For more information, contact:
Robert D. Sznewajs
President & CEO
(503) 598-3243
Anders Giltvedt
Executive Vice President & CFO
(503) 598-3250
WEST COAST BANCORP REPORTS 2008 THIRD QUARTER RESULTS
• | THIRD QUARTER LOSS PER DILUTED SHARE OF $.15 INCLUDED $.27, AFTER-TAX, IN OTHER THAN TEMPORARY IMPAIRMENT CHARGES. |
• | CORE* EARNINGS PER DILUTED SHARE WERE $.12 IN THE MOST RECENT QUARTER AND $.42 YEAR TO DATE SEPTEMBER 30, 2008 (SEE TABLE BELOW). |
• | WEST COAST BANK CONTINUED TO BE WELL CAPITALIZED; THE TOTAL CAPITAL RATIO FOR THE BANK INCREASED TO 10.78% FROM 10.70% AT JUNE 30, 2008. |
• | INCREASED PROVISION FOR CREDIT LOSSES TO $9.1 MILLION LARGELY REFLECTING THE DIFFICULT CONDITIONS IN THE RESIDENTIAL CONSTRUCTION SECTOR. |
• | PAYMENT SYSTEM AND DEPOSIT SERVICE CHARGE REVENUES GREW 5% OVER SECOND QUARTER 2008 AND 22% OVER THIRD QUARTER 2007. |
Lake Oswego, OR – October 20, 2008 – West Coast Bancorp (NASDAQ: WCBO) today announced a quarterly loss of $2.3 million or $.15 per diluted share for the third quarter of 2008, compared to third quarter 2007 earnings of $8.3 million or $.52 per diluted share. Year to date the Company reported earnings of $2.4 million or $.15 per diluted share, compared to $24.3 million or $1.51 per diluted share for the same period in 2007.
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 2 of 25
| | | | | | | |
| | GAAP | | | | CORE* | |
(Dollars in thousands, | | September 30, | | | | September 30, | |
except per share data, unaudited) | | 2008 | 2007 | Change | | | 2008 | 2007 | Change |
For the three months ended: | | | | | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (2,316 | ) | $ | 8,330 | | -128 | % | | | $ | 1,804 | | $ | 8,330 | | -78 | % |
Diluted (loss) earnings per share | | | ($0.15 | ) | $ | 0.52 | | -129 | % | | | $ | 0.12 | | $ | 0.52 | | -77 | % |
| | | | | | | | | | | | | | | | | | | |
Return on average equity | | | -4.5 | % | | 15.3 | % | -19.8 | % | | | | 3.5 | % | | 15.3 | % | -11.8 | % |
| | | | | | | | | | | | | | | | | | | |
For the nine months ended: | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 2,368 | | $ | 24,329 | | -90 | % | | | $ | 6,488 | | $ | 24,329 | | -73 | % |
Diluted earnings per share | | $ | 0.15 | | $ | 1.51 | | -90 | % | | | $ | 0.42 | | $ | 1.51 | | -72 | % |
| | | | | | | | | | | | | | | | | | | |
West Coast Bancorp Tier 1 capital ratio | | | 10.16 | % | | 10.16 | % | 0.00 | % | | | | | | | | | | |
West Coast Bancorp Total capital ratio | | | 11.42 | % | | 11.27 | % | 0.15 | % | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
West Coast Bank Tier 1 capital ratio | | | 9.52 | % | | 9.47 | % | 0.05 | % | | | | | | | | | | |
West Coast Bank Total capital ratio | | | 10.78 | % | | 10.57 | % | 0.21 | % | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total period end loans | | $ | 2,109,517 | | $ | 2,183,301 | | -3 | % | | | | | | | | | | |
Total period end deposits | | $ | 2,061,419 | | $ | 2,111,453 | | -2 | % | | | | | | | | | | |
*Core earnings for the periods shown, and numbers derived using core earnings, including core net income, core earnings per diluted share, and core return on average equity, are non-GAAP (Generally Accepted Accounting Principles) financial measures derived by adjusting the Company’s GAAP earnings for the negative impact of third quarter impairment charges of approximately $4.1 million, after tax, or $.27 per diluted share. Management uses this non-GAAP information internally and has disclosed it to investors based on its belief that the information provides additional, valuable information relating to its operating performance as compared to prior periods. See financial tables 1 and 2 below for a reconciliation to the GAAP measure.
“West Coast Bank’s total capital ratio as of September 30, 2008 was 10.78%, an increase from June 30, 2008, and the Bank remained well capitalized for regulatory purposes. The results in the quarter were strongly influenced by impairment charges related to certain securities in our investment portfolio, including Freddie Mac preferred stock and pooled trust preferred securities, and additional loan loss provisioning associated with the slowdown in the residential construction industry in our markets. However, the Company did report core earnings per share of $.12 per diluted share in the third quarter of 2008,” said Robert D. Sznewajs, President and CEO. Sznewajs added, “During the third quarter we continued to increase our checking account base; our total checking accounts now exceeds 91,000. In addition, the commercial, term commercial real estate and home equity portfolios, representing approximately 80% of our total loan balance at September 30, 2008, continued to perform well from a credit quality perspective”
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 3 of 25
Financial Results:
Total loan balance of $2.110 billion at September 30, 2008 declined 3% compared to September 30, 2007. Excluding two-step loan balances, year-over-year loan growth was $103 million, or 5%, with expansion in the commercial real estate and residential mortgage loan categories. The reduction in outstanding two-step loan balances over the past 12 months was $177 million or 64%. The remaining two step loan balance of $98 million at quarter end represented less than 5% of total loans, down from approximately 13% of total loans a year ago. Remaining available commitments for two-step loans were $2 million at September 30, 2008. Third quarter 2008 average total deposits of $2.046 billion declined 1% from the third quarter of 2007 but were unchanged from the second quarter of this year. Total average loans to total average deposit ratio was reduced to 104% from 107% during third quarter 2008.
Third quarter 2008 net interest income declined $6.1 million to $23.7 million from the same quarter last year predominantly due to a 92 basis point compression in the net interest margin to 4.02%. The net interest margin declined as a result of the lower value of non-interest bearing demand deposits and a 52 basis point contraction in the net interest spread. Relative to the third quarter 2007, the combination of interest reversals on two-step loans and the cost of carrying the nonaccrual two-step loans and Other Real Estate Owned (“OREO”) balances reduced the third quarter 2008 net interest margin and spread by approximately 23 basis points. Lower construction loan fees reduced the net interest margin and spread by 16 basis points from the same quarter in 2007 while the remaining contraction resulted from a very competitive pricing environment for interest bearing deposits.
Compared to second quarter 2008, the net interest margin remained relatively stable in the most recent quarter after adjustment for lower two-step interest reversals in the most recent quarter. Net interest income also stabilized from the second quarter 2008.
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 4 of 25
Third quarter 2008 non-interest income of $1.1 million declined $7.1 million from the same period in 2007. This was primarily a result of a non-cash Other Than Temporary Impairment (“OTTI”) charge totaling $6.3 million pre-tax, of which $3.1 million was associated with two trust preferred pool securities, $2.8 million for Freddie Mac preferred stock, and $.4 million for a Lehman Brothers senior bond. Mainly due to the 8% growth in consumer and business transaction accounts over the past 12 months and higher transaction volumes, total deposit service charge revenues grew nearly $1.0 million or 30%. The expansion in transaction accounts and volumes also helped generate a $.2 million or 10% growth in payment systems revenues over the third quarter of 2007. Gain on sales of loans declined 30% or $.2 million in the most recent quarter as a result of reduced activity in the residential mortgage market as well as lower SBA loan production and sales. The uncertainty surrounding the economy and related decline in the equity markets contributed to a reduction in trust and investment revenues of $.4 million or 25% from the same quarter in 2007. Additionally, in the most recent quarter, we recorded a negative valuation adjustment of $1.1 million associated with re-appraised properties held in the two-step OREO portfolio. We also recognized a $.3 million OREO loss upon disposition of 19 two-step OREO properties. Including 13 short sales, we disposed of a total of 32 properties during the third quarter with proceeds of $9.3 million. There were 173 properties in the two-step OREO portfolio at September 30, 2008. (See table 7 for details).
Third quarter 2008 total non-interest expense of $22.2 million decreased $.4 million or 2% from the same period of 2007. Our personnel expense fell 17% or $2.3 million. Due in part to a $.8 million reversal of previously accrued incentive pay, total performance-related pay declined $3.8 million. This decline was partly offset by $.5 million in annual merit increases and a $1.0 million reduction in deferred construction loan origination costs compared to the same quarter in 2007. Other non-interest expense year-over-year third quarter variances included a $.5 million increase in FDIC insurance premium expense and $1.2 million in two-step property collection and disposition expenses during the most recent quarter. There were no such two-step expenses in the third quarter of 2007.
