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EXHIBIT 99.1
Contact: Scott A. Montgomery Joseph W. Kiley III
President/CEO Executive Vice President &
National Mercantile Bancorp Chief Financial Officer
(310) 282-6778 (310) 282-6703
FOR IMMEDIATE RELEASE
NATIONAL MERCANTILE BANCORP ANNOUNCES RECORD NET INCOME
FOR THE SECOND QUARTER AND
FOR THE SIX MONTHS ENDED JUNE 30, 2000
Los Angeles, California, July 11, 2000 -- National Mercantile Bancorp (the
"Company") (NASDAQ: MBLA Common Stock; MBLAP - Preferred Stock), parent company
of Mercantile National Bank ("Bank"), today reported net income of $1.2 million
for the second quarter ended June 30, 2000, or $1.28 basic earnings per share
("EPS"), while diluted EPS, when considering the Company's convertible preferred
stock, warrants and options, is $0.45, as compared to net income of $245,000 or
$0.36 basic EPS and $0.10 diluted EPS for the second quarter ended June 30,
1999.
During the second quarter net income consisted of $586,000 in core earnings
and $576,000 as a reverse provision for credit losses ("Reverse Provision") in
recognition of the level of the allowance for loan and lease losses ("ALLL")
generated by a loan recovery. Without the Reverse Provision, core earnings
increased to record levels up 139.2% to $586,000 or $0.65 basic EPS, while
diluted EPS was $0.23 during the second quarter of 2000 as compared to the same
quarter in 1999 of $245,000 or $0.36 basic EPS, while diluted EPS was $0.10.
For the six months ended June 30, 2000, net income increased $1.2 million
or 378.8% to $1.5 million or $1.80 basic EPS, while diluted EPS was $0.61, as
compared to net income of $321,000
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or $0.47 basic EPS, while diluted EPS was $0.13 for the six months ended June
30, 1999. Excluding the Reverse Provision, core earnings for the six months
ended June 30, 2000 increased 199.4% to $961,000 or $1.13 basic EPS, while
diluted EPS was $0.38 as compared to core earnings of $321,000 or $0.47 basic
EPS, and diluted EPS was $0.13 for the six months ended June 30, 1999.
Scott Montgomery, President and Chief Executive Officer of the Company and
the Bank, commented, "We are extremely pleased to report record levels of net
income in our twelfth consecutive quarter of profitability , both before and
after the effects of the Reverse Provision. The increase in net income was
driven by strong loan demand up 54.5% or $33.2 million, a 15.2% increase in
income from investment securities and a Reverse Provision of $576,000. Including
the Reverse Provision, return on average assets ("ROAA") increased to 2.77% for
the second quarter and to 1.86% for the six months ended June 30, 2000, while
return on average equity ("ROAE") was 38.7% for the second quarter and 26.3% for
the six month period. Excluding the Reverse Provision, ROAA increased to 1.40%,
as compared to an ROAA of 0.69% during the same quarter in 1999, while ROAE
increased to 19.53% as compared to 7.48% during the second quarter of 1999. For
the six months ended June 30, 2000 as compared to the same period in 1999 and
excluding the Reverse Provision, ROAA increased to 1.16% from 0.46% while ROAE
increased to 16.42% from 4.90%." He continued, "These results are very
gratifying and represent the best performance for the Company since it was
founded in 1982. We are very proud of the team of Mercantile bankers who
produced these outstanding results."
LOAN LOSS RECOVERY
In May of 2000, the Bank announced a net recovery of approximately $1.3
million on a loan charged off in January 1995. Generally Accepted Accounting
Principles ("GAAP") require that recoveries of loans previously charged off be
recognized as an increase to the ALLL. The Company has determined, based on
reviewing the adequacy of the resulting level of the ALLL, that it would not be
necessary to retain the entire recovery in the ALLL in order to absorb estimated
credit losses. Accordingly, the Company has determined that approximately
$700,000 of the $1.3 million will remain in the ALLL. However, credit quality is
affected by many factors beyond the Company's control, including local, regional
and national economic activity. Facts
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may exist which are not known today, which may adversely affect the likelihood
of repayment of various loans in the Company's portfolio. Therefore, no
assurance can be given that the Bank will not sustain loan losses materially in
excess of the ALLL even at this increased level.
