Santa Cruz County Bank Reports Record Quarterly and Year to Date Earnings for the Third Quarter Ended September 30, 2016

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Oct 19, 2016, 06:00 ET

SANTA CRUZ, Calif., Oct. 19, 2016 /PRNewswire/ -- Santa Cruz County Bank (OTCQX: SCZC), a top rated, locally owned and operated full-service community bank headquartered in Santa Cruz County, today announced unaudited net income for the third quarter ended September 30, 2016 of $1.63 million. This represents an increase of 7% compared to the prior quarter and an increase of 18% comparing the third quarter with the same period ended in 2015. Basic earnings per share for the third quarter increased $0.11 to $0.75, a 17% increase over the third quarter in 2015.

Pretax income for the quarter ended September 30, 2016 was $2.64 million, an increase of $365 thousand, 16%, compared to $2.28 million for the quarter ended September 30, 2015. Year to date net income as of September 30, 2016 was $4.66 million, a 17% or $676 thousand increase over the prior year.

President and CEO David V. Heald commented, "For the third quarter and year to date, the Bank has set record earnings and asset levels. Solid growth in deposits placed in quality earning assets sets us on pace for another record year in growth and earnings."

Selected financial information is presented in the following table:

	Three-Months Ended,
	09.30.16	09.30.15	06.30.16
Balance Sheet
Total assets	$ 578,240,368	$ 523,665,738	$ 558,029,387
Gross loans	384,137,220	343,091,423	384,643,935
Allowance for loan losses	7,968,586	7,003,638	7,725,187
Non-interest-bearing deposits	242,628,086	228,422,322	223,453,562
Total deposits	521,244,485	473,897,222	502,899,156
Shareholders' equity	49,082,013	42,591,628	47,496,868

Net Income	$ 1,630,256	$ 1,379,573	$ 1,525,945
Ratios
Net interest margin	3.86%	3.91%	4.12%
Tier 1 leverage ratio	8.55%	8.23%	8.87%
Return on average assets	1.13%	1.05%	1.14%
Return on average equity	13.33%	12.94%	13.06%
Efficiency ratio	55.41%	55.24%	56.99%

Share and Per Share Data
Basic earnings per common share	$ 0.75	$ 0.64	$ 0.70
Book value per common share	$ 22.41	$ 19.81	$ 21.70
Total common shares outstanding	2,189,736	2,149,969	2,189,236

Third Quarter Financial Highlights:

Assets of $578.2 million, a new record
Total deposits of $521.2 million, a new record
Net income of $1.6 million for the quarter and $4.66 million year to date, both new records
Book value per share after dividends increased by $2.60 to $22.41 over third quarter of 2015
Efficiency ratio of 55.41%

Loans, Asset Quality & Deposits
Total assets grew by $20.2 million to $578.2 million in the third quarter and by $54.6 million over the last twelve months. The Bank's asset quality remained exceptional. For the third quarter, gross loans decreased by $507 thousand, due to loan sales, seasonal lines of credit and reductions in construction loans due to payoffs. On a year to year basis, loans increased $41.0 million, 12% to $384.1 million. Allowance for loan losses of $8.0 million at September 30, 2016 represents a 14% increase over the same period last year. Deposits grew by 4%, $18.3 million since June 30, 2016 and grew 10%, $47.3 million to $521.2 million, a new record, over the last twelve months.

Non-Interest Income / Expense and Net Interest Margin
A component of the Bank's core business is the origination and sale of loans generated by its top producing SBA Department which results in gains that are included in non-interest income. The amount of these gains is based on the volume of loans sold and the economic environment at the time of sale and may create fluctuations within the non-interest income category. When strategically beneficial, management may elect to forgo these sales to retain higher yielding earning assets which can benefit future earnings. For the third quarter of 2016, loan sales generated approximately $274 thousand in gains which were included in the non-interest income total of $895 thousand. This resulted in a slight decrease in non-interest income of $58 thousand from prior quarter when a $385 thousand gain from sold loans was recognized, but an increase of $324 over the same period in 2015 when no loan gains were taken. If the gain on loans sold is factored out, there is an 8% growth in non-interest income year over year.

Non-interest expense for the three-month period ended September 30, 2016, decreased 3% or $116 thousand compared to prior quarter and rose 14% or $412 thousand compared to the same period last year.

Net interest income of $5.4 million for the quarter ended September 30, 2016 was $80 thousand or 1% more than prior quarter but exceeded the third quarter of 2015 by $454 thousand or 9%. The improvement year over year is driven by a continued focus on building high quality earning assets through loan production. However there was some downward pressure on margin as loans pay-off and are replaced at lower yields. Consequently, net interest margin declined to 3.86% compared to 3.91% for the same period last year and 4.12% for the 2nd quarter of 2016.

Shareholders' Equity
Total shareholders' equity was $49 million at September 30, 2016, a $6.5 million, 15% increase over September 30, 2015. The value added to our shareholders was due to continued strong earnings. This increase was reduced by the payout of quarterly cash dividends. Common stock cash dividends totaled $109 thousand or $.05 per share for the quarter ended September 30, 2016. Historically, the Bank has paid 14 consecutive $0.05 cash dividends totaling over $1.4 million to shareholders.

For the three-month period ended September 30, 2016, the Bank's return on average equity was 13.33% and return on average assets was 1.13%. The book value per share of Santa Cruz County Bank's common stock at September 30, 2016 was $22.41, up from $19.81 for the same period in 2015.

NATIONAL, STATE, AND LOCAL RATINGS AND AWARDS

OTCQX Best 50: Santa Cruz County Bank was named one of 50 best performing companies on OTCQX based on total return and growth in average daily dollar volume in 2015.

