Wilshire Bancorp, Inc (WIBC)

[Enterprising Investor]

WIBC Reports Net Income of $38.5 Million or $0.54 Earnings Per Share for Third Quarter 2012 (10/22/12)

LOS ANGELES, Oct. 22, 2012 (GLOBE NEWSWIRE) -- Wilshire Bancorp, Inc. (Nasdaq:WIBC) ('the Company"), the holding company for Wilshire State Bank ("the Bank"), today reported net income available to common shareholders of $38.5 million, or $0.54 per diluted common share, for the quarter ended September 30, 2012. This compares to net income available to common shareholders of $10.2 million, or $0.14 per common share, for the same period of the prior year, and net income available to common shareholders of $22.1 million, or $0.31 per common share, for the second quarter of 2012. The increase in net income for the third quarter of 2012 is primarily attributable to a $12.0 million negative provision for losses on loans and a $12.6 million tax benefit that resulted from the reversal of the deferred tax asset valuation allowance.

Jae Whan (J.W.) Yoo, President and CEO of Wilshire Bancorp, said, "Our third quarter results represent the highest level of net income and earnings per share in our history. We believe that the Company continues to exhibit positive trends, including solid loan growth, an improving deposit mix, an expanding net interest margin, and improved efficiencies. We also continue to see stable credit quality and a low level of credit losses, which drove a further reduction in our allowance for loan losses from the elevated levels we built last year.

"As we previously announced, both the Company's and the Bank's Memoranda of Understanding with their respective regulators have been terminated, and as a result, we anticipate more flexibility in terms of strategic planning," said Mr. Yoo.

Q3 2012 Summary:
•Net income available to common shareholders of $38.5 million or $0.54 per diluted share

•Net interest margin increased to 4.35% for Q3 2012 from 4.13% for Q2 2012 as cash and cash equivalents were shifted to higher yielding loans

•Deferred tax asset valuation allowance fully reversed in Q3 2012

•Strengthened capital ratios with tier 1 leverage ratio at 15.0%, total risk based ratio at 20.6%, and tangible common equity ratio at 12.3% in Q3 2012.

•Gross loans (including held-for-sale) totaled $2.09 billion at Q3 2012, an increase of 3.2% from $2.03 billion at Q2 2012

•Improved deposit mix with non-interest-bearing demand deposits increasing to 24.8% of total deposits at Q3 2012 from 23.6% at Q2 2012

•Non-accrual loans declined to $38.9 million, classified loan declined to $172.8 million, and gross charge-offs declined to $2.8 million in Q3 2012 compared to Q2 2012

•Improved credit quality and reduced gross charge-offs resulted in $12.0 million negative provision for losses on loans

•FDIC indemnification impairment of $2 million as a result of improved credit quality of covered loans

•Redemption of $10 million in junior subordinated debentures in Q3 2012 that had a rate of approximately 3.5% at redemption

STATEMENT OF OPERATIONS

Net Interest Income and Margin

Net interest income before credit for losses on loans totaled $25.6 million in the third quarter of 2012, slightly up from $25.5 million for the third quarter of 2011, and an increase of 5.6% from $24.2 million in the second quarter of 2012. The increase from the prior quarter was primarily due to an increase in average loans outstanding and a decrease in interest expense.

Net interest margin was 4.35% for the third quarter of 2012, compared to 4.23% in the third quarter of 2011, and 4.13% for the second quarter of 2012. The increase in net interest margin from the second quarter of 2012 was primarily due to a higher percentage of loans in the mix of interest-earning assets, as well as a reduction in the cost of overall deposits.

Loan yields increased to 5.73% for the third quarter of 2012 from 5.71% for the second quarter of 2012, due to an increase in prepayment penalty fees collected during the quarter. These prepayment penalty fees totaled $336 thousand for the third quarter of 2012, compared to $16 thousand for the second quarter of 2012. The total cost of interest-bearing deposits declined to 0.87% for the third quarter of 2012, down from 0.96% for the second quarter of 2012. Cost of total deposits was reduced to 0.66% for the third quarter of 2012 compared to 0.74% during the previous quarter. The reduction in deposit rates was a result of declines in deposit costs across all categories combined with an increase in demand deposits as a percentage of total deposits.

