- Return on Average Assets Was 1.01% in the Second Quarter 2012, an Improvement From .76% in the Same Quarter Last Year.
- Net Income for the Six Month Period Ended, June 30, 2012 Was $11.8 Million, an Increase of 21% From the Same Period in 2011.
- The Written Agreement Between the Holding Company and Certain Regulators Was Terminated on June 27, 2012.
- Second Quarter 2012 Total Noninterest Expense Declined 6%, or $1.5 Million, From the Same Period in 2011.
- The Efficiency Ratio Improved to 70.3% in First Half of 2012 From 75.1% in the Same Period in 2011.
LAKE OSWEGO, Ore., July 23, 2012 (GLOBE NEWSWIRE) -- West Coast Bancorp (Nasdaq:WCBO) ("Bancorp" or "Company"), the parent company of West Coast Bank ("Bank") and West Coast Trust Company, Inc., today announced second quarter 2012 net income of $6.0 million or $.28 per diluted share compared to net income of $4.6 million or $.22 per diluted share in the same quarter of 2011. Net income for the first six months of 2012 was $11.8 million or $.55 per diluted share compared to net income of $9.7 million or $.45 per diluted share in the same period of 2011.
"Net income reached $11.8 million for the first half of 2012 and grew 21% or $2.1 million from the same period a year ago," said Robert D. Sznewajs, President and Chief Executive Officer. "The continued reduction in credit-related costs and ongoing improvements in expense management were the primary contributors to the improved operating results. The Company's return on average assets for the first half of 2012 reached 1.00% compared to .80% in the same period in 2011."
Table 1 below shows summary financial information for the quarters ended June 30, 2012, and 2011, and March 31, 2012.
| Table 1 | |||||
| SUMMARY FINANCIAL INFORMATION | |||||
| Qtr. ended | Qtr. ended | Qtr. ended | |||
| June 30, | June 30, | March 31, | |||
| (Dollars and shares in thousands) | 2012 | 2011 | Change | 2012 | Change |
| Net income | $ 6,034 | $ 4,634 | $ 1,400 | $ 5,789 | $ 245 |
| Net income available to common stockholders 1 | $ 5,639 | $ 4,312 | $ 1,327 | $ 5,393 | 246 |
| Selective quarterly performance ratios | |||||
| Return on average assets, annualized | 1.01% | 0.76% | 0.25 | 0.98% | 0.03% |
| Return on average equity, annualized | 7.50% | 6.58% | 0.92 | 7.34% | 0.16% |
| Efficiency ratio2 | 70.85% | 76.05% | (5.20) | 69.76% | 1.09% |
| Share and Per Share Figures-Actual | |||||
| Common shares outstanding at period end | 19,295 | 19,316 | (21) | 19,295 | -- |
| Weighted average diluted shares3 | 21,547 | 21,326 | 221 | 21,348 | 199 |
| Weighted average diluted shares-two class method 4 | 20,256 | 20,025 | 231 | 20,054 | 202 |
| Net income per diluted share | $ 0.28 | $ 0.22 | $ 0.06 | $ 0.27 | $ 0.01 |
| Book value per common share | $ 15.91 | $ 13.69 | $ 2.22 | $ 15.54 | $ 0.37 |
| 1 Adjusted for the impact of allocating net income to participating instruments, which include restricted stock and Series B preferred stock. | |||||
| 2 The efficiency ratio has been computed as noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income excluding gains/losses on sales of securities. | |||||
| 3 Reflects the average dilutive impacts of Series B preferred stock (1,213), warrants (1,148), options (26), and restricted stock (78). | |||||
| 4 Reflects the calculation of diluted shares under the two-class method which includes average common (19,082), options (26), and warrants (1,148). | |||||
Balance Sheet Overview
Total loans at June 30, 2012, increased $25 million or 2% from March 31, 2012, with growth occurring in the commercial real estate term and construction portfolios. Second quarter 2012 average total loan balances of $1.48 billion declined $44 million or 3% from the same quarter of 2011. The decline was primarily a result of lower average commercial, mortgage, and home equity balances. Home equity loan and line production continues to reflect the effects of residential real estate market conditions. The yield on the loan portfolio of 5.08% in the most recent quarter declined 25 basis points compared to the second quarter last year as higher yielding loans paid off and new loans were originated at lower yields reflecting prevailing market interest rates. The yield on loans contracted 12 basis points in the second quarter of 2012 from the first quarter of 2012.
