ViewPoint Financial Group, Inc. Reports Second Quarter 2011 Earnings

PLANO, Texas, July 28, 2011 /PRNewswire/ -- ViewPoint Financial Group, Inc. (NASDAQ: VPFG) (the "Company"), the holding company for ViewPoint Bank, announced financial results today for the quarter ended June 30, 2011.  Detailed results of the quarter will be available in the Company's Quarterly Report on Form 10-Q, which will be filed today and posted on our websites, http://www.viewpointbank.com and http://www.viewpointfinancialgroup.com.  

Performance Highlights

• Quarterly net income increased by $1.7 million, or 52.0%:  The $1.7 million increase in net income for the quarter ended June 30, 2011, compared to the same period last year, was driven by higher net interest income and a lower provision for loan losses.
• Basic and diluted EPS increased by $0.04:  Basic and diluted earnings per share for the quarter ended June 30, 2011, was $0.15, up $0.04 from the quarter ended June 30, 2010.
• Lower net charge-offs for both the three and six month periods: Net charge-offs declined by $102,000 during the quarter ended June 30, 2011, compared to the same period in 2010, while net charge-offs for the six months ended June 30, 2011, declined by $181,000 compared to the same period last year.
• Lower deposit and borrowing rates fueled a 12 basis point increase in net interest margin to 2.82%:  The net interest margin increased 12 basis points to 2.82% for the six months ended June 30, 2011, from 2.70% for the six months ended June 30, 2010.  
• Loan growth year-to-date:  During the six months ended June 30, 2011, loans increased in all categories except for mortgage loans held for sale and the consumer portfolio.  This increase includes a $33.6 million jump in commercial real estate loans and $5.2 million of growth in commercial non-mortgage loans.
• Linked quarter growth in Warehouse Purchase Program:  Compared to the quarter ended March 31, 2011, Warehouse Purchase Program loans increased by $104.5 million, or 34.8%.
• Deposit growth of $53.3 million: Deposits increased by $53.3 million from December 31, 2010, primarily due to growth of $43.8 million in interest-bearing demand accounts.

"We are very pleased with how the company performed in the first half of 2011," said President and Chief Executive Officer Gary Base.  "In addition to increasing our net income and improving our net interest margin, we've made strong gains in our lending activities. We're especially pleased with our increases in both commercial real estate and commercial non-mortgage lending."

Results of Operations for the Quarter Ended June 30, 2011

Net income for the three months ended June 30, 2011, was $4.9 million, an increase of $1.7 million, or 52.0%, from net income of $3.2 million for the three months ended June 30, 2010.  The increase in net income was driven by higher net interest income and a reduction in the provision for loan losses and was partially offset by lower non-interest income and higher non-interest expense.  Our basic and diluted earnings per share for the three months ended June 30, 2011, was $0.15, a $0.04 increase from $0.11 for the three months ended June 30, 2010.

The provision for loan losses was $1.1 million for the three months ended June 30, 2011, a decrease of $823,000, or 43.6%, from the three months ended June 30, 2010.  The balance of the allowance for loan losses increased by $1.8 million from June 30, 2010, to June 30, 2011, as management increased qualitative factors due to increased non-performing loans in the Company's loan portfolio and due to the continued weak economic conditions.  Despite these trends, the Company has not seen an increase in charge-offs, as net charge-offs declined by $102,000 during the second quarter of 2011 compared to the same period last year.  

Results of Operations for the Six Months Ended June 30, 2011

Net income for the six months ended June 30, 2011, was $11.4 million, an increase of $5.5 million, or 93.4%, from net income of $5.9 million for the six months ended June 30, 2010.  Net income for the six months ended June 30, 2011, included a $2.2 million net of tax gain on the sale of available for sale securities.  The increase in net income, which was also driven by higher net interest income and a lower provision for loan losses, was partially offset by a $2.0 million decline in the net gain on sales of loans.  Our basic and diluted earnings per share for the six months ended June 30, 2011, was $0.35, a $0.14 increase from $0.21 for the six months ended June 30, 2010.

Net Interest Spread and Margin

The net interest rate spread increased six basis points to 2.52% for the three months ended June 30, 2011, from 2.46% for the same period last year.  The net interest margin increased ten basis points to 2.83% for the three months ended June 30, 2011, from 2.73% for the same period last year.  The net interest rate spread increased nine basis points to 2.52% for the six months ended June 30, 2011, from 2.43% for the same period last year.  The net interest margin increased 12 basis points to 2.82% for the six months ended June 30, 2011, from 2.70% for the same period last year.  The increase in the net interest rate spread and margin was primarily attributable to lower deposit and borrowing rates.  Over the past year, we have adjusted the terms on our Absolute Checking product and certain money market accounts and modified $91.6 million in FHLB advances to reduce our cost of funds.  The net interest margin increased by three basis points, from 2.80% for the first quarter of 2011 to 2.83% for the second quarter of 2011, primarily due to improvement in our earning asset mix.

Financial Condition as of June 30, 2011

Total assets increased by $21.9 million, or 0.74%, to $2.96 billion at June 30, 2011, from $2.94 billion at December 31, 2010.  The increase in total assets was primarily due to a $112.4 million increase in securities held to maturity and a $38.2 million increase in net loans held for investment.  This increase was partially offset by a $71.4 million decrease in loans held for sale and a $33.6 million decrease in securities available for sale.  Total deposits increased by $53.3 million, or 2.6%, to $2.07 billion at June 30, 2011, from $2.02 billion at December 31, 2010, primarily due to a $46.4 million increase in our interest-bearing Absolute Checking product.

