EX-99.1 2 a08-11088_1ex99d1.htm EX-99.1

Exhibit 99.1

 

PRESS RELEASE

 

First Community Bancorp

(NASDAQ: FCBP)

 

Contact:





Phone:
Fax:

 

Matthew P. Wagner
Chief Executive Officer
10250 Constellation Boulevard
Suite 1640
Los Angeles, CA 90067

310-728-1020
310-201-0498

 

Victor R. Santoro
Executive Vice President and
Chief Financial Officer
10250 Constellation Boulevard
Suite 1640
Los Angeles, CA 90067
310-728-1021
310-201-0498

 

FOR IMMEDIATE RELEASE

April 17, 2008

 

FIRST COMMUNITY BANCORP ANNOUNCES RESULTS FOR THE

FIRST QUARTER OF 2008

 

San Diego, California . . . First Community Bancorp (Nasdaq: FCBP) today announced a net loss for the first quarter of 2008 of $272.7 million, or $10.05 per diluted share.  The net loss was caused by a $275.0 million write-off of goodwill made in response to the recent volatility in the banking industry and the effect such volatility has had on the market prices of banking stocks, including First Community Bancorp’s.  Net earnings (loss) excluding the goodwill write-off (hereinafter referred to as “net operating earnings”) for the quarter ended March 31, 2008 totaled $2.3 million, or $0.08 per diluted share.  This compares to net operating earnings of $17.1 million, or $0.62 per diluted share, for the fourth quarter of 2007, and net operating earnings of $28.5 million, or $0.98 per diluted share, for the first quarter of 2007.  The decrease in net operating earnings compared to the net operating earnings for the fourth and first quarters of 2007 resulted primarily from a higher provision for credit losses.

 

The discussion in this release of net earnings, earnings per share, performance ratios and comparisons to prior periods will be based on net operating earnings as described above and as shown in the following table.  The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance.  These non-GAAP financial measures are presented for supplemental informational purposes only for understanding the Company’s operating results and should not be considered a substitute for financial information presented in accordance with GAAP.  Please refer to the table at the end of this release for a presentation of performance ratios in accordance with GAAP and a reconciliation of the non-GAAP financial measurements to the GAAP financial measurements.

 

1



 

FIRST QUARTER RESULTS

 

 

 

First

 

Fourth

 

First

 

 

 

Quarter

 

Quarter

 

Quarter

 

In thousands, except per share data and percentages

 

2008

 

2007

 

2007

 

 

 

 

 

 

 

 

 

Net (loss) earnings as reported

 

$

(272,723

)

$

17,059

 

$

28,546

 

Goodwill write-off

 

275,000

 

 

 

Net operating earnings

 

$

2,277

 

$

17,059

 

$

28,546

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per share

 

$

(10.05

)

$

0.62

 

$

0.98

 

Diluted net operating earnings per share

 

$

0.08

 

$

0.62

 

$

0.98

 

 

 

 

 

 

 

 

 

Return on average assets (ROA)

 

(21.10

)%

1.32

%

2.10

%

Operating return on average assets

 

0.18

%

1.32

%

2.10

%

 

 

 

 

 

 

 

 

Return on average equity (ROE)

 

(96.35

)%

5.86

%

9.91

%

Operating return on average equity

 

0.80

%

5.86

%

9.91

%

 

 

 

 

 

 

 

 

Efficiency ratio

 

481.6

%

53.2

%

42.2

%

Operating efficiency ratio

 

54.8

%

53.2

%

42.2

%

 

 

 

 

 

 

 

 

Net interest margin

 

5.58

%

6.11

%

6.33

%

 

The decrease in net operating earnings of $14.8 million for the first quarter of 2008 compared to the fourth quarter of 2007 is due to the combination of lower net interest income ($2.9 million after tax), a higher provision for credit losses ($13.3 million after tax), higher noninterest income ($705,000 after tax), and lower operating noninterest expenses ($600,000 after tax).   The fourth quarter of 2007 included prepayment penalties on certain FHLB advances, a donation, and reorganization charges, which totaled $1.6 million in the aggregate after tax; there were no such items in the other periods presented.  The increase in the operating efficiency ratio in the first quarter of 2008 was due mostly to the combined effects of lower net interest income, higher noninterest income and lower overhead costs.  The prepayment penalty, donation and reorganization charges increased our efficiency ratio by 409 basis points in the fourth quarter of 2007.

 

The decrease in net operating earnings for the first quarter of 2008 compared to the first quarter of 2007 is attributed mostly to a higher provision for credit losses and lower net interest income and noninterest income.  The decrease in both net interest income and noninterest income relates, in part, to the sale of a participating interest of approximately $353 million in commercial real estate mortgage loans at the end of the first quarter of 2007; this sale generated an after-tax gain of $3.9 million and the proceeds were used mostly to repay overnight borrowings.  Noninterest income also declined due to lower income related to discounts recognized on acquired loans that have since been repaid.

