LONGVIEW, Wash., Jan. 25 /PRNewswire-FirstCall/ --
Flash Results Cowlitz Bancorporation (Numbers in Thousands, Except Per Share Data) Three Months Ended Twelve Months Ended December 31, September 30, December 31, 2007 2006 2007 2007 2006 Net Interest Income $5,390 $6,256 $5,673 $22,355 $22,375 Net Income (Loss) ($3,141) $1,245 $1,276 $86 $4,759 Diluted EPS ($0.62) $0.24 $0.25 $0.02 $0.93 Total Period End Loans $397,325 $358,390 Total Period End Deposits $441,179 $399,450
Cowlitz Bancorporation today reported a net loss of $3,141,000 or ($0.62) per diluted share for the fourth quarter of 2007, compared with net income of $1,245,000, or $0.24 per diluted share, during the same period of 2006. Net income for the year was $86,000, or $0.02, compared with $4,759,000, or $0.93 per diluted share, for the year 2006.
The Company recorded a provision for credit losses of $6.8 million in the fourth quarter of 2007. This fourth quarter provision equated to $0.85 per diluted share (after-tax) compared with $0.09 per share provision expense for the third quarter of 2007 and $0.15 per share for the fourth quarter of 2006. The Company recorded net loan charge-offs of $6.9 million in the current quarter, primarily related to residential land acquisition and development loans. As of December 31, 2007, the Company's capital level remained significantly above the minimum to be classified as "well-capitalized" under regulatory requirements.
Richard J. Fitzpatrick, President and CEO of Cowlitz Bancorporation and its wholly-owned subsidiary Cowlitz Bank, commented, "The real estate market in the Pacific Northwest has recently shown signs of deterioration, particularly in the Portland, Oregon and Vancouver, Washington markets. Based on the recent weaknesses evident in our local real estate markets, we have taken a conservative approach to evaluating the underlying collateral of our entire loan portfolio."
Total loans were $397.3 million at December 31, 2007, compared with $358.4 million a year ago and $398.8 million at September 30, 2007. Average loans in the fourth quarter of 2007 increased 8% on an annualized basis over average loans in the third quarter of 2007. Average loans for 2007 were 20% higher than average loans in 2006.
At December 31, 2007, non-performing loans as a percentage of total loans were 2.72%, compared with 3.06% at September 30, 2007 and 0.32% at December 31, 2006. Subsequent to year-end, on January 25, 2008, one non-accrual loan totaling $2.5 million was sold without additional loss, reducing non- performing loans as a percentage of total loans to 2.10% on a pro forma basis at December 31, 2007. The Company had two large non-accrual loans totaling $11.9 million at September 30, 2007. One loan was partially charged-off and remained on non-accrual status, and a $2.5 million portion of the second loan was foreclosed on and moved to other real estate owned after recording a $250,000 charge-off. The new loans placed on nonaccrual in the fourth quarter of 2007 primarily related to two real estate collateral dependent loans totaling $4.0 million after charge-offs to bring carrying values in line with current appraisals and management's assessment of collectible amounts.
Non-performing assets totaled $13.1 million at December 31, 2007 compared with $12.2 million at September 30, 2007 and $1.8 million at the end of 2006. As a percentage of total assets, non-performing assets were 2.54% at year-end 2007, compared with 2.37% at September 30, 2007 and 0.38% at year-end 2006.
"We are closely watching our construction and land development loans and recently performed an extensive review of the entire commercial real estate portfolio. Our management team has a significant amount of experience dealing with this sector of our business through all business cycles," stated Ernie D. Ballou, Vice President and Chief Credit Administrator. At December 31, 2007, approximately 24% of the Company's total loans were construction and land development loans. The Company did not have any past due loans in its one-to-four family residential portfolio at the end of 2007. Mr. Ballou went on to say, "We have experienced a significant decline in property values within certain of our lending markets. We believe the actions taken will adequately address our current credit concerns and expect no significant amount of additional losses from the existing non-accrual loans."
The Company's net interest margin was 4.74% in the fourth quarter of 2007, compared with 5.97% in the same quarter last year and 5.01% in the third quarter of 2007. The decline in the fourth quarter 2007 net interest margin related to several factors, including recent Federal Reserve rate cuts, competitive loan and deposit pricing, interest reversals on new nonaccrual loans, as well as a higher level of non-accrual loans. The Company estimates the reduction in the fourth quarter 2007 net interest margin due to interest income reversals of $158,000 was 14 basis points. The average rate paid on interest bearing liabilities in the fourth quarter of 2007 decreased ten basis points to 4.21%, compared with 4.31% in the third quarter of 2007 and 3.90% in the fourth quarter of 2006.
