WCBO West Coast Bancorp (MM)

West Coast Bancorp Reports Record Second Quarter 2005 Earnings - Return on Average Equity Reaches 16.6% in Second Quarter 2005 LAKE OSWEGO, Ore., July 19 /PRNewswire-FirstCall/ -- West Coast Bancorp (NASDAQ:WCBO) today announced quarterly earnings of $6.1 million or $0.40 per diluted share for the second quarter of 2005, compared to earnings of $5.3 million or $0.34 per diluted share in the second quarter of 2004. This represents a 17.6% increase in earnings per diluted share from the same quarter in 2004. Three Months Ended June 30, (# in 000's except per share data) 2005 2004 Earnings per Diluted Share $.40 $.34 Net Income $6,146 $5,282 Return on Average Equity 16.6% 15.0% Book Value per Share $10.28 $9.38 Total Period End Loans $1,478,331 $1,300,684 Total Period End Deposits $1,563,867 $1,424,762 "We are very pleased with the 17.6% earnings per diluted share growth and the 16.6% return on average shareholder equity in the second quarter of 2005," said Robert D. Sznewajs, President and CEO. "Continued strong core loan and deposit growth, combined with an improved net interest margin of 4.93% during this rising interest rate environment has driven the Company's net income to record levels for the second quarter of 2005." Financial Results: For the quarter ended June 30, 2005, net interest income was $21.0 million, an increase of 15% or $2.7 million compared with the second quarter of 2004. Growth in average loan and deposit balances of nearly 15% and 10%, respectively, from second quarter of 2004, augmented by improved earning asset and deposit mixes, contributed to the higher net interest income. Mainly due to a shift in earning asset mix towards loans and higher value of non-interest bearing demand deposits from rising short-term interest rates, the net interest margin expanded to 4.93% from 4.68% in the second quarter of 2004. The provision for loan losses was $.825 million in the second quarter 2005, down from $1.0 million in the same quarter last year, as the Company experienced net loan recoveries in the second quarter 2005. Second quarter 2005 total non-interest income of $6.1 million increased 6% or $.4 million from the same quarter last year. The Company had strong growth of $.2 million or 19% in payment system revenues, which include interchange and merchant card revenues. Trust revenue also showed robust growth, increasing 30% or $.2 million since second quarter of 2004, while deposit service charge revenues were up $.2 million or 11% over the same period. Mainly due to a $.4 million gain on sale associated with the sale of the Company's $5 million credit card portfolio in the most recent quarter, other non-interest income increased $.5 million from the second quarter of 2004. These increases were partially offset by a $.2 million decline in gains on sales of loans from the same period a year ago and a $.4 million loss on the sale of investment securities in the second quarter of 2005. Total non-interest expense increased $1.9 million or 12% in the second quarter of 2005 from the same quarter in 2004. Personnel expense grew $1.4 million, with the majority of the increase resulting from new branch team members in late 2004, increased variable pay due to higher loan originations, and the hiring of additional commercial lenders. The remaining expense growth came from higher marketing costs associated with the introduction of the totally free checking product in the Oregon market in the most recent quarter, as well as from higher rent and transaction processing expenses. Annualized net recoveries were 0.02% of average loans in the second quarter 2005, an improvement from annualized net charge-offs of 0.18% in the same quarter a year ago. Non-performing assets at June 30, 2005, were $1.8 million or 0.09% of total assets, down from $6.6 million or 0.38% a year ago. During the second quarter of 2005, consistent with its capital plan, the Company repurchased approximately 108,000 shares at an average cost of $21.94 per share. At June 30, 2005, approximately 583,000 shares remained available for future repurchases under the Company's share repurchase program. West Coast Bancorp also announced operating earnings of $11.5 million or $.75 per fully diluted share for the six months ended June 30, 2005, compared to operating earnings of $10.5 million or $.67 per fully diluted share for the same period in 2004. Operating earnings is a non-GAAP (Generally Accepted Accounting Principles) financial measure that is derived by adjusting the Company's net income to exclude the April 4, 2005, announced