-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M316C53mI8ewMpPESgjJyN/9pwxWoOpb3Sj7fPThr0+O/cmXZeq2KcLSuRJaNGU7 ZD9jM2ftSXYatUtUZXrBVQ== 0000891092-05-000120.txt : 20050126 0000891092-05-000120.hdr.sgml : 20050126 20050126143333 ACCESSION NUMBER: 0000891092-05-000120 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050126 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050126 DATE AS OF CHANGE: 20050126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL CORP OF THE WEST CENTRAL INDEX KEY: 0001004740 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 770405791 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27384 FILM NUMBER: 05549717 BUSINESS ADDRESS: STREET 1: 550 W MAIN STREET CITY: MERCED STATE: CA ZIP: 95340 BUSINESS PHONE: 2097252200 MAIL ADDRESS: STREET 1: 550 W MAIN STREET CITY: MERCED STATE: CA ZIP: 95340 8-K 1 e20326_8k.txt CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): January 26, 2005 CAPITAL CORP OF THE WEST (Exact Name of Registrant as Specified in Charter) California 0-27384 77-0147763 (State or Other Jurisdiction (Commission File (IRS Employer of Incorporation) Number) Identification No.) 550 West Main Street, Merced, California 95340 (Address of Principal Executive Offices) (Zip Code) (209) 725-2200 (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 Disclosure of Results of Operations and Financial Condition On January 25, 2005, Capital Corp of the West (Nasdaq: CCOW) issued a press release to announce their quarterly earnings for the fourth quarter of 2004. A copy of the press release appears as Exhibit 99.1 to this Current Report and is incorporated herein by reference. ITEM 9.01 Financial Statements and Exhibits (a) Financial Statements of Business Acquired. Not Applicable (b) Pro Forma Financial Information. Not Applicable (c) Exhibits 99.1 Copy of press release, dated January 25, 2005, issued by Capital Corp of the West. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. Capital Corp of the West ------------------------ (Registrant) Dated: January 26, 2005 By /s/ David A. Curtis ---------------- ------------------- David A. Curtis Vice President and Controller EX-99.1 2 e20326ex99-1.txt PRESS RELEASE Exhibit 99.1 PRESS RELEASE Available for Immediate Publication: January 25, 2005 Contacts: Thomas T. Hawker, President / Chief Executive Officer (209) 725-2276 R. Dale McKinney, EVP / Chief Financial Office (209) 725-7435 Web Site www.ccow.com Capital Corp of the West Announces Full Year and Fourth Quarter 2004 Earnings Merced, California, January 25, 2005-Capital Corp of the West NASDAQ:NMS:CCOW) today announced $12,323,000 and $816,000 in net income for the full year and the fourth quarter ended December 31, 2004. These amounts reflect two charges to earnings announced on December 27, 2004 that totaled $3,380,000, pretax. The first charge was a $2,151,000, net of tax, reduction related to other-than-temporarily-impaired securities (OTTI). The second charge was a $1,229,000 reduction related to a Real Estate Investment Trust (REIT) consent dividend deduction available to California banks for the tax years 2001 and 2002. Additionally, as announced in a separate press release today, the Board of Capital Corp of the West, declared a $.05 per share quarterly cash dividend for shareholders of record February 4, 2004, payable February 25, 2005. "Neither of these two charges should have a negative impact on the future earnings of Capital Corp of the West", stated Chief Financial Officer, R. Dale McKinney. "Prior to these two charges, earnings for the full year 2004 were $15,703,000 or a 15.1% increase over the $13,640,000 earnings reported for the full year 2003. The 15.1% increase is slightly over the 13% to 15% full year 2004 guidance provided in our third quarter October 27, 2004 earnings announcement and represents a 16.2% return on equity (ROE), excluding these two charges, for our shareholders. For the fourth quarter 2004, earnings were $4,196,000 or a 16.9% increase over the comparable fourth quarter 2003 earnings. Our underlying earnings potential continues to be strong. We have grown our total assets by 17% in the last year and averaged a solid 4.49% tax equivalent margin for the full year 2004" continued Mr. McKinney. "Although we have made these fourth quarter earnings charges, our performance over the last several years, by any measures, has been outstanding", stated