HOUSTON, Oct. 26, 2007 (PRIME NEWSWIRE) -- Encore Bancshares, Inc. (Nasdaq:EBTX) today announced earnings for the third quarter of 2007.
Highlights:
* Net earnings grew 32% over third quarter of 2006 * Net interest margin improved 41 basis points over the prior year quarter * Loans increased 20% compared with the third quarter of 2006 * Nonperforming assets dropped 27% compared with the second quarter of 2007
"We continued to make good progress in improving our net interest margin and profitability during the quarter," said James S. D'Agostino, Jr., Chairman and Chief Executive Officer. "In addition, we reported a 38% increase in wealth management earnings, with assets under management up 16% to $2.8 billion. Further I am pleased that our credit quality metrics are improving."
In the third quarter of 2007, we completed our initial public offering of 2,190,475 shares of common stock (including the underwriter's over allotment), which priced at $21.00 per share on July 17, 2007. The net proceeds of the offering, approximately $41.7 million, contributed to total shareholders' equity of $155.4 million as of September 30, 2007.
Earnings
For the three months ended September 30, 2007, net earnings were $2.2 million, or $0.22 per diluted share, compared with $1.7 million, or $0.21 per diluted share, for the same period of 2006. The 32.3% improvement in net earnings was due primarily to greater net interest income resulting from an improved asset and funding mix and growth in wealth management earnings.
For the nine months ended September 30, 2007, net earnings were $5.7 million, or $0.64 per diluted share, compared with $6.3 million, or $0.80 per diluted share, for the first nine months of 2006. The 10.0% decrease in net earnings, period over period, was due primarily to a decrease in mortgage banking income.
Net Interest Income
Net interest income for the third quarter of 2007 was $9.1 million, up $1.5 million, or 20.1%, compared with the third quarter of 2006. The net interest margin expanded 41 basis points to 2.86%, reflecting an improved asset and funding mix resulting from the replacement of lower yielding first mortgage loans and securities with higher yielding loans. For the nine months ended September 30, 2007, net interest income was $24.7 million, an increase of $2.0 million, or 8.6%, compared with the same period in 2006. The net interest margin increased 20 basis points to 2.69%, due primarily to improvements in the asset and funding mix. Linked quarter (compared with the immediately preceding quarter) net interest income rose $1.1 million, or 13.4%, and the net interest margin improved 19 basis points.
Noninterest Income
Noninterest income was $7.5 million in the third quarter of 2007, down $359,000, or 4.6%, compared with the third quarter of 2006. Noninterest income for the nine months ended September 30, 2007 was $24.7 million, a decrease of $2.1 million, or 8.0%, compared with the same period of 2006. The decrease in noninterest income for both periods was primarily attributable to reduced mortgage banking income, the majority of which was related to second mortgages. This reduction occurred due to the combined effects of a lower dollar volume of mortgage loans sold and lower pricing, which resulted from a slowdown in the housing market and changes in the market for mortgage loans.
As a result of the unfavorable mortgage market conditions that have developed, and giving consideration to our assessment that the credit quality of the mortgage loans we originate is strong and the yield is favorable, we intend to originate these loans for our portfolio. We began this practice with all new loans originated in the latter part of the third quarter. We anticipate that the near-term decrease in mortgage banking income resulting from this change in strategy will be mitigated in the long term by an increase in interest income as a result of the growth in the loan portfolio from the retained mortgage loans. In an effort to further mitigate the decrease in mortgage banking income, we initiated a cost reduction effort in the fourth quarter of 2007, which includes a staff consolidation of approximately 5%. We expect that these cost reductions will yield expense savings of approximately $2.0 million in 2008 which will mostly be reinvested in growing our business.
Noninterest Expense
Noninterest expense was $12.5 million for the third quarter of 2007, up $420,000, or 3.5%, compared with the third quarter of 2006. Noninterest expense for the nine months ended September 30, 2007 was $38.2 million, up $551,000, or 1.5%, compared with the same period of 2006. The change in both periods was due primarily to the costs associated with opening two new private client offices. Partially offsetting these increased expenses were lower commissions paid as a result of the slowdown in mortgage origination and lower expenses due to the sale of certain trust related assets in June 2006. Linked quarter noninterest expense decreased $800,000, or 6.0%, as a result of a loss related to an early debt extinguishment in the second quarter of 2007 and increased cost deferrals associated with originating second mortgages for the loan portfolio.
