HOUSTON, April 24, 2009 (GLOBE NEWSWIRE) -- Encore Bancshares, Inc. (Nasdaq:EBTX) today announced its financial results for the first quarter of 2009.
Improved earnings metrics
* Revenue of $17.3 million improved 4.5% compared with the first
quarter of 2008
* Pre-tax, pre-provision earnings grew 47.2% to $4.8 million
compared with the first quarter of 2008
* Net interest income of $11.5 million on a fully tax equivalent basis
(TE) was up 16.8% over the first quarter of 2008
* Net interest margin of 3.13% (TE) expanded 19 basis points compared
with the first quarter of 2008
Continued to grow franchise
* Loan growth of $22.6 million, or 2.0%, compared with March 31, 2008
* Noninterest bearing deposits grew $29.0 million, or 22.3% compared
with March 31, 2008
Maintained strong capital position
* Tier 1 capital of $174.0 million, or 14.83% tier 1 risk based
capital ratio
* $125.3 million of tangible common equity, or $12.24 per share
* Tangible common equity ratio increased to 8.11% from 7.94% at
December 31, 2008
Increased allowance for loan losses by $1.6 million to 2.26% of total
loans, compared with 2.06% at December 31, 2008
Extended $38.4 million in new credit to businesses and consumers
during the first quarter of 2009.
"In the first quarter of 2009, we earned $1.1 million and grew revenue and deposits, while increasing our allowance for loan losses," said James S. D'Agostino, Jr., Chairman and Chief Executive Officer. "Our strong capital and allowance position combined with our increased pre-provision pre-tax earnings, should enable us to withstand a further deterioration in economic conditions. At the same time, our experienced team continues to provide superior service to our clients, increase noninterest-bearing deposits, make sound loans, attract assets to manage, and maintain expense control, all of which provides us momentum for the future."
Earnings
For the three months ended March 31, 2009, net earnings were $1.1 million, or $0.05 per diluted common share, compared with $1.2 million, or $0.11 per diluted common share for the same period of 2008. The decrease in diluted earnings per share was due to the accrual of dividends on preferred stock which was issued in the fourth quarter of 2008. Results for the first quarter of 2009 include an improvement in net interest income (TE) of $1.7 million, or 16.8%, and a decrease in expenses of $807,000 due primarily to lower compensation expenses and professional fees. Offsetting these improvements were a $1.5 million increase in the provision for loan losses and lower noninterest income resulting from lower trust and investment management fees.
Net Interest Income
Net interest income (TE) for the first quarter of 2009 was $11.5 million, an increase of $1.7 million, or 16.8%, compared with the first quarter of 2008. The net interest margin (TE) improved 19 basis points to 3.13%. The growth in the margin was due in part to the falling rate environment as the yield on the loan portfolio fell less than the rate paid on deposits. In addition, we benefited from a $33.9 million, or 31.7%, increase in average noninterest-bearing deposits. On a linked quarter basis (compared with immediately preceding quarter), net interest income (TE) decreased $405,000, or 3.4%, and the net interest margin (TE) contracted 18 basis points. During the fourth quarter of 2008, the prime rate fell an extraordinary 1.75%, which immediately affected our variable rate loans. However, our deposits, particularly our certificates of deposit, were not able to fully capture this reduction in interest rates during the first quarter.
Noninterest Income
Noninterest income was $5.8 million for the first quarter of 2009, a decrease of $840,000, or 12.6%, compared with the same period of 2008. The decrease was due primarily to lower trust and investment management fees as assets under management fell 21.9% due to the sharp drop in equity markets. In addition, real estate operations decreased $300,000 compared with the first quarter of 2008 due primarily to taxes and legal fees.
Noninterest Expense
Noninterest expense was $12.5 million for the first quarter of 2009, a decrease of $807,000, or 6.1%, compared with the same period of 2008. The decrease was due primarily to a reduction in compensation and professional fees. The first quarter of 2008 included a $635,000 severance expense to a former executive of the bank, and $415,000 for legal fees associated with an arbitration matter that has since been resolved. Excluding these items, expenses for the first quarter of 2009 increased $243,000, or 2.0%, compared with adjusted expenses for the same period of 2008.