Chief Executive Officer, Tom Hawker. "We are well positioned to continue delivery of outstanding results to our shareholders and the communities we serve in the years ahead. This year has seen the continued expansion of our franchise and branch network with loan growth of $120 million or 16% and gross deposit growth of $145 million or 14%, net of a $20 million reduction in out of the area brokered deposits. We are especially pleased with our continued growth in the Fresno market, the opening of our 20th branch office in Downtown Fresno, and the start up of our wealth management services during 2004. Economic forecasts are for a robust Central Valley and we look forward to this favorable environment in which to continue to provide high quality service to our valued customer base, supporting the health and well being of the communities in which we operate, continuing the trend of excellent returns to our shareholders, and a challenging workplace for our team members" continued Mr. Hawker. Fourth Quarter 2004 Earnings Charges ------------------------------------ As previously discussed, the Company recorded two earnings charges during the fourth quarter of 2004. The reason for these two charges in the fourth quarter are as follows: County Bank (the "Bank"), the primary subsidiary of CCOW, holds two Freddie Mac preferred stocks with par values of $3,000,000 and $6,710,000 and one Fannie Mae preferred stock with a $5,000,000 par value in its investment portfolio. Bank management has been closely following the market valuations of these stocks, which have been depressed for a significant amount of time, and has evaluated recent financial news on these agencies, and has now concluded that all three are other-than-temporarily impaired. As a result, a pre tax earnings charge on the $3,000,000 and $6,710,000 Freddie Mac and the $5,000,000 Fannie Mae stocks of $690,660, $1,617,110, and $1,401,400 respectively has been recorded. The after tax impact of these three write-downs total $2,151,319 has been recorded in the fourth quarter of 2004. The State of California Franchise Tax Board's Chief Council Announcement 2003-1 dated December 31, 2003 took the position that certain tax transactions related to Real Estate Investment Trusts (REIT's) would be disallowed by the Franchise Tax Board. For the years 2001 and 2002, the Bank recorded certain state tax savings related to the consent dividends declared by the REIT. Under California's Voluntary Compliance Initiative ("VCI") program that concluded on April 15, 2004, the bank paid taxes and interest relating to the years 2001 and 2002 REIT consent dividends and established a $1,563,000 receivable along with an offsetting $334,000 reserve, net of federal tax, for the pending refund claims that have yet to be filed. Management intends to actively pursue our rights for a state tax refund relating to this receivable under the legal and statutory processes available. However, during the fourth quarter of 2004, management wrote off into current period earnings the $1,563,000 state tax receivable less the $334,000 reserve or an after tax impact of $1,229,000. The write off of these amounts does not impact the ultimate outcome of the legal and statutory process, but is a conservative measure in that the final outcomes are uncertain as to amount of ultimate recovery and time frames required. The Company does not plan to record any benefits related to the REIT consent dividend going forward until the courts resolve this tax issue. Earnings Discussion ------------------- Net earnings were $816,000 or $0.14 per share for the three months ended December 31, 2004. This compares to earnings of $3,590,000 or $0.62 per share for the same period in 2003. Annualized return on average assets and return on average equity were 0.23% and 3.16% for the fourth quarter of 2004 compared with 1.21% and 16.44% for 2003. The 2004 fourth quarter earnings of $816,000 reflect a year over year decrease in earnings of $2,774,000 due primarily to the two earnings charges recorded in 2004, partially offset by a $1,908,000 2 improvement in net interest income. The increase in net interest income was driven by a $179,614,000 or a 17% increase in average interest earning assets. The net interest margin for the fourth quarter of 2004 was 4.47%, a decrease of 2 basis points from the 4.49% achieved during the same period during 