Exhibit 99.1
PRESS RELEASE
First Community Bancorp
(NASDAQ: FCBP)
Contact: | | Matthew P. Wagner | | Victor R. Santoro |
| | Chief Executive Officer | | Executive Vice President and |
| | 10250 Constellation Boulevard | | Chief Financial Officer |
| | Suite 1640 | | 10250 Constellation Boulevard |
| | Los Angeles, CA 90067 | | Suite 1640 |
| | | | Los Angeles, CA 90067 |
Phone: | | 310-728-1020 | | 310-728-1021 |
Fax: | | 310-201-0498 | | 310-201-0498 |
FOR IMMEDIATE RELEASE | | January 23, 2007 |
FIRST COMMUNITY BANCORP ANNOUNCES RECORD EARNINGS FOR THE FOURTH QUARTER OF 2006
— Net Earnings for the Fourth Quarter of 2006 Totaled $22.8 Million, Up 49% over the Fourth Quarter of 2005—
— Fourth Quarter 2006 Organic Loan Growth of Nearly $84 Million—
— Nonaccrual Loans Declined to 0.51% of Total Loans—
— Fourth Quarter 2006 Net Interest Margin of 6.52%—
San Diego, California . . . First Community Bancorp (Nasdaq: FCBP) today announced net earnings for the year ended December 31, 2006 of $76.0 million, or $3.21 per diluted share, compared to net earnings of $50.4 million, or $2.98 per diluted share, for 2005. The increase is due to higher net interest income from acquisitions and organic loan growth tempered by an increased credit loss provision, loss on sale of securities and reorganization charges. The after-tax effect of the loss on sale of securities and the reorganization costs was $2.4 million, or $0.10 per diluted share, for 2006.
Fourth quarter of 2006 net earnings were $22.8 million, or $0.82 per diluted share, compared to net earnings of $15.3 million, or $0.84 per diluted share, for the fourth quarter of 2005 and net earnings of $21.4 million, or $0.88 per diluted share, for the third quarter of 2006. The increase in net earnings compared to the fourth quarter of 2005 and the third quarter of 2006 resulted primarily from higher net interest income due to acquisitions and organic loan growth, offset by the loss on sale of securities andhigher noninterest expense due to business growth and reorganization costs. The after tax effect of the loss on sale of securities and the reorganization costs was $2.2 million, or $0.08 per diluted share, for the fourth quarter of 2006.
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The comparability of financial information is affected by our acquisitions. Operating results include the operations of acquired entities from the dates of acquisition. We acquired Community Bancorp in October 2006, which added $1.0 billion in assets, Foothill Independent Bancorp in May 2006, which added $897.9 million in assets, and Cedars Bank in January 2006, which added $488.9 million in assets. In addition, we acquired First American Bank in August 2005 and Pacific Liberty Bank in October 2005, which together added $469.2 million in assets.
HIGHLIGHTS FOR THE FOURTH QUARTER OF 2006 AND FISCAL 2006
| | Fourth Quarter
2006 | | Fiscal 2006 | |
Net earnings increase over 2005 period | | 48.9 | % | 50.9 | % |
Organic loan growth | | $ | 83.8 | million | $ | 259.3 | million |
Average loan yield | | 8.61 | % | 8.61 | % |
Average cost of deposits | | 1.33 | % | 1.07 | % |
Net interest margin | | 6.52 | % | 6.67 | % |
Average noninterest bearing deposits to average total deposits | | 43 | % | 45 | % |
Nonaccrual loans to total loans at period end | | 0.51 | % | 0.51 | % |
| | | | | | | |
Matt Wagner, Chief Executive Officer, stated, “We had an eventful and successful year, completing three acquisitions, consolidating our subsidiaries and converting to a state-chartered bank. We executed our core strategy of loan growth and maintaining a high volume of low-cost deposits, despite the challenges posed by acquisitions and the rising interest rate environment. We are pleased to have generated nearly $260 million in organic loan growth, while at the same time maintaining a healthy net interest margin. Additionally during 2006, we worked out problem loans from acquired portfolios, and reduced the ratio of nonaccrual loans to total loans to 0.51% at year end from 0.59% at the end of September.”
Mr. Wagner continued, “Our Pacific Western Bank subsidiary now has over $5.5 billion in assets with a footprint of 64 branches across the most attractive areas of Southern California. We intend to build on our fourth quarter momentum in 2007 as we continue to focus on generating low-cost deposits and making quality loans.”
Vic Santoro, Executive Vice President and Chief Financial Officer, also commented, “Our net interest margin was 6.52% for the fourth quarter and only 8 basis points less than the third quarter net interest margin of 6.60%. The compression is due to a combination of competitive pressures, the reliance on borrowings to fund loan growth and deposit flows, and the impact of adding Community Bancorp. During the quarter we sold approximately $100 million in securities yielding 3.52% at a loss of approximately $1.3 million after-tax in an effort to reduce our reliance on borrowed funds and to improve net interest income. We also retired $20.6 million of 9.71% subordinated debentures in December and elected to move $200 million in borrowings to longer terms to take advantage of the inverted yield curve in a continuing effort to maintain our net interest margin.”
