MAYAGUEZ, Puerto Rico, Jan. 30 /PRNewswire-FirstCall/ -- W Holding
Company, Inc. (NYSE: "WHI"), the financial holding company of
Westernbank Puerto Rico, today reported its financial position and
results of operations for the quarter and year ended December 31,
2006. YEAR-END AND FOURTH QUARTER HIGHLIGHTS: For the year ended
December 31, 2006, W Holding reported a net income of $100.5
million or $0.39 earnings per basic common share ($0.38 on a
diluted basis). This is a decrease of $62.6 million or 38.36%, when
compared to a net income of $163.1 million or $0.77 earnings per
basic common share ($0.74 on a diluted basis) for the same period
in 2005. Net income for the fourth quarter of year 2006, was $17.9
million or $0.05 earnings per basic and diluted common share, when
compared to $30.2 million or $0.13 earnings per basic common share
($0.12 on a diluted basis) for the same quarter in 2005, a decrease
of $12.3 million or 40.81%. The fourth quarter of year 2006 was
mainly impacted by the following: * an increase of $5.5 million in
the current income tax provision, mainly as a result of additional
income tax provisions for the transitory income tax of 2% approved
by the Government of Puerto Rico on May 13, 2006, a provision of
$2.9 million for income tax contingencies, and a change in the
proportion between exempt and taxable income, therefore increasing
the Company's effective tax rate. The transitory income taxes of 2%
and 2.5% (the latter was approved by the Government of Puerto Rico
on August 1, 2005) are intended to be temporary in nature and are
scheduled to end on December 31, 2006; * an increase of $5.2
million in noninterest expenses, principally attributed to the
Company's continued growth and expansion in all of its business
areas, mainly in the San Juan Metropolitan area; * a $14.0 million
increase in the provision for loan losses as a result of the
increases in the Company's loan portfolios, net loans charged-off,
non-performing loans and loss allowances on classified loans; * and
a $10.0 million increase in net interest income. The net income for
the year ended December 31, 2006, was mainly impacted by: * an
increase of $24.1 million in the current income tax provision,
which includes a provision for income tax contingencies of $10.2
million for the year ended December 31, 2006; * an increase of
$16.3 million in noninterest expenses; * an increase of $33.6
million in the provision for loan losses; * and a $7.2 million
increase in net interest income. Effective January 1, 2007, the
Company adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 48 ("FIN No. 48"), "Accounting for Uncertainty
in Income Taxes". For the preliminary cumulative effect of the
adoption of FIN No. 48, refer to the "New Accounting Pronouncement"
section. Overview W Holding reported net income for the fourth
quarter of 2006 of $17.9 million or $0.05 earnings per basic common
and diluted common share, when compared to $30.2 million or $0.13
earnings per basic common share ($0.12 on a diluted basis) for the
same quarter in 2005, a decrease of $12.3 million or 40.81%. Net
income for the fourth quarter of 2006 was impacted by a $14.0
million increase in the provision for loan losses (mainly
attributed to the loan portfolio of the Company's asset-based
lending division), an increase of $5.2 million in noninterest
expenses and an increase of $6.4 million in the provision for
income taxes. Such effects were partially offset by an increase of
$10.0 million or 13.26% in net interest income and a positive
variance of $3.8 million on the net gain (loss) on derivative
instruments. For the year ended December 31, 2006, W Holding
reported a net income of $100.5 million or $0.39 earnings per basic
common share ($0.38 on a diluted basis). This is a decrease of
$62.6 million or 38.36%, when compared to a net income of $163.1
million or $0.77 earnings per basic common share ($0.74 on a
diluted basis) for the same period in 2005. Net income for the year
ended December 31, 2006, was impacted by an increase of $33.6
million in the provision for loan losses, an increase of $16.3
million in noninterest expenses and an increase of $21.2 million in
the provision for income taxes. Such increases were partially
offset by an increase of $7.2 million or 2.32% in net interest
income. The return on assets (ROA) and the return on common
stockholders' equity (ROCE) for the quarter ended December 31, 2006
were 0.42% and 4.96%, respectively, compared to 0.76% and 12.77%
reported for the same quarter in 2005. For the year ended December
31, 2006, the ROA and the ROCE were 0.60% and 9.36%, respectively,
compared to 1.07% and 20.53%, for the same period in the prior
year. At December 31, 2006, driven by strong increases in the W
Holding loan portfolio, total assets ended at $17.15 billion. Total
assets grew $1.00 billion or 6.21%, from $16.15 billion at December
31, 2005, almost exclusively from the growth of $825.4 million or
10.56% in the loans-net portfolio, partially offset by a decrease
of $51.1 million in the investment portfolio, excluding short-term
money market instruments. Continuing management's strategy
implemented in the latter part of 2004, and in light of the current
interest rate scenario and a flat-to-inverted yield curve during
the year ended December 31, 2006, the Company has continued to
emphasize the growth of its loan portfolio, principally through
floating rate loans, so as to lessen the impact of margin
compression, while remaining on the sidelines of the investment
side until investment opportunities arise. Stockholders' equity
increased by $34.4 million or 2.88%, to $1.23 billion as of
December 31, 2006, when compared to December 31, 2005. Such
increase resulted principally from the combination of the net
income of $100.5 million generated during the year ended December
31, 2006, and the proceeds from the exercise of stock options of
$1.1 million, partially offset by dividends declared during year
2006 of $31.2 million and $36.9 million on the Company's common and
preferred shares, respectively. The period-end number of common
shares outstanding increased from 164,098,237 as of December 31,
2005, to 164,486,691 as of December 31, 2006, as a result of the
conversion of 3,550 shares of the Company's convertible preferred
stock Series A, into 12,403 shares of the Company's common stock,
and the issuance of 376,051 common shares from the exercise of
stock options. Net Interest Income Net interest income for the
fourth quarter ended December 31, 2006, was $85.3 million, an
increase of $10.0 million or 13.26%, from $75.3 million for the
same quarter in 2005. This increase mainly resulted from an
increase in the average net interest-earning assets of $56.3
million, which contributed a $10.4 million positive volume
variance, partially offset by a $448,000 negative rate variance. In
addition, such increase includes a $5.9 million prepayment fee
collected in the quarter on a commercial loan relationship. Average
interest-earning assets for the fourth quarter of 2006 increased by
$1.00 billion or 6.43%, compared to the same quarter in year 2005.
The average loan portfolio increased by $981.5 million or 12.80%,
particularly in the commercial real estate collateralized and
commercial, industrial and agricultural ("Commercial &
C&I") and in the construction loan portfolios. The average
investment portfolio, excluding short-term money market
instruments, increased by $149.8 million or 2.37%, primarily in
short- term tax-exempt securities, such as U.S. Government Agencies
discount notes. Average mortgage-backed securities and average
money market instruments decreased by $58.7 million or 8.10% and
$71.7 million or 8.28%, respectively. The change in the investments
portfolio is attributable to the reinvestment in short-term
tax-exempt securities, specifically U.S. Government Agencies
discount notes, as part of management's strategy of growing the
Company's tax exempt interest income. For the year ended December
31, 2006, net interest income increased from $311.6 million in 2005
to $318.8 million in 2006, an increase of $7.2 million or 2.32%.
