HOUSTON, Oct. 29, 2010 (GLOBE NEWSWIRE) -- Encore Bancshares, Inc. (Nasdaq:EBTX) today announced its financial results for the third quarter of 2010.

Texas franchise shows strong growth
  • Demand deposits grew 49.0% compared with September 30, 2009
  • Commercial loans grew 5.1% compared with September 30, 2009
  • Assets under management grew 8.5% compared with September 30, 2009

Florida branch transaction expected to close in the fourth quarter 2010
  • Loans held for sale of $66.3 million
  • Deposits held for sale of $187.4 million

Agreement to sell majority of the Florida problem loans
  • Agreed to sell approximately $25.3 million of Florida loans in a bulk sale
  • Mark to market charge of $8.5 million recorded in the third quarter 2010
  • Upon completion of sale, nonperforming loans reduced by $19.8 million

Capital position and credit reserves remain strong
  • Estimated tier 1 capital of 13.51% and tangible common equity ratio of 6.19%
  • Allowance for loan losses of 2.27% of loans, excluding loans held for sale

"We believe that we have recognized substantially all of the cost associated with exiting the Florida market," said James S. D'Agostino, Jr., Chairman and Chief Executive Officer of Encore Bancshares, Inc. "We see good opportunities to grow in Houston and we plan to devote all our resources to increasing our franchise and improving profitability."

Earnings

For the three months ended September 30, 2010, our net loss was $8.4 million, compared with a net loss of $1.8 million for the same period of 2009. Loss per diluted common share for the third quarter of 2010 was $0.79, after deducting preferred dividends, compared with a loss per diluted common share of $0.22 for the same period of 2009. During the third quarter, we marked-to-market certain Florida loans, including those we recently agreed to sell, and repossessed real estate, resulting in a charge of $11.3 million to the allowance for loan losses, a charge to the income statement of $1.0 million for the write down of loans held for sale, and a $2.8 million write down of repossessed real estate. Additionally, we provisioned $9.6 million to the allowance for loan losses.

For the nine months ended September 30, 2010, the net loss was $23.3 million, compared with net earnings of $203,000 for the same period of 2009. The loss per diluted common share, after deducting preferred dividends, was $2.25, compared with a net loss of $0.14 per diluted common share 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 third quarter of 2010 was $11.1 million, a decrease of $993,000, or 8.2% compared with the same period of 2009. The net interest margin (TE) contracted 30 basis points to 2.83% during the same comparison period. Net interest income (TE) for the nine months ended September 30, 2010 was $33.8 million, a decrease of $1.4 million, or 4.1%, compared with the same period of 2009. The net interest margin (TE) contracted 17 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) was essentially flat, as average earning assets increased by approximately $34.9 million, but the net interest margin decreased 9 basis points. The decrease in margin was due to a combination of lower securities yields, which was a result of securities maturing and having to be reinvested at lower yields, and an increase in low yielding temporary investments. Average temporary investments, which we are holding partly in anticipation of the remaining Florida branch sale, were $290.5 million or 18.7% of average interest earning assets for the third quarter of 2010.

Noninterest Income

Noninterest income was $7.0 million for the third quarter of 2010, an increase of $215,000, or 3.2%, compared with the same period of 2009. The increase was due primarily to a combination of trust and investment management fees, which increased $138,000, or 3.1%, as assets under management grew 8.5% due primarily to the improvements in the equity markets, and insurance commissions, which increased $159,000, or 11.6%, because of new commercial business.

Noninterest Expense

Noninterest expense was $20.7 million for the third quarter of 2010, an increase of $7.4 million, compared with the same period of 2009. The increase was due primarily to a combination of higher compensation expense, foreclosed real estate expense, FDIC assessment and write down of loans held for sale. Compensation expense rose in part due to the addition of new lenders earlier in the year to grow the bank's commercial lending platform in Houston.  The increase in FDIC assessment reflects a higher assessment rate and a more rapid amortization of the prepaid FDIC assessment. The rise in foreclosed real estate expense reflected $3.2 million in write downs of primarily Florida real estate. In addition, we incurred a $1.0 million charge in write downs of loans held for sale.

Segment Earnings

On a segment basis, our banking segment showed a net loss of $9.3 million, compared with a net loss of $2.6 million in the same period of 2009, due primarily to credit costs and write downs of loans and real estate in Florida. Our wealth management group had net earnings of $792,000 for the third quarter of 2010, a decrease of $74,000 or 8.5%. Wealth management fees increased due to rising equity valuations, but were offset by higher expense, which was primarily compensation related. Our insurance agency showed net earnings of $251,000 for the third quarter of 2010, an increase of $76,000, due to higher insurance commissions, associated with new commercial customers.

Loans

Period end loans, including loans held for sale, were $1.0 billion at September 30, 2010, a decrease of $70.1 million, or 6.3%, compared with September 30, 2009. The decrease was due primarily to lower construction, land loans and commercial real estate loans. Commercial loans in Texas grew 5.1% in the same comparison period, and grew 8.9% year to date. Additionally, we have entered into an agreement to sell $25.3 million of Florida problem loans. These loans are classified as held-for-sale at September 30, 2010.

