EVERETT, Wash., July 27, 2009 (GLOBE NEWSWIRE) -- Cascade Financial Corporation (Nasdaq:CASB), parent company of Cascade Bank, today reported financial results for the second quarter of 2009. During the quarter, Cascade increased its provision for loan losses to $18.3 million and recorded a charge of $11.7 million against its goodwill based upon an impairment analysis. As a result, Cascade reported a net operating loss, excluding the goodwill impairment charge, of $9.7 million and a net loss on a GAAP basis of $21.4 million. The loss available for common stockholders, which adjusts for the dividends to the U.S. Treasury paid on preferred stock, was a loss of $21.9 million or $1.81 per diluted share, in the second quarter of 2009. In the second quarter a year ago, Cascade earned $3.6 million, or $0.30 per diluted share. The non-cash goodwill impairment represents the write-off of a portion of the goodwill recorded from a prior bank acquisition. The goodwill impairment charge does not impact liquidity, operations, tangible capital or the Corporation's regulatory capital ratios.
For the first six months of the year, net losses were $26.2 million and losses allocated to common shareholders were $27.2 million. Losses per diluted share were $2.25, compared to earnings of $6.2 million, or $0.51 per diluted share in the first six months of 2008. The loan loss provision for the first half of 2009 was $32.2 million versus $3.6 million in the first half of 2008.
"Like many other Northwest banks, the prolonged downturn in the residential real estate market has adversely impacted our loan portfolio and caused us to add to our reserve for loan losses," stated Carol K. Nelson, President and CEO. "The continued decline in the real estate market has resulted in an increase in nonperforming loans and charge-offs, primarily in the residential land development and construction portfolios." Nonperforming loans (NPLs) represented 9.33% of total loans, or $114.4 million, at June 30, 2009, compared to 4.05% or $50.6 million at the end of the preceding quarter and 2.68% or $32.0 million at June 30, 2008.
"While the residential market is seeing signs of stabilization according to the Northwest Multiple Listing Service, it is too early to predict that the market has bottomed out," added Nelson. "We continue to take a conservative posture in our provisioning for loan losses and have dedicated resources to aggressively execute our strategies to effectively reduce nonperforming loans."
Items unique to second quarter results include: * A provision for loan losses of $18.3 million well in excess of Cascade's historical averages. * Non-cash goodwill impairment charge of $11.7 million. * FDIC special assessment of $740,000. * Increased regular FDIC insurance premiums of $501,000, up 188% from second quarter 2008. 2Q09 Highlights: (compared to 2Q08) * Deposit mix improved with total checking account balances representing 29% of total deposits versus 17%. * Total checking account balances increased 72%: * Personal checking account balances grew 89%. * Business checking account balances grew 58%. * Loan portfolio mix improved with a 24% reduction in real estate construction loans. * Total allowance for loan losses to total loans increased to 2.00%, up from 1.12%. * Tier 1 Capital Ratio improved to 9.10% from 8.41%. * Risk Weighted Capital Ratio increased to 12.60% from 10.45%.
Loan Portfolio
Total loans decreased by $24.4 million in the second quarter from the end of the previous quarter as Cascade reduced real estate construction concentrations. However, total loans increased 3% or $31.6 million on a year-over-year basis to $1.23 billion as of June 30, 2009. "Total loans outstanding declined for the quarter as payoffs and pay downs exceeded new loan originations of $53.4 million for the second quarter," said Lars Johnson, Chief Financial Officer. "The slower loan growth was a function of targeted reduction in residential construction lending, slower loan demand due to economic factors, as well as increased loan charge-offs. Cascade experienced strong growth in its residential mortgage portfolio as lower interest rates resulted in an active purchase and refinance market."
Cascade has not engaged in the practice of subprime residential lending and the loan portfolio does not contain any such loans.
