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EXHIBIT 99.1
PRESS RELEASE
COOPERATIVE BANKSHARES, INC. ANNOUNCES DELAY IN EARNINGS REPORT AND
RETIREMENT OF PRESIDENT AND CEO
Wilmington, N.C., February 3, 2009---Cooperative Bankshares, Inc. (the
"Company") (NASDAQ:COOP), parent company of Cooperative Bank, the deposits of
which are insured by the FDIC, (the "Bank"), announced today that it is delaying
the release of its earnings report for the quarter and year-ended December 31,
2008 due to an ongoing third-party analysis of its loan portfolio and a
third-party analysis of its $5.5 million goodwill asset. The Company also
announced that Frederick Willetts, III has retired as President and Chief
Executive Officer. Mr. Willetts will continue to serve as Chairman of the Board
of Directors of the Company and the Bank.
The Company has delayed its earnings report pending the completion of
an ongoing third-party evaluation of the Bank's loan portfolio and its allowance
for loan losses. Numerous specific loans within the portfolio have been and are
being reviewed as part of the evaluation. The Bank's 25 largest loan
relationships and all loans with balances of at least $1 million that have a
delinquency history within the past six months (most of which are construction
and acquisition and development loans) have already been reviewed and a risk
assessment of each of the different segments of the loan portfolio has been
performed. Based on the current status of this analysis, the Company believes
that the loan loss provision for the fourth quarter will be approximately $20.0
million, which is primarily attributable to $7.2 million in charged-off loans,
additional specific reserves primarily associated with loans in its construction
and acquisition and development portfolios and general reserves against its
residential lot loan portfolio. Assuming a $20.0 million provision, the Bank's
loan loss allowance at December 31, 2008 will be approximately 3.14% of loans as
compared to 1.70% at September 30, 2008.
The delay in the earnings report also relates to the fact that the
Company is performing an impairment analysis of its $5.5 million goodwill asset
relating to its acquisitions of Lumina Mortgage and the Bank of Jefferson. While
this analysis is in its preliminary stages, given current market conditions, the
Company currently expects that it will likely record a non-cash other than
temporary impairment on this asset. While any such impairment would increase net
loss for the three-months and year-ended December 31, 2008, it would have little
if any impact on the Company's regulatory capital since a portion of goodwill is
already excluded from the calculation of regulatory capital.
Not including the possible goodwill impairment charge and based on the
estimated $20.0 million provision for loan losses, the Company would record a
net loss of approximately $12.0 million for the fourth quarter and $20.5 million
for the full year. Based on these assumptions, the Bank's tier 1 risk-based
capital and tier 1 leverage ratios would be 6.66% and 5.40%, respectively (both
of which exceed the "well capitalized" thresholds under the federal prompt
corrective action regulations), but its total risk-based capital ratio would be
approximately 7.94% (which is slightly below the 8.0% level necessary to be
considered "adequately capitalized"). The ongoing loan portfolio analysis could
identify the need for a larger provision for loan losses, in which case the net
loss for the quarter and year-ended December 31, 2008 would be greater and the
risk-based capital ratios would be lower. The Company is undertaking certain
actions to improve its capital ratios, including conducting select asset sales.
The Company has also engaged an investment banker and financial advisors to
assist with its efforts to raise additional capital and assess its strategic
options.
The Company expects to issue its earnings report after the goodwill
impairment and loan portfolio analyses have been completed. The financial
information contained in this release could change as a result of these
processes and also remains subject to the completion of audit review procedures
by the Company's independent auditors.
Regarding his retirement, Mr. Willetts said, "Given the challenges the
Company is facing and the economic environment in which we are operating, I feel
that it is in the shareholders' best interest that the Company bring in a new
chief executive officer to manage its day-to-day operations. As Chairman of the
Board and the Company's largest shareholder, I will continue to be involved with
the Company. Until we find a permanent replacement, we are appointing Todd
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Sammons, the Company's Chief Financial Officer, to also serve as
interim-President and Chief Executive Officer. I have worked with Todd for
almost 23 years. He is completely dedicated to the success of the Bank and the
Company, more than qualified to serve in this capacity and I fully support his
appointment to this position."
