WCBO West Coast Bancorp (MM)

- Third quarter loss per diluted share of $.15 included $.27, after-tax, in other than temporary impairment charges. LAKE OSWEGO, Ore., Oct. 21 /PRNewswire-FirstCall/ -- 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. (Dollars in GAAP CORE* thousands, except September 30, September 30, per share data, 2008 2007 Change 2008 2007 Change unaudited) 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." 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. 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. 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. 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. Additional information regarding the two-step loan portfolio (Dollars in thousands, unaudited) Total Nonaccrual Accruing accruing Total two- two-step two-step two-step loan Period ended step loans loans loans commitments 12/31/2007 $262,952 $20,545 $242,407 $320,991 3/31/2008 211,406 88,784 122,622 156,823 6/30/2008 145,703 98,728 46,975 59,603 9/30/2008 97,894 82,990 14,904 16,943 Allowance for credit losses Allowance for on two-step credit losses loans as a % of Allowance for on two-step loans total accruing credit losses as a % of accruing two-step loan Period ended on two-step loans two-step loans commitments 12/31/2007 $31,065 12.8% 9.7% 3/31/2008 11,812 9.6% 7.5% 6/30/2008 5,280 11.2% 8.9% 9/30/2008 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. 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. Risk based capital ratios (Unaudited) 09/30/08 09/30/07 06/30/08 Excess over Well well capitalized capitalized West Coast Bancorp Ratio minimum 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 http://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 http://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 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. 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 Consolidated Statements of Income (Loss) (Unaudited) (Dollars and shares in thousands, Three months ended Nine months ended 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 Consolidated Balance Sheets (Dollars and shares in thousands, Sept. 30 Sept. 30 June 30, 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 % of % of (Dollars in thousands, unaudited) Sept. 30 total Sept. 30 total 2008 loans 2007 loans Commercial loans $498,715 24% $530,196 24% Real estate construction loans (1) 330,833 16% 519,870 24% Real estate mortgage loans 389,553 18% 305,675 14% Commercial real estate loans 867,902 41% 804,200 37% Installment and other consumer loans 22,514 1% 23,360 1% Total loans $2,109,517 100% $2,183,301 100% (1) Two-step residential construction loans $97,894 5% $274,747 13% Total loans other than two-step loans 2,011,623 95% 1,908,554 87% Total loans $2,109,517 100% $2,183,301 100% Change June 30, Change (Dollars in thousands, unaudited) Amount % 2008 % Commercial loans $(31,481) -6% $512,689 -3% Real estate construction loans 1 (189,037) -36% 392,724 -16% Real estate mortgage loans 83,878 27% 377,771 3% Commercial real estate loans 63,702 8% 847,430 2% Installment and other consumer loans (846) -4% 23,102 -3% Total loans $(73,784) -3% $2,153,716 -2% (1) Two-step residential construction loans $(176,853) -64% $145,703 -33% Total loans other than two-step loans 103,069 5% 2,008,013 0% Total loans $(73,784) -3% $2,153,716 -2% 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 For the nine months ended months ended Sept. 30, 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 reconciliation(1) For the three months For the nine months (Dollars in thousands, ended Sept. 30, ended Sept. 30, 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. Table 3 West Coast Bancorp Financial Information (Dollars in thousands except for per share data, unaudited) Third Third Second (all rates have been annualized where Quarter Quarter Quarter appropriate) 2008 2007 2008 PERFORMANCE RATIOS - Return on average assets -0.36% 1.29% 0.41% - Return on average common equity -4.47% 15.33% 5.19% - Return on average tangible equity -4.66% 16.60% 5.69% - Non-interest income to average assets 0.17% 1.26% 1.39% - Non-interest expense to average assets 3.45% 3.49% 3.60% - Efficiency ratio, tax equivalent 70.4% 58.7% 70.7% NET INTEREST MARGIN - Yield on average interest-earning assets 5.85% 7.87% 5.91% - Rate on average interest-bearing liabilities 2.36% 3.86% 2.52% - Net interest spread 3.49% 4.01% 3.39% - Net interest margin 4.02% 4.94% 3.94% AVERAGE ASSETS - Investment securities $228,382 $257,771 $233,156 - Commercial loans 502,781 516,634 527,781 - Real estate construction loans 371,687 507,613 432,398 - Real estate mortgage loans 383,214 300,114 366,997 - Commercial real estate loans 851,849 798,940 834,069 - Installment and other consumer loans 23,220 23,799 24,367 - Total loans 2,132,751 2,147,100 2,185,612 - Total interest earning assets 2,393,207 2,426,360 2,465,147 - Other assets 170,466 143,180 144,807 - Total assets $2,563,673 $2,569,540 $2,609,954 AVERAGE LIABILITIES & EQUITY - Demand deposits $482,780 $490,336 $467,664 - Savings and Interest bearing demand 348,008 341,496 357,664 - Money market 672,051 680,027 662,962 - Time deposits 543,451 565,550 558,087 - Total deposits 2,046,290 2,077,409 2,046,377 - Borrowings and subordinated debentures 300,258 252,314 341,578 - Total interest bearing liabilities 1,863,768 1,839,387 1,920,292 - Other liabilities 493,545 514,603 