 

Matt Wagner, Chief Executive Officer, stated, “During the first quarter, we focused on asset quality and core deposit growth.  We continue to manage the loan portfolio aggressively, and we

 

2



 

further reduced our exposure to residential construction loans and other credits that carry heightened risk in today’s environment.  The nonowner-occupied residential construction loan portfolio declined by almost $63 million, and now represents 7.2% of our gross loans.”  Mr. Wagner continued, “The favorable rate environment and our capital strength enabled us to grow core deposits by $102 million during the first quarter.  While we remain cautious, we believe our healthy capital ratios and allowance for credit losses position us favorably in the current environment as we seek to attract core deposits and continue serving our customer base.”

 

Vic Santoro, Executive Vice President and Chief Financial Officer, commented, “Since its formation, the Company  completed 19 acquisitions that have increased its assets to nearly $5 billion, developed a sizable revenue stream and created $761 million in goodwill, an asset which is not amortized to expense.  The disruption in the financial sector has caused the market valuation for banking stocks to decline over the last few quarters, including the market value of our common stock.  As a result, in following the accounting rules, we wrote off to expense $275 million in goodwill.  This expense write-off had no impact on our regulatory capital levels, cash flows, or liquidity.”  Mr. Santoro continued, “Although the Federal Reserve’s actions to lower the Federal funds rate negatively affected our net interest margin, we were able to reprice certain deposits throughout the first quarter.  This repricing along with the high level of our demand deposit balances enabled us to lower our total deposit cost to 1.35% in March.  The combination of our strong net interest margin of 5.56% in March, reduced loan portfolio risk, our credit loss reserve coverage and high regulatory capital levels position us to take advantage of growth opportunities as they arise.”

 

BALANCE SHEET CHANGES

 

Total loans, including loans held for sale and net of unearned income, decreased $46.5 million to $4.0 billion at March 31, 2008, from December 31, 2007.  The decrease is primarily due to the sale of $34.1 million of nonaccrual loans and the continued emphasis on lowering residential construction loan exposure offset by growth in commercial real estate loan products.   Deposits increased $74.0 million to $3.3 billion at March 31, 2008, from December 31, 2007.  Since year end, demand deposits, including our line of free checking products, increased $65.4 million to $1.3 billion at March 31, 2008, and represented 38% of total deposits at that date.  Core transaction deposits, which are composed of demand deposits, money market deposits and NOW accounts, increased $102.3 million to $2.8 billion at March 31, 2008 from December 31, 2007.

 

NET INTEREST INCOME

 

Net interest income totaled $57.9 million for the first quarter of 2008 compared to $62.9 million for the fourth quarter of 2007 and $69.4 million for the first quarter of 2007.  The decrease in net interest income compared to the previous quarter was due mainly to lower loan yields from reductions in our base lending rate and lower average construction loan balances.  The Federal Reserve lowered the Federal funds rate by 200 basis points since year end, and our base lending rate was reduced by the same amount.  On the funding side, interest expense decreased $1.9 million compared to the fourth quarter of 2007 due mostly to declining market rates and the effect such decline had on our deposit pricing and the cost of wholesale funding through Federal Home Loan Bank (“FHLB”) advances.  We continue to use FHLB advances to fund loan growth and deposit flows as such funding has been cost effective during the recent disruption in the financial markets.

 

The $11.6 million decrease in net interest income for the first quarter of 2008 compared to the same quarter of 2007 was mainly a result of reduced loan interest income due to lower loan yields

 

3



 

and average loan balances.  Our average loan yields have declined in line with the general decline in market interest rates that began in September 2007.  The lower average loan balances resulted mostly from the sale of the participating interest of approximately $353 million in commercial real estate mortgage loans at the end of March 2007 combined with our efforts to reduce our nonowner-occupied residential construction loan exposure.  Interest expense decreased $3.6 million for the first quarter of 2008 compared to the same quarter of 2007 due mainly to a decrease in the cost of our funding sources as market interest rates have declined.

 

NET INTEREST MARGIN

 

Our net interest margin for the first quarter of 2008 was 5.58%, a decrease of 53 basis points when compared to the fourth quarter of 2007 and a decrease of 75 basis points when compared to the first quarter of 2007.  The net interest margin was 5.56% in March 2008, down from 5.91% in December 2007.  The declines in the net interest margin are due mainly to lower loan yields.  The yield on average earning assets was 7.47% for the first quarter of 2008 compared to 8.19% for the fourth quarter of 2007 and 8.44% for the first quarter of 2007.  The yield on average loans was 7.57% for the first quarter of 2008 compared to 8.29% for the fourth quarter of 2007 and 8.55% for the first quarter of 2007. Our average loan yield for March 2008 was 7.37%, a decline of 73 basis points from our December 2007 loan yield of 8.10%.  The declines in loan yield resulted from reductions in our base lending rate and lower average construction loan balances.