The Board of Directors jointly said of Mr. Willetts' retirement, "Rick
Willetts has been a part of Cooperative Bank since 1972. On behalf of the entire
Bank community, we are grateful to him for his long and dedicated service to the
Bank and the Company. Rick deserves the opportunity to spend more time with his
family, particularly given the birth last week of his twin grandsons. He will
remain Chairman of the Board of Directors, so his life-long affiliation with his
Cooperative family will continue. While we search for Rick's replacement, the
Board will work closely with Todd Sammons to make this transition period as
smooth as possible and to ensure that he has the resources available to him to
balance his duties. To this end, the Board has also promoted Craig L. Unwin to
Chief Credit Officer of the Bank. Mr. Unwin will oversee all lending operations
for the Bank going forward. Todd and Craig both know our Bank and its customers
extremely well."
Chartered in 1898, Cooperative Bank provides a full range of financial
services through twenty -one financial centers and one loan origination office
in Eastern North Carolina and three financial centers in South Carolina. The
Bank is a member of the FDIC and its deposits are FDIC-insured, dollar for
dollar, up to applicable legal limits. On October 3, 2008, Congress temporarily
increased FDIC deposit insurance from $100,000 to $250,000 per depositor through
December 31, 2009. The Bank's subsidiary, Lumina Mortgage, Inc., is a
mortgage-banking firm, originating and selling residential mortgage loans
through four offices in North Carolina.
THIS PRESS RELEASE MAY CONTAIN FORWARD-LOOKING STATEMENTS ABOUT COOPERATIVE
BANKSHARES, INC. WHICH THE COMPANY INTENDS TO BE COVERED UNDER THE SAFE HARBOR
PROVISIONS CONTAINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
STATEMENTS THAT ARE NOT HISTORICAL OR CURRENT FACTS, INCLUDING STATEMENTS ABOUT
BELIEFS AND EXPECTATIONS, ARE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS COVER, AMONG OTHER THINGS, ANTICIPATED FUTURE REVENUE AND EXPENSES
AND THE FUTURE PLANS AND PROSPECTS OF THE COMPANY. THESE STATEMENTS OFTEN
INCLUDE THE WORDS "MAY," "COULD," "WOULD," "SHOULD," "BELIEVES," "EXPECTS,"
"ANTICIPATES," "ESTIMATES," "INTENDS," "PLANS," "TARGETS," "POTENTIALLY,"
"PROBABLY," "PROJECTS," "OUTLOOK" OR SIMILAR EXPRESSIONS. YOU ARE CAUTIONED THAT
FORWARD-LOOKING STATEMENTS INVOLVE UNCERTAINTIES, AND IMPORTANT FACTORS COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED, INCLUDING THE
GOODWILL IMPAIRMENT ANALYSIS UNDERTAKEN BY THE COMPANY, THE FINAL RESULTS OF THE
LOAN PORTFOLIO ANALYSIS BEING PERFORMED BY A THIRD PARTY, THE RESULTS OF THE
AUDIT REVIEW PROCEDURES BEING CONDUCTED ON THE COMPANY'S FINANCIAL STATEMENTS,
CHANGES IN GENERAL BUSINESS AND ECONOMIC CONDITIONS, CHANGES IN INTEREST RATES,
LEGAL AND REGULATORY DEVELOPMENTS, INCREASED COMPETITION FROM BOTH BANKS AND
NON-BANKS, CHANGES IN CUSTOMER BEHAVIOR AND PREFERENCES, AND EFFECTS OF CRITICAL
ACCOUNTING POLICIES AND JUDGMENTS. FOR DISCUSSION OF THESE AND OTHER RISKS THAT
MAY CAUSE ACTUAL RESULTS TO DIFFER FROM EXPECTATIONS, REFER TO OUR ANNUAL REPORT
ON FORM 10-K AND OUR QUARTERLY REPORTS ON FORM 10-Q ON FILE WITH THE SEC,
INCLUDING THE SECTIONS ENTITLED "RISK FACTORS." THESE RISKS AND UNCERTAINTIES
SHOULD BE CONSIDERED IN EVALUATING FORWARD-LOOKING STATEMENTS AND UNDUE RELIANCE
SHOULD NOT BE PLACED ON SUCH STATEMENTS. FORWARD-LOOKING STATEMENTS SPEAK ONLY
AS OF THE DATE THEY ARE MADE, AND THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE
THEM IN LIGHT OF NEW INFORMATION OR FUTURE EVENTS.
Contact: Todd L. Sammons, Interim-President, CEO 910-343-0181