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 5 of 25
Compared to second quarter 2008 our total non-interest expense fell $1.1 million or 5%, largely due to the one-time reversal of accrued incentive pay.
Credit Quality:
The Company recorded a third quarter 2008 provision for credit losses of $9.1 million, up $6.4 million from the third quarter in 2007, and an increase of $3.1 million from the second quarter 2008. The provision related to the two-step portfolio was $2.0 million in the most recent quarter, which was unchanged from the previous quarter. Both the probability of default and severity of loss upon default increased slightly compared to the original model assumptions made in establishing the allowance for credit losses for the two-step portfolio at December 31, 2007. Given there is only $14.9 million in remaining two-step accruing loans at September 30, 2008, the higher default rate is not expected to materially impact future provision requirements associated with two-step loans. The actual loss rate was based on the 19 pending and 58 closed two-step property sales for the nine months ended September 30, 2008. Approximately 70% of the two-step nonperforming assets had been re-appraised at the end of the third quarter 2008. Consistent with our ongoing process, each property is re-appraised within 45 days prior to its expected foreclosure date and an additional provision is possible based on those appraisals. All nonaccruing two-step loans have already been individually impaired and written down to appraised value. Accordingly, these loans do not carry a general valuation allowance in our allowance for credit loss model.
The provision associated with loans other than two-step loans was $7.1 million in the third quarter compared to $4.0 million in the second quarter of 2008. The combination of negative risk rating changes and higher net charge-offs increased the provision requirement in our allowance model. The higher level of charge off activity was largely related to $4.2 million in net charge offs associated with residential construction loans.
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 6 of 25
At September 30, 2008, the total outstanding non two-step residential construction loan portfolio was $169 million. This portfolio consisted of $24 million in land, $71 million in site development, and $74 million in construction of residencies (vertical construction). Delinquent loans in the non two-step residential construction portfolio amounted to $7.7 million or 4.5%. Nonaccrual non two-step residential construction loans were $26.3 million or 15.6% of the total residential construction loan portfolio. Loans to borrowers involved in residential site development and vertical construction exhibit the most deterioration in credit quality. Nonaccrual non two-step residential construction loans are largely located in Clark County in the state of Washington, and in Marion and Deschutes counties in the state of Oregon.
Total net charge-offs in third quarter 2008 were $11.7 million, of which $5.8 million related to the two-step portfolio. The third quarter 2008 net charge-offs for loans other than two-step loans were $5.9 million or 1.11% annualized of average total loans compared to $2.9 million in the second quarter 2008 and minimal net charge-offs in the same quarter of 2007. The higher level of net charge-off activity was substantially associated with impaired residential construction loans, a loan segment which also heavily influenced the negative risk rating migration during the quarter.
At September 30, 2008, the total allowance for credit losses was $34.4 million, including $1.5 million associated with the two-step loan portfolio. The allowance for credit losses in the two-step portfolio at September 30, 2008, was 8.9% of total two-step commitments associated with two-step loans on accruing status as of September 30, 2008 and is consistent with the two-step allowance percentage as of June 30, 2008. The following table summarizes the significant trends in the two-step loan portfolio and allowance for credit losses.
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 7 of 25
Additional information regarding the two-step loan portfolio |
(Dollars in thousands, unaudited) |
Period ended
| | Total two-step
loans | Nonaccrual
two-step loans | Accruing two-
step loans | Total accruing
two-step loan
commitments | Allowance for
credit losses
on two-step
loans | | Allowance for
credit losses
on two-step
loans as a %
of accruing
two-step loans | | Allowance for
credit losses on
two-step loans as
a % of total
accruing two-step
loan commitments |
12/31/2007 | | $ | 262,952 | | $ | 20,545 | | $ | 242,407 | | $ | 320,991 | | $ | 31,065 | | | 12.8 | % | | 9.7 | % |
3/31/2008 | | | 211,406 | | | 88,784 | | | 122,622 | | | 156,823 | | | 11,812 | | | 9.6 | % | | 7.5 | % |
6/30/2008 | | | 145,703 | | | 98,728 | | | 46,975 | | | 59,603 | | | 5,280 | | | 11.2 | % | | 8.9 | % |
9/30/2008 | | | 97,894 | | | 82,990 | | | 14,904 | | | 16,943 | | | 1,502 | | | 10.1 | % | | 8.9 | % |
The allowance for credit losses associated with loans other than two-step loans was $32.9 million or 1.64% of such outstanding loan balances at September 30, 2008, up from 1.58% at June 30, 2008 and 1.25% at December 31, 2007. For loans other than two-step loans, the allowance for credit losses was 63% of total nonperforming loans compared to 153% at June 30, 2008.
Total non-performing assets were $183 million or 7.1% of total assets at September 30, 2008, up from $147 million and 5.6%, respectively, as of June 30, 2008 and $30 million and 1.1% at year end 2007. Non-performing assets related to the two-step loan portfolio were $128 million or 5.0% of total assets at September 30, 2008, an increase of $2 million from the end of the second quarter 2008. During the third quarter, the nonaccrual two-step loan balance declined by $16 million to $83 million as properties moved into the OREO portfolio. As of September 30, 2008, the $83 million in nonaccrual two-step loans reflected prior write-downs of approximately 17% of the original principal balance. The two-step OREO balance increased from $26 million at June 30, 2008, to $45 million at the end of the third quarter in line with our expectations. At September 30, 2008, there were $15 million in accruing two-step loan balances. Based on current property sales trends and fewer two-step loans becoming nonaccruing in future quarters, we believe the level of two-step nonperforming assets peaked in the third quarter of 2008.
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 8 of 25
Nonperforming assets other than in the two-step portfolio increased $34 million to $56 million or 2.16% of total assets from $22 million and .84% at June 30, 2008, and $6 million and .22% at year end 2007. The overall increase in non two-step nonperforming loans was due to a $32 million increase in nonaccrual loans and a $2 million increase in OREO. The increase in non accrual non two step loans is linked to higher levels of non accrual loans to residential builders and developers and nonstandard mortgage loans, most of which are mortgages provided to two-step borrowers whom are motivated to retain their properties. There were no non-performing assets related to commercial construction, and the commercial, commercial real estate, and home equity portfolios continued to perform well as the end of the third quarter. As of September 30, 2008, all non two-step related nonaccrual loans had been measured for impairment and written down to appraised fair value, less expected selling costs, of the underlying collateral.
Total non two-step delinquent loans were $10.9 million or .54% of total non two-step loans at the end of the third quarter of 2008, up from $9 million and .47% at June 30, 2008, and up from $7.7 million and .40% at year end 2007. The increased delinquency for non two-step loans in the most recent quarter was primarily due to higher delinquencies in residential construction loans to builders and developers. For more detailed credit quality information, see tables 4 through 14.
Capital:
The Company increased its capital ratios in the third quarter of 2008 and continued to be well capitalized. At September 30, 2008, the total capital ratio for West Coast Bank was approximately 10.78%, up from 10.70% at June 30, 2008, and 10.57% a year ago. West Coast Bank’s tier 1 capital ratio at 9.52% and leverage ratio of 8.91% at September 30, 2008 were significantly above the well capitalized regulatory threshold. The following table shows the Company’s risk based capital ratios for the indicated periods.
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 9 of 25
Risk based capital ratios | | | | | | | | |
(Unaudited) | | 09/30/08 | | | 09/30/07 | | | 06/30/08 |
West Coast Bancorp | | Ratio | Well capitalized
minimum | Excess over
well capitalized
minimum | | | Ratio | | | Ratio |
Tier 1 capital ratio | | 10.16 | % | 6.00 | % | 4.16 | % | | | 10.16 | % | | | 10.00 | % |
Total capital ratio | | 11.42 | % | 10.00 | % | 1.42 | % | | | 11.27 | % | | | 11.25 | % |
Leverage ratio | | 9.56 | % | 5.00 | % | 4.56 | % | | | 9.95 | % | | | 9.46 | % |
| | | | | | | | | | | | | | | |
West Coast Bank | | | | | | | | | | | | | | | |
Tier 1 capital ratio | | 9.52 | % | 6.00 | % | 3.52 | % | | | 9.47 | % | | | 9.45 | % |
Total capital ratio | | 10.78 | % | 10.00 | % | 0.78 | % | | | 10.57 | % | | | 10.70 | % |
Leverage ratio | | 8.91 | % | 5.00 | % | 3.91 | % | | | 9.26 | % | | | 8.90 | % |
Other:
The Company will hold a Webcast conference call Tuesday, October 21, 2008, at 8:00 a.m. Pacific Time, during which the Company will discuss third quarter 2008 results and key activities. To access the conference call via a live Webcast, go to www.wcb.com and click on Investor Relations and the “3rd Quarter 2008 Earnings Conference Call” tab. The conference call may also be accessed by dialing (877) 604-2074. Conference ID#: 63329959 a few minutes prior to 8:00 a.m. PDT. The call will be available for replay by accessing the Company’s website at www.wcb.com and following the same instructions.
