Wilshire Bancorp Reports Financial Results for Second Quarter 2010

LOS ANGELES, July 27, 2010 (GLOBE NEWSWIRE) -- Wilshire Bancorp, Inc. (Nasdaq:WIBC), the holding company for Wilshire State Bank, today reported a net loss of $4.6 million, or ($0.15) per basic and diluted common share, for the quarter ended June 30, 2010. This compares to net income of $12.8 million, or $0.44 per basic and diluted common share, for the same period of the prior year. Net loss for the second quarter of 2010 was partly attributable to provisions for losses on loans of $32.2 million. Of this amount, $13.4 million resulted from the sale of approximately $48.0 million in non-performing and delinquent loans.

"Our second quarter results reflect the increasing impact of the weak economy on our commercial real estate portfolio and our aggressive actions to reduce our problem assets," said Ms. Joanne Kim, President and CEO of Wilshire Bancorp. "We were able to dispose of a large number of problem loans with only a small impact to our capital ratios. We will continue our proactive approach to managing credit quality including additional sales of non-performing and delinquent loans if problem assets remain elevated in the near future."

"The core earnings power of the Company continues to be strengthened as evidenced by the Company's increased net interest income before provision for loan losses. Our net interest income before provision in the second quarter of 2010 increased 39% over the same period of the prior year. The large increase was a result of strong interest income growth coupled with declining interest expense. We expect these positive operating trends to continue in the second half of the year, which will help us accelerate our return to profitability as we better absorb our credit costs going forward," said Ms. Kim.

SECOND QUARTER 2010 SUMMARY:

• Increase in net interest income -- Net interest income increased 39% year-over-year.
• Expanding net interest margin -- Net interest margin increased six basis points from the prior quarter, and by 38 basis points from the prior year.
• Decline in non-accrual loans -- Non-accrual loans declined to $83.1 million, or 3.41% of gross loans, for quarter ended June 30, 2010, from $105.0 million, or 4.34% of gross loans, on March 31, 2010.
• Increase in allowance for loan losses -- The allowance for loan losses as a percentage of gross loans was strengthened to 3.72% on June 30, 2010, from 3.29% on March 31, 2010 and our allowance as a percentage of gross legacy Wilshire loans (all loans excluding those acquired in the Mirae Bank acquisition) increased to 4.11% from 3.66% in the same period.
• Strong capital position -- Total risk-based capital ratio remained strong at 15.17% as of June 30, 2010. Tangible common equity per common share was $6.74 on June 30, 2010.

CREDIT QUALITY

During the second quarter of 2010, the Company sold 18 non-performing and delinquent loans with a carrying balance of approximately $48.0 million at an approximate 15.7% average weighted discount to their carrying values. These loans consisted of $42.9 million in commercial real estate loans and $5.1 million in commercial loans. Of the commercial real estate loans sold, loans secured by multifamily residential properties accounted for $16.7 million or 34.8%, of total non-performing and delinquent loans sold, loans secured by carwash and gas stations totaled $10.0 million or 20.9%, and loans secured by hotels totaled $6.7 million or 13.9%. Non-performing loans totaled $29.3 million or 61.2% of the total sold, and two loans totaling $18.6 million or 38.8% were delinquent loans past due 61 and 54 days, respectively, on June 30, 2010. Legacy Wilshire loans accounted for the bulk of the loans at $43.6 million or 90.9% of loans sold.

For the second quarter of 2010, the Company recorded a provision for losses on loans and loan commitments of $32.2 million in the second quarter of 2010 compared to $17.0 million in the first quarter of 2010. Approximately $13.4 million of the second quarter provision for loan losses was attributable to the sale of loans discussed above. $7.3 million of the $13.4 million in provision for loan losses resulted from charge-offs from the loan sale transactions, and the remaining $6.1 million was recorded as general valuation allowance to reflect the overall inherent credit risk in the remaining loan portfolio after the sale.

The allowance for loan losses increased to $91.4 million, or 3.72% of total loans, on June 30, 2010, from $79.6 million, or 3.29% of total loans, on March 31, 2010. Allowance for loan losses as a percentage of legacy Wilshire loans increased 45 basis points from 3.66% to 4.11% for the same period. The coverage ratio of allowance for loan losses to non-performing assets also increased from 72.42% to 101.02% from March 31, 2009 to June 30, 2010.

