HOUSTON, Oct. 24, 2008 (GLOBE NEWSWIRE) -- Encore Bancshares, Inc. (Nasdaq:EBTX) today announced its financial results for the third quarter of 2008.
* Improved net interest margin by 48 basis points to 3.34% compared with the third quarter of 2007 and by 21 basis points compared with the second quarter of 2008. * Improved the efficiency ratio to 67.59% compared with 74.03% for the third quarter of 2007. * Built reserves by $2.3 million, or $0.14 per diluted share, which increased the allowance for loan losses to total loans from 1.03% at June 30, 2008 to 1.22% at September 30, 2008. * Maintained Tier 1 Capital at $147.1 million, or 12.58%, at September 30, 2008.
"I am very pleased with the significant improvement in our net interest margin and in our efficiency ratio in the third quarter," said James S. D'Agostino, Jr., Chairman and Chief Executive Officer. "We have continued to improve our key metrics, strengthen our loan loss reserves and maintain our strong capital position. We are well positioned to take advantage of the opportunities that uncertainty and change create. I am very proud of our experienced professionals who provide personalized service and foster long-term relationships with our clients."
Earnings
For the three months ended September 30, 2008, net earnings were $228,000, or $0.02 per diluted share, compared with $2.2 million, or $0.22 per diluted share, for the same period of 2007. During the quarter, we made an additional provision for loan losses of $2.3 million, which increased our allowance for loan losses to period end loans to 1.22% at September 30, 2008 from 1.03% at June 30, 2008. We believe this increase in the allowance for loan losses was prudent given the challenging economy and credit environment. Excluding this additional provision, net earnings would have been $1.7 million, or $0.16 per diluted share. Net earnings were positively impacted by a $2.5 million, or 28.0%, improvement in net interest income and a $416,000, or 3.3%, decline in noninterest expense, but these improvements were offset by a rise in credit costs.
For the nine months ended September 30, 2008, net earnings were $1.9 million, or $0.17 per diluted share, compared with $5.7 million, or $0.64 per diluted share for the same period of 2007. Net interest income increased $7.6 million, or 30.7%, but this increase was offset by higher credit costs and a reduction in mortgage banking income.
Net Interest Income
Net interest income for the third quarter of 2008 was a record $11.6 million, an increase of $2.5 million, or 28.0%, compared with the third quarter of 2007. The net interest margin expanded 48 basis points to 3.34%. For the nine months ended September 30, 2008, net interest income was $32.3 million, an increase of $7.6 million, or 30.7%, compared with the same period of 2007. The net interest margin improved 45 basis points to 3.14%. The improvements in both periods were due primarily to a combination of improved asset mix, as a result of average loan growth of approximately 22% in the quarter, and a steepening yield curve, which allowed us to decrease the pricing of our deposits by an average rate that was more than the decline in average yield on our earning assets. On a linked quarter basis (compared with immediately preceding quarter), net interest income rose $763,000, or 7.0%, and the net interest margin improved 21 basis points.
Noninterest Income
Noninterest income was $6.0 million for the third quarter of 2008, a decrease of $1.5 million, or 20.6%, compared with the same period of 2007. Noninterest income for the nine months ended September 30, 2008 was $18.8 million, a decrease of $5.9 million, or 23.8%, compared with the same period of 2007. The decrease in both periods was due primarily to lower mortgage banking income, resulting from our decision to discontinue second mortgage sales in the third quarter of 2007.
Noninterest Expense
Noninterest expense was $12.1 million for the third quarter of 2008, a decrease of $416,000, or 3.3%, compared with the same period of 2007. Noninterest expense was $37.9 million for the nine months ended September 30, 2008, a decrease of $293,000, or 0.8%, compared with the same period of 2007. The reduction in both periods was due principally to a combination of compensation, advertising and outside data processing expense reduction initiatives.
Segment Earnings
On a segment basis, our wealth management group showed net earnings of $794,000 for the third quarter of 2008, a decrease of $121,000, or 13.2%, compared with the same period of 2007. The decrease in net earnings was due primarily to a 6.6% decrease in assets under management, reflecting the declining valuation of the stock market. Our banking segment lost $620,000 for the third quarter of 2008, compared with net earnings of $1.3 million for the same period of 2007. Net interest income improved $2.6 million, or 27.4%, but this increase was more than offset by lower mortgage banking income and by higher credit costs. Our insurance group had net earnings of $265,000 for the third quarter of 2008, compared with $316,000 for the same period of 2007. The decrease in net earnings was due primarily to a soft property and casualty market, resulting in lower commission fee income.
Loans
Period end loans were $1.2 billion at September 30, 2008, up $168.3 million, or 16.3%, compared with September 30, 2007, and up $29.3 million, or 2.5%, on a linked quarter basis. Average loans were $1.2 billion for the third quarter of 2008, an increase of $213.0 million, or 21.9%, compared with the same period of 2007.
