EX-99.1 2 exhibit991.htm EXHIBIT 99.1 Exhibit 99.1

PRESS RELEASE

Available for Immediate Publication: July 13, 2006
Contacts:
Thomas T. Hawker, President / Chief Executive Officer (209) 725-2276
David A. Heaberlin, EVP / Treasurer and Chief Financial Officer (209) 725-7435
Web Site www.ccow.com


Capital Corp of the West Announces 22% Increase
in Second Quarter 2006 Earnings



Merced, California, July 13, 2006-Capital Corp of the West NASDAQ:NMS: CCOW) today announced $6,254,000 in net income for the second quarter ended June 30, 2006. This represents an increase of 22% when compared to the second quarter 2005. For the six months ended June 30, 2006, net income grew by nearly 17% to $11.811 million from $10.114 million in 2005. Fully diluted earnings per share for the second quarter of 2006 was $0.57 compared with $0.47 for the same period in 2005. For the first half of 2006, fully diluted earnings per share totaled $1.08 versus $0.94 for the same period in 2005. During the second quarter of 2006, an after tax gain of $361,000 was recorded related to the sale of a portion of our agency preferred stock investments and an ARM mutual fund. Without these net gains, second quarter 2006 earnings would have increased 15% over second quarter 2005 earnings and second quarter 2006 fully diluted earnings per share would have been $0.54 versus the reported $0.57.

Tom Hawker, Chief Executive Officer, stated: “The second quarter results are a continuing affirmation of the intrinsic strength of our franchise and our ability to meet the needs of our customers. The 22% increase in our net income from the second quarter of 2005 provides further confirmation of our ability to reward our shareholders. Of course, none of this could be accomplished without the strength and commitment of our Team.

With our continuing asset growth, now beyond $1.8 billion, comes numerous complexities. We are very pleased to have attracted several experienced and veteran bankers to our senior management Team during this past year. John Incandela joined us as our Chief Credit Officer in June 2005; Kathy Wohlford joined as our Chief Administrative Officer in March of 2006; and this quarter, Richard de La Pena, became our General Counsel while Dave Heaberlin assumed the Treasurer and Chief Financial Officer role. This group, together with our able Bank President, Ed Rocha, and me, positions our organization well for the challenges associated with our continuing growth and expansion. I look forward to discussing these and other matters at our scheduled conference call on July 14th”, continued Mr. Hawker.

Dave Heaberlin, Chief Financial Officer, commented that “the 22% growth in net income for the second quarter of 2006 is directly associated with the $239 million or 17% growth in average interest-earning assets from the second quarter of 2005. The current quarter also benefited from an improvement in the net interest margin to 4.84% from 4.67% for the second quarter of 2005. This margin improvement was primarily a function of the rising rate environment triggering the repricing of our interest-earning assets more quickly than our interest-bearing liabilities. Obviously, if the rising rate environment flattens, our net interest margin could compress while the lagged impact of the repricing of our interest-bearing liabilities continues.”


Earnings Discussion

Net earnings were $6,254,000 or $0.57 per fully diluted share for the three months ended June 30, 2006. This compares to earnings of $5,126,000 or $0.47 per fully diluted share for the same period in 2005. Annualized return on average assets and return on average equity were 1.41% and 19.10% for the second quarter of 2006 compared with 1.35% and 18.63% for the same period in 2005. “This performance is particularly noteworthy given the continuing internal expansion and enhancement of the branch network, together with the technology and support staff increases required to successfully accommodate these efforts” stated Mr. Heaberlin.

