Cooperative Bankshares, Inc. Reports 26% Increase in First Quarter Earnings
May 20 2009 - 4:36PM
Business Wire
Cooperative Bankshares, Inc. (NASDAQ: COOP) (the �Company�), the
parent company of Cooperative Bank (the �Bank�), reported net
income for the quarter ended March 31, 2009 of $949,000, or $0.14
per diluted share, an increase of 26.2% over the same quarter last
year. Net income for the quarter ended March 31, 2008 was $752,000,
or $0.11 per diluted share. The increase in net income during the
first quarter of 2009 compared to the prior year period was mainly
due to a tax benefit recognized as a result of a decrease to the
valuation allowance on the Company�s net deferred tax asset and a
reduction of compensation and fringe benefits, partially offset by
a reduction in net interest income and an increase in the provision
for loan losses. The Company reported a tax benefit of $1.6 million
on an operating loss of $642,000 for the quarter ended March 31,
2009 compared to a tax expense of $359,000 on an operating profit
of $1.1 million for the quarter ended March 31, 2008. Net deferred
tax asset before any valuation allowance decreased from $13.8
million at December 31, 2008 to $12.8 million at March 31, 2009,
primarily as a result of a decrease to the allowance for loan
losses during this period due to net charge offs exceeding the
provision for loan losses. The Company recorded a tax benefit of
$1.0 million due to a reduction of the valuation allowance on the
decreased balance of the net deferred tax asset. The Company was
also able to record a tax benefit on its operating loss for the
first quarter of 2009. Compensation and fringe benefits decreased
to $1.7 million during the first quarter of 2009 compared to $3.3
million for the same period a year earlier. Most of this decrease
is related to the $1.1 million reversal of the EITF 06-4 accrual as
a result of the Company�s decision, with agreement from the
directors and applicable executive officers, to surrender select
bank-owned life insurance policies during the first quarter of 2009
as disclosed in the Company�s Annual Report on Form 10-K for the
year ended December 31, 2008. The remainder of the decrease in
compensation and fringe benefits is related to salary and benefit
reductions implemented in the fourth quarter of 2008 or in the
first quarter of 2009. Net interest income for the quarter ended
March 31, 2009 was $4.8 million compared to $6.3 million for the
quarter ended March 31, 2008. The decrease in net interest income
for the three months ended March 31, 2009 from the prior year
period was primarily caused by a reduction in the interest rate
spread of 62 basis points. This decrease is primarily attributable
to action taken by the Federal Reserve to reduce interest rates by
400 basis points during 2008, which had a corresponding effect on
market rates of interest, and an increase in non-accrual loans at
March 31, 2009, which accounted for a 27 basis point decrease in
the interest rate spread during the quarter ended March 31, 2009.
As a result of these rate reductions, the Bank�s loan portfolio has
repriced faster than deposits, causing a decline in net interest
income. The provision for loan losses increased to $2.0 million for
the quarter ended March 31, 2009 compared to $855,000 for the
quarter ended March 31, 2008. The increase in the provision for
loan losses during the first quarter of 2009 was primarily the
result of an increase in valuation allowances for the recorded
investment in nonperforming loans compounded by the decline of real
estate collateral values as a result of the deterioration of the
economy. At March 31, 2009 and 2008, the recorded investment in
nonperforming loans was $84.0 million and $8.8 million,
respectively, with corresponding valuation allowances of $8.8
million and $706,000, respectively. The provision for loan losses
was also affected by a decrease in the allowance allocated to the
remainder of the portfolio, primarily due to a decrease in loans
during the quarter ended March 31, 2009. �The decline in real
estate values and the economic environment continues to be a
challenge, but we are beginning to see the benefits in several of
the changes that we have implemented, including cost cutting
measures and working with our troubled assets,� said Todd L.
Sammons, the Company�s Chief Financial Officer and Interim
President and Chief Executive Officer.
Total assets increased to $967.3 million at March 31, 2009
compared to $951.0 million at December 31, 2008. Asset growth was
primarily the result of an increase in cash and cash equivalents
from the payoff of loans held for investment, the sales of loans
held for sale, the surrender of select bank-owned life insurance
policies, and an increase in deposits. Cash and cash equivalents
increased to $63.7 million at March 31, 2009 compared to $7.9
million at December 31, 2008, representing an improvement in the
Bank�s liquidity position. Loans decreased to $842.9 million at
March 31, 2009 compared to $871.2 million at December 31, 2008. For
the three-month period ended March 31, 2009, the bulk of the
decrease in the loan portfolio occurred in one-to-four family
loans, which decreased $17.1 million (3.4%), and construction and
land development loans, which decreased $5.4 million (3.5%). The
Bank halted or slowed the origination of loans held for investment
beginning in the last quarter of 2008 to comply with the previously
announced regulatory directives and to improve its capital ratios.
Deposits at March 31, 2009 increased $72.3 million for the quarter,
partially offset by a reduction in borrowings of $56.1 million. The
increase in deposits is primarily the result of growth in internet
deposits which grew by $97.6 million during the first quarter of
2009. Due to the current economic environment, the Company�s
nonperforming assets, which consist of loans ninety days or more
delinquent, non-accrual loans, troubled-debt restructurings,
nonperforming investments, and foreclosed real estate owned,
increased to $99.2 million at March 31, 2009 compared to $91.6
million at December 31, 2008. All foreclosed real estate owned has
been appraised and is recorded at the estimated fair value of the
property less estimated costs to sell. At March 31, 2009,
stockholders� equity was $20.5 million, or $3.11 per share, and
represented 2.12% of assets, compared to $19.6 million, or $2.97
per share, representing 2.06% of assets at December 31, 2008. In
order to achieve compliance with its regulatory directives, among
other things, the Company and the Bank must hire a new chief
executive officer and must either raise capital, sell assets, or
both. The Company is actively engaged in a national search for a
new chief executive officer, has interviewed numerous candidates
and, subject to the approval of its regulators, intends to appoint
a new chief executive officer as soon as possible. Additionally, as
previously reported, the Company is undertaking certain actions
designed to improve its capital position and has engaged financial
advisors to assist with this effort and to evaluate the Company�s
strategic options, including a possible sale or merger of the
Company and/or possible sale of certain of the Bank�s assets. As of
the date of this press release, the Company believes that it needs
to raise a minimum of $30.0 million of additional capital, assuming
no�change in�risk-weighted assets or its capital position, in order
to be capitalized at the levels required by the regulatory
directives. To date, the Company has neither raised any additional
capital nor agreed to a sale of the Company, the Bank, or any Bank
assets (other than Bank loans) and no assurances can be made as to
when or whether such capital will be raised or whether the Company
will be successful in negotiating a sale of the Company or any of
its assets.
Chartered in 1898, Cooperative Bank provides a full range of
financial services through twenty-two offices in North Carolina and
three offices in South Carolina. The Bank�s subsidiary, Lumina
Mortgage, Inc., is a mortgage banking firm, originating and selling
residential mortgage loans through three offices in North
Carolina.
Statements in this news release that are not historical facts
are forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements,
which contain words such as �expects,� �intends,� �believes� or
words of similar import, are subject to numerous risks and
uncertainties disclosed from time to time in documents the Company
files with the SEC, which could cause actual results to differ
materially from the results currently anticipated. Undue reliance
should not be placed on such forward-looking statements.
The Company has filed a Form 8-K with the SEC containing
additional financial information regarding the three-month period
ended March 31, 2009.
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