Cascade Financial (CASB) Earns $1.6 Million in Third Quarter; Reports Strong Checking Deposit Growth
Cascade Financial Corporation (Nasdaq:CASB), parent company of Cascade Bank, today reported net income of $1.6 million for the third quarter of 2009. After adjustments for the preferred stock dividend and accretion of the issuance discount on the U.S. Treasury preferred stock, the Bank earned $1.0 million, or $0.09 per diluted share, in the third quarter of 2009, compared to a net loss of $6.6 million, or $0.55 per diluted share, in the third quarter a year ago. Dividends on preferred stock issued to the U.S. Treasury under the Capital Purchase Program for the quarter totaled $487,125, and the accretion of the issuance discount on preferred stock for the quarter was $105,000. In the third quarter last year, Cascade recorded an Other Than Temporary Impairment (OTTI) charge of $17.3 million on Fannie Mae and Freddie Mac preferred shares after the U.S. Government placed these companies into conservatorship. Excluding the OTTI charge, third quarter 2008 net income would have been $4.7 million.
“Cascade posted a solid quarter, returning to profitability with record checking deposit growth, controlled operating costs and a stable net interest margin, in spite of the drag of nonperforming loans,” stated Carol K. Nelson, President and CEO. “Checking deposits were up 89% year-over-year and 14% from the prior quarter, and the net interest margin expanded slightly from the previous quarter as core deposit growth helped lower our cost of funds. We continue to operate in a challenging lending environment and are taking every opportunity to strengthen our capital levels and have increased our total risk based capital to 13.01% from 12.62% in the second quarter.”
3Q09 Highlights: (compared to 3Q08) * Net income of $1.6 million, with income available to common shareholders of $1.0 million, or $0.09 per diluted common share * Compensation expense down 11% in spite of adding one new branch * Deposit mix improved with total checking account balances representing 32% of total deposits versus 17% * Total checking account balances increased 89% * Personal checking account balances grew 119% * Business checking account balances grew 56% * Loan portfolio mix improved with a 29% reduction in real estate construction loans * Total allowance for loan losses to total loans increased to 2.02%, up from 1.21% * Tier 1 capital ratio improved to 9.05% from 7.87% * Risk weighted capital ratio increased to 13.01% from 10.40%
Year to date, Cascade reported a net loss of $24.6 million, and a loss attributable to common stockholders of $26.4 million, or $2.18 per diluted share, compared to a net loss of $372,000 for the first nine months of 2008. During the second quarter of 2009, Cascade recorded an impairment charge of $11.7 million against its goodwill based upon an impairment analysis. The non-cash goodwill impairment charge represented the write-off of a portion of the goodwill recorded from a prior bank acquisition. The goodwill charge does not impact liquidity, operations, tangible capital or the Corporation’s regulatory capital ratios. The loan loss provision for the first nine months of 2009 was $36.2 million versus $4.8 million in the first nine months of 2008.
Credit Quality
“Asset quality trends are beginning to show signs of stabilization,” said Rob Disotell, Chief Credit Officer. “During the third quarter, Cascade had lower charge-offs, which have moderated after we aggressively wrote down the value of loans during the first half of 2009. Additionally, the pace of nonperforming loan growth has slowed. While Nonperforming Loans (NPLs) were up $11.2 million, Real Estate Owned (REO) and other repossessed assets were down $905,000 compared to the previous quarter.”
Nonperforming loans increased during the quarter to $125.7 million, or 10.21% of total loans, at September 30, 2009, compared to $114.4 million or 9.33% of total loans three months earlier.
The following table shows nonperforming loans versus total loans in each category:
Nonper
Balance at -forming NPL as a %
LOAN PORTFOLIO ($ in 000's) 9/30/2009 Loans (NPL) of Loans
--------------------------- ---------- ---------- ----------
Business $ 473,546 $ 8,624 2%
R/E construction
Spec construction 70,325 17,760 25%
Land acquisition and development 129,345 56,835 44%
Land 35,416 19,679 56%
Multifamily and
custom construction 17,594 -- 0%
Commercial construction 32,208 6,364 20%
---------- ----------
Total R/E construction 284,888 100,638 35%
Commercial R/E 193,652 13,459 7%
Multifamily 84,029 2,100 2%
Home equity/consumer 31,455 458 1%
Residential 163,151 408 0%
---------- ----------
Total $1,230,721 $ 125,687 10%
========== ==========
“During the quarter we saw good migration of nonperforming loans through the loan portfolio,” added Disotell. While $20.9 million in loans were placed on nonaccrual status, $6.0 million were paid off during the quarter, and $3.4 million were charged off. Additions to nonperforming loans were centered in:
* $8.1 million in loans to one business banking client secured by real estate * $6.4 million in commercial real estate construction loans on a retail building * $2.6 million in advances on existing spec construction loans to fund the completion of single family homes, with over $4.1 million in paydowns during the quarter * $1.9 million in net additions to multifamily loans Paydowns on loans on nonaccrual status during the quarter were centered in: * $4.1 million in spec construction loans through the sale of completed homes * $1.9 million in land acquisition and development through the sale of completed homes
Net additions to nonaccrual loans were $11.2 million for the quarter.