This increase mainly resulted from an increase in the average net
interest-earning assets of $97.4 million, which contributed a $52.8
million positive volume variance, partially offset by a $45.6
million negative rate variance. In addition, such increase includes
a $5.9 million prepayment fee collected in the fourth quarter of
2006 on a commercial loan relationship. Average interest-earning
assets increased by $1.35 billion or 9.01%. The average loan
portfolio increased by $1.32 billion or 18.92%, particularly in the
Commercial & C&I loan portfolio, as explained before. The
average investment portfolio, excluding short-term money market
instruments, increased by $252.2 million or 4.02%, primarily in
short-term tax-exempt securities, such as U.S. Government Agencies
discount notes, as explained before, while average mortgage-backed
securities and average money market instruments decreased by $120.0
million or 15.95% and $105.6 million or 11.10%, respectively. The
average yield earned on interest-earning assets increased 89 basis
points from 5.53% to 6.42%, and 81 basis points from 5.32% to
6.13%, for the quarter and the year ended December 31, 2006,
respectively, when compared to the same periods in the prior year.
The increase in the average yield for the quarter and the year
ended December 31, 2006, was mainly due to higher average yields
earned on the loan portfolio, higher reinvestment rates on matured
and called securities and higher yields earned on mortgage-backed
securities and money market instruments. The increase in the
average yield earned on the loan portfolio was due to new higher
yielding loans and the repricing of existing floating and
adjustable rate Commercial and C&I loans. In addition, such
increase includes a $5.9 million prepayment fee collected and
mentioned before. During the year ended December 31, 2006, the
Federal Reserve increased the discount rate by 100 basis points,
which has reflected equally on the Prime Rate, the index used by
the Bank to reprice most of its floating rate commercial loans. For
the quarter ended December 31, 2006, the Company's overall cost of
funds increased 81 basis points when compared to the same quarter
in 2005. This increase was due to a general increase in the cost of
funding sources of the Company. The average interest rate paid on
deposits increased by 89 basis points for the quarter ended
December 31, 2006, as compared to the same period in 2005. Average
interest rate paid on federal funds purchased and repurchase
agreements increased by 77 basis points for the quarter ended
December 31, 2006, as compared to the same period in 2005. The
average interest rate paid on advances from the FHLB also increased
by 102 basis points for the quarter ended December 31, 2006, as
compared to the same period in 2005. For the year ended December
31, 2006, the overall cost of funds increased 101 basis points as
compared to the year ended December 31, 2005. The average interest
rate paid on deposits increased by 90 basis points for the year
ended December 31, 2006, as compared to the same period in 2005.
Average interest rates paid on federal funds purchased and
repurchase agreements increased 122 basis points for the year ended
December 31, 2006, as compared to the year ended December 31, 2005.
The average interest rate paid on advances from the FHLB increased
117 basis points for the year ended December 31, 2006, as compared
to the same period in 2005. The strong growth in average
interest-earning assets between both periods was in part offset by
an increase in the average interest-bearing liabilities of $944.7
million or 6.51%, and $1.25 billion or 8.96%, for the quarter and
the year ended December 31, 2006, respectively. Deposits grew on
average by $966.1 million or 11.97%, and $1.39 billion or 18.91%,
during the quarter and year ended December 31, 2006, respectively,
while other borrowings (federal funds purchased, repurchase
agreements and advances from FHLB) on average decreased by $21.4
million or 0.33%, and $144.0 million or 2.19%, for the same periods
in 2005, respectively. On a linked quarter comparison, the average
yield earned in interest- earning assets increased 19 basis points,
from 6.23% for the third quarter of 2006 to 6.42% for the fourth
quarter of 2006. The increase in the average yield for the fourth
quarter of 2006 was mainly due to higher average yields earned on
the loan portfolio and on the mortgage-backed securities portfolio.
Meanwhile, the Company's overall cost of funds increased by 5 basis
points for the fourth quarter of 2006, as compared to the third
quarter of 2006. The increase in the overall cost of funds was due
to a general increase in the cost of funding sources of the
Company, principally in the average interest rate paid on deposits.
Net Interest Margin The Company's net interest margin increased 12
basis points for the fourth quarter of 2006 to 2.04%, as compared
to 1.92% in the fourth quarter of 2005. On a tax equivalent basis,
the Company's net interest margin remained relatively unchanged at
2.09% for the fourth quarter of 2006, when compared to the same
quarter in 2005. The improvement in the net interest margin for the
fourth quarter of 2006 was mainly due to the increase in the
average yield earned on the loan portfolio as a result of higher
yielding loans and the repricing of existing floating and
adjustable rate Commercial and C&I loans. In addition, such
increase includes a $5.9 million prepayment fee collected in the
quarter on a commercial loan. For the year ended December 31, 2006,
the Company's net interest margin decreased 12 basis points, and on
a tax equivalent basis, decreased 30 basis points, when compared to
the year ended December 31, 2005. The decrease in the Company's net
interest margin when compared to prior year was due to the fact
that the upward repricing of the Company's interest-earning assets
lagged behind the increase in the cost of funds of its
interest-bearing liabilities. In addition, the net interest margin
on a tax equivalent basis resulted from a reduction in the
proportion of the Company's exempt assets. On a linked quarterly
comparison, the Company's net interest margin increased by 13 basis
points, from 1.91% in the third quarter of 2006. On a tax
equivalent basis, the Company net interest margin improved by 10
basis points from 1.99% in the third quarter of 2006. Under a flat
interest rate scenario for the next twelve-month period, based on
the Company's asset and liability composition as of December 31,
2006, we estimate the Company's net interest margin will be within
a range of 1.79% to 1.87% during said period. Assuming an
instantaneous 100 basis-points decrease in the fed funds rate, we
estimate the Company's net interest margin will fluctuate within a
range of 1.84% to 1.95% during said period. Under an instantaneous
200 basis-points decrease in the fed funds rate, we estimate the
Company's net interest margin will fluctuate within a range of
1.71% to 1.91%. Assuming a 100 basis-points increase in the fed
funds rate, we estimate the Company's net interest margin will
fluctuate within a range of 1.59% to 1.90%. Furthermore, a 200
basis-points increase in the fed funds rate will cause the
Company's net interest margin to fluctuate between a range of 1.33%
to 1.92%. The lower and higher values of such range mean the lowest
and highest net interest margin for any given quarter within the
said twelve-month period. These ranges are management's estimates
based on instantaneous rate shocks of 100 and 200 basis-points with
results one year (twelve months) forward. They do not consider any
asset/liability management strategy that could be undertaken given
such interest rate changes during said one year period. Attached as
Exhibits IIIa, IIIb and IIIc are supplemental unaudited data
schedules providing additional information on the net interest
margin, including average balances and average rates for both,
interest-earning assets and interest-bearing liabilities, as well
as changes in volumes and rates for the periods presented.
