updated 4/29/2011 8:17:16 AM ET 2011-04-29T12:17:16

HOUSTON, April 29, 2011 (GLOBE NEWSWIRE) -- Encore Bancshares, Inc. (Nasdaq:EBTX) today announced its financial results for the first quarter of 2011.

First Quarter Highlights

Earnings metrics improvement compared with first quarter 2010

  • Net interest margin expanded 26 basis points to 3.37%
  • Provision for loan losses decreased $2.8 million
  • Wealth management revenue increased 9.8%
  • Noninterest expense decreased 21.4%

Growth of Texas franchise compared with March 31, 2010

  • Deposit growth of 8.6%
  • Commercial loan growth of 18.9%
  • Demand deposits were 21.1% of total deposits, up from 16.3%
  • Assets under management grew 2.5% to $2.9 billion

Continued improvement in credit quality

  • Net charge-offs declined to $1.8 million, compared with $6.3 million for the first quarter 2010
  • Nonperforming assets decreased 32.3%, compared with March 31, 2010
  • Allowance for loan losses of 2.03% of loans, excluding loans held for sale

Capital ratios remain solid

  • Estimated tier 1 capital ratio of 13.07%
  • Tangible common equity ratio of 6.91%

"I am very pleased with our return to profitability and the improvement in our net interest margin," said James S. D'Agostino, Jr., Chairman and Chief Executive Officer of Encore Bancshares, Inc. "We are executing on our strategy to grow our Houston franchise and to improve credit quality."

Earnings

For the three months ended March 31, 2011, our net earnings were $1.2 million, compared with a net loss of $2.3 million for the same period of 2010. Earnings per diluted common share for the first quarter of 2011 were $0.05, compared with a loss per diluted common share of $0.27 for the same period of 2010, after deducting preferred dividends for each period. Earnings in the first quarter of 2011 improved due to lower credit costs and reduced expenses as the first quarter of 2010 included charges related to the sale of our Florida operations, which was completed December 31, 2010.

Net Interest Income

Net interest income on a tax equivalent basis (TE) for the first quarter of 2011 was $11.2 million, a decrease of $404,000, or 3.5% compared with the same period of 2010, reflecting the decline in interest earning assets, which was mainly a result of the sale of our Florida operations. The net interest margin (TE) expanded 26 basis points to 3.37% during the same comparison period. The increase in margin was due primarily to an improved balance sheet mix, as temporary investments and higher costing deposits decreased after the sale of our Florida operations. On a linked quarter basis (compared with the immediately preceding quarter), net interest income (TE) was relatively flat. Although average earning assets decreased by approximately $192.3 million, the net interest margin increased 48 basis points. The increase in margin was due primarily to the sale of the Florida operations and the investment of surplus liquidity into securities. Average temporary investments, which we were holding partly in anticipation of the Florida operations sale were $243.3 million, or 15.8% of average interest earning assets, for the fourth quarter of 2010, compared with $60.1 million, or 4.5% of interest earning assets, for the first quarter of 2011.

Noninterest Income

Noninterest income was $7.1 million for the first quarter of 2011, an increase of $157,000, or 2.3%, compared with the same period of 2010. Trust and investment management fees increased $454,000, or 9.8%, as assets under management grew 2.5% primarily due to the improvements in the equity markets. This improvement was partially offset by lower insurance commissions and a loss on securities sales compared with a gain in the first quarter of 2010.

Noninterest Expense

Noninterest expense was $14.4 million for the first quarter of 2011, a decrease of $3.9 million, compared with the same period of 2010. The first quarter of 2010 included a write down of assets held for sale of $2.5 million and $1.1 million in foreclosed real estate expenses, both of which were primarily attributable to our Florida operations.

Segment Earnings

On a segment basis, our banking segment showed net earnings of $197,000, compared with a net loss of $3.2 million in the same period of 2010. The first quarter of 2010 included significant expenses related to the mark to market of our held-for-sale Florida operations. Our wealth management group had net earnings of $954,000 for the first quarter of 2011, a $246,000, or 34.7% increase, compared with the same period of 2010. The growth in earnings resulted mainly from a 2.5% increase in assets under management. Our insurance agency showed lower earnings compared with the same period of 2010, due to lower contingent commissions and higher expenses reflecting growth in the Ft. Worth office.

Loans

Period end loans, including loans held for sale, were $938.9 million at March 31, 2011, a decrease of $117.3 million, or 11.1%, compared with March 31, 2010. This decrease was due primarily to the sale of Florida loans as we exited the Florida market. Commercial loans in Texas grew $58.3 million, or 18.9%, in the same comparison period. 