The 2006 second quarter earnings of $6,254,000 reflect an increase in net interest income that was driven by a $239,538,000 or a 17% increase in average interest earning assets. The taxable equivalent net interest margin for the second quarter of 2006 was 4.84%, an increase of 17 basis points from the 4.67% achieved during the same period during 2005. In comparing the 2006 to 2005 second quarter, noninterest expenses increased by $2,405,000 or 22% due primarily to increases in salaries and benefits of $1,678,000 that were the result of management and support staff increases necessary to accommodate branch expansion, normal salary progression, the addition of an asset based lending group in 2006, and equity compensation expense. In the second quarter of 2006, stock option expense of $219,000 was recorded, primarily related to the granting of options to the Company’s new Chief Financial Officer and General Counsel. The $190,000 increase in premises and occupancy expense was due primarily to branch expansion and remodeling costs. Our effective tax rate was 35% for the second quarter of 2006 compared with 32% for the same quarter of 2005. Income tax expense increased $926,000 to $3,338,000 compared to the $2,412,000 recorded during the same quarter in 2005. The increase in the 2006 tax rate compared to 2005 was primarily attributable to a higher level of fully taxable income year over year.
 

Credit Quality

The Company’s allowance for loan losses was $15,084,000 or 1.26% of total loans at June 30, 2006. Nonperforming assets totaled $2,119,000 or 0.12% of total assets while nonperforming loans stood at $1,593,000 or 0.13% of total loans. At June 30, 2006, the allowance for loan losses totaled 947% of nonperforming loans. This compares to an allowance for loan losses of $13,404,000 or 1.36% of total loans at June 30, 2005. At June 30, 2005, nonperforming assets totaled $2,325,000 or 0.15% of total assets, nonperforming loans totaled $2,265,000 or 0.23% of total loans and the allowance for loan losses totaled 592% of nonperforming loans. The increase in the provision for loan losses in the quarter ended June 30, 2006 when compared to the same quarter in 2005 was due primarily to the increase in new loans generated during the quarter.
 
Charge-offs for the second quarter of 2006 remained minimal at $257,000 and compares with net charge-offs of $55,000 for the same period in 2005.

Book Values - Capital

The Company’s capital at June 30, 2006 stood at $132,930,000 compared with $113,331,000 as of June 30, 2005. Book value and tangible book value per share totaled $12.40 and $12.27 as of June 30, 2006 compared to $10.80 and $10.66 as of June 30, 2005. The Company’s tangible leverage capital ratio stood at 9.37% at June 30, 2006, compared with 8.44% as of June 30, 2005. The Company’s risk based capital ratio stood at 12.30% at June 30, 2006, compared with 11.53% as of June 30, 2005.



Conference Call Recording

Capital Corp of the West’s second quarter 2006 earnings conference call is scheduled for July 14, 2006 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.


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 28 years of service as “Central California’s Community Bank.” Currently County Bank has twenty three branch offices serving the counties of Fresno, Madera, Mariposa, Merced, Sacramento, San Francisco, San Joaquin, Santa Clara, Stanislaus, 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 significant retail branches. This ranks County Bank fifth out of thirty-seven banking institutions in this market area. For further information about the Company’s financial performance, contact Tom Hawker, President and Chief Executive Officer at (209) 725-2276, or Dave Heaberlin, Treasurer and Chief Financial Officer, at (209) 725-7435.


-Financial Tables Follow-

 
 
 

Capital Corp of the West
Consolidated Statements of Income
(Unaudited)

   
For the Three Months Ended June 30,
  
For the Six Months Ended June 30,
  
(Dollars in thousands)
 
  
2006
 
  
2005
 
  
2006
 
  
2005
 
  
Interest income
  
$
30,406
  
$
21,651
  
$
58,053
  
$
41,664
  
Interest expense
    
10,930
    
5,650
    
20,219
    
10,723
  
Net interest income
    
19,476
    
16,001
    
37,834
    
30,941
  
Provision for loan losses
    
200
    
101
    
200
    
321
  
Noninterest income:
                          
Service charges on accounts
    
1,504
    
1,526
    
2,925
    
2,893
  
Gain (loss) on sale of securities
    
622
    
-
    
622
    
-
  
All other income
    
1,297
    
814
    
2,508
    
2,116
  
Noninterest expenses:
                          