first quarter recording of an other-than-temporary, non-cash impairment charge of approximately $.8 million after tax or $.05 per diluted share related to its $5 million investment in Freddie Mac preferred stock. This security, which was purchased in November 1999, resets its coupon to the five-year treasury note rate every five years. The following table reconciles net income to operating earnings, including per-share figures: (Dollars in thousands, except per share data) Six months ended June 30, 2005 2004 Net income $10,666 $10,453 Add back: Impairment charge on securities, net of tax 803 -- Operating earnings $11,469 $10,453 Earnings per Diluted Share based on Net income $0.70 $0.67 Operating earnings $0.75 $0.67 Return on Average Equity based on Net income 14.5% 14.9% Operating earnings 15.6% 14.9% 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 earnings as compared to prior periods. Other: The Company will hold a webcast conference call Wednesday, July 20, 2005, at 8:30 a.m. Pacific Time, during which the Company will discuss second quarter 2005 results, review its strategic progress, and provide management's current earnings expectations for the full year 2005. To access the conference call via a live webcast, go to http://www.wcb.com/ and click on Investor Relations/Conference Call/West Coast Bancorp Webcast. The conference call may also be accessed by dialing 877-604-2074 a few minutes prior to 8:30 a.m. PDT. The call will be available for replay by accessing the Company's website at http://www.wcb.com/ and clicking on Investor Relations/Conference Call/Archived Conference Call (Replay). West Coast Bancorp is a Northwest bank holding company with $1.8 billion in assets, operating 52 offices in Oregon and Washington. West Coast Bancorp, the parent company of West Coast Bank and West Coast Trust, is headquartered in Oregon. West Coast Bank 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 http://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 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. Factors that could cause results to differ from forward-looking statements include, among others: general economic and banking business conditions; evolving banking industry standards; competitive factors, including pricing pressures on Bancorp's yields on loans and rates paid on deposits; changing customer investment, deposit and borrowing behaviors; changing interest rate environments, including the shape and the level of the yield curve, which could decrease net interest income and fee income, including reducing gains on sales of loans; vendor service quality; changes in laws and other legal developments; changes in government funding of Small Business Administration ("SBA") loans; and changes in technology or required investments in technology. Furthermore, the forward-looking statements are subject to risks related to the Company's ability to: attract and retain lending officers and other key personnel; close loans in the pipeline; generate loan and deposit balances at projected spreads; maintain asset quality; control the level of net charge- offs; sustain fee income generation; retain customers of greatest value; create revenue growth from investments in new team members and branches, control expenses; monitor and manage the Company's internal control environments, including disclosure and financial reporting controls, and other matters. Readers are cautioned not to place undue reliance on the forward-looking statements which reflect management's analysis only as of the date of the statements. Readers should carefully review the disclosures we file from time to time with the Securities and Exchange Commission. Bancorp undertakes no obligation to publicly review or update forward-looking statements to reflect events or circumstances that arise after the date of this report. West Coast Bancorp Consolidated Income Statements (Unaudited) Three months ended Six months ended (Dollars and shares in thousands) June 30, March 31, June 30, 2005 2004 2005 2005 2004 Net interest income Interest and fees on loans $24,666 $19,170 $22,471 $47,137 $38,106 Interest on investment securities 2,603 3,284 2,692 5,294 6,766 Other interest income 52 18 39 92 32 Total interest income 27,321 22,472 25,202 52,523 44,904 Interest expense on deposit accounts 4,596 2,636 3,761 8,357 5,387 Interest on borrowings including subordinated debentures 1,697 1,544 1,567 3,264 2,988 Total interest expense 6,293 4,180 5,328 11,621 8,375 Net interest income 21,028 18,292 19,874 40,902 36,529 Provision for loan loss 825 1,000 -- 825 1,900 