EX-99.1 2 f8kcwlz3qeaex991.htm EXHIBIT 99.1 f8kcwlz3qeaex991.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EXHIBIT 99.1
October 25, 2007 2:00 p.m. Pacific Time

Company Press Release

SOURCE:

CONTACTS:

Cowlitz Bancorporation

Richard J. Fitzpatrick, Chief Executive Officer Gerald L. Brickey, Chief Financial Officer (360) 423-9800

Cowlitz Bancorporation Reports Third Quarter 2007 Earnings Per Share of $0.25, Compared with $0.26 a Year Ago. Loan Growth Remains Strong.

LONGVIEW, Wash., Oct. 25, 2007 /PRNewswire/ --

Flash Results
Cowlitz Bancorporation (NASDAQ: CWLZ)
(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 (NASDAQ: CWLZ - news) 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,                   September 30,         September 30,  
        2007         2006         June 30, 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 30,         September 30,                   September 30,        September 30, 
SELECTED AVERAGES        2007         2006         June 30, 2007                  2007        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 
 
        September 30,         September 30,                            
SELECTED BALANCE SHEET ACCOUNTS        2007         2006         June 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 )        (1,106 )        (806 )                 
 Loans, net of deferred loan fees        398,841         344,273         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 30,         September 30,                   September 30,     September 30,  
RATIOS ANNUALIZED        2007         2006         June 30, 2007         2007     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 30,         September 30,         September 30,         September 30,        
ALLOWANCE FOR CREDIT LOSSES        2007         2006         2007         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 %       
 
                  September 30,         September 30,                  
NON-PERFORMING ASSETS                  2007         2006         June 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 %