HOUSTON, July 23, 2010 (GLOBE NEWSWIRE) -- Encore Bancshares, Inc. (Nasdaq:EBTX) today announced its financial results for the second quarter of 2010. Earnings significantly reduced by credit costs associated with exiting Florida
Net commercial loan charge-offs of $13.2 million in the Florida portfolio
Write down of loans held for sale of $2.8 million
Florida legacy commercial loans reduced to $56.2 million
Florida transactions
Closed sale of two Florida branches in May, which included $50.5 million in deposits
Final Florida exit transaction remains on track
Loans held for sale of $70.6 million
Deposits held for sale of $184.1 million
Capital position and credit reserves remain strong
Estimated tier 1 capital of 14.59% and tangible common equity ratio of 6.80%
Allowance for loan losses of 2.74% of loans, excluding loans held for sale
Texas franchise shows strong core deposit growth
DDA growth of 17.1%, linked quarter
DDA as a percent of total deposits in Texas grew to 18%
Total Texas deposits top $1.0 billion at June 30, 2010
"We continue to work through our Florida problem loans and to reduce our exposure as rapidly as reasonable. I am pleased that our exit of the Florida market remains on track," said James S. D'Agostino, Jr., Chairman and Chief Executive Officer of Encore Bancshares, Inc. "I am optimistic about the opportunity to continue to build our Houston franchise." Earnings For the three months ended June 30, 2010, our net loss was $12.7 million, compared with net earnings of $821,000 for the same period of 2009. Loss per diluted common share for the second quarter of 2010 was $1.16, after deducting preferred dividends, compared with earnings per diluted common share of $0.02 for the same period of 2009. The loss for the quarter was due primarily to credit costs related to the Florida market.
For the six months ended June 30, 2010, the net loss was $14.9 million, compared with net earnings of $2.0 million for the same period of 2009. The loss per diluted share, after deducting preferred dividends, was $1.46, compared with net earnings of $0.08 for the comparable period of 2009. The loss was due primarily to credit costs and write downs of assets held for sale in Florida.
Net Interest Income Net interest income on a tax equivalent basis (TE) for the second quarter of 2010 was $11.1 million, a decrease of $518,000, or 4.5% compared with the same period of 2009. The net interest margin (TE) contracted 17 basis points to 2.92% during the same comparison period. Net interest income (TE) for the six months ended June 30, 2010 was $22.7 million, a decrease of $439,000, or 1.9%, compared with the same period of 2009. The net interest margin (TE) contracted 10 basis points during this same comparison period. The decrease in margin for both periods was due primarily to the decrease in loans and an offsetting increase in short term lower yielding investments. On a linked quarter basis (compared with the immediately preceding quarter), net interest income (TE) decreased $553,000, or 4.8%, and the net interest margin decreased 19 basis points. The decrease in margin was due to a combination of lower loan yields, which was due mainly to a $23.5 million increase in nonaccrual loans, and lower securities balances, which were reinvested in temporary investments at lower interest rates. Noninterest Income Noninterest income was $7.9 million for the second quarter of 2010, an increase of $1.6 million, or 25.6%, compared with the same period of 2009. The increase was due primarily to the $1.1 million gain on sale of two branches in Florida. In addition, trust and investment management fees increased $504,000, or 12.3%, as assets under management grew 12.7% due to the improvements in the equity markets.
Noninterest Expense
Noninterest expense was $19.4 million for the second quarter of 2010, an increase of $5.7 million, compared with the same period of 2009. Excluding the $2.8 million write down of loans held for sale, noninterest expense was $16.6 million, an increase of $2.9 million, or 21.1%, compared with the same period of 2009. The increase was due primarily to a combination of higher compensation expense, foreclosed real estate expense and professional fees. 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 Houston. The increase in foreclosed real estate expense primarily reflected write downs or losses on the sale of properties, the largest of which was a $1.0 million write down of a lot in Florida. The increase in professional fees primarily reflects costs associated with loan collection and the recent filing of our shelf registration statement. Segment Earnings On a segment basis, our banking segment showed a net loss of $13.5 million, compared with net earnings of $47,000 in the same period of 2009, due primarily to credit costs in Florida. Our wealth management group had net earnings of $702,000 for the second quarter of 2010, relatively unchanged from the prior year period. Wealth management fees rose due to rising equity valuations, but were partially offset by higher expense, which was primarily compensation related. Our insurance agency showed net earnings of $297,000 for the second quarter of 2010, an increase of $21,000. Loans Period end loans, including loans held for sale, were $1.1 billion at June 30, 2010, a decrease of $99.3 million, or 8.6%, compared with June 30, 2009. The decrease was due primarily to lower construction and land loans and declining loans outstanding in Florida. Deposits Period end deposits, including deposits held for sale were $1.2 billion, at June 30, 2010, an increase of $23.2 million, or 2.0%, compared with June 30, 2009. During the second quarter of 2010, we completed the sale of two branches in the Tampa, Florida area which included deposits totaling $50.5 million. Average deposits were $1.2 billion for the second quarter of 2010, an increase of $42.7 million, or 3.7%, compared with the same period of 2009.
