Western Liberty Bancorp, Inc. (Nasdaq:WLBC), the holding company
for Service1st Bank of Nevada (Service1st Bank), today reported it
lost $6.9 million, or $0.46 per share in the third quarter ended
September 30, 2011, following a non-cash charge of $5.6 million for
goodwill impairment and a $1.7 million provision for loan losses,
partially offset by the $1.8 million reduction in the fair value of
the contingent consideration liability related to the
Service1st acquisition. For the first nine months of 2011, the
net loss totaled $11.9 million, or $0.79 per share, which includes
a $7.4 million provision for loan losses as well as the goodwill
impairment charge and the contingent consideration liability
reduction.
In the second quarter of 2011, Western Liberty recorded a loss
of $4.6 million, or $0.30 per share, with a $4.3 million provision
for loan losses and a loss of $409,000, or $0.03 per share in the
first quarter of 2011, when Western Liberty's provision was $1.4
million. For the year ago periods, Western Liberty was solely a
shell company. Therefore, comparisons for financial results in the
third quarter and first nine months of 2010 generally are not
meaningful, because before the acquisition of Service1st Bank on
October 28, 2010, Western Liberty had no operating entity.
"Despite the accounting requirements that generated significant
non cash entries on our income statement, our balance sheet and
capital levels are exceptionally strong. In addition, the
share repurchase program implemented this last quarter supported
our tangible book value," said William Martin, Chief Executive
Officer. "With our extremely strong capital levels, we
repurchased 639,413 shares during the third quarter and completed
the program with total shares repurchased of 754,400 as of November
1, 2011, at an average cost of $2.63 per share. We believe
share repurchases are an excellent use of capital at this
time."
"We continue to see the impact of the recession on our asset
quality this year," said George Rosenbaum, Chief Financial
Officer. "Nonaccrual loans increased to $18.9 million, of
which $10.7 million are loans that have been modified or
restructured. During the year, these troubled debt
restructured (TDR) loans were written down to $10.7 million from
$14.5 million. As a result of the decline in asset quality, we are
increasing our reserve for loan losses, which was eliminated last
year under fair value accounting standards during the merger, as a
result of downgrades to purchased loans, as well as for new loan
originations. Consequently, the allowance for loans losses is
now 2.95% of total portfolio loans."
Financial Highlights (at or for the quarter
ended September 30, 2011)
- Service1st Bank has exceptionally strong capital ratios with
Tier 1 Capital/risk-weighted assets of 28.4%.
- Western Liberty also has exceptionally strong capital with Tier
1 Capital/risk-weighted assets of 73.6%.
- Tangible book value increased to $5.54 per share, based on
14,448,610 shares outstanding.
- Total cash and cash equivalents held by Western Liberty was
$95.0 million, of which $49.4 million is at the holding company
level.
- Noninterest bearing deposits accounted for 42% of total
deposits and core deposits (excluding time certificates over
$100,000) and were 74% of total deposits.
- Repurchased 639,413 shares at an average cost of $2.65 as of
September 30, 2011.
Nevada Economic Update
"Although U.S. economic growth was weak in the first half of
2011, the Las Vegas tourism, hospitality and gaming sector is
showing a number of indications that it is in recovery," said
Stephen P. A. Brown, PhD, Director, Center for Business and
Economic Research at the University of Nevada, Las Vegas in his
September 8th Economic Outlook. "Other aspects of the Las
Vegas economy, including overall employment and housing,
construction and real estate, are mostly showing weakened economic
conditions.