2003. In comparing the 2004 to 2003 fourth quarter, other expenses increased by $673,000 due primarily to increases in salaries and benefits of $335,000 that were the result of management and support staff increases necessary to accommodate branch expansion and normal salary progression and a $76,000 increase in premises and occupancy expenses due primarily to branch expansion and remodel expenses. Our effective tax rate was 66% for the fourth quarter of 2004 compared with 34% for the fourth quarter of 2003. Income tax expense decreased $244,000 to $1,611,000 when compared to the $1,855,000 recorded during the same quarter in 2003. The increase in the 2004 tax rate is primarily attributable to the elimination of the tax benefit of the REIT consent dividend. Without these charges, the 2004 fourth quarter effective tax rate would have been 32%, a decrease of 2% from the level achieved in the fourth quarter of 2003. The primary reason for this reduction is an increased investment in Housing Tax Credit ("HTC") limited partnerships that is partially offset by a higher level of taxable operating income. Credit Quality -------------- The Company's allowance for loan losses was $14,284,000 or 1.61% of total loans at December 31, 2004. Nonperforming assets totaled $4,455,000 or 0.31% of total assets and nonperforming loans stood at $4,395,000 or 0.50% of total loans. At December 31, 2004 the allowance for loan losses totaled 325% of nonperforming loans. This compares to an allowance for loan losses of $13,263,000 or 1.74% of total loans at December 31, 2003. At December 31, 2003, nonperforming assets totaled $4,047,000 or 0.33% of total assets, nonperforming loans totaled $3,987,000 or 0.52% of total loans and the allowance for loan losses totaled 333% of nonperforming loans. Included in non-performing loans at the end of 2004 were two commercial real estate loans totaling $3.2 million, which are secured by first deeds of trust with adequate margin between appraised value and the loan balance. Net charge-offs for the fourth quarter of 2004 were $747,000, which compares to $465,000 for the same period in 2003. Net charge-offs for the full year 2004 were $1,650,000, which compares to $1,326,000 for the same period in 2003. The increased charge-off activity in the fourth quarter and for the full year 2004 was primarily in the commercial and agricultural segment of the loan portfolio. 3 Book Values - Capital --------------------- The Company's capital at December 31, 2004 stood at $103,637,000 compared with $89,485,000 as of December 31, 2003. Book value and tangible book value per share totaled $17.89 and $17.63 as of December 31, 2004 as compared to $15.82 and $15.36 as of December 31, 2003. The Company's tangible leverage capital ratio stood at 8.30% at December 31, 2004, compared with 8.55% as of December 31, 2003. The Company's risk based capital ratio stood at 11.36% at December 31, 2004, compared with 11.57% as of December 31, 2003. 4 Forecasted Information ---------------------- Looking to the full year 2005, Chief Financial Officer R. Dale McKinney comments, "Although interest rates are anticipated to rise during the year, the forecast is based on existing interest rates since future interest rates can not be predicted with certainty. Our ALCO model indicates slight asset sensitivity; therefore if rates rise as predicted, forecasted margins should slightly improve. Tax equivalent margins averaged 4.47% for fourth quarter 2004 and are expected to decline during the year 2005 to an average tax equivalent margin in the 4.30% to 4.40% range. Loan loss accruals and net charge offs for 2005 are anticipated to remain at the same relative levels as during the year 2004. Our effective tax rate for 2005 is forecasted to rise slightly to the 33% to 34% range. For 2005, ROE is forecast to be 15% plus and growth in total assets of about 12%. As stated earlier, expense growth in the 10% to 12% range for 2005 is anticipated as infrastructure was added during the 2004 year in order to comply with provisions of both Sarbanes Oxley (SOX) and the Bank Secrecy Act (BSA), and in support of our continued branch and franchise expansion. After adding back the two previously announced fourth quarter 2004 earnings charges, a 12% to 14% earnings improvement over our 2004 year is forecasted, or fully diluted earnings per share in the $2.90 to $2.95 range. Risk