LAKE OSWEGO, Ore., Oct. 16 /PRNewswire-FirstCall/ -- West Coast Bancorp today announced quarterly earnings of $8.3 million or $.52 per diluted share for the third quarter of 2007, compared to third quarter 2006 earnings of $7.9 million or $.49 per diluted share. Year-to-date earnings per diluted share growth and return on average equity, tangible, were 9% and 17%, respectively.
Three months ended September 30, (Dollars in millions, except per share data) 2007 2006 % Change Diluted Earnings Per Share $0.52 $0.49 6% Return On Average Equity 15.3% 16.6% Return On Average Equity, Tangible* 16.6% 18.2% Total Period End Loans $2,183 $1,869 17% Total Period End Deposits $2,111 $2,007 5% * Return on Average Equity, Tangible is a non-GAAP measure that we define and calculate as net income excluding intangible asset amortization, net of tax, divided by average equity less average intangible assets. See financial tables for a reconciliation to the GAAP measure.
"The continuation of strong growth in net interest and non-interest income in the third quarter of 2007, as compared to the same period a year ago, contributed to the 6% quarter over quarter growth in diluted quarterly earnings per share," said Robert D. Sznewajs, President and Chief Executive Officer. "Year-to-date 2007, as compared to the same period in 2006, the diluted earnings per share increased 9%. The quarterly and year-to-date performance results in 2007 versus the same periods in 2006 compare favorably to recent industry trends in our region."
Financial Results:
In the third quarter of 2007, total net interest income increased $3.5 million or 13% compared to the same quarter last year primarily due to 17% loan growth from September 30, 2006. The third quarter net interest spread and net interest margin remained relatively unchanged from the same quarter in 2006, as the Company was able to match higher rates on interest bearing deposits with higher yields on loans. The third quarter 2007 net interest margin of 4.94% was slightly better than anticipated due to higher than expected construction loan balances and loan fees.
Total non-interest income rose $.7 million, or 9%, year-over-year third quarter. Excluding the $.4 million merchant services contract credit received during the third quarter of 2006, total non-interest income grew 15%. See financial tables for reconciliation. Beyond slightly lower gains on sales of loans, which were impacted by lower residential mortgage market activity, the company generated broad-based fee income growth. Deposit service charges revenues grew 11% in the third quarter primarily reflecting the 11% year-over-year growth in number of transaction deposit accounts. This account growth also boosted payment system-related revenues which, adjusted for the above mentioned merchant services credit, grew 24% from the third quarter of 2006. Due to a strong equity market and investment product sales, trust and investment services revenue grew 26% from the same quarter of 2006.
Compared to the third quarter 2006, total non-interest expense increased $1.5 million or 7% in the third quarter of 2007. Approximately one-third of this growth can be attributed to additional team members and branch locations. The 27% increase in year over year third quarter payment system expense was largely due to significantly higher transaction volumes across our payment systems product offerings. Marketing expense grew 18% from third quarter 2006 due to an aggressive direct mail schedule in the most recent quarter, which we expect to extend the growth of new transaction deposit accounts in future periods.
The $2.7 million 2007 third quarter provision for loan losses increased significantly from $.6 million in the same quarter in 2006. The higher provision was due to a moderately negative trend in credit migration of the loan portfolio in the most recent quarter compared to the improving trend that occurred during the third quarter in 2006, as well as net charge-offs increasing to $.7 million from $.1 million in the same period in 2006. The ratio of net charge-offs to average loans (annualized) was 0.13% in the most recent quarter compared to 0.02% in the third quarter of 2006. Non-performing assets increased to $9.1 million or .34% of total assets on September 30, 2007, from $2.7 million or .11% on September 30, 2006, mainly due to higher non-performing 2-step residential construction loans.
As of September 30, 2007, we reclassified a portion of the allowance for loan losses and recorded a reserve for unfunded loan commitments. The amount reclassified into other liabilities was $1.0 million or .05% of total loans. For purposes of comparison to prior periods, the combined allowance for loan losses and reserve for unfunded commitments, defined as the total allowance for credit losses, was 1.31% as a percentage of total loans at September 30, 2007. See financial tables for details. This reclassification had no impact on our provision for loan losses expense. Any future expense related to a provision for unfunded commitments will be recorded in other non-interest expense.
Reflecting a slowing trend in risk-weighted asset growth, the Company repurchased 175,000 shares during the third quarter of 2007. As of September 30, 2007, approximately 1.1 million shares remained available for repurchase under the Company's recently announced share repurchase program. The Company also increased its quarterly cash dividend payable on October 31, 2007, 12.5% to 13.5 cents.
