HOUSTON, Jan. 29, 2010 (GLOBE NEWSWIRE) -- Encore Bancshares, Inc. (Nasdaq:EBTX) today announced its financial results for the fourth quarter of 2009.
Improved earnings metrics
- Net earnings of $1.6 million for the fourth quarter of 2009, and $1.8 million for the twelve months ended December 31, 2009
- Trust and investment management revenue rose 14.4% compared with the fourth quarter of 2008, due to rising assets under management, which reached $2.7 billion
- Core deposit growth of 13.2% compared with December 31, 2008, which included noninterest-bearing deposit growth of 32.2%
Increased credit reserve
- Allowance for loan losses grew to 2.46% of total loans compared with 2.06% at December 31, 2008.
Continued strong capital position
- Tier 1 capital of $166.3 million, or 14.70% Tier 1 risk-based capital ratio
- Tangible common equity ratio was 7.31%
“Our parallel efforts to contain problems loans, especially in Florida, and build our capacity to increase our relationships with quality commercial and private banking clients in Houston are progressing well,” said James S. D’Agostino, Jr., Chairman and Chief Executive Officer of Encore Bancshares, Inc. “It appears that problem loans have reached a plateau over the past three quarters and we are making good progress in resolving these loans. Further, we have added another team to our existing experienced Houston lenders that positions us well as we see indications of economic stability, especially in Houston. We’ve maintained a strong capital position, solid allowance and capable team of lenders that we believe will serve us well in the years ahead.”
Earnings
For the three months ended December 31, 2009, net earnings were $1.6 million, compared with a net loss of $10.0 million for the same period of 2008. Earnings per diluted common share for the fourth quarter of 2009 were $0.09, compared with a loss per diluted common share of $0.99 for the same period of 2008. Earnings per share include the dividends on preferred stock issued in the fourth quarter of 2008. The increase in earnings was due primarily to lower credit costs.
For the twelve months ended December 31, 2009, net earnings were $1.8 million, compared with a net loss of $8.1 million for the same period of 2008. The improvement in earnings was due primarily to lower credit costs. The loss per diluted common share, after deducting preferred dividends, for the twelve months ended December 31, 2009 was $0.04, compared with a loss per diluted common share of $0.81 for the comparable period of 2008.
Net Interest Income
Net interest income on a tax equivalent basis (TE) for the fourth quarter of 2009 was $11.8 million, a decrease of $192,000, or 1.6% compared with the same period of 2008. The net interest margin (TE) contracted 27 basis points during the same comparison period. On a linked quarter basis (compared with immediately preceding quarter), net interest income (TE) decreased $331,000, or 2.7%, and the net interest margin (TE) contracted 9 basis points. The decrease in margin for both comparison periods was due primarily to a decrease in loans and increase in short term liquid investments. For the twelve months ended December 31, 2009, net interest income (TE) was $46.9 million, an increase of $2.7 million, or 6.0%, compared with the same period of 2008, due primarily to higher earning assets. The net interest margin decreased 8 basis points, reflecting a decline in loans.
Noninterest Income
Noninterest income was $8.1 million for the fourth quarter of 2009, an increase of $4.5 million, compared with the same period of 2008. For the twelve months ended December 31, 2009, noninterest income was $27.3 million, an increase of $4.4 million, or 19.1% compared with the same period of 2008. The increase for both periods was due primarily to gain on sale of securities of $1.9 million in the fourth quarter of 2009 as we sold securities to better position the balance sheet for the anticipated rise in interest rates.
Noninterest Expense
Noninterest expense was $14.7 million for the fourth quarter of 2009, an increase of $2.2 million, or 17.6%, compared with the same period of 2008. For the twelve months ended December 31, 2009, noninterest expense was $54.4 million, an increase of $3.4 million, or 6.7%, compared with the same period of 2008. The increase was due primarily to a combination of higher compensation expense and FDIC assessments. The increase in compensation was due in part to the addition of executive management, loan workout personnel and new lenders to grow the bank’s commercial lending platform. In addition, we capitalized fewer loan origination expenses due to lower loan production volumes. The higher FDIC assessment expenses reflect a growing deposit base, the expiration of credits in previous quarters, as well as higher assessment rates imposed by the FDIC, including the special assessment accrued in the second quarter of 2009.
Segment Earnings
On a segment basis, our banking segment showed net earnings of $753,000, compared with a loss of $11.1 million in the same period of 2008, due primarily to lower credit costs. Our wealth management group showed net earnings of $1.0 million for the fourth quarter of 2009, a decrease of $231,000, or 18.6%, compared with the same period of 2008. Wealth management income rose due primarily to rising equity valuations, but was offset by an increase in compensation and software expenses. Our insurance agency had net earnings of $11,000, a decrease of $79,000, due to a soft insurance market, resulting in lower revenue.
Loans
Period end loans were $1.1 billion at December 31, 2009, a decrease of $140.2 million, or 11.5%, compared with December 31, 2008. The reduction in the loan portfolio reflected the deleveraging of both companies and consumers. The largest reduction was in construction loans reflecting the weak residential and commercial real estate markets.
Deposits
Period end deposits were $1.2 billion at December 31, 2009, an increase of $91.0 million, or 8.3%, compared with December 31, 2008. Noninterest-bearing deposits grew to $174.1 million, an increase of $42.4 million, or 32.2%, compared with December 31, 2008. Average deposits were $1.2 billion for the fourth quarter of 2009, an increase of $125.0 million, or 11.9%, compared with the same period of 2008.
