As a prudent measure against potential future losses, management
and the board elected to provide an additional $5.0 million to the
Bank's allowance for loan losses during the quarter ended June 30,
2010. As a result, Commonwealth Bankshares, Inc. (Nasdaq:CWBS) (the
"Company") today reported a net loss for the quarter ended June 30,
2010 of $2.5 million, compared to earnings of $584.0 thousand
reported for the quarter ended June 30, 2009. Diluted loss per
share equaled $0.37 for the quarter ended June 30, 2010 compared to
earnings of $0.09 for the same period in 2009. For the six
months ended June 30, 2010 the Company reported a net loss of $3.5
million compared to earnings of $1.2 million for same period last
year. During the first six months of 2010, management elected
to provide $10.0 million to the Bank's allowance for loan losses
compared to $7.5 million during the same period in 2009.
"We are committed to taking the actions necessary to move
forward through this difficult economic phase. During the
first six months of 2010, our Board and Senior Management have
continued the execution of our three year strategic plan and our
three year capital management plan. We are being extremely
proactive in our efforts to strengthen our balance sheet by
focusing on reducing the level of nonperforming assets, maintaining
our "well capitalized" capital status, improving our liquidity
position, maintaining an adequate allowance for loan losses and
reducing expenses. In addition, we have increased problem loan
management and credit administrative staff, and improved risk
management practices. We are fully committed to seeing the
Company return to profitability and realize the full potential of
the Commonwealth Bankshares franchise," said Edward J. Woodard,
Jr., CLBB, President and Chief Executive Officer.
The Bank's total capital to risk weighted assets ratio and Tier
1 capital to average assets ratio as of June 30, 2010 was 10.43%
and 6.86%, respectively, above the 10.00% and 5.00% minimum
regulatory requirements needed to be a "well capitalized"
institution.
As of June 30, 2010, total assets were $1.2 billion. This
is an increase of 7.68% or $87.1 million from the $1.1 billion
reported at June 30, 2009. Total loans at the end of the
quarter were $962.3 million while total deposits remained solid at
$1.0 billion. We continued to improve our liquidity position
through the generation of core deposits and the reduction of
outstanding loans. From June 30, 2009 to June 30, 2010, total
deposits, excluding brokered certificates of deposit, increased by
$166.6 million, while broker certificates of deposit decreased
$15.0 million. "We have seen positive returns on our efforts to
attract and retain core deposits. Our customers continue to
recognize the benefits of banking with a community partner that
puts their needs first," added Mr. Woodard.
The Company has taken appropriate measures to mitigate potential
further exposure by increasing the allowance for loan losses to
5.38% of total loans at June 30, 2010 compared to 4.44% at December
31, 2009 and 2.11% at June 30, 2009. Mr. Woodard also
commented, "As long as the U.S. economy remains weak, losses in the
loan portfolio may increase. Our Company continues to take
actions to enable us to navigate through this current economic and
credit cycle. Calculated provisions are associated with an
assertive and conservative reclassification of loans and
management's aggressive stance in recognizing impaired loans. Our
local and regional economies continue to meet the challenges
created as a result of this economic storm. The credit quality
issues in our loan portfolio continue to significantly affect net
income. Financial deterioration within the commercial real
estate sector has resulted in the need for increases in our
provision for loan losses and has directly impacted our net
charge-offs. Addressing troubled credits quickly and
conservatively has always been, and will continue to be, a top
priority."