481,791 - Total liabilities 2,357,313 2,353,990 2,402,083 - Common equity 206,360 215,550 207,871 - Total average liabilities and common equity $2,563,673 $2,569,540 $2,609,954 AVERAGE ASSET/LIABILITY RATIOS - Stockholders' equity to total assets 8.05% 8.39% 7.96% - Interest earning assets to interest bearing liabilities 128.4% 131.9% 128.4% - Total loans to total assets 83.2% 83.6% 83.7% - Interest bearing deposits to total assets 61.0% 61.8% 60.5% (Dollars in thousands except for per share data, unaudited) (all rates have been annualized where Year to date Year to date appropriate) 2008 2007 PERFORMANCE RATIOS - Return on average assets 0.12% 1.29% - Return on average common equity 1.52% 15.50% - Return on average tangible equity 1.78% 16.87% - Non-interest income to average assets 1.05% 1.32% - Non-interest expense to average assets 3.50% 3.47% - Efficiency ratio, tax equivalent 69.0% 57.9% NET INTEREST MARGIN - Yield on average interest-earning assets 6.03% 7.83% - Rate on average interest-bearing liabilities 2.67% 3.79% - Net interest spread 3.36% 4.04% - Net interest margin 3.96% 4.94% AVERAGE ASSETS - Investment securities $238,732 $278,468 - Commercial loans 513,005 495,833 - Real estate construction loans 434,950 460,861 - Real estate mortgage loans 364,245 290,915 - Commercial real estate loans 828,841 796,294 - Installment and other consumer loans 23,941 25,172 - Total loans 2,164,982 2,069,075 - Total interest earning assets 2,440,704 2,370,055 - Other assets 149,321 143,374 - Total assets $2,590,025 $2,513,429 AVERAGE LIABILITIES & EQUITY - Demand deposits $471,552 $474,828 - Savings and Interest bearing demand 354,862 273,383 - Money market 665,863 661,037 - Time deposits 560,170 547,622 - Total deposits 2,052,447 1,956,870 - Borrowings and subordinated debentures 308,960 250,011 - Total interest bearing liabilities 1,889,854 1,804,853 - Other liabilities 491,699 498,768 - Total liabilities 2,381,553 2,303,621 - Common equity 208,472 209,808 - Total average liabilities and common equity $2,590,025 $2,513,429 AVERAGE ASSET/LIABILITY RATIOS - Stockholders' equity to total assets 8.05% 8.35% - Interest earning assets to interest bearing liabilities 129.1% 131.3% - Total loans to total assets 83.6% 82.3% - Interest bearing deposits to total assets 61.0% 59.0% 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 Quarter Quarter ended ended 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% 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% 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% 5.60% 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% 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 (Dollars in ended Number ended Number ended Number thousands, Sept. 30, of Sept. 30, of June 30, of unaudited) 2008 properties 2007 properties 2008 properties Beginning balance $27,892 108 $- 1 $5,688 24 Additions to OREO(1) 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 (Dollars in ended Number ended Number ended Number thousands, Sept. 30, of Sept. 30, of June 30, of unaudited) 2008 properties 2007 properties 2008 properties Beginning balance $26,460 101 $- - $5,688 23 Additions to OREO(1) 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 (Dollars in ended Number ended Number ended Number thousands, Sept. 30, of Sept. 30, of June 30, of unaudited) 2008 properties 2007 properties 2008 properties Beginning balance $1,432 7 $- 1 $- 1 Additions to OREO(1) 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. 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 Quarter Quarter ended ended 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 loans(1) 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% 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% 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 Quarter Quarter ended ended 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% 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% 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, September 30, September 30, June 30, unaudited) 2008 2007 2008 Amount Percent Amount Percent Amount Percent Land loans(1) $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 loans(1) $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 loans(1) $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 loans(1) $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. 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, September 30, September 30, June 30, unaudited) 2008 2007 2008 Percent Percent Percent of loan of loan of loan Amount category(2) Amount category Amount category(2) Land loans(1) $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 loans(1) $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 loans(1) - 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 loans(1) $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. 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, September 30, September 30, June 30, unaudited) 2008 2007 2008 Percent Percent Percent of loan of loan of loan Amount category(2) Amount category Amount category(2) Land loans(1) $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 loans(1) $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 loans(1) $- 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 loans(1) $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. 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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