HOUSTON, Jan. 30, 2009 (GLOBE NEWSWIRE) -- Encore Bancshares, Inc. (Nasdaq:EBTX) today announced its financial results for the fourth quarter 2008.
Reported the following significant items in the fourth quarter of 2008
* $10.5 million (pre-tax) increase to loan loss reserves, resulting in an allowance for loan losses to total loans of 2.06% * $6.0 million (pre-tax) charge-off of a loan to a high net worth professional * $2.0 million (pre-tax) non-cash impairment charge of a Community Reinvestment Act related investment security Maintained strong capital position * Issued $34.0 million of fixed rate cumulative preferred stock and a warrant to purchase 364,026 shares of common stock at $14.01 per share under the U.S. Department of the Treasury Capital Purchase Program * Tier I Risked Based Capital of 14.63% * Tangible book value per share of $11.76 * Ratio of tangible common equity to tangible assets of 7.75% Continued to grow franchise * Deposits increased 5.7% or $59.4 million during 2008 * Noninterest bearing deposits increased 23.8% to $131.7 million * Loans increased 11.0% to $1.2 billion at year end 2008 Improved key earnings metrics * Net interest income grew 26.6% to $11.9 million in the fourth quarter * Net interest margin expanded by 46 basis points to 3.31% for the fourth quarter and by 44 basis points to 3.18% for the year * Noninterest expense approximately the same for the fourth quarter and the year, compared with the same periods of 2007 Extended $68.8 million in credit to businesses, individuals, and municipalities during the fourth quarter of 2008
"Encore Bancshares is in a strong capital position with high levels of liquidity. While I am very disappointed with the charge-off of a large loan at year end, I am satisfied that our business fundamentals remain strong driven by margin expansion, significant noninterest income from our wealth management and insurance agency, and expense controls," said James S. D'Agostino, Jr., Chairman and Chief Executive Officer. "Given forecasts of job losses and declining economic activity, we added to our capital by participating in the Capital Purchase Program under the Troubled Asset Relief Program and strengthened our balance sheet by building our loan loss reserve to 2.06% of loans.
"As the U.S. economy rapidly deteriorated, we commenced a rigorous review of our loan portfolio. We have used both internal and several new external resources for this effort that included evaluating our consumer real estate loans. The results of this process were considered in our determination of the adequacy of our allowance for loan losses at year end. At the same time, our team continues to provide superior service to our clients, increase core deposits, make sound loans, attract assets to manage, and maintain expense control, which provides us momentum for the future. When the economy eventually recovers, I believe we will be able to achieve our goal of 1% return on assets," said Mr. D'Agostino.
Results
For the three months ended December 31, 2008, the net loss was $10.0 million, or $1.02 per diluted share, compared with net earnings of $1.7 million, or $0.16 per diluted share, for the same period of 2007. Results for the fourth quarter of 2008 include a $2.5 million, or 26.6%, improvement in net interest income. Offsetting this improvement was a $17.5 million increase in the provision for loan losses, which includes a $6.0 million charge-off of a loan to a high net worth professional and a $10.5 million addition to the allowance for loan losses. The fourth quarter results also include a $2.0 million non-cash impairment charge on a security held as part of our Community Reinvestment Act compliance program.
For the year ended December 31, 2008, the net loss was $8.1 million, or $0.83 per diluted share, compared with net earnings of $7.4 million, or $0.79 per diluted share for the year ended December 31, 2007. Net interest income increased by $10.1 million, but was offset by higher credit costs and a reduction in mortgage banking income.
Net Interest Income
Net interest income for the fourth quarter of 2008 was $11.9 million, an increase of $2.5 million, or 26.6%, compared with the fourth quarter of 2007. The net interest margin improved by 46 basis points to 3.31%. For the full year ended December 31, 2008, net interest income was $44.3 million, an increase of $10.1 million, or 29.6%, compared with the same period of 2007. The net interest margin expanded 44 basis points to 3.18%. The improvements in both periods were due primarily to improvements in asset mix. For the fourth quarter, the ratio of loans to earning assets rose from 80.9% in 2007 to 84.1% in 2008, which represents the results of our continuing strategy of replacing low-yielding securities with higher yielding loans. On a linked quarter basis (compared with immediately preceding quarter), net interest income rose $334,000, or 2.9%, and the net interest margin decreased 3 basis points. The decrease in the margin was due primarily to the 1.75% decline in the prime rate on our variable rate loans. In this extraordinary environment, deposit rates have not fallen as quickly as the prime rate and certificates of deposit reprice more slowly.
Noninterest Income
Noninterest income was $3.5 million for the fourth quarter of 2008, a decrease of $2.8 million, or 44.4%, compared with the same period of 2007. The decrease was due primarily to a $2.0 million pre-tax impairment charge of an investment acquired in connection with our Community Reinvestment Act requirements. This investment is the only one of its type in our portfolio and the value was written down to $16,000. Excluding the impairment charge, noninterest income was $5.5 million, a decrease of $797,000, or 12.7%, compared with the same period of 2007. The decrease was due primarily to lower asset management fees, as assets under management declined 19.3% due to the recent disruption in the financial markets. Noninterest income for the full year ended December 31, 2008 was $22.3 million, a decrease of $8.7 million, or 28.0%, compared with the full year ended December 31, 2007. The decrease was due primarily to the aforementioned impairment charge and a decrease in mortgage banking income.