Deposits
Period end deposits were $1.0 billion at September 30, 2008, up $6.3 million, or 0.6%, compared with September 30, 2007, and down $16.3 million, or 1.5%, on a linked quarter basis. Deposits decreased during the third quarter due primarily to the strategic decision to focus on profitability and not match some competitors' aggressive deposit pricing. Noninterest-bearing deposits were $121.1 million at September 30, 2008, an increase of $5.4 million, or 4.6%, compared with September 30, 2007. Average deposits were $1.0 billion for the third quarter of 2008, an increase of $30.9 million, or 3.1%, compared with the same period of 2007.
Credit Quality and Capital Ratios
The provision for loan losses was $5.2 million in the third quarter of 2008, an increase of $4.2 million compared with the same period of 2007. The increase in the provision reflected growth in the loan portfolio, the overall credit environment, and higher net charge-offs during the quarter. The provision for loan losses included $2.3 million to build the loan loss reserve in light of the current and anticipated economic conditions and credit environment. Net charge-offs for the third quarter of 2008 were $2.7 million, or 0.90% of average total loans on an annualized basis, compared with $465,000, or 0.19% of average total loans for the third quarter of 2007. The allowance for loan losses was $14.6 million, or 1.22% of total loans at September 30, 2008, compared with $10.7 million, or 1.04% of total loans at September 30, 2007.
At September 30, 2008, nonperforming assets, including loans past due 90 days and still accruing, were $23.4 million, or 1.95% of total loans and investment in real estate, compared with $14.4 million, or 1.23% of total loans and investment in real estate at June 30, 2008, and $9.5 million, or 0.92% of total loans and investment in real estate at September 30, 2007. At September 30, 2008, nonaccrual loans were $21.1 million, compared with $12.1 million at June 30, 2008. The increase in nonaccrual loans was due primarily to three residential construction loans in Houston. Loans 90 days past due or more and still accruing were $23,000 at September 30, 2008, compared with $240,000 at June 30, 2008. Investment in real estate was $2.2 million at September 30, 2008 compared with $2.1 million at June 30, 2008.
As of September 30, 2008, our Tier 1 risked-based, total risked-based, and leverage capital ratios were 12.58%, 13.87% and 10.18%, respectively, and Encore Bank was considered "well capitalized" pursuant to regulatory capital definitions.
Conference Call
A conference call will be held on Friday, October 24, 2008 at 10:00 a.m., Central time, to discuss third quarter 2008 results. A question and answer session will follow the prepared remarks. Individuals may access the call by dialing 1-877-681-3371, or access the live webcast by visiting www.encorebank.com/investorrelations.shtml
About Encore Bancshares, Inc.
Encore Bancshares, Inc. is a financial holding company headquartered in Houston, Texas and offers a broad range of banking, wealth management and insurance services through Encore Bank, N.A., and its affiliated companies. Encore Bank operates 11 private client offices in the Greater Houston area and six in southwest Florida. Headquartered in Houston and with $1.5 billion in assets, Encore Bank builds relationships with professional firms, privately-owned businesses, investors and affluent individuals. Encore Bank offers a full range of business and personal banking products and services, as well as financial planning, wealth management, trust and insurance products through its trust division, Encore Trust, and its affiliated companies, Linscomb & Williams and Town & Country Insurance. Products and services offered by Encore Bank's affiliates are not FDIC insured. The Company's common stock is listed on the NASDAQ Global Market under the symbol "EBTX".
The Encore Bancshares, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4257
This press release contains certain financial information determined by methods other than in accordance with GAAP. Encore's management believes these non-GAAP financial measures provide information useful to investors in understanding our financial results and facilitates comparisons with the performance of peers within the financial services industry. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP.
This press release contains certain forward-looking information about Encore Bancshares that is intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially from those expressed in or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: competitive pressure among financial institutions; volatility and disruption in national and international financial markets; government intervention in the U.S. financial system; our ability to expand and grow our businesses and operations and to realize the cost savings and revenue enhancements expected from such activities; a deterioration of credit quality or a reduced demand for credit; changes in the interest rate environment; the continued service of key management personnel; our ability to attract, motivate and retain key employees; general economic conditions, either nationally, regionally or in the market areas in which we operate; legislative or regulatory developments or changes in laws; changes in the securities markets and other risks that are described from time to time in our 2007 Annual Report on Form 10-K and other reports and documents filed with the Securities and Exchange Commission.
