(Source: Business Wire)
Capital Corp of the West (NASDAQ:CCOW), parent company of County Bank, today announced a third quarter net loss of $54.6 million, or $5.04 per diluted share, compared to net income of $6.0 million, or $0.55 per diluted share, for the third quarter of 2007. Third quarter results were negatively impacted by significant non-cash charges corresponding to a goodwill impairment of $23.5 million and an increase in the deferred tax valuation allowance of $25.3 million. These non-cash charges only partially impacted the Bank's regulatory capital and the Bank remains adequately capitalized.
In addition to the non-cash charges, the Company also recorded a loan loss provision of $11.5 million in the third quarter of 2008. As previously disclosed on November 12, 2008, the Company required additional time preparing its third quarter of 2008 results in order to complete the proper accounting of the Company's goodwill, deferred tax assets and loan loss provisions.
Excluding the goodwill impairment and deferred tax valuation allowance non-cash charges, the Company would have reported a third quarter net loss of $5.8 million. While not a normal accounting measurement, this figure is included to provide additional insight into the impact of the Company's non-cash charges on its third quarter financial statements.
"A limited number of specific and complex accounting issues related to the proper accounting of the Company's goodwill and deferred tax assets necessitated these significant non-cash balance sheet adjustments in the third quarter that, when combined with additional loan loss provisions, contributed to the net loss,"said Richard S. Cupp, Chief Executive Officer, Capital Corp of the West and County Bank.
Any future reductions in the deferred tax valuation allowance will have a positive impact on the Company's net income, regulatory capital and stockholders'equity. The deferred tax asset has now been reduced to an amount that can be realized only through the carryback of tax losses to prior year federal tax returns.
"At the heart of the matter is the fact that the Central Valley has undergone a violent property value correction that has dramatically eroded the Company's operating results. That said, the Central Valley still has many terrific things going for it and I am confident that, given the necessary time, it will recover from this market correction in no small part because of its resilient and hard-working residents and business owners, the very people County Bank has been serving since 1977,"said Cupp.
County Bank never carried any of the subprime mortgages that have plagued some of the nation's top lenders and its direct exposure to residential real estate loans is minimal. However, the Bank does have significant exposure to construction and partially developed land for residential development purposes and has received numerous real estate appraisals that indicate declines in appraised values of more than 50% throughout the Central Valley and, in certain specific instances, declines of 70% or more.
The Bank increased net deposit accounts by 4,879 during the first nine months of 2008 with 75.4% of those net deposit accounts represented by low-cost checking accounts. Service charges on deposit accounts increased 22.3% during the third quarter and 20.9% through the nine months ended September 30, 2008 as a result of the Bank's retail branch acquisition in the fourth quarter of 2007 as well as the Bank's organic growth during the first nine months of 2008, increased Bank fees and reduced waivers on service charges.