Deposits

Period end deposits, including deposits held for sale, were $1.2 billion, at September 30, 2010, an increase of $66.7 million, or 5.7%, compared with September 30, 2009. Noninterest bearing accounts in Texas were $205.9 million, an increase of $67.7 million, or 49.0%, and represent 19.7% of total deposits in Texas at September 30, 2010.  Average deposits were $1.2 billion for the third quarter of 2010, an increase of $64.1 million, or 5.5%, compared with the same period of 2009.

Credit Quality and Capital Ratios

The provision for loan losses was $9.6 million for the third quarter of 2010, compared with $7.7 million for the same period of 2009. Net charge-offs for the third quarter were $15.3 million, or 5.75% of average total loans on an annualized basis, compared with $5.3 million, or 1.88% of average total loans on an annualized basis in the same period of 2009. Commercial loan charge-offs were $13.6 million, primarily reflecting the $11.3 million in mark to market write downs of certain Florida loans reclassified to held-for-sale.  Consumer loan charge-offs were $2.1 million, which reflected a $1.4 million decrease compared with the second quarter, due primarily to our semiannual review of the purchased loan portfolio in the second quarter. The allowance for loan losses was $21.0 million, or 2.27% of loans, excluding loans held for sale, at September 30, 2010, compared with $27.6 million, or 2.49% of loans at September 30, 2009.  

At September 30, 2010, nonperforming assets were $62.5 million compared with $77.8 million at June 30, 2010 and $45.3 million at September 30, 2009.  The following provides proforma nonperforming asset data reflecting the announced sale:
Total nonperforming assets before sale  $ 62,548
Sale of Florida nonaccrual loans  (19,803)
Total nonperforming assets after sale  $ 42,745
   
Nonperforming assets to total loans  
and investment in real estate after sale 4.18%

Nonperforming loans in Texas were $17.4 million at September 30, 2010, compared with $22.4 million at June 30, 2010. The decrease was due primarily to the repossession of a $3.9 million home loan.  Nonperforming loans in Florida were $34.3 million at September 30, 2010, compared with $41.8 million at June 30, 2010. Proforma nonperforming loans in Florida (giving effect to the announced loan sale) were $14.4 million, a decrease of $27.3 million, or 65.4% compared with June 30, 2010.   

In addition, during the third quarter, we sold a $3.2 million land loan and a $1.0 million commercial real estate loan.  The remaining $14.4 million in nonperforming Florida loans have been written down to 54.2% of the legal loan balance. After the sales, the balance of portfolio loans in Florida total $29.1 million, of which $11.7 million is held-for-sale.

Investment in real estate was $10.9 million at September 30, 2010, compared with $13.6 million at June 30, 2010, a decrease of $2.8 million, or 20.2%. The decrease was due primarily to the write down of Florida real estate. Restructured loans still accruing were $2.6 million at September 30, 2010, compared with $1.1 million at June 30, 2010. The increase was due primarily to a land loan in Florida.

As of September 30, 2010, our estimated Tier 1 risk-based, total risk-based and leverage capital ratios were 13.51%, 14.77%, and 9.18%, 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 $12.33 and $8.76 at September 30, 2010, compared with $13.06 and $9.47 at June 30, 2010. The decrease was primarily due to the loss for the quarter.

Conference Call

Encore will host a conference call for investors and analysts that will be broadcast live via the Internet on Friday, October 29, 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, November 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 four in southwest Florida. Headquartered in Houston and with $1.7 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. Additionally, Encore has reviewed and presented non-GAAP financial information related to its Florida operations held-for-sale on pages 11 and 12. 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 transactions for the sale of certain Florida problem loans and 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 As of and for the Nine 
  Months Ended September 30, Months Ended September 30,
   2010   2009   2010   2009 
         
Operations Statement Data:        
Interest income  $ 16,922  $ 19,517  $ 52,078  $ 58,671
Interest expense  5,953  7,562  18,680  23,797
Net interest income  10,969  11,955  33,398  34,874
Provision for loan losses  9,599  7,685  32,572  13,651
Net interest income after provision for loan losses  1,370  4,270  826  21,223
Noninterest income  7,028  6,813  21,884  19,244
Noninterest expense  20,728  13,289  58,387  39,737
Net earnings (loss) before income taxes  (12,330)  (2,206)  (35,677)  730
Income tax expense (benefit)  (3,904)  (453)  (12,347)  527
Net earnings (loss)  $ (8,426)  $ (1,753)  $ (23,330)  $ 203
Earnings (loss) available to common shareholders  $ (8,981)  $ (2,306)  $ (24,997)  $ (1,457)
         
Common Share Data:        
Basic earnings (loss) per share (1)  $ (0.79)  $ (0.22)  $ (2.25)  $ (0.14)
Diluted earnings (loss) per share (1)  (0.79)  (0.22)  (2.25)  (0.14)
Book value per share  12.33  15.01  12.33  15.01
Tangible book value per share (2)  8.76  11.83  8.76  11.83
         