Segment Earnings
On a segment basis, our banking net earnings were $1.3 million for the third quarter of 2007, an increase of $153,000, or 13.7%, compared with the same period of 2006, resulting from a rise in net interest income that was partially offset by a decline in mortgage banking income. Our wealth management group showed net earnings of $915,000 for the third quarter of 2007, an increase of $251,000, or 37.8%, over the prior year quarter. The growth in net earnings was due primarily to a 16.2% increase in assets under management. Our insurance group also reported earnings growth, with net earnings of $316,000 for the third quarter of 2007, an increase of $64,000, or 25.4% compared with the prior year quarter. The increased net earnings were due primarily to growth in commercial business lines.
Loans
Period end loans were $1.0 billion at September 30, 2007, an increase of $173.1 million, or 20.2%, from September 30, 2006, and up $77.3 million, or 8.1%, on a linked quarter basis. Average loans were $973.6 million for the third quarter of 2007, an increase of $133.0 million, or 15.8%, compared with the prior year quarter.
Deposits
Period end deposits were $1.0 billion, up $92.8 million, or 9.9%, from September 30, 2006 and up $11.9 million, or 1.2%, on a linked quarter basis. Noninterest-bearing deposits were $115.7 million, up $28.9 million, or 33.3%, from September 30, 2006. Average deposits were $1.0 billion for the third quarter of 2007, up $86.8 million, or 9.4%, compared with the prior year quarter.
Credit Quality
Net charge-offs for the third quarter of 2007 were $465,000, or 0.19% of average total loans on an annualized basis, compared with $182,000, or 0.09% of average total loans on an annualized basis, for the third quarter of 2006. The provision for loan losses was $1.0 million in the third quarter, an increase of $243,000, or 31.8%, compared with the prior year quarter, reflecting the growth in the loan portfolio. The allowance for loan losses was $10.7 million, or 1.04% of total loans at September 30, 2007, compared with $10.2 million, or 1.07% of total loans at June 30, 2007.
At September 30, 2007, nonperforming assets were $9.5 million, or 0.92% of total loans and investment in real estate, compared with $9.7 million, or 1.07% of total loans and investment in real estate at December 31, 2006. At September 30, 2007, non-accrual loans were $8.7 million compared with $9.1 million at June 30, 2007. Non-accrual loans consisted primarily of one loan in the amount of $6.3 million to a law firm. Loans 90 days past due and still accruing were $20,000 at September 30, 2007 compared with $2.2 million at June 30, 2007. The improvement is primarily attributable to a number of small commercial loans that were renewed or repaid. Investment in real estate decreased $1.1 million, due to the sale of a property that was originally acquired to be a private client office. We expect that nonperforming assets will be further reduced prior to year-end 2007.
Other Information
Effective October 1, 2007, Encore Bank's Executive Vice President and Chief Credit Officer, John Fields, resigned from his position. Mr. Fields has been with Encore Bank since 2000 and has served in his current position since that time.
To ensure continuity of our strong credit culture as well as adherence to credit policies and practices, the duties of Chief Credit Officer have been assumed on an interim basis by Chairman and CEO, James D'Agostino, until a permanent replacement is named. In addition, Jim Riley, an experienced banker, who joined the bank in March 2007 as a credit consultant, will continue to support credit administration.
Conference Call
A conference call will be held on Friday, October 26, 2007 at 10 a.m., Central time to discuss third quarter 2007 results. A question and answer session will follow the prepared remarks. Individuals may access the call by dialing 1-800-289-0569 (Int'l callers dial 913-981-5542), or access the live webcast by visiting www.encorebank.com/investorrelations.shtml or www.bestcalls.com
About Encore Bancshares, Inc.
Encore Bancshares, Inc. is a bank holding company headquartered in Houston, Texas, with $1.4 billion in consolidated assets. Encore builds relationships with professional firms, privately-owned businesses, investors and affluent individuals. We offer a full range of business and personal banking products and services, as well as financial planning, wealth management, trust and insurance products through Encore Bank, N.A. and its subsidiaries Linscomb & Williams and Town & Country Insurance. Encore Bank operates eleven private client offices in Houston and six in southwest Florida. Encore Bancshares' common stock is listed on the NASDAQ Global Market under the symbol "EBTX."
The Encore Bancshares, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=4257
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. Risks and uncertainties include, but are not limited to: competitive pressure among financial institutions; our ability to expand and grow our businesses and operations and to realize the cost savings and revenue enhancements expected from such activities; a deterioration of credit quality or a reduced demand for credit; changes in the interest rate environment; the continued service of key management personnel; our ability to attract, motivate and retain key employees; general economic conditions, either nationally, regionally or in the market areas in which we operate; legislative or regulatory developments or changes in laws; changes in the securities markets and other risks that are described in our public filings with the Securities and Exchange Commission.