Non-performing assets at June 30, 2010 were $108.7 million or
8.90% of total assets compared to $89.0 million or 6.97% of total
assets at December 31, 2009 and $75.5 million or 6.65% of total
assets at June 30, 2009. Non-performing assets at June 30,
2010 was comprised of $94.9 million in non-performing loans, of
which $86.7 million were non-accrual loans. Management
continues to take a proactive approach to monitoring these loans
and will continue to actively manage these credits to minimize
loss. Mr. Woodard further commented, "We continue to build on our
existing infrastructure to be proactive and aggressive in
identifying and addressing problem assets. In addition to
shifting resources internally, during the first quarter we employed
a Chief Credit Officer and two workout specialists. Our
third-party loan review team completed its semi-annual review of
the Bank's construction, development and commercial real estate
loan portfolios, with an emphasis on large loans and problem loans
during the first quarter. Also, the Bank's Loan Impairment
Committee continues to monitor past due loans, identify potential
problem credits and develop action plans to work through these
loans as promptly as possible. As a result of these
initiatives, we continue to increase reserves as
necessary." The remaining $13.9 million in non-performing
assets is comprised of other real estate owned ("OREO") properties,
all of which are being actively marketed. Mr. Woodard
continued, "We are starting to see some solid movement in the real
estate market as it relates to our foreclosed
properties. During the second quarter of 2010, we sold sixteen
of these properties and currently have eleven under contract for
sale."
Between June 30, 2009 and June 30, 2010, the Company's loan
portfolio decreased by $94.1 million or 8.9%. Total loans at June
30, 2010 were $962.3 million. The overall decrease in gross
loans was primarily due to scheduled principal curtailments, loan
sales and part of our overall strategy to shrink loans to mitigate
risk and preserve capital. While the Company's performing
loans provided a strong yield and helped maintain solid sources of
interest income, the planned reduction in loan volume, the level of
non-performing assets and restructured loans lead to a year over
year decrease in interest income. Interest income on loans,
including fees, decreased $3.6 million or 10.7% to $29.5 million
for the six months ended June 30, 2010 as compared to the same
period in 2009. For the quarter ended June 30, 2010, interest
income on loans, including fees, was $14.8 million, a decrease of
11.5% from the same period in 2009.
Interest expense of $15.0 million for the six months ended June
30, 2010 represented a $446.0 thousand increase from the comparable
period in 2009. For the second quarter of 2010, interest
expense was $7.4 million, an increase of $73.0 thousand over the
second quarter of 2009. The increase in interest expense was
primarily attributable to the increase of $151.6 million in total
deposits as of June 30, 2010 as compared to the same period in
2009. Average interest bearing liabilities increased $181.1
million or 19.2% from June 30, 2009 to June 30, 2010, while the
overall rate paid on these liabilities decreased 43 basis
points.
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 2.49% for the first six months of 2010 as compared to
3.53% for the same period in 2009. The compression of our
margins from prior year is the result of the increase in the
balance of non-accruing and restructured loans. In addition, the
Company chose to bolster its liquidity position by placing funds in
correspondent bank accounts (overnight funds) paying only
0.25%. In addition, the continued pressure on deposit pricing
and the competition for deposits from the reduction in liquidity
throughout the financial markets has kept rates at a high level
relative to loan rates.
Noninterest expense increased $500.9 thousand and decreased
$651.3 thousand for the three and six months ended June 30, 2010,
respectively, as compared to the same periods in
2009. Salaries and employee benefits for the six months ended
June 30, 2010 decreased by $1.9 million or 38.6% when compared to
the same period in 2009, primarily due to the elimination of the
executive officer deferred compensation plan during the first
quarter of 2010. Net occupancy and furniture and equipment
expenses declined $36.8 thousand and $15.7 thousand for the three
and six month period ended June 30, 2010, respectively, as compared
to the same period in 2009. Other operating expenses increased
by $489.2 thousand and $1.9 million for the three and six months
ended June 30, 2010, respectively, as compared to the same periods
in 2009. The increases were due to increases for FDIC
insurance, OREO expenses and increased credit and collection
costs.
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
21 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, maintains its 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.
