BancTrust Financial Group, Inc. Reports Second Quarter 2008 Earnings

2008-07-25 07:30:00

BancTrust Financial Group, Inc. Reports Second Quarter 2008 Earnings

    MOBILE, Ala., July 25 /EMWNews/ -- BancTrust Financial

Group, Inc. (Nasdaq: BTFG) today reported an increase in net income to $1.8

million for the second quarter ended June 30, 2008 compared to net income

of $1.3 million in the second quarter of 2007. Net income per diluted share

was $0.10 in the second quarter of 2008 compared with $0.11 in the second

quarter of 2007. The decrease in per share earnings was due to a 55%

increase in average diluted shares outstanding related to the acquisition

of The Peoples BancTrust Company, Inc. in October 2007. More information

about this acquisition is found below under the heading "Accounting

Treatment for Peoples BancTrust Acquisition."



    Net income for the first six months of 2008 increased to $4.5 million,

or $0.26 per diluted share, compared with $3.7 million, or $0.33 per

diluted share, for the first six months of 2007. The 2008 results include a

one-time first quarter pre-tax gain of $1.1 million on the sale of an

interest rate contract acquired as part of the Peoples' transaction.



    BancTrust also announced that its Board of Directors declared a

dividend of $0.13 per share, payable October 1, 2008, to shareholders of

record as of September 12, 2008.



    "We remain focused on growing earnings by improving credit quality and

enhancing our operating efficiency," stated W. Bibb Lamar, Jr., President

and Chief Executive Officer of BancTrust Financial Group, Inc. "Our credit

quality remained stable in the second quarter resulting in a lower loan

loss provision and lower charge-offs compared with the linked first quarter

of this year. We improved our cost structure by merging our Alabama and

Florida subsidiary banks as of June 30, 2008. Going forward, BancTrust will

operate as a one-bank holding company, thereby affording us further

operating efficiencies."



    Second Quarter Results



    Total interest revenue increased 15.5% to $27.6 million in the second

quarter of 2008 compared with $23.9 million in the second quarter of 2007.

The growth resulted from a 52.8% increase in our second quarter average

loan portfolio, primarily a result of the Peoples acquisition. The greater

loan volume was partially offset by a 36 basis point decline in the net

interest margin which was 3.60% at the end of the second quarter 2008.

Since December 31, 2007, our net loans are down 4.5%, or $73.1 million, to

$1.5 billion due to a slowdown in several of our markets and to an increase

in other real estate owned.



    "The decline in our net interest margin slowed in the second quarter of

2008 because of a more stable interest rate environment," continued Mr.

Lamar. "Our margin remains below our target levels as a result of more

non-performing loans since last year and our plan to slow loan growth this

year. Our focus remains on improving credit quality rather than growing our

loan portfolio, and we plan to maintain that focus until we see renewed

strength of the economy in our markets. We believe this is an important

part of our strategy to protect our capital base."



    Net interest revenue rose 32.5% to $16.2 million in the second quarter

of 2008 compared with $12.2 million in the second quarter of 2007. The

increase was due largely to higher average loan balances resulting from the

Peoples acquisition, but was partially offset by a decline in the net

interest margin. Approximately 60.2% of our loan portfolio bears variable

interest rates, and we expect our margin to remain relatively stable if

interest rates remain at the current levels or increase in the future.



    The provision for loan losses declined 18.8% to $2.4 million in the

second quarter of 2008 compared with $2.9 million in the second quarter of

2007. The provision for loan losses was also down from $2.9 million in the

linked first quarter of 2008. For the first six months of 2008, the

provision for loan losses was $5.3 million compared with net charge-offs of

$4.4 million, providing additional reserves which grew the Company's

allowance for loan losses to $24.6 million at June 30, 2008. At the end of

the second quarter 2008, our allowance for loan losses to net loans

improved to 1.58% compared with 1.51% at March 31, 2008.