Credit Quality and Capital Ratios
The provision for loan losses was $18.0 million for the second quarter of 2010, compared with $2.9 million for the same period of 2009. The increase in the provision for loan losses primarily reflects declining collateral values in Florida. Net charge-offs for the second quarter were $16.5 million, or 6.23% of average total loans on an annualized basis, compared with $4.4 million, or 1.50% of average total loans on an annualized basis in the same period of 2009. Commercial loan charge-offs were $13.6 million, the majority of which were in Florida as we reduced the carrying value of our nonperforming loans in Florida down to the underlying collateral values. We are now carrying Florida nonperforming loans, excluding loans held for sale, at 62.1% of the legal loan balance. Florida nonperforming loans include $5.5 million of loans held for sale, which are carried at 66.3% of the original loan balance. The allowance for loan losses was $26.7 million, or 2.74% of loans, excluding loans held for sale, at June 30, 2010, compared with $25.2 million, or 2.19% at June 30, 2009. At June 30, 2010, nonperforming assets were $77.8 million compared with $51.8 million at March 31, 2010 and $36.6 million at June 30, 2009. At June 30, 2010 nonaccrual loans were $22.4 million in Texas, compared with $8.9 million at March 31, 2010, an increase of $13.6 million. The increase consisted of three relationships: two loans associated with a residence, a land loan, and a loan to an individual, all of which are secured by collateral in excess of the loan amount. At June 30, 2010, nonaccrual loans were $41.8 million in Florida, compared with $31.9 million at March 31, 2010. The increase consisted mainly of several commercial real estate loans. Investment in real estate was $13.6 million at June 30, 2010, compared with $11.1 million at March 31, 2010, an increase of $2.5 million, or 23.1%. The increase was due primarily to the repossession of a $2.2 million parcel of vacant land in Florida. Restructured loans still accruing were $1.1 million at June 30, 2010, compared with $5.7 million at March 31, 2010. The decrease was due primarily to a land loan in Houston that was moved to nonaccrual.
As of June 30, 2010, our estimated Tier 1 risk-based, total risk-based and leverage capital ratios were 14.59%, 15.86%, and 9.93%, 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 $13.06 and $9.47 at June 30, 2010, compared with $14.43 and $10.76 at March 31, 2010. The decrease was primarily due to the loss for the quarter and additional shares issued.
Conference Call Encore will host a conference call for investors and analysts that will be broadcast live via the Internet on Friday, July 23, 2010, at 10:00 a.m. Eastern Time. Interested parties may participate by calling 877-303-6295 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 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, July 26, 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 four 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".
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. Additionally, Encore has reviewed and presented non-GAAP financial information related to its Florida operations held-for-sale on pages 10 and 11. Encore's management believes this non-GAAP financial information is useful to investors in understanding our financial results. 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; the failure to complete the pending transaction for the sale of our Florida operations; 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; the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations; 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 2009 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 Months Ended June 30,
As of and for the Six Months Ended June 30,
2010
2009
2010
2009
Operations Statement Data:
Interest income
$ 17,201
$ 19,529
$ 35,156
$ 39,154
Interest expense
6,262
8,071
12,727
16,235
Net interest income
10,939
11,458
22,429
22,919
Provision for loan losses
18,013
2,927
22,973
5,966
Net interest income after provision for loan losses
(7,074)
8,531
(544)
16,953
Noninterest income
7,947
6,327
14,856
12,431
Noninterest expense
19,395
13,711
37,659
26,448
Net earnings (loss) before income taxes
(18,522)
1,147
(23,347)
2,936
Income tax expense (benefit)
(5,869)
326
(8,443)
980
Net earnings (loss)
$ (12,653)
$ 821
$ (14,904)
$ 1,956
Earnings (loss) available to common shareholders
$ (13,209)
$ 267
$ (16,016)
$ 849
Common Share Data:
Basic earnings (loss) per share (1)
$ (1.16)
$ 0.03
$ (1.46)
$ 0.08
Diluted earnings (loss) per share (1)
(1.16)
0.02
(1.46)
0.08
Book value per share
13.06
15.39
13.06
15.39
Tangible book value per share (2)
9.47
12.14
9.47
12.14
Average common shares outstanding
11,375
10,334
10,969
10,284
Diluted average common shares outstanding
11,375
11,145
10,969
11,013
Shares outstanding at end of period
11,380
10,337
11,380
10,337
Selected Performance Ratios:
Return on average assets
(3.13)%
0.21%
(1.85)%
0.25%
Return on average common equity (1)
(32.89)%
0.67%
(20.24)%
1.08%
Return on average tangible common equity (1)(2)
(44.09)%
0.85%
(27.24)%
1.37%
Taxable-equivalent net interest margin (2)
2.92%
3.09%
3.01%
3.11%
Efficiency ratio
93.16%
76.14%
89.05%
73.86%
Noninterest income to total revenue
42.08%
35.57%
39.84%
35.17%
(1) Using earnings (loss) available to common shareholders.