Noninterest Expense
Noninterest expense was $12.4 million for the fourth quarter of 2008, essentially unchanged compared with the same period of 2007. Increases to noninterest expense were primarily in occupancy and the reserve for unfunded loan commitments, which were offset by lower compensation expense. The increase in occupancy expense was due to a few one time items, such as the vacating of several lease locations in Florida as part of our expense reduction efforts. These leases were for loan production offices that were closed in the third quarter of 2008. Noninterest expense was $50.4 million for the full year ended December 31, 2008, a decrease of $246,000, or 0.5%, compared with the full year ended December 31, 2007. Professional fees were higher in 2008 due primarily to an arbitration matter that was resolved and the full year's effect of costs related to being a public company. These costs were offset by lower compensation expense, primarily incentive compensation, and reduced outside data processing expense due to lower negotiated pricing.
Segment Earnings
On a segment basis, our wealth management group showed net earnings of $1.2 million for the fourth quarter of 2008, essentially unchanged from the fourth quarter of 2007. Revenue in this segment was lower, due primarily to a 19.3% decrease in assets under management compared with the third quarter of 2008 as the financial markets experienced significant downward pressure in the third and fourth quarter. However, this lower revenue was offset by lower incentive compensation and other expense management initiatives. Our banking segment lost $11.1 million for the fourth quarter of 2008, compared with net earnings of $526,000 in the same period of 2007. Net interest income increased $2.5 million, but this improvement was more than offset by higher credit costs and a non-cash impairment charge on an investment security. Our insurance agency had net earnings of $90,000 in the fourth quarter of 2008, compared with $238,000 for the same period of 2007, with the decrease due primarily to a soft property and casualty market, resulting in lower commission income.
Loans
Period end loans were $1.2 billion at December 31, 2008, an increase of $121.1 million, or 11.0%, compared with December 31, 2007. We extended approximately $68.8 million in new credit during the fourth quarter to consumers, businesses and municipalities.
Deposits
Period end deposits were $1.1 billion at December 31, 2008, up $59.4 million, or 5.7%, compared with December 31, 2007, and up $62.3 million, or 6.0%, on a linked quarter basis. Noninterest-bearing deposits grew to $131.7 million at December 31, 2008, an increase of $25.3 million, or 23.8%, compared with December 31, 2007. Average deposits were $1.1 billion for the fourth quarter of 2008, an increase of $11.0 million, or 1.1%, compared with the same period of 2007. We remain focused on profitably growing deposits, which includes deepening existing customer relationships and developing new long-term relationships.
Credit Quality and Capital Ratios
The provision for loan losses was $18.6 million in the fourth quarter of 2008, an increase of $17.5 million compared with the same period of 2007. The increase in the provision reflected growth in the loan portfolio, the overall negative economic environment and higher net charge-offs during the quarter. The provision for loan losses included $10.5 million to increase the allowance for loan losses in light of weakening economic conditions and credit environment. Net charge-offs for the fourth quarter of 2008 were $8.2 million, or 2.69% of average total loans on an annualized basis, compared with $726,000, or 0.27% of average total loans for the fourth quarter of 2007. Net charge-offs included a $6.0 million charge-off of a loan to a high net worth professional. The allowance for loan losses was $25.1 million, or 2.06% of total loans at December 31, 2008 compared with $11.2 million, or 1.02% of total loans at December 31, 2007.
At December 31, 2008, nonperforming assets, including loans past due 90 days and still accruing, were $34.0 million, or 2.78% of total loans and investment in real estate, compared with $23.4 million, or 1.95% of total loans and investment in real estate at September 30, 2008, and $14.2 million, or 1.30% of total loans and investment in real estate at December 31, 2007. At December 31, 2008, nonaccrual loans were $30.5 million, compared with $21.1 million at September 30, 2008. Approximately half of this increase in nonaccrual loans related to loans to professionals and entrepreneurs in Houston. Most of the remaining increase related to commercial real estate loans, primarily in Florida. Loans 90 days past due or more and still accruing were $646,000, compared with $23,000 at September 30, 2008. The increase was due primarily to several residential construction loans in Houston. Investment in real estate was $2.8 million at December 31, 2008 compared with $2.2 million at September 30, 2008. The increase was due primarily to a residential loan in Florida.
As of December 31, 2008, our Tier 1 risk-based, total risked-based, and leverage capital ratios were 14.63%, 15.89% and 11.61%, respectively, and Encore Bank was considered "well capitalized" pursuant to regulatory capital definitions.
Conference Call
A conference call will be held on Friday, January 30, 2009 at 10:00 a.m., Central time, to discuss fourth quarter 2008 results. A question and answer session will follow the prepared remarks. Individuals may access the call by dialing 1-877-874-1588, or access the live webcast by visiting www.encorebank.com/investorrelations.shtml
About Encore Bancshares, Inc.
Encore Bancshares, Inc. is a financial holding company headquartered in Houston, Texas and offers a broad range of banking, wealth management and insurance services through Encore Bank, N.A., and its affiliated companies. Encore Bank operates 11 private client offices in the Greater Houston area and six in southwest Florida. Headquartered in Houston and with $1.6 billion in assets, Encore Bank builds relationships with professional firms, privately-owned businesses, investors and affluent individuals. Encore Bank offers a full range of business and personal banking products and services, as well as financial planning, wealth management, trust and insurance products through its trust division, Encore Trust, and its affiliated companies, Linscomb & Williams and Town & Country Insurance. Products and services offered by Encore Bank's affiliates are not FDIC insured. The Company's common stock is listed on the NASDAQ Global Market under the symbol "EBTX".
