Exhibit 99.1
NEWS STORY FOR COMMONWEALTH BANKSHARES
February 2, 2006
COMMONWEALTH BANKSHARES, INC., NORFOLK, VA, ANNOUNCES 114% INCREASE IN EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2005
Norfolk, VA, February 2, 2006 / PRNewswire-FirstCall / (NASDAQ: CWBS)
Commonwealth Bankshares, Inc. today reported record earnings of $6.6 million for
the year ended December 31, 2005, an increase of $3.5 million or 113.9% over the
comparable period in 2004. For the quarter ended December 31, 2005, the Company
earned a record $2.0 million, an increase of 117.4% over the $906.4 thousand
reported in the fourth quarter of 2004. On a per share basis, diluted earnings
increased 42.2% to $1.65 for the year ended December 31, 2005 compared to $1.16
for the same period in 2004. For the quarter ended December 31, 2005, diluted
earnings per share was $0.43, up from $0.27 for the fourth quarter in 2004.
Edward J. Woodard, Jr., CLBB, Chairman of the Board, President and Chief
Executive Officer, commented, "Throughout my forty-five year banking career, I
have never been more proud and excited to be part of such a dynamic and growing
company as Bank of the Commonwealth. 2005 was an exceptional year for us, both
in earnings and asset growth. Our fourth quarter earnings surpassed any
previously reported quarterly earnings over our thirty-four year history. We
continue to seek opportunities to grow and expand our franchise. During 2005
there have been several exciting events which have transformed our Bank. In
February, we added four of the area's leading veteran commercial lending
officers, with over sixty-eight years of combined experience, to our
professional team at Bank of the Commonwealth. With the addition of these
professionals, we are poised to grow our commercial lending operations
significantly. We opened a new branch in the Ocean View section of Norfolk on
August 15, a new branch in the Western Branch section of the Tri-Cities area of
Portsmouth - Chesapeake - Northern Suffolk on September 6, and a new branch in
the Little Neck - Birchwood corridor on Virginia Beach Boulevard in Virginia
Beach on November 1, 2005. As a result of this growth, a number of seasoned
community banking professionals have joined Bank of the Commonwealth's staff
over the past year, adding to the experience and community related involvements
the Bank has enjoyed for some thirty-four years as the oldest community bank
headquartered in and serving Southside Hampton Roads. As we continue to grow, we
are looking to diversify and search for new avenues of revenue. Bank of the
Commonwealth expanded its title insurance services with the formation of
Executive Title Center, which commenced operations July 1st. In addition to
providing a considerably diverse and expanded source of fee income, Executive
Title Center will provide a high level of responsive and personalized service to
our customers, making their real estate endeavors a smooth transaction. As of
November 1, 2005, the Bank expanded its brokerage and investment advisory
services, as well as offering a wide range of insurance products to our
customers, through its creation of Commonwealth Financial Advisors, LLC, a
wholly owned subsidiary of Bank of the Commonwealth. Heading the Company is a
group of seasoned professionals with over sixty years of combined experience. By
offering investment services conveniently located where our customers bank, we
are continuing our tradition of personalized service, tailored to meet each of
our customer's needs. I am also proud to report that on June 27, 2005, the
Company successfully added $19.34 million in additional capital through a
private placement of 967,009 shares of newly issued Company common stock. On
November 30, 2005, we raised an additional $20 million in trust preferred
securities. The loyalty and continued support of our shareholders and customers
has provided the foundation for our growth and success. We look forward to
continuing to execute on a strategy we believe will enhance the long-term growth
of the company and value for our shareholders."
The Company's record earnings resulted in favorable profitability ratios.
Profitability as measured by the Company's return on average assets (ROA) was
1.46% for the year ended December 31, 2005 up 51 basis points or 53.7% from
0.95% for the comparable period in 2004. Return on average equity (ROE)
increased 35 basis points to 13.35% for the year ended December 31, 2005 as
compared to 13.00% for the year ended December 31, 2004. For the quarter ended
December 31, 2005, ROA was 1.48% and ROE was 12.72%. In addition, the Company's
efficiency ratio improved to 49.68% for 2005 from 61.57% a year ago.