Non-Interest Income

Total non-interest income was $6.6 million for the third quarter of 2012, compared to $7.7 million for the third quarter of 2011, and $8.5 million for second quarter of 2012. The decrease in non-interest income from the prior quarter was primarily due to lower gains on sales of loans, as the Company decided to retain a larger portion of its SBA loan production during the third quarter of 2012. Total SBA loans held-for-sale at the end of the third quarter of 2012 totaled $51.6 million compared to $33.9 million at the end of the previous quarter. The decision to retain or sell SBA loan production will be made on a quarter-to-quarter basis, dependent upon pricing in the secondary market and the Company's liquidity needs.

The $1.2 million in net gains on sales of loans recognized in the third quarter of 2012 included $1.1 million in gains from the sale of SBA loans and $86 thousand in gains from the sale of mortgage loans.

Non-Interest Expense

Total non-interest expense totaled $18.3 million for the third quarter of 2012, compared with $18.5 million for the third quarter of 2011, and $20.4 million for the second quarter of 2012. The decrease in total non-interest expense for the third quarter of 2012, compared to the second quarter of 2012 was primarily due to lower other non-interest expense. Other non-interest expense for the third quarter of 2012 totaled $4.4 million, a 51.5% decline compared with $9.0 million in the third quarter of 2011 and a 34.3% decline from $6.7 million for the second quarter of 2012. The decrease from the prior quarters was primarily attributable to lower professional fees, a decline in expenses related to other real estate owned ("OREO"), and lower regulatory assessment fees.

Total salaries and employee benefits expense was $9.4 million in the third quarter of 2012, compared with $6.8 million in the third quarter of 2011, and $9.0 million in the second quarter of 2012. The increase from the prior quarters was largely due an increase in staff, particularly in areas related to lending and loan underwriting.

During the third quarter of 2012, the Company recorded an impairment of the FDIC indemnification asset amounting to $2.0 million. The impairment reflected overall improved credit quality in the covered loan portfolio. As such the FDIC indemnification asset balance at September 30, 2012, net of the impairment charge of $2.0 million, was $9.9 million.

The Company's operating efficiency ratio was 57.0% for the third quarter of 2012, compared with 55.7% for the third quarter of 2011 and 62.2% for the second quarter of 2012.

Tax Provision

For the third quarter of 2012, the Company recorded a tax benefit of $12.6 million, primarily related to the full reversal of the remaining valuation allowance held against the Company's deferred tax asset. This compares to $215 thousand in tax provision for the second quarter of 2012 and $1.1 million tax provision for the third quarter of 2011.

The Company recorded a valuation allowance during the first quarter of 2011 against its entire net deferred tax asset, primarily due to accumulated taxable losses and the absence of clear and objective positive evidence that future taxable income would be sufficient enough to realize the tax benefits of its deferred tax assets. However, with 12 quarters (3 years) of cumulative positive income, 6 continuous quarters of earnings, strengthening capital, significantly improved asset quality, and removal of regulatory orders, management concluded that those deferred tax assets are now more likely than not to be realized and thus maintaining a valuation allowance was no longer required.

Going forward, the Company expects its effective tax rate to be comparable to its normalized historical tax rate, approximately 37%-38%.

BALANCE SHEET

Total gross loans were $2.09 billion at September 30, 2012, compared to $2.03 billion at June 30, 2012. The increase in total gross loans during the third quarter of 2012 was primarily due to increases in the commercial real estate and residential real estate portfolio, offset primarily by declines in construction loans.

As previously disclosed, upon acquiring certain assets and liabilities of the former Mirae Bank, the Company entered into a loss sharing agreement with the FDIC whereby the FDIC has agreed to share in losses on assets covered under the agreement. The assets covered by the loss sharing agreement include loans and foreclosed loan collateral existing on June 26, 2009 and acquired from Mirae Bank. As a result, loans acquired through the acquisition of Mirae Bank are identified as "covered" loans, and those that were originated at Wilshire are "non-covered" loans or "legacy Wilshire" loans.

http://globenewswire.com/news-release/2012/10/22/498766/10009295/en/Wilshire-Bancorp-Reports-Net-Income-of-38-5-Million-or-0-54-Earnings-Per-Share-for-Third-Quarter-2012.html