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| WABC > SEC Filings for WABC > Form 10-Q on 30-Oct-2009 | All Recent SEC Filings |
30-Oct-2009
Quarterly Report
Net Income
Following is a summary of the components of net income for the periods
indicated:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
(In thousands, except per share data)
Net interest income (FTE) $ 61,593 $ 48,693 $ 183,270 $ 146,407
Provision for loan losses (2,800 ) (600 ) (7,200 ) (1,800 )
Noninterest income (loss) 15,961 (27,499 ) 96,315 (11,963 )
Noninterest expense (35,151 ) (25,203 ) (107,940 ) (74,596 )
Income tax (provision) benefit
(FTE) (14,346 ) 4,653 (63,180 ) (19,023 )
Net income $ 25,257 $ 44 $ 101,265 $ 39,025
Net income applicable to common
equity $ 23,791 $ 44 $ 98,114 $ 39,025
Average diluted common shares 29,429 29,273 29,313 29,292
Diluted earnings per common share $ 0.81 $ 0.00 $ 3.35 $ 1.33
Average total assets $ 5,072,866 $ 4,137,232 $ 5,113,359 $ 4,275,657
Net income applicable to common
equity to average total assets
(annualized) 1.86 % 0.00 % 2.57 % 1.22 %
Net income applicable to common
equity to average common
stockholders' equity (annualized) 19.68 % 0.04 % 28.38 % 12.83 %
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County was acquired from the FDIC on February 6, 2009. Net income applicable to
common equity for the third quarter of 2009 was $23.7 million more than the same
quarter of 2008, largely attributable to a $24 million after-tax FHLMC and FNMA
preferred stock loss on sale and impairment charge in the third quarter of 2008,
higher net interest income (FTE) and higher service fee income on deposit
accounts, partially offset by higher provision for loan losses, higher
noninterest expense and an increase in income tax provision (FTE). A
$12.9 million or 26.5% increase in net interest income (FTE) was mostly
attributed to growth in average balances of loans due to the acquisition, lower
rates paid on interest-bearing liabilities and lower average balances of
borrowings, partially offset by lower yields on earning assets and higher
average balances of interest-bearing deposits and lower average balances of
investments. The provision for loan losses increased $2.2 million, reflecting
Management's evaluation of losses inherent in the loan portfolio not covered by
loss-sharing agreements with the FDIC. Noninterest income rose by $43.5 million
mainly due to higher service charges on deposit accounts and because the third
quarter of 2008 included securities losses and impairment charge of
$41.2 million. Noninterest expense increased $9.9 million mostly due to
acquisition-related increases in salaries and related benefits, occupancy and
equipment expenses and higher FDIC insurance assessments and amortization of
intangibles. The provision for income taxes (FTE) increased $19.0 million
primarily due to higher profitability and because the third quarter of 2008
included the $17.3 million tax benefit on the investment security losses on sale
and impairment charge.
Comparing the first nine months of 2009 to the first nine months of 2008, net
income applicable to common equity increased $59.1 million, due to the FAS 141R
gain, higher net interest income (FTE), higher service charges on deposit
accounts and the 2008 securities losses and impairment charges, partially offset
by increases in the provision for loan losses, noninterest expense and income
tax provision (FTE) and the 2008 gain on sale of Visa common stock and reversal
of noninterest expense related to Visa litigation contingencies. The higher net
interest income (FTE) was mainly caused by higher average loans, lower rates
paid on interest-bearing deposits and lower average balances of borrowings,
partially offset by lower yields on loans, lower average investments and higher
average balances of interest-bearing deposits. The provision for loan losses
increased $5.4 million to reflect Management's assessment of losses inherent in
the loan portfolio not covered by loss-sharing agreements with the FDIC.
Noninterest income increased $108.3 million largely due to the FAS 141R gain,
higher service charges on deposit accounts due to assumed deposits and the
securities losses in the first nine months of 2008, partially offset by the gain
on Visa common stock in the first quarter of 2008. The income tax provision
(FTE) increased $44.2 million primarily due to the FAS 141R gain, and higher
profitability and securities losses in the first nine months of 2008, partially
offset by an increase related to the gain on sale of Visa common stock in the
first nine months of 2008.