Deposits

Period end deposits were $1.0 billion at March 31, 2011, a decrease of $160.6 million, or 13.4%, compared with March 31, 2010. The decrease was mainly due to the sale of approximately $231.3 million in Florida deposits in May and December 2010. Total Texas deposits increased 8.6% in the same comparison period. Noninterest-bearing deposits at March 31, 2011 were $219.6 million, an increase of $63.6 million, or 40.7%, and represented 21.1% of total deposits.

Credit Quality and Capital Ratios

The provision for loan losses was $2.2 million for the first quarter of 2011, compared with $5.0 million for the same period of 2010. The decline in the provision for loan losses reflected improving credit quality. Net charge-offs for the first quarter were $1.8 million, or 0.78% of average total loans on an annualized basis, compared with $6.3 million, or 2.41% of average total loans on an annualized basis for the same period of 2010. Commercial loan charge-offs were $665,000 for the first quarter of 2011, compared with $5.1 million in the same period of 2010. The charge-offs in the first quarter of 2010 included $1.8 million in mark to market adjustments on certain Florida loans which were classified as held-for-sale. The allowance for loan losses was $19.0 million, or 2.03% of loans, excluding loans held for sale, at March 31, 2011, compared with $25.1 million, or 2.58% of loans at March 31, 2010.  

At March 31, 2011, nonperforming assets were $35.0 million compared with $35.8 million at December 31, 2010 and $51.8 million at March 31, 2010. Nonperforming loans were $27.7 million at March 31, 2011, compared with $26.5 million at December 31, 2010, an increase of $1.2 million, or 4.7%. The increase in nonperforming loans was due primarily to three commercial real estate loans in Florida.

Subsequent to March 31, 2011, we received pay downs totaling $6.5 million on two lending relationships that had been reported as nonperforming. On a proforma basis as of March 31, 2011, our nonperforming assets would be $28.5 million, or 3.04% of total loans and investment in real estate, after these payments.

Investment in real estate was $7.3 million at March 31, 2011, compared with $9.3 million at December 31, 2010, a decrease of $2.0 million, or 21.4%. The decrease resulted primarily from the sale of several properties, which consisted mostly of vacant land in Florida. Restructured loans still accruing were $1.8 million at March 31, 2011, compared with $804,000 at December 31, 2010. The increase was due primarily to one commercial loan in Houston.

As of March 31, 2011, our estimated Tier 1 risk-based, total risk-based and leverage capital ratios were 13.07%, 14.33%, and 9.29%, respectively. In addition, Encore Bank was considered "well capitalized" pursuant to regulatory capital definitions. Book value per common share and tangible book value per common share were $11.97 and $8.48 at March 31, 2011, compared with $12.00 and $8.45 at December 31, 2010.

Conference Call

Encore will host a conference call for investors and analysts that will be broadcast live via the Internet on Friday, April 29, 2011, at 10:30 a.m. Eastern Time. Interested parties may participate by calling 877-303-6295 at least ten minutes prior to the start time.

To listen to this conference call live via the Internet, please visit the Investor Relations section of the Company's web site at http://www.encorebank.com at least fifteen minutes prior to the call to register, download and install any necessary audio software. An audio archive of the call will also be available on the web site on or before Monday, May 2, 2011.

About Encore Bancshares, Inc.

Encore Bancshares, Inc. is a financial holding company headquartered in Houston, Texas and offers a broad range of banking, wealth management and insurance services through Encore Bank, N.A., and its affiliated companies. Encore Bank operates 11 private client offices in the Greater Houston area. Headquartered in Houston and with $1.5 billion in assets, Encore Bank builds relationships with professional firms, privately-owned businesses, investors and affluent individuals. Encore Bank offers a full range of business and personal banking products and services, as well as financial planning, wealth management, trust and insurance products through its trust division, Encore Trust, and its affiliated companies, Linscomb & Williams and Town & Country Insurance. Products and services offered by Encore Bank's affiliates are not FDIC insured. The Company's common stock is listed on the NASDAQ Global Market under the symbol "EBTX".