"Perhaps more than ever, the fortunes of the Las Vegas economy
are tied to overall economic conditions in the United States,"
Brown continued. "With a recovery in the Las Vegas area, real
estate and construction industries are probably still several years
into the future; the near-term outlook for the Las Vegas economy
remains heavily dependent on tourism. Fortunately, the Las Vegas
hospitality and leisure industry has done well in the first half of
2011. A strengthening in national economic activity during the
second half of the year could boost tourism, hospitality and gaming
portions of the Las Vegas economy during the second half of 2011
and into 2012." Additional reports on the Nevada economy can
be found on the CBER website, which can be found at
http://cber.unlv.edu. Sources: Nevada
economy http://business.unlv.edu/wp-content/uploads/2011/06/CBERonLasVegasEconomy-9-8-11.pdf
Balance Sheet Review
Western Liberty had $206.1 million in total assets
at September 30, 2011, down from $223.3 million at June 30,
2011. Total loans were $101.8 million at September 30, 2011,
compared to $101.5 million June 30, 2011. Commercial real
estate loans accounted for 51% and commercial loans comprised 41%
of the loan portfolio. Construction and land development loans
accounted for 4% and residential real estate loans were 5% of total
loans at the end of September. Of the total loan portfolio,
59% is secured by real estate and 42% of the commercial real estate
loan portfolio is owner occupied. The majority, or
57%, of the loan portfolio is adjustable rate
loans, with most of these loans indexed to the national prime rate
and have interest rate minimums that are above the current prime
rate index.
Western Liberty had $124.8 million in total
deposits, with 42% in non-interest bearing demand
accounts. Deposits declined from $131.6 million June 30, 2011
with small decreases in each category. "Our core deposit base
continues to be almost completely local deposits with no brokered
or internet funding in the mix," said Martin.
"We had two independent balance sheet adjustments,
one asset and one liability, that significantly impacted the income
statement this quarter," said Rosenbaum. "In accordance with the
accounting standards, we established October 31 as our annual
impairment testing date, but we monitor the goodwill asset carried
on our balance sheet on a regular basis to determine if there are
any adverse conditions that would require us to complete our
impairment test at an earlier date. Based on the current economic
climate, our overall performance, and the market value of our
shares, we determined that it was appropriate to complete the
impairment testing in the third quarter, which resulted in writing
down the value of the goodwill asset to zero. This write-down
generated a non-cash operating expense of $5.6 million in the third
quarter.
"When we completed the merger of Service1st with
Western Liberty, we provided for a potential future benefit for the
original Service1st shareholders, which was carried at fair value
on our balance sheet as a contingent liability, Rosenbaum
continued. "Given numerous negative factors in the local
economy, our overall performance and our stock trading
significantly below book value, we determined that it was unlikely
that our stock price will recover enough to trigger this
benefit. Consequently, the fair value of this liability was
reversed to zero. We will continue to evaluate this liability
quarterly, until it expires in October of 2012, and record the
appropriate fair value adjustment, if necessary. This reduction on
the liability side of the balance sheet generated a non-cash
benefit of $1.8 million in non-interest income in the third
quarter."
Total shares outstanding were 14.4 million at quarter end
reflecting the recent share repurchase program and were 14.3
million once the share buyback was completed this
month. Shareholders' equity was $80.7 million at the end of
September compared to $89.1 million at the end of June.
Asset Quality
Nonperforming assets totaled $23.0 million, or
11.2% of total assets at September 30, 2011, compared to $14.1
million, or 6.3% of total assets at June 30, 2011. Loans
measured for impairment, which include nonperforming loans as well
as loans that continue to perform but have some identified
weakness, totaled $24.2 million, or 24% of the loan portfolio.
Activity in the allowance for loan losses was as follows:
($ in 000's) |
Commercial |
Commercial Real Estate |
Residential Real Estate |
Consumer |
Construction, Land Development, Other
Land |
Total |
Nine months ended |
|
|
|
|
|
|
Beginning balance, December 31, 2010
|
$ 36 |
$ -- |
$ -- |
$ -- |
$ -- |
$ 36 |
Provision for loan losses |
3,155 |
3,651 |
5 |
-- |
619 |
7,430 |
Recoveries |
225 |
-- |
4 |
-- |
-- |
229 |
Loan charge-offs |
(1,809) |
(2,412) |
-- |
-- |
(469) |
(4,690) |
Balance, September 30, 2011 |
$ 1,607 |
$ 1,239 |
$ 9 |
$ -- |
$ 150 |
$ 3,005 |
Review of Operations
In the third quarter, net interest income, before
the provision for loan losses, was $1.5 million, compared to $2.0
million in the second quarter of the year. Net interest income was
impacted by a reduction of discount accretion as a result of lower
payoffs in the third quarter. Discount accretion contributed
$331,000 to interest income in the third quarter of 2011 compared
to $552,000 in the second quarter of 2011. For the first nine
months of 2011, net interest income before the provision for loan
losses, totaled $7.2 million, of which $3.1 million was attributed
to the discount accretion.