Encore Bancshares, Inc. and Subsidiaries FINANCIAL HIGHLIGHTS (Unaudited, amounts in thousands, except per share data) As of and for the As of and for the Three Months Ended Nine Months Ended September 30, September 30, ----------------- ----------------- 2008 2007 2008 2007 ------- ------- ------- ------- Earnings Statement Data: Interest income $20,481 $21,032 $61,078 $60,187 Interest expense 8,873 11,966 28,746 35,443 ------- ------- ------- ------- Net interest income 11,608 9,066 32,332 24,744 Provision for loan losses 5,249 1,008 10,527 2,853 ------- ------- ------- ------- Net interest income after provision for loan losses 6,359 8,058 21,805 21,891 Noninterest income 5,975 7,521 18,812 24,697 Noninterest expense 12,073 12,489 37,947 38,240 ------- ------- ------- ------- Net earnings before income taxes 261 3,090 2,670 8,348 Income tax expense 33 842 791 2,667 ------- ------- ------- ------- Net earnings $ 228 $ 2,248 $ 1,879 $ 5,681 ======= ======= ======= ======= Common Share Data: Basic earnings per share $ 0.02 $ 0.24 $ 0.19 $ 0.70 Diluted earnings per share 0.02 0.22 0.17 0.64 Book value per share 15.73 15.36 15.73 15.36 Tangible book value per share 12.39 11.91 12.39 11.91 Average common shares outstanding 9,895 9,347 9,876 8,160 Diluted average common shares outstanding 10,771 10,156 10,755 8,836 Shares outstanding at end of period 10,238 10,120 10,238 10,120 Selected Performance Ratios: Return on average assets 0.06% 0.66% 0.17% 0.58% Return on average equity 0.56% 6.20% 1.56% 6.31% Return on average tangible equity 0.71% 8.20% 1.99% 8.93% Net interest margin 3.34% 2.86% 3.14% 2.69% Efficiency ratio 67.59% 74.03% 73.09% 75.80% Noninterest income to total revenue 33.98% 45.34% 36.78% 49.95% Encore Bancshares, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (Unaudited, dollars in thousands, except per share data) Sept 30, June 30, March 31, Dec 31, Sept 30, 2008 2008 2008 2007 2007 ---------- ---------- ---------- ---------- ---------- ASSETS Cash and due from banks $ 21,005 $ 21,954 $ 16,608 $ 18,817 $ 19,044 Interest -bearing deposits in banks 13,471 28,297 40,328 18,581 1,804 Federal funds sold and other 5,562 10,716 58,769 41,017 100,630 ---------- ---------- ---------- ---------- ---------- Cash and cash equiv- alents 40,038 60,967 115,705 78,415 121,478 Securities available -for-sale, at estimated fair value 57,077 41,508 12,108 12,207 12,205 Securities held-to- maturity, at amortized cost 100,329 107,424 123,133 134,056 140,507 Mortgages held -for-sale 448 -- 1,928 1,396 2,244 Loans receivable 1,198,445 1,169,151 1,156,501 1,097,268 1,030,133 Allowance for loan losses (14,620) (12,054) (11,603) (11,161) (10,711) ---------- ---------- ---------- ---------- ---------- Net loans receiv- able 1,183,825 1,157,097 1,144,898 1,086,107 1,019,422 Federal Home Loan Bank of Dallas stock, at cost 10,513 7,943 6,987 5,880 5,805 Investment in real estate 2,215 2,063 2,078 835 731 Premises and equipment, net 17,688 17,050 16,789 16,831 15,814 Goodwill 27,975 27,975 27,969 27,942 27,922 Other intangible assets, net 6,218 6,406 6,592 6,780 6,991 Cash surrender value of life insurance policies 14,539 14,398 14,256 14,091 13,951 Accrued interest receivable and other assets 17,358 17,882 16,183 16,657 16,062 ---------- ---------- ---------- ---------- ---------- $1,478,223 $1,460,713 $1,488,626 $1,401,197 $1,383,132 ========== ========== ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest -bearing $ 121,100 $ 123,594 $ 129,983 $ 106,382 $ 115,742 Interest -bearing 917,379 931,149 981,164 934,992 916,442 ---------- ---------- ---------- ---------- ---------- Total deposits 1,038,479 1,054,743 1,111,147 1,041,374 1,032,184 Borrowings and repurchase agreements 249,426 212,257 188,845 173,395 166,359 Junior subord- inated debentures 20,619 20,619 20,619 20,619 20,619 Accrued interest payable and other liabil- ities 8,690 12,882 8,604 8,330 8,538 ---------- ---------- ---------- ---------- ---------- Total liabil- ities 1,317,214 1,300,501 1,329,215 1,243,718 1,227,700 Commitments and contin- gencies -- -- -- -- - Share- holders' equity: Preferred stock -- -- -- -- - Common stock 10,243 10,240 10,158 10,128 10,124 Additional paid-in capital 109,488 109,169 108,813 108,173 107,954 Retained earnings 41,642 41,414 40,933 39,763 38,060 Common stock in treasury, at cost (98) (98) (69) (69) (69) Accum- ulated other compre- hensive loss (266) (513) (424) (516) (637) ---------- ---------- ---------- ---------- ---------- Total