BEO Bancorp earnings up 63% in 2Q2007
E. George Koffler, President & CEO, (541) 676-0201
Mark Lemmon, EVP & CFO, (541) 676-0201
Joey J. Warmenhoven, Wedbush Morgan Securities, Market Maker, (800) 357-3680
John T. Cavender, Howe Barnes Hoefer & Arnett, Market Maker, (800) 346-5544
(OTC Bulletin Board: BEOB)
Heppner, Oregon, (July 27, 2007) - BEO Bancorp, parent company of Bank of Eastern Oregon, reported a 63% increase in earnings in the second quarter of 2007.
Earning $583,000 in 2Q2007, compared to $358,000 in 2Q2006.
Earning $1,039,000 YTD 2007, compared to $601,000 YTD 2006.
Net interest income up 32% quarter over quarter in 2Q2007.
Loan growth 9.9% year over year.
EPS $1.32 in 2Q2007 versus $.81 in 2Q2006.
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BEO Bancorp delivered record earnings in the second quarter of 2007 at $583,000. This is a 63% increase over the $358,000 earned in 2Q2006. Earnings per share increased to $1.32 per share compared to $.81 earned in 2Q2006. YTD earnings of $1,039,000 for the first half of 2007 are at record levels and compare to earnings of $601,000 in the first half of 2006, an improvement of 73%. "We are extremely gratified at the results of the second quarter of 2007 and the first half of the year. Primary drivers of this improvement are an improving net interest margin, solid loan growth, and loan fee income generation," said President and CEO, E. George Koffler.
ROAA improved in the second quarter to 1.21% for the quarter and 1.09% for the first half of 2007. ROAE also showed excellent trending, improving to 23.57% for the second quarter and 21.58% YTD.
Revenue and Expense
Total revenue continues a strong upward trend with YTD total income at $7,677,000, a 17% increase over the $6,583,000 of last year through the second quarter. Loan fee income for the second quarter increased 278% from $59,604 to $225,477 with mortgage fees, commercial loan fees and loan participation fees leading the way. Interest on loans, which is always a primary profit driver, increased 18% year over year.
Total expenses are showing a slower rate of growth with YTD expenses at $6,638,000, compared to $5,982,000 in 2006, an 11% increase. Of particular note is the interest expense increase year over year of only 3%.
Loan Growth and Credit Quality
Loan growth continues to be a foundation of the bank's improving performance with total loans standing at $131,370,000 at quarter end, a 9.9% increase over last year and an 11.4% increase over the linked quarters. "We continue to grow organically in our footprint with strong local relationships. We also have leveraged our relationships with other top performing community banks and purchased good quality participation loans to supplement that growth," said EVP and CCO, Jeff Bailey.
"Credit quality is sound," said Bailey. "We had no past dues at quarter end compared to .06% at the end of the first quarter," he added. Charge offs for the quarter were $2,370 and recoveries $1,722. There was a single non-accrual loan booked at quarter end totaling $48,000, secured by real estate. No loss is expected on the credit.
Deposit Growth and Operations
Deposits grew 3.8% year over year from $162,669,000 to $168,869,000. Adding to the funding mix was increased sweep repurchase balances growing from $3,910,000 to $9,402,000 in the past twelve months. "We continue to generate more than sufficient deposit and other liability funds to support loan growth," said EVP and COO, Gary Propheter. "This month Bank of Eastern Oregon will bring live its first Remote Deposit Capture Service customer. We are excited about this addition to our business product line and how it will enable us to better service business customers in our extended footprint."
Net Interest Margin and Interest Rate Risk
Net Interest Margin (NIM) continues to be a bright spot for the organization. Average NIM for 2Q2007 was 5.82%, compared to 4.82% in 2Q2006. NIM for 2007 stands at a solid 5.48%. "Profitability continues to be driven by an improving NIM at the bank," said EVP and CFO, Mark Lemmon. "Stable rates that don't appear to be declining for the balance of 2007 should help keep the NIM at acceptable levels," Lemmon added.
Interest rate risk continues at a manageable level with the cumulative gap from one to three years being within policy levels and earning fluctuations are projected to be minimal based on interest rate forecasts.
Capital and Equity
Capital levels continue to strengthen as a result of overall bank profitability. At the bank level, tier 1 capital improved year over year and linked quarters while tier 1 risked based capital and total risk based capital declined because of strong loan growth. Capital levels are at 8.87%, 10.57%, and 11.59% at quarter end as compared to first quarter 2007 ratios at 8.55%, 11.17%, and 12.25%.
Total equity of the holding company stands at $9,908,000 as of the end of the second quarter, a new high for the company.
About BEO Bancorp
BEO Bancorp is the holding company for Bank of Eastern Oregon, which operates 11 branches and three loan production offices in nine eastern Oregon counties. Branches are located in Arlington, Ione, Heppner, Condon, Irrigon, Boardman, Burns, John Day, Prairie City, Fossil and Moro; loan production offices are located in Hermiston, Ontario, and Enterprise. Bank of Eastern Oregon also operates a mortgage division and offers brokerage services through BEO Financial Services. Bank of Eastern Oregon's website is www.beobank.com.
The statements contained in this release that are not historical facts are forward-looking statements based upon management's current expectations and beliefs concerning future developments and their potential effect on BEO Bancorp. There can be no assurances that future developments affecting BEO Bancorp will be the same as those anticipated by management.
Actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve risks and uncertainties. These risks and uncertainties include, but are not limited to:
(1) competitive pressures in the banking and financial industries;
(2) changes in interest rate environment;
(3) general economic conditions, nationally, regionally, and in operating markets;
(4) changes in regulatory environment;
(5) changes in business conditions and inflation;
(6) changes in securities markets; and
(7) future credit loss experience.