MAYAGUEZ, Puerto Rico, May 1 /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 first quarter ended March 31, 2007.
FIRST QUARTER HIGHLIGHTS: Net income for the first quarter ended
March 31, 2007, was $28.7 million or $0.12 earnings per basic and
diluted common share, when compared to $35.4 million or $0.16
earnings per basic common share ($0.15 on a diluted basis) for the
same quarter in 2006, a decrease of $6.7 million or 18.85%. The
first quarter of 2007, as compared to the same quarter in 2006, was
mainly impacted by the following: -- an increase of $3.4 million in
net interest income, mainly due to higher average yields earned on
the Company's loan portfolios. -- a $9.0 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 specific allowances on classified loans; -- and an
increase of $5.6 million in non-interest expenses, principally
attributed to the Company's continued growth and expansion in all
of its business areas, mainly in the San Juan Metropolitan area; On
a linked quarter comparison, net income for the quarter ended March
31, 2007 increased by $10.9 million, or 60.83%, when compared to
$17.9 million for the quarter ended December 31, 2006. This
increase mainly resulted from a $12.0 million lower provision for
loan losses as a result of a lower increase in net loans
charged-off, non-performing loans and specific allowances on
classified loans when compared with the quarter ended December 31,
2006. Interest income for the quarter ended December 31, 2006,
included a $5.9 million prepayment fee collected on a commercial
loan relationship. Other key indicators of the Company's
performance and asset quality for the first quarter of 2007 were as
follows: -- total assets reached $17.55 billion, an increase of
$394.6 million when compared to $17.15 billion at December 31,
2006. On a year-to-year basis, total assets increased $835.1
million when compared to $16.71 billion at March 31, 2006. -- loans
receivable-net reached $8.93 billion, an increase of $291.4 million
at March 31, 2007, from $8.64 billion at December 31, 2006. On a
year-to-year basis, loan production was strong, increasing the
Company's loan portfolio-net by $909.3 million, from $8.02 billion
at March 31, 2006; -- loans secured by commercial real estate and
construction mortgages reached $5.97 billion at March 31, 2007, an
increase of $305.9 million, from $5.67 billion at December 31,
2006. On a year-to-year basis, these loan portfolios increased by
$1.07 billion, from $4.91 billion at March 31, 2006; -- net loans
charged-off to average total loans ratio improved by 9 basis points
during the first quarter of 2007, to 0.27% (annualized) from 0.36%
for the year ended December 31, 2006. -- The Company's combined
delinquency on all loan portfolios for the categories of 60 days
and over at March 31, 2007 was 0.72% (less than 1%). -- The
delinquency ratio on the commercial real estate-mortgage and
commercial, industrial and agricultural loan and construction loan
portfolios (the largest component of loans receivable) for the
categories of 60 days and over was 0.68% (less than 1%) at March
31, 2007. -- The Company has maintained operating expenses at
adequate levels and achieved an efficiency ratio of 38.04% for the
first quarter of 2007. Effective January 1, 2007, the Company
adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 48 ("FIN No. 48"), "Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement No. 109,
Accounting for Income Taxes". The cumulative effect adjustment of
$10.6 million was charged to retained earnings to increase the
accrued liability for uncertain tax positions and the deferred
income tax asset by $10.9 million and $265,000, respectively.
Overview W Holding reported net income for the first quarter of
2007 of $28.7 million or $0.12 earnings per basic and diluted
common share, when compared to $35.4 million or $0.16 earnings per
basic common share ($0.15 on a diluted basis) for the same quarter
in 2006, a decrease of $6.7 million or 18.85%. Net income for the
first quarter of 2007 was impacted by an increase of $3.4 million
in net interest income, offset by the combination of a $9.0 million
increase in the provision for loan losses, an increase of $5.6
million in non-interest expenses and a decrease of $2.7 million in
the provision for income taxes. On a linked quarter comparison, net
income for the quarter ended March 31, 2007 increased by $10.9
million, or 60.83%, when compared to $17.9 million for the quarter
ended December 31, 2006. This increase mainly resulted from a $12.0
million lower provision for loan losses as a result of a lower
increase in net loans charged-off, non-performing loans and
specific allowances on classified loans when compared with the
quarter ended December 31, 2006. Interest income for the quarter
ended December 31, 2006, included a $5.9 million prepayment fee
collected on a commercial loan relationship. The return on assets
(ROA) and the return on common stockholders' equity (ROCE) for the
quarter ended March 31, 2007 were 0.66% and 11.16% (both
annualized), respectively, compared to 0.60% and 9.36% reported for
the year ended December 31, 2006, respectively, and compared to
0.86% and 15.57% (both annualized), reported for the first quarter
of 2006, respectively. At March 31, 2007, driven by the continued
increase in the loan portfolio, total assets ended at $17.55
billion. Total assets grew $394.6 million, or 2.30%, from $17.15
billion at December 31, 2006, principally driven by the growth of
$291.4 million, or 3.37% and $266.6 million, or 3.79% in the loans-
net portfolio and in the investment portfolio, excluding money
market instruments, respectively; partially offset by a decrease of
$152.6 million or 15.70% in money market instruments. Changes