Average common shares outstanding   11,380  10,441  11,108  10,337
Diluted average common shares outstanding   11,380  10,441  11,108  10,337
Shares outstanding at end of period  11,380  10,499  11,380  10,499
         
Selected Performance Ratios:        
Return on average assets (2.01)% (0.43)% (1.91)% 0.02%
Return on average common equity (1) (24.02)% (5.72)% (21.45)% (1.22)%
Return on average tangible common equity (1)(2) (33.13)% (7.24)% (29.10)% (1.55)%
Taxable-equivalent net interest margin (2) 2.83% 3.13% 2.95% 3.12%
Efficiency ratio 110.27% 71.37% 96.06% 73.00%
Noninterest income to total revenue 39.05% 36.30% 39.59% 35.56%
         
(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)
           
   Sept 30,   June 30,   March 31,   Dec 31,   Sept 30, 
   2010   2010   2010   2009   2009 
           
ASSETS          
Cash and due from banks  $ 16,825  $ 14,718  $ 18,420  $ 16,796  $ 15,035
Interest-bearing deposits in banks  231,866  314,624  237,771  172,984  144,238
Federal funds sold and other   993  902  1,695  7,396  6,818
Cash and cash equivalents  249,684  330,244  257,886  197,176  166,091
Securities available-for-sale, at estimated fair value  198,530  72,153  138,495  140,651  134,079
Securities held-to-maturity, at amortized cost  55,436  68,628  88,454  117,171  117,316
Loans held-for-sale  111,505  77,914  81,953  1,058  --
Loans receivable  924,589  972,765  974,301  1,078,205  1,106,169
Allowance for loan losses  (20,967)  (26,675)  (25,132)  (26,501)  (27,575)
 Net loans receivable  903,622  946,090  949,169  1,051,704  1,078,594
Federal Home Loan Bank of Dallas stock, at cost  9,602  9,593  9,578  9,569  9,565
Investment in real estate  10,852  13,602  11,054  14,639  6,952
Premises and equipment, net  7,284  7,567  9,327  15,484  15,953
Cash surrender value of life insurance policies  15,786  15,637  15,489  15,339  15,182
Goodwill  35,799  35,799  35,799  35,799  27,873
Other intangible assets, net  4,876  5,034  5,192  5,351  5,521
Accrued interest receivable and other assets  44,430  40,085  32,176  31,414  23,594
Other assets held-for-sale  3,256  3,269  3,344  --  --
   $ 1,650,662  $ 1,625,615  $ 1,637,916  $ 1,635,355  $ 1,600,720
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Deposits:          
Noninterest-bearing  $ 205,927  $ 182,729  $ 156,071  $ 174,102  $ 152,367
Interest-bearing  838,125  832,876  802,597  1,017,734  1,012,466
Deposits held-for-sale  187,433  184,106  242,755  --  --
Total deposits  1,231,485  1,199,711  1,201,423  1,191,836  1,164,833
Borrowings and repurchase agreements  220,818  219,602  218,560  220,612  221,492
Junior subordinated debentures  20,619  20,619  20,619  20,619  20,619
Accrued interest payable and other liabilities  8,028  7,804  7,094  15,620  7,316
Other liabilities held-for-sale  6  6  10  --  --
Total liabilities  1,480,956  1,447,742  1,447,706  1,448,687  1,414,260
           
Commitments and contingencies          
Shareholders' equity:          
Preferred stock  29,368  29,238  29,107  28,976  28,847
Common stock  11,421  11,416  11,195  10,527  10,508
Additional paid-in capital  121,939  121,533  121,345  116,084  115,860
Retained earnings   6,098  15,079  28,288  31,095  30,066
Common stock in treasury, at cost  (389)  (346)  (319)  (233)  (123)
Accumulated other comprehensive income  1,269  953  594  219  1,302
Shareholders' equity  169,706  177,873  190,210  186,668  186,460
   $ 1,650,662  $ 1,625,615  $ 1,637,916  $ 1,635,355  $ 1,600,720
           
Ratios and Per Share Data:          
Leverage ratio (1) 9.18% 9.93% 10.73% 10.55% 10.94%
Tier 1 risk-based capital ratio (1) 13.51% 14.59% 15.56% 14.80% 15.30%
Total risk-based capital ratio (1) 14.77% 15.86% 16.82% 16.07% 16.57%
Book value per share  $ 12.33  $ 13.06  $ 14.43  $ 15.01  $ 15.01
Tangible book value per share (2)  8.76  9.47  10.76  11.10  11.83
Tangible common equity to tangible assets (2) 6.19% 6.80% 7.52% 7.31% 7.93%
           