Salaries and related benefits
   
7,335
    
5,657
    
14,194
    
11,210
  
Premises and occupancy
    
1,256
    
1,066
    
2,445
    
2,051
  
Equipment
   
1,042
    
1,043
    
2,033
    
1,901
  
Professional fees
   
554
    
644
    
1,474
    
1,206
  
Marketing
    
466
    
329
    
853
    
624
  
Intangible amortization
    
12
    
12
    
23
    
23
  
Supplies
    
303
    
308
    
539
    
572
  
Charitable donations
    
291
    
218
    
509
    
396
  
Other expenses
   
1,848
    
1,425
    
3,513
    
3,027
  
Total noninterest expenses
    
13,107
    
10,702
    
25,583
    
21,010
  
Income before income taxes
    
9,592
    
7,538
    
18,106
    
14,619
  
Provision for income taxes
    
3,338
    
2,412
    
6,295
    
4,505
  
NET INCOME
  
$
6,254
  
$
5,126
  
$
11,811
  
$
10,114
  

Outstanding Shares & EPS

   
For The Three Months
  
For The Six Months
  
   
Ended June 30,
  
Ended June 30,
  
(Dollars in thousands, except per share data)
  
2006
  
2005
  
2006
  
2005
  
                   
Fully Diluted EPS computation:
                  
Net income
  
$
6,254
  
$
5,126
  
$
11,811
  
$
10,114
  
Average common shares outstanding
    
10,687
    
10,479
    
10,643
    
10,466
  
Effect of stock options
    
264
    
323
    
293
    
330
  
     
10,951
    
10,802
    
10,936
    
10,796
  
Fully Diluted EPS
  
$
0.57
  
$
0.47
  
$
1.08
  
$
0.94
  

 
 
 

Capital Corp of the West
Consolidated Balance Sheets
(Unaudited)
           
2006
  
2006
  
   
At June 30,
  
Averages
  
Averages
  
(Dollars in thousands)
  
2006
  
2005
  
QTD
  
YTD
  
Assets
                  
Cash and noninterest-bearing deposits in other banks
  
$
50,390
  
$
47,186
  
$
45,724
  
$
47,605
  
Federal funds sold
    
25,185
    
1,675
    
3,510
    
4,049
  
Time deposits at other financial institutions
    
350
    
350
    
350
    
350
  
Investment securities available for sale, at fair value
    
265,746
    
258,787
    
285,940
    
299,216
  
Investment securities held to maturity at cost, fair value of $170,127 and $184,634 at June 30, 2006 and 2005
    
176,152
    
183,194
    
178,085
    
178,231
  
Loans, net of allowance for loan losses of $15,084 and $13,404 at June 30, 2006 and 2005
   