Noninterest Income Noninterest income increased $3.3 million or
48.19% for the three-month period ended December 31, 2006, when
compared to the same period in 2005. This increase was mainly due
to a positive variance of $3.8 million in net gain (loss) on
derivative instruments, as a result of the mark to market of such
positions. On January 3, 2006, the Company redesignated most of its
interest rate swaps relating to its brokered certificates of
deposit ("brokered CDs") utilizing the "long-haul" method of SFAS
No. 133. In cases in which the hedging relationship is effective,
the changes in the fair value of both the hedged items (the
brokered CDs) and the interest rate swaps are recorded through
earnings. Service fees and other fees and commissions for the
fourth quarter of 2006 increased slightly to $10.2 million, when
compared to $10.0 million for the same period in 2005. For the year
ended December 31, 2006, noninterest income increased $1.3 million
or 3.57%, when compared to year 2005. This increase was mainly the
result of an increase of $4.2 million or 12.61% in service fees and
other fees and commissions due to higher activity and fees
resulting from the Company's overall growing volume of business and
other fees. Such increase was partially offset by a negative
variance of $1.2 million on net gain (loss) on derivative
instruments, as a result of the mark to market of such positions.
Also, during the year ended December 31, 2006, the Company recorded
a loss of $1.8 million on other-than-temporarily impaired
investments, mainly related to certain investments in Puerto Rico
Government Obligations that were downgraded by one notch below
investment grade in May 2006. Noninterest Expenses Total
noninterest expenses increased $5.2 million or 18.01% for the
three- month period ended December 31, 2006, and $16.3 million or
15.05% for the year ended December 31, 2006, when compared to the
corresponding periods in 2005. Salaries and employees' benefits,
the largest component of total noninterest expenses, increased $2.2
million or 17.47% for the quarter ended December 31, 2006 and $7.7
million or 16.56%, for the year ended December 31, 2006 compared to
the corresponding periods in 2005. Such increases are attributed to
the increases in personnel, normal salary increases and related
employees' benefits, principally related to the Company's continued
expansion in all of its business areas, mainly in the San Juan
Metropolitan area. In October 2005, the Company opened its second
branch in the eastern region of Puerto Rico, in the city of
Fajardo. In December 2005, the Company opened a mega branch in the
Condado area in the city of San Juan and in September 2006, the
Company opened its newest mega branch in the city of Bayamon. Also,
during the first quarter of year 2006, the Company established
Westernbank International Trade Services ("WITS"), a division of
Westernbank Puerto Rico that provides international trade products
and services to customers. At December 31, 2006, the Company had
1,363 full-time employees, including its executive officers, an
increase of 52 employees or 3.97% since December 31, 2005.
Depreciation, maintenance and related equipment expenses increased
$557,000 or 22.26% for the three months ended December 31, 2006,
and $2.1 million or 21.52% for the year ended December 31, 2006,
when compared to the same periods in 2005. The increase was mainly
due to the continued growth of the Company's branch network, as
explained in the above paragraph. Noninterest expenses, other than
salaries and employees' benefits and related equipment expenses
discussed above, increased by $2.4 million or 17.74% for the
quarter ended December 31, 2006, and $6.5 million or 12.51% for the
year ended December 31, 2006, when compared to the same period in
2005. Such increases resulted primarily from the additional
investment in technology and general infrastructure to sustain and
coordinate the Company's growth and expansion in all of its
business areas, mainly in the San Juan Metropolitan area. The
Company has maintained operating expenses at adequate levels and
achieved an efficiency ratio of 34.94% for the year ended December
31, 2006 and 35.64% for the fourth quarter of 2006, compared to
30.67% and 33.43% for the same periods in 2005, respectively. The
change in the efficiency ratio in 2006 was mainly due to increases
in non-interest expenses. Provision for Income Taxes The provision
for income taxes increased $21.2 million or 47.06% for the year
ended December 31, 2006, when compared to the same period in 2005.
The current provision for income taxes for the year ended December
31, 2006, amounted to $76.6 million, an increase of $24.1 million
or 45.80%, when compared to $52.5 million for the same period in
2005. The increase in the current provision for income taxes is
attributed to three factors. First, on May 13, 2006, with an
effective date of January 1, 2006, the Puerto Rico Legislature
approved Law No. 89, which imposes an additional 2.0% tax on all
companies covered by the Puerto Rico Banking Act, as amended, such
as Westernbank. Therefore, Westernbank is now subject to a maximum
statutory tax rate of 43.5%. This transitory income tax of 2%
amounted to $3.0 million for the year ended December 31, 2006. The
transitory income taxes of 2% and 2.5% (the latter was approved by
the Government of Puerto Rico on August 1, 2005) are intended to be
temporary in nature and are scheduled to end on December 31, 2006.
Second, the increase in the Company's taxable income derived from
the increase in its loan portfolio has changed the proportion
between exempt and taxable income, therefore increasing the
Company's effective tax rate. Third, for the year ended December
31, 2006, the Company accrued $10.2 million for income tax
contingencies. The Company evaluates and assesses the relative
risks and appropriate tax treatment of transactions and filing
positions after considering statutes, regulations, judicial
precedent and other information and maintains tax accruals
consistent with its evaluation of these relative risks and merits.