The following table shows the changes in the loan portfolio in each category:
LOANS ($ in 000's) June 30, March 31, June 30, One Year
2009 2009 2008 Change
Business $ 467,923 $ 477,220 $ 486,876 -4%
R/E construction 296,931 342,796 391,765 -24%
Commercial R/E 192,886 176,356 117,043 65%
Multifamily 91,554 96,758 63,905 43%
Home equity/consumer 30,919 30,567 29,250 6%
Residential 146,231 127,176 106,043 38%
---------- ---------- ----------
Total loans $1,226,444 $1,250,873 $1,194,882 3%
========== ========== ==========
Construction loans outstanding decreased 24% to $297 million at June 30, 2009, compared to $392 million a year ago. Commercial real estate loans increased 65% from year ago levels to $193 million and multifamily loans increased 43% from year ago levels to $91.6 million, both as a result of the reclassification of construction loans. Business loans decreased 4% over the same period to $468 million. Home equity and consumer loans increased 6% to $30.9 million, while residential loans grew 38% to $146 million.
Further details on changes during the second quarter are as follows:
Net new
Balance at loans- Reclassifi- Transfers
LOANS ($ in 000's) 6/30/2009 payments cations to REO
------------------ ---------- ---------- ---------- ----------
Business $ 467,923 $ (9,133) $ -- $ --
R/E construction 296,931 (14,522) (11,460) (1,694)
Commercial R/E 192,886 5,429 11,101 --
Multifamily 91,554 (2,969) (2,235) --
Home equity/consumer 30,919 534 -- --
Residential 146,231 16,461 2,594 --
---------- ---------- ---------- ----------
Total loans 1,226,444 $ (4,200) $ -- $ (1,694)
Deferred loan fees (2,928) 180 (334) --
Allowance for
loan losses (24,490) (18,300) 319 --
---------- ---------- ---------- ----------
Loans, net $1,199,026 $ (22,320) $ (15) $ (1,694)
========== ========== ========== ==========
Charge- Balance at
LOANS ($ in 000's) offs (1) 3/31/2009 Change
------------------ ---------- ---------- ----------
Business $ (164) $ 477,220 -2%
R/E construction (18,189) 342,796 -13%
Commercial R/E -- 176,356 9%
Multifamily -- 96,758 -5%
Home equity/consumer (182) 30,567 1%
Residential -- 127,176 15%
---------- ----------
Total loans $ (18,535) 1,250,873 -2%
Deferred loan fees -- (2,774) 6%
Allowance for loan losses 18,511 (25,020) -2%
---------- ----------
Loans, net $ (24) $1,223,079 -2%
========== ==========
(1) Excludes negative now accounts totaling $76,000 and recoveries
of $100,000
"The reduction in the construction loan portfolio was due to $14.5 million in net payoffs and $18.2 million in charge-offs, as well as $11.5 million of transfers as completed projects were moved to the commercial real estate and multifamily portfolios," said Johnson. "Also, $1.7 million of nonperforming loans were converted to the Real Estate Owned (REO) category."
Credit Quality
Nonperforming loans (NPLs) increased during the quarter to $114 million, or 9.33% of total loans, at June 30, 2009, compared to 4.05% three months earlier. Additions to nonperforming loans were $94.1 million for the quarter, which was comprised primarily of real estate construction credits in the form of land acquisition and development construction loans totaling $48.9 million and interest only land loans totaling $22.4 million. Additionally commercial real estate loans totaling $12.7 million were placed on nonperforming status. NPLs were $50.6 million at the end of the preceding quarter and $32.0 million at June 30, 2008.
