EX-99.1 2 cb6491ex991.txt EXHIBIT 99.1 Exhibit 99.1 COMMONWEALTH BANKSHARES, INC., NORFOLK, VA, ANNOUNCES RECORD EARNINGS FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2006 AND DECLARES QUARTERLY CASH DIVIDEND NORFOLK, Va., July 25 /PRNewswire-FirstCall/ -- Commonwealth Bankshares, Inc. (Nasdaq: CWBS) today reported record earnings of $4.6 million for the first six months of 2006, an increase of $1.9 million or 69.2% over the comparable period in 2005. For the quarter ended June 30, 2006, the Company earned a record $2.5 million, an increase of 70.2% over the $1.5 million reported in the second quarter of 2005. On a per share basis, diluted earnings increased 29.0% to $0.89 for the six months ended June 30, 2006 compared to $0.69 for the same period in 2005. For the quarter ended June 30, 2006, diluted earnings per share was $0.49, up from $0.37 for the second quarter in 2005. In consideration of the Company's strong financial performance and proven track record, the Directors of Commonwealth Bankshares, Inc. declared a quarterly cash dividend in the amount of 5.5 cents per share on its common stock, payable August 31, 2006, to shareholders of record as of August 21, 2006. This is the third quarterly dividend declared in 2006, for a total year to date dividend of 16.4 cents per share, up 20% from the 13.7 cents per share dividend declared during the first three quarters of 2005. Total dividends paid in 2005 and 2004 were 19.1 cents and 18.2 cents per share, respectively. 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 first half of 2006. We are pleased to report another record quarter in both earnings and asset growth. Our second 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. 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 1.53% for the six months ended June 30, 2006 up 17 basis points from 1.36% for the first six months of 2005. Return on average equity (ROE) increased 10 basis points to 14.11% for the six months ended June 30, 2006 as compared to 14.01% for the six months ended June 30, 2005. For the quarter ended June 30, 2006, ROA was 1.60% and ROE was 15.15%. Year to date average assets increased $202.6 million or 50.7% from June 30, 2005 to June 30, 2006. Year to date average equity increased $26.4 million or 68.1% as of June 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 49.37% and 47.92% for the six months and three months ended June 30, 2006 compared to 52.92% and 49.84%, respectively, during the comparable period in 2005. The record earnings were driven by the $197.5 million or 47.6% increase in the Bank's loan portfolio from June 30, 2005 to June 30, 2006. Total loans at June 30, 2006 reached a record $612.6 million. Our strong loan demand generated record increases in interest income. Interest income on loans increased $9.7 million or 68.9% to $23.8 million for the six months ended June 30, 2006. For the quarter ended June 30, 2006 interest income on loans increased 67.6% to $12.8 million up from the $7.6 million reported in the second quarter of 2005. Interest expense of $10.2 million for the six months ended June 30, 2006 represented a $4.9 million increase from the comparable period in 2005. For the second quarter of 2006, interest expense was $5.5 million, an increase of $2.7 million over the second 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 $7.5 million for the quarter ended June 30, 2006, an increase of $2.6 million or 52.7% over the comparable period in 2005. For the six months ended June 30, 2006, net interest income reached a record $14.1 million, an increase of $5.0 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) increased 11 basis points from 4.80% during the first six months of 2005 to 4.91% for the same period in 2006. For the quarter ended June 30, 2006, the net interest margin was 4.94% compared to 4.80% for the comparable period in 2005. Commonwealth Bankshares exceeded its goal for asset growth. Total assets at June 30, 2006 reached a new high of $658.6 million, up 38.5% or $183.1 million from $475.4 million at June 30, 2005. Despite the rapid growth in the Company's loan portfolio, our asset quality remains exceptional. Net charge-offs for the six months ended June 30, 2006 were $61.3 thousand, or 0.01% of year to date average loans. Non- performing assets were $255.6 thousand or 0.04% of total assets at June 30, 2006 compared to $442.0 thousand or 0.09% of total assets at June 30, 2005. 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 Six Months Ended --------------------------- --------------------------- (in thousands, except June 30, June 30, June 30, June 30, per share data) 2006 2005 2006 2005 ----------------------------------- ------------ ------------ ------------ ------------ Operating Results: Interest Income $ 12,991 $ 7,746 $ 24,287 $ 14,381 Interest Expense 5,498 2,840 10,158 5,210 Net interest income 7,493 4,906 14,129 9,171 Provision for loan losses 750 685 1,420 1,015 Noninterest income 1,267 941 2,351 1,687 Noninterest expense 4,191 2,922 8,134 5,762 Income before provision for income taxes and noncontrolling interest 3,819 2,240 6,926 4,081 Provision for income taxes 1,296 762 2,352 1,386 Income before noncontrolling interest 2,523 1,478 4,574 2,695 Noncontrolling interest in subsidiary 8 - 14 - Net income $ 2,515 $ 1,478 $ 4,560 $ 2,695 Per Share Data**: Basic earnings $ 0.54 $ 0.43 $ 0.99 $ 0.80 Diluted earnings $ 0.49 $ 0.37 $ 0.89 $ 0.69 Book value $ 14.66 $ 13.23 $ 14.66 $ 13.23 Dividends $ 0.055 $ 0.045 $ 0.109 $ 0.091 Basic weighted average shares outstanding 4,637,621 3,410,330 4,602,860 3,368,221 Diluted weighted average shares outstanding 5,266,764 4,130,471 5,250,648 4,094,732 Shares outstanding at period-end 4,662,820 4,439,808 4,662,820 4,439,808 Period End Balances: Assets $ 658,554 $ 475,439 $ 658,554 $ 475,439 Loans* 612,607 415,086 612,607 415,086 Loans held for sale - 32,004 - 32,004 Investment securities 8,558 5,696 8,558 5,696 Deposits 474,770 353,581 474,770 353,581 Shareholders' equity 68,376 58,752 68,376 58,752 Average Balance: Assets $ 631,738 $ 424,799 $ 602,211 $ 399,633 Loans* 591,281 384,924 563,494 363,551 Loans held for sale - 13,901 - 10,885 Investment securities 8,787 6,715 8,838 6,805 Deposits 445,726 315,460 418,126 298,630 Shareholders' equity 66,557 39,995 65,188 38,787 Financial Ratios: Return on average assets 1.60% 1.40% 1.53% 1.36% Return on average shareholders' equity 15.15% 14.82% 14.11% 14.01% Efficiency ratio (tax equivalent basis) 47.92% 49.84% 49.37% 52.92% Shareholders' equity to total assets 10.38% 12.36% 10.38% 12.36% Loan loss allowance to loans 1.12% 0.92% 1.12% 0.92% Loan loss allowance to non-performing assets 2692.00% 861.21% 2692.00% 861.21% Non-performing assets to total assets 0.04% 0.09% 0.04% 0.09% Net interest margin (tax equivalent basis) 4.94% 4.80% 4.91% 4.80% Bank's Tier 1 capital to average assets 14.15% 14.53% 14.15% 14.53% Bank's Tier 1 capital to risk weighted assets 14.77% 15.28% 14.77% 15.28% Bank's Total capital to risk weighted assets 15.91% 16.22% 15.91% 16.22%
* 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- 07/25/2006 /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)