Credit Quality and Capital Ratios
The provision for loan losses was $3.0 million for the fourth quarter of 2009, compared with $18.6 million in the fourth quarter of 2008. The provision for loan losses was elevated in the fourth quarter of 2008 to boost the allowance for loan losses due to the rapidly deteriorating economic environment. Net charge-offs for the fourth quarter of 2009 were $4.1 million, or 1.49% of average total loans on an annualized basis, compared with $8.2 million, or 2.69% of average total loans on an annualized basis in 2008. Charge-offs for the fourth quarter of 2009 were primarily in the Florida portfolio and included a $2.2 million partial charge-off of a commercial construction loan, an $800,000 land loan, and several small commercial real estate loans totaling $700,000. Offsetting these charge-offs was a $2.0 million partial recovery of a Houston private banking loan that was charged-off in the fourth quarter of 2008. The allowance for loan losses was $26.5 million, or 2.46% of total loans at December 31, 2009, compared with $25.1 million, or 2.06% of total loans at December 31, 2008.
At December 31, 2009, nonperforming assets were $50.6 million, or 4.63% of total loans and investment in real estate, compared with $45.3 million, or 4.07% of total loans and investment in real estate at September 30, 2009 and $33.3 million, or 2.73% of total loans and investment in real estate at December 31, 2008. At December 31, 2009, nonaccrual loans were $36.0 million, compared with $38.4 million at September 30, 2009, a decrease of $2.4 million, or 6.2%. The decrease in nonaccrual loans was due primarily to the resolution of a commercial construction loan in Florida. Investment in real estate was $14.6 million at December 31, 2009 compared with $7.0 million at September 30, 2009, an increase of $7.7 million. The increase was due to a combination of factors which include a $3.6 million property that was acquired in connection with a loan settlement, $1.6 million foreclosure of vacant land in Florida, and the repossession of several residential construction loans in Houston totaling $2.6 million. Loans 90 days or more past due and still accruing, which are not included as nonperforming loans or assets, was $1.5 million at December 31, 2009, which consisted of one commercial real estate loan in Florida.
As of December 31, 2009, our estimated Tier 1 risk-based, total risk-based and leverage capital ratios were 14.70%, 15.97%, and 10.55%, respectively. In addition, Encore Bank was considered “well capitalized” pursuant to regulatory capital definitions. Book value per share and tangible book value per share were $15.01 and $11.10 at December 31, 2009, compared with $15.01 and $11.83 at September 30, 2009. Our regulatory capital ratios, tangible book value per share and tangible common equity ratio decreased from September 30, 2009 due primarily to the completion of a contingency payment agreement in connection with our acquisition of Linscomb & Williams. The accrued liability related to this transaction as of December 31, 2009 was $7.9 million and will be extinguished by the issuance of approximately 1.0 million common shares. The exact number of shares issued will be based on a 10-day average trading price of our common stock immediately prior to delivery of the shares. The recording of this transaction resulted in approximately $7.9 million in additional goodwill, which reduced tangible book value and regulatory capital. Upon issuance of the shares during the first quarter of 2010, tangible book value and regulatory capital will be increased by approximately $7.9 million. If we had issued the shares at December 31, 2009, the tangible book value per share, tangible common equity ratio, Tier 1 risk-based, total risk-based and leverage capital ratios would have been $10.82, 7.81%, 15.40%, 16.67%, and 11.05%, respectively.
Conference Call
Encore will host a conference call for investors and analysts that will be broadcast live via the Internet on Friday, January 29, 2010, at 10:30 a.m. Eastern Time. Interested parties may participate by calling 888-713-3588 at least ten minutes prior to the start time.
To listen to this conference call live via the Internet, please visit the Investor Relations section of the Company's web site at http://www.encorebank.com/">http://www.encorebank.com at least fifteen minutes prior to the call to register, download and install any necessary audio software. An audio archive of the call will also be available on the web site on or before Monday, February 1, 2010.