The following table shows nonperforming loans versus total loans in each category:
Balance at Nonperforming NPL as a %
LOAN PORTFOLIO ($ in 000's) 6/30/2009 Loans (NPL) of Loans
--------------------------- ---------- ---------- ----------
Business $ 467,923 $ 550 0.12%
R/E construction
Spec construction 81,169 20,244 24.94%
Land acquisition and development 134,082 60,084 44.81%
Land 37,146 20,095 54.10%
Multifamily construction 14,795 -- 0.00%
Commercial construction 29,739 -- 0.00%
---------- ----------
Total R/E construction 296,931 100,423 33.82%
Commercial R/E 192,886 12,735 6.60%
Multifamily 91,554 250 0.27%
Home equity/consumer 30,919 216 0.70%
Residential 146,231 275 0.19%
---------- ----------
Total $1,226,444 $ 114,449 9.33%
========== ==========
The following table shows the migration of nonperforming loans through the portfolio in each category: (6/30/09 compared to 3/31/09)
NONPER
-FORMING Charge
LOANS Additions Paydowns -offs
($ in Balance at during during during Transfers Balance at
000's) 6/30/2009 quarter quarter quarter to REO 3/31/2009
--------- --------- -------- -------- -------- -------- --------
Business $ 550 $ 43 $ (59) $ (164) $ -- $ 730
R/E const
-ruction
Spec
const
-ruction 20,244 9,090 (7,470) (4,891) (1,400) 24,915
Land
acqui
-sition
and
develop
-ment 60,084 48,900 (1,596) (3,401) (294) 16,475
Land 20,095 22,435 (766) (9,897) -- 8,323
-------- -------- -------- -------- -------- --------
Total R/E
const
-ruction 100,423 80,425 (9,832) (18,189) (1,694) 49,713
Commercial
R/E 12,735 12,735 -- -- -- --
Multifamily 250 250 -- -- -- --
Home equity
/consumer 216 396 (2) (182) -- 4
Residential 275 275 (155) -- -- 155
-------- -------- -------- -------- -------- --------
Total $114,449 $ 94,124 $(10,048) $(18,535) $ (1,694) $ 50,602
======== ======== ======== ======== ======== ========
"Despite increased levels of home sales in the Puget Sound Region in recent months, the housing market remains weak and continues to present challenges," said Robert Disotell, Chief Credit Officer. "We continue to build our allowance for loan losses with a year-to-date provision expense of $32.2 million compared to net charge-offs of $23.8 million. The provision expense was $18.3 million during the second quarter compared to net charge-offs of $18.5 million." Net charge-offs were $5.3 million in the previous quarter and $448,000 in the second quarter a year ago. At June 30, 2009, REO decreased to $7.9 million from $9.1 million at March 31, 2009.
The following table shows the change in REO during the quarter:
REO ($ in 000's)
----------------
Balance at 3/31/09 $ 9,082
Additions 1,700
Sales (1,685)
Write-downs (1,068)
Loss on sales (157)
-------
Balance at 6/30/09 $ 7,872
=======
Nonperforming assets were 7.59% of total assets at June 30, 2009, compared to 3.60% at the end of the preceding quarter, and 2.07% a year ago. The total allowance for loan losses, which includes a $72,000 allowance for off-balance sheet loan commitments, was $24.6 million at quarter-end, equal to 2.00% of total loans compared to 2.01% at March 31, 2009, and 1.12% as of June 30, 2008.
Loans delinquent 31-90 days totaled $23.7 million, or 1.93% of total loans at June 30, 2009, compared to $4.1 million, or 0.33% of total loans at March 31, 2009 and $2.9 million, or 0.24% of total loans at June 30, 2008. The bank had two loans totaling $10.0 million at June 30, 2009, that were 90 days or more past due and still accruing interest. Both loans are in the process of being assumed by qualified borrowers.
Deposit Growth
Total deposits were $1.00 billion at June 30, 2009, compared to $991 million a year ago. Total checking account balances were up $13.7 million, or 5% from the prior quarter and up $120 million, or 72% compared to a year ago. "The increase in core low-cost deposits has lowered our funding costs. Further, it demonstrates the effectiveness of our strong sales culture and continued success of our High Performance Checking program," said Nelson. Personal checking account balances grew by 89% or $68.7 million over the last twelve months and business checking balances grew 58% or $51.3 million during the same time period. The growth in business checking balances resulted from a combination of new accounts, higher business escrow account balances and the movement of $40.0 million of public funds previously in money market accounts and CDs into insured checking accounts. CDs were down $24.5 million during the second quarter but were up $98.9 million on a year-over-year basis. Brokered CDs were down $42.0 million at the quarter end to $190 million. Public CDs fell by $5.6 million during the quarter as Cascade met the new deposit collateralization requirements for Washington State public funds.
The following table shows deposits in each category: (6/30/09 compared to 3/31/09 and 6/30/08)
June 30, March 31, June 30, One Year
DEPOSITS ($ in 000's) 2009 2009 2008 Change
Personal checking
accounts $ 146,310 $ 129,549 $ 77,591 89%
Business checking
accounts 140,345 143,430 89,071 58%
---------- ---------- ----------
Total checking accounts 286,655 272,979 166,662 72%
Savings and MMDA 132,704 135,917 340,911 -61%
CDs 581,937 606,467 482,988 20%
---------- ---------- ----------
Total deposits $1,001,296 $1,015,363 $ 990,561 1%
========== ========== ==========
Total assets declined by $48.6 million in the second quarter from the end of the first quarter but grew by $63.1 million year-over-year to $1.61 billion at June 30, 2009. The investment portfolio decreased by $6.4 million during the quarter to $278 million as the calls on Cascade's securities exceeded new purchases. Cascade sold its entire remaining investment in Fannie Mae and Freddie Mac preferred shares during the quarter at a net loss of $11,000.