| Table 2 | ||||||||
| AVERAGE LOANS FOR THE QUARTER | ||||||||
| (Dollars in thousands) | June 30, | % of | June 30, | % of | Change | March 31, | % of | |
| 2012 | Total | 2011 | total | Amount | % | 2012 | Total | |
| Commercial loans | $ 284,473 | 19% | $ 301,436 | 20% | $ (16,963) | -6% | $ 288,395 | 19% |
| Commercial real estate construction | 23,200 | 2% | 19,029 | 1% | 4,171 | 22% | 18,547 | 1% |
| Residential real estate construction | 11,283 | 1% | 17,223 | 1% | (5,940) | -34% | 12,680 | 1% |
| Total real estate construction loans | 34,483 | 3% | 36,252 | 2% | (1,769) | -5% | 31,227 | 2% |
| Mortgage | 62,610 | 4% | 73,303 | 5% | (10,693) | -15% | 66,125 | 5% |
| Home equity | 252,014 | 17% | 266,221 | 17% | (14,207) | -5% | 254,883 | 17% |
| Total real estate mortgage | 314,624 | 21% | 339,524 | 22% | (24,900) | -7% | 321,008 | 22% |
| Commercial real estate loans | 832,870 | 56% | 831,738 | 55% | 1,132 | 0% | 828,681 | 56% |
| Installment and other consumer loans | 12,776 | 1% | 14,220 | 1% | (1,444) | -10% | 13,211 | 1% |
| Total loans | $ 1,479,226 | $ 1,523,170 | $ (43,944) | -3% | $ 1,482,522 | |||
| Yield on loans | 5.08% | 5.33% | (0.25) | 5.20% | ||||
The 2012 second quarter average balance of total cash equivalents and investment securities of $775 million remained relatively unchanged over the past twelve months. The Company reduced its average cash equivalents balance by $50 million in the most recent quarter from the second quarter of 2011 while increasing its investment securities portfolio by $29 million. The shift towards the investment portfolio reflected efforts to improve net interest income and margin in a period where market interest rates are expected to remain low for some time. Over the past year, the Company has increased its investments in U.S. government agency and municipal securities. During this time purchases consisted principally of U.S. government agency securities with 3-5-year maturities as well as 10-year and 15-year fully amortizing U.S. government agency mortgage-backed securities. The expected duration of the investment portfolio was approximately 2.8 years at June 30, 2012, compared to approximately 3.0 years a year ago.
The 2012 second quarter yield on total cash equivalents and investment securities balances was 2.29%, a decline of 31 basis points from the corresponding quarter of 2011, and down 7 basis points from the first quarter of 2012. This reflected continued investment securities purchases with yields lower than those that matured or were called in the portfolio.
| Table 3 | |||||
| AVERAGE CASH EQUIVALENTS AND INVESTMENT SECURITIES FOR THE QUARTER | |||||
| (Dollars in thousands) | June 30, | June 30, | Change | March 31, | |
| 2012 | 2011 | Amount | % | 2012 | |
| Cash equivalents: | |||||
| Federal funds sold | $ 2,555 | $ 4,790 | $ (2,235) | -47% | $ 2,601 |
| Interest-bearing deposits in other banks | 45,260 | 93,225 | (47,965) | -51% | 35,334 |
| Total cash equivalents | 47,815 | 98,015 | (50,200) | -51% | 37,935 |
| Investment securities: | |||||
| U.S. Treasury securities | 200 | 4,261 | (4,061) | -95% | 202 |
| U.S. Government agency securities | 230,509 | 183,601 | 46,908 | 26% | 213,035 |
| Corporate securities | 8,516 | 9,846 | (1,330) | -14% | 8,507 |
| Mortgage-backed securities | 407,011 | 427,944 | (20,933) | -5% | 414,198 |
| Obligations of state and political sub. | 67,882 | 59,850 | 8,032 | 13% | 61,337 |
| Equity investments and other securities | 12,735 | 12,614 | 121 | 1% | 12,721 |
| Total investment securities | 726,853 | 698,116 | 28,737 | 4% | 710,000 |
| Total cash equivalents and investment securities | $ 774,668 | $ 796,131 | $ (21,463) | -3% | $ 747,935 |
| Tax equivalent yield on cash equivalents and investment securities | 2.29% | 2.60% | (0.31) | 2.36% | |
Average total deposits of $1.87 billion in the second quarter 2012 declined 3% or $62 million from the same period in 2011 and were substantially unchanged from the prior quarter. Consistent with past trends, the Company continued to reduce its time deposit balances, which declined $74 million or 33% from the corresponding quarter in 2011. Time deposits represented 8% of the Company's average total deposits in the most recent quarter compared to 12% during the same quarter of 2011.
| Table 4 | ||||||||
| AVERAGE DEPOSITS, BORROWINGS AND SUBORDINATED DEBENTURES FOR THE QUARTER | ||||||||
| (Dollars in thousands) | Q2 | % of | Q2 | % of | Change | Q1 | % of | |
| 2012 | Total | 2011 | Total | Amount | % | 2012 | Total | |
| Demand deposits | $ 621,547 | 33% | $ 578,562 | 29% | $ 42,985 | 7% | $ 585,749 | 31% |
| Interest-bearing demand | 374,579 | 20% | 365,407 | 19% | 9,172 | 3% | 366,635 | 20% |
| Total checking deposits | 996,126 | 53% | 943,969 | 48% | 52,157 | 6% | 952,384 | 51% |
| Savings | 127,930 | 7% | 110,683 | 6% | 17,247 | 16% | 123,725 | 7% |
| Money market | 596,949 | 32% | 654,668 | 34% | (57,719) | -9% | 623,111 | 33% |
| Total non-time deposits | 1,721,005 | 92% | 1,709,320 | 88% | 11,685 | 1% | 1,699,220 | 91% |
| Time deposits | 151,085 | 8% | 224,674 | 12% | (73,589) | -33% | 167,418 | 9% |
| Total deposits | $ 1,872,090 | 100% | $ 1,933,994 | 100% | $ (61,904) | -3% | $ 1,866,638 | 100% |
| Average rate on total deposits | 0.09% | 0.31% | (0.22) | 0.12% | ||||
| Average borrowings and subordinated debentures | $ 178,241 | $ 219,599 | $ (41,358) | -19% | $ 171,505 | |||
| Rate on borrowings and subordinated debentures | 1.44% | 3.04% | (1.60) | 1.46% | ||||
Second quarter 2012 average total checking balances of $996 million grew $52 million or 6% from second quarter 2011 and represented 53% of the Company's average total deposits in the quarter. The lower market interest rates and continuing shift in the mix of deposit balances from time deposits to non-time deposits over the past year reduced the average rate paid on total deposits to 9 basis points in the most recent quarter, a decline of 22 basis points from the corresponding quarter in 2011 and a decline of 3 basis points for sequential quarters.