The following table shows the migration of nonperforming loans through the portfolio in each category: (9/30/09 compared to 6/30/09)
NONPER
-FORMING
LOANS Balance Additions Paydowns Charge-offs Balance
($ in at during during during Transfers at
000's) 9/30/2009 quarter quarter quarter to REO 6/30/2009
------------------- -------- -------- -------- -------- --------
Business $ 8,624 $ 8,098 $ (24) $ -- $ -- $ 550
R/E
construc
-tion
Spec
construc
-tion 17,760 2,640 (4,138) (986) -- 20,244
Land
acqui
-sition
and
develop
-ment 56,835 -- (1,870) (1,140) (239) 60,084
Land 19,679 788 -- (1,204) -- 20,095
Commercial
R/E 6,364 6,364 -- -- -- --
-------- -------- -------- -------- -------- --------
Total R/E
construc
-tion 100,638 9,792 (6,008) (3,330) (239) 100,423
Commercial
R/E 13,459 724 -- -- -- 12,735
Multifamily 2,100 1,850 -- -- -- 250
Home equity
/consumer 458 307 -- (55) (10) 216
Residential 408 140 (7) -- -- 275
-------- -------- -------- -------- -------- --------
Total $125,687 $ 20,911 $ (6,039) $ (3,385) $ (249) $114,449
======== ======== ======== ======== ======== ========
“Despite increased levels of home sales in the Puget Sound Region in recent months, the housing market remains fragile and continues to present challenges,” said Disotell. “We continue to build our allowance for loan losses with a year-to-date provision expense of $36.2 million compared to net charge-offs of $27.2 million and a third quarter provision expense of $4.0 million compared to net charge-offs of $3.4 million.” Net charge-offs were $18.5 million in the preceding quarter and $43,000 in the third quarter a year ago. At September 30, 2009, REO and other repossessed assets decreased to $7.0 million from $7.9 million at June 30, 2009.
The following table shows the change in REO and other repossessed assets during the quarter:
REO and other repossessed assets ($ in 000's)
---------------------------------------------
Balance at 6/30/09 $ 7,872
Additions 457
Sales (1,293)
Write-downs --
Loss on sales (69)
--------
Balance at 9/30/09 $ 6,967
========
Nonperforming assets were 8.05% of total assets at September 30, 2009, compared to 7.59% at the end of the preceding quarter, and 1.10% a year ago. The total allowance for loan losses, which includes the $75,000 allowance for off-balance sheet loan commitments, was $24.8 million at quarter-end, equal to 2.02% of total loans compared to 2.00% at June 30, 2009, and 1.21% as of September 30, 2008.
Loans delinquent 31-90 days totaled $1.1 million, or 0.09% of total loans at September 30, 2009, compared to $23.7 million, or 1.93% of total loans at June 30, 2009 and $171,000, or 0.01% of total loans at September 30, 2008. The bank had seven loans totaling $2.5 million that were 90 days or more past due and still accruing interest at September 30, 2009.
Loan Portfolio
“The modest increase in total loans was attributed to our builder loan program,” said Lars Johnson, Chief Financial Officer. “We continue to be reticent to lend on construction projects and commercial real estate in this economic environment.” Total loans increased 1%, or $17.7 million, on a year-over-year basis to $1.23 billion as of September 30, 2009. Total loans, however, remained relatively unchanged from the end of the previous quarter as Cascade further reduced its real estate construction concentrations.
The following table shows the changes in the loan portfolio in each category: (9/30/09 compared to 6/30/09 and 9/30/08)
Sept. 30, June 30, Sept. 30, One Year
LOANS ($ in 000's) 2009 2009 2008 Change
Business $ 473,546 $ 467,923 $ 473,213 0%
R/E construction 284,888 296,931 403,569 -29%
Commercial R/E 193,652 192,886 119,787 62%
Multifamily 84,029 91,554 74,535 13%
Home equity/consumer 31,455 30,919 29,659 6%
Residential 163,151 146,231 112,283 45%
---------- ---------- ----------
Total loans $1,230,721 $1,226,444 $1,213,046 1%
========== ========== ==========
Construction loans outstanding decreased 29% to $285 million at September 30, 2009, compared to $404 million a year ago. Commercial real estate loans increased 62% from year ago levels to $194 million, which includes $66.0 million in loans reclassified into that category as construction projects were completed and hit their lease up targets. Multifamily loans increased 13% from year ago levels to $84.0 million and business loans were unchanged compared to a year ago at $474 million. Home equity and consumer loans increased 6% to $31.5 million, while residential loans grew 45% to $163 million, compared to a year ago.