Capital Management
Cascade remains well capitalized for regulatory purposes with a Tier 1 Capital Ratio of 9.10% and an estimated Risk Based Capital Ratio of 12.60% as of June 30, 2009. Book value per common share was $7.89 at quarter-end, compared to $10.43 a year ago and tangible book value was $6.79 per common share at quarter-end, compared to $8.34 a year ago. Cascade's tangible capital to assets ratio was 5.15% at quarter-end compared to 6.60% twelve months earlier.
In June 2009, Cascade announced that it would temporarily suspend its regular quarterly cash dividend on common stock. "While we are disappointed with the dividend suspension, we remain committed to building our banking franchise through focusing on customer needs, especially in these challenging times," said Nelson. "We expect to return to paying a quarterly cash dividend as soon as market conditions improve."
Operating Results
Second quarter net interest income was down 5% to $10.8 million compared to $11.4 million for the second quarter of 2008, due primarily to the reversal of previously accrued interest on nonperforming loans. Also impacting net interest income was the increase in nonperforming loans and a decline in the yield on the investment securities portfolio as the spread between agency rates and U.S. Treasury rates narrowed, precipitating calls by the issuers on the majority of our callable agency notes.
Total other income remained unchanged at $2.2 million for the quarter, compared to the second quarter a year ago. A $12,000 fair value gain in the second quarter of 2009 represented the fair value adjustment of Cascade Capital Trust I, the Corporation's $10.0 million par junior subordinated debentures payable. In first quarter of 2009, Cascade recorded a fair value gain of $1.8 million of these securities and a $193,000 gain during the second quarter of 2008.
Total other expenses (excluding the goodwill impairment charge) were up 38% to $10.0 million in the second quarter of 2009, compared to $7.3 million in the same quarter last year. The primary contributors to this increase were the $1.1 million REO write down, $740,000 FDIC special assessment (based upon five basis points of total assets, less Tier 1 capital as of June 30, 2009), higher legal expenses associated with loan workouts, and an increase in REO expense.
For the first six months of 2009, net interest income was $21.9 million, unchanged from the first six months of 2008. Other income was $5.9 million for the first half of 2009 compared to $4.7 million in the first half of 2008, increasing primarily due to the $1.8 million fair value gain on junior subordinated debentures. For the first half of the year, total other expenses excluding the goodwill impairment increased to $18.6 million compared to $14.2 million in the first half of 2008. The increase was largely due to the jump in FDIC insurance, WPDPC assessment of $368,000, and REO expense.
The efficiency ratio excluding the goodwill charge was 76.6% in the second quarter of 2009 compared to 58.4% in the previous quarter and 53.1% in the second quarter a year ago. For the first six months of 2009, the efficiency ratio was 66.9% compared to 53.4% in the first half of 2008. This ratio was impacted by costs associated with REO, legal expenses, OTTI and the FDIC special assessment.
Net Interest Margin & Interest Rate Risk
Cascade's net interest margin was 3.01% for the second quarter of 2009 compared to 3.03% in the immediate prior quarter and 3.17% for the second quarter a year ago. "The drag from nonperforming loans, including the reversal of previously accrued interest, more than offset the reduction in our deposit costs. As a result our net interest margin declined slightly during the second quarter compared to the previous quarter," said Johnson. "Our yield on earning assets declined by 20 basis points compared to the previous quarter, while the cost of interest-bearing liabilities decreased by 28 basis points. This improvement in interest spread did not translate into an improved margin because earning assets were a smaller percentage of total assets due to the increase in nonperforming assets." For the first six months of 2009, the net interest margin was 3.02%, compared to 3.09% for the first six months of 2008.