Capital Position
As shown in Table 5 below, the Company improved its June 30, 2012, capital position compared to June 30, 2011. This was primarily due to continued profitability.
On June 27, 2012, the Written Agreement between the Federal Reserve Bank of San Francisco, the State of Oregon, Division of Finance and Corporate Securities ("DFCS"), and the Company was terminated. This agreement precluded Bancorp from paying cash dividends to shareholders as well as requiring Bancorp to maintain risk-based capital ratios in excess of that required for well capitalized status. The Memorandum of Understanding between the Federal Deposit Insurance Corporation ("FDIC"), DFCS and West Coast Bank remains in place and restricts payments of dividends from the Bank to Bancorp.
| Table 5 | |||||
| CAPITAL RATIOS | |||||
| June 30, | June 30, | March 31, | |||
| 2012 | 2011 | Change | 2012 | Change | |
| West Coast Bancorp | |||||
| Tier 1 risk-based capital ratio | 20.33% | 17.99% | 2.34 | 20.36% | (0.03) |
| Total risk-based capital ratio | 21.50% | 19.25% | 2.25 | 21.53% | (0.03) |
| Leverage ratio | 15.55% | 13.55% | 2.00 | 15.41% | 0.14 |
| West Coast Bank | |||||
| Tier 1 risk-based capital ratio | 19.62% | 17.30% | 2.32 | 19.62% | -- |
| Total risk-based capital ratio | 20.88% | 18.56% | 2.32 | 20.88% | -- |
| Leverage ratio | 15.02% | 13.04% | 1.98 | 14.85% | 0.17 |
Operating Results
As shown in Table 6 below, pre-tax income in the second quarter of 2012 was $9.3 million, an increase of $5.6 million or 155% from the corresponding quarter in 2011, and a $.4 million or 4% improvement from the first quarter of 2012. The improvement was principally the result of declines in the provision for credit losses and total noninterest expense. Net income of $6.0 million in the second quarter of 2012 increased $1.4 million or 30% from the corresponding quarter last year, and $.2 million or 4% from the first quarter of 2012.
| Table 6 | |||||||
| SUMMARY INCOME STATEMENT | |||||||
| (Dollars in thousands) | Q2 | Q2 | Change | Q1 | Change | ||
| 2012 | 2011 | $ | % | 2012 | $ | % | |
| Net interest income | $ 21,773 | $ 21,961 | $ (188) | -1% | $ 22,133 | $ (360) | -2% |
| Provision (benefit) for credit losses | (492) | 3,426 | (3,918) | -114% | 89 | (581) | -653% |
| Noninterest income | 8,494 | 8,070 | 424 | 5% | 7,887 | 607 | 8% |
| Noninterest expense | 21,476 | 22,958 | (1,482) | -6% | 21,025 | 451 | 2% |
| Income before income taxes | 9,283 | 3,647 | 5,636 | 155% | 8,906 | 377 | 4% |
| Provision (benefit) for income taxes | 3,249 | (987) | 4,236 | 429% | 3,117 | 132 | 4% |
| Net income | $ 6,034 | $ 4,634 | $ 1,400 | 30% | $ 5,789 | $ 245 | 4% |
Second quarter 2012 net interest income of $21.8 million declined $.2 million from the same quarter in 2011. This was primarily a result of lower average earning asset balances and a declining yield on those earning assets more than offsetting the lower cost of FHLB borrowings and interest-bearing deposits. The second quarter 2012 net interest margin of 3.93% increased 8 basis points from the corresponding quarter last year largely due to lower volume and cost of interest-bearing liabilities. For the sequential quarters, the net interest margin contracted 11 basis points mainly as a result of declining yield on the loan portfolio.
| Table 7 | |||||
| NET INTEREST SPREAD AND MARGIN | |||||
| (Annualized, tax-equivalent basis) | Q2 | Q2 | Q1 | ||
| 2012 | 2011 | Change | 2012 | Change | |
| Yield on average interest-earning assets | 4.12% | 4.39% | (0.27) | 4.25% | (0.13) |
| Rate on average interest-bearing liabilities | 0.30% | 0.80% | (0.50) | 0.33% | (0.03) |
| Net interest spread | 3.82% | 3.59% | 0.23 | 3.92% | (0.10) |
| Net interest margin | 3.93% | 3.85% | 0.08 | 4.04% | (0.11) |
As shown in Table 8 below, second quarter 2012 total noninterest income of $8.5 million increased $.4 million or 5% from the same quarter in 2011. The increase can be attributed to a rise in sales of Small Business Administration and residential mortgage loans, along with an increase in trust and investment services revenues. These increases were partly offset by a $.4 million or 10% decline in deposit service charges. Total noninterest income increased 8% or $.6 million from the first quarter of 2012, in large part due to growth in deposit service charges, which increased $.4 million or 14% as a result of repricing actions taken in the second quarter.
