NORFOLK, Va., Aug. 5, 2009 (GLOBE NEWSWIRE) -- Commonwealth Bankshares, Inc. (Nasdaq:CWBS) today reported total assets of $1.1 billion as of June 30, 2009. This is an increase of 18.3% or $175.3 million from the $959.7 million reported at June 30, 2008. Total loans at the end of the quarter were $1.0 billion while total deposits grew 29.3% to end the quarter at a record $880.4 million. Edward J. Woodard, Jr., CLBB, Chairman of the Board, President and Chief Executive Officer, commented, "The Bank continues to produce positive results despite the challenging economic climate. Both loans and deposits experienced growth. We are a well capitalized and sound Company. As previously reported, to further bolster the Bank's capital position, during the first quarter of 2009, the Holding Company invested an additional $15 million in the Bank." The Bank's total capital to risk weighted assets ratio and Tier 1 capital to average assets ratio as of June 30, 2009 was 12.70% and 10.83%, respectively, well above the 10.00% and 5.00% minimum regulatory requirements needed to be a "well capitalized" institution. "Our capital levels prior to the additional investment as well as after, exceeds regulatory well-capitalized standards, which allow us to lend money in the community, build our local economy, and endure these uncertain economic times. The success of community banks such as ourselves contributes to the recovery of our local economy and is vital to the overall health of the financial system."
In response to the prolonged economic downturn and continued economic uncertainties management and the board elected to provide an additional $3.5 million to the Bank's allowance for loan losses during the quarter ended June 30, 2009. This is an increase of $2.7 million over the comparable period in 2008. As a result, Commonwealth Bankshares' reported earnings of $584.1 thousand for the three months ended June 30, 2009, a decrease of 75.7% over the $2.4 million reported in the second quarter of 2008. On a per share basis, diluted earnings decreased 74.3% to $0.09 for the three months ended June 30, 2009 compared to $0.35 for the same period in 2008. Net income for the six months ended June 30, 2009 totaled $1.2 million, a decrease of 75.5% or $3.6 million over the amount reported for the first six months of 2008. During the first six months of 2009, management elected to provide $7.5 million to its allowance for loan losses. This is an increase of $6.2 million over the same period in 2008. Diluted earnings per share equaled $0.17 for the six months ended June 30, 2009 compared to earnings of $0.68 for the same period in 2008.
Mr. Woodard commented, "The unprecedented economic environment has continued to negatively impact our loan portfolio, in particular commercial relationships secured by real estate. Several of our customers are experiencing deterioration in their overall financial condition, which has resulted in an increase in our provision for loan losses as well as our net charge-offs. Addressing troubled credits quickly and conservatively has always been, and will continue to be, a top priority. We are committed to working with our customers and will continue to do so in order to get through this downturn in the market. We feel that the increase to our allowance for loan losses is prudent and, with our strong capital position, will allow us to weather this economic storm."
Profitability as measured by the Company's return on average assets (ROA) was 0.21% for the six months ended June 30, 2009, down 87 basis points from 1.08% for the first six months of 2008. For the quarter ended June 30, 2009, ROA was 0.21% compared to 1.05% for the second quarter of 2008. Return on average equity (ROE) was 2.20% for the six months ended June 30, 2009 compared to 8.31% for the six months ended June 30, 2008. For the quarter ended June 30, 2009, ROE was 2.19% as compared to 8.33% for the quarter ended June 30, 2008.
"We have been diligent in keeping operating costs down. The Company's efficiency ratio (tax equivalent basis) was 55.90% and 58.60% for the six months and three months ended June 30, 2009, respectively, as compared to 55.03% and 53.75% during the comparable period in 2008, well below our peers," said Woodard.
"The Company's core operating performance continues to produce favorable results," continued Woodard. The Company's pre-tax, pre-provision income for the six months ended June 30, 2009 was $9.3 million, up 9.2% from the $8.5 million reported for the six months ended June 30, 2008. For the quarter ended June 30, 2009, the Company's pre-tax, pre-provision income was $4.4 million, a decrease of $61.1 thousand or 1.4% over the comparable period in 2008. Net interest income was $18.7 million for the six months ended June 30, 2009, an increase of $2.2 million or 13.3% over the $16.5 million for the six months ended June 30, 2008. For the quarter ended June 30, 2009, net interest income was $9.5 million, an increase of $1.1 million or 12.9% over the comparable period in 2008.
Between June 30, 2008 and June 30, 2009, the Company's loan portfolio increased by $160.9 million or 18.0%. Total loans at June 30, 2009 were $1.0 billion. Our loan demand helped maintain solid sources of interest income given the low interest rate environment. Interest income on loans, including fees, increased $2.6 million or 8.6% to $33.1 million for the six months ended June 30, 2009 as compared to the same period in 2008. For the quarter ended June 30, 2009, interest income on loans, including fees, was $16.7 million, an increase of 9.1% over the same period in 2008.
