SOURCE: Desert Community Bank

October 31, 2005 18:51 ET

Desert Community Bank Announces Record Earnings for the Third Quarter and Year-to-Date Periods Ended September 30, 2005

Earnings Increase 61.2% for the Third Quarter and 41.3% Year-to-Date; Results of Operation for the Quarter Ended September 30, 2005

VICTORVILLE, CA -- (MARKET WIRE) -- October 31, 2005 -- Desert Community Bank (the "Bank") (NASDAQ: DCBK) today reported earnings for the quarter and nine-month period ended September 30, 2005 of $1,997,000 and $4,841,000, respectively, as compared to $1,239,000 and $3,426,000, respectively for the same periods in 2004. The growth in earnings of $758,000 for the third quarter of 2005 represents a 61.2% increase over the earnings in the third quarter of 2004. For the year-to-date period ended September 30, 2005, the increase over the comparable 2004 period amounted to $1,415,000, which represents a 41.3% improvement. Diluted earnings per share for the quarter and the nine-month periods ended September 30, 2005 totaled $0.67 and $1.64, as compared to $0.42 and $1.16 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 lower provisions for loan losses. These factors were partially offset by higher operating costs.

Total assets of the Bank increased to a record $530.8 million at September 30, 2005. This level represents increases of $23.8 million (4.7%) since June 30, 2005, $61.0 million (13.0%) since January 1, 2005 and $60.7 million (12.9%) since September 30, 2004. Average earning assets for the third quarter of 2005 increased to a record $460.9 million. This level represents increases of $34.1 million (8.0%) from the second quarter of 2005 and $46.9 million (11.3%) from the third quarter of 2004.

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

--  federal funds sold increased by $15.7 million (19.6%) to $96.1 million
--  total loans increased by $10.5 million (3.5%) to $312.8 million
--  total deposits increased by $22.0 million (4.8%) to $481.1 million
--  shareholders' equity increased by $1.5 million (3.3%)
--  repossessed and foreclosed assets declined from $3.4 million to $3.2
    million
--  net interest margin increased to 6.12% from 5.92% in the second
    quarter of 2005 and from 5.95% in the third quarter of 2004
    
Highlights for the nine-month period ended September 30, 2005, as compared to September 30, 2004 include:
--  federal funds sold increased by $43.2 million (81.6%)
--  total loans increased by $11.1 million (3.7%)
--  total deposits increased by $57.4 million (13.5%)
--  shareholders' equity increased by $4.1 million (9.6%)
--  repossessed and foreclosed assets declined from $6.4 million to $3.2
    million
--  net interest margin increased to 5.84% from 5.77%
    
During the quarter and nine-month periods ended September 30, 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. The provision for loan losses declined in the third quarter to $125,000, as compared to $200,000 in the second quarter and $300,000 in the first quarter. On a comparative basis, the year-to-date provision for loan losses in 2005 was $625,000 as compared to $1,550,000 in 2004.

The Bank's net interest income before its provision for loan losses was $7,012,000 for the quarter, which represents an increase of $902,000 (14.8%) over the third quarter of 2004. For the nine-month period, net interest income before the provision for loan losses was $19,355,000, which represents an increase of $2,355,000 (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 September 30, 2004. The Bank's net interest margin increased to 6.12% for the quarter, as compared to 5.95% for the third quarter of 2004. For the nine-month period, the Bank's net interest margin improved to 5.84% from 5.77% in 2004.

Other operating income was moderately lower for both the quarter and the nine-month periods ended September 30, 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 $5.0 million for the quarter as compared to $4.9 for the third quarter of 2004. For the nine-month periods, total operating expenses amounted to $14.8 million for 2005, as compared to $14.0 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 Bank's efficiency ratio, which measures the proportion of total operating income that is used to cover operating expenses, improved to 60.69% for the quarter and 63.68% for the nine-month periods in 2005, as compared to 61.74% and 65.34% for the quarter and nine-month periods ended in September 2004.