(2) Non-GAAP measure. See calculation of tangible common equity and taxable-equivalent amounts in subsequent tables.
Encore Bancshares, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands, except per share data)
June 30, 2010
March 31, 2010
Dec 31, 2009
Sept 30, 2009
June 30, 2009
ASSETS
Cash and due from banks
$ 14,718
$ 18,420
$ 16,796
$ 15,035
$ 17,891
Interest-bearing deposits in banks
314,624
237,771
172,984
144,238
124,959
Federal funds sold and other
902
1,695
7,396
6,818
3,263
Cash and cash equivalents
330,244
257,886
197,176
166,091
146,113
Securities available-for-sale, at estimated fair value
75,820
138,495
140,651
134,079
132,437
Securities held-to-maturity, at amortized cost
68,628
88,454
117,171
117,316
108,594
Loans held-for-sale
77,914
81,953
1,058
--
1,168
Loans receivable
972,765
974,301
1,078,205
1,106,169
1,148,820
Allowance for loan losses
(26,675)
(25,132)
(26,501)
(27,575)
(25,214)
Net loans receivable
946,090
949,169
1,051,704
1,078,594
1,123,606
Federal Home Loan Bank of Dallas stock, at cost
9,593
9,578
9,569
9,565
9,561
Investment in real estate
13,602
11,054
14,639
6,952
8,032
Premises and equipment, net
7,567
9,327
15,484
15,953
16,435
Cash surrender value of life insurance policies
15,637
15,489
15,339
15,182
15,019
Goodwill
35,799
35,799
35,799
27,873
27,873
Other intangible assets, net
5,034
5,192
5,351
5,521
5,691
Accrued interest receivable and other assets
36,418
32,176
31,414
23,594
22,189
Other assets held-for-sale
3,269
3,344
--
--
--
$ 1,625,615
$ 1,637,916
$ 1,635,355
$ 1,600,720
$ 1,616,718
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing
$ 182,729
$ 156,071
$ 174,102
$ 152,367
$ 146,373
Interest-bearing
832,876
802,597
1,017,734
1,012,466
1,030,134
Deposits held-for-sale
184,106
242,755
--
--
--
Total deposits
1,199,711
1,201,423
1,191,836
1,164,833
1,176,507
Borrowings and repurchase agreements
219,602
218,560
220,612
221,492
223,218
Junior subordinated debentures
20,619
20,619
20,619
20,619
20,619
Accrued interest payable and other liabilities
7,804
7,094
15,620
7,316
8,565
Other liabilities held-for-sale
6
10
--
--
--
Total liabilities
1,447,742
1,447,706
1,448,687
1,414,260
1,428,909
Commitments and contingencies
Shareholders' equity:
Preferred stock
29,238
29,107
28,976
28,847
28,718
Common stock
11,416
11,195
10,527
10,508
10,346
Additional paid-in capital
121,533
121,345
116,084
115,860
115,698
Retained earnings
15,079
28,288
31,095
30,066
32,372
Common stock in treasury, at cost
(346)
(319)
(233)
(123)
(123)
Accumulated other comprehensive income
953
594
219
1,302
798
Shareholders' equity
177,873
190,210
186,668
186,460
187,809
$ 1,625,615
$ 1,637,916
$ 1,635,355
$ 1,600,720
$ 1,616,718
Ratios and Per Share Data:
Leverage ratio (1)
9.93%
10.73%
10.55%
10.94%
11.22%
Tier 1 risk-based capital ratio (1)
14.59%
15.56%
14.80%
15.30%
14.99%
Total risk-based capital ratio (1)
15.86%
16.82%
16.07%
16.57%
16.25%
Book value per share
$ 13.06
$ 14.43
$ 15.01
$ 15.01
$ 15.39
Tangible book value per share (2)
9.47
10.76
11.10
11.83
12.14
Tangible common equity to tangible assets (2)
6.80%
7.52%
7.31%
7.93%
7.93%
(1) Estimated at June 30, 2010.
