• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Desert Community Bank Announces Record Earnings For The Fourth Quarter and Year Ended December 31, 2005

Posted on: Friday, 27 January 2006, 12:00 CST

Desert Community Bank (the "Bank") (NASDAQ: DCBK) today reported earnings for the quarter and year ended December 31, 2005 of $1,964,000 and $6,805,000, respectively, as compared to $1,517,000 and $4,942,000, respectively for the same periods in 2004. The growth in earnings of $447,000 for the fourth quarter of 2005 represents a 29.5% increase over the earnings in the fourth quarter of 2004. For the year ended December 31, 2005, the increase over the comparable 2004 period amounted to $1,863,000, which represents a 37.7% improvement. Diluted earnings per share for the quarter and year ended December 31, 2005 totaled $0.66 and $2.30, as compared to $0.52 and $1.68 in 2004.

The increase in net income is attributable to higher net interest income resulting from increases in the interest rate environment, growth of earning assets and deposits and significantly lower provisions for loan losses and a lower effective income tax rate. These factors were partially offset by higher operating costs.

Total assets of the Bank increased to a record $539.9 million at December 31, 2005. This level represents increases of $9.0 million (1.7%) since September 30, 2005 and $70.0 million (14.9%) since December 31, 2004. Average earning assets for the fourth quarter of 2005 increased to a record $476.6 million. This level represents increases of $15.7 million (3.4%) from the third quarter of 2005 and $47.4 million (11.1%) from the fourth quarter of 2004. For the year ended December 31, 2005, average earning assets totaled $446,011, for an increase of $43.4 million (10.8%) over the $402,574 level for the year 2004.

Highlights for the quarter ended December 31, 2005, as compared to quarter ended September 30, 2005 include:

 --  federal funds sold decreased by $9.4 million to $86.7 million as a     result of investments made in marketable securities --  marketable investment securities increased $16.9 million (27.3%) to     $78.7 million --  total loans increased by $7.4 million (2.4%) to $317.5 million --  total deposits increased by $6.7 million (1.4%) to $487.8 million --  shareholders' equity increased by $1.7 million (3.6%) --  repossessed real estate assets declined from $3.2 million to $1.8     million --  net interest margin declined to 5.95% from 6.12% in the third quarter     of 2005, but increased from 5.80% in the fourth quarter of 2004      

Highlights for the year ended December 31, 2005, as compared to the year ended December 31, 2004 include:

 --  federal funds sold increased by $33.8 million (63.9%) to $86.7 million --  marketable investment securities increased $14.5 million (22.5%) to     $78.7 million --  total loans increased by $17.9 million (6.0%) to $317,529 --  total deposits increased by $63.8 million (15.1%) to $487,822 --  shareholders' equity increased by $5.7 million (13.6%) to $47.9     million --  repossessed and foreclosed assets declined from $6.0 million to $1.8     million --  net interest margin increased to 5.96% from 5.80% --  our share price increased 28% during the year, a pace that eclipsed     most share indexes      

During the quarter ended December 31, 2005 the majority of the growth in total assets was in marketable investment securities. For the year ended December 31, 2005, the majority of the growth in total assets has been in federal funds sold, which resulted from the strong growth in deposits. This growth reflects the growth in the Bank's market, which has been accelerating in the past two years.

Asset quality has improved steadily throughout 2005, which has resulted in significantly lower credit losses and provisions than in the comparable periods in 2004. The provision for loan losses for the fourth quarter of 2005 was $325,000, as compared to $125,000 for the third quarter of 2005, and $750,000 for the fourth quarter of 2004. For the year ended December 31, 2005, the provision for loan losses was $950,000 as compared to $2,375,000 in 2004.

The Bank's net interest income before its provision for loan losses was $7,043,000 for the quarter, which represents an increase of $860,000 (13.2%) over the fourth quarter of 2004. For the year ended December 31, 2005, net interest income before the provision for loan losses was $26,398,000, which represents an increase of $3,215,000 (13.9%) over the comparable period in 2004. These increases are the result of growth of the total earning asset base and deposit base, and the increases in the interest rate environment occurring since June 30, 2004.

Other operating income was moderately lower for both the quarter and the year ended December 31, 2005, as compared to levels of the prior year. A substantial factor in the lower income was the closing of two subsidiary servicing companies in September 2004. Total operating expenses amounted to $5.4 million for the quarter as compared to $5.1 for the fourth quarter of 2004. For year ended December 31, 2005, total operating expenses amounted to $20.2 million, as compared to $19.0 million for the 2004 period. These increases are largely attributable to the opening of a new retail branch in December 2004, coupled with general increases in costs.