The levels of nonperforming assets, which is composed of nonperforming loans and repossessed and foreclosed assets, fell from $8.3 million to $5.4 million between September 30, 2004 and 2005. This was brought about primarily by the sale of foreclosed real estate which was sold in the second quarter of 2005.

"We are very pleased with the quarter's results," said Ron L. Wilson, Chairman and CEO of the Bank, noting that this was the second straight quarter reflecting record total assets, as well as the second straight quarter with earnings increases of over 60% from the prior year amounts. "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 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." 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)


                                       September    December    September
                                              30,         31,         30,
                                            2005         2004        2004
                                          --------    --------    --------
ASSETS
Cash and due from banks                   $ 27,041    $ 17,014    $ 19,465
Federal funds sold                          96,107      52,920      61,301
                                          --------    --------    --------
  Total cash and cash equivalents          123,148      69,934      80,766
Securities available-for-sale               61,835      64,243      60,356
Securities, restricted equities              2,011       1,794       1,787
Loans held for sale                          2,594       3,015       4,994
Loans, net of allowance of $4,054,
 $3,779, and $3,162                        306,118     294,820     286,452
Foreclosed assets                            3,248       6,392       6,692
Premises and equipment, net                 16,046      15,585      14,857
Cash surrender value of life insurance       8,546       8,343       7,311
Accrued interest receivable and
 other assets                                7,269       5,707       6,936
                                          --------    --------    --------

  TOTAL ASSETS                            $530,815    $469,833    $470,151
                                          ========    ========    ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
  Noninterest-bearing                     $172,034    $137,644    $143,934
  Interest-bearing                         309,069     286,066     281,755
                                          --------    --------    --------
    TOTAL DEPOSITS                         481,103     423,710     425,689
Borrowings                                     700         700         700
Accrued interest payable and
 other liabilities                           2,779       3,257       2,528
                                          --------    --------    --------
    TOTAL LIABILITIES                      484,582     427,667     428,917

Commitments and contingent liabilities

SHAREHOLDERS' EQUITY
Common stock, no par value:  9,375,000
 shares authorized, no par value;
 2,942,372 shares issued at September
 30, 2005, and 2,941,272 at December 31,
 2004 and September 30, 2004                14,838      14,810      14,810
Retained earnings                           31,870      27,382      26,218
Accumulated other comprehensive
 income (loss)                                (475)        (26)        206
                                          --------    --------    --------
    TOTAL SHAREHOLDERS' EQUTY               46,233      42,166      41,234
                                          --------    --------    --------
  TOTAL LIABILITIES AND SHAREHOLDERS'
   EQUITY                                 $530,815    $469,833    $470,151
                                          ========    ========    ========

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 Nine-Month Periods Ended September 30
            (Amounts in thousands, except for per share data)

                                 Three Months Ended      Nine Months Ended
                                    September 30,          September 30,
                                   2005       2004       2005       2004
                                --------   --------   --------   --------
Interest Income
  Loans, including fees         $  6,888   $  6,056   $ 19,082   $ 16,963
  Investment securities              567        594      1,638      1,575
  Direct lease financing              37         86        140        322
  Federal funds sold and other       775        159      1,624        396
                                --------   --------   --------   --------
                                   8,267      6,895     22,484     19,256
                                --------   --------   --------   --------

Interest expense
  Deposits                         1,253        783      3,124      2,252
  Other borrowings                     2          2          5          4
                                --------   --------   --------   --------
                                   1,255        785      3,129      2,256
                                --------   --------   --------   --------

Net interest income                7,012      6,110     19,355     17,000

Provision for loan losses            125        675        625      1,550
                                --------   --------   --------   --------

Net interest income after
 provision for loan losses         6,887      5,435     18,730     15,450
                                --------   --------   --------   --------