(2) 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
Six Months Ended
June 30,
March 31,
Dec 31,
Sept 30,
June 30,
June 30,
2010
2010
2009
2009
2009
2010
2009
Interest income:
Loans, including fees
$ 14,111
$ 14,316
$ 16,157
$ 17,045
$ 17,220
$ 28,427
$ 34,699
Loans held-for-sale
1,330
1,378
11
34
32
2,708
60
Securities
1,526
2,046
2,177
2,258
2,121
3,572
4,083
Federal funds sold and other
234
215
210
180
156
449
312
Total interest income
17,201
17,955
18,555
19,517
19,529
35,156
39,154
Interest expense:
Deposits
2,962
3,042
4,507
5,131
5,643
6,004
11,375
Deposits held-for-sale
863
1,010
--
--
--
1,873
--
Borrowings and repurchase agreements
2,139
2,116
2,129
2,129
2,119
4,255
4,235
Junior subordinated debentures
298
297
298
302
309
595
625
Total interest expense
6,262
6,465
6,934
7,562
8,071
12,727
16,235
Net interest income
10,939
11,490
11,621
11,955
11,458
22,429
22,919
Provision for loan losses
18,013
4,960
3,009
7,685
2,927
22,973
5,966
Net interest income after provision for loan losses
(7,074)
6,530
8,612
4,270
8,531
(544)
16,953
Noninterest income:
Trust and investment management fees
4,591
4,618
4,557
4,501
4,087
9,209
7,836
Mortgage banking
78
36
41
110
351
114
502
Insurance commissions and fees
1,488
1,639
1,098
1,365
1,404
3,127
3,014
Net gain on sale of available-for-sale securities
120
99
1,937
387
--
219
--
Gain on sale of branches
1,115
--
--
--
--
1,115
--
Other
555
517
460
450
485
1,072
1,079
Total noninterest income
7,947
6,909
8,093
6,813
6,327
14,856
12,431
Noninterest expense:
Compensation
8,638
8,551
7,657
7,761
7,231
17,189
14,745
Occupancy
1,454
1,478
1,546
1,496
1,554
2,932
3,008
Equipment
330
363
383
430
449
693
882
Advertising and promotion
153
181
177
214
200
334
416
Outside data processing
897
870
829
797
783
1,767
1,547
Professional fees
1,435
921
1,126
912
1,043
2,356
1,979
Intangible amortization
159
158
170
171
169
317
340
FDIC assessment
703
655
1,047
270
746
1,358
798
Foreclosed real estate expenses, net
1,402
1,124
675
183
378
2,526
645
Write down of assets held-for-sale
2,793
2,535
--
--
--
5,328
--
Other
1,431
1,428
1,077
1,055
1,158
2,859
2,088
Total noninterest expense
19,395
18,264
14,687
13,289
13,711
37,659
26,448
Net earnings (loss) before income taxes
(18,522)
(4,825)
2,018
(2,206)
1,147
(23,347)
2,936
Income tax expense (benefit)
(5,869)
(2,574)
435
(453)
326
(8,443)
980
Net earnings (loss)
$ (12,653)
$ (2,251)
$ 1,583
$ (1,753)
$ 821
$ (14,904)
$ 1,956
Earnings (loss) available to common shareholders
$ (13,209)
$ (2,807)
$ 1,029
$ (2,306)
$ 267
$ (16,016)
$ 849
Earnings (loss) per common share:
Basic
$ (1.16)
$ (0.27)
$ 0.10
$ (0.22)
$ 0.03
$ (1.46)
$ 0.08
Diluted
(1.16)
(0.27)
0.09
(0.22)
0.02
(1.46)
0.08
Average common shares outstanding
11,375
10,558
10,513
10,441
10,334
10,969
10,284
Diluted average common shares outstanding
11,375
10,558
11,536
10,441
11,145
10,969
11,013
Encore Bancshares, Inc. and Subsidiaries
SELECTED FINANCIAL DATA OF FLORIDA OPERATIONS HELD-FOR-SALE (1)
(Unaudited, amounts in thousands)
Three Months Ended
Six Months Ended
June 30,
March 31,
Dec 31,
Sept 30,
June 30,
June 30,
Income and Expense Data
2010
2010
2009
2009
2009
2010
2009
Interest income on loans, including fees
$ 1,308
$ 1,366
$ 1,396
$ 1,377
$ 1,358
$ 2,674
$ 2,694
Interest expense on deposits
863
1,010
1,139
1,380
1,643
1,873
3,320
Net interest income (expense)
445
356
257
(3)
(285)
801
(626)
Write down of loans
--
1,792
--
--
--
1,792
--
Noninterest income
31
25
21
15
10
56
23
Noninterest expense:
Compensation
544
571
485
499
500
1,115
999
Occupancy
239
261
263
270
255
500
513
Equipment
20
53
56
65
65
73
123
Advertising and promotion
6
6
8
57
25
12
36
Outside data processing
2
10
1
3
1
12
--
FDIC assessment
139
127
213
203
13
266
24
Write down of assets held-for-sale
2,793
2,535
--
--
--
5,328
--
Other
183
261
113
108
105
444
185
Total noninterest expense
3,926
3,824
1,139
1,205
964
7,750
1,880
Net expense from Florida operations held-for-sale
(3,450)
(5,235)
(861)
(1,193)
(1,239)
(8,685)
(2,483)
Average Balances of Assets and Liabilities
Assets:
Loans
$ 79,981
$ 84,594
$ 86,543
$ 85,413
$ 85,107
Noninterest-earning assets
4,481
7,377
7,532
7,607
7,494
Total assets
$ 84,462
$ 91,971
$ 94,075
$ 93,020
$ 92,601
Liabilities:
Interest checking
$ 45,770
$ 46,780
$ 43,461
$ 37,078
$ 29,106
Money market and savings
45,146
48,704
50,517
48,982
46,094
Time deposits
111,003
124,325
124,952
139,859
160,861
Total interest-bearing deposits
201,919
219,809
218,930
225,919
236,061
Noninterest-bearing deposits
17,830
17,213
14,412
14,455
14,893
Other liabilities
253
303
350
436
601
Total liabilities
$ 220,002
$ 237,325
$ 233,692
$ 240,810
$ 251,555
(1) This data represents a non-GAAP presentation of Florida operations held-for-sale that we believe provides selected information useful to investors in understanding our financial results. This information should not be considered a substitute for operating results determined in accordance with GAAP. This table includes certain direct income and expense of our Florida operations held-for-sale for all prior periods for comparison purposes and no corporate income or expense allocations have been made.
