West Coast Bancorp Reports Strong Third Quarter 2010 Earnings

- Third quarter 2010 net income was $6.1 million or $.06 per diluted share, representing a return on average assets of .96% annualized.

- West Coast Bank's total risk based capital ratio improved significantly over the past year to 17.56% at September 30, 2010.

- Nonperforming assets of $104.4 million at September 30, 2010, continued their steady decline from previous periods and were down 50% over the past twelve months.

- Allowance for credit losses was 2.71% of total loans and 62% of nonperforming loans.

- Third quarter 2010 net interest margin improved to 3.71%, up from 3.14% in the same quarter last year.

- Average non-time deposits grew 7% since the third quarter in 2009 due to solid core deposit account growth.

Oct 22, 2010, 08:00 ET from West Coast Bancorp

LAKE OSWEGO, Ore., Oct. 22 /PRNewswire-FirstCall/ -- West Coast Bancorp (Nasdaq: WCBO) ("Bancorp" or "Company"), the parent company of West Coast Bank ("Bank") and West Coast Trust Company, Inc., today announced net income of $6.1 million or $.06 per diluted share for third quarter 2010 compared to a net loss for third quarter 2009 of $12.4 million or $.79 per diluted share. Year-to-date the Company reported net income of $1.3 million or $.01 per diluted share, compared to a net loss of $42.3 million or $2.71 per diluted share for the same period in 2009. There were 103.1 million weighted average diluted shares outstanding in the most recent quarter compared to 15.5 million in the third quarter 2009.

"The favorable operating trends that the Company experienced in the first half of 2010 continued in the third quarter with lower provisioning for loan losses, continued reduction in non-performing assets, an improved net interest margin, and reduced OREO costs", said Robert D. Sznewajs, President and Chief Executive Officer. "These positive trends combined with low cost funding and a growing core deposit account base, contributed to third quarter and year-to-date profitability for the Company", says Sznewajs.

Capital

Table 1 below shows regulatory capital ratios for Bancorp and the Bank at September 30, 2010 and 2009, and at June 30, 2010, illustrating significant and continued improvement as a result of the Company's capital raising activities and continued reductions in risk-weighted assets over the past twelve months. Due to favorable operating trends and improved capital ratios, the Company terminated the discretionary equity issuance program on August 6, 2010 after raising aggregate gross sales proceeds of approximately $7.9 million.

Table 1

SELECTED INFORMATION

Capital Ratios

September 30,

September 30,

June 30,

2010

2009

Change

2010

Change

West Coast Bancorp

Tier 1 capital ratio

16.96%

9.79%

7.17

16.50%

0.46

Total capital ratio

18.23%

11.05%

7.18

17.76%

0.47

Leverage ratio

12.84%

7.88%

4.96

11.90%

0.94

West Coast Bank

Tier 1 capital ratio

16.30%

9.49%

6.81

15.84%

0.46

Total capital ratio

17.56%

10.75%

6.81

17.10%

0.46

Leverage ratio

12.34%

7.64%

4.70

11.43%

0.91

Selective quarterly performance ratios

Return on average equity, annualized

8.84%

-29.39%

38.23

-5.92%

14.76

Return on average assets, annualized

0.96%

-1.85%

2.81

-0.58%

1.54

Efficiency ratio for the quarter to date

76.09%

95.97%

(19.88)

80.83%

4.74

Share and Per Share Figures

Quarter ended

Quarter ended

Quarter ended

(Shares in thousands)

September 30, 2010

September 30, 2009

Change

June 30, 2010

Change

Common shares outstanding at period end

96,424

15,647

80,777

96,421

3

Weighted average diluted shares

103,144

15,520

87,624

92,123

11,021

Income (loss) per diluted share

$                             0.06

$                           (0.79)

$              0.85

$                  (0.04)

$       0.10

Book value per common share

$                             2.63

$                           10.33

$            (7.70)

$                    2.55

$       0.08

Please see table 21 for additional information regarding outstanding shares and the possible dilutive effects of presently outstanding securities.

Balance Sheet Overview

Total loan balances declined $247 million or 14% from September 30, 2009 to $1.58 billion at September 30, 2010. The decline primarily reflects continued soft loan demand, as well as the Company's strategy to reduce risk exposure in selective loan segments over the past year. As a result, the real estate construction loan portfolio contracted $92 million or 61% since September 30, 2009, and measured 4% of total loans at the most recent quarter end compared to 8% a year ago. The Company also continued to exit a number of higher risk rated commercial loans, which contributed to the $90 million or 22% contraction in the commercial loan category from September 30 a year ago. However, over the last few months the Company has seen an increase in commercial loan originations as a result of its marketing efforts.