Financial Management Consulting (FMC) Group: The Bank ranked #1 in California for overall bank performance and 1^st (lowest) in non-performing assets and asset quality for the second quarter of 2016. Santa Cruz County Bank ranked 2^nd in overall performance among 185 California banks in 2015.The Bank has ranked in FMC's top ten banks for two consecutive years.

The Findley Reports, Inc.: Santa Cruz County Bank named a Super Premier Performing Bank for its 2015 performance. This is the sixth year the Bank has received the top ranking of Super Premier by Findley.

Bauer Financial Reports, Inc.: Santa Cruz County Bank rated five star or "Superior" for its financial performance for the quarter ended June 30, 2016.

American Banker Magazine: Santa Cruz County Bank ranked 44^th out of 684 institutions in American Banker Magazine's "Top Performing 200 Community Banks & Thrifts in the United States" based upon 3-year average return on equity. The Bank has ranked in the Top 200 Community Banks in the United States for three consecutive years.

Independent Banker Magazine, published by the ICBA: Santa Cruz County Bank ranked 22^nd in its Top Best Performing Member Community Banks for return on average equity.

Community Awards and Recognition

2016: United Way of Santa Cruz County "Corporate Spirit Award" for outstanding support.

2016, 2015, 2014, 2013: Voted "Best Bank" by the readers of Good Times, a weekly publication with distribution throughout Santa Cruz County.

2016, 2015: Voted "Best Bank" by the readers of Santa Cruz Sentinel, a daily publication with distribution throughout Santa Cruz County.

2013: Volunteer Center of Santa Cruz County "Be the Difference" Business Award for leadership and volunteerism.

ABOUT SANTA CRUZ COUNTY BANK
Santa Cruz County Bank, founded in 2004, is a locally owned and operated community bank with offices located in Aptos, Capitola, Santa Cruz, Scotts Valley and Watsonville. The bank offers a variety of competitive deposit and lending solutions for businesses and individuals; including business loans, lines of credit, commercial real estate financing, agricultural loans, SBA and USDA government guaranteed loans, credit cards, merchant services, remote deposit capture, mobile and online banking, bill payment, and cash management. For the past nine years, the Bank's SBA Department has been recognized as a top SBA lender in Santa Cruz County. Santa Cruz County Bank is a top USDA lender in the state of California.

Santa Cruz County Bank stock is publicly traded on the OTCQX marketplace under the stock symbol SCZC. Stock purchase orders may be placed through a brokerage firm or one of the Market Makers listed in the Investor Relations section of the bank's website. For more information about Santa Cruz County Bank, please visit our website www.sccountybank.com.

This release 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 Bank is conducting its operations, including the real estate market in California and other factors beyond the Bank'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 Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

		Selected Financial Data (unaudited)
			Change			Change
	Quarter ended 9/30/16	Quarter ended 9/30/15	$	%	Quarter ended 6/30/16	$	%

Balance Sheet

Total assets	$ 578,240,368	$ 523,665,738	$ 54,574,630	10%	$ 558,029,387	$ 20,210,981	4%
Gross loans	384,137,220	343,091,423	41,045,797	12%	384,643,935	(506,715)	0%
Allowance for loan losses	7,968,586	7,003,638	964,948	14%	7,725,187	243,399	3%
Non interest-bearing deposits	242,628,086	228,422,322	14,205,764	6%	223,453,562	19,174,524	9%
Total deposits	521,244,485	473,897,222	47,347,263	10%	502,899,156	18,345,329	4%
Shareholders' equity	49,082,013	42,591,628	6,490,385	15%	47,496,868	1,585,145	3%

Income Statement										Change
								Nine-months ended 9/30/16	Nine-months ended 9/30/15	$	%
Interest income	5,538,547	5,057,717	480,830	10%	5,458,159	80,388	1%	16,548,656	14,812,328	$ 1,736,328	12%
Interest expense	143,287	116,119	27,168	23%	140,258	3,029	2%	420,079	341,370	78,709	23%
Net interest income	5,395,260	4,941,598	453,662	9%	5,317,901	77,359	1%	16,128,577	14,470,958	1,657,619	11%

Provision for loan losses	187,500	187,500	-	0%	187,500	-	0%	562,500	562,500	-	0%
Non-interest income	894,515	570,876	323,639	57%	952,478	(57,963)	-6%	2,811,616	2,529,590	282,026	11%
Non-interest expense	3,457,315	3,045,384	411,931	14%	3,573,810	(116,495)	-3%	10,712,682	9,861,567	851,115	9%
Net income before taxes	2,644,960	2,279,590	365,370	16%	2,509,069	135,891	5%	7,665,011	6,576,481	1,088,530	17%
Income tax expense	1,014,704	900,017	114,687	13%	983,124	31,580	3%	3,008,637	2,596,133	412,504	16%
Net income after taxes	$ 1,630,256	$ 1,379,573	250,683	18%	$ 1,525,945	104,311	7%	$ 4,656,374	$ 3,980,348	676,026	17%

Basic earnings per share	$ 0.75	$0.64	0.11	17%	$ 0.70	0.05	7%	$ 2.14	$1.85	$ 0.29	16%
Book value per share	$ 22.41	$19.81	2.60	13%	$ 21.70	0.71	3%	$ 22.41	$19.81	$ 2.60	13%

Ratios
Net interest margin	3.86%	3.91%			4.12%			4.09%	4.11%
Tier 1 leverage ratio	8.55%	8.23%			8.87%			8.55%	8.23%
Return on average assets	1.13%	1.05%			1.14%			1.14%	1.09%
Return on average equity	13.33%	12.94%			13.06%			13.24%	12.98%
Efficiency ratio	55.41%	55.24%			56.99%			56.71%	58.01%