SOURCE: Civitas BankGroup

October 24, 2006 12:51 ET

Civitas Reports Continued Strong Growth and Improving Profits

FRANKLIN, TN -- (MARKET WIRE) -- October 24, 2006 -- Civitas BankGroup (NASDAQ: CVBG) reported net income of $5.5 million for the first nine months of 2006 and 25.1% growth in loans at its subsidiary, Cumberland Bank.

The $5.5 million nine months' net income from continuing operations represents a $2.6 million or 89.8% increase from the comparable period in 2005. On a per share basis, 2006 net income from continuing operations totaled $0.35 per share, compared to $0.18 per share in 2005.

Net income for the first nine months of 2006 included a non-recurring $2.1 million (after tax) gain related to the company's sale of its 50% interest in the Murray (Kentucky) Bank. Earnings for the first nine months of 2006, excluding this gain, were $3.4 million compared to earnings from continuing operations of $2.9 million for the first nine months of 2005.

Net income for the third quarter 2006 was $1.2 million ($0.07 per share), an increase of 42.1% over the third quarter 2005.

Loans and deposits at Cumberland Bank have continued to exhibit strong growth. Compared to September 30, 2005, loans have grown $124.5 million (26.2%) and deposits have increased $132.4 million (23.7%). Compared to year-end 2005, loans have grown at an annualized rate of 33.5% and annualized growth compared to June 30, 2006, was 45.6%.

"Growth dominated our financial performance during the third quarter of 2006," explained Richard E. Herrington, President of Civitas BankGroup. "Loans grew $61 million during the third quarter, an annualized growth rate of 45.6%. In the last twelve months, we have grown our loan portfolio by $125 million. In the highly competitive Middle Tennessee market, these growth rates are remarkable. The loan and deposit growth reflect the last two years' efforts to focus on the Middle Tennessee market. We are now fully restructured as Middle Tennessee's community bank. We opened our twelfth banking center in Hendersonville earlier this year and have announced plans for new banking centers in Cool Springs and Murfreesboro for 2007."

"However, there is a downside to such dynamic growth," added Herrington. "Short-term, net income is penalized by loan growth as a result of substantial additions to the Allowance for Loan Losses through provision for loan loss expense. In reality, we have given up short-term income to build for longer term profits. Additionally, short-term earnings have been negatively impacted by national and local interest rate markets, characterized by a flat or inverted yield curve and rapidly rising short-term interest rates, as we have rebuilt our balance sheet and shifted our funding philosophy away from long-term, high cost certificates of deposits."

"While franchise growth has been outstanding, we have been mindful of the need to continue our focus on asset quality," said Herrington. "Our asset quality ratios put us in a leadership position among peer banks. For example, our delinquency ratio finished the quarter below 0.5% of loans, which is less than half of our peer group average."

"We are in the fourth year of our rebuilding program, and we are pleased with the results," explained Herrington. "Since year-end 2002, we have achieved three key objectives. First, we have eliminated the vast majority of our problem loan issues and implemented an appropriate credit culture. Second, we have significantly grown Cumberland Bank, increasing assets from $468 million at year-end 2002 to $862 million at September 30, 2006. Finally, while sacrificing short-term earnings to solve problems and build a strong foundation, we have increased core earnings and developed a positive trend in profits and profitability. To accomplish these three objectives simultaneously speaks to the abilities and experience of our banking team."

In July 2006, the common stock of Civitas began trading on the NASDAQ Global Markets exchange.

Civitas BankGroup is a bank holding company operating in Middle Tennessee through Cumberland Bank. The company also owns 50% of Nashville's Insurors Bank of Tennessee.

THE STATEMENTS CONTAINED IN THIS RELEASE WHICH ARE NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS DESCRIBING OUR FUTURE PLANS, PROJECTIONS, STRATEGIES AND EXPECTATIONS, ARE BASED ON ASSUMPTIONS AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND OUR CONTROL. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED DUE TO CHANGES IN INTEREST RATES, COMPETITION IN THE INDUSTRY, CHANGES IN LOCAL AND NATIONAL ECONOMIC CONDITIONS AND VARIOUS OTHER FACTORS. ADDITIONAL INFORMATION CONCERNING SUCH FACTORS, WHICH COULD AFFECT US, IS CONTAINED IN OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

Contact Information

  • Contact:
    Aimee Punessen
    Investor Relations
    615.236.7454

    810 Crescent Centre Drive, Suite 320
    Franklin, TN 37067
    office 615.263.9500
    fax 615.383.8830