Encore Bancshares, Inc. and Subsidiaries FINANCIAL HIGHLIGHTS (Unaudited, dollars in thousands, except per share data) As of and for the As of and for the Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2007 2006 2007 2006 -------- -------- -------- -------- Earnings Statement Data: Interest income $ 21,032 $ 19,513 $ 60,187 $ 56,220 Interest expense 11,966 11,963 35,443 33,435 -------- -------- -------- -------- Net interest income 9,066 7,550 24,744 22,785 Provision for loan losses 1,008 765 2,853 2,287 -------- -------- -------- -------- Net interest income after provision for loan losses 8,058 6,785 21,891 20,498 Noninterest income 7,521 7,880 24,697 26,839 Noninterest expense 12,489 12,069 38,240 37,689 -------- -------- -------- -------- Net earnings before income taxes 3,090 2,596 8,348 9,648 Income tax expense 842 897 2,667 3,334 -------- -------- -------- -------- Net earnings $ 2,248 $ 1,699 $ 5,681 $ 6,314 ======== ======== ======== ======== Common Share Data: Basic earnings per share $ 0.24 $ 0.23 $ 0.70 $ 0.84 Diluted earnings per share 0.22 0.21 0.64 0.80 Book value per share 15.36 13.34 15.36 13.34 Tangible book value per share 11.91 8.85 11.91 8.85 Weighted average shares outstanding (basic) 9,347,162 7,503,526 8,160,116 7,500,999 Weighted average shares outstanding (diluted) 10,156,090 7,934,716 8,836,428 7,906,746 Shares outstanding at end of period 10,120,440 7,781,709 10,120,440 7,781,709 Selected Performance Ratios: Return on average assets 0.66% 0.51% 0.58% 0.64% Return on average equity 6.20% 6.60% 6.31% 8.44% Return on average tangible equity 8.20% 10.05% 8.93% 13.03% Net interest margin 2.86% 2.45% 2.69% 2.49% Efficiency ratio 74.03% 76.68% 75.80% 74.50% Noninterest income to total revenue 45.34% 51.07% 49.95% 54.08% 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, 2007 2007 2007 2006 2006 ---------- ---------- ---------- ---------- ---------- ASSETS Cash and due from banks $ 19,044 $ 23,972 $ 23,912 $ 27,428 $ 24,143 Interest- bearing deposits in banks 1,804 2,903 7,122 2,904 3,924 Federal funds sold and other 100,630 9,862 888 8,764 18,398 ---------- ---------- ---------- ---------- ---------- Cash and cash equivalents 121,478 36,737 31,922 39,096 46,465 Securities available- for-sale, at estimated fair value 12,205 15,298 51,439 83,701 88,193 Securities held-to- maturity, at amortized cost 140,507 148,983 156,472 172,555 180,967 Mortgages held-for- sale 2,244 54,004 45,954 57,769 51,916 Loans receivable 1,030,133 952,838 932,793 908,368 857,005 Allowance for loan losses (10,711) (10,168) (9,790) (9,056) (10,123) ---------- ---------- ---------- ---------- ---------- Net loans receivable 1,019,422 942,670 923,003 899,312 846,882 Federal Home Loan Bank of Dallas stock, at cost 5,805 6,424 6,611 7,719 9,416 Investments in real estate 731 1,785 1,785 235 450 Premises and equipment, net 15,814 15,790 13,051 12,639 12,337 Goodwill 27,922 27,905 27,894 27,869 27,085 Other intangible assets, net 6,991 7,200 7,408 7,618 7,855 Cash surrender value of life insurance policies 13,951 13,818 13,684 13,551 13,419 Accrued interest receivable and other assets 16,062 16,587 15,764 14,779 13,967 ---------- ---------- ---------- ---------- ---------- $1,383,132 $1,287,201 $1,294,987 $1,336,843 $1,298,952 ========== ========== ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest- bearing $ 115,742 $ 106,064 $ 112,585 $ 131,476 $ 86,845 Interest- bearing 916,442 914,208 884,713 899,335 852,563 ---------- ---------- ---------- ---------- ---------- Total deposits 1,032,184 1,020,272 997,298 1,030,811 939,408 Borrowings and repurchase agreements 166,359 125,753 157,505 171,732 227,455 Junior subordinated debentures 20,619 20,619 20,619 20,619 20,619 Accrued interest payable and other liabilities 8,538 9,447 10,621 8,004 7,648 ---------- ---------- ---------- ---------- ---------- Total liabilities 1,227,700 1,176,091 1,186,043 1,231,166 1,195,130 Commitments and contingencies -- -- -- -- -- Puttable common stock -- -- -- 774 774 Puttable