Non-accrual Loans

At June 30, 2010, total non-accrual loans totaled $83.1 million, or 3.41% of gross loans, compared to $105.0 million, or 4.34% of gross loans, on March 31, 2010. The decrease is primarily attributable to the sales of non-performing loans described above in addition to a decrease in the inflow of new non-accrual loans. New inflows into non-accrual loans in the second quarter of 2010 totaled $10.7 million, $3.5 million of which were "covered loans" that were added through the acquisition of Mirae Bank. Compared to the first quarter of 2010, total inflows to non-accrual status decreased by $34.9 million or 77% from $45.6 million. Loans that migrated from delinquencies to non-accrual status decreased from $36.6 million during the first quarter of 2010 to $7.9 million during the second quarter of 2010, and TDR loans that migrated to non-accrual status decreased from $8.0 million to $1.1 million for the same periods. Outflow from non-accrual status, which consists of note sales, upgraded loans, OREO (other real estate owned), charge-offs, paid-off loans, and payments received, increased from $10.0 million in the first quarter of 2010 to $32.6 million for the second quarter.

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 is a table showing "covered" and "non-covered" non-accrual loans by loan type:

Loan Delinquencies

At June 30, 2010, total loan delinquencies increased to $37.0 million from $30.5 million on March 31, 2010. However, as a percentage of gross loans, delinquencies still remained fairly low at 1.50% on June 30, 2010, compared to 1.26% on March 31, 2010. 60-89 day delinquencies increased the most from $9.9 million on March 31, 2010 to $15.8 million on June 30, 2010. Delinquencies by days past due and loan type are reflected in the tables below:

Loan Charge-offs

Net loan charge-offs for the second quarter of 2010 were $17.2 million, compared to $5.8 million in the first quarter of 2010. The increase in charge-offs was based upon updated appraisal values for commercial real estate loans, charge-off from loan sales, and write-downs from anticipated loan sale transactions. Approximately $7.3 million of the charge-offs in the second quarter of 2010 related to the sale of non-performing and delinquent loan sales discussed above.

COMMERCIAL REAL ESTATE PORTFOLIO

CRE Loan Composition

Total CRE loans on June 30, 2010 were $1.90 billion, a slight increase from $1.89 billion on March 31, 2010, and an increase of 8% from $1.76 billion on June 30, 2009. The breakdown of the CRE by property type is provided below.

The CRE loan maturity distributions are listed below:

The Company believes that overall refinance risk is limited based upon relatively low loan-to-value ratios and the fact that 88% of the CRE loan portfolio has maturities in 2011 or later.

BALANCE SHEET

Total assets were $3.43 billion on June 30, 2010, down slightly from $3.46 billion on March 31, 2010.

Total loans were $2.46 billion on June 30, 2010, compared to $2.42 billion on March 31, 2010. Total new loan origination was $186.1 million in the second quarter of 2010, compared to $87.3 million in the first quarter of 2010. All categories of loans with the exception of commercial and industrial loans increased in the second quarter of 2010.

Loan Categories

Total deposits were $2.90 billion on June 30, 2010, down slightly from $2.93 billion on March 31, 2010. As part of its strategy to reduce deposit costs, the Company discontinued its money market product promotion. This resulted in a shift of deposits out of money market accounts and into time deposits during the second quarter of 2010. Non-interest bearing demand deposits increased by $13.8 million or 3.3% to $427.8 million from the first quarter of 2010. Although core deposits decreased by 1.4% from March 31, 2010 to June 30, 2010, compared to June 30, 2009, core deposit experienced strong growth at 63.4% or $833.4 million.

During the second quarter of 2010, the Company sold $274 million in total investments for a realized gain totaling $3.7 million. The sale of investments during the second quarter was a result of management's plan to shorten the duration of the investment portfolio as interest rates are expected to increase in the future. The sale of investments resulted in an increase in cash and cash equivalents from $245.0 million on March 31, 2010 to $358.7 million on June 30, 2010. Overnight and term fed funds sold, a component of cash and cash equivalents, increased to $224.0 million on June 30, 2010 from $30.0 million on March 31, 2010. The cash and cash equivalent balance will be reduced as the Company continues to reinvest the proceeds from the sale of securities in the second quarter of 2010.