Encore Bancshares, Inc. and Subsidiaries
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands)
Three Months Ended
June 30, 2010
March 31, 2010
Dec 31, 2009
Sept 30, 2009
June 30, 2009
Assets:
Interest-earning assets:
Loans
$ 978,547
$ 979,171
$ 998,519
$ 1,038,069
$ 1,081,341
Loans held-for-sale (1)
81,148
85,204
87,097
87,129
86,719
Total loans
1,059,695
1,064,375
1,085,616
1,125,198
1,168,060
Securities
186,777
230,390
241,267
235,819
215,473
Federal funds sold and other
275,148
220,019
205,944
168,213
121,328
Total interest-earning assets
1,521,620
1,514,784
1,532,827
1,529,230
1,504,861
Less: Allowance for loan losses
(24,796)
(26,672)
(27,197)
(23,972)
(25,656)
Noninterest-earning assets
122,236
126,284
103,938
102,245
104,025
Noninterest-earning assets held-for-sale (1)
4,481
7,377
7,532
7,607
7,494
Total assets
$ 1,623,541
$ 1,621,773
$ 1,617,100
$ 1,615,110
$ 1,590,724
Liabilities and shareholders' equity:
Interest-bearing liabilities:
Interest checking
$ 145,856
$ 153,023
$ 151,181
$ 154,475
$ 148,287
Money market and savings
238,000
240,292
262,470
257,807
197,182
Time deposits
415,615
400,451
382,150
385,962
403,722
Interest-bearing deposits held-for-sale (1)
201,919
219,809
218,930
225,919
236,061
Total interest-bearing deposits
1,001,390
1,013,575
1,014,731
1,024,163
985,252
Borrowings and repurchase agreements
218,794
220,759
222,428
222,978
226,118
Junior subordinated debentures
20,619
20,619
20,619
20,619
20,619
Total interest-bearing liabilities
1,240,803
1,254,953
1,257,778
1,267,760
1,231,989
Noninterest-bearing liabilities:
Noninterest-bearing deposits
168,021
146,779
148,921
133,433
144,364
Noninterest-bearing deposits held-for-sale (1)
17,830
17,213
14,412
14,455
14,893
Other liabilities
6,384
15,412
8,572
10,356
10,765
Other liabilities held-for-sale (1)
253
303
350
436
601
Total liabilities
1,433,291
1,434,660
1,430,033
1,426,440
1,402,612
Shareholders' equity
190,250
187,113
187,067
188,670
188,112
Total liabilities and shareholders' equity
$ 1,623,541
$ 1,621,773
$ 1,617,100
$ 1,615,110
$ 1,590,724
(1) Portions of this table represent a non-GAAP presentation of Florida operations held-for-sale that we believe provide information useful to investors in understanding our financial results. This table includes average balances of Florida operations held-for-sale for all prior periods for comparison purposes.
Encore Bancshares, Inc. and Subsidiaries
SELECTED FINANCIAL DATA
(Unaudited, dollars in thousands)
Loan Portfolio:
June 30, 2010
March 31, 2010
Dec 31, 2009
Sept 30, 2009
June 30, 2009
Commercial:
Commercial
$ 131,712
$ 115,653
$ 115,431
$ 107,034
$ 126,079
Commercial real estate
189,471
199,166
259,480
253,634
232,179
Real estate construction
55,332
66,618
87,008
118,513
154,307
Total commercial
376,515
381,437
461,919
479,181
512,565
Consumer:
Residential real estate first lien
215,911
211,366
222,337
228,090
232,885
Residential real estate second lien
290,934
289,344
291,433
292,265
292,891
Home equity lines
66,311
68,677
74,356
76,369
77,793
Consumer installment - indirect
6,311
7,339
8,372
9,743
11,202
Consumer other
16,783
16,138
19,788
20,521
21,484
Total consumer
596,250
592,864
616,286
626,988
636,255
Loans receivable
972,765
974,301
1,078,205
1,106,169
1,148,820
Loans held-for-sale
77,914
81,953
1,058
--
1,168
--
Total loans
$ 1,050,679
$ 1,056,254
$ 1,079,263
$ 1,106,169
$ 1,149,988
Asset Quality:
Nonaccrual loans - Texas (1)
$ 22,441
$ 8,860
$ 9,908
$ 9,128
$ 10,795
Nonaccrual loans - Florida (1)
41,773
31,851
26,080
29,241
17,757
Total nonaccrual loans (1)
64,214
40,711
35,988
38,369
28,552
Investment in real estate - Texas
6,194
6,954
9,494
4,054
5,213
Investment in real estate - Florida
7,408
4,100
5,145
2,898
2,819
Total investment in real estate
13,602
11,054
14,639
6,952
8,032
Total nonperforming assets
$ 77,816
$ 51,765
$ 50,627
$ 45,321