share- holders' equity 161,009 160,212 159,411 157,479 155,432 ---------- ---------- ---------- ---------- ---------- $1,478,223 $1,460,713 $1,488,626 $1,401,197 $1,383,132 ========== ========== ========== ========== ========== Ratios and Per Share Data: Leverage ratio 10.18% 10.07% 10.31% 10.47% 10.71% Tier 1 risk-based capital ratio 12.58% 12.82% 12.91% 13.59% 14.20% Total risk-based capital ratio 13.87% 13.87% 13.94% 14.65% 15.28% Book value per share $ 15.73 $ 15.65 $ 15.70 $ 15.56 $ 15.36 Tangible book value per share 12.39 12.30 12.30 12.13 11.91 Tangible common equity to tangible assets 8.78% 8.82% 8.59% 8.98% 8.94% Encore Bancshares, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited, amounts in thousands, except per share data) Three Months Ended --------------------------------------- Nine Months Sept June March Dec Sept Ended Sept 30, 30, 30, 31, 31, 30, --------------- 2008 2008 2008 2007 2007 2008 2007 ------- ------- ------- ------- ------- ------- ------- Interest income: Loans, including fees $18,738 $18,238 $18,378 $18,536 $17,309 $55,354 $49,463 Mortgages held-for -sale 13 25 32 64 1,346 70 3,669 Securities 1,469 1,250 1,319 1,442 1,463 4,038 5,481 Federal funds sold and other 261 552 803 1,198 914 1,616 1,574 ------- ------- ------- ------- ------- ------- ------- Total interest income 20,481 20,065 20,532 21,240 21,032 61,078 60,187 Interest expense: Deposits 6,458 7,123 8,542 9,731 9,947 22,123 28,928 Borrowings and repurchase agreements 2,085 1,767 1,755 1,710 1,651 5,607 5,319 Junior subordinated debentures 330 330 356 368 368 1,016 1,196 ------- ------- ------- ------- ------- ------- ------- Total interest expense 8,873 9,220 10,653 11,809 11,966 28,746 35,443 ------- ------- ------- ------- ------- ------- ------- Net interest income 11,608 10,845 9,879 9,431 9,066 32,332 24,744 Provision for loan losses 5,249 3,777 1,501 1,176 1,008 10,527 2,853 ------- ------- ------- ------- ------- ------- ------- Net interest income after provision for loan losses 6,359 7,068 8,378 8,255 8,058 21,805 21,891 Noninterest income: Trust and investment management fees 4,277 4,660 4,407 4,533 4,501 13,344 13,013 Mortgage banking 28 135 54 95 1,167 217 5,411 Insurance commissions and fees 1,385 1,385 1,727 1,217 1,450 4,497 4,725 Real estate operations (103) (452) 55 63 178 (500) 303 Net loss on sale of available- for-sale securities (2) -- -- -- -- (2) (181) Other 390 432 434 361 225 1,256 1,426 ------- ------- ------- ------- ------- ------- ------- Total noninterest income 5,975 6,160 6,677 6,269 7,521 18,812 24,697 Noninterest expense: Compensation 6,991 7,467 8,078 7,081 7,318 22,536 23,036 Occupancy 1,477 1,485 1,438 1,428 1,438 4,400 4,336 Equipment 494 487 531 553 506 1,512 1,523 Advertising and promotion 187 219 204 223 328 610 795 Outside data processing 762 717 694 883 884 2,173 2,596 Professional fees 671 739 1,156 797 401 2,566 1,249 Intangible amortization 187 188 187 209 209 562 629 Loss on early debt extinguish- ment -- -- -- -- -- -- 391 Other 1,304 1,295 989 1,193 1,405 3,588 3,685 ------- ------- ------- ------- ------- ------- ------- Total noninterest expense 12,073 12,597 13,277 12,367 12,489 37,947 38,240 ------- ------- ------- ------- ------- ------- ------- Net earnings before income taxes 261 631 1,778 2,157 3,090 2,670 8,348 Income tax expense 33 150 608 454 842 791 2,667 ------- ------- ------- ------- ------- ------- ------- NET EARNINGS $ 228 $ 481 $ 1,170 $ 1,703 $ 2,248 $ 1,879 $ 5,681 ======= ======= ======= ======= ======= ======= ======= Earnings Per Common Share: Basic $ 0.02 $ 0.05 $ 0.12 $ 0.17 $ 0.24 $ 0.19 $ 0.70 Diluted 0.02 0.04 0.11 0.16 0.22 0.17 0.64 Average common shares outstanding 9,895 9,886 9,846 9,808 9,347 9,876 8,160 Diluted average common shares outstanding 10,771 10,780 10,714 10,661 10,156 10,755 8,836 Encore Bancshares, Inc. and Subsidiaries AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited, dollars in thousands) Three Months Ended ------------------------------------------------------ Sept 30, June 30, March 31, Dec 31, Sept 30, 2008 2008 2008 2007 2007 ---------- ---------- ---------- ---------- ---------- Assets: Interest -earning assets: Loans $1,186,606 $1,170,959 $1,119,439 $1,060,927 $ 973,641 Mortgages held-for-sale 596 1,151 1,465 2,693 60,959 Securities 156,354 139,510 142,098 148,912 156,159 Federal funds sold and other 40,128 82,841 89,419 98,789 68,347 ---------- ---------- ---------- ---------- ---------- Total