based capital ratios are anticipated at 11.00% to 11.50% and leverage capital ratios are anticipated at 8.25% to 8.50% during the full 2005 year. These ratios are considered well capitalized by regulatory definitions." Conference Call Recording ------------------------- Capital Corp of the West's year end 2004 earnings conference call is scheduled for January 26, 2005 at 7:00 am PDT. Investors have the opportunity to listen to a recording of the conference call by going the web site of the company www.ccow.com just after the call and following the instructions to play back the recorded conference call. The recording will be available on the web site for 30 days following the conference call. Safe Harbor ----------- In addition to historical information, this release includes certain forward-looking statements regarding events and trends that may affect the Company's future results. Such statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially. These factors include general risks inherent to commercial lending; risks related to asset quality; risks related to the Company's dependence on key personnel and its ability to manage existing and future growth; risks related to competition; risks posed by present and future government regulation and legislation; and risks resulting from federal monetary policy. 5 Reference Information --------------------- Capital Corp. of the West, a bank holding company established November 1, 1995, is the parent company of County Bank, which has more than 27 years of service as "Central California's Community Bank." Currently County Bank has twenty branch offices serving the counties of Fresno, Madera, Mariposa, Merced, Stanislaus, San Joaquin, San Francisco and Tuolumne. As of the latest FDIC data, County Bank has 6.5% market share in the six Central California counties in which it has retail branches. This ranks County Bank fifth out of thirty-nine banking institutions in this market area. For further information about the Company's financial performance, contact Tom Hawker, President & Chief Executive Officer at (209) 725-2276, or R. Dale McKinney Chief Financial Officer, at (209) 725-7435. -Financial Tables Follow- ------------------------- 6 Capital Corp of the West Consolidated Statements of Income (Unaudited)
(Dollars in thousands) For the Three For the Year Months Ended Ended December 31, December 31, 2004 2003 2004 2003 ---- ---- ---- ---- Interest income $ 18,784 $ 16,217 $ 70,571 $ 62,413 Interest expense -------- ------- -------- -------- Net interest income 14,198 12,290 53,474 46,160 Provision for loan losses 670 551 2,671 2,455 Other income: Service charges on accounts 1,479 1,416 6,134 5,480 Loss on sale or impairment of securities (3,708) -- (3,665) -- All other income 990 1,480 3,936 4,697 Other expenses: Salaries and related benefits 5,227 4,892 20,697 19,071 Premises and occupancy 913 837 3,446 2,946 Equipment 825 999 3,186 3,335 Professional fees 568 594 1,671 1,662 Marketing 281 247 1,062 963 Intangible amortization 155 166 655 676 Supplies 251 179 873 794 Other expenses 1,642 1,276 6,145 5,938 -------- ------- -------- -------- Total other expenses 9,862 9,190 37,735 35,385 -------- ------- -------- -------- Income before income taxes 2,427 5,445 19,473 18,497 Provision for income taxes 1,611 1,855 7,150 4,857 -------- ------- -------- -------- NET INCOME $ 816 $ 3,590 $ 12,323 $ 13,640 ======== ======= ======== ========
7 Capital Corp of the West Consolidated Balance Sheets (Unaudited)
(Dollars in thousands) 2004 2004 At December 31, Averages Averages 2004 2003 QTD YTD ---- ---- --- --- Assets Cash and noninterest-bearing deposits in other banks $ 40,454 $ 44,292 $ 41,487 $ 40,475 Federal funds sold 17,365 1,190 37,447 16,604 Time deposits at other financial institutions 3,350 350 1,622 670 Investment securities available for sale, at fair value 269,189 275,403 266,182 272,221 Investment securities held to maturity at cost, fair value of $166,958 and $97,295 at December 31, 2004 and 2003 166,987 96,612 131,000 109,769 Loans, net of allowance for loan losses of $14,284 and $13,263 at December 31, 2004 and 2003 870,809 750,989 837,354 799,049 Interest receivable 5,979 6,045 5,452 5,447 Premises and equipment, net 22,426 16,557 21,206 18,881 Intangible assets 1,474 2,649 1,706 2,227 Cash value of life insurance 28,362 24,138 28,217 26,341 Investment in housing tax credit