HOUSTON, July 24, 2009 (GLOBE NEWSWIRE) -- Encore Bancshares, Inc. (Nasdaq:EBTX) today announced its financial results for the second quarter of 2009.
Earnings of $821,000 improved $340,000 compared with the second quarter of 2008
* Net earnings included a FDIC special assessment of $684,000, or
$0.04 per diluted share
* Revenue increased 1.7% to $17.8 million, including a 6.8% increase
in net interest income on a fully tax equivalent basis (TE) to
$11.6 million
* Noninterest expense, excluding the FDIC special assessment,
remained essentially unchanged
Maintained credit quality
* Nonperforming assets decreased 9.1% compared with March 31, 2009
* Allowance for loan losses was $25.2 million, or 2.19% of total loans
Maintained strong capital position
* Tier 1 capital of $174.7 million, or 15.02% tier 1 risk-based
capital ratio
* $125.5 million of tangible common equity, or $12.14 per share
* Tangible common equity ratio was 7.93%
"We are encouraged that, despite high unemployment and a continued weak economy, earnings improved and nonperforming assets declined slightly for the quarter," said James S. D'Agostino, Jr., Chairman and Chief Executive Officer. "Our strong capital position, allowance, and pre-provision, pre-tax earnings position us well in the face of continued economic uncertainty. We continue to see increased momentum in growth of low-cost deposits and attracting assets under management. The recently announced leadership additions to Encore Bank of Preston Moore as President and CEO, and Carmen Jordan, EVP and Chief Lending Officer, significantly enhance our ability to develop additional business banking."
Earnings
For the three months ended June 30, 2009, net earnings were $821,000, compared with $481,000 for the same period of 2008. Earnings per diluted common share for the second quarter of 2009 were $0.02, compared with $0.04 for the comparable period of 2008. The decrease in diluted earnings per share was due to the dividends on preferred stock issued in the fourth quarter of 2008. Results for the second quarter of 2009 include an improvement in net interest income (TE) of $736,000, or 6.8%, and a decrease in provision for loan losses of $850,000. Partly offsetting these improvements was a $639,000 increase in noninterest expense, which was due primarily to a special insurance assessment from the FDIC.
For the six months ended June 30, 2009, net earnings were $2.0 million, compared with $1.7 million for the same period of 2008. Earnings per diluted common share for the six months ended June 30, 2009 were $0.08 compared with $0.15 for the same period of 2008. Net interest income (TE) increased by $2.4 million, or 11.6%, as the net interest margin expanded 8 basis points, but was partly offset by higher credit costs and lower trust and investment management fees.
Net Interest Income
Net interest income (TE) for the second quarter of 2009 was $11.6 million, an increase of $736,000, or 6.8%, compared with the second quarter of 2008. The net interest margin (TE), however, decreased 4 basis points to 3.09%. The margin compression was due in part to greater liquidity on the balance sheet and a shift in the deposit mix as clients moved to certificates of deposit in pursuit of higher yields. On a linked quarter basis (compared with immediately preceding quarter), net interest income (TE) remained essentially unchanged, and the net interest margin (TE) contracted 4 basis points.
Noninterest Income
Noninterest income was $6.3 million for the second quarter of 2009, a decrease of $308,000, or 4.6%, compared with the same period of 2008. The decrease was due primarily to trust and investment management fees, which decreased $573,000, or 12.3%, as assets under management fell 16.0% due to the sharp drop in equity markets from the prior year. This decrease was partly offset by a $222,000 gain on sale of second mortgage loans.
Noninterest Expense
Noninterest expense was $13.7 million for the second quarter of 2009, an increase of $639,000, or 4.9%, compared with the same period of 2008. The increase was due primarily to a special FDIC assessment of $684,000, which was levied on all banks to replenish the FDIC insurance fund. In addition, professional fees increased, which were primarily related to higher legal and audit fees at the bank.
Segment Earnings
On a segment basis, our banking operation showed net earnings of $47,000 for the second quarter of 2009, an increase of $879,000 compared with the same period of 2008. Net interest income increased $610,000, or 5.5%, driven by higher earning assets. The provision for loan losses decreased $850,000, or 22.5%, due to a slight decline in nonperforming assets. Noninterest income increased $219,000 compared with the second quarter of 2008, due to higher mortgage banking income. Noninterest expense increased $316,000, or 3.4%, which was due primarily to the FDIC special assessment. Wealth management had net earnings of $701,000 for the second quarter of 2009, a decrease of $562,000, or 44.5%, compared with the same period of 2008. Revenue for this segment decreased due primarily to lower assets under management, which declined 16.0%. Expenses increased $315,000, or 11.6%, due primarily to a reversal of an accrual for a legal settlement in 2008. Our insurance agency had net earnings of $276,000 for the second quarter of 2009, essentially unchanged from the same period of 2008.
Loans
Period end loans were $1.1 billion at June 30, 2009, a decrease of $20.3 million, or 1.7%, compared with June 30, 2008. In April and June, we sold second mortgage loans totaling approximately $9.7 million.