1,182,358
    
969,561
    
1,156,688
    
1,124,819
  
Interest receivable
    
8,228
    
6,969
    
8,073
    
7,737
  
Premises and equipment, net
    
36,007
    
24,731
    
33,536
    
31,743
  
Intangible assets
    
1,405
    
1,451
    
1,409
    
1,414
  
Cash value of life insurance
    
32,396
    
28,215
    
32,234
    
32,078
  
Investment in housing tax credit limited partnerships
    
8,623
    
8,394
    
8,520
    
8,591
  
Other assets
    
19,713
    
13,936
    
17,316
    
17,702
  
Total assets
  
$
1,806,553
  
$
1,544,449
  
$
1,771,385
  
$
1,753,535
  
                           
Liabilities and Shareholders’ Equity
                          
Deposits
                          
Noninterest-bearing demand
  
$
295,016
  
$
275,695
    
284,519
    
284,321
  
Negotiable orders of withdrawal
    
197,652
    
169,443
    
203,459
    
209,103
  
Savings
    
332,740
    
358,213
    
341,294
    
363,106
  
Time, under $100
    
247,883
    
207,003
    
234,485
    
227,733
  
Time, $100 and over
    
401,443
    
216,095
    
354,097
    
304,728
  
Total deposits
    
1,474,734
    
1,226,449
    
1,417,854
    
1,388,991
  
                           
Federal funds purchased
    
-
    
11,275
    
34,801
    
36,625
  
Other borrowings and subordinated debentures
    
187,351
    
179,985
    
172,225
    
184,398
  
Accrued interest, taxes and other liabilities
    
11,538
    
13,409
    
15,528
    
14,972
  
Total liabilities
    
1,673,623
    
1,431,118
    
1,640,408
    
1,624,986
  
                           
Preferred stock, no par value; 10,000,000 shares authorized; none outstanding
    
-
    
-
    
-
    
-
  
Common stock, no par value; 20,000,000 shares authorized; 10,720,318 and 10,490,566 issued & outstanding at June 30, 2006 and 2005
    
63,276
    
58,188
    
61,958
    
61,024
  
Retained earnings
    
75,473
    
55,269
    
73,317
    
70,675
  
Accumulated other comprehensive (loss)
    
(5,819
)
  
(126
)
  
(4,298
)
  
(3,150
)
Total shareholders’ equity
    
132,930
    
113,331
    
130,977
    
128,549
  
Total liabilities and shareholders’ equity
  
$
1,806,553
  
$
1,544,449
  
$
1,771,385
  
$
1,753,535
  


Loan Portfolio Composition

   
June 30
  
(Dollars in thousands)
  
2006
 
2005
  
Loan Categories:
  
Dollar Amount
  
Percent of loans
  
Dollar Amount
  
Percent Of loans
  
Commercial
  
$
324,846
    
27
%
$
245,307
    
25
%
Agricultural
    
82,241
    
7
    
74,797
    
7
  
Real estate construction
    
161,976
    
13
    
134,357
    
14
  
Real estate mortgage
    
535,013
    
45
    
449,986
    
46
  
Consumer
    
93,366
    
8
    
78,518
    
8
  
Total
    
1,197,442
    
100
%
  
982,965
    
100
%
Less allowance for loan losses
    
(15,084
)
        
(13,404
)
      
Net loans
  
$
1,182,358
        
$
969,561
        

Allowance for Loan Loss Activity

   
Six Months Ended June 30,
  
(Dollars in thousands)
  
2006
  
2005
  
2004
  
Allowance for Loan Losses:
              
Balance at beginning of period
  
$
14,776
  
$
13,605
  
$
12,524
  
Provision for loan losses
    
200
    
321
    
1,304
  
Charge-offs
    
(642
)
  
(1,121
)
  
(1,030
)
Recoveries
    
750
    
599
    
283
  
Net (charge-offs) recoveries
   
108
    
(522
)
  
(747
)
Balance at end of period
  
$
15,084
  
$
13,404
  
$
13,081
  
                     
Loans outstanding at period-end
  
$
1,197,442
  
$
982,965
  
$
817,731
  
Average loans outstanding
 
$
1,139,997
  
$
915,490
  
$
784,807
  
                     
Annualized net charge-offs to average loans
    
(0.02
)%
  
0.11
%
  
0.19
%
Allowance for loan losses
                    
To total loans
    
1.26
%
  
1.36
%
  
1.60
%
To nonperforming loans
    
947
%
  
592
%
  
265
%


 
 
 

Capital Corp of the West
Selected Financial Data

   
Three Months Ended June 30,
  
Six Months Ended June 30,
  
   
2006
  
2005
  
2006
  
2005
  
Basic Earnings Per Share
 
$
0.59
  
$
0.49
  
$
1.11
  
$
0.97
  
Fully Diluted Earnings Per Share
 
$
0.57
  
$
0.47
  
$
1.08
  
$
0.94
  
                           
Annualized Return on:
                          
