WLBC Western Liberty Bancorp (MM)

Western Liberty Bancorp, Inc. (NASDAQ:WLBC), the holding company for Service1st Bank of Nevada (Service1st Bank) and Las Vegas Sunset Properties (LVSP), today reported its tangible book value per share was $5.43, down slightly from $5.53 in the preceding quarter. Western Liberty reported second quarter loss of $1.5 million, or $0.11 per share, compared to $1.1 million, or $0.08 per share, in the first quarter of 2012, and $4.6 million, or $0.30 per share in the second quarter of 2011. For the six month period ended June 30, 2012, net losses narrowed to $2.5 million, or $0.19 per share, compared to $5.0 million, or $0.33 per share in the first half of 2011. All financial results are unaudited.

“Our loan portfolio continues to stabilize with nonperforming loans down $3.5 million from year end,” said William Martin, Chief Executive Officer. “While we still have a lot of work to do, we believe the steps we are taking will help us achieve our operating goals. Fortunately, capital remains exceptionally strong.”

Financial Highlights (at or for the six months ended June 30, 2012)

• Service1st Bank has exceptionally strong capital ratios with Total Capital/Total risk-weighted assets of 35.98%.
• Western Liberty also has exceptionally strong capital ratios with Total Capital/Total risk-weighted assets of 69.04%.
• Tangible book value was $5.43 per share, based on 13,466,536 shares outstanding.
• Total cash and cash equivalents held by Western Liberty is $85.1 million, of which $17.7 million is at the holding company level and $2.3 million is at the holding company subsidiary Las Vegas Sunset Properties, (LVSP).
• Noninterest bearing deposits increased by $9.3 million and accounted for 48% of total deposits and core deposits (excluding time certificates of $100,000 or more) were 85% of total deposits.

Nevada Economic Update

According to the July 31, 2012 report from the University of Nevada Las Vegas’ Center for Business and Economic Research (CBER), “CBER’s Southern Nevada Coincident Index grew by 0.61% in May, the strongest showing since before the financial crisis in 2008. Nonfarm employment grew by 0.45% and household employment increased by 0.77%.

“Compared to the previous six months, CBER’s Southern Nevada Leading Index slowed down, increasing by only 0.17% for May 2012. This is about 0.08 percentage points below the average for early 2012 and late 2011. Our neighboring states fared well; Arizona’s component increased by 0.17% and California’s by 0.29%.

"Decreased activity at McCarran airport and lower stock prices weren’t enough to offset these gains. Changes in CBER’s three other indexes for Southern Nevada were as follows:

• CBER’s Clark County Business Activity Index rose for the second straight month, and is faring better than in May 2011.
• CBER’s Clark County Tourism Index remained relatively flat, after lackluster months for gaming revenue and McCarran airport.
• CBER’s Clark County Construction Index grew, influenced by both residential and commercial building permits.”

Sources: http://cber.unlv.edu/commentary/CBER-31July2012.pdf

Balance Sheet Review

Total assets were $198.7 million at June 30, 2012, compared to $202.0 million at March 31, 2012, and $223.3 million at June 30, 2011.

Western Liberty has cash and cash equivalents of $85.1 million, which accounts for 43% of total assets. In addition, the investment portfolio was $713,000 at the end of June 2012, and is comprised of certificates of deposits, U.S. Government Agency securities and collateralized mortgage obligations.

Total loans increased to $104.8 million at June 30, 2012, compared to $102.4 million at March 31, 2012, and $101.5 million at June 30, 2011. Commercial real estate loans accounted for 56% of the total loan portfolio, commercial and industrial loans comprised 31%, construction and land development loans accounted for 3% and residential real estate loans were 10% of total loans at quarter end. Of the total loan portfolio, 69% is secured by real estate and 34% of the commercial real estate loan portfolio is owner-occupied. Approximately half of the loan portfolio is adjustable rate loans, with most of these loans indexed to the national prime rate with interest rate floors above the current prime rate index.

Western Liberty’s total deposits were $124.3 million at June 30, 2012, with 48% in noninterest bearing demand accounts. At March 31, 2012, total deposits were $126.0 million and$131.6 million at June 30, 2011. “Our deposit mix continues to improve with core deposit balances making up 85% of our funding base,” said Martin.

Total shares outstanding were approximately 13.5 million at June 30, 2012. Shareholders’ equity was $73.7 million at June 30, 2012, compared to $76.0 million at December 31, 2011, and $89.1 at June 30, 2011. Tangible book value per share was $5.43 at June 30, 2012 compared to $5.53 at March 31, 2012 and $5.48 at June 30, 2011.