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 $1.6 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. Specifically, Encore reviews tangible book value per share, return on average tangible common equity and the tangible common equity to tangible assets ratio for internal planning and forecasting purposes. Encore reviews its net interest income, net interest spread and net interest margin on a tax equivalent basis, which is standard practice in the banking industry. Encore has included in this press release information relating to these non-GAAP financial measures for the applicable periods presented. Encore's management believes these non-GAAP financial measures provide information useful to investors in understanding our financial results and believes that its presentation, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. These non-GAAP measures should not be considered a substitute for operating results determined in accordance with GAAP and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.
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; incorrect assumptions underlying the establishment of and provisions made to the allowance for loan losses; changes in the interest rate environment; the continued service of key management personnel; our ability to attract, motivate and retain key employees; changes in availability of funds; 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 2008 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 Three | As of and for the Years | |||
| Months Ended December 31, | Ended December 31, | |||
| 2009 | 2008 | 2009 | 2008 | |
| Operations Statement Data: | ||||
| Interest income | $18,555 | $20,193 | $77,226 | $81,271 |
| Interest expense | 6,934 | 8,251 | 30,731 | 36,997 |
| Net interest income | 11,621 | 11,942 | 46,495 | 44,274 |
| Provision for loan losses | 3,009 | 18,648 | 16,660 | 29,175 |
| Net interest income after provision for loan losses | 8,612 | (6,706) | 29,835 | 15,099 |
| Noninterest income (1) | 8,093 | 3,561 | 27,337 | 22,945 |
| Noninterest expense (1) | 14,687 | 12,487 | 54,424 | 51,006 |
| Net earnings (loss) before income taxes | 2,018 | (15,632) | 2,748 | (12,962) |
| Income tax expense (benefit) | 435 | (5,679) | 962 | (4,888) |
| Net earnings (loss) | $1,583 | $(9,953) | $1,786 | $(8,074) |
| Earnings (loss) available to common shareholders (2) | $1,029 | $(10,119) | $(428) | $(8,240) |
| Common Share Data: | ||||
| Basic earnings (loss) per share (3)(5) | $0.10 | $(0.99) | $(0.04) | $(0.81) |
| Diluted earnings (loss) per share (3)(5) | 0.09 | (0.99) | (0.04) | (0.81) |
| Book value per share | 15.01 | 15.36 | 15.01 | 15.36 |
| Tangible book value per share (4) | 11.10 | 12.05 | 11.10 | 12.05 |
| Average common shares outstanding (3) | 10,513 | 10,236 | 10,381 | 10,205 |
| Diluted average common shares | ||||
| outstanding (3) | 11,536 | 10,236 | 10,381 | 10,205 |
| Shares outstanding at end of period | 10,504 | 10,241 | 10,504 | 10,241 |
| Selected Performance Ratios: | ||||
| Return on average assets | 0.39% | (2.60)% | 0.11% | (0.54)% |
| Return on average common equity (5) | 2.58% | (25.03)% | (0.27)% | (5.13)% |
| Return on average tangible common equity (4)(5) | 3.27% | (31.77)% | (0.34)% | (6.53)% |
| Net interest margin (6) | 3.04% | 3.31% | 3.10% | 3.18% |
| Efficiency ratio (1) | 81.66% | 70.33% | 75.16% | 72.62% |
| Noninterest income to total revenue (1) | 41.05% | 22.97% | 37.03% | 34.13% |
| (1) Prior periods adjusted to include net expenses of foreclosed real estate in other noninterest expense. | ||||
| (2) Net earnings after deducting preferred dividends. The shares of preferred stock were issued on December 5, 2008. | ||||
| (3) Prior periods adjusted to include nonvested restricted stock in average common shares outstanding as required by FASB ASC 260-45-60A. | ||||
| (4) Non-GAAP measure. See calculation of tangible common equity in subsequent table. | ||||
| (5) Using earnings (loss) available to common shareholders. | ||||
| (6) On taxable-equivalent basis in 2009. Taxable-equivalent amounts in 2008 were immaterial. Taxable-equivalent measures are considered non-GAAP. See calculation in subsequent table. | ||||
| Encore Bancshares, Inc. and Subsidiaries | |||||
| CONSOLIDATED BALANCE SHEETS | |||||
| (Unaudited, dollars in thousands, except per share data) | |||||
| Dec 31, | Sept 30, | June 30, | March 31, | Dec 31, | |
| 2009 | 2009 | 2009 | 2009 | 2008 | |
| ASSETS | |||||
| Cash and due from banks | $16,796 | $15,035 | $17,891 | $19,313 | $23,044 |
| Interest-bearing deposits in banks | 172,984 | 144,238 | 124,959 | 100,982 | 91,459 |
| Federal funds sold and other | 7,396 | 6,818 | 3,263 | 3,290 | 3,549 |
| Cash and cash equivalents | 197,176 | 166,091 | 146,113 | 123,585 | 118,052 |
| Securities available-for-sale, at estimated fair value | 140,651 | 134,079 | 132,437 | 77,875 | 78,816 |
| Securities held-to-maturity, at amortized cost | 117,171 | 117,316 | 108,594 | 114,706 | 95,875 |
| Mortgages held-for-sale | 1,058 | -- | 1,168 | 6,340 | 150 |
| Loans receivable | 1,078,205 | 1,106,169 | 1,148,820 | 1,179,083 | 1,218,404 |
| Allowance for loan losses | (26,501) | (27,575) | (25,214) | (26,664) | (25,105) |
