Exhibit 99.1
Commonwealth Bankshares, Inc., Norfolk, VA, Announces Record
Earnings Second Quarter 2004
NORFOLK, Va., Aug. 12 /PRNewswire-FirstCall/ -- Commonwealth Bankshares,
Inc. (Nasdaq: CWBS) today reported record quarter end earnings of $744.7
thousand, an increase of 2.3% over the $727.8 thousand reported in the second
quarter of 2003. During the first six months of 2004, the Company reached a
record $1.3 million in net income, an increase of 2.8% over the comparable
period in 2003. On a per share basis, diluted earnings increased to 53 cents
for the first six months ended June 30, 2004 compared to 51 cents for the same
period in 2003. Diluted earnings per share equaled 30 cents and 29 cents for
the three months ended June 30, 2004 and 2003, respectively.
Profitability as measured by the Company's return on average assets (ROA)
was 0.85% and 0.94% for the six months ended June 30, 2004 and 2003,
respectively. ROA was impacted by an increase in net income of 2.8% which was
offset by an increase in average assets of $35.3 million or 13.1% from June
30, 2003 to June 30, 2004. The return on average equity (ROE) was 13.00% and
15.66% for the three months ended June 30, 2004 and 2003, respectively. The
decrease in ROE is the result of the growth in average equity of $3.8 million
or 19.2% from June 30, 2003 to June 30, 2004.
Net interest income was $5.9 million for the six months ended June 30,
2004, an increase of $475.3 thousand or 8.8% over the comparable period in
2003. For the quarter ended June 30, 2004, net interest income was $3.1
million, up 7.9% over the quarter ended June 30, 2003.
Total interest income was $10.0 million for the six months ended June 30,
2004, an increase of $481.9 thousand over the same period of 2003. For the
quarter ended June 30, 2004, total interest income was $5.1 million, up 5.1%
from the quarter ended June 30, 2003. Due to the low interest rate
environment, loan yields declined, however, our strong loan demand led to an
increase in the average loan volume, and sustained the Company's earnings.
Interest income on loans increased $604.4 thousand or 6.6% to $9.7 million for
the six months ended June 30, 2004. For the three months ended June 30, 2004,
interest income on loans increased 7.4% to $5.0 million compared to $4.7
million for the comparable period in 2003.
Interest expense of $4.2 million for the six months ended June 30, 2004
represented a $6.6 thousand increase from the comparable period in 2003. For
the quarter ended June 30, 2004, interest expense was $2.1 million, up $24.6
thousand from the quarter ended June 30, 2003. This slight increase is due to
the decrease in overall rates paid on liabilities as a result of the lower
interest rate environment, which was offset by the record increase in the
Company's average interest bearing liabilities. Average short term borrowings
during the first six months of 2004 declined $5.9 million, as compared to the
same period of 2003, which was offset by a record $27.1 million increase in
average deposits from June 30, 2004 to June 30, 2003.
The provision for loan losses is the annual cost of maintaining an
allowance for inherent credit losses. The amount of the provision each year
and the level of the allowance are matters of judgment and are impacted by
many factors, including actual credit losses during the period, the
prospective view of credit losses, loan performance measures and trends (such
as delinquencies and charge-offs), and other factors, both internal and
external that may affect the quality and future loss experience of the credit
portfolio. At June 30, 2004, the Company had total allowance for loan losses
of $3,342,122 or 1.27% of total loans. The provision for loan losses was
$835,000 for the first six months of 2004 compared to $240,000 for the same
period of 2003. Loan charge-offs for the six months ended June 30, 2004
totaled $392 and recoveries for the same period totaled $4,514.
During the first half of 2004, non-performing assets decreased $2.1
million to $1.9 million as of June 30, 2004. The decline was a result of the
sale of the two properties included in real estate acquired in settlement of
loans. Nonaccrual loans at June 30, 2004 consisted of seven loans which
totaled $1.9 million. $1.4 million of the total represents one significant
commercial credit. Management is closely monitoring this credit, but is
currently unable to estimate the size of the loss due to uncertainties
regarding the liquidation of the collateral and the outcome of a suit against
the loan guarantors. Management believes the maximum potential after tax loss
could be approximately $700,000. Due to the uncertainty of the outcome
coupled with the aforementioned strong loan growth experienced during the
year, out of an abundance of caution management increased its monthly
provision to $75,000 during the first quarter and $90,000 during the second
quarter of 2004 compared to $40,000 per month during the first half of 2003.
Furthermore, management added an additional provision of $240,000 in March
2004 and $100,000 in May 2004 to adequately provide for any potential loss.
When determinable, the loss, if any, will be a one time charge to the
allowance for loan losses. Management believes that the current monthly
provision and allowance for loan losses is sufficient to absorb any potential
loss associated with this credit and the potential loss will not negatively
impact the Company's ability to conduct its business on a going forward basis.
