VIST Financial Corp. Announces 2010 Third Quarter Earnings & Cash Dividend

WYOMISSING, Pa., Oct. 26 /PRNewswire-FirstCall/ -- VIST Financial Corp. ("Company") (Nasdaq: VIST) reported net income for the nine months ended September 30, 2010 of $2,637,000, a $2,459,000 increase over net income of $178,000 for the same period in 2009.  The Company also reported net loss for the three months ended September 30, 2010 of $602,000, a $757,000 decrease over a net income of $155,000 for the same period in 2009.

The Company further reported that the board of directors declared a cash dividend of $0.05 per share on the Company's common stock to shareholders of record on November 5, 2010 payable November 15, 2010.

Commenting on the third quarter 2010, Robert D. Davis, President and Chief Executive Officer of VIST Financial Corp. said, "We are pleased with the progress we are making in our core operating results, however, those positive results continue to be significantly offset by additional credit provisions, elevated other real estate owned ('OREO') expense and non-cash, other than temporary impairment ('OTTI') charges.  Consistent with our prior public commentary, the lagging effects of the recession on our national and regional business climate will continue to influence our financial performance for some time to come."

"During the quarter, we experienced strong loan growth of $32 million or 3.6% over the second quarter of this year.  We expect this growth to continue through the fourth quarter.  Our sales force also generated equally strong core deposit growth."

Davis continued, "We experienced an improvement in our net interest margin which we expect to remain stable through the balance of this year.  Importantly, our non-interest, fee-based revenue from retail banking, insurance, residential mortgage, and wealth management businesses represents 32% of our total net revenue."

Commenting on capital strength, Davis continued, "As reported during the second quarter of this year, we raised $5.2 million in new capital through the issuance of 644,000 shares of common stock at $8 per share to two institutional investors who specialize in the banking sector.  The Company's capital ratios continue to exceed all regulatory guidelines for a well-capitalized institution."

Davis concluded, "We are pleased that our board of directors has declared a cash dividend.  By this action, our board respects both the need to preserve capital while demonstrating confidence in our future operating results."

Net Interest Income

For the nine months ended September 30, 2010, net interest income before the provision for loan losses increased 16.3% to $29,999,000 compared to $25,795,000 for the same period in 2009.  The increase in net interest income for the nine months resulted from a 2.0% increase in total interest income to $47,625,000 from $46,678,000 and a 15.6% reduction in total interest expense to $17,626,000 from $20,883,000.  For the three months ended September 30, 2010, net interest income before the provision for loan losses increased 12.6% to $10,176,000 compared to $9,041,000 for the same period in 2009.  The increase in net interest income for the three months resulted from a 0.2% decrease in total interest income to $15,788,000 from $15,824,000 and a 17.3% decrease in total interest expense to $5,612,000 from $6,783,000.

The increase in total interest income for the nine months ended September 30, 2010 resulted primarily from an increase in average earning assets compared to the same periods in 2009.  The decrease in total interest income for the three months ended September 30, 2010 resulted primarily from a decrease in interest rates on mortgage and consumer loans and available for sale investment securities.  Average earning assets for the nine and three month periods ended September 30, 2010 increased $76,481,000 and $55,595,000, respectively, compared to the same periods in 2009 due primarily to growth in federal funds sold, available for sale investment securities and commercial loans.

The reduction in total interest expense for the nine and three months ended September 30, 2010 resulted primarily from lower interest rates compared to the same periods in 2009.  Average interest-bearing liabilities for the nine and three months ended September 30, 2010 increased $79,180,000 and $46,049,000, respectively, compared to the same periods in 2009.  The increases in interest-bearing liabilities are due primarily to an increase in average interest-bearing deposits for the nine and three months ended September 30, 2010 of $122,755,000 and $82,830,000, respectively, offset by a net decrease in average securities sold under agreements to repurchase and average long term borrowings for the nine and three months ended September 30, 2010 of $44,597,000 and $35,449,000, respectively, compared to the same periods in 2009.

The provision for loan losses for the nine months ended September 30, 2010 was $8,160,000 compared to $6,525,000 for the same period in 2009.  The provision for loan losses for the three months ended September 30, 2010 was $3,550,000 compared to $1,400,000 for the same period in 2009.  As of September 30, 2010, the allowance for loan losses was $14,418,000 compared to $11,449,000 as of December 31, 2009, an annualized increase of 34.6%.  The increase in the provision is due primarily to economic conditions and the result of management's evaluation and classification of the credit quality of the loan portfolio utilizing a qualitative and quantitative internal loan review process.  At September 30, 2010, total non-performing loans were $26,134,000 or 2.8% of total loans compared to $26,951,000 or 3.0% of total loans at December 31, 2009.  The $817,000 decrease in non-performing loans from December 31, 2009 to September 30, 2010, was due primarily to pay-downs and charge-offs of non-performing commercial real estate loans.  Management considers the current allowance for loan losses adequate as of September 30, 2010.

