Exhibit 99.1
PRESS RELEASE
Available for Immediate Publication: January 25, 2005
Contacts: Thomas T. Hawker, President / Chief Executive Officer (209) 725-2276
R. Dale McKinney, EVP / Chief Financial Office (209) 725-7435
Web Site www.ccow.com
Capital Corp of the West Announces Full Year and Fourth Quarter 2004 Earnings
Merced, California, January 25, 2005-Capital Corp of the West
NASDAQ:NMS:CCOW) today announced $12,323,000 and $816,000 in net income for the
full year and the fourth quarter ended December 31, 2004. These amounts reflect
two charges to earnings announced on December 27, 2004 that totaled $3,380,000,
pretax. The first charge was a $2,151,000, net of tax, reduction related to
other-than-temporarily-impaired securities (OTTI). The second charge was a
$1,229,000 reduction related to a Real Estate Investment Trust (REIT) consent
dividend deduction available to California banks for the tax years 2001 and
2002. Additionally, as announced in a separate press release today, the Board of
Capital Corp of the West, declared a $.05 per share quarterly cash dividend for
shareholders of record February 4, 2004, payable February 25, 2005.
"Neither of these two charges should have a negative impact on the future
earnings of Capital Corp of the West", stated Chief Financial Officer, R. Dale
McKinney. "Prior to these two charges, earnings for the full year 2004 were
$15,703,000 or a 15.1% increase over the $13,640,000 earnings reported for the
full year 2003. The 15.1% increase is slightly over the 13% to 15% full year
2004 guidance provided in our third quarter October 27, 2004 earnings
announcement and represents a 16.2% return on equity (ROE), excluding these two
charges, for our shareholders. For the fourth quarter 2004, earnings were
$4,196,000 or a 16.9% increase over the comparable fourth quarter 2003 earnings.
Our underlying earnings potential continues to be strong. We have grown our
total assets by 17% in the last year and averaged a solid 4.49% tax equivalent
margin for the full year 2004" continued Mr. McKinney.
"Although we have made these fourth quarter earnings charges, our
performance over the last several years, by any measures, has been outstanding",
stated Chief Executive Officer, Tom Hawker. "We are well positioned to continue
delivery of outstanding results to our shareholders and the communities we serve
in the years ahead. This year has seen the continued expansion of our franchise
and branch network with loan growth of $120 million or 16% and gross deposit
growth of $145 million or 14%, net of a $20 million reduction in out of the area
brokered deposits. We are especially pleased with our continued growth in the
Fresno market, the opening of our 20th branch office in Downtown Fresno, and the
start up of our wealth management services during 2004. Economic forecasts are
for a robust Central Valley and we look forward to this favorable environment in
which to continue to provide high quality service to our valued customer base,
supporting the health and well being of the communities in which we operate,
continuing the trend of excellent returns to our shareholders, and a challenging
workplace for our team members" continued Mr. Hawker.
Fourth Quarter 2004 Earnings Charges
------------------------------------
As previously discussed, the Company recorded two earnings charges during
the fourth quarter of 2004. The reason for these two charges in the fourth
quarter are as follows:
County Bank (the "Bank"), the primary subsidiary of CCOW, holds two
Freddie Mac preferred stocks with par values of $3,000,000 and $6,710,000 and
one Fannie Mae preferred stock with a $5,000,000 par value in its investment
portfolio. Bank management has been closely following the market valuations of
these stocks, which have been depressed for a significant amount of time, and
has evaluated recent financial news on these agencies, and has now concluded
that all three are other-than-temporarily impaired. As a result, a pre tax
earnings charge on the $3,000,000 and $6,710,000 Freddie Mac and the $5,000,000
Fannie Mae stocks of $690,660, $1,617,110, and $1,401,400 respectively has been
recorded. The after tax impact of these three write-downs total $2,151,319 has
been recorded in the fourth quarter of 2004.
