Virginia Commerce Bancorp, Inc. (the �Company�), (Nasdaq:VCBI),
parent company of Virginia Commerce Bank (the �Bank�), today
reported its financial results for the three months ended March 31,
2008. First Quarter 2008 Results: Net income of $4.2 million,
representing a 35.9% decrease from first quarter 2007 Diluted
earnings per share down 37.5% to $0.15 Total non-performing assets
and loans past due 90+ days rising to 1.01% of total assets, with
net-charge-offs of 0.05% Assets, loans and deposits up 21.3%, 23.3%
and 18.1%, respectively, year-over-year Total assets surpassing
$2.5 billion for the first time Twenty-fifth branch opened, second
in Fredericksburg, Virginia Peter A. Converse, Chief Executive
Officer, commented, �Obviously, we are disappointed with the
increase in non-performing assets and the resulting decline in
earnings from higher loan loss provisioning, caused by the downturn
in the residential real estate market. However, we feel we have a
good grasp on the magnitude of risk in our real estate loan
portfolio and are confident that we can navigate successfully
through this challenging economic environment. We believe our risk
management practices and monitoring systems will mitigate further
deterioration in the loan portfolio, and by taking quick and
decisive action to strengthen our reserves and address current and
foreseeable asset quality issues, we expect to remain
well-positioned to pursue our long-term growth and earnings goals.
I note that the current challenge to our earnings performance is
largely limited to risks associated with the residential portion of
our acquisition, construction and development loans (approximately
16% of our loan portfolio). We have avoided other industry pitfalls
such as sub-prime loans, collateralized debt obligations and
structured investment vehicles. Converse continued, �Of a more
positive nature, our banking operations remain profitable despite
heightened loan loss provisioning and our underlying business
remains strong. At quarter-end, we surpassed another milestone with
total assets exceeding $2.5 billion and realized continued
double-digit growth in loans, deposits and assets. Growth
opportunities for our franchise were further enhanced by the
opening of our Central Park branch in Fredericksburg, our second in
that market and twenty-fifth overall. We continue to be
well-capitalized within regulatory guidelines and are committed to
maintain our capital strength as we continue to grow and weather
the current economic downturn. To that end, we are evaluating
various capital raising options for near-term utilization.� SUMMARY
REVIEW OF FINANCIAL PERFORMANCE Net Income First quarter earnings
of $4.2 million were down $2.3 million, or 35.9%, from 2007 first
quarter earnings of $6.5 million. On a diluted per share basis, as
adjusted for a 10% stock dividend payable May 8, 2008, first
quarter earnings were $0.15 compared to $0.24 for the first quarter
of 2007, a decrease of 37.5%. Earnings for the three months ended
March 31, 2008, were significantly impacted by $4.1 million in loan
loss provisions. The higher provision was a result of increases in
the level of nonperforming assets and other impaired loans, $946
thousand in net charge-offs, and overall loan portfolio growth.
Asset Quality and Provisions For Loan Losses Provisions for loan
losses were $4.1 million for the three months ended March 31, 2008,
compared to $360 thousand for the same period in 2007. This was due
to an increase in non-performing assets and loans 90+ days past due
from $4.4 million at December 31, 2007, to $25.2 million, $946
thousand in net charge-offs, and higher net loan growth of $158.4
million for the first quarter of 2008 as compared to growth of
$59.8 million for the prior year quarter. Loan growth in the
quarter accounted for $1.2 million of the loan loss provisioning.