common stock in excess of par -- -- -- 9,492 9,492 ---------- ---------- ---------- ---------- ---------- Total puttable common stock -- -- -- 10,266 10,266 Shareholders' equity: Preferred stock -- -- -- -- -- Common stock 10,124 7,925 7,901 7,016 7,014 Additional paid-in capital 107,954 68,188 67,670 57,585 57,248 Retained earnings 38,060 35,812 34,154 32,529 31,365 Common stock in treasury, at cost (69) (69) (69) (69) (104) Accumulated other comprehensive loss (637) (746) (712) (1,650) (1,967) ---------- ---------- ---------- ---------- ---------- Total shareholders' equity 155,432 111,110 108,944 95,411 93,556 ---------- ---------- ---------- ---------- ---------- $1,383,132 $1,287,201 $1,294,987 $1,336,843 $1,298,952 ========== ========== ========== ========== ========== Ratios: Leverage ratio 10.71% 7.66% 7.40% 6.35% 6.26% Tier 1 risk-based capital ratio 14.20% 10.31% 10.28% 9.20% 9.56% Total risk- based capital ratio 15.28% 11.40% 11.35% 11.37% 11.99% Book value per share $ 15.36 $ 14.03 $ 13.80 $ 13.57 $ 13.34 Tangible book value per share 11.91 9.60 9.33 9.01 8.85 Tangible common equity to tangible assets 8.94% 6.07% 5.85% 5.39% 5.45% Encore Bancshares, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited, dollars in thousands, except per share data) Three Months Ended ------------------------------------------------------ Sept 30, June 30, March 31, Dec 31, Sept 30, 2007 2007 2007 2006 2006 ---------- ---------- ---------- ---------- ---------- Interest income: Loans, including fees $ 17,309 $ 16,346 $ 15,808 $ 15,283 $ 14,651 Mortgages held-for-sale 1,346 1,202 1,121 1,442 1,787 Securities 1,463 1,745 2,273 2,583 2,705 Federal funds sold and other 914 382 278 282 370 ---------- ---------- ---------- ---------- ---------- Total interest income 21,032 19,675 19,480 19,590 19,513 Interest expense: Deposits 9,947 9,525 9,456 9,441 8,603 Borrowings and repurchase agreements 1,651 1,779 1,889 2,318 2,898 Junior subordinated debentures 368 373 455 443 462 ---------- ---------- ---------- ---------- ---------- Total interest expense 11,966 11,677 11,800 12,202 11,963 ---------- ---------- ---------- ---------- ---------- Net interest income 9,066 7,998 7,680 7,388 7,550 Provision for loan losses 1,008 945 900 1,204 765 ---------- ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 8,058 7,053 6,780 6,184 6,785 Noninterest income: Trust and investment management fees 4,501 4,268 4,244 4,159 3,899 Mortgage banking 1,167 2,052 2,192 2,643 2,243 Insurance commissions and fees 1,450 1,562 1,713 1,114 1,364 Real estate operations, including net gain on sales 178 107 18 (21) 81 Net loss on sale of available- for-sale securities -- (32) (149) -- -- Other 225 764 437 349 293 ---------- ---------- ---------- ---------- ---------- Total noninterest income 7,521 8,721 8,455 8,244 7,880 Noninterest expense: Compensation 7,318 7,855 7,863 7,272 7,482 Occupancy 1,438 1,499 1,399 1,634 1,236 Equipment 506 497 520 516 511 Advertising and promotion 328 271 196 374 227 Outside data processing 884 904 808 834 861 Professional fees 401 458 390 405 497 Intangible amortization 209 211 209 236 237 Loss on early debt extinguishment -- 391 -- -- -- Other 1,405 1,203 1,077 1,378 1,018 ---------- ---------- ---------- ---------- ---------- Total noninterest expense 12,489 13,289 12,462 12,649 12,069 ---------- ---------- ---------- ---------- ---------- Net earnings before income taxes 3,090 2,485 2,773 1,779 2,596 Income tax expense 842 827 998 615 897 ---------- ---------- ---------- ---------- ---------- NET EARNINGS $ 2,248 $ 1,658 $ 1,775 $ 1,164 $ 1,699 ========== ========== ========== ========== ========== Earnings Per Common Share: Basic $ 0.24 $ 0.22 $ 0.23 $ 0.16 $ 0.23 Diluted 0.22 0.20 0.22 0.15 0.21 Average common shares outstanding 9,347,162 7,558,597 7,554,893 7,501,526 7,503,526 Diluted average common shares outstanding 10,156,090 8,199,564 8,131,379 7,981,883 7,934,716 Nine Months Ended September 30, ---------------------------- 2007 2006 -------- -------- Interest