West Coast Bancorp, one of Oregon Business Magazine’s 100 Best Companies to Work For, is a Northwest bank holding company with $2.6 billion in assets, and 64 offices in Oregon and Washington. The Company combines the sophisticated products and expertise of larger banks with the local decision making, market knowledge and customer service of a community bank. For more information, visit the Company’s web site at www.wcb.com.
Forward Looking Statements:
Statements in this release regarding future events, performance or results are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") and
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 10 of 25
are made pursuant to the safe harbors of the PSLRA. Actual results could be quite different from those expressed or implied by the forward-looking statements. Do not unduly rely on forward-looking statements. They give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.
A number of factors could cause results to differ significantly from our expectations, including, among others, factors identified in our Annual Report on Form 10-K for the year ended December 31, 2007, including under the heading "Forward Looking Statement Disclosure" and in Item 1A, “Risk Factors,” all as updated in our Quarterly Report on Form 10-Q.
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 11 of 25
| | West Coast Bancorp |
| | Consolidated Statements of Income (Loss) |
(Unaudited) | | Three months ended | | | Nine months ended |
(Dollars and shares in thousands, except per share data) | | September 30, | June 30, | | | September 30, |
| | 2008 | 2007 | 2008 | | | 2008 | 2007 |
Net interest income | | | | | | | | | | | | | | | | | | |
Interest and fees on loans | | $ | 32,013 | | $ | 44,517 | | $ | 32,826 | | | | $ | 99,912 | | $ | 127,065 | |
Interest on investment securities | | | 2,686 | | | 3,129 | | | 2,779 | | | | | 8,563 | | | 10,268 | |
Other interest income | | | 73 | | | 96 | | | 140 | | | | | 354 | | | 329 | |
Total interest income | | | 34,772 | | | 47,742 | | | 35,745 | | | | | 108,829 | | | 137,662 | |
Interest expense on deposit accounts | | | 8,310 | | | 14,504 | | | 9,064 | | | | | 28,987 | | | 41,015 | |
Interest on borrowings and subordinated debentures | | | 2,739 | | | 3,401 | | | 2,968 | | | | | 8,829 | | | 10,201 | |
Total interest expense | | | 11,049 | | | 17,905 | | | 12,032 | | | | | 37,816 | | | 51,216 | |
Net interest income | | | 23,723 | | | 29,837 | | | 23,713 | | | | | 71,013 | | | 86,446 | |
| | | | | | | | | | | | | | | | | | |
Provision for credit losses | | | 9,125 | | | 2,700 | | | 6,000 | | | | | 23,850 | | | 9,000 | |
| | | | | | | | | | | | | | | | | | |
Non-interest income | | | | | | | | | | | | | | | | | | |
Service charges on deposit accounts | | | 4,176 | | | 3,213 | | | 3,883 | | | | | 11,694 | | | 9,234 | |
Payment systems related revenue | | | 2,337 | | | 2,122 | | | 2,340 | | | | | 6,808 | | | 5,812 | |
Trust and investment services revenues | | | 1,241 | | | 1,662 | | | 1,534 | | | | | 4,360 | | | 4,803 | |
Gains on sales of loans | | | 455 | | | 650 | | | 769 | | | | | 2,084 | | | 2,921 | |
OREO gain (loss) on sale and valuation adjustments | | | (1,422 | ) | | — | | | (274 | ) | | | | (1,685 | ) | | 27 | |
Other | | | 621 | | | 661 | | | 599 | | | | | 2,619 | | | 2,153 | |
Loss on impairment of debt and equity securities | | | (6,338 | ) | | — | | | — | | | | | (6,338 | ) | | — | |
Gains (losses) on sales of securities | | | — | | | (163 | ) | | 187 | | | | | 777 | | | (67 | ) |
Total non-interest income | | | 1,070 | | | 8,145 | | | 9,038 | | | | | 20,319 | | | 24,883 | |
Non-interest expense | | | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | | 11,017 | | | 13,312 | | | 12,645 | | | | | 36,017 | | | 38,369 | |
Equipment | | | 1,793 | | | 1,593 | | | 1,765 | | | | | 5,309 | | | 4,693 | |
Occupancy | | | 2,354 | | | 2,099 | | | 2,297 | | | | | 7,026 | | | 6,306 | |
Payment systems related expense | | | 952 | | | 843 | | | 892 | | | | | 2,687 | | | 2,333 | |
Professional fees | | | 1,334 | | | 485 | | | 948 | | | | | 3,082 | | | 1,451 | |
Postage, printing and office supplies | | | 991 | | | 973 | | | 1,000 | | | | | 2,957 | | | 2,818 | |
Marketing | | | 1,009 | | | 1,298 | | | 1,006 | | | | | 2,810 | | | 3,292 | |
Communications | | | 437 | | | 415 | | | 427 | | | | | 1,266 | | | 1,202 | |
Other non-interest expense | | | 2,334 | | | 1,584 | | | 2,366 | | | | | 6,634 | | | 4,677 | |
Total non-interest expense | | | 22,221 | | | 22,602 | | | 23,346 | | | | | 67,788 | | | 65,141 | |
Income (loss) before income taxes | | | (6,553 | ) | | 12,680 | | | 3,405 | | | | | (306 | ) | | 37,188 | |
Provision (benefit) for income taxes | | | (4,237 | ) | | 4,350 | | | 721 | | | | | (2,674 | ) | | 12,859 | |
Net (loss) income | | $ | (2,316 | ) | $ | 8,330 | | $ | 2,684 | | | | $ | 2,368 | | $ | 24,329 | |
| | | | | | | | | | | | | | | | | | |
Basic (loss) earnings per share | | $ | (0.15 | ) | $ | 0.54 | | $ | 0.17 | | | | $ | 0.15 | | $ | 1.57 | |
Diluted (loss) earnings per share | | $ | (0.15 | ) | $ | 0.52 | | $ | 0.17 | | | | $ | 0.15 | | $ | 1.51 | |
| | | | | | | | | | | | | | | | | | |
Weighted average common shares | | | 15,487 | | | 15,536 | | | 15,467 | | | | | 15,467 | | | 15,528 | |
Weighted average diluted shares | | | 15,487 | | | 16,035 | | | 15,540 | | | | | 15,571 | | | 16,108 | |
| | | | | | | | | | | | | | | | | | |
Tax equivalent net interest income | | $ | 24,154 | | $ | 30,225 | | $ | 24,162 | | | | $ | 72,343 | | $ | 87,629 | |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 12 of 25
| | West Coast Bancorp |
| | Consolidated Balance Sheets |
| | Sept. 30, | | | Sept. 30, | | | June 30, |
(Dollars and shares in thousands, unaudited) | | 2008 | | | 2007 | | | 2008 |
Assets: | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 101,614 | | | | $ | 101,372 | | | | $ | 101,767 | |
Investments | | | 205,987 | | | | | 261,499 | | | | | 248,954 | |
Total loans | | | 2,109,517 | | | | | 2,183,301 | | | | | 2,153,716 | |
Allowance for loan losses | | | (33,498 | ) | | | | (27,534 | ) | | | | (35,723 | ) |
Loans, net | | | 2,076,019 | | | | | 2,155,767 | | | | | 2,117,993 | |
OREO, net | | | 48,121 | | | | | 1,183 | | | | | 27,892 | |
Goodwill and other intangibles | | | 14,153 | | | | | 14,611 | | | | | 14,253 | |
Other assets | | | 127,152 | | | | | 113,179 | | | | | 122,067 | |
Total assets | | $ | 2,573,046 | | | | $ | 2,647,611 | | | | $ | 2,632,926 | |
| | | | | | | | | | | | | | |
Liabilities and Stockholders’ Equity: | | | | | | | | | | | | | | |
Demand | | $ | 486,540 | | | | $ | 500,120 | | | | $ | 500,189 | |
Savings and interest-bearing demand | | | 337,472 | | | | | 347,560 | | | | | 349,950 | |
Money market | | | 672,690 | | | | | 666,352 | | | | | 693,801 | |
Time deposits | | | 564,717 | | | | | 597,421 | | | | | 534,310 | |
Total deposits | | | 2,061,419 | | | | | 2,111,453 | | | | | 2,078,250 | |
Borrowings and subordinated debentures | | | 282,059 | | | | | 285,141 | | | | | 322,378 | |
Reserve for unfunded commitments | | | 946 | | | | | 972 | | | | | 1,322 | |
Other liabilities | | | 24,400 | | | | | 32,134 | | | | | 25,468 | |
Total liabilities | | | 2,368,824 | | | | | 2,429,700 | | | | | 2,427,418 | |
Stockholders’ equity | | | 204,222 | | | | | 217,911 | | | | | 205,508 | |