Changes to the estimate of accrued taxes occur periodically due,
among other, to changes in tax rates, interpretations of tax laws,
the status of examinations being conducted by taxing authorities
and changes to statutory, judicial and regulatory guidance that
impact the relative risks of tax positions. These changes, when
they occur, can affect the income tax accruals as well as the
current period's income tax expense and can be significant to the
operating results of the Company. The Company's consolidated
statements of financial condition include an accrual of $10.9
million at December 31, 2006, for the exposures resulting from tax
positions identified by the Company in connection with this
evaluation. The deferred credit for the year ended December 31,
2006, increased by $2.8 million, when compared to the same period
in the prior year. Such increase is attributable to temporary
differences in the recognition of certain items for tax and books,
principally changes in the allowance for loan losses and in the
fair value of derivative instruments. Asset Quality W Holding's
asset quality continues to be strong in spite of the Company's
continued loan portfolio growth, as measured by the Company's
ratios of net loan charge-offs to average total loans, provision
for loan losses to net loans charged-off and reserves to total
loans. The Company's combined delinquency on all portfolios for the
categories of 60 days and over was 0.66% (less than 1%) at December
31, 2006, an improvement of 6 basis points when compared to 0.72%
(less than 1%) at December 31, 2005. The improvement in the
combined delinquency ratio arises from a reduction in delinquent
loans of the Commercial and C&I and construction loan
portfolios. The delinquency ratio on the Commercial and C&I and
construction loan portfolios for the categories of 60 days and over
improved to 0.63% (less than 1%), when compared to 0.85% (less than
1%) reported for year 2005, a decrease of 22 basis points. The
delinquency ratio on the consumer loan portfolio, including the
Expresso of Westernbank loan portfolio, for the categories of 60
days and over increased by 39 basis points, to 1.52% at December
31, 2006, when compared to 1.13% for the comparable period last
year. The increase in the delinquency ratio of the consumer loans
portfolio is mainly attributable to regular consumer loans past due
over 60 days which are collateralized by real estate properties. On
a linked quarter comparison, the Company's combined delinquency on
all portfolios for the categories of 60 days and over improved by 4
basis points, from 0.70% (less than 1%) at September 30, 2006. As
explained before, the decrease in the combined delinquency ratio
arises from a decrease in delinquent loans of the Commercial and
C&I and construction loan portfolios. The delinquency ratio on
the Commercial and C&I and construction loan portfolios for the
categories of 60 days and over improved by 1 basis point from 0.64%
(less than 1%) at September 30, 2006. The delinquency ratio on the
consumer loan portfolio, including the Expresso of Westernbank loan
portfolio, for the categories of 60 days and over decreased by 38
basis points when compared to 1.90% at September 30, 2006. The
decrease in the consumer loan portfolio delinquency ratio on a
linked quarter comparison is mainly due to lower loans past due
over 60 days in the regular consumer loan portfolio. The provision
for possible loan losses increased by $14.0 million, up to $28.0
million for the fourth quarter of 2006, when compared to the same
quarter in 2005. For the year ended December 31, 2006, the
provision for possible loan losses amounted to $64.6 million, up by
$33.6 million, from $31.0 million for the year ended December 31,
2005. The allowance for possible loan losses reached $126.8 million
as of December 31, 2006. The increase in the provision for loan
losses for both periods is attributable to the following factors:
first, the overall growth in the Company's loan portfolio, mainly
those of its Commercial and C&I loans; and second, to higher
non- performing loans, net loans charged-off and specific reserves
during the period, principally in the loan portfolio of the
Company's asset-based lending division. Commercial and C&I loan
portfolio grew to $6.22 billion at December 31, 2006, an increase
of $946.8 million or 17.95%, when compared to December 31, 2005.
Westernbank Business Credit loan portfolio grew to $1.46 billion at
December 31, 2006, an increase of $193.2 million or 15.28%, when
compared to December 31, 2005. The provision for loan losses for
the asset-based lending division increased by $4.6 million and
$35.1 million, for the quarter and the year ended December 31,
2006, when compared to the same periods in 2005. Such increases are
mainly attributable to two factors: first, the increase in the
Division's loan portfolio from $1.26 billion at December 31, 2005,
to $1.46 billion at December 31, 2006; and second, the increase in
classified loans of the Division's loans portfolio. During the year
ended December 31, 2006, the Company classified three loans of the
Division's loan portfolio with outstanding principal balances of
$44.9 million, $40.5 million and $7.3 million at December 31, 2006.
These loans required valuation allowances as follows: $11.4 million
for the $44.9 million loan (after a partial charge- off of $7.5
million), $15.2 million for the $40.5 million loan and $2.5 million
for the $7.3 million loan (after a partial charge-off of $3.0
million). All these loans are current and have not missed their
payment schedules but have shortfalls in the collaterals and in the
financial condition of the borrowers. Net loans charged-off in the
fourth quarter of 2006 were $16.1 million or 0.74% (annualized) to
average loans, an increase of $7.9 million, when compared to $8.2
million or 0.43% (annualized) to average loans for the same period
in 2005. The increase in loans charged-off for the fourth quarter
of 2006 when compared to the same quarter in 2005 is mainly
attributed to an increase of $7.7 million in Commercial and C&I
loans charged-off. Such increase is principally due to partial
charge-offs of $7.5 million and $3.0 million on two loans of the
Company's asset-based lending division with outstanding principal
balances after charge-offs of $44.9 million and $7.3 million,
respectively, at December 31, 2006. Both loans are current.
Consumer loan charge-offs in the fourth quarter of 2006 remained
relatively unchanged at $4.1 million, when compared to the same
quarter in 2005. Such stability is principally attributed to the
steadiness of loan charge-offs by the Expresso of Westernbank
division, the principal component of the consumer loan charge-offs.
Loans charged-off by the Expresso of Westernbank division decreased
by $320,000 to $2.5 million for the fourth quarter of 2006, when
compared to same quarter in 2005. Management's strategy of
stabilizing loan losses and increasing the overall rates charged on
the Expresso loan portfolio by continuously reviewing its
underwriting policies and increasing the level of collateralized
loans, has resulted in lower levels of net charge-offs and a higher
yield loan portfolio. For the year ended December 31, 2006, net
loan charge-offs amounted to $30.1 million or 0.36% to average
loans, an increase of $11.5 million or 61.37%, when compared to
$18.7 million or 0.27% to average loans in 2005. As explained
before, the increase in loans charged-off for the year ended
December 31, 2006, when compared to the same period in 2005, is
mainly attributed to an increase of $14.4 million in Commercial and
C&I loans charged-off. Such increase in the Commercial and
C&I loans charged-off resulted principally from loans
charged-off on the Company's asset based lending division. During
the year ended December 31, 2006, the Company partially charged-off
three loans of its asset based lending division for an aggregate
amount of $15.8 million. Consumer loan charge-offs for the year
ended December 31, 2006, were $12.6 million, an improvement of $1.2
million or 8.93%, when compared to $13.8 million for the same
period in 2005. Such improvement is principally attributed to lower
charge-offs by the Expresso of Westernbank division, the principal
component of the consumer loan charge-offs. Loans charged-off by
the Expresso of Westernbank division decreased from $9.8 million
for the year ended December 31, 2005, to $8.9 million for the same
period in 2006, a decrease of $836,000 or 8.56%. As explained
before, this is the result of management's strategy of stabilizing
loan losses and increasing the overall rates charged of the
Expresso loan portfolio by continuously reviewing its underwriting
policies and increasing the level of collateralized loans.
Non-performing loans amounted to $165.8 million or 1.89% of the
total loan portfolio at December 31, 2006, an increase of $101.8
million, when compared to $64.0 million or 0.81% (less than 1%) of
the total loan portfolio at December 31, 2005. The increase in
non-performing loans for the year ended December 31, 2006, when
compared to the same period in 2005, is mainly due to an increase
of $99.3 million in non-performing loans, mainly attributed to four
loans of the Company's asset based lending division, with
outstanding principal balances of $44.9 million, $40.5 million,
$14.2 million and $7.3 million at December 31, 2006. These loans
are current and have not missed their payment schedules but have
shortfalls in the collaterals and in the financial condition of the
borrowers. These loans required valuation allowances as follows:
$11.4 million for the $44.9 million loan, $15.2 million for the
$40.5 million loan, $4.7 million for the $14.2 loan and $2.5
million for the $7.3 million loan. During the year ended December
31, 2006, five loans related to one single borrower that were in
non-performing status at December 31, 2005, with an aggregate
outstanding principal balance of $8.4 million, were collected. At
December 31, 2006, the allowance for possible loan losses was
76.50% of total non-performing loans (reserve coverage). Of the
total allowance of $126.8 million, $40.2 million is the Company's
specific allowance and the remaining $86.6 million is a general
allowance. Total Loans, Investments and Deposits Loans
receivable-net grew $825.4 million or 10.56%, to $8.64 billion at
December 31, 2006, compared to $7.82 billion at December 31, 2005.
