-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NfRQFog6dLoeYyM/kPb8eDaA2cy5RRHlHsDfbWyjftjFO3Wh3QP+347X3NGqePKz KJM6Q8A7TU69TBXJYVlRiQ== 0000840007-04-000072.txt : 20040722 0000840007-04-000072.hdr.sgml : 20040722 20040721175104 ACCESSION NUMBER: 0000840007-04-000072 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040630 ITEM INFORMATION: FILED AS OF DATE: 20040722 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REDWOOD EMPIRE BANCORP CENTRAL INDEX KEY: 0000840007 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 680166366 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10868 FILM NUMBER: 04925146 BUSINESS ADDRESS: STREET 1: 111 SANTA ROSA AVENUE STREET 2: PO BOX 402 CITY: SANTA ROSA STATE: CA ZIP: 95404-4905 BUSINESS PHONE: 7075734800 MAIL ADDRESS: STREET 1: 111 SANTA ROSA AVENUE CITY: SANTA ROSA STATE: CA ZIP: 95404-4905 8-K 1 sec8k072104.txt REDWOOD EMPIRE BANCORP 2ND QTR RESULTS ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: July 21, 2004 REDWOOD EMPIRE BANCORP (Exact number of Registrant as specified in its charter) California File No. 0-19231 68-0166366 (State or other jurisdiction of (Commission File Number) (IRS Employer) Incorporated or organization) Identification No.) 111 Santa Rosa Avenue, Santa Rosa, California 95404-4905 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (707) 573-4800 ================================================================================ Item 12. Results of Operations and Financial Condition On July 21, 2004, Redwood Empire Bancorp issued a press release concerning financial results for the second quarter ended June 30, 2004, a copy of which is furnished herewith as Exhibit 99. Exhibit 99 - Press Release dated July 21, 2004. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: 07-21-04 REDWOOD EMPIRE BANCORP -------- ---------------------- (Registrant) By: /s/ Kim McClaran ----------------------- Kim McClaran Vice President and Chief Financial Officer EX-99 2 sec8k072104ex99_1.txt REB 2ND QTR 04 PR AND FINANCIALS Exhibit 99.1 FOR: REDWOOD EMPIRE BANCORP APPROVED BY: Patrick Kilkenny President and CEO (707) 573-4911 For Immediate Release REDWOOD EMPIRE BANCORP REPORTS SECOND QUARTER 2004 EARNINGS Santa Rosa, CA. - (July 21, 2004) -- Redwood Empire Bancorp, (Nasdaq: REBC) today reported net income of $1,851,000 or $.36 per diluted share for the quarter ended June 30, 2004. This compares to net income of $2,181,000 or $.42 per diluted share for the second quarter of 2003. For the six months ended June 30, 2004, net income was $3,539,000 or $.69 per diluted share as compared to $4,197,000 or $.80 per diluted share one year ago. On July 15, 2003, the Company's Board of Directors declared a three-for-two stock split of its outstanding shares of common stock. Earnings per share information for all periods presented give effect to the split. Annualized return on average equity was 26.37% and 25.52% for the three and six months ended June 30, 2004 as compared to annualized return on average equity of 29.85% and 29.31% for the same periods one year ago. Annualized return on average assets was 1.44% and 1.37% for the three and six months ended June 30, 2004 as compared to 1.67% and 1.64% one year ago. The Company experienced a decline in net income during the three and six months ended June 30, 2004 when compared to the same periods in 2003, primarily due to a decline in the amount of interest income recognized on the available for sale investment portfolio, an increase in the Company's effective tax rate and higher operating expenses, including a portion related to adding capacity for future growth. Interest income on available for sale securities declined due to significant paydown activity which has occurred within the mortgage-backed securities portfolio throughout the second half of 2003 and the first half of 2004. In consideration of this paydown activity, the Company decided to reduce exposure to interest rate risk and not reinvest the proceeds back into the investment portfolio. As previously disclosed, the Company formed its Real Estate Investment Trust (REIT) subsidiary on January 15, 2002. With the formation of the REIT, the Company began to recognize state tax benefits in the first quarter of 2002. During December 2003, the California Franchise Tax Board took the position that certain tax transactions related to REITs and regulated investment companies (RICs) would be disallowed. Therefore, during the second quarter of 2004 the Company terminated the REIT. As previously announced, during December 2003 the Company reversed previously recognized net state tax benefits related to the REIT and will not record any related