First National Bank of Northern California Reports Third Quarter 2012 Earnings of $1.33 per Diluted Share

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SOUTH SAN FRANCISCO, CA--(Marketwire - Nov 2, 2012) -  FNB Bancorp (OTCQB: FNBG), parent company of First National Bank of Northern California (the "Bank"), today announced net earnings available to common shareholders for the third quarter of 2012 of $4,783,000 or $1.33 per diluted share, compared to net earnings available to common shareholders of $817,000 or $0.23 per diluted share for the third quarter of 2011. During September 2012, Oceanic Bank Holding, Inc. and its wholly-owned subsidiary, Oceanic Bank, were acquired by FNB Bancorp. The material increase in earnings, assets and loans year over year were enhanced by this one-time event. Dividend payments on the preferred shares outstanding were made as required by the Treasury Department's Small Business Lending Program during the third quarter of 2012 and the third quarter of 2011. Total assets as of September 30, 2012 were $897,724,000 compared to $723,020,000 as of September 30, 2011. Our net loan totals increased by $103,828,000 or 23.4% during the nine months of this year, and our deposits increased $170,186,000 or 27.4% during the same time period. The Company's liquidity position remains strong with $228,805,000 in available for sale securities and $70,803,000 in cash and cash equivalents as of September 30, 2012.

On September 15, 2011, Preferred Stock was issued by FNB Bancorp to the U. S. Treasury as part of the U. S. Treasury's Small Business Lending Fund ("SBLF"). The initial dividend rate is 5%. Depending on the volume of our small business lending, it can decrease to as low as one percent. If our small business lending does not increase in the first two years, the rate will increase to seven percent. After 4.5 years, the dividend rate will increase to nine percent if the Company has not repaid the SBLF funding. The proceeds of this Preferred Stock investment were used to pay off the Preferred Stock Series A and B that were issued by the U. S. Treasury under the TARP program in 2009.

"With respect to the recent acquisition of Oceanic Bank, all the employees of Oceanic were offered employment with First National Bank of Northern California, so there were no layoffs that resulted from this transaction. Adding Oceanic Bank's locations, customers, and employee expertise to that of our own will give us a greater presence in San Francisco. During the third quarter of 2012, our nonperforming loans continued to decrease, excluding the nonperforming loans acquired in the Oceanic Bank merger and one large nonperforming credit relationship was paid off in full," stated Tom McGraw, Chief Executive Officer.

 
Financial Highlights: Third Quarter, 2012          
Consolidated Statements of Earnings            
(in '000s except earnings per share amounts)          
 
 
 
 
 
 
 
 
 
Three months
ended
September 30,
2012
 
 
 
 
 
 
 
 
Three months
ended
September 30,
2011
 
 
 
 
 
 
 
 
Nine months
ended
September 30,
2012
 
 
 
 
 
 
 
 
Nine months
ended
September 30,
2011
 
 
 
 
                                 
Interest income   $ 8,355     $ 8,241     $ 24,115     $ 24,730  
Interest expense     663       842       2,000       2,583  
  Net interest income     7,692       7,399       22,115       22,147  
Provision for loan losses     (400 )     (450 )     (1,200 )     (1,300 )
Noninterest income     4,770       1,367       8,105       3,769  
Noninterest expense     6,631       6,783       20,182       20,303  
  Income before income taxes     5,431       1,533       8,838       4,313  
Income tax expense     490       344       1,381       1,141  
  Net earnings     4,941       1,189       7,457       3,172  
  Dividends and discount accretion on preferred stock     158       372       501       800  
  Net earnings available to common shareholders   $ 4,783     $ 817     $ 6,956     $ 2,372  
                                 
                                 
Basic earnings per share   $ 1.36     $ 0.23     $ 1.98     $ 0.68  
Diluted earnings per share   $ 1.33     $ 0.23     $ 1.95     $ 0.67  
                                 
Average assets   $ 787,264     $ 724,083     $ 757,792     $ 716,068  
Average equity   $ 90,135     $ 84,574     $ 88,834     $ 82,872  
Return on average assets (annualized)     2.43 %     0.45 %     1.22 %     0.44 %
Return on average equity (annualized)     21.23 %     3.86 %     10.44 %     3.82 %
Efficiency ratio     53 %     77 %     67 %     78 %
Net interest margin (taxable equivalent)     4.58 %     4.83 %     4.55 %     4.92 %
Average shares outstanding     3,516       3,509       3,513       3,509  
Average diluted shares outstanding     3,583       3,528       3,569       3,528  
                                 

"During the third quarter, we demonstrated our ability to grow our deposits and our loan pipeline volumes are increasing. We have hired Stuart Keirle to enhance our business development efforts in San Francisco, and we have successfully expanded our lending reach into Santa Clara County with our loan production office in Sunnyvale. We are continually looking for ways to add value to our franchise, either through expansion of our branch and lending operations organically or through successful acquisitions. However, our primary objective has been, and will continue to be, to provide local banking services that our customers need with service levels that exceed expectations," continued Mr. McGraw.