interest- earning assets 1,383,684 1,394,461 1,352,421 1,311,321 1,259,106 Less: Allowance for loan losses (12,630) (11,526) (11,178) (10,754) (10,391) Noninterest- earning assets 108,224 103,918 102,266 101,783 102,667 ---------- ---------- ---------- ---------- ---------- Total assets $1,479,278 $1,486,853 $1,443,509 $1,402,350 $1,351,382 ========== ========== ========== ========== ========== Liabilities and shareholders' equity: Interest -bearing liabilities: Interest checking $ 192,424 $ 194,973 $ 182,483 $ 169,823 $ 169,860 Money market and savings 283,130 307,047 333,241 359,217 358,732 Time deposits 448,983 466,199 434,597 399,224 375,896 ---------- ---------- ---------- ---------- ---------- Total interest -bearing deposits 924,537 968,219 950,321 928,264 904,488 Borrowings and repurchase agreements 240,104 202,229 193,855 170,141 158,203 Junior subordinated debentures 20,619 20,619 20,619 20,619 20,619 ---------- ---------- ---------- ---------- ---------- Total interest -bearing liabilities 1,185,260 1,191,067 1,164,795 1,119,024 1,083,310 ---------- ---------- ---------- ---------- ---------- Noninterest -bearing liabilities: Noninterest -bearing deposits 119,024 123,453 106,905 113,849 108,168 Other liabilities 12,186 12,015 13,313 13,428 16,128 ---------- ---------- ---------- ---------- ---------- Total liabilities 1,316,470 1,326,535 1,285,013 1,246,301 1,207,606 Shareholders' equity 162,808 160,318 158,496 156,049 143,776 ---------- ---------- ---------- ---------- ---------- Total liabilities and shareholders' equity $1,479,278 $1,486,853 $1,443,509 $1,402,350 $1,351,382 ========== ========== ========== ========== ========== Encore Bancshares, Inc. and Subsidiaries SELECTED FINANCIAL DATA (Unaudited, dollars in thousands) Sept 30, June 30, March 31, Dec 31, Sept 30, Loan Portfolio: 2008 2008 2008 2007 2007 ---------- ---------- ---------- ---------- ---------- Commercial: Commercial $ 130,484 $ 127,639 $ 142,259 $ 127,583 $ 111,072 Commercial real estate 305,570 298,562 291,543 277,047 249,576 Real estate construction 96,450 91,371 97,807 100,975 132,557 ---------- ---------- ---------- ---------- ---------- Total commercial 532,504 517,572 531,609 505,605 493,205 Consumer: Residential real estate first lien 247,765 256,201 264,445 271,346 264,541 Residential real estate second lien 291,933 269,409 234,623 195,583 146,719 Home equity lines 79,888 79,913 78,860 79,023 76,096 Consumer installment - indirect 16,461 18,806 21,917 25,262 29,210 Consumer other 29,894 27,250 25,047 20,449 20,362 ---------- ---------- ---------- ---------- ---------- Total consumer 665,941 651,579 624,892 591,663 536,928 ---------- ---------- ---------- ---------- ---------- Total loans receivable $1,198,445 $1,169,151 $1,156,501 $1,097,268 $1,030,133 ========== ========== ========== ========== ========== Nonperforming Assets: Nonaccrual loans $ 21,142 $ 12,118 $ 14,131 $ 11,208 $ 8,734 Accruing loans past due 90 days or more 23 240 283 2,183 20 Restructured loans -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total nonperforming loans 21,165 12,358 14,414 13,391 8,754 ---------- ---------- ---------- ---------- ---------- Investment in real estate 2,215 2,063 2,078 835 731 ---------- ---------- ---------- ---------- ---------- Total nonperforming assets $ 23,380 $ 14,421 $ 16,492 $ 14,226 $ 9,485 ========== ========== ========== ========== ========== Asset Quality Ratios: Nonperforming assets to total loans and investment in real estate 1.95% 1.23% 1.42% 1.30% 0.92% Net charge-offs to average loans 0.90% 1.14% 0.38% 0.27% 0.19% Allowance for loan losses to period end loans 1.22% 1.03% 1.00% 1.02% 1.04% Allowance for loan losses to nonperforming loans 69.08% 97.54% 80.50% 83.35% 122.36% Deposits: Noninterest -bearing deposits $ 121,100 $ 123,594 $ 129,983 $ 106,382 $ 115,742 Interest checking 182,456 186,902 190,633 179,486 169,646 Money market and savings 268,969 292,631 338,386 345,066 362,289 Time deposits less than $100,000 192,603 198,603 201,735 193,900 175,071 ---------- ---------- ---------- ---------- ---------- Core deposits 765,128 801,730 860,737 824,834 822,748 ---------- ---------- ---------- ---------- ---------- Time deposits $100,000 and greater 245,018 239,556 233,462 201,932 194,619 Brokered deposits 28,333 13,457 16,948 14,608 14,817 ---------- ---------- ---------- ---------- ---------- Total deposits $1,038,479 $1,054,743 $1,111,147 $1,041,374 $1,032,184 ========== ========== ========== ========== ========== Assets