This press release contains certain financial information determined by methods other than in accordance with GAAP. Specifically, Encore reviews tangible book value per share, return on average tangible common equity and the tangible common equity to tangible assets ratio for internal planning and forecasting purposes. Encore reviews its net interest income, net interest spread and net interest margin on a tax equivalent basis, which is standard practice in the banking industry.  Encore has included in this press release information relating to these non-GAAP financial measures for the applicable periods presented. Encore's management believes these non-GAAP financial measures provide information useful to investors in understanding our financial results and believes that its presentation, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. These non-GAAP measures should not be considered a substitute for operating results determined in accordance with GAAP and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

This press release contains certain forward-looking information about Encore Bancshares that is intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially from those expressed in or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to:  competitive pressure among financial institutions; volatility and disruption in national and international financial markets; government intervention in the U.S. financial system; our ability to expand and grow our businesses and operations and to realize the cost savings and revenue enhancements expected from such activities; a deterioration of credit quality or a reduced demand for credit; incorrect assumptions underlying the establishment of and provisions made to the allowance for loan losses; changes in the interest rate environment; the continued service of key management personnel; our ability to attract, motivate and retain key employees; the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations; changes in availability of funds; our ability to fully realize our net deferred tax asset; our ability to raise capital when needed; general economic conditions, either nationally, regionally or in the market areas in which we operate; legislative or regulatory developments or changes in laws; changes in the securities markets and other risks that are described from time to time in our 2010 Annual Report on Form 10-K and other reports and documents filed with the Securities and Exchange Commission.

Encore Bancshares, Inc. and Subsidiaries
       
FINANCIAL HIGHLIGHTS
       
(Unaudited, amounts in thousands, except per share data)
     
  As of and for the Three Months Ended
  March 31, December 31,
   2011   2010   2010 
       
Operations Statement Data:      
Interest income  $ 15,839  $ 17,955  $ 16,725
Interest expense  4,744  6,465  5,624
Net interest income  11,095  11,490  11,101
Provision for loan losses  2,170  4,960  2,597
Net interest income after provision for      
 loan losses  8,925  6,530  8,504
Noninterest income  7,066  6,909  9,859
Noninterest expense  14,355  18,264  20,213
Net earnings (loss) before income taxes  1,636  (4,825)  (1,850)
Income tax expense (benefit)  484  (2,574)  (950)
Net earnings (loss)  $ 1,152  $ (2,251)  $ (900)
Earnings (loss) available to common shareholders  $ 594  $ (2,807)  $ (1,457)
       
Common Share Data:      
Basic earnings (loss) per share (1)  $ 0.05  $ (0.27)  $ (0.13)
Diluted earnings (loss) per share (1)  0.05  (0.27)  (0.13)
Book value per share  11.97  14.43  12.00
Tangible book value per share (2)  8.48  10.76  8.45
       
Average common shares outstanding   11,491  10,558  11,391
Diluted average common shares outstanding   11,575  10,558  11,391
Common shares outstanding at end of period  11,552  11,162  11,431
       
Selected Performance Ratios:      
Return on average assets 0.32% (0.56)% (0.22)%
Return on average common equity (1) 1.75% (7.20)% (4.11)%
Return on average tangible common equity (1)(2) 2.49% (9.73)% (5.79)%
Taxable-equivalent net interest margin (2) 3.37% 3.11% 2.89%
Efficiency ratio 78.02% 85.09% 77.96%
Noninterest income to total revenue 38.91% 37.55% 47.04%
       
(1) Using earnings (loss) available to common shareholders.       
(2) Non-GAAP measure. See calculation of tangible common equity and taxable-equivalent   
 amounts in subsequent tables.      
       
Encore Bancshares, Inc. and Subsidiaries
           
CONSOLIDATED BALANCE SHEETS
           
(Unaudited, dollars in thousands, except per share data)
           
   March 31,   Dec 31,   Sept 30,   June 30,   March 31, 
   2011   2010   2010   2010   2010 
           