Other impaired loans, which, although well-secured and currently
performing, but in some instances requiring higher reserve levels,
increased from $15.4 million at December 31, 2007, to $37.8 million
at March 31, 2008. As a result, the allowance for loan losses to
total loans increased from 1.14% at December 31, 2007, to 1.20% as
of March 31, 2008. As noted, nonperforming assets and loans 90+
days past due increased by approximately $20.8 million, to 1.01% of
total assets. The increase is primarily due to deterioration in
five lending relationships, four of which represent residential
construction and/or land development projects and one of which
represents a manufacturing concern tied to the production housing
industry. During the quarter, the Bank foreclosed on a Loudoun
County, Virginia property containing 34 raw single-family lots and
one single-family dwelling, resulting in a charge-off of $219
thousand. The Bank is carrying the property at its current �as is�
appraised value of $5.7 million and intends to sell the finished
home and complete development of the lots which, based upon a
discounted value at completion, should result in a full recovery. A
second builder relationship of $9.0 million consists of five loans
on three single-family lots, a home under construction, a completed
home under contract scheduled to close in April and the builder�s
personal residence, all located in Great Falls, Oakton and McLean,
Virginia. These loans are fully secured based upon current
appraisals. A related loan totaling $2.1 million is impaired, but
performing, and secured by 13 townhouses under construction. The
third and fourth relationships represent two separate transactions
totaling $3 million, involving a home under construction in Loudoun
County, Virginia, and a single-family parcel in Fairfax, Virginia,
where the lot yield is in litigation. An aggregate of $1 million in
specific reserves are set aside for these loans. The fifth
relationship represents lines of credit, term loans and equipment
loans totaling $4.1 million to a building product fabricator
selling to the production housing industry and home improvement
retailers. This business is downsizing by closing unprofitable
operating locations. Related loans totaling $2.5 million to
profitable locations are impaired but, performing. Specific
reserves of $1.3 million have been provided for this relationship.
Net charge-offs for the quarter of $946 thousand, or 0.05% of
average loans outstanding, included the aforementioned $219
thousand relating to the foreclosure, with the balance spread among
six small commercial loans totaling $706 thousand, and several
consumer loans. Collection of the small commercial loans was
negatively impacted by a decline in residential property values
which represented secondary collateral. As the Bank works through
the process of resolving its non-performing loans, additional
charge-offs are anticipated. However, a majority of these
charge-offs have been addressed by specific reserves already
established and should not require significant additional
provisions. Overall, charge-offs are not anticipated to exceed
0.25% of average loans outstanding, in the aggregate, for the
remainder of the year and non-performing assets are not anticipated
to exceed current levels. These asset quality metrics could vary
depending on evolving real estate market conditions. Net Interest
Income Net interest income for the first quarter of $19.5 million
was up 8.8% over the same quarter last year due to strong loan
growth, as the net interest margin declined from 3.74% in the first
quarter of 2007 to 3.34% for the three-month period ended March 31,
2008. On a sequential basis, the margin was down nineteen basis
points from 3.53% in the fourth quarter of 2007. The declines in
the net interest margin continue to be primarily the result of
lower yields on loans due to reductions in the prime rate from
8.25% in September 2007, to 5.25% presently, with a 200 basis point
decline in the quarter ended March 31, 2008. As a result, the yield
on loans fell from 7.98% for the three months ended March 31, 2007,
to 7.10% in the current period, and was down fifty-five basis
points sequentially. On the funding side, ongoing strong
competition for deposits in the local market has not allowed for
the same level of decline in the cost of interest-bearing
liabilities, which declined from 4.45% for the three months ended
March 31, 2007, to 4.06% this quarter. Although it is expected that
the Federal Open Market Committee will cut rates further,
Management expects that the effect of future declines in the Fed
funds rate will be mitigated as over $100 million of approximately
$570 million in prime based loans have reached floor levels, and
over $850 million in time deposits mature and are expected to be
replaced with lower rate liabilities over the next six months. As a
result, Management anticipates the margin will range from 3.25% to
3.50% over that time period. Non-Interest Income Non-interest
income for the first quarter was down $231 thousand, or 12.4%, from
$1.9 million in 2007, to $1.6 million with decreases in all
categories except for an $81 thousand increase in deposit account
service charges. Compared to the three months ended December 31,
2007, non-interest income was lower by $189 thousand. Reduced fees
and net gains on mortgage loans held-for-sale account for the
majority of decreased non-interest income, due to lower levels of
originations being sold. Non-Interest Expense Non-interest expense
increased $1.3 million, or 13.7%, from $9.5 million in the first
quarter of 2007, to $10.8 million in the current period, and was up
$384 thousand from the three months ended December 31, 2007. The
majority of the year-over-year increase was due to the opening of
five new branch locations and the resumption of FDIC insurance
premiums in the second quarter of 2007, while the increase in the
current period was mostly associated with the opening of the Bank�s
twenty-fifth branch in January 2008. As a result of these increases
in expenses, as well as slower growth in net-interest income and
lower non-interest income, the efficiency ratio rose from 48.0% in
the first quarter of 2007 to 51.2% in the current period.