Net interest income after the provision for loan losses for the nine months ended September 30, 2010 and 2009 was $21,839,000 and $19,270,000, respectively.  Net interest income after the provision for loan losses for the three months ended September 30, 2010 and 2009 was $6,626,000 and $7,641,000, respectively.

For the nine months ended September 30, 2010, the net interest margin on a fully taxable equivalent basis was 3.44% as compared to 3.15% for the same period in 2009.  For the three months ended September 30, 2010, the net interest margin on a fully taxable equivalent basis was 3.48% as compared to 3.24% for the same period in 2009 and 3.05% for the second quarter of 2009.  The increase in net interest margin for the comparative nine and three month periods ended September 30, 2010 was due mainly to lower cost of funds compared to the same periods in 2009.

Non-Interest Income

Total non-interest income for the nine months ended September 30, 2010 increased 21.9% to $15,843,000 compared to $13,002,000 for the same period in 2009.  Total non-interest income for the three months ended September 30, 2010 increased 54.9% to $4,386,000 compared to $2,831,000 for the same period in 2009.

For the nine months ended September 30, 2010, customer service fees decreased to $1,610,000 from $1,854,000, or 13.2%, for the same period in 2009.  For the three months ended September 30, 2010, customer service fees decreased to $478,000 from $600,000, or 20.3%, for the same period in 2009.  The decrease for the comparative nine and three month periods is due primarily to a decrease in commercial account analysis fees, uncollected funds charges and non-sufficient funds charges.

For the nine months ended September 30, 2010, revenue from mortgage banking activities decreased to $631,000 from $963,000, or 34.5%, for the same period in 2009.  For the three months ended September 30, 2010, revenue from mortgage banking activities decreased to $266,000 from $288,000, or 7.6%, for the same period in 2009.  The decrease for the comparative nine and three month periods is primarily due to a decrease in the volume of loans sold into the secondary mortgage market.  The Company operates its mortgage banking activities through VIST Mortgage, a division of VIST Bank.

For the nine months ended September 30, 2010, revenue from commissions and fees from insurance sales decreased 0.7% to $9,192,000 compared to $9,254,000 for the same period in 2009.  For the three months ended September 30, 2010, revenue from commissions and fees from insurance sales decreased 7.2% to $3,024,000 compared to $3,260,000 for the same period in 2009.  The decrease for the comparative nine and three month periods is mainly attributed to a decrease in contingency income on insurance products sold through VIST Insurance, LLC, a wholly owned subsidiary of the Company.

For the nine months ended September 30, 2010, revenue from brokerage and investment advisory commissions and fee activity decreased to $565,000 from $594,000, or 4.9%, for the same period in 2009.  For the three months ended September 30, 2010, revenue from brokerage and investment advisory commissions and fee activity increased to $279,000 from $112,000, or 149.1%, for the same period in 2009.  Fluctuations for the comparative nine and three month periods is due primarily to the volume of investment advisory services offered through VIST Capital Management, LLC, a wholly owned subsidiary of the Company.

For the nine months ended September 30, 2010, earnings on investment in life insurance increased to $302,000 from $280,000, or 7.9%, for the same period in 2009.  For the three months ended September 30, 2010, earnings on investment in life insurance increased to $111,000 from $96,000, or 15.6%, for the same period in 2009.  The increase for the comparative nine and three month periods is due primarily to increased earnings credited on the Company's bank owned life insurance.

For the nine months ended September 30, 2010, revenue from other commissions and fees increased to $1,464,000 from $1,451,000, or 0.9%, for the same period in 2009.  For the three months ended September 30, 2010, revenue from other commissions and fees decreased to $402,000 from $480,000, or 16.3%, for the same period in 2009.  The increase for the comparative nine month periods and the decrease for the comparative three month periods is due primarily to the volume of customer debit card transactions processed through the debit card network interchange.

For the nine months ended September 30, 2010, other income including gain on sale of equity interest increased to $2,385,000 from $573,000 for the same period in 2009.  For the three months ended September 30, 2010, other income increased to $269,000 from ($75,000) for the same period in 2009.  Other income including gain on sale of equity interest increase for the comparative nine month periods is due primarily to a $1,875,000 gain recognized on the sale of a 25% equity interest in First HSA, LLC related to the transfer of approximately $89,000,000 of Health Savings Account ("HSA") deposits in the second quarter of 2010.  The increase in other income including gain on sale of equity interest for the comparative three month periods is due primarily to a $272,000 premium paid to the Company resulting from a counterparty exercising a call option to terminate an interest rate swap.