Deposits
Period end deposits were $1.2 billion at June 30, 2009, an increase of $121.8 million, or 11.5%, compared with June 30, 2008. Noninterest-bearing deposits were $146.4 million at June 30, 2009, an increase of $22.8 million, or 18.4%, compared with June 30, 2008. Average deposits were $1.1 billion for the second quarter of 2009, an increase of $52.8 million, or 4.8%, compared with the same period of 2008.
Credit Quality and Capital Ratios
The provision for loan losses was $2.9 million for the second quarter of 2009. The decrease in provision, compared with the second quarter of 2008, resulted primarily from a slight decline in nonperforming assets for the quarter. Net charge-offs for the second quarter of 2009 were $4.4 million, or 1.51% of average total loans on an annualized basis, compared with $3.3 million, or 1.14% of average total loans on an annualized basis for the second quarter of 2008. Most of the commercial loan charge-offs resulted from loans on which we had previously recorded specific reserves. The increase in consumer loan charge-offs was primarily related to first mortgage residential loans in Florida.
At June 30, 2009, nonperforming assets were $36.6 million, or 3.16% of total loans and investment in real estate, compared with $40.2 million, or 3.40% of total loans and investment in real estate at March 31, 2009 and $14.4 million, or 1.23% of total loans and investment in real estate at June 30, 2008. At June 30, 2009, nonaccrual loans were $28.6 million, compared with $34.7 million at March 31, 2009, a decrease of $6.1 million, or 17.7%. The decrease was due primarily to a commercial loan to a trial lawyer for approximately $2.3 million that was resolved, and the repossession of properties securing a $2.4 million residential construction loan to a builder. Investment in real estate was $8.0 million at June 30, 2009, compared with $5.5 million at March 31, 2009.
As of June 30, 2009, our estimated Tier 1 risk-based, total risk-based, and leverage capital ratios were 15.02%, 16.28% and 11.22%, respectively, and Encore Bank was considered "well capitalized" pursuant to regulatory capital definitions.
Conference Call
A conference call will be held on Friday, July 24, 2009 at 10:00 a.m., Central time, to discuss second quarter 2009 results. A question and answer session will follow the prepared remarks. Individuals may access the call by dialing 1-888-339-3401, or access the live webcast by visiting https://encorebank.com/investorRelations.php
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. Specifically, Encore reviews tangible book value per share, return on average tangible common equity and the tangible common equity to tangible assets ratio for internal planning and forecasting purposes. Encore has included in this press release information relating to these non-GAAP financial measures for the applicable periods presented. Encore's management believes these non-GAAP financial measures provide information useful to investors in understanding our financial results and believes that its presentation, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. These non-GAAP measures should not be considered a substitute for operating results determined in accordance with GAAP and Encore strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.
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 As of and for
the Three Months the Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
Operations Statement Data:
Interest income $ 19,529 $ 20,065 $ 39,154 $ 40,597
Interest expense 8,071 9,220 16,235 19,873
-------- -------- -------- --------
Net interest income 11,458 10,845 22,919 20,724
Provision for loan losses 2,927 3,777 5,966 5,278
-------- -------- -------- --------
Net interest income after
provision for loan losses 8,531 7,068 16,953 15,446
Noninterest income (1) 6,327 6,635 12,431 13,284
Noninterest expense (1) 13,711 13,072 26,448 26,321
-------- -------- -------- --------
Net earnings before
income taxes 1,147 631 2,936 2,409
Income tax expense 326 150 980 758
-------- -------- -------- --------
Net earnings $ 821 $ 481 $ 1,956 $ 1,651
======== ======== ======== ========
Earnings available to common
shareholders (2) $ 267 $ 481 $ 849 $ 1,651
======== ======== ======== ========
Common Share Data:
Basic earnings per share (3) $ 0.03 $ 0.05 $ 0.08 $ 0.16
Diluted earnings per share (3) 0.02 0.04 0.08 0.15
Book value per share 15.39 15.65 15.39 15.65
Tangible book value
per share (4) 12.14 12.30 12.14 12.30
Average common shares
outstanding (3) 10,334 10,202 10,284 10,173
Diluted average common shares
outstanding (3) 11,145 10,925 11,013 10,889
Shares outstanding at
end of period 10,337 10,234 10,337 10,234
Selected Performance Ratios:
Return on average assets 0.21% 0.13% 0.25% 0.23%
Return on average common
equity (5) 0.67% 1.21% 1.08% 2.08%
Return on average tangible
common equity (4)(5) 0.85% 1.54% 1.37% 2.66%
Net interest margin (6) 3.09% 3.13% 3.11% 3.03%
Efficiency ratio (1) 76.14% 73.71% 73.86% 76.29%
Noninterest income to
total revenue (1) 35.57% 37.96% 35.17% 39.06%
(1) Prior periods adjusted to include net expenses of foreclosed real
estate in other noninterest expense.
(2) Net earnings after deducting preferred dividends. The shares of
preferred stock were issued on December 5, 2008.
(3) Prior periods adjusted to include nonvested restricted stock in
average common shares outstanding as required by EITF 03-6-1.
(4) Non-GAAP measure. See calculation of tangible common equity in
subsequent table.
(5) Using earnings available to common shareholders.
(6) On taxable-equivalent basis in 2009. Taxable-equivalent amounts
in 2008 were immaterial.
Encore Bancshares, Inc.
