Wilshire Bancorp Reports Net Income of $15.2 Million or $0.21 Earnings per Share for Fourth Quarter 2012

LOS ANGELES, Jan. 23, 2013 (GLOBE NEWSWIRE) -- Wilshire Bancorp, Inc. (Nasdaq:WIBC) (the "Company"), the holding company for Wilshire State Bank (the "Bank"), today reported net income available to common shareholders of $15.2 million, or $0.21 per diluted common share, for the quarter ended December 31, 2012. This compares to net income available to common shareholders of $5.8 million, or $0.08 per common share, for the same period of the prior year, and net income of $38.5 million, or $0.54 per common share, for the third quarter of 2012. The increase in net income from the fourth quarter of 2011 is primarily attributable to a $12.0 million negative provision for losses on loans and loan commitments. The decline in net income from the third quarter of 2012 is primarily attributable to the return to a normalized tax provision.

For the full year 2012, the Company reported net income available to common shareholders of $93.7 million, or $1.31 per diluted common share, compared with a net loss of $34.0 million, or ($0.61) per share, for the full year 2011.

Jae Whan (J.W.) Yoo, President and CEO of Wilshire Bancorp, said, "We ended 2012 with another strong quarter, which contributed to the most profitable year in the history of the Company. Our new business development efforts continue to gain momentum, as we had $264 million in loan originations during the fourth quarter, which represents our highest level of loan production in several years. At the same time, our credit quality continues to show strong improvement with non-covered non-accrual loans declining by 32% from the end of the prior quarter. This improvement reflects our effective management of problem assets, which is resulting in a steady migration of non-accrual loans back to accrual status and the continued pay-down of outstanding problem loans.

"As we begin 2013, we are optimistic that we will continue to generate solid profitability. We expect to continue seeing good demand for CRE loans, and we believe the investments we have made to build our commercial, SBA, and residential real estate lending businesses will continue to generate strong loan production this year. In addition, we continue to have a significant amount of excess capital that we can utilize to create additional value for shareholders going forward," said Mr. Yoo.

Q4 2012 Summary:

• Net income available to common shareholders of $15.2 million or $0.21 per diluted share
• Loans receivable totaled $2.01 billion at December 31, 2012, an increase of 3.0% from $1.95 billion at September 30, 2012
• Loan originations for the fourth quarter of 2012 totaled $264.4 million, compared to total loan originations of $209.2 million for the third quarter of 2012
• Improved deposit mix with non-interest-bearing demand deposits increasing to 27.0% of total deposits at December 31, 2012 from 24.8% at September 30, 2012
• Non-covered non-accrual loans declined 31.7% and non-covered delinquencies declined 56.8% from end of prior quarter
• Non-covered classified and criticized loans declined 4.7% and 12.6%, respectively, from Q3 2012 to Q4 2012
• Improved credit quality and reduced gross charge-offs resulted in a $12.0 million negative provision for losses on loans and loan commitments for Q4 2012

STATEMENT OF OPERATIONS

Net Interest Income and Margin

Net interest income before credit for losses on loans and loan commitments totaled $25.6 million in the fourth quarter of 2012, an increase of 1.6% from $25.2 million for the fourth quarter of 2011, and unchanged from the third quarter of 2012. The increase from the prior year was primarily due to a decline in interest expense on both deposits and borrowings.

Net interest margin was 4.33% for the fourth quarter of 2012, compared to 4.17% in the fourth quarter of 2011, and 4.35% for the third quarter of 2012. The decrease in net interest margin from the third quarter of 2012 was primarily due to lower yields on loans, partially offset by a reduction in the cost of deposits and a reduction in interest earning cash at the Federal Reserve Bank.

Loan yields decreased to 5.54% for the fourth quarter of 2012 from 5.73% for the third quarter of 2012 due to the large amount of loans that were originated at rates that were lower than that of the existing portfolio, due to the low interest rate environment and competitive landscape within the banking industry. The total cost of interest-bearing deposits declined to 0.79% for the fourth quarter of 2012, down from 0.87% for the third quarter of 2012. Cost of total deposits was reduced to 0.59% for the fourth quarter of 2012, compared to 0.66% during the previous quarter. The reduction in deposit rates was a result of declines in deposit costs across all categories combined with an increase in demand deposits as a percentage of total deposits.