Mr. Santoro continued, “A great deal of our effort since the beginning of the year has been devoted to integrating our acquisitions and realigning the acquired deposit bases within our
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pricing structure. The deposit realignment, along with competitive forces, resulted in deposit outflow. We are focused on continuing to maintain a properly positioned balance sheet through our numerous ongoing initiatives, including deposit gathering, selected asset sales to reduce reliance on borrowed funds, and the ongoing share repurchase program.”
YEAR TO DATE RESULTS
In thousands, except per share data and | | Year Ended December 31, | | | |
percentages | | 2006 | | 2005 | | % Change | |
| | | | | | | |
Net Earnings * | | $ | 75,998 | | $ | 50,366 | | 50.9 | % |
Diluted Share Count | | 23,680.3 | | 16,893.5 | | 40.2 | % |
Diluted Earnings Per Share * | | $ | 3.21 | | $ | 2.98 | | 7.7 | % |
Return on Average Assets (ROA) | | 1.72 | % | 1.68 | % | 2.4 | % |
Return on Average Equity (ROE) | | 9.13 | % | 12.10 | % | (24.5 | )% |
Net Interest Margin | | 6.67 | % | 6.37 | % | 4.7 | % |
Efficiency Ratio | | 47.0 | % | 50.1 | % | (6.2 | )% |
* The year ended December 31, 2006, includes $142,000 of additional net earnings, or less than $0.01 per diluted share, related to the accounting change described below.
The increases in net earnings, diluted earnings per share and ROA for the year ended December 31, 2006 compared to the same period in 2005 were driven by net interest margin expansion, increases in our average loans, and the effect of our acquisitions. The loss on sale of securities and the reorganization costs reduced 2006 diluted earnings per share by $0.10.
FOURTH QUARTER RESULTS
In thousands, except per share
data and percentages | | Fourth
Quarter
2006 | | Fourth
Quarter
2005 | | %
Change | | Third
Quarter
2006 | | %
Change | |
| | | | | | | | | | | |
Net Earnings | | $ | 22,769 | | $ | 15,292 | | 48.9 | % | $ | 21,375 | | 6.5 | % |
Diluted Share Count | | 27,801.6 | | 18,189.7 | | 52.8 | % | 24,407.6 | | 13.9 | % |
Diluted Earnings Per Share | | $ | 0.82 | | $ | 0.84 | | (2.4 | )% | $ | 0.88 | | (6.8 | )% |
Return on Average Assets (ROA) | | 1.73 | % | 1.87 | % | (7.5 | )% | 1.87 | % | (7.5 | )% |
Return on Average Equity (ROE) | | 8.32 | % | 12.50 | % | (33.4 | )% | 9.62 | % | (13.5 | )% |
Net Interest Margin | | 6.52 | % | 6.85 | % | (4.8 | )% | 6.60 | % | (1.2 | )% |
Efficiency Ratio | | 49.5 | % | 48.2 | % | 2.7 | % | 45.5 | % | 8.8 | % |
The increase in net earnings for the fourth quarter of 2006 compared to the fourth quarter of 2005 and the third quarter of 2006 was driven by increased average loans. Average loans increased from a combination of organic growth and acquisitions. The increase in the efficiency ratio percentage is due to a combination of net interest margin compression as well as $2.3 million in loss on sale of securities and $1.4 million in reorganization charges recorded in the fourth quarter of 2006; there were no such charges in the other quarters
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presented. The loss on sale of securities and the reorganization costs reduced diluted earnings per share by $0.08 and increased the efficiency ratio 336 basis points.
BALANCE SHEET GROWTH
Loans, net of unearned income, increased $820.3 million, including $736.5 million acquired in the Community Bancorp acquisition, to $4.4 billion at December 31, 2006, from September 30, 2006. Organic loan growth was centered in commercial real estate loans. Deposits increased $663.9 million to $3.7 billion at December 31, 2006, from September 30, 2006; this increase was due to the Community Bancorp acquisition. Demand deposits totaled $1.6 billion at December 31, 2006, and represented 43% of total deposits at that date. Loan demand in excess of deposit growth was funded by borrowings from the Federal Home Loan Bank.
NET INTEREST INCOME CONTINUES TO INCREASE
Net interest income increased $81.5 million, or 51%, to $242.0 million for the year ended December 31, 2006 compared to the same period of 2005. Interest income increased $98.5 million due to the $1.2 billion increase in average loans for 2006 when compared to 2005. In addition, increases in our prime lending rate and loan repricings in response to market interest rate changes caused our loan yield to increase to 8.61% for 2006 from 7.80% for 2005, and contributed $19.4 million to interest income. Interest expense increased $36.7 million due to a combination of an increased reliance on Federal Home Loan Bank borrowings to fund loan growth and deposit flows and an increase in the cost of our funding sources.