The Encore Bancshares, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4257
This press release contains certain financial information determined by methods other than in accordance with GAAP. Encore's management believes these non-GAAP financial measures provide information useful to investors in understanding our financial results and facilitates comparisons with the performance of peers within the financial services industry. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP.
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; a decline in wealth management fees; changes in the interest rate environment; changes in the availability of funds; 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 from time to time in our 2007 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 As of
the Three and for the
Months Ended Years Ended
December 31, December 31,
------------------- -------------------
2008 2007 2008 2007
-------- -------- -------- --------
Earnings Statement
Data:
Interest income $ 20,193 $ 21,240 $ 81,271 $ 81,427
Interest expense 8,251 11,809 36,997 47,252
-------- -------- -------- --------
Net interest income 11,942 9,431 44,274 34,175
Provision for loan
losses 18,648 1,176 29,175 4,029
-------- -------- -------- --------
Net interest income
after provision
for loan losses (6,706) 8,255 15,099 30,146
Noninterest income 3,488 6,269 22,300 30,966
Noninterest expense 12,414 12,367 50,361 50,607
-------- -------- -------- --------
Net earnings (loss)
before income
taxes (15,632) 2,157 (12,962) 10,505
Income tax expense
(benefit) (5,679) 454 (4,888) 3,121
-------- -------- -------- --------
Net earnings (loss) $ (9,953) $ 1,703 $ (8,074) $ 7,384
======== ======== ======== ========
Earnings (loss)
available to common
shareholders* $(10,119) $ 1,703 $ (8,240) $ 7,384
======== ======== ======== ========
Common Share Data:
Basic earnings
(loss) per share $ (1.02) $ 0.17 $ (0.83) $ 0.86
Diluted earnings
(loss) per share (1.02) 0.16 (0.83) 0.79
Book value per share 15.07 15.56 15.07 15.56
Tangible book value
per share 11.76 12.13 11.76 12.13
Average common
shares outstanding 9,897 9,808 9,881 8,576
Diluted average
common shares
outstanding 9,897 10,661 9,881 9,296
Shares outstanding
at end of period 10,241 10,124 10,241 10,124
Selected Performance
Ratios:
Return on average
assets (2.60)% 0.48% (0.54)% 0.55%
Return on average
common equity** (25.03)% 4.33% (5.13)% 5.71%
Return on average
tangible common
equity** (31.77)% 5.57% (6.53)% 7.84%
Net interest margin 3.31% 2.85% 3.18% 2.74%
Efficiency ratio 70.21% 77.44% 72.36% 76.19%
Noninterest income
to total revenue 22.61% 39.93% 33.50% 47.54%
* Net earnings (loss) after deducting preferred dividends. The
shares of preferred stock were issued on December 5, 2008.
** Using earnings (loss) available to common shareholders.
Encore Bancshares, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands, except per share data)
Dec 31, Sept 30, June 30, March 31, Dec 31,
2008 2008 2008 2008 2007
---------- ---------- ---------- ---------- ----------
ASSETS
Cash and
due from
banks $ 23,044 $ 21,005 $ 21,954 $ 16,608 $ 18,817
Interest-
bearing
deposits
in banks 91,459 13,471 28,297 40,328 18,581
Federal
funds
sold and
other 3,549 5,562 10,716 58,769 41,017
---------- ---------- ---------- ---------- ----------
Cash and
cash
equival-
ents 118,052 40,038 60,967 115,705 78,415
Securities
available
-for-
sale, at
estimated
fair
value 78,816 57,077 41,508 12,108 12,207
Securities
held-to-
maturity,
at
amortized
cost 95,875 100,329 107,424 123,133 134,056
Mortgages
held-for
-sale 150 448 -- 1,928 1,396
Loans
receiv-
able 1,218,404 1,198,445 1,169,151 1,156,501 1,097,268
Allowance
for loan
losses (25,105) (14,620) (12,054) (11,603) (11,161)
---------- ---------- ---------- ---------- ----------
Net loans
receiv-
able 1,193,299 1,183,825 1,157,097 1,144,898 1,086,107
Federal
Home Loan
Bank of
Dallas
stock,
at cost 9,534 10,513 7,943 6,987 5,880
Investment
in real
estate 2,781 2,215 2,063 2,078 835
Premises
and
equipment,
net 17,362 17,688 17,050 16,789 16,831
Goodwill 27,873 27,975 27,975 27,969 27,942
Other
intangible
assets,
net 6,031 6,218 6,406 6,592 6,780
Cash
surrender
value of
life
insurance
policies 14,686 14,539 14,398 14,256 14,091
Accrued
interest
receivable
and other
assets 23,385 17,358 17,882 16,183 16,657
---------- ---------- ---------- ---------- ----------
$1,587,844 $1,478,223 $1,460,713 $1,488,626 $1,401,197
========== ========== ========== ========== ==========
LIABILITIES
AND SHARE-
HOLDERS'
EQUITY
Deposits:
Non-
interest
-bear-
ing $ 131,709 $ 121,100 $ 123,594 $ 129,983 $ 106,382
Interest
-bearing 969,088 917,379 931,149 981,164 934,992
---------- ---------- ---------- ---------- ----------
Total
depo-
sits 1,100,797 1,038,479 1,054,743 1,111,147 1,041,374
Borrowings
and
repurchase
agreements 272,026 249,426 212,257 188,845 173,395
Junior
sub-
ordinated
debentures 20,619 20,619 20,619 20,619 20,619
Accrued
interest
payable
and other
liabil-
ities 8,660 8,690 12,882 8,604 8,330
---------- ---------- ---------- ---------- ----------
Total
liabil-
ities 1,402,102 1,317,214 1,300,501 1,329,215 1,243,718
Commit-
ments and
conting-
encies -- -- -- -- --
Share-
holders'
equity 185,742 161,009 160,212 159,411 157,479
---------- ---------- ---------- ---------- ----------
$1,587,844 $1,478,223 $1,460,713 $1,488,626 $1,401,197
========== ========== ========== ========== ==========
Ratios and
Per Share
Data:
Leverage
ratio* 11.61% 10.18% 10.07% 10.31% 10.47%
Tier 1
risk-
based
capital
ratio* 14.63% 12.58% 12.82% 12.91% 13.59%
Total risk
-based
capital
ratio* 15.89% 13.87% 13.87% 13.94% 14.65%
Book value
per
share $ 15.07 $ 15.73 $ 15.65 $ 15.70 $ 15.56
Tangible
book
value per
share 11.76 12.39 12.30 12.30 12.13
Tangible
common
equity to
tangible
assets 7.75% 8.78% 8.82% 8.59% 8.98%
* Estimated at December 31, 2008.