The record earnings were driven by the $193.1 million or 61.2% increase in the
Bank's loan portfolio from December 31, 2004 to December 31, 2005. Total loans
at December 31, 2005 reached a record $508.9 million. Our strong loan demand
generated record increases in interest income. Interest income on loans
increased $12.4 million or 57.9% to $33.8 million for the year ended December
31, 2005. For the quarter ended December 31, 2005 interest income on loans
increased 71.8% to $10.3 million up from the $6.0 million reported in the fourth
quarter of 2004.
Interest expense of $12.7 million for the year ended December 31, 2005
represented a $4.1 million increase from the comparable period in 2004. For the
fourth quarter of 2005, interest expense was $4.1 million, an increase of $1.9
million over the fourth quarter of 2004. The increase was primarily attributable
to the record increase in the Company's average interest bearing liabilities,
which was offset by the decrease in overall rates paid on time deposits as a
result of higher priced time deposits repricing at lower rates throughout 2005.
A fundamental source of the Company's earnings, net interest income, is defined
as the difference between income on earning assets and the cost of funds
supporting those assets. Significant categories of earning assets are loans and
securities, while deposits and short-term borrowings represent the major portion
of interest bearing liabilities. The level of net interest income is impacted
primarily by variations in the volume and mix of these assets and liabilities,
as well as changes in interest rates when compared to previous periods of
operations. As a result of the record increases in interest earning assets
coupled with the increase in the rate earned on our interest earning assets, our
net interest income reached an all time quarterly high of $6.4 million for the
quarter ended December 31, 2005, an increase of $2.5 million or 63.3% over the
comparable period in 2004. For the year ended December 31, 2005, net interest
income reached a record $21.5 million, an increase of $8.2 million over the
comparable period in 2004.
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 Company's net interest margin (tax
equivalent basis) increased 61 basis points from 4.29% for the year ended
December 31, 2004 to 4.90% for the same period in 2005. For the quarter ended
December 31, 2005 the net interest margin (tax equivalent basis) was 5.02% up
from 4.49% reported in the fourth quarter of 2004.
Commonwealth Bankshares exceeded its goal for asset growth. Total assets at
December 31, 2005 reached a new high of $549.5 million, up 46.9% or $175.4
million from $374.1 million at December 31, 2004.
Despite the rapid growth in the Company's loan portfolio, our asset quality
remains exceptional. Net charge-offs for the year ended December 31, 2005 were
$56.2 thousand, or 0.013% of year to date average loans. Non-performing assets
were $182.5 thousand or 0.03% of total assets at December 31, 2005 compared to
$467.6 thousand or 0.12% of total assets at December 31, 2004.
Shareholders' equity at December 31, 2005 reached a new high of $62.7 million up
$25.7 million or 69.4% from $37.0 million at December 31, 2004. The record
increase in net income contributed to the new high along with the $19.34 million
in additional capital raised in the second quarter of 2005 though a private
placement of its common stock. In the fourth quarter of 2004, $15 million in
additional capital was added through a private placement of its common stock.
Mr. Woodard added, "Our shareholders play an important role in supporting our
company. To share in the Company's success, I am please to note that we raised
our fourth quarter divided by 20% to $0.06 per share, reflecting the Company's
strong financial performance."
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
ten bank branches strategically located throughout the Hampton Roads region 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, maintain the 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
investment related services through its new subsidiary, Commonwealth Financial
Advisors, LLC.* Additional information about the company, its products and
services, can be found on the Web at www.bankofthecommonwealth.com.