income: Loans, including fees $ 49,463 $ 41,470 Mortgages held-for-sale 3,669 5,104 Securities 5,481 8,656 Federal funds sold and other 1,574 990 -------- -------- Total interest income 60,187 56,220 Interest expense: Deposits 28,928 21,079 Borrowings and repurchase agreements 5,319 11,060 Junior subordinated debentures 1,196 1,296 -------- -------- Total interest expense 35,443 33,435 -------- -------- Net interest income 24,744 22,785 Provision for loan losses 2,853 2,287 -------- -------- Net interest income after provision for loan losses 21,891 20,498 Noninterest income: Trust and investment management fees 13,013 13,156 Mortgage banking 5,411 8,018 Insurance commissions and fees 4,725 4,342 Real estate operations, including net gain on sales 303 355 Net loss on sale of available-for-sale securities (181) -- Other 1,426 968 -------- -------- Total noninterest income 24,697 26,839 Noninterest expense: Compensation 23,036 23,775 Occupancy 4,336 3,831 Equipment 1,523 1,534 Advertising and promotion 795 718 Outside data processing 2,596 2,419 Professional fees 1,249 1,404 Intangible amortization 629 719 Loss on early debt extinguishment 391 -- Other 3,685 3,289 -------- -------- Total noninterest expense 38,240 37,689 -------- -------- Net earnings before income taxes 8,348 9,648 Income tax expense 2,667 3,334 -------- -------- NET EARNINGS $ 5,681 $ 6,314 ======== ======== Earnings Per Common Share: Basic $ 0.70 $ 0.84 Diluted 0.64 0.80 Average common shares outstanding 8,160,116 7,500,999 Diluted average common shares outstanding 8,836,428 7,906,746 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, 2007 2007 2007 2006 2006 ---------- ---------- ---------- ---------- ---------- Assets: Interest- earning assets: Loans $ 973,641 $ 938,356 $ 916,523 $ 887,439 $ 840,674 Mortgages held-for-sale 60,959 53,926 52,273 59,042 80,951 Securities 156,159 183,008 232,154 262,873 277,854 Federal funds sold and other 68,347 27,755 19,412 18,448 25,248 ---------- ---------- ---------- ---------- ---------- Total interest- earning assets 1,259,106 1,203,045 1,220,362 1,227,802 1,224,727 Less: Allowance for loan losses (10,391) (9,843) (9,268) (10,110) (9,726) Noninterest- earning assets 102,667 103,512 102,234 104,350 100,204 ---------- ---------- ---------- ---------- ---------- Total assets $1,351,382 $1,296,714 $1,313,328 $1,322,042 $1,315,205 ========== ========== ========== ========== ========== Liabilities, shareholders' equity and puttable common stock: Interest- bearing liabilities: Interest checking $ 169,860 $ 167,956 $ 183,335 $ 175,640 $ 168,222 Money market and savings 358,732 340,950 334,971 331,517 294,911 Time deposits 375,896 373,669 374,389 369,385 373,687 ---------- ---------- ---------- ---------- ---------- Total interest- bearing deposits 904,488 882,575 892,695 876,542 836,820 Borrowings and repurchase agreements 158,203 161,698 172,660 205,667 252,416 Junior subordinated debentures 20,619 20,930 20,619 20,619 20,619 ---------- ---------- ---------- ---------- ---------- Total interest- bearing liabilities 1,083,310 1,065,203 1,085,974 1,102,828 1,109,855 ---------- ---------- ---------- ---------- ---------- Noninterest- bearing liabilities: Noninterest- bearing deposits 108,168 109,753 105,950 100,773 89,038 Other liabilities 16,128 12,127 13,685 14,091 14,161 ---------- ---------- ---------- ---------- ---------- Total liabilities 1,207,606 1,187,083 1,205,609 1,217,692 1,213,054 Shareholders' equity and puttable common stock 143,776 109,631 107,719 104,350 102,151 ---------- ---------- ---------- ---------- ---------- Total liabilities, shareholders' equity and puttable common stock $1,351,382 $1,296,714 $1,313,328 $1,322,042 $1,315,205 ========== ========== ========== ========== ========== Encore Bancshares, Inc. and Subsidiaries SELECTED FINANCIAL DATA (Unaudited, dollars in thousands) Loan Sept 30, June 30, March 31, Dec 31, Sept 30, Portfolio: 2007 2007 2007 2006 2006 ---------- ---------- ---------- ---------- ---------- Commercial: Commercial $ 111,072 $ 113,370 $ 115,896 $ 113,526 $ 106,201 Commercial real estate 249,576 225,985 210,992 190,550 169,811 Real estate construction 132,557 130,168 134,781 121,848 109,761 ---------- ---------- ---------- ---------- ---------- Total commercial 493,205 469,523 461,669 425,924 385,773 Consumer: Residential real estate 411,260 355,279 334,156 336,077 317,390 Home equity lines 76,096 76,452 78,430 78,158 75,038 Consumer installment - indirect 29,210 33,622 39,204 44,360 50,020 Consumer other 20,362 17,962 19,334 23,849 28,784 ---------- ---------- ---------- ---------- ---------- Total consumer 536,928 483,315 471,124 482,444 471,232 ---------- ---------- ---------- ---------- ---------- Total loans receivable $1,030,133 $ 952,838 $ 932,793 $ 908,368 $ 857,005 ========== ========== ========== ========== ========== Nonperforming Assets: Nonaccrual loans $ 8,734 $ 9,111 $ 8,446 $ 9,411 $ 4,453 Accruing loans past due 90 days or more 20 2,178 100 96 870 Restructured loans -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total nonperforming loans 8,754 11,289 8,546 9,507 5,323 ---------- ---------- ---------- ---------- ---------- Investment in real estate 731 1,785 1,785 235 450 ---------- ---------- ---------- ---------- ---------- Total nonperforming assets $ 9,485 $ 13,074 $ 10,331 $ 9,742 $ 5,773 ========== ========== ========== ========== ========== Asset Quality Ratios: Nonperforming assets to total loans and investment in real estate 0.92% 1.37% 1.11% 1.07% 0.67% Net charge-offs to average loans 0.19% 0.24% 0.07% 1.02% 0.09% Allowance for loan losses to period-end loans 1.04% 1.07% 1.05% 1.00% 1.18% Allowance for loan losses to nonperforming loans 122.36% 90.07% 114.56% 95.26% 190.17% Deposits: Noninterest- bearing deposits $ 115,742 $ 106,064 $ 112,585 $ 131,476 $ 86,845 Interest checking 169,646 172,079 174,602 191,683 162,172 Money market and savings 362,289 368,682 329,414 332,605 323,724 Time deposits less than $100,000 175,071 166,482 174,281 178,216 173,340 ---------- ---------- ---------- ---------- ---------- Core deposits 822,748 813,307 790,882 833,980 746,081 ---------- ---------- ---------- ---------- ---------- Time deposits $100,000 and greater 194,619 188,075 195,894 187,864 184,339 Brokered deposits 14,817 18,890 10,522 8,967 8,988 ---------- ---------- ---------- ---------- ---------- Total deposits $1,032,184 $1,020,272 $ 997,298 $1,030,811 $ 939,408 ========== ========== ========== ========== ========== Assets Under Management $2,792,894 $2,683,841 $2,609,893 $2,509,185 $2,403,681 ========== ========== ========== ========== ========== 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, 2007 2007 2007 2006 2006 ------- ------ ------- ------- ------- Allowance for loan losses at beginning of quarter $10,168 $ 9,790 $ 9,056 $10,123 $ 9,540 Charge-offs: Commercial: Commercial (42) -- -- (1,488) -- Commercial real estate -- -- -- -- -- Real estate construction -- -- -- -- -- ------- ------- ------- ------- ------- Total commercial (42) -- -- (1,488) -- ------- ------- ------- ------- ------- Consumer: Residential real estate (340) (416) (84) (66) (27) Home equity lines (25) -- (10) (61) (71) Consumer installment - indirect (307) (215) (80) (439) (174) Consumer other (13) (24) (144) (340) (76) ------- ------- ------- ------- ------- Total consumer (685) (655) (318) (906) (348) ------- ------- ------- ------- ------- Total charge-offs (727) (655) (318) (2,394) (348) ------- ------- ------- ------- ------- Recoveries: Commercial: Commercial 6 -- -- -- -- Commercial real estate -- -- -- -- -- Real estate construction -- -- -- -- -- ------- ------- ------- ------- ------- Total commercial 6 -- -- -- -- ------- ------- ------- ------- ------- Consumer: Residential real estate 157 7 26 3 99 Home equity lines -- -- 43 -- 1 Consumer installment - indirect 76 45 64 100 43 Consumer other 23 36 19 20 23 ------- ------- ------- ------- ------- Total consumer 256 88 152 123 166 ------- ------- ------- ------- ------- Total