 

The cost of deposits and other funding has declined steadily with the decrease in market interest rates.  During the first quarter, we adjusted our deposit rates downward as market rates declined.  The average cost of deposits was 1.46% for the first quarter of 2008 compared to 1.67% for the fourth quarter of 2007 and 1.51% for the first quarter of 2007.  On a monthly basis, deposit cost declined steadily to 1.35% in March 2008 from 1.64% in December 2007.  Our relatively low cost of deposits is driven by demand deposit balances, which averaged 39% of average total deposits during the first quarter of 2008.  Further, for the first quarter of 2008 the cost of money market deposits was 2.57%, a decline of 49 basis points from the prior quarter, and the cost of time deposits was 3.77%, a decline of 25 basis points from the prior quarter.  The overall cost of interest-bearing liabilities decreased to 2.87% for the first quarter of 2008 compared to 3.28% for the fourth quarter of 2007 and 3.41% for the first quarter of 2007 due mostly to lower market interest rates.  In line with deposit cost trends, the cost of interest bearing liabilities declined to 2.67% in March 2008 from 3.23% in December 2007.  We increased our reliance on FHLB advances during the first quarter of 2008 as a cost-effective source to fund loan growth and deposit flows.

 

NONINTEREST INCOME

 

Noninterest income for the first quarter of 2008 totaled $6.6 million compared to $5.4 million in the fourth quarter of 2007 and $14.4 million earned in the first quarter of 2007.  The increase compared to the fourth quarter of 2007 is due mostly to increased gain on sale of loans and other income. The net gain on sale of SBA loans was $269,000 for the first quarter of 2008 compared to a net loss of $543,000 for the fourth quarter of 2007.  Other income includes the recognition of discounts related to the payoffs of acquired loans; such amounts were $446,000 for the first quarter of 2008 and $187,000 for the fourth quarter of 2007.

 

The decrease in noninterest income compared to the first quarter of 2007 is due mostly to the sale of the participating interest in commercial real estate mortgage loans in March 2007, which generated a gain of $6.6 million, and net gains of $876,000 on the sale of SBA loans.  The other income category for the first quarter of 2007 included $1.9 million from the recognition of discounts related to payoffs of acquired loans.

 

4



 

NONINTEREST EXPENSE

 

Excluding the goodwill write-off, first quarter of 2008 noninterest expense totaled $35.3 million compared to $36.3 million for the fourth quarter of 2007 and $35.4 million for the first quarter of 2007.  The decrease in operating noninterest expense compared to the fourth quarter of 2007 is due to the prior quarter including a $1.4 million prepayment penalty on certain FHLB advances, a $1.0 million donation to the San Diego Foundation, and $390,000 of reorganization charges; there were no such items in the first quarter of 2008.  These decreases were offset, in part, by higher compensation costs.

 

Noninterest expense includes amortization of time-based and performance-based restricted stock, which is included in compensation, and intangible asset amortization.  Restricted stock amortization totaled $952,000 for the first quarter of 2008 compared to $1.2 million for the fourth quarter of 2007 and $2.1 million for the first quarter of 2007.  The decline in the restricted stock amortization compared to the first quarter of 2007 is due to the suspension in the fourth quarter of 2007 of amortization of certain performance-based restricted stock awards whose vesting is dependent on the attainment of specific long-term financial targets.  At that time, we concluded that attainment of these financial targets was less than probable.  If and when the attainment of such financial targets is deemed probable in future periods, a catch-up adjustment will be recorded and amortization of such performance-based restricted stock will recommence.  Amortization expense for all time-based and performance-based restricted stock awards is estimated to be $4.8 million for 2008.  Intangible asset amortization totaled $2.5 million for the first quarter of 2008 and is estimated to be $9.4 million for 2008.  The 2008 estimates of both restricted stock award expense and intangible asset amortization are subject to change.

 

GOODWILL WRITE-OFF

 

As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, the Company’s market capitalization was less than our total shareholders’ equity at December 31, 2007.  Since this trend continued through the end of the first quarter of 2008, we are required under generally accepted accounting principles to determine whether and to what extent our goodwill asset is impaired.  We engaged an independent valuation consultant to assist us in evaluating a potential goodwill write-off.  Based on the evaluation, we wrote off $275.0 million of our goodwill as a non-cash charge to earnings in the first quarter of 2008.  Such charge had no effect on the Company’s or the Bank’s cash balances or liquidity.  In addition, because goodwill and other intangible assets are not included in the calculation of regulatory capital, the Company’s and the Bank’s well-capitalized regulatory ratios are not affected by this non-cash expense.

 

TAXES

 

The effective tax rate on net operating earnings for the first quarter of 2008 was 26.9% compared to 41.1% for the fourth quarter of 2007 and 41.0 % for the first quarter of 2007.  The effective tax rates shown reflect reductions for credits on certain investments and tax-exempt income.  The first quarter of 2008 goodwill write-off is not deductible for tax purposes.

 

5



 

CREDIT QUALITY

 

Credit quality was impacted mostly by three events during the first quarter of 2008: the sale of certain nonaccrual loans, the provision for credit losses, and the reduction in our construction loan exposure.  In mid-March we sold $34.1 million of construction related nonaccrual loans at a loss of $16.2 million which was charged to the allowance for credit losses.  These loans were collateralized by both residential construction projects and residential land, and we estimated that it would take several quarters to work out these troubled credits.  We decided to sell these loans at a substantial discount in order to eliminate from our portfolio the risks presented by these loans and to reduce the distraction their work out would have caused.  The credit loss provision for the first quarter of 2008 was $26.0 million and was based on our reserve methodology and considered, among other factors, the charge-off from the loan sale, the level and trends of classified, criticized, and nonaccrual loans, portfolio concentrations and general market conditions.