The remaining $0.5 million in nonaccrual loans represents six (6) loans, with
the majority making monthly payments and in most cases are secured with
workout arrangements currently in place. Based on current expectations
relative to portfolio characteristics and performance measures including loss
projections, management considers the level of the allowance to be adequate.
Noninterest income for the six months ended June 30, 2004 equaled $1.3
million, an increase of $473.9 thousand over the $824.9 thousand reported for
the six months ended June 30, 2003. For the three months ended June 30, 2004,
noninterest income was $674.1 thousand, up $247.9 thousand or 58.2% over the
comparable period in 2003. The increase in other income for the quarter ended
and six months ended was the result of a $240.1 thousand gain on the sale of
securities available for sale in the first quarter of 2004 and a $200.8
thousand gain on the call of securities in the second quarter of 2004.
Noninterest expense consists of salaries and benefits provided to
employees of the Company, expenses related to premises and equipment, data
processing expenses, and operating expenses associated with day to day
business affairs. Noninterest expense for the six months ended June 30, 2004
totaled $4.4 million, an increase of $267.7 thousand over the $4.1 million
recorded during the six months ended June 30, 2003. For the quarter ended
June 30, 2004, noninterest expense was $2.2 million, an increase of $158.1
thousand over the comparable period in 2003. The increase was primarily due
to an 8.8% rise in salaries and employee benefits resulting from the addition
of several new positions during 2003 and the first quarter of 2004, and an
increase in medical insurance costs for our employees. The Company is
currently servicing a record number of deposit and loan accounts. To support
this growth, along with the legislation and requirements relating to the
Sarbones-Oxley Act, the Bank Secrecy Act, the Patriot Act, the Fair Credit
Reporting Act, the Gramm Leach Bliley Act, and others, the Company had to
deploy significant resources including additional employees who can devote the
time and attention necessary to ensure ongoing compliance with each of these
important policies.
Financial Condition
Total assets at June 30, 2004 reached a new high of $325.2 million, up
15.4% or $43.5 million from $281.7 million at June 30, 2003. Total loans, the
Company's largest and most profitable asset, ended the quarter at a record
$263.7 million, up $45.9 million or 21.1% from June 30, 2003. The favorable
financing environment along with the efforts of the Company's officers to
develop new loan relationships combined with the support of existing customers
continue to generate record loan demand for the Company.
As of June 30, 2004, 81.3% of the Company's loan portfolio consisted of
commercial loans, which are considered to provide higher yields. It should be
noted that 71.3% of these commercial loans are collateralized with real
estate, and accordingly do not represent an unfavorable risk. At June 30,
2004, 72.6% of the Bank's total loan portfolio consisted of loans
collateralized with real estate.
To fund the Company's record loan demand, and to take advantage of the
gains in the investment portfolio given the existing market conditions and the
likelihood of interest rates increasing, the Company sold securities from its
investment portfolio. The sale resulted in the Company recognizing a gain on
securities sold of $240,054 during the first quarter of 2004. In addition,
$2.5 million of investments were called at a premium, resulting in a $200,820
gain recognized in the second quarter of 2004 and contributed to the decrease
in the investment portfolio of $3.9 million.
The Company's strong growth in deposits continued into the first half of
2004 with deposits at June 30, 2004 reaching a record $256.0 million, an
increase of $22.6 million from June 30, 2003. Non-interest bearing demand
deposits increased by $10.8 million or 40.6% and interest bearing deposits
increased by $11.8 million or 5.7%. Management believes the growth in
deposits is a result of the increased promotional efforts put forth by the
Company as well as the efforts of our experienced staff to attract new
customers through our special deposit promotions, product enhancements, and
offering unsurpassed service. The Company's deposits are provided by
individuals and businesses located within communities served.
Capital Position
Shareholders' equity for the Company increased to $20.7 million from $16.8
million or 22.9% from June 30, 2003 to June 30, 2004. Shareholders' equity
for June 30, 2004 reflects a $67.8 thousand net unrealized gain on securities
available for sale in accordance with FASB 115, as compared to a $511.0
thousand net unrealized gain as of June 30, 2003.
The Federal Reserve Board, the Office of Controller of the Currency, and
the FDIC has issued risk-based capital guidelines for U.S. banking
organizations. These guidelines provide a capital framework that is sensitive
to differences in risk profiles among banking companies.
Risk-based capital ratios are another measure of capital adequacy. At
June 30, 2004, the Bank's risk-adjusted capital ratios were 9.29% for Tier 1
and 10.54% for total capital, well above the required minimums of 4.0% and
8.0%, respectively. Under Federal Reserve Bank rules, the Bank was considered
"well capitalized," the highest category of capitalization defined by the
regulators, as of June 30, 2004.
Cash Dividend
In compliance with the Company's dividend payout policy, on February 27,
2004 the Company paid a cash dividend of 5 cents per share, totaling $96,370.
On May 24, 2004 the Company paid a 5 cent dividend totaling $98,611.