Noninterest income
  Service charges and fees           758        715      2,191      2,152
  Voucher control fees               316        230        787        682
  Net gains on sales of loans          -        360          -        360
  Net gains (losses) on sales of
   equipment and premises              -          2          -         (5)
  Net gains (losses) on sales of
   repossessed and foreclosed assets   -          -         75          -
  Other                              210        478        807      1,229
                                --------   --------   --------   --------
                                   1,284      1,785      3,860      4,418
                                --------   --------   --------   --------
Noninterest expense
  Salaries and employee
   benefits                        2,819      2,427      8,098      7,228
  Occupancy and equipment            647        604      1,924      1,743
  Loan processing                    133        430        494        877
  Data processing                    328        286        963        893
  Other                            1,107      1,128      3,302      3,253
                                --------   --------   --------   --------
                                   5,034      4,875     14,781     13,994
                                --------   --------   --------   --------
Income before income taxes         3,137      2,345      7,809      5,874
Income tax expense                 1,140      1,106      2,968      2,448
                                --------   --------   --------   --------

Net income                      $  1,997   $  1,239   $  4,841   $  3,426
                                ========   ========   ========   ========

Weighted average common shares
 outstanding (shares
 in thousands):
  Basic                            2,941      2,941      2,941      2,941
  Diluted                          2,960      2,941      2,951      2,941

Earnings per share
  Basic                         $    .68   $    .42   $   1.65   $   1.16
  Diluted                       $    .67   $    .42   $   1.64   $   1.16


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 Nine-Month Periods Ended September 30
           (Amounts in thousands, except for per share data)


                                    Three Months Ended  Nine Months Ended
                                       September 30,       September 30,
                                      2005      2004      2005      2004
                                    --------  --------  --------  --------
Profitability Ratios:
  Return on average assets              1.54%     1.07%     1.28%     1.03%
  Return on average equity             17.31%    11.90%    14.35%    11.22%
  Net interest margin
   (tax-equivalent)                     6.12%     5.95%     5.84%     5.77%
  Efficiency ratio                     60.69%    61.74%    63.68%    65.34%

Other Information:
  Average total assets              $517,995  $464,956  $502,384  $445,011
  Average interest-earning assets    460,909   414,013   444,348   396,127
  Average equity                      46,112    41,652    44,966    40,707

Share Information:
  Average basic shares outstanding
   (in thousands)                      2,941     2,941     2,941     2,941
  Average diluted shares outstanding
   (in thousands)                      2,960     2,941     2,951     2,941
  Basic earnings per share          $    .68  $    .42  $   1.65  $   1.16
  Diluted earnings per share        $    .67  $    .42  $   1.64  $   1.16

Book value per share at end of
 period
  Shares outstanding at end of
   period                              2,942     2,941     2,942     2,941
  Share prices and quotes:
      Closing price per share at
       end of period                   32.49     26.01     32.49     26.01
      Average price per share
       during period                   28.54     26.11     27.83     24.53
      Highest share price during
       the period                      33.16     27.17     33.16     27.17
      Lowest share price during the
       period                          25.50     24.32     25.50     21.17
      Closing share price as
       multiple of book value           2.07      1.86
      Closing share price as
       multiple of basic earnings:
        Current period annualized      11.97     15.43
        Trailing twelve months         12.04     16.03

Asset Quality Information at end of
 period:
    Nonperforming loans                2,126     1,655
    Repossessed and foreclosed
     assets                            3,248     6,692
    Allowance for loan losses          4,054     3,162
    Nonperforming loans/total loans     0.69%     0.57%
    Nonperforming assets/total
     assets                             1.01%     1.78%
    Allowance for loan losses/loans
     outstanding                        1.31%     1.09%
    Allowance for loan
     losses/nonaccrual loans          190.69%   191.06%

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 September 30, 2005 and 2004
                         (Amounts in thousands)


                     Three Months Ended             Three Months Ended
                     September 30, 2005             September 30, 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       $306,521  $  6,925      9.04% $306,487  $  6,142      8.02%
  Investment
   securities -
   taxable        57,099       479      3.36%   54,082       509      3.76%
  Investment
   securities -
   nontaxable      7,869       133      6.78%    7,587       129      6.79%
  Federal funds
   sold           89,420       775      3.47%   45,857       159      1.39%
                --------  --------  --------  --------  --------  --------
  Total
   interest-
   earning
   assets        460,909     8,312      7.21%  414,013     6,939      6.70%
                          --------  ========            --------  ========
Noninterest-
 earning assets   57,086                        50,943
                --------                      --------
Total assets    $517,995                      $464,956
                ========                      ========

