Commonwealth Bankshares, Inc. (Nasdaq:CWBS) (the "Company")
reported today a net loss of $6.8 million, or $0.98 loss per share,
for the three months ended March 31, 2011, compared to a $39.0
million net loss, or $5.66 loss per share, for the fourth quarter
of 2010. It reported a net loss of $923 thousand, or $0.13 loss per
share, for the three months ended March 31, 2010.
"We are devoting an enormous amount of resources to resolving
our credit problems," said President and CEO Chris Beisel. "In the
past eight months, we have created a new infrastructure for
managing credit risk. We have implemented numerous new credit
policies and procedures which are greatly aiding us in indentifying
those risks within the loan portfolio. That
identification then clearly reveals the areas onto which we focus
and aggressively manage. These directions are what we strongly
believe will get our bank on track."
Non-performing assets declined $7.8 million from the fourth
quarter of 2010, due primarily to $22.3 million in net charge-offs
made during the first quarter of 2011. Provision for loan losses
also declined to $5.0 million from $22.5 million in the previous
quarter, and was in line with the provision for the three months
ended March 31, 2010.
Earnings were impacted by a decline in net interest income,
increased losses on other real estate owned, their related
expenses, and costs associated with current regulatory and legal
matters. The challenging economic conditions experienced over the
past three years continued to negatively impact the businesses and
consumers in our market area during the first quarter of
2011. Ongoing deterioration in our loan portfolio resulted in
further declines in the commercial real estate sector and
additional credit quality issues for the Company.
During the first quarter of 2011, the company charged-off $22.3
million (net of recoveries) in loans primarily as a result of
declining collateral values based on updated appraisals received
during the first quarter. Consequently, management and the Board
provided $5.0 million to the Bank's allowance for loan losses
during the three months ended March 31, 2011, which was in addition
to the $52.5 million and $53.9 million provided in years ended
December 31, 2010 and 2009, respectively.
"Addressing these troubled credits aggressively and
conservatively has been, and will continue to be, a top priority,"
Beisel said. "At the same time, we have not lost sight of our
fundamental belief in standing by our clients, employees,
stockholders and communities. Today's environment requires
stringent measures. We are committed to taking the actions
necessary to withstand this difficult economic phase."
Total assets declined by $65.1 million to $1.0 billion during
the three months ended March 31, 2011. This decrease was primarily
the result of decreases in cash and cash equivalents and loans
outstanding. Total cash and cash equivalents declined $35.6 million
to $84.3 million during the period, primarily resulting from paying
off brokered certificates of deposit as they matured. Management's
ongoing philosophy of aggressively resolving problem loan credits
through charge-offs foreclosure and normal principal curtailments
contributed to its net loan balances declining $51.7 million to
$898.8 million at March 31, 2011.
As a result of our net losses in 2010 and for the first quarter
of 2011, our total risk-based capital ratio for the Bank fell below
the adequately capitalized regulatory minimum threshold of 8% to
6.29% at March 31, 2011.
"Our goals for repositioning the Bank include increasing our
capital levels in order to return to a 'well capitalized' capital
status, as well as improving our liquidity position, maintaining an
adequate allowance for loan losses and reducing expenses," said
Beisel.
Non-performing assets were $154.8 million or 15.0% of total
assets at March 31, 2011, compared to $162.6 million or 14.81% of
total assets at December 31, 2010 and $108.4 million or 8.71% of
total assets at March 31, 2010. Non-performing loans decreased
$12.8 million during the three months ended March 31, 2011 to
$117.6 million. The decrease in balances primarily related to the
$22.3 million in net charge-offs made during the first quarter of
2011. The Company continues to enhance its Special Assets and
Credit Administration areas with additional personnel to
proactively and aggressively identify and address problem
assets. In addition, the company has strengthened its credit
administration processes including the use of a third-party loan
review team that completed a comprehensive review of the
construction, development and commercial real estate loan
portfolios, with an emphasis on large loans and problem loans.
The company intends to continue using the third-party loan
review team, and anticipates that this type of comprehensive review
by both internal and external personnel will be performed on a
semi-annual basis for the foreseeable future. The company's Loan
Impairment Committee monitors non-performing assets and past due
loans to identify potential problem credits and to develop plans to
work through these loans as promptly as possible.
"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 March 31, 2010 and March 31, 2011, the Company's loan
portfolio decreased by $104.2 million or 10.4%. Total loans at
March 31, 2011 were $898.8 million. The overall decrease in
gross loans was primarily due to scheduled principal curtailments,
loan sales, charge-off's 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 led to a decrease in interest income. Interest income on
loans, including fees, decreased $2.8 million or 18.9% to $12.0
million for the quarter ended March 31, 2011, as compared to the
same period in 2010.
Interest expense of $5.9 million for the quarter ended March 31,
2011 represented a $1.8 million decrease from the comparable period
in 2010. The decrease in interest expense was primarily
attributable to the decrease of $139.7 million in average interest
bearing deposits for the quarter ended March 31, 2011, as compared
to the same period in 2010, coupled with a decrease in the overall
rate paid on our interest bearing liabilities of 32 basis
points. The decrease in deposits was primarily related to a
$77.8 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. For
the three months ended March 31, 2011, the net interest margin was
2.40% compared to 2.41% reported for the first quarter of 2010.