This increase reflects the Company's emphasis on continued growth
in its variable rate loan portfolio mainly through Commercial and
C&I and construction loan portfolio. As a result, the
commercial real estate mortgage loan portfolio increased from $4.26
billion as of December 31, 2005, to $4.95 billion as of December
31, 2006, an increase of $685.7 million or 16.09%. The commercial,
industrial and agricultural loans portfolio increased from $1.01
billion at December 31, 2005, to $1.27 billion at December 31,
2006, up by $261.1 million or 25.78%. The construction loan
portfolio increased by $217.0 million or 42.91%, from $505.8
million at December 31, 2005, to $722.8 million as of December 31,
2006. Attached as Exhibit IV is a supplemental unaudited data
schedule providing additional information on W Holding's loan
portfolio. W Holding's investment portfolio, excluding short-term
money market instruments, stands at $7.03 billion at December 31,
2006, decreasing by $51.1 million in comparison to $7.08 billion at
December 31, 2005. In light of the current interest rate scenario,
the Company's strategy has shifted to reposition its balance sheet
by continuing the emphasis on growing its floating rate loans,
while remaining on the sideline on the investment side until new
investment opportunities arise. The investment portfolio at
December 31, 2006, had an average contractual maturity of 31
months. The Company's interest rate risk model takes into
consideration the callable feature of certain investment
securities. Assuming that all call features are exercised, the
investment portfolio as of December 31, 2006, had a remaining
average maturity of 5 months. Under the present interest rate
scenario, no single security may be called. However, no assurance
can be given that such levels will be maintained in future periods.
As of December 31, 2006, total deposits reached $9.34 billion, from
$8.38 billion at December 31, 2005, an increase of $961.5 million
or 11.48%, while federal funds purchased and repurchase agreements
increased by $60.5 million, to $6.32 billion at December 31, 2006,
from $6.26 billion at December 31, 2005. New Accounting
Pronouncement In July 2006, the FASB issued FASB Interpretation No.
48, "Accounting for Uncertainty in Income Taxes" ("FIN No. 48"), an
interpretation of FASB Statement No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). FIN No. 48 clarifies the accounting for
uncertainty in income taxes recognized in a company's financial
statements in accordance with SFAS No. 109. FIN No. 48 also
prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. Under the
new guidance, recognition is based upon the company's determination
as whether it is more likely than not that a tax position will be
sustained upon examination based upon the technical merits of the
position. In evaluating the more-likely-than-not recognition
threshold, a company should presume the tax position will be
subject to examination by a taxing authority with full knowledge of
all relevant information. The Company adopted the interpretation
effective January 1, 2007. We are still in the process of
evaluating the cumulative effect of adopting FIN No. 48 on our
consolidated results of operations and financial position. Based on
management's preliminary evaluation of the Company's tax positions,
it is anticipated that the Company will record an increase in
liabilities and a corresponding decrease in beginning retained
earnings of between $10.0 million to $15.0 million, including
interest and penalties. These numbers are preliminary and are
subject to the completion of management's evaluation and the Audit
Committee's approval. Forward Looking Statements This press release
may contain some information that constitutes "forward- looking
statements." Such information can be identified by the use of
forward- looking terminology such as "may," "will," "should,"
"expect," "anticipate," "estimate," "intend," "continue," or
"believe," or the negatives or other variations of these terms or
comparable terminology. Forward-looking statements with respect to
future financial conditions, results of operations and businesses
of the Company are always subject to various risk and market
factors out of management's control which could cause future
results to differ materially from current management expectations
or estimates and as such should be understood. Such factors include
particularly, but are not limited to the possibility of prolonged
adverse economic conditions or that an adverse interest rate
environment could develop. For a discussion of these and other
risks and uncertainties, please refer to Item 1A of the Company's
Annual Report on Form 10-K for the most recently completed fiscal
year. Except as required by applicable securities laws, the Company
does not intend, and specifically disclaims any obligation, to
update forward-looking statements. About the Company Westernbank
Puerto Rico, a wholly owned subsidiary of W Holding Company, Inc.,
is the second-largest commercial bank in Puerto Rico, based on
total assets, operating throughout 56 full-fledged branches,
including 33 in the southwestern region of Puerto Rico, 7 in the
northeastern region, 14 in the San Juan Metropolitan area of Puerto
Rico and 2 in the eastern region of Puerto Rico, and a fully
functional banking site on the Internet. W Holding Company, Inc.
also owns Westernbank Insurance Corp., a general insurance agent
placing property, casualty, life and disability insurance, whose
results of operations and financial condition are reported on a
consolidated basis. The Company's Senior Management will review W
Holding's fourth quarter and year end results via teleconference on
Wednesday, January 31, 2007 at 11:30 AM Puerto Rico time (USA
times: 10:30 AM Eastern, 9:30 AM Central, 8:30 AM Mountain, or 7:30
AM Pacific time). Please register at
https://www.myrcplus.com/rsvp-index.asp?BWebID=&CID=5449261.