(1) Estimated at September 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 Nine Months Ended
  Sept 30, June 30, March 31, Dec 31, Sept 30, September 30,
   2010   2010   2010   2009   2009   2010   2009 
Interest income:              
Loans, including fees  $ 14,196  $ 14,111  $ 14,316  $ 16,157  $ 17,045  $ 42,623  $ 51,744
Loans held-for-sale  1,212  1,330  1,378  11  34  3,920  94
Securities  1,276  1,526  2,046  2,177  2,258  4,848  6,341
Federal funds sold and other  238  234  215  210  180  687  492
Total interest income  16,922  17,201  17,955  18,555  19,517  52,078  58,671
Interest expense:              
Deposits  2,827  2,962  3,042  4,507  5,131  8,831  16,506
Deposits held-for-sale  698  863  1,010  --  --  2,571  --
Borrowings and repurchase agreements  2,127  2,139  2,116  2,129  2,129  6,382  6,364
Junior subordinated debentures  301  298  297  298  302  896  927
Total interest expense  5,953  6,262  6,465  6,934  7,562  18,680  23,797
Net interest income  10,969  10,939  11,490  11,621  11,955  33,398  34,874
Provision for loan losses  9,599  18,013  4,960  3,009  7,685  32,572  13,651
Net interest income after provision for loan losses  1,370  (7,074)  6,530  8,612  4,270  826  21,223
Noninterest income:              
Trust and investment management fees  4,639  4,591  4,618  4,557  4,501  13,848  12,337
Mortgage banking  150  78  36  41  110  264  612
Insurance commissions and fees  1,524  1,488  1,639  1,098  1,365  4,651  4,379
Net gain on sale of available-for-sale securities  261  120  99  1,937  387  480  387
Gain on sale of branches  --  1,115  --  --  --  1,115  --
Other  454  555  517  460  450  1,526  1,529
Total noninterest income  7,028  7,947  6,909  8,093  6,813  21,884  19,244
Noninterest expense:              
Compensation  8,503  8,638  8,551  7,657  7,761  25,692  22,506
Occupancy   1,395  1,454  1,478  1,546  1,496  4,327  4,504
Equipment  274  330  363  383  430  967  1,312
Advertising and promotion  146  153  181  177  214  480  630
Outside data processing  874  897  870  829  797  2,641  2,344
Professional fees  1,325  1,435  921  1,126  912  3,681  2,891
Intangible amortization  158  159  158  170  171  475  511
FDIC assessment  1,532  703  655  1,047  270  2,890  1,068
Foreclosed real estate expenses, net  4,458  1,402  1,124  675  183  6,984  828
Write down of assets held-for-sale  1,012  2,793  2,535  --  --  6,340  --
Other  1,051  1,431  1,428  1,077  1,055  3,910  3,143
Total noninterest expense  20,728  19,395  18,264  14,687  13,289  58,387  39,737
Net earnings (loss) before income taxes   (12,330)  (18,522)  (4,825)  2,018  (2,206)  (35,677)  730
Income tax expense (benefit)  (3,904)  (5,869)  (2,574)  435  (453)  (12,347)  527
Net earnings (loss)  $ (8,426)  $ (12,653)  $ (2,251)  $ 1,583  $ (1,753)  $ (23,330)  $ 203
Earnings (loss) available to common shareholders  $ (8,981)  $ (13,209)  $ (2,807)  $ 1,029  $ (2,306)  $ (24,997)  $ (1,457)
Earnings (loss) per common share:              
 Basic  $ (0.79)  $ (1.16)  $ (0.27)  $ 0.10  $ (0.22)  $ (2.25)  $ (0.14)
 Diluted  (0.79)  (1.16)  (0.27)  0.09  (0.22)  (2.25)  (0.14)
Average common shares outstanding  11,380  11,375  10,558  10,513  10,441  11,108  10,337
Diluted average common shares outstanding  11,380  11,375  10,558  11,536  10,441  11,108  10,337
               
Encore Bancshares, Inc. and Subsidiaries
               
SELECTED FINANCIAL DATA OF FLORIDA OPERATIONS HELD-FOR-SALE (1)
               
(Unaudited, amounts in thousands)
               
  Three Months Ended Nine Months Ended
  Sept 30, June 30, March 31, Dec 31, Sept 30, September 30,
Income and Expense Data  2010   2010   2010   2009   2009   2010   2009 
Interest income on loans, including fees  $ 1,189  $ 1,308  $ 1,366  $ 1,396  $ 1,377  $ 3,863  $ 4,071
Interest expense on deposits  698  863  1,010  1,139  1,380  2,571  4,700
Net interest income (expense)  491  445  356  257  (3)  1,292  (629)
               
Write down of loans   --  --  1,792  --  --  1,792  --
               
Noninterest income  8  31  25  21  15  64  38
Noninterest expense:              
Compensation  395  544  571  485  499  1,510  1,498
Occupancy   151  239  261  263  270  651  783
Equipment  11  20  53  56  65  84  188
Advertising and promotion  7  6  6  8  57  19  93
Outside data processing  2  2  10  1  3  14  3
FDIC assessment  231  139  127  213  203  497  227
Write down of assets held-for-sale  1,012  2,793  2,535  --  --  6,340  --
Other  102  183  261  113  108  546  293
Total noninterest expense  1,911  3,926  3,824  1,139  1,205  9,661  3,085
               
Net expense from Florida operations held-for-sale  (1,412)  (3,450)  (5,235)  (861)  (1,193)  (10,097)  (3,676)
               