Further details on changes during the third quarter are as follows:
Net new
Balance at loans- Reclassifi- Transfers
LOANS ($ in 000's) 9/30/2009 payments cations to REO
------------------ ---------- ---------- ---------- ----------
Business $ 473,546 $ 5,623 $ -- $ --
R/E construction 284,888 (6,128) (2,346) (239)
Commercial R/E 193,652 1,326 (560) --
Multifamily 84,029 (7,525) -- --
Home equity/consumer 31,455 601 -- (10)
Residential 163,151 14,014 2,906 --
---------- ---------- ---------- ----------
Total loans 1,230,721 7,911 -- (249)
Deferred loan fees (3,204) 94 (370) --
Allowance for
loan losses (24,749) (4,000) 373 --
---------- ---------- ---------- ----------
Loans, net $1,202,768 $ 4,005 $ 3 $ (249)
========== ========== ========== ==========
Charge-offs Balance at
LOANS ($ in 000's) (1) 6/30/2009 Change
------------------ ---------- ---------- ----------
Business $ -- $ 467,923 1%
R/E construction (3,330) 296,931 -4%
Commercial R/E -- 192,886 0%
Multifamily -- 91,554 -8%
Home equity/consumer (55) 30,919 2%
Residential -- 146,231 12%
---------- ----------
Total loans (3,385) 1,226,444 0%
Deferred loan fees -- (2,928) 9%
Allowance for loan losses 3,368 (24,490) 1%
---------- ----------
Loans, net $ (17) $1,199,026 0%
========== ==========
(1) Excludes negative now accounts totaling $61,000 and recoveries
of $78,000
Investment Portfolio and Liquidity
Total assets increased by $36.3 million, or 2%, in the third quarter from the end of the second quarter and grew by $95.2 million, or 6%, year-over-year to $1.65 billion at September 30, 2009. The increase in interest-bearing deposits was $43.4 million on a sequential basis and $69.2 million on a year-over-year comparison. The investment portfolio increased $2.9 million over the preceding quarter and $26.1 million over the past twelve months to $281 million at September 30, 2009. “The mix of Available For Sale (AFS) securities compared to Held To Maturity (HTM) securities continued to shift as HTM securities have been called and replaced with securities designated as AFS,” added Johnson. “The primary motivation for this shift is to provide more flexibility in managing the securities portfolio.” All debt securities held in the investment portfolio are rated AAA.
Deposit Growth
Total deposits were up $31.4 million, or 3% from the prior quarter-end and up $40.2 million, or 4% compared to a year ago. Total checking account balances were up $41.0 million, or 14% from the prior quarter and up $154 million, or 89% compared to a year ago. Personal checking account balances grew by 119% or $108 million over the last twelve months and business checking balances grew 56% or $46.4 million during the same time period. “The robust growth in core deposits over the past twelve months has lowered our funding costs and demonstrates the effectiveness of our strong sales culture as well as continued success of the High Performance Checking Program,” said Nelson. The growth in business checking balances resulted from a combination of new accounts, higher business escrow account balances and the movement of public funds previously in money market accounts and CDs into insured checking accounts. CDs were down $5.8 million during the third quarter but were up $23.4 million on a year-over-year basis and brokered CDs were down $10.0 million at the quarter-end to $180 million.
The following table shows deposits in each category: (9/30/09 compared to 6/30/09 and 9/30/08)
Sept. 30, June 30, Sept. 30, One Year
DEPOSITS ($ in 000's) 2009 2009 2008 Change
Personal checking
accounts $ 198,766 $ 146,310 $ 90,772 119%
Business checking
accounts 128,846 140,345 82,485 56%
---------- ---------- ----------
Total checking accounts 327,612 286,655 173,257 89%
Savings and MMDA 128,918 132,704 266,560 -52%
CDs 576,133 581,937 552,688 4%
---------- ---------- ----------
Total deposits $1,032,663 $1,001,296 $ 992,505 4%
========== ========== ==========
Capital Management
Cascade remains well capitalized for regulatory purposes with a Risk Based Capital Ratio of 13.01% and Tier 1 Capital Ratio of 9.05% as of September 30, 2009. Tangible book value was $7.11 per common share at quarter-end, compared to $7.79 a year ago. Cascade’s tangible capital to assets ratio was 5.29% at quarter-end compared to 6.16% twelve months earlier.