state tax benefits in the future. Due to the absence of such state tax benefits, the Company's effective tax rate increased by 4% from 36% to 40% for the three months ended June 30, 2004 when compared to June 30, 2003. On a year to date basis, the effective tax rate increased by 5% from 35% to 40%. This change in the effective tax rate had a negative impact on net income of $111,000, or $.03 per diluted share for the second quarter of 2004 and $268,000, or $.05 per diluted share for the six-month period ending June 30, 2004. Net Interest Income Interest income was $7,026,000 for the second quarter of 2004 as compared to $7,608,000 for the second quarter of 2003, a decrease of $582,000 or 8%. Interest income decreased $956,000, or 6% to $14,194,000 for the six months ended June 30, 2004, as compared to $15,150,000 one year ago. While the Company has experienced growth in average portfolio loans during 2004 as compared to 2003, the continued low interest rate environment and substantial paydown activity within the mortgage-backed securities portfolio have both had a negative impact on interest income. Average portfolio loans totaled $414,332,000 for the second quarter of 2004 as compared to $407,797,000 for the same period one year ago, an increase of $6,535,000 or 2%. For the six months ended June 30, 2004, average portfolio loans have grown $17,150,000, or 4% to $411,603,000 from $394,453,000. Average investment securities totaled $58,608,000 and $62,727,000 for the three and six months ended June 30, 2004, as compared to $82,136,000 and $90,890,000 for the same periods one year ago. For the three and six months ended June 30, 2004, interest expense was $1,514,000 and $3,155,000, down $416,000, or 22% and $787,000, or 20% when compared to the same periods in 2003. With the decline in the general interest rate environment, the Company has been successful in reducing costs associated with interest bearing deposits. For the three and six months ended June 30, 2004, the cost of average interest bearing deposits was 1.29% and 1.34% down from 1.80% and 1.88% for the three and six months ended June 30, 2003. The Company has also improved the current mix of deposits by increasing noninterest bearing demand deposits, while decreasing the balance of higher cost time deposits. Net interest income was $5,512,000 for the second quarter of 2004, a decrease of $166,000, or 3% percent when compared to $5,678,000 for the second quarter of 2003. The net interest margin was 4.61% for the second quarter of 2004 as compared to 4.62% one year ago. For the six months ended June 30, 2004, net interest income was $11,039,000, a decrease of $169,000 or 2% from $11,208,000 at June 30, 2003. Net interest margin was 4.58% for the six months ended June 30, 2004 as compared to 4.62% one year ago. The Company's net interest margin has been negatively impacted during 2004 due to the additional interest expense incurred with the completion of the Company's second $10,000,000 trust preferred securities financing in July 2003. Such financing, which has been used for stock repurchases and other corporate matters, bears an annual interest rate of 6.35%. Total interest expense for both trust preferred securities financing was $414,000 and $827,000 for the three and six months ended June 30, 2004 as compared to $255,000 and $510,000 during the same periods in 2003. Loan Activity Total loans as of June 30, 2004 were $424,086,000, an increase of $9,023,000, or 2% when compared to total loans of $415,063,000 at June 30, 2003. The Company continues to focus on improving asset mix and growth within the loan portfolio. Several additional loan personnel have been hired to assist with the more rapid loan growth expected throughout the remainder of 2004. During the second quarter of 2004, total loans increased $12,841,000 when compared to March 31, 2004, primarily due to an increase of $6,196,000 in commercial loans, an increase in commercial real estate loans of $12,697,000, offset by a decline in construction loans of $6,723,000. It is anticipated that the decline in construction loans experienced during the second quarter of 2004 will not continue and that the portfolio will grow during the remainder of 2004. Loan Losses Nonperforming assets represented .3% of total assets at June 30, 2004 as compared to .6% at the end of the same quarter one year ago. The allowance for loan losses was 1.66% of total loans and 448% of nonperforming loans at June 30, 2004 as compared to 1.80% of total loans and 241% of nonperforming loans at June 30, 2003. The Company had net charge-offs of $138,000 or .13% (annualized) and $123,000 or .05% (annualized) of