LONGVIEW, Wash., Oct. 25 /PRNewswire-FirstCall/ --
Flash Results Cowlitz Bancorporation (Numbers in Thousands, Except Per Share Data) Three Months Ended Nine Months Ended September 30, June 30, September 30, 2007 2006 2007 2007 2006 Net Interest Income $5,673 $5,979 $5,540 $16,965 $16,119 Net Income $1,276 $1,341 $673 $3,227 $3,514 Diluted EPS $0.25 $0.26 $0.13 $0.62 $0.69 Total Period End Loans $398,841 $344,273 Total Period End Deposits $441,787 $386,809
Cowlitz Bancorporation today reported strong third quarter 2007 earnings, higher non-interest revenues and 16% year-over-year loan growth.
Net income was $1,276,000 or $0.25 per diluted share for the third quarter of 2007, compared with net income of $1,341,000, or $0.26 per diluted share, during the same period of 2006. Net income for the first nine months of 2007 was $3,227,000, or $0.62, compared with $3,514,000, or $0.69 per diluted share, for the first nine months of 2006.
"In light of the extremely competitive nature of markets we serve, our lenders have done an outstanding job of continuing to bring new business relationships to the bank," said Richard J. Fitzpatrick, President and CEO of Cowlitz Bancorporation and its wholly owned subsidiary Cowlitz Bank. "Total assets increased to $517 million, with loans reaching $399 million, an increase of 16% over September 30, 2006 and up 11% from year-end 2006."
Net loans were $398.8 million at September 30, 2007, compared with $344.4 million a year ago, and were up 15% on an annualized basis from year-end 2006 and 17% on an annualized basis from June 30, 2007. Growth was strongest in commercial and industrial loans, with a smaller increase in commercial real estate loans. Total deposits were up 14% from the third quarter of 2006 balance, 11% from year-end 2006 and 6% from June 30, 2007. Non-interest bearing demand deposits at September 30, 2007 were down 10% from a year ago totals, but up $7.3 million, or 7%, from June 30, 2007. A significant amount of the interest-bearing deposit growth consisted of brokered deposits.
The Company's net interest margin was 5.01% in the third quarter of 2007, compared with 6.04% in the same quarter last year and 5.09% in the second quarter of 2007. The foregone interest income on two large nonaccrual loans was approximately $293,000, which decreased the third quarter 2007 net interest margin 25 basis points. The average rate paid on interest bearing deposits in the third quarter of 2007 increased five basis points, which was a slower rate of increase as compared with increases in recent quarters. The average rate paid on interest-bearing liabilities for the third quarter of 2007 was 4.31% compared with 3.74% in the third quarter of 2006 and 4.26% in the second quarter of 2007.
Mr. Fitzpatrick stated, "The full impact of the 50 basis point decrease in the Bank's prime lending rate, as well as anticipated decreases in interest-bearing deposit rates, will not be reflected until the fourth quarter. The foregone interest related to non-accrual loans had a significant impact on our margin and earnings for the third quarter."
The provision for credit losses was $725,000 in the third quarter of 2007, compared with $800,000 in the third quarter of 2006 and no provision in the second quarter of 2007. Net loan loss recoveries of $190,000 and $275,000 were recorded for the three and nine-month periods ended September 30, 2007, respectively, compared with net charge-offs of $684,000 and $675,000 for the three and nine-month periods of 2006. The allowance for loan losses was 1.46% as a percentage of loans outstanding at September 30, 2007, compared with 1.51% at September 30, 2006 and 1.27% at June 30, 2007. Management believes the allowance for credit losses is at an appropriate level based upon its evaluation and analysis of portfolio credit quality and prevailing economic conditions. The allowance represented 48% of non-performing loans at quarter end.
As of September 30, 2007, non-performing loans as a percentage of total loans were 3.06%, compared with 0.59% at September 30, 2006 and 4.25% at June 30, 2007. As a percentage of total assets, non-performing assets were 2.37% , compared with 3.45% at June 30, 2007. In the third quarter of 2007, a $4.2 million non-performing loan at June 30, 2007 was paid off and approximately $600,000 of equipment repossessed in the second quarter of 2007 was sold. Ernie D. Ballou, Vice President and Chief Credit Administrator stated, "Our primary goal is to resolve our two largest non-accrual loans totaling $11.9 million as soon as practical."