In June 2009, Cascade announced that it would temporarily suspend its regular quarterly cash dividend on common stock to preserve capital.
Operating Results
Third quarter net interest income was down 15% to $10.9 million compared to $12.8 million for the third quarter of 2008, due primarily to the reversal of previously accrued interest on nonperforming loans as well as the increase in nonperforming loans compared to the third quarter a year ago.
Total other income increased 36% to $3.2 million for the quarter, compared to $2.3 million for the third quarter a year ago. Gain on securities sales was up $939,000.
Total other expenses were $7.9 million in the third quarter of 2009, compared to $7.2 million, excluding the $17.3 million OTTI charge, in the third quarter of 2008. There was an 11% reduction in compensation expense, even with one new branch, but this reduction was more than offset by a $319,000 increase in FDIC insurance, higher legal expenses associated with loan workouts, and an increase in REO expense.
For the first nine months of 2009, net interest income was $32.9 million, compared to $34.8 million for the first nine months of 2008. The impact of the increase in nonperforming assets is the primary cause for the lower year-to-date net interest income. Other income increased 29% to $9.1 million for the first nine months of 2009 compared to $7.0 million in the first nine months of 2008. The increase is primarily due to the $800,000 increase in gain on sale of securities and the $1.3 million increase in fair value gain on junior subordinated debentures. For the first nine months of the year, total other expenses excluding the 2Q09 goodwill impairment increased to $26.6 million compared to $21.4 million, excluding the 3Q08 OTTI, in the first nine months of 2008. The increase was largely due to the increase in FDIC insurance premiums, the FDIC special assessment, the loss on REO and REO expense.
The efficiency ratio, excluding the 2Q09 goodwill charge and 3Q08 OTTI charge, was 56.4% in the third quarter of 2009 compared to 76.6% in the preceding quarter and 47.3% in the third quarter a year ago. For the first nine months of 2009, the efficiency ratio, excluding the 2Q09 goodwill charge and 3Q08 OTTI charge, was 61.3% compared to 51.1% in the first nine months of 2008. This ratio was impacted by costs associated with REO, legal expenses and the FDIC special assessment.
Net Interest Margin
Cascade’s net interest margin was 3.03% for the third quarter of 2009, compared to 3.01% in the immediate prior quarter and 3.52% for the third quarter a year ago. “The drag from nonperforming loans, including the reversal of previously accrued interest, continues to weigh on net interest income. Our net interest margin improved slightly during the third quarter compared to the preceding quarter as the reduction in our deposit costs more than offset the drag from nonperforming loans,” said Johnson. “Our yield on earning assets declined by three basis points compared to the preceding quarter, while the cost of interest-bearing liabilities decreased by eleven basis points driven by a decline in the cost of deposits by the same amount. This eight basis point improvement in the interest spread only translated into a two basis point improved margin because earning assets were a smaller percentage of total assets due to the increase in nonperforming assets.” For the first nine months of 2009, the net interest margin was 3.02%, compared to 3.24% for the first nine months of 2008.
The following table depicts Cascade’s yield on assets, its cost of funds and the resulting spread and margin:
3Q09 2Q09 1Q09 4Q08 3Q08 2Q08 1Q08 4Q07 3Q07
-----------------------------------------------------
Asset yield 5.60% 5.63% 5.83% 6.07% 6.67% 6.31% 6.62% 7.20% 7.29%
Liability cost 2.63% 2.74% 3.02% 3.33% 3.44% 3.51% 4.03% 4.32% 4.42%
Spread 2.97% 2.89% 2.81% 2.74% 3.23% 2.80% 2.59% 2.88% 2.87%
Margin 3.03% 3.01% 3.03% 3.01% 3.52% 3.17% 3.02% 3.38% 3.37%
Regulatory Matters
Cascade Bank recently received notice from the FDIC that based on an off-site review of its financial information, the Bank will be subject to a corrective action program based upon the finalization of a full scope examination completed in June 2009. The concern was primarily focused on the deterioration of asset quality, concentration of credit in the real estate area, and liquidity. In light of the concern, the Bank was instructed to take steps to preserve capital; provide prior notice to the FDIC of certain management changes; seek prior regulatory approval of any severance or any golden parachute payments; and obtain a non-objection from the regulators before paying any cash dividend.
Conference Call
Cascade’s management team will host an analyst call on Wednesday, October 21, 2009, at 11:00 a.m. PDT (2:00 p.m. EDT) to discuss third quarter results. Interested investors may listen to the call live or via replay at www.cascadebank.com under shareholder information. Investment professionals are invited to dial (480) 629-9818, using access code 4164643 to participate in the live call. A replay will be available for a week at (303) 590-3030, using access code 4164643.