The total net loss on OREO of $1.0 million in the quarter ended June 30, 2012, increased slightly from a $.9 million net loss in the same quarter of 2011, and from $.6 million on a linked-quarter basis. Excluding the total net loss on OREO, the Company's second quarter noninterest income grew both on a year-over-year and sequential quarter basis.
| Table 8 | |||||||
| NONINTEREST INCOME | |||||||
| (Dollars in thousands) | Q2 | Q2 | Change | Q1 | Change | ||
| 2012 | 2011 | $ | % | 2012 | $ | % | |
| Noninterest income | |||||||
| Service charges on deposit accounts | $ 3,212 | $ 3,575 | $ (363) | -10% | $ 2,818 | $ 394 | 14% |
| Payment systems-related revenue | 3,084 | 3,169 | (85) | -3% | 3,073 | 11 | 0% |
| Trust and investment services revenues | 1,457 | 1,208 | 249 | 21% | 935 | 522 | 56% |
| Gains on sales of loans | 722 | 300 | 422 | 141% | 735 | (13) | -2% |
| Gains on sales of securities | 228 | 130 | 98 | 75% | 147 | 81 | 55% |
| Other-than-temporary impairment losses | -- | (179) | 179 | 0% | (49) | 49 | 0% |
| Other | 821 | 777 | 44 | 6% | 802 | 19 | 2% |
| Total | 9,524 | 8,980 | 544 | 6% | 8,461 | 1,063 | 13% |
| OREO gains (losses) on sale | 183 | 645 | (462) | -72% | (53) | 236 | 445% |
| OREO valuation adjustments | (1,213) | (1,555) | 342 | 22% | (521) | (692) | -133% |
| Total net loss on OREO | (1,030) | (910) | (120) | -13% | (574) | (456) | -79% |
| Total noninterest income | $ 8,494 | $ 8,070 | $ 424 | 5% | $ 7,887 | $ 607 | 8% |
As shown in Table 9 below, the Company's total noninterest expense of $21.5 million in the second quarter of 2012 declined by $1.5 million or 6% from the same quarter in 2011. The efficiency ratio declined to 70.9% from 76.1% during the same periods. As a result of cost savings initiatives and product changes implemented over the past year, marketing, payment system, occupancy and other noninterest expense declined. Comparing the second quarter of 2012 to the corresponding quarter in 2011, lower salary expenses were offset by higher employee benefit costs. The year-over-year second quarter reduction in marketing expense of $.6 million was related to the Company's introduction of a new consumer deposit product marketing strategy in 2012. Additionally, the other noninterest expense category declined $.5 million in the most recent quarter of 2012 compared to the same period a year ago, with $.2 million of the decline resulting from a lower FDIC deposit insurance premium assessment. The increase in total noninterest expense in the second quarter of 2012 compared to the first quarter of 2012 was primarily attributable to the increase in employee benefit costs.
| Table 9 | |||||||
| NONINTEREST EXPENSE | |||||||
| (Dollars in thousands) | Q2 | Q2 | Change | Q1 | Change | ||
| 2012 | 2011 | $ | % | 2012 | $ | % | |
| Noninterest expense | |||||||
| Salaries and employee benefits | $ 12,081 | $ 12,119 | $ (38) | 0% | $ 11,478 | $ 603 | 5% |
| Equipment | 1,584 | 1,564 | 20 | 1% | 1,662 | (78) | -5% |
| Occupancy | 2,119 | 2,232 | (113) | -5% | 2,075 | 44 | 2% |
| Payment systems-related expense | 1,075 | 1,350 | (275) | -20% | 1,119 | (44) | -4% |
| Professional fees | 1,060 | 976 | 84 | 9% | 1,111 | (51) | -5% |
| Postage, printing and office supplies | 729 | 862 | (133) | -15% | 819 | (90) | -11% |
| Marketing | 255 | 831 | (576) | -69% | 312 | (57) | -18% |
| Communications | 419 | 389 | 30 | 8% | 380 | 39 | 10% |
| Other noninterest expense | 2,154 | 2,635 | (481) | -18% | 2,069 | 85 | 4% |
| Total noninterest expense | $ 21,476 | $ 22,958 | $ (1,482) | -6% | $ 21,025 | $ 451 | 2% |
Income Taxes
Second quarter 2012 provision for income taxes was $3.2 million compared to a benefit for income taxes of $1.0 million in the same quarter of 2011. The second quarter 2012 provision for income taxes is the result of an effective tax rate of 35% on pre-tax income. The provision for taxes in the second quarter last year reflected the impact of the Company's deferred tax asset valuation allowance maintained at that time, which was subsequently fully reversed in the fourth quarter of 2011.