Table 2

PERIOD END LOANS

(Dollars in thousands)

September 30,

% of

September 30,

% of

Change

June 30,

% of

2010

total

2009

total

Amount

%

2010

total

Commercial loans

$         317,037

20%

$         406,807

22%

$          (89,770)

-22%

$         312,170

19%

 Commercial real estate construction

17,933

1%

43,944

2%

(26,011)

-59%

22,096

1%

 Residential real estate construction

39,955

3%

105,921

6%

(65,966)

-62%

52,062

3%

Total real estate construction loans

57,888

4%

149,865

8%

(91,977)

-61%

74,158

5%

   Mortgage

71,446

5%

78,144

4%

(6,698)

-9%

73,867

5%

   Nonstandard mortgage

13,294

1%

21,952

1%

(8,658)

-39%

14,348

1%

   Home equity

272,132

17%

282,552

16%

(10,420)

-4%

274,072

17%

Total real estate mortgage

356,872

23%

382,648

21%

(25,776)

-7%

362,287

23%

Commercial real estate loans

827,668

52%

863,658

48%

(35,990)

-4%

837,033

52%

Installment and other consumer loans

15,986

1%

19,023

1%

(3,037)

-16%

16,384

1%

Total

$      1,575,451

$      1,822,001

$        (246,550)

-14%

$      1,602,032

Yield on loans

5.44%

5.21%

0.23

5.46%

Over the past twelve months the Company's total cash equivalents and investment securities balances collectively grew $141 million to $758 million at September 30, 2010. Total cash equivalents, however, declined $87 million or 43% since September 30, 2009. This decline was largely a result of the second quarter 2010 prepayment of $99 million in Federal Home Loan Bank ("FHLB") term borrowings and reinvestment of excess cash in our investment portfolio over the past year. Total cash equivalents remained relatively unchanged from June 30, 2010.

Primarily due to the significant contraction in loan balances, the investment portfolio grew $228 million or 55% over the past twelve months. The majority of the growth occurred in U.S. Government Agency and mortgage-backed securities. At September 30, 2010, the expected duration of the investment securities portfolio, excluding FHLB stock, was 1.7 years.

Table 3

PERIOD END CASH EQUIVALENTS AND INVESTMENT SECURITIES

(Dollars in thousands)

September 30,

% of

September 30,

% of

Change

June 30,

% of

2010

total

2009

total

Amount

%

2010

total

Cash equivalents:

 Federal funds sold

$           4,605

1%

$           3,287

1%

$           1,318

40%

$         13,431

2%

 Interest-bearing deposits in other banks

113,144

15%

201,583

32%

(88,439)

-44%

109,781

14%

Total cash equivalents

117,749

16%

204,870

33%

(87,121)

-43%

123,212

16%

Investment securities:

 U.S. Treasury securities

14,551

2%

45,197

7%

(30,646)

-68%

14,688

2%

 U.S. Government Agency securities

221,450

28%

39,603

6%

181,847

459%

250,848

32%

 Corporate securities

9,014

1%

10,621

2%

(1,607)

-15%

9,674

1%

 Mortgage-backed securities

324,563

43%

233,206

38%

91,357

39%

300,485

39%

 Obligations of state and political sub.

58,206

8%

73,903

12%

(15,697)

-21%

58,564

8%

 Equity investments and other securities

12,290

2%

9,454

2%

2,836

30%

11,972

2%

Total investment securities

640,074

84%

411,984

67%

228,090

55%

646,231

84%

Total cash equivalents and investment securities

$       757,823

100%

$       616,854

100%

$       140,969

23%

$       769,443

100%

Tax equivalent yield on cash equivalents and investment securities

2.30%

2.42%

(0.12)

2.27%

Third quarter 2010 average total deposits of $2.0 billion declined 7% or $162 million from the same quarter in 2009. However, average non-time deposits increased $113 million or 7% over the same period. With excess balance sheet liquidity, we elected to reduce higher cost time deposit balances, which declined $274 million or 45% from average time deposit balances in the third quarter last year. Time deposits represented just 17% of the Company's average total deposits in the most recent quarter compared to 28% in third quarter 2009. The combination of the Company's favorable deposit mix and deposit pricing strategies helped reduce the average rate paid on total deposits to .51% in third quarter 2010, a decline of 63 basis points from 1.14% in third quarter 2009.

Table 4

QUARTERLY AVERAGE DEPOSITS BY CATEGORY

(Dollars in thousands)

Q3

% of

Q3

% of

Change

Q2

% of

2010

total

2009

total

Amount

%

2010

total

Demand deposits

$         550,695

28%

$         508,758

24%

$          41,937

8%

$         523,298

26%

Interest bearing demand

337,214

17%

311,319

15%

25,895

8%

332,850

16%

Savings

106,768

5%

93,611

4%

13,157

14%

104,052

5%

Money market

667,150

33%

635,511

29%

31,639

5%

657,454

32%

 Total non-time deposit accounts

1,661,827

83%

1,549,199

72%

112,628

7%

1,617,654

79%

Time deposits

336,678

17%

610,907

28%

(274,229)

-45%

431,669

21%

 Total

$      1,998,505

100%

$      2,160,106

100%

$      (161,601)

-7%

$      2,049,323

100%

Average rate on total deposits

0.51%

1.14%

(0.63)

0.64%

The number of checking accounts, the foundation from which we build broader client relationships, grew by over 6,000 accounts or 6% over the past twelve months.

Table 5

NUMBER OF DEPOSIT ACCOUNTS

(In thousands)

Sept. 30,

% of

Sept. 30,

% of

Change

June 30,

% of

Change

2010

total

2009

total

#

%

2010

total

#

% (1)

Demand deposits

50,757

32%

47,763

31%

2,994

6%

50,340

32%

417

3%

Interest bearing demand

51,891

34%

48,693

32%

3,198

7%

51,465

34%

426

3%

 Total checking accounts

102,648

66%

96,456

63%

6,192

6%

101,805

66%

843

3%

Savings

28,599

18%

26,227

17%

2,372

9%

28,488

18%

111

2%

Money market

14,499

9%

15,044

10%

(545)

-4%

14,575

9%

(76)

-2%

Time deposits

10,499

7%

14,907

10%

(4,408)

-30%

11,681

7%

(1,182)

-40%

 Total

156,245

100%

152,634

100%

3,611

2%

156,549

100%

(304)

-1%

(1) Annualized.