$ 36,584
Accruing loans past due 90 days or more
$ --
$ --
$ 1,489
$ --
$ --
Restructured loans still accruing
$ 1,072
$ 5,710
$ 530
$ --
$ --
Asset Quality Ratios:
Nonperforming assets to total loans and investment in real estate
7.31%
4.85%
4.63%
4.07%
3.16%
Net charge-offs to average total loans
6.23%
2.41%
1.49%
1.88%
1.50%
Allowance for loan losses to period end loans (excluding loans held-for-sale)
2.74%
2.58%
2.46%
2.49%
2.19%
Allowance for loan losses to nonperforming loans
41.54%
61.73%
73.64%
71.87%
88.31%
Deposits:
Noninterest-bearing deposits
$ 182,729
$ 156,071
$ 174,102
$ 152,367
$ 146,373
Interest checking
152,041
157,796
211,174
189,143
184,620
Money market and savings
259,189
237,204
294,840
312,206
295,176
Time deposits less than $100
132,514
130,898
191,372
193,005
206,149
Core deposits
726,473
681,969
871,488
846,721
832,318
Time deposits $100 and greater
265,076
251,089
298,163
293,041
321,737
Brokered deposits
24,056
25,610
22,185
25,071
22,452
Deposits held-for-sale
184,106
242,755
--
--
--
Total deposits
$ 1,199,711
$ 1,201,423
$ 1,191,836
$ 1,164,833
$ 1,176,507
Assets Under Management
$ 2,592,186
$ 2,786,220
$ 2,673,832
$ 2,519,458
$ 2,299,338
(1) Nonaccrual troubled debt restructurings are included in nonaccrual loans.
Encore Bancshares, Inc. and Subsidiaries
ALLOWANCE FOR LOAN LOSSES
(Unaudited, dollars in thousands)
Three Months Ended
June 30, 2010
March 31, 2010
Dec 31, 2009
Sept 30, 2009
June 30, 2009
Allowance for loan losses at beginning of quarter
$ 25,132
$ 26,501
$ 27,575
$ 25,214
$ 26,664
Charge-offs:
Commercial:
Commercial
(402)
(382)
(326)
(1,475)
(796)
Commercial real estate
(10,118)
(4,346)
(701)
(64)
(313)
Real estate construction
(3,101)
(322)
(3,142)
(2,679)
(718)
Total commercial
(13,621)
(5,050)
(4,169)
(4,218)
(1,827)
Consumer:
Residential real estate first lien
(1,707)
(618)
(813)
(474)
(1,446)
Residential real estate second lien
(1,301)
(434)
(626)
(829)
(634)
Home equity lines
(237)
(699)
(677)
(344)
(517)
Consumer installment - indirect
(68)
(77)
(100)
(145)
(150)
Consumer other
(180)
(7)
(3)
(18)
(9)
Total consumer
(3,493)
(1,835)
(2,219)
(1,810)
(2,756)
Total charge-offs
(17,114)
(6,885)
(6,388)
(6,028)
(4,583)
Recoveries:
Commercial:
Commercial
543
131
2,269
564
62
Commercial real estate
17
--
--
--
--
Real estate construction
3
46
--
--
6
Total commercial
563
177
2,269
564
68
Consumer:
Residential real estate first lien
9
134
1
74
1
Residential real estate second lien
27
132
12
28
13
Home equity lines
11
78
4
15
88
Consumer installment - indirect
33
34
18
22
36
Consumer other
1
1
1
1
--
Total consumer
81
379
36
140
138
Total recoveries
644
556
2,305
704
206
Net charge-offs
(16,470)
(6,329)
(4,083)
(5,324)
(4,377)
Provision for loan losses
18,013
4,960
3,009
7,685
2,927
Allowance for loan losses at end of quarter
$ 26,675
$ 25,132
$ 26,501
$ 27,575
$ 25,214
Encore Bancshares, Inc. and Subsidiaries
SEGMENT OPERATIONS
(Unaudited, dollars in thousands)
As of and for the Three Months Ended
As of and for the Six Months
June 30,
March 31,
Dec 31,
Sept 30,
June 30,
Ended June 30,
2010
2010
2009
2009
2009
2010
2009
Banking
Net interest income
$ 11,191
$ 11,742
$ 11,873
$ 12,213
$ 11,726
$ 22,933
$ 23,462
Provision for loan losses
18,013
4,960
3,009
7,685
2,927
22,973
5,966
Noninterest income
1,800
647
2,423
937
760
2,447
1,421
Noninterest expense
14,747
13,675
10,591
9,090
9,614
28,422
18,220
Earnings (loss) before income taxes
(19,769)
(6,246)
696
(3,625)
(55)
(26,015)
697
Income tax expense (benefit)
(6,311)
(3,076)
(57)
(1,028)
(102)
(9,387)
189
Net earnings (loss)
$ (13,458)
$ (3,170)
$ 753
$ (2,597)
$ 47
$ (16,628)
$ 508
Total assets at quarter end
$ 1,628,706
$ 1,645,468
$ 1,644,083
$ 1,608,348
$ 1,623,467
$ 1,628,706
$ 1,623,467
Wealth Management
Net interest income
$ 41
$ 40
$ 40
$ 39
$ 38
$ 81
$ 76
Noninterest income
4,593
4,618
4,570
4,501