While insignificant, the decrease in net interest margin for the
first quarter of 2011 was primarily the result of a drop in the
average yield on our average interest earning assets of 28 basis
points. Ongoing credit quality, primarily related to the increase
in non-accrual loans, resulted in a 68 basis points decline in
average yield on loans to 5.17% for the first quarter of 2011 as
compared with 5.85% for the first quarter of 2010. The drop in
yield of our earning assets was offset with a decrease in the cost
of our interest bearing liabilities of 32 basis points over the
past twelve months. The decrease in our interest-bearing liability
costs primarily related to maturing time deposits re-pricing at a
lower cost during the past year, resulting in our average cost of
time deposits decreasing from 2.83% in the 2010 first quarter to
2.55% for the first quarter of 2011.
Total noninterest income decreased $879.1 thousand or 143.7% in
the first quarter of 2011 to a loss of $267.4 thousand from income
of $611.7 thousand reported in the 2010 first quarter. The
primary reason for the lower noninterest income for the first
quarter of 2011 related to the increase in losses on other real
estate owned ("OREO") and decreases in revenue from the Bank's
non-banking subsidiary companies. The company recorded losses
on OREO totaling $846.8 thousand and $355.9 thousand for the three
months ended March 31, 2011 and 2010, respectively.
Noninterest expenses continued to grow in the 2011 first quarter
due to the increased costs related to managing the company during
this difficult economic and regulatory environment, including
expenses associated with carrying OREO, increased credit and
collections costs, increased FDIC premiums, increased consulting
expenses and legal expenses related to regulatory matters, and
further increases in personnel in key areas necessary to support
regulatory compliance and address problem assets. Total noninterest
expense increased $3.4 million or 80.0% to $7.8 million in the 2011
first quarter from $4.3 million for the first quarter of 2010. The
2010 first quarter included a one-time reduction of benefit cost of
$1.9 million.
"We are fully committed to seeing the company return to
profitability and realize the full potential of the Commonwealth
Bankshares franchise," said Beisel.
About Commonwealth Bankshares
Commonwealth Bankshares, Inc., the parent of Bank of the
Commonwealth, operates 21 offices throughout Hampton Roads,
Virginia, 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. |
|
|
Selected Financial Information
(Unaudited) |
|
|
|
|
|
(in thousands, except per share data) |
Three Months Ended |
|
March 31, 2011 |
March 31, 2010 |
Operating Results: |
|
|
Interest and dividend
income |
$ 12,146 |
$ 14,958 |
Interest expense |
5,867 |
7,655 |
Net interest income |
6,279 |
7,303 |
Provision for loan losses |
4,999 |
4,998 |
Noninterest income |
(76) |
696 |
Noninterest expense |
7,951 |
4,415 |
Income (loss) before income
taxes and noncontrolling interest |
(6,747) |
(1,414) |
Income tax expense
(benefit) |
3 |
(497) |
Income (loss) before
noncontrolling interest |
(6,750) |
(917) |
Noncontrolling interest in
subsidiaries |
(5) |
(6) |
Net income (loss) |
$ (6,755) |
$ (923) |
|
|
|
Per Share Data |
|
|
Basic earnings (loss) |
$ (0.98) |
$ (0.13) |
Diluted earnings (loss) |
$ (0.98) |
$ (0.13) |
Book value |
$ 3.09 |
$ 11.48 |
Cash dividends |
$ -- |
$ -- |
Basic weighted average shares
outstanding |
6,897,082 |
6,888,800 |
Diluted weighted average shares
outstanding |
6,897,082 |
6,888,800 |
Shares outstanding at
period-end |
6,897,082 |
6,889,432 |
|
|
|
Period End Balances: |
|
|
Assets |
$ 1,032,341 |
$ 1,245,456 |
Loans* |
898,782 |
1,002,999 |
Investment securities |
12,070 |
4,196 |
Deposits |
911,776 |
1,053,368 |
Shareholders' equity |
21,337 |
79,102 |
|
|
|
Average Balances: |
|
|
Assets |
$ 1,068,187 |
$ 1,272,858 |
Loans* |
938,534 |
1,021,811 |
Investment securities |
10,609 |
4,824 |
Deposits |
935,995 |
1,078,167 |
Shareholders' equity |
27,365 |
80,135 |
|
|
|
Financial Ratios: |
|
|
Return on average assets |
-2.56% |
-0.29% |
Return on average shareholders'
equity |
-100.11% |
-4.67% |
Efficiency Ratio (tax
equivalent basis) |
129.06% |
54.57% |
Period end shareholders' equity
to total assets |
2.07% |
6.35% |
Loan loss allowance to period
end loans* |
6.87% |
4.90% |
Loan loss allowance to
non-performing loans |
52.50% |
52.59% |
Non-performing assets to total
assets |
14.99% |
8.71% |
Net interest margin (tax
equivalent basis) |
2.40% |
2.41% |
Bank's Tier 1 capital to
average assets |
3.97% |
6.90% |
Bank's Tier 1 capital to risk
weighted assets |
4.97% |
8.97% |
Bank's Total capital to risk
weighted assets |
6.29% |
10.27% |
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* Net of unearned income |
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CONTACT: Chris Beisel
President and Chief Executive Officer
Commonwealth Bankshares, Inc.
(757) 446-6900
Commonwealth Bankshares, Inc. (MM) (NASDAQ:CWBS)
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