For the nine months ended September 30, 2010, net realized gains on sales of available for sale securities were $465,000 compared to net realized gains on sales of available for sale securities of $351,000 for the same period in 2009.  For the three months ended September 30, 2010, net realized gains on sales of available for sale securities were $179,000 compared to net realized gains on sales of available for sale securities of $66,000 for the same period in 2009.  The net securities gains are primarily from the planned sale of existing available for sale investment securities.

For the nine months ended September 30, 2010, net credit impairment losses recognized in earnings resulting from other-than-temporary impairment ("OTTI") losses on investment securities were $771,000 compared to net credit impairment losses recognized in earnings resulting from OTTI losses on investment securities of $2,318,000 for the same period in 2009.  For the three month period ended September 30, 2010, net credit impairment losses recognized in earnings resulting from OTTI losses on investment securities were $622,000 compared to net credit impairment losses recognized in earnings resulting from OTTI losses on investment securities of $1,996,000 for the same period in 2009.  The net credit impairment losses relate to OTTI charges for estimated credit losses on available for sale and held to maturity pooled trust preferred securities.  For the nine and three months ended September 30, 2010, the OTTI losses recognized on available for sale and held to maturity pooled trust preferred securities resulted primarily from changes in the underlying cash flow assumptions used in determining credit losses due to the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Non-Interest Expense

Total non-interest expense for the nine months ended September 30, 2010 increased 5.8% to $35,618,000 compared to $33,669,000 for the same period in 2009.  Total non-interest expense for the three months ended September 30, 2010 increased 17.0% to $12,663,000 compared to $10,823,000 for the same period in 2009.

Salaries and benefits were $16,422,000 for the nine months ended September 30, 2010, a decrease of 2.3% compared to $16,816,000 for the same period in 2009.  Salaries and benefits were $5,584,000 for the three months ended September 30, 2010, an increase of 3.9% compared to $5,374,000 for the same period in 2009.  The decrease in salaries and benefits for the comparative nine month periods is due primarily to a decrease in employer 401(k) matching contributions and commissions paid.  The increase in salaries and benefits for the comparative three month periods is due primarily to an increase in employee medical insurance costs and the addition of a Chief Information Officer.  Included in salaries and benefits for the nine months ended September 30, 2010 and 2009 were stock-based compensation costs of $112,000 and $138,000, respectively.  Included in salaries and benefits for the three months ended September 30, 2010 and 2009 were stock-based compensation costs of $36,000 and $61,000, respectively.  Total commissions paid for the nine months ended September 30, 2010 and 2009 were $806,000 and $1,081,000, respectively.  Total commissions paid for the three months ended September 30, 2010 and 2009 were $310,000 and $345,000, respectively.

For the nine months ended September 30, 2010, occupancy expense and furniture and equipment expense increased to $5,215,000 from $4,919,000, or 6.0%, for the same period in 2009.  For the three months ended September 30, 2010, occupancy expense and furniture and equipment expense decreased to $1,712,000 from $1,729,000, or 1.0%, for the same period in 2009.  The increase for the comparative nine month periods is due primarily to an increase in building lease expense, equipment maintenance and software maintenance expense.

For the nine months ended September 30, 2010, marketing and advertising expense decreased to $792,000 from $813,000, or 2.6%, for the same period in 2009.  For the three months ended September 30, 2010, advertising and marketing expense increased to $285,000 from $208,000, or 37.0%, for the same period in 2009.  The decrease for the comparative nine month periods is due primarily to a reduction in marketing costs associated with market research, media space, media production and special events.  The increase for the comparative three month periods is due primarily to an increase in marketing costs associated with business development and direct mail initiatives.

For the nine months ended September 30, 2010, professional services expense increased to $2,104,000 from $1,919,000, or 9.6%, for the same period in 2009.  For the three months ended September 30, 2010, professional services expense increased to $750,000 from $545,000, or 37.6%, for the same period in 2009.  The increase for the comparative nine and three month periods is due primarily to an increase in accounting fees for accounting and accounting related services and consulting fees associated with various corporate projects.

For the nine months ended September 30, 2010, outside processing expense decreased to $2,921,000 from $3,051,000, or 4.3%, for the same period in 2009.  For the three months ended September 30, 2010, outside processing expense increased to $1,036,000 from $1,014,000, or 2.2%, for the same period in 2009.  The decrease for the comparative nine month periods is due primarily to a decrease in costs incurred for computer services, network fees and data line charges.  The increase for the comparative three month periods is due primarily to an increase in costs incurred for computer services, internet banking development and training expenses.

