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BancTrust Financial Group, Inc. Reports Third Quarter Results

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MOBILE, Ala.--(BUSINESS WIRE)--

BancTrust Financial Group, Inc. (BancTrust) (NASDAQ: BTFG) today reported its financial results for the third quarter and nine months ended September 30, 2012. The Company reported a net loss to common shareholders of $10.3 million, or $0.57 per fully diluted share, for the third quarter of 2012 compared with a net loss to common shareholders of $743,000, or $0.04 per diluted share, for the third quarter of 2011. For the nine-month period ended September 30, 2012, BancTrust reported a net loss to common shareholders of $23.2 million, or $1.29 per share, compared with a net loss to common shareholders of $457,000, or $0.03 per share, for the first nine months of 2011.

Merger with Trustmark Corporation

On May 29, 2012, BancTrust and Trustmark Corporation (Trustmark) announced the signing of a definitive agreement pursuant to which BancTrust will merge into Trustmark.

Under the terms of the definitive agreement, which was approved by BancTrust shareholders at a special shareholders' meeting on September 26, 2012, holders of BancTrust common stock will receive 0.125 of a share of Trustmark common stock for each share of BancTrust common stock in a tax-free exchange.

On October 9, 2012, BancTrust and Trustmark announced that the definitive agreement dated May 28, 2012, pursuant to which BancTrust will merge into Trustmark, has been amended to accommodate the closing of the merger in early 2013. As such, the latest possible closing date for the merger has been extended from December 31, 2012, to February 28, 2013. This extension provides additional time to receive regulatory approval and to ensure a smooth transition and operational conversion to Trustmark systems in early 2013. All other material aspects of the definitive agreement remain unchanged.

Commenting on the status of the pending merger with Trustmark, W. Bibb Lamar, Jr., President and Chief Executive Officer of BancTrust, stated, “Our shareholders' overwhelming approval of the merger with Trustmark at our shareholders' meeting on September 26, 2012, affirms that we are on the right path. The recent amendment of the merger agreement to extend the deadline for completion of the merger is aimed at minimizing potential customer disruptions during the holiday season and will allow more time to ensure seamless integration of our systems with those of Trustmark. Our associates are working diligently with Trustmark personnel to prepare for the merger and remain committed to providing our customers with superior service during and after this transition. We expect regulatory approval of the merger late in 2012 or early in 2013, and we anticipate closing the merger in early 2013.”

Third Quarter Results

Net interest revenue was $13.2 million in the third quarter of 2012 compared with $15.8 million in the third quarter of 2011. The decrease in net interest revenue was due primarily to a decrease in average earning assets and net interest margin compared with the third quarter of last year. BancTrust's net interest margin (tax equivalent) was 2.91% in the third quarter of 2012 compared with 3.28% in the third quarter of 2011.

Total loans were $1.2 billion at September 30, 2012, compared with $1.3 billion at September 30, 2011. The decrease in loans since last year was due to soft loan demand in certain markets, the transfer of loans to other real estate and loan charge-offs.

The results for the third quarter of 2012 included a $9.5 million provision for loan losses, compared with a $6.0 million provision for the corresponding period in 2011. The increase in the provision for loan losses was due primarily to increases in specific allowances for impaired loans, especially for certain land and land development loans in the panhandle of Florida, made in response to recent appraisals and independent appraisal reviews.

The allowance for loan losses was strengthened to 4.85% of total loans at September 30, 2012, compared with 3.30% in the third quarter of 2011. Net charge-offs for the third quarter of 2012 were $4.6 million compared with $3.2 million in the third quarter of 2011.

Deposits were $1.78 billion at September 30, 2012, compared with $1.84 billion at September 30, 2011. Liquidity at our subsidiary bank remained strong at September 30, 2012, as evidenced by $269.3 million in average overnight funds and short-term investments. Short-term investments include investment securities with little price volatility that we can sell as needed for liquidity purposes. At the end of the third quarter, the bank had no brokered deposits.

Total non-interest revenue was $5.1 million in the third quarter of 2012 compared with $5.3 million in the third quarter of 2011. The decrease in non-interest revenue was due to lower trust revenue, service charges on deposits and other non-interest revenue, offset partially by higher securities gains compared with the third quarter of last year.