recoveries 262 88 152 123 166 ------- ------- ------- ------- ------- Net charge-offs (465) (567) (166) (2,271) (182) ------- ------- ------- ------- ------- Provision for loan losses 1,008 945 900 1,204 765 ------- ------- ------- ------- ------- Allowance for loan losses at end of quarter $10,711 $10,168 $ 9,790 $ 9,056 $10,123 ======= ======= ======= ======= ======= Encore Bancshares, Inc. and Subsidiaries SEGMENT OPERATIONS (Unaudited, dollars in thousands) As of and for the Three Months Ended ------------------------------------------------------ Sept 30, June 30, March 31, Dec 31, Sept 30, 2007 2007 2007 2006 2006 ---------- ---------- ---------- ---------- ---------- Banking ------- Net interest income $ 9,315 $ 8,258 $ 8,035 $ 7,732 $ 7,927 Provision for loan losses 1,008 945 900 1,204 765 Noninterest income 1,559 2,807 2,481 2,978 2,620 Noninterest expense 8,338 8,853 8,453 8,522 8,223 ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 1,528 1,267 1,163 984 1,559 Income tax expense 261 370 396 373 445 ---------- ---------- ---------- ---------- ---------- Net earnings $ 1,267 $ 897 $ 767 $ 611 $ 1,114 ========== ========== ========== ========== ========== Total assets at quarter end $1,392,156 $1,292,112 $1,301,562 $1,342,446 $1,304,825 ========== ========== ========== ========== ========== Wealth Management ----------------- Net interest income $ 82 $ 77 $ 73 $ 73 $ 66 Noninterest income 4,501 4,268 4,244 4,160 3,898 Noninterest expense 3,137 2,988 3,027 3,190 2,860 ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 1,446 1,357 1,290 1,043 1,104 Income tax expense 531 483 467 344 440 ---------- ---------- ---------- ---------- ---------- Net earnings $ 915 $ 874 $ 823 $ 699 $ 664 ========== ========== ========== ========== ========== Total assets at quarter end $ 45,425 $ 44,395 $ 43,935 $ 42,684 $ 41,419 ========== ========== ========== ========== ========== Insurance --------- Net interest income $ 37 $ 36 $ 27 $ 26 $ 19 Noninterest income 1,460 1,637 1,716 1,117 1,352 Noninterest expense 1,014 1,057 982 937 986 ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 483 616 761 206 385 Income tax expense 167 232 272 195 133 ---------- ---------- ---------- ---------- ---------- Net earnings $ 316 $ 384 $ 489 $ 11 $ 252 ========== ========== ========== ========== ========== Total assets at quarter end $ 9,219 $ 9,101 $ 9,278 $ 8,231 $ 8,219 ========== ========== ========== ========== ========== Other ----- Net interest expense $ (368)$ (373)$ (455)$ (443)$ (462) Noninterest income 1 9 14 (11) 10 Noninterest expense -- 391 -- -- -- ---------- ---------- ---------- ---------- ---------- Loss before income taxes (367) (755) (441) (454) (452) Income tax benefit (117) (258) (137) (297) (121) ---------- ---------- ---------- ---------- ---------- Net loss $ (250)$ (497)$ (304)$ (157)$ (331) ========== ========== ========== ========== ========== Total assets at quarter end $ (63,668)$ (58,407)$ (59,788)$ (56,518)$ (55,511) ========== ========== ========== ========== ========== Consolidated ------------ Net interest income $ 9,066 $ 7,998 $ 7,680 $ 7,388 $ 7,550 Provision for loan losses 1,008 945 900 1,204 765 Noninterest income 7,521 8,721 8,455 8,244 7,880 Noninterest expense 12,489 13,289 12,462 12,649 12,069 ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 3,090 2,485 2,773 1,779 2,596 Income tax expense 842 827 998 615 897 ---------- ---------- ---------- ---------- ---------- Net earnings $ 2,248 $ 1,658 $ 1,775 $ 1,164 $ 1,699 ========== ========== ========== ========== ========== Total assets at quarter end $1,383,132 $1,287,201 $1,294,987 $1,336,843 $1,298,952 ========== ========== ========== ========== ========== Encore Bancshares, Inc. and Subsidiaries YIELD ANALYSIS (Unaudited, dollars in thousands) For the Three Months Ended September 30, --------------------------------------------------------- 2007 2006 ---------------------------- ---------------------------- Average Interest Average Average Interest