Operating Results Improved Significantly from Third Quarter 2009

As shown in Table 6 below, third quarter 2010 net income of $6.1 million increased $18.5 million from a net loss of $12.4 million in the same quarter of 2009 and increased $9.9 million from a $3.8 million net loss in the second quarter 2010. The improved year-over-year third quarter was primarily a result of significantly lower credit costs, including an $18.7 million decrease in the provision for credit losses and a $3.0 million decline in Other Real Estate Owned ("OREO") valuation adjustments and losses upon OREO dispositions. Excluding a prepayment fee of $2.3 million associated with prepayment of $99 million in FHLB borrowings and effects of taxes, the Company's adjusted net income in the second quarter of 2010 would have been $.2 million. See reconciliation below.

Table 6

SUMMARY INCOME STATEMENT

(Dollars in thousands)

Q3

Q3

Change

Q2

Change

2010

2009

$

%

2010

$

%

Net interest income

$     21,875

$     19,145

$    2,730

14%

$     18,910

$     2,965

16%

Provision for credit losses

1,567

20,300

18,733

92%

7,758

6,191

80%

Noninterest income

8,069

4,971

3,098

62%

9,625

(1,556)

-16%

Noninterest expense

23,003

23,489

486

2%

22,909

(94)

0%

Income (loss) before income taxes

5,374

(19,673)

25,047

127%

(2,132)

7,506

352%

Provision (benefit) for income taxes

(676)

(7,265)

(6,589)

-91%

1,717

2,393

139%

  Net income (loss)

$       6,050

$   (12,408)

$  18,458

149%

$     (3,849)

$     9,899

257%

Reconciliation of adjusted net income to GAAP  

Net income (loss)

$       6,050

$   (12,408)

$  18,458

149%

$     (3,849)

$     9,899

257%

Less FHLB prepayment fee (1)

-

-

-

(2,326)

2,326

Less: Impact of taxes:

  Unrealized gain on securities

(676)

-

(676)

(1,798)

1,122

  Increase in deferred tax assets-tax return adjustments

-

-

-

3,515

(3,515)

Net income (loss) excluding FHLB prepayment fee and taxes (2)

$       5,374

$   (12,408)

$  17,782

143%

$          194

$     5,180

2670%

(1) No tax benefit was recognized for FHLB prepayment fee.

(2) Management uses this non-GAAP information internally and has disclosed it to investors based on its belief that the information provides additional , valuable information relating to its operating performance as compared to prior periods.

Third quarter 2010 net interest income of $21.9 million increased $2.7 million or 14% from the same quarter in 2009. This increase was mainly due to a reduction in interest expense on deposits and borrowings as well as lower interest reversals on nonaccrual loans. The net interest margin of 3.71% in the most recent quarter expanded 57 basis points from third quarter 2009. Consistent with expectations, the net interest margin widened 23 basis points from 3.48% in second quarter 2010 excluding the impact of the FHLB prepayment fee in that quarter. See reconciliation to GAAP for second quarter 2010 net interest margin in Table 7 below. The spread between the yield earned on loans and rate paid on interest bearing deposits improved 102 basis points year-over-year in the third quarter notwithstanding a significant shift in average earning assets from higher yielding loan balances to cash equivalents and investment securities balances. Collectively, cash equivalents and investment securities earned 314 basis points less than the loan portfolio during the most recent quarter.

Table 7

NET INTEREST SPREAD AND MARGIN

(Annualized, tax-equivalent basis)

Q3

Q3

Q2

2010

2009

Change

2010

Change

Yield on average interest-earning assets

4.41%

4.53%

(0.12)

4.39%

0.02

Rate on average interest-bearing liabilities

1.00%

1.73%

(0.73)

1.72%

(0.72)

Net interest spread

3.41%

2.80%

0.61

2.67%

0.74

Net interest margin

3.71%

3.14%

0.57

3.11%

0.60

Impact of FHLB prepayment fee in Q2 2010

0.00%

0.00%

-

-0.37%

0.37

Net interest margin excluding FHLB prepayment fee

3.71%

3.14%

0.57

3.48%

0.23

As shown in Table 8 below, third quarter 2010 total noninterest income of $8.1 million increased $3.1 million or 62% from the same quarter last year. The increase was mainly due to a $3.0 million improvement in OREO valuation adjustments and gains or losses associated with OREO dispositions.

Excluding OREO valuation adjustments and gain or losses from both quarters, the Company's noninterest income was flat year-over-year third quarter. The $.5 million or 20% growth in payment system revenues and $.1 million increase in service charges on deposit accounts offset the declines in gains on sales of loans and trust and investment services revenues.