Average Balances of Assets and Liabilities              
Assets:              
Loans  $ 72,468  $ 79,981  $ 84,594  $ 86,543  $ 85,413    
Noninterest-earning assets  4,196  4,481  7,377  7,532  7,607    
 Total assets  $ 76,664  $ 84,462  $ 91,971  $ 94,075  $ 93,020    
Liabilities:              
Interest checking  $ 42,361  $ 45,770  $ 46,780  $ 43,461  $ 37,078    
Money market and savings  38,304  45,146  48,704  50,517  48,982    
Time deposits  91,140  111,003  124,325  124,952  139,859    
 Total interest-bearing deposits  171,805  201,919  219,809  218,930  225,919    
Noninterest-bearing deposits  14,983  17,830  17,213  14,412  14,455    
Other liabilities  216  253  303  350  436    
 Total liabilities  $ 187,004  $ 220,002  $ 237,325  $ 233,692  $ 240,810    
               
(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 
  Sept 30, June 30, March 31, Dec 31, Sept 30,
   2010   2010   2010   2009   2009 
           
Assets:          
Interest-earning assets:          
 Loans  $ 983,011  $ 978,547  $ 979,171  $ 998,519  $ 1,038,069
 Loans held-for-sale (1)  73,646  81,148  85,204  87,097  87,129
Total loans  1,056,657  1,059,695  1,064,375  1,085,616  1,125,198
 Securities  209,365  186,777  230,390  241,267  235,819
 Federal funds sold and other  290,541  275,148  220,019  205,944  168,213
Total interest-earning assets  1,556,563  1,521,620  1,514,784  1,532,827  1,529,230
Less: Allowance for loan losses  (27,144)  (24,796)  (26,672)  (27,197)  (23,972)
Noninterest-earning assets  128,197  122,236  126,284  103,938  102,245
Noninterest-earning assets held-for-sale (1)  4,196  4,481  7,377  7,532  7,607
 Total assets  $ 1,661,812  $ 1,623,541  $ 1,621,773  $ 1,617,100  $ 1,615,110
           
Liabilities and shareholders' equity:          
Interest-bearing liabilities:          
 Interest checking  $ 139,820  $ 145,856  $ 153,023  $ 151,181  $ 154,475
 Money market and savings   279,084  238,000  240,292  262,470  257,807
 Time deposits  410,318  415,615  400,451  382,150  385,962
 Interest-bearing deposits held-for-sale (1)  171,805  201,919  219,809  218,930  225,919
 Total interest-bearing deposits  1,001,027  1,001,390  1,013,575  1,014,731  1,024,163
 Borrowings and repurchase agreements  220,068  218,794  220,759  222,428  222,978
 Junior subordinated debentures  20,619  20,619  20,619  20,619  20,619
 Total interest-bearing liabilities  1,241,714  1,240,803  1,254,953  1,257,778  1,267,760
Noninterest-bearing liabilities:          
 Noninterest-bearing deposits  220,166  168,021  146,779  148,921  133,433
 Noninterest-bearing deposits held-for-sale (1)  14,983  17,830  17,213  14,412  14,455
 Other liabilities  7,132  6,384  15,412  8,572  10,356
 Other liabilities held-for-sale (1)  216  253  303  350  436
 Total liabilities  1,484,211  1,433,291  1,434,660  1,430,033  1,426,440
Shareholders' equity   177,601  190,250  187,113  187,067  188,670
Total liabilities and shareholders' equity   $ 1,661,812  $ 1,623,541  $ 1,621,773  $ 1,617,100  $ 1,615,110
           
(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)
             
  Sept 30, June 30, March 31, Dec 31, Sept 30,  
Loan Portfolio:  2010   2010   2010   2009   2009   
Commercial:            
Commercial  $ 138,594  $ 131,712  $ 115,653  $ 115,431  $ 107,034  
Commercial real estate   154,476  189,471  199,166  259,480  253,634  
Real estate construction   54,140  55,332  66,618  87,008  118,513  
Total commercial  347,210  376,515  381,437  461,919  479,181  
Consumer:            
Residential real estate first lien  207,386  215,911  211,366  222,337  228,090  
Residential real estate second lien  280,245  290,934  289,344  291,433  292,265  
Home equity lines  63,983  66,311  68,677  74,356  76,369  
Consumer installment - indirect  5,520  6,311  7,339  8,372  9,743  
Consumer other  20,245  16,783  16,138  19,788  20,521  
Total consumer  577,379  596,250  592,864  616,286  626,988  
 Loans receivable  924,589  972,765  974,301  1,078,205  1,106,169  
Loans held-for-sale  111,505  77,914  81,953  1,058  --  
 Total loans  $ 1,036,094  $ 1,050,679  $ 1,056,254  $ 1,079,263  $ 1,106,169  
             
Asset Quality:            
Nonaccrual loans - Texas (1)  $ 17,445  $ 22,441  $ 8,860  $ 9,908  $ 9,128  
Nonaccrual loans - Florida (1)  34,251  41,773  31,851  26,080  29,241  
Total nonaccrual loans (1)  51,696  64,214  40,711  35,988  38,369  
Investment in real estate - Texas  5,762  6,194  6,954  9,494  4,054  
Investment in real estate - Florida  5,090  7,408  4,100  5,145  2,898  
Total investment in real estate  10,852  13,602  11,054  14,639  6,952  
 Total nonperforming assets  $ 62,548  $ 77,816  $ 51,765  $ 50,627  $ 45,321  
             
