Commonwealth Bankshares, Inc. (Nasdaq:CWBS) (the "Company")
reported today a net loss of $51.8 million for the year ended
December 31, 2010 and a net loss of $39.0 million for the fourth
quarter 2010, compared to a net loss of $25.8 million and net
income of $487,000 for the same periods a year ago, as the Company
took more aggressive steps to identify and reduce problem loans.
Diluted loss per share was $5.66 for the quarter ended December 31,
2010 compared to earnings of $0.07 for the same period in 2009. For
the year ended December 31, 2010, diluted loss per share was $7.52
compared to a loss of $3.75 a year earlier.
The Company's overall performance was significantly impacted by
an increase in nonperforming assets, up approximately 83% to $162.6
million in 2010 from $89.0 million in 2009. The Company added a
$22.5 million provision in the fourth quarter to its loan loss
allowance, a reserve set aside for problem credits. During the year
ended December 31, 2010, the Company added $52.5 million to its
loan loss reserves. Additionally, in the fourth quarter of 2010,
the Company established a valuation allowance for its deferred tax
asset of $23.6 million, all of which was reported as income tax
expense during the fourth quarter of 2010.
"We can only blame external factors but for so long," said
interim President Chris Beisel, the former chief credit officer who
replaced former CEO Edward Woodard after he retired in December
2010. "There is no question the economy hasn't fully recovered; the
fact is, we can't wait on these factors to improve to get our ship
in order. We took a hard line on bad loans and credit policies in
2010. The result wasn't pleasing, but it was the responsible thing
to do and what we need to do to turn things around."
The Bank was "undercapitalized" at December 31, 2010 under the
regulatory capital minimum requirements. The Bank's risk-adjusted
capital ratios at December 31, 2010, were 5.53% for Tier 1 and
6.88% for total capital, with the total capital ratio being below
the required minimum of 8.0% to be adequately
capitalized. "The Board and management are committed to make
their utmost efforts to increase its capital levels to regain the
'well capitalized' status," said Beisel.
The Company's allowance for loan losses ratio to year-end loans
was 8.32% at December 31, 2010, compared to 4.44% a year ago, the
result of an increase in nonaccrual and impaired loans and falling
property values. The bank also took a more aggressive approach in
its impairment calculations.
"We've strengthened our credit process during the past
year and developed a plan to work through these problem loans as
quickly as possible," Beisel said. "We are doing the things that
need to get done to get our bank back to profitability. We have the
right people at the right time to move this Company ahead."
Between December 31, 2009 and December 31, 2010, the Company's
loan portfolio decreased by $81.5 million or 7.9%. Total loans at
December 31, 2010 were $950.4 million. The overall decrease in
gross loans was primarily due to scheduled principal curtailments,
loan sales and part of our overall strategy to shrink loans to
mitigate risk and preserve capital. While the Company's
performing loans provided a strong yield and helped maintain solid
sources of interest income, the planned reduction in loan volume,
the level of non-performing assets and restructured loans lead to a
decrease in interest income. Interest income decreased $3.4
million or 5.1% to $62.6 million for the year ended December 31,
2010, as compared to the same period in 2009. For the quarter
ended December 31, 2010, interest income was $13.8 million, a
decrease of 15.7% from the same period in 2009.
Interest expense of $28.8 million for the year ended December
31, 2010, represented a $990,000 decrease from the comparable
period in 2009. For the fourth quarter of 2010, interest
expense was $6.7 million, a decrease of $1.0 million over the
fourth quarter of 2009. The decrease in interest expense was
primarily attributable to the decrease of $120.7 million in total
deposits as of December 31, 2010, as compared to the same period in
2009, coupled with a decrease in the overall rate paid on our
interest bearing liabilities of 41 basis points. The decrease
in deposits was primarily related to a $98.1 million decrease in
brokered deposits as the Company continues to reduce its reliance
on brokered deposits.
The net interest margin is affected by the structure of the
balance sheet as well as by competition and the economy. The
Company's net interest margin (tax equivalent basis) was 2.88% for
the year ended December 31, 2010 as compared to 3.30% for the same
period in 2009. The compression of our margins from prior year
is the result of the increase in the balance of non-accruing and
restructured loans. In addition, the Company chose to bolster
its short-term liquidity position by placing funds in correspondent
bank accounts (overnight funds) paying only 0.25%.
Noninterest income declined in 2010 largely due to losses on
other real estate owned and reductions in title insurance premiums
and mortgage broker income, which was partially offset by a gain on
sale of loans in the third quarter of 2010. For the quarter
and year ended December 31, 2010, noninterest income was down
$245,000 and $889,000, respectively, compared to the same periods
in the prior year. Despite management's best efforts to
control noninterest expenses, noninterest expense increased $1.7
million and $2.2 million, respectively, for the quarter and year
ended December 31, 2010, primarily due to higher costs related to
other real estate owned, increase credit and collection costs and
increased FDIC premiums.
Total assets were $1.1 billion as of December 31, 2010.