Non-interest income Service charges on deposit accounts 2,020 1,825 1,891 3,911 3,679 Other service charges, commissions and fees 2,140 1,940 2,085 4,225 3,645 Trust revenues 696 537 567 1,263 1,037 Gains on sales of loans 901 1,117 775 1,676 2,030 Other 755 280 270 1,025 816 Loss on impairment of securities -- -- (1,316) (1,316) -- Gains (losses) on sales of securities (373) 75 -- (373) 75 Total non-interest income 6,139 5,774 4,272 10,411 11,282 Non-interest expense Salaries and employee benefits 9,982 8,580 9,674 19,657 17,501 Equipment 1,264 1,307 1,253 2,518 2,607 Occupancy 1,531 1,313 1,539 3,069 2,887 Check and other transaction processing 834 664 758 1,592 1,294 Professional fees 561 504 1,099 1,660 918 Postage, printing and office supplies 707 662 629 1,336 1,304 Marketing 1,029 639 601 1,630 1,130 Communications 328 277 272 600 567 Litigation settlement charge -- -- 800 800 -- Other non-interest expense 929 1,355 849 1,777 2,281 Total non-interest expense 17,165 15,301 17,474 34,639 30,489 Income before income taxes 9,177 7,765 6,672 15,849 15,422 Provision for income taxes 3,031 2,483 2,153 5,183 4,969 Net income $6,146 $5,282 $4,519 $10,666 $10,453 Basic earnings per share $0.42 $0.35 $0.31 $0.73 $0.70 Diluted earnings per share $0.40 $0.34 $0.29 $0.70 $0.67 Weighted average common shares 14,642 14,890 14,726 14,684 14,917 Weighted average diluted shares 15,246 15,542 15,422 15,339 15,593 Tax equivalent net interest income $21,395 $18,709 $20,238 $41,633 $37,364 West Coast Bancorp Consolidated Balance Sheets (Dollars and shares in thousands, June 30, June 30, March 31, unaudited) 2005 2004 2005 Assets: Cash and cash equivalents $78,299 $51,411 $58,968 Investments 231,499 308,688 258,181 Total loans 1,478,331 1,300,684 1,432,446 Allowance for loan losses (19,897) (19,123) (18,997) Loans, net 1,458,434 1,281,561 1,413,449 Other assets 79,095 75,683 75,704 Total assets $1,847,327 $1,717,343 $1,806,302 Liabilities and Stockholders' Equity: Demand $428,825 $366,211 $395,323 Savings and interest bearing demand 761,587 726,171 758,783 Certificates of deposits 373,455 332,380 355,182 Total deposits 1,563,867 1,424,762 1,509,288 Borrowings and subordinated debentures 119,326 140,341 135,142 Other liabilities 12,667 11,906 15,038 Total liabilities 1,695,860 1,577,009 1,659,468 Stockholders' equity 151,467 140,334 146,834 Total liabilities and stockholders' equity $1,847,327 $1,717,343 $1,806,302 Common shares outstanding period end 14,737 14,968 14,775 Book value per common share $10.28 $9.38 $9.94 Tangible book value per common share $10.25 $9.33 $9.91 West Coast Bancorp Period End Loan Portfolio By Category (Dollars in thousands, June 30, June 30, Change March 31, unaudited) 2005 2004 Amount % 2005 Commercial loans $360,872 $271,670 $89,202 33% $357,505 Real estate construction loans 148,487 123,144 25,343 21% 125,959 Real estate mortgage loans 221,735 199,340 22,395 11% 215,580 Real estate commercial loans 714,291 670,372 43,919 7% 698,864 Installment and other consumer loans 32,946 36,158 (3,212) -9% 34,538 Total loans $1,478,331 $1,300,684 $177,647 14% $1,432,446 (Reconciliation to GAAP financial measures)* Total loans excluding real estate commercial loans $764,040 $630,312 $133,728 21% $733,582 Real estate commercial loans 714,291 670,372 43,919 7% 698,864 Total loans $1,478,331 $1,300,684 $177,647 14% $1,432,446 * 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 results in light of its business strategies. West Coast Bancorp Financial Information (Dollars in thousands except for per Second Second First share data, unaudited) Quarter Quarter Quarter (all rates have been annualized where appropriate) 2005 2004 2005 PERFORMANCE RATIOS - Return on average assets 1.34% 1.25% 1.02% - Return on average common equity 16.61% 15.04% 12.38% - Non-interest income to average assets 1.33% 1.36% 0.97% - Non-interest expense to average assets 3.73% 3.62% 3.95% - Efficiency ratio, tax equivalent 61.5% 62.7% 67.7% NET INTEREST MARGIN - Yield on interest-earning assets 6.38% 5.73% 6.12% - Rate on interest-bearing liabilities 1.98% 1.39% 1.73% - Net interest spread 4.40% 4.34% 4.39% - Net interest margin 4.93% 4.68% 4.84% AVERAGE ASSETS - Investment securities $257,743 $310,021 $264,062 - Commercial loans $368,485 $265,072 $352,067 - Real estate construction loans 139,947 122,769 118,194 - Real estate mortgage loans 217,670 191,269 213,969 - Real estate commercial loans 714,201 667,922 702,705 - Installment and other consumer loans 33,162 37,483 35,359 - Total loans $1,473,465 $1,284,515 $1,422,294 - Total interest earning