between the investment portfolio and money market instruments were
attributable to the reinvestment of matured money market
instruments in tax exempt securities, specifically U.S. Government
and agencies obligations on a short-term basis, as part of the
management strategy of growing the Company's exempt interest
income. 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 quarter ended March
31, 2007, 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. On a year-to-year basis, total assets grew $835.1 million,
or 5.00%, from $16.71 billion at March 31, 2006, almost exclusively
from the growth in the Company's loan portfolio. Loans
receivable-net grew by $909.3 million, or 11.33%, from $8.02
billion as of March 31, 2006, while the investment portfolio,
excluding money market instruments, decreased by $111.4 million,
from $7.40 billion at March 31, 2006. Stockholders' equity
increased by $3.0 million, to $1.23 billion as of March 31, 2007,
when compared to December 31, 2006. Such increase principally
resulted from the combination of the net income of $28.7 million
generated during the quarter ended March 31, 2007 and the proceeds
from the exercise of stock options of $1.2 million, almost offset
by the cumulative effect of the adoption of FIN No. 48 which
resulted in a charge to retained earnings of $10.6 million, as
explained before, and the dividends declared during the same
quarter of $7.8 million and $9.2 million on the Company's common
and preferred shares, respectively. The period-end number of common
shares outstanding increased from 164,486,691 as of December 31,
2006, to 164,897,600 as of March 31, 2007, as a result of the
issuance of 410,909 common shares from the exercise of stock
options. Net Interest Income Net interest income for the first
quarter ended March 31, 2007, was $81.9 million, an increase of
$3.4 million or 4.29%, from $78.6 million for the same quarter in
2006. This increase in net interest income mainly resulted from
higher yielding net interest-earning assets, which contributed a
$7.1 million positive volume variance, which was partly offset by a
$3.7 million negative rate variance. Average interest-earning
assets for the first quarter of 2007 increased by $846.8 million,
or 5.30%, compared to the same quarter in year 2006. The average
loan portfolio increased by $804.6 million, or 10.08%, 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 mortgage-backed securities and money market instruments,
increased by $64.5 million, or 0.99% (less than 1%), primarily in
short-term tax-exempt securities, such as U.S. Government Agencies
discount notes. Average mortgage-backed securities decreased by
$39.6 million, or 6.09%, while average money market instruments
increased by $17.2 million, or 2.07%. 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. The average yield earned on
interest-earning assets increased 58 basis points, from 5.86% for
the first quarter ended March 31, 2006, to 6.44% for the same
quarter in 2007. The increase in the average yield for the first
quarter of 2007 was mainly due to higher average yields earned on
all the categories of interest-earning assets. 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. During the last four
quarters ended March 31, 2007, the Federal Reserve has increased
the Fed Funds Target Rate by 50 basis points 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 March 31,
2007, the Company's overall cost of funds increased 60 basis
points, from 4.15% to 4.75%, when compared to the same quarter in
2006. 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 76 basis points, from 3.81% for the quarter
ended March 31, 2006, to 4.57% for the same quarter in 2007.
Average interest rate paid on federal funds purchased and
repurchase agreements increased by 43 basis points, from 4.58% for
the quarter ended March 31, 2006, to 5.01% for the same quarter in
2007. The average interest rate paid on advances from the FHLB also
increased by 68 basis points, from 4.95% for the quarter ended
March 31, 2006, to 5.63% for the same quarter in 2007. The growth
in average interest-earning assets for the quarter ended March 31,
2007 was offset by an increase in the average interest-bearing
liabilities of $938.7 million, or 6.30%, for the quarter ended
March 31, 2007. Deposits grew on average by $1.09 billion, or
12.89%, during the first quarter of 2007, while other borrowings
(federal funds purchased, repurchase agreements and advances from
FHLB and line of credit) on average decreased by $150.4 million, or
2.34%, when compared to the same quarter in 2006. There were no
outstanding lines of credit at December 31, 2006 or during the
comparable quarter in year 2006. On a linked quarter comparison,
the average yield earned in interest- earning assets increased two
basis points, from 6.42% for the fourth quarter of 2006 to 6.44%
for the first quarter of 2007. The increase in the average yield
for the first quarter of 2007 was mainly due to higher average
yields earned on the investment portfolio, mortgage backed
securities portfolio and money market instruments portfolio, while
the average yield earned on the loan portfolio slightly decreased
from 8.55% to 8.48% on a linked quarter comparison. The average
yield earned on the loan portfolio for the fourth quarter of 2006
includes a $5.9 million prepayment fee collected on a commercial
loan relationship. Meanwhile, the Company's overall cost of funds
increased by six basis points for the first quarter of 2007, as
compared to the fourth quarter of 2006. The slight increase in the
overall cost of funds was principally due to an increase of 13
basis points in the average interest rate paid on deposits, from