Table 8

NONINTEREST INCOME

(Dollars in thousands)

Q3

Q3

Change

Q2

Change

2010

2009

$

%

2010

$

%

Noninterest income

  Service charges on deposit accounts

$            4,145

$            4,038

$       107

3%

$            4,213

$         (68)

-2%

  Payment systems related revenue

2,998

2,501

497

20%

2,875

123

4%

  Trust and investment services revenues

978

1,140

(162)

-14%

1,167

(189)

-16%

  Gains on sales of loans

182

466

(284)

-61%

306

(124)

-41%

  Other  

728

824

(96)

-12%

785

(57)

-7%

  Gain on sales of securities

-

-

-

0%

488

(488)

-100%

Total

9,031

8,969

62

1%

9,834

(803)

-8%

  OREO gains (losses) on sale

549

(201)

750

373%

1,048

(499)

-48%

  OREO valuation adjustments  

(1,511)

(3,797)

2,286

60%

(1,257)

(254)

-20%

Total

(962)

(3,998)

3,036

76%

(209)

(753)

-360%

Total noninterest income

$            8,069

$            4,971

$    3,098

62%

$            9,625

$    (1,556)

-16%

As presented in Table 9 below, third quarter 2010 total noninterest expense of $23.0 million decreased $.5 million from the same quarter in 2009 as declines in FDIC assessment and OREO related expenses were offset by higher salaries and employee benefits reflective of increased employee incentives and restricted stock expenses. The increase in payment system expense was directly associated with higher transaction volumes.

Table 9

NONINTEREST EXPENSE

(Dollars in thousands)

Q3

Q3

Change

Q2

Change

2010

2009

$

%

2010

$

%

Noninterest expense

  Salaries and employee benefits

$            11,836

$            10,753

$    (1,083)

-10%

$            11,322

$       (514)

-5%

  Equipment

1,525

1,758

233

13%

1,606

81

5%

  Occupancy

2,216

2,247

31

1%

2,249

33

1%

  Payment systems related expense

1,214

1,043

(171)

-16%

1,212

(2)

0%

  Professional fees

1,147

1,091

(56)

-5%

1,161

14

1%

  Postage, printing and office supplies

791

799

8

1%

737

(54)

-7%

  Marketing

861

832

(29)

-3%

738

(123)

-17%

  Communications

374

402

28

7%

381

7

2%

  Other noninterest expense

3,039

4,564

1,525

33%

3,503

464

13%

Total  

$            23,003

$            23,489

$         486

2%

$            22,909

$         (94)

0%

Income Taxes and Deferred Tax Asset Valuation Allowance

Third quarter 2010 income tax benefit was $.7 million compared to a benefit for income taxes of $7.3 million in the same quarter 2009.  The benefit for income taxes for the third quarter 2010 was the result of an increase in the unrealized gain on our investment securities. Income taxes in third quarter 2010 reflected tax expense determined on pretax income which was offset by a corresponding income tax benefit resulting from a reduction in the deferred tax asset and its associated valuation allowance.

The Company maintained a valuation allowance of $22.0 million against the deferred tax asset balance of $27.6 million as of September 30, 2010, for a net deferred tax asset of $5.6 million. This represented a $.7 million increase from the June 30, 2010 net deferred tax asset balance of $4.9 million.

Table 10

PROVISION (BENEFIT) FOR INCOME TAXES

(Dollars in thousands)

Q3

Q3

Q2

2010

2009

Change

2010

Change

Provision (benefit) for income taxes net of decrease  

  in deferred tax asset valuation allowance

$              -

$      (7,265)

$        7,265

$              -

$              -

Provision (benefit) for income taxes from deferred

  tax asset valuation allowance:

  Unrealized gain on securities

(676)

-

(676)

(1,798)

1,122

   Increase in deferred tax assets-tax return adjustments

-

-

-

3,515

(3,515)

Total provision (benefit) for income taxes

$         (676)

$      (7,265)

$        6,589

$        1,717

$      (2,393)

Credit Quality

The Company recorded a third quarter 2010 provision for credit losses of $1.6 million, a decline from $20.3 million in the same quarter of 2009. Consistent with the first two quarters of 2010, the latest quarter marked a significant reduction in loan net charge-offs compared to the corresponding quarter a year ago. Third quarter 2010 net charge-offs of $3.3 million, or .82% of average loans on an annualized basis, declined $15.5 million from $18.8 million in the third quarter of 2009, and was at their lowest quarterly level in over two years. The reduction in net charge-offs from the same quarter in 2009 was primarily attributable to the commercial, residential real estate construction, and mortgage loan categories. The Company's future provisioning will continue to be heavily dependent on the local real estate market, level of market interest rates, and general economic conditions nationally and in the areas in which we do business.

Table 11

ALLOWANCE FOR CREDIT LOSSES AND NET CHARGEOFFS

(Dollars in thousands)

Q3

Q2

Q1

Q4

Q3

2010

2010

2010

2009

2009

Allowance for credit losses, beginning of period

$          44,347

$          41,299

$          39,418

$          40,036

$          38,569

Total provision for credit losses

1,567

7,758

7,634

35,233

20,300

Loan net charge-offs:

 Commercial

524

1,684

839

13,271

5,744

   Commercial real estate construction

-

248

487

-

324

   Residential real estate construction

813

432

734

10,538

8,536

 Total real estate construction

813

680

1,221

10,538

8,860

   Mortgage

449

478

909

4,734

3,018

   Nonstandard mortgage

5

641

1,497

692

725

   Home equity

568

627

914

1,346

203

 Total real estate mortgage

1,022

1,746

3,320

6,772

3,946

 Commercial real estate

339

275

95

4,733

(79)

 Installment and consumer

272

146

137

285

128

 Overdraft

326

179

141

252

234

 Total loan net charge-offs

3,296

4,710

5,753

35,851

18,833

Total allowance for credit losses

$          42,618

$          44,347

$          41,299

$          39,418

$          40,036

Components of allowance for credit losses:

