Regional Banks Feel Effects of Downturn

As regional publicly-held banks begin releasing results for first quarter 2009, they are citing the effects of the economic downturn as they report declines in earnings.
They also are continuing to build liquidity while growing loans and deposits.
“We know that 2009 will be a challenging year, but we continue to focus on our strategic goal of building long-term shareholder value as we work through these difficult times,” said Rick Green, president and CEO of Stillwater-based Southwest Bancorp, Inc.
Southwest Bancorp Grows Loans
Southwest Bancorp reported net income available to common shareholders of $296,000, or $0.02 per diluted share for the first quarter 2009, compared to $5.2 million, or $0.36 per diluted share for the first quarter of 2008, and $3 million, or $0.20 per diluted share for the fourth quarter of 2008. At March 31, 2009, total assets were $2.9 billion.
“During the first quarter, we continued to follow our strategic vision of prudent loan growth in carefully selected markets in Texas, Oklahoma and Kansas; careful expansion of our community banking operations; and continued our focus on building liquidity,” Green said. “In the quarter, we increased portfolio loans by $31.8 million, up 1 percent, from year-end 2008 and increased our core deposits by $105.3 million, up 8 percent.
“In early 2008, we decided to increase capital resources to support our operations during the uncertain economic conditions ahead. By March 31, 2009, we had increased our shareholders’ equity to $300.4 million, up $76.3 million, or 34 percent, over March 31, 2008, and our capital ratios substantially exceeded the levels for regulatory classification as ‘well-capitalized.’”
Green said, “The decrease in first quarter net income available to common shareholders is the result of an increase in the provision for loan losses, a decrease in net interest income, and dividends on the preferred stock we issued late last year. The changes in net interest income and the provision for loan losses were driven mainly by economic conditions that adversely affect our net interest margin and the value of commercial real estate securing loans. These negative factors were partially offset by decreases in income taxes and personnel expenses and an increase in gains on sale of investment securities.”
Total assets were $2.9 billion at March 31, 2009, an increase of two percent from Dec. 31, 2008. At March 31, 2009, total loans were $2.6 billion, also an increase of two percent from Dec. 31, 2008.
At March 31, 2009, the allowance for loan losses was $46.3 million, up 54 percent from March 31, 2008 and up 16 percent from year-end 2008, and represented 1.83 percent of portfolio loans vs. 1.31 percent at March 31, 2008 and 1.59 percent at Dec. 31, 2008. Nonperforming assets to portfolio loans and other real estate owned were 3.53 percent at March 31, 2009 compared to 1.41 percent at March 31, 2008 and 2.80 percent at Dec. 31, 2008.
Commerce Bumps Loss Provision
Kansas City-based Commerce Bancshares Inc. announced earnings of $.40 per share for the three months ended March 31, 2009, compared to $.84 per share in the first quarter of 2008. Net income for the first quarter amounted to $30.8 million compared to $64.2 million in the same period last year.
The first quarter last year included a $22.2 million pre-tax cash gain on the sale of VISA Inc. stock and the reversal of certain VISA litigation charges totaling $8.8 million pre-tax, which had the effect of increasing earnings per share by approximately $.26. For the quarter, the return on average assets totaled .73 percent and the return on average equity was 7.8 percent. At quarter end, the ratio of tangible common equity to total assets was 8.2 percent.
David W. Kemper, chairman and CEO, said, “Net income for the first quarter 2009 was down from the previous year mainly due to an increase in our loan loss provision resulting from higher credit losses created by current economic conditions. In the current quarter the loan loss provision increased $23.2 million over the same period last year and $1.8 million compared to the previous quarter. At March 31, 2009, the allowance for loan losses totaled $180.9 million, an increase of $8.2 million during the quarter, and represents 164 percent of our total non-accrual loans and 1.65 percent of outstanding loans.”
Kemper noted, “In this environment our balance sheet has remained strong, liquidity continues to improve and our key business units are operating within plan. During the quarter, average deposits grew 6.5 percent on strong growth from both consumers and businesses, which increased earning assets. Also net interest income this quarter increased by 7 percent over the same period last year due to higher earning assets and a stable net interest margin. Non-interest income, while essentially flat with the previous year, totaled $92.4 million and amounted to 38 percent of total revenue. Non-interest expense, exclusive of the VISA indemnification noted above in 2008, grew by only 2.6 percent.”
Total assets at March 31, 2009 were $17.9 billion, total loans were $11.4 billion, and total deposits were $14.0 billion.
IBC OKs Cash Dividend, Stock Repurchase Program
Laredo, Texas-based International Bancshares Corp. has approved a 17-cents-per-share cash dividend for shareholders of record as of the close of business on April 27, 2009, payable on May 11, 2009.
The board of directors also established a stock repurchase program that authorizes the repurchase of up to $40 million of common stock within the next twelve months, which repurchase cap the board is inclined to increase over time.
The bank reported the board determined that the best use of the company’s dividend resources is to pay a portion of these funds to its shareholders in the form of a traditional cash dividend and to use the balance of the funds to repurchase common stock in the open market.
“Based on current market prices, we believe our common stock is undervalued and that the stock offers a tremendous investment opportunity that will greatly enhance shareholder value” said Dennis E. Nixon, chairman and president of IBC.
The company terminated its stock repurchase program on Dec. 19, 2008, in connection with participating in the Treasury Department’s Capital Purchase Program. On April 7, 2009, the company was given Treasury approval to pay quarterly dividends and to use the regular dividend funds to repurchase common stock. The IBC board will determine at a later date whether a more frequent dividend program and expanded repurchase program are warranted and beneficial to the shareholders.

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