About Cascade Financial
Established in 1916, Cascade Bank, the only operating subsidiary of Cascade Financial Corporation, is a state chartered commercial bank headquartered in Everett, Washington. Cascade Bank has proudly served the Puget Sound region for over 90 years and operates 22 full service branches in Everett, Lynnwood, Marysville, Mukilteo, Shoreline, Smokey Point, Issaquah, Clearview, Woodinville, Lake Stevens, Bellevue, Snohomish, North Bend, Burlington and Edmonds.
In June 2009, Cascade was ranked #55 on the Seattle Times’ Northwest 100 list of public companies. In April 2009, Cascade was ranked #5 on the Puget Sound Business Journal’s list of largest bank companies headquartered in the Puget Sound area.
Non-GAAP Financial Measures
This news release contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (GAAP). These measures include tangible book value per share, efficiency ratio and tangible capital/assets ratio. These measures should not be construed as a substitute for GAAP measures; they should be read and used in conjunction with Cascade’s GAAP financial information. A reconciliation of the included non-GAAP financial measures to GAAP measures is included elsewhere in this release.
Forward-Looking Statements
Certain of the statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Reform Act. CASB’s actual results may differ materially from those included in the forward-looking statements. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “intend,” “may increase,” “may fluctuate,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” and “could.” These forward-looking statements involve risks and uncertainties including, but not limited to, economic conditions, portfolio growth, the credit performance of the portfolios, including bankruptcies, and seasonal factors; changes in general economic conditions including the performance of financial markets, prevailing inflation and interest rates, realized gains from sales of investments, gains from asset sales, and losses on commercial lending activities; results of various investment activities; the effects of competitors’ pricing policies, of changes in laws and regulations on competition and of demographic changes on target market populations’ savings and financial planning needs; industry changes in information technology systems on which we are highly dependent; failure of acquisitions to produce revenue enhancements or cost savings at levels or within the time frames originally anticipated or unforeseen integration difficulties; the adoption by CASB of an FFIEC policy that provides guidance on the reporting of delinquent consumer loans and the timing of associated credit charge-offs for financial institution subsidiaries; and the resolution of legal proceedings and related matters. In addition, the banking industry in general is subject to various monetary and fiscal policies and regulations, which include those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and state regulators, whose policies and regulations could affect CASB’s results. These statements are representative only on the date hereof, and CASB undertakes no obligation to update any forward-looking statements made.
BALANCE SHEET
(Dollars in
thousands Three
except per Sept. 30, June 30, Month Sept. 30, One Year
share amounts) 2008 2009 Change 2008 Change
---------- ---------- -------- ---------- --------
(Unaudited)
ASSETS
Cash and due
from banks $ 4,401 $ 13,976 -69% $ 12,822 -66%
Interest
-bearing
deposits 69,838 26,403 165% 611 NM
Securities
available-for
-sale 242,136 227,924 6% 102,313 137%
Federal Home
Loan Bank
(FHLB) stock 11,920 11,920 0% 11,920 0%
Securities held
-to-maturity 26,912 38,243 -30% 140,615 -81%
---------- ---------- ----------
Total
securities 280,968 278,087 1% 254,848 10%
Loans
Business 473,546 467,923 1% 473,213 0%
R/E
construction 284,888 296,931 -4% 403,569 -29%
Commercial R/E 193,652 192,886 0% 119,787 62%
Multifamily 84,029 91,554 -8% 74,535 13%
Home equity
/consumer 31,455 30,919 2% 29,659 6%
Residential 163,151 146,231 12% 112,283 45%
---------- ---------- ----------
Total loans 1,230,721 1,226,444 0% 1,213,046 1%
Deferred
loan fees (3,204) (2,928) 9% (3,248) -1%
Allowance for
loan losses (24,749) (24,490) 1% (14,531) 70%
---------- ---------- ----------
Loans, net 1,202,768 1,199,026 0% 1,195,267 1%
Real estate
owned (REO)
and other
repossessed
assets 6,967 7,872 -11% 1,446 382%
Premises and
equipment 15,009 15,319 -2% 15,676 -4%
Bank owned life
insurance 24,275 24,052 1% 23,388 4%
Deferred tax
asset 6,426 7,167 -10% 8,437 -24%
Other assets 23,062 25,486 -10% 14,173 63%
Goodwill 12,885 12,885 0% 24,585 -48%
Core deposit
intangible,
net 388 423 -8% 529 -27%
---------- ---------- ----------
Total assets $1,646,987 $1,610,696 2% $1,551,782 6%
========== ========== ==========
LIABILITIES
AND EQUITY
Liabilities:
Deposits
Personal
checking
accounts $ 198,766 $ 146,310 36% $ 90,772 119%
Business
checking
accounts 128,846 140,345 -8% 82,485 56%
---------- ---------- ----------
Total checking
accounts 327,612 286,655 14% 173,257 89%
Savings and
money market
accounts 128,918 132,704 -3% 266,560 -52%
Certificates
of deposit 576,133 581,937 -1% 552,688 4%
---------- ---------- ----------
Total deposits 1,032,663 1,001,296 3% 992,505 4%
FHLB advances 239,000 239,000 0% 255,000 -6%
Securities sold
under
agreement to
repurchase 147,455 146,600 1% 120,983 22%
Federal Reserve
borrowings 60,000 60,000 0% 30,000 100%
Other
liabilities 7,489 7,307 2% 8,194 -9%
Jr. Sub. Deb.