Under Management $2,607,702 $2,736,790 $2,737,603 $2,784,617 $2,792,894 ========== ========== ========== ========== ========== Encore Bancshares, Inc. and Subsidiaries ALLOWANCE FOR LOAN LOSSES (Unaudited, dollars in thousands) Three Months Ended ---------------------------------------------------- Sept 30, June 30, March 31, Dec 31, Sept 30, 2008 2008 2008 2007 2007 -------- -------- -------- -------- -------- Allowance for loan losses at beginning of quarter $ 12,054 $ 11,603 $ 11,161 $ 10,711 $ 10,168 Charge-offs: Commercial: Commercial (301) (2,119) (231) (20) (42) Commercial real estate (407) (289) (80) -- -- Real estate construction (356) (57) (9) (79) -- -------- -------- -------- -------- -------- Total commercial (1,064) (2,465) (320) (99) (42) -------- -------- -------- -------- -------- Consumer: Residential real estate first lien (256) (193) (43) (66) (124) Residential real estate second lien (417) (151) (377) (44) (216) Home equity lines (831) (463) (42) (299) (25) Consumer installment - indirect (254) (200) (297) (360) (307) Consumer other (23) (5) (29) (45) (13) -------- -------- -------- -------- -------- Total consumer (1,781) (1,012) (788) (814) (685) -------- -------- -------- -------- -------- Total charge-offs (2,845) (3,477) (1,108) (913) (727) -------- -------- -------- -------- -------- Recoveries: Commercial: Commercial 8 9 11 40 6 Commercial real estate -- 6 -- -- -- Real estate construction -- -- -- -- -- -------- -------- -------- -------- -------- Total commercial 8 15 11 40 6 -------- -------- -------- -------- -------- Consumer: Residential real estate first lien 3 19 1 22 12 Residential real estate second lien 54 3 2 -- 145 Home equity lines 4 -- 2 -- -- Consumer installment - indirect 81 37 6 109 76 Consumer other 12 77 27 16 23 -------- -------- -------- -------- -------- Total consumer 154 136 38 147 256 -------- -------- -------- -------- -------- Total recoveries 162 151 49 187 262 -------- -------- -------- -------- -------- Net charge-offs (2,683) (3,326) (1,059) (726) (465) -------- -------- -------- -------- -------- Provision for loan losses 5,249 3,777 1,501 1,176 1,008 -------- -------- -------- -------- -------- Allowance for loan losses at end of quarter $ 14,620 $ 12,054 $ 11,603 $ 11,161 $ 10,711 ======== ======== ======== ======== ======== Encore Bancshares, Inc. and Subsidiaries SEGMENT OPERATIONS (Unaudited, dollars in thousands) As of and for the Three Months Ended ---------------------------------------------------------- Sept 30, June 30, March 31, Dec 31, Sept 30, 2008 2008 2008 2007 2007 ---------- ---------- ---------- ---------- ---------- Banking Net interest income $ 11,871 $ 11,116 $ 10,130 $ 9,674 $ 9,315 Provision for loan losses 5,249 3,777 1,501 1,176 1,008 Noninterest income 300 66 519 509 1,559 Noninterest expense 7,988 8,823 9,103 8,378 8,338 ---------- ---------- ---------- ---------- ---------- Earnings (loss) before income taxes (1,066) (1,418) 45 629 1,528 Income tax expense (benefit) (446) (586) (15) 103 261 ---------- ---------- ---------- ---------- ---------- Net earnings (loss) $ (620) $ (832) $ 60 $ 526 $ 1,267 ========== ========== ========== ========== ========== Total assets at quarter end $1,481,311 $1,472,045 $1,500,462 $1,411,934 $1,392,156 ========== ========== ========== ========== ========== Wealth Management Net interest income $ 51 $ 37 $ 64 $ 89 $ 82 Noninterest income 4,277 4,660 4,407 4,533 4,501 Noninterest expense 3,083 2,725 3,070 3,042 3,137 ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 1,245 1,972 1,401 1,580 1,446 Income tax expense 451 709 504 460 531 ---------- ---------- ---------- ---------- ---------- Net earnings $ 794 $ 1,263 $ 897 $ 1,120 $ 915 ========== ========== ========== ========== ========== Total assets at quarter end $ 49,263 $ 48,146 $ 47,444 $ 46,270 $ 45,425 ========== ========== ========== ========== ========== Insurance Net interest income $ 16 $ 22 $ 41 $ 36 $ 37 Noninterest income 1,398 1,458 1,732 1,222 1,460 Noninterest expense 1,002 1,049 1,104 947 1,014 ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 412 431 669 311 483 Income tax expense 147 154 240 73 167 ---------- ---------- ---------- ---------- ---------- Net earnings $ 265 $ 277 $ 429 $ 238 $ 316 ========== ========== ========== ========== ========== Total assets at quarter end $ 6,997 $ 13,188 $ 10,143 $ 9,242 $ 9,219 ========== ========== ========== ========== ========== Other Net interest