ASSETS          
Cash and due from banks  $ 18,477  $ 13,523  $ 16,825  $ 14,718  $ 18,420
Interest-bearing deposits in banks  49,109  49,478  231,866  314,624  237,771
Federal funds sold and other   856  1,098  993  902  1,695
Cash and cash equivalents  68,442  64,099  249,684  330,244  257,886
Securities available-for-sale, at estimated fair value  241,370  251,784  198,530  72,153  138,495
Securities held-to-maturity, at amortized cost  101,235  107,618  55,436  68,628  88,454
Loans held-for-sale  2,913  10,915  111,505  77,914  81,953
Loans receivable  936,036  920,457  924,589  972,765  974,301
Allowance for loan losses  (19,008)  (18,639)  (20,967)  (26,675)  (25,132)
 Net loans receivable  917,028  901,818  903,622  946,090  949,169
Federal Home Loan Bank of Dallas stock, at cost  10,206  9,610  9,602  9,593  9,578
Investment in real estate  7,311  9,298  10,852  13,602  11,054
Premises and equipment, net  6,757  7,023  7,284  7,567  9,327
Cash surrender value of life insurance policies  16,078  15,935  15,786  15,637  15,489
Goodwill  35,799  35,799  35,799  35,799  35,799
Other intangible assets, net  4,575  4,716  4,876  5,034  5,192
Accrued interest receivable and other assets  46,467  47,882  44,430  40,085  32,176
Other assets held-for-sale  --  --  3,256  3,269  3,344
   $ 1,458,181  $ 1,466,497  $ 1,650,662  $ 1,625,615  $ 1,637,916
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Deposits:          
Noninterest-bearing  $ 219,629  $ 219,756  $ 205,927  $ 182,729  $ 156,071
Interest-bearing  821,163  830,688  838,125  832,876  802,597
Deposits held-for-sale  --  --  187,433  184,106  242,755
Total deposits  1,040,792  1,050,444  1,231,485  1,199,711  1,201,423
Borrowings and repurchase agreements  221,582  219,777  220,818  219,602  218,560
Junior subordinated debentures  20,619  20,619  20,619  20,619  20,619
Accrued interest payable and other liabilities  7,274  9,016  8,028  7,804  7,094
Other liabilities held-for-sale  --  --  6  6  10
Total liabilities  1,290,267  1,299,856  1,480,956  1,447,742  1,447,706
           
Commitments and contingencies          
Shareholders' equity:          
Preferred stock  29,633  29,500  29,368  29,238  29,107
Common stock  11,603  11,479  11,421  11,416  11,195
Additional paid-in capital  123,329  122,678  121,939  121,533  121,345
Retained earnings   5,235  4,641  6,098  15,079  28,288
Common stock in treasury, at cost  (497)  (455)  (389)  (346)  (319)
Accumulated other comprehensive income (loss)  (1,389)  (1,202)  1,269  953  594
Shareholders' equity  167,914  166,641  169,706  177,873  190,210
   $ 1,458,181  $ 1,466,497  $ 1,650,662  $ 1,625,615  $ 1,637,916
           
Ratios and Common Share Data:          
Leverage ratio (1) 9.29% 8.10% 9.00% 9.93% 10.73%
Tier 1 risk-based capital ratio (1) 13.07% 12.83% 13.26% 14.59% 15.56%
Total risk-based capital ratio (1) 14.33% 14.09% 14.79% 15.86% 16.82%
Book value per share  $ 11.97  $ 12.00  $ 12.33  $ 13.06  $ 14.43
Tangible book value per share (2)  8.48  8.45  8.76  9.47  10.76
Tangible common equity to tangible assets (2) 6.91% 6.78% 6.19% 6.80% 7.52%
           
(1) Estimated at March 31, 2011.          
(2) Non-GAAP measure. See calculation of tangible common equity in subsequent table.         
           
Encore Bancshares, Inc. and Subsidiaries
           
CONSOLIDATED STATEMENTS OF OPERATIONS
           
(Unaudited, amounts in thousands, except per share data)
           
  Three Months Ended
  March 31, Dec 31, Sept 30, June 30, March 31,
   2011   2010   2010   2010   2010 
Interest income:          
Loans, including fees  $ 13,442  $ 14,646  $ 15,408  $ 15,441  $ 15,694
Securities  2,305  1,872  1,276  1,526  2,046
Federal funds sold and other  92  207  238  234  215
Total interest income  15,839  16,725  16,922  17,201  17,955
Interest expense:          
Deposits  2,340  2,562  2,827  2,962  3,042
Deposits held-for-sale  --  636  698  863  1,010
Borrowings and repurchase agreements  2,106  2,128  2,127  2,139  2,116
Junior subordinated debentures  298  298  301  298  297
Total interest expense  4,744  5,624  5,953  6,262  6,465
Net interest income  11,095  11,101  10,969  10,939  11,490
Provision for loan losses  2,170  2,597  9,599  18,013  4,960
Net interest income after provision for loan losses  8,925  8,504  1,370  (7,074)  6,530
Noninterest income:          
Trust and investment management fees  5,072  5,122  4,639  4,591  4,618
Mortgage banking  140  501  150  78  36
Insurance commissions and fees  1,440  1,120  1,524  1,488  1,639
Net gain (loss) on sale of available-for-sale securities  (31)  38  261  120  99
Gain on sale of branches  --  2,567  --  1,115  --
Other  445  511  454  555  517
Total noninterest income  7,066  9,859  7,028  7,947  6,909
Noninterest expense:          
Compensation  8,706  8,469  8,503  8,638  8,551
Occupancy   1,287  1,339  1,395  1,454  1,478
Equipment  241  261  274  330  363
Advertising and promotion  156  137  146  153  181
Outside data processing  783  910  874  897  870
Professional fees  1,134  1,165  1,325  1,435  921
Intangible amortization  140  160  158  159  158
FDIC assessment  798  790  1,532  703  655
Foreclosed real estate expenses, net  83  119  4,458  1,402  1,124
Write down of assets held-for-sale  21  5,744  1,012  2,793  2,535
Other  1,006  1,119  1,051  1,431  1,428
Total noninterest expense  14,355  20,213  20,728  19,395  18,264
Net earnings (loss) before income taxes   1,636  (1,850)  (12,330)  (18,522)  (4,825)
Income tax expense (benefit)  484  (950)  (3,904)  (5,869)  (2,574)
Net earnings (loss)  $ 1,152  $ (900)  $ (8,426)  $ (12,653)  $ (2,251)
Earnings (loss) available to common shareholders  $ 594  $ (1,457)  $ (8,981)  $ (13,209)  $ (2,807)
Earnings (loss) per common share:          
 Basic  $ 0.05  $ (0.13)  $ (0.79)  $ (1.16)  $ (0.27)
 Diluted  0.05  (0.13)  (0.79)  (1.16)  (0.27)
Average common shares outstanding  11,491  11,391  11,380  11,375  10,558
Diluted average common shares outstanding  11,575  11,391  11,380  11,375  10,558
           