The effective income tax rate for the fourth quarter and year ended December 31, 2005 was 23.8% and 34.5%, respectively, as compared to 21.0% and 36.6% for the quarter and year ended December 31, 2004, respectively. The lower effective rate for the fourth quarter and year of 2005 relate to an adjustment to the level of deferred taxes. In absence of the one-time adjustment, the effective income tax rate would have been approximately 35%.

The Bank's efficiency ratio, which measures the proportion of total operating income that is used to cover operating expenses, increased in the fourth quarter of 2005 to 64.9%, as compared to 60.7% for the third quarter of 2005 and 65.5% for the fourth quarter of 2004. For the year ended December 31, 2005, the efficiency ratio decreased to 64.0% as compared to 65.1% for 2004.

During the fourth quarter of 2005, the levels of nonperforming assets, composed of loans past due over 90 days, loans in non-accrual status and repossessed and foreclosed real estate, declined to $3.5 million from the $5.3 million balance at September 30, 2005. The decline in the fourth quarter of 2005 relates principally to a parcel of foreclosed real estate that was sold. At December 31, 2004, the balance of nonperforming assets was $7.0 million. The decline during 2005 is primarily attributable to the sale of two parcels of repossessed and foreclosed real estate. At December 31, 2005, the Bank had one property remaining recorded as repossessed and foreclosed real estate, and this property had been sold in 2004 with the Bank extending a loan to cover the sales price. Since the sale, the buyer has made all payments as agreed.

"We are very pleased with these results," said Ron L. Wilson, Chairman and CEO of the Bank, noting that this was the seventeenth consecutive annual increase in net income and noting that the net income for the quarter was the highest in the Bank's history. "These results reflect our continuing efforts to provide excellence in financial services to our customers in this, one of the fastest growing markets in the United States. Our focus on serving our customers will not diminish, but rather will be enhanced over the next year, as we prepare to open our new Phelan Branch and continue to seek to invest in new branch facilities, products and services to better serve our customers and our communities."

About Desert Community Bank

From its inception in March 1980, Desert Community Bank has been a leader in serving the needs of the communities in which it operates. That leadership is reflected by the involvement of the Bank and its employees in the many civic and non-profit organizations that act as its partner in enhancing the quality of life for all. The success of the Bank's efforts in partnership with many community leaders is reflected in the growth of the Bank to become the largest financial institution headquartered in the High Desert.

Desert Community Bank is based in Victorville, California, and operates eight full-service branches in San Bernardino County in the cities of Victorville, Apple Valley, Hesperia, Wrightwood, Adelanto and Barstow. Shares of the Bank's common stock are traded on the NASDAQ Small Cap Market System under the symbol "DCBK." The Bank's web site is located at www.dcbk.org. To obtain a copy of any of the Bank's public filings, or to obtain additional information, please contact Mr. Ronald L. Wilson, President and CEO, or John G. Sullivan, Chief Financial Officer at (760) 243-2140.

This news release may contain forward-looking statements with respect to the financial condition, results of operation and business of Desert Community Bank. These may include, but are not limited to statements that relate to or are dependent upon estimates or assumptions relating to the prospects of loan growth, deposit growth, credit quality, and certain operating efficiencies resulting from the operations of the Bank. These statements are subject to various risks and uncertainties. Such forward-looking statements are made based upon management's belief as well as assumptions made by, and information currently available to, management pursuant to "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Bank's actual results may differ materially from the results anticipated in forward-looking statements due to a variety of factors. Such factors are described below and include, without limitation, (i) unanticipated deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses, (ii) increased competition with other financial institutions, (iii) lack of sustained growth in the economy in the Victorville, California area, (iv) rapid fluctuations or unanticipated changes in interest rates, (v) the inability of the Bank to satisfy regulatory requirements for its expansion plans, and (vi) changes in the legislative and regulatory environment. Many of such factors are beyond the Bank's ability to control or predict, and readers are cautioned not to put undue reliance on such forward-looking statements. The Bank does not intend to update or reissue any forward-looking statements contained in this report as a result of new information or other circumstances that may become known to the Bank.

