Wilshire Bancorp Reports $0.14 Earnings Per Share for Third Quarter 2011

LOS ANGELES, Oct. 25, 2011 (GLOBE NEWSWIRE) -- Wilshire Bancorp, Inc. (Nasdaq:WIBC), the holding company ("the Company") for Wilshire State Bank ("the Bank"), today reported net income available to common shareholders of $10.2 million, or $0.14 per diluted common share, for the quarter ended September 30, 2011. This compares to net income available to common shareholders of $4.1 million, or $0.14 per diluted common share, for the same period of the prior year, and net income available to common shareholders of $2.1 million, or $0.04 per diluted common share, in the second quarter of 2011.

Jae Whan (J.W.) Yoo, President and CEO of Wilshire Bancorp, said, "We are very pleased with our third quarter results, which reflect significant improvement in our asset quality and the continued strong earnings power of our franchise. Our primary focus remains on credit quality and reducing problem loans, and we continue to make excellent progress in this area. During the third quarter of 2011, our non-performing loans, delinquent loans, impaired loans, and classified loans were all reduced from the previous quarter. This is the result of our aggressive efforts to dispose of our weakest credits, which has significantly improved the overall quality of our remaining loan portfolio.

Q3 2011 Summary:

• Net income available to common shareholders of $10.2 million, or $0.14 per share
  
• Substantial improvement in asset quality from Q2 2011 to Q3 2011 with a 76% decline in delinquent loans and a 28% decline in non-accrual loans
  
• Overall reduction in inflows into all major credit categories
  
• Annualized quarter to date return on average assets of 1.65%
  
• Annualized quarter to date return on average equity of 14.89%
  
• All capital ratios strengthened from prior quarter

STATEMENT OF OPERATIONS

Net Interest Income and Margin

Net interest income before provision for loan losses totaled $25.5 million in the third quarter of 2011, a decrease of 14% from $29.7 million in the third quarter of 2010, and a decrease of 7% from $27.3 million in the second quarter of 2011. The decrease in net interest income on a linked quarter basis was primarily attributable to a decline in total loans as result of management's plan to aggressively reduce problem loans.

Net interest margin was 4.23% in the third quarter of 2011, compared to 3.93% in the third quarter of 2010 and 4.42% in the second quarter of 2011. Loan yields increased from 5.94% for the second quarter of 2011 to 6.01% for the third quarter of 2011 mainly due to the reduction in interest income reversals from non-accrual loans. Total non-accrual loan interest reversals declined to $812 thousand during the third quarter of 2011 compared to $1.8 million during the previous quarter. The cost of interest bearing deposits continued to decrease and was 1.05% for the third quarter of 2011, down from 1.07% and 1.47% for the second quarter of 2011 and third quarter of 2010, respectively.

Despite the improvement in loan yields and deposit costs, the net interest margin declined from 4.42% in the second quarter of 2011 to 4.23% in third quarter of 2011 due to a 41 basis point reduction in investment yields, as well as higher balances of fed funds sold which includes cash held at the Federal Reserve Bank which yields only 25 basis points. As excess liquidity is redeployed into loan originations and investment purchases, the Company expects to reduce slightly a portion of the compression in its net interest margin going forward.

Non-Interest Income

Total non-interest income was $7.7 million for the quarter ended September 30, 2011, compared to $1.7 million for the previous quarter and $10.0 million for the quarter ended September 30, 2010. During the second quarter of 2011, the Company had a net loss of $3.6 million due to loss on sale of loans and valuation allowances for held-for-sale loans. For the third quarter of 2011, gain on sale of loans and valuation allowances totaled $1.7 million, a difference of $5.3 million from the previous quarter which accounted for the large increase in non-interest income. Compared to the third quarter of 2010, non-interest income declined by $2.3 million mainly due to the decline in gain on sale of investments which totaled $52 thousand for the third quarter of 2011 compared to $2.6 million for the same period of the previous year.