average portfolio loans for the three and six months ended June 30, 2004. This compares to net recoveries of $137,000 or ..13% (annualized) and $92,000 or .05% (annualized) for the three and six months ended June 30, 2003. There was no loan loss provision for the three and six months ended June 30, 2004 and June 30, 2003. Deposits Total deposits as of June 30, 2004, were $453,043,000, a decrease of $13,592,000, or 3% when compared to one year ago. The decrease in total deposits during the second quarter of 2004 when compared to 2003 is due to the intentional run-off of higher cost time deposits, partially offset by growth in noninterest bearing demand deposits. Noninterest Income Noninterest income increased 15% to $1,899,000 for the quarter ended June 30, 2004 as compared to $1,649,000 for the same period in 2003. Noninterest income was $3,607,000 for the six months ended June 30, 2004 as compared to $3,278,000 one year ago. Merchant draft processing revenues increased $220,000 from $1,088,000 in the second quarter of 2003 to $1,308,000 in the second quarter of 2004 due to an increase in processing volume. Merchant draft processing revenues increased $252,000 from $2,217,000 at June 30, 2003 to $2,469,000 at June 30, 2004. Excluding net revenue from merchant bankcard processing, noninterest income amounted to $591,000 and $1,138,000 for the three and six months ended June 30, 2004 as compared to $561,000 and $1,061,000 for the same periods one year ago. The increase in other income during the three and six month period of 2004 as compared to 2003 is primarily due to an increase in other income of $92,000 and $169,000 partially offset by a decrease in net realized gains on investment securities available for sale of $86,000. The increase in other income is primarily due to income associated with the Company's implementation of a program to sell investment products and income derived from the purchase of life insurance policies on certain key executives. Noninterest Expense Noninterest expense was $4,329,000 for the quarter ended June 30, 2004 as compared to $3,901,000 in the same period one year ago, which represents an increase of $428,000 or 11%. For the six months ended June 30, 2004, noninterest expense increased $764,000 or 10% to $8,751,000 from $7,987,000 one year ago. The increase in noninterest expense is primarily attributable to an increase in salaries and employee benefits expense. The increase during 2004 is partially due to an increase of the number of full time equivalent employees employed by the Company, the continued impact of increased costs associated with health care and workers compensation insurance and normal annual salary increases. Additionally, when compared to June 2003, salaries and employee benefits expense was negatively impacted by a decline in contra-salary expense related to Statement of Accounting Standards No. 91 of $85,000 for the three month period ended June 30, 2004, and a decline of $185,000 for the six month period ended June 30, 2004, resulting from lower levels of loan originations. The Company's efficiency ratio for the three and six months ended June 30, 2004 was 58% and 60% and as compared to 53% and 55% one year ago. The efficiency ratio for the Company's subsidiary, National Bank of the Redwoods was 54% and 55% for the three and six months ended June 30, 2004 as compared to 50% and 52% one year ago. Segments For the three and six months ended June 30, 2004, net income of the Company's community banking segment was $1,415,000 and $2,766,000 on revenues of $5,977,000 and $11,944,000. This compares to net income of $1,795,000 and $3,415,000 and revenues of $6,011,000 and $11,876,000 for the same periods one year ago. The segment's decrease in net income, as compared to 2003, is primarily attributable to an increase in noninterest expense, a slight decrease in net interest income and a higher effective tax rate in 2004, which is partially offset by an increase in noninterest income. The net income of the Company's bankcard segment was $436,000 and $773,000 for the three and six months ended June 30, 2004 versus $386,000 and $782,000 in 2003. The increase in the segment's net income for the three and six months ended June 30, 2004 is primarily due to an increase in merchant draft processing revenues, which is partially offset by a decrease in net interest income. The bankcard segment's net interest income is partially determined by the Company's internal funds transfer pricing systems, which assigns a cost of funds or credit for funds to assets or liabilities based on their type, maturity or repricing characteristics. The decrease in net interest