Exhibit 99.1
Capital Corp of the West Announces a 10% Earnings Increase Along With a 16%
Increase in Total Assets Relative to Third Quarter 2003
MERCED, Calif., Oct. 12 /PRNewswire-FirstCall/ -- Capital Corp of the West
(Nasdaq: CCOW) today announced a 10% increase in net income for the third
quarter ended September 30, 2004 relative to the third quarter 2003.
"With this quarter's results, we have provided our shareholders a Return
on Equity (ROE) of 15% or higher for each quarter for more than two
consecutive years," stated Chief Executive Officer, Tom Hawker. "County Bank's
10-Year Strategic Plan mandates opening two to three branches per year while
generating growth in assets of at least 15% and maintaining a Return On Equity
(ROE) of at least 15%. This means we must absorb significant start up costs
until each new branch reaches profitability. County Bank can accomplish this
because of the continued strong growth at its existing branches and corporate
lending offices and the development of new products and services such as the
newly formed Wealth Management and Trust Services division. The ability to
maintain its strong performance record while at the same time absorbing such
significant expenses gives the best indication of County Bank's real
operational strength.
"Since the third quarter of 2003, total assets increased 16%, loans
increased 19%, and deposits increased 12% as we continue to expand our
franchise throughout the Central Valley. A key goal of an efficiency ratio
below 60% has also been achieved with a 56% efficiency ratio this quarter.
This is another significant achievement due to the fact that we continue to
invest earnings back into our franchise in order to sustain the growth
statistics we are experiencing. A good example of these reinvestment
activities is our newly created Wealth Management Division and its successful
business development activities already resulting in the recording of revenues
this quarter. We are now increasing our forecasted earnings for the remainder
of 2004 and are looking forward to the future and sustaining our current high
levels of performance."
"These third quarter results of a 16.3% ROE and a 16% growth in assets
over a year ago, continues our internal goal of achieving at least a
15% growth in assets while returning a 15% or better ROE to our
shareholders," stated Chief Financial Officer, R. Dale McKinney. "Our 4.45%
margin for the quarter is as anticipated and is a result of a solid 12% net
deposit growth since a year ago. We achieved this net deposit growth while
at the same time improving our funding mix by allowing $44 million in brokered
deposits to mature. After allowing for the maturing brokered deposits, our
underlying deposits have actually increased 17% from third quarter year ago.
Our third quarter 2004 pretax earnings are even stronger with a pre tax
earnings increase of 28% compared to third quarter 2003. This is due an
increase in our third quarter 2004 effective tax rate to 34% relative to the
third quarter 2003 effective tax rate of 23% in anticipation of both higher
federal and state income tax payments for the year 2004."
Earnings Discussion
Net earnings were $3,983,000 or $0.67 per share for the three months ended
September 30, 2004. This compares to earnings of $3,628,000 or $0.62 per
share for the same period in 2003. Annualized return on average assets and
return on average equity were 1.21% and 16.26% for the third quarter of 2004
compared with 1.26% and 16.61% for the third quarter of 2003.
The 2004 third quarter earnings of $3,983,000 reflect a year over year
increase in earnings of $355,000 due primarily to a $1,421,000 improvement in
net interest income. The increase in net interest income was driven by a
$136,889,000 or a 13% increase in average interest earning assets. The net
interest margin for the third quarter of 2004 was 4.45%, which is equal to the
4.45% achieved during the same period during 2003. In comparing the 2004 to
2003 third quarter, noninterest expenses increased by $168,000 due primarily
to increases in salaries and benefits of $234,000 that were the result of
management and support staff increases necessary to accommodate branch
expansion and normal salary progression. Our effective tax rate was 34% for
the third quarter of 2004 compared with 23% for the same quarter in 2003.
Income tax expense increased $958,000 to $2,042,000 when compared to the
$1,084,000 recorded during the same quarter in 2003. The increase in the 2004
tax rate is attributable to no longer recording REIT tax benefits for state
income tax purposes, realization of lower than expected housing tax credits,
and a higher level of taxable operating income.
Credit Quality
The Company's allowance for loan losses was $14,361,000 or 1.67% of total
loans at September 30, 2004. Nonperforming assets totaled $4,306,000 or
0.32% of total assets and nonperforming loans stood at $4,246,000 or 0.49% of
total loans. At September 30, 2004 the allowance for loan losses totaled
338% of nonperforming loans. This compares to an allowance for loan losses of
$13,177,000 or 1.83% of total loans at September 30, 2003. At September 30,
2003, nonperforming assets totaled $1,793,000 or 0.15% of total assets,
nonperforming loans totaled $1,733,000 or 0.24% of total loans and the
allowance for loan losses totaled 760% of nonperforming loans. The increase
in nonperforming loans between September 30, 2004 and 2003 was primarily due
to the downgrading of two real estate loans totaling $3.1 million. The two
real estate loan downgrades are composed of a $2.1 million fourth quarter 2003
and a $1.0 million second quarter 2004 downgrade. Each of these loans is
adequately secured by first deeds of trust.