 

The construction loan portfolio declined $55.6 million during the first quarter of 2008 to $661.8 million at the end of March.  Within our construction loan portfolio, we reduced our exposure to nonowner-occupied residential construction loans by $62.6 million to $287.5 million at the end of March from year end 2007.  The details regarding the nonowner-occupied residential construction loan portfolio as of the dates indicated follows:

 

 

 

Balance

 

Number of loans

 

Average loan balance

 

 

 

As of

 

As of

 

As of

 

Loan Category

 

12/31/07

 

3/31/08

 

3/31/08

 

3/31/08

 

 

 

(Dollars in thousands)

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Residential land

 

$

80,848

 

$

57,174

 

42

 

$

1,361

 

Residential nonowner-occupied single family

 

133,694

 

96,381

 

61

 

1,580

 

Unimproved residential land

 

51,014

 

49,761

 

10

 

4,976

 

Residential multifamily

 

84,533

 

84,215

 

19

 

4,432

 

 

 

$

350,089

 

$

287,531

 

132

 

$

2,178

 

 

Nonperforming assets totaled $38.0 million at the end of March, up $12.8 million from the $25.3 million at the end of December.  Nonaccrual loans increased $9.5 million to $32.0 million and other real estate owned (“OREO”) increased $3.3 million to $6.1 million as of March 31, 2008.    Our ratio of nonaccrual loans to total loans, including loans held for sale, increased to 0.81% at March 31, 2008 from 0.56% at December 31, 2007.   The types of loans included in the nonaccrual category as of March 31, 2008 and December 31, 2007 follows:

 

 

 

Balance

 

 

 

As of

 

Loan category

 

12/31/07

 

3/31/08

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

SBA 7(a)

 

$

7,006

 

$

11,011

 

SBA 504

 

3,351

 

4,461

 

Residential construction

 

9,475

 

7,857

 

Commercial real estate

 

519

 

4,754

 

Commercial

 

1,507

 

3,213

 

Residential other

 

6

 

295

 

Residential land

 

220

 

220

 

Other, including foreign

 

389

 

144

 

 

 

$

22,473

 

$

31,955

 

 

6



 

The increase in OREO is due mostly to foreclosures on a land loan for 8 improved lots in Temecula and a condo project in San Diego, which combined total $4.0 million.  The ratio of nonperforming assets to loans and real estate owned was 0.96% at March 31, 2008 compared to 0.63% at December 31, 2007.

 

The credit loss reserve ratio to net loans increased to 1.76% at the end of March compared to 1.55% at the end of 2007.  The allowance for credit losses totaled $68.9 million at March 31, 2008 and $61.0 million at December 31, 2007.

 

No part of the allowance for credit losses is allocated to loans held for sale as they are carried at the lower of aggregate cost or fair value and are shown separately on our balance sheet.  The allowance for credit losses applies only to loans held for investment purposes and loan commitments.

 

REGULATORY CAPITAL MEASURES ARE ABOVE THE WELL-CAPITALIZED MINIMUMS

 

First Community and its wholly-owned banking subsidiary, Pacific Western Bank, each remained well capitalized at March 31, 2008.

 

 

 

Minimum

 

 

 

 

 

 

 

Regulatory

 

 

 

 

 

 

 

Requirements

 

Actual

 

 

 

Well

 

Pacific

 

Company

 

 

 

Capitalized

 

Western

 

Consolidated

 

Tier 1 leverage capital ratio

 

5.00

%

9.09

%

9.98

%

Tier 1 risk-based capital ratio

 

6.00

%

9.61

%

10.55

%

Total risk-based capital

 

10.00

%

10.87

%

11.80

%

 

REINCORPORATION PROPOSAL

 

On March 10, 2008, First Community announced its intention to reincorporate in Delaware from California under the name PacWest Bancorp.  Subject to the receipt of shareholder approval at the special meeting on April 23, 2008, we intend to reincorporate effective May 14, 2008 following our Annual Meeting of Shareholders to be held on May 13, 2008.

 

Other than the change of the Company’s name and corporate domicile, the reincorporation would not result in any change in the business, location, management, assets, liabilities or net worth of the Company, nor will it result in any change in location of Company employees, including the Company’s management. Additionally, the reincorporation itself would not alter any shareholder’s ownership interest in the Company.

 

Additional information on the proposed reincorporation is available in the Company’s proxy statement filed with the Securities and Exchange Commission on March 25, 2008.

 

ABOUT FIRST COMMUNITY BANCORP

 

First Community Bancorp is a bank holding company with $4.9 billion in assets as of March 31, 2008, with one wholly-owned banking subsidiary, Pacific Western Bank. Through 60 full-service community banking branches, Pacific Western provides commercial banking services, including real estate, construction and commercial loans, to small and medium-sized businesses. Pacific Western’s branches are located in Los Angeles, Orange, Riverside, San Diego and San Bernardino

 

7



 

Counties.  Through its subsidiary BFI Business Finance and its divisions First Community Financial and Pacific Western SBA Lending, Pacific Western also provides working capital financing to growing companies located throughout the Southwest, primarily in the states of Arizona, California and Texas. Additional information regarding First Community Bancorp is available on the Internet at www.firstcommunitybancorp.com. Information regarding Pacific Western Bank is also available on the Internet at www.pacificwesternbank.com.