 Allowance for loan losses

$          41,753

$          43,329

$          40,446

$          38,490

$          39,075

 Reserve for unfunded commitments

865

1,018

853

928

961

Total allowance for credit losses

$          42,618

$          44,347

$          41,299

$          39,418

$          40,036

Net loan charge-offs to average loans (annualized)

0.82%

1.15%

1.37%

7.94%

4.01%

Allowance for loan losses to total loans

2.65%

2.70%

2.43%

2.23%

2.14%

Allowance for credit losses to total loans

2.71%

2.77%

2.48%

2.29%

2.20%

Allowance for loan losses to nonperforming loans

61%

55%

47%

39%

30%

Allowance for credit losses to nonperforming loans

62%

56%

48%

40%

30%

The September 30, 2010 allowance for credit losses of $42.6 million or 2.71% of total loan balances increased from $40.0 million or 2.20% of total loan balances a year ago. The increase in the allowance for credit losses relative to total loan balances over the past twelve months was due to higher general valuation allowances and a larger unallocated allowance in the September 30, 2010 allowance model. At September 30, 2010, the unallocated portion of the allowance for loan losses amounted to $7.0 million or 16% of the total allowance for credit losses, an increase from $3.9 million or 10%, respectively, at the end of the third quarter 2009. As shown in Table 18, year-to-date provision for credit losses exceeded net charge-offs by $3.2 million. During the third quarter 2010, however, the net charge-offs exceeded the provision for credit losses by $1.7 million due to a slowdown in the unfavorable risk rating migration within the loan portfolio as well as a reduction in higher risk rated loan balances. These changes caused the September 30, 2010 allowance for credit losses as a percentage of total loans to decline slightly from 2.77% at June 30, 2010. The Company's estimate of appropriate reserve amounts will continue to be primarily dependent on the loan portfolio's credit quality performance trends, including net charge-offs, which will be heavily dependent on local economic conditions.

Total nonperforming assets were $104.4 million or 4.2% of total assets as of September 30, 2010, which represented the sixth consecutive quarterly decline. The balance of nonperforming loans has decreased 50% or $104.2 million from $208.6 million a year ago, at which time total nonperforming assets represented 7.9% of total assets. The balance of total nonperforming assets at quarter end reflected write-downs totaling $56.4 million or 36% from the original principal loan balance compared to write-downs of 29% twelve months ago. Total nonperforming assets fell $11.8 million or 10% during the most recent quarter. The allowance for credit losses represented 62% of nonperforming loans at September 30, 2010, an increase from 30% a year ago.

Table 12

NONPERFORMING ASSETS

(Dollars in thousands)

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

2010

2010

2010

2009

2009

Loans on nonaccrual status:

Commercial

$          13,319

$          15,317

$          24,856

$          36,211

$          49,871

Real estate construction:

 Commercial real estate construction

3,391

3,391

3,939

1,488

2,449

 Residential real estate construction

13,316

19,465

19,776

22,373

42,277

Total real estate construction

16,707

22,856

23,715

23,861

44,726

Real estate mortgage:

 Mortgage

13,040

14,535

9,829

11,563

12,498

 Nonstandard mortgage

5,150

6,121

9,327

8,752

10,810

 Home equity

1,538

2,198

2,248

2,036

1,599

Total real estate mortgage

19,728

22,854

21,404

22,351

24,907

Commercial real estate

18,792

17,542

15,322

16,778

12,463

Installment and consumer

-

74

172

144

39

Total nonaccrual loans

68,546

78,643

85,469

99,345

132,006

90 days past due not on nonaccrual

-

-

-

-

-

 Total nonperforming loans

68,546

78,643

85,469

99,345

132,006

Other real estate owned

35,814

37,578

45,238

53,594

76,570

Total nonperforming assets

$        104,360

$        116,221

$        130,707

$        152,939

$        208,576

Nonperforming loans to total loans

4.35%

4.91%

5.13%

5.76%

7.25%

Nonperforming assets to total assets

4.20%

4.64%

4.91%

5.60%

7.86%

Over the past year total nonaccrual loans declined $63.5 million or 48% to $68.5 million at September 30, 2010. This reduction was largely due to the Company taking ownership of additional residential site development and construction properties related to loans which previously were on nonaccrual status, nonaccrual loan payoffs, and the disposition of certain large nonaccrual commercial loans. At September 30, 2010, the total nonaccrual loan portfolio had been written down 22% from the original principal balance compared to 24% at the end of the third quarter a year ago.

As indicated in Table 13 below, the Company remains focused on OREO property disposition activities. During the most recent quarter, the Company disposed of 51 OREO properties with a book value of $5.4 million. At September 30, 2010, the OREO portfolio consisted of 448 properties valued at $35.8 million. The quarter end OREO balance reflected write-downs totaling 53% from the original loan principal compared to 38% twelve months earlier. The largest balances in the OREO portfolio at September 30, 2010 were attributable to residential homes followed by residential site development projects. The site development projects remaining as of quarter end were primarily located in Vancouver and Washougal, Washington and in Salem, Oregon.