Strong Capital Ratios

Capital ratios remained strong in the second quarter of 2010 and were well in excess of "well capitalized" regulatory requirements. Based on capital levels as of June 30, 2010, the Company had excess capital to absorb future credit costs, as shown in the table below:

STATEMENT OF OPERATIONS

Net interest Income and Margin

Net interest income was $29.2 million in the second quarter of 2010, compared to $21.0 million in the same period of the prior year and $28.6 million in the previous quarter. The increase is primarily attributable to a higher level of earning assets resulting from our acquisition of the assets of Mirae Bank as well as strong organic growth.

Net interest margin was 3.71% in the second quarter of 2010, compared to 3.65% in the first quarter of 2010 and 3.33% in the second quarter of 2009. The sequential quarter increase in net interest margin is primarily attributable to a lower cost of deposits and a decrease in non-accrual loan interest income reversals. The Company's total cost of deposits declined to 1.43% in the second quarter of 2010 from 1.55% in the first quarter of 2010.

The weighted average loan yield increased by 11 basis points to 6.09% in the second quarter of 2010 from 5.98% in the first quarter of 2010. The increase in the weighted average loan yield is primarily attributable to a decrease in non-accrual loan interest income reversals. Total yield on investment securities and other earning assets decreased 51 basis points to 2.62% in the second quarter of 2010 from 3.13% in the first quarter of 2010. The decrease in total yield on investment securities and other earning assets is primarily attributable to an increase in Fed Funds Sold as the Company waits for more attractive reinvestment opportunities in the securities market before reinvesting the proceeds from the sale of the securities in the second quarter of 2010.

Non-Interest Income

Non-interest income was $9.9 million in the second quarter of 2010, compared with $28.6 million in the same period of the prior year. Non-interest income in the second quarter of 2009 was positively impacted by a $21.7 million bargain purchase gain related to the acquisition of Mirae Bank. For the quarter ending June 30, 2010, gain on sale of loans increased to $1.4 million and gain on sale of securities increased to $3.7 million from the quarter ending June 30, 2009. Other non-interest income decreased 18% from $1.9 million to $1.6 million for the same period.

On a quarter to quarter comparison, non-interest income increased 27% to $9.9 million on June 30, 2010. The increase is primarily due to gain on sale of loans, which increased from $36,000 on March 31, 2010 to $1.4 million on June 30, 2010. The increase is due to the adoption of a new accounting standard that resulted in a timing difference in which gain on sales of SBA loans are recognized not at the time of the sale, but upon expiration of recourse provisions of the sale transactions. Therefore, portions of the gain on sale of SBA loans in the first quarter of 2010 were recognized in the second quarter 2010. During the second quarter of 2010, the Company originated $32.6 million in SBA loans and sold approximately $25.2 million. Gain on sale of securities also increased $1.2 million to $3.7 million from the first to second quarter of 2010.

Non-Interest Expense

Total non-interest expense was $16.1 million in the second quarter of 2010, an increase of 15% from $14.1 million in the same period of the prior year. The increase is primarily due to growth in personnel and occupancy expenses related to an increase in professional fees which includes legal fees, accounting, and outside consulting fees. Compared to the previous quarter, non-interest expense increased 10% from $14.7 million on March 31, 2010 to $16.1 million on June 30, 2010. The quarterly increase in other non-interest expense was primarily due to increases in professional fees and expense related to other real estate owned (OREO). Together these expenses increased by $714,000 during the second quarter of 2010.

The Company's efficiency ratio in the second quarter of 2010 was 41.24%, compared to 40.42% in the first quarter of 2010 and 28.40% in the second quarter of 2009. The efficiency ratio in the second quarter of 2009 was positively impacted by the bargain purchase gain resulting from our acquisition of Mirae Bank that substantially increased revenue in the quarter.

Tax Provision

The quarter to date tax benefit for June 30, 2010 was $5.6 million compared to a tax provision of $1.3 million on March 31, 2010, and a quarterly tax provision of $9.6 million on June 30, 2009. The effective tax rate for the second quarter of 2010 was based upon the actual year-to-date income earned, and not based on the previously utilized estimated annualized income. This resulted in an increased recognition of tax benefits which increased our overall effective tax rate for the second quarter of 2010.

CONFERENCE CALL

Management will host its quarterly conference call on July 27, 2010, at 11:00 a.m. PDT (2:00 p.m. EDT). Investment professionals are invited to participate in the call by dialing 866-783-2138 (domestic number) or 857-350-1597 (international number) and entering passcode 82435882.

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.

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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.