ICB Financial 2009 Financial Performance

ONTARIO, Calif., Feb. 28 /PRNewswire-FirstCall/ -- ICB Financial (OTC Bulletin Board: ICBN)

Letter to Our Customers and Shareholders

In 2009, even the strongest banks faced the challenges of a deepening recession. While ICB Financial ("ICB") remained profitable on a month-to-month basis for most of the year, write-downs, loan loss provisions, and FDIC expenses in the fourth quarter had a substantial impact on our year-end net income, resulting in a higher than expected loss. However, the ICB franchise continues to be financially strong while we implement multiple steps to strengthen our balance sheet.

In a difficult economy, we were able to achieve double-digit growth in total assets as well as total deposits. Assets grew 12.8% to $285.6 million from $253.1 million at year end 2008. Deposits grew 19.2% to $252.5 million from $211.9 million at year end 2008. This was exceptional growth considering the economy and the growth of other banks in our peer group. Despite a declining interest rate environment we were able to maintain a healthy annualized net interest margin of 4.45%.

ICB also compares very favorably to its peer group of banks in risk-factor measurement, which is indicative of a bank's credit troubles. ICB has a Texas Ratio of 19%, coming in significantly lower than the State of California bank average of 35% or the Western States bank average of 43%.

Our area's economic conditions, as well as our work to strengthen the loan portfolio, resulted in a 1.8% decrease in loan volume from the previous year. Total loans were $205.4 million, compared to $207.6 million at December 31, 2008. ICB incurred a net operating loss of $5.6 million for 2009, compared to net income of $313,000 for the year ended December 31, 2008. Several issues precipitated this loss, including a write-down of a Goodwill Asset ($2.3 million), our loan losses from the depressed business climate in the Inland Empire ($5.4 million), higher loan loss reserves ($6.9 million), and a substantial increase in FDIC insurance expense ($548,000).

This past year has shown us that to continue as one of the premier community banks in Southern California, we must not be encumbered with assets that represent past successes. The Management and the Board of Directors have thus agreed to dispose of a Goodwill Asset, which was a non-earning asset, that has been included in our assets since the consummation of a successful merger with another local community bank in 2006. Writing off this Goodwill resulted in an expense of $2.3 million in the fourth quarter of the year. Going forward, this will make the Bank's asset base more efficient and productive in the years ahead. This write-off of goodwill did not affect shareholder value since goodwill has traditionally been excluded from the calculation of tangible book value.

During 2009, we took a multi-pronged approach to strengthening our franchise with efforts that included enhancing our liquidity, increasing our ability to provide credit-worthy lending, improving our loan portfolio, and augmenting our management group:

• ICB continues to exceed the "well capitalized" benchmarks and further strengthen our capital ratios, which now stand at 13.70% for Total Risk-Based Capital (the minimum for "well-capitalized" status is 10%) and 9.27% for Tier 1 Leverage Capital (the minimum for "well-capitalized" status is 5%). By participating in the U.S. Treasury Department's TARP Capital Program, we added an additional $6 million capital cushion in early 2009. This provided ICB with the capacity to increase our lending to credit-worthy businesses. Participation in the TARP program was limited to banks considered to be strong, viable banking entities with a future of continued community service to their respective markets.
• Liquidity Management has been extremely important to the Company and recent market events continue to highlight the need for sound liquidity risk management practices. Inland Community Bank (the "Bank") has maintained strong liquidity and has improved its liquidity measures by using both traditional static balance sheet ratios with forward-looking dynamic measures and performing stress testing using stress scenarios that are outlined in the latest regulatory guidance.  These stress scenarios, outlined in the regulatory guidance, are incorporated into our comprehensive Contingency Funding Plan.
• Asset quality remains a top priority for Management and, as a result of the continuous monitoring of problem assets the Bank added $6.9 million to its Allowance for Loan and Lease Losses ("ALLL") during 2009. The ratio of the ALLL to total loans  for the Bank increased from 1.38% at the end of 2008 to 2.32% at the end of 2009. Until conditions improve we will be extremely conservative in positioning our ALLL to insure it is consistent with the losses inherent in our loan portfolio.
• The Bank continues to diligently increase operating efficiencies and to look for new ways to reduce overhead expenses in addition to reductions that were initially implemented in 2008. These efforts have continued to increase the income generated from operations. Additional efforts implemented by Senior Management have also helped to reduce non-interest expenses, which have again been reduced substantially in 2009. These reductions in expenses have been somewhat negated by a substantial increase in FDIC insurance expense, which increased from $158,000 in 2008 to $548,000 in 2009, and there appears to be no reduction in this expense for the next few years.  
• To navigate these uncertain times, we've augmented our management group with experienced senior officers in loan and branch administration and added a respected and knowledgeable former Inland Empire banker to our Board of Directors.