           
Encore Bancshares, Inc. and Subsidiaries
           
AVERAGE CONSOLIDATED BALANCE SHEETS
           
(Unaudited, dollars in thousands)
           
  Three Months Ended 
  March 31, Dec 31, Sept 30, June 30, March 31,
   2011   2010   2010   2010   2010 
Assets:          
Interest-earning assets:          
 Loans  $ 933,361  $ 1,004,472  $ 1,056,657  $ 1,059,695  $ 1,064,375
 Securities  354,250  292,241  209,365  186,777  230,390
 Federal funds sold and other  60,084  243,304  290,541  275,148  220,019
Total interest-earning assets  1,347,695  1,540,017  1,556,563  1,521,620  1,514,784
Less: Allowance for loan losses  (18,604)  (20,433)  (27,144)  (24,796)  (26,672)
Noninterest-earning assets  131,183  131,861  128,197  122,236  126,284
Noninterest-earning assets held-for-sale  --  4,403  4,196  4,481  7,377
 Total assets  $ 1,460,274  $ 1,655,848  $ 1,661,812  $ 1,623,541  $ 1,621,773
           
Liabilities and shareholders' equity:          
Interest-bearing liabilities:          
 Interest checking  $ 162,577  $ 148,875  $ 139,820  $ 145,856  $ 153,023
 Money market and savings   287,029  298,725  279,084  238,000  240,292
 Time deposits  379,142  386,634  410,318  415,615  400,451
 Interest-bearing deposits held-for-sale  --  167,869  171,805  201,919  219,809
 Total interest-bearing deposits  828,748  1,002,103  1,001,027  1,001,390  1,013,575
 Borrowings and repurchase agreements  224,792  220,042  220,068  218,794  220,759
 Junior subordinated debentures  20,619  20,619  20,619  20,619  20,619
 Total interest-bearing liabilities  1,074,159  1,242,764  1,241,714  1,240,803  1,254,953
Noninterest-bearing liabilities:          
 Noninterest-bearing deposits  210,885  220,169  220,166  168,021  146,779
 Noninterest-bearing deposits held-for-sale  --   14,767  14,983  17,830  17,213
 Other liabilities  8,344  8,019  7,132  6,384  15,412
 Other liabilities held-for-sale  --  197  216  253  303
 Total liabilities  1,293,388  1,485,916  1,484,211  1,433,291  1,434,660
Shareholders' equity   166,886  169,932  177,601  190,250  187,113
Total liabilities and shareholders' equity   $ 1,460,274  $ 1,655,848  $ 1,661,812  $ 1,623,541  $ 1,621,773
           
Encore Bancshares, Inc. and Subsidiaries
           
SELECTED FINANCIAL DATA
           
(Unaudited, dollars in thousands)
           