Accordingly, $576,000 has been recognized as income through a reverse
provision to the ALLL which had the effect of increasing earnings during the
second quarter of 2000. As a result of the continuing effect of the Company's
net operating loss carryforward ("NOL"), the amount reversed and recognized as
earnings will not be taxable (except for alternative minimum tax). Further, the
amount reversed, coupled with substantially increased core earnings increases
the Company's book value and legal lending limit, enabling the Company to expand
its client services.
ASSETS AND LIABILITIES
Total assets increased 16.4% or $25.1 million to $177.8 million at June 30,
2000 as compared to $152.7 million at June 30, 1999. The growth in assets was
primarily due to a $33.2 million or 54.5% increase in loans receivable and a
$3.3 million or 5.0% increase in investment securities. The increase in
liabilities was primarily due to a $24.3 million increase in other borrowed
funds.
SHAREHOLDERS' EQUITY
Shareholders' equity increased 8.9% or $1.1 million to $13.1 million at
June 30, 2000 as compared to $12.0 million at June 30, 1999. The increase was
the result of a larger increase in net income, than the decline in equity caused
by the estimated fair value adjustment in the investment securities portfolio,
caused by increased market interest rates during the latter part of 1999 and the
first six months of 2000. GAAP requires that securities classified as available
for sale ("AFS"), be recorded at estimated fair value with the resulting
unrealized gains or losses reflected as a separate component of shareholders'
equity. If the investment securities were classified as held to maturity, no
adjustment to equity, under GAAP, based on estimated fair value would have been
required. The Bank carries its investment securities as AFS, as do many
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banks, in order to provide maximum flexibility, although the Bank generally
intends to hold its investment securities to maturity.
Book value per share increased to $5.34 per share at June 30, 2000 from
$4.86 per share at June 30, 1999. The increase is the result of the estimated
fair market value adjustment to equity relating to securities classified as AFS,
which was smaller than the increase in year to date net income, discussed
previously. Regulatory Accounting Principles do not require an estimated fair
value adjustment to equity for investment securities classified as AFS, for
purposes of calculating regulatory capital ratios. Without the estimated fair
value adjustment, book value per share at June 30, 2000 was $6.15 per share,
which includes all preferred shares on an "as if" converted basis, as compared
to $5.39 at June 30, 1999, or an increase of 14.1%.
The Company continues to benefit from the NOL, which was $20.3 million of
carryforward benefit for Federal income taxes and $4.8 million of carryforward
benefit for State income taxes at December 31, 1999. The carryforward has the
effect of substantially reducing income taxes which adds to the growth in
equity. The Company's Federal net operating loss carryforward is available
through 2006 and then begins to expire in 2007, while the State tax
carryforwards continue to expire, but remain available in reducing amounts
through 2002. As a result, the provision for income taxes, including the loan
recovery, representing alternative minimum tax, was only $26,000 for the six
months ended June 30, 2000.
INTEREST AND FEE INCOME
During the second quarter of 2000, total interest income increased 32.3% to
$3.4 million from $2.5 million during the second quarter of 1999. Interest
income from investment securities increased 17.5% to $1.2 million from $1.0
million during the second quarter of 1999.
Other operating income increased by 96.0% from $149,000 during the quarter
ended June 30, 1999 to $292,000 during the quarter ended June 30, 2000. The
primary reason for the increase in non-interest income is attributable to a
higher volume of fees from international and investment services, increased
deposit related income, as well as gains on the sale of other real
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estate owned ("OREO") property and investment securities during the second
quarter of 2000.
For the six months ended June 30, 2000 total interest income increased
29.8% or $1.5 million to $6.5 million from $5.0 million at June 30, 1999. Other
operating income increased 57.8% or $178,000 to $486,000 from $308,000.
Net interest margin ("NIM") increased to 5.71% during the second quarter of
2000, up from 5.26% during the first quarter of 2000 and from 5.16% during the
fourth quarter of 1999.
OPERATING EXPENSES
Other operating expenses increased 23.5% or by $378,000 during the second
quarter of 2000, as compared to the second quarter of 1999. The increase was
primarily the result of an increase in staff and benefits costs related to
initiating two new departments and increasing staff in existing departments. In
addition, furniture and equipment expense increased as did data processing
expenses.
HEALTHCARE AND COMMUNITY BASED NONPROFIT ORGANIZATIONS DEPARTMENTS
Both new departments, initiated in January of 2000, have met or exceeded
expectations. Healthcare loans outstanding are in excess of $6 million at June
30, 2000 with deposit balances of over $500,000, while the Community Based
Nonprofit Department deposit balances are approximately $500,000 at June 30,
2000.