Total liabilities and stockholders’ equity | | $ | 2,573,046 | | | | $ | 2,647,611 | | | | $ | 2,632,926 | |
| | | | | | | | | | | | | | |
Common shares outstanding period end | | | 15,702 | | | | | 15,604 | | | | | 15,702 | |
Book value per common share | | $ | 13.01 | | | | $ | 13.97 | | | | $ | 13.09 | |
Tangible book value per common share | | $ | 12.10 | | | | $ | 13.03 | | | | $ | 12.18 | |
| | West Coast Bancorp |
| | Period End Loan Portfolio By Category |
| | Sept. 30 | % of | Sept. 30 | % of | Change | | June 30, | Change |
(Dollars in thousands, unaudited) | | 2008 | total loans | 2007 | total loans | Amount | % | | 2008 | % |
Commercial loans | | $ | 498,715 | | 24 | % | $ | 530,196 | | 24 | % | $ | (31,481 | ) | -6 | % | | | $ | 512,689 | | -3 | % |
Real estate construction loans 1 | | | 330,833 | | 16 | % | | 519,870 | | 24 | % | | (189,037 | ) | -36 | % | | | | 392,724 | | -16 | % |
Real estate mortgage loans | | | 389,553 | | 18 | % | | 305,675 | | 14 | % | | 83,878 | | 27 | % | | | | 377,771 | | 3 | % |
Commercial real estate loans | | | 867,902 | | 41 | % | | 804,200 | | 37 | % | | 63,702 | | 8 | % | | | | 847,430 | | 2 | % |
Installment and other consumer loans | | | 22,514 | | 1 | % | | 23,360 | | 1 | % | | (846 | ) | -4 | % | | | | 23,102 | | -3 | % |
Total loans | | $ | 2,109,517 | | 100 | % | $ | 2,183,301 | | 100 | % | $ | (73,784 | ) | -3 | % | | | $ | 2,153,716 | | -2 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
1 Two-step residential construction | | | | | | | | | | | | | | | | | | | | | | | |
loans | | $ | 97,894 | | 5 | % | $ | 274,747 | | 13 | % | $ | (176,853 | ) | -64 | % | | | $ | 145,703 | | -33 | % |
Total loans other than two-step loans | | | 2,011,623 | | 95 | % | | 1,908,554 | | 87 | % | | 103,069 | | 5 | % | | | | 2,008,013 | | 0 | % |
Total loans | | $ | 2,109,517 | | 100 | % | $ | 2,183,301 | | 100 | % | $ | (73,784 | ) | -3 | % | | | $ | 2,153,716 | | -2 | % |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 13 of 25
The following table reconciles GAAP earnings income to core earnings, including per-share figures:
Table 1 | | West Coast Bancorp |
| | GAAP net income (loss) to core earnings reconciliation |
| | For the three months ended Sept. 30, | | | For the nine months ended Sept. 30, |
(Dollars in thousands, unaudited) | | 2008 | | | 2007 | | | 2008 | | | 2007 |
Net (loss) income | | $ | (2,316) | | | | $ | 8,330 | | | | $ | 2,368 | | | | $ | 24,329 | |
Add: impairment charge on securities, net of tax* | | | 4,120 | | | | | — | | | | | 4,120 | | | | | — | |
Core earnings | | $ | 1,804 | | | | $ | 8,330 | | | | $ | 6,488 | | | | $ | 24,329 | |
*Federal income tax provision applied at 35%. | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Diluted (loss) earnings per share | | | | | | | | | | | | | | | | | | | |
GAAP | | $ | (0.15) | | | | $ | 0.52 | | | | $ | 0.15 | | | | $ | 1.51 | |
Core | | $ | 0.12 | | | | $ | 0.52 | | | | $ | 0.42 | | | | $ | 1.51 | |
The following table reconciles return on average equity to return on average equity, tangible.
Table 2 | West Coast Bancorp |
| Return on average equity tangible reconciliation1 |
| For the three months ended Sept. 30, | | For the nine months ended Sept. 30, |
(Dollars in thousands, unaudited) | | 2008 | | | 2007 | | | 2008 | | | 2007 |
Net (loss) income | | $ | (2,316) | | | | $ | 8,330 | | | | $ | 2,368 | | | | $ | 24,329 | |
Add: intangible asset amortization, net of tax* | | | 66 | | | | | 78 | | | | | 220 | | | | | 274 | |
Net (loss) income, tangible | | $ | (2,250) | | | | $ | 8,408 | | | | $ | 2,588 | | | | $ | 24,603 | |
| | | | | | | | | | | | | | | | | | | |
Average shareholders’ equity | | $ | 206,360 | | | | $ | 215,550 | | | | $ | 208,472 | | | | $ | 209,808 | |
Less: average intangibles | | | (14,194) | | | | | (14,660) | | | | | (14,311) | | | | | (14,805) | |
Average shareholders’ equity, tangible | | $ | 192,166 | | | | $ | 200,890 | | | | $ | 194,161 | | | | $ | 195,003 | |
*Federal income tax provision applied at 35%. | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Return on average equity | | | -4.5 | % | | | | 15.3 | % | | | | 1.5 | % | | | | 15.5 | % |
Return on average equity, tangible | | | -4.7 | % | | | | 16.6 | % | | | | 1.8 | % | | | | 16.9 | % |
| | | | | | | | | | | | | | | | | | | |
1 Management uses return on equity, tangible internally and has disclosed it to investors based on its belief that the figure makes it easier to compare the Company’s performance to other financial institutions that do not have merger-related intangible assets and is commonly used in the industry. Ratios have been annualized where appropriate.
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 14 of 25
Table 3 | West Coast Bancorp |
| Financial Information |
| Third | | Third | | Second | | | | |
(Dollars in thousands except for per share data, unaudited) | Quarter | | Quarter | | Quarter | | Year to date | | Year to date |
(all rates have been annualized where appropriate) | 2008 | | 2007 | | 2008 | | 2008 | | 2007 |
PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Return on average assets | | | | | -0.36 | % | | | | 1.29 | % | | | | 0.41 | % | | | | 0.12 | % | | | | 1.29 | % | |
- Return on average common equity | | | | | -4.47 | % | | | | 15.33 | % | | | | 5.19 | % | | | | 1.52 | % | | | | 15.50 | % | |
- Return on average tangible equity | | | | | -4.66 | % | | | | 16.60 | % | | | | 5.69 | % | | | | 1.78 | % | | | | 16.87 | % | |
- Non-interest income to average assets | | | | | 0.17 | % | | | | 1.26 | % | | | | 1.39 | % | | | | 1.05 | % | | | | 1.32 | % | |
- Non-interest expense to average assets | | | | | 3.45 | % | | | | 3.49 | % | | | | 3.60 | % | | | | 3.50 | % | | | | 3.47 | % | |
- Efficiency ratio, tax equivalent | | | | | 70.4 | % | | | | 58.7 | % | | | | 70.7 | % | | | | 69.0 | % | | | | 57.9 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
NET INTEREST MARGIN | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Yield on average interest-earning assets | | | | | 5.85 | % | | | | 7.87 | % | | | | 5.91 | % | | | | 6.03 | % | | | | 7.83 | % | |
- Rate on average interest-bearing liabilities | | | | | 2.36 | % | | | | 3.86 | % | | | | 2.52 | % | | | | 2.67 | % | | | | 3.79 | % | |
- Net interest spread | | | | | 3.49 | % | | | | 4.01 | % | | | | 3.39 | % | | | | 3.36 | % | | | | 4.04 | % | |
- Net interest margin | | | | | 4.02 | % | | | | 4.94 | % | | | | 3.94 | % | | | | 3.96 | % | | | | 4.94 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVERAGE ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Investment securities | | | | $ | 228,382 | | | | $ | 257,771 | | | | $ | 233,156 | | | | $ | 238,732 | | | | $ | 278,468 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Commercial loans | | | | | 502,781 | | | | | 516,634 | | | | | 527,781 | | | | | 513,005 | | | | | 495,833 | | |
- Real estate construction loans | | | | | 371,687 | | | | | 507,613 | | | | | 432,398 | | | | | 434,950 | | | | | 460,861 | | |
- Real estate mortgage loans | | | | | 383,214 | | | | | 300,114 | | | | | 366,997 | | | | | 364,245 | | | | | 290,915 | | |
- Commercial real estate loans | | | | | 851,849 | | | | | 798,940 | | | | | 834,069 | | | | | 828,841 | | | | | 796,294 | | |
- Installment and other consumer loans | | | | | 23,220 | | | | | 23,799 | | | | | 24,367 | | | | | 23,941 | | | | | 25,172 | | |