Accruing loans past due 90 days or more  $ --  $ --  $ --  $ 1,489  $ --  
             
Restructured loans still accruing  $ 2,570  $ 1,072  $ 5,710  $ 530  $ --  
             
Asset Quality Ratios:            
Nonperforming assets to total loans and  investment in real estate 5.97% 7.31% 4.85% 4.63% 4.07%  
Net charge-offs to average total loans  5.75% 6.23% 2.41% 1.49% 1.88%  
Allowance for loan losses to period end  loans (excluding loans held-for-sale) 2.27% 2.74% 2.58% 2.46% 2.49%  
Allowance for loan losses to nonperforming  loans (excluding loans held-for-sale) 88.89% 45.47% 61.73% 73.64% 71.87%  
             
Deposits:            
Noninterest-bearing deposits  $ 205,927  $ 182,729  $ 156,071  $ 174,102  $ 152,367  
Interest checking  145,257  152,041  157,796  211,174  189,143  
Money market and savings  293,381  259,189  237,204  294,840  312,206  
Time deposits less than $100  124,132  132,514  130,898  191,372  193,005  
 Core deposits   768,697  726,473  681,969  871,488  846,721  
Time deposits $100 and greater  251,271  265,076  251,089  298,163  293,041  
Brokered deposits  24,084  24,056  25,610  22,185  25,071  
Deposits held-for-sale  187,433  184,106  242,755  --  --  
 Total deposits  $ 1,231,485  $ 1,199,711  $ 1,201,423  $ 1,191,836  $ 1,164,833  
             
Assets Under Management  $ 2,732,757  $ 2,592,186  $ 2,786,220  $ 2,673,832  $ 2,519,458  
             
(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
  Sept 30, June 30, March 31, Dec 31, Sept 30,
   2010   2010   2010   2009   2009 
           
Allowance for loan losses at beginning of quarter  $ 26,675  $ 25,132  $ 26,501  $ 27,575  $ 25,214
           
Charge-offs:          
Commercial:          
Commercial  (160)  (402)  (382)  (326)  (1,475)
Commercial real estate  (10,049)  (10,118)  (4,346)  (701)  (64)
Real estate construction   (3,407)  (3,101)  (322)  (3,142)  (2,679)
Total commercial   (13,616)  (13,621)  (5,050)  (4,169)  (4,218)
           
Consumer:          
Residential real estate first lien   (503)  (1,707)  (618)  (813)  (474)
Residential real estate second lien   (879)  (1,301)  (434)  (626)  (829)
Home equity lines   (664)  (237)  (699)  (677)  (344)
Consumer installment - indirect  (53)  (68)  (77)  (100)  (145)
Consumer other   (20)  (180)  (7)  (3)  (18)
Total consumer  (2,119)  (3,493)  (1,835)  (2,219)  (1,810)
           
Total charge-offs  (15,735)  (17,114)  (6,885)  (6,388)  (6,028)
           
Recoveries:          
Commercial:          
Commercial  157  543  131  2,269  564
Commercial real estate   --  17  --  --  --
Real estate construction   1  3  46  --  --
Total commercial   158  563  177  2,269  564
           
Consumer:          
Residential real estate first lien   161  9  134  1  74
Residential real estate second lien   36  27  132  12  28
Home equity lines   11  11  78  4  15
Consumer installment - indirect  33  33  34  18  22
Consumer other   29  1  1  1  1
Total consumer  270  81  379  36  140
           
Total recoveries  428  644  556  2,305  704
           
Net charge-offs  (15,307)  (16,470)  (6,329)  (4,083)  (5,324)
           
Provision for loan losses  9,599  18,013  4,960  3,009  7,685
           
Allowance for loan losses at end of quarter  $ 20,967  $ 26,675  $ 25,132  $ 26,501  $ 27,575
               
Encore Bancshares, Inc. and Subsidiaries
               
SEGMENT OPERATIONS
               
(Unaudited, dollars in thousands)
               
  As of and for the Three Months Ended As of and for the Nine 
  Sept 30, June 30, March 31, Dec 31, Sept 30, Months Ended September 30,
   2010   2010   2010   2009   2009   2010   2009 
Banking               
Net interest income   $ 11,231  $ 11,191  $ 11,742  $ 11,873  $ 12,213  $ 34,164  $ 35,675
Provision for loan losses  9,599  18,013  4,960  3,009  7,685  32,572  13,651
Noninterest income  857  1,800  647  2,423  937  3,304  2,358
Noninterest expense  16,133  14,747  13,675  10,591  9,090  44,555  27,310
Earnings (loss) before income taxes  (13,644)  (19,769)  (6,246)  696  (3,625)  (39,659)  (2,928)
Income tax expense (benefit)  (4,370)  (6,311)  (3,076)  (57)  (1,028)  (13,757)  (839)
Net earnings (loss)   $ (9,274)  $ (13,458)  $ (3,170)  $ 753  $ (2,597)  $ (25,902)  $ (2,089)
Total assets at quarter end  $ 1,650,297  $ 1,628,706  $ 1,645,468  $ 1,644,083  $ 1,608,348  $ 1,650,297  $ 1,608,348
               