Net interest income increased to $70.2 million for the fourth quarter of 2006 compared to $46.9 million for the same period of 2005 and $61.7 million for the third quarter of 2006. The increases compared to the fourth quarter of 2005 and the third quarter of 2006 were mainly a result of increased interest income from our loan growth offset by higher interest expense on funding sources. Average earning assets increased $1.6 billion to $4.3 billion for the fourth quarter of 2006 when compared to the same period for 2005, due entirely to the increase in average loans. Loan increases resulted from both acquisitions and organic growth. Average earning assets increased $561.4 million, including a $653.7 million increase in average loans, for the fourth quarter of 2006 when compared to the third quarter of 2006 due to organic growth and the impact of the Community Bancorp acquisition. Our loan yield increased 2 basis points to 8.61% for the fourth quarter when compared to the third quarter. Interest expense increased $13.8 million for the fourth quarter of 2006 compared to the fourth quarter of 2005 and increased $4.9 million compared to the third quarter of 2006. These increases were due to acquisitions and an increase in our total funding sources as well as to the cost of such funds.
NET INTEREST MARGIN
Our net interest margin increased 30 basis points to 6.67% for the year ended December 31, 2006, from 6.37% for 2005. The increase is primarily the result of higher average loan balances and loan yields.
Our net interest margin for the fourth quarter of 2006 was 6.52%, a decrease of 33 basis points when compared to the same period of 2005 and a decrease of 8 basis points when
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compared to the third quarter of 2006. Yields on average earning assets were 8.44% and 7.85% for the fourth quarters of 2006 and 2005, respectively, and 8.29% for the third quarter of 2006. The yield on average loans was 8.61% and 8.35% for the fourth quarters of 2006 and 2005, and 8.59% for the third quarter of 2006. The decrease in the net interest margin in the fourth quarter of 2006 compared to the fourth quarter of 2005 and the third quarter of 2006 is due mainly to the deposit structures of the banks we acquired and increased funding costs. The banks we acquired in 2005 and 2006 had greater concentrations of time deposits and lower net interest margins than we have experienced. Our funding costs increased due to competitive pressure on deposit pricing and an increased reliance on Federal Home Loan Bank advances.
The average cost of deposits was 1.33% for the fourth quarter of 2006 compared to 0.58% for the fourth quarter of 2005 and 1.09% for the third quarter of 2006. The increased deposit cost in the fourth quarter of 2006 compared to the same period of 2005 and third quarter of 2006 resulted from a combination of the higher deposit costs of the banks we acquired and upward adjustments we made in rates offered on selected money market and time deposits in response to competition. Our relatively low cost of deposits is driven by demand deposit balances which averaged 43% of average total deposits during the fourth quarter of 2006. The overall cost of interest-bearing liabilities increased to 3.17% for the fourth quarter of 2006 compared to 1.77% for the same period of 2005 and 2.91% for the third quarter of 2006. The increase over both the fourth quarter of 2005 and the third quarter of 2006 is due to a combination of increased deposit costs and increased average borrowings used to fund loan growth and deposit flows.
During the fourth quarter of 2006 we took steps to both improve and maintain our net interest margin. We sold $101.8 million of securities yielding 3.52% and used the proceeds to reduce overnight borrowings, which were costing approximately 5.35%. In December, we retired $20.6 million of subordinated debentures that had an annual cost of 9.71%. Also during the fourth quarter, we extended the term on $200 million of Federal Home Loan Bank borrowings for up to 2 years at rates more favorable than overnight liquidity. We are considering the potential sale of certain loans the proceeds of which would be used to repay borrowings.
NONINTEREST INCOME INCREASED
Noninterest income for the year ended December 31, 2006, totaled $16.5 million compared to $13.8 million for 2005. Noninterest income for the fourth quarter of 2006 totaled $3.9 million compared to $3.4 million earned in the same period in 2005, and $4.7 million in the third quarter of 2006. The full year and fourth quarter of 2006 included a loss on sale of securities of $2.3 million and a $642,000 gain related to unearned discount on the payoff of an acquired loan; there were no such items in the prior periods. The increases in noninterest income categories result largely from increased service charges and fees for deposits, which are attributed to our acquisitions, and increases in fees for other services, such as letters of credit and foreign exchange.
NONINTEREST EXPENSE ITEMS
Noninterest expense for the year ended December 31, 2006, totaled $121.5 million compared to $87.3 million for the same period in 2005. The increase is due to a
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combination of acquisitions, business growth, and reorganization charges. Our branch network has expanded through our acquisitions to 64 offices.
Noninterest expense for the fourth quarter of 2006 totaled $36.7 million compared to $24.3 million for the fourth quarter of 2005 and $30.1 million for the third quarter of 2006. The increases compared to the fourth quarter of 2005 and the third quarter of 2006 relate mainly to higher compensation, reorganization costs, increased business activity, and the five acquisitions completed since August 2005. The increase in compensation resulted from additional staff added through acquisitions, pay rate increases, increased benefits costs, and higher discretionary incentive compensation.