expense $ (330) $ (330) $ (356) $ (368) $ (368) Noninterest income -- (24) 19 5 1 Noninterest expense -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Loss before income taxes (330) (354) (337) (363) (367) Income tax benefit (119) (127) (121) (182) (117) ---------- ---------- ---------- ---------- ---------- Net loss $ (211) $ (227) $ (216) $ (181) $ (250) ========== ========== ========== ========== ========== Total assets at quarter end $ (59,348) $ (72,666) $ (69,423) $ (66,249) $ (63,668) ========== ========== ========== ========== ========== Consolidated Net interest income $ 11,608 $ 10,845 $ 9,879 $ 9,431 $ 9,066 Provision for loan losses 5,249 3,777 1,501 1,176 1,008 Noninterest income 5,975 6,160 6,677 6,269 7,521 Noninterest expense 12,073 12,597 13,277 12,367 12,489 ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 261 631 1,778 2,157 3,090 Income tax expense 33 150 608 454 842 ---------- ---------- ---------- ---------- ---------- Net earnings $ 228 $ 481 $ 1,170 $ 1,703 $ 2,248 ========== ========== ========== ========== ========== Total assets at quarter end $1,478,223 $1,460,713 $1,488,626 $1,401,197 $1,383,132 ========== ========== ========== ========== ========== As of and for the Nine Months Ended September 30, ---------------------- 2008 2007 ---------- ---------- Banking Net interest income $ 33,117 $ 25,608 Provision for loan losses 10,527 2,853 Noninterest income 885 6,847 Noninterest expense 25,914 25,644 ---------- ---------- Earnings (loss) before income taxes (2,439) 3,958 Income tax expense (benefit) (1,047) 1,027 ---------- ---------- Net earnings (loss) $ (1,392) $ 2,931 ========== ========== Total assets at quarter end $1,481,311 $1,392,156 ========== ========== Wealth Management Net interest income $ 152 $ 232 Noninterest income 13,344 13,013 Noninterest expense 8,878 9,152 ---------- ---------- Earnings before income taxes 4,618 4,093 Income tax expense 1,664 1,481 ---------- ---------- Net earnings $ 2,954 $ 2,612 ========== ========== Total assets at quarter end $ 49,263 $ 45,425 ========== ========== Insurance Net interest income $ 79 $ 100 Noninterest income 4,588 4,813 Noninterest expense 3,155 3,053 ---------- ---------- Earnings before income taxes 1,512 1,860 Income tax expense 541 671 ---------- ---------- Net earnings $ 971 $ 1,189 ========== ========== Total assets at quarter end $ 6,997 $ 9,219 ========== ========== Other Net interest expense $ (1,016) $ (1,196) Noninterest income (5) 24 Noninterest expense -- 391 ---------- ---------- Loss before income taxes (1,021) (1,563) Income tax benefit (367) (512) ---------- ---------- Net loss $ (654) $ (1,051) ========== ========== Total assets at quarter end $ (59,348) $ (63,668) ========== ========== Consolidated Net interest income $ 32,332 $ 24,744 Provision for loan losses 10,527 2,853 Noninterest income 18,812 24,697 Noninterest expense 37,947 38,240 ---------- ---------- Earnings before income taxes 2,670 8,348 Income tax expense 791 2,667 ---------- ---------- Net earnings $ 1,879 $ 5,681 ========== ========== Total assets at quarter end $1,478,223 $1,383,132 ========== ========== Encore Bancshares, Inc. and Subsidiaries YIELD ANALYSIS (Unaudited, dollars in thousands) Three Months Ended September 30, ------------------------------------ 2008 ------------------------------------ Average Interest Average Outstanding Income/ Yield/ Balance Expense Rate ---------- ---------- ---------- Assets: Interest-earning assets: Loans $1,186,606 $ 18,738 6.28% Mortgages held-for-sale 596 13 8.68% Securities 156,354 1,469 3.74% Federal funds sold and other 40,128 261 2.59% ---------- ---------- Total interest-earning assets 1,383,684 20,481 5.89% Less: Allowance for loan losses (12,630) Noninterest-earning assets 108,224 ---------- Total assets $1,479,278 ========== Liabilities and shareholders' equity: Interest-bearing liabilities: Interest checking $ 192,424 $ 610 1.26% Money market and savings 283,130 1,217 1.71% Time deposits 448,983 4,631 4.10% ---------- ---------- Total interest-bearing deposits 924,537 6,458 2.78% Borrowings and repurchase agreements 240,104 2,085 3.45% Junior subordinated debentures 20,619 330 6.37% ---------- ---------- Total interest-bearing liabilities 1,185,260 8,873 2.98% ---------- ---------- Noninterest-bearing liabilities: Noninterest-bearing deposits 119,024 Other liabilities 12,186 ---------- Total liabilities 1,316,470 Shareholders' equity 162,808 ---------- Total liabilities and shareholders' equity $1,479,278 ========== Net interest income $ 11,608 ========== Net interest spread 2.91% Net interest margin 3.34% ------------------------------------ 2007 ------------------------------------ Average Interest Average Outstanding Income/ Yield/ Balance Expense Rate ---------- ---------- ---------- Assets: Interest-earning assets: Loans $ 973,641 $ 17,309 7.05% Mortgages held-for-sale 60,959 1,346 8.76% Securities 156,159 1,463 3.72% Federal funds sold and other 68,347 914 5.31% ---------- ---------- Total interest-earning assets 1,259,106 21,032 6.63% Less: Allowance for loan losses (10,391) Noninterest-earning assets 102,667 ---------- Total assets $1,351,382 ========== Liabilities and shareholders' equity: Interest-bearing liabilities: Interest checking $ 169,860 $ 1,347 3.15% Money market and savings 358,732 3,907 4.32% Time deposits 375,896 4,693 4.95% ---------- ---------- Total interest-bearing deposits 904,488 9,947 4.36% Borrowings and repurchase agreements 158,203 1,651 4.14% Junior subordinated debentures 20,619 368 7.08% ---------- ---------- Total interest-bearing liabilities 1,083,310 11,966 4.38% ---------- ---------- Noninterest-bearing liabilities: Noninterest-bearing deposits 108,168 Other liabilities 16,128 ---------- Total liabilities 1,207,606 Shareholders' equity 143,776 ---------- Total liabilities and shareholders' equity $1,351,382 ========== Net interest income $ 9,066 ========== Net interest spread 2.25% Net interest margin 2.86% Encore Bancshares, Inc. and Subsidiaries YIELD ANALYSIS (Unaudited, dollars in thousands) Nine Months Ended September 30, ------------------------------------ 2008 ------------------------------------ Average Interest Average Outstanding Income/ Yield/ Balance Expense Rate ---------- ---------- ---------- Assets: Interest-earning assets: Loans $1,159,102 $ 55,354 6.38% Mortgages held-for-sale 1,069 70 8.75% Securities 146,025 4,038 3.69% Federal funds sold and other 70,684 1,616 3.05% ---------- ---------- Total interest-earning assets 1,376,880 61,078 5.93% Less: Allowance for loan losses (11,781) Noninterest-earning assets 104,815 ---------- Total assets $1,469,914 ========== Liabilities, shareholders' equity and puttable common stock: Interest-bearing liabilities: Interest checking $ 189,969 $ 2,204 1.55% Money market and savings 307,716 4,960 2.15% Time deposits 449,923 14,959 4.44% ---------- ---------- Total interest-bearing deposits 947,608 22,123 3.12% Borrowings and repurchase agreements 212,165 5,607 3.53% Junior subordinated debentures 20,619 1,016 6.58% ---------- ---------- Total interest-bearing liabilities 1,180,392 28,746 3.25% ---------- ---------- Noninterest-bearing liabilities: Noninterest-bearing deposits 116,470 Other liabilities 12,503 ---------- Total liabilities 1,309,365 Shareholders' equity and puttable common stock 160,549 ---------- Total liabilities, shareholders' equity and puttable common stock $1,469,914 ========== Net interest income $ 32,332 ========== Net interest spread 2.68% Net interest margin 3.14% ------------------------------------ 2007 ------------------------------------ Average Interest Average Outstanding Income/ Yield/ Balance Expense Rate ---------- ---------- ---------- Assets: Interest-earning assets: Loans $ 943,048 $ 49,463 7.01% Mortgages held-for-sale 55,753 3,669 8.80% Securities 190,165 5,481 3.85% Federal funds sold and other 38,746 1,574 5.43% ---------- ---------- Total interest-earning assets 1,227,712 60,187 6.55% Less: Allowance for loan losses (9,838) Noninterest-earning assets 102,592 ---------- Total assets $1,320,466 ========== Liabilities, shareholders' equity and puttable common stock: Interest-bearing liabilities: Interest checking $ 173,671 $ 3,915 3.01% Money market and savings 344,978 11,203 4.34% Time deposits 374,654 13,810 4.93% ---------- ---------- Total interest-bearing deposits 893,303 28,928 4.33% Borrowings and repurchase agreements 164,133 5,319 4.33% Junior subordinated debentures 20,743 1,196 7.71% ---------- ---------- Total interest-bearing liabilities 1,078,179 35,443 4.40% ---------- ---------- Noninterest-bearing liabilities: Noninterest-bearing deposits 107,965 Other liabilities 14,015 ---------- Total liabilities 1,200,159 Shareholders' equity and puttable common stock 120,307 ---------- Total liabilities, shareholders' equity and puttable common stock $1,320,466 ========== Net interest income $ 24,744 ========== Net interest spread 2.15% Net interest margin 2.69%