 

FORWARD-LOOKING STATEMENTS

 

This press release contains certain forward-looking information about First Community 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 inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to: planned acquisitions and related cost savings cannot be realized or realized within the expected time frame; lower than expected revenues; credit quality deterioration which could cause an increase in the allowance for credit losses and a reduction in net earnings; increased competitive pressure among depository institutions; the Company’s ability to complete announced acquisitions, to successfully integrate acquired entities, or to achieve expected synergies and operating efficiencies within expected time-frames or at all; the integration of acquired businesses costs more, takes longer or is less successful than expected; the possibility that personnel changes will not proceed as planned; the cost of additional capital is more than expected; a change in the interest rate environment reduces interest margins; asset/liability repricing risks and liquidity risks; pending legal matters may take longer or cost more to resolve or may be resolved adversely to the Company; general economic conditions, either nationally or in the market areas in which the Company does or anticipates doing business, are less favorable than expected; environmental conditions, including natural disasters, may disrupt our business, impede our operations, negatively impact the values of collateral securing the Company’s loans or impair the ability of our borrowers to support their debt obligations; the economic and regulatory effects of the continuing war on terrorism and other events of war, including the war in Iraq; legislative or regulatory requirements or changes adversely affecting the Company’s business; changes in the securities markets; regulatory approvals for any acquisitions cannot be obtained on the terms expected or on the anticipated schedule; and, other risks that are described in First Community’s public filings with the U.S. Securities and Exchange Commission (the “SEC”). If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, First Community’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. First Community assumes no obligation to update such forward-looking statements.

 

For a more complete discussion of risks and uncertainties, investors and security holders are urged to read First Community Bancorp’s annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by First Community with the SEC.  The documents filed by First Community with the SEC may be obtained at First Community Bancorp’s website at www.firstcommunitybancorp.com or at the SEC’s website at www.sec.gov.  These documents may also be obtained free of charge from First Community by directing a request to: First Community Bancorp c/o Pacific Western Bank, 275 North Brea Boulevard, Brea, CA 92821.  Attention: Investor Relations. Telephone 714-671-6800.

 

8



 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(In thousands, except share date)

 

Assets:

 

 

 

 

 

Cash and due from banks

 

$

129,653

 

$

99,363

 

Federal funds sold

 

 

2,000

 

Total cash and cash equivalents

 

129,653

 

101,363

 

 

 

 

 

 

 

Interest-bearing deposits in financial institutions

 

286

 

420

 

 

 

 

 

 

 

Federal Home Loan Bank stock, at cost

 

32,768

 

26,649

 

Securities available-for-sale, at estimated fair value

 

117,696

 

106,888

 

Total securities

 

150,464

 

133,537

 

 

 

 

 

 

 

Loans, held for sale

 

57,309

 

63,565

 

 

 

 

 

 

 

Loans, net of unearned income

 

3,909,007

 

3,949,218

 

Allowance for loan losses

 

(60,199

)

(52,557

)

Net loans

 

3,848,808

 

3,896,661

 

 

 

 

 

 

 

Premises and equipment

 

25,702

 

26,327

 

Other real estate owned, net

 

6,055

 

2,736

 

Intangible assets

 

528,171

 

805,775

 

Cash surrender value of life insurance

 

68,598

 

67,846

 

Other assets

 

77,670

 

80,810

 

Total assets

 

$

4,892,716

 

$

5,179,040

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity:

 

 

 

 

 

Liabilities:

 

 

 

 

 

Noninterest-bearing deposits

 

$

1,277,302

 

$

1,211,946

 

Interest-bearing deposits

 

2,041,842

 

2,033,200

 

Total deposits

 

3,319,144

 

3,245,146

 

 

 

 

 

 

 

Accrued interest payable and other liabilities

 

45,286

 

45,054

 

Borrowings

 

539,800

 

612,000

 

Subordinated debentures

 

130,173

 

138,488

 

Total liabilities

 

4,034,403

 

4,040,688

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

Common stock

 

937,559

 

936,608

 

Retained earnings (accumulated deficit)

 

(80,333

)

201,220

 

Accumulated other comprehensive income:

 

 

 

 

 

Unrealized gain on securities available-for-sale, net

 

1,087

 

524

 

Total Shareholders’ Equity

 

858,313

 

1,138,352

 

Total Liabilities and Shareholders’ Equity

 

$

4,892,716

 

$

5,179,040

 

 

 

 

 

 

 

Shares outstanding (including 999,189 shares and 861,269 shares at March 31, 2008 and December 31, 2007, underlying unvested stock awards)

 

28,147,608

 

28,002,382

 

 

 

 

 

 

 

Book value per share

 

$

30.49

 

$

40.65

 

 

9



 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

 

 

 

Quarters Ended

 

 

 

3/31/08

 

12/31/07

 

3/31/07

 

 

 

(In thousands, except per share data)

 

Interest income:

 

 

 

 

 

 

 

Interest and fees on loans

 