  March 31, Dec 31, Sept 30, June 30, March 31,
Loan Portfolio:  2011   2010   2010   2010   2010 
Commercial:          
Commercial  $ 164,053  $ 147,090  $ 138,594  $ 131,712  $ 115,653
Commercial real estate   168,893  166,043  154,476  189,471  199,166
Real estate construction   52,106  46,326  54,140  55,332  66,618
Total commercial  385,052  359,459  347,210  376,515  381,437
Consumer:          
Residential real estate first lien  205,012  205,531  207,386  215,911  211,366
Residential real estate second lien  263,286  269,727  280,245  290,934  289,344
Home equity lines  59,832  60,609  63,983  66,311  68,677
Consumer other  22,854  25,131  25,765  23,094  23,477
Total consumer  550,984  560,998  577,379  596,250  592,864
 Loans receivable  936,036  920,457  924,589  972,765  974,301
Loans held-for-sale  2,913  10,915  111,505  77,914  81,953
 Total loans  $ 938,949  $ 931,372  $ 1,036,094  $ 1,050,679  $ 1,056,254
           
Asset Quality:          
Nonaccrual loans - Texas (1)  $ 14,557  $ 15,167  $ 17,445  $ 22,441  $ 8,860
Nonaccrual loans - Florida (1)  13,169  11,310  34,251  41,773  31,851
Total nonaccrual loans (1)  27,726  26,477  51,696  64,214  40,711
Investment in real estate - Texas  4,226  4,783  5,762  6,194  6,954
Investment in real estate - Florida  3,085  4,515  5,090  7,408  4,100
Total investment in real estate  7,311  9,298  10,852  13,602  11,054
 Total nonperforming assets  $ 35,037  $ 35,775  $ 62,548  $ 77,816  $ 51,765
Accruing loans past due 90 days or more  $ --  $ 313  $ --  $ --  $ --
Restructured loans still accruing  $ 1,755  $ 804  $ 2,570  $ 1,072  $ 5,710
           
Asset Quality Ratios:          
Nonperforming assets to total loans and          
 investment in real estate 3.70% 3.80% 5.97% 7.31% 4.85%
Net charge-offs to average total loans  0.78% 1.95% 5.75% 6.23% 2.41%
Allowance for loan losses to period end          
 loans (excluding loans held-for-sale) 2.03% 2.02% 2.27% 2.74% 2.58%
Allowance for loan losses to nonperforming           
 loans (excluding loans held-for-sale) 74.72% 94.11% 88.89% 45.47% 61.73%
           
Deposits:          
Noninterest-bearing deposits  $ 219,629  $ 219,756  $ 205,927  $ 182,729  $ 156,071
Interest checking  155,262  173,839  145,257  152,041  157,796
Money market and savings  285,612  278,507  293,381  259,189  237,204
Time deposits less than $100  114,819  117,974  124,132  132,514  130,898
 Core deposits   775,322  790,076  768,697  726,473  681,969
Time deposits $100 and greater  239,936  239,129  251,271  265,076  251,089
Brokered deposits  25,534  21,239  24,084  24,056  25,610
Deposits held-for-sale  --  --  187,433  184,106  242,755
 Total deposits  $ 1,040,792  $ 1,050,444  $ 1,231,485  $ 1,199,711  $ 1,201,423
           
Assets Under Management  $ 2,855,544  $ 2,857,390  $ 2,732,757  $ 2,592,186  $ 2,786,220
           
(1) Nonaccrual troubled debt restructurings are included in nonaccrual loans.        
           
Encore Bancshares, Inc. and Subsidiaries
           
ALLOWANCE FOR LOAN LOSSES
           
(Unaudited, dollars in thousands)
           
  Three Months Ended
  March 31, Dec 31, Sept 30, June 30, March 31,
   2011   2010   2010   2010   2010 
           
Allowance for loan losses at beginning of quarter  $ 18,639  $ 20,967  $ 26,675  $ 25,132  $ 26,501
           
Charge-offs:          
Commercial:          
Commercial  (196)  (21)  (160)  (402)  (382)
Commercial real estate  (465)  (14)  (10,049)  (10,118)  (4,346)
Real estate construction   (4)  (2,329)  (3,407)  (3,101)  (322)
Total commercial   (665)  (2,364)  (13,616)  (13,621)  (5,050)
           
Consumer:          
Residential real estate first lien   (222)  (1,261)  (503)  (1,707)  (618)
Residential real estate second lien   (1,059)  (1,106)  (879)  (1,301)  (434)
Home equity lines   (296)  (430)  (664)  (237)  (699)
Consumer other   (36)  (9)  (73)  (248)  (84)
Total consumer  (1,613)  (2,806)  (2,119)  (3,493)  (1,835)
           
Total charge-offs  (2,278)  (5,170)  (15,735)  (17,114)  (6,885)
           