Occupancy costs increased due to additional office locations added by acquisitions and all other expenses increased due to the acquisitions. The reorganization costs of $1.4 million represent severance costs associated with the Community Bancorp acquisition, the consolidation of branch offices, and other costs associated with Pacific Western Bank’s charter-conversion and merger with First National Bank. We expect to consolidate our Escondido branch locations during the first quarter of 2007 and recognize a consolidation charge of approximately $800,000 when we cease to use the duplicate facility.
Other expense for the fourth quarter of 2005 included a $775,000 settlement on a legal matter; there was no similar charge in the fourth quarter of 2006.
Noninterest expense includes amortization of restricted and performance stock, which is included in compensation, and intangible asset amortization. Restricted and performance stock amortization totaled $2.0 million for the fourth quarter of 2006 compared to $1.2 million for the fourth quarter of 2005 and $2.1 million for the third quarter of 2006. The increase compared to the fourth quarter of 2005 resulted largely from additional awards made during each of the quarters of 2006. Amortization expense for all restricted and performance stock awards is estimated to be $7.6 million for 2007. Intangible asset amortization increased to $2.2 million for the fourth quarter of 2006; the increase related to the Community Bancorp acquisition. Intangible asset amortization totaled $6.7 million for 2006 and is estimated to be $8.5 million for 2007. The 2007 estimates of both restricted and performance stock award expense and intangible asset amortization are subject to change.
TAXES
The effective tax rate for 2006 was 40.4% compared to 41.1% for 2005. The effective tax rate for the fourth quarter of 2006 was 39.1% compared to 41.3% for the same period in 2005 and 41.1% for the third quarter for 2006. The lower effective tax rates for the 2006 periods result from tax credits on certain investments acquired in our 2006 acquisitions.
CREDIT QUALITY
We recorded $9.6 million in credit loss provision during 2006 and no provision during the fourth quarter of 2006. The 2006 provision was based on our reserve methodology, which considers the level of classified, criticized, and nonaccrual loans as well as total loan volumes and market conditions.
Our nonaccrual loans increased $1.2 million to $22.1 million at December 31, 2006 compared to $20.9 million at September 30, 2006. The increase includes the addition of
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Community National Bank’s nonaccrual loans of $7.8 million and a net decrease of $6.6 million in nonaccrual loans previously reported at the end of the third quarter of 2006. Our ratio of nonaccrual loans to total loans, including loans held for sale, decreased to 0.51% at December 31, 2006 from 0.59% at September 30, 2006.
At December 31, 2006, the ratio of our allowance for credit losses to loans, net of unearned income, was 1.46% compared to 1.47% at September 30, 2006. The allowance for total credit losses totaled $61.2 million at December 31, 2006 and $51.9 million at September 30, 2006. Since loans held for sale are carried at the lower of aggregate cost or fair value and are shown separately on our balance sheet, no part of the allowance for credit losses is allocated to them. The allowance for credit losses applies only to loans held for investment purposes and loan commitments.
ACCOUNTING CHANGE
On January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (“SFAS 123R”). As permitted under formerly effective accounting rules, we did not consider estimated forfeitures of stock awards during periods prior to January 1, 2006, and recognized the effect of forfeitures as they occurred. As required by SFAS 123R, we recognized the cumulative effect of estimated forfeitures for unvested restricted stock awards as of December 31, 2005, by increasing our first quarter of 2006 earnings by $242,000. The after tax effect of this adjustment was to increase net earnings by $142,000, or less than $0.01 per diluted share.
REGULATORY CAPITAL MEASURES ARE ABOVE THE WELL-CAPITALIZED MINIMUMS
First Community and its wholly-owned banking subsidiary, Pacific Western Bank, each remained well capitalized at December 31, 2006.
ACQUISITION AND PLAN OF CONSOLIDATION
On October 26, 2006 we completed the acquisition of Community Bancorp Inc., the parent of Community National Bank, a 12-branch bank in San Diego and Riverside counties, and previously headquartered in Escondido, California. Community Bancorp shareholders received approximately 4.7 million shares of First Community common stock, based on an exchange ratio of 0.735 of a share of First Community common stock for each share of Community Bancorp common stock. Community Bancorp option holders received approximately $6.1 million in cash in lieu of First Community common stock. Community National Bank was merged with and into First National Bank, a wholly-owned subsidiary of First Community. Immediately following the Community Bancorp acquisition, and as previously announced, First National Bank merged with and into Pacific Western Bank.
STOCK REPURCHASE PROGRAM
On May 3, 2006, our Board of Directors authorized the repurchase of up to one million shares of First Community common stock. During the fourth quarter of 2006, we repurchased 100,000 shares at an average price of $53.26 per share. Future repurchases under the stock repurchase program may be limited or terminated at any time with or without prior notice.