Book Values - Capital
The Company's capital at September 30, 2004 stood at $101,742,000 compared
with $85,613,000 as of September 30, 2003. Book value and tangible book value
per share totaled $17.63 and $17.25 as of September 30, 2004 as compared to
$15.23 and $14.73 as of September 30, 2003. The Company's tangible leverage
capital ratio stood at 8.68% at September 30, 2004, compared with 7.66% as of
September 30, 2003. The Company's risk based capital ratio stood at 11.80% at
September 30, 2004, compared with 10.85% as of September 30, 2003
Forecasted Information
Looking to the fourth quarter of 2004, Chief Financial Officer R. Dale
McKinney comments, "Although as expected rates have risen recently, it is
still difficult to predict future interest rates. Our forecast for the fourth
quarter of 2004, based on the current rate environment, is for margins to
decline slightly from the 4.45% reported this quarter. Should rates rise
during the fourth quarter margins are forecasted to remain flat relative to
this quarter. Loan loss accruals for the fourth quarter are anticipated to be
in line with a forecasted $25 to $35 million range of loan growth for the
fourth quarter of 2004. For the fourth quarter, ROE is forecast to continue
at 15% plus and growth in total assets should continue at an approximate
15% annual pace. We are increasing our prior earnings forecast to a 13% to
15% improvement over our 2003 year, or fully diluted earnings per share in the
$2.60 to $2.65 range. Our 2004 earnings forecast, includes a fourth quarter
effective tax rate of approximately 34% and a total 2004 year effective tax
rate of approximately 33%, well above the 2003 total year effective tax rate
of 26%. Although we plan to continue to build and strengthen our franchise by
reinvesting in our future, we anticipate an efficiency ratio below 60% going
forward. Risk based capital ratios are anticipated in the 11.25% to
11.75% range and leverage capital ratios are anticipated in the 8.00% to
8.50% range for fourth quarter 2004. These ratios continue to be considered
well capitalized by regulatory definitions."
Conference Call Recording
Capital Corp of the West's third quarter 2004 earnings conference call is
scheduled for October 13, 2004 at 7:00 a.m. PDT. Investors have the
opportunity to listen to a recording of the conference call by going the web
site of the company www.ccow.com just after the call and following the
instructions to play back the recorded conference call. The recording will be
available on the web site for 30 days following the conference call.
Safe Harbor
In addition to historical information, this release includes certain
forward-looking statements regarding events and trends that may affect the
Company's future results. Such statements are subject to risks and
uncertainties that could cause the Company's actual results to differ
materially. These factors include general risks inherent to commercial
lending; risks related to asset quality; risks related to the Company's
dependence on key personnel and its ability to manage existing and future
growth; risks related to competition; risks posed by present and future
government regulation and legislation; and risks resulting from federal
monetary policy.
Reference Information
Capital Corp. of the West, a bank holding company established November 1,
1995, is the parent company of County Bank, which has more than 27 years of
service as "Central California's Community Bank." Currently County Bank has
twenty branch offices serving the counties of Fresno, Madera, Mariposa,
Merced, Stanislaus, San Joaquin, San Francisco and Tuolumne. As of the latest
FDIC data, County Bank has 6.2% market share of the six counties in which it
has retail branches. This ranks County Bank sixth out of forty financial
institutions in its market area. For further information about the Company's
financial performance, contact Tom Hawker, President & Chief Executive Officer
at 209-725-2276, or R. Dale McKinney Chief Financial Officer, at 209-725-7435.
Capital Corp of the West
Consolidated Statements of Income
(Dollars in thousands)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
Interest income $17,587 $16,052 $51,787 $46,196
Interest expense 4,256 4,142 12,511 12,326
Net interest income 13,331 11,910 39,276 33,870
Provision for loan losses 760 751 2,001 1,904
Other income:
Service charges on accounts 1,641 1,430 4,655 4,064
All other income
Other expenses: 978 1,120 2,995 3,217
Salaries and related benefits 4,976 4,742 15,470 14,179
Premises and occupancy 990 727 2,533 2,109
Equipment 789 875 2,361 2,336
Professional fees 335 310 1,103 1,068
Marketing 281 208 781 716
Intangible amortization 167 170 500 510
Supplies 222 183 622 615
Other expenses 1,405 1,782 4,509 4,662