For the nine months ended September 30, 2010, FDIC deposit and other insurance expense decreased to $1,668,000 from $1,914,000, or 12.9%, for the same period in 2009.  For the three months ended September 30, 2010, FDIC deposit and other insurance expense increased to $612,000 from $486,000, or 25.9%, for the same period in 2009.  The decrease in FDIC deposit and other insurance expense for the comparative nine month periods is due primarily to a $580,000 special industry-wide FDIC deposit insurance premium assessed in 2009.  The increase in FDIC deposit and other insurance expense for the comparative three month periods is due primarily to an increase in interest-bearing deposits and time deposits.

For the nine months ended September 30, 2010, OREO expense increased to $3,263,000 from $975,000, or 234.7%, for the same period in 2009.  For the three months ended September 30, 2010, OREO expense increased to $1,571,000 from $357,000, or 340.1%, for the same period in 2009.  The increase in OREO expense for the comparative nine and three month periods is due primarily to an increase in costs associated with adjusting foreclosed properties to fair value after these assets have been classified as OREO, as well as other costs to operate and maintain OREO property during the holding period.

Income Tax Expense

Income tax benefit for the nine months ended September 30, 2010 was $573,000, a 63.6% decrease as compared to an income tax benefit of $1,575,000 for the nine months ended September 30, 2009.  Income tax benefit for the three months ended September 30, 2010 was $1,049,000, a 107.3% increase as compared to an income tax benefit of $506,000 for the three months ended September 30, 2009.  The income tax benefit decrease for the comparative nine month periods is due primarily to an increase in net income before income taxes.  The income tax benefit increase for the comparative three month periods is due primarily to a decrease in net income before income taxes.  Included in income tax expense for the nine and three months ended September 30, 2010 and 2009 is a federal tax benefit from a $5,000,000 investment in an affordable housing, corporate tax credit limited partnership.

Earnings Per Share

Diluted earnings per common share for the nine months ended September 30, 2010 were $0.22 on average shares outstanding of 6,236,889 compared to diluted (loss) per common share of ($0.18) on average shares outstanding of 5,774,006 for the nine months ended September 30, 2009.  Diluted (loss) per common share for the three months ended September 30, 2010 were ($0.16) on average shares outstanding of 6,511,195 compared to diluted (loss) per common share of ($0.04) on average shares outstanding of 5,794,883 for the three months ended September 30, 2009.  The increase in diluted earnings per share for the comparative nine month periods is due primarily to an increase in net income available to common shareholders.  The decrease in diluted earnings per share for the comparative three month periods is due primarily to a decrease in net income available to common shareholders.

Assets, Liabilities and Equity

Total assets as of September 30, 2010 increased $51,981,000, or 5.3% annualized, to $1,360,700,000 compared to $1,308,719,000 at December 31, 2009.  Total gross loans as of September 30, 2010 increased $16,615,000, or 2.4% annualized, to $927,579,000 compared to $910,964,000 at December 31, 2009.  Total federal funds sold as of September 30, 2010 increased $45,575,000, or 717.0% annualized, to $54,050,000 compared to $8,475,000 at December 31, 2009.  Total deposits increased $57,504,000, or 7.5% annualized, to $1,078,402,000 compared to $1,020,898,000 at December 31, 2009 due primarily to an increase in NOW, MMDA and Savings deposits.  Total borrowings as of September 30, 2010, decreased $17,957,000, or 15.5% annualized, to $136,897,000 compared to $154,854,000 at December 31, 2009.

Shareholders' equity as of September 30, 2010 increased $10,362,000, or 11.0% annualized, to $135,790,000 compared to $125,428,000 at December 31, 2009.  In the second quarter of 2010, the Company completed the issuance of approximately $4.8 million in common stock, net of offering costs.  Also included in shareholders' equity is an unrealized loss position on available for sale and held to maturity securities, net of taxes, as of September 30, 2010, of $244,000 compared to an unrealized loss position on available for sale securities, net of taxes, of $4,512,000 at December 31, 2009.

Quarterly Shareholder and Investor Conference Call

VIST Financial will host a quarterly shareholder and investor conference call on Wednesday, October 27, 2010 at 8:30 a.m. EDT.  Interested parties can join the conference call and ask questions by dialing 877.303.1593 or listening through the computer by clicking on the following link:

http://tinyurl.com/2d2glfp

The conference call can also be accessed through a link located under the Investor Relations page within VIST Financial Corp's website:  http://www.VISTfc.com.

The conference call will be archived for 90 days and will be available at the link above and on the Company's Investor Relations webpage.

VIST Financial Corp. is diversified financial services company headquartered in Wyomissing, PA, offering banking, insurance, investments, wealth management, and title insurance services throughout Berks, Southern Schuylkill, Montgomery, Delaware, Philadelphia and Lancaster Counties.

This release may contain forward-looking statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, estimates, and intentions that are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond the Company's control. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

SOURCE VIST Financial Corp.

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