Average Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Balance Paid Rate Balance Paid Rate ----------- -------- ------- ----------- -------- ------- Assets: Interest- earning assets: Loans $ 973,641 $17,309 7.05% $ 840,674 $14,651 6.91% Mortgages held-for- sale 60,959 1,346 8.76% 80,951 1,787 8.76% Securities 156,159 1,463 3.72% 277,854 2,705 3.86% Federal funds sold and other 68,347 914 5.31% 25,248 370 5.81% ---------- ------- ---------- ------- Total interest- earning assets 1,259,106 21,032 6.63% 1,224,727 19,513 6.32% Less: Allowance for loan losses (10,391) (9,726) Noninterest- earning assets 102,667 100,204 ---------- ---------- Total assets $1,351,382 $1,315,205 ========== ========== Liabilities, shareholders' equity and puttable common stock: Interest- bearing liabilities: Interest checking $ 169,860 $ 1,347 3.15%$ 168,222 $ 1,184 2.79% Money market and savings 358,732 3,907 4.32% 294,911 3,206 4.31% Time deposits 375,896 4,693 4.95% 373,687 4,213 4.47% ---------- ------- ---------- ------- Total interest- bearing deposits 904,488 9,947 4.36% 836,820 8,603 4.08% Borrowings and repurchase agreements 158,203 1,651 4.14% 252,416 2,898 4.55% Junior subordinated debentures 20,619 368 7.08% 20,619 462 8.89% ---------- ------- ---------- ------- Total interest- bearing liabilities 1,083,310 11,966 4.38% 1,109,855 11,963 4.28% ---------- ------- ---------- ------- Noninterest- bearing liabilities: Noninterest- bearing deposits 108,168 89,038 Other liabilities 16,128 14,161 ---------- ---------- Total liabilities 1,207,606 1,213,054 Shareholders' equity and puttable common stock 143,776 102,151 ---------- ---------- Total liabilities, shareholders' equity and puttable common stock $1,351,382 $1,315,205 ========== ========== Net interest income $ 9,066 $ 7,550 ======= ======= Net interest spread 2.25% 2.04% Net interest margin 2.86% 2.45% Encore Bancshares, Inc. and Subsidiaries YIELD ANALYSIS (Unaudited, dollars in thousands) For the Nine Months Ended September 30, --------------------------------------------------------- 2007 2006 ---------------------------- ---------------------------- Average Interest Average Average Interest Average Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Balance Paid Rate Balance Paid Rate ----------- -------- ------- ----------- -------- ------- Assets: Interest- earning assets: Loans $ 943,048 $49,463 7.01% $ 824,456 $41,470 6.73% Mortgages held-for- sale 55,753 3,669 8.80% 77,673 5,104 8.79% Securities 190,165 5,481 3.85% 296,578 8,656 3.90% Federal funds sold and other 38,746 1,574 5.43% 25,951 990 5.10% ---------- ------- ---------- ------- Total interest- earning assets 1,227,712 60,187 6.55% 1,224,658 56,220 6.14% Less: Allowance for loan losses (9,838) (9,217) Noninterest- earning assets 102,592 99,339 ---------- ---------- Total assets $1,320,466 $1,314,780 ========== ========== Liabilities, shareholders' equity and puttable common stock: Interest- bearing liabilities: Interest checking $ 173,671 $ 3,915 3.01% $ 166,603 $ 2,969 2.38% Money market and savings 344,978 11,203 4.34% 241,540 6,738 3.73% Time deposits 374,654 13,810 4.93% 359,101 11,372 4.23% ---------- ------- ---------- ------- Total interest- bearing deposits 893,303 28,928 4.33% 767,244 21,079 3.67% Borrowings and repurchase agreements 164,133 5,319 4.33% 330,328 11,060 4.48% Junior subordinated debentures 20,743 1,196 7.71% 20,619 1,296 8.40% ---------- ------- ---------- ------- Total interest- bearing liabilities 1,078,179 35,443 4.40% 1,118,191 33,435 4.00% ---------- ------- ---------- ------- Noninterest- bearing liabilities: Noninterest- bearing deposits 107,965 83,416 Other liabilities 14,015 13,099 ---------- ---------- Total liabilities 1,200,159 1,214,706 Shareholders' equity and puttable common stock 120,307 100,074 ---------- ---------- Total liabilities, shareholders' equity and puttable common stock $1,320,466 $1,314,780 ========== ========== Net interest income $24,744 $22,785 ======= ======= Net interest spread 2.15% 2.14% Net interest margin 2.69% 2.49%