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Encore Bancshares Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 6, 2009 07:08PM
Encore Bancshares Inc. (EBTX) filed Quarterly Report for the period ended 2009-03-31.
Highlight of Business Operations:
Encore Bancshares, Inc. is a bank holding company and wealth management organization that provides banking, investment management, financial planning and insurance services to professional firms, privately-owned businesses, investors and affluent individuals. We are headquartered in Houston, Texas and currently manage, through our primary subsidiary, Encore Bank, National Association (Encore Bank), eleven private client offices in the greater Houston market and six private client offices in southwest Florida. We also operate five wealth management offices and three insurance offices in Texas. As of March 31, 2009, we reported, on a consolidated basis, total assets of $1.6 billion, total loans of $1.2 billion, total deposits of $1.1 billion, shareholders equity of $187.6 million and $2.1 billion in assets under management.
Net earnings for the quarter ended March 31, 2009 were $1.1 million, or $0.05 per diluted common share, compared with $1.2 million, or $0.11 per diluted common share, for the quarter ended March 31, 2008. The decrease in diluted earnings per share was due to the accrual of dividends on preferred stock which was issued in the fourth quarter of 2008. Results for the first quarter of 2009 include an improvement in net interest income on a fully taxable-equivalent basis (TE) of $1.7 million, or 16.8%, and a decrease in expenses of $807,000 due primarily to lower compensation expenses and professional fees. Offsetting these improvements were a $1.5 million increase in the provision for loan losses and lower noninterest income resulting from lower trust and investment management fees.
Net interest income (TE) was $11.5 million for the three months ended March 31, 2009, an increase of $1.7 million, or 16.8%, compared with the first quarter of 2008. Average earning assets grew $140.9 million, or 10.4%, due primarily to growth in loans. The net interest margin (TE) expanded 19 basis points to 3.13% for the same comparison period, due in part to the falling rate environment as the yield on the loan portfolio fell less than the cost of deposits. In addition, average noninterest-bearing deposits were $140.8 million for the first quarter of 2009, a $33.9 million, or 31.7%, increase compared with the same period of 2008.
Noninterest income decreased $840,000, or 12.6%, to $5.8 million for the three months ended March 31, 2009, compared with the same period in 2008. The decrease was due primarily to lower trust and investment management fees, which declined $658,000, or 14.9%, to $3.7 million. The decline in trust and investment management fees was due primarily to a 21.9% decrease in assets under management due to the sharp drop in equity markets. In addition, real estate operations, which includes repossessed property, declined $300,000 compared with the first quarter of 2008 due primarily to taxes and legal fees.
Noninterest expense was $12.5 million, a decrease of $807,000, or 6.1%, compared with the first quarter of 2008. Noninterest expense in the first quarter of 2008 included $415,000 of legal fees related to an arbitration matter and a severance charge (included in compensation) of $635,000. Other noninterest expense includes $52,000 in FDIC insurance assessments, net of the FDIC credit recognized, in the first quarter of 2009. This amount gives effect to the increased FDIC assessment rates effective January 2009. Excluding the credit from the FDIC, the assessment would have been $224,000. We expect this credit to run out later in 2009. In addition to regular assessments, the FDIC has proposed a special assessment of 20 basis points based on deposits as of June 30, 2009 and payable on September 30, 2009. This special assessment could be lowered to 10 basis points if the FDICs borrowing authority is increased pursuant to legislation which was recently introduced in Congress. Further, the special assessment could drop below 10 basis points if the recently proposed surcharge on longer-term guaranteed debt issued under the FDICs Temporary Liquidity Guarantee Program is approved.
The provision for income taxes was $654,000 for the three months ended March 31, 2009, compared with $608,000 for the same three months of 2008. The effective tax rate for the three months ended March 31, 2009 and 2008 was 36.6% and 34.2%.