Non-interest income in the third quarter of 2007 was $910,000, compared with $657,000 in the third quarter of 2006. The third quarter of 2006 included losses on securities transactions of $184,000. Excluding the amounts related to securities transactions, the increase in the third quarter of 2007 over the comparable 2006 quarter was primarily related to revenues from the Company's international trade department, which began operations late in the second quarter of 2006.
Non-interest expenses in the third quarter of 2007 were $4.2 million, compared with $4.0 million in the third quarter of 2006. Included in the current quarter's results was a non-cash credit of $245,000 for the ineffective portion of the Company's cash flow hedges. To the extent the Company's cash flow hedges are ineffective in hedging interest income cash flows from variable rate loans, the ineffectiveness must be recognized in the income statement. The fair value of the Company's interest rate contracts increased substantially in the third quarter of 2007, with the vast majority of that increase recorded on the balance sheet in accumulated other comprehensive income. Excluding the amounts related to hedge ineffectiveness from both periods, total non-interest expenses for the third quarter of 2007 increased $376,000 over the same quarter of 2006. The increase was primarily a reflection of the overall higher level of staffing, including hiring costs, merit increases and performance-based pay, occupancy, data processing and professional services. These expenses were primarily due to loan growth, the expansion of the Company's international trade finance capabilities late in the second quarter of 2006, professional fees associated with non-performing assets and costs associated with the Company's compliance with Sarbanes-Oxley Act requirements for 2007. On a year-to date basis, non-interest expenses in 2007 also included $274,000 of share-based compensation expense, compared with $91,000 in the first nine months of 2006. The lower amount in 2006 was primarily due to no share-based compensation awards made that year.
The Company's efficiency ratio was 63.7% and 60.2% for the third quarters of 2007 and 2006, respectively. The Company's leverage and risk-based capital ratios continue to exceed the "well-capitalized" requirements.
Cowlitz Bancorporation is the holding company of Cowlitz Bank, which was established in 1977. In addition to its four branches in Cowlitz County Washington, Cowlitz Bank's divisions include Bay Bank located in Bellevue, Seattle, and Vancouver, Washington; Portland and Wilsonville, Oregon; and Bay Mortgage in southwest Washington. Cowlitz specializes in commercial and international banking services for Northwest businesses, professionals, and retail customers, and offers trust services in southwest Washington and Portland, Oregon.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. You should not place undue reliance on forward-looking statements and we undertake no obligation to update any such statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those discussed in this press release as a result of risk factors identified in the Company's Form 10-K for the year ended December 31, 2006, and other filings with the SEC. We make forward-looking statements in this release related to the impact of the decrease in the Bank's prime lending rate, decreases in deposit rates, anticipated amount of losses on non-accrual loans, adequacy of our loan loss reserve and the timing of resolution of non-accrual loans.
INCOME STATEMENT Quarter Ending Nine Months Ending September 30, September 30, June 30, September 30, September 30, 2007 2006 2007 2007 2006 Interest income $9,364 $8,603 $9,024 $27,156 $22,558 Interest expense 3,691 2,624 3,484 $10,191 $6,439 Net interest income 5,673 5,979 5,540 16,965 16,119 Provision for credit losses 725 800 - 1,000 1,490 Net interest income after provision for credit losses 4,948 5,179 5,540 15,965 14,629 Non-interest income Service charges on deposit accounts 171 205 171 508 518 Fiduciary income 165 125 174 529 427 International trade fees 146 54 133 425 85 Increase in cash surrender value of bank owned life insurance 142 140 137 415 388 Net loss on sale of investment securities - (184) - - (348) Other income 286 317 294 848 949 Total non- interest income 910 657 909 2,725 2,019 Non-interest expense Salaries and employee benefits 2,391 2,166 2,419 7,306 6,316 Net occupancy and equipment