Encore Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited, amounts in thousands, except per share data)
Three Months Ended
------------------------------------------------
Dec 31, Sept 30, June 30, March 31, Dec 31,
2008 2008 2008 2008 2007
-------- -------- -------- -------- --------
Interest income:
Loans, including
fees $ 18,394 $ 18,738 $ 18,238 $ 18,378 $ 18,536
Mortgages held-for
-sale 9 13 25 32 64
Securities 1,585 1,469 1,250 1,319 1,442
Federal funds sold
and other 205 261 552 803 1,198
-------- -------- -------- -------- --------
Total interest
income 20,193 20,481 20,065 20,532 21,240
Interest expense:
Deposits 5,748 6,458 7,123 8,542 9,731
Borrowings and
repurchase
agreements 2,174 2,085 1,767 1,755 1,710
Junior subordinated
debentures 329 330 330 356 368
-------- -------- -------- -------- --------
Total interest
expense 8,251 8,873 9,220 10,653 11,809
-------- -------- -------- -------- --------
Net interest
income 11,942 11,608 10,845 9,879 9,431
Provision for loan
losses 18,648 5,249 3,777 1,501 1,176
-------- -------- -------- -------- --------
Net interest
income after
provision for
loan losses (6,706) 6,359 7,068 8,378 8,255
Noninterest income:
Trust and
investment
management fees 3,985 4,277 4,660 4,407 4,533
Mortgage banking 34 28 135 54 95
Insurance
commissions and
fees 1,184 1,385 1,385 1,727 1,217
Real estate
operations (50) (103) (452) 55 63
Net loss on sale of
available-for-sale
securities (1) (2) -- -- --
Impairment write
down on securities (1,984) -- -- -- --
Other 320 390 432 434 361
-------- -------- -------- -------- --------
Total noninterest
income 3,488 5,975 6,160 6,677 6,269
Noninterest expense:
Compensation 6,781 6,991 7,467 8,078 7,081
Occupancy 1,645 1,477 1,485 1,438 1,428
Equipment 448 494 487 531 553
Advertising and
promotion 232 187 219 204 223
Outside data
processing 797 762 717 694 883
Professional fees 904 671 739 1,156 797
Intangible
amortization 187 187 188 187 209
Loss on early debt
extinguishment -- -- -- -- --
Other 1,420 1,304 1,295 989 1,193
-------- -------- -------- -------- --------
Total noninterest
expense 12,414 12,073 12,597 13,277 12,367
-------- -------- -------- -------- --------
Net earnings
(loss) before
income taxes (15,632) 261 631 1,778 2,157
Income tax expense
(benefit) (5,679) 33 150 608 454
-------- -------- -------- -------- --------
Net earnings (loss) $ (9,953) $ 228 $ 481 $ 1,170 $ 1,703
======== ======== ======== ======== ========
Earnings (loss)
available to common
shareholders $(10,119) $ 228 $ 481 $ 1,170 $ 1,703
======== ======== ======== ======== ========
Earnings (loss) per
common share:
Basic $ (1.02) $ 0.02 $ 0.05 $ 0.12 $ 0.17
Diluted (1.02) 0.02 0.04 0.11 0.16
Average common
shares outstanding 9,897 9,895 9,886 9,846 9,808
Diluted average
common shares
outstanding 9,897 10,771 10,780 10,714 10,661
Years Ended
December 31,
-------------------
2008 2007
-------- --------
Interest income:
Loans, including fees $ 73,748 $ 67,999
Mortgages held-for-sale 79 3,733
Securities 5,623 6,923
Federal funds sold and other 1,821 2,772
-------- --------
Total interest income 81,271 81,427
Interest expense:
Deposits 27,871 38,659
Borrowings and repurchase agreements 7,781 7,029
Junior subordinated debentures 1,345 1,564
-------- --------
Total interest expense 36,997 47,252
-------- --------
Net interest income 44,274 34,175
Provision for loan losses 29,175 4,029
-------- --------
Net interest income after provision for loan
losses 15,099 30,146
Noninterest income:
Trust and investment management fees 17,329 17,546
Mortgage banking 251 5,506
Insurance commissions and fees 5,681 5,942
Real estate operations (550) 366
Net loss on sale of available-for-sale
securities (3) (181)
Impairment write down on securities (1,984) --
Other 1,576 1,787
-------- --------
Total noninterest income 22,300 30,966
Noninterest expense:
Compensation 29,317 30,117
Occupancy 6,045 5,764
Equipment 1,960 2,076
Advertising and promotion 842 1,018
Outside data processing 2,970 3,479
Professional fees 3,470 2,046
Intangible amortization 749 838
Loss on early debt extinguishment -- 391
Other 5,008 4,878
-------- --------
Total noninterest expense 50,361 50,607
-------- --------
Net earnings (loss) before income taxes (12,962) 10,505
Income tax expense (benefit) (4,888) 3,121
-------- --------
Net earnings (loss) $ (8,074) $ 7,384
======== ========
Earnings (loss) available to common