income for the bankcard segment is due to a decline in the general interest rate environment and a decrease in the segment's customer deposit base, which resulted in a decrease in the credit for funds given to the segment. The merchant bankcard segment's net income comprised 24% and 22% of the Company's consolidated net income for the three and six months ended June 30, 2004, as compared to 18% and 19% for the three and six months ended June 30, 2003. Capital Structure In January 2004, the Company raised its quarterly cash dividend to $0.21 per common share from $0.17. In August 2001, the Company announced an authorization to repurchase 533,250 shares, as adjusted for the three-for-two stock splits declared September 20, 2001 and July 15, 2003. In August 2003, the Company announced an authorization to repurchase an additional 496,500 shares, for a total authorization of 1,029,750. To date, 557,987 shares have been repurchased under the current authorization, as adjusted for the three-for-two stock splits. Under the repurchase program, the Company plans to purchase shares from time to time on the open market and/or in privately negotiated transactions. The Company continues to believe this represents a prudent use of shareholder capital and an investment in the Company's future. As of June 30, 2004, Redwood Empire Bancorp had total assets of $515,421,000 and 4,947,623 common shares outstanding. The Company provides diverse financial products and services which are marketed through full-service offices in the North Coast counties of California. Redwood Empire Bancorp stock is traded on The Nasdaq Stock Market(R) under the symbol REBC. Except for historical information contained herein, the statements contained in this press release, including statements concerning future increases in the value of Redwood Empire Bancorp stock, are forward-looking statements within the meaning of the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act or 1934, as amended. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those set forth in or implied by forward-looking statements. These risks are described from time to time in Redwood Empire Bancorp's Securities and Exchange Commission filings, including its Annual Reports on Form 10-K and quarterly reports on Form 10-Q. Redwood Empire Bancorp disclaims any intent or obligation to update these forward-looking statements. (Tables to follow)
REDWOOD EMPIRE BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands except for earnings per share and share data) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 ------- ------- ------- ------- Interest income: Interest and fees on loans $6,343 $6,730 $12,757 $13,136 Interest on investment securities 664 868 1,390 1,991 Interest on federal funds sold 19 10 47 23 ------- ------- ------- ------- Total interest income 7,026 7,608 14,194 15,150 Interest expense: Interest on deposits 1,087 1,637 2,289 3,381 Interest on other borrowings 427 293 866 561 ------- ------- ------- ------- Total interest expense 1,514 1,930 3,155 3,942 ------- ------- ------- ------- Net interest income 5,512 5,678 11,039 11,208 Provision for loan losses --- --- --- --- ------- ------- ------- ------- Net interest income after provision for loan losses 5,512 5,678 11,039 11,208 Noninterest income: Service charges on deposit accounts 266 254 512 522 Merchant draft processing, net 1,308 1,088 2,469 2,217 Loan servicing income 55 43 82 78 Net realized gains on investment securities available for sale --- 86 --- 86 Other income 270 178 544 375 ------- ------- ------- ------- Total noninterest income 1,899 1,649 3,607 3,278 Noninterest expense: Salaries and employee benefits 2,615 2,258 5,348 4,542 Occupancy and equipment expense 540 478 1,075 1,092 Other 1,174 1,165 2,328 2,353 ------- ------- ------- ------- Total noninterest expense 4,329 3,901 8,751 7,987 ------- ------- ------- ------- Income before income taxes 3,082 3,426 5,895 6,499 Provision for income taxes 1,231 1,245 2,356 2,302 ------- ------- ------- ------- Net income $1,851 $2,181 $3,539 $4,197 ======= ======= ======= ======= Basic earnings per share: Net income available for common stock $0.37 $0.43 $0.72 $0.83 shareholders Weighted average shares (1) 4,944,000 5,084,000 4,946,000 5,081,000 Diluted earnings per share: Net income available for common stock $0.36 $0.42 $0.69 $0.80 shareholders Weighted average shares (1) 5,079,000 5,216,000 5,093,000 5,239,000 Selected Ratios Annualized Return on Average Total Equity 26.37 % 29.85% 25.52 % 29.31% Annualized Return on Average Total Assets 1.44 % 1.67% 1.37 % 1.64% (1) Adjusted for three-for-two stock split announced July 15, 2003.