Net gain on sale of loans totaled $2.1 million for the quarter ended September 30, 2011. The $2.1 million consisted of gains from SBA loan sales totaling $2.7 million, gains from mortgage loan sales totaling $80 thousand, and a net loss on sale of CRE loans totaling $700 thousand.

Other non-interest income increased to $2.7 million for the quarter ended September 30, 2011 compared to $2.2 million and $1.7 million for the quarters ended June 30, 2011 and September 30, 2010, respectively. The increase in other non-interest income from the previous periods was the result of an increase in loan fees coupled and other miscellaneous non-interest income.

Non-Interest Expense

Total non-interest expense was $18.5 million for the third quarter of 2011, compared with $16.6 million for the prior quarter and $14.8 million for the third quarter of 2010. The Company's operating efficiency ratio improved to 55.7% for the quarter ended September 30, 2011 from 57.2% for the quarter ended June 30, 2011.

Total salaries and employee benefits were $6.8 million in the third quarter of 2011, compared with $6.8 million in the prior quarter and $7.5 million in the third quarter of 2010. The decrease from the same period of the prior year is primarily due to the reduction in staff during the first quarter of this year.

Other non-interest expenses for the third quarter of 2011 totaled $9.0 million, compared with $7.0 million in the second quarter of 2011 and $4.7 million in the third quarter of 2010. The increase in other non-interest expenses from the prior quarter and previous year was primarily attributable to an increase in expenses related to other real estate owned ("OREO") and an increase in legal fees.

BALANCE SHEET

Total loans (including loans held-for-sale) were $1.99 billion at September 30, 2011, compared to $2.08 billion at June 30, 2011. The decrease was due to $28.7 million in note sales, $12.5 million in charge-offs, and loan pay-downs during the third quarter of 2011.

As previously disclosed, upon acquiring certain assets and liabilities of the former Mirae Bank, the Company entered into a loss sharing agreement with the FDIC whereby the FDIC has agreed to share in losses on assets covered under the agreement. The assets covered by the loss sharing agreement include loans and foreclosed loan collateral existing on June 26, 2009 and acquired from Mirae Bank. As a result, loans acquired through the acquisition of Mirae Bank are identified as "covered" loans, and those that were originated at Wilshire are "non-covered" loans or "legacy Wilshire" loans. The following table shows "covered" and "non-covered" gross loans by loan type:

 Loan Categories

Loan originations for the third quarter of 2011 totaled $97.5 million. This compares to total loan originations of $82.2 million for the second quarter of 2011 and $112.9 million for the third quarter of 2010. The decrease in real estate secured loan originations for the third quarter of 2011 was a result of management's efforts to reduce the Company's concentration of real estate secured loans and focusing on increasing originations of other loan types. 

The following table shows quarterly loan originations by loan type: 

Proceeds from loan pay-downs and note sales were utilized for investment purchases and an increase in term fed funds sold. Investment securities increased 16% to $356.2 million at September 30, 2011 from $307.4 million at June 30, 2011 and term fed funds sold increased 30% to $150.0 million at September 30, 2011 from $115.0 million at June 30, 2011.

Total OREOs were $9.3 million at September 30, 2011, compared with $8.5 million at June 30, 2011. Outflow from OREO in the third quarter of 2011 consisted of 16 sold properties totaling approximately $7.5 million. Inflow to OREO in the third quarter of 2011 consisted of 11 properties totaling approximately $9.0 million.

Total deposits were $2.15 billion at September 30, 2011, unchanged from June 30, 2011. However, the Company continued to improve its deposit mix with non-interest bearing demand deposits increasing to 21.8% of total deposits at September 30, 2011, up from 20.9% at June 30, 2011 and 16.7% at September 30, 2010.   

CREDIT QUALITY

The Company's credit quality metrics improved in the third quarter of 2011 with significant declines in the balances and inflow of new problem assets to each respective category. From the second to third quarter of 2011, non-accrual loans declined 27.6%, delinquencies declined 75.5%, troubled debt restructuring ("TDR") loans declined 34.8%, impaired loans declined 25.7%, classified loans declined 20.9%, and gross charge-offs declined 11.7%. As a result of the improved credit quality metrics, the Company's provision for loan losses declined to $2.5 million in the third quarter of 2011, down from $10.3 million in the prior quarter. 