Asset Quality

Nonperforming assets totaled $26.5 million, or 13% of total assets at June 30, 2012, compared to $28.5 million, or 14% of total assets at March 31, 2012, and $14.1 million, or 6% of total assets at June 30, 2011. Loans measured for impairment, which include nonperforming loans as well as loans that continue to perform but have some identified weakness, decreased to $28.5 million, down from $29.3 million at December 31, 2011. The majority of loans measured for impairment were in the commercial real estate portfolio.

Review of Operations

Net interest income, before the provision for loan losses, was $1.2 million in the second quarter of 2012, compared to $1.6 million in the preceding quarter and $2.0 million in the second quarter of 2011. Discount accretion contributed $153,000 to second quarter interest income compared to $469,000 in the preceding quarter and $27,000 in the year ago quarter. In the first six months of 2012, net interest income before the provision for loan losses was $2.8 million, including $622,000 in discount accretion, compared to $5.7 million, including $1.7 million in discount accretion, in the first six months of 2011.

The provision for loan losses totaled $319,000 in the second quarter compared to zero for the first quarter of 2012, and $4.3 million in the second quarter of 2011. “While asset quality has stabilized, we are continuing to add to our provisions based on the growth and performance of the loan portfolio,” said Pat Ochal, Chief Financial Officer. The allowance for loan losses totaled $2.6 million, or 2.52% of total loans at June 30, 2012.

During the second quarter non-interest income contributed $120,000 to revenue compared to $219,000 in the preceding quarter and $192,000 in the year ago quarter. In the first six months of 2012, non-interest income was $339,000 compared to $313,000 in the first six months of 2011.

Noninterest expense for the second quarter of 2012 was $2.5 million, down from $2.9 million in the first quarter and $2.4 million in the year ago quarter. Year to date, noninterest expense was $5.4 million compared to $5.3 million in the first six months of 2011.

About Western Liberty Bancorp

Western Liberty Bancorp is a Nevada bank holding company which conducts operations through Service1st Bank of Nevada, its wholly owned banking subsidiary, and its newly created wholly owned subsidiary Las Vegas Sunset Properties. Service1st Bank operates as a traditional community bank and provides a full range of deposit, lending and other banking services to locally owned businesses, professional firms, individuals and other customers from its headquarters and two retail banking facilities located in the greater Las Vegas area. Services provided include basic commercial and consumer depository services, commercial working capital and equipment loans, commercial real estate loans, and other traditional commercial banking services. Primarily all of the bank’s business is generated in the Nevada market.

www.wlbancorp.com

Consolidated Balance Sheet

(Dollars in thousands, except per share data)     (Unaudited) June 30, March 31, June 30, 2012 2012 2011   Assets: Cash and due from banks $ 8,799 $ 8,525 $ 7,163 Money market funds 100 100 51,308 Interest-bearing deposits in banks   76,193     84,277     44,955   Cash and cash equivalents 85,092 92,902 103,426   Certificates of deposits 1,988 - 4,195 Securities, available for sale 250 300 824 Securities, held to maturity 463 2,007 3,692 Loans: Construction, land development and other land 2,742 2,101 4,107 Commercial real estate 58,960 58,860 54,306 Residential real estate 10,488 10,101 4,704 Commercial and industrial 32,585 31,262 38,279 Consumer 16 18 102 Plus: net deferred loan costs   46     31     35   Total loans 104,837 102,373 101,533 Less: allowance for loan losses   (2,645 )   (2,687 )   (4,404 ) Net loans 102,192 99,686 97,129 Premises and equipment, net 584 742 1,013 Other real estate owned, net 5,820 3,891 4,440 Goodwill, net - - 5,633 Other intangibles, net 624 647 719 Accrued interest receivable and other assets   1,699     1,815     2,272   Total assets $ 198,712   $ 201,990   $ 223,343     Liabilities: Demand deposits, noninterest bearing $ 59,801 $ 59,891 $ 54,576 NOW and money market 40,767 38,002 34,056 Savings deposits 1,397 892 925 Time deposits $100,000 or more 19,211 22,559 35,059 Other time deposits   3,074     4,631     6,969   Total deposits 124,250 125,975 131,585 Contingent consideration - - 1,816 Accrued interest and other liabilities   750     925     843   Total liabilities 125,000 126,900 134,244   Shareholders' Equity: Common stock 1 1 1 Additional paid-in capital 118,068 117,960 117,597 Accumulated deficit (40,263 ) (38,778 ) (28,494 ) Treasury stock (4,094 ) (4,094 ) - Accumulated other comprehensive gain/(loss), net   -     1     (5 )

Total shareholders' equity

  73,712     75,090     89,099   Total liabilities and stockholders’ equity $ 198,712   $ 201,990   $ 223,343    