4.44% for the fourth quarter of 2006, to 4.57% for the first
quarter of 2007. Net Interest Margin The Company's net interest
margin decreased slightly by two basis points for the first quarter
of 2007 when compared to 1.99% in the first quarter of 2006. On a
tax equivalent basis, the Company's net interest margin decreased
by three basis points, to 2.10% for the first quarter of 2007, when
compared to 2.13% for the same quarter in 2006. Although there was
an improvement on the average yield earned on interest-earning
assets of 58 basis points, a 60 basis points increase on the
average interest rate paid on interest-bearing liabilities offset
such increase. The upward repricing of the Company's
interest-bearing assets during the first quarter of 2007 continues
to lag behind the increase in the cost of funds of its
interest-bearing liabilities. On a linked quarterly comparison, the
Company's net interest margin decreased by seven basis points, from
2.04% in the fourth quarter of 2006. On a tax equivalent basis, the
Company net interest margin improved by one basis point from 2.09%
in the fourth quarter of 2006. The net interest margin for the
fourth quarter of 2006 includes a $5.9 million prepayment fee
collected on a commercial loan relationship. Under a flat interest
rate scenario for the next twelve-month period, based on the
Company's asset and liability composition as of March 31, 2007, we
estimate the Company's net interest margin will be within a range
of 1.78% to 1.85% during said period. Assuming an instantaneous 100
basis-points decrease in the Fed Funds Target Rate, we estimate the
Company's net interest margin will fluctuate within a range of
1.76% to 1.87% during said period. Under an instantaneous 200
basis-points decrease in the Fed Funds Target Rate, we estimate the
Company's net interest margin will fluctuate within a range of
1.66% to 1.89%. Assuming a 100 basis-points increase in the Fed
Funds Target Rate, we estimate the Company's net interest margin
will fluctuate within a range of 1.48% to 1.85%. Furthermore, a 200
basis-points increase in the Fed Funds Target Rate will cause the
Company's net interest margin to fluctuate between a range of 1.28%
to 1.91%. 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 in the Fed Funds Target Rate of
100 and 200 basis- points and their corresponding estimated impact
on the market yield curve 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 and IIIb 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. Non-interest Income Non-interest
income increased $1.8 million, or 19.86% for the three-month period
ended March 31, 2007, when compared to the same period in 2006.
This is the result of an increase of $1.4 million on service fees
and other fees and commissions, due to higher activity associated
with the Company's overall growing volume of business, and a
positive variance of $287,000 in net gain on derivative
instruments, as a result of the mark to market valuation of such
positions. Non-interest Expenses Total non-interest expenses
increased $5.6 million, or 19.05% for the three-month period ended
March 31, 2007, when compared to the corresponding period in 2006.
Salaries and employees' benefits, the largest component of total
non-interest expenses, increased $1.8 million, or 12.88% for the
quarter ended March 31, 2007, when compared to the corresponding
period in 2006. Such increase is mainly 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 September 2006 and March 2007, the Company opened its two
newest mega branches in the cities of Bayamon and Canovanas. 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 March 31, 2007, the Company had 1,386
full-time employees, including its executive officers, an increase
of 30 employees or 2.21% since March 31, 2006. Deposit insurance
premiums and supervisory examination expenses increased $1.1
million for the three months ended March 31, 2007, when compared to
the same period in 2006. The increase was mainly due to the
increase in premiums assessed by the Federal Deposit Insurance
Corporation (the "FDIC") as a result of final FDIC assessment
regulations adopted on November 2, 2006. The final regulations
implemented certain changes to FDIC assessments, which changes
became effective in 2007. Non-interest expenses, other than
salaries and employees' benefits and deposit insurance premiums and
supervisory examination expenses discussed above, increased by $2.7
million or 18.51% for the quarter ended March 31, 2007, when
compared to the same period in 2006. Such increase 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 38.04% for the
first quarter of 2007, compared to 33.72% for the same period in
2006, respectively. The change in the efficiency ratio in 2007 was
mainly due to increases in non-interest expenses. Provision for
Income Taxes The provision for income taxes decreased $2.8 million,
or 17.15% for the three-month period ended March 31, 2007, when
compared to the same period in 2006. The current provision for
income taxes for the first quarter of 2007 amounted to $16.7
million, a decrease of $554,000, or 3.22%, when compared to $17.2
million for the same period in 2006. Such decrease in the provision
for income taxes is mainly attributed to the end of the transitory
income taxes of 2% and 2.5% approved by the Government of Puerto
Rico on May 13, 2006 and August 1, 2006, respectively, which ended
on December 31, 2006, almost offset by the increases in the
provisions for federal income tax and uncertain tax positions, when
compared to the same period in 2006. As explained before, on
January 1, 2007, the Company adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of
FASB Statement No. 109, Accounting for Income Taxes ("FIN No. 48").