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ABOUT FIRST COMMUNITY BANCORP
First Community Bancorp is a bank holding company with $5.6 billion in assets as of December 31, 2006, with one wholly-owned banking subsidiary, Pacific Western Bank. Through 64 full-service community banking branches, Pacific Western provides commercial banking services, including real estate, construction and commercial loans, to small and medium-sized businesses. Pacific Western’s branches are located in Los Angeles, Orange, Riverside, San Diego and San Bernardino Counties. Through its divisions First Community Financial and Pacific Western SBA Lending, Pacific Western also provides working capital financing to growing companies located throughout the Southwest, primarily in the states of Arizona, California and Texas. Additional information regarding First Community Bancorp is available on the Internet at www.firstcommunitybancorp.com. Information regarding Pacific Western Bank is also available on the Internet at www.pacificwesternbank.com.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking information about First Community that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of First Community. First Community cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to: the possibility that personnel changes will not proceed as planned; planned acquisitions and related cost savings cannot be realized or realized within the expected time frame; costs and uncertainties related to the outcome of pending litigation; revenues are lower than expected; competitive pressure among depository institutions increases significantly; the integration of acquired businesses costs more, takes longer or is less successful than expected; the cost of additional capital is more than expected; a change in the interest rate environment reduces interest margins; general economic conditions, either nationally or in the market areas in which First Community operates, are less favorable than expected; legislative or regulatory requirements or changes that adversely affect First Community’s business or regulatory capital requirements, or that alter the regulatory capital treatment of the Company’s trust preferred securities; changes in the securities markets and other risks that are described in First Community’s public filings with the U.S. Securities and Exchange Commission (the “SEC”). If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, First Community’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. First Community assumes no obligation to update such forward-looking statements.
For a more complete discussion of risks and uncertainties, investors and security holders are urged to read First Community Bancorp’s annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by First Community with the SEC. The documents filed by First Community with the SEC may be obtained at First Community Bancorp’s website at www.firstcommunitybancorp.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from First Community by directing a request to: First Community Bancorp c/o Pacific Western Bank, 275 North Brea Boulevard, Brea, CA 92821. Attention: Investor Relations. Telephone 714-671-6800.
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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| | December 31, | | December 31, | |
| | 2006 | | 2005 | |
| | (In thousands, except share data) | |
Assets: | | | | | |
Cash and due from banks | | $ | 128,910 | | $ | 100,662 | |
Federal funds sold | | 22,000 | | 4,600 | |
Total cash and cash equivalents | | 150,910 | | 105,262 | |
| | | | | |
Interest-bearing deposits in financial institutions | | 501 | | 90 | |
| | | | | |
Federal Reserve Bank and Federal Home Loan Bank stock, at cost | | 28,747 | | 26,753 | |
Securities available-for-sale | | 91,381 | | 212,601 | |
Total securities | | 120,128 | | 239,354 | |
| | | | | |
Loans held for sale | | 173,319 | | — | |
| | | | | |
Loans, net of unearned income | | 4,189,543 | | 2,467,828 | |
Allowance for loan losses | | (52,908 | ) | (27,303 | ) |
Net loans | | 4,136,635 | | 2,440,525 | |
| | | | | |
Premises and equipment | | 37,102 | | 19,063 | |
Intangible assets | | 788,510 | | 323,188 | |
Cash surrender value of life insurance | | 67,512 | | 56,207 | |
Other assets | | 78,706 | | 42,722 | |
Total assets | | $ | 5,553,323 | | $ | 3,226,411 | |
| | | | | |
Liabilities and Shareholders’ Equity: | | | | | |
Liabilities: | | | | | |
Noninterest-bearing deposits | | $ | 1,571,361 | | $ | 1,179,808 | |
Interest-bearing deposits | | 2,114,372 | | 1,225,553 | |
Total deposits | | 3,685,733 | | 2,405,361 | |
| | | | | |
Accrued interest payable and other liabilities | | 51,043 | | 38,318 | |
Borrowings | | 499,000 | | 160,300 | |
Subordinated debentures | | 149,219 | | 121,654 | |
Total liabilities | | 4,384,995 | | 2,725,633 | |
| | | | | |
Shareholders’ Equity: | | | | | |
Common stock | | 1,000,202 | | 400,868 | |
Retained earnings | | 168,297 | | 102,325 | |