Contact: Edward J. Woodard, Jr., CLBB, Chairman of the Board, President and
Chief Executive Officer, P.O. Box 1177, Norfolk, Virginia 23501, Phone: (757)
446-6904 or ewoodard@bocmail.net Web Site: http://bankofthecommonwealth.com
*Securities and Insurance Products are: *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. Securities and insurance offered through BI Investments,
LLC. member NASD and SIPC. BI Investments is associated with Bank of the
Commonwealth. 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 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.
COMMONWEALTH BANKSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION (Unaudited)
Three Months Ended Twelve Months Ended
------------------------------- -------------------------------
December 31, December 31, December 31, December 31,
(in thousands, except per share data) 2005 2004 2005 2004
- ------------------------------------------ ------------- ------------- ------------- -------------
Operating Results:
- ------------------
Interest income $ 10,480 $ 6,147 $ 34,289 $ 21,957
Interest expense 4,128 2,257 12,742 8,625
------------- ------------- ------------- -------------
Net interest income 6,352 3,890 21,547 13,332
Provision for loan losses 900 590 2,740 1,695
Non-interest income 1,097 997 3,893 3,068
Non-interest expense 3,552 2,977 12,638 10,098
------------- ------------- ------------- -------------
Income before provision for income taxes 2,997 1,320 10,062 4,607
Provision for income taxes 1,018 414 3,419 1,506
------------- ------------- ------------- -------------
Income after provision for income taxes 1,979 906 6,643 3,101
Noncontrolling interest (9) - (9) -
------------- ------------- ------------- -------------
Net income $ 1,970 $ 906 $ 6,634 $ 3,101
============= ============= ============= =============
Per Share Data:
- ---------------
Basic earnings $ 0.48 $ 0.32 $ 1.86 $ 1.42
Diluted earnings $ 0.43 $ 0.27 $ 1.65 $ 1.16
Book value $ 15.40 $ 12.40 $ 15.40 $ 12.40
Dividends per share $ 0.06 $ 0.05 $ 0.21 $ 0.20
Basic weighted average shares
outstanding 4,062,618 2,835,763 3,562,739 2,181,915
Diluted weighted average shares
outstanding 4,721,450 3,550,351 4,178,136 2,929,842
Shares outstanding at period-end 4,073,547 2,984,794 4,073,547 2,984,794
Period End Balances:
- --------------------
Assets $ 549,454 $ 374,061 $ 549,454 $ 374,061
Loans* 508,903 315,755 508,903 315,755
Loans held for sale - 31,107 - 31,107
Investment securities 8,924 6,945 8,924 6,945
Deposits 383,890 277,632 383,890 277,632
Shareholders' equity 62,730 37,024 62,730 37,024
Average Balances:
- -----------------
Assets $ 528,055 $ 359,397 $ 455,833 $ 326,667
Loans* 497,960 299,405 417,106 264,815
Loans held for sale 417 35,193 11,747 33,255
Investment securities 5,177 7,818 6,026 8,995
Deposits 366,985 258,781 329,955 260,027
Shareholders' equity 61,434 34,453 49,702 23,861
Financial Ratios:
- -----------------
Return on average assets 1.48% 1.00% 1.46% 0.95%
Return on average shareholders'
equity 12.72% 10.47% 13.35% 13.00%
Efficiency Ratio 47.68% 60.92% 49.68% 61.57%
Shareholders' equity to total assets 11.42% 9.90% 11.42% 9.90%
Loan loss allowance to loans* 1.09% 0.90% 1.09% 0.90%
Loan loss allowance to
non-performing assets 3025.54% 607.92% 3025.54% 607.92%
Non-performing assets to total
assets 0.03% 0.12% 0.03% 0.12%
Net interest margin (tax equivalent
basis) 5.02% 4.49% 4.90% 4.29%
Bank's Tier 1 capital to average
assets 12.48% 11.18% 12.48% 11.18%
Bank's Tier 1 capital to risk
weighted assets 13.22% 12.84% 13.22% 12.84%
Bank's Total capital to risk
weighted assets 14.33% 13.75% 14.33% 13.75%
* Net of unearned income and loans held for sale