limited partnerships 8,623 8,717 8,700 8,664 Other assets 12,906 7,600 10,440 9,175 ---------- ---------- ---------- ----------- Total assets $1,447,924 $1,234,542 $1,390,813 $ 1,309,523 ========== ========== ========== =========== Liabilities and Shareholders' Equity Deposits Noninterest-bearing demand $ 262,315 $ 206,709 $ 237,593 $ 213,864 Negotiable orders of withdrawal 170,870 136,975 167,492 148,951 Savings 360,319 330,023 359,737 350,270 Time, under $100 193,913 182,363 195,428 188,907 Time, $100 and over 166,740 172,738 164,788 167,277 ---------- ---------- ---------- ----------- Total deposits 1,154,157 1,028,808 1,125,038 1,069,269 Other borrowings and subordinated debentures 180,615 109,313 156,685 138,081 Accrued interest, taxes and other liabilities 9,515 6,936 5,892 5,081 ---------- ---------- ---------- ----------- Total liabilities 1,344,287 1,145,057 1,287,615 1,212,431 ---------- ---------- ---------- ----------- Preferred stock, no par value; 10,000,000 shares authorized; none outstanding -- -- -- -- Common stock, no par value; 20,000,000 shares authorized; 5,734,308 and 5,660,739 issued & outstanding at December 31, 2004 and 2003 57,295 54,228 56,746 55,554 Retained earnings 45,981 34,816 47,178 41,933 Accumulated other comprehensive income 361 441 (726 (395) ---------- ---------- ---------- ----------- Total shareholders' equity 103,637 89,485 103,198 97,092 ---------- ---------- ---------- ----------- Total liabilities and shareholders' equity $1,447,924 $1,234,542 $1,390,813 $ 1,309,523 ========== ========== ========== ===========
8 Loan Portfolio Composition
December 31 December 31 (Dollars in thousands) 2004 2003 ----- ---- Percent Percent Loan Categories: Dollar Amount of loans Dollar Amount of loans ------------- -------- ------------- -------- Commercial $217,524 25% $ 195,588 25% 80,598 9 92,550 12 Real estate construction 97,396 11 89,652 12 Real estate mortgage 416,385 47 318,624 42 Consumer 73,190 8 67,838 9 -------- --- --------- --- Total 885,093 100% 764,252 100% -------- === --------- === Less allowance for loan losses (14,284) (13,263) -------- --------- Net loans $870,809 $ 750,989 -------- ---------
Allowance for Loan Loss Activity Year Ended December 31, 2004 2003 2002 ---- ---- ---- (In thousands) Allowance for Loan Losses: Balance at beginning of period $ 13,263 $ 12,134 $ 9,743 -------- -------- -------- Provision for loan losses 2,671 2,455 4,151 -------- -------- -------- Charge-offs (2,296) (1,995) (2,589) Recoveries 646 669 829 -------- -------- -------- Net charge-offs (1,650) (1,326) (1,760) -------- -------- -------- Balance at end of period $ 14,284 $ 13,263 $ 12,134 ======== ======== ======== Loans outstanding at period-end $885,093 $764,252 $633,733 ======== ======== ======== Average loans outstanding $813,050 $687,419 $576,156 ======== ======== ======== Annualized net charge-offs to average loans 0.20% 0.19% 0.31% Allowance for loan losses To total loans 1.61% 1.74% 1.91% To nonperforming loans 325% 333% 509% 9 Selected Financial Data
Three Three Twelve Twelve Capital Corp of the West Months Ended Months Ended Months Ended Months Ended Selected Financial Data 12/31/04 12/31/03 12/31/04 12/31/03 --------------------------------------------------------------- Basic Earnings Per Share $ .14 $ .65 $ 2.15 $ 2.43 Diluted Earnings Per Share $ .14 $ .62 $ 2.06 $ 2.34 Annualized Return on: Average Assets 0.23% 1.21% 0.94% 1.23% Average Equity 3.16% 16.44% 12.69% 16.43% Net Interest Margin 4.47% 4.49% 4.49% 4.53% Efficiency Ratio 75% 59% 62% 62% - ----------------------------------------------------------------------------------------------------------- Annualized Net Charge-offs to Average Loans 0.35% 0.20% 0.25% 0.19%
Capital / Shareholder information December 31, December 31, 2004 2003 ---- ---- Book Value Per Share $17.89 $15.82 Tangible Book Value Per Share $17.63 $15.36 Leverage Capital Ratio 8.47% 8.55% Risk Based Capital Ratio 11.56% 11.57% Nonperforming Assets December 31 December 31 2004 2003 ---- ---- (In thousands) Nonaccrual loans $4,395 $3,987 Accruing loans past due 90 days or more -- -- ------ ------ Total nonperforming loans 4,395 3,987 Other real estate owned 60 60 ------ ------ Total nonperforming assets $4,455 $4,047 ====== ====== Nonperforming loans to total loans 0.50% 0.52% Nonperforming assets to total assets 0.31% 0.33% 10 -----END PRIVACY-ENHANCED MESSAGE-----