About Commonwealth Bankshares
Commonwealth Bankshares, Inc., the parent of Bank of the
Commonwealth, operates 21 offices throughout Hampton Roads, Va.,
and northeastern North Carolina. 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 access to investment related
services through its subsidiary Commonwealth Financial
Advisors, LLC.* Additional information about the
Company, its products and services, can be found on the Web at
www.bankofthecommonwealth.com.
* Securities offered through Infinex Investments, Inc., member
FINRA and SIPC. 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. 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 principles, 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. |
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Selected Financial
Information (Unaudited) |
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(in thousands, except per share data) |
Three Months Ended |
Twelve Months Ended |
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December 31, 2010 |
December 31, 2009 |
December 31, 2010 |
December 31, 2009 |
Operating Results: |
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Interest and dividend
income |
$ 13,804 |
$ 16,384 |
$ 62,583 |
$ 65,968 |
Interest expense |
6,670 |
7,672 |
28,809 |
29,799 |
Net interest income |
7,134 |
8,712 |
33,774 |
36,169 |
Provision for loan losses |
22,503 |
1,516 |
52,513 |
53,925 |
Noninterest income |
(349) |
(104) |
2,154 |
3,043 |
Noninterest expense |
8,051 |
6,307 |
26,792 |
24,627 |
Income (loss) before income
taxes and noncontrolling interest |
(23,769) |
785 |
(43,377) |
(39,340) |
Income tax expense
(benefit) |
15,297 |
296 |
8,458 |
(13,596) |
Income (loss) before
noncontrolling interest |
(39,066) |
489 |
(51,835) |
(25,744) |
Noncontrolling interest in
subsidiaries |
29 |
(2) |
(11) |
(37) |
Net income (loss) |
$ (39,037) |
$ 487 |
$ (51,846) |
$ (25,781) |
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Per Share Data |
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Basic earnings (loss) |
$ (5.66) |
$ 0.07 |
$ (7.52) |
$ (3.75) |
Diluted earnings (loss) |
$ (5.66) |
$ 0.07 |
$ (7.52) |
$ (3.75) |
Book value |
$ 4.07 |
$ 11.62 |
$ 4.07 |
$ 11.62 |
Cash dividends |
$ -- |
$ -- |
$ -- |
$ 0.10 |
Basic weighted average shares
outstanding |
6,894,757 |
6,887,873 |
6,891,185 |
6,879,923 |
Diluted weighted average shares
outstanding |
6,894,757 |
6,887,873 |
6,891,185 |
6,879,923 |
Shares outstanding at
period-end |
6,897,084 |
6,888,451 |
6,897,084 |
6,888,451 |
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Period End Balances: |
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Assets |
$ 1,097,486 |
$ 1,276,503 |
$ 1,097,486 |
$ 1,276,503 |
Loans* |
950,432 |
1,031,885 |
950,432 |
1,031,885 |
Investment securities |
9,337 |
5,755 |
9,337 |
5,755 |
Deposits |
960,234 |
1,080,896 |
960,234 |
1,080,896 |
Shareholders' equity |
28,063 |
80,038 |
28,063 |
80,038 |
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Average Balances: |
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Assets |
$ 1,165,672 |
$ 1,189,254 |
$ 1,220,865 |
$ 1,138,260 |
Loans* |
981,225 |
1,052,784 |
992,707 |
1,053,431 |
Investment securities |
8,068 |
5,700 |
6,606 |
5,749 |
Deposits |
988,781 |
1,005,130 |
1,031,962 |
891,624 |
Shareholders' equity |
66,558 |
79,814 |
75,717 |
100,212 |
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Financial Ratios: |
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Return on average assets |
-13.29% |
0.16% |
-4.25% |
-2.26% |
Return on average shareholders'
equity |
-232.69% |
2.42% |
-68.47% |
-25.73% |
Efficiency Ratio (tax
equivalent basis) |
118.64% |
73.23% |
74.54% |
62.76% |
Period end shareholders' equity
to total assets |
2.56% |
6.27% |
2.56% |
6.27% |
Loan loss allowance to period
end loans* |
8.32% |
4.44% |
8.32% |
4.44% |
Loan loss allowance to
non-performing loans |
60.63% |
58.98% |
60.63% |
58.98% |
Non-performing assets to total
assets |
14.81% |
6.97% |
14.81% |
6.97% |
Net interest margin (tax
equivalent basis) |
2.55% |
2.98% |
2.88% |
3.30% |
Bank's Tier 1 capital to
average assets |
4.21% |
8.37% |
4.21% |
8.37% |
Bank's Tier 1 capital to risk
weighted assets |
5.53% |
9.80% |
5.53% |
9.80% |
Bank's Total capital to risk
weighted assets |
6.88% |
11.09% |
6.88% |
11.09% |
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* Net of unearned income,
excluding loans held for sale. |
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CONTACT: Chris Beisel
Interim President
Commonwealth Bankshares, Inc.
(757) 446-6900
Commonwealth Bankshares, Inc. (MM) (NASDAQ:CWBS)
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Commonwealth Bankshares, Inc. (MM) (NASDAQ:CWBS)
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