    "Our non-performing assets were up only 1.5% to $85.9 million in the

second quarter compared with $84.6 million in the first quarter of this

year," continued Mr. Lamar. "The majority of our credit issues are with

Gulf Coast properties and we continue to monitor these closely. Our special

assets team is very proactive in monitoring credit quality throughout our

system to minimize future credit losses."



    Total non-interest revenue rose 64.7% to $5.2 million in the second

quarter of 2008 compared with $3.2 million in the second quarter of 2007.

Trust revenue rose 35.1% to $1.0 million; service charges on deposit

accounts increased to $2.8 million; and other income, charges and fees were

up 47.6% to $1.4 million, all compared with the second quarter of 2007. The

increase in non-interest income resulted in part from organic growth, but

is primarily attributable to the Peoples acquisition. The increase was

tempered by a decline in mortgage origination fees which were $180 thousand

less compared with the second quarter of 2007.



    Total non-interest expense increased 51.4% to $16.4 million in the

second quarter of 2008 compared with $10.8 million in the prior year second

quarter. The increase resulted from the acquisition of Peoples and the

effect of the purchase accounting treatment, including a $761 thousand

increase in intangible amortization costs, offset partially by improved

operating efficiencies since last year.



    "We have eliminated over $5 million in expenses since last year by

integrating Peoples' operations," noted Mr. Lamar. "We expect to reduce our

non-interest costs by another $1 million on an annualized basis as we

realize savings from additional operating efficiencies and leveraging the

merger of our bank charters. The Florida bank charter merger was completed

effective June 30, 2008. We remain intent on improving our operating

efficiency as a one-bank holding company."



    BancTrust previously announced the sale of three branch offices located

in the Tuscaloosa, Alabama market. The branches were acquired as part of

the Peoples transaction. The sale is expected to close in late August 2008.

We expect the sale to allow us to better focus on markets where BancTrust

has a greater presence. The transaction will have a minimal but positive

effect on tangible equity and the regulatory capital ratios of the Company.

Our Board and Management will continue to monitor both internal and

external conditions in order to maintain and strengthen the financial

condition of the Company in view of the uncertain economic environment in

which we are operating.



    Income before taxes rose 62.6% to $2.6 million in the second quarter of

2008 compared with $1.6 million in the second quarter of 2007. Net income

for the second quarter of 2008 was $1.8 million compared with net income of

$1.3 million in the second quarter of 2007. Net income per share for the

second quarter of 2008 was $0.10 on 17.7 million diluted average shares

outstanding compared with $0.11 per diluted share in the second quarter of

2007 on 11.4 million diluted average shares outstanding.



    Book value per share increased to $14.12 at June 30, 2008, compared

with $12.48 at June 30, 2007. Average shareholders' equity was $249.3

million at June 30, 2008, compared with $142.7 million at June 30, 2007.



    Six Months Results



    Net income for the first six months of 2008 increased 22.1% to $4.5

million compared with $3.7 million for the first six months of 2007. Net

income per diluted share was $0.26 for the first six months of 2008

compared with $0.33 for the same period in 2007. Per share earnings

declined from 2007 to 2008 as a result of a 55.2% increase in diluted

average shares outstanding to 17.7 million, up from 11.4 million for the

first six months of 2007. The increase in shares outstanding was primarily

due to shares issued in the acquisition of Peoples in October 2007.



    Net interest revenue increased 36.0% to $33.0 million in the first six

months of 2008 compared with $24.3 million in the first six months of 2007.

The growth in interest income was due to a 47.9% increase in average

earnings assets to $1.9 billion resulting primarily from the Peoples

acquisition.



    The provision for loan losses rose to $5.3 million in the 2008 period

compared with $3.7 million in the 2007 period. The increase in the

provision since last year was primarily due to an increase in

non-performing assets in our Florida market. At June 30, 2008,

non-performing assets totaled $85.9 million compared with $35.0 million at

June 30, 2007.



    Non-interest income increased 93.2% to $11.9 million in the first six

months of 2008 compared with $6.2 million in the first six months of 2007,

primarily as a result of the Peoples acquisition.