4,087
9,211
7,836
Noninterest expense
3,547
3,562
3,022
3,088
3,040
7,109
6,138
Earnings before income taxes
1,087
1,096
1,588
1,452
1,085
2,183
1,774
Income tax expense
385
388
575
586
384
773
627
Net earnings
$ 702
$ 708
$ 1,013
$ 866
$ 701
$ 1,410
$ 1,147
Total assets at quarter end
$ 62,518
$ 61,316
$ 59,618
$ 50,174
$ 49,563
$ 62,518
$ 49,563
Insurance
Net interest income
$ 5
$ 5
$ 6
$ 5
$ 3
$ 10
$ 6
Noninterest income
1,554
1,644
1,100
1,375
1,480
3,198
3,174
Noninterest expense
1,101
1,027
1,074
1,111
1,057
2,128
2,090
Earnings before income taxes
458
622
32
269
426
1,080
1,090
Income tax expense
161
218
21
94
150
379
383
Net earnings
$ 297
$ 404
$ 11
$ 175
$ 276
$ 701
$ 707
Total assets at quarter end
$ 8,714
$ 8,053
$ 7,962
$ 7,390
$ 7,625
$ 8,714
$ 7,625
Other
Net interest expense
$ (298)
$ (297)
$ (298)
$ (302)
$ (309)
$ (595)
$ (625)
Noninterest income
--
--
--
--
--
--
--
Loss before income taxes
(298)
(297)
(298)
(302)
(309)
(595)
(625)
Income tax benefit
(104)
(104)
(104)
(105)
(106)
(208)
(219)
Net loss
$ (194)
$ (193)
$ (194)
$ (197)
$ (203)
$ (387)
$ (406)
Total assets at quarter end
$ (74,323)
$ (76,921)
$ (76,308)
$ (65,192)
$ (63,937)
$ (74,323)
$ (63,937)
Consolidated
Net interest income
$ 10,939
$ 11,490
$ 11,621
$ 11,955
$ 11,458
$ 22,429
$ 22,919
Provision for loan losses
18,013
4,960
3,009
7,685
2,927
22,973
5,966
Noninterest income
7,947
6,909
8,093
6,813
6,327
14,856
12,431
Noninterest expense
19,395
18,264
14,687
13,289
13,711
37,659
26,448
Earnings (loss) before income taxes
(18,522)
(4,825)
2,018
(2,206)
1,147
(23,347)
2,936
Income tax expense (benefit)
(5,869)
(2,574)
435
(453)
326
(8,443)
980
Net earnings (loss)
$ (12,653)
$ (2,251)
$ 1,583
$ (1,753)
$ 821
$ (14,904)
$ 1,956
Total assets at quarter end
$ 1,625,615
$ 1,637,916
$ 1,635,355
$ 1,600,720
$ 1,616,718
$ 1,625,615
$ 1,616,718
Encore Bancshares, Inc. and Subsidiaries
TAXABLE-EQUIVALENT YIELD ANALYSIS (1)
(Unaudited, dollars in thousands)
Three Months Ended June 30,
2010
2009
Average Outstanding Balance
Interest Income/ Expense
Average Yield/ Rate
Average Outstanding Balance
Interest Income/ Expense
Average Yield/ Rate
Assets:
Interest-earning assets:
Loans
$ 978,547
$ 14,175
5.81%
$ 1,166,448
$ 17,291
5.95%
Loans held-for-sale
81,148
1,330
6.57%
1,612
32
7.96%
Total loans
1,059,695
15,505
5.87%
1,168,060
17,323
5.95%
Securities
186,777
1,586
3.41%
215,473
2,173
4.04%
Federal funds sold and other
275,148
234
0.34%
121,328
156
0.52%
Total interest-earning assets
1,521,620
17,325
4.57%
1,504,861
19,652
5.24%
Less: Allowance for loan losses
(24,796)
(25,656)
Noninterest-earning assets
122,236
111,519
Noninterest-earning assets held-for-sale
4,481
--
Total assets
$ 1,623,541
$ 1,590,724
Liabilities and shareholders' equity:
Interest-bearing liabilities:
Interest checking
$ 145,856
$ 113
0.31%
$ 177,393
$ 212
0.48%
Money market and savings
238,000
447
0.75%
243,276
685
1.13%
Time deposits
415,615
2,402
2.32%
564,583
4,746
3.37%
Interest-bearing deposits held-for-sale
201,919
863
1.71%
--
--
Total interest-bearing deposits
1,001,390
3,825
1.53%
985,252
5,643
2.30%
Borrowings and repurchase agreements
218,794
2,139
3.92%
226,118
2,119
3.76%
Junior subordinated debentures
20,619
298
5.80%
20,619
309
6.01%
Total interest-bearing liabilities
1,240,803
6,262
2.02%
1,231,989
8,071
2.63%
Noninterest-bearing liabilities:
Noninterest-bearing deposits
168,021
159,257
Noninterest-bearing deposits held-for-sale
17,830
--
Other liabilities
6,384
11,366
Other liabilities held-for-sale
253
--
Total liabilities
1,433,291
1,402,612
Shareholders' equity
190,250
188,112
Total liabilities and shareholders' equity
$ 1,623,541
$ 1,590,724
Net interest income
$ 11,063
$ 11,581
Net interest spread
2.55%
2.61%
Net interest margin
2.92%
3.09%
(1) Non-GAAP measure. See calculation of taxable-equivalent amounts in subsequent table.