Segment Earnings
On a segment basis, our banking operation showed net earnings of $461,000 for the first quarter of 2009, an increase of $401,000, compared with the same period of 2008. Net interest income increased $1.6 million, or 15.9%, but this increase was largely offset by higher credit costs. Noninterest expense decreased $764,000, or 8.4%, which was due primarily to severance expense paid in 2008. Wealth management had net earnings of $446,000 for the first quarter of 2009, a decrease of $451,000, or 50.3%, compared with the same period of 2008. Revenue for this segment decreased due primarily to lower assets under management, which declined 21.9% as discussed above. Expenses were essentially flat. Our insurance agency had net earnings of $431,000 for the first quarter of 2009, essentially unchanged from the same period of 2008. Revenue decreased $38,000, or 2.2%, due primarily to a soft property and casualty market. Expenses decreased $71,000, or 6.4%, reflecting lower compensation expenses.
Loans
Period end loans were $1.2 billion at March 31, 2009, an increase of $22.6 million, or 2.0%, compared with March 31, 2008. In March, we sold a pool of approximately $4.8 million of second mortgage loans, recognizing a gain of $75,000. We extended approximately $38.4 million in new credit during the first quarter of 2009 to consumers and businesses.
Deposits
Period end deposits were $1.1 billion at March 31, 2009, an increase of $5.4 million, or 0.5%, compared with March 31, 2008. Noninterest-bearing deposits grew to $159.0 million at March 31, 2009, an increase of $29.0 million, or 22.3%, compared with March 31, 2008. Average deposits were $1.1 billion for the first quarter of 2009, an increase of $49.0 million, or 4.6%, compared with the same period of 2008.
Credit Quality and Capital Ratios
The provision for loan losses was $3.0 million for the first quarter of 2009, an increase of $1.5 million from the same period of 2008. The increase in the provision reflected the recessionary economic environment, weakness in our Florida market, and the higher net charge-offs compared with the first quarter of 2008. The provision for loan losses was $1.6 million greater than net charge-offs for the quarter, and increased our allowance for loan losses to total loans from 2.06% at December 31, 2008 to 2.26% at March 31, 2009. Net charge-offs for the first quarter of 2009 were $1.5 million, or 0.50% of average total loans on an annualized basis, compared with $1.1 million, or 0.38% of average total loans on an annualized basis for the first quarter of 2008. The increase in net charge-offs resulted primarily from consumer loans, which includes residential real estate loans.
At March 31, 2009, nonperforming assets were $40.2 million, or 3.40% of total loans and investment in real estate, compared with $34.0 million, or 2.78% of total loans and investment in real estate at December 31, 2008 and $16.5 million, or 1.42% of total loans and investment in real estate at March 31, 2008. At March 31, 2009, nonaccrual loans were $34.7 million, compared with $30.5 million at December 31, 2008. Most of this increase was due to commercial real estate loans in Florida. Investment in real estate was $5.5 million at March 31, 2009, compared with $2.8 million at December 31, 2008. The increase was due primarily to the repossession of commercial real estate property in Florida and several homes under construction in Houston.
As of March 31, 2009, our estimated Tier 1 risk-based, total risk-based, and leverage capital ratios were 14.83%, 16.09% and 11.26%, respectively, and Encore Bank was considered "well capitalized" pursuant to regulatory capital definitions.
Conference Call
A conference call will be held on Friday, April 24, 2009 at 10:00 a.m., Central time, to discuss first quarter 2009 results. A question and answer session will follow the prepared remarks. Individuals may access the call by dialing 1-877-591-4949, 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 athttp://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; changes in the interest rate environment; the continued service of key management personnel; our ability to attract, motivate and retain key employees; changes in availability of funds; general economic conditions, either nationally, regionally or in the market areas in which we operate; legislative or regulatory developments or changes in laws; changes in the securities markets and other risks that are described from time to time in our 2008 Annual Report on Form 10-K and other reports and documents filed with the Securities and Exchange Commission.
Encore Bancshares, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(Unaudited, amounts in thousands, except per share data)
As of and for the Three Months Ended
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March 31, Dec.