shareholders $ (8,240) $ 7,384
======== ========
Earnings (loss) per common share:
Basic $ (0.83) $ 0.86
Diluted (0.83) 0.79
Average common shares outstanding 9,881 8,576
Diluted average common shares outstanding 9,881 9,296
Encore Bancshares, Inc. and Subsidiaries
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands)
Three Months Ended
------------------------------------------------------
Dec 31, Sept 30, June 30, March 31, Dec 31,
2008 2008 2008 2008 2007
---------- ---------- ---------- ---------- ----------
Assets:
Interest-
earning
assets:
Loans $1,205,310 $1,186,606 $1,170,959 $1,119,439 $1,060,927
Mortgages
held-for-
sale 405 596 1,151 1,465 2,693
Securities 162,221 156,354 139,510 142,098 148,912
Federal funds
sold and
other 66,057 40,128 82,841 89,419 98,789
---------- ---------- ---------- ---------- ----------
Total
interest-
earning
assets 1,433,993 1,383,684 1,394,461 1,352,421 1,311,321
Less:
Allowance for
loan losses (14,275) (12,630) (11,526) (11,178) (10,754)
Noninterest-
earning
assets 102,341 108,224 103,918 102,266 101,783
---------- ---------- ---------- ---------- ----------
Total assets $1,522,059 $1,479,278 $1,486,853 $1,443,509 $1,402,350
========== ========== ========== ========== ==========
Liabilities
and
shareholders'
equity:
Interest-
bearing
liabilities:
Interest
checking $ 179,797 $ 192,424 $ 194,973 $ 182,483 $ 169,823
Money market
and savings 244,195 283,130 307,047 333,241 359,217
Time
deposits 495,880 448,983 466,199 434,597 399,224
---------- ---------- ---------- ---------- ----------
Total
interest-
bearing
deposits 919,872 924,537 968,219 950,321 928,264
Borrowings
and
repurchase
agreements 267,081 240,104 202,229 193,855 170,141
Junior
subordinated
debentures 20,619 20,619 20,619 20,619 20,619
---------- ---------- ---------- ---------- ----------
Total
interest-
bearing
liabilities 1,207,572 1,185,260 1,191,067 1,164,795 1,119,024
---------- ---------- ---------- ---------- ----------
Noninterest-
bearing
liabilities:
Noninterest-
bearing
deposits 133,226 119,024 123,453 106,905 113,849
Other
liabilities 11,244 12,186 12,015 13,313 13,428
---------- ---------- ---------- ---------- ----------
Total
liabilities 1,352,042 1,316,470 1,326,535 1,285,013 1,246,301
Shareholders'
equity 170,017 162,808 160,318 158,496 156,049
---------- ---------- ---------- ---------- ----------
Total
liabilities
and
shareholders'
equity $1,522,059 $1,479,278 $1,486,853 $1,443,509 $1,402,350
========== ========== ========== ========== ==========
Encore Bancshares, Inc. and Subsidiaries
SELECTED FINANCIAL DATA
(Unaudited, dollars in thousands)
Loan Dec 31, Sept 30, June 30, March 31, Dec 31,
Portfolio: 2008 2008 2008 2008 2007
---------- ---------- ---------- ---------- ----------
Commercial:
Commercial $ 135,534 $ 130,484 $ 127,639 $ 142,259 $ 127,583
Commercial
real estate 311,909 305,570 298,562 291,543 277,047
Real estate
construction 95,668 96,450 91,371 97,807 100,975
---------- ---------- ---------- ---------- ----------
Total
commercial 543,111 532,504 517,572 531,609 505,605
Consumer:
Residential
real estate
first lien 241,969 247,765 256,201 264,445 271,346
Residential
real estate
second lien 302,141 291,933 269,409 234,623 195,583
Home equity
lines 82,555 79,888 79,913 78,860 79,023
Consumer
installment
- indirect 14,409 16,461 18,806 21,917 25,262
Consumer other 34,219 29,894 27,250 25,047 20,449
---------- ---------- ---------- ---------- ----------
Total
consumer 675,293 665,941 651,579 624,892 591,663
---------- ---------- ---------- ---------- ----------
Total loans
receivable $1,218,404 $1,198,445 $1,169,151 $1,156,501 $1,097,268
========== ========== ========== ========== ==========
Nonperforming
Assets:
Nonaccrual
loans $ 30,531 $ 21,142 $ 12,118 $ 14,131 $ 11,208
Accruing loans
past due 90
days or more 646 23 240 283 2,183
Restructured
loans* -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total
non-
performing
loans 31,177 21,165 12,358 14,414 13,391
---------- ---------- ---------- ---------- ----------
Investment in
real estate 2,781 2,215 2,063 2,078 835
---------- ---------- ---------- ---------- ----------
Total
non-
performing
assets $ 33,958 $ 23,380 $ 14,421 $ 16,492 $ 14,226
========== ========== ========== ========== ==========
Asset Quality
Ratios:
Nonperforming
assets to
total loans
and
investment in
real estate 2.78% 1.95% 1.23% 1.42% 1.30%