Wealth Management              
Net interest income   $ 34  $ 41  $ 40  $ 40  $ 39  $ 115  $ 115
Noninterest income  4,638  4,593  4,618  4,570  4,501  13,849  12,337
Noninterest expense  3,442  3,547  3,562  3,022  3,088  10,551  9,226
Earnings before income taxes  1,230  1,087  1,096  1,588  1,452  3,413  3,226
Income tax expense   438  385  388  575  586  1,211  1,213
Net earnings   $ 792  $ 702  $ 708  $ 1,013  $ 866  $ 2,202  $ 2,013
Total assets at quarter end  $ 63,933  $ 62,518  $ 61,316  $ 59,618  $ 50,174  $ 63,933  $ 50,174
               
Insurance              
Net interest income   $ 5  $ 5  $ 5  $ 6  $ 5  $ 15  $ 11
Noninterest income  1,533  1,554  1,644  1,100  1,375  4,731  4,549
Noninterest expense  1,153  1,101  1,027  1,074  1,111  3,281  3,201
Earnings before income taxes  385  458  622  32  269  1,465  1,359
Income tax expense   134  161  218  21  94  513  477
Net earnings   $ 251  $ 297  $ 404  $ 11  $ 175  $ 952  $ 882
Total assets at quarter end  $ 9,063  $ 8,714  $ 8,053  $ 7,962  $ 7,390  $ 9,063  $ 7,390
               
Other              
Net interest expense  $ (301)  $ (298)  $ (297)  $ (298)  $ (302)  $ (896)  $ (927)
Loss before income taxes  (301)  (298)  (297)  (298)  (302)  (896)  (927)
Income tax benefit  (106)  (104)  (104)  (104)  (105)  (314)  (324)
Net loss  $ (195)  $ (194)  $ (193)  $ (194)  $ (197)  $ (582)  $ (603)
Total assets at quarter end  $ (72,631)  $ (74,323)  $ (76,921)  $ (76,308)  $ (65,192)  $ (72,631)  $ (65,192)
               
Consolidated               
Net interest income   $ 10,969  $ 10,939  $ 11,490  $ 11,621  $ 11,955  $ 33,398  $ 34,874
Provision for loan losses  9,599  18,013  4,960  3,009  7,685  32,572  13,651
Noninterest income  7,028  7,947  6,909  8,093  6,813  21,884  19,244
Noninterest expense  20,728  19,395  18,264  14,687  13,289  58,387  39,737
Earnings (loss) before income taxes  (12,330)  (18,522)  (4,825)  2,018  (2,206)  (35,677)  730
Income tax expense (benefit)   (3,904)  (5,869)  (2,574)  435  (453)  (12,347)  527
Net earnings (loss)   $ (8,426)  $ (12,653)  $ (2,251)  $ 1,583  $ (1,753)  $ (23,330)  $ 203
Total assets at quarter end  $ 1,650,662  $ 1,625,615  $ 1,637,916  $ 1,635,355  $ 1,600,720  $ 1,650,662  $ 1,600,720
             
Encore Bancshares, Inc. and Subsidiaries
             
TAXABLE-EQUIVALENT (TE) YIELD ANALYSIS (1)
             
(Unaudited, dollars in thousands)
             
  Three Months Ended September 30,
  2010 2009
  Average Interest Average Average Interest Average
  Outstanding Income/ Yield/ Outstanding Income/ Yield/
  Balance Expense Rate Balance Expense Rate
Assets:            
Interest-earning assets:            
 Loans - TE yield  $ 983,011  $ 14,254 5.75%  $ 1,123,482  $ 17,114 6.04%
 Loans held-for-sale  73,646  1,212 6.53%  1,716  34 7.86%
Total loans - TE yield  1,056,657  15,466 5.81%  1,125,198  17,148 6.05%
 Securities - TE yield  209,365  1,337 2.53%  235,819  2,315 3.89%
 Federal funds sold and other  290,541  238 0.32%  168,213  180 0.42%
Total interest-earning assets - TE yield  1,556,563  17,041 4.34%  1,529,230  19,643 5.10%
Less: Allowance for loan losses  (27,144)      (23,972)    
Noninterest-earning assets  128,197      109,852    
Noninterest-earning assets held-for-sale  4,196      --    
 Total assets  $ 1,661,812      $ 1,615,110    
             