Credit Quality
The Company recorded a benefit for credit losses of $.5 million in the second quarter of 2012, a significant improvement compared to a provision for credit losses of $3.4 million in the second quarter of 2011 and $.1 million in the previous quarter of 2012. Second quarter 2012 net charge-offs of $.2 million, or .07% of average loans on an annualized basis, declined from 1.22% in the corresponding quarter in 2011 and .39% on a linked-quarter basis. The net charge off and benefit for credit losses in the second quarter of 2012 were heavily influenced by a recovery of $1.1 million related to a commercial real estate loan. As shown in the table below, net charge-offs declined in every loan category from the second quarter last year.
| Table 10 | ||||||
| ALLOWANCE FOR CREDIT LOSSES AND NET CHARGEOFFS | ||||||
| Charge-offs as | Charge-offs as | Charge-offs as | ||||
| a % of average | a % of average | a % of average | ||||
| (Dollars in thousands) | Q2 | loan balance | Q2 | loan balance | Q1 | loan balance |
| 2012 | annualized | 2011 | annualized | 2012 | annualized | |
| Allowance for credit losses, beginning of period | $ 34,634 | $ 40,429 | $ 35,983 | |||
| Total provision (benefit) for credit losses | (492) | 3,426 | 89 | |||
| Loan net charge-offs: | ||||||
| Commercial | 223 | 0.32% | 321 | 0.43% | (5) | -0.01% |
| Commercial real estate construction | -- | 0.00% | 648 | 13.66% | -- | 0.00% |
| Residential real estate construction | (29) | -1.03% | 213 | 4.96% | 1 | 0.03% |
| Total real estate construction | (29) | -0.34% | 861 | 9.53% | 1 | 0.01% |
| Mortgage | 92 | 0.59% | 222 | 1.21% | 534 | 3.28% |
| Home equity | 336 | 0.54% | 2,291 | 3.45% | 542 | 0.86% |
| Total real estate mortgage | 428 | 0.55% | 2,513 | 2.97% | 1,076 | 1.36% |
| Commercial real estate | (580) | -0.28% | 561 | 0.27% | 41 | 0.02% |
| Installment and consumer | 57 | 1.79% | 185 | 5.22% | 165 | 5.08% |
| Overdraft | 143 | 0.00% | 183 | 0.00% | 160 | 0.00% |
| Total loan net charge-offs | 242 | 0.07% | 4,624 | 1.22% | 1,438 | 0.39% |
| Total allowance for credit losses | $ 33,900 | $ 39,231 | $ 34,634 | |||
| Components of allowance for credit losses: | ||||||
| Allowance for loan losses | $ 33,132 | $ 38,422 | $ 33,854 | |||
| Reserve for unfunded commitments | 768 | 809 | 780 | |||
| Total allowance for credit losses | $ 33,900 | $ 39,231 | $ 34,634 | |||
| Net loan charge-offs to average loans (annualized) | 0.07% | 1.22% | 0.39% | |||
| Allowance for loan losses to total loans | 2.22% | 2.53% | 2.30% | |||
| Allowance for credit losses to total loans | 2.27% | 2.58% | 2.35% | |||
| Allowance for loan losses to nonperforming loans | 99% | 76% | 80% | |||
| Allowance for credit losses to nonperforming loans | 101% | 78% | 82% | |||
The allowance for credit losses was $33.9 million or 2.27% of total loans at June 30, 2012, compared to an allowance for credit losses of $39.2 million or 2.58% of total loans a year earlier and $34.6 million or 2.35% of total loans at March 31, 2012. The decline in the allowance for credit losses and the allowance relative to total loans reflected the improving trend in the overall risk profile of the loan portfolio. Other factors that reduced reserve requirements and the allowance for credit losses year-over-year included lower loan balances and adjustments made to the reserve percentages. The allowance for credit losses relative to nonperforming loans increased from 78% a year ago to 101% at June 30, 2012. The Company's estimate of an appropriate allowance for credit losses will continue to be closely related to the loan portfolio's credit quality performance trends and the region's economic conditions.
Total nonperforming assets at June 30, 2012, were $59.3 million or 2.46% of total assets, and represented a 31% reduction from $86.0 million or 3.49% of total assets a year ago, and a decline of 15% from $69.7 million or 2.89% as of March 31, 2012.
Over the past twelve months, total nonaccrual loans declined $17.1 million or 34% to $33.6 million at June 30, 2012, with declines in all loan categories.
| Table 11 | |||||
| NONPERFORMING ASSETS | |||||
| (Dollars in thousands) | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, |
| 2012 | 2012 | 2011 | 2011 | 2011 | |
| Loans on nonaccrual status: | |||||
| Commercial | $ 6,199 | $ 6,482 | $ 7,750 | $ 9,987 | $ 9,280 |
| Real estate construction: | |||||
| Commercial real estate construction | 3,750 | 3,749 | 3,750 | 3,886 | 4,357 |
| Residential real estate construction | 1,936 | 1,981 | 2,073 | 3,311 | 3,439 |
| Total real estate construction | 5,686 | 5,730 | 5,823 | 7,197 | 7,796 |
| Real estate mortgage: | |||||
| Mortgage | 7,044 | 10,744 | 9,624 | 10,877 | 11,527 |
| Home equity | 2,239 | 2,528 | 2,325 | 3,285 | 2,755 |
| Total real estate mortgage | 9,283 | 13,272 | 11,949 | 14,162 | 14,282 |
| Commercial real estate | 12,384 | 16,648 | 15,070 | 21,513 | 19,263 |
| Installment and consumer | -- | 1 | 5 | 6 | 1 |
| Total nonaccrual loans | 33,552 | 42,133 | 40,597 | 52,865 | 50,622 |
| 90 days past due not on nonaccrual | -- | -- | -- | -- | -- |
| Total nonperforming loans | 33,552 | 42,133 | 40,597 | 52,865 | 50,622 |
| Other real estate owned | 25,726 | 27,525 | 30,823 | 30,234 | 35,374 |
| Total nonperforming assets | $ 59,278 | $ 69,658 | $ 71,420 | $ 83,099 | $ 85,996 |
| Nonperforming loans to total loans | 2.24% | 2.86% | 2.70% | 3.52% | 3.33% |
| Nonperforming assets to total assets | 2.46% | 2.89% | 2.94% | 3.30% | 3.49% |
| Total delinquent loans 30-89 days past due | $ 3,422 | $ 4,095 | $ 4,273 | $ 5,556 | $ 9,961 |
| Delinquent loans to total loans | 0.23% | 0.28% | 0.28% | 0.37% | 0.65% |
As indicated in Table 12 below, during the most recent quarter the Company disposed of 30 OREO properties with a book value of $3.9 million while acquiring 28 properties with a book value of $3.3 million and recording OREO valuation adjustments totaling $1.2 million. The combination of these transactions resulted in a $1.8 million or 7% net reduction in total OREO during the second quarter of 2012 to $25.7 million at June 30, 2012. The OREO balance reflected write-downs of 55% from original loan principal. The largest balance in the OREO portfolio at June 30, 2012, was in the income-producing properties category followed by homes and land, all of which are located within the Company's footprint.