CREDIT QUALITY
Total non-performing assets of $1.4 million at June 30, 1999 were reduced
by 48.0% or $689,000 to $746,000 at June 30, 2000. During the first six months
of 2000 loan charge-offs were $107,000, while recoveries were $1.3 million,
resulting in net recoveries of $1.2 million. Also, as of June 30, 2000, the Bank
has sold all of its OREO property and for the first time in many years has no
OREO property on its books.
The ALLL was augmented during the second quarter by approximately $700,000
as a result of the large loan recovery offset by the Reverse Provision discussed
previously. The net
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ALLL balance increased to $2.5 million or 2.71% at June 30, 2000 from $1.9
million or 2.42% at March 31, 2000 and from $1.9 million or 2.57% at December
31, 1999. Coverage ratios improved due to the increase in ALLL and the continued
reduction in non-performing and classified assets.
Total classified assets declined 47.7% or by $902,000 from $1.9 million at
June 30, 1999, to $1.0 million at June 30, 2000. The decrease was primarily due
to the reduction in non-performing loans and the sale of OREO property.
This press release contains statements which constitute forward looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 that involve risk and
uncertainties. Actual results may differ materially from the results in these
forward looking statements. Factors that might cause such a difference include,
among other things, fluctuations in interest rates, changes in economic
conditions or governmental regulation, credit quality and other factors
discussed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999.
National Mercantile Bancorp is the holding company for Mercantile National
Bank, member FDIC, a business bank located in Century City in West Los Angeles,
California. The Bank offers a wide range of financial services to the
entertainment industry, the professional, healthcare and executive markets,
community-based non-profit organizations, escrow companies and the business
banking market.
"Redefining Business Banking"
#####
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National Mercantile Bancorp
June 30, 2000 - FINANCIAL SUMMARY
($ in 000's, except share data)
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SELECTED FINANCIAL June 30, March 31, September 30, June 30,
CONDITION DATA: 2000 2000 December 31, 1999 1999 December 31,
(Unaudited) (Unaudited) 1999 (Unaudited) (Unaudited) 1998
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and Due from Banks ..................... $ 12,472 $ 10,437 $ 5,789 $ 7,031 $ 7,552 $ 5,405
Investments - Interest Earning .............. 71,561 79,126 75,685 77,475 83,837 78,649
Loans
Commercial ......................... 90,580 76,736 71,581 67,621 58,606 53,563
Real Estate Construction and Land .. 715 105 6 -- -- --
Consumer and Others ................ 3,013 2,545 2,496 2,410 2,434 3,707
Deferred Loan Fees, Net ...... (352) (252) (240) (238) (236) (298)
--------- --------- --------- --------- --------- --------
Total ........................ 93,956 79,134 73,843 69,793 60,804 56,972
Allowance for Credit Losses .. (2,546) (1,917) (1,896) (2,162) (2,056) (2,144)
--------- --------- --------- --------- --------- --------
Net Loans ......................... 91,410 77,217 71,947 67,631 58,748 54,828
Other Assets ................................ 2,337 2,652 2,732 2,718 2,576 2,741
--------- --------- --------- --------- --------- --------
Total Assets ................................ $ 177,780 $ 169,432 $ 156,153 $ 154,855 $152,713 $141,623
========= ========= ========= ========= ========= ========
Deposits
Demand, Noninterest Bearing ......... $ 52,883 $ 61,707 $ 53,827 $ 44,113 $ 48,160 $ 47,375
NOW ................................. 9,779 9,726 8,669 7,129 7,494 6,835
MMDA ................................ 33,022 36,024 25,376 31,077 33,705 21,652
Savings ............................. 1,320 1,321 3,079 1,066 1,132 2,063
Time Certificates GREATER THAN $100 . 18,060 19,528 19,488 27,619 18,404 14,966