Net Interest Income
Following is a summary of the components of net interest income for the periods
indicated:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
(In thousands)
Interest and fee income $ 61,196 $ 50,975 $ 183,453 $ 159,024
Interest expense (4,500 ) (7,438 ) (15,078 ) (28,651 )
FTE adjustment 4,897 5,156 14,895 16,034
Net interest income (FTE) $ 61,593 $ 48,693 $ 183,270 $ 146,407
Average earning assets $ 4,470,851 $ 3,745,058 $ 4,541,596 $ 3,878,972
Net interest margin (FTE) (annualized) 5.48 % 5.19 % 5.39 % 5.04 %
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At September 30, 2009, FDIC covered loans represented 29 percent of the
Company's loan portfolio. Under the terms of the FDIC loss-sharing agreements,
the FDIC is obligated to reimburse the Bank 80 percent of loan interest income
foregone on covered loans. Such reimbursements are limited to the lesser of
90 days contractual interest or actual unpaid contractual interest at the time a
principal loss is recognized in respect to the underlying loan. The Bank
includes estimated FDIC reimbursable loan interest income in income in the
period such loan interest would be recognized if the borrower were in compliance
with the contractual terms of the loan.
Net interest income (FTE) increased during the third quarter of 2009 by
$12.9 million or 26.5% from the same period in 2008 to $61.6 million, mainly due
to higher average balances of loans (up $849.1 million), lower rates paid on
interest-bearing liabilities (down 61 basis points ("bp")) and lower average
balances of borrowings (down $171.5 million), partially offset by lower yields
on loans (down 21 bp) and higher average balances of interest-bearing deposits
(up $778.9 million), and lower average balances of investments (down
$123.3 million).
Comparing the first nine months of 2009 with the corresponding period of 2008,
net interest income (FTE) increased $36.9 million or 25.2%, primarily due to a
higher volume of average loans (up $817.9 million), lower rates paid on
interest-bearing liabilities (down 83 bp) and lower average balances of
borrowings (down $167.8 million), partially offset by lower yields on loans
(down 35 bp), higher average balances of interest-bearing deposits (up
$739.0 million) and lower average balances of investments (down $155.3 million).
Interest and Fee Income
Interest and fee income (FTE) for the third quarter of 2009 increased
$10.0 million or 17.7% from the same period in 2008. The increase was caused
primarily by higher average balances of loans (up $849.1 million), partially
offset by lower yields on loans (down 21 bp) and lower average balances of
investments (down $123.3 million).
The growth in the average earning assets in the third quarter of 2009 compared
with the same period in 2008 was substantially attributable to the acquisition
of County loans from the FDIC. The average balance of such loans for the third
quarter of 2009 was $974.1 million. The growth in average balances of loans were
mainly due to increases in the average balance of commercial real estate loans
(up $483.5 million), taxable commercial loans (up $319.9 million), and other
consumer loans (up $119.6 million), partially offset by a $21.5 million decline
in average tax-exempt commercial loans, a $37.8 million decline in average
residential real estate loans and a $20.3 million decline in indirect automobile
loans. The acquired County loan portfolio did not contain significant volumes of
tax-exempt commercial loans or residential real estate loans. The average
investment portfolio decreased $123.3 million largely due to declines in average
balances of U.S. government sponsored entity obligations (down $94.7 million),
municipal securities (down $15.8 million) and a $42.9 million decline in average
balances of FHLMC and FNMA stock resulting from impairment charges in the
second, third and fourth quarters of 2008, partially offset by a $21.7 million
increase in the average balance of mortgage backed securities and collateralized
mortgage obligations which were purchased from the FDIC as a part of the County
acquisition. The Bank has not been actively purchasing investment securities in
the current environment. The resulting liquidity has been applied to reduce
high-cost and interest-sensitive funding sources.
The average yield on the Company's earning assets decreased from 5.98% in the
third quarter 2008 to 5.88% in the corresponding period of 2009. The composite
yield on loans fell 21 bp to 6.03% due to decreases in yields on taxable
commercial loans (down 104 bp), commercial real estate loans (down 33 bp), real
estate construction loans (down 261 bp) and residential real estate loans (down
13 bp), partially offset by a 16 bp increase in yields on consumer loans. The
investment portfolio yield decreased 2 bp to 5.47%, mainly due to a 363 bp
decrease in the average yield on corporate and other securities which was
affected primarily by suspended dividends on FHLMC and FNMA preferred stock.
Comparing the first nine months of 2009 with the comparable period of 2008,
interest and fee income (FTE) was up $23.3 million or 13.3%. The increase
largely resulted from a higher volume of average loans due to the County
acquisition, partially offset by lower yields on loans and lower average
balances of investments.