                 
Financial Highlights: Third Quarter, 2012
Consolidated Balance Sheets
(in '000s)

  As of
September 30,
2012
  As of
December 31,
2011
  As of
September 30,
2011
  As of
December 31,
2010
  Assets:                        
Cash and cash equivalents   $ 70,803   $ 38,474   $ 69,273   $ 60,874
Securities available for sale     228,805     187,664     152,376     126,189
Loans, net     547,549     443,721     456,106     474,828
Premises, equipment and leasehold improvements, net     12,761     13,227     13,399     13,535
Other real estate owned, net     1,923     2,747     2,988     6,680
Goodwill     1,841     1,841     1,841     1,841
Other equity securities     5,888     4,608     4,768     5,246
Accrued interest receivable     3,639     3,614     3,120     3,765
Prepaid expenses     1,513     2,107     1,753     2,843
Other assets     23,002     17,638     17,396     18,838
  Total assets   $ 897,724   $ 715,641   $ 723,020   $ 714,639
                         
    Liabilities and stockholders' equity:                        
Deposits:                        
Demand and NOW   $ 254,611   $ 202,690   $ 201,823   $ 197,650
Savings and money market     351,078     310,237     324,321     305,390
Time     186,275     108,851     105,510     125,400
  Total deposits     791,964     621,778     631,654     628,440
Accrued expenses and other liabilities     11,044     6,667     5,672     5,275
  Total liabilities     803,008     628,445     637,326     633,715
Stockholders' equity     94,716     87,196     85,694     80,924
  Total liab. and stockholders' equity   $ 897,724   $ 715,641   $ 723,020   $ 714,639
                         
Other Financial Information                        
Allowance for loan losses   $ 8,582   $ 9,897   $ 9,646   $ 9,524
Nonperforming assets   $ 25,555   $ 21,845   $ 19,168   $ 23,392
Total gross loans   $ 556,131   $ 453,618   $ 465,752   $ 484,352
                         

On September 21, 2012, FNB Bancorp completed its purchase of Oceanic Bank Holding, Inc., the sole shareholder of Oceanic Bank. As part of the purchase transaction, Oceanic Bank Holding, Inc. was merged into FNB Bancorp, and Oceanic Bank was merged into First National Bank of Northern California. The assets and liabilities were valued at fair value at the time the purchase was completed. Listed below is a summary of the balance sheet of Oceanic Bank at acquisition, the preliminary estimates of the balance sheet effects of recording the assets and liabilities at fair value, and the post-merger balance sheet positions that were merged into First National Bank of Northern California. The purchase transaction was an all cash deal for $27,750,000, which resulted in a bargain purchase gain of $3,666,133 which is recorded as non-interest income.

   
Oceanic Bank  
Statement of Financial Condition  
As of Friday, September 21, 2012 PST  
   
Description  
 
 
 
Balance
as of
9/21/2012
 
 
 
 
 
 
 
 
Merger and Fair
Market
Adjustments (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance
post
merger
 
 
 
 
                               
Assets                              
Cash and Due From Banks   $ 9,297,624     $ (27,671,585 )   (1 )   $ (18,373,961 )
Time deposits     17,096,333       -             17,096,333  
MBS and CMO securities     5,292,917       (209,612 )           5,083,305  
Commercial paper investments     8,303,735       -             8,303,735  
Gross loans     107,483,947       -             107,483,947  
Loan purchase discount     -       (4,290,371 )           (4,290,371 )
Less: Allowance for loan and lease losses     (1,902,092 )     1,902,092             -  
Fixed assets and suspense accounts     42,867       -             42,867  
Interest receivable     396,587       -             396,587  
Prepaid assets     96,586       -             96,586  
Deferred tax assets     1,008,860       972,000             1,980,860  
Core deposit intangibles     -       109,544             109,544  
  Total assets   $ 147,117,364     $ (29,187,932 )         $ 117,929,432  
                               
Liabilities                              
DDA and savings deposits   $ 24,075,230       -           $ 24,075,230  
Time deposits     83,544,506       49,401             83,593,907  
  Total deposits   $ 107,619,736     $ 49,401           $ 107,669,137  
                               
FHLB Borrowings     6,015,000                     6,015,000  
Deferred interest offset - FHLB Borrowings     -       81,711             81,711  
Interest payable     163,735       -             163,735  
Accounts payable     333,716       -             333,716  
  Total liabilities   $ 114,132,187     $ 131,112           $ 114,263,299  
                               
Equity:                              
Capital Stock   $ 10,000,000     $ (10,000,000 )         $ -  
Retained earnings     22,086,214       (22,086,214 )           -  
Bargain purchase gain     -       3,666,133             3,666,133  
YTD 2012 net earnings     898,963       (898,963 )           -  
  Total Equity   $ 32,985,177     $ (29,319,044 )         $ 3,666,133  
                               
Total liabilities and equity   $ 147,117,364     $ (29,187,932 )         $ 117,929,432  
                               
Footnotes:
1) The $27,671,585 is the purchase price of $27,750,000 plus escrow costs less funds held in the name of Oceanic Holding, Inc. They are not fair value adjustments to book valuations.
2) All fair market value adjustments contained in this schedule are based on the facts known at this time. Subsequent information may become available that could cause these fair market adjustments to change.
 

Cautionary Statement: This release contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those stated herein. Management's assumptions and projections are based on their anticipation of future events and actual performance may differ materially from those projected. Risks and uncertainties which could impact future financial performance include, among others, (a) competitive pressures in the banking industry; (b) changes in the interest rate environment; (c) general economic conditions, either nationally or regionally or locally, including fluctuations in real estate values; (d) changes in the regulatory environment; (e) changes in business conditions or the securities markets and inflation; (f) possible shortages of gas and electricity at utility companies operating in the State of California, and (g) the effects of terrorism, including the events of September 11, 2001, and thereafter, and the conduct of war on terrorism by the United States and its allies. Therefore, the information set forth herein, together with other information contained in the periodic reports filed by FNB Bancorp with the Securities and Exchange Commission, should be carefully considered when evaluating its business prospects. FNB Bancorp undertakes no obligation to update any forward-looking statements contained in this release.

Contact:

Tom McGraw
Chief Executive Officer
(650) 875-4864

Dave Curtis
Chief Financial Officer
(650) 875-4862

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