You will be assigned a Personal Identification Number (PIN) that
should be used in order to join the conference. Conference dial-in
numbers: Toll Free: 1-866-237-3252 or 1-719-457-1018, if you can't
dial in with the toll-free number. Conference passcode: 449261. In
case of difficulties accessing the conference call, please contact
Mrs. Aileen Rodriguez, Investment Department, at (787) 834-8000
ext. 2300, or . You may contact Mr. Vixson Frank Baez, with
appropriate questions regarding this press release at (787)
834-8000 ext. 5535, or via email at or ; or visit
http://www.wholding.com/. W HOLDING COMPANY, INC. EXHIBIT I
FINANCIAL HIGHLIGHTS (UNAUDITED) Three Months Ended Year Ended
December December December December 31, 2006 31, 2005 31, 2006 31,
2005 (Dollars in thousands, except per share data) Income Statement
Data Interest income: Loans, including loan fees $186,311 $137,784
$671,530 $479,042 Investment securities 65,794 63,109 261,971
247,533 Mortgage-backed securities 6,994 7,315 28,489 32,321 Money
market instruments 9,191 9,064 38,235 36,433 Total interest income
268,290 217,272 1,000,225 795,329 Interest expense: Deposits
101,049 72,252 366,063 241,268 Federal funds purchased and
repurchase agreements 80,390 67,677 307,463 234,791 Advances from
Federal Home Loan Bank 1,516 1,997 7,893 7,688 Total interest
expense 182,955 141,926 681,419 483,747 Net interest income 85,335
75,346 318,806 311,582 Provision for loan losses 28,000 14,000
64,550 31,000 Net interest income after provision for loan losses
57,335 61,346 254,256 280,582 Noninterest income: Service and other
charges on loans 3,376 3,731 12,527 11,577 Service charges on
deposit accounts 2,700 2,334 9,976 8,636 Other fees and commissions
4,116 3,886 15,104 13,182 Net gain (loss) on derivative instruments
487 (3,276) 632 1,878 Net gain (loss) on sales and valuation of
loans, securities, and other assets (590) 133 (1,141) 547 Total
noninterest income 10,089 6,808 37,098 35,820 Total net interest
income and noninterest income 67,424 68,154 291,354 316,402
Noninterest expenses: Salaries and employees' benefits 14,811
12,608 54,378 46,653 Equipment 3,059 2,502 11,610 9,554 Deposit
insurance premium and supervisory examination 1,011 902 3,770 3,370
Occupancy 2,240 2,030 8,482 7,640 Advertising 2,126 2,416 9,140
9,160 Printing, postage, stationery, and supplies 819 800 3,654
3,128 Telephone 642 341 2,275 1,853 Net gain from operations of
foreclosed real estate held for sale (45) (116) (270) (402)
Municipal taxes 1,833 1,276 6,218 4,708 Other 7,551 6,091 25,261
22,566 Total noninterest expenses 34,047 28,850 124,518 108,230
Income before provision for income taxes 33,377 39,304 166,836
208,172 Provision for income taxes: Current 18,434 12,982 76,599
52,538 Deferred credit (2,914) (3,847) (10,294) (7,452) Total
provision for income taxes 15,520 9,135 66,305 45,086 Net income
17,857 30,169 100,531 163,086 Less dividends to preferred
stockholders 9,227 9,229 36,911 36,985 Income available to common
stockholders $8,630 $20,940 $63,620 $126,101 Basic earnings per
common share $0.05 $0.13 $0.39 $0.77 Diluted earnings per common
share $0.05 $0.12 $0.38 $0.74 Cash dividends declared on common
stock $7,814 $7,794 $31,235 $30,575 Cash dividends declared per
common share (1) $0.05 $0.05 $0.19 $0.19 Period end number of
common shares outstanding 164,487 164,098 164,487 164,098 Weighted
average number of common shares outstanding 164,487 164,067 164,380
164,024 Weighted average number of common shares outstanding on a
diluted basis 167,844 168,529 168,051 170,619 (1) Cash dividend
amounts in the table are rounded. W HOLDING COMPANY, INC. EXHIBIT
II FINANCIAL HIGHLIGHTS (UNAUDITED) December 31, December 31,
Balance Sheet Data 2006 2005 (In thousands) At Period End Cash and
due from banks $105,027 $97,612 Money market instruments: Federal
funds sold and resell agreements 950,573 746,539 Interest-bearing
deposits in banks 21,060 57,116 Investment securities available for
sale, at fair value 20,541 5,166 Investment securities held to
maturity, at amortized cost 7,007,579 7,074,025 Federal Home Loan
Bank stock, at cost 37,982 42,798 Residential mortgage loans held
for sale, at lower of cost or fair value 11,379 1,539 Loans-net
8,641,023 7,815,623 Accrued interest receivable 121,360 105,882
Premises and equipment, net 124,648 117,623 Deferred income taxes,
net 51,338 41,111 Other assets 62,178 46,830 Total Assets
$17,154,688 $16,151,864 Liabilities: Deposits: Noninterest-bearing
$373,634 $277,099 Interest-bearing and related accrued interest
payable 8,963,429 8,098,510 Total deposits 9,337,063 8,375,609
Federal fund purchased and repurchase agreements 6,320,481
6,260,029 Advances from Federal Home Loan Bank 127,000 172,000
Mortgage note payable 35,968 36,432 Accrued expenses and other
liabilities 106,289 114,316 Total Liabilities 15,926,801 14,958,386
Stockholders' equity 1,227,887 1,193,478 Total Liabilities and
Stockholders' Equity $17,154,688 $16,151,864 Quarterly Averages (1)
Year to Date Averages (1) Average Balances December December
December December 31, 2006 31, 2005 31, 2006 31, 2005 (In
thousands) Cash and due from banks $98,635 $96,598 $101,320 $87,682
Money market instruments: Federal funds sold and resell agreements
896,145 769,640 848,556 881,921 Interest-bearing deposits in banks
18,266 81,365 39,088 53,296 Investment securities available for
sale 20,770 2,923 12,854 6,523 Investment securities held to
maturity 7,009,595 7,030,519 7,040,802 6,997,702 Federal Home Loan
Bank stock 40,457 39,049 40,390 47,497 Residential mortgage loans
held for sale 9,339 1,511 6,459 1,586 Loans-net 8,547,822 7,603,589
8,228,323 6,866,488 Accrued interest receivable 116,549 101,073
113,621 97,084 Premises and equipment 123,534 116,140 121,136
113,837 Deferred income taxes, net 49,904 39,188 46,225 37,386
Other assets 62,269 48,801 54,502 45,741 Total Assets $16,993,285
$15,930,396 $16,653,276 $15,236,743 Liabilities: Deposits:
Noninterest- bearing $344,361 $283,014 $325,367 $263,234
Interest-bearing and related accrued interest payable 8,830,724
7,854,856 8,530,970 7,046,656 Total deposits 9,175,085 8,137,870
8,856,337 7,309,890 Federal fund purchased and repurchase
agreements 6,318,024 6,288,398 6,290,255 6,471,778 Advances from
Federal Home Loan Bank 132,000 172,000 149,500 191,500 Mortgage
note payable 36,029 36,488 36,200 36,645 Accrued expenses and other
liabilities 104,862 108,878 110,301 91,411 Total Liabilities
15,766,000 14,743,634 15,442,593 14,101,224 Stockholders' equity
1,227,285 1,186,762 1,210,683 1,135,519 Total Liabilities and
Stockholders' Equity $16,993,285 $15,930,396 $16,653,276
$15,236,743 (1) Average balances have been computed using beginning
and period-end balances. EXHIBIT III a W HOLDING COMPANY, INC.