Encore Bancshares, Inc. and Subsidiaries
TAXABLE-EQUIVALENT YIELD ANALYSIS (1)
(Unaudited, dollars in thousands)
Six Months Ended June 30,
2010
2009
Average Outstanding Balance
Interest Income/ Expense
Average Yield/ Rate
Average Outstanding Balance
Interest Income/ Expense
Average Yield/ Rate
Assets:
Interest-earning assets:
Loans
$ 978,857
$ 28,557
5.88%
$ 1,187,456
$ 34,835
5.92%
Loans held-for-sale
83,165
2,708
6.57%
1,502
60
8.06%
Total loans
1,062,022
31,265
5.94%
1,188,958
34,895
5.92%
Securities
208,463
3,692
3.57%
201,789
4,146
4.14%
Federal funds sold and other
247,736
449
0.37%
108,393
312
0.58%
Total interest-earning assets
1,518,221
35,406
4.70%
1,499,140
39,353
5.29%
Less: Allowance for loan losses
(25,729)
(25,420)
Noninterest-earning assets
124,249
111,270
Noninterest-earning assets held-for-sale
5,921
--
Total assets
$ 1,622,662
$ 1,584,990
Liabilities and shareholders' equity:
Interest-bearing liabilities:
Interest checking
$ 149,420
$ 235
0.32%
$ 179,672
$ 425
0.48%
Money market and savings
239,140
953
0.80%
235,880
1,363
1.17%
Time deposits
408,075
4,816
2.38%
559,821
9,587
3.45%
Interest-bearing deposits held-for-sale
210,814
1,873
1.79%
--
--
Total interest-bearing deposits
1,007,449
7,877
1.58%
975,373
11,375
2.35%
Borrowings and repurchase agreements
219,771
4,255
3.90%
240,741
4,235
3.55%
Junior subordinated debentures
20,619
595
5.82%
20,619
625
6.11%
Total interest-bearing liabilities
1,247,839
12,727
2.06%
1,236,733
16,235
2.65%
Noninterest-bearing liabilities:
Noninterest-bearing deposits
157,459
150,090
Noninterest-bearing deposits held-for-sale
17,523
--
Other liabilities
10,873
10,820
Other liabilities held-for-sale
278
--
Total liabilities
1,433,972
1,397,643
Shareholders' equity
188,690
187,347
Total liabilities and shareholders' equity
$ 1,622,662
$ 1,584,990
Net interest income
$ 22,679
$ 23,118
Net interest spread
2.64%
2.64%
Net interest margin
3.01%
3.11%
(1) Non-GAAP measure. See calculation of taxable-equivalent amounts in subsequent table.
Encore Bancshares, Inc. and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(Unaudited, amounts in thousands)
June 30, 2010
March 31, 2010
Dec 31, 2009
Sept 30, 2009
June 30, 2009
Shareholders' equity (GAAP)
$ 177,873
$ 190,210
$ 186,668
$ 186,460
$ 187,809
Less: Preferred stock
29,238
29,107
28,976
28,847
28,718
Goodwill and other intangible assets, net
40,833
40,991
41,150
33,394
33,564
Tangible common equity (1)
$ 107,802
$ 120,112
$ 116,542
$ 124,219
$ 125,527
Total assets (GAAP)
$ 1,625,615
$ 1,637,916
$ 1,635,355
$ 1,600,720
$ 1,616,718
Less: Goodwill and other intangible assets, net
40,833
40,991
41,150
33,394
33,564
Tangible assets
$ 1,584,782
$ 1,596,925
$ 1,594,205
$ 1,567,326
$ 1,583,154
Shares outstanding at end of period
11,380
11,162
10,504
10,499
10,337
(1) 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 June 30,
Six Months Ended June 30,
2010
2009
2010
2009
Net interest income (GAAP)
$ 10,939
$ 11,458
$ 22,429
$ 22,919
Taxable-equivalent adjustment (1)
124
123
250
199
Net interest income on a taxable-equivalent basis
$ 11,063
$ 11,581
$ 22,679
$ 23,118
(1) 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.
CONTACT: Encore Bancshares, Inc. L. Anderson Creel, Chief Financial Officer 713.787.3138 James S. D'Agostino, Jr., Chairman and CEO 713.787.3103