The State of California Franchise Tax Board's Chief Council Announcement
2003-1 dated December 31, 2003 took the position that certain tax transactions
related to Real Estate Investment Trusts (REIT's) would be disallowed by the
Franchise Tax Board. For the years 2001 and 2002, the Bank recorded certain
state tax savings related to the consent dividends declared by the REIT. Under
California's Voluntary Compliance Initiative ("VCI") program that concluded on
April 15, 2004, the bank paid taxes and interest relating to the years 2001 and
2002 REIT consent dividends and established a $1,563,000 receivable along with
an offsetting $334,000 reserve, net of federal tax, for the pending refund
claims that have yet to be filed. Management intends to actively pursue our
rights for a state tax refund relating to this receivable under the legal and
statutory processes available. However, during the fourth quarter of 2004,
management wrote off into current period earnings the $1,563,000 state tax
receivable less the $334,000 reserve or an after tax impact of $1,229,000. The
write off of these amounts does not impact the ultimate outcome of the legal and
statutory process, but is a conservative measure in that the final outcomes are
uncertain as to amount of ultimate recovery and time frames required. The
Company does not plan to record any benefits related to the REIT consent
dividend going forward until the courts resolve this tax issue.
Earnings Discussion
-------------------
Net earnings were $816,000 or $0.14 per share for the three months ended
December 31, 2004. This compares to earnings of $3,590,000 or $0.62 per share
for the same period in 2003. Annualized return on average assets and return on
average equity were 0.23% and 3.16% for the fourth quarter of 2004 compared with
1.21% and 16.44% for 2003.
The 2004 fourth quarter earnings of $816,000 reflect a year over year
decrease in earnings of $2,774,000 due primarily to the two earnings charges
recorded in 2004, partially offset by a $1,908,000
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improvement in net interest income. The increase in net interest income was
driven by a $179,614,000 or a 17% increase in average interest earning assets.
The net interest margin for the fourth quarter of 2004 was 4.47%, a decrease of
2 basis points from the 4.49% achieved during the same period during 2003. In
comparing the 2004 to 2003 fourth quarter, other expenses increased by $673,000
due primarily to increases in salaries and benefits of $335,000 that were the
result of management and support staff increases necessary to accommodate branch
expansion and normal salary progression and a $76,000 increase in premises and
occupancy expenses due primarily to branch expansion and remodel expenses. Our
effective tax rate was 66% for the fourth quarter of 2004 compared with 34% for
the fourth quarter of 2003. Income tax expense decreased $244,000 to $1,611,000
when compared to the $1,855,000 recorded during the same quarter in 2003. The
increase in the 2004 tax rate is primarily attributable to the elimination of
the tax benefit of the REIT consent dividend. Without these charges, the 2004
fourth quarter effective tax rate would have been 32%, a decrease of 2% from the
level achieved in the fourth quarter of 2003. The primary reason for this
reduction is an increased investment in Housing Tax Credit ("HTC") limited
partnerships that is partially offset by a higher level of taxable operating
income.
Credit Quality
--------------
The Company's allowance for loan losses was $14,284,000 or 1.61% of total
loans at December 31, 2004. Nonperforming assets totaled $4,455,000 or 0.31% of
total assets and nonperforming loans stood at $4,395,000 or 0.50% of total
loans. At December 31, 2004 the allowance for loan losses totaled 325% of
nonperforming loans. This compares to an allowance for loan losses of
$13,263,000 or 1.74% of total loans at December 31, 2003. At December 31, 2003,
nonperforming assets totaled $4,047,000 or 0.33% of total assets, nonperforming
loans totaled $3,987,000 or 0.52% of total loans and the allowance for loan
losses totaled 333% of nonperforming loans. Included in non-performing loans at
the end of 2004 were two commercial real estate loans totaling $3.2 million,
which are secured by first deeds of trust with adequate margin between appraised
value and the loan balance.
Net charge-offs for the fourth quarter of 2004 were $747,000, which
compares to $465,000 for the same period in 2003. Net charge-offs for the full
year 2004 were $1,650,000, which compares to $1,326,000 for the same period in
2003. The increased charge-off activity in the fourth quarter and for the full
year 2004 was primarily in the commercial and agricultural segment of the loan
portfolio.
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Book Values - Capital
---------------------
The Company's capital at December 31, 2004 stood at $103,637,000 compared with
$89,485,000 as of December 31, 2003. Book value and tangible book value per
share totaled $17.89 and $17.63 as of December 31, 2004 as compared to $15.82
and $15.36 as of December 31, 2003. The Company's tangible leverage capital
ratio stood at 8.30% at December 31, 2004, compared with 8.55% as of December
31, 2003. The Company's risk based capital ratio stood at 11.36% at December 31,
2004, compared with 11.57% as of December 31, 2003.