REDWOOD EMPIRE BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In Thousands) June 30, December 31, June 30, 2004 2003 2003 ----------- ------------ ---------- (Unaudited) (Unaudited) Assets: Cash and due from banks $18,827 $19,259 $23,139 Federal funds sold 5,600 8,600 4,600 -------- -------- -------- Cash and cash equivalents 24,427 27,859 27,739 Investment securities: Held to maturity 17,223 17,566 16,269 Available for sale, at fair value 36,300 58,229 57,151 -------- -------- -------- Total investment securities 53,523 75,795 73,420 Mortgage loans held for sale 5 192 653 Loans: Residential real estate mortgage 104,297 108,851 119,619 Commercial real estate mortgage 197,954 186,185 173,757 Commercial 65,585 55,473 60,960 Real estate construction 41,723 51,154 47,756 Installment and other 14,862 13,025 13,178 Less net deferred loan fees (335) (167) (207) -------- -------- -------- Total portfolio loans 424,086 414,521 415,063 Less allowance for loan losses (7,039) (7,162) (7,492) -------- -------- -------- Net loans 417,047 407,359 407,571 Premises and equipment, net 2,191 2,489 2,876 Cash surrender value of life insurance 8,832 3,782 3,703 Other assets and interest receivable 9,396 11,424 9,912 -------- -------- -------- Total assets $515,421 $528,900 $525,874 ======== ======== ======== Liabilities and Shareholders' equity: Deposits: Noninterest bearing demand deposits $117,785 $107,359 $98,853 Interest-bearing transaction accounts 161,212 154,640 158,426 Time deposits one hundred thousand and over 74,001 73,262 75,217 Other time deposits 100,045 119,521 134,139 -------- -------- -------- Total deposits 453,043 454,782 466,635 Short-term borrowings 1,939 16,265 4,463 Subordinated debentures 20,000 20,000 10,000 Other liabilities and interest payable 12,171 10,173 14,500 -------- -------- -------- Total liabilities 487,153 501,220 495,598 Shareholders' equity: Common stock 10,520 10,577 11,130 Retained earnings 17,424 16,344 18,098 Accumulated other comprehensive income, net of tax 324 759 1,048 -------- -------- -------- Total shareholders' equity 28,268 27,680 30,276 -------- -------- -------- Total liabilities and shareholders' equity $515,421 $528,900 $525,874 ======== ======== ========
REDWOOD EMPIRE BANCORP AND SUBSIDIARIES BUSINESS SEGMENTS (Unaudited) (Dollars in thousands) Three Months Ended Six Months Ended June 30, 2004 June 30, 2004 ------------------------ --------------------- Community Community Banking Bankcard Banking Bankcard --------- -------- --------- -------- Total interest income $7,026 $ --- $14,194 $ --- Total interest expense 1,514 --- 3,153 2 Interest income (expense) allocation (126) 126 (235) 235 ------ ----- ------- ----- Net interest income 5,386 126 10,806 233 ------ ----- ------- ----- Provision for loan losses --- --- --- --- Service charges on deposit accounts 266 --- 512 --- Merchant draft processing, net --- 1,308 --- 2,469 Loan servicing income 55 --- 82 --- Other income 270 --- 544 --- ------ ----- ------- ----- Total noninterest income 591 1,308 1,138 2,469 ------ ----- ------- ----- Salaries and employee benefits 2,120 495 4,361 987 Occupancy and equipment expense 489 51 977 98 Other 1,013 161 1,999 329 ------ ----- ------- ----- Total noninterest expense 3,622 707 7,337 1,414 ------ ----- ------- ----- Income before income tax expense 2,355 727 4,607 1,288 Income tax expense 940 291 1,841 515 ------ ----- ------- ----- Net income $1,415 $436 $2,766 $773 ====== ===== ======= =====
Three Months Ended Six Months Ended June 30, 2004 June 30, 2004 ------------------------ --------------------- Community Community Banking Bankcard Banking Bankcard --------- -------- --------- -------- Total interest income $7,608 $ --- $15,150 $ --- Total interest expense 1,913 17 3,920 22 Interest income (expense) allocation (245) 245 (415) 415 ------ ----- ------- ----- Net interest income 5,450 228 10,815 393 ------ ----- ------- ----- Provision for loan losses --- --- --- --- Service charges on deposit accounts 254 --- 522 --- Merchant draft processing, net --- 1,088 --- 2,217 Loan servicing income 43 --- 78 --- Net realized gains on investment securities available for sale 86 --- 86 --- Other income 178 --- 375 --- ------ ----- ------- ----- Total noninterest income 561 1,088 1,061 2,217 ------ ----- ------- ----- Salaries and employee benefits 1,800 458 3,630 912 Occupancy and equipment expense 436 42 1,001 91 Other 954 211 1,954 399 ------ ----- ------- ----- Total noninterest expense 3,190 711 6,585 1,402 ------ ----- ------- ----- Income before income tax expense 2,821 605 5,291 1,208 Income tax expense 1,026 219 1,876 426 ------ ----- ------- ----- Net income $1,795 $386 $3,415 $782 ====== ===== ======= =====
-----END PRIVACY-ENHANCED MESSAGE-----