Accumulated other comprehensive income: | | | | | |
Unrealized loss on securities available-for-sale, net | | (171 | ) | (2,415 | ) |
Total shareholders’ equity | | 1,168,328 | | 500,778 | |
Total liabilities and shareholders’ equity | | $ | 5,553,323 | | $ | 3,226,411 | |
| | | | | |
Shares outstanding (includes 750,014 shares and 405,831 shares at December 31, 2006 and 2005, underlying unvested stock awards) | | 29,635,957 | | 18,346,566 | |
| | | | | |
Book value per share | | $ | 39.42 | | $ | 27.30 | |
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
| | Quarters Ended | | Year Ended
December 31, | |
| | 12/31/06 | | 9/30/06 | | 12/31/05 | | 2006 | | 2005 | |
| | (In thousands, except per share data) | |
Interest income: | | | | | | | | | | | |
Interest and fees on loans | | $ | 89,064 | | $ | 74,726 | | $ | 51,120 | | $ | 292,069 | | $ | 174,202 | |
Interest on federal funds sold | | 105 | | 62 | | — | | 297 | | 1,245 | |
Interest on time deposits in other financial institutions | | 7 | | 4 | | 2,220 | | 31 | | 5 | |
Interest on investment securities | | 1,716 | | 2,730 | | 379 | | 9,200 | | 7,900 | |
Total interest income | | 90,892 | | 77,522 | | 53,719 | | 301,597 | | 183,352 | |
| | | | | | | | | | | |
Interest expense: | | | | | | | | | | | |
Interest expense on deposits | | 11,837 | | 8,617 | | 3,667 | | 33,219 | | 11,087 | |
Interest expense on borrowings | | 5,649 | | 4,238 | | 849 | | 15,168 | | 3,350 | |
Interest expense on subordinated debentures | | 3,184 | | 2,922 | | 2,345 | | 11,253 | | 8,480 | |
Total interest expense | | 20,670 | | 15,777 | | 6,861 | | 59,640 | | 22,917 | |
Net interest income before provision for credit losses | | 70,222 | | 61,745 | | 46,858 | | 241,957 | | 160,435 | |
Provision for credit losses | | — | | — | | — | | 9,600 | | 1,420 | |
Net interest income after provision for credit losses | | 70,222 | | 61,745 | | 46,858 | | 232,357 | | 159,015 | |
| | | | | | | | | | | |
Noninterest income: | | | | | | | | | | | |
Service charges on deposit accounts | | 2,878 | | 2,412 | | 1,511 | | 8,835 | | 6,367 | |
Other commissions and fees | | 1,847 | | 1,495 | | 1,066 | | 6,420 | | 4,180 | |
Gain on sale of loans | | — | | — | | 129 | | — | | 596 | |
Loss on sale of securities, net | | (2,332 | ) | — | | (45 | ) | (2,332 | ) | (45 | ) |
Increase in cash surrender value of life insurance | | 637 | | 616 | | 407 | | 2,205 | | 1,628 | |
Other income | | 865 | | 124 | | 377 | | 1,338 | | 1,052 | |
Total noninterest income | | 3,895 | | 4,647 | | 3,445 | | 16,466 | | 13,778 | |
| | | | | | | | | | | |
Noninterest expense: | | | | | | | | | | | |
Compensation | | 19,702 | | 15,708 | | 13,227 | | 65,505 | | 48,623 | |
Occupancy | | 4,437 | | 3,809 | | 2,866 | | 15,296 | | 10,733 | |
Furniture and equipment | | 1,219 | | 1,073 | | 740 | | 4,034 | | 2,730 | |
Data processing | | 1,490 | | 1,773 | | 1,305 | | 6,317 | | 4,869 | |
Other professional services | | 1,407 | | 1,529 | | 985 | | 5,072 | | 4,548 | |
Business development | | 564 | | 327 | | 335 | | 1,591 | | 1,188 | |
Communications | | 889 | | 839 | | 548 | | 3,103 | | 1,993 | |
Insurance and assessments | | 441 | | 716 | | 426 | | 2,121 | | 1,715 | |
Intangible asset amortization | | 2,171 | | 1,791 | | 1,066 | | 6,688 | | 3,607 | |
Reorganization charges | | 1,415 | | — | | — | | 1,822 | | — | |
Other | | 2,978 | | 2,562 | | 2,762 | | 9,906 | | 7,296 | |
Total noninterest expense | | 36,713 | | 30,127 | | 24,260 | | 121,455 | | 87,302 | |
Earnings before income taxes and effect of accounting change | | 37,404 | | 36,265 | | 26,043 | | 127,368 | | 85,491 | |
Income taxes | | 14,635 | | 14,890 | | 10,751 | | 51,512 | | 35,125 | |
Net earnings before cumulative effect of accounting change | | 22,769 | | 21,375 | | $ | 15,292 | | 75,856 | | 50,366 | |
Cumulative effect on prior years (to December 31, 2005) of changing the method of accounting for stock-based compensation forfeitures | | — | | — | | — | | 142 | | — | |
Net earnings | | $ | 22,769 | | $ | 21,375 | | $ | 15,292 | | $ | 75,998 | | $ | 50,366 | |
| | | | | | | | | | | |
Per share information | | | | | | | | | | | |
Number of shares (weighted average): | | | | | | | | | | | |
Basic | | 27,666.6 | | 24,252.3 | | 17,869.1 | | 23,476.4 | | 16,536.4 | |
Diluted | | 27,801.6 | | 24,407.6 | | 18,189.7 | | 23,680.3 | | 16,893.5 | |
Basic earnings per share: | | | | | | | | | | | |
Net earnings before accounting change | | $ | 0.82 | | $ | 0.88 | | $ | 0.86 | | $ | 3.23 | | $ | 3.05 | |
Accounting change (1) | | — | | — | | — | | — | | — | |
Basic earnings per share | | $ | 0.82 | | $ | 0.88 | | $ | 0.86 | | $ | 3.23 | | $ | 3.05 | |
Diluted earnings per share: | | | | | | | | | | | |
Net earnings before accounting change | | $ | 0.82 | | $ | 0.88 | | $ | 0.84 | | $ | 3.21 | | $ | 2.98 | |
Accounting change (1) | | — | | — | | — | | — | | — | |
Diluted earnings per share | | $ | 0.82 | | $ | 0.88 | | $ | 0.84 | | $ | 3.21 | | $ | 2.98 | |
(1) Less than $0.01 per diluted share for the year ended December 31, 2006.