Management has increased its dividends paid out to its shareholders in order
to share in the Company's record earnings. Total dividends of 10 cents paid
during the first six months of 2004 is a 25% increase over the 8 cents total
dividends paid during the same time period in 2003.
Acquisition of Community Home Mortgage of Virginia, Inc.
During July 2004, Bank of the Commonwealth and Commonwealth Bankshares,
Inc. acquired Community Home Mortgage of Virginia, Inc. Community Home
Mortgage of Virginia, Inc., based in Richmond, Virginia since May of 2000,
serves as a mortgage brokerage firm that originates, processes and sells
residential mortgages on a servicing released basis throughout Virginia and
Maryland. The predominant service focus for this group is new and second home
loans. In addition, Community Home Mortgage of Virginia also offers a full
spectrum of mortgage products including A,B,C and D Loans, equity lines and
refinance loans. The loans outlined herein, cover all types of residential
properties such as condominiums, single family residences, 2-4 units and
modular homes. Community Home Mortgage will be a wholly owned subsidiary of
Bank of the Commonwealth."
Our expanded company will offer mortgage funding services locally
throughout Hampton Roads. In addition, we will continue to maintain mortgage
funding offices in the Richmond, Virginia area, the Gloucester County,
Virginia area and the Columbia, Maryland area. The two founding principals,
David B. Rudolph and Craig T. Cradlin have extensive experience and contacts
in the mortgage loan industry. The full staff of 18 employees have all been
extended an opportunity to retain employment with the newly expanded entity.
"Today, Come Bank With Your Neighbors takes on an expanded new meaning, as
we grow to better serve the people of our community. As Neighborhood Bankers
Since 1971 we can now fully realize the benefits of expanded product offerings
and associations."
Commonwealth Bankshares, Inc. is the parent company of Bank of the
Commonwealth, a full-service community bank headquartered in Norfolk, VA.
Bank of the Commonwealth 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 bank's growth has mirrored that of the communities it serves.
Today, Bank of the Commonwealth has nine bank branches strategically located
throughout the Hampton Roads region and an extensive ATM network for added
convenience. We continue to grow and develop new services, such as Online
Banking and a Corporate Cash Management program, and at the same time we
maintain our 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 is the parent company of BOC Insurance
Agencies of Hampton Roads, Inc. and BOC Title of Hampton Roads, Inc.
Commonwealth Bankshares, Inc. and Subsidiaries
Selected Financial Information (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
(in thousands, except per share data)
Operating Results:
Interest Income $5,142 $4,893 $10,046 $9,564
Interest Expense 2,091 2,066 4,171 4,164
Net interest income 3,051 2,827 5,875 5,400
Provision for loan losses 370 120 835 240
Noninterest income 674 426 1,299 825
Noninterest expense 2,236 2,078 4,417 4,149
Income before provision for
income taxes 1,119 1,055 1,922 1,836
Provision for income taxes 374 327 633 581
Net income $745 $728 $1,289 $1,255
Per Share Data:
Basic earnings $0.38 $0.42 $0.66 $0.73
Diluted earnings $0.30 $0.29 $0.53 $0.51
Book value $10.43 $9.75 $10.43 $9.75
Basic weighted average
shares outstanding 1,965,186 1,724,620 1,942,739 1,723,550
Diluted weighted average
shares outstanding 2,718,009 2,823,372 2,720,157 2,822,302
Shares outstanding at
period-end 1,982,361 1,725,888 1,982,361 1,725,888
At Period End
June 30, June 30,
2004 2003
Month End Balance:
Assets $325,250 $281,665
Loans* 263,691 217,759
Loans held for sale 33,806 32,817
Investment securities 10,104 14,036
Deposits 256,033 233,443
Shareholders' equity 20,676 16,820
YTD Average Balance:
Assets $305,036 $269,764
Loans* 241,044 204,892
Loans held for sale 31,177 32,671
Investment securities 9,939 15,541
Deposits 260,609 233,515
Shareholders' equity 19,934 16,116
Ratios:
Return on average assets 0.85% 0.94%
Return on average shareholders' equity 13.00% 15.66%
Shareholders' equity to total assets 6.36% 5.97%
Loan loss allowance to loans 1.27% 1.06%
Net interest margin (tax equivalent basis) 3.82% 3.97%
Bank's Tier 1 capital to average assets 7.86% 8.21%
Bank's Tier 1 capital to risk weighted assets 9.29% 9.12%
Bank's Total capital to risk weighted assets 10.54% 10.10%
* Net of unearned income and loans held for sale
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
SOURCE Commonwealth Bankshares, Inc.
-0- 08/12/2004
/CONTACT: E.J. Woodard, Jr., CLBB, Chairman Of The Board, President, and
Chief Executive Officer of Commonwealth Bankshares, Inc., +1-757-446-6904, or
ewoodard@bocmail.net/
/Web site: http://www.bankofthecommonwealth.com /
(CWBS)
CO: Commonwealth Bankshares, Inc.
ST: Virginia
IN: FIN
SU: ERN TNM DIV