The provision for loan losses totaled $1.7 million
in the third quarter compared to $4.3 million in the second quarter
of 2011, bringing the year to date provision to $7.4 million.
During the third quarter other operating income was
$2.0 million, including the $1.8 million in contingent
consideration liability reduction.
Non-interest expense was $8.6 million in the third
quarter, including the $5.6 million goodwill impairment
charge. In addition, the bank recorded a $686,000 impairment
on its other real estate owned excluding the non-cash charges
associated with the goodwill and OREO impairments which totaled
$6.3 million, third quarter operating expenses declined to $2.3
million compared to $2.4 million in the second quarter and $2.9
million in the first quarter. Lower legal and professional
fees were the primary driver of operating cost
reductions.
About Western Liberty Bancorp
Western Liberty Bancorp is a Nevada bank holding
company which conducts operations through Service1st Bank of
Nevada, its wholly owned banking subsidiary. Service1st Bank
operates as a traditional community bank and provides a full range
of deposit, lending and other banking services to locally-owned
businesses, professional firms, individuals and other customers
from its headquarters and two retail banking facilities located in
the greater Las Vegas area. Services provided include: basic
commercial and consumer depository services, commercial working
capital and equipment loans, commercial real estate loans, and
other traditional commercial banking services. Primarily all of the
bank's business is generated in the Nevada market.
www.wlbancorp.com
FORWARD LOOKING STATEMENTS
This release may contain "forward-looking statements" that are
subject to risks and uncertainties. Readers should not place undue
reliance on forward-looking statements, which reflect management's
views only as of the date hereof. All statements, other than
statements of historical fact, regarding our financial position,
business strategy and management's plans and objectives for future
operations are forward-looking statements. When used in this
report, the words "anticipate," "believe," "estimate," "expect,"
and "intend" and words or phrases of similar meaning, as they
relate to Western Liberty or management, are intended to help
identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Although we
believe that management's expectations as reflected in
forward-looking statements are reasonable, we cannot assure readers
that those expectations will prove to be
correct. Forward-looking statements are subject to various
risks and uncertainties that may cause our actual results to differ
materially and adversely from our expectations as indicated in the
forward-looking statements. These risks and uncertainties
include our ability to maintain or expand our market share or net
interest margins, and to implement our marketing and growth
strategies. Further, actual results may be affected by our
ability to compete on price and other factors with other financial
institutions; customer acceptance of new products and services; the
regulatory environment in which we operate; and general trends in
the local, regional and national banking industry and economy as
those factors relate to our cost of funds and return on
assets. In addition, there are risks inherent in the banking
industry relating to collectability of loans and changes in
interest rates. Many of these risks, as well as other risks
that may have a material adverse impact on our operations and
business, are identified in our other filings with the
SEC. However, you should be aware that these factors are not
an exhaustive list, and you should not assume these are the only
factors that may cause our actual results to differ from our
expectations.