Non-interest expense was $18.3 million in the third quarter of 2012 compared with $15.2 million in the third quarter of 2011. The increase in non-interest expense was due primarily to higher losses on other real estate and other non-interest expense compared with the prior year's third quarter. Net losses on other real estate rose to $3.5 million in the third quarter of 2012 compared with $1.5 million in the third quarter of 2011.

BancTrust's pre-tax loss was $9.5 million in the third quarter of 2012 compared with a pre-tax loss of $86,000 in the third quarter of 2011. Net loss available to common shareholders was $10.3 million, or $0.57 per share, for the third quarter of 2012 compared with a net loss to common shareholders of $743,000, or $0.04 per share, in the third quarter of 2011.

Nine Months Results

For the first nine months of 2012, net loss to common shareholders was $23.2 million compared with a net loss to common shareholders of $457,000 for the same period in 2011. Net loss to common shareholders per diluted share was $1.29 for the first nine months of 2012 compared with a net loss to common shareholders per diluted share of $0.03 for the same period in 2011.

Net interest revenue was $42.7 million in the first nine months of 2012 compared with $46.7 million in the first nine months of 2011. The decrease in net interest revenue was due primarily to a decrease in average earning assets and net interest margin compared with last year. Average earning assets, primarily loans, were down 5.9% to $1.8 billion compared with average earning assets of $1.9 billion in the first nine months of 2011. Net interest margin for the first nine months of 2012 was 3.12% compared with 3.22% in the same period of 2011.

The provision for loan losses rose to $26.8 million in the 2012 period compared with $14.5 million in the 2011 period. At September 30, 2012, non-performing assets were $197.6 million compared with $154.2 million at December 31, 2011, as collateral dependent real estate loans continued to underperform.

Non-interest revenue rose to $15.24 million in the first nine months of 2012 compared with $15.20 million in the first nine months of 2011. The increase was due to an increase in securities gains for the first nine months of 2012 compared with the same period in 2011. Securities gains rose to $3.1 million in the first nine months of 2012 compared with $2.4 million in the first nine months of 2011.

Non-interest expense increased to $52.6 million in the first nine months of 2012 compared with $45.3 million in the first nine months of 2011. The increase was due primarily to an increase in loss on other real estate, loss on repossessed assets, capital raise costs, and a $3.5 million settlement expense. The 2012 results include $2.4 million in capital raise costs associated with the Company's abandoned capital raise and pending merger, and $3.5 million in settlement expenses which the bank paid to Countrywide Home Loans to settle any and all claims and disputes related to mortgage loans sold by the bank or its predecessors to Countrywide Home Loans prior to July 2, 2012. There were no comparable capital raise or settlement expenses in the first nine months of 2011.

BancTrust was classified as well-capitalized at the end of the third quarter of 2012. Total risk-based capital was 11.09% for the holding company and 12.85% for the bank, compared with a regulatory requirement of 10.0% for a well-capitalized institution and a minimum regulatory requirement of 8.0%. Tier 1 risk-based capital was 9.66% for the holding company and 11.56% for the bank, both measures significantly above the requirement of 6.0% for a well-capitalized institution and minimum regulatory requirement of 4.0%.

About BancTrust Financial Group, Inc.

BancTrust Financial Group, Inc. is a registered bank holding company headquartered in Mobile, Alabama. The Company provides an array of traditional financial services through 40 bank offices in the southern two thirds of Alabama and nine 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 www.banktrustonline.com by following the link to investor relations.