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. FIN No. 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosure and transition. Under the new guidance, tax
positions shall initially be recognized in the financial statements
when it is more likely than not the position will be sustained upon
examination by the tax authorities. Such tax positions shall
initially and subsequently be measured as the largest amount of tax
benefit that is greater than 50% likely of being realized upon
ultimate settlement with the tax authority assuming full knowledge
of the position and all relevant facts. FIN No. 48 also revises
disclosure requirements to include an annual tabular rollforward of
unrecognized tax benefits. On January 1, 2007, the cumulative
effect adjustment of $10.6 million was charged to retained earnings
to increase the accrued liability for uncertain tax positions and
the deferred income tax asset by $10.9 million and $265,000,
respectively. The deferred credit for the quarter ended March 31,
2007, increased by $2.2 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
financial reporting purposes, 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 its ratios of delinquent loans to total loans, 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 0.72% (less than 1%) at March 31, 2007, a slight
increase of six basis points when compared to 0.66% (less than 1%)
at December 31, 2006. The slight increase in the combined
delinquency ratio is the result of an increase in delinquent loans
of the Commercial and C&I and construction loan portfolios,
mainly in loans collateralized by real estate properties. The
delinquency ratio on the Commercial and C&I and construction
loan portfolios for the categories of 60 days and over increased to
0.68% (less than 1%), when compared to 0.63% (less than 1%) at
December 31, 2006, an increase of five 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 2 basis points, to 1.54% at March 31,
2007, when compared to 1.52% at December 31, 2006. The increases in
both delinquency ratios from 2006 to 2007 were principally
attributable to delinquencies in Commercial and C&I loans and
regular consumer loans past due over 90 days which are
collateralized by real estate properties. On a quarter-to-quarter
basis, the combined delinquency on all portfolios for the
categories of 60 days and over increased by seven basis points,
when compared to the year-ago combined delinquency ratio of 0.65%
at March 31, 2006. As explained before, the increase in the overall
delinquency ratio resulted from the increase in delinquent loans of
the Commercial and C&I loan portfolio, mainly in loans
collateralized by real estate properties. The delinquency ratio on
the Commercial and C&I and construction loan portfolios for the
categories of 60 days and over increased by 2 basis points to 0.68%
(less than 1%), when compared to the year-ago ratio of 0.66% at
March 31, 2006. 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 21 basis points
to 1.54% at March 31, 2007, from 1.33% for the comparable period in
2006. The increases in both delinquency ratios are principally
attributable to Commercial and C&I loans and consumer loans
past due over 60 days which are collateralized by real estate
properties. The provision for possible loan losses increased by
$9.0 million, up to $16.0 million for the first quarter of 2007,
when compared to the same quarter in 2006. The allowance for
possible loan losses reached $136.9 million as of March 31, 2007.
The increase in the provision for loan losses for the first quarter
of 2007 is mainly attributable to two 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 and net loans charged-off. Commercial and C&I loan
portfolio grew to $6.48 billion at March 31, 2007, an increase of
$261.5 million, or 4.20%, when compared to December 31, 2006. On a
year-to-year basis, the Commercial and C&I loan portfolio grew
$1.03 billion, or 18.80%, from $5.46 billion at March 31, 2006.
Westernbank Business Credit loan portfolio stands at $1.41 billion
at March 31, 2007, a decrease of $45.5 million, or 3.12%, when
compared to December 31, 2006, and an increase of $58.4 million and
4.32%, when compared to March 31, 2006. The provision for loan
losses for the asset-based lending division increased by $3.8
million for the quarter ended March 31, 2007, when compared to the
same period in 2006. Such increase is mainly attributable to two
factors: first, the increase in the Division's loan portfolio from
$1.35 billion at March 31, 2006, to $1.41 billion at March 31,
2007, and second, the increase in classified loans of the
Division's loans portfolio. During the quarter ended March 31,
2007, the Company classified two loans of the Division's loan
portfolio with outstanding principal balances of $11.4 million and
$6.8 million at March 31, 2007. These loans required valuation
allowances as follows: $1.9 million for the $11.4 million loan and
$2.0 million for the $6.8 million loan. These loans have shortfalls
in the collaterals and in the financial condition of the borrowers.