- Total loans | | | | | 2,132,751 | | | | | 2,147,100 | | | | | 2,185,612 | | | | | 2,164,982 | | | | | 2,069,075 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Total interest earning assets | | | | | 2,393,207 | | | | | 2,426,360 | | | | | 2,465,147 | | | | | 2,440,704 | | | | | 2,370,055 | | |
- Other assets | | | | | 170,466 | | | | | 143,180 | | | | | 144,807 | | | | | 149,321 | | | | | 143,374 | | |
- Total assets | | | | $ | 2,563,673 | | | | $ | 2,569,540 | | | | $ | 2,609,954 | | | | $ | 2,590,025 | | | | $ | 2,513,429 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVERAGE LIABILITIES & EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Demand deposits | | | | $ | 482,780 | | | | $ | 490,336 | | | | $ | 467,664 | | | | $ | 471,552 | | | | $ | 474,828 | | |
- Savings and Interest bearing demand | | | | | 348,008 | | | | | 341,496 | | | | | 357,664 | | | | | 354,862 | | | | | 273,383 | | |
- Money market | | | | | 672,051 | | | | | 680,027 | | | | | 662,962 | | | | | 665,863 | | | | | 661,037 | | |
- Time deposits | | | | | 543,451 | | | | | 565,550 | | | | | 558,087 | | | | | 560,170 | | | | | 547,622 | | |
- Total deposits | | | | | 2,046,290 | | | | | 2,077,409 | | | | | 2,046,377 | | | | | 2,052,447 | | | | | 1,956,870 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Borrowings and subordinated debentures | | | | | 300,258 | | | | | 252,314 | | | | | 341,578 | | | | | 308,960 | | | | | 250,011 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Total interest bearing liabilities | | | | | 1,863,768 | | | | | 1,839,387 | | | | | 1,920,292 | | | | | 1,889,854 | | | | | 1,804,853 | | |
- Other liabilities | | | | | 493,545 | | | | | 514,603 | | | | | 481,791 | | | | | 491,699 | | | | | 498,768 | | |
- Total liabilities | | | | | 2,357,313 | | | | | 2,353,990 | | | | | 2,402,083 | | | | | 2,381,553 | | | | | 2,303,621 | | |
- Common equity | | | | | 206,360 | | | | | 215,550 | | | | | 207,871 | | | | | 208,472 | | | | | 209,808 | | |
- Total average liabilities and common equity | | | | $ | 2,563,673 | | | | $ | 2,569,540 | | | | $ | 2,609,954 | | | | $ | 2,590,025 | | | | $ | 2,513,429 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
AVERAGE ASSET/LIABILITY RATIOS | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Stockholders’ equity to total assets | | | | | 8.05 | % | | | | 8.39 | % | | | | 7.96 | % | | | | 8.05 | % | | | | 8.35 | % | |
- Interest earning assets to interest bearing liabilities | | | | | 128.4 | % | | | | 131.9 | % | | | | 128.4 | % | | | | 129.1 | % | | | | 131.3 | % | |
- Total loans to total assets | | | | | 83.2 | % | | | | 83.6 | % | | | | 83.7 | % | | | | 83.6 | % | | | | 82.3 | % | |
- Interest bearing deposits to total assets | | | | | 61.0 | % | | | | 61.8 | % | | | | 60.5 | % | | | | 61.0 | % | | | | 59.0 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 15 of 25
The following table presents information with respect to the change in the Company’s total allowance for credit losses.
Table 4 | | West Coast Bancorp |
| | Total Loan Portfolio |
| | Allowance For Credit Losses and Net Charge-offs |
| | Quarter ended | | Quarter ended | | | Quarter ended |
| | September 30, | | September 30, | | | June 30, |
(Dollars in thousands, unaudited) | | 2008 | | 2007 | | | 2008 |
Allowance for credit losses, beginning of period | | $ | 37,045 | | | | $ | 26,496 | | | | $ | 42,454 | |
Provision for credit losses | | | 9,125 | | | | | 2,700 | | | | | 6,000 | |
Loan charge-offs: | | | | | | | | | | | | | | |
Commercial | | | 516 | | | | | — | | | | | 2,118 | |
Real estate construction | | | 10,691 | | | | | 599 | | | | | 10,028 | |
Real estate mortgage | | | 580 | | | | | 7 | | | | | 260 | |
Commercial real estate | | | 44 | | | | | — | | | | | — | |
Installment and consumer | | | 382 | | | | | 81 | | | | | 45 | |
Overdraft | | | 323 | | | | | 303 | | | | | 302 | |
Total loan charge-offs | | | 12,536 | | | | | 990 | | | | | 12,753 | |
Loan recoveries: | | | | | | | | | | | | | | |
Commercial | | | 49 | | | | | 189 | | | | | — | |
Real estate construction | | | 716 | | | | | 7 | | | | | 1,239 | |
Real estate mortgage | | | (22 | ) | | | | 24 | | | | | 26 | |
Commercial real estate | | | — | | | | | 1 | | | | | — | |
Installment and consumer | | | 18 | | | | | 15 | | | | | 24 | |
Overdraft | | | 49 | | | | | 64 | | | | | 55 | |
Total loan recoveries | | | 810 | | | | | 300 | | | | | 1,344 | |
Net charge-offs | | | 11,726 | | | | | 690 | | | | | 11,409 | |
| | | | | | | | | | | | | | |
Total allowance for credit losses | | $ | 34,444 | | | | $ | 28,506 | | | | $ | 37,045 | |
Components of allowance for credit losses: | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 33,498 | | | | $ | 27,534 | | | | $ | 35,723 | |
Reserve for unfunded commitments | | | 946 | | | | | 972 | | | | | 1,322 | |
Total allowance for credit losses | | $ | 34,444 | | | | $ | 28,506 | | | | $ | 37,045 | |
| | | | | | | | | | | | | | |
Net loan charge-offs to average loans (annualized) | | | 2.19 | % | | | | 0.13 | % | | | | 2.10 | % |
Allowance for loan losses to total loans | | | 1.59 | % | | | | 1.26 | % | | | | 1.66 | % |
Allowance for credit losses to total loans | | | 1.63 | % | | | | 1.31 | % | | | | 1.72 | % |
Allowance for loan losses to nonperforming loans | | | 25 | % | | | | 350 | % | | | | 30 | % |
Allowance for credit losses to nonperforming loans | | | 25 | % | | | | 362 | % | | | | 31 | % |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 16 of 25
Table 5 | West Coast Bancorp |
| Total Loan Portfolio |
| Allowance For Credit Losses and Net Charge-offs |
| | Year to date | | | Year to date |
| | September 30, | | | September 30, |
(Dollars in thousands, unaudited) | | 2008 | | | 2007 |
Allowance for credit losses, beginning of period | | $ | 54,903 | | | | $ | 23,017 | |
Provision for credit losses | | | 23,850 | | | | | 9,000 | |
Loan charge-offs: | | | | | | | | | |
Commercial | | | 3,256 | | | | | 2,466 | |
Real estate construction | | | 41,113 | | | | | 673 | |
Real estate mortgage | | | 840 | | | | | 7 | |
Commercial real estate | | | 44 | | | | | — | |
Installment and consumer | | | 502 | | | | | 182 | |
Overdraft | | | 927 | | | | | 748 | |
Total loan charge-offs | | | 46,682 | | | | | 4,076 | |
Loan recoveries: | | | | | | | | | |
Commercial | | | 81 | | | | | 268 | |
Real estate construction | | | 2,020 | | | | | 7 | |
Real estate mortgage | | | 30 | | | | | 33 | |
Commercial real estate | | | — | | | | | 2 | |
Installment and consumer | | | 63 | | | | | 89 | |
Overdraft | | | 179 | | | | | 166 | |
Total loan recoveries | | | 2,373 | | | | | 565 | |
Net charge-offs | | | 44,309 | | | | | 3,511 | |
| | | | | | | | | |
Total allowance for credit losses | | $ | 34,444 | | | | $ | 28,506 | |
Components of allowance for credit losses: | | | | | | | | | |
Allowance for loan losses | | $ | 33,498 | | | | $ | 27,534 | |
Reserve for unfunded commitments | | | 946 | | | | | 972 | |
Total allowance for credit losses | | $ | 34,444 | | | | $ | 28,506 | |
| | | | | | | | | |
Net loan charge-offs to average loans (annualized) | | | 2.73 | % | | | | 0.23 | % |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 17 of 25
The following table presents information about the Company’s total nonperforming assets and delinquent loans.