Selected Consolidated Financial
Highlights |
|
|
|
|
(Dollars in thousands, except per share
data) |
September 30, |
June 30, |
March 31, |
December 31, |
(Unaudited) |
2011 |
2011 |
2011 |
2010 |
Per Share data: |
|
|
|
|
Book Value |
$ 5.58 |
$ 5.91 |
$ 6.21 |
$ 6.22 |
Tangible Book Value |
$ 5.54 |
$ 5.48 |
$ 5.78 |
$ 5.79 |
|
|
|
|
|
Selected Balance Sheet
Data: |
|
|
|
|
Total Assets |
$ 206,140 |
$ 223,343 |
$ 228,791 |
$ 257,546 |
Cash and cash equivalents |
95,004 |
103,426 |
90,443 |
103,227 |
Gross loans, including net deferred loan
costs |
101,776 |
101,533 |
102,207 |
106,259 |
Allowance for loan losses |
3,005 |
4,404 |
1,290 |
36 |
Deposits |
124,783 |
131,585 |
131,813 |
160,286 |
Stockholders' equity |
80,673 |
89,099 |
93,558 |
93,829 |
|
|
|
|
|
Asset Quality: |
|
|
|
|
Nonperforming loans |
$ 18,902 |
$ 9,650 |
$ 4,665 |
$ 10,426 |
Other Real Estate Owned |
4,119 |
4,440 |
5,444 |
3,406 |
Nonperforming assets |
$ 23,021 |
$ 14,090 |
$ 10,109 |
$ 13,832 |
Allowance for loan losses as a percentage of
nonperforming loans |
15.90% |
45.64% |
27.65% |
0.35% |
Allowance for loan losses as a percentage of
portfolio loans |
2.95% |
4.34% |
1.26% |
0.03% |
Nonperforming loans as a percentage of total
portfolio loans |
18.57% |
9.50% |
4.56% |
9.81% |
Nonperforming assets as a percentage of total
assets |
11.17% |
6.31% |
4.42% |
5.37% |
Net charge-offs to average portfolio
loans |
4.53% |
1.33% |
0.11% |
0.00% |
|
|
|
|
|
Capital Ratios: |
|
|
|
|
Tier 1 equity to average assets |
28.40% |
31.40% |
33.00% |
30.50% |
Tier 1 Risk-Based Capital ratio |
73.60% |
70.10% |
70.60% |
68.40% |
Total Risk-Based Capital ratio |
74.80% |
71.30% |
71.70% |
68.80% |
|
|
|
|
|
|
|
|
|
|
Consolidated Balance
Sheet |
|
|
|
|
(Dollars in thousands, except per share
data) |
|
|
|
|
(Unaudited) |
September 30, |
June 30, |
March 31, |
December 31, |
|
2011 |
2011 |
2011 |
2010 |
|
|
|
|
|
Assets: |
|
|
|
|
Cash and due from banks |
$ 4,815 |
$ 7,163 |
$ 8,749 |
$ 11,675 |
Money market funds |
100 |
51,308 |
52,206 |
52,206 |
Interest-bearing deposits in banks |
90,089 |
44,955 |
29,488 |
39,346 |
Cash and cash equivalents |
95,004 |
103,426 |
90,443 |
103,227 |
|
|
|
|
|
Certificates of deposits |
246 |
4,195 |
16,784 |
26,889 |
Securities, available for sale |
773 |
824 |
1,345 |
1,819 |
Securities, held to maturity |
3,631 |
3,692 |
3,737 |
5,314 |
Loans: |
|
|
|
|
Construction, land development and other
land |
3,582 |
4,107 |
4,619 |
5,923 |
Commercial real estate |
52,058 |
54,306 |
53,416 |
54,975 |
Residential real estate |
4,674 |
4,704 |
3,980 |
9,247 |
Commercial and industrial |
41,373 |
38,279 |
40,041 |
35,946 |
Consumer |
69 |
102 |
131 |
131 |
Plus: net deferred loan costs |
20 |
35 |
20 |
37 |
Total loans |
101,776 |
101,533 |
102,207 |
106,259 |
Less: allowance for loan losses |
(3,005) |
(4,404) |
(1,290) |
(36) |
Net loans |
98,771 |
97,129 |
100,917 |
106,223 |
Premises and equipment, net |
927 |
1,013 |
1,120 |
1,228 |
Other real estate owned, net |
4,119 |
4,440 |
5,444 |
3,406 |
Goodwill, net |
-- |
5,633 |
5,633 |
5,633 |
Other intangibles, net |
695 |
719 |
744 |
768 |
Accrued interest receivable and other
assets |
1,974 |
2,272 |
2,624 |
3,039 |
Total assets |
$ 206,140 |
$ 223,343 |
$ 228,791 |
$ 257,546 |
|
|
|
|
|
Liabilities: |
|
|
|
|
Demand deposits, noninterest bearing |
$ 52,770 |