                            DESERT COMMUNITY BANK              CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                                (Unaudited)             (Amounts in thousands, except for per share data)                                         December    September     December                                         31, 2005     30, 2005     31, 2004                                        ---------    ---------    --------- ASSETS Cash and due from banks                $  23,505    $  27,041    $  17,014 Federal funds sold                        86,727       96,107       52,920                                        ---------    ---------    ---------   Total cash and cash equivalents        110,232      123,148       69,934 Securities available-for-sale             78,698       61,835       64,242 Securities, restricted equities            2,027        2,011        1,794 Loans held for sale                        1,523        2,594        3,015 Loans, net of allowance of $4,245,  $4,054 and $3,779                       313,284      306,118      295,832 Foreclosed real estate                     1,829        3,177        6,015 Premises and equipment, net               15,819       16,046       15,585 Cash surrender value of life  insurance                                 8,628        8,546        8,343 Accrued interest receivable  and other assets                          7,796        7,340        5,073                                        ---------    ---------    ---------   TOTAL ASSETS                         $ 539,836    $ 530,815    $ 469,833                                        =========    =========    ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities  Deposits   Noninterest-bearing                  $ 166,153    $ 172,034    $ 137,644   Interest-bearing                       321,669      309,069      286,356                                        ---------    ---------    ---------       TOTAL DEPOSITS                     487,822      481,103      424,000 Borrowings                                   700          700          700 Accrued interest payable and  other liabilities                         3,444        2,779        2,967                                        ---------    ---------    ---------       TOTAL LIABILITIES                  491,966      484,582      427,667 Commitments and contingent liabilities SHAREHOLDERS' EQUITY Common stock, no par value:  9,375,000 shares authorized, no  par value; 2,944,272 shares issued  at December 31, 2005, 2,942,372 at  September 30, 2005 and 2,941,272 at  December 31, 2004                        14,888       14,838       14,810 Retained earnings                         33,629       31,870       27,382 Accumulated other comprehensive  income (loss)                              (647)        (475)         (26)                                        ---------    ---------    ---------       TOTAL SHAREHOLDERS' EQUITY          47,870       46,233       42,166                                        ---------    ---------    ---------   TOTAL LIABILITIES AND SHAREHOLDERS'    EQUITY                              $ 539,836    $ 530,815    $ 469,833                                        =========    =========    ========= Where appropriate, some items in the prior financial statements have been reclassified to conform to the current presentation.                            DESERT COMMUNITY BANK                      CONSOLIDATED STATEMENTS OF INCOME                                 (Unaudited)            For the Three-Month and Year Periods Ended December 31              (Amounts in thousands, except for per share data)                                     Three Months Ended      Year Ended                                        December 31,         December 31,                                       2005      2004      2005      2004                                     --------  --------  --------  -------- Interest Income    Loans, including fees            $  6,843  $  6,099  $ 25,925  $ 23,063    Investment securities                 764       590     2,402     2,165    Direct lease financing                 29        69       169       391    Federal funds sold and other          834       293     2,458       689                                     --------  --------  --------  --------                                        8,470     7,051    30,954    26,308                                     --------  --------  --------  -------- Interest expense    Deposits                            1,421       867     4,545     3,120    Other borrowings                        6         1        11         5                                     --------  --------  --------  --------                                        1,427       868     4,556     3,125                                     --------  --------  --------  -------- Net interest income                    7,043     6,183    26,398    23,183 Provision for loan losses                325       750       950     2,375                                     --------  --------  --------  -------- Net interest income after provision  for loan losses                       6,718     5,433    25,448    20,808                                     --------  --------  --------  -------- Noninterest income    Service charges and fees              423       434     1,676     1,743    Voucher control fees                  210       272       997       954    Net gains on sales of loans             -       177         -       538    Net gains (losses) on sales of     equipment and premises                 -        (3)        -        (8)    Net gains (losses) on sales of     repossessed and foreclosed     assets                                (8)        -        67         -    Other                                 397       683     2,352     2,755                                     --------  --------  --------  --------                                        1,232     1,563     5,092     5,982                                     --------  --------  --------  -------- Noninterest expense    Salaries and employee benefits      2,885     2,495    10,908     9,650    Occupancy and equipment               642       626     2,566     2,369    Loan