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Forecasted Information
----------------------
Looking to the full year 2005, Chief Financial Officer R. Dale McKinney
comments, "Although interest rates are anticipated to rise during the year, the
forecast is based on existing interest rates since future interest rates can not
be predicted with certainty. Our ALCO model indicates slight asset sensitivity;
therefore if rates rise as predicted, forecasted margins should slightly
improve. Tax equivalent margins averaged 4.47% for fourth quarter 2004 and are
expected to decline during the year 2005 to an average tax equivalent margin in
the 4.30% to 4.40% range. Loan loss accruals and net charge offs for 2005 are
anticipated to remain at the same relative levels as during the year 2004. Our
effective tax rate for 2005 is forecasted to rise slightly to the 33% to 34%
range. For 2005, ROE is forecast to be 15% plus and growth in total assets of
about 12%. As stated earlier, expense growth in the 10% to 12% range for 2005 is
anticipated as infrastructure was added during the 2004 year in order to comply
with provisions of both Sarbanes Oxley (SOX) and the Bank Secrecy Act (BSA), and
in support of our continued branch and franchise expansion. After adding back
the two previously announced fourth quarter 2004 earnings charges, a 12% to 14%
earnings improvement over our 2004 year is forecasted, or fully diluted earnings
per share in the $2.90 to $2.95 range. Risk based capital ratios are anticipated
at 11.00% to 11.50% and leverage capital ratios are anticipated at 8.25% to
8.50% during the full 2005 year. These ratios are considered well capitalized by
regulatory definitions."
Conference Call Recording
-------------------------
Capital Corp of the West's year end 2004 earnings conference call is
scheduled for January 26, 2005 at 7:00 am 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.
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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 6.5% market share in the six Central California counties in which it has
retail branches. This ranks County Bank fifth out of thirty-nine banking
institutions in this 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.
-Financial Tables Follow-
-------------------------
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Capital Corp of the West
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands) For the Three For the Year
Months Ended Ended
December 31, December 31,
2004 2003 2004 2003
---- ---- ---- ----
Interest income $ 18,784 $ 16,217 $ 70,571 $ 62,413
Interest expense
-------- ------- -------- --------
Net interest income 14,198 12,290 53,474 46,160
Provision for loan losses 670 551 2,671 2,455
Other income:
Service charges on accounts 1,479 1,416 6,134 5,480
Loss on sale or impairment of securities (3,708) -- (3,665) --
All other income 990 1,480 3,936 4,697
Other expenses:
Salaries and related benefits 5,227 4,892 20,697 19,071
Premises and occupancy 913 837 3,446 2,946
Equipment 825 999 3,186 3,335
Professional fees 568 594 1,671 1,662
Marketing 281 247 1,062 963
Intangible amortization 155 166 655 676
Supplies 251 179 873 794
Other expenses 1,642 1,276 6,145 5,938
-------- ------- -------- --------
Total other expenses 9,862 9,190 37,735 35,385
-------- ------- -------- --------
Income before income taxes 2,427 5,445 19,473 18,497
Provision for income taxes 1,611 1,855 7,150 4,857
-------- ------- -------- --------
NET INCOME $ 816 $ 3,590 $ 12,323 $ 13,640
======== ======= ======== ========
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Capital Corp of the West
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands) 2004 2004
At December 31, Averages Averages
2004 2003 QTD YTD
---- ---- --- ---
Assets
Cash and noninterest-bearing deposits in other banks $ 40,454 $ 44,292 $ 41,487 $ 40,475
Federal funds sold 17,365 1,190 37,447 16,604
Time deposits at other financial institutions 3,350 350 1,622 670
Investment securities available for sale, at fair value 269,189 275,403 266,182 272,221
Investment securities held to maturity at cost, fair
value of $166,958 and $97,295 at December 31, 2004
and 2003 166,987 96,612 131,000 109,769
Loans, net of allowance for loan losses of $14,284 and
$13,263 at December 31, 2004 and 2003 870,809 750,989 837,354 799,049
Interest receivable 5,979 6,045 5,452 5,447
Premises and equipment, net 22,426 16,557 21,206 18,881
Intangible assets 1,474 2,649 1,706 2,227
Cash value of life insurance 28,362 24,138 28,217 26,341