Interest expense of $14.6 million for the six months ended June 30, 2009 represented a $143.8 thousand increase from the comparable period in 2008. For the second quarter of 2009, interest expense was $7.3 million, an increase of $168.1 thousand over the second quarter of 2008. The slight increase was primarily attributable to the increase in the Company's average interest bearing liabilities as a result of the $199.6 million increase in total deposits as of June 30, 2009 as compared to 2008. Average interest bearing liabilities increased $225.3 million or 31.4% from June 30, 2008 to June 30, 2009, while the overall rate paid on these liabilities decreased 92 basis points as a result of the declining interest rate environment.
Net interest margin, which is calculated by expressing net interest income as a percentage of average interest earning assets, is an indicator of effectiveness in generating income from earning assets. The net interest margin is affected by the structure of the balance sheet as well as by competition and the economy. The Company's net interest margin (tax equivalent basis) was 3.53% during the first six months of 2009, as compared to 3.92% for the same period in 2008. The compression of our margins from prior year can be attributed to the Federal Reserve lowering the Federal Funds rate 175 basis points between October 2008 and December 2008, along with the continued pressure on deposit pricing and the pricing of some deposit products which lag the decrease in the prime rate, which has an immediate affect on variable loans. In addition, the competitiveness for deposits from the reduction in liquidity throughout the financial markets has kept rates at a high level relative to loan rates. Also contributing to the compression of our margins was the increase in the balance of non-accruing loans which further lowered interest income. For the quarter ended June 30, 2009, the net interest margin was 3.52% compared to 3.88% for the second quarter of 2008.
Non-performing assets at June 30, 2009 were $75.5 million or 6.65% of total assets at June 30, 2009 compared to $12.2 million or 1.27% of total assets at June 30, 2008. Non-performing assets at June 30, 2009 was comprised of $61.9 million in non-performing loans. Of these non-performing loans 95.7% are secured by real estate. The Company has established a Loan Impairment Committee to monitor past due loans, identify potential problem credits and develop action plans to work through these loans as promptly as possible. As all non-performing loans are deemed impaired, the Committee has individually reviewed the underlying collateral value (less cost to sell) on each of these loans as part of its analysis of impaired loans. Based on current collateral values, we believe the specific reserve is adequate to cover any short falls resulting from the sale of the underlying collateral. Based on current accounting and regulatory guidelines we have provided a reserve based on current market values for these impaired loans however, we plan to work with our customers to get through these unprecedented economic conditions and to minimize any potential credit exposure. Management has taken a proactive approach to monitoring these loans and will continue to actively manage these credits to minimize loss. Asset quality remains a top priority for the company and management is closely monitoring these credits and is aggressively working to restore them to performing status. The remaining $13.6 million in non-performing assets is comprised of twenty-six (26) other real estate owned ("OREO") properties. All of these properties are being actively marketed. Based on current expectations relative to portfolio characteristics and management's comprehensive allowance analysis, management considers the level of the allowance to be adequate as of June 30, 2009. Mr. Woodard added, "We remain focused on asset quality and have taken the appropriate measures to mitigate potential future exposure by increasing our allowance for loan losses to 2.11% of total loans at June 30, 2009 compared to 1.14% one year earlier."
Noninterest expense grew $1.0 million and $1.4 million for the three and six months ended June 30, 2009, respectively, as compared to the same periods in 2008 as a result of the increases to FDIC insurance expense, legal expenses related to loan collections, OREO expenses and general expansion. During the second quarter of 2009, the FDIC increased deposit insurance costs for all banks and levied a special assessment to replenish the insurance fund. This increased our insurance expense to $659.4 thousand and $817.3 thousand for the three and six months ended June 30, 2009, respectively, increases of $567.3 thousand and $635.7 thousand over the previous year's comparable periods.
About Commonwealth Bankshares
Commonwealth Bankshares, Inc. is the parent of Bank of the Commonwealth which opened its first office in Norfolk, Virginia, in 1971, creating a community bank that was attuned to local issues and could respond to the needs of local citizens and businesses. Over the last three decades, the Company's growth has mirrored that of the communities it serves. Today, Bank of the Commonwealth has twenty-one bank branches strategically located throughout the Hampton Roads and Eastern North Carolina regions and an extensive ATM network for added convenience. The Company continues to grow and develop new services, such as Online Banking and a Corporate Cash Management program and at the same time, maintain the longstanding commitment to personal service. Our slogan conveys our true corporate philosophy: "When you bank with us, you bank with your neighbors." Bank of the Commonwealth offers insurance services through its subsidiary BOC Insurance Agencies of Hampton Roads, Inc., title services through its subsidiary Executive Title Center, mortgage funding services through its subsidiary, Bank of the Commonwealth Mortgage, and access to investment related services through its subsidiary Commonwealth Financial Advisors, LLC.* Additional information about the company, its products and services, can be found on the Web at www.bankofthecommonwealth.com.