$ 54,576 |
$ 51,847 |
$ 67,087 |
NOW and money market |
32,301 |
34,056 |
39,721 |
56,509 |
Savings deposits |
599 |
925 |
1,031 |
1,273 |
Time deposits $100,000 or more |
31,926 |
35,059 |
33,335 |
30,498 |
Other time deposits |
7,187 |
6,969 |
5,879 |
4,919 |
Total deposits |
124,783 |
131,585 |
131,813 |
160,286 |
Contingent consideration |
-- |
1,816 |
1,816 |
1,816 |
Accrued interest and other
liabilities |
684 |
843 |
1,604 |
1,615 |
Total liabilities |
125,467 |
134,244 |
135,233 |
163,717 |
|
|
|
|
|
Shareholders' Equity: |
|
|
|
|
Common stock |
1 |
1 |
1 |
1 |
Additional paid-in capital |
117,728 |
117,597 |
117,458 |
117,317 |
Accumulated deficit |
(35,361) |
(28,494) |
(23,898) |
(23,489) |
Treasury stock |
(1,696) |
-- |
-- |
-- |
Accumulated other comprehensive
gain/(loss), net |
1 |
(5) |
(3) |
-- |
Total shareholders' equity |
80,673 |
89,099 |
93,558 |
93,829 |
Total liabilities and stockholders'
equity |
$ 206,140 |
$ 223,343 |
$ 228,791 |
$ 257,546 |
|
|
|
|
|
|
|
|
|
|
Consolidated Income
Statement |
|
|
|
|
(Dollars in thousands, except per share
data) |
Three Months
Ended |
Nine Months Ended |
(Unaudited) |
September 30, |
June 30, |
March 31, |
September 30, |
|
2011 |
2011 |
2011 |
2011 |
Interest Income: |
|
|
|
|
Interest and fees on loans |
$ 1,587 |
$ 2,018 |
$ 3,782 |
$ 7,387 |
Interest on securities, taxable and
other |
60 |
68 |
66 |
194 |
Total interest and
dividend income |
1,647 |
2,086 |
3,848 |
7,581 |
Interest Expense: |
|
|
|
|
Interest expense on deposits |
123 |
127 |
112 |
362 |
Net interest income |
1,524 |
1,959 |
3,736 |
7,219 |
Provision for loan losses |
1,718 |
4,348 |
1,364 |
7,430 |
Net interest income (loss) after
provision for loan losses |
(194) |
(2,389) |
2,372 |
(211) |
|
|
|
|
|
Other Operating Income: |
|
|
|
|
Service charges |
77 |
78 |
78 |
233 |
Gain on sale of Oreo |
-- |
-- |
-- |
34 |
Contingent consideration recovery |
1,816 |
-- |
-- |
1,816 |
Other |
84 |
114 |
43 |
207 |
Total other operating income |
1,977 |
192 |
121 |
2,290 |
|
|
|
|
|
Other Operating Expense: |
|
|
|
|
Salaries and employee benefits |
823 |
765 |
793 |
2,381 |
Occupancy, equipment and
depreciation |
365 |
374 |
374 |
1,113 |
Computer service charges |
71 |
74 |
77 |
222 |
Federal deposit insurance |
111 |
129 |
152 |
392 |
Legal and professional fees |
341 |
520 |
936 |
1,796 |
Advertising and business development |
17 |
48 |
20 |
85 |
Insurance |
73 |
67 |
71 |
211 |
Telephone |
19 |
17 |
26 |
62 |
Printing and supplies |
30 |
87 |
142 |
259 |
Director fees |
51 |
49 |
49 |
149 |
Stock-based compensation |
131 |
138 |
141 |
411 |
Provision for unfunded commitments |
48 |
(203) |
(133) |
(288) |
Oreo property impairment |
686 |
-- |
-- |
686 |
Goodwill impairment |
5,633 |
-- |
-- |
5,633 |
Other |
251 |
334 |
254 |
839 |
Total other operating expense |
8,650 |
2,399 |
2,902 |
13,951 |
Net loss |
$ (6,867) |
$ (4,596) |
$ (409) |
$ (11,872) |
|
|
|
|
|
Basic EPS |
$ (0.46) |
$ (0.30) |
$ (0.03) |
$ (0.79) |
Diluted EPS |
$ (0.46) |
$ (0.30) |
$ (0.03) |
$ (0.79) |
Average basic shares |
15,058,383 |
15,088,023 |
15,088,023 |
15,078,143 |
Average diluted shares |
15,058,383 |
15,088,023 |
15,088,023 |
15,078,143 |
CONTACT: George Rosenbaum, Chief Financial Officer
(702) 966-7400
Western Liberty Bancorp (MM) (NASDAQ:WLBC)
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