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,” “hope,” “schedule,” “outlook,” “estimate,” “anticipate,” “should,” “will,” “plan,” “believe,” “continue,” “predict,” “contemplate” and similar expressions. Our ability to accurately project results or predict the future effects of our plans and strategies is inherently limited. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward looking statements. Our forward-looking statements are based on information presently available to management and are subject to various risks and uncertainties, in addition to the inherent uncertainty of predictions, including, without limitation, the risk that indications of an improving economy may prove to be premature; the risks presented by the recent economic recession and the slow recovery of the economy, which could continue to adversely affect credit quality, collateral values, including the value of real estate collateral and other real estate owned, investment values, liquidity and loan originations, reserves for loan losses, charge-offs of loans and loan portfolio delinquency rates; if we do not complete the merger with Trustmark, we may be compelled to seek additional capital to augment capital levels or ratios or improve liquidity, but capital or liquidity may not be available when needed or on favorable terms; existing regulatory requirements, changes in regulatory requirements, including accounting standards and legislation, and our inability to meet those requirements, including capital requirements, and increases in our deposit insurance premiums, could adversely affect the businesses in which we are engaged, our results of operations and financial condition; risks that competitive pressures among depository and other financial institutions may increase significantly; changes in the interest rate environment may reduce margins; and competitors may have greater financial resources and develop products that enable these competitors to compete more successfully than BancTrust can compete. These risks, specifically with respect to the pending Trustmark merger also include the risk that BancTrust or Trustmark may be unable to obtain governmental and regulatory approvals required for the merger, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; the risk that a condition to closing of the merger may not be satisfied; the timing to consummate the proposed merger; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; the diversion of management time on merger-related issues; general worldwide economic conditions and related uncertainties; and the effect of changes in governmental regulations. We also refer you to the other risks described in BancTrust's reports and filings under “Cautionary Note Concerning Forward-Looking Statements” and “Risk Factors,” which are applicable as well. 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 Nine Months Ended
September 30, June 30, March 31, December 31, September 30, September 30, September 30,
2012 2012 2012 2011 2011 2012 2011
 
EARNINGS:
Interest revenue $16,234 $17,722 $18,461 $19,305 $20,213 $52,417 $61,215
Interest expense 2,988 3,370 3,388 3,835 4,406 9,746 14,476
 
Net interest revenue 13,246 14,352 15,073 15,470 15,807 42,671 46,739
 
Provision for loan losses 9,500 13,700 3,600 17,600 6,000 26,800 14,500
 
Trust revenue 873 945 924 522 945 2,742 3,035
Service charges on deposit accounts 1,449 1,417 1,494 1,620 1,581 4,360 4,606
Securities gains 1,117 664 1,302 1,433 1,086 3,083 2,449
Other than temporary impairment loss 0 0 0 (150) (50) 0 -50
Other income, charges and fees 1,640 1,693 1,720 1,800 1,711 5,053 5,159
Total non-interest revenue 5,079 4,719 5,440 5,225 5,273 15,238 15,199
 
Salaries, pensions and other employee benefits 6,630 6,604 6,884 7,035 6,806 20,118 20,908
Net occupancy, furniture and equipment expense 2,564 2,651 2,266 2,553 2,429 7,481 7,115
Intangible amortization 226 225 226 237 292 677 876
Loss on other real estate, net 3,464 0 0 30,211 1,461 3,464 2,187
Loss (gain) on repossessed and other assets 199 (8) 21 (89) (1) 212 (158)
Merger and capital raise costs 17 402 1,965 1,219 0 2,384 0
Mortgage recourse settlement 0 3,520 0 0 0 3,520 0
FDIC insurance assessment 675 661 683 678 356 2,019 2,528
Other real estate carrying cost 536 395 658 457 438 1,589 1,399
Other non-interest expense 4,016 3,590 3,546 3,394 3,385 11,152 10,463
Total non-interest expense 18,327 18,040 16,249 45,695 15,166 52,616 45,318
Income (loss) before income taxes (9,502) (12,669) 664 (42,600) (86) (21,507) 2,120
Income tax expense (benefit) 0 (700) 28 7,103 (117) (672) 263
Net income (loss) (9,502) (11,969) 636 (49,703) 31 (20,835) 1,857
 
Effective preferred stock dividend 792 781 778 776 774 2,351 2,314
 
Net loss to common shareholders ($10,294) ($12,750) ($142) ($50,479) ($743) ($23,186) ($457)
 
Loss per common share:
 
Basic ($0.57) ($0.71) ($0.01) ($2.81) ($0.04) ($1.29) ($0.03)
Diluted (0.57) (0.71) (0.01) (2.81) (0.04) (1.29) (0.03)
 