Table 6 | West Coast Bancorp |
| Total Loan Portfolio |
| Non-performing Assets and Delinquencies |
| | September 30, | | September 30, | | | June 30, |
(Dollars in thousands, unaudited) | | 2008 | | 2007 | | | 2008 |
Non-accruing loans | | $ | 135,177 | | | | $ | 7,867 | | | | $ | 119,529 | |
90 days past due and accruing interest | | | — | | | | | — | | | | | — | |
Total non-performing loans | | | 135,177 | | | | | 7,867 | | | | | 119,529 | |
| | | | | | | | | | | | | | |
Other real estate owned | | | 48,121 | | | | | 1,183 | | | | | 27,892 | |
Total non-performing assets | | $ | 183,298 | | | | $ | 9,050 | | | | $ | 147,421 | |
| | | | | | | | | | | | | | |
Non-performing loans to total loans | | | 6.41 | % | | | | 0.36 | % | | | | 5.55 | % |
Non-performing assets to total assets | | | 7.12 | % | | | | 0.34 | % | | | | | % |
| | | | | | | | | | | | | | |
| Total Loan Portfolio |
| Delinquent loans 30-89 days past due as a % of loan category |
| | September 30, | | September 30, | | | June 30, |
(Dollars in thousands, unaudited) | | 2008 | | 2007 | | | 2008 |
Commercial loans | | | 0.06 | % | | | | 0.32 | % | | | | 0.19 | % |
Real estate construction loans | | | 3.69 | % | | | | 1.90 | % | | | | 1.92 | % |
Real estate mortgage loans | | | 0.53 | % | | | | 0.19 | % | | | | 1.42 | % |
Commercial real estate loans | | | 0.04 | % | | | | 0.32 | % | | | | 0.10 | % |
Installment and other consumer loans | | | 0.49 | % | | | | 0.44 | % | | | | 0.90 | % |
| | | | | | | | | | | | | | |
Delinquent loans 30-89 days past due: | | | | | | | | | | | | | | |
Two-step residential construction loans | | $ | 4,089 | | | | $ | 9,878 | | | | $ | 5,462 | |
Total loans other than two-step loans | | | 10,919 | | | | | 4,949 | | | | | 9,432 | |
Total delinquent loans 30-89 days past due, not in nonaccrual status | | $ | 15,008 | | | | $ | 14,827 | | | | $ | 14,894 | |
| | | | | | | | | | | | | | |
Delinquent loans to total loans | | | 0.71 | % | | | | 0.68 | % | | | | 0.69 | % |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 18 of 25
The following table presents information about the Company’s activity in other real estate owned.
Table 7 | West Coast Bancorp |
| Other real estate owned (“OREO”) activity |
| Three months | | Three months | | Three months | |
| ended Sept. 30, | Number | ended Sept. 30, | Number | ended June 30, | Number |
(Dollars in thousands, unaudited) | 2008 | of properties | 2007 | of properties | 2008 | of properties |
Beginning balance | | $ | 27,892 | | 108 | | | | $ | — | | 1 | | | | $ | 5,688 | | 24 | |
Additions to OREO1 | | | 26,965 | | 103 | | | | | 1,374 | | 6 | | | | | 25,390 | | 94 | |
Disposition of OREO | | | (5,618) | | (22) | | | | | — | | (1) | | | | | (2,941) | | (10) | |
Valuation adjustments to OREO | | | (1,118) | | | | | | | (191 | ) | | | | | | (245) | | | |
Ending balance | | $ | 48,121 | | 189 | | | | $ | 1,183 | | 6 | | | | $ | 27,892 | | 108 | |
| | | | | | | | | | | | | | | | | | | | |
| OREO activity related to two-step loans |
| Three months | | Three months | | Three months | |
| ended Sept. 30, | Number | ended Sept. 30, | Number | ended June 30, | Number |
(Dollars in thousands, unaudited) | 2008 | of properties | 2007 | of properties | 2008 | of properties |
Beginning balance | | $ | 26,460 | | 101 | | | | $ | — | | — | | | | $ | 5,688 | | 23 | |
Additions to OREO1 | | | 24,200 | | 91 | | | | | 1,374 | | 6 | | | | | 23,734 | | 87 | |
Disposition of OREO | | | (4,867) | | (19) | | | | | — | | (1) | | | | | (2,717) | | (9) | |
Valuation adjustments to OREO | | | (1,118) | | | | | | | (191 | ) | | | | | | (245) | | | |
Ending balance | | $ | 44,675 | | 173 | | | | $ | 1,183 | | 5 | | | | $ | 26,460 | | 101 | |
| | | | | | | | | | | | | | | | | | | | |
| OREO activity related to loans other than two-step loans |
| Three months | | Three months | | Three months | |
| ended Sept. 30, | Number | ended Sept. 30, | Number | ended June 30, | Number |
(Dollars in thousands, unaudited) | 2008 | of properties | 2007 | of properties | 2008 | of properties |
Beginning balance | | $ | 1,432 | | 7 | | | | $ | — | | 1 | | | | $ | — | | 1 | |
Additions to OREO1 | | | 2,765 | | 12 | | | | | — | | — | | | | | 1,656 | | 7 | |
Disposition of OREO | | | (751) | | (3) | | | | | — | | — | | | | | (224) | | (1) | |
Valuation adjustments to OREO | | | — | | | | | | | — | | — | | | | | — | | | |
Ending balance | | $ | 3,446 | | 16 | | | | $ | — | | 1 | | | | $ | 1,432 | | 7 | |
| | | | | | | | | | | | | | | | | | | | |
1 Includes capitalized cost of OREO. | | | | | | | | | | | | | | | | | | | | |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 19 of 25
The following table presents information with respect to the change in the Company’s allowance for credit losses in the two-step residential construction loan portfolio.
Table 8 | | West Coast Bancorp |
| | Two-Step Loan Portfolio |
| | Allowance For Credit Losses and Net Charge-offs
Two-Step Portfolio |
| | Quarter ended | | | Quarter ended | | | Quarter ended |
| | September 30, | | | September 30, | | | June 30, |
(Dollars in thousands, unaudited) | | 2008 | | | 2007 | | | 2008 |
Allowance for credit losses, beginning of period | | $ | 5,280 | | | | $ | 3,971 | | | | $ | 11,812 | |
Provision for credit losses | | | 1,997 | | | | | 1,891 | | | | | 1,947 | |
Charge-offs | | | 6,490 | | | | | 666 | | | | | 9,718 | |
Recoveries | | | 715 | | | | | — | | | | | 1,239 | |
Net charge-offs | | | 5,775 | | | | | 666 | | | | | 8,479 | |
| | | | | | | | | | | | | | |
Total allowance for credit losses | | $ | 1,502 | | | | $ | 5,196 | | | | $ | 5,280 | |
| | | | | | | | | | | | | | |
Components of allowance for credit losses | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 1,472 | | | | $ | 5,025 | | | | $ | 4,858 | |
Reserve for unfunded commitments | | | 30 | | | | | 171 | | | | | 422 | |
Total allowance for credit losses | | $ | 1,502 | | | | $ | 5,196 | | | | $ | 5,280 | |
| | | | | | | | | | | | | | |
Net loan charge-offs to average total loans (annualized) | | | 1.08 | % | | | | 0.12 | % | | | | 1.56 | % |
Allowance for two-step loan losses to nonperforming two-step loans1 | | | 1.77 | % | | | | 75.06 | % | | | | 4.92 | % |
Allowance for two-step credit losses to total two-step loans | | | 1.53 | % | | | | 1.89 | % | | | | 3.62 | % |
Allowance for two-step loan losses to total two-step loans | | | 1.50 | % | | | | 1.83 | % | | | | 3.33 | % |
1 Two-step nonaccrual loans are net of chargeoffs previously taken against the balance. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Year to date | | | Year to date | | | | | |
| | September 30, | | | September 30, | | | | | |
(Dollars in thousands, unaudited) | | 2008 | | | 2007 | | | | | |
Allowance for credit losses, beginning of period | | $ | 31,065 | | | | $ | 2,618 | | | | | | |
Provision for credit losses | | | 4,724 | | | | | 3,244 | | | | | | |
Charge-offs | | | 36,307 | | | | | 666 | | | | | | |
Recoveries | | | 2,020 | | | | | — | | | | | | |
Net Charge-offs | | | 34,287 | | | | | 666 | | | | | | |
| | | | | | | | | | | | | | |
Total allowance for credit losses | | $ | 1,502 | | | | $ | 5,196 | | | | | | |
| | | | | | | | | | | | | | |
Components of allowance for credit losses | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 1,472 | | | | $ | 5,025 | | | | | | |
Reserve for unfunded commitments | | | 30 | | | | | 171 | | | | | | |
Total allowance for credit losses | | $ | 1,502 | | | | $ | 5,196 | | | | | | |
| | | | | | | | | | | | | | |
Net loan charge-offs to average total loans (annualized) | | | 2.12 | % | | | | 0.04 | % | | | | | |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 20 of 25
The following table presents information about the Company’s nonperforming assets and delinquencies in the two-step residential construction loan portfolio.