Net charge-
offs to
average loans 2.69% 0.90% 1.14% 0.38% 0.27%
Allowance for
loan losses
to period end
loans 2.06% 1.22% 1.03% 1.00% 1.02%
Allowance for
loan losses
to non-
performing
loans 80.52% 69.08% 97.54% 80.50% 83.35%
Deposits:
Noninterest-
bearing
deposits $ 131,709 $ 121,100 $ 123,594 $ 129,983 $ 106,382
Interest
checking 197,384 182,456 186,902 190,633 179,486
Money market
and savings 252,571 268,969 292,631 338,386 345,066
Time deposits
less than
$100,000 188,302 192,603 198,603 201,735 193,900
---------- ---------- ---------- ---------- ----------
Core deposits 769,966 765,128 801,730 860,737 824,834
---------- ---------- ---------- ---------- ----------
Time deposits
$100,000 and
greater 274,903 245,018 239,556 233,462 201,932
Brokered
deposits 55,928 28,333 13,457 16,948 14,608
---------- ---------- ---------- ---------- ----------
Total
deposits $1,100,797 $1,038,479 $1,054,743 $1,111,147 $1,041,374
========== ========== ========== ========== ==========
Assets Under
Management $2,248,047 $2,607,702 $2,736,790 $2,737,603 $2,784,617
========== ========== ========== ========== ==========
* All troubled debt restructurings are included in nonaccrual loans.
Encore Bancshares, Inc. and Subsidiaries
ALLOWANCE FOR LOAN LOSSES
(Unaudited, dollars in thousands)
Three Months Ended
-------------------------------------------
Dec 31, Sept 30, June 30, March 31, Dec 31,
2008 2008 2008 2008 2007
------- ------- ------- ------- -------
Allowance for loan
losses at beginning of
quarter $14,620 $12,054 $11,603 $11,161 $10,711
Charge-offs:
Commercial:
Commercial (5,950) (301) (2,119) (231) (20)
Commercial real estate (751) (407) (289) (80) --
Real estate
construction (408) (356) (57) (9) (79)
------- ------- ------- ------- -------
Total commercial (7,109) (1,064) (2,465) (320) (99)
------- ------- ------- ------- -------
Consumer:
Residential real estate
first lien (142) (256) (193) (43) (66)
Residential real estate
second lien (378) (417) (151) (377) (44)
Home equity lines (477) (831) (463) (42) (299)
Consumer installment -
indirect (265) (254) (200) (297) (360)
Consumer other (23) (23) (5) (29) (45)
------- ------- ------- ------- -------
Total consumer (1,285) (1,781) (1,012) (788) (814)
------- ------- ------- ------- -------
Total charge-offs (8,394) (2,845) (3,477) (1,108) (913)
------- ------- ------- ------- -------
Recoveries:
Commercial:
Commercial 111 8 9 11 40
Commercial real estate -- -- 6 -- --
Real estate
construction -- -- -- -- --
------- ------- ------- ------- -------
Total commercial 111 8 15 11 40
------- ------- ------- ------- -------
Consumer:
Residential real estate
first lien 18 3 19 1 22
Residential real estate
second lien 71 54 3 2 --
Home equity lines 3 4 -- 2 --
Consumer installment -
indirect 15 81 37 6 109
Consumer other 13 12 77 27 16
------- ------- ------- ------- -------
Total consumer 120 154 136 38 147
------- ------- ------- ------- -------
Total recoveries 231 162 151 49 187
------- ------- ------- ------- -------
Net charge-offs (8,163) (2,683) (3,326) (1,059) (726)
------- ------- ------- ------- -------
Provision for loan
losses 18,648 5,249 3,777 1,501 1,176
------- ------- ------- ------- -------
Allowance for loan
losses at end of
quarter $25,105 $14,620 $12,054 $11,603 $11,161
======= ======= ======= ======= =======
Encore Bancshares, Inc. and Subsidiaries
SEGMENT OPERATIONS
(Unaudited, dollars in thousands)
As of and for the Three Months Ended
----------------------------------------------------------
Dec 31, Sept 30, June 30, March 31, Dec 31,
2008 2008 2008 2008 2007
---------- ---------- ---------- ---------- ----------
Banking
-------
Net
interest
income $ 12,223 $ 11,871 $ 11,116 $ 10,130 $ 9,674
Provision
for loan
losses 18,648 5,249 3,777 1,501 1,176
Non-
interest
income (1,669) 300 66 519 509
Non-
interest
expense 9,234 7,988 8,823 9,103 8,378
---------- ---------- ---------- ---------- ----------
Earnings
(loss)
before
income
taxes (17,328) (1,066) (1,418) 45 629
Income
tax
expense
(benefit) (6,251) (446) (586) (15) 103
---------- ---------- ---------- ---------- ----------
Net
earnings
(loss) $ (11,077) $ (620) $ (832) $ 60 $ 526
========== ========== ========== ========== ==========
Total
assets
at
quarter
end $1,592,933 $1,481,311 $1,472,045 $1,500,462 $1,411,934
========== ========== ========== ========== ==========
Wealth
Management
-----------
Net
interest