Investment in housing tax credit limited partnerships 8,623 8,717 8,700 8,664
Other assets 12,906 7,600 10,440 9,175
---------- ---------- ---------- -----------
Total assets $1,447,924 $1,234,542 $1,390,813 $ 1,309,523
========== ========== ========== ===========
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing demand $ 262,315 $ 206,709 $ 237,593 $ 213,864
Negotiable orders of withdrawal 170,870 136,975 167,492 148,951
Savings 360,319 330,023 359,737 350,270
Time, under $100 193,913 182,363 195,428 188,907
Time, $100 and over 166,740 172,738 164,788 167,277
---------- ---------- ---------- -----------
Total deposits 1,154,157 1,028,808 1,125,038 1,069,269
Other borrowings and subordinated debentures 180,615 109,313 156,685 138,081
Accrued interest, taxes and other liabilities 9,515 6,936 5,892 5,081
---------- ---------- ---------- -----------
Total liabilities 1,344,287 1,145,057 1,287,615 1,212,431
---------- ---------- ---------- -----------
Preferred stock, no par value; 10,000,000 shares
authorized; none outstanding -- -- -- --
Common stock, no par value; 20,000,000 shares authorized;
5,734,308 and 5,660,739 issued & outstanding at
December 31, 2004 and 2003 57,295 54,228 56,746 55,554
Retained earnings 45,981 34,816 47,178 41,933
Accumulated other comprehensive income 361 441 (726 (395)
---------- ---------- ---------- -----------
Total shareholders' equity 103,637 89,485 103,198 97,092
---------- ---------- ---------- -----------
Total liabilities and shareholders' equity $1,447,924 $1,234,542 $1,390,813 $ 1,309,523
========== ========== ========== ===========
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Loan Portfolio Composition
December 31 December 31
(Dollars in thousands) 2004 2003
----- ----
Percent Percent
Loan Categories: Dollar Amount of loans Dollar Amount of loans
------------- -------- ------------- --------
Commercial $217,524 25% $ 195,588 25%
80,598 9 92,550 12
Real estate construction 97,396 11 89,652 12
Real estate mortgage 416,385 47 318,624 42
Consumer 73,190 8 67,838 9
-------- --- --------- ---
Total 885,093 100% 764,252 100%
-------- === --------- ===
Less allowance for loan losses (14,284) (13,263)
-------- ---------
Net loans $870,809 $ 750,989
-------- ---------
Allowance for Loan Loss Activity
Year Ended December 31,
2004 2003 2002
---- ---- ----
(In thousands)
Allowance for Loan Losses:
Balance at beginning of period $ 13,263 $ 12,134 $ 9,743
-------- -------- --------
Provision for loan losses 2,671 2,455 4,151
-------- -------- --------
Charge-offs (2,296) (1,995) (2,589)
Recoveries 646 669 829
-------- -------- --------
Net charge-offs (1,650) (1,326) (1,760)
-------- -------- --------
Balance at end of period $ 14,284 $ 13,263 $ 12,134
======== ======== ========
Loans outstanding at period-end $885,093 $764,252 $633,733
======== ======== ========
Average loans outstanding $813,050 $687,419 $576,156
======== ======== ========
Annualized net charge-offs to average loans 0.20% 0.19% 0.31%
Allowance for loan losses
To total loans 1.61% 1.74% 1.91%
To nonperforming loans 325% 333% 509%
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Selected Financial Data
Three Three Twelve Twelve
Capital Corp of the West Months Ended Months Ended Months Ended Months Ended
Selected Financial Data 12/31/04 12/31/03 12/31/04 12/31/03
---------------------------------------------------------------
Basic Earnings Per Share $ .14 $ .65 $ 2.15 $ 2.43
Diluted Earnings Per Share $ .14 $ .62 $ 2.06 $ 2.34
Annualized Return on:
Average Assets 0.23% 1.21% 0.94% 1.23%
Average Equity 3.16% 16.44% 12.69% 16.43%
Net Interest Margin 4.47% 4.49% 4.49% 4.53%
Efficiency Ratio 75% 59% 62% 62%
- -----------------------------------------------------------------------------------------------------------
Annualized Net Charge-offs to
Average Loans 0.35% 0.20% 0.25% 0.19%
Capital / Shareholder information
December 31, December 31,
2004 2003
---- ----
Book Value Per Share $17.89 $15.82
Tangible Book Value Per Share $17.63 $15.36
Leverage Capital Ratio 8.47% 8.55%
Risk Based Capital Ratio 11.56% 11.57%
Nonperforming Assets
December 31 December 31
2004 2003
---- ----
(In thousands)
Nonaccrual loans $4,395 $3,987
Accruing loans past due 90 days or more -- --
------ ------
Total nonperforming loans 4,395 3,987
Other real estate owned 60 60
------ ------
Total nonperforming assets $4,455 $4,047
====== ======
Nonperforming loans to total loans 0.50% 0.52%
Nonperforming assets to total assets 0.31% 0.33%
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