Average earning assets increased $662.6 million or 17.1% for the first nine
months of 2009 compared with the same period of 2008 due to the County
acquisition. A $817.9 million increase in the average balance of the loan
portfolio was attributable to increases in average balances of commercial real
estate loans (up $447.8 million), taxable commercial loans (up $328.1 million)
and consumer loans (up $96.5 million), partially offset by a $29.0 million
decrease in the average balance of residential real estate loans and a
$22.7 million decrease in the average balance of tax-exempt commercial loans.
The acquired County loan portfolio did not contain significant volumes of
tax-exempt commercial loans or residential real estate loans. Average
investments decreased by $155.3 million due to declines in the average balances
of U.S. government sponsored entity obligations (down $112.6 million), municipal
securities (down $17.5 million) and a $55.3 million decline in average balances
of FHLMC and FNMA stock resulting from the impairment charge in the second,
third and fourth quarters of 2008, partially offset by a $22.4 million increase
in the average balance of mortgage backed securities and collateralized mortgage
obligations. The Bank has not been actively purchasing investment securities in
the current environment. The resulting liquidity has been applied to reduce
high-cost and interest-sensitive funding sources.
The average yield on earning assets for the first nine months of 2009 was 5.83%
compared with 6.02% in the corresponding period of 2008. The loan portfolio
yield for the first nine months of 2009 compared with the previous quarter was
lower by 35 bp, due to decreases in yields on taxable commercial loans (down 155
bp), commercial real estate loans (down 49 bp) and real estate construction
loans (down 295 bp), partially offset by consumer loans (up 15 bp) and
tax-exempt commercial loans (up 10 bp). The investment portfolio yield decreased
by 5 bp. The decrease resulted from an 11 bp decline in yields on mortgage
backed securities and collateralized mortgage obligations and a 494 bp decline
in yields on corporate and other securities which was affected primarily by
suspended dividends on FHLMC and FNMA preferred stock, partially offset by
higher yields on U.S. government sponsored entity obligations (up 28 bp).
Interest Expense
Interest expense in the third quarter of 2009 decreased $2.9 million compared
with the same period in 2008. The decrease was attributable to lower rates paid
on the interest-bearing liabilities, lower balances of borrowings and higher
levels of shareholders' equity, partially offset by higher average
interest-bearing deposits. The average rate paid on interest-bearing liabilities
decreased from 1.19% in the third quarter of 2008 to 0.58% in the same quarter
of 2009. Rates paid on most interest-bearing liabilities moved with general
market conditions. Rates on interest-bearing deposits decreased 53 bp to 0.47%
primarily due to decreases in rates paid on CDs over $100 thousand (down 108 bp)
, CDs less than $100 thousand (down 180 bp) and preferred money market savings
(down 87 bp). Rates on short-term borrowings also decreased 59 bp mostly due to
lower rates on federal funds purchased (down 180 bp) and sweep accounts (down 35
bp). Average interest-bearing liabilities rose by $607.4 million or 24.4% for
the third quarter of 2009 over the same period of 2008 primarily through
acquisition. Interest-bearing deposits grew $778.9 million primarily due to
increases in CDs less than $100 thousand (up $298.4 million), CDs over $100
thousand (up $97.3 million), money market checking accounts (up $169.1 million),
money market savings (up $148.9 million) and regular savings (up $81.5 million).
Offsetting the increase were decreases in average balances of short-term
borrowings (down $162.8 million) and long-term debt (down $8.6 million). Average
short-term borrowings decreased due to a $341.5 million decline in the average
balance of federal funds purchased, partially offset by FHLB advances assumed
through the County acquisition averaging $86.2 million and a $95.2 million
increase in average balances of repurchase agreements due to the County
acquisition.
Comparing the first nine months of 2009 with the same period of 2008, interest
expense decreased $13.6 million, due to lower rates paid, lower average balances
of borrowing and higher levels of shareholders' equity, offset in part by higher
average balances of interest-bearing deposits. Average interest-bearing
liabilities during the first nine months of 2009 rose by $571.2 million or 21.8%
over the same period of 2008 mainly through the County acquisition. A
$739.0 million growth in interest-bearing deposits was mostly attributable to
increases in average balances of CDs less than $100 thousand (up
$271.9 million), CDs over $100 thousand (up $129.4 million), money market
checking accounts (up $161.4 million), money market savings (up $116.6 million)
and regular savings (up $72.0 million). Short-term borrowings decreased
$158.2 million, mainly the net result of lower average balances of federal funds
purchased (down $296.4 million) and sweep accounts (down $15.8 million),
partially offset by higher average balances of repurchase agreements (up
$76.7 million) and FHLB advances (up $77.3 million). Average balances of
long-term debt also declined $9.6 million. Rates paid on interest-bearing
liabilities averaged 0.63% during the first nine months of 2009 compared with
1.46% for the first nine months of 2008. The average rate paid on
interest-bearing deposits declined 62 bp to 0.56% in the first nine months of
2009 mainly due to lower rates on CDs less than $100 thousand (down 212 bp), CDs
over $100 thousand (down 125 bp) and preferred money market savings (down 109
bp). Rates on short-term borrowings were also lower by 139 bp largely due to
federal funds (down 236 bp) and repurchase agreements (down 118 bp).