Average Assets
    
1.41
%
  
1.35
%
  
1.35
%
  
1.36
%
Average Equity
    
19.10
%
  
18.63
%
  
18.38
%
  
18.73
%
Net Interest Margin
    
4.84
%
  
4.67
%
  
4.67
%
  
4.63
%
Efficiency Ratio
 
    
57
%
  
58
%
  
58
%
  
58
%
Annualized Net Charge-offs to
                          
Average Loans
    
0.09
%
  
0.02
%
  
-0.02
%
  
0.11
%

Capital / Shareholder information

   
June 30,
  
   
2006
  
2005
  
Book Value Per Share
 
$
12.40
  
$
10.80
  
Tangible Book Value Per Share
  
$
12.27
  
$
10.66
  
               
Leverage Capital Ratio
    
9.57
%
  
8.44
%
Risk Based Capital Ratio
    
12.30
%
  
11.53
%
               

Nonperforming Assets

   
June 30
  
(Dollars in thousands)
  
2006
  
2005
  
Nonaccrual loans
  
$
1,592
  
$
2,265
  
Accruing loans past due 90 days or more
    
-
    
-
  
  Total nonperforming loans
    
1,592
    
2,265
  
Other real estate owned
    
527
    
60
  
  Total nonperforming assets
  
$
2,119
  
$
2,325
  
               
Nonperforming loans to total loans
    
0.13
%
  
0.23
%
Nonperforming assets to total assets
    
0.12
%
  
0.15
%

Brokered CDs

   
June 30
  
(Dollars in thousands)
  
2006
  
2005
  
Brokered CDs
  
$
128,614
  
$
20,966
  

 
 
 

Taxable Equivalent Net Interest Margin

 
 
   
Three months ended
  
Three months ended
  
   
June 30, 2006
  
June 30, 2005
  
(Dollars in thousands)
  
Average Balance
  
Taxable Equivalent Interest
  
Taxable Equivalent Yield/rate
  
Average Balance
  
Taxable Equivalent Interest
  
Taxable Equivalent Yield/rate
  
Assets
                          
Federal funds sold
  
$
3,511
  
$
44
    
5.03
%
$
5,423
  
$
37
    
2.74
%
Time deposits at other financial institutions
    
350
    
4
    
4.58
    
350
    
3
    
3.44
  
Taxable investment securities
    
360,343
    
4,204
    
4.68
    
363,164
    
3,806
    
4.20
  
Nontaxable investment securities
    
103,682
    
1,259
    
4.87
    
90,250
    
1,143
    
5.08
  
Loans, gross:
    
1,171,876
    
25,208
    
8.63
    
941,037
    
16,977
    
7.24
  
Total interest-earning assets
    
1,639,762
    
30,719
    
7.51
    
1,400,224
  
$
21,966
    
6.29
  
Allowance for loan losses
    
(15,188
)
              
(13,483
)
            
Cash and due from banks
    
45,724
                
43,410
              
Premises and equipment, net
    
33,536
                
24,407
              
Interest receivable and other assets
    
67,551
                
59,949
              
Total assets
  
$
1,771,385
              
$
1,514,507
              
                                       
Liabilities And Shareholders' Equity
                                      
Negotiable order of withdrawal
  
$
203,459
  
$
305
    
0.60
  
$
177,019
  
$
38
    
0.09
  
Savings deposits
    
341,294
    
1,913
    
2.25
    
358,658
    
1,104
    
1.23
  
Time deposits
    
588,581
    
5,970
    
4.07
    
391,483
    
2,729
    
2.80
  
Other borrowings
    
189,171
    
2,344
    
4.97
    
178,765
    
1,445
    
3.24
  
Subordinated Debentures
    
17,855
    
398
    
8.94
    
16,496
    
334
    
8.12
  
Total interest-bearing liabilities
    
1,340,360
    
10,930
    
3.27
    
1,122,421
    
5,650
    
2.02
  
                                       
Noninterest-bearing deposits
    
284,520
                
270,117
              
Accrued interest, taxes and other liabilities
    
15,528
                
11,887
              
Total liabilities
    
1,640,408
                
1,404,425
              
                                       
Total shareholders' equity
    
130,977
                
110,082
              
Total liabilities and shareholders' equity
  
$
1,771,385
              
$
1,514,507
              
                                       
Net interest income and margin
        
$
19,789
    
4.84
%
      
$
16,316
    
4.67
%