As a true community bank, we're committed to providing comprehensive banking services to businesses that have looked to us as the foundation of their success. Our growth in our deposit base demonstrates the confidence that our customers place in ICB and we will build on this trust into 2010 and beyond. Every member of our team has worked hard to ensure that our customers receive the best service possible and to assure each customer that any deposit made in  Inland Community Bank, regardless of size, is safe and sound. We continue to emphasize the basic fundamentals of banking and managing the risks associated with business banking.

We move into 2010 confident that we fully have the capabilities and strategies in place to expand the ICB franchise as the business climate turns more positive. The ICB team of banking professionals continues to focus on building a foundation of strength and safety for our customers and shareholders, supported by a great team of employees. We're working hard to assure that an investment in ICB Financial will be rewarding in the years to come.

Thank you once again for your support during this difficult time as we remain focused on meeting the needs of our business community and growing our franchise.

James S. Cooper  

President and Chief Executive Officer

Financial Performance highlights for the year and quarter ended December 31, 2009 include:

• Total assets increased 12.8%; $285.5 million as of December 31, 2009 compared to $253.1 million at December 31, 2008, an increase of $32.4 million.
• Total loans at December 31, 2009 were $205.4 million compared to $207.6 at December 31, 2008.
• Total deposits at December 31, 2009 were up 19.2% or $40.6 million compared to December 31, 2008.
• The Efficiency ratio for 2009 was 97.5% which was up from 72.9% in 2008, as the result of several issues including the write-off of goodwill in the amount of $2.3 million and increased FDIC insurance assessments totaling $548,000.
• Non-performing assets increased to 3.4% of total assets at December 31, 2009 compared to 2.4% at December 31, 2008.
• Provision for loan and lease losses was $7,471M for 2009 verses $2,700M for 2008 for the Company.
• Gross interest revenue of $13.8 million for 2009 compared to $14.6 million for 2008, a decrease of 6.0%.
• Important Bank Ratios at December 31, 2009:
  • Total Risk-Based Capital – 13.70%; minimum for well capitalized under regulatory guidelines is 10.00%.
  • Tier 1 Leverage Capital – 9.27%; minimum for well capitalized under regulatory guideline is 5.0%
  • ALLL as a percent of  loans (excludes loans held for sale) – 2.31%.
  • Net charge-offs for 2009 as a percent of 2009 average total loans – 2.85%
  • Total OREO, Delinquent and Non-accrual loans (NPA's) to total risk based capital – 27.4%, which is also equivalent to 4.0% of total loans at 12-31-09.
  • Average Net Interest Margin for 2009 was a healthy 4.45%.