The provision for possible loan losses for the consumer loans
portfolio, including the Expresso of Westernbank loan portfolio,
amounted to $5.9 million for the quarter ended March 31, 2007, up
from $1.8 million for the same quarter in 2006, an increase of $4.2
million. The increase is attributable to higher net loans
charged-off during the first quarter of 2007, when compared to the
same quarter in 2006. The provision for loan losses of the Expresso
of Westernbank loan portfolio grew by $2.0 million, from $1.5
million in the first quarter of 2006, to $3.5 million in same
quarter in 2007. Loans charged- off by the Expresso of Westernbank
Division during the first quarter of 2007 were $2.6 million,
compared to $1.7 million for the same quarter in year 2006. Net
loans charged-off in the first quarter of 2007 were $6.0 million,
or 0.27% (annualized) to average loans, an increase of $2.8
million, when compared to $3.1 million, or 0.16% (annualized) to
average loans for the same period in 2006. The increase in net
loans charged-off when compared to same quarter in 2006 was due to
the following two factors; first, an increase in consumer loans
charged-off of $1.4 million, or 63.56%, and second, to a decrease
in total recoveries of loans previously charged-off of $1.3
million, or 59.02%. The increase in consumer loans charged-off was
primarily due to an increase of $948,000 in loans charged-off by
the Expresso of Westernbank division. Loans charged-off by the
Expresso of Westernbank Division during the first quarter of year
2007 were $2.6 million, compared to $1.7 million for the same
quarter in year 2006. Non-performing loans amounted to $191.8
million or 2.12% of the total loan portfolio at March 31, 2007, an
increase of $26.0 million, when compared to $165.8 million, or
1.89%, of the total loan portfolio at December 31, 2006. The
increase in non-performing loans is mainly due to two loans of the
Company's asset based lending division, with outstanding principal
balances of $11.4 million and $6.8 million at March 31, 2007. These
loans have shortfalls in the collaterals and in the financial
condition of the borrowers. These loans required valuation
allowances at March 31, 2007 as follows: $1.9 million for the $11.4
million loan and $2.0 million for the $6.8 million loan. At March
31, 2007, the allowance for possible loan losses was 71.35% of
total non-performing loans (reserve coverage). Most of the
Company's non- performing loans are collateralized with real estate
properties, accounts receivable, inventories and equipment. Of the
total allowance of $136.9 million, $45.0 million is the Company's
specific allowance and the remaining $91.9 million is the general
allowance component. Total Loans, Investments and Deposits Loans
receivable-net grew $291.4 million, or 3.37%, to $8.93 billion at
March 31, 2007, compared to $8.64 billion at December 31, 2006, and
$909.3 million, or 11.33%, compared to $8.02 billion at March 31,
2006. These increases reflect 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 $4.32 billion as of March 31, 2006, to $4.95 billion
as of December 31, 2006, and to $5.20 billion at March 31, 2007, an
increase of $877.7 million or 20.33% on a year-to-year basis, and
$249.3 million or 5.04%, when compared to December 31, 2006. The
commercial, industrial and agricultural loan portfolio increased
from $1.14 billion at March 31, 2006, to $1.27 billion at December
31, 2006, and to $1.29 billion at March 31, 2007, up by $148.0
million, or 13.00% on a year-to-year basis, and $12.2 million, or
0.96%, when compared to December 31, 2006. The construction loan
portfolio increased from $589.0 million at March 31, 2006, to
$722.8 million at December 31, 2006, and to $779.4 million as of
March 31, 2007, an increase of $190.3 million, or 32.31% on a
year-to-year basis, and $56.6 million, or 7.83%, when compared to
December 31, 2006. Attached as Exhibit IV is a supplemental
unaudited data schedule providing additional information on the
Company's loan portfolio. The Company's investment portfolio,
excluding money market instruments, stands at $7.29 billion at
March 31, 2007, increasing by $266.6 million in comparison to $7.03
billion at December 31, 2006. Such increase was due to a shifting
between the investment securities portfolio and short-term money
market instruments attributable to the reinvestment of matured
money market instruments into tax exempt securities, specifically
U.S. Government and agencies obligations on a short-term basis, as
part of the management strategy of growing W Holding exempt
interest income. The investment portfolio at March 31, 2007, had an
average contractual maturity of 28 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 March 31, 2007, had a
remaining average maturity of four 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 March 31, 2007, total deposits reached $9.96
billion, from $9.34 billion at December 31, 2006, an increase of
$622.9 million, or 6.67%, while federal funds purchased and
repurchase agreements decreased by $268.4 million, to $6.05 billion
at March 31, 2007, from $6.32 billion at December 31, 2006.