income $ 44 $ 51 $ 37 $ 64 $ 89
Non-
interest
income 3,985 4,277 4,660 4,407 4,533
Non-
interest
expense 2,179 3,083 2,725 3,070 3,042
---------- ---------- ---------- ---------- ----------
Earnings
before
income
taxes 1,850 1,245 1,972 1,401 1,580
Income
tax
expense 606 451 709 504 460
---------- ---------- ---------- ---------- ----------
Net
earnings $ 1,244 $ 794 $ 1,263 $ 897 $ 1,120
========== ========== ========== ========== ==========
Total
assets
at
quarter
end $ 47,879 $ 49,263 $ 48,146 $ 47,444 $ 46,270
========== ========== ========== ========== ==========
Insurance
---------
Net
interest
income $ 4 $ 16 $ 22 $ 41 $ 36
Non-
interest
income 1,172 1,398 1,458 1,732 1,222
Non-
interest
expense 1,001 1,002 1,049 1,104 947
---------- ---------- ---------- ---------- ----------
Earnings
before
income
taxes 175 412 431 669 311
Income
tax
expense 85 147 154 240 73
---------- ---------- ---------- ---------- ----------
Net
earnings $ 90 $ 265 $ 277 $ 429 $ 238
========== ========== ========== ========== ==========
Total
assets
at
quarter
end $ 6,738 $ 6,997 $ 13,188 $ 10,143 $ 9,242
========== ========== ========== ========== ==========
Other
-----
Net
interest
expense $ (329) $ (330) $ (330) $ (356) $ (368)
Non-
interest
income -- -- (24) 19 5
Non-
interest
expense -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Loss
before
income
taxes (329) (330) (354) (337) (363)
Income
tax
benefit (119) (119) (127) (121) (182)
---------- ---------- ---------- ---------- ----------
Net loss $ (210) $ (211) $ (227) $ (216) $ (181)
========== ========== ========== ========== ==========
Total
assets
at
quarter
end $ (59,706) $ (59,348) $ (72,666) $ (69,423) $ (66,249)
========== ========== ========== ========== ==========
Consolidated
------------
Net
interest
income $ 11,942 $ 11,608 $ 10,845 $ 9,879 $ 9,431
Provision
for loan
losses 18,648 5,249 3,777 1,501 1,176
Non-
interest
income 3,488 5,975 6,160 6,677 6,269
Non-
interest
expense 12,414 12,073 12,597 13,277 12,367
---------- ---------- ---------- ---------- ----------
Earnings
(loss)
before
income
taxes (15,632) 261 631 1,778 2,157
Income
tax
expense
(benefit) (5,679) 33 150 608 454
---------- ---------- ---------- ---------- ----------
Net
earnings
(loss) $ (9,953) $ 228 $ 481 $ 1,170 $ 1,703
========== ========== ========== ========== ==========
Total
assets
at
quarter
end $1,587,844 $1,478,223 $1,460,713 $1,488,626 $1,401,197
========== ========== ========== ========== ==========
As of and for the Years
Ended December 31,
--------------------------
2008 2007
----------- -----------
Banking
Net interest income $ 45,340 $ 35,282
Provision for loan losses 29,175 4,029
Noninterest income (784) 7,356
Noninterest expense 35,148 34,022
----------- -----------
Earnings (loss) before income taxes (19,767) 4,587
Income tax expense (benefit) (7,298) 1,130
----------- -----------
Net earnings (loss) $ (12,469) $ 3,457
=========== ===========
Total assets at quarter end $ 1,592,933 $ 1,411,934
=========== ===========
Wealth Management
Net interest income $ 196 $ 321
Noninterest income 17,329 17,546
Noninterest expense 11,057 12,194
----------- -----------
Earnings before income taxes 6,468 5,673
Income tax expense 2,270 1,941
----------- -----------
Net earnings $ 4,198 $ 3,732
=========== ===========
Total assets at quarter end $ 47,879 $ 46,270
=========== ===========
Insurance
Net interest income $ 83 $ 136
Noninterest income 5,760 6,035
Noninterest expense 4,156 4,000
----------- -----------
Earnings before income taxes 1,687 2,171
Income tax expense 626 744
----------- -----------
Net earnings $ 1,061 $ 1,427
=========== ===========
Total assets at quarter end $ 6,738 $ 9,242
=========== ===========
Other
Net interest expense $ (1,345) $ (1,564)
Noninterest income (5) 29
Noninterest expense -- 391
----------- -----------
Loss before income taxes (1,350) (1,926)
Income tax benefit (486) (694)
----------- -----------
Net loss $ (864) $ (1,232)
=========== ===========
Total assets at quarter end $ (59,706) $ (66,249)
=========== ===========
Consolidated
Net interest income $ 44,274 $ 34,175
Provision for loan losses 29,175 4,029
Noninterest income 22,300 30,966
Noninterest expense 50,361 50,607
----------- -----------
Earnings (loss) before income taxes (12,962) 10,505
Income tax expense (benefit) (4,888) 3,121
----------- -----------
Net earnings (loss) $ (8,074) $ 7,384
=========== ===========
Total assets at quarter end $ 1,587,844 $ 1,401,197
=========== ===========
Encore Bancshares, Inc. and Subsidiaries
YIELD ANALYSIS
(Unaudited, dollars in thousands)
Three Months Ended December 31,
--------------------------------------------------------
2008 2007
--------------------------------------------------------
Average Average
Outstan- Interest Average Outstan- Interest Average
ding Income/ Yield/ ding Income/ Yield/
Balance Expense Rate Balance Expense Rate
---------- -------- ------- ---------- -------- -------
Assets:
Interest-
earning
assets:
Loans $1,205,310 $ 18,394 6.07% $1,060,927 $ 18,536 6.93%
Mortgages
held-for-
sale 405 9 8.84% 2,693 64 9.43%
Securities 162,221 1,585 3.89% 148,912 1,442 3.84%
Federal funds
sold and
other 66,057 205 1.23% 98,789 1,198 4.81%
---------- -------- ---------- --------
Total
interest-
earning
assets 1,433,993 20,193 5.60% 1,311,321 21,240 6.43%
Less:
Allowance for
loan losses (14,275) (10,754)
Noninterest-
earning
assets 102,341 101,783
---------- ----------
Total
assets $1,522,059 $1,402,350
========== ==========
Liabilities
and
shareholders'
equity:
Interest-
bearing
liabilities:
Interest
checking $ 179,797 $ 311 0.69% $ 169,823 $ 1,216 2.84%
Money market
and savings 244,195 799 1.30% 359,217 3,553 3.92%
Time
deposits 495,880 4,638 3.72% 399,224 4,962 4.93%
---------- -------- ---------- --------
Total
interest-
bearing
deposits 919,872 5,748 2.49% 928,264 9,731 4.16%
Borrowings
and
repurchase
agreements 267,081 2,174 3.24% 170,141 1,710 3.99%
Junior
subordinated
debentures 20,619 329 6.35% 20,619 368 7.08%
---------- -------- ---------- --------
Total
interest-
bearing
liabili-
ties 1,207,572 8,251 2.72% 1,119,024 11,809 4.19%
---------- -------- ---------- --------
Noninterest-
bearing
liabilities:
Noninterest-
bearing
deposits 133,226 113,849
Other
liabilities 11,244 13,428
---------- ----------
Total
liabilities 1,352,042 1,246,301
Shareholders'
equity 170,017 156,049
---------- ----------
Total
liabilities
and
shareholders'
equity $1,522,059 $1,402,350
========== ==========
Net interest
income $ 11,942 $ 9,431
======== ========
Net interest
spread 2.88% 2.24%
Net interest
margin 3.31% 2.85%
Encore Bancshares, Inc. and Subsidiaries
YIELD ANALYSIS
(Unaudited, dollars in thousands)
Years Ended December 31,
--------------------------------------------------------
2008 2007
--------------------------------------------------------
Average Average
Outstan- Interest Average Outstan- Interest Average
ding Income/ Yield/ ding Income/ Yield/
Balance Expense Rate Balance Expense Rate
---------- -------- ------- ---------- -------- -------
Assets:
Interest-
earning
assets:
Loans $1,170,717 $ 73,748 6.30% $ 972,760 $ 67,999 6.99%
Mortgages
held-for-
sale 902 79 8.76% 42,379 3,733 8.81%
Securities 150,096 5,623 3.75% 179,767 6,923 3.85%
Federal funds
sold and
other 69,521 1,821 2.62% 53,880 2,772 5.14%
---------- -------- ---------- --------
Total
interest-
earning
assets 1,391,236 81,271 5.84% 1,248,786 81,427 6.52%
Less:
Allowance for
loan losses (12,408) (10,069)
Noninterest-
earning
assets 104,193 102,388
---------- ----------
Total
assets $1,483,021 $1,341,105
========== ==========
Liabilities,
shareholders'
equity and
puttable
common stock:
Interest-
bearing
liabilities:
Interest
checking $ 187,412 $ 2,515 1.34% $ 172,701 $ 5,131 2.97%
Money market
and savings 291,749 5,759 1.97% 348,567 14,756 4.23%
Time deposits 461,475 19,597 4.25% 380,847 18,772 4.93%
---------- -------- ---------- --------
Total
interest-
bearing
deposits 940,636 27,871 2.96% 902,115 38,659 4.29%
Borrowings
and
repurchase
agreements 225,969 7,781 3.44% 165,647 7,029 4.24%
Junior
subordinated
debentures 20,619 1,345 6.52% 20,712 1,564 7.55%
---------- -------- ---------- --------
Total
interest-
bearing
liabilities 1,187,224 36,997 3.12% 1,088,474 47,252 4.34%
---------- -------- ---------- --------
Noninterest-
bearing
liabilities:
Noninterest-
bearing
deposits 120,682 109,448
Other
liabilities 12,186 13,867
---------- ----------
Total
liabilities 1,320,092 1,211,789
Shareholders'
equity and
puttable
common stock 162,929 129,316
---------- ----------
Total
liabilities,
shareholders'
equity and
puttable
common stock $1,483,021 $1,341,105
========== ==========
Net interest
income $ 44,274 $ 34,175
======== ========
Net interest
spread 2.72% 2.18%
Net interest
margin 3.18% 2.74%