                                                Consolidated Balance Sheets                                                  Unaudited - Internally Prepared                                                        (in thousands)                                                                                                                                                                         Dec 2008 to                                                 As of     As of   Dec 2009    As of                                           Dec 31,   Dec 31, Percentage  Dec 31,                                           2009      2008     Change     2007                                            -------   -------  ---------  -------     Assets                                                                           Total cash and                                                                  due from banks                                                                  Noninterest-bearing                                                             balances, coin and currency       $7,626    $6,111    24.8%   $9,355          Interest bearing balances          31,059     9,979   211.2%   13,103        Held to maturity                                                                securities - held to                                                           maturity                                 -     3,001  -100.0%    8,583        Available for                                                                   sale securities                     21,097     4,099   414.7%      848        Federal funds sold                        -         -     0.0%    7,885        Loans held for sale (at the                                                     lower of cost or market)            17,289     9,520    81.6%        -        Loans , net of                                                                  unearned income                    188,155   198,125    -5.0%  188,690          Less: Allowance                                                                 for loan  losses                  (4,133)   (2,627)   57.3%   (1,974)                                            ------    ------    ----    ------        Net loans                           201,311   205,018    -1.8%  186,716                                            -------   -------    ----   -------                                                                                       Premises and                                                                    fixed assets - net                   9,834    10,181    -3.4%   10,281        Other real estate owned                                                         and investments in OREO                 94     1,688   -94.4%      600        Intangible assets:   Goodwill             -     2,280  -100.0%    2,280                             Core deposit                                    intangibles       990     1,094    -9.5%    1,396        Other assets                         13,549     9,679    40.0%    8,508                                             ------     -----    ----     -----      Total Assets                         $285,560  $253,130    12.8% $249,555                                           ========  ========    ====  ========                                                                                     Liabilities and Capital         Deposits                                                                         Noninterest-bearing               $60,152   $57,277     5.0%  $68,177          Interest bearing                  192,390   154,576    24.5%  147,315                                            -------   -------    ----   -------        Total deposits                      252,542   211,853    19.2%  215,492                                            -------   -------    ----   -------                                                                                       Advances from FHLB                                                              San Francisco                            -     9,000  -100.0%        -        Other liabilities                     1,537     1,504     2.2%    1,652                                              -----     -----     ---     -----      Total liabilities                     254,079   222,357    14.3%  217,144                                            -------   -------    ----   -------                                                                                     Equity capital                                                                   Preferred Stock                       6,300         -                 -        Common stock                          5,121     5,108     0.3%    5,459        Surplus                              21,641    21,611     0.1%   23,246        Retained earnings                    (1,585)    3,998  -139.6%    3,714        Accumulated other                                                               comprehensive income (loss)              4        56   -92.9%       (8)                                               ---       ---   -----       ---      Total Equity Capital                   31,481    30,773     2.3%   32,411                                             ------    ------     ---    ------                                                                                     Total Liabilities                                                               and Equity Capital                  $285,560  $253,130    12.8% $249,555                                           ========  ========    ====  ========                                                                                 