YIELDS EARNED AND RATES PAID THREE MONTHS ENDED, (UNAUDITED)
December 31, 2006 Annualized Average Average Interest Balance(1)
Yield/Rate (Dollars in thousands) Normal spread: Interest-earning
assets: Loans, including loan fees (2) $186,311 $8,647,744 8.55 %
Investment securities (3) 65,794 6,468,173 4.04 Mortgage-backed
securities (4) 6,994 666,086 4.17 Money market instruments 9,191
793,836 4.59 Total 268,290 16,575,839 6.42 Interest-bearing
liabilities: Deposits 101,049 9,036,841 4.44 Federal funds
purchased and repurchase agreements 80,390 6,320,424 5.05 Advances
from FHLB 1,516 106,891 5.63 Total 182,955 15,464,156 4.69 Net
interest income $85,335 Interest rate spread 1.73 % Net
interest-earning assets $1,111,683 Net yield on interest-earning
assets (5) 2.04 % Ratio of interest-earning assets to
interest-bearing liabilities 107.19% Tax equivalent spread:
Interest-earning assets $268,290 $16,575,839 6.42 % Tax equivalent
adjustment 1,857 -- 0.05 Interest-earning assets - tax equivalent
270,147 $16,575,839 6.47 Interest-bearing liabilities 182,955
$15,464,156 4.69 Net interest income $87,192 Interest rate spread
1.78 % Net yield on interest - earning assets (5) 2.09 % December
31, 2005 Annualized Average Average Interest Balance(1) Yield/Rate
(Dollars in thousands) Normal spread: Interest-earning assets:
Loans, including loan fees (2) $137,784 $7,666,231 7.13 %
Investment securities (3) 63,109 6,318,331 3.96 Mortgage-backed
securities (4) 7,315 724,768 4.00 Money market instruments 9,064
865,527 4.15 Total 217,272 15,574,857 5.53 Interest-bearing
liabilities: Deposits 72,252 8,070,775 3.55 Federal funds purchased
and repurchase agreements 67,677 6,276,708 4.28 Advances from FHLB
1,997 172,000 4.61 Total 141,926 14,519,483 3.88 Net interest
income $75,346 Interest rate spread 1.65 % Net interest-earning
assets $1,055,374 Net yield on interest-earning assets (5) 1.92 %
Ratio of interest-earning assets to interest-bearing liabilities
107.27% Tax equivalent spread: Interest-earning assets $217,272
$15,574,857 5.53 % Tax equivalent adjustment 7,176 -- 0.19
Interest-earning assets - tax equivalent 224,448 $15,574,857 5.72
Interest-bearing liabilities 141,926 $14,519,483 3.88 Net interest
income $82,522 Interest rate spread 1.84 % Net yield on interest -
earning assets (5) 2.10 % September 30, 2006 Annualized Average
Average Interest Balance(1) Yield/Rate (Dollars in thousands)
Normal spread: Interest-earning assets: Loans, including loan fees
(2) $175,042 $8,414,071 8.25 % Investment securities (3) 65,562
6,449,169 4.03 Mortgage-backed securities (4) 7,036 675,437 4.13
Money market instruments 10,409 890,212 4.64 Total 258,049
16,428,889 6.23 Interest-bearing liabilities: Deposits 96,693
8,856,606 4.33 Federal funds purchased and repurchase agreements
80,184 6,312,742 5.04 Advances from FHLB 2,169 154,174 5.58 Total
179,046 15,323,522 4.64 Net interest income $79,003 Interest rate
spread 1.59 % Net interest-earning assets $1,105,367 Net yield on
interest-earning assets (5) 1.91 % Ratio of interest-earning assets
to interest-bearing liabilities 107.21% Tax equivalent spread:
Interest-earning assets $258,049 $16,428,889 6.23 % Tax equivalent
adjustment 3,487 -- 0.09 Interest-earning assets - tax equivalent
261,536 $16,428,889 6.32 Interest-bearing liabilities 179,046
$15,323,522 4.64 Net interest income $82,490 Interest rate spread
1.68 % Net yield on interest - earning assets (5) 1.99 % (1)
Average balance on interest-earning assets and interest-bearing
liabilities is computed using daily monthly average balances during
the period. (2) Average loans exclude non-performing loans. Loans
fees, net amounted to $4.4 million, $2.4 million, and $4.7 million
for the three-month periods ended December 31, 2006 and 2005 and
September 30, 2006, respectively. (3) Includes available for sale
securities. (4) Includes trading and available for sale securities.
(5) Annualized net interest income divided by average
interest-earning assets. W HOLDING COMPANY, INC. YIELDS EARNED AND
RATES PAID YEARS ENDED DECEMBER 31, (UNAUDITED) 2006 Annualized
Average Average Interest Balance(1) Yield/ Rate (Dollars in
thousands) Normal spread: Interest-earning assets: Loans, including
loan fees (2) $671,530 $8,308,353 8.08% Investment securities (3)
261,971 6,519,398 4.02 Mortgage-backed securities (4) 28,489
632,792 4.50 Money market instruments 38,235 845,375 4.52 Total
1,000,225 16,305,918 6.13 Interest-bearing liabilities: Deposits
366,063 8,771,531 4.17 Federal funds purchased and repurchase
agreements 307,463 6,290,818 4.89 Advances from FHLB 7,893 147,780
5.34 Total 681,419 15,210,129 4.48 Net interest income $318,806
Interest rate spread 1.65% Net interest-earning assets $1,095,789
Net yield on interest-earning assets (5) 1.96% Ratio of
interest-earning assets to interest-bearing liabilities 107.20% Tax
equivalent spread: Interest-earning assets $1,000,225 $16,305,918
6.13% Tax equivalent adjustment 16,502 -- 0.11 Interest-earning
assets - tax equivalent 1,016,727 $16,305,918 6.24 Interest-bearing
liabilities 681,419 $15,210,129 4.48 Net interest income $335,308
Interest rate spread 1.76% Net yield on interest - earning assets
(5) 2.06% 2005 Annualized Average Average Interest Balance(1)
Yield/ Rate (Dollars in thousands) Normal spread: Interest-earning
assets: Loans, including loan fees (2) $479,042 $6,986,626 6.86%
Investment securities (3) 247,533 6,267,159 3.95 Mortgage-backed
securities (4) 32,321 752,839 4.29 Money market instruments 36,433
950,980 3.83 Total 795,329 14,957,604 5.32 Interest-bearing
liabilities: Deposits 241,268 7,376,605 3.27 Federal funds
purchased and repurchase agreements 234,791 6,398,451 3.67 Advances
from FHLB 7,688 184,153 4.17 Total 483,747 13,959,209 3.47 Net
interest income $311,582 Interest rate spread 1.85% Net
interest-earning assets $998,395 Net yield on interest-earning
assets (5) 2.08% Ratio of interest-earning assets to
interest-bearing liabilities 107.15% Tax equivalent spread:
Interest-earning assets $795,329 $14,957,604 5.32% Tax equivalent
adjustment 41,305 -- 0.27 Interest-earning assets - tax equivalent
836,634 $14,957,604 5.59 Interest-bearing liabilities 483,747
$13,959,209 3.47 Net interest income $352,887 Interest rate spread
2.12% Net yield on interest - earning assets (5) 2.36% (1) Average
balance on interest-earning assets and interest-bearing liabilities
is computed using daily monthly average balances during the period.
(2) Average loans exclude non-performing loans. Loans fees, net
amounted to $16.3 million for the years ended December 31, 2006 and
2005, respectively. (3) Includes available for sale securities. (4)
Includes trading and available for sale securities. (5) Annualized
net interest income divided by average interest-earning assets.
EXHIBIT W HOLDING COMPANY, INC. III c CHANGES IN YIELDS EARNED AND
RATES PAID (UNAUDITED) Three Months Ended December 31, 2006 vs.