Net Interest Margin (FTE)
The following summarizes the components of the Company's net interest margin for
the periods indicated:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Yield on earning assets (FTE) 5.88 % 5.98 % 5.83 % 6.02 %
Rate paid on interest-bearing
liabilities 0.58 % 1.19 % 0.63 % 1.46 %
Net interest spread (FTE) 5.30 % 4.79 % 5.20 % 4.56 %
Impact of all other net noninterest
bearing funds 0.18 % 0.40 % 0.19 % 0.48 %
Net interest margin (FTE) 5.48 % 5.19 % 5.39 % 5.04 %
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During the third quarter of 2009, the net interest margin (FTE) increased 29 bp compared with the same period in 2008. Rates paid on interest-bearing liabilities declined faster than yields on earning assets (FTE), resulting in a 51 bp increase in net interest spread. The margin contribution of noninterest bearing funds decreased 22 bp because of the lower market rates of interest at which they could be invested. The net interest margin (FTE) in the first nine months of 2009 rose by 35 bp compared with the comparable period of 2008. Earning asset yields decreased 19 bp while the cost of interest-bearing liabilities declined 83 bp, resulting in a 64 bp increase in the net interest spread. The margin contribution from noninterest bearing funding sources decreased 29 bp.
Summary of Average Balances, Yields/Rates and Interest Differential The following tables present, for the periods indicated, information regarding the Company's consolidated average assets, liabilities and shareholders' equity, the amount of interest income from average earning assets and the resulting yields, and the amount of interest expense paid on interest-bearing liabilities. Average loan balances include nonperforming loans. Interest income includes proceeds from loans on nonaccrual status only to the extent cash payments have been received and applied as interest income. Yields on securities and certain loans have been adjusted upward to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate (FTE).
For the three months ended
September 30, 2009
Interest Rates
Average Income/ Earned/
Balance Expense Paid
(In thousands)
Assets:
Money market assets and funds sold $ 602 $ 1 0.66 %
Investment securities:
Available for sale
Taxable 237,965 2,352 3.95 %
Tax-exempt (1) 167,339 2,846 6.80 %
Held to maturity
Taxable 275,553 3,025 4.39 %
Tax-exempt (1) 526,004 8,290 6.30 %
Loans:
Commercial:
Taxable 642,366 9,391 5.80 %
Tax-exempt (1) 184,054 3,032 6.54 %
Commercial real estate 1,313,545 21,967 6.63 %
Real estate construction 74,707 667 3.54 %
Real estate residential 424,189 5,004 4.72 %
Consumer 624,527 9,518 6.05 %
Total loans (1) 3,263,388 49,579 6.03 %
Total earning assets (1) 4,470,851 $ 66,093 5.88 %
Other assets 602,015
Total assets $ 5,072,866
Liabilities and shareholders' equity
Deposits:
Noninterest bearing demand $ 1,371,124 $ - -
Savings and interest-bearing transaction 1,687,028 1,178 0.28 %
Time less than $100,000 491,555 829 0.67 %
Time $100,000 or more 581,681 1,266 0.86 %
Total interest-bearing deposits 2,760,264 3,273 0.47 %
Short-term borrowed funds 307,266 804 1.04 %
Debt financing and notes payable 26,551 423 6.36 %
Total interest-bearing liabilities 3,094,081 $ 4,500 0.58 %
Other liabilities 58,330
Shareholders' equity 549,331
Total liabilities and shareholders' equity $ 5,072,866
Net interest spread (1) (2) 5.30 %
Net interest income and interest margin (1) (3) $ 61,593 5.48 %
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(1) Interest and rates calculated on a fully taxable equivalent basis using the current statutory federal tax rate.
(2) Net interest spread represents the average yield earned on earning assets minus the average rate paid on interest-bearing liabilities.
(3) Net interest margin is computed by calculating the difference between interest income and expense (annualized), divided by the average balance of earning assets. . . .
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