Non-Interest Income

Total non-interest income was $6.7 million for the fourth quarter of 2012, compared to $5.8 million for the fourth quarter of 2011, and $6.6 million for third quarter of 2012. The major categories of non-interest income in the fourth quarter of 2012 were relatively unchanged from the prior quarter. Other non-interest income for the fourth quarter of 2012 slightly increased compared to prior quarters due to an increase in loan servicing income.

The $1.2 million in net gains on sales of loans recognized in the fourth quarter of 2012 represents $1.1 million in gains from the sale of SBA loans, and $84 thousand in gains from the sale of mortgage and other loans.

Non-Interest Expense

Total non-interest expense was $20.7 million for the fourth quarter of 2012, compared with $16.2 million for the fourth quarter of 2011, and $18.3 million for the third quarter of 2012. The increase in total non-interest expense for the fourth quarter of 2012 compared to prior quarters was primarily due to a higher impairment charge against the FDIC indemnification asset.

During the fourth quarter of 2012, the Company recorded an additional impairment of the FDIC indemnification asset amounting to $3.9 million. The impairment reflected the continuing overall improved credit quality in the covered loan portfolio. The FDIC indemnification asset balance at December 31, 2012, after reflecting the impairment charge of $3.9 million, was $5.4 million.

Total salaries and employee benefits expense was $7.9 million in the fourth quarter of 2012, compared with $7.1 million in the fourth quarter of 2011, and $9.4 million in the third quarter of 2012. The decrease from the prior quarter was primarily due to a reduction in bonus accruals recorded during the fourth quarter of 2012. Compared to the fourth quarter of 2011, salaries and benefits for the fourth quarter of 2012 increased primarily due to an increase in the number of employees.

Other non-interest expense for the fourth quarter of 2012 totaled $6.2 million, compared with $6.5 million in the fourth quarter of 2011, and $4.4 million for the third quarter of 2012. The increase from the prior quarter was primarily attributable to increased professional fees and other loan expenses.

The Company's operating efficiency ratio was 64.1% for the fourth quarter of 2012, compared with 52.4% for the fourth quarter of 2011 and 57.0% for the third quarter of 2012. The increase in efficiency ratio for the fourth quarter of 2012 compared to prior quarters is largely due to the $3.9 million impairment charge on the FDIC indemnification asset and the increase in other non-interest expense.

Tax Provision

For the fourth quarter of 2012, the Company recorded a provision for income taxes totaling $8.4 million, reflecting an effective tax rate of 35.6%. This reflects the Company's return to a more normalized effective tax rate following several quarters of recording no tax provision or a tax benefit due to the reversal of the valuation allowance that had been established against the Company's deferred tax asset.

BALANCE SHEET

Total gross loans, including loans held-for-sale, were $2.16 billion at December 31, 2012, compared to $2.09 billion at September 30, 2012. The increase in total gross loans during the fourth quarter of 2012 was primarily due to the increase in loan originations during the quarter.

As previously disclosed, upon acquiring certain assets and liabilities of the former Mirae Bank, the Company entered into a loss sharing agreement with the FDIC whereby the FDIC has agreed to share in losses on assets covered under the agreement. The assets covered by the loss sharing agreement include loans and foreclosed loan collateral existing on June 26, 2009 and acquired from Mirae Bank. As a result, loans acquired through the acquisition of Mirae Bank are identified as "covered" loans, and those that were originated at Wilshire are "non-covered" loans or "legacy Wilshire" loans.

The following table shows "covered" and "non-covered" gross loans (excluding loan fees and allowance for loan losses) by loan type:

Loan originations for the fourth quarter of 2012 totaled $264.4 million, compared to total loan originations of $209.2 million for the third quarter of 2012.  The increase in total loan originations from the prior quarter was attributable to an increase in originations of commercial real estate loans and SBA loans.

The following table shows quarterly loan originations by loan type:

Total SBA loans held-for-sale at the end of the fourth quarter of 2012 totaled $72.8 million compared to $51.6 million at the end of the previous quarter. The remaining $73.2 million in loans held-for-sale at December 31, 2012 were comprised entirely of mortgage loans. The decision to retain or sell SBA loan production will be made on a quarter-to-quarter basis, dependent upon pricing in the secondary market and the Company's liquidity needs. During the fourth quarter of 2012, the Company sold approximately $9.8 million in SBA loans.

Total OREO was $2.1 million at December 31, 2012, compared with $2.3 million at September 30, 2012. Outflow from OREO during the fourth quarter of 2012 consisted of 1 sold property totaling approximately $300 thousand. Inflow into OREO during the fourth quarter of 2012 consisted of 1 property totaling approximately $100 thousand.