Despite the reduced provision for loan losses, the Company's coverage ratios remained relatively stable from the end of the prior quarter. The allowance for loan losses was $105.3 million, or 5.27% of gross loans at September 30, 2011, compared to $111.0 million, or 5.32% of gross loans, at June 30, 2011. The coverage ratio of the allowance for loan losses to non-performing assets was 160% at September 30, 2011, compared with 128% at June 30, 2011.  Allowance coverage of legacy Wilshire loans (i.e. loans originated by Wilshire as opposed to Mirae Bank) was 5.78% at September 30, 2011, compared with 5.86% at June 30, 2011.

The Company's ratio of legacy classified assets to Tier 1 capital plus reserves percentage was 32.5% at September 30, 2011. The requirement for the legacy classified assets to Tier 1 capital plus reserves ratio for the Bank stated in the memorandum of understanding ("MOU") with regulators is a maximum of 50%, with which the Bank is in compliance.

Note Sales

The Company sold $28.7 million in held-for-sale loans (not including SBA or residential mortgage loans) during the third quarter of 2011. All of the loans were sold on an individual basis and had an average discount to their principal balance of 33.1%. The held-for-sale loans that were sold included $24.7 million in non-accrual loans, $2.9 million in troubled debt restructured loans, and $1.1 million in other loans.

As of September 30, 2011, the Company had approximately $70.7 million in loans classified as held-for-sale. Of that total, commercial real estate loans accounted for $37.2 million, SBA loans totaled $4.7 million and $28.8 million were residential mortgage loans.

Non-Accrual Loans

At September 30, 2011, total non-covered non-accrual loans declined to $39.5 million, or 2.18% of gross non-covered loans, compared to $59.4 million, or 3.13% of non-covered loans, at June 30, 2011. 

The following table shows "covered" and "non-covered" non-accrual loans by loan type: 

The decrease in non-accrual loans is attributable to the sale of $24.7 million of non-accrual loans in addition to a decline in inflows into non-accrual status. Included in the sale of $24.7 million in non-accrual loans during the third quarter of 2011 was a construction loan totaling $12.0 million, which was sold with an approximate gain of $500 thousand.

The inflow into total (covered and non-covered) non-accrual loans was $17.1 million in the third quarter of 2011, a decline from inflow of $29.3 million for the second quarter of 2011. Total outflow from total non-accrual loans increased to $38.6 million in the third quarter of 2011 from $31.5 million in the second quarter of 2011.  

Impaired Loans            

Loans are classified as impaired when based on current information, it is probable that the Company will not be able to collect all principal and interest payments due in accordance with the terms of the loan. Non-covered impaired loans at September 30, 2011 totaled $65.7 million, compared with $91.2 million at June 30, 2011. The decrease in impaired loans during the third quarter of 2011 is largely attributable to note sales and charge-offs, as well as a slowing of inflow into the impaired loan category. Total inflows into impaired loans decreased from $33.5 million for the quarter ended June 30, 2011 to $18.2 million for the third quarter of 2011.

Total impaired loans by loan category are shown in the table below: 

Troubled Debt Restructured Loans

At September 30, 2011, total non-covered troubled debt restructured loans or "TDR loans", declined to $13.1 million from $22.3 million at June 30, 2011. The decline in TDR loans was a result of note sales, charge-offs, and a reduction in the number of modification requests during the quarter.

Total TDR loans by loan category are shown in the table below: 

Of the total $21.0 million in TDR loans at September 30, 2011, $7.0 million in TDR loans were also classified as non-accrual of which only $678 thousand was non-covered. These loans were also included in our non-accrual loan totals at September 30, 2011 in addition to being reported as TDR loans in the above table.