(Trust
Preferred
Securities) 15,465 15,465 0% 15,465 0%
Jr. Sub. Deb.
(Trust
Preferred
Securities),
at fair value 8,357 8,708 -4% 10,535 -21%
---------- ---------- ----------
Total
liabilities 1,510,429 1,478,376 2% 1,432,682 5%
---------- ---------- ----------
Stockholders'
equity:
Preferred stock 36,931 36,826 0% -- NM
Common stock
and paid in
capital 41,129 41,054 0% 40,857 1%
Retained
earnings 54,503 53,430 2% 79,753 -32%
Warrants issued
to U.S.
Treasury 2,389 2,389 0% -- NM
Accumulated
other
comprehensive
gain (loss),
net 1,606 (1,379) NM (1,510) NM
---------- ---------- ----------
Total
stockholders'
equity 136,558 132,320 3% 119,100 15%
---------- ---------- ----------
Total
liabilities
and
stockholders'
equity $1,646,987 $1,610,696 2% $1,551,782 6%
========== ========== ==========
STATEMENT OF
OPERATIONS
(Dollars in Quarter Quarter Quarter
thousands Ended Ended Three Ended
except per Sept. 30, June 30, Month Sept. 30, One Year
share amounts) 2009 2009 Change 2008 Change
(Unaudited) ---------- ---------- -------- ---------- --------
Interest
income $ 20,189 $ 20,215 0% $ 24,345 -17%
Interest
expense 9,271 9,392 -1% 11,508 -19%
---------- ---------- ----------
Net interest
income 10,918 10,823 1% 12,837 -15%
Provision for
loan losses 4,000 18,300 -78% 1,250 220%
---------- ---------- ----------
Net interest
income (loss)
after
provision for
loan losses 6,918 (7,477) NM 11,587 -40%
Other income:
Checking fees 1,342 1,270 6% 1,328 1%
Service fees 237 286 -17% 280 -15%
Bank owned
life
insurance 239 208 15% 271 -12%
Gain on sales
/calls of
securities 852 226 277% (87) NM
Gain on sale
of loans 23 98 -77% 36 -36%
Fair value
gains 351 12 NM 389 -10%
Other 123 120 2% 109 13%
---------- ---------- ----------
Total other
income 3,167 2,220 43% 2,326 36%
Total income
(loss) 10,085 (5,257) NM 13,913 -28%
---------- ---------- ----------
Other expenses:
Compensation
expense 3,382 3,587 -6% 3,789 -11%
Other
operating
expenses 3,989 3,942 1% 3,187 25%
FDIC insurance
and WPDPC
assessment 505 1,241 -59% 186 172%
Loss on sale
of REO 69 1,225 -94% 3 NM
OTTI charge -- -- NM 17,338 NM
---------- ---------- ----------
Other expenses
excluding
goodwill
impairment 7,945 9,995 -21% 24,503 -68%
Goodwill
impairment -- 11,700 NM -- NM
---------- ---------- ----------
Total other
expenses 7,945 21,695 -63% 24,503 -68%
---------- ---------- ----------
Net income
(loss) before
provision
(benefit) for
income tax 2,140 (26,952) NM (10,590) NM
Provision
(benefit) for
income tax 507 (5,552) NM (3,971) NM
---------- ---------- ----------
Net income
(loss) 1,633 (21,400) NM (6,619) NM
Dividends on
preferred
stock 487 487 0% -- NM
Accretion of
issuance
discount on
preferred
stock 105 105 0% -- NM
---------- ---------- ----------
Income (loss)
available for
common
stockholders $ 1,041 $ (21,992) NM $ (6,619) NM
========== ========== ==========
EARNINGS PER
SHARE
INFORMATION
Earnings per
share, basic $ 0.09 $ (1.82) NM $ (0.55) NM
Earnings per
share,
diluted $ 0.09 $ (1.82) NM $ (0.55) NM
Weighted
average number
of shares
outstanding
Basic 12,128,257 12,110,434 12,059,480
Diluted 12,128,257 12,110,434 12,140,168
Nine Nine
Months Months
STATEMENT OF OPERATIONS Ended Ended Nine
(Dollars in thousands except per Sept. 30, Sept. 30, Month
share amounts) 2009 2008 Change
---------- ---------- --------
(Unaudited)
Interest income $ 61,814 $ 70,152 -12%
Interest expense 28,954 35,395 -18%
---------- ----------
Net interest income 32,860 34,757 -5%
Provision for loan losses 36,175 4,840 647%
---------- ----------
Net interest (loss) income after
provision for loan losses (3,315) 29,917 -111%
Other income:
Checking fees 3,724 3,640 2%
Service fees 772 825 -6%
Bank owned life insurance 687 790 -13%
Gain on sales/calls of securities 1,196 396 202%
Gain on sale of loans 160 119 34%
Fair value gains 2,153 887 143%