$

75,653

 

$

82,742

 

$

90,949

 

Interest on federal funds sold

 

40

 

251

 

214

 

Interest on time deposits in other financial institutions

 

3

 

4

 

6

 

Interest on investment securities

 

1,701

 

1,358

 

1,376

 

Total interest income

 

77,397

 

84,355

 

92,545

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

Interest expense on deposits

 

11,821

 

14,391

 

13,425

 

Interest expense on borrowings

 

5,307

 

4,306

 

6,752

 

Interest expense on subordinated debentures

 

2,409

 

2,715

 

2,933

 

Total interest expense

 

19,537

 

21,412

 

23,110

 

Net interest income before provision for credit losses

 

57,860

 

62,943

 

69,435

 

Provision for credit losses

 

26,000

 

3,000

 

 

Net interest income after provision for credit losses

 

31,860

 

59,943

 

69,435

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

Service charges on deposit accounts

 

3,224

 

3,029

 

2,817

 

Other commissions and fees

 

1,519

 

1,817

 

1,323

 

Gain (loss) on sale of loans

 

269

 

(543

)

7,525

 

Increase in cash surrender value of life insurance

 

587

 

649

 

616

 

Other income

 

968

 

400

 

2,070

 

Total noninterest income

 

6,567

 

5,352

 

14,351

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

Compensation

 

18,846

 

16,669

 

18,922

 

Occupancy

 

4,731

 

4,871

 

4,761

 

Furniture and equipment

 

1,139

 

1,183

 

1,293

 

Data processing

 

1,543

 

1,475

 

1,558

 

Other professional services

 

1,415

 

1,495

 

1,437

 

Business development

 

756

 

1,709

 

707

 

Communications

 

824

 

779

 

832

 

Insurance and assessments

 

540

 

464

 

413

 

Intangible asset amortization

 

2,530

 

2,621

 

2,174

 

Reorganization charges

 

 

390

 

258

 

Goodwill write-off

 

275,000

 

 

 

Other

 

2,986

 

4,689

 

3,038

 

Total noninterest expense

 

310,310

 

36,345

 

35,393

 

(Loss) earnings before income taxes

 

(271,883

)

28,950

 

48,393

 

Income taxes

 

840

 

11,891

 

19,847

 

Net (loss) earnings

 

$

(272,723

)

$

17,059

 

$

28,546

 

 

 

 

 

 

 

 

 

Per share information

 

 

 

 

 

 

 

Number of shares (weighted average):

 

 

 

 

 

 

 

Basic

 

27,145.2

 

27,645.0

 

28,867.2

 

Diluted

 

27,145.2

 

27,703.0

 

28,995.1

 

(Loss) earnings per share:

 

 

 

 

 

 

 

Basic (loss) earnings per share

 

$

(10.05

)

$

0.62

 

$

0.99

 

Diluted (loss) earnings per share

 

$

(10.05

)

$

0.62

 

$

0.98

 

 

 

 

 

 

 

 

 

Net operating earnings per share:

 

 

 

 

 

 

 

Basic net operating earnings per share

 

$

0.08

 

$

0.62

 

$

0.99

 

Diluted net operating earnings per share

 

$

0.08

 

$

0.62

 

$

0.98

 

 

10



 

UNAUDITED AVERAGE BALANCE SHEETS

 

 

 

Quarters Ended

 

 

 

3/31/08

 

12/31/07

 

3/31/07

 

 

 

 

 

(Dollars in thousands)

 

 

 

Average Assets:

 

 

 

 

 

 

 

Loans, net of unearned income

 

$

4,019,224

 

$

3,960,621

 

$

4,316,266

 

Investment securities

 

143,379

 

105,995

 

113,278

 

Federal funds sold

 

5,032

 

21,437

 

16,590

 

Interest-bearing deposits in financial institutions

 

324

 

425

 

486

 

Average earning assets

 

4,167,959

 

4,088,478

 

4,446,620

 

Other assets

 

1,030,130

 

1,037,646

 

1,061,067

 

Average total assets

 

$

5,198,089

 

$

5,126,124

 

$

5,507,687

 

 

 

 

 

 

 

 

 

Average Liabilities and Shareholders’ Equity:

 

 

 

 

 

 

 

Average liabilities

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

1,273,173

 

$

1,332,259

 

$

1,530,242

 

 

 

 

 

 

 

 

 

Interest checking

 

369,841

 

363,756

 

274,303

 

Money market accounts

 

1,089,672

 

1,182,456

 

1,089,677

 

Savings

 

104,905

 

113,398

 

138,517

 

Time deposits

 

413,712

 

423,668

 

571,930

 

Interest-bearing deposits

 

1,978,130

 

2,083,278

 

2,074,427

 

Average deposits

 

3,251,303

 

3,415,537

 

3,604,669

 

Subordinated debentures

 

137,829

 

138,553

 

149,173

 

Borrowings

 

620,349

 

366,196

 

528,490

 

Other liabilities

 

50,207

 

50,339

 

56,959

 

Average liabilities

 

4,059,688

 

3,970,625

 

4,339,291

 

Average equity

 

1,138,401

 

1,155,499

 

1,168,396

 