Management expects higher levels in all non-interest expense
categories in the second quarter with the opening of the Bank�s
twenty-sixth branch on April 21. Loans Loans, net of allowance for
loan losses, increased $393.5 million, or 23.3%, from $1.7 billion
at March 31, 2007, to $2.1 billion at March 31, 2008. Non-farm,
non-residential real estate loans increased $228.2 million, or
32.6%, one-to-four family residential loans increased $88.0
million, or 44.4%, commercial loans were up $59.7 million, or
30.7%, while real estate construction loans rose only $17.3
million, or 3.1%. Since December 31, 2007, loans are up $158.4
million, or 32.9%, on an annualized basis, with non-farm
non-residential loans up $92.1 million, construction loans up $29.7
million and one-to-four family residential loans up $19.9 million.
Increases in one-to-four family residential loans are due to the
Bank holding more of its originations in portfolio rather than
selling them, due to a reduction in demand and available products
in the secondary market, while the growth in construction loans was
concentrated in commercial real estate projects. Year-over-year,
residential construction loans are down $46.0 million. Deposits
Since March 31, 2007, deposits have increased $309.8 million, or
18.1%, from $1.7 billion to $2.0 billion, with savings and
interest�bearing demand deposits increasing by $52.8 million, or
10.9%, and time deposits rising $257.1 million, or 24.9%.
Sequentially, deposits rose $151.5 million, or 32.4%, on an
annualized basis, with demand deposits decreasing by $21.7 million,
savings and interest-bearing demand accounts growing $21.7 million,
and time deposits increasing by $151.5 million. Repurchase
Agreements and Fed Funds Purchased Repurchase agreements, the
majority of which represent sweep funds of significant commercial
demand deposit customers, and Fed funds purchased increased $77.5
million, or 52.5%, year-over-year, to $225.1 million at March 31,
2008. Of the total increase, $50 million represents a structured
repurchase agreement with a correspondent bank. Since December 31,
2007, repurchase agreements and Fed funds purchased are up $2.6
million. Investment Securities Investment securities increased
$64.1 million, or 24.8%, from $258.8 million at March 31, 2007, to
$322.9 million at March 31, 2008, and were down slightly during the
three months ended March 31, 2008. The majority of the
year-over-year growth in securities was concentrated in
pass-throughs and CMOs issued by U.S. government agencies, and
various bank-qualified municipals. The Bank does not hold any
collateralized debt obligations or non-government agency
pass-throughs in its portfolio. Other Borrowed Funds
Year-over-year, other borrowed funds increased $25 million due to
an advance from the Federal Home Loan Bank of Atlanta.
Stockholders� Equity Stockholders� equity increased $28.5 million,
or 19.4%, from $146.8 million at March 31, 2007, to $175.2 million
at March 31, 2008, with earnings of $23.5 million over the
twelve-month period, a $3.3 million increase in other comprehensive
income related to the investment securities portfolio, and $1.7
million from proceeds and tax benefits related to the exercise of
options by company directors, officers and employees and stock
option expense credits. On March 26, 2008, the Company declared a
10% stock dividend to be paid on May 7, 2008, to stockholders of
record as of the close of business on April 14, 2008. This will be
the thirteenth consecutive year that a stock dividend or split has
been paid. Although the Company and the Bank remain
well-capitalized for regulatory purposes, the Company is
proactively considering the impact of current market conditions and
balance sheet growth on the adequacy of capital, and reviewing
alternatives to maintain and enhance our capital position.
