West Coast Bancorp Reports Fourth Quarter Provision Charge
08 Januar 2008 - 11:39PM
PR Newswire (US)
- The Company's Earnings Will Be in the $16.4 Million to $17.0
Million Range for 2007 LAKE OSWEGO, Ore., Jan. 8
/PRNewswire-FirstCall/ -- West Coast Bancorp (the "Company")
(NASDAQ:WCBO) announced that it will record a fourth quarter 2007
provision for credit losses of $30.0 million (pre-tax), of which
$27.8 million will be associated with expected losses within the
Company's two-step residential construction loan portfolio. After
taking into account the provision for credit losses, the Company
expects a loss per diluted share for fourth quarter 2007 in the
range of ($.46) to ($.50) and earnings per diluted share for full
year 2007 in the range of $1.02 to $1.06. The provision associated
with the two-step portfolio represents approximately $1.10 per
diluted share in the fourth quarter of 2007. West Coast Bank's (the
"Bank's") total capital ratio will be approximately 10.50% at
December 31, 2007, or well capitalized according to regulatory
guidelines, compared to 10.23% at year end 2006 and 10.57% at
September 30, 2007. At December 31, 2007, outstanding loan balances
in the two-step loan portfolio were $263 million and unused
commitments for the portfolio totaled $79 million, compared to $275
million and $123 million, respectively, at September 30, 2007. The
allowance for credit losses associated with the two-step portfolio
was $5.2 million at September 30, 2007. Given $1.9 million in net
charge-offs in the two-step portfolio during the fourth quarter and
the provision for credit losses noted above, the allowance for
credit losses in the two-step portfolio will be $31.1 million at
year end 2007. The Company will record actual future charge-offs in
the two-step portfolio against the allowance for credit losses
associated with the portfolio. Nonperforming assets associated with
the two-step portfolio were $23.8 million at December 31, 2007.
"The fourth quarter provision for credit losses associated with our
two- step portfolio reflects expected losses in the portfolio
associated with dramatic slowing of the residential real estate
market in our market areas and the significant tightening in
underwriting standards for, and resulting decreased availability
of, permanent take-out financing. Taken together, these factors
have led to a rapid increase in delinquencies and non-performing
assets within the two-step loan portfolio since August 2007,"
Robert D. Sznewajs, President & Chief Executive Officer said.
"While the Company took steps to strengthen the underwriting of
two-step residential construction loans in the second and third
quarters of 2007, the original underwriting criteria did not
sufficiently anticipate the sudden and dramatic shift in market
conditions. While results for the quarter are disappointing, we do
not believe the fourth quarter two-step provision for credit losses
is indicative of any broader credit concerns within the remainder
of our loan portfolio. The Company's balance sheet is strong, our
bank remains well capitalized under regulatory guidelines, and we
expect to achieve solid net income growth in 2008 over 2007." The
Company's total allowance for credit losses will be $54.9 million
at December 31, 2007, following net charge-offs of $3.6 million in
the fourth quarter and after taking into account the planned
provision for credit losses of $30.0 million. Total nonperforming
assets for the Company were $29.7 million at year end 2007. The
fourth quarter provision for credit losses in the two-step
portfolio reflects the Company's current assessment of the
anticipated losses within the portfolio. The Company expects the
fourth quarter provision for credit losses and the resulting year
end allowance for credit losses to be adequate to cover the
anticipated losses in this portfolio based on information currently
available to it. However, given the current volatility in the
permanent residential mortgage market and uncertainty regarding
residential real estate values within our markets, there can be no
assurance that the reserve will be sufficient. The two-step
residential construction loan program was discontinued on October
19, 2007. Under the two-step program, the Bank made loans to
individual borrowers wishing to finance construction of residential
properties. The program was referred to as the "two-step" program
because each project involved a two-step financing process --
initial construction financing that was provided by the Bank and
secondary, or "take-out," financing typically provided by third
parties. The program began in the first quarter of 2002, but
activity in the program did not accelerate significantly until
early 2005. Since the third quarter of 2007 management actions
regarding the two-step program have focused on the following key
areas: -- Increasing customer contact prior to loan maturity to
encourage early action to secure permanent financing or identify
alternatives; -- Identifying higher risk segments within the
portfolio and developing risk mitigation strategies; -- Adding
resources to assist with collection efforts and the management and
sale of Other Real Estate Owned, or OREO, property; and --
Developing additional non-standard, permanent mortgage products for
two-step program borrowers who qualify; at year end approximately
15 borrowers had used these products. The Company's objective is to
transition two-step program borrowers into permanent mortgages with
the Bank or a third party and to proactively manage each problem
loan to minimize loss exposure while supporting borrowers in their
efforts to retain their properties. The Company has scheduled its
regular earnings conference call on Wednesday, January 16th, 2008,
at 8:30 a.m. PST. In addition to discussing the results for the
fourth quarter 2007 and providing management's current expectations
for 2008 during the call, the Company will review and respond to
questions regarding the two-step loan portfolio. 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, operating 63 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 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.
Examples of forward-looking statements in this release include
projections of the Company's earnings or losses and future trends
with respect to the Company's provision for credit losses and non-
performing assets. Actual results could be quite different from
those expressed or implied by the forward-looking statements.
Forward-looking statements speak only as of the date they are made,
and the Company does not undertake any obligation to update them to
reflect changes that occur after that date. Do not unduly rely on
forward-looking statements. A number of factors could cause results
to differ significantly from the Company's current expectations,
including, among others, a downturn in the economy, a specific
industry sector, or the real estate market in the Company's market
areas, a rapid change in interest rates, decreases in the value of
real estate that serves as collateral for many loans, an inability
of borrowers in the two-step program to find permanent financing or
sell their homes, and other factors identified in the Company's
Annual Report on Form 10-K for the year ended December 31, 2006,
including under the heading "Forward Looking Statement Disclosure"
and in Item IA. Risk Factors, as updated in the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 2007.
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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