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Santa Cruz County Bank: 4th quarter modest, year-end profit up

February 4, 2010

By Jondi Gumz - Santa Cruz Sentinel

Fourth-quarter earnings improved at Santa Cruz County Bank compared to the third quarter, generating a year-end profit of $203,000. That represents a solid increase over 2008, when year-end profit was $17,000.

However, earnings at the 6-year-old locally owned bank have not rebounded to pre-recession levels.

Net income for the fourth quarter was $71,000 compared to $218,000 in that quarter in 2008. The decrease was due to a $450,000 increase in provision for loan losses.

David Heald, president and chief executive officer, said this change reflects "management's intention to be well-positioned" to withstand the effects of the downturn on customers.

Net interest income for the quarter was up $214,000 compared to a year ago, mainly due to a reduction in interest expense. Changes in yields and costs are the result of the general decline in market interest rates, according to Heald.

Pre-tax income for the quarter was $130,000, up 53 percent from the prior quarter. Pre-tax income for the year was $362,000, up 1399 percent from 2008.

Fourth-quarter growth was modest compared to the prior quarter.

Assets grew to $265.1 million, up 1 percent. Deposits totaled $239.3 million, an increase of less than 1 percent. Loans totaled $156.5 million, up 4 percent.

"People opened accounts but didn't add money," said Heald, noting the downtown office opened 72 new accounts in October, 64 in November, 52 in December and 97 in January.

He said new customers in January mentioned seeing the MoveYourMoney video, which has gotten close to 450,000 views since being posted on YouTube on Dec. 29.

Non-interest expenses grew by $329,000 compared to the fourth quarter of 2008 because of expenses related to bank growth and assessments levied by the Federal Deposit Insurance Corporation because of bank failures nationwide.

"Additional FDIC assessments to support our industry and continued economic instability puts pressure on earnings," Heald said.

He noted the bank has trimmed operating expenses by reducing personnel from 70 to 65 full-time equivalent staff and plans to move the four-person business lending office in Capitola to the downtown Santa Cruz office by the end of March.

One staff reduction came in January when Sandi Eason resigned as executive vice president and chief operating officer.

The bank's annual meeting has been scheduled for 3 p.m. May 25 at Bittersweet Bistro in Aptos.

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