                                         Consolidated Income Statements                                           Unaudited - Internally Prepared                                                  (in thousands)                                                                 Year        Year                                                            ended      ended                                                Dec 31,     Dec 31,    Percentage                                           2009       2008        Change                                            --------   --------    ----------        Interest Income on:                                                          Total interest and fees on                                                  loans                            $13,065    $13,911       -6.5%       Interest on investment                                                  securities                           459        376       18.1%       Interest on federal funds sold          3        108    -3500.0%       Other interest income                 320        284       11.3%                                             ---        ---       ----          Total interest income            13,847     14,679       -6.0%                                          ------     ------       ----      Interest Expense:                                                        Interest paid on deposits           3,535      4,391      -24.2%         Total interest expense            3,535      4,391      -24.2%                                           -----      -----      -----                                                                             Net interest income                 $10,312    $10,288        0.2%                                                                            Provision for Possible Loan                                             Losses                               7,471      2,700       63.9%                                           -----      -----       ----                                                                             Net Interest Income after ALLL                                          Provision                            2,841      7,588     -167.1%                                                                            Total non-interest income             1,924      1,530       20.5%                                                                            Total non-interest expense           11,928      8,616       27.8%                                          ------      -----       ----                                                                             Income before income taxes           (7,163)       502      107.0%       Applicable income taxes                                                 expense (benefit)                 (1,903)       189      109.9%                                          ------        ---      -----      Net Income (loss) before                                                preferred dividend                  (5,260)       313      106.0%       Preferred stock dividend                                                expense                             (319)         -      100.0%                                            ----        ---      -----      Net income                          $(5,579)      $313      105.6%                                         =======       ====      =====                                                                                                                                                                                         SELECTED FINANCIAL RATIOS AND PER SHARE DATA     Per Common Share Data                                                        Earnings per share - basic          (1.09)      0.06    -1880.1%       Earnings per share - diluted        (1.06)      0.06    -1914.4%       Actual shares outstanding       5,120,861  5,107,731        0.3%       Weighted Average Shares                                                 Outstanding                    5,114,296  5,195,592       -1.6%       Shares outstanding - (fully                                             diluted)                       5,257,566  5,351,992       -1.8%                                                                            Financial Ratios                                                         Return on Average Assets            -1.99%      0.13%   -1630.8%       Return on Average Equity           -18.35%      0.99%   -1953.5%       Yield on Earning Assets              5.71%      6.73%     -15.2%       Efficiency ratio                    97.50%     72.90%      33.7%       Loan to deposit ratio               81.30%     98.00%     -17.0%       ALLL as a percent of Total                                              Loans (Includes OBS reserve)        2.09%      1.38%      51.4%       Nonperforming loans  - in                                               thousands                         $9,825     $5,952       65.1%       Nonperforming loans as a                                                percent of total assets             3.44%      2.35%      46.4%       Book value per share                $4.92      $6.02      -18.3%       Tangible book value per share       $4.72      $5.53      -14.6%                                                                                                                                                                                                                                                                    4th        4th                                                          Quarter    Quarter    Percentage                                             2009       2008       Change                                               ----       ----       ------         Interest Income on:                                                          Total interest and fees on                                                  loans                             $3,268     $3,427       -4.6%       Interest on investment                                                  securities                           124         89       39.3%       Interest on federal funds sold          -         10     -100.0%       Other interest income                  74         65       13.8%                                              --         --       ----          Total interest income             3,466      3,591       -3.5%                                           -----      -----       ----      Interest Expense:                                                        Interest paid on deposits             813      1,055      -22.9%         Total interest expense              813      1,055      -22.9%                                             ---      -----      -----                                                                             Net interest income                   2,653      2,536        4.6%                                                                            Provision for Possible Loan                                             Losses                               4,845      1,055      359.2%                                           -----      -----      -----                                                                             Net Interest Income after ALLL                                          Provision                           (2,192)     1,481     -248.0%                                                                            Total non-interest income               513        395       29.9%                                                                            Total non-interest expense            5,212      2,129      144.8%                                           -----      -----      -----                                                                             Income before income taxes           (6,891)      (253)    2623.7%       Applicable income taxes                                                 expense (benefit)                 (1,788)       (91)    1864.8%                                          ------        ---     ------      Net Income (loss) before                                                preferred dividend                  (5,103)      (162)    3050.0%       Preferred stock dividend                                                expense                              (97)         -      100.0%                                             ---        ---      -----      Net income                          $(5,200)     $(162)    3109.9%                                         =======      =====     ======                                                                                                          SELECTED FINANCIAL RATIOS AND PER SHARE DATA                                                                            Per Common Share Data                                                    Earnings per share - basic          (1.02)     (0.03)   -3101.6%       Earnings per share - diluted        (1.02)     (0.03)   -3284.8%       Actual shares outstanding       5,120,861  5,107,731        0.3%       Weighted Average Shares                                                 Outstanding                    5,114,296  5,195,592       -1.6%       Shares outstanding - (fully                                             diluted)                       5,257,566  5,351,992       -1.8%                                                                            Financial Ratios                                                         Return on Average Assets            -7.36%     -0.50%   -1372.0%       Return on Average Equity           -59.56%     -0.50%  -11812.0%       Yield on Earning Assets              5.84%      6.46%      -9.6%       Efficiency ratio                   164.63%     72.60%     126.8%       Loan to deposit ratio               81.30%     98.00%     -17.0%       ALLL as a percent of Total                                              Loans (Includes OBS reserve)        2.09%      1.38%      51.4%       Nonperforming loans  - in                                               thousands                         $9,825     $5,952       65.1%       Nonperforming loans as a                                                percent of total assets             3.44%      2.35%      46.4%       Book value per share                $4.92      $6.02      -18.3%       Tangible book value per share       $4.72      $5.53      -14.6%      

SOURCE ICB Financial