Recoveries:          
Commercial:          
Commercial  3  52  157  543  131
Commercial real estate   12  --  --  17  --
Real estate construction   131  54  1  3  46
Total commercial   146  106  158  563  177
           
Consumer:          
Residential real estate first lien   223  --  161  9  134
Residential real estate second lien   71  31  36  27  132
Home equity lines   19  80  11  11  78
Consumer other   18  28  62  34  35
Total consumer  331  139  270  81  379
           
Total recoveries  477  245  428  644  556
           
Net charge-offs  (1,801)  (4,925)  (15,307)  (16,470)  (6,329)
           
Provision for loan losses  2,170  2,597  9,599  18,013  4,960
           
Allowance for loan losses at end of quarter  $ 19,008  $ 18,639  $ 20,967  $ 26,675  $ 25,132
           
Encore Bancshares, Inc. and Subsidiaries
           
SEGMENT OPERATIONS
           
(Unaudited, dollars in thousands)
           
  As of and for the Three Months Ended
  March 31, Dec 31, Sept 30, June 30, March 31,
   2011   2010   2010   2010   2010 
Banking           
Net interest income   $ 11,367  $ 11,361  $ 11,231  $ 11,191  $ 11,742
Provision for loan losses  2,170  2,597  9,599  18,013  4,960
Noninterest income  529  3,602  857  1,800  647
Noninterest expense  9,563  15,476  16,133  14,747  13,675
Earnings (loss) before income taxes  163  (3,110)  (13,644)  (19,769)  (6,246)
Income tax benefit  (34)  (1,309)  (4,370)  (6,311)  (3,076)
Net earnings (loss)   $ 197  $ (1,801)  $ (9,274)  $ (13,458)  $ (3,170)
Total assets at quarter end  $ 1,467,887  $ 1,473,837  $ 1,650,297  $ 1,628,706  $ 1,645,468
           
Wealth Management          
Net interest income   $ 24  $ 34  $ 34  $ 41  $ 40
Noninterest income  5,089  5,130  4,638  4,593  4,618
Noninterest expense  3,643  3,612  3,442  3,547  3,562
Earnings before income taxes  1,470  1,552  1,230  1,087  1,096
Income tax expense   516  475  438  385  388
Net earnings   $ 954  $ 1,077  $ 792  $ 702  $ 708
Total assets at quarter end  $ 64,157  $ 63,254  $ 63,933  $ 62,518  $ 61,316
           
Insurance          
Net interest income   $ 2  $ 4  $ 5  $ 5  $ 5
Noninterest income  1,448  1,127  1,533  1,554  1,644
Noninterest expense  1,149  1,125  1,153  1,101  1,027
Earnings before income taxes  301  6  385  458  622
Income tax expense (benefit)   106  (12)  134  161  218
Net earnings   $ 195  $ 18  $ 251  $ 297  $ 404
Total assets at quarter end  $ 6,827  $ 9,095  $ 9,063  $ 8,714  $ 8,053
           
Other          
Net interest expense  $ (298)  $ (298)  $ (301)  $ (298)  $ (297)
Loss before income taxes  (298)  (298)  (301)  (298)  (297)
Income tax benefit  (104)  (104)  (106)  (104)  (104)
Net loss  $ (194)  $ (194)  $ (195)  $ (194)  $ (193)
Total assets at quarter end  $ (80,690)  $ (79,689)  $ (72,631)  $ (74,323)  $ (76,921)
           
Consolidated           
Net interest income   $ 11,095  $ 11,101  $ 10,969  $ 10,939  $ 11,490
Provision for loan losses  2,170  2,597  9,599  18,013  4,960
Noninterest income  7,066  9,859  7,028  7,947  6,909
Noninterest expense  14,355  20,213  20,728  19,395  18,264
Earnings (loss) before income taxes  1,636  (1,850)  (12,330)  (18,522)  (4,825)
Income tax expense (benefit)   484  (950)  (3,904)  (5,869)  (2,574)
Net earnings (loss)   $ 1,152  $ (900)  $ (8,426)  $ (12,653)  $ (2,251)
Total assets at quarter end  $ 1,458,181  $ 1,466,497  $ 1,650,662  $ 1,625,615  $ 1,637,916
           
Encore Bancshares, Inc. and Subsidiaries
             
TAXABLE-EQUIVALENT (TE) YIELD ANALYSIS (1)
             
(Unaudited, dollars in thousands)
             