Total deposits were $2.17 billion at December 31, 2012, unchanged from $2.17 billion at September 30, 2012. Increases in non-interest bearing demand deposits enabled the Company to run off higher costing deposits, resulting in an overall improved deposit mix. Non-interest bearing deposits accounted for 27% of total deposits at December 31, 2012, an increase from 23% at the end of the prior year.

FHLB borrowings increased to $150.0 million at the end of the fourth quarter of 2012, compared to $60.0 million at the end of the fourth quarter of 2011. There were no borrowings outstanding at the end of the third quarter of 2012. The increase in FHLB borrowings was primarily to fund loan originations.

During the third quarter of 2012, $10.0 million in subordinated debentures issued by Wilshire State Bank was redeemed. An additional $15.5 million in subordinated debentures issued by Wilshire Bancorp were redeemed during the fourth quarter of 2012. The interest rate of the junior subordinated debentures redeemed during the fourth quarter of 2012 was approximately 3.24% at the time of the redemption. At December 31, 2012, $61.9 million in subordinated debentures remained outstanding, all previously issued by Wilshire Bancorp. 

CREDIT QUALITY

The Company has experienced improving credit trends for over a year with declining trends in non-performing loans, classified loans, delinquencies, and charge-offs. In light of the continued improvements in credit quality, the Company recorded a negative provision for losses on loans and loan commitments of $12.0 million in the fourth quarter of 2012. The allowance for loan losses totaled $63.3 million, or 3.15% of gross loans (excluding loans held-for-sale), at December 31, 2012, compared to $74.4 million, or 3.81% of gross loans (excluding loans held-for-sale) at September 30, 2012. The coverage ratio of the allowance for loan losses to non-performing assets was 210.7% at December 31, 2012, compared with 180.7% at September 30, 2012. Allowance coverage of legacy Wilshire loans (excluding loans held-for-sale) was 3.33% at December 31, 2012, compared with 4.08% at September 30, 2012.

Non-Accrual Loans

At December 31, 2012, total non-covered non-accrual loans were $23.0 million, or 1.13% of gross non-covered loans, compared to $33.7 million, or 1.72% of gross non-covered loans, at September 30, 2012. Non-covered non-accrual loans experienced a 31.7% decline from the third to fourth quarter of 2012.

The following table shows "covered" and "non-covered" non-accrual loans by loan type:

The inflow into total (covered and non-covered) non-accrual loans was $4.5 million in the fourth quarter of 2012, compared with inflow of $5.3 million in the third quarter of 2012. The fourth quarter of 2012 represented the lowest level of inflow to non-accrual status experienced by the Bank in the past several years. Total outflow from total non-accrual loans was $15.5 million during the fourth quarter of 2012, compared with $7.9 million for the third quarter of 2012. The increase in outflow of non-accrual loans was largely due to $8.4 million in loans that were paid-off and $2.8 million in loans that migrated back to current status. The remaining $4.3 million in outflows were comprised of payments, amortizations, note sales, charge-offs, and outflow to OREO.

Troubled Debt Restructured Loans

At December 31, 2012, total non-covered troubled debt restructured loans or "TDR loans", were $29.7 million, essentially unchanged from $29.8 million at September 30, 2012. 

Total TDR loans by loan category are shown in the table below:

Of the total $35.7 million in TDR loans at December 31, 2012, $6.5 million were also classified as non-accrual, of which $4.0 million were non-covered. The remaining TDR loans were performing in accordance with their modified terms. Inflow into TDR declined to $903 thousand for the fourth quarter of 2012 compared to $9.4 million during the previous quarter. Outflow from TDR increased slightly to $1.4 million during the fourth quarter 2012, compared to $1.1 million during the third quarter of 2012.

Loan Delinquencies (Excluding Non-Accrual Loans)

At December 31, 2012, total non-covered loan delinquencies were $3.6 million, compared with $8.4 million at September 30, 2012. Non-covered delinquent loans declined by 56.8% from the third quarter of 2012 to the fourth quarter of 2012, and represented the lowest level of delinquencies in several years.

Delinquent loans by days past due are reflected in the table below: 

Total inflow into loan delinquencies was $2.5 million in the fourth quarter of 2012, compared with $8.6 million in the prior quarter. Total outflow from loan delinquencies was $8.8 million in the fourth quarter of 2012, compared with $9.6 million in the prior quarter. The $8.8 million in fourth quarter outflows consisted of $3.6 million in loans that migrated to current status, $1.9 million that were sold, and $1.8 million in delinquencies that migrated to non-accrual status, with the remainder either being paid-down or charged-off.