Consolidated Income Statement

  2Q 2012   1Q 2012   2Q 2011     (Dollars in thousands, except per share data) Three Months Ended Three Months Ended Three Months Ended   Six Months Ended Six Months Ended (Unaudited) June 30, March 31, June 30, June 30, June 30, 2012 2012 2011 2012 2011 Interest Income: Interest and fees on loans $ 1,285 $ 1,643 $ 2,018 $ 2,928 $ 5,800 Interest on securities, taxable and other   60     62     68     122     134   Total interest and dividend income 1,345 1,705 2,086 3,050 5,934 Interest Expense: Interest expense on deposits   100     115     127     215     239   Net interest income 1,245 1,590 1,959 2,835 5,695 Provision for loan losses   319     0     4,348     319     5,712   Net interest income (loss) after provision for loan losses 926 1,590 (2,389 ) 2,516 (17 )   Other Operating Income: Service charges 69 70 78 139 156 Contingent consideration recovery - - - - - Other   51     149     114     200     157   Total other operating income 120 219 192 339 313   Other Operating Expense: Salaries and employee benefits 789 844 765 1,633 1,558 Occupancy, equipment and depreciation 431 332 374 763 748 Computer service charges 77 78 74 155 151 Federal deposit insurance 136 134 129 270 281 Legal and professional fees 402 750 520 1,152 1,455 Advertising and business development 16 29 48 45 68 Insurance 74 72 67 146 138 Telephone 17 18 17 35 43 Printing and supplies 50 27 87 77 229 Director fees 57 56 49 113 98 Stock-based compensation 108 114 138 222 280 Provision for unfunded commitments 3 - (203 ) 3 (336 ) Oreo property impairment 83 117 - 200 - Goodwill impairment - - - - - Other   288     299     334     587     588   Total other operating expense   2,531     2,870     2,399     5,401     5,301   Net loss $ (1,485 ) $ (1,061 ) $ (4,596 ) $ (2,546 ) $ (5,005 )   Basic EPS $ (0.11 ) $ (0.08 ) $ (0.30 ) $ (0.19 ) $ (0.33 ) Diluted EPS $ (0.11 ) $ (0.08 ) $ (0.30 ) $ (0.19 ) $ (0.33 ) Average basic shares 13,466,536 13,466,536 15,088,024 13,466,536 15,088,024 Average diluted shares 13,466,536 13,466,536 15,088,024 13,466,536 15,088,024  

Selected Consolidated Financial Highlights

(Dollars in thousands, except per share data)   June 30,   March 31,   June 30, (Unaudited) 2012 2012 2011 Per Share data: Book Value $ 5.47 $ 5.58 $ 5.91 Tangible Book Value $ 5.43 $ 5.53 $ 5.48   Selected Balance Sheet Data: Total Assets $ 198,712 $ 201,990 $ 223,343 Cash and cash equivalents 85,092 92,902 103,426 Gross loans, including net deferred loan costs 104,837 102,373 101,533 Allowance for loan losses 2,645 2,687 4,404 Deposits 124,250 125,975 131,585 Stockholders' equity 73,712 75,090 89,099   Asset Quality: Nonperforming loans $ 20,673 $ 24,598 $ 9,650 Other Real Estate Owned   5,862     3,891     4,440   Nonperforming assets $ 26,535 $ 28,489 $ 14,090

Allowance for loan losses as a percentage of nonperforming loans

12.79 % 10.92 % 45.64 %

Allowance for loan losses as a percentage of portfolio loans

2.52 % 2.62 % 4.34 %

Nonperforming loans as a percentage of total portfolio loans

19.72 % 24.03 % 9.50 % Nonperforming assets as a percentage of total assets 13.35 % 14.10 % 6.31 % Net charge-offs to average portfolio loans 0.22 % 0.22 % 1.33 %   Capital Ratios: Tier 1 equity to average assets 36.56 % 37.08 % 31.40 % Tier 1 Risk-Based Capital ratio 68.06 % 71.28 % 70.10 % Total Risk-Based Capital ratio 69.04 % 72.29 % 71.30 %

FORWARD LOOKING STATEMENTS

This release may contain “forward-looking statements” that are subject to risks and uncertainties. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy and management’s plans and objectives for future operations are forward-looking statements. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” and “intend” and words or phrases of similar meaning, as they relate to Western Liberty or management, are intended to help identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe that management’s expectations as reflected in forward-looking statements are reasonable, we cannot assure readers that those expectations will prove to be correct. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include our ability to maintain or expand our market share or net interest margins, and to implement our marketing and growth strategies. Further, actual results may be affected by our ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy, as those factors relate to our cost of funds and return on assets. In addition, there are risks inherent in the banking industry relating to collectability of loans and changes in interest rates. Many of these risks, as well as other risks that may have a material adverse impact on our operations and business, are identified in our other filings with the SEC. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations.