Exhibit 99.1
COMMONWEALTH BANKSHARES, INC., NORFOLK, VA, ANNOUNCES RECORD EARNINGS
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2006
NORFOLK, Va., Oct. 25 /PRNewswire-FirstCall/ -- Commonwealth Bankshares,
Inc. (Nasdaq: CWBS) today reported record earnings of $7.3 million for the first
nine months of 2006, an increase of $2.7 million or 57.0% over the comparable
period in 2005. For the quarter ended September 30, 2006, the Company earned a
record $2.8 million, an increase of 40.4% over the $2.0 million reported in the
third quarter of 2005. On a per share basis, diluted earnings increased 30.3% to
$1.42 for the nine months ended September 30, 2006 compared to $1.09 for the
same period in 2005. For the quarter ended September 30, 2006, diluted earnings
per share was $0.53, up 35.9% from $0.39 for the third quarter in 2005. All
share and per share amounts have been restated for all periods presented to
reflect the eleven-for-ten stock split distributed on June 30, 2006 to
shareholders of record on June 19, 2006.
Edward J. Woodard, Jr., CLBB, Chairman of the Board, President and Chief
Executive Officer, commented, "Our tremendous growth rate continues unabated
into the third quarter of 2006. We are pleased to report another record quarter
in both earnings and asset growth. Our third quarter earnings surpassed any
previously reported quarterly earnings. Equally meaningful, our exceptional
growth rate has been achieved while, at the same time, improving profitability,
maintaining our sound asset quality and building our capital base. We continue
to seek opportunities to grow and expand our network. In June 2006, we opened a
private banking center in Norfolk. Furthermore, we plan to open additional
branches over the next twelve months. In December 2006, we are scheduled to move
into our permanent branch in the Ocean View section of Norfolk, Virginia. In
January 2007, we will open our second branch in Portsmouth, Virginia at 1020
London Boulevard. In February 2007, we will be opening our third branch in
Chesapeake, Virginia at 2600 Taylor Road, across from the Chesapeake Square
Mall. As we continue to grow we are continuously looking to expand our
traditional nonbanking services as well as searching for new avenues of revenue.
Our mortgage subsidiary, Bank of the Commonwealth Mortgage, has expanded its
mortgage lending services to the outer banks of North Carolina. Our fourth
mortgage office in Kill Devil Hills, NC at 2603 N. Croatan Highway opened in May
2006. As we look to the remainder of the year, we believe we are positioned for
continued strong performance and growth. Our expansion strategy, combined with
sound asset quality, expanding margins and improved operating efficiencies,
continues to drive our results. 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 stockholders."
The Company's record earnings resulted in favorable profitability ratios.
Profitability as measured by the Company's return on average assets (ROA) was
1.57% for the nine months ended September 30, 2006 up 12 basis points from 1.45%
for the first nine months of 2005. Return on average equity (ROE) increased 103
basis points to 14.66% for the nine months ended September 30, 2006 as compared
to 13.63% for the nine months ended September 30, 2005. For the quarter ended
September 30, 2006, ROA was 1.66% and ROE was 16.56%. Year to date average
assets increased $193.5 million or 44.8% from September 30, 2005 to September
30, 2006. Year to date average equity increased $21.0 million or 46.0% as of
September 30, 2006 as compared to the comparable period in 2005, as a result of
the additional capital raised in the second quarter of 2005. In addition, the
Company's efficiency ratio (tax equivalent basis) was 48.66% and 46.96% for the
nine months and three months ended September 30, 2006 compared to 50.37% and
46.50%, respectively, during the comparable period in 2005.
The record earnings were driven by the $168.8 million or 35.5% increase in
the Bank's loan portfolio from September 30, 2005 to September 30, 2006. Total
loans at September 30, 2006 reached a record $644.6 million. Our strong loan
demand generated record increases in interest income. Interest income on loans
increased $14.2 million or 60.6% to $37.6 million for the nine months ended
September 30, 2006. For the quarter ended September 30, 2006 interest income on
loans increased 48.1% to $13.8 million up from the $9.3 million reported in the
third quarter of 2005.
Interest expense of $16.4 million for the nine months ended September 30,
2006 represented a $7.8 million increase from the comparable period in 2005. For
the third quarter of 2006, interest expense was $6.3 million, an increase of
$2.9 million over the third quarter of 2005. The increase was primarily
attributable to the record increase in the Company's average interest bearing
liabilities, along with the increase in overall rates paid on liabilities as a
result of the rising interest rate environment.
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 income, our net
interest income reached an all time quarterly high of $7.7 million for the
quarter ended September 30, 2006, an increase of $1.7 million or 28.5% over the
comparable period in 2005. For the nine months ended September 30, 2006, net
interest income reached a record $21.9 million, an increase of $6.7 million over
the comparable period in 2005.