The following table depicts Cascade's yield on assets, its cost of funds and the resulting spread and margin:
2Q09 1Q09 4Q08 3Q08 2Q08 1Q08 4Q07 3Q07 2Q07
------------------------------------------------------------
Asset
yield 5.63% 5.83% 6.07% 6.67% 6.31% 6.62% 7.20% 7.29% 7.30%
Liability
cost 2.74% 3.02% 3.33% 3.44% 3.51% 4.03% 4.32% 4.42% 4.39%
Spread 2.89% 2.81% 2.74% 3.23% 2.80% 2.59% 2.88% 2.87% 2.91%
Margin 3.01% 3.03% 3.01% 3.52% 3.17% 3.02% 3.38% 3.37% 3.37%
Conference Call
Cascade's management team will host a conference call on Tuesday, July 28, 2009, at 11:00 a.m. PDT (2:00 p.m. EDT). 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) 629-9725, using access code 4098346 to participate in the live call. A telephone replay of the call will be available for a month at (303) 590-3000, using access code 4098346.
KBW Community Bank Investor Conference Presentation
Cascade's management team is scheduled to present at the Keefe, Bruyette & Woods 2009 Community Bank Conference in New York on Wednesday, July 29, 2009, at 7:00 a.m. PDT (10:00 a.m. EDT). The live and archived presentation can be viewed at www.cascadebank.com or www.kbw.com.
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. In September 2008, President and CEO Carol K. Nelson was named to U.S. Banker magazine's list of "25 Women to Watch" in its annual ranking of the 25 Most Powerful Women in Banking and Finance.
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 One
except per June 30, March 31, Month June 30, Year
share amounts) 2009 2009 Change 2008 Change
---------- ---------- ---- ---------- ----
(Unaudited)
ASSETS
Cash and due
from banks $ 13,976 $ 10,267 36% $ 13,921 0%
Interest-bearing
deposits/Fed funds
sold 26,403 42,166 -37% 1,850 1327%
Securities
available-for-sale 227,924 196,391 16% 123,630 84%
Federal Home Loan
Bank (FHLB) stock 11,920 11,920 0% 11,920 0%
Securities
held-to-maturity 38,243 76,195 -50% 137,065 -72%
---------- ---------- ----------
Total securities 278,087 284,506 -2% 272,615 2%
Loans
Business 467,923 477,220 -2% 486,876 -4%
R/E construction 296,931 342,796 -13% 391,765 -24%
Commercial R/E 192,886 176,356 9% 117,043 65%
Multifamily 91,554 96,758 -5% 63,905 43%
Home equity/consumer 30,919 30,567 1% 29,250 6%
Residential 146,231 127,176 15% 106,043 38%
---------- ---------- ----------
Total loans 1,226,444 1,250,873 -2% 1,194,882 3%
Deferred loan fees (2,928) (2,774) NM (3,471) NM
Allowance for
loan losses (24,490) (25,020) NM (13,318) NM
---------- ---------- ----------
Loans, net 1,199,026 1,223,079 -2% 1,178,093 2%
REO and other
repossessed assets 7,872 9,082 -13% 25 NM
Premises and equipment 15,319 15,413 -1% 15,778 -3%
Bank owned
life insurance 24,052 23,860 1% 23,133 4%
Deferred tax asset 7,167 11,984 -40% 2,585 177%
Other assets 25,486 13,938 83% 14,471 76%
Goodwill 12,885 24,585 -48% 24,585 -48%
Core deposit
intangible, net 423 458 -8% 564 -25%
---------- ---------- ----------
Total assets $1,610,696 $1,659,338 -3% $1,547,620 4%
========== ========== ==========
LIABILITIES AND EQUITY
Liabilities:
Deposits
Personal checking
accounts $ 146,310 $ 129,549 13% $ 77,591 89%
Business checking
accounts 140,345 143,430 -2% 89,071 58%
---------- ---------- ----------
Total checking
accounts 286,655 272,979 5% 166,662 72%
Savings and money
market accounts 132,704 135,917 -2% 340,911 -61%
Certificates
of deposit 581,937 606,467 -4% 482,988 20%
---------- ---------- ----------
Total deposits 1,001,296 1,015,363 -1% 990,561 1%
FHLB advances 239,000 249,000 -4% 250,000 -4%
Securities sold under
agreement to
repurchase 146,600 146,495 0% 120,641 22%
Federal Reserve
borrowings 60,000 60,000 0% 25,000 140%
Other liabilities 7,307 8,129 -10% 9,381 -22%
Jr. Sub. Deb. (Trust
Preferred Securities) 15,465 15,465 0% 15,465 0%