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 57 full-fledged branches (including 20
Expresso of Westernbank branches), including 33 in the southwestern
region of Puerto Rico, 8 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. 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 March 31,
March, 31 Dec. 31, 2007 2006 2006 (Dollars in thousands, except per
share data) Income Statement Data Interest income: Loans, including
loan fees $183,818 $149,819 $186,311 Investment securities 66,522
64,896 65,794 Mortgage-backed securities 6,931 7,278 6,994 Money
market instruments 10,120 8,936 9,191 Total interest income 267,391
230,929 268,290 Interest expense: Deposits 107,506 79,478 101,049
Federal funds purchased and repurchase agreements 76,224 70,830
80,390 Advances from Federal Home Loan Bank 1,455 2,061 1,516 Line
of credit 272 -- -- Total interest expense 185,457 152,369 182,955
Net interest income 81,934 78,560 85,335 Provision for loan losses
16,000 7,000 28,000 Net interest income after provision for loan
losses 65,934 71,560 57,335 Non-interest income: Service and other
charges on loans 3,211 2,954 3,376 Service charges on deposit
accounts 2,930 2,258 2,700 Other fees and commissions 3,962 3,452
4,116 Net gain on derivative instruments 640 353 487 Net gain
(loss) on sales and valuation of loans, securities, and other
assets 265 167 (590) Total non-interest income 11,008 9,184 10,089
Total net interest income and non-interest income 76,942 80,744
67,424 Non-interest expenses: Salaries and employees' benefits
15,418 13,659 14,811 Equipment 3,194 2,648 3,059 Deposit insurance
premium and supervisory examination 1,985 893 1,011 Occupancy 2,199
1,974 2,240 Advertising 2,194 2,798 2,126 Printing, postage,
stationery, and supplies 884 981 819 Telephone 529 523 642 Net gain
from operations of foreclosed real estate held for sale (181) (212)
(45) Municipal taxes 1,833 1,276 1,833 Other 6,958 4,871 7,551
Total non-interest expenses 35,013 29,411 34,047 Income before
provision for income taxes 41,929 51,333 33,377 Provision for
income taxes: Current 16,669 17,223 18,434 Deferred credit (3,460)
(1,280) (2,914) Total provision for income taxes 13,209 15,943
15,520 Net income 28,720 35,390 17,857 Less dividends to preferred
stockholders 9,228 9,229 9,227 Income available to common
stockholders $19,492 $26,161 $8,630 Basic earnings per common share
$0.12 $0.16 $0.05 Diluted earnings per common share $0.12 $0.15
$0.05 Cash dividends declared on common stock $7,827 $7,799 $7,814
Cash dividends declared per common share (1) $0.05 $0.05 $0.05
Period end number of common shares outstanding 164,898 164,236
164,487 Weighted average number of common shares outstanding
164,703 164,144 164,487 Weighted average number of common shares
outstanding on a diluted basis 167,550 170,176 167,844 (1) Cash
dividend amounts in the table are rounded. W HOLDING COMPANY, INC.
EXHIBIT II FINANCIAL HIGHLIGHTS (UNAUDITED) March 31, December 31,
March 31, Balance Sheet Data 2007 2006 2006 (In thousands) At
Period End Cash and due from banks $107,847 $105,027 $81,508 Money
market instruments: Federal funds sold and resell agreements
809,502 950,573 776,415 Interest-bearing deposits in banks 9,540
21,060 70,042 Trading securities, at fair value -- -- 1,613
Investment securities available for sale, at fair value 21,565
20,541 3,231 Investment securities held to maturity, at amortized
cost 7,273,193 7,007,579 7,401,352 Federal Home Loan Bank stock, at
cost 33,482 37,982 42,968 Residential mortgage loans held for sale,
at lower of cost or fair value 4,135 11,379 1,687 Loans-net
8,932,413 8,641,023 8,023,162 Accrued interest receivable 114,998
121,360 102,007 Premises and equipment, net 125,866 124,648 118,961
Deferred income taxes, net 54,869 51,338 42,395 Other assets 61,884
62,178 48,810 Total Assets $17,549,294 $17,154,688 $16,714,151
Liabilities: Deposits: Non-interest-bearing $328,776 $373,634
$288,500 Interest-bearing and related accrued interest payable
9,631,248 8,963,429 8,639,353 Total deposits 9,960,024 9,337,063
8,927,853 Federal fund purchased and repurchase agreements
6,052,049 6,320,481 6,245,713 Advances from Federal Home Loan Bank
102,000 127,000 162,000 Line of credit 32,500 -- -- Mortgage note
payable 35,836 35,968 36,310 Accrued expenses and other liabilities
135,994 106,289 129,885 Total Liabilities 16,318,403 15,926,801
15,501,761 Stockholders' equity 1,230,891 1,227,887 1,212,390 Total
Liabilities and Stockholders' Equity $17,549,294 $17,154,688
$16,714,151 Quarterly Averages (1) Average Balances March 31, March
31, 2007 2006 (In thousands) Cash and due from banks $106,437
$89,560 Money market instruments: Federal funds sold and resell
agreements 880,038 761,477 Interest-bearing deposits in banks
15,300 63,579 Trading securities -- 807 Investment securities
available for sale 21,053 4,199 Investment securities held to
maturity 7,140,386 7,237,689 Federal Home Loan Bank stock 35,732
42,883 Residential mortgage loans held for sale 7,757 1,613
