Greater Sacramento Bancorp Reports Third Quarter Earnings down 15%; Nine Months Earnings up 14%

SACRAMENTO, Calif., Oct. 17, 2012 /PRNewswire/ -- For the Third Quarter ended September 30, 2012, Greater Sacramento Bancorp (GSB) (OTC: GSCB.OB), parent company of Bank of Sacramento (BOS), reported Net Income of $576,000 ($.22 per share diluted) representing an 15% decrease from the $680,000 ($.26 per share diluted) reported in the Third Quarter 2011; it also represented a similar 15% decrease from the $675,000 reported for the Second Quarter 2012.

However, for the full nine months of 2012, GSB reported Net Income of $1,979,000 ($.75 per share diluted) representing a 14% increase over the $1,737,000 ($.66 per share diluted) reported for the nine months of 2011.

The single event which had a dramatic $100,000 negative impact on Net Income for the Third Quarter was the levying of California State income taxes on past interest income earned on loans to companies and projects located in State Enterprise Zones. The interest from such loans which previously had been deemed eligible for non-taxable status by state examiners was reversed by the state's re-interpretation of the Enterprise Zone Tax Regulations.

The improvement in Net Income for the nine months of 2012 was principally spurred by the continuation of improved loan quality. Total expenses related to additions to the loan loss reserve and OREO expense and valuation allowance was $480,000 for the nine months of 2012 which was 74% lower than the $1,837,000 incurred for the same 2011 period.

Non-Interest Income for the nine months of 2012 of $2,014,000 was up slightly (2%) over the 2011 figure of $1,966.000. Non-Interest expense for the comparable nine month periods was virtually unchanged: $8,356,000 in 2012 versus $8,377,000 in 2011.

Somewhat offsetting these positive factors was an 11% decrease in Third Quarter Net Interest Income to $3,171,000 from $3,548,000 for Third Quarter 2011.  For the comparative nine month periods the decrease was 12%; $9,595,000 in 2012 and $10,870,000 in 2011.

The general fall in interest rates has resulted in an industry wide decrease in the Net Interest Margin of virtually all banks.  GSB's Net Interest Margin for the nine months of 2012 was 3.47% compared to the same period 2011 figure of 4.17%. Net Interest Margin is one of the two major determinates of our Net Interest Income with the other determinate being loan demand or volume.  Loan volume while recently showing strong signs of returning to a more robust level has averaged below expectations for the nine months of 2012. This combination has negatively affected our Net Interest Income.

Regarding GSB's performance during the nine months of 2012, CEO and Chairman, William J.  Martin commented:  "Management and the Board remain most pleased with our earnings performance in spite of the challenging low interest rate environment. Most encouraging is the improving loan demand environment. At June 30, 2012 our gross loan outstanding stood at $220,768,000 as our asset 'clean-up' efforts and our customers own deleveraging actions reduced total loans from our all-time high of $267,381,000 at September 30, 2009.  During the Third Quarter 2012 we added $13,445,000 in loan outstandings to finish the quarter with gross loan outstandings of $234,213,000; a 6.1% growth over June 30, 2012."

"We are optimistic that this rate of loan growth will continue through the Fourth Quarter and hopefully into 2013.  With loan growth should come earnings growth."

Regarding asset quality, two key asset quality indicators for BOS over the past five quarters witness the continuation of our ­­­­lower level of problem assets:

• Ratio of Non-Performing Loans plus OREO to Total Assets:

• Ratio of Non-Performing Assets plus Trouble Debt Restructures to Equity plus Loan Loss Reserve ("Texas Ratio"):

Likewise GSB's profit over the past five quarters has been relatively consistent particularly when one adjusts for the impact of the Enterprise Zone tax treatment which negatively impacted the Third Quarter 2012:

• Net Income and Dollar Per Share Diluted:

As of September 30, 2012 the Bank's Tier One Capital stood at $40,620,000 and GSB's Tier One Capital was $41,429,000.  The Leverage Capital Ratio for BOS and GSB were 9.48% and 9.66%, respectively.  By all regulatory measures the Bank and GSB are considered well capitalized.

Comparing balance sheets for the Quarters ending September 30, 2012 and June 30, 2012, and September 30, 2011 the following highlights are noted:

A copy of the company's information and disclosure statement pursuant to Securities and Exchange Commission Rule 15c2-11 can be found on the home page of the company's website at www.bankofsacramento.com under the title Investor Relations.

Contact:               William J. Martin, CEO and Chairman, 916-648-2100

This report may contain forward-looking statements that are subject to risks and uncertainties.  Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, and competition within the business areas in which the Company is conducting its operations, including the real estate market in California and other factors beyond the Company's control.  Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated.  Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof.  The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

SOURCE Greater Sacramento Bancorp