expense 592 556 553 1,684 1,582 Data and communication 248 295 210 718 613 Professional fees 454 252 384 1,225 681 Foreclosed asset expense - - 422 422 (36) Interest rate contracts valuation adjustment (245) (67) 506 388 115 Other expenses 752 792 1,050 2,635 2,567 Total non- interest expense 4,192 3,994 5,544 14,378 11,838 Income before provision for income taxes 1,666 1,842 905 4,312 4,810 Provision for income taxes 390 501 232 1,085 1,296 Net income $1,276 $1,341 $673 $3,227 $3,514 Earnings per share: Basic $0.26 $0.27 $0.14 $0.65 $0.73 Diluted $0.25 $0.26 $0.13 $0.62 $0.69 Weighted average shares outstanding: Basic 4,995,073 4,881,525 4,944,457 4,947,019 4,832,629 Diluted 5,161,748 5,131,368 5,191,600 5,172,132 5,084,077 Shares outstanding at period end 5,047,325 4,884,748 4,950,975 5,047,325 4,884,748 Efficiency ratio (1) 63.7% 60.2% 86.0% 73.0% 65.3% Number of full-time equivalent employees 144 129 (1) Non-interest expense divided by net interest income plus non-interest income. Quarter Ending Nine Months Ending September September June September September SELECTED AVERAGES 30, 2007 30, 2006 30, 2007 30, 2007 30, 2006 Average loans $393,133 $337,942 $382,440 $377,579 $306,738 Average interest-earning assets 459,347 401,529 442,845 440,855 370,694 Total average assets 502,056 440,278 485,801 483,164 407,606 Average deposits 428,724 370,263 412,573 410,762 341,598 Average interest-bearing liabilities 340,080 280,545 327,728 323,873 259,177 Average equity 54,457 48,381 53,201 52,979 46,666 SELECTED BALANCE SHEET September September June ACCOUNTS 30, 2007 30, 2006 30, 2007 Total assets $517,026 $456,615 $489,954 Securities available for sale 57,345 54,158 53,454 Loans: Real estate secured: One to four family residential 44,568 39,958 40,938 Multifamily 16,274 15,490 17,560 Construction 79,346 72,576 82,784 Commercial real estate 139,574 128,102 134,976 Total real estate 279,762 256,126 276,258 Commercial and industrial 117,687 85,678 103,260 Consumer and other 2,312 3,575 3,999 399,761 345,379 383,517 Deferred loan fees (920) (1,006) (806) Loans, net of deferred loan fees 398,841 344,373 382,711 Goodwill and other intangibles 1,859 1,899 1,885 Deposits: Non-interest-bearing demand 107,361 118,765 100,084 Savings and interest- bearing demand 121,990 93,198 101,372 Certificates of deposits 212,436 174,846 216,554 Total deposits 441,787 386,809 418,010 Borrowings 1,152 694 1,051 Junior subordinated debentures 12,372 12,372 12,372 Stockholders' equity 56,856 49,940 52,601 Book value per share $11.26 $10.22 $10.62 Tangible book value per share $10.90 $9.83 $10.24 Tier 1 leverage capital ratio (Q3-07 estimated) 13.45% 13.68% 13.27% Quarter Ending Nine Months Ending September September June September September RATIOS ANNUALIZED 30, 2007 30, 2006 30, 2007 30, 2007 30, 2006 Return on average assets 1.01% 1.22% 0.56% 0.89% 1.15% Return on average equity 9.30% 11.09% 5.07% 8.14% 10.04% Return on average tangible equity 9.63% 11.55% 5.26% 8.44% 10.47% Average equity/average assets 10.85% 10.99% 10.95% 10.97% 11.45% Yield on interest-earning assets (TE) 8.20% 8.65% 8.25% 8.35% 8.20% Rate on interest-bearing liabilities 4.31% 3.74% 4.26% 4.21% 3.31% Net interest spread (TE) 3.89% 4.91% 3.99% 4.14% 4.89% Net interest margin (TE) 5.01% 6.04% 5.09% 5.26% 5.88% TE - Tax exempt interest income has been adjusted to a taxable equivalent basis using a 34% tax rate. Quarter Ending Nine Months Ending September September September September ALLOWANCE FOR CREDIT LOSSES 30, 2007 30, 2006 30, 2007 30, 2006 Balance at beginning of period $5,185 $5,367 $4,825 $4,668 Provision for credit losses 725 800 1,000 1,490 Recoveries 222 234 394 293 Charge-offs (32) (918) (119) (968) Balance at end of period $6,100 $5,483 $6,100 $5,483 Components Allowance for loan losses $5,828 $5,208 Liability for unfunded credit commitments 272 275 Total allowance for credit losses $6,100 $5,483 Allowance for loan losses/total loans 1.46% 1.51% Allowance for credit losses/total loans 1.53% 1.59% Allowance for loan losses/non- performing loans 48% 258% Allowance for credit losses/non- performing loans 50% 271% NON-PERFORMING ASSETS September September June 30, 2007 30, 2006 30, 2007 Non-accrual loans $12,220 $2,021 $16,278 Other real estate owned and other foreclosed assets 14 - 618 Total non-performing assets $12,234 $2,021 $16,896 Total non-performing loans to total loans 3.06% 0.59% 4.25% Total non-performing assets/total assets 2.37% 0.44% 3.45%