Jr. Sub. Deb. (Trust
Preferred Securities),
at fair value 8,708 8,720 0% 10,924 -20%
---------- ---------- ----------
Total liabilities 1,478,376 1,503,172 -2% 1,421,972 4%
---------- ---------- ----------
Stockholders equity:
Preferred stock 36,826 36,721 0% -- NM
Common stock and paid
in capital 41,054 41,027 0% 40,669 1%
Retained earnings 53,430 75,423 -29% 87,456 -39%
Warrants issued to
U.S. Treasury 2,389 2,389 0% -- NM
Accumulated other
comprehensive (loss)
gain, net (1,379) 606 -328% (2,477) NM
---------- ---------- ----------
Total stockholder's
equity 132,320 156,166 -15% 125,648 5%
---------- ---------- ----------
Total liabilities and
stockholder's equity $1,610,696 $1,659,338 -3% $1,547,620 4%
========== ========== ==========
STATEMENT OF OPERATIONS Quarter Quarter Quarter
(Dollars in thousands Ended Ended Three Ended One
except per June 30, March 31, Month June 30, Year
share amounts) 2009 2009 Change 2008 Change
---------- ---------- ---- ---------- ----
(Unaudited)
Interest income $ 20,215 $ 21,410 -6% $ 22,793 -11%
Interest expense 9,392 10,291 -9% 11,348 -17%
---------- ---------- ----------
Net interest income 10,823 11,119 -3% 11,445 -5%
Provision for
loan losses 18,300 13,875 32% 1,200 1425%
---------- ---------- ----------
Net interest (loss)
income after provision
for loan losses (7,477) (2,756) NM 10,245 -173%
Other income:
Checking fees 1,270 1,112 14% 1,277 -1%
Service fees 286 249 15% 313 -9%
Bank owned life
insurance 208 239 -13% 259 -20%
Gain on sales/calls
of securities 226 118 92% 19 1089%
Gain on sale of loans 98 39 151% 45 118%
Fair value gains 12 1,790 -99% 193 -94%
Other 120 117 3% 111 8%
---------- ---------- ----------
Total other income 2,220 3,664 -39% 2,217 0%
Total (loss) income (5,257) 908 -679% 12,462 -142%
---------- ---------- ----------
Other expenses:
Compensation expense 3,587 3,605 0% 3,609 -1%
Other operating
expenses 3,942 3,351 18% 3,468 14%
FDIC insurance and
WPDPC assessment 1,241 759 64% 174 613%
Loss on sale of real
estate owned 1,225 54 2169% -- NM
OTTI charge -- 858 NM -- NM
---------- ---------- ----------
Other expenses
excluding goodwill
impairment 9,995 8,627 16% 7,251 38%
Goodwill impairment 11,700 -- NM -- NM
---------- ---------- ----------
Total other expenses 21,695 8,627 151% 7,251 199%
---------- ---------- ----------
Net (loss) income
before (benefit)
provision for income
tax (26,952) (7,719) NM 5,211 -617%
(Benefit) provision
for income tax (5,552) (2,902) NM 1,577 -452%
---------- ---------- ----------
Net (loss) income (21,400) (4,817) NM 3,634 -689%
Dividends/preferred
stock 487 482 1% -- NM
---------- ---------- ----------
(Loss) income available
for common
stockholders $ (21,887) $ (5,299) NM $ 3,634 -702%
========== ========== ==========
EARNINGS PER
SHARE INFORMATION
Earnings per share,
basic $ (1.81) $ (0.44) NM $ 0.30 -699%
Earnings per share,
diluted $ (1.81) $ (0.44) NM $ 0.30 -705%
Weighted average number
of shares outstanding
Basic 12,110,434 12,100,584 12,047,927
Diluted 12,110,434 12,100,584 12,162,848
Six Months Six Months
STATEMENT OF OPERATIONS Ended Ended
(Dollars in thousands June 30, June 30, Six Month
except per share amounts) 2009 2008 Change
---------- ---------- --------
(Unaudited)
Interest income $ 41,626 $ 45,807 -9%
Interest expense 19,683 23,887 -18%
---------- ----------
Net interest income 21,943 21,920 0%
Provision for loan losses 32,175 3,590 796%
---------- ----------
Net interest (loss) income after
provision for loan losses (10,232) 18,330 -156%
Other income:
Checking fees 2,382 2,312 3%
Service fees 535 545 -2%
Bank owned life insurance 448 519 -14%
Gain on sales/calls of securities 344 483 -29%
Gain on sale of loans 138 83 66%
Fair value gains 1,802 498 262%
Other 236 231 2%
---------- ----------
Total other income 5,885 4,671 26%