Other:
The Company will hold a Webcast conference call Wednesday, October 17, at 8:30 a.m. Pacific Time, during which the Company will discuss results for third quarter 2007, review its strategic progress, and provide management's current expectations for the remainder of 2007.
To access the conference call via a live Webcast, go to http://www.wcb.com/ and click on Investor Relations and the "3rd Quarter 2007 Earnings Conference Call" tab. The conference call may also be accessed by dialing 877.604.2074, ID # 15774636 a few minutes prior to 8:30 a.m. PDT. The call will be available for replay by accessing the Company's website at http://www.wcb.com/ and following the same instructions.
West Coast Bancorp, one of Oregon Business Magazine's 100 Best Companies to Work For, is a Northwest bank holding company with $2.6 billion in assets, and 62 offices in Oregon and Washington. The Company combines the sophisticated products and expertise of larger banks with the local decision making, market knowledge and customer service of a community bank. For more information, visit the Company's web site at http://www.wcb.com/.
Forward Looking Statements:
Statements in this release regarding future events, performance or results are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") and are made pursuant to the safe harbors of the PSLRA. Actual results could be quite different from those expressed or implied by the forward-looking statements. Do not unduly rely on forward-looking statements. They give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.
A number of factors could cause results to differ significantly from our expectations, including, among others, factors identified in our Annual Report on Form 10-K for the year ended December 31, 2006, including under the heading "Forward Looking Statement Disclosure" and in Item 1A. Risk Factors.
West Coast Bancorp Consolidated Income Statements (Unaudited) Three months ended Nine months ended (Dollars and shares in thousands) September 30, June 30, September 30, 2007 2006 2007 2007 2006 Net interest income Interest and fees on loans $44,517 $36,748 $42,637 $127,065 $98,056 Interest on investment securities 3,129 3,485 3,397 10,268 9,921 Other interest income 96 316 114 329 519 Total interest income 47,742 40,549 46,148 137,662 108,496 Interest expense on deposit accounts 14,504 11,860 13,524 41,015 27,441 Interest on borrowings and subordinated debentures 3,401 2,394 3,900 10,201 7,023 Total interest expense 17,905 14,254 17,424 51,216 34,464 Net interest income 29,837 26,295 28,724 86,446 74,032 Provision for loan losses 2,700 625 3,500 9,000 1,533 Non-interest income Service charges on deposit accounts 3,213 2,897 3,136 9,234 8,262 Payment systems related revenue 2,122 2,116 2,012 5,812 5,000 Trust and investment services revenues 1,662 1,322 1,649 4,803 3,997 Gains on sales of loans 650 748 967 2,921 2,141 Other 661 591 845 2,180 1,875 Gains (losses) on sales of securities (163) (206) 96 (67) (686) Total non-interest income 8,145 7,468 8,705 24,883 20,589 Non-interest expense Salaries and employee benefits 13,312 12,209 12,544 38,369 35,223 Equipment 1,593 1,412 1,574 4,693 4,022 Occupancy 2,099 1,855 2,158 6,306 5,127 Payment systems related expense 843 666 825 2,333 1,754 Professional fees 485 680 545 1,451 1,837 Postage, printing and office supplies 973 996 969 2,818 2,639 Marketing 1,298 1,103 870 3,292 3,708 Communications 415 372 354 1,202 982 Other non-interest expense 1,584 1,845 1,661 4,677 4,994 Total non-interest expense 22,602 21,138 21,500 65,141 60,286 Income before income taxes 12,680 12,000 12,429 37,188 32,802 Provision for income taxes 4,350 4,131 4,294 12,859 11,241 Net income $8,330 $7,869 $8,135 $24,329 $21,561 Basic earnings per share $0.54 $0.51 $0.52 $1.57 $1.45 Diluted earnings per share $0.52 $0.49 $0.50 $1.51 $1.38 Weighted average common shares 15,536 15,386 15,567 15,528 14,904 Weighted average diluted shares 16,035 16,053 16,143 16,108 15,587 Tax equivalent net interest income $30,225 $26,700 $29,121 $87,629 $75,186 West Coast Bancorp Consolidated