Table 13

OTHER REAL ESTATE OWNED ACTIVITY

(Dollars in thousands)

Q3 2010

Q2 2010

Q1 2010

Q4 2009

Q3 2009

Amount

#

Amount

#

Amount

#

Amount

#

Amount

#

Beginning balance

$      37,578

446

$      45,238

596

$      53,594

672

$      76,570

301

$      83,830

335

 Additions to OREO

5,119

53

7,209

20

5,003

15

26,293

536

12,064

36

 Dispositions of OREO

(5,372)

(51)

(13,612)

(170)

(11,000)

(91)

(42,329)

(165)

(15,527)

(70)

 OREO valuation adjustments

(1,511)

-

(1,257)

-

(2,359)

-

(6,940)

-

(3,797)

-

Ending balance

$      35,814

448

$      37,578

446

$      45,238

596

$      53,594

672

$      76,570

301

Table 14

OTHER REAL ESTATE OWNED BY PROPERTY TYPE

(Dollars in thousands)

Sept. 30,

# of

June 30,

# of

March 31,

# of

2010

properties

2010

properties

2010

properties

Homes

$               15,341

66

$               17,254

75

$               21,040

91

Residential site developments

8,096

281

7,296

265

13,488

400

Lots

4,062

61

4,750

67

5,114

71

Land

3,525

10

3,474

10

2,682

7

Income producing properties

3,212

7

2,996

6

1,094

4

Condominiums

881

12

1,111

12

1,111

12

Multifamily

697

11

697

11

709

11

 Total

$               35,814

448

$               37,578

446

$               45,238

596

Other:

The Company will hold a Webcast conference call Friday, October 22, 2010, at 10:00 a.m. Pacific Time, during which the Company will discuss third quarter 2010 results and key activities. To access the conference call via a live Webcast, go to www.wcb.com and click on Investor Relations and the "3rd Quarter 2010 Earnings Conference Call" tab. The conference call may also be accessed by dialing (877) 247-4281 Conference ID#: 11014366 a few minutes prior to 10:00 a.m. Pacific Time. The call will be available for replay by accessing the Company's website at www.wcb.com and following the same instructions.

West Coast Bancorp is a Northwest bank holding company with $2.5 billion in assets and 65 offices in Oregon and Washington.  The Company combines the sophisticated products and expertise of larger banks with the local decision making, market knowledge and customer service of a community bank.  For more information, visit the Company's web site at www.wcb.com.

Forward Looking Statements:

Statements in this release regarding future events, performance or results are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") and are made pursuant to the safe harbors of the PSLRA.  These statements can often be identified by words such as "expects," "believes," "anticipates," or "will," or other words of similar meaning. Actual results could be quite different from those expressed or implied by the forward-looking statements, which give our current expectations about the future and are not guarantees.  Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.

A number of factors could cause results to differ significantly from our expectations, including, among others, the effects of (i) market conditions in our service areas on our efforts to continue to reduce our levels of nonperforming assets and increase loan originations as well as (ii) all risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2009, including under the headings "Forward Looking Statement Disclosure" and in the section "Risk Factors," and in our most recent Quarterly Report on Form 10-Q.

Table 15

INCOME STATEMENT

(Dollars in thousands)

Q3

Q3

Change

Q2

Year to date

Year to date

2010

2009

$

%

2010

2010

2009

Net interest income

  Interest and fees on loans

$      21,800

$      24,535

$      (2,735)

-11%

$      22,416

$      67,059

$      76,899

  Interest on investment securities

4,160

3,063

1,097

36%

4,237

12,604

8,113

  Other interest income

93

127

(34)

-27%

163

404

190

Total interest income

26,053

27,725

(1,672)

-6%

26,816

80,067

85,202

Interest expense on deposit accounts

2,553

6,216

3,663

59%

3,275

10,121

19,060

Interest on borrowings and subordinated debentures

1,625

2,364

739

31%

4,631

8,528

6,653

Total interest expense

4,178

8,580

4,402

51%

7,906

18,649

25,713

  Net interest income

21,875

19,145

2,730

14%

18,910

61,418

59,489

Provision for credit losses

1,567

20,300

18,733

92%

7,758

16,959

54,824

Noninterest income

  Service charges on deposit accounts

4,145

4,038

107

3%

4,213

11,954

11,976

  Payment systems related revenue

2,998

2,501

497

20%

2,875

8,409

6,997

  Trust and investment services revenues

978

1,140

(162)

-14%

1,167

3,124

3,030

  Gains on sales of loans

182

466

(284)

-61%

306

629

1,565

  Net OREO valuation adjustments and gains (losses) on sales

(962)

(3,998)

3,036

76%

(209)

(3,229)

(12,485)

  Other  

728

824

(96)

-12%

785

2,270

3,553

  Other-than-temporary impairment losses

-

-

-

0%

-

-

(192)

  Gain on sales of securities

-

-

-

100%

488

945

833

Total noninterest income

8,069

4,971

3,098

62%

9,625

24,102

15,277

Noninterest expense

  Salaries and employee benefits

11,836

10,753

(1,083)

-10%

11,322

34,333

33,215

  Equipment

1,525

1,758

233

13%

1,606

4,707

5,500

  Occupancy

2,216

2,247

31

1%

2,249

6,649

6,908

  Payment systems related expense

1,214

1,043

(171)

-16%

1,212

3,430

2,960

  Professional fees

1,147

1,091

(56)

-5%

1,161

3,169

3,389

  Postage, printing and office supplies

791

799

8

1%

737

2,332

2,420

  Marketing

861

832

(29)

-3%

738

2,286

2,158

  Communications

374

402

28

7%

381

1,137

1,199

  Goodwill impairment

-

-

-

0%

-

-

13,059

  Other noninterest expense

3,039

4,564

1,525

33%

3,503

8,964

13,299

Total noninterest expense

23,003

23,489

486

2%

22,909

67,007

84,107

Net income (loss) before income taxes

5,374

(19,673)