Liabilities
Interest-bearing
 liabilities:
  Money Market
   and Desert
   Gold          221,218       941      1.70%  203,533       561      1.10%
  Savings         42,658        85      0.80%   35,226        50      0.57%
  Certificates
   of deposit     39,202       227      2.32%   40,597       172      1.69%
  Other borrowed
   funds           1,797         2      1.14%      743         2      1.08%
                --------  --------  --------  --------  --------  --------
  Total
   interest-
   bearing
   liabilities   304,874     1,255      1.65%  280,099       785      1.12%
                          --------  ========            --------  ========
Noninterest-
 bearing
 liabilities:
  Demand
   deposits      164,821                       140,604
  Other
   liabilities     2,189                         2,601
                --------                      --------
Total
 liabilities     471,883                       423,304
Stockholders'
 equity           46,112                        41,652
                --------                      --------
Total
 liabilities and
 stockholders'
 equity         $517,995                      $464,956
                ========                      ========
Net interest
 income                   $  7,057                      $  6,154
                          ========                      ========
Net interest spread           5.57%                         5.58%

Net interest margin           6.12%                         5.95%

(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           $     88                      $     85

    Adjustment to reported
     income to convert to
     tax-equivalent amount      45                            44
                          --------                      --------

    Tax-equivalent
     adjustment
     to income            $    133                      $    129
                          ========                      ========


                         DESERT COMMUNITY BANK
                         SUPPLEMENTAL ANALYSES
                              (Unaudited)
   As of or for the Nine-Month Periods Ended September 30, 2005 and 2004
                         (Amounts in thousands)

                     Nine Months Ended             Nine Months Ended
                     September 30, 2005            September 30, 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         $304,919  $ 19,221      8.40% $286,794  $ 17,285      8.04%
  Investment
   securities -
   taxable        55,637     1,387      3.32%   50,518     1,317      3.48%
  Investment
   securities -
   nontaxable      7,715       381      6.59%    7,673       391      6.79%
  Federal funds
   sold           76,608     1,623      2.83%   51,143       396      1.03%
                --------  --------  --------  --------  --------  --------
  Total
   interest-
   earning
   assets        444,878    22,613      6.78%  396,127    19,389      6.53%
                          --------  ========            --------  ========
Noninterest-
 earning assets   57,506                        48,884
                --------                      --------
Total assets    $502,384                      $445,011
                ========                      ========

Liabilities
Interest-bearing
 liabilities:
  Money Market
   and Desert
   Gold          215,312     2,302      1.43%  194,798     1,548      1.06%
  Savings         41,444       239      0.77%   32,797       129      0.52%
  Certificates of
   deposit        38,298       583      2.03%   42,690       575      1.80%
  Other borrowed
   funds           1,759         5      0.38%      617         4      0.86%
                --------  --------  --------  --------  --------  --------
  Total
   interest-
   bearing
   liabilities   296,813     3,129      1.41%  270,902     2,256      1.11%
                          --------  ========            --------  ========
Noninterest-
 bearing
 liabilities:
  Demand
   deposits      158,417                       130,841
  Other
   liabilities     2,459                         2,561
                --------                      --------
Total
 liabilities     457,418                       404,304
Stockholders'
 equity           44,966                        40,707
                --------                      --------
Total
 liabilities and
 stockholders'
 equity         $502,384                      $445,011
                ========                      ========

Net interest
 income                   $ 19,484                      $ 17,133
                          ========                      ========

Net interest
 spread                       5.37%                         5.42%

Net interest
 margin                       5.84%                          5.77%


(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           $    252                      $    258

    Adjustment to reported
     income to convert to
     tax-equivalent
     amount                    129                           133
                          --------                      --------

    Tax-equivalent
     adjustment
     to income            $    381                      $    391
                          ========                      ========

Contact Information

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