Balance Sheets Sept. 30 Sept. 30 June 30, (Dollars and shares in thousands, 2007 2006 2007 unaudited) Assets: Cash and cash equivalents $101,372 $119,301 $82,414 Investments 271,409 295,753 267,614 Total loans 2,183,301 1,868,564 2,140,942 Allowance for loan losses (27,534) (22,404) (26,496) Loans, net 2,155,767 1,846,160 2,114,446 Goodwill and other intangibles 14,611 15,182 14,730 Other assets 104,452 93,045 105,195 Total assets $2,647,611 $2,369,441 $2,584,399 Liabilities and Stockholders' Equity: Demand $500,120 $508,719 $482,698 Savings and interest-bearing demand 347,560 336,557 347,028 Money market 666,352 622,652 668,373 Certificates of deposits 597,421 539,319 547,054 Total deposits 2,111,453 2,007,247 2,045,153 Borrowings and subordinated debentures 285,141 146,111 296,727 Other liabilities 33,106 21,827 28,656 Total liabilities 2,429,700 2,175,185 2,370,536 Stockholders' equity 217,911 194,256 213,863 Total liabilities and stockholders' equity $2,647,611 $2,369,441 $2,584,399 Common shares outstanding period end 15,604 15,532 15,748 Book value per common share $13.97 $12.51 $13.58 Tangible book value per common share $13.03 $11.53 $12.65 West Coast Bancorp Period End Loan Portfolio By Category Sept. 30 Sept. 30 Change June 30, (Dollars in thousands, 2007 2006 Amount % 2007 unaudited) Commercial loans $530,196 $452,035 $78,161 17% $515,590 Real estate construction loans 519,870 308,886 210,984 68% 503,414 Real estate mortgage loans 305,675 274,812 30,863 11% 294,447 Real estate commercial loans 804,200 805,458 (1,258) 0% 803,155 Installment and other consumer loans 23,360 27,373 (4,013) -15% 24,336 Total loans $2,183,301 $1,868,564 $314,737 17% $2,140,942 West Coast Bancorp Return on average equity tangible reconciliation(1) For the three months For the nine months (Dollars in thousands) ended Sept. 30, ended Sept. 30, 2007 2006 2007 2006 Net income $8,330 $7,869 $24,329 $21,561 Less: intangible asset amortization, net of tax* 78 99 274 185 Net income, tangible $8,408 $7,968 $24,603 $21,746 Average shareholders' equity $215,550 $188,496 $209,808 $171,254 Less: average intangibles (14,660) (15,266) (14,805) (5,658) Average shareholders' equity, tangible $200,890 $173,230 $195,003 $165,596 *Federal income tax provision applied at 35%. Return on average equity 15.3% 16.6% 15.5% 16.8% Return on average equity, tangible 16.6% 18.2% 16.9% 17.6% (1) Management uses return on equity, tangible internally and has disclosed it to investors based on its belief that the figure makes it easier to compare the Company's performance to other financial institutions that do not have merger-related intangible assets and is commonly used in the industry. Ratios have been annualized where appropriate. West Coast Bancorp Noninterest income/payment systems income reconciliation(2) For the three months ended Sept. Variance Variance (Dollars in thousands) 30, $$ % 2007 2006 Noninterest income per GAAP $8,145 $7,468 $677 9% Less: merchant services contract credit -- 400 Noninterest income excluding adjustment $8,145 $7,068 $1,077 15% Payment system income per GAAP $2,122 $2,116 $6 0% Less: merchant services contract credit -- 400 Payment system income excluding adjustment $2,122 $1,716 $406 24% (2) Management has adjusted percentage growth and has disclosed it to investors based on its belief that the figure makes it easier to compare the Company's performance in the current year to the prior year. West Coast Bancorp Allowance For Credit Losses and Net Charge-offs Quarter Quarter Quarter ended ended ended Sept. 30, Sept. 30, June 30, (Dollars in thousands, unaudited) 2007 2006 2007 Allowance for loan losses, beginning of period $26,496 $21,883 $24,464 Provision for loan losses 2,700 625 3,500 Reclassification to reserve for unfunded commitments (972) -- -- Charge-offs 990 330 1,567 Recoveries 300 226 99 Net charge-offs 690 104 1,468 Total allowance for loan losses $27,534 $22,404 $26,496 Reserve for unfunded commitments 972 -- -- Total allowance for credit losses $28,506 $22,404 $26,496 Net loan charge-offs to average loans (annualized) 