    In today's volatile markets, we believe our acquisition of Peoples has

brought us a measure of market stability, as it has diluted somewhat our

exposure to the economic conditions in our immediate Gulf Coast markets.



    BancTrust Stock Added to Russell 2000 Index



    BancTrust's stock was added to the Russell 2000 index effective June

27, 2008. The Russell 2000 Index is reconstituted annually and represents

approximately 2000 of the smallest issuers as a subset of the Russell 3000

Index. Russell primarily uses market capitalization for inclusion in these

indexes.



    Accounting Treatment for Peoples BancTrust Acquisition



    The acquisition of Peoples was accounted for under the purchase

accounting method as required by United States generally accepted

accounting principles. Under this method of accounting, the financial

statements of the Company do not reflect results of operations or the

financial condition of Peoples prior to October 15, 2007, the date of

acquisition. The acquisition has made comparison to prior-year periods less

useful as a means of judging the Company's performance.



    About BancTrust Financial Group, Inc.



    BancTrust Financial Group, Inc. is now a one-bank holding company

headquartered in Mobile, Alabama. The Company provides an array of

traditional financial services through 44 bank offices in the southern

two-thirds of Alabama and 10 bank offices in northwest Florida. BancTrust's

common stock is listed on the NASDAQ Global Select Market under the symbol

BTFG.



    Additional information concerning BancTrust Financial Group can be

accessed at http://www.btfginc.com.



    Forward-Looking Statements



    This press release includes forward-looking statements within the

meaning and subject to the protection of Section 27A of the Securities Act

of 1933 and Section 21E of the Securities Exchange Act of 1934. These

statements can be identified by the use of words such as "expect," "may,"

"could," "intend," "project," "schedule," "estimate," "anticipate,"

"should," "will," "plan," "believe," "continue," "predict," "contemplate"

and similar expressions. Such forward-looking statements are based on

information presently available to BancTrust's management and are subject

to various risks and uncertainties, including, without limitation, risks

that competitive pressures among depository and other financial

institutions may increase significantly; changes in the interest rate

environment may reduce margins; general economic conditions may be less

favorable than expected, resulting in, among other things, a deterioration

in credit quality and/or a reduction in demand for credit; legislative or

regulatory changes, including changes in accounting standards, may

adversely affect the business in which BancTrust is engaged; BancTrust may

be unable to obtain required shareholder or regulatory approval or

financing for any proposed acquisition or other strategic or capital

raising transactions; costs or difficulties related to the integration of

BancTrust's businesses may be greater than expected; deposit attrition,

customer loss or revenue loss following acquisitions may be greater than

expected; competitors may have greater financial resources and develop

products that enable these competitors to compete more successfully than

BancTrust can compete; and the other risks described in BancTrust's SEC

reports and filings under "Cautionary Note Concerning Forward-Looking

Statements" and "Risk Factors." You should not place undue reliance on

forward-looking statements, since the statements speak only as of the date

that they are made. BancTrust has no obligation and does not undertake to

publicly update, revise or correct any of its forward-looking statements

after the date of this press release, or after the respective dates on

which such statements otherwise are made, whether as a result of new

information, future events or otherwise.