| Net loans receivable | 1,051,704 | 1,078,594 | 1,123,606 | 1,152,419 | 1,193,299 |
| Federal Home Loan Bank of Dallas stock, at cost | 9,569 | 9,565 | 9,561 | 9,547 | 9,534 |
| Investment in real estate | 14,639 | 6,952 | 8,032 | 5,537 | 2,781 |
| Premises and equipment, net | 15,484 | 15,953 | 16,435 | 16,901 | 17,362 |
| Goodwill | 35,799 | 27,873 | 27,873 | 27,873 | 27,873 |
| Other intangible assets, net | 5,351 | 5,521 | 5,691 | 5,861 | 6,031 |
| Cash surrender value of life insurance policies | 15,339 | 15,182 | 15,019 | 14,870 | 14,686 |
| Accrued interest receivable and other assets | 31,414 | 23,594 | 22,189 | 22,210 | 23,385 |
| $1,635,355 | $1,600,720 | $1,616,718 | $1,577,724 | $1,587,844 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Deposits: | |||||
| Noninterest-bearing | $174,102 | $152,367 | $146,373 | $158,994 | $131,709 |
| Interest-bearing | 1,017,734 | 1,012,466 | 1,030,134 | 957,602 | 969,088 |
| Total deposits | 1,191,836 | 1,164,833 | 1,176,507 | 1,116,596 | 1,100,797 |
| Borrowings and repurchase agreements | 220,612 | 221,492 | 223,218 | 244,999 | 272,026 |
| Junior subordinated debentures | 20,619 | 20,619 | 20,619 | 20,619 | 20,619 |
| Accrued interest payable and other liabilities | 15,620 | 7,316 | 8,565 | 7,926 | 8,660 |
| Total liabilities | 1,448,687 | 1,414,260 | 1,428,909 | 1,390,140 | 1,402,102 |
| Commitments and contingencies | -- | -- | -- | -- | -- |
| Shareholders' equity: | |||||
| Preferred stock | 28,976 | 28,847 | 28,718 | 28,590 | 28,461 |
| Common stock | 10,527 | 10,508 | 10,346 | 10,240 | 10,247 |
| Additional paid-in capital | 116,084 | 115,860 | 115,698 | 115,743 | 115,489 |
| Retained earnings | 31,095 | 30,066 | 32,372 | 32,105 | 31,523 |
| Common stock in treasury, at cost | (233) | (123) | (123) | (109) | (98) |
| Accumulated other comprehensive income | 219 | 1,302 | 798 | 1,015 | 120 |
| Shareholders' equity | 186,668 | 186,460 | 187,809 | 187,584 | 185,742 |
| $1,635,355 | $1,600,720 | $1,616,718 | $1,577,724 | $1,587,844 | |
| Ratios and Per Share Data: | |||||
| Leverage ratio* | 10.55% | 10.94% | 11.22% | 11.26% | 11.61% |
| Tier 1 risk-based capital ratio* | 14.70% | 15.30% | 14.99% | 14.83% | 14.58% |
| Total risk-based capital ratio* | 15.97% | 16.57% | 16.25% | 16.09% | 15.84% |
| Book value per share | $15.01 | $15.01 | $15.39 | $15.54 | $15.36 |
| Tangible book value per share** | 11.10 | 11.83 | 12.14 | 12.24 | 12.05 |
| Tangible common equity to tangible assets** | 7.31% | 7.93% | 7.93% | 8.11% | 7.94% |
| * Estimated at December 31, 2009. | |||||
| ** Non-GAAP measure. See calculation of tangible common equity in subsequent table. | |||||
| Encore Bancshares, Inc. and Subsidiaries | |||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
| (Unaudited, amounts in thousands, except per share data) | |||||||
| Three Months Ended | Years Ended | ||||||
| Dec 31, | Sept 30, | June 30, | March 31, | Dec 31, | December 31, | ||
| 2009 | 2009 | 2009 | 2009 | 2008 | 2009 | 2008 | |
| Interest income: | |||||||
| Loans, including fees | $16,157 | $17,045 | $17,220 | $17,479 | $18,394 | $67,901 | $73,748 |
| Mortgages held-for-sale | 11 | 34 | 32 | 28 | 9 | 105 | 79 |
| Securities | 2,177 | 2,258 | 2,121 | 1,962 | 1,585 | 8,518 | 5,623 |
| Federal funds sold and other | 210 | 180 | 156 | 156 | 205 | 702 | 1,821 |
| Total interest income | 18,555 | 19,517 | 19,529 | 19,625 | 20,193 | 77,226 | 81,271 |
| Interest expense: | |||||||
| Deposits | 4,507 | 5,131 | 5,643 | 5,732 | 5,748 | 21,013 | 27,871 |
| Borrowings and repurchase agreements | 2,129 | 2,129 | 2,119 | 2,116 | 2,174 | 8,493 | 7,781 |
| Junior subordinated debentures | 298 | 302 | 309 | 316 | 329 | 1,225 | 1,345 |
| Total interest expense | 6,934 | 7,562 | 8,071 | 8,164 | 8,251 | 30,731 | 36,997 |
| Net interest income | 11,621 | 11,955 | 11,458 | 11,461 | 11,942 | 46,495 | 44,274 |
| Provision for loan losses | 3,009 | 7,685 | 2,927 | 3,039 | 18,648 | 16,660 | 29,175 |
| Net interest income after provision for loan losses | 8,612 | 4,270 | 8,531 | 8,422 | (6,706) | 29,835 | 15,099 |
| Noninterest income: | |||||||
| Trust and investment management fees | 4,557 | 4,501 | 4,087 | 3,749 | 3,985 | 16,894 | 17,329 |
| Mortgage banking | 41 | 110 | 351 | 151 | 34 | 653 | 251 |
| Insurance commissions and fees | 1,098 | 1,365 | 1,404 | 1,610 | 1,184 | 5,477 | 5,681 |
| Net gain (loss) on sale of available-for-sale securities | 1,937 | 387 | -- | -- | (1) | 2,324 | (3) |
| Impairment write down on securities | -- | -- | -- | -- | (1,984) | -- | (1,984) |
| Other* | 460 | 450 | 485 | 594 | 343 | 1,989 | 1,671 |
| Total noninterest income* | 8,093 | 6,813 | 6,327 | 6,104 | 3,561 | 27,337 | 22,945 |
| Noninterest expense: | |||||||
| Compensation | 7,657 | 7,761 | 7,231 | 7,514 | 6,781 | 30,163 | 29,317 |
| Occupancy | 1,546 | 1,496 | 1,554 | 1,454 | 1,645 | 6,050 | 6,045 |
| Equipment | 383 | 430 | 449 | 433 | 448 | 1,695 | 1,960 |