Total (loss) income (4,347) 23,001 -119%
---------- ----------
Other expenses:
Compensation expense 7,195 7,250 -1%
Other operating expenses 7,290 6,736 8%
FDIC insurance and WPDPC assessment 2,000 200 900%
Loss on sale of real estate owned 1,279 -- NM
OTTI charge 858 -- NM
---------- ----------
Other expenses excluding
goodwill impairment 18,622 14,186 31%
Goodwill impairment 11,700 -- NM
---------- ----------
Total other expense 30,322 14,186 114%
---------- ----------
Net (loss) income before (benefit)
provision for income tax (34,669) 8,815 -493%
(Benefit) provision for income tax (8,452) 2,567 -429%
---------- ----------
Net (loss) income (26,217) 6,248 -520%
Dividends/preferred stock 969 -- NM
---------- ----------
(Loss) income available for
common stockholders $ (27,186) $ 6,248 -535%
========== ==========
EARNINGS PER SHARE INFORMATION
Earnings per share, basic $ (2.25) $ 0.52 -533%
Earnings per share, diluted $ (2.25) $ 0.51 -538%
Weighted average number of
shares outstanding
Basic 12,104,805 12,041,001
Diluted 12,104,805 12,185,563
(Dollars in thousands except per share amounts)(Unaudited)
Six Months
Quarter Ended Ended
PERFORMANCE MEASURES June March June June June
AND RATIOS 30, 31, 30, 30, 30,
2009 2009 2008 2009 2008
------ ------ ------ ------ ------
Return on average equity -60.08% -17.01% 11.57% -34.78% 10.01%
Return on average assets -5.33% -1.20% 0.96% -3.26% 0.84%
Efficiency ratio 166.33% 58.36% 53.07% 108.96% 53.35%
Efficiency ratio
(excluding goodwill charge) 76.63% 58.36% 53.07% 66.92% 53.35%
Net interest margin 3.01% 3.03% 3.17% 3.02% 3.09%
Quarter Ended Six Months Ended
AVERAGE June 30, March 31, June 30, June 30, June 30,
BALANCES 2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
Average
assets $1,611,721 $1,634,314 $1,527,947 $1,622,955 $1,500,017
Average
earning
assets 1,440,316 1,490,698 1,453,058 1,465,368 1,425,119
Average
total
loans 1,247,475 1,259,331 1,173,781 1,253,370 1,151,896
Average
deposits 986,945 973,214 968,873 980,118 948,187
Average
equity
(including
preferred
stock) 142,861 161,253 126,384 152,006 125,577
Average
common
equity
(excluding
preferred
stock) 106,102 124,574 126,384 115,287 125,577
Average
tangible
common
equity
(excluding
preferred
stock) 92,776 99,511 101,219 96,125 100,392
EQUITY June 30, March 31, June 30,
ANALYSIS 2009 2009 2008
---------- ---------- ----------
Total equity $ 132,320 $ 156,166 $ 125,648
Less: preferred stock 36,826 36,721 --
---------- ---------- ----------
Total common equity 95,494 119,445 125,648
Less: goodwill and intangibles 13,308 25,043 25,149
---------- ---------- ----------
Tangible common equity $ 82,186 $ 94,402 $ 100,499
Common stock outstanding 12,110,434 12,110,434 12,047,927
Book value per common share $ 7.89 $ 9.86 $ 10.43
Tangible book value
per common share $ 6.79 $ 7.80 $ 8.34
(Dollars in thousands except per share amounts)(Unaudited)
June 30, March 31, June 30,
ASSET QUALITY 2009 2009 2008
--------- --------- ---------
Nonperforming loans (NPLs) $ 114,449 $ 50,602 $ 32,019
Nonperforming loans/total loans 9.33% 4.05% 2.68%
Real estate/repossessed assets owned $ 7,872 $ 9,082 $ 25
Nonperforming assets $ 122,321 $ 59,684 $ 32,044
Nonperforming assets/total assets 7.59% 3.60% 2.07%
Net loan charge-offs in the quarter $ 18,512 $ 5,299 $ 448
Net charge-offs in the
quarter/total loans 1.51% 0.42% 0.04%
Allowance for loan losses $ 24,490 $ 25,020 $ 13,318
Plus: Allowance for off-balance
sheet commitments 72 88 113
--------- --------- ---------
Total allowance for loan losses $ 24,562 $ 25,108 $ 13,431
Total allowance for loan
losses/total loans 2.00% 2.01% 1.12%
Total allowance for loan
losses/nonperforming loans 21% 50% 42%
Capital/asset ratio (inc. jr. sub deb) 9.77% 10.92% 9.73%
Capital/asset ratio (Tier 1, inc.