Other 359 340 6%
---------- ----------
Total other income 9,051 6,997 29%
Total income 5,736 36,914 -84%
---------- ----------
Other expenses:
Compensation expense 10,575 11,039 -4%
Other operating expenses 11,281 9,923 14%
FDIC insurance and WPDPC assessment 2,505 385 551%
Loss on sale of REO 1,348 3 NM
OTTI charge 858 17,338 -95%
---------- ----------
Other expenses excluding
goodwill impairment 26,567 38,688 -31%
Goodwill impairment 11,700 -- NM
---------- ----------
Total other expenses 38,267 38,688 -1%
---------- ----------
Net loss before benefit
for income tax (32,531) (1,774) NM
Benefit for income tax (7,947) (1,402) 467%
---------- ----------
Net loss (24,584) (372) NM
Dividends on preferred stock 1,456 -- NM
Accretion of issuance discount
on preferred stock 315 -- NM
---------- ----------
Loss attributable to common
stockholders $ (26,355) $ (372) NM
========== ==========
EARNINGS PER SHARE INFORMATION
Earnings per share, basic $ (2.18) $ (0.03) NM
Earnings per share, diluted $ (2.18) $ (0.03) NM
Weighted average number of
shares outstanding
Basic 12,113,623 12,047,700
Diluted 12,113,623 12,168,009
(Dollars in thousands except per share amounts)(Unaudited)
Nine Nine
Quarter Quarter Quarter Months Months
PERFORMANCE Ended Ended Ended Ended Ended
MEASURES Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
AND RATIOS 2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
Return on
average
common
equity 6.77% -80.68% -20.69% -30.08% -0.39%
Return on
average
assets 0.40% -5.33% -1.69% -2.02% -0.03%
Efficiency
ratio* 56.41% 76.63% 47.25% 61.34% 51.13%
Net
interest
margin 3.03% 3.01% 3.52% 3.02% 3.24%
*Excludes goodwill and OTTI charges for 6/30/09
and 9/30/08 respectively
Nine Nine
Quarter Quarter Quarter Months Months
Ended Ended Ended Ended Ended
AVERAGE Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
BALANCES 2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
Average
assets $1,634,855 $1,611,721 $1,556,771 1,626,966 1,519,073
Average
earning
assets 1,430,829 1,440,316 1,452,526 1,453,728 1,430,815
Average
total
loans 1,231,888 1,247,475 1,201,676 1,246,130 1,168,611
Average
deposits 1,024,489 986,945 988,905 995,071 961,859
Average
equity
(including
preferred
stock) 133,375 142,861 127,936 145,728 126,369
Average
common
equity
(excluding
preferred
stock) 96,513 106,102 127,936 108,961 126,369
Average
tangible
common
equity
(excluding
pref stock
and good
will) 83,223 92,776 102,804 91,778 101,202
Sept. 30, June 30, Sept. 30,
EQUITY ANALYSIS 2009 2009 2008
---------- ---------- ----------
Total equity $ 136,558 $ 132,320 $ 119,100
Less: senior preferred stock 36,931 36,826 --
---------- ---------- ----------
Total common equity 99,627 95,494 119,100
Less: goodwill and intangibles 13,273 13,308 25,114
---------- ---------- ----------
Tangible common equity $ 86,354 $ 82,186 $ 93,986
Common stock outstanding 12,146,080 12,110,434 12,071,032
Book value per common share $ 8.20 $ 7.89 $ 9.87
Tangible book value
per common share $ 7.11 $ 6.79 $ 7.79
Sept. 30, June 30, Sept. 30,
ASSET QUALITY 2009 2009 2008
---------- ---------- ----------
Nonperforming loans (NPLs) $ 125,687 $ 114,449 $ 15,697
Nonperforming loans/total loans 10.21% 9.33% 1.29%
REO and other repossessed assets $ 6,967 $ 7,872 $ 1,446
Nonperforming assets $ 132,654 $ 122,321 $ 17,143
Nonperforming assets/total assets 8.05% 7.59% 1.10%
Net loan charge-offs in
the quarter $ 3,368 $ 18,512 $ 43
Net charge-offs in the quarter
/total loans 0.27% 1.51% 0.00%
Allowance for loan losses $ 24,749 $ 24,490 $ 14,531
Plus: Allowance for off-balance
sheet commitments 75 72 107
---------- ---------- ----------
Total allowance for loan losses $ 24,824 $ 24,562 $ 14,638
Total allowance for loan losses
/total loans 2.02% 2.00% 1.21%
Total allowance for loan losses
/nonperforming loans 20% 21% 93%
Capital/asset ratio (inc.