| Table 12 | ||||||
| OTHER REAL ESTATE OWNED ACTIVITY | ||||||
| (Dollars in thousands) | Q2 2012 | Q2 2011 | Q1 2012 | |||
| Amount | # | Amount | # | Amount | # | |
| Beginning balance | $ 27,525 | 246 | $ 39,329 | 399 | $ 30,823 | 264 |
| Additions to OREO | 3,304 | 28 | 4,270 | 18 | 810 | 9 |
| Dispositions of OREO | (3,890) | (30) | (6,670) | (51) | (3,587) | (27) |
| OREO valuation adjustment | (1,213) | -- | (1,555) | -- | (521) | -- |
| Ending balance | $ 25,726 | 244 | $ 35,374 | 366 | $ 27,525 | 246 |
| Table 13 | ||||||
| OTHER REAL ESTATE OWNED BY PROPERTY TYPE | ||||||
| (Dollars in thousands) | June 30, | # of | June 30, | # of | Mar. 31, | # of |
| 2012 | properties | 2011 | properties | 2012 | properties | |
| Income-producing properties | $ 8,106 | 13 | $ 9,237 | 14 | $ 9,352 | 15 |
| Homes | 5,539 | 20 | 10,108 | 43 | 5,228 | 16 |
| Land | 4,780 | 15 | 4,052 | 11 | 4,710 | 14 |
| Residential site developments | 3,104 | 126 | 5,912 | 215 | 3,367 | 136 |
| Lots | 1,999 | 42 | 3,126 | 52 | 2,453 | 49 |
| Multifamily | 1,570 | 20 | 673 | 11 | 408 | 4 |
| Condominiums | 325 | 2 | 1,900 | 14 | 1,641 | 6 |
| Commercial site developments | 303 | 6 | 366 | 6 | 366 | 6 |
| Total | $ 25,726 | 244 | $ 35,374 | 366 | $ 27,525 | 246 |
Other
The Company will hold a Webcast conference call Monday, July 23, 2012, at 1:00 p.m. Pacific Time, during which the Company will discuss second quarter 2012 results and current activities. To access the conference call via a live Webcast, go to www.wcb.com and click on Investor Relations and the "2nd Quarter 2012 Earnings Conference Call" tab. The conference call may also be accessed by dialing (866) 394-3464, Conference ID#: 92767115 a few minutes prior to 1:00 p.m. Pacific Time. 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 is a publicly held, Northwest bank holding company headquartered in Oregon with $2.4 billion in assets, and the parent company of West Coast Bank and West Coast Trust Company, Inc. West Coast Bank operates 58 branches in Oregon and Washington. The Company serves clients who seek the resources, sophisticated products and expertise of larger financial institutions, along with the local decision-making, market knowledge, and customer service orientation of a community bank. The Company offers a broad range of banking, investment, fiduciary and trust services. For more information, please visit the Company web site at www.wcb.com.
The West Coast Bancorp logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=13726
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 are made pursuant to the safe harbors of the PSLRA. These statements can often be identified by words such as "expects," "believes," "projects," "anticipates," or "will," or other words of similar meaning, and specifically include in this release all statements regarding the expected future benefits of our ongoing cost-cutting initiatives. Actual results could be quite different from those expressed or implied by the forward-looking statements, which give our current 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, the effects of (i) market conditions in our service areas on our efforts to continue to reduce our levels of nonperforming assets and increase loan originations, (ii) cost reduction initiatives, and (iii) risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2011, including under the heading "Forward Looking Statement Disclosure" and in the section "Risk Factors".