Loan Portfolio and Asset Quality

During the six months ended June 30, 2011, loans increased in all categories except for mortgage loans held for sale and the consumer portfolio.  This increase includes a $33.6 million jump in commercial real estate loans and $5.2 million of growth in commercial non-mortgage loans as compared to December 31, 2010.  Gross loans (including $420.6 million in mortgage loans held for sale) decreased by $32.2 million, or 2.0%, to $1.57 billion at June 30, 2011, from $1.60 billion at December 31, 2010.  

At June 30, 2011, mortgage loans held for sale consisted of $405.0 million in Warehouse Purchase Program loans and $15.6 million in loans originated for sale by our mortgage banking subsidiary, ViewPoint Mortgage ("VPM").  Mortgage loans held for sale decreased by $71.4 million, or 14.5%, from December 31, 2010, with $55.9 million of this variance attributable to a reduction in Warehouse Purchase Program loans purchased for sale under our standard loan participation agreement. The remaining $15.5 million of the decline was associated with loans originated for sale by VPM.  VPM originated $167.6 million in one- to four-family mortgage loans during the six months ended June 30, 2011, compared to $223.0 million during the six months ended June 30, 2010.  Of the $167.6 million originated during the six months ended June 30, 2011, $115.0 million were sold or committed to be sold to investors, generating a net gain on sale of loans of $3.8 million during that period.  The remaining $52.6 million of VPM production was retained in the Company's loan portfolio.  The decrease in mortgage production seen in the Warehouse Purchase Program and VPM compared to December 31, 2010, is primarily attributable to an overall decline in the mortgage market as refinance volume has dropped industry-wide.

Commercial real estate loans increased by $33.6 million, or 7.0%, from December 31, 2010.  Our commercial real estate portfolio consists almost exclusively of loans secured by existing, multi-tenanted commercial buildings.  91% of our commercial real estate loan balances are secured by properties located in Texas, a market that we do not believe has experienced the same level of economic pressure experienced in certain other geographic areas in the United States.  Our commercial non-mortgage portfolio increased by $5.2 million, or 13.1%, from December 31, 2010, as we continue to focus on developing this portfolio by adding experienced commercial lenders and applying local loan decisioning and a sophisticated loan pricing model.  During the six months ended June 30, 2011, we originated $14.3 million in commercial non-mortgage loans, with the average balance of this portfolio increasing by $4.6 million during the six months ended June 30, 2011, compared to the same time period last year.

Our non-performing loans to total loans ratio at June 30, 2011, was 1.56%, compared to 1.59% at December 31, 2010.  Non-performing loans increased by $238,000, from $17.6 million at December 31, 2010, to $17.9 million at June 30, 2011.  Compared to March 31, 2011, non-performing loans increased by $1.8 million, primarily due to increases of $1.3 million and $711,000 in one- to four-family and commercial real estate non-performing loans, respectively.  

Our allowance for loan losses at June 30, 2011, was $16.2 million, or 1.41% of total loans, compared to $14.8 million, or 1.34% of total loans, at December 31, 2010.  Our allowance for loan losses to non-performing loans was 90.45% at June 30, 2011, compared to 84.22% as of December 31, 2010.

Goodwill

In June 2011, the Company impaired its goodwill by $271,000, reducing the goodwill balance from $1.1 million at December 31, 2010, to $818,000 at June 30, 2011.  The goodwill resulted from the Bank's 2007 purchase of the assets of Bankers Financial Mortgage Group, Ltd (now VPM).    Due to the downturn in mortgage market conditions, reduced earnings and loan production personnel changes, the Company performed an evaluation of its goodwill outside of the normal annual review cycle which showed a $271,000 excess of carrying value of the goodwill over its fair value.

Conference Call

The Company will host an investor conference call to review these results on Friday, July 29, 2011, at 10 a.m., Central Time. Participants are asked to call (toll-free) 1-877-317-6789 at least five minutes prior to the call.  International participants are asked to call 1-412-317-6789 and participants in Canada are asked to call (toll-free) 1-866-605-3852.

The call and corresponding presentation slides will be webcast live on the home page of the Company's website, www.viewpointfinancialgroup.com.  An audio replay will be available one hour after the conclusion of the call at 1-877-344-7529, Conference #10001717.  This replay will be available until October 28, 2011, at 8 a.m., Central Time. The webcast will be archived on the Company's website until October 28, 2011.

About ViewPoint Financial Group, Inc.

ViewPoint Financial Group, Inc. is the holding company for ViewPoint Bank.  ViewPoint Bank operates 23 community bank offices and 12 loan production offices.  For more information, please visit www.viewpointbank.com or www.viewpointfinancialgroup.com.

When used in filings by the Company with the Securities and Exchange Commission (the "SEC") in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions, legislative changes, changes in policies by regulatory agencies, fluctuations in interest rates, the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses, the Company's ability to access cost-effective funding, fluctuations in real estate values and both residential and commercial real estate market conditions, demand for loans and deposits in the Company's market area, the industry-wide decline in mortgage production, competition, changes in management's business strategies and other factors set forth under Risk Factors in the Company's Form 10-K, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected.  The Company wishes to advise readers that the factors listed above could materially affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake – and specifically declines any obligation – to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.  

SOURCE ViewPoint Financial Group, Inc.