* 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 principles, 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, 2010 |
June 30, 2009 |
June 30, 2010 |
June 30, 2009 |
Operating Results: |
|
|
|
|
Interest and dividend income |
$ 14,996 |
$ 16,814 |
$ 29,953 |
$ 33,282 |
Interest expense |
7,367 |
7,294 |
15,022 |
14,576 |
Net interest income |
7,629 |
9,520 |
14,931 |
18,706 |
Provision for loan losses |
5,009 |
3,496 |
10,007 |
7,500 |
Noninterest income |
258 |
1,138 |
954 |
2,418 |
Noninterest expense |
6,751 |
6,250 |
11,165 |
11,817 |
Income (loss) before income taxes
and noncontrolling interest |
(3,873) |
912 |
(5,287) |
1,807 |
Income tax expense (benefit) |
(1,358) |
317 |
(1,855) |
615 |
Income (loss) before noncontrolling
interest |
(2,515) |
595 |
(3,432) |
1,192 |
Noncontrolling interest in
subsidiaries |
(28) |
(11) |
(34) |
(27) |
Net income (loss) |
$ (2,543) |
$ 584 |
$ (3,466) |
$ 1,165 |
|
|
|
|
|
Per Share Data: |
|
|
|
|
Basic earnings (loss) |
$ (0.37) |
$ 0.09 |
$ (0.50) |
$ 0.17 |
Diluted earnings (loss) |
$ (0.37) |
$ 0.09 |
$ (0.50) |
$ 0.17 |
Book value |
$ 11.12 |
$ 15.53 |
$ 11.12 |
$ 15.53 |
Cash dividends |
$ -- |
$ 0.02 |
$ -- |
$ 0.10 |
Basic weighted average shares
outstanding |
6,889,729 |
6,882,437 |
6,889,267 |
6,872,198 |
Diluted weighted average shares
outstanding |
6,889,729 |
6,882,437 |
6,889,267 |
6,872,198 |
Shares outstanding at period-end |
6,890,305 |
6,886,975 |
6,890,305 |
6,886,975 |
|
|
|
|
|
Period End Balances: |
|
|
|
|
Assets |
$ 1,222,145 |
$ 1,135,028 |
$ 1,222,145 |
$ 1,135,028 |
Loans* |
962,327 |
1,056,470 |
962,327 |
1,056,470 |
Investment securities |
6,979 |
5,333 |
6,979 |
5,333 |
Deposits |
1,031,981 |
880,398 |
1,031,981 |
880,398 |
Shareholders' equity |
76,586 |
106,984 |
76,586 |
106,984 |
|
|
|
|
|
Average Balances: |
|
|
|
|
Assets |
$ 1,236,968 |
$ 1,126,594 |
$ 1,254,937 |
$ 1,110,285 |
Loans* |
995,545 |
1,066,359 |
1,008,612 |
1,051,945 |
Investment securities |
6,523 |
5,420 |
5,678 |
5,863 |
Deposits |
1,045,184 |
841,108 |
1,061,580 |
812,752 |
Shareholders' equity |
78,920 |
107,049 |
79,524 |
106,984 |
|
|
|
|
|
Financial Ratios: |
|
|
|
|
Return on average assets |
-0.82% |
0.21% |
-0.56% |
0.21% |
Return on average shareholders'
equity |
-12.93% |
2.19% |
-8.79% |
2.20% |
Efficiency Ratio (tax equivalent
basis) |
85.54% |
58.60% |
70.24% |
55.90% |
Period end shareholders' equity to total
assets |
6.27% |
9.43% |
6.27% |
9.43% |
Loan loss allowance to period end
loans* |
5.38% |
2.11% |
5.38% |
2.11% |
Loan loss allowance to non-performing
loans |
54.57% |
29.49% |
54.57% |
29.49% |
Non-performing assets to total
assets |
8.90% |
6.65% |
8.90% |
6.65% |
Net interest margin (tax equivalent
basis) |
2.57% |
3.52% |
2.49% |
3.53% |
Bank's Tier 1 capital to average
assets |
6.86% |
10.83% |
6.86% |
10.83% |
Bank's Tier 1 capital to risk weighted
assets |
9.13% |
11.44% |
9.13% |
11.44% |
Bank's Total capital to risk weighted
assets |
10.43% |
12.70% |
10.43% |
12.70% |
|
|
|
|
|
* Net of unearned income. |
|
|
|
|
CONTACT: Commonwealth Bankshares, Inc.
Edward J. Woodard, Jr., CLBB, President
and Chief Executive Officer
(757) 446-6904
ewoodard@bocmail.net
http://bankofthecommonwealth.com
P.O. Box 1177
Norfolk, Virginia 23501
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