10
UNAUDITED AVERAGE BALANCE SHEETS
| | Quarters Ended | | Year Ended
December 31 , | |
| | 12/31/06 | | 9/30/06 | | 12/31/05 | | 2006 | | 2005 | |
| | | | (Dollars in thousands) |
| | | |
Average Assets: | | | | | | | | | | | |
Loans, net of unearned income | | $ | 4,105,125 | | $ | 3,451,376 | | $ | 2,430,146 | | $ | 3,394,123 | | $ | 2,231,975 | |
Investment securities | | 158,763 | | 254,608 | | 246,720 | | 228,031 | | 248,471 | |
Federal funds sold | | 7,930 | | 4,731 | | 38,414 | | 6,491 | | 39,117 | |
Interest-bearing deposits in financial institutions | | 645 | | 324 | | 82 | | 826 | | 198 | |
Average earning assets | | 4,272,463 | | 3,711,039 | | 2,715,362 | | 3,629,471 | | 2,519,761 | |
Other assets | | 939,167 | | 828,501 | | 528,606 | | 778,323 | | 473,024 | |
Average total assets | | $ | 5,211,630 | | $ | 4,539,540 | | $ | 3,243,968 | | $ | 4,407,794 | | $ | 2,992,785 | |
| | | | | | | | | | | |
Average Liabilities and Shareholders’ Equity: | | | | | | | | | | | |
Average liabilities | | | | | | | | | | | |
Noninterest-bearing deposits | | $ | 1,529,817 | | $ | 1,437,035 | | $ | 1,173,666 | | $ | 1,387,919 | | $ | 1,072,071 | |
Interest-bearing deposits | | 2,002,905 | | 1,699,072 | | 1,317,663 | | 1,705,768 | | 1,233,900 | |
Average deposits | | 3,532,722 | | 3,136,107 | | 2,491,329 | | 3,093,687 | | 2,305,971 | |
Subordinated debentures | | 150,544 | | 130,603 | | 121,654 | | 132, 389 | | 121,654 | |
Other interest-bearing liabilities | | 430,742 | | 322,482 | | 94,755 | | 303,251 | | 105,722 | |
Other liabilities | | 12,044 | | 69,025 | | 50,710 | | 46,444 | | 43,352 | |
Average liabilities | | 4,126,052 | | 3,658,217 | | 2,758,448 | | 3,575,771 | | 2,576,699 | |
Average equity | | 1,085,578 | | 881,323 | | 485,520 | | 832,023 | | 416,086 | |
Average liabilities and shareholders’ equity | | $ | 5,211,630 | | $ | 4,539,540 | | $ | 3,243,968 | | $ | 4,407,794 | | $ | 2,992,785 | |
| | | | | | | | | | | |
Yield Analysis: | | | | | | | | | | | |
Average earning assets | | $ | 4,272,463 | | $ | 3,711,039 | | $ | 2,715,362 | | $ | 3,629,471 | | $ | 2,519,761 | |
Yield | | 8.44 | % | 8.29 | % | 7.85 | % | 8.31 | % | 7.28 | % |
Average interest-bearing deposits | | $ | 2,002,905 | | $ | 1,699,072 | | $ | 1,317,663 | | $ | 1,705,768 | | $ | 1,233,900 | |
Cost | | 2.34 | % | 2.01 | % | 1.10 | % | 1.95 | % | 0.90 | % |
Average deposits | | $ | 3,532,722 | | $ | 3,136,107 | | $ | 2,491,329 | | $ | 3,093,687 | | $ | 2,305,971 | |
Cost | | 1.33 | % | 1.09 | % | 0.58 | % | 1.07 | % | 0.48 | % |
Average interest-bearing liabilities | | $ | 2,584,191 | | $ | 2,152,157 | | $ | 1,534,072 | | $ | 2,141,408 | | $ | 1,461,276 | |
Cost | | 3.17 | % | 2.91 | % | 1.77 | % | 2.79 | % | 1.57 | % |
Average subordinated debentures | | 150,544 | | $ | 130,603 | | 121,654 | | 132,389 | | 121,654 | |
Cost | | 8.39 | % | 8.88 | % | 7.65 | % | 8.50 | % | 6.97 | % |
Average other interest-bearing liabilities | | 430,742 | | $ | 322,482 | | 94,755 | | 303,251 | | 105,722 | |
Cost | | 5.20 | % | 5.21 | % | 3.55 | % | 5.00 | % | 3.17 | % |
Average interest sensitive liabilities | | $ | 4,114,008 | | $ | 3,589,192 | | $ | 2,707,738 | | $ | 3,529,327 | | $ | 2,533,347 | |
Cost | | 1.99 | % | 1.74 | % | 1.01 | % | 1.69 | % | 0.90 | % |
| | | | | | | | | | | |
Interest spread | | 5.27 | % | 5.38 | % | 6.08 | % | 5.52 | % | 5.71 | % |
Net interest margin | | 6.52 | % | 6.60 | % | 6.85 | % | 6.67 | % | 6.37 | % |
LOAN CONCENTRATION (unaudited)
| | As of the Dates Indicated | |
| | 12/31/06 * | | 9/30/06 | | 6/30/06 | | 3/31/06 | | 12/31/05 | |