Table 9 | | West Coast Bancorp |
| | Two-Step Residential Construction Loans |
| | Nonperforming Assets and Delinquencies |
| | | | | | | | |
| | September 30, | | | September 30, | | | June 30, |
(Dollars in thousands, unaudited) | | 2008 | | | 2007 | | | 2008 |
Nonaccrual two-step loans | | $ | 82,990 | | | | $ | 6,695 | | | | $ | 98,728 | |
90 day past due and accruing interest | | | — | | | | | — | | | | | — | |
Total nonperforming two-step loans | | | 82,990 | | | | | 6,695 | | | | | 98,728 | |
| | | | | | | | | | | | | | |
Other real estate owned two-step | | | 44,675 | | | | | 1,183 | | | | | 26,460 | |
Total nonperforming two-step assets | | $ | 127,665 | | | | $ | 7,878 | | | | $ | 125,188 | |
| | | | | | | | | | | | | | |
Delinquent two-step loans 30-89 days past due, not in nonaccrual status | | $ | 4,089 | | | | $ | 9,878 | | | | $ | 5,462 | |
| | | | | | | | | | | | | | |
Nonperforming two-step loans to total two-step loans | | | 84.78 | % | | | | 2.44 | % | | | | 67.76 | % |
Nonperforming two-step assets to total assets | | | 4.96 | % | | | | 0.30 | % | | | | 4.75 | % |
Delinquent two-step loans to total two-step loans | | | 4.18 | % | | | | 3.60 | % | | | | 3.75 | % |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 21 of 25
The following table presents information with respect to the change in the Company’s allowance for credit losses for the loans other than two-step residential construction loans.
Table 10 | | West Coast Bancorp |
| | Loans Other than Two-Step Loans |
| | Allowance For Credit Losses and Net Charge-offs loans other than two-step loans |
| | Quarter ended | | | Quarter ended | | | Quarter ended |
| | September 30, | | | September 30 | | | June 30, |
(Dollars in thousands, unaudited) | | 2008 | | | 2007 | | | 2008 |
Allowance for credit losses, beginning of period | | $ | 31,765 | | | | $ | 22,525 | | | | $ | 30,642 | |
Provision for credit losses | | | 7,128 | | | | | 809 | | | | | 4,053 | |
Charge-offs | | | 6,046 | | | | | 324 | | | | | 3,035 | |
Recoveries | | | 95 | | | | | 300 | | | | | 105 | |
Net charge-offs | | | 5,951 | | | | | 24 | | | | | 2,930 | |
| | | | | | | | | | | | | | |
Total allowance for credit losses | | $ | 32,942 | | | | $ | 23,310 | | | | $ | 31,765 | |
| | | | | | | | | | | | | | |
Components of allowance for credit losses | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 32,026 | | | | $ | 22,509 | | | | $ | 30,865 | |
Reserve for unfunded commitments | | | 916 | | | | | 801 | | | | | 900 | |
Total allowance for credit losses | | $ | 32,942 | | | | $ | 23,310 | | | | $ | 31,765 | |
| | | | | | | | | | | | | | |
Net loan charge-offs to average total loans (annualized) | | | 1.11 | % | | | | 0.00 | % | | | | 0.54 | % |
Allowance for non two-step loan losses to total non two-step loans | | | 1.59 | % | | | | 1.18 | % | | | | 1.54 | % |
Allowance for non two-step credit losses to total non two-step loans | | | 1.64 | % | | | | 1.22 | % | | | | 1.58 | % |
Allowance for non two-step loan losses to non-performing non two-step loans | | | 61 | % | | | | 1921 | % | | | | 148 | % |
Allowance for non two-step credit losses to non-performing non two-step loans | | | 63 | % | | | | 1989 | % | | | | 153 | % |
| | | | | | | | | | | | | | |
| | Year to date | | | Year to date | | | | | |
| | September 30, | | | September 30, | | | | | |
(Dollars in thousands, unaudited) | | 2008 | | | 2007 | | | | | |
Allowance for credit losses, beginning of period | | $ | 23,838 | | | | $ | 20,399 | | | | | | |
Provision for credit losses | | | 19,126 | | | | | 5,756 | | | | | | |
Charge-offs | | | 10,375 | | | | | 3,410 | | | | | | |
Recoveries | | | 353 | | | | | 565 | | | | | | |
Net Charge-offs | | | 10,022 | | | | | 2,845 | | | | | | |
| | | | | | | | | | | | | | |
Total allowance for credit losses | | $ | 32,942 | | | | $ | 23,310 | | | | | | |
| | | | | | | | | | | | | | |
Components of allowance for credit losses | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 32,026 | | | | $ | 22,509 | | | | | | |
Reserve for unfunded commitments | | | 916 | | | | | 801 | | | | | | |
Total allowance for credit losses | | $ | 32,942 | | | | $ | 23,310 | | | | | | |
| | | | | | | | | | | | | | |
Net loan charge-offs to average total loans (annualized) | | | 0.62 | % | | | | 0.18 | % | | | | | |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 22 of 25
The following table presents information about the Company’s nonperforming assets and delinquencies in the loan portfolio excluding two-step residential construction loans.
Table 11 | | West Coast Bancorp |
| | Loans Other than Two-Step Loans |
| | Nonperforming Assets and Delinquencies |
| | September 30, | | September 30, | | | June 30, |
(Dollars in thousands, unaudited) | | 2008 | | 2007 | | | 2008 |
Nonaccruing non two-step loans | | | | | | | | | | | | | | |
Commercial loans | | $ | 6,650 | | | | $ | 388 | | | | $ | 4,168 | |
Real estate construction loans | | | 21,025 | | | | | — | | | | | 6,542 | |
Real estate mortgage loans other than nonstandard | | | 7,028 | | | | | 306 | | | | | 2,166 | |
Real estate mortgage loans nonstandard | | | 11,834 | | | | | — | | | | | 5,849 | |
Commercial real estate loans | | | 5,636 | | | | | 478 | | | | | 2,074 | |
Installment and other consumer loans | | | 14 | | | | | — | | | | | 2 | |
90 day past and accruing interest | | | — | | | | | — | | | | | — | |
Total nonperforming non two-step loans | | | 52,187 | | | | | 1,172 | | | | | 20,801 | |
| | | | | | | | | | | | | | |
Other real estate owned non two-step | | | 3,446 | | | | | — | | | | | 1,432 | |
Total nonperforming non two-step assets | | $ | 55,633 | | | | $ | 1,172 | | | | $ | 22,233 | |
| | | | | | | | | | | | | | |
Delinquent non two-step loans 30-89 days past due, not in nonaccrual status | | $ | 10,919 | | | | $ | 4,949 | | | | $ | 9,432 | |
| | | | | | | | | | | | | | |
Nonperforming non two-step loans to total non two-step loans | | | 2.59 | % | | | | 0.06 | % | | | | 1.04 | % |
Nonperforming non two-step assets to total assets | | | 2.16 | % | | | | 0.04 | % | | | | 0.84 | % |
Delinquent non two-step loans to total non two-step loans | | | 0.54 | % | | | | 0.26 | % | | | | 0.47 | % |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 23 of 25
The following table shows the components of our construction and land loans outside the two-step portfolio as of the dates shown:
Table 12 | | West Coast Bancorp |
| | Construction and land loans outside the two-step portfolio |
(Dollars in thousands, unaudited) | | September 30, 2008 | | | September 30, 2007 | | June 30, 2008 |
| | Amount | | Percent | | | Amount | Percent | | Amount | Percent |
Land loans1 | | $ | 44,805 | | 16 | % | | | $ | 44,088 | | 15 | % | | | $ | 44,256 | | 15 | % |
Residential construction loans other than two-step loans | | | 144,517 | | 52 | % | | | | 150,432 | | 52 | % | | | | 152,755 | | 52 | % |
Commercial construction loans | | | 88,630 | | 32 | % | | | | 94,278 | | 33 | % | | | | 94,779 | | 33 | % |
Total construction and land loans other than two-step loans | | $ | 277,952 | | 100 | % | | | $ | 288,798 | | 100 | % | | | $ | 291,790 | | 100 | % |
| | | | | | | | | | | | | | | | | | | | |
Components of residential construction and land loans other than two-step loans: | | | | | | | | | | | | | | | | | | | | |
Land loans1 | | $ | 24,038 | | 14 | % | | | $ | 21,723 | | 13 | % | | | $ | 25,809 | | 15 | % |
Site development | | | 71,125 | | 42 | % | | | | 80,370 | | 47 | % | | | | 75,790 | | 42 | % |
Vertical construction | | | 73,392 | | 44 | % | | | | 70,062 | | 41 | % | | | | 76,965 | | 43 | % |
Total residential construction and land loans other than two-step loans | | $ | 168,555 | | 100 | % | | | | 172,155 | | 100 | % | | | $ | 178,564 | | 100 | % |
| | | | | | | | | | | | | | | | | | | | |
Components of commercial construction and land loans: | | | | | | | | | | | | | | | | | | | | |
Land loans1 | | $ | 20,767 | | 19 | % | | | $ | 22,365 | | 19 | % | | | $ | 18,447 | | 16 | % |
Site development | | | 77 | | 0 | % | | | | — | | 0 | % | | | | 1,122 | | 1 | % |
Vertical construction | | | 88,553 | | 81 | % | | | | 94,278 | | 81 | % | | | | 93,657 | | 83 | % |
Total commercial construction and land loans | | $ | 109,397 | | 100 | % | | | $ | 116,643 | | 100 | % | | | $ | 113,226 | | 100 | % |
| | | | | | | | | | | | | | | | | | | | |
Components of total construction and land loans other than two-step loans: | | | | | | | | | | | | | | | | | | | | |
Land loans1 | | $ | 44,805 | | 16 | % | | | $ | 44,088 | | 15 | % | | | $ | 44,256 | | 15 | % |
Site development | | | 71,202 | | 26 | % | | | | 80,370 | | 28 | % | | | | 76,912 | | 26 | % |
Vertical construction | | | 161,945 | | 58 | % | | | | 164,340 | | 57 | % | | | | 170,622 | | 59 | % |
Total construction and land loans other than two-step loans | | $ | 277,952 | | 100 | % | | | $ | 288,798 | | 100 | % | | | $ | 291,790 | | 100 | % |
| | | | | | | | | | | | | | | | | | | | |
1 Land loans represent balances that are carried in the Company’s residential real estate mortgage of $26 million and commercial real estate loan portfolios of $18 million in the period shown. |
2 Calculations have been based on more detailed information and therefore may not recompute exactly due to rounding. |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 24 of 25
The following table shows the components of our nonaccrual construction and land loans outside the two-step portfolio as of the dates shown.