BANCTRUST FINANCIAL GROUP, INC. (BTFG) Financial Highlights (Unaudited) (In thousands, except per share amounts) Quarter Ended Six Months Ended June 30, March 31, June 30, June 30, 2008 2008 2007 2008 2007 EARNINGS: Interest revenue $27,622 $30,994 $23,920 $58,616 $47,670 Interest expense 11,458 14,135 11,720 25,593 23,390 Net interest revenue 16,164 16,859 12,200 33,023 24,280 Provision for loan losses 2,382 2,929 2,933 5,311 3,719 Trust revenue 1,000 1,000 740 2,000 1,473 Service charges on deposit accounts 2,753 2,817 1,462 5,570 2,675 Securities gains 41 7 0 48 0 Gain on sale of interest rate floor 0 1,115 0 1,115 0 Other income, charges and fees 1,448 1,745 981 3,193 2,026 Total non-interest revenue 5,242 6,684 3,183 11,926 6,174 Salaries, pensions and other employee benefits 7,603 8,446 5,558 16,049 11,337 Net occupancy, furniture and equipment expense 3,148 2,991 1,678 6,139 3,364 Intangible amortization 948 824 187 1,772 374 Other non-interest expense 4,712 4,450 3,420 9,162 6,535 Total non-interest expense 16,411 16,711 10,843 33,122 21,610 Income before income taxes 2,613 3,903 1,607 6,516 5,125 Income tax expense 836 1,155 351 1,991 1,418 Net income $1,777 $2,748 $1,256 $4,525 $3,707 Earnings per share: Total Basic $0.10 $0.16 $0.11 $0.26 $0.33 Diluted 0.10 0.16 0.11 0.26 0.33 Cash dividends declared per share $0.13 $0.13 $0.13 $0.26 $0.26 Book value per share $14.12 $14.32 $12.48 $14.12 $12.48 Common shares outstanding 17,535 17,526 11,197 17,535 11,197 Basic average shares outstanding 17,535 17,522 11,191 17,529 11,185 Diluted average shares outstanding 17,697 17,649 11,385 17,673 11,387 STATEMENT OF CONDITION: 06/30/08 03/31/08 12/31/07 06/30/07 Cash and cash equivalents $77,124 $121,118 $128,781 $140,769 Securities available for sale 222,082 225,775 245,877 116,208 Loans and loans held for sale 1,560,449 1,576,894 1,632,676 1,027,043 Allowance for loan losses (24,642) (23,888) (23,775) (19,259) Goodwill 98,463 96,543 95,643 41,793 Other intangible assets 11,205 12,153 12,978 2,621 Other assets 179,630 171,261 147,914 79,389 Total assets $2,124,311 $2,179,856 $2,240,094 $1,388,564 Deposits $1,703,332 $1,767,481 $1,827,927 $1,158,039 Short term borrowings 16,242 548 4,198 4,438 FHLB borrowings and long term debt 134,607 134,960 137,341 75,521 Other liabilities 22,476 25,815 21,108 10,838 Shareholders' equity 247,654 251,052 249,520 139,728 Total liabilities and shareholders' equity $2,124,311 $2,179,856 $2,240,094 $1,388,564 Quarter Ended Six Months Ended 06/30/08 03/31/08 06/30/07 06/30/08 06/30/07 AVERAGE BALANCES: Total assets $2,127,484 $2,178,918 $1,408,471 $2,153,201 $1,405,633 Earning assets 1,819,174 1,889,782 1,256,994 1,854,478 1,254,022 Loans 1,570,840 1,605,924 1,027,950 1,588,382 1,020,171 Deposits 1,710,582 1,765,154 1,166,321 1,737,868 1,159,337 Shareholders' equity 249,270 249,880 142,721 249,575 141,090 PERFORMANCE RATIOS: Return on average assets 0.34% 0.51% 0.36% 0.42% 0.53% Return on average equity 2.87% 4.42% 3.53% 3.65% 5.30% Net interest margin (tax equivalent) 3.60% 3.62% 3.96% 3.61% 3.97% Efficiency ratio 75.81% 70.43% 69.58% 73.12% 70.03% ASSET QUALITY: Ratio of non-performing assets to total assets 4.04% 3.88% 2.52% 4.04% 2.52% Ratio of allowance for loan losses to total loans, net of unearned income 1.58% 1.51% 1.88% 1.58% 1.88% Net loans charged-off to average loans (annualized) 0.42% 0.71% 0.26% 0.56% 0.16% Ratio of ending allowance to total non-performing loans 68.88% 54.85% 62.33% 68.88% 62.33% CAPITAL RATIOS: Average shareholders' equity to average total assets 11.72% 11.47% 10.13% 11.59% 10.04% Dividend payout ratio 130.00% 81.25% 118.18% 100.00% 78.79%

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