| Advertising and promotion | 177 | 214 | 200 | 216 | 232 | 807 | 842 |
| Outside data processing | 829 | 797 | 783 | 764 | 797 | 3,173 | 2,970 |
| Professional fees | 1,126 | 912 | 1,043 | 936 | 904 | 4,017 | 3,470 |
| Intangible amortization | 170 | 171 | 169 | 171 | 187 | 681 | 749 |
| FDIC assessment | 1,047 | 270 | 746 | 52 | 50 | 2,115 | 161 |
| Other* | 1,752 | 1,238 | 1,536 | 1,197 | 1,443 | 5,723 | 5,492 |
| -- | |||||||
| Total noninterest expense* | 14,687 | 13,289 | 13,711 | 12,737 | 12,487 | 54,424 | 51,006 |
| Net earnings (loss) before income taxes | 2,018 | (2,206) | 1,147 | 1,789 | (15,632) | 2,748 | (12,962) |
| Income tax expense (benefit) | 435 | (453) | 326 | 654 | (5,679) | 962 | (4,888) |
| Net earnings (loss) | $1,583 | $(1,753) | $821 | $1,135 | $(9,953) | $1,786 | $(8,074) |
| Earnings (loss) available to common shareholders | $1,029 | $(2,306) | $267 | $582 | $(10,119) | $(428) | $(8,240) |
| Earnings (loss) per common share: | |||||||
| Basic** | $0.10 | $(0.22) | $0.03 | $0.06 | $(0.99) | $(0.04) | $(0.81) |
| Diluted** | 0.09 | (0.22) | 0.02 | 0.05 | (0.99) | (0.04) | (0.81) |
| Average common shares outstanding** | 10,513 | 10,441 | 10,334 | 10,233 | 10,236 | 10,381 | 10,205 |
| Diluted average common shares outstanding** | 11,536 | 10,441 | 11,145 | 10,880 | 10,236 | 10,381 | 10,205 |
| * Prior periods adjusted to include net expenses of foreclosed real estate in other noninterest expense. | |||||||
| ** Prior periods adjusted to include nonvested restricted stock in average common shares outstanding as required by FASB ASC 260-45-60A. | |||||||
| Encore Bancshares, Inc. and Subsidiaries | |||||
| AVERAGE CONSOLIDATED BALANCE SHEETS | |||||
| (Unaudited, dollars in thousands) | |||||
| Three Months Ended | |||||
| Dec 31, | Sept 30, | June 30, | March 31, | Dec 31, | |
| 2009 | 2009 | 2009 | 2009 | 2008 | |
| Assets: | |||||
| Interest-earning assets: | |||||
| Loans | $1,085,062 | $1,123,482 | $1,166,448 | $1,208,697 | $1,205,310 |
| Mortgages held-for-sale | 554 | 1,716 | 1,612 | 1,391 | 405 |
| Securities | 241,267 | 235,819 | 215,473 | 187,953 | 162,221 |
| Federal funds sold and other | 205,944 | 168,213 | 121,328 | 95,314 | 66,057 |
| Total interest-earning assets | 1,532,827 | 1,529,230 | 1,504,861 | 1,493,355 | 1,433,993 |
| Less: Allowance for loan losses | (27,197) | (23,972) | (25,656) | (25,181) | (14,275) |
| Noninterest-earning assets | 111,470 | 109,852 | 111,519 | 111,018 | 102,341 |
| Total assets | $1,617,100 | $1,615,110 | $1,590,724 | $1,579,192 | $1,522,059 |
| Liabilities and shareholders' equity: | |||||
| Interest-bearing liabilities: | |||||
| Interest checking | $194,642 | $191,553 | $177,393 | $181,976 | $179,797 |
| Money market and savings | 312,987 | 306,789 | 243,276 | 228,402 | 244,195 |
| Time deposits | 507,102 | 525,821 | 564,583 | 555,006 | 495,880 |
| Total interest-bearing deposits | 1,014,731 | 1,024,163 | 985,252 | 965,384 | 919,872 |
| Borrowings and repurchase agreements | 222,428 | 222,978 | 226,118 | 255,526 | 267,081 |
| Junior subordinated debentures | 20,619 | 20,619 | 20,619 | 20,619 | 20,619 |
| Total interest-bearing liabilities | 1,257,778 | 1,267,760 | 1,231,989 | 1,241,529 | 1,207,572 |
| Noninterest-bearing liabilities: | |||||
| Noninterest-bearing deposits | 163,333 | 147,888 | 159,257 | 140,821 | 133,226 |
| Other liabilities | 8,922 | 10,792 | 11,366 | 10,269 | 11,244 |
| Total liabilities | 1,430,033 | 1,426,440 | 1,402,612 | 1,392,619 | 1,352,042 |
| Shareholders' equity | 187,067 | 188,670 | 188,112 | 186,573 | 170,017 |
| Total liabilities and shareholders' equity | $1,617,100 | $1,615,110 | $1,590,724 | $1,579,192 | $1,522,059 |
| Encore Bancshares, Inc. and Subsidiaries | |||||
| SELECTED FINANCIAL DATA | |||||
| (Unaudited, dollars in thousands) | |||||
| Dec 31, | Sept 30, | June 30, | March 31, | Dec 31, | |
| Loan Portfolio: | 2009 | 2009 | 2009 | 2009 | 2008 |
| Commercial: | |||||
| Commercial | $115,431 | $107,034 | $126,079 | $127,279 | $135,534 |
| Commercial real estate (1) | 259,480 | 253,634 | 232,179 | 233,207 | 228,732 |
| Real estate construction (1) | 87,008 | 118,513 | 154,307 | 169,235 | 178,845 |
| Total commercial | 461,919 | 479,181 | 512,565 | 529,721 | 543,111 |
| Consumer: | |||||
| Residential real estate first lien | 222,337 | 228,090 | 232,885 | 229,981 | 241,969 |
| Residential real estate second lien | 291,433 | 292,265 | 292,891 | 294,994 | 302,141 |
| Home equity lines | 74,356 | 76,369 | 77,793 | 80,099 | 82,555 |
| Consumer installment - indirect | 8,372 | 9,743 | 11,202 | 12,643 | 14,409 |
| Consumer other | 19,788 | 20,521 | 21,484 | 31,645 | 34,219 |
| Total consumer | 616,286 | 626,988 | 636,255 | 649,362 | 675,293 |
| Total loans receivable | $1,078,205 | $1,106,169 | $1,148,820 | $1,179,083 | $1,218,404 |
| Asset Quality: | |||||
| Nonaccrual loans (2) | $35,988 | $38,369 | $28,552 | $34,698 | $30,531 |