| | (Dollars in thousands) | |
Loan Category: | | | | | | | | | | | |
Domestic: | | | | | | | | | | | |
Commercial | | $ | 836,665 | | $ | 705,546 | | $ | 716,418 | | $ | 672,211 | | $ | 639,393 | |
Real estate–construction | | 939,463 | | 755,813 | | 763,861 | | 683,180 | | 570,080 | |
Commercial real estate–mortgage | | 2,463,481 | | 1,952,547 | | 1,812,484 | | 1,321,657 | | 1,117,030 | |
Consumer | | 45,984 | | 46,910 | | 54,455 | | 49,958 | | 47,221 | |
Foreign: | | | | | | | | | | | |
Commercial | | 83,359 | | 88,826 | | 95,692 | | 98,152 | | 94,930 | |
Other | | 6,778 | | 6,656 | | 7,182 | | 7,728 | | 8,320 | |
Total gross loans, including loans held for sale | | $ | 4,375,730 | | $ | 3,556,298 | | $ | 3,450,092 | | $ | 2,832,886 | | $ | 2,476,974 | |
* Commercial and commercial real estate-mortgage categories include loans held for sale of $83.8 million and $89.5 million.
11
COMPONENTS OF ALLOWANCE FOR CREDIT LOSSES AND NONPERFORMING ASSETS AND CREDIT QUALITY MEASURES (Unaudited)
| | At December 31, | |
| | 2006 | | 2005 | |
| | (Dollars in thousands) | |
ALLOWANCE FOR CREDIT LOSSES: | | | | | |
Allowance for loan losses | | $ | 52,908 | | $ | 27,303 | |
Reserve for unfunded loan commitments | | 8,271 | | 5,668 | |
Allowance for credit losses | | $ | 61,179 | | $ | 32,971 | |
| | | | | |
NONPERFORMING ASSETS: | | | | | |
Nonaccrual loans | | $ | 22,095 | | $ | 8,422 | |
Other real estate owned | | — | | — | |
Total nonperforming assets | | $ | 22,095 | | $ | 8,422 | |
| | | | | |
Allowance for loan losses to loans, net of unearned income | | 1.26 | % | 1.11 | % |
Allowance for credit losses to loans, net of unearned income | | 1.46 | % | 1.34 | % |
Allowance for loan losses to nonaccrual loans | | 239.5 | % | 324.2 | % |
Allowance for credit losses to nonaccrual loans | | 276.9 | % | 391.5 | % |
Allowance for loan losses to nonperforming assets | | 239.5 | % | 324.2 | % |
Allowance for credit losses to nonperforming assets | | 276.9 | % | 391.5 | % |
Nonperforming assets to total loans, including loans held for sale, and other real estate owned | | 0.51 | % | 0.34 | % |
Nonaccrual loans to total loans, including loans held for sale | | 0.51 | % | 0.34 | % |
ALLOWANCE FOR CREDIT LOSSES ROLLFORWARD AND NET CHARGE-OFF MEASUREMENT(unaudited)
| | As of or for the: | |
| | Quarter Ended
December 31, | | Year Ended
December 31, | |
| | 2006 | | 2006 | | 2005 | |
| | (Dollars in thousands) | |
Balance at beginning of period | | $ | 51,918 | | $ | 32,971 | | $ | 29,507 | |
Loans charged-off: | | | | | | | |
Commercial | | (377 | ) | (1,083 | ) | (1,646 | ) |
Real estate – construction | | — | | (144 | ) | — | |
Real estate – mortgage | | — | | — | | (100 | ) |
Consumer | | (111 | ) | (189 | ) | (180 | ) |
Foreign | | (568 | ) | (1,691 | ) | (1,592 | ) |
Total loans charged-off | | (1,056 | ) | (3,107 | ) | (3,518 | ) |
| | | | | | | |
Recoveries on loans charged-off: | | | | | | | |
Commercial | | 148 | | 1,361 | | 2,106 | |
Real estate – construction | | — | | — | | — | |
Real estate – mortgage | | — | | — | | 11 | |
Consumer | | 31 | | 171 | | 241 | |
Foreign | | 173 | | 187 | | 2 | |
Total recoveries on loans charged-off | | 352 | | 1,719 | | 2,360 | |
Net charge-offs | | (704 | ) | (1,388 | ) | (1,158 | ) |
Provision for credit losses | | — | | 9,600 | | 1,420 | |
Additions due to acquisitions | | 9,965 | | 19,996 | | 3,202 | |
Balance at end of period | | $ | 61,179 | | $ | 61,179 | | $ | 32,971 | |
| | | | | | | |
Annualized net charge-offs to average loans | | 0.07 | % | 0.04 | % | 0.05 | % |
12