Loan Delinquencies

At September 30, 2011, total non-covered loan delinquencies (not including non-accrual loans) declined to $7.3 million from $28.4 million at June 30, 2011, a decline of 74.3%. As a percentage of gross non-covered loans, delinquencies decreased to 0.40% at September 30, 2011, from 1.50% at June 30, 2011. The decline in delinquencies was primarily attributable to a sizable migration of loans back to current status (less than 30 days past due) and a decline in inflows to delinquency. During the third quarter, $15.2 million in delinquent loans returned to current status.  Inflow into loan delinquencies was $4.3 million in the third quarter of 2011, compared with $28.2 million in the prior quarter. 

Delinquent loans by days past due are reflected in the table below:  

Of the total $8.1 million in delinquent loans at September 30, 2011, $4.1 million was made up of delinquent real estate secured loans and $3.9 million consists of commercial and industrial delinquent loans.

Loan Classifications

At September 30, 2011, total non-covered classified loans (loans graded substandard, doubtful, and loss) declined to $123.5 million from $158.0 million at June 30, 2011. Non-covered criticized loans (loans graded special mention) were $159.2 million at September 30, 2011, compared with $156.2 million at June 30, 2011.

Loan balances broken down by classification are reflected in the table below: 

Loan Charge-offs

Non-covered loan charge-offs for the third quarter of 2011 totaled $11.7 million, compared to $14.2 million in the second quarter of 2011. The decline in charge-offs is primarily due to lower charge-offs in the construction portfolio.

Charge-offs by loan type is reflected in the table below: 

During the third quarter of 2011, the Company had $3.6 million in loan recoveries, most of which came from the non-covered loan portfolio. Non-covered loan net charge-offs (net of recoveries) totaled $8.1 million at the end of the third quarter of 2011 compared to net charge-offs of $13.9 million for the previous quarter.

Capital Ratios

As of September 30, 2011, the Company's Tier 1 Leverage ratio was 13.6%. The minimum required Tier 1 capital ratio for the Bank stated in the MOU is 10%, with which the Bank is in compliance.

In addition, all of the Company's capital ratios remain in excess of "well capitalized" regulatory requirements as shown in the following table:   

CONFERENCE CALL

Management will host its quarterly conference call on October 25, 2011, at 11:00 a.m. PT (2:00 p.m. ET). Investment professionals are invited to participate in the call by dialing 866-203-3206 (domestic number) or 617-213-8848 (international number) and entering passcode #19305419.

COMPANY INFORMATION

Headquartered in Los Angeles, Wilshire State Bank operates 24 branch offices in California, Texas, New Jersey and New York, and six loan production offices in Dallas, Houston, Atlanta, Denver, Annandale, Virginia, and Fort Lee, New Jersey, and is an SBA preferred lender nationwide. Wilshire State Bank is a community bank with a focus on commercial real estate lending and general commercial banking, with its primary market encompassing the multi-ethnic populations of the Los Angeles Metropolitan area. Wilshire Bancorp's strategic goals include increasing shareholder and franchise value by continuing to grow its multi-ethnic banking business and expanding its geographic reach to other similar markets with strong levels of small business activity. Visit us at www.wilshirebank.com. ;

FORWARD-LOOKING STATEMENTS

Statements concerning future performance, events, or any other guidance on future periods constitute forward-looking statements that are subject to a number of risks and uncertainties that might cause actual results to differ materially from stated expectations. Specific factors include, but are not limited to, loan production and sales, credit quality, the ability to expand net interest margin, the ability to continue to attract low-cost deposits, success of expansion efforts, competition in the marketplace and general economic conditions. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes included in Wilshire Bancorp's most recent reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission, as they may be amended from time to time. Results of operations for the most recent quarter are not necessarily indicative of operating results for any future periods. Any projections in this release are based on limited information currently available to management and are subject to change. Since management will only provide guidance at certain points during the year, Wilshire Bancorp will not necessarily update the information. Such information speaks only as of the date of this release. Additional information on these and other factors that could affect financial results are included in filings by Wilshire Bancorp with the Securities and Exchange Commission.