Total other expenses 9,165 8,997 27,879 26,195
Income before income taxes 6,025 4,712 17,046 13,052
Provision for income taxes 2,042 1,084 5,539 3,002
NET INCOME $3,983 $3,628 $11,507 $10,050
Capital Corp of the West
Consolidated Balance Sheets
2004 2004
(Dollars in thousands) At September 30, Averages Averages
2004 2003 QTD YTD
Assets
Cash and noninterest-bearing
deposits in other banks $43,894 $40,540 $41,569 $40,135
Federal funds sold 3,910 28,290 12,284 9,605
Time deposits at other
financial institutions 350 350 350 350
Investment securities
available for sale,
at fair value 267,031 237,114 262,822 274,250
Investment securities
held to maturity at
cost, fair value of
$120,893 and $89,380
at September 30, 2004
and 2003 120,191 89,480 105,750 102,641
Loans, net of allowance
for loan losses of $14,361
and $13,177 at September
30, 2004 and 2003 843,619 708,745 815,941 786,188
Interest receivable 5,530 5,378 5,366 5,446
Premises and equipment,
net 20,040 14,429 19,367 18,100
Intangible assets 2,149 2,815 2,237 2,403
Other assets 44,649 35,436 46,621 43,110
Total assets $1,351,363 $1,162,577 $1,312,307 $1,282,228
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing
demand $ 234,578 $172,945 $219,849 $205,897
Negotiable orders of
withdrawal 148,409 125,076 149,659 142,725
Savings 345,937 308,254 348,290 347,091
Time, under $100 196,887 175,060 191,118 186,719
Time, $100 and over 161,840 193,497 160,336 168,112
Total deposits 1,087,651 974,832 1,069,252 1,050,544
Total borrowings 140,159 90,235 123,693 115,339
Subordinated Debentures 16,496 6,186 16,496 16,496
Accrued interest, taxes
and other liabilities 5,315 5,711 4,886 4,808
Total liabilities 1,249,621 1,076,964 1,214,327 1,187,187
Preferred stock, no par
value; 10,000,000 shares
authorized; none outstanding -- -- -- --
Common stock, no par value;
20,000,000 shares authorized;
5,772,325 and 5,619,770
issued & outstanding at
September 30, 2004 and 2003 56,572 53,436 55,878 55,153
Retained earnings 45,426 31,228 43,637 40,171
Accumulated other
comprehensive income (256) 949 (1,535) (283)
Total shareholders'
equity 101,742 85,613 97,980 95,041
Total liabilities and
shareholders' equity $ 1,351,363 $ 1,162,577 $1,312,307 $1,282,228
Loan Portfolio Composition
September 30 September 30
(Dollars in thousands) 2004 2003
Loan Categories: Dollar Percent Dollar Percent
Amount of loans Amount of loans
Commercial $236,738 27% $166,006 23%
Agricultural 83,057 10 98,008 14
Real estate construction 100,166 12 79,631 11
Real estate mortgage 361,379 42 310,978 43
Consumer 76,640 9 67,299 9
Total 857,980 100% 721,922 100%
Less allowance for loan losses (14,361) (13,177)
Net loans $843,619 $708,745
Allowance for Loan Loss Activity
For the Nine Months Ended September 30,
2004 2003 2002
(In thousands)
Allowance for Loan Losses:
Balance at beginning of period $13,263 $12,134 $9,743
Provision for loan losses 2,001 1,904 3,421
Charge-offs (1,420) (1,396) (1,847)
Recoveries 517 535 617
Net charge-offs (903) (861) (1,230)
Balance at end of period $14,361 $13,177 $11,934
Loans outstanding at period-end $857,980 $721,922 $612,755
Average loans outstanding $799,997 $672,370 $563,518
Annualized net charge-offs to
average loans 0.15% 0.17% 0.29%
Allowance for loan losses
To total loans 1.67% 1.83% 1.95%
To nonperforming loans 338.25% 760.36% 160.84%
Selected Financial Data
Capital Corp of the West Three Three Nine Nine
Selected Financial Data Months Months Months Months
Ended Ended Ended Ended
09/30/04 09/30/03 09/30/04 09/30/03
Basic Earnings Per Share $0.69 $0.65 $2.01 $1.79
Diluted Earnings Per Share $0.67 $0.62 $1.94 $1.73
Annualized Return on:
Average Assets 1.21% 1.26% 1.20% 1.23%
Average Equity 16.26% 16.61% 16.14% 16.00%
Net Interest Margin 4.45% 4.45% 4.49% 4.54%
Efficiency Ratio 56% 61% 58% 62%
Annualized Net Charge-offs to
Average Loans 0.08% 0.11% 0.15% 0.17%
Capital / Shareholder information
Sept. 30, Sept. 30,
2004 2003
Book Value Per Share $17.63 $15.23
Tangible Book Value Per Share $17.25 $14.73
Leverage Capital Ratio 8.68% 7.66%
Risk Based Capital Ratio 11.80% 10.85%
Nonperforming Assets
Sept. 30 Sept. 30
2004 2003
(In thousands)
Nonaccrual loans $3,836 $1,725
Accruing loans past due 90 days or more 410 8
Total nonperforming loans 4,246 1,733
Other real estate owned 60 60
Total nonperforming assets $4,306 $1,793
Nonperforming loans to total loans 0.49% 0.24%
Nonperforming assets to total assets 0.32% 0.15%
SOURCE Capital Corp of the West
-0- 10/12/2004
/CONTACT: Thomas T. Hawker, President/Chief Executive Officer,
+1-209-725-2276, or R. Dale McKinney, EVP/Chief Financial Office,
+1-209-725-7435, both of Capital Corp of the West/
/Web site: http://www.ccow.com /
(CCOW)
CO: Capital Corp of the West; County Bank
ST: California
IN: FIN
SU: ERN CCA