Time Certificates LESS THAN $100 .... 6,248 5,640 6,545 8,673 11,163 14,081
--------- --------- --------- --------- -------- --------
Total Deposits .............. 121,312 133,946 116,984 119,677 120,058 106,972
Securities Sold under Agreements to
Repurchase and Other Borrowed Funds ..... 41,800 22,500 26,200 21,521 19,500 20,300
Other Liabilities ........................... 1,541 1,390 1,382 1,522 1,105 1,093
Shareholders' Equity-Tier 1 ................. 15,600 14,437 14,062 13,649 13,369 13,047
Accumulated Other Comprehensive (Loss)Income (2,473) (2,841) (2,475) (1,514) (1,319) 211
--------- --------- --------- --------- --------- --------
Total Liabilities and Stockholders' Equity .. $ 177,780 $ 169,432 $ 156,153 $ 154,855 $ 152,713 $ 141,623
========= ========= ========= ========= ========= =========
Average Quarterly Assets
Holding Company .................... $ 168,805 $ 163,095 $ 154,671 $ 150,358 $ 142,705 $ 149,241
Bank ............................... $ 167,709 $ 162,002 $ 153,631 $ 148,575 $ 139,327 $ 146,080
Regulatory Capital
Holding Company .................... $ 15,600 $ 14,437 $ 14,062 $ 13,649 $ 13,369 $ 13,047
Bank ............................... $ 14,437 $ 13,301 $ 12,949 $ 12,556 $ 9,910 $ 9,728
Non-Performing Assets
Non-Accrual Loans .................. $ 484 $ 580 $ 932 $ 967 $ 789 $ 1,505
Loans 90 Days P/D & Accruing ....... 262 -- -- -- 88 --
OREO and Other Non-performing Assets -- 441 532 558 558 593
--------- --------- --------- --------- --------- --------
Total Non-Performing Assets ................. $ 746 $ 1,021 $ 1,464 $ 1,525 $ 1,435 $ 2,098
========= ========= ========= ========= ========= =========
Classified Assets
Substandard Loans .................. $ 988 $ 1,102 $ 1,169 $ 1,145 $ 1,177 $ 2,001
Doubtful Loans ..................... -- -- 16 384 331 41
--------- --------- --------- --------- --------- --------
Total Classified Loans ............. $ 988 $ 1,102 $ 1,185 $ 1,529 $ 1,508 $ 2,042
OREO ............................... -- 241 382 382 382 417
--------- --------- --------- --------- --------- --------
Total Classified Assets ..................... $ 988 $ 1,343 $ 1,567 $ 1,911 $ 1,890 $ 2,459
========= ========= ========= ========= ========= =========
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SELECTED STATEMENT OF June 30, March 31, September 30, June 30,
FINANCIAL CONDITION RATIOS: 2000 2000 December 31, 1999 1999 December 31,
(Unaudited) (Unaudited) 1999 (Unaudited) (Unaudited) 1998
----------- ----------- ----------- ------------ ----------- ------------
Loans to Deposits Ratio ...................... 77.45% 59.08% 63.12% 58.32% 50.65% 53.26%
Ratio of Allowance for Loan Losses to:
Total Loans .......................... 2.71% 2.42% 2.57% 3.10% 3.38% 3.76%
Total Non-Performing Assets .......... 341.29% 187.76% 129.51% 141.77% 143.28% 102.19%
Total Classified Assets .............. 257.69% 142.74% 121.00% 113.13% 108.78% 87.19%
Earning Assets to Total Assets ............... 93.10% 93.41% 95.76% 95.10% 94.71% 95.76%
Earning Assets to Interest-Bearing Liabilities 150.16% 167.05% 167.34% 151.69% 158.25% 169.74%
Capital Ratios Holding Company:
Total Risk-Based Capital ............. 15.94% 16.57% 17.47% 17.50% 17.80% 18.65%
Tier 1 Risk-Based Capital ............ 14.68% 15.32% 16.21% 16.23% 16.53% 17.38%
Tier 1 Leverage ...................... 9.08% 8.70% 8.98% 8.97% 9.36% 8.78%
Capital Ratios Bank :
Total Risk-Based Capital ............. 14.96% 15.49% 16.29% 16.34% 14.00% 14.75%
Tier 1 Risk-Based Capital ............ 13.70% 14.23% 15.03% 15.07% 12.73% 13.48%
Tier 1 Leverage ...................... 8.46% 8.07% 8.32% 8.35% 7.10% 6.69%
Risk Weighted Assets:
Holding Company .................... $ 106,298 $ 94,265 $ 86,751 $ 84,104 $ 80,865 $ 75,055
Bank ............................... $ 105,416 $ 93,485 $ 86,125 $ 83,300 $ 77,852 $ 72,189
Book Value per Share (1) (2) ................. $ 5.34 $ 4.85 $ 4.68 $ 4.89 $ 4.86 $ 5.35
Total Shares Outstanding (2) ................. 2,477,443 2,477,195 2,477,195 2,477,195 2,477,195 2,477,048
(1) Includes dilutive options and warrants.