25,047

127%

(2,132)

1,554

(64,165)

Provision (benefit) for income taxes

(676)

(7,265)

(6,589)

-91%

1,717

241

(21,819)

Net income (loss)

$        6,050

$    (12,408)

$      18,458

149%

$      (3,849)

$        1,313

$    (42,346)

Net income (loss) per share:

    Basic

$          0.06

$        (0.79)

$          0.85

$        (0.04)

$          0.01

$        (2.71)

    Diluted

$          0.06

$        (0.79)

$          0.85

$        (0.04)

$          0.01

$        (2.71)

Weighted average common shares

94,776

15,520

79,256

92,123

84,776

15,510

Weighted average diluted shares

103,144

15,520

87,624

92,123

101,002

15,510

Tax equivalent net interest income

$      22,163

$      19,505

$        2,658

$      19,205

$      62,322

$      60,630

Table 16

BALANCE SHEETS

(Dollars in thousands)

Sept. 30,

Sept. 30,

June 30,

Dec. 31,

Dec. 31,

2010

2009

2010

2009

2008

Assets:

Cash and due from banks

$             57,216

$             46,772

$             45,685

$              47,708

$            58,046

Federal funds sold

4,605

3,287

13,431

20,559

6,682

Interest-bearing deposits in other banks

113,144

201,583

109,781

234,830

50

 Total cash and cash equivalents

174,965

251,642

168,897

303,097

64,778

Investment securities

640,074

411,984

646,231

562,277

198,515

Total loans

1,575,451

1,822,001

1,602,032

1,724,842

2,064,796

Allowance for loan losses

(41,753)

(39,075)

(43,329)

(38,490)

(28,920)

Loans, net

1,533,698

1,782,926

1,558,703

1,686,352

2,035,876

OREO, net

35,814

76,570

37,578

53,594

70,110

Goodwill and other intangibles

418

716

477

637

14,054

Total interest earning assets

2,335,882

2,440,506

2,374,787

2,544,415

2,274,448

Other assets

101,410

129,519

93,600

127,590

132,807

    Total assets

$        2,486,379

$        2,653,357

$        2,505,486

$         2,733,547

$       2,516,140

Liabilities and Stockholders' Equity:

Demand

$           565,543

$           522,629

$           533,865

$            542,215

$          478,292

Savings and interest-bearing demand

442,892

401,256

433,001

422,838

346,206

Money market

675,402

651,198

661,913

657,306

615,588

Time deposits

291,218

580,743

375,321

524,525

584,293

Total deposits

1,975,055

2,155,826

2,004,100

2,146,884

2,024,379

Borrowings and subordinated debentures

215,199

314,299

215,199

314,299

274,059

Reserve for unfunded commitments

865

961

1,018

928

1,014

Other liabilities

20,553

20,588

17,757

22,378

18,501

    Total liabilities

2,211,672

2,491,674

2,238,074

2,484,489

2,317,953

Stockholders' equity

274,707

161,683

267,412

249,058

198,187

    Total liabilities and stockholders' equity

$        2,486,379

$        2,653,357

$        2,505,486

$         2,733,547

$       2,516,140

Table 17

AVERAGE BALANCE SHEETS

(Dollars in thousands)

QTD Sept. 30,

QTD Sept. 30,

QTD June 30,

Year to date

Year to date

2010

2009

2010

2010

2009

Cash and due from banks

$             50,087

$             48,354

$             48,232

$              48,279

$            46,914

Federal funds sold

4,379

5,667

3,605

6,935

5,128

Interest-bearing deposits in other banks

138,503

187,865

249,007

204,604

90,747

 Total cash and cash equivalents

192,969

241,886

300,844

259,818

142,789

Investment securities

640,216

387,830

578,669

592,391

296,140

Total loans

1,586,849

1,865,050

1,645,189

1,644,509

1,956,562

Allowance for loan losses

(42,917)

(39,336)

(42,895)

(41,934)

(36,018)

Loans, net

1,543,932

1,825,714

1,602,294

1,602,575

1,920,544

Total interest earning assets

2,372,072

2,460,793

2,477,349

2,449,722

2,363,608

Other assets

125,273

206,485

158,604

151,134

212,298

    Total assets

$        2,502,390

$        2,661,915

$        2,640,411

$         2,605,918

$       2,571,771

Demand

$           550,695

$           508,758

$           523,298

$            531,276

$          485,715

Savings and interest-bearing demand

443,982

404,930

436,902

433,434

379,734

Money market

667,150

635,511

657,454

655,823

609,830

Time deposits

336,678

610,907

431,669

424,724

598,626

Total deposits

1,998,505

2,160,106

2,049,323

2,045,257

2,073,905

Borrowings and subordinated debentures

215,199

314,299

313,210

280,540

300,643

Total interest bearing liabilities

1,663,009

1,965,647

1,839,235

1,794,521

1,888,833

Other liabilities

17,164

20,035

17,118

17,839

17,774

Stockholders' equity

271,522

167,475

260,760

262,282

179,449

    Total liabilities and stockholders' equity

$        2,502,390

$        2,661,915

$        2,640,411

$         2,605,918

$       2,571,771

The following table presents information with respect to the Company's allowance for credit losses.