Use of Non-GAAP Financial Measures
This earnings press release contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding our results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the Form 8-K filed related to this release, which can be found on the SEC's EDGAR website at www.sec.gov or our website at www.bankofthecommonwealth.com.
*Securities offered through Infinex Investments, Inc., member FINRA and SIPC. Not insured by FDIC or any Federal Government Agency. May Lose Value. Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate. Commonwealth Financial Advisors, LLC is a wholly-owned subsidiary of Bank of the Commonwealth. This press release contains forward-looking statements. Words such as "anticipates," " believes," "estimates," "expects," "intends," "should," "will," variations of such words and similar expressions are intended to identify forward-looking statements. These statements reflect management's current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand and asset quality, including real estate and other collateral values; changes in banking regulations and accounting principals, policies or guidelines; and the impact of competition from traditional or new sources. These and other factors that may emerge could cause decisions and actual results to differ materially from current expectations. Commonwealth Bankshares, Inc. undertakes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.
Commonwealth Bankshares, Inc.
Selected Financial Information (Unaudited)
(in thousands, except
per share data) Three Months Ended Six Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Operating Results:
---------------------
Interest and dividend
income $ 16,814 $ 15,558 $ 33,282 $ 30,946
Interest expense 7,294 7,126 14,576 14,433
---------- ---------- ---------- ----------
Net interest income 9,520 8,432 18,706 16,513
Provision for loan
losses 3,496 800 7,500 1,255
Noninterest income 1,138 1,242 2,418 2,464
Noninterest expense 6,250 5,205 11,817 10,454
---------- ---------- ---------- ----------
Income before
provision for income
taxes and
noncontrolling
interest 912 3,669 1,807 7,268
Provision for income
taxes 317 1,272 615 2,519
---------- ---------- ---------- ----------
Income before
noncontrolling
interest 595 2,397 1,192 4,749
Noncontrolling
interest in
subsidiaries (11) 6 (27) 10
---------- ---------- ---------- ----------
Net income $ 584 $ 2,403 $ 1,165 $ 4,759
========== ========== ========== ==========
Per Share Data**:
-----------------
Basic earnings $ 0.09 $ 0.35 $ 0.17 $ 0.69
Diluted earnings $ 0.09 $ 0.35 $ 0.17 $ 0.68
Book value $ 15.53 $ 16.95 $ 15.53 $ 16.95
Cash dividends $ 0.02 $ 0.08 $ 0.10 $ 0.16
Basic weighted
average shares
outstanding 6,882,437 6,935,206 6,872,198 6,935,192
Diluted weighted
average shares
outstanding 6,882,437 6,953,464 6,872,198 6,961,386
Shares outstanding
at period-end 6,886,975 6,816,751 6,886,975 6,816,751
Period End Balances:
--------------------
Assets $1,135,028 $ 959,733 $1,135,028 $ 959,733
Loans* 1,056,470 895,562 1,056,470 895,562
Investment securities 5,333 7,279 5,333 7,279
Deposits 880,398 680,756 880,398 680,756
Shareholders' equity 106,984 115,574 106,984 115,574
Average Balances:
-----------------
Assets $1,126,594 $ 917,929 $1,110,285 $ 890,305
Loans* 1,066,359 856,164 1,051,945 830,454
Investment securities 5,420 7,371 5,863 7,390
Deposits 841,108 639,667 812,752 612,690
Shareholders' equity 107,049 115,989 106,984 115,092
Financial Ratios:
-----------------
Return on average
assets 0.21% 1.05% 0.21% 1.08%
Return on average
shareholders' equity 2.19% 8.33% 2.20% 8.31%
Efficiency Ratio (tax
equivalent basis) 58.60% 53.75% 55.90% 55.03%
Period end
shareholders' equity
to total assets 9.43% 12.04% 9.43% 12.04%
Loan loss allowance
to period end loans* 2.11% 1.14% 2.11% 1.14%
Loan loss allowance
to non-performing
assets 29.49% 83.32% 29.49% 83.32%
Non-performing assets
to total assets 6.65% 1.27% 6.65% 1.27%
Net interest margin (tax
equivalent basis) 3.52% 3.88% 3.53% 3.92%
Bank's Tier 1 capital
to average assets 10.83% 12.36% 10.83% 12.36%
Bank's Tier 1 capital
to risk weighted
assets 11.44% 12.63% 11.44% 12.63%
Bank's Total capital
to risk weighted
assets 12.70% 13.76% 12.70% 13.76%
* Net of unearned income.
** All share and per share amounts have been restated for all
periods presented to reflect the eleven-for-ten stock split
distributed on June 30, 2006 and the eleven-for-ten stock split
distributed on December 29, 2006.