Table 13 | | West Coast Bancorp |
| | Nonaccrual construction and land loans outside the two-step portfolio |
(Dollars in thousands, unaudited) | | September 30, 2008 | | | September 30, 2007 | | | June 30, 2008 |
| | Amount | | Percent of loan category | | | Amount | | Percent of loan category | | | Amount | | Percent of loan category |
Land loans1 | | $ | 5,308 | | 1.91 | % | | | $ | — | | 0.00 | % | | | $ | 1,396 | | 0.48 | % |
Residential construction loans other than two-step loans | | | 21,025 | | 7.56 | % | | | | — | | 0.00 | % | | | | 6,542 | | 2.24 | % |
Commercial construction loans | | | — | | 0.00 | % | | | | — | | 0.00 | % | | | | — | | 0.00 | % |
Total nonaccrual construction and land loans other than two-step loans | | $ | 26,333 | | 9.47 | % | | | $ | — | | 0.00 | % | | | $ | 7,938 | | 2.72 | % |
| | | | | | | | | | | | | | | | | | | | |
Components of nonaccrual residential construction and land loans other than two-step loans: | | | | | | | | | | | | | | | | | | | | |
Land loans1 | | $ | 5,308 | | 3.15 | % | | | $ | — | | 0.00 | % | | | $ | 1,396 | | 0.78 | % |
Site development | | | 13,731 | | 8.15 | % | | | | — | | 0.00 | % | | | | 2,830 | | 1.58 | % |
Vertical construction | | | 7,294 | | 4.33 | % | | | | — | | 0.00 | % | | | | 3,712 | | 2.08 | % |
Total nonaccrual residential construction and land loans other than two-step loans | | $ | 26,333 | | 15.63 | % | | | $ | — | | 0.00 | % | | | $ | 7,938 | | 4.45 | % |
| | | | | | | | | | | | | | | | | | | | |
Components of nonaccrual commercial construction and land loans: | | | | | | | | | | | | | | | | | | | | |
Land loans1 | | | — | | 0.00 | % | | | | — | | 0.00 | % | | | | — | | 0.00 | % |
Site development | | | — | | 0.00 | % | | | | — | | 0.00 | % | | | | — | | 0.00 | % |
Vertical construction | | | — | | 0.00 | % | | | | — | | 0.00 | % | | | | — | | 0.00 | % |
Total nonaccrual commercial construction and land loans | | $ | — | | 0.00 | % | | | $ | — | | 0.00 | % | | | $ | — | | 0.00 | % |
| | | | | | | | | | | | | | | | | | | | |
Components of total nonaccrual construction and land loans other than two-step loans: | | | | | | | | | | | | | | | | | | | | |
Land loans1 | | $ | 5,308 | | 1.91 | % | | | $ | — | | 0.00 | % | | | $ | 1,396 | | 0.48 | % |
Site development | | | 13,731 | | 4.94 | % | | | | — | | 0.00 | % | | | | 2,830 | | 0.97 | % |
Vertical construction | | | 7,294 | | 2.62 | % | | | | — | | 0.00 | % | | | | 3,712 | | 1.27 | % |
Total nonaccrual construction and land loans other than two-step loans | | $ | 26,333 | | 9.47 | % | | | $ | — | | 0.00 | % | | | $ | 7,938 | | 2.72 | % |
| | | | | | | | | | | | | | | | | | | | |
1 Land loans represent balances that are carried in the Company’s residential real estate mortgage and commercial real estate loan portfolios in the period shown. |
2 Calculations have been based on more detailed information and therefore may not recompute exactly due to rounding. |
WEST COAST BANCORP REPORTS THIRD QUARTER 2008 EARNINGS
OCTOBER 20, 2008
Page 25 of 25
The following table shows the components of our delinquent construction and land loans outside the two-step portfolio as of the dates shown.
Table 14 | | West Coast Bancorp |
| | Delinquent construction and land loans outside the two-step loan portfolio |
(Dollars in thousands, unaudited) | | September 30, 2008 | | | September 30, 2007 | | | June 30, 2008 |
| | Amount | Percent of loan category | | | Amount | | Percent of loan category | | | Amount | | Percent of loan category |
Land loans1 | | $ | 461 | | 0.17 | % | | | $ | — | | 0.00 | % | | | $ | — | | 0.00 | % |
Residential construction loans other than two-step loans | | | 7,241 | | 2.61 | % | | | | — | | 0.00 | % | | | | 1,976 | | 0.68 | % |
Commercial construction loans | | | 807 | | 0.29 | % | | | | — | | 0.00 | % | | | | 83 | | 0.03 | % |
Total 30-89 days past due construction loans other than two-step loans | | $ | 8,509 | | 3.07 | % | | | $ | — | | 0.00 | % | | | $ | 2,059 | | 0.71 | % |
| | | | | | | | | | | | | | | | | | | | |
Components of 30-89 days past due residential construction and land loans other than two-step loans: | | | | | | | | | | | | | | | | | | | | |
Land loans1 | | $ | 461 | | 0.27 | % | | | $ | — | | 0.00 | % | | | $ | — | | 0.00 | % |
Site development | | | 5,586 | | 3.31 | % | | | | 6,150 | | 3.44 | % | | | | — | | 0.00 | % |
Vertical construction | | | 1,655 | | 0.98 | % | | | | — | | 0.00 | % | | | | 1,976 | | 1.11 | % |
Total 30-89 days past due residential construction and land loans other than two-step loans | | $ | 7,702 | | 4.56 | % | | | $ | 6,150 | | 3.44 | % | | | $ | 1,976 | | 1.11 | % |
| | | | | | | | | | | | | | | | | | | | |
Components of 30-89 days past due commercial construction and land loans: | | | | | | | | | | | | | | | | | | | | |
Land loans1 | | $ | — | | 0.00 | % | | | $ | — | | 0.00 | % | | | $ | — | | 0.00 | % |
Site development | | | — | | 0.00 | % | | | | — | | 0.00 | % | | | | — | | 0.00 | % |
Vertical construction | | | 807 | | 0.74 | % | | | | — | | 0.00 | % | | | | 83 | | 0.07 | % |
Total 30-89 days past due commercial construction and land loans | | $ | 807 | | 0.74 | % | | | $ | — | | 0.00 | % | | | $ | 83 | | 0.07 | % |
| | | | | | | | | | | | | | | | | | | | |
Components of total 30-89 days past due construction and land loans other than two-step loans: | | | | | | | | | | | | | | | | | | | | |
Land loans1 | | $ | 461 | | 0.17 | % | | | $ | — | | 0.00 | % | | | $ | — | | 0.00 | % |
Site development | | | 5,586 | | 2.01 | % | | | | 6,150 | | 2.11 | % | | | | — | | 0.00 | % |
Vertical construction | | | 2,462 | | 0.89 | % | | | | — | | 0.00 | % | | | | 2,059 | | 0.71 | % |
Total 30-89 days past due construction and land loans other than two-step loans | | $ | 8,509 | | 3.07 | % | | | $ | 6,150 | | 2.11 | % | | | $ | 2,059 | | 0.71 | % |
| | | | | | | | | | | | | | | | | | | | |
1 Land loans represent balances that are carried in the Company’s residential real estate mortgage and commercial real estate loan portfolios in the period shown. |
2 Calculations have been based on more detailed information and therefore may not recompute exactly due to rounding. |