  Three Months Ended March 31,
  2011 2010
  Average Interest Average Average Interest Average
  Outstanding Income/ Yield/ Outstanding Income/ Yield/
  Balance Expense Rate Balance Expense Rate
Assets:            
Interest-earning assets:            
Loans - TE yield  $ 933,361  $ 13,495 5.86%  $ 1,064,375  $ 15,760 6.00%
Securities - TE yield  354,250  2,369 2.71%  230,390  2,106 3.71%
Federal funds sold and other  60,084  92 0.62%  220,019  215 0.40%
Total interest-earning assets - TE yield  1,347,695  15,956 4.80%  1,514,784  18,081 4.84%
Less: Allowance for loan losses  (18,604)      (26,672)    
Noninterest-earning assets  131,183      126,284    
Noninterest-earning assets held-for-sale  --      7,377    
Total assets  $ 1,460,274      $ 1,621,773    
             
Liabilities and shareholders' equity:            
Interest-bearing liabilities:            
Interest checking  $ 162,577  $ 91 0.23%  $ 153,023  $ 122 0.32%
Money market and savings  287,029  309 0.44%  240,292  506 0.85%
Time deposits  379,142  1,940 2.08%  400,451  2,414 2.44%
Interest-bearing deposits held-for-sale  --   --     219,809  1,010 1.86%
Total interest-bearing deposits  828,748  2,340 1.15%  1,013,575  4,052 1.62%
Borrowings and repurchase agreements  224,792  2,106 3.80%  220,759  2,116 3.89%
Junior subordinated debentures  20,619  298 5.86%  20,619  297 5.84%
Total interest-bearing liabilities  1,074,159  4,744 1.79%  1,254,953  6,465 2.09%
Noninterest-bearing liabilities:            
Noninterest-bearing deposits  210,885      146,779    
Noninterest-bearing deposits held-for-sale  --      17,213    
Other liabilities  8,344      15,412    
Other liabilities held-for-sale  --      303    
Total liabilities  1,293,388      1,434,660    
Shareholders' equity   166,886      187,113    
Total liabilities and shareholders' equity   $ 1,460,274      $ 1,621,773    
             
Net interest income - TE    $ 11,212      $ 11,616  
             
Net interest spread - TE     3.01%     2.75%
Net interest margin - TE     3.37%     3.11%
             
(1) Non-GAAP measure. See calculation of taxable-equivalent amounts in subsequent table.      
             
Encore Bancshares, Inc. and Subsidiaries
           
NON-GAAP FINANCIAL MEASURES
           
(Unaudited, amounts in thousands)
           
  March 31, Dec 31, Sept 30, June 30, March 31,
   2011   2010   2010   2010   2010 
           
Shareholders' equity (GAAP)  $ 167,914  $ 166,641  $ 169,706  $ 177,873  $ 190,210
Less: Preferred stock  29,633  29,500  29,368  29,238  29,107
Goodwill and other intangible assets, net  40,374  40,515  40,675  40,833  40,991
Tangible common equity (1)  $ 97,907  $ 96,626  $ 99,663  $ 107,802  $ 120,112
           
Total assets (GAAP)  $ 1,458,181  $ 1,466,497  $ 1,650,662  $ 1,625,615  $ 1,637,916
Less: Goodwill and other intangible assets, net  40,374  40,515  40,675  40,833  40,991
Tangible assets  $ 1,417,807  $ 1,425,982  $ 1,609,987  $ 1,584,782  $ 1,596,925
           
Common shares outstanding at end of period  11,552  11,431  11,380  11,380  11,162
           
(1) Tangible common equity, a non-GAAP financial measure, includes total equity, less preferred equity, goodwill and other intangible assets. Management reviews tangible common equity along with other measures of capital as part of its financial analyses and has included this information because of current interest on the part of market participants in tangible common equity as a measure of capital. The methodology of determining tangible common equity may differ among companies. 
           
           
  Three Months Ended    
  March 31,    
   2011   2010       
Net interest income (GAAP)  $ 11,095  $ 11,490      
Taxable-equivalent adjustment (1)  117  126      
Net interest income on a taxable-equivalent basis   $ 11,212  $ 11,616      
           
(1) Net interest income, net interest spread and net interest margin are reported on a taxable-equivalent basis. The taxable-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets. Management believes that it is a standard practice in the banking industry to present net interest income, net interest spread and net interest margin on a fully taxable-equivalent basis. Management believes these measures provide useful information to investors by allowing them to make peer comparisons. 
           
CONTACT: L. Anderson Creel
         Chief Financial Officer
         713.787.3138
         
         James S. D'Agostino, Jr.
         Chairman and CEO
         713.787.3103

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