assets $1,741,618 $1,606,929 $1,695,109 - Other assets 103,255 94,940 99,299 - Total assets $1,844,873 $1,701,869 $1,794,408 AVERAGE LIABILITIES & EQUITY - Demand deposits $405,760 $335,647 $378,054 - Interest bearing demand, savings, and money market 766,658 732,928 755,550 - Certificates of deposits 366,109 332,552 347,852 - Total deposits $1,538,527 $1,401,127 $1,481,456 - Borrowings and subordinated debentures $145,039 $147,943 $148,118 - Total interest bearing liabilities $1,277,806 $1,213,423 $1,251,519 - Other liabilities 418,635 347,220 394,847 - Total liabilities $1,696,441 $1,560,643 $1,646,366 - Average common equity 148,432 141,226 148,042 - Total average liabilities and common equity $1,844,873 $1,701,869 $1,794,408 AVERAGE ASSET/LIABILITY RATIOS - Average stockholders' equity to average assets 8.05% 8.30% 8.25% - Average int. earning assets to int. bearing liabilities 136.3% 132.4% 135.4% - Average loans to average assets 79.9% 75.5% 79.3% - Interest bearing deposits to assets 61.4% 62.6% 61.5% (Dollars in thousands except for per Year Year share data, unaudited) to date to date (all rates have been annualized where 2005 2004 appropriate) PERFORMANCE RATIOS - Return on average assets 1.18% 1.25% - Return on average common equity 14.51% 14.92% - Non-interest income to average assets 1.15% 1.35% - Non-interest expense to average assets 3.84% 3.65% - Efficiency ratio, tax equivalent 64.5% 62.8% NET INTEREST MARGIN - Yield on interest-earning assets 6.25% 5.79% - Rate on interest-bearing liabilities 1.85% 1.39% - Net interest spread 4.40% 4.40% - Net interest margin 4.89% 4.73% AVERAGE ASSETS - Investment securities $260,885 $313,881 - Commercial loans $360,321 $255,767 - Real estate construction loans 129,131 120,068 - Real estate mortgage loans 215,829 186,751 - Real estate commercial loans 708,484 661,976 - Installment and other consumer loans 34,255 38,022 - Total loans $1,448,020 $1,262,584 - Total interest earning assets $1,718,492 $1,587,646 - Other assets 101,288 93,527 - Total assets $1,819,780 $1,681,173 AVERAGE LIABILITIES & EQUITY - Demand deposits $391,984 $318,314 - Interest bearing demand, savings, and money market 761,134 733,475 - Certificates of deposits 357,031 330,985 - Total deposits $1,510,149 $1,382,774 - Borrowings and subordinated debentures $146,570 $147,633 - Total interest bearing liabilities $1,264,735 $1,212,093 - Other liabilities 406,807 328,193 - Total liabilities $1,671,542 $1,540,286 - Average common equity 148,238 140,887 - Total average liabilities and common equity $1,819,780 $1,681,173 AVERAGE ASSET/LIABILITY RATIOS - Average stockholders' equity to average assets 8.15% 8.38% - Average int. earning assets to int. bearing liabilities 135.9% 131.0% - Average loans to average assets 79.6% 75.1% - Interest bearing deposits to assets 61.5% 63.3% West Coast Bancorp Allowance For Loan Losses and Net Charge-offs Quarter Quarter Quarter ended ended ended June 30, June 30, March 31, (Dollars in thousands, unaudited) 2005 2004 2005 Allowance for loan losses, beginning of period $18,997 $18,685 $18,971 Provision for loan loss 825 1,000 -- Charge-offs 195 744 195 Recoveries 270 182 221 Net (recoveries) charge-offs (75) 562 (26) Total allowance for loan losses $19,897 $19,123 $18,997 Net loan charge-offs to average loans (annualized) -0.02% 0.18% -0.01% Full year Full year June 30, June 30, (Dollars in thousands, unaudited) 2005 2004 Allowance for loan losses, beginning of period $18,971 $18,131 Provision for loan loss 825 1,900 Charge-offs 389 1,314 Recoveries 490 406 Net Charge-offs (101) 908 Total allowance for loan losses $19,897 $19,123 Net loan charge-offs to average loans (annualized) -0.01% 0.14% West Coast Bancorp Non-performing Assets June 30, June 30, March 31, (Dollars in thousands, unaudited) 2005 2004 2005 Non-accruing loans $1,556 $5,201 $3,695 90 day delinquencies -- -- 301 Total non-performing loans 1,556 5,201 3,996 Other real estate owned 198 1,382 384 Total non-performing assets $1,754 $6,583 $4,380 Allowance for loan losses to total loans 1.35% 1.47% 1.33% Non-performing loans to total loans 0.11% 0.40% 0.28% Allowance for loan losses to non- performing loans 1279% 368% 475% Non-performing assets to total assets 0.09% 0.38% 0.24% Allowance for loan losses to non- performing assets 1134% 290% 434% DATASOURCE: West Coast Bancorp CONTACT: Robert D. Sznewajs, President & CEO, +1-503-598-3243, or Anders Giltvedt, Executive Vice President &CFO, +1-503-598-3250, both of West Coast Bancorp Web site: http://www.wcb.com/

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