jr. sub deb) 9.10% 9.66% 8.41%
Tangible cap/asset ratio (ex. jr. sub
deb and pref. stock) 5.15% 5.78% 6.60%
Risk based capital/risk weighted
asset ratio 12.60% 13.02% 10.45%
Quarter Ended
June 30, March 31, June 30,
INTEREST SPREAD ANALYSIS 2009 2009 2008
--------- --------- ---------
Yield on total loans 6.00% 6.11% 6.52%
Yield on investments 4.49% 5.12% 5.54%
Yield on earning assets 5.63% 5.83% 6.31%
Cost of deposits 1.62% 2.07% 2.74%
Cost of FHLB advances 4.33% 4.33% 4.30%
Cost of Federal Reserve borrowings 0.30% 0.28% 0.00%
Cost of securities sold under
agreement to repurchase 5.74% 5.74% 4.62%
Cost of jr. sub. debentures 8.79% 8.28% 8.03%
Cost of interest-bearing liabilities 2.74% 3.02% 3.51%
Net interest spread 2.89% 2.81% 2.80%
Net interest margin 3.01% 3.03% 3.17%
RECONCILIATION TO NON-GAAP FINANCIAL MEASURES*
(Dollars in Quarter
thousands) Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
AVERAGE
TANGIBLE
COMMON
EQUITY
(Loss)
income
available
for common
stock
-holders $ (21,887) $ 5,299 $ 3,634 $ (27,186) $ 6,248
Less
goodwill
impairment (11,700) -- -- (11,700) --
---------- ---------- ---------- ---------- ----------
(Loss)
income
available
for common
stock
-holders
excluding
goodwill
impairment (10,187) 5,299 3,634 (15,486) 6,248
Average
tangible
common
equity
(excluding
preferred
stock) 92,776 99,511 101,219 96,125 100,392
EFFICIENCY
RATIO
Net
interest
income $ 10,823 $ 11,119 $ 11,445 $ 21,943 $ 21,920
Other
income 2,220 3,664 2,217 5,885 4,671
---------- ---------- ---------- ---------- ----------
Total
income 13,043 14,783 13,662 27,828 26,591
---------- ---------- ---------- ---------- ----------
Total other
expenses 21,695 8,627 7,251 30,322 14,186
---------- ---------- ---------- ---------- ----------
Efficiency
ratio 166.33% 58.36% 53.07% 108.96% 53.35%
Total other
expenses 21,695 8,627 7,251 30,322 14,186
Goodwill
impairment 11,700 -- -- 11,700 --
---------- ---------- ---------- ---------- ----------
Total other
expenses
(excluding
goodwill
impairment) 9,995 8,627 7,251 18,622 14,186
---------- ---------- ---------- ---------- ----------
Efficiency
ratio
(excluding
goodwill
impairment) 76.63% 58.36% 53.07% 66.92% 53.35%
TANGIBLE
COMMON
EQUITY
RATIO
Total
assets $1,610,696 $1,659,338 $1,547,620
Less
goodwill
and
intang-
ibles 13,308 25,043 25,149
---------- ---------- ----------
Total
tangible
assets 1,597,388 1,634,295 1,522,471
Tangible
common
equity 82,186 94,402 100,499
Tangible
cap/asset
ratio
(ex jr,.
Sub deb
and pref
stock) 5.15% 5.78% 6.60%
*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.