Loans-net 8,786,718 7,919,393 Accrued interest receivable 118,179
103,945 Premises and equipment 125,257 118,292 Deferred income
taxes, net 53,104 41,753 Other assets 62,031 47,818 Total Assets
$17,351,992 $16,433,008 Liabilities: Deposits: Non-interest-bearing
$351,205 $282,799 Interest-bearing and related accrued interest
payable 9,297,339 8,368,932 Total deposits 9,648,544 8,651,731
Federal fund purchased and repurchase agreements 6,186,265
6,252,871 Advances from Federal Home Loan Bank 114,500 167,000 Line
of credit 16,250 -- Mortgage note payable 35,902 36,371 Accrued
expenses and other liabilities 121,142 122,101 Total Liabilities
16,122,603 15,230,074 Stockholders' equity 1,229,389 1,202,934
Total Liabilities and Stockholders' Equity $17,351,992 $16,433,008
(1) Average balances have been computed using beginning and
period-end balances. W HOLDING COMPANY, INC. EXHIBIT III a YIELDS
EARNED AND RATES PAID THREE MONTHS ENDED, (UNAUDITED) March 31,
2007 Annualized Average Average Interest Balance(1) Yield/Rate
(Dollars in thousands) Normal spread: Interest-earning assets:
Loans, including loan fees (2) $183,818 $8,789,439 8.48 Investment
securities (3) 66,522 6,581,804 4.10 Mortgage-backed securities (4)
6,931 610,355 4.61 Money market instruments 10,120 848,853 4.84
Total 267,391 16,830,451 6.44 Interest-bearing liabilities:
Deposits 107,506 9,541,900 4.57 Federal funds purchased and
repurchase agreements 76,224 6,166,709 5.01 Advances from FHLB
1,455 104,777 5.63 Line of credit 272 18,155 6.08 Total 185,457
15,831,541 4.75 Net interest income $81,934 Interest rate spread
1.69 Net interest-earning assets $998,910 Net yield on
interest-earning assets (5) 1.97 Ratio of interest-earning assets
to interest-bearing liabilities 106.31% Tax equivalent spread:
Interest-earning assets $267,391 $16,830,451 6.44 Tax equivalent
adjustment 5,152 -- 0.13 Interest-earning assets - tax equivalent
272,543 $16,830,451 6.57 Interest-bearing liabilities 185,457
$15,831,541 4.75 Net interest income $87,086 Interest rate spread
1.82 Net yield on interest - earning assets (5) 2.10 March 31, 2006
Annualized Average Average Interest Balance(1) Yield/Rate (Dollars
in thousands) Normal spread: Interest-earning assets: Loans,
including loan fees (2) $149,819 $7,984,850 7.61 Investment
securities (3) 64,896 6,517,255 4.04 Mortgage-backed securities (4)
7,278 649,929 4.54 Money market instruments 8,936 831,604 4.36
Total 230,929 15,983,638 5.86 Interest-bearing liabilities:
Deposits 79,478 8,452,711 3.81 Federal funds purchased and
repurchase agreements 70,830 6,271,307 4.58 Advances from FHLB
2,061 168,777 4.95 Line of credit -- -- -- Total 152,369 14,892,795
4.15 Net interest income $78,560 Interest rate spread 1.71 Net
interest-earning assets $1,090,843 Net yield on interest-earning
assets (5) 1.99 Ratio of interest-earning assets to
interest-bearing liabilities 107.32% Tax equivalent spread:
Interest-earning assets $230,929 $15,983,638 5.86 Tax equivalent
adjustment 5,360 -- 0.14 Interest-earning assets - tax equivalent
236,289 $15,983,638 6.00 Interest-bearing liabilities 152,369
$14,892,795 4.15 Net interest income $83,920 Interest rate spread
1.85 Net yield on interest - earning assets (5) 2.13 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 Line of credit -- -- -- 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 (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 $4.9 million, $3.6 million, and $4.4 million for the
three-month periods ended March 31, 2007 and 2006 and December 31,
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.
EXHIBIT W HOLDING COMPANY, INC. III b CHANGES IN YIELDS EARNED AND
RATES PAID (UNAUDITED) Three Months Ended March 31, 2007 vs. 2006
Volume Rate Total (In thousands) Interest income: Loans $15,906
$18,093 $33,999 Investment securities (1) 647 979 1,626
Mortgage-backed securities (2) (451) 104 (347) Money market
instruments 181 1,003 1,184 Total increase in interest income
16,283 20,179 36,462 Interest expense: Deposits 11,041 16,987
28,028 Federal funds purchased and repurchase agreements (1,157)
6,551 5,394 Advances from FHLB (950) 344 (606) Line of credit 272
-- 272 Total increase in interest expense 9,206 23,882 33,088
Increase (decrease) in net interest income $7,077 $(3,703) $3,374
(1) Includes available for sale securities. (2) Includes trading
and available for sale securities. W HOLDING COMPANY, INC. EXHIBIT
IV LOAN RECEIVABLE-NET (UNAUDITED) March 31, December 31, March 31,
By Collateral Type 2007 2006 2006 (In thousands) Commercial real
estate mortgage (1) $5,195,214 $4,945,932 $4,317,466 Residential
real estate - mortgage (2) 1,009,200 1,014,957 1,246,447
Construction - mortgage 779,367 722,789 589,045 Commercial,
industrial and agricultural (1) 1,286,406 1,274,236 1,138,451
Consumer and others (3) (4) 799,112 809,953 828,035 Total Loans
9,069,299 8,767,867 8,119,444 Allowance for loan losses (136,886)
(126,844) (96,282) Loans - net $8,932,413 $8,641,023 $8,023,162 (1)