processing                        96       366       590     1,243    Data processing                       338       319     1,301     1,213    Other                               1,411     1,269     4,744     4,521                                     --------  --------  --------  --------                                        5,372     5,075    20,153    18,996                                     --------  --------  --------  -------- Income before income taxes             2,578     1,921    10,387     7,794                                     --------  --------  --------  -------- Income tax expense                       614       404     3,582     2,852                                     --------  --------  --------  -------- Net income                          $  1,964  $  1,517  $  6,805  $  4,942                                     ========  ========  ========  ======== Weighted average common shares  outstanding    (shares in thousands):    Basic                               2,943     2,941     2,942     2,941    Diluted                             2,995     2,941     2,964     2,941 Earnings per share    Basic                            $    .67  $    .52  $   2.31  $   1.68    Diluted                          $    .66  $    .52  $   2.30  $   1.68 Where appropriate, some items in the prior financial statements have been reclassified to conform to the current presentation.                            DESERT COMMUNITY BANK                            SUPPLEMENTAL ANALYSES                                (Unaudited)        As of or for the Three-Month and Year Periods Ended December 31               (Amounts in thousands, except for per share data)                                     Three Months Ended      Year Ended                                        December 31,        December 31,                                       2005      2004      2005      2004                                     --------  --------  --------  -------- Profitability Ratios:    Return on average assets             1.48%     1.27%     1.35%     1.08%    Return on average equity            16.55%    14.27%    15.14%    12.05%    Net interest margin     (tax-equivalent)                    5.95%     5.80%     5.96%     5.80%    Efficiency ratio                    64.91%    65.52%    64.00%    65.13% Other Information:    Average total assets             $530,787  $479,424  $504,852  $458,087    Average interest-earning assets   476,637   429,204   446,011   402,574    Average equity                     47,474    42,534    44,953    41,004 Share Information:    Average basic shares outstanding     (in thousands)                     2,943     2,941     2,942     2,941    Average diluted shares     outstanding (in thousands)         2,995     2,941     2,964     2,941    Basic earnings per share         $    .67  $    .52  $   2.31  $   1.68    Diluted earnings per share       $    .66  $    .52  $   2.30  $   1.68 Book value per share at end of  period    Shares outstanding at end of     period                             2,944     2,941     2,944     2,941    Book value per share at end of     period                             16.26     14.34     16.26     14.34    Share prices and quotes:       Closing price per share at        end of period                   33.09     25.86     33.09     25.86       Average price per share        during period                   33.93     26.13     29.35     24.94       Highest share price during        the period                      36.25     27.25     36.25     27.25       Lowest share price during        the period                      31.05     25.00     25.50     21.17       Closing share price as        multiple of book value           2.04      1.80      2.04      1.80       Closing share price as        multiple of basic earnings:         Current period annualized      12.21     12.55         Trailing twelve months         14.26     15.39       Market capitalization at        end of period (000)          $ 97,426  $ 76,061 Asset Quality Information at end  of period:    Nonperforming loans                 1,638       991    Repossessed and foreclosed     assets                             1,829     6,015    Allowance for loan losses           4,245     3,779    Nonperforming loans/total loans      0.51%     0.33%    Nonperforming assets/total     assets                              0.64%     1.49%    Allowance for loan losses/loans     outstanding                         1.34%     1.26%    Allowance for loan     losses/nonaccrual loans            259.2%    381.3% Where appropriate, some items in the prior financial statements have been  reclassified to conform to the current presentation.                          DESERT COMMUNITY BANK                          SUPPLEMENTAL ANALYSES                               (Unaudited)       For the Three-Month Periods Ended December 31, 2005 and 2004                          (Amounts in thousands)                     Three Months Ended            Three Months Ended                      December 31, 2005             December 31, 2004                           Interest   Average           Interest    Average                  Average   Earned   Yield or   Average   Earned   Yield or                 Balances   or Paid Rate Paid  Balances  or Paid  Rate Paid                 --------  --------  --------  --------  --------  -------- Assets Interest-earning  assets:   Loans and    leases       $316,311  $  6,873      8.69% $300,753  $  6,168      8.20%   Investment    securities -    taxable        65,828       665      4.04%   59,496       505      3.40%   Investment    securities -    nontaxable      9,127       150      6.57%    7,582       128      6.75%   Federal funds    sold           85,371       833      3.90%   61,373       293      1.91%                 --------  --------  --------  --------  --------  --------   Total    interest-    earning    assets        476,637     8,521      7.15%  429,204     7,094      6.61%                           --------  ========            --------  ======== Noninterest-  earning  assets           54,154                        50,220                 --------                      -------- Total assets    $530,787                      $479,424                 ========                      ======== Liabilities Interest-bearing  liabilities:   Money Market    and Desert    Gold          219,901     1,001      1.82%  210,377       631      1.20%   Savings         43,666        88      0.81%   37,922        63      0.66%   Certificates    of deposit     46,522       332      2.85%   39,185       173      1.77%   Other borrowed    funds             614         6      3.91%      485         1      0.82%                 --------  --------  --------  --------  --------  --------   Total    interest-    bearing    liabilities   310,703     1,427      1.84%  287,969       868      1.21%                           --------  ========            --------  ======== Noninterest-  bearing  liabilities:   Demand    deposits      169,201                       145,775   Other    liabilities     3,409                         3,146                 --------                      -------- Total  liabilities     483,313                       436,890 Stockholders'  equity           47,474                        42,534                 --------                      -------- Total  liabilities and  stockholders'  equity         $530,787                      $479,424                 ========                      ======== Net interest  income                   $  7,094                      $  6,226                           ========                      ======== Net interest  spread                       5.31%                         5.40% Net interest  margin                       5.95%                         5.80% (1) Interest income presented above is stated on a tax-equivalent basis     using the statutory income tax rate of 34%.  The reconciliation of     interest income as presented in the basic financial statements to the     above amounts is as follows:     Interest income      from investment      securities-      non-taxable as      presented in the      basic financial      statements           $     99                      $     85     Adjustment to reported      income to convert to      tax-equivalent amount      51                            43                           --------                      --------     Tax-equivalent income $    150                      $    128                           ========                      ========                          DESERT COMMUNITY BANK                          SUPPLEMENTAL ANALYSES                               (Unaudited)        As of or for the Years Ended December 31, 2005 and 2004                          (Amounts in thousands)                          Year Ended                   Year Ended                      December 31, 2005             December 31, 2004                           Interest   Average            Interest   Average                 Average    Earned   Yield or   Average   Earned   Yield or                 Balances  or Paid  Rate Paid  Balances  or Paid  Rate Paid                 --------  --------  --------  --------  --------  -------- Assets Interest-earning  assets:   Loans and    leases       $306,569  $ 26,094      8.51% $289,272  $ 23,454      8.11%   Investment    securities -    taxable        58,243     2,052      3.52%   51,952     1,823      3.51%   Investment    securities -    nontaxable      7,936       532      6.70%    7,650       515      6.73%   Federal funds    sold           73,263     2,457      3.36%   53,700       688      1.28%                 --------  --------  --------  --------  --------  --------   Total    interest-    earning    assets        446,011    31,135      6.98%  402,574    26,480      6.58%                           --------  ========            --------  ======== Noninterest-  earning assets   58,841                        55,513                 --------                      -------- Total assets    $504,852                      $458,087                 ========                      ======== Liabilities Interest-bearing  liabilities:   Money Market    and Desert    Gold          215,067     3,303      1.54%  198,738     2,180      1.10%   Savings         41,446       327      0.79%   34,092       192      0.56%   Certificates    of deposit     40,288       915      2.27%   41,803       748      1.79%   Other borrowed    funds             861        11      1.28%      584         5      0.85%                 --------  --------  --------  --------  --------  --------   Total    interest-    bearing    liabilities   297,661     4,556      1.53%  275,217     3,125      1.14%                           --------  ========            --------  ======== Noninterest-  bearing  liabilities:   Demand    deposits      159,192                       135,749   Other    liabilities     3,047                         6,117                 --------                      -------- Total  liabilities     459,899                       417,083 Stockholders'  equity           44,953                        41,004                 --------                      -------- Total  liabilities and  stockholders'  equity        $ 504,852                      $458,087                 ========                      ======== Net interest  income                   $ 26,579                      $ 23,355                           ========                      ======== Net interest  spread                       5.45%                         5.44% Net interest  margin                       5.96%                         5.80% (2) Interest income presented above is stated on a tax-equivalent basis     using the statutory income tax rate of 34%.  The reconciliation of     interest income as presented in the basic financial statements to the     above amounts is as follows:     Interest income      from investment      securities-      non-taxable as      presented in the      basic financial      statements           $    351                      $    343     Adjustment to reported      income to convert to      tax-equivalent amount     181                           172                           --------                      --------     Tax-equivalent income $    532                      $    515                           ========                      ======== 

 Contact: Ronald L. Wilson Chairman/CEO (760) 243-2140  

SOURCE: Desert Community Bank

Source: MARKET WIRE

More News in this Category