Average liabilities and shareholders’ equity

 

$

5,198,089

 

$

5,126,124

 

$

5,507,687

 

 

 

 

 

 

 

 

 

Yield Analysis:

 

 

 

 

 

 

 

Average earning assets

 

$

4,167,959

 

$

4,088,478

 

$

4,446,620

 

Yield

 

7.47

%

8.19

%

8.44

%

Average interest-bearing deposits

 

$

1,978,130

 

$

2,083,278

 

$

2,074,427

 

Yield

 

2.40

%

2.74

%

2.62

%

Average deposits

 

$

3,251,303

 

$

3,415,537

 

$

3,604,669

 

Cost

 

1.46

%

1.67

%

1.51

%

Average interest-bearing liabilities

 

$

2,736,308

 

$

2,588,027

 

$

2,752,090

 

Cost

 

2.87

%

3.28

%

3.41

%

Average subordinated debentures

 

137,829

 

138,553

 

149,173

 

Cost

 

7.03

%

7.77

%

7.97

%

Average borrowings

 

620,349

 

366,196

 

528,490

 

Cost

 

3.44

%

4.67

%

5.18

%

Average interest sensitive liabilities

 

$

4,009,481

 

$

3,920,286

 

$

4,282,332

 

Cost

 

1.96

%

2.17

%

2.19

%

 

 

 

 

 

 

 

 

Interest spread

 

4.60

%

4.89

%

5.03

%

Net interest margin

 

5.58

%

6.11

%

6.33

%

 

11



 

DEPOSITS (unaudited)

 

 

 

As of the Dates Indicated

 

 

 

3/31/08

 

12/31/07

 

3/31/07

 

 

 

 

 

(Dollars in thousands)

 

 

 

Transaction accounts:

 

 

 

 

 

 

 

Demand deposits

 

$

1,277,302

 

$

1,211,946

 

$

1,524,895

 

Interest checking

 

373,145

 

366,191

 

273,270

 

Total transaction accounts

 

1,650,447

 

1,578,137

 

1,798,165

 

Non-transaction accounts:

 

 

 

 

 

 

 

Money market

 

1,165,336

 

1,135,307

 

1,182,324

 

Savings

 

100,505

 

108,223

 

136,822

 

Time deposits under $100,000

 

136,476

 

138,750

 

227,387

 

Time deposits over $100,000

 

266,379

 

284,729

 

334,324

 

Total non-transaction accounts

 

1,668,696

 

1,667,009

 

1,880,857

 

Total deposits

 

$

3,319,143

 

$

3,245,146

 

$

3,679,022

 

 

LOAN CONCENTRATION (unaudited)

 

 

 

As of the Dates Indicated

 

 

 

3/31/08

 

12/31/07

 

9/30/07

 

6/30/07

 

3/31/07

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

Loan Category:

 

 

 

 

 

 

 

 

 

 

 

Domestic:

 

 

 

 

 

 

 

 

 

 

 

Commercial*

 

$

855,228

 

$

858,708

 

$

864,114

 

$

882,426

 

$

792,877

 

Real estate-construction

 

661,782

 

717,419

 

795,272

 

839,564

 

918,086

 

Commercial real estate-mortgage*

 

2,361,365

 

2,335,099

 

2,144,323

 

2,124,225

 

2,124,768

 

Consumer

 

47,506

 

49,943

 

48,550

 

46,355

 

46,755

 

Foreign:

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

48,737

 

59,916

 

57,538

 

69,236

 

75,548

 

Other

 

906

 

1,206

 

5,879

 

5,848

 

6,342

 

Total gross loans, including loans held for sale

 

$

3,975,524

 

$

4,022,291

 

$

3,915,676

 

$

3,967,654

 

$

3,964,376

 

 


*Commercial and commercial real estate-mortgage include loans held for sale.

 

12



 

COMPONENTS OF ALLOWANCE FOR CREDIT LOSSES,

NONPERFORMING ASSETS AND CREDIT QUALITY

MEASURES (Unaudited)

 

 

 

As of or for the:

 

 

 

Quarter Ended

 

Year Ended

 

Quarter Ended

 

 

 

3/31/08

 

12/31/07

 

3/31/07

 

 

 

 

 

(Dollars in thousands)

 

 

 

ALLOWANCE FOR CREDIT LOSSES:

 

 

 

 

 

 

 

Allowance for loan losses

 

$

60,199

 

$

52,557

 

$

50,352

 

Reserve for unfunded loan commitments

 

8,671

 

8,471

 

8,271

 

Allowance for credit losses

 

$

68,870

 

$

61,028

 

$

58,623

 

 

 

 

 

 

 

 

 

NONPERFORMING ASSETS:

 

 

 

 

 

 

 

Nonaccrual loans

 

$

31,955

 

$

22,473

 

$

27,572

 

Other real estate owned

 

6,055

 

2,736

 

479

 

Total nonperforming assets

 

$

38,010

 

$

25,209

 

$

28,051

 

 

 

 

 

 

 

 

 

Allowance for credit losses to loans, net of unearned income

 

1.76

%

1.55

%

1.54

%

Allowance for credit losses to nonaccrual loans

 

