295 $353,739 $364,668 $340,936 Certificates of deposit, $100,000 or more 35,278 27,893 37,575 29,448 Other time deposits 32,568 39,990 34,309 41,469 --------- --------- --------- --------- Total interest-bearing deposits 426,141 421,622 436,552 411,853 Other interest-bearing liabilities 8,248 8,248 8,248 8,248 --------- --------- --------- --------- Total interest-bearing liabilities 434,389 429,870 444,800 420,101 Non-interest liabilities: Demand deposits 284,977 251,701 277,787 242,146 Other non-interest liabilities 6,318 4,845 13,541 5,243 --------- --------- --------- --------- Total liabilities 725,684 686,416 736,128 667,490 Stockholders' equity 70,175 62,983 66,450 61,758 --------- --------- --------- --------- Total Liabilities and Stockholders' Equity $795,859 $749,399 $802,578 $729,248 ========= ========= ========= ========= *T