2005 Volume Rate Total (In thousands) Interest income: Loans
$19,014 $29,513 $48,527 Investment securities (1) 1,512 1,173 2,685
Mortgage-backed securities (2) (640) 319 (321) Money market
instruments (786) 913 127 Total increase in interest income 19,100
31,918 51,018 Interest expense: Deposits 9,348 19,449 28,797
Federal funds purchased and repurchase agreements 475 12,238 12,713
Advances from FHLB (1,160) 679 (481) Total increase in interest
expense 8,663 32,366 41,029 Increase (decrease) in net interest
income $10,437 $(448) $9,989 Year Ended December 31, 2006 vs. 2005
Volume Rate Total (in thousands) Interest income: Loans $98,956
$93,532 $192,488 Investment securities (1) 10,084 4,354 14,438
Mortgage-backed securities (2) (5,515) 1,683 (3,832) Money market
instruments (4,324) 6,126 1,802 Total increase in interest income
99,201 105,695 204,896 Interest expense: Deposits 50,744 74,051
124,795 Federal funds purchased and repurchase agreements (3,880)
76,552 72,672 Advances from FHLB (495) 700 205 Total increase in
interest expense 46,369 151,303 197,672 Increase (decrease) in net
interest income $52,832 $(45,608) $7,224 (1) Includes available for
sale securities. (2) Includes trading and available for sale
securities. W HOLDING COMPANY, INC. EXHIBIT IV LOAN RECEIVABLE-NET
(UNAUDITED) December December By Collateral Type 31, 2006 31, 2005
(In thousands) Commercial real estate mortgage (1) $4,945,932
$4,260,258 Residential real estate - mortgage (2) 1,014,957
1,298,535 Construction - mortgage 722,789 505,760 Commercial,
industrial and agricultural (1) 1,274,236 1,013,092 Consumer and
others (3) (4) 809,953 830,384 Total Loans 8,767,867 7,908,029
Allowance for loan losses (126,844) (92,406) Loans - net $8,641,023
$7,815,623 (1) Includes $1.46 billion and $1.26 billion of
Westernbank Business Credit division outstanding loans at December
31, 2006 and 2005, respectively. (2) Includes fixed and floating
interest rate loans to two mortgage originator groups in Puerto
Rico mainly secured by mortgages on one-to- four family residential
properties with an outstanding principal balance of $940.0 million
and $1.14 billion at December 31, 2006 and 2005, respectively. (3)
Includes $129.0 million and $135.0 million of Expresso of
Westernbank division outstanding loans at December 31, 2006 and
2005, respectively. (4) Includes $490.7 million and $585.9 million
collateralized by real estate at December 31, 2006 and 2005,
respectively. W HOLDING COMPANY, INC. EXHIBIT V NON-PERFORMING
LOANS AND FORECLOSED REAL ESTATE HELD FOR SALE (UNAUDITED) December
December 31, 2006 31, 2005 (Dollars in thousands) Commercial real
estate - mortgages and commercial, industrial and agricultural
loans $154,862 $55,585 Residential real estate mortgage and
construction loans 1,641 2,125 Consumer loans 9,309 6,288 Total
non-performing loans 165,812 63,998 Foreclosed real estate held for
sale 5,917 4,137 Total non-performing loans and foreclosed real
estate held for sale $171,729 $68,135 Interest that would have been
recorded if the loans had not been classified as non-performing
$9,052 $4,916 Interest recorded on non-performing loans $4,785 $743
Total non-performing loans as a percentage of total loans at end of
period 1.89% 0.81% Total non-performing loans and foreclosed real
estate held for sale as a percentage of total assets at end of
period 1.00% 0.42% W HOLDING COMPANY, INC. EXHIBIT VI CHANGES IN
ALLOWANCE FOR LOAN LOSSES (UNAUDITED) December December 31, 2006
31, 2005 (Dollars in thousands) Balance, beginning of year $92,406
$80,066 Loans charged-off: Commercial real estate - mortgage and
commercial, industrial and agricultural loans (1) (22,606) (8,233)
Residential real estate-mortgage and construction loans (94) (121)
Consumer loans (2) (12,576) (13,809) Total loans charged-off
(35,276) (22,163) Recoveries of loans previously charged-off:
Commercial real estate - mortgage and commercial, industrial and
agricultural loans 2,846 1,008 Residential real estate-mortgage and
construction loans 66 212 Consumer loans (3) 2,252 2,283 Total
recoveries of loans previously charged-off 5,164 3,503 Net loans
charged-off (30,112) (18,660) Provision for loan losses 64,550
31,000 Balance, end of period $126,844 $92,406 Ratios: Allowance
for loan losses to total loans at end of period 1.45% 1.17%
Provision for loan losses to net loans charged-off 214.37% 166.13%
Recoveries of loans to loans charged- off in previous period 23.30%
15.78% Net loans charged-off to average total loans (4) 0.36% 0.27%
Allowance for loan losses to non- performing loans 76.50% 144.39%
(1) Includes charge-offs of $15.8 million and $5.3 million of
Westernbank Business Credit Division for the years ended December
31, 2006 and 2005, respectively. (2) Includes $8.9 million and $9.8
million of Expresso of Westernbank loans charged-offs for the years
ended December 31, 2006 and 2005, respectively. (3) Includes $1.0
and $1.1 million of Expresso of Westernbank loans recoveries for
the years ended December 31, 2006 and 2005, respectively. (4)
Average loans were computed using beginning and period-end
balances. W HOLDING COMPANY, INC. EXHIBIT VII SELECTED FINANCIAL
RATIOS (UNAUDITED) At and for the At and for the Three Months Ended
Years Ended December 31, December 31, 2006 2005 2006 2005 (Amounts
in thousands, except per share data) Per share data: Dividend
payout ratio 90.54% 37.22% 49.10% 24.25% Book value per common
share $4.24 $4.04 $4.24 $4.04 Preferred stock outstanding at end of
period 18,157 18,160 18,157 18,160 Preferred stock equity at end of
period $530,838 $530,926 $530,838 $530,926 Performance ratios:
Return on assets (1) 0.42% 0.76% 0.60% 1.07% Return on common
stockholders' equity (1) 4.96% 12.77% 9.36% 20.53% Efficiency ratio
35.64% 33.43% 34.94% 30.67% Operating expenses to total
end-of-period assets 0.79% 0.71% 0.73% 0.67% Capital ratios: Total
capital to risk- weighted assets 12.49% 13.13% 12.49% 13.13% Tier I
capital to risk- weighted assets 11.45% 12.30% 11.45% 12.30% Tier I
capital to average assets 7.21% 7.48% 7.21% 7.48% Equity-to-assets
ratio (1) 7.22% 7.45% 7.27% 7.45% Other selected data: Total trust
assets managed $542,733 $486,017 $542,733 $486,017 Branch offices
56 55 56 55 Number of full-time employees 1,363 1,311 1,363 1,311
(1) The return on assets is computed by dividing annualized net
income by average total assets for the period. The return on common
stockholders' equity is computed by dividing annualized net income
less preferred stock dividends by average common stockholders'
equity for the period. The equity-to-asset ratio is computed by
dividing average equity by average total assets. Average balances
have been computed using beginning and period-end balances.
https://www.myrcplus.com/rsvp-index.asp?BWebID=&CID=5449261DATASOURCE:
W Holding Company, Inc. CONTACT: Vixson Frank Baez, W Holding
Company, +1-787-834-8000, ext. 5535, or , or Web site:
http://www.wbpr.com/
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