215.52

%

271.6

%

212.6

%

Allowance for credit losses to nonperforming assets

 

181.19

%

242.1

%

209.0

%

Nonperforming assets to total loans, including loans held for sale, and other real estate owned

 

0.96

%

0.63

%

0.71

%

Nonaccrual loans to total loans, including loans held for sale

 

0.81

%

0.56

%

0.70

%

 

ALLOWANCE FOR CREDIT LOSSES ROLLFORWARD

AND NET CHARGE-OFF MEASUREMENT (unaudited)

 

 

 

As of or for the:

 

 

 

Quarter Ended

 

Year Ended

 

Quarter Ended

 

 

 

3/31/08

 

12/31/07

 

3/31/07

 

 

 

 

 

(Dollars in thousands)

 

 

 

Balance at beginning of period

 

$

61,028

 

$

61,179

 

$

61,179

 

Loans charged-off:

 

 

 

 

 

 

 

Commercial

 

(108

)

(2,091

)

(463

)

Real estate-construction

 

(17,565

)

(660

)

 

Real estate-mortgage

 

(838

)

(454

)

(22

)

Consumer

 

(38

)

(166

)

(36

)

Foreign

 

 

(1,414

)

 

Total loans charged-off

 

(18,549

)

(4,785

)

(521

)

 

 

 

 

 

 

 

 

Recoveries on loans charged-off:

 

 

 

 

 

 

 

Commercial

 

356

 

1,591

 

162

 

Real estate-mortgage

 

26

 

163

 

 

Consumer

 

9

 

122

 

103

 

Foreign

 

 

73

 

 

Total recoveries on loans charged-off

 

391

 

1,949

 

265

 

Net (charge-offs) recoveries

 

(18,158

)

(2,836

)

(256

)

Provision for credit losses

 

26,000

 

3,000

 

 

Reduction for loans sold

 

 

(2,461

)

(2,300

)

Additions due to acquisitions

 

 

2,146

 

 

Balance at end of period

 

$

68,870

 

$

61,028

 

$

58,623

 

 

 

 

 

 

 

 

 

Annualized net (charge-offs) recoveries to average loans

 

(1.82

)%

(0.07

)%

(0.02

)%

 

13



 

The Company has disclosed in this release certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investor’s overall understanding of the Company’s operating financial performance.  Management believes that these non-GAAP financial measures allow for additional transparency and are used by some investors, analysts and other users of the Company’s financial information as performance measures.  These non-GAAP financial measures are presented for supplemental informational purposes only for understanding the Company’s operating results and should not be considered a substitute for financial information presented in accordance with GAAP.  These non-GAAP financial measurers presented by the Company may be different from non-GAAP financial measures used by other companies.  The following table presents performance ratios in accordance with GAAP and a reconciliation of the non-GAAP financial measurements to the GAAP financial measurements.

 

Non GAAP Measurements (Unaudited)

 

 

 

Quarter Ended

 

Quarter Ended

 

Quarter Ended

 

In thousands, except per share data and percentages

 

March 31, 2008

 

December 31, 2007

 

March 31, 2007

 

Net (loss) earnings as reported

 

$

(272,723

)

$

17,059

 

$

28,546

 

Goodwill write-off

 

275,000

 

 

 

Net operating earnings

 

$

2,277

 

$

17,059

 

$

28,546

 

 

 

 

 

 

 

 

 

GAAP basic shares outstanding

 

27,145.2

 

27,645.0

 

28,867.2

 

Effect of restricted stock and dilutive stock options (a)

 

 

58.0

 

127.9

 

GAAP diluted shares outstanding

 

27,145.2

 

27,703.0

 

28,995.1

 

 

 

 

 

 

 

 

 

Operating earnings basic shares outstanding

 

27,145.2

 

27,645.0

 

28,867.2

 

Effect of restricted stock and dilutive stock options

 

18.1

 

58.0

 

127.9

 

Operating earnings diluted shares outstanding

 

27,163.3

 

27,703.0

 

28,995.1

 

 

 

 

 

 

 

 

 

GAAP basic and diluted earnings (loss) per share

 

$

(10.05

)

$

0.62

 

$

0.98

 

Net operating diluted earnings per share

 

$

0.08

 

$

0.62

 

$

0.98

 

 

 

 

 

 

 

 

 

GAAP return on average assets

 

(21.10

)%

1.32

%

2.10

%

Net operating return on average assets

 

0.18

%

1.32

%

2.10

%

 

 

 

 

 

 

 

 

GAAP return on average equity

 

(96.35

)%

5.86

%

9.91

%

Net operating return on average equity

 

0.80

%

5.86

%

9.91

%

 

 

 

 

 

 

 

 

Noninterest expense as reported

 

$

310,310

 

$

36,345

 

$

35,393

 

Goodwill write-off

 

(275,000

)

 

 

Operating noninterest expense

 

$

35,310

 

$

36,345

 

$

35,393

 

 

 

 

 

 

 

 

 

GAAP efficiency ratio

 

481.6

%

53.2

%

42.2

%

Net operating efficiency ratio

 

54.8

%

53.2

%

42.2

%

 


(a) Anti-dilutive for the quarter ended March 31, 2008.

 

14