| Investment in real estate | 14,639 | 6,952 | 8,032 | 5,537 | 2,781 |
| Total nonperforming assets | $50,627 | $45,321 | $36,584 | $40,235 | $33,312 |
| Accruing loans past due 90 days or more (3) | $1,489 | $-- | $-- | $-- | $646 |
| Restructured loans still accruing | $530 | $-- | $-- | $-- | $-- |
| Asset Quality Ratios: | |||||
| Nonperforming assets to total loans and investment in real estate (3) | 4.63% | 4.07% | 3.16% | 3.40% | 2.73% |
| Net charge-offs to average loans | 1.49% | 1.88% | 1.51% | 0.50% | 2.69% |
| Allowance for loan losses to period end loans | 2.46% | 2.49% | 2.19% | 2.26% | 2.06% |
| Allowance for loan losses to nonperforming loans (3) | 73.64% | 71.87% | 88.31% | 76.85% | 82.23% |
| Deposits: | |||||
| Noninterest-bearing deposits | $174,102 | $152,367 | $146,373 | $158,994 | $131,709 |
| Interest checking | 211,174 | 189,143 | 184,620 | 171,881 | 197,384 |
| Money market and savings | 294,840 | 312,206 | 295,176 | 215,726 | 252,571 |
| Time deposits less than $100 | 191,372 | 193,005 | 206,149 | 207,648 | 188,302 |
| Core deposits | 871,488 | 846,721 | 832,318 | 754,249 | 769,966 |
| Time deposits $100 and greater | 298,163 | 293,041 | 321,737 | 330,919 | 274,903 |
| Brokered deposits | 22,185 | 25,071 | 22,452 | 31,428 | 55,928 |
| Total deposits | $1,191,836 | $1,164,833 | $1,176,507 | $1,116,596 | $1,100,797 |
| Assets Under Management | $2,745,328 | $2,519,458 | $2,299,338 | $2,137,137 | $2,248,047 |
| (1) As of December 31, 2009, land loans were reclassified from commercial real estate to real estate construction for all periods. | |||||
| (2) Nonaccrual restructured loans are included in nonaccrual loans. | |||||
| (3) As of December 31, 2009, accruing loans past due 90 days or more were reclassified from nonperforming loans to a separate category for all periods. | |||||
| Encore Bancshares, Inc. and Subsidiaries | |||||||||
| ALLOWANCE FOR LOAN LOSSES | |||||||||
| (Unaudited, dollars in thousands) | |||||||||
| Three Months Ended | |||||||||
| Dec 31, | Sept 30, | June 30, | March 31, | Dec 31, | |||||
| 2009 | 2009 | 2009 | 2009 | 2008 | |||||
| Allowance for loan losses at beginning of quarter | $27,575 | $25,214 | $26,664 | $25,105 | $14,620 | ||||
| Charge-offs: | |||||||||
| Commercial: | |||||||||
| Commercial | (326) | (1,475) | (796) | (236) | (5,950) | ||||
| Commercial real estate* | (701) | (64) | (313) | (97) | (141) | ||||
| Real estate construction* | (3,142) | (2,679) | (718) | (241) | (1,018) | ||||
| Total commercial | (4,169) | (4,218) | (1,827) | (574) | (7,109) | ||||
| Consumer: | |||||||||
| Residential real estate first lien | (813) | (474) | (1,446) | (34) | (142) | ||||
| Residential real estate second lien | (626) | (829) | (634) | (454) | (378) | ||||
| Home equity lines | (677) | (344) | (517) | (282) | (477) | ||||
| Consumer installment - indirect | (100) | (145) | (150) | (261) | (265) | ||||
| Consumer other | (3) | (18) | (9) | (48) | (23) | ||||
| Total consumer | (2,219) | (1,810) | (2,756) | (1,079) | (1,285) | ||||
| Total charge-offs | (6,388) | (6,028) | (4,583) | (1,653) | (8,394) | ||||
| Recoveries: | |||||||||
| Commercial: | |||||||||
| Commercial | 2,269 | 564 | 62 | 22 | 111 | ||||
| Commercial real estate* | -- | -- | -- | -- | -- | ||||
| Real estate construction* | -- | -- | 6 | -- | -- | ||||
| Total commercial | 2,269 | 564 | 68 | 22 | 111 | ||||
| Consumer: | |||||||||
| Residential real estate first lien | 1 | 74 | 1 | 34 | 18 | ||||
| Residential real estate second lien | 12 | 28 | 13 | 17 | 71 | ||||
| Home equity lines | 4 | 15 | 88 | 24 | 3 | ||||
| Consumer installment - indirect | 18 | 22 | 36 | 76 | 15 | ||||
| Consumer other | 1 | 1 | -- | -- | 13 | ||||
| Total consumer | 36 | 140 | 138 | 151 | 120 | ||||
| Total recoveries | 2,305 | 704 | 206 | 173 | 231 | ||||
| Net charge-offs | (4,083) | (5,324) | (4,377) | (1,480) | (8,163) | ||||
| Provision for loan losses | 3,009 | 7,685 | 2,927 | 3,039 | 18,648 | ||||
| Allowance for loan losses at end of quarter | $26,501 | $27,575 | $25,214 | $26,664 | $25,105 | ||||
| * As of December 31, 2009, land loans were reclassified from commercial real estate to real estate construction for all periods. | |||||||||
| Encore Bancshares, Inc. and Subsidiaries | |||||||
| SEGMENT OPERATIONS | |||||||
| (Unaudited, dollars in thousands) | |||||||
| As of and for the Three Months Ended | As of and for the Years | ||||||
| Dec 31, | Sept 30, | June 30, | March 31, | Dec 31, | Ended December 31, | ||
| 2009 | 2009 | 2009 | 2009 | 2008 | 2009 | 2008 | |
| Banking | |||||||
| Net interest income | $11,873 | $12,213 | $11,726 | $11,736 | $12,223 | $47,548 | $45,340 |
| Provision for loan losses | 3,009 | 7,685 | 2,927 | 3,039 | 18,648 | 16,660 | 29,175 |
| Noninterest income* | 2,423 | 937 | 760 | 661 | (1,596) | 4,781 | (139) |
| Noninterest expense* | 10,591 | 9,090 | 9,614 | 8,606 | 9,307 | 37,901 | 35,793 |