(2) Includes assumed conversion of 785,425 shares of Preferred Stock into
1,570,850 shares of Common Stock.
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National Mercantile Bancorp
June 30, 2000 - FINANCIAL SUMMARY
($ in 000's, except share data)
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SELECTED STATEMENT OF OPERATIONS DATA AND RATIOS:
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
QUARTERLY DATA (1): 2000 2000 1999 1999 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest Income ........................................ $ 3,365 $ 3,091 $ 2,867 $ 2,705 $ 2,544
Interest Expense ....................................... 1,063 1,047 938 975 830
----------- ----------- ----------- ----------- -----------
Net Interest Income before Provision for Loan Losses ... 2,302 2,044 1,929 1,730 1,714
Provision for Loan Losses ............................. (576) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Interest Income after
Provision for Loan Losses ......................... 2,878 2,044 1,929 1,730 1,714
Net gain (loss) on Sale of Securities Available-for-Sale 18 -- -- -- (1)
Gain on Sale of OREO ................................... 59 10 -- -- --
Other Operating Income ................................. 215 184 193 197 150
Other Operating Expense ................................ 1,989 1,856 1,682 1,639 1,611
----------- ----------- ----------- ----------- -----------
Net Income before Provision for
Income Taxes ...................................... 1,181 382 440 288 252
Provision for Income Taxes ............................. 19 7 27 8 7
----------- ----------- ----------- ----------- -----------
Net Income ............................................. $ 1,162 $ 375 $ 413 $ 280 $ 245
=========== =========== =========== =========== ===========
Basic Earnings Per Share ............................... $ 1.28 $ 0.47 $ 0.61 $ 0.41 $ 0.36
Diluted Earnings Per Share (2) ......................... $ 0.45 $ 0.15 $ 0.17 $ 0.11 $ 0.10
Weighted Avg Common Shares O/S (3)(4)................... 906,576 798,318 677,195 677,195 677,108
Return on Quarterly Average Assets ..................... 2.77% 0.92% 1.06% 0.74% 0.69%
Return on Quarterly Average Equity ..................... 38.74% 13.15% 13.67% 9.44% 7.48%
Net Interest Margin - Avg Earning Assets ............... 5.71% 5.26% 5.16% 4.74% 5.10%
Operating Expense Ratio ................................ 4.74% 4.58% 4.31% 4.32% 4.53%
Efficiency Ratio ....................................... 76.68% 82.93% 79.26% 85.05% 86.48%
(1) Operating ratios are annualized.
(2) Includes the dilutive potential Common shares from assumed conversions of Preferred Stock, Options and Warrants.
(3) Shares used to compute Basic Earnings per share.
(4) Increase is due to conversion of Preferred Stock into Common Stock.
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<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30:
(Unaudited)
2000 1999 1998
------------ ----------- ----------
<S> <C> <C> <C>
Interest Income $ 6,456 $ 4,973 $ 4,730
Interest Expense 2,110 1,645 1,601
------------ ----------- ----------
Net Interest Income before Provision for Loan Losses 4,346 3,328 3,129
Provision for Loan Losses (576) -- --
------------ ----------- ----------
Net Interest Income after
Provision for Loan Losses 4,922 3,328 3,129
Net Gain (Loss) on Sale of Securities Available-for-Sale 18 (1) 38
Gain on Sale of OREO and Fixed Assets 69 -- 68
Other Operating Income 399 309 340
Other Operating Expense 3,845 3,303 3,234
------------ ----------- ----------
Net Income (Loss) before Provision for
Income Taxes 1,563 333 341
Provision for Income Taxes 26 12 2
------------ ----------- ----------
Net Income (Loss) $ 1,537 $ 321 $ 339
============ =========== ==========
Basic Earnings Per Share $ 1.80 $ 0.47 $ 0.50
Diluted Earnings Per Share (1) $ 0.61 $ 0.13 $ 0.13
Weighted Avg Common Shares O/S (2) 852,447 677,078 677,074
Return on Average Assets 1.86% 0.46% 0.55%
Return on Average Equity 26.27% 4.90% 5.41%
Net Interest Margin - Avg Earning Assets 5.49% 5.08% 5.39%
Operating Expense Ratio 4.64% 4.76% 5.26%
Efficiency Ratio 79.57% 90.84% 90.46%
(1) Includes the dilutive potential Common shares from assumed conversions of Preferred Stock, Options and Warrants.
(2) Shares used to compute Basic Earnings per share.
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