Liabilities and shareholders' equity:            
Interest-bearing liabilities:            
 Interest checking  $ 139,820  $ 90 0.26%  $ 191,553  $ 227 0.47%
 Money market and savings  279,084  442 0.63%  306,789  833 1.08%
 Time deposits  410,318  2,295 2.22%  525,821  4,071 3.07%
 Interest-bearing deposits held-for-sale  171,805  698 1.61%  --   --   
 Total interest-bearing deposits  1,001,027  3,525 1.40%  1,024,163  5,131 1.99%
 Borrowings and repurchase agreements  220,068  2,127 3.83%  222,978  2,129 3.79%
 Junior subordinated debentures  20,619  301 5.79%  20,619  302 5.81%
 Total interest-bearing liabilities  1,241,714  5,953 1.90%  1,267,760  7,562 2.37%
Noninterest-bearing liabilities:            
 Noninterest-bearing deposits  220,166      147,888    
 Noninterest-bearing deposits held-for-sale  14,983      --    
 Other liabilities  7,132      10,792    
 Other liabilities held-for-sale  216      --    
 Total liabilities  1,484,211      1,426,440    
Shareholders' equity   177,601      188,670    
Total liabilities and shareholders' equity   $ 1,661,812      $ 1,615,110    
             
Net interest income - TE    $ 11,088      $ 12,081  
             
Net interest spread - TE     2.44%     2.73%
Net interest margin - TE     2.83%     3.13%
             
(1) Non-GAAP measure. See calculation of taxable-equivalent amounts in subsequent table.
             
Encore Bancshares, Inc. and Subsidiaries
             
TAXABLE-EQUIVALENT (TE) YIELD ANALYSIS (1)
             
(Unaudited, dollars in thousands)
             
  Nine Months Ended September 30,
  2010 2009
  Average Interest Average Average Interest Average
  Outstanding Income/ Yield/ Outstanding Income/ Yield/
  Balance Expense Rate Balance Expense Rate
Assets:            
Interest-earning assets:            
 Loans - TE yield  $ 980,257  $ 42,811 5.84%  $ 1,165,897  $ 51,949 5.96%
 Loans held-for-sale  79,957  3,920 6.55%  1,574  94 7.98%
Total loans - TE yield  1,060,214  46,731 5.89%  1,167,471  52,043 5.96%
 Securities - TE yield  208,767  5,029 3.22%  213,257  6,461 4.05%
 Federal funds sold and other  262,161  687 0.35%  128,552  492 0.51%
Total interest-earning assets - TE yield  1,531,142  52,447 4.58%  1,509,280  58,996 5.23%
Less: Allowance for loan losses  (26,206)      (24,932)    
Noninterest-earning assets  125,579      110,792    
Noninterest-earning assets held-for-sale  5,340      --    
 Total assets  $ 1,635,855      $ 1,595,140    
             
Liabilities and shareholders' equity:            
Interest-bearing liabilities:            
 Interest checking  $ 146,185  $ 325 0.30%  $ 183,676  $ 652 0.47%
 Money market and savings  252,601  1,395 0.74%  259,776  2,196 1.13%
 Time deposits  408,831  7,111 2.33%  548,363  13,658 3.33%
 Interest-bearing deposits held-for-sale  197,668  2,571 1.74%  --   --   
 Total interest-bearing deposits  1,005,285  11,402 1.52%  991,815  16,506 2.23%
 Borrowings and repurchase agreements  219,871  6,382 3.88%  234,755  6,364 3.62%
 Junior subordinated debentures  20,619  896 5.81%  20,619  927 6.01%
 Total interest-bearing liabilities  1,245,775  18,680 2.00%  1,247,189  23,797 2.55%
Noninterest-bearing liabilities:            
 Noninterest-bearing deposits  178,591      149,348    
 Noninterest-bearing deposits held-for-sale  16,667      --    
 Other liabilities  9,612      10,810    
 Other liabilities held-for-sale  257      --    
 Total liabilities  1,450,902      1,407,347    
Shareholders' equity   184,953      187,793    
Total liabilities and shareholders' equity   $ 1,635,855      $ 1,595,140    
             
Net interest income - TE    $ 33,767      $ 35,199  
             
Net interest spread - TE     2.58%     2.68%
Net interest margin - TE     2.95%     3.12%
             
(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)
           
  Sept 30, June 30, March 31, Dec 31, Sept 30,
   2010   2010   2010   2009   2009 
           
Shareholders' equity (GAAP)  $ 169,706  $ 177,873  $ 190,210  $ 186,668  $ 186,460
Less: Preferred stock  29,368  29,238  29,107  28,976  28,847
 Goodwill and other intangible assets, net  40,675  40,833  40,991  41,150  33,394
Tangible common equity (1)  $ 99,663  $ 107,802  $ 120,112  $ 116,542  $ 124,219
           
Total assets (GAAP)  $ 1,650,662  $ 1,625,615  $ 1,637,916  $ 1,635,355  $ 1,600,720
Less: Goodwill and other intangible assets, net  40,675  40,833  40,991  41,150  33,394
Tangible assets  $ 1,609,987  $ 1,584,782  $ 1,596,925  $ 1,594,205  $ 1,567,326
           
Shares outstanding at end of period  11,380  11,380  11,162  10,504  10,499
           
(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   Nine Months Ended
  September 30,   September 30,
   2010   2009     2010   2009 
Net interest income (GAAP)  $ 10,969  $ 11,955    $ 33,398  $ 34,874
Taxable-equivalent adjustment (1)  119  126    369  325
Net interest income on a taxable-equivalent basis   $ 11,088  $ 12,081    $ 33,767  $ 35,199
           
(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

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