The provision for credit losses was $6,800,000 in the fourth quarter of 2007, compared with $1,150,000 in the fourth quarter of 2006 and $725,000 in the third quarter of 2007. Net charge-offs of $6,910,000 and $6,635,000 were recorded for the three and twelve-month periods ended December 31, 2007, respectively, compared with net charge-offs of $1,808,000 and $2,483,000 for the three and twelve-month periods of 2006. The allowance for loan losses was 1.46% as a percentage of loans outstanding at December 31, 2007, compared with 1.25% at December 31, 2006 and 1.46% at September 30, 2007. Management believes the allowance for loan losses is at an appropriate level based upon their evaluation and analysis of portfolio credit quality and prevailing economic conditions. The allowance for loan losses represented 54% of non- performing loans at year-end 2007.
Non-interest income in the fourth quarter of 2007 was $737,000, compared with $806,000 in the fourth quarter of 2006. The fourth quarter of 2007 included losses on securities transactions of $265,000. Excluding securities transactions, non-interest income increased $196,000 in the fourth quarter of 2007 over the comparable 2006 quarter. The increase was primarily related to revenues from the Company's international trade department.
Non-interest expenses in the fourth quarter of 2007 were $4.3 million, up slightly from the fourth quarter of 2006. Included in the fourth quarter 2007 and 2006 results were non-cash credits of $173,000 and $120,000, respectively, for the ineffective portion of the Company's cash flow hedges. Excluding the amounts related to hedge ineffectiveness from the fourth quarter of 2006 and 2007 and third quarter of 2007, expenses were higher in the fourth quarter of 2007 primarily due to costs associated with recruiting additional lenders, FDIC deposit insurance assessments incurred as carry forward assessment credits were fully utilized, and the establishment of a valuation reserve on interest receivable related to a nonperforming USDA guaranteed loan acquired in the fourth quarter of 2005 with Asia-Europe-Americas Bank.
The Company's hedges provide a floor or fixed rate yields ranging from 7.50% to 7.76% on $125 million of variable rate loans compared with the current prime rate of 6.50%. To the extent the Company's hedges are ineffective in hedging interest income cash flows from variable rate loans, the ineffectiveness is recognized in the income statement and included in non- interest expenses. The fair value of the Company's interest rate contracts increased substantially as of the end of the fourth quarter of 2007 to $4.3 million. The Company has recorded cumulative unrealized gains, net of taxes, of $2.4 million as other comprehensive income included in stockholders' equity as of December 31, 2007.
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, 2007, and other filings with the SEC. We make forward-looking statements in this release related to the 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 Twelve Months Ending December December September December December 31, 31, 30, 31, 31, 2007 2006 2007 2007 2006 Interest income $9,070 $9,080 $9,364 $36,226 $31,638 Interest expense 3,680 2,824 3,691 13,871 9,263 Net interest income 5,390 6,256 5,673 22,355 22,375 Provision for credit losses 6,800 1,150 725 7,800 2,640 Net interest income after provision for credit losses (1,410) 5,106 4,948 14,555 19,735 Non-interest income Service charges on deposit accounts 175 177 171 683 695 Fiduciary income 163 175 165 692 602 International trade fees 219 42 146 644 127 Increase in cash surrender value of bank owned life insurance 155 128 142 570 516 Net loss on sale of investment securities (265) - - (265) (348) Other income 290 284 286 1,138 1,233 Total non-interest income 737 806 910 3,462 2,825 Non-interest expense Salaries and employee benefits 2,182 2,251 2,391 9,488 8,567 Net occupancy and equipment expense 596 528 592 2,280 2,110 Data and communication 241 264 248 959 877 Professional fees 354 450 454 1,579 1,131 Foreclosed asset expense 25 - - 447 (36) Equity in limited partnerships (gains)losses 47 92 (77) 56 195 Interest rate contracts valuation adjustment (173) (120) (245) 215 (5) Other expenses 1,071 796 829 3,697 3,260 Total non-interest