Jr. Sub. Deb.) 9.81% 9.77% 9.29%
Capital/asset ratio (Tier 1, inc.
Jr. Sub. Deb.) 9.05% 9.10% 7.87%
Tangible cap/asset ratio
(ex. Jr. Sub. Deb. and preferred
stock) 5.29% 5.15% 6.16%
Risk based capital/risk
weighted asset ratio 13.01% 12.62% 10.40%
Quarter Quarter Quarter
Ended Ended Ended
Sept. 30, June 30, Sept. 30,
INTEREST SPREAD ANALYSIS 2009 2009 2008
---------- ---------- ----------
Yield on total loans 5.51% 5.57% 6.82%
Yield on investments 4.38% 4.49% 5.38%
Yield on earning assets 5.60% 5.63% 6.67%
Cost of deposits 1.51% 1.62% 2.59%
Cost of FHLB advances 4.35% 4.33% 4.30%
Cost of Federal Reserve borrowings 0.25% 0.30% 2.37%
Cost of securities sold under
agreement to repurchase 5.89% 5.74% 5.32%
Cost of Jr. Sub. Debentures 8.70% 8.79% 8.00%
Cost of interest-bearing
liabilities 2.63% 2.74% 3.44%
Net interest spread 2.97% 2.89% 3.23%
Net interest margin 3.03% 3.01% 3.52%
RECONCILIATION TO NON-GAAP FINANCIAL MEASURES*
(Dollars in thousands)
(Unaudited)
Quarter Ended Nine Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
AVERAGE
TANGIBLE
COMMON
EQUITY
Income
(loss)
available
for common
stock
-holders $ 1,041 $ (21,992) $ (6,619) $ (26,355) $ (372)
Less
goodwill
impairment -- 11,700 -- 11,700 --
---------- ---------- ---------- ---------- ----------
Income
(loss)
available
for common
stock
-holders
excluding
goodwill
impair
-ment $ 1,041 $ (10,292) $ (6,619) $ (14,655) $ (372)
Average
tangible
common
equity
(excluding
preferred
stock) $ 83,223 $ 92,776 $ 102,804 $ 91,778 $ 101,202
EFFICIENCY
RATIO
Net
interest
income $ 10,918 $ 10,823 $ 12,837 $ 32,860 $ 34,757
Other
income 3,167 2,220 2,326 9,051 6,997
---------- ---------- ---------- ---------- ----------
Total
income $ 14,085 $ 13,043 $ 15,163 $ 41,911 $ 41,754
Total other
expenses $ 7,945 $ 21,695 $ 24,503 $ 38,267 $ 38,688
OTTI $ -- $ -- $ 17,338 $ 858 $ 17,338
Goodwill
impair
-ment $ -- $ 11,700 $ -- $ 11,700 $ --
---------- ---------- ---------- ---------- ----------
Total other
expenses
(excluding
OTTI and
goodwill
impair
-ment) $ 7,945 $ 9,995 $ 7,165 $ 25,709 $ 21,350
Efficiency
ratio 56.41% 76.63% 47.25% 61.34% 51.13%
TANGIBLE
COMMON
EQUITY
RATIO
Total
assets $1,646,987 $1,610,696 $1,551,782
Less
goodwill
and
intang
-ibles 13,273 13,308 25,114
---------- ---------- ----------
Total
tangible
assets $1,633,714 $1,597,388 $1,526,668
Tangible
common
equity $ 86,354 $ 82,186 $ 93,986
Tangible
cap/asset
ratio (ex.
Jr. Sub
Deb and
preferred
stock) 5.29% 5.15% 6.16%
*Management believes that the presentation of non-GAAP results
provides useful information to investors regarding the effects on
the Company's reported results of operations.
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