| Table 14 | |||||||
| INCOME STATEMENT | |||||||
| (Dollars and shares in thousands) | Q2 | Q2 | Change | Q1 | Year to date | ||
| 2012 | 2011 | $ | % | 2012 | 2012 | 2011 | |
| Net interest income | |||||||
| Interest and fees on loans | $ 18,699 | $ 20,231 | $ (1,532) | -8% | $ 19,209 | $ 37,908 | $ 40,530 |
| Interest on investment securities | 4,110 | 4,811 | (701) | -15% | 4,099 | 8,209 | 9,359 |
| Other interest income | 32 | 62 | (30) | -48% | 25 | 57 | 133 |
| Total interest income | 22,841 | 25,104 | (2,263) | -9% | 23,333 | 46,174 | 50,022 |
| Interest expense on deposit accounts | 431 | 1,476 | (1,045) | -71% | 577 | 1,008 | 3,285 |
| Interest on borrowings and subordinated deb. | 637 | 1,667 | (1,030) | -62% | 623 | 1,260 | 3,264 |
| Total interest expense | 1,068 | 3,143 | (2,075) | -66% | 1,200 | 2,268 | 6,549 |
| Net interest income | 21,773 | 21,961 | (188) | -1% | 22,133 | 43,906 | 43,473 |
| Provision (benefit) for credit losses | (492) | 3,426 | (3,918) | -114% | 89 | (403) | 5,502 |
| Noninterest income | |||||||
| Service charges on deposit accounts | 3,212 | 3,575 | (363) | -10% | 2,818 | 6,030 | 7,219 |
| Payment systems related revenue | 3,084 | 3,169 | (85) | -3% | 3,073 | 6,157 | 6,099 |
| Trust and investment services revenues | 1,457 | 1,208 | 249 | 21% | 935 | 2,392 | 2,356 |
| Gains on sales of loans | 722 | 300 | 422 | 141% | 735 | 1,457 | 813 |
| Net OREO valuation adjustments and gains (losses) on sales | (1,030) | (910) | (120) | -13% | (574) | (1,604) | (1,244) |
| Other-than-temporary impairment losses | -- | (179) | 179 | -- | (49) | (49) | (179) |
| Gain on sales of securities | 228 | 130 | 98 | 75% | 147 | 375 | 397 |
| Other | 821 | 777 | 44 | 6% | 802 | 1,623 | 1,525 |
| Total noninterest income | 8,494 | 8,070 | 424 | 5% | 7,887 | 16,381 | 16,986 |
| Noninterest expense | |||||||
| Salaries and employee benefits | 12,081 | 12,119 | (38) | 0% | 11,478 | 23,559 | 23,996 |
| Equipment | 1,584 | 1,564 | 20 | 1% | 1,662 | 3,246 | 3,092 |
| Occupancy | 2,119 | 2,232 | (113) | -5% | 2,075 | 4,194 | 4,397 |
| Payment systems related expense | 1,075 | 1,350 | (275) | -20% | 1,119 | 2,194 | 2,597 |
| Professional fees | 1,060 | 976 | 84 | 9% | 1,111 | 2,171 | 1,958 |
| Postage, printing and office supplies | 729 | 862 | (133) | -15% | 819 | 1,548 | 1,672 |
| Marketing | 255 | 831 | (576) | -69% | 312 | 567 | 1,482 |
| Communications | 419 | 389 | 30 | 8% | 380 | 799 | 767 |
| Other noninterest expense | 2,154 | 2,635 | (481) | -18% | 2,069 | 4,223 | 5,550 |
| Total noninterest expense | 21,476 | 22,958 | (1,482) | -6% | 21,025 | 42,501 | 45,511 |
| Income before income taxes | 9,283 | 3,647 | 5,636 | 155% | 8,906 | 18,189 | 9,446 |
| Provision (benefit) for income taxes | 3,249 | (987) | 4,236 | 429% | 3,117 | 6,366 | (293) |
| Net income | $ 6,034 | $ 4,634 | $ 1,400 | 30% | $ 5,789 | $ 11,823 | $ 9,739 |
| Net income per share: | |||||||
| Basic | $ 0.29 | $ 0.23 | $ 0.06 | $ 0.28 | $ 0.58 | $ 0.48 | |
| Diluted | $ 0.28 | $ 0.22 | $ 0.06 | $ 0.27 | $ 0.55 | $ 0.45 | |
| Weighted average common shares | 19,082 | 19,006 | 76 | 19,038 | 19,060 | 18,983 | |
| Weighted average diluted shares | 20,256 | 20,025 | 231 | 20,054 | 20,161 | 19,982 | |
| Tax equivalent net interest income | $ 22,046 | $ 22,249 | $ (203) | $ 22,398 | $ 44,444 | $ 44,019 | |
| Table 15 | |||||
| BALANCE SHEETS | |||||
| (Dollars in thousands) | June 30, | June 30, | Change | Mar. 31, | |
| 2012 | 2011 | $ | % | 2012 | |
| Assets: | |||||
| Cash and due from banks | $ 55,332 | $ 54,296 | $ 1,036 | 2% | $ 59,146 |
| Federal funds sold | 2,740 | 2,367 | 373 | 16% | 1,803 |
| Interest-bearing deposits in other banks | 52,815 | 33,583 | 19,232 | 57% | 108,735 |
| Total cash and cash equivalents | 110,887 | 90,246 | 20,641 | 23% | 169,684 |
| Investment securities | 708,884 | 760,704 | (51,820) | -7% | 670,534 |
| Loans | 1,495,797 | 1,521,147 | (25,350) | -2% | 1,470,848 |
| Allowance for loan losses | (33,132) | (38,422) | 5,290 | 14% | (33,854) |
| Loans, net | 1,462,665 | 1,482,725 | (20,060) | -1% | 1,436,994 |