CONFERENCE CALL Virginia Commerce Bancorp will host a
teleconference call for the financial community on April 24, 2008,
at 11:00 a.m. Eastern Daylight Time to discuss the first quarter
2008 financial results. The public is invited to listen to this
conference call by dialing 866-847-7860 at least 10 minutes prior
to the call. A replay of the conference call will be available from
2:00 p.m. Eastern Daylight Time on April 24, 2008, until 11:59 p.m.
Eastern Daylight Time on May 1, 2008. The public is invited to
listen to this conference call replay by dialing 888-266-2081 and
entering access code 1228856. ABOUT VIRGINIA COMMERCE BANCORP
Virginia Commerce Bancorp, Inc. is the parent bank holding company
for Virginia Commerce Bank, a Virginia state chartered bank that
commenced operations in May 1988. The Bank pursues a traditional
community banking strategy, offering a full range of business and
consumer banking services through twenty-six branch offices, two
residential mortgage offices and two investment services offices,
principally to individuals and small-to-medium size businesses in
Northern Virginia and the Metropolitan Washington, D.C. area.
NON-GAAP PRESENTATIONS This press release refers to the efficiency
ratio, which is computed by dividing non-interest expense by the
sum of net interest income on a tax equivalent basis and
non-interest income. This is a non-GAAP financial measure that we
believe provides investors with important information regarding our
operational efficiency. Comparison of our efficiency ratio with
those of other companies may not be possible because other
companies may calculate the efficiency ratio differently. The
Company, in referring to its net income, is referring to income
under accounting principals generally accepted in the United
States, or �GAAP�. FORWARD LOOKING STATEMENTS This press release
may contain forward-looking statements within the meaning of the
Securities and Exchange Act of 1934, as amended, including
statements of goals, intentions, and expectations as to future
trends, plans, events or results of Company operations and policies
and regarding general economic conditions. In some cases,
forward-looking statements can be identified by use of words such
as �may,� �will,� �anticipates,� �believes,� �expects,� �plans,�
�estimates,� �potential,� �continue,� �should,� and similar words
or phrases. These statements are based upon current and anticipated
economic conditions, nationally and in the Company�s market,
interest rates and interest rate policy, competitive factors, and
other conditions which by their nature, are not susceptible to
accurate forecast, and are subject to significant uncertainty.
Because of these uncertainties and the assumptions on which this
discussion and the forward-looking statements are based, actual
future operations and results may differ materially from those
indicated herein. Readers are cautioned against placing undue
reliance on any such forward-looking statements. The Company�s past
results are not necessarily indicative of future performance.
Virginia Commerce Bancorp, Inc. Financial Highlights (Dollars in
thousands, except per share data) (Unaudited) � � � Three Months
Ended March 31, 2008 � 2007 � % Change Summary Operating Results:
Interest and dividend income $ 40,063 $ 36,107 11.0% Interest
expense 20,598 18,218 13.1% Net interest and dividend income 19,465
17,889 8.8% Provision for loan losses 4,112 360 1142.2%
Non-interest income 1,631 1,862 -12.4% Non-interest expense 10,792
9,489 13.7% Income before income taxes 6,192 9,902 -37.5% Net
income $ 4,148 $ 6,474 -35.9% � Performance Ratios: Return on
average assets 0.69% 1.31% Return on average equity 9.61% 18.37%