| Earnings (loss) before income taxes | 696 | (3,625) | (55) | 752 | (17,328) | (2,232) | (19,767) |
| Income tax expense (benefit) | (57) | (1,028) | (102) | 291 | (6,251) | (896) | (7,298) |
| Net earnings (loss) | $753 | $(2,597) | $47 | $461 | $(11,077) | $(1,336) | $(12,469) |
| Total assets at quarter end | $1,644,083 | $1,608,348 | $1,623,467 | $1,584,698 | $1,592,933 | $1,644,083 | $1,592,933 |
| Wealth Management | |||||||
| Net interest income | $40 | $39 | $38 | $38 | $44 | $155 | $196 |
| Noninterest income | 4,570 | 4,501 | 4,087 | 3,749 | 3,985 | 16,907 | 17,329 |
| Noninterest expense | 3,022 | 3,088 | 3,040 | 3,098 | 2,179 | 12,248 | 11,057 |
| Earnings before income taxes | 1,588 | 1,452 | 1,085 | 689 | 1,850 | 4,814 | 6,468 |
| Income tax expense | 575 | 586 | 384 | 243 | 606 | 1,788 | 2,270 |
| Net earnings | $1,013 | $866 | $701 | $446 | $1,244 | $3,026 | $4,198 |
| Total assets at quarter end | $59,618 | $50,174 | $49,563 | $48,648 | $47,879 | $59,618 | $47,879 |
| Insurance | |||||||
| Net interest income | $6 | $5 | $3 | $3 | $4 | $17 | $83 |
| Noninterest income | 1,100 | 1,375 | 1,480 | 1,694 | 1,172 | 5,649 | 5,760 |
| Noninterest expense | 1,074 | 1,111 | 1,057 | 1,033 | 1,001 | 4,275 | 4,156 |
| Earnings before income taxes | 32 | 269 | 426 | 664 | 175 | 1,391 | 1,687 |
| Income tax expense | 21 | 94 | 150 | 233 | 85 | 498 | 626 |
| Net earnings | $11 | $175 | $276 | $431 | $90 | $893 | $1,061 |
| Total assets at quarter end | $7,962 | $7,390 | $7,625 | $7,695 | $6,738 | $7,962 | $6,738 |
| Other | |||||||
| Net interest expense | $(298) | $(302) | $(309) | $(316) | $(329) | $(1,225) | $(1,345) |
| Noninterest income | -- | -- | -- | -- | -- | -- | (5) |
| Loss before income taxes | (298) | (302) | (309) | (316) | (329) | (1,225) | (1,350) |
| Income tax benefit | (104) | (105) | (106) | (113) | (119) | (428) | (486) |
| Net loss | $(194) | $(197) | $(203) | $(203) | $(210) | $(797) | $(864) |
| Total assets at quarter end | $(76,308) | $(65,192) | $(63,937) | $(63,317) | $(59,706) | $(76,308) | $(59,706) |
| Consolidated | |||||||
| Net interest income | $11,621 | $11,955 | $11,458 | $11,461 | $11,942 | $46,495 | $44,274 |
| Provision for loan losses | 3,009 | 7,685 | 2,927 | 3,039 | 18,648 | 16,660 | 29,175 |
| Noninterest income* | 8,093 | 6,813 | 6,327 | 6,104 | 3,561 | 27,337 | 22,945 |
| Noninterest expense* | 14,687 | 13,289 | 13,711 | 12,737 | 12,487 | 54,424 | 51,006 |
| Earnings (loss) before income taxes | 2,018 | (2,206) | 1,147 | 1,789 | (15,632) | 2,748 | (12,962) |
| Income tax expense (benefit) | 435 | (453) | 326 | 654 | (5,679) | 962 | (4,888) |
| Net earnings (loss) | $1,583 | $(1,753) | $821 | $1,135 | $(9,953) | $1,786 | $(8,074) |
| Total assets at quarter end | $1,635,355 | $1,600,720 | $1,616,718 | $1,577,724 | $1,587,844 | $1,635,355 | $1,587,844 |
| * Prior periods adjusted to include net expenses of foreclosed real estate in other noninterest expense. | |||||||
| Encore Bancshares, Inc. and Subsidiaries | ||||||
| YIELD ANALYSIS | ||||||
| (Unaudited, dollars in thousands) | ||||||
| Three Months Ended December 31, | ||||||
| 2009 | 2008 | |||||
| Average | Interest | Average | Average | Interest | Average | |
| Outstanding | Income/ | Yield/ | Outstanding | Income/ | Yield/ | |
| Balance | Expense | Rate | Balance | Expense | Rate | |
| Assets: | ||||||
| Interest-earning assets: | ||||||
| Loans* | $1,085,062 | $16,226 | 5.93% | $1,205,310 | $18,394 | 6.07% |
| Mortgages held-for-sale | 554 | 11 | 7.88% | 405 | 9 | 8.84% |
| Securities* | 241,267 | 2,237 | 3.68% | 162,221 | 1,585 | 3.89% |
| Federal funds sold and other | 205,944 | 210 | 0.40% | 66,057 | 205 | 1.23% |
| Total interest-earning assets* | 1,532,827 | 18,684 | 4.84% | 1,433,993 | 20,193 | 5.60% |
| Less: Allowance for loan losses | (27,197) | (14,275) | ||||
| Noninterest-earning assets | 111,470 | 102,341 | ||||
| Total assets | $1,617,100 | $1,522,059 | ||||
| Liabilities and shareholders' equity: | ||||||
| Interest-bearing liabilities: | ||||||
| Interest checking | $194,642 | $236 | 0.48% | $179,797 | $311 | 0.69% |
| Money market and savings | 312,987 | 780 | 0.99% | 244,195 | 799 | 1.30% |
| Time deposits | 507,102 | 3,491 | 2.73% | 495,880 | 4,638 | 3.72% |
| Total interest-bearing deposits | 1,014,731 | 4,507 | 1.76% | 919,872 | 5,748 | 2.49% |
| Borrowings and repurchase agreements | 222,428 | 2,129 | 3.80% | 267,081 | 2,174 | 3.24% |
| Junior subordinated debentures | 20,619 | 298 | 5.73% | 20,619 | 329 | 6.35% |
| Total interest-bearing liabilities | 1,257,778 | 6,934 | 2.19% | 1,207,572 | 8,251 | 2.72% |
| Noninterest-bearing liabilities: | ||||||
| Noninterest-bearing deposits | 163,333 | 133,226 | ||||
| Other liabilities | 8,922 | 11,244 | ||||
| Total liabilities | 1,430,033 | 1,352,042 | ||||
| Shareholders' equity | 187,067 | 170,017 | ||||
| Total liabilities and shareholders' equity | $1,617,100 | $1,522,059 | ||||