Table 18

ALLOWANCE FOR CREDIT LOSSES

(Dollars in thousands)

Year to date

Year to date

September 30,

September 30,

2010

2009

Allowance for credit losses, beginning of period

$                                39,418

$                                29,934

 Provision for credit losses loans other than two-step loans

16,517

$                                48,607

 Provision for credit losses two-step loans

442

6,217

Total provision for credit losses

16,959

54,824

Loan charge-offs:

 Commercial

3,961

8,869

   Commercial real estate construction

735

324

   Residential real estate construction

1,852

17,789

   Two-step residential construction

442

6,833

 Total real estate construction

3,029

24,946

   Mortgage

1,897

5,280

   Nonstandard mortgage

2,147

2,975

   Home equity

2,134

2,014

 Total real estate mortgage

6,178

10,269

 Commercial real estate

734

646

 Installment and consumer

637

545

 Overdraft

801

766

 Total loan charge-offs

15,340

46,041

Loan recoveries:

 Commercial

914

734

   Commercial real estate construction

-

-

   Residential real estate construction

315

-

   Two-step residential construction

-

195

 Total real estate construction

315

195

   Mortgage

61

3

   Nonstandard mortgage

4

1

   Home equity

25

1

 Total real estate mortgage

90

5

 Commercial real estate

25

147

 Installment and consumer

82

56

 Overdraft

155

182

 Total loan recoveries

1,581

1,319

   Net charge-offs

13,759

44,722

Total allowance for credit losses

$                                42,618

$                                40,036

Components of allowance for credit losses:

 Allowance for loan losses

$                                41,753

$                                39,075

 Reserve for unfunded commitments

865

961

Total allowance for credit losses

$                                42,618

$                                40,036

Net loan charge-offs to average loans

1.12%

3.06%

The following table presents information about the Company's total delinquent loans.

Table 19

DELINQUENT LOANS 30-89 DAYS PAST DUE AS A % OF LOAN CATEGORY

(Dollars in thousands)

September 30,

September 30,

June 30,

2010

2009

2010

Commercial loans

0.36%

0.16%

0.14%

Real estate construction loans

0.00%

5.68%

1.48%

Real estate mortgage loans

0.43%

0.75%

0.18%

Commercial real estate loans

0.34%

0.14%

0.04%

Installment and other consumer loans

0.25%

0.09%

1.27%

Total delinquent loans 30-89 days past due

$                           5,502

$                         13,136

$                           2,743

Delinquent loans to total loans

0.35%

0.72%

0.17%

The following table presents information about the Company's activity in other real estate owned.

Table 20

OTHER REAL ESTATE OWNED ACTIVITY

(Dollars in thousands)

Two-step related OREO activity

Non two-step related OREO activity

Total OREO related activity

Amount

Number

Amount

Number

Amount

Number

Full year 2009:

Beginning balance January 1, 2009

$               60,022

251

$               10,088

37

$               70,110

288

 Additions to OREO

34,724

114

39,450

585

74,174

699

 Capitalized improvements

4,650

283

4,933

 Valuation adjustments

(14,704)

(3,858)

(18,562)

 Disposition of OREO properties

(59,030)

(243)

(18,031)

(72)

(77,061)

(315)

Ending balance Dec. 31, 2009

$               25,662

122

$               27,932

550

$               53,594

672

Quarterly 2010

 Additions to OREO

288

2

3,559

13

3,847

15

 Capitalized improvements

987

169

1,156

 Valuation adjustments

(1,846)

(513)

(2,359)

 Disposition of OREO properties

(6,937)

(27)

(4,063)

(64)

(11,000)

(91)

Ending balance March 31, 2010

$               18,154

97

$               27,084

499

$               45,238

596

 Additions to OREO

-

1

5,924

19

5,924

20

 Capitalized improvements

497

788

1,285

 Valuation adjustments

(493)

(764)

(1,257)

 Disposition of OREO properties

(5,197)

(18)

(8,415)

(152)

(13,612)

(170)

Ending balance June 30, 2010

$               12,961

80

$               24,617

366

$               37,578

446

 Additions to OREO

-

4,515

53

4,515

53

 Capitalized improvements

377

227

604

 Valuation adjustments

(1,150)

(361)

(1,511)

 Disposition of OREO properties

(1,999)

(11)

(3,373)

(40)

(5,372)

(51)

Ending balance September 30, 2010

$               10,189

69

$               25,625

379

$               35,814

448

The following table presents information regarding common shares outstanding at September 30, 2010 on an actual and diluted basis.

Table 21

COMMON SHARE AND DILUTIVE SHARE INFORMATION

(Shares in thousands)

Number

of shares

Common shares outstanding at September 30, 2010

96,424

Common shares issuable on conversion of series B preferred stock (1)

6,066

Dilutive impact of warrants (2,3)

2,215

Dilutive impact of stock options and restricted stock (3)

87

 Total potential dilutive shares (4)

104,792

(1) 121,328 shares of series B preferred stock outstanding at September 30, 2010.

(2) Warrants to purchase 240,000 shares at a price of $100 per series B preferred share outstanding at September 30, 2010.

(3) The estimated dilutive impact of warrants, options, and restricted stock is shown. These figures are calculated under the treasury method utilizing an average stock price of $2.45 for the period and do not reflect the number of common shares that would be issued if securities were exercised in full.

(4) Potential dilutive shares is a non-GAAP figure and not the weighted average diluted shares calculated in accordance with GAAP.

SOURCE West Coast Bancorp



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