Cash dividends declared per common share

$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
 
Book value per common share $2.47 $3.03 $3.55 $3.65 $6.76 $2.47 $6.76
 
Common shares outstanding 17,961 17,961 17,954 17,954 17,954 17,961 17,954
Basic average common shares outstanding 17,961 17,958 17,954 17,954 17,953 17,958 17,886
Diluted average common shares outstanding 17,961 17,958 17,954 17,954 17,953 17,958 17,886
 
 
STATEMENT OF CONDITION: 09/30/12 06/30/12 03/31/12 12/31/11 09/30/11 09/30/12 09/30/11
Cash and cash equivalents $160,757 $122,123 $135,472 $99,853 $126,761 $160,757 $126,761
Securities available for sale 497,606 521,100 479,497 517,213 508,160 497,606 508,160
Loans and loans held for sale 1,184,441 1,218,649 1,256,490 1,277,049 1,307,376 1,184,441 1,307,376
Allowance for loan losses (57,435) (52,553) (43,085) (42,156) (43,117) (57,435) (43,117)
Other intangible assets 2,841 3,067 3,293 3,519 3,755 2,841 3,755
Other real estate owned 53,750 59,141 60,765 57,387 89,883 53,750 89,883
Other assets 112,562 115,189 116,335 119,012 126,195 112,562 126,195
Total assets $1,954,522 $1,986,716 $2,008,767 $2,031,877 $2,119,013 $1,954,522 $2,119,013
 
Deposits $1,780,495 $1,799,634 $1,791,456 $1,811,673 $1,842,843 $1,780,495 $1,842,843
Short-term borrowings 20,000 20,000 20,000 20,000 20,000 20,000 20,000
FHLB borrowings and long-term debt 45,326 45,391 70,476 70,539 70,597 45,326 70,597
Other liabilities 15,226 18,206 14,202 15,383 15,702 15,226 15,702
Preferred stock 49,198 49,039 48,884 48,730 48,579 49,198 48,579
Common shareholders' equity 44,277 54,446 63,749 65,552 121,292 44,277 121,292
Total liabilities and shareholders' equity $1,954,522 $1,986,716 $2,008,767 $2,031,877 $2,119,013 $1,954,522 $2,119,013
 
 
Quarter Ended Nine Months Ended
09/30/12 06/30/12 03/31/12 12/31/11 09/30/11 09/30/12 09/30/11
AVERAGE BALANCES:
Total assets $1,967,124 $2,004,636 $2,010,407 $2,096,048 $2,123,774 $1,993,959 $2,154,405
Earning assets 1,811,984 1,836,997 1,840,200 1,891,021 1,912,651 1,829,662 1,944,210
Loans 1,203,775 1,244,122 1,272,431 1,299,330 1,318,652 1,239,977 1,344,446
Deposits 1,784,107 1,791,044 1,790,017 1,822,445 1,848,136 1,788,374 1,866,838
Common shareholders' equity 52,929 63,573 66,215 119,811 120,934 60,877 118,390
 
PERFORMANCE RATIOS:
 
Return on average assets -1.92% -2.40% 0.13% -9.41% 0.01% -1.40% 0.12%
Return on average common shareholders' equity -77.37% -80.66% -0.86% -167.15% -2.44% -50.87% -0.52%
Net interest margin (tax equivalent) 2.91% 3.14% 3.30% 3.25% 3.28% 3.12% 3.22%
 
 
ASSET QUALITY:
 
Ratio of non-performing assets to total assets 10.11% 8.39% 8.04% 7.59% 9.28% 10.11% 9.28%

Ratio of allowance for loan losses to total loans, net of unearned income

4.85% 4.31% 3.43% 3.30% 3.30% 4.85% 3.30%
Net loans charged-off to average loans (annualized) 1.53% 1.37% 0.84% 5.67% 0.95% 1.24% 1.92%
Ratio of ending allowance to total non-performing loans 39.92% 48.85% 42.80% 43.53% 40.42% 39.92% 40.42%
 
CAPITAL RATIOS:
 

Average common shareholders' equity to average total assets

2.69% 3.17% 3.29% 5.72% 5.69% 3.05% 5.50%
Dividend payout ratio N/A N/A N/A N/A N/A N/A N/A

BancTrust Financial Group, Inc.
F. Michael Johnson, 251-431-7813
Chief Financial Officer

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