Includes $1.41 billion, $1.46 billion and $1.35 billion of
Westernbank Business Credit division outstanding loans at March 31,
2007, December 31, 2006 and March 31, 2006, 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 $914.8 million, $940.0 million and $1.08
billion at March 31, 2007, December 31, 2006 and March 31, 2006,
respectively. (3) Includes $125.6 million, $129.0 million and
$133.7 million of Expresso of Westernbank division outstanding
loans at March 31, 2007, December 31, 2006 and March 31, 2006,
respectively. (4) Includes $488.3 million, $490.7 million and
$551.9 million collateralized by real estate at March 31, 2007,
December 31, 2006 and March 31, 2006, respectively. W HOLDING
COMPANY, INC. EXHIBIT V NON-PERFORMING LOANS AND FORECLOSED REAL
ESTATE HELD FOR SALE (UNAUDITED) March 31, December 31, March 31,
2007 2006 2006 (Dollars in thousands) Commercial real estate -
mortgages and commercial, industrial and agricultural loans
$179,223 $154,862 $60,253 Residential real estate mortgage and
construction loans 3,833 1,641 2,023 Consumer loans 8,785 9,309
7,659 Total non-performing loans 191,841 165,812 69,935 Foreclosed
real estate held for sale 6,223 5,917 4,003 Total non-performing
loans and foreclosed real estate held for sale $198,064 $171,729
$73,938 Interest that would have been recorded if the loans had not
been classified as non-performing $11,371 $9,052 $4,978 Interest
recorded on non-performing loans $1,805 $4,785 $1,453 Total
non-performing loans as a percentage of total loans at end of
period 2.12% 1.89% 0.86% Total non-performing loans and foreclosed
real estate held for sale as a percentage of total assets at end of
period 1.13% 1.00% 0.44% W HOLDING COMPANY, INC. EXHIBIT VI CHANGES
IN ALLOWANCE FOR LOAN LOSSES (UNAUDITED) Three Months Ended Year
Ended March 31, December 31, 2007 2006 2006 (Dollars in thousands)
Balance, beginning of year $126,844 $92,406 $92,406 Loans
charged-off: Commercial real estate - mortgage and commercial,
industrial and agricultural loans (1) (3,149) (3,121) (22,606)
Residential real estate-mortgage and construction loans (60) (1)
(94) Consumer loans (2) (3,667) (2,242) (12,576) Total loans
charged-off (6,876) (5,364) (35,276) Recoveries of loans previously
charged-off: Commercial real estate - mortgage and commercial,
industrial and agricultural loans 503 1,575 2,846 Residential real
estate-mortgage and construction loans 20 63 66 Consumer loans (3)
395 602 2,252 Total recoveries of loans previously charged-off 918
2,240 5,164 Net loans charged-off (5,958) (3,124) (30,112)
Provision for loan losses 16,000 7,000 64,550 Balance, end of
period $136,886 $96,282 $126,844 Ratios: Allowance for loan losses
to total loans at end of period 1.51% 1.19% 1.45% Provision for
loan losses to net loans charged-off 268.55% 224.07% 214.37%
Recoveries of loans to loans charged- off in previous year (4)
10.55% 40.99% 23.30% Net loans charged-off to average total loans
(4) (5) 0.27% 0.16% 0.36% Allowance for loan losses to non-
performing loans 71.35% 137.67% 76.50% (1) Includes partial
charge-offs of $2.0 million and $2.3 million of Westernbank
Business Credit Division for the three-month periods ended March
31, 2007 and 2006, respectively, and $15.8 million for the year
ended December 31, 2006. (2) Includes $2.6 million and $1.7 million
of Expresso of Westernbank loans charged-offs for the three-month
periods ended March 31, 2007 and 2006, respectively, and $8.9
million for the year ended December 31, 2006. (3) Includes $275,000
and $211,000 of Expresso of Westernbank loans recoveries for the
three-month periods ended March 31, 2007 and 2006, respectively,
and $1.0 million for the year ended December 31, 2006. (4) Net
loans charged-off ratios are annualized for comparison purposes.
(5) 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 March 31, December 31, 2007 2006 2006 (Amounts in
thousands, except per share data) Per share data: Dividend payout
ratio 40.15% 29.81% 49.10% Book value per common share $4.25 $4.15
$4.24 Preferred stock outstanding at end of period 18,157 18,157
18,157 Preferred stock equity at end of period $530,838 $530,838
$530,838 Performance ratios: Return on assets (1) 0.66% 0.86% 0.60%
Return on common stockholders' equity (1) 11.16% 15.57% 9.36%
Efficiency ratio 38.04% 33.72% 34.94% Operating expenses to total
end-of-period assets 0.80% 0.70% 0.73% Capital ratios: Total
capital to risk-weighted assets 12.23% 12.90% 12.51% Tier I capital
to risk-weighted assets 11.14% 12.08% 11.47% Tier I capital to
average assets 7.06% 7.41% 7.23% Equity-to-assets ratio (1) 7.01%
7.25% 7.27% Other selected data: Total trust assets managed
$547,270 $502,405 $542,733 Branch offices 57 55 56 Number of
full-time employees 1,386 1,356 1,363 (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. DATASOURCE: W Holding Company,
Inc. CONTACT: Vixson Frank Baez, W Holding Company,
+1-787-834-8000, ext. 5535, , Web site: http://www.wholding.com/
Copyright