expense 4,343 4,261 4,192 18,721 16,099 Income (loss) before provision for income taxes (5,016) 1,651 1,666 (704) 6,461 Provision (benefit) for income taxes (1,875) 406 390 (790) 1,702 Net income (loss) $(3,141) $1,245 $1,276 $86 $4,759 Earnings (loss) per share: Basic $(0.62) $0.25 $0.26 $0.02 $0.98 Diluted $(0.62) $0.24 $0.25 $0.02 $0.93 Weighted average shares outstanding: Basic 5,048,102 4,885,247 4,995,073 4,972,498 4,845,892 Diluted 5,176,350 5,141,564 5,161,696 5,175,526 5,098,334 Shares outstanding at period end 5,054,437 4,889,323 5,047,325 5,054,437 4,889,323 Efficiency ratio (1) 70.9% 60.3% 63.7% 72.5% 63.9% Number of full-time equivalent employees 146 135 (1) Non-interest expense divided by net interest income plus non-interest income. Quarter Ending Twelve Months Ending December December September December December SELECTED AVERAGES 31, 31, 30, 31, 31, 2007 2006 2007 2007 2006 Average loans $400,979 $357,696 $393,133 $383,477 $319,577 Average interest- earning assets 462,604 424,505 459,347 446,337 384,251 Total average assets 507,745 465,119 502,056 489,141 422,133 Average deposits 429,657 394,604 428,724 415,301 354,958 Average interest- bearing liabilities 346,464 289,777 340,080 329,344 266,891 Average equity 56,757 50,533 54,457 53,932 47,642 SELECTED BALANCE SHEET December December September ACCOUNTS 31, 31, 30, 2007 2006 2007 Total assets $514,431 $468,395 $517,026 Securities available for sale 51,578 57,688 57,345 Loans (bank regulatory classification): Real estate secured: One to four family residential 41,599 39,238 42,599 Multifamily 9,937 11,311 11,248 Construction 97,447 98,278 95,566 Commercial real estate 146,348 127,026 148,111 Total real estate 295,331 275,853 297,524 Commercial and industrial 99,264 80,164 98,532 Consumer and other 3,924 3,451 3,705 398,519 359,468 399,761 Deferred loan fees (1,194) (1,078) (920) Loans, net of deferred loan fees 397,325 358,390 398,841 Goodwill and other intangibles 1,833 1,938 1,859 Deposits: Non-interest-bearing demand 91,662 107,943 107,361 Savings and interest- bearing demand 122,450 95,861 121,990 Certificates of deposits 227,067 195,646 212,436 Total deposits 441,179 399,450 441,787 Borrowings 1,179 738 1,152 Junior subordinated debentures 12,372 12,372 12,372 Stockholders' equity 55,791 50,725 56,856 Book value per share $11.04 $10.37 $11.26 Tangible book value per share $10.68 $9.98 $10.90 Tier 1 leverage capital ratio (Q4-07 estimated) 13.49% 13.14% 13.30% Quarter Ending Twelve Months Ending RATIOS ANNUALIZED December December September December December 31, 31, 30, 31, 31, 2007 2006 2007 2007 2006 Return on average assets -2.45% 1.05% 1.01% 0.02% 1.13% Return on average equity -21.96% 9.63% 9.30% 0.16% 9.99% Return on average tangible equity -22.70% 10.01% 9.63% 0.17% 10.34% Average equity/average assets 11.18% 10.86% 10.85% 11.03% 11.29% Yield on interest- earning assets (TE) 7.90% 8.63% 8.20% 8.23% 8.31% Rate on interest- bearing liabilities 4.21% 3.90% 4.31% 4.21% 3.47% Net interest spread (TE) 3.69% 4.73% 3.89% 4.02% 4.84% Net interest margin (TE) 4.74% 5.97% 5.01% 5.12% 5.90%
TE - Tax exempt interest income has been adjusted to a taxable equivalent basis using a 34% tax rate.
Quarter Ending Twelve Months Ending ALLOWANCE FOR CREDIT December December December December LOSSES 31, 31, 31, 31, 2007 2006 2007 2006 Balance at beginning of period $6,100 $5,483 $4,825 $4,668 Provision for credit losses 6,800 1,150 7,800 2,640 Recoveries 41 15 435 308 Charge-offs (6,951) (1,823) (7,070) (2,791) Balance at end of period $5,990 $4,825 $5,990 $4,825 Components Allowance for loan losses $5,801 $4,481 Liability for unfunded credit commitments 189 344 Total allowance for credit losses $5,990 $4,825 Allowance for loan losses/total loans 1.46% 1.25% Allowance for credit losses/total loans 1.51% 1.35% Allowance for loan losses/non-performing loans 54% 394% Allowance for credit losses/non-performing loans 55% 424% NON-PERFORMING ASSETS December December September 31, 31, 30, 2007 2006 2007 Non-accrual loans $10,827 $1,137 $12,220 Other real estate owned and other foreclosed assets 2,250 622 14 Total non-performing assets $13,077 $1,759 $12,234 Total non-performing loans to total loans 2.72% 0.32% 3.06% Total non-performing assets/total assets 2.54% 0.38% 2.37%