| Net interest income* | $11,750 | $11,942 | ||||
| Net interest spread* | 2.65% | 2.88% | ||||
| Net interest margin* | 3.04% | 3.31% | ||||
| * On taxable-equivalent basis in 2009. Taxable-equivalent amounts in 2008 were immaterial. Taxable-equivalent measures are considered non-GAAP. See calculation in subsequent table. | ||||||
| Encore Bancshares, Inc. and Subsidiaries | ||||||
| YIELD ANALYSIS | ||||||
| (Unaudited, dollars in thousands) | ||||||
| Years Ended December 31, | ||||||
| 2009 | 2008 | |||||
| Average | Interest | Average | Average | Interest | Average | |
| Outstanding | Income/ | Yield/ | Outstanding | Income/ | Yield/ | |
| Balance | Expense | Rate | Balance | Expense | Rate | |
| Assets: | ||||||
| Interest-earning assets: | ||||||
| Loans* | $1,145,522 | $68,175 | 5.95% | $1,170,717 | $73,748 | 6.30% |
| Mortgages held-for-sale | 1,317 | 105 | 7.97% | 902 | 79 | 8.76% |
| Securities* | 220,317 | 8,698 | 3.95% | 150,096 | 5,623 | 3.75% |
| Federal funds sold and other | 148,059 | 702 | 0.47% | 69,521 | 1,821 | 2.62% |
| Total interest-earning assets* | 1,515,215 | 77,680 | 5.13% | 1,391,236 | 81,271 | 5.84% |
| Less: Allowance for loan losses | (25,503) | (12,408) | ||||
| Noninterest-earning assets | 110,963 | 104,193 | ||||
| Total assets | $1,600,675 | $1,483,021 | ||||
| Liabilities and shareholders' equity: | ||||||
| Interest-bearing liabilities: | ||||||
| Interest checking | $186,440 | $888 | 0.48% | $187,412 | $2,515 | 1.34% |
| Money market and savings | 273,188 | 2,976 | 1.09% | 291,749 | 5,759 | 1.97% |
| Time deposits | 537,963 | 17,149 | 3.19% | 461,475 | 19,597 | 4.25% |
| Total interest-bearing deposits | 997,591 | 21,013 | 2.11% | 940,636 | 27,871 | 2.96% |
| Borrowings and repurchase agreements | 231,648 | 8,493 | 3.67% | 225,969 | 7,781 | 3.44% |
| Junior subordinated debentures | 20,619 | 1,225 | 5.94% | 20,619 | 1,345 | 6.52% |
| Total interest-bearing liabilities | 1,249,858 | 30,731 | 2.46% | 1,187,224 | 36,997 | 3.12% |
| Noninterest-bearing liabilities: | ||||||
| Noninterest-bearing deposits | 152,873 | 120,682 | ||||
| Other liabilities | 10,334 | 12,186 | ||||
| Total liabilities | 1,413,065 | 1,320,092 | ||||
| Shareholders' equity | 187,610 | 162,929 | ||||
| Total liabilities and shareholders' equity | $1,600,675 | $1,483,021 | ||||
| Net interest income* | $46,949 | $44,274 | ||||
| Net interest spread* | 2.67% | 2.72% | ||||
| Net interest margin* | 3.10% | 3.18% | ||||
| * On taxable-equivalent basis in 2009. Taxable-equivalent amounts in 2008 were immaterial. Taxable-equivalent measures are considered non-GAAP. See calculation in subsequent table. | ||||||
| Encore Bancshares, Inc. and Subsidiaries | |||||
| NON-GAAP FINANCIAL MEASURES | |||||
| (Unaudited, amounts in thousands) | |||||
| Dec 31, | Sept 30, | June 30, | March 31, | Dec 31, | |
| 2009 | 2009 | 2009 | 2009 | 2008 | |
| Shareholders' equity (GAAP) | $186,668 | $186,460 | $187,809 | $187,584 | $185,742 |
| Less: Preferred stock | 28,976 | 28,847 | 28,718 | 28,590 | 28,461 |
| Goodwill and other intangible assets, net | 41,150 | 33,394 | 33,564 | 33,734 | 33,904 |
| Tangible common equity* | $116,542 | $124,219 | $125,527 | $125,260 | $123,377 |
| Total assets (GAAP) | $1,635,355 | $1,600,720 | $1,616,718 | $1,577,724 | $1,587,844 |
| Less: Goodwill and other intangible assets, net | 41,150 | 33,394 | 33,564 | 33,734 | 33,904 |
| Tangible assets | $1,594,205 | $1,567,326 | $1,583,154 | $1,543,990 | $1,553,940 |
| Shares outstanding at end of period | 10,504 | 10,499 | 10,337 | 10,233 | 10,241 |
| * Tangible common equity, a non-GAAP financial measure, includes total equity, less preferred equity, goodwill and other intangible assets. Management reviews tangible common equity along with other measures of capital as part of its financial analyses and has included this information because of current interest on the part of market participants in tangible common equity as a measure of capital. The methodology of determining tangible common equity may differ among companies. | |||||
| Three Months Ended | Years Ended | ||||
| December 31, | December 31, | ||||
| 2009 | 2008 | 2009 | 2008 | ||
| Net interest income (GAAP) | $11,621 | $11,942 | $46,495 | $44,274 | |
| Taxable-equivalent adjustment* | 129 | -- | 454 | -- | |
| Net interest income on a taxable-equivalent basis | $11,750 | $11,942 | $46,949 | $44,274 | |
| * Net interest income, net interest spread and net interest margin are reported on a taxable-equivalent basis. The taxable-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets. Management believes that it is a standard practice in the banking industry to present net interest income, net interest spread and net interest margin on a fully taxable-equivalent basis. Management believes these measures provide useful information to investors by allowing them to make peer comparisons. | |||||