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) was 4.85% for the first nine months of
2006 compared to 4.88% for the same period in 2005. For the quarter ended
September 30, 2006, the net interest margin was 4.75% compared to 5.00% for the
comparable period in 2005.
Commonwealth Bankshares exceeded its goal for asset growth. Total assets at
September 30, 2006 reached a new high of $688.3 million, up 35.7% or $181.1
million from $507.2 million at September 30, 2005.
Despite the rapid growth in the Company's loan portfolio, our asset quality
remains exceptional. Net charge-offs for the nine months ended September 30,
2006 were $79.4 thousand, or 0.01% of year to date average loans. Non-performing
assets were $3.9 million or 0.57% of total assets at September 30, 2006 compared
to $458.5 thousand or 0.09% of total assets at September 30, 2005.
Non-performing assets at September 30, 2006 consist of ten loans. Subsequent to
September 30, 2006, two of the loans totaling $2.3 million have been brought
current. The majority of the remaining loans are making monthly payment and in
most cases are secured with workout arrangements currently in place.
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 eleven 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
http://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 Nine Months Ended
------------------------------ ------------------------------
(in thousands, except September 30, September 30, September 30, September 30,
per share data) 2006 2005 2006 2005
- ----------------------------------- ------------- ------------- ------------- -------------
Operating Results:
Interest Income $ 14,023 $ 9,427 $ 38,310 $ 23,808
Interest Expense 6,280 3,403 16,439 8,613
Net interest income 7,743 6,024 21,871 15,195
Provision for loan losses 625 825 2,045 1,840
Noninterest income 1,425 1,108 3,776 2,795
Noninterest expense 4,325 3,323 12,458 9,085
Income before provision for
income taxes and
noncontrolling interest 4,218 2,984 11,144 7,065
Provision for income taxes 1,447 1,014 3,799 2,401
Income before noncontrolling
interest 2,771 1,970 7,345 4,664
Noncontrolling interest in
subsidiary 6 - 20 -
Net income $ 2,765 $ 1,970 $ 7,325 $ 4,664
Per Share Data**:
Basic earnings $ 0.58 $ 0.44 $ 1.57 $ 1.25
Diluted earnings $ 0.53 $ 0.39 $ 1.42 $ 1.09
Book value $ 14.87 $ 13.62 $ 14.87 $ 13.62
Dividends $ 0.055 $ 0.045 $ 0.164 $ 0.136
Basic weighted average
shares outstanding 4,780,902 4,452,770 4,662,859 3,733,710
Diluted weighted average
shares outstanding 5,274,858 5,163,367 5,257,385 4,441,467
Shares outstanding at period-end 4,885,955 4,462,057 4,885,955 4,462,057
Period End Balances:
Assets $ 688,301 $ 507,191 $ 688,301 $ 507,191
Loans* 644,622 475,848 644,622 475,848
Loans held for sale - 3,715 - 3,715
Investment securities 8,027 5,059 8,027 5,059
Deposits 495,890 356,983 495,890 356,983
Shareholders' equity 72,647 60,747 72,647 60,747
Average Balance:
Assets $ 660,216 $ 494,106 $ 625,005 $ 431,519
Loans* 629,150 441,613 585,619 389,858
Loans held for sale - 24,773 - 15,565
Investment securities 8,525 5,340 8,733 6,311
Deposits 462,818 354,580 435,448 317,476
Shareholders' equity 66,222 59,455 66,797 45,752
Financial Ratios:
Return on average assets 1.66% 1.58% 1.57% 1.45%
Return on average
shareholders' equity 16.56% 13.14% 14.66% 13.63%
Efficiency ratio (tax
equivalent basis) 46.96% 46.50% 48.66% 50.37%
Shareholders' equity to
total assets 10.55% 11.98% 10.55% 11.98%
Loan loss allowance to loans 1.16% 0.98% 1.16% 0.98%
Loan loss allowance to non-
performing assets 189.87% 1013.81% 189.87% 1013.81%
Non-performing assets to
total assets 0.57% 0.09% 0.57% 0.09%
Net interest margin (tax
equivalent basis) 4.75% 5.00% 4.85% 4.88%
Bank's Tier 1 capital to
average assets 13.79% 12.91% 13.79% 12.91%
Bank's Tier 1 capital to
risk weighted assets 14.49% 13.75% 14.49% 13.75%
Bank's Total capital to risk
weighted assets 15.67% 14.76% 15.67% 14.76%
* Net of unearned income and loans held for sale
** All share and per share amounts have been restated for all periods presented
to reflect the eleven-for-ten stock split distributed on June 30, 2006
SOURCE Commonwealth Bankshares, Inc.
-0- 10/25/2006
/CONTACT: Edward J. Woodard, Jr., CLBB, Chairman of the Board, President
and Chief Executive Officer of Commonwealth Bankshares, Inc., +1-757-446-6904,
ewoodard@bocmail.net /
/Web site: http://www.bankofthecommonwealth.com /
(CWBS)