0.13% 0.02% 0.28% Year to date Year to date Sept. 30, Sept. 30, (Dollars in thousands, unaudited) 2007 2006 Allowance for loan losses, beginning of period $23,017 $20,469 Provision for loan losses 9,000 1,533 Reclassification to reserve for unfunded commitments (972) -- Charge-offs 4,076 1,147 Recoveries 565 662 Net Charge-offs 3,511 485 Allowance for loan losses, from acquisition -- 887 Total allowance for loan losses $27,534 $22,404 Reserve for unfunded commitments 972 -- Total allowance for credit losses $28,506 $22,404 Net loan charge-offs to average loans (annualized) 0.23% 0.04% West Coast Bancorp Financial Information (Dollars in thousands except for per share data, unaudited) (all rates have been annualized Third Third Second Year to Year to where Quarter Quarter Quarter date date appropriate) 2007 2006 2007 2007 2006 PERFORMANCE RATIOS - Return on average assets 1.29% 1.35% 1.29% 1.29% 1.35% - Return on average common equity 15.33% 16.56% 15.51% 15.50% 16.83% - Return on average tangible equity 16.60% 18.24% 16.89% 16.87% 17.56% - Non-interest income to average assets 1.26% 1.28% 1.38% 1.32% 1.29% - Non-interest expense to average assets 3.49% 3.63% 3.41% 3.47% 3.78% - Efficiency ratio, tax equivalent 58.7% 61.5% 57.0% 57.9% 62.5% NET INTEREST MARGIN - Yield on interest-earning assets 7.87% 7.50% 7.84% 7.83% 7.29% - Rate on interest-bearing liabilities 3.86% 3.51% 3.84% 3.79% 3.10% - Net interest spread 4.01% 3.99% 4.00% 4.04% 4.19% - Net interest margin 4.94% 4.89% 4.90% 4.94% 5.00% AVERAGE ASSETS - Investment securities $267,681 $298,988 $285,156 $288,377 $290,946 - Commercial loans $516,634 $449,107 $502,749 $495,833 $411,016 - Real estate construction loans 507,613 287,558 474,660 460,861 256,736 - Real estate mortgage loans 300,114 271,511 289,812 290,915 260,395 - Real estate commercial loans 798,940 801,354 790,372 796,294 744,463 - Installment and other consumer loans 23,799 28,567 25,967 25,172 27,948 - Total loans $2,147,100 $1,838,097 $2,083,560 $2,069,075 $1,700,558 - Total interest earning assets $2,426,360 $2,167,250 $2,381,652 $2,370,055 $2,009,767 - Other assets 143,180 143,854 144,857 143,374 123,771 - Total assets $2,569,540 $2,311,104 $2,526,509 $2,513,429 $2,133,538 AVERAGE LIABILITIES & EQUITY - Demand deposits $490,336 $489,796 $470,622 $474,828 $455,975 - Savings and Interest bearing demand 341,496 338,642 348,086 273,383 337,452 - Money market 680,027 587,174 659,817 661,037 531,245 - Certificates of deposits 565,550 504,894 538,713 547,622 431,154 - Total deposits $2,077,409 $1,920,506 $2,017,238 $1,956,870 $1,755,826 - Borrowings and subordinated debentures $252,314 $182,085 $274,093 $250,011 $188,422 - Total interest bearing liabilities $1,839,387 $1,612,796 $1,820,709 $1,804,853 $1,488,273 - Other liabilities 514,603 509,812 495,451 498,768 474,011 - Total liabilities $2,353,990 $2,122,608 $2,316,160 $2,303,621 $1,962,284 - Average common equity 215,550 188,496 210,349 209,808 171,254 - Total average liabilities and common equity $2,569,540 $2,311,104 $2,526,509 $2,513,429 $2,133,538 AVERAGE ASSET/LIABILITY RATIOS - Average stockholders' equity to average assets 8.39% 8.16% 8.33% 8.35% 8.03% - Average int. earning assets to int. bearing liabilities 131.9% 134.4% 130.8% 131.3% 135.0% - Average loans to average assets 83.6% 79.5% 82.5% 82.3% 79.7% - Interest bearing deposits to assets 61.8% 61.9% 61.2% 59.0% 57.1% West Coast Bancorp Non-performing Assets Sept. 30, Sept. 30, June 30, (Dollars in thousands, unaudited) 2007 2006 2007 Non-accruing loans $7,867 $2,652 $6,116 90 day delinquencies -- -- -- Total non-performing loans 7,867 2,652 6,116 Other real estate owned 1,183 -- -- Total non-performing assets $9,050 $2,652 $6,116 Allowance for loan losses to total loans 1.26% 1.20% 1.24% Allowance for credit losses to total loans 1.31% 1.20% 1.24% Non-performing loans to total loans 0.36% 0.14% 0.29% Allowance for loan losses to non- performing loans 350% 845% 433% Non-performing assets to total assets 0.34% 0.11% 0.24% Allowance for loan losses to non- performing assets 304% 845% 433%