Of the total $4.2 million in delinquent loans at December 31, 2012, $2.7 million was comprised of delinquent real estate secured loans and $1.5 million consisted of delinquent commercial and industrial loans. Over 70% of total delinquent loans at December 31, 2012 were past due less than 60 days.

Loan Classifications

At December 31, 2012, total non-covered classified loans (loans graded substandard, doubtful, and loss) totaled $138.4 million, compared with $145.2 million at September 30, 2012. Non-covered criticized loans (loans graded special mention) were $78.3million at December 31, 2012, compared with $89.5 million at September 30, 2012. 

Loan balances broken down by classification are reflected in the table below:

Gross Loan Charge-offs

Non-covered loan charge-offs for the fourth quarter of 2012 totaled $2.6 million, compared to $3.1 million in the third quarter of 2012. The Company also had loan recoveries of $2.5 million in the fourth quarter of 2012. Net non-covered charge-offs totaled $143 thousand during the fourth quarter of 2012.

Charge-offs by loan type are reflected in the table below:

CAPITAL RATIOS

All of the Company's capital ratios remain in excess of "well capitalized" regulatory requirements as shown in the following table: 

The Company's regulatory capital ratios declined from the third quarter of 2012 to the fourth quarter of 2012 due to the $15.5 million redemption of the junior subordinated debenture in December 2012. The junior subordinated debenture was previously included in the Company's calculation of tier 1 and total capital. However, the reduction of regulatory capital was partially offset by the $14.9 million increase in capital that resulted from earnings for the three months ended December 31, 2012.

CONFERENCE CALL

Management will host its quarterly conference call on January 24, 2013, at 10:00 a.m. PT (1:00 p.m. ET). Investment professionals are invited to participate in the call by dialing 800-260-8140 (domestic number) or 617-614-3672 (international number) and entering passcode #50622068.

COMPANY INFORMATION

Headquartered in Los Angeles, Wilshire State Bank operates 24 branch offices in California, Texas, New Jersey and New York, and eight loan production offices in Dallas and Houston, TX, Atlanta, GA, Aurora, CO, Annandale, VA, Fort Lee, NJ, Newark, CA, and Bellevue, WA, and is an SBA preferred lender nationwide. Wilshire State Bank is a community bank with a focus on commercial real estate lending and general commercial banking, with its primary market encompassing the multi-ethnic populations of the Los Angeles Metropolitan area. The Company's strategic goals include increasing shareholder and franchise value by continuing to grow its multi-ethnic banking business and expanding its geographic reach to other similar markets with strong levels of small business activity. Visit us at www.wilshirebank.com.

FORWARD-LOOKING STATEMENTS

This press release contains statements that we believe are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. Statements concerning future performance, events, financial condition, results of operations, plans or any other guidance on future periods constitute forward-looking statements that are subject to a number of risks and uncertainties that might cause actual results to differ materially from stated expectations. You should not place undue reliance on forward-looking statements, as they are subject to risks and uncertainties, including but not limited to the risk factors set forth in our most recent Annual Report on Form 10-K. Specific factors that could cause future results to differ materially from historical performance and these forward-looking statements include, but are not limited to, (1) loan production and sales, (2) credit quality, (3) the ability to expand net interest margin, (4) the ability to continue to attract low-cost deposits, (5) success of expansion efforts, (6) competition in the marketplace, (7) political developments, war or other hostilities, (8) changes in the interest rate environment, (9) the ability of our borrowers to repay their loans, (10) the ability to maintain capital requirements and adequate sources of liquidity, (11) effects of or changes in accounting policies, (12) legislative or regulatory changes or actions, (13) the ability to attract and retain key personnel, (14) the ability to receive dividends from our subsidiaries, (15) the ability to secure confidential information through the use of computer systems and telecommunications networks, (16) weakening in the economy, specifically the real estate market, either nationally or in the states in which we do business, and (17) general economic conditions. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes included in the Company's most recent reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission, as they may be amended from time to time. Results of operations for the most recent quarter are not necessarily indicative of operating results for any future periods. Any projections in this release are based on limited information currently available to management and are subject to change. Since management will only provide guidance at certain points during the year, the Company will not necessarily update the information. Such information speaks only as of the date of this release. Additional information on these and other factors that could affect financial results are included in filings by the Company with the Securities and Exchange Commission.