| Total interest earning assets | 2,261,029 | 2,319,332 | (58,303) | -3% | 2,254,019 |
| OREO, net | 25,726 | 35,374 | (9,648) | -27% | 27,525 |
| Other assets | 100,277 | 93,507 | 6,770 | 7% | 104,550 |
| Total assets | $ 2,408,439 | $ 2,462,556 | $ (54,117) | -2% | $ 2,409,287 |
| Liabilities and Stockholders' Equity: | |||||
| Demand | $ 648,819 | $ 599,020 | $ 49,799 | 8% | $ 620,015 |
| Savings and interest-bearing demand | 497,135 | 465,779 | 31,356 | 7% | 503,829 |
| Money market | 585,421 | 658,185 | (72,764) | -11% | 614,831 |
| Time deposits | 145,510 | 208,013 | (62,503) | -30% | 155,830 |
| Total deposits | 1,876,885 | 1,930,997 | (54,112) | -3% | 1,894,505 |
| Borrowings and subordinated debentures | 178,900 | 219,599 | (40,699) | -19% | 171,000 |
| Reserve for unfunded commitments | 768 | 809 | (41) | -5% | 780 |
| Other liabilities | 23,869 | 25,582 | (1,713) | -7% | 22,020 |
| Total liabilities | 2,080,422 | 2,176,987 | (96,565) | -4% | 2,088,305 |
| Stockholders' equity | 328,017 | 285,569 | 42,448 | 15% | 320,982 |
| Total liabilities and stockholders' equity | $ 2,408,439 | $ 2,462,556 | $ (54,117) | -2% | $ 2,409,287 |
| Table 16 | ||||||||
| PERIOD END LOANS | ||||||||
| (Dollars in thousands) | June 30, | % of | June 30, | % of | Change | Mar. 31, | % of | |
| 2012 | Total | 2011 | total | Amount | % | 2012 | Total | |
| Commercial loans | $ 292,643 | 19% | $ 297,817 | 20% | $ (5,174) | -2% | $ 278,195 | 19% |
| Commercial real estate construction | 33,477 | 2% | 17,024 | 1% | 16,453 | 97% | 19,839 | 1% |
| Residential real estate construction | 10,549 | 1% | 15,410 | 1% | (4,861) | -32% | 12,082 | 1% |
| Total real estate construction loans | 44,026 | 3% | 32,434 | 2% | 11,592 | 36% | 31,921 | 2% |
| Mortgage | 59,970 | 4% | 72,708 | 5% | (12,738) | -18% | 65,063 | 5% |
| Home equity | 248,921 | 17% | 264,016 | 17% | (15,095) | -6% | 252,990 | 17% |
| Total real estate mortgage | 308,891 | 21% | 336,724 | 22% | (27,833) | -8% | 318,053 | 22% |
| Commercial real estate loans | 837,415 | 56% | 839,665 | 55% | (2,250) | 0% | 830,053 | 56% |
| Installment and other consumer loans | 12,822 | 1% | 14,507 | 1% | (1,685) | -12% | 12,626 | 1% |
| Total loans | $ 1,495,797 | $ 1,521,147 | $ (25,350) | -2% | $ 1,470,848 | |||
| Table 17 | |||||
| AVERAGE BALANCE SHEETS | |||||
| (Dollars in thousands) | Q2 | Q2 | Q1 | Year to date | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| Cash and due from banks | $ 51,903 | $ 52,273 | $ 50,017 | $ 50,960 | $ 50,495 |
| Federal funds sold | 2,555 | 4,790 | 2,601 | 2,578 | 4,371 |
| Interest-bearing deposits in other banks | 45,260 | 93,225 | 35,334 | 40,297 | 99,972 |
| Total cash and cash equivalents | 99,718 | 150,288 | 87,952 | 93,835 | 154,838 |
| Investment securities | 726,853 | 698,116 | 710,000 | 718,426 | 685,850 |
| Total loans | 1,479,226 | 1,523,170 | 1,482,522 | 1,480,874 | 1,526,213 |
| Allowance for loan losses | (33,699) | (38,944) | (35,249) | (34,474) | (39,616) |
| Loans, net | 1,445,527 | 1,484,226 | 1,447,273 | 1,446,400 | 1,486,597 |
| Total interest earning assets | 2,254,192 | 2,319,980 | 2,232,288 | 2,243,240 | 2,317,311 |
| Other assets | 123,179 | 127,895 | 132,951 | 127,984 | 128,438 |
| Total assets | $ 2,395,277 | $ 2,460,525 | $ 2,378,176 | $ 2,386,645 | $ 2,455,723 |
| Demand | $ 621,547 | $ 578,562 | $ 585,749 | $ 603,647 | $ 565,468 |
| Savings and interest-bearing demand | 502,509 | 476,090 | 490,361 | 496,436 | 463,316 |
| Money market | 596,949 | 654,668 | 623,111 | 610,030 | 657,653 |
| Time deposits | 151,085 | 224,674 | 167,417 | 159,251 | 246,733 |
| Total deposits | 1,872,090 | 1,933,994 | 1,866,638 | 1,869,364 | 1,933,170 |
| Borrowings and subordinated debentures | 178,241 | 219,599 | 171,505 | 174,873 | 219,599 |
| Total interest bearing liabilities | 1,428,784 | 1,575,031 | 1,452,394 | 1,440,590 | 1,587,301 |
| Other liabilities | 21,550 | 24,331 | 22,782 | 22,085 | 24,656 |
| Stockholders' equity | 323,396 | 282,601 | 317,251 | 320,323 | 278,298 |
| Total liabilities and stockholders' equity | $ 2,395,277 | $ 2,460,525 | $ 2,378,176 | $ 2,386,645 | $ 2,455,723 |