Net interest margin 3.34% 3.74% Efficiency ratio (1) 51.16% 48.04%
� Per Share Data: (2) Net income-basic $ 0.16 $ 0.25 -36.0% Net
income-diluted $ 0.15 $ 0.24 -37.5% Average number of shares
outstanding: Basic 26,532,920 26,274,494 Diluted 27,269,248
27,446,962 � � As of March 31, 2008 � 2007 � % Change Selected
Balance Sheet Data: Loans, net $ 2,083,149 $ 1,689,670 23.3%
Investment securities 322,880 258,779 24.8% Assets 2,501,358
2,061,544 21.3% Deposits 2,020,614 1,710,775 18.1% Stockholders�
equity 175,241 146,772 19.4% Book value per share (2) $ 6.60 $ 5.59
18.0% � Capital Ratios (% of risk weighted assets): Tier 1 capital:
Company 9.39% 10.42% Bank 7.58% 7.84% Total qualifying capital:
Company 10.51% 11.43% Bank 10.47% 11.21% � Asset Quality:
Non-performing assets: Non-accrual loans $ 17,480 $ 3,866 452.1%
OREO � 5,720 � -- N/A Total non-performing assets $ 23,200 $ 3,866
600.1% Loans 90+ days past due and still accruing � 2,000 � -- N/A
Total non-performing assets and past due loans $ 25,200 $ 3,866
651.8% � Non-performing assets to total loans: 1.10% 0.23% to total
assets: 0.93% 0.19% Non-performing assets and past due loans to
total loans: 1.19% 0.23% to total assets: 1.01% 0.19% Allowance for
loan losses to total loans 1.20% 1.08% Net charge-offs (recoveries)
$ 946 $ 18 Net charge-offs to average loans outstanding 0.05%
0.001% � � As of March 31, 2008 � 2007 � % Change Loan Portfolio:
Commercial $ 254,294 $ 194,552 30.7% Real estate-one-to-four family
residential 286,255 198,283 44.4% Real estate-multi-family
residential 62,321 58,234 7.0% Real estate-nonfarm, nonresidential
927,607 699,362 32.6% Real estate-construction 574,011 556,692 3.1%
Farmland 1,686 -- 100.0% Consumer � 7,700 � 6,235 23.5% Total loans
$ 2,113,874 $ 1,713,358 23.4% Less unearned income 5,299 5,245 1.0%
Less allowance for loan losses � 25,426 � 18,443 37.9% Loans, net $
2,083,149 $ 1,689,670 23.3% � Investment Securities (at book
value): Available-for-sale: U.S. Government Agency obligations $
243,490 $ 193,069 26.1% Domestic corporate debt obligations 7,792
6,040 29.0% Obligations of states and political subdivisions 23,319
9,987 233.5% Restricted stock: Federal Reserve Bank 1,442 1,442 --
Federal Home Loan Bank 5,334 3,506 52.1% Community Bankers� Bank �
55 � 55 -- $ 281,432 $ 214,099 31.4% Held-to-maturity: U.S.
Government Agency obligations $ 22,445 $ 34,313 -34.6% Obligations
of states and political subdivisions � 19,003 � 10,367 83.3% $
41,448 $ 44,680 -7.2% (1) Computed by dividing non-interest expense
by the sum of net interest income on a tax equivalent basis using a
35% rate and non-interest income. � (2) Adjusted to give effect to
a 10% stock dividend payable May 7, 2008. � � Virginia Commerce
Bancorp, Inc. Consolidated Balance Sheets (Dollars in thousands,
except per share data) As of March 31, (Unaudited) � � 2008 � 2007
Assets Cash and due from banks $ 34,785 $ 23,640 Interest-bearing
deposits with other banks 1,154 1,094 Securities (fair value: 2008,
$323,698; 2007, $258,116) 322,880 258,779 Federal funds sold --
37,159 Loans held-for-sale 3,432 8,202 Loans, net of allowance for
loan losses of $25,426 in 2008 and $18,443 in 2007 2,083,149
1,689,670 Bank premises and equipment, net 13,463 10,113 Accrued
interest receivable 11,091 9,825 Other assets � 31,404 � 23,062
Total assets $ 2,501,358 $ 2,061,544 Liabilities and Stockholders�
Equity Deposits Demand deposits $ 192,095 $ 192,116 Savings and
interest-bearing demand deposits 538,872 486,068 Time deposits �
1,289,647 � 1,032,591 Total deposits $ 2,020,614 $ 1,710,775
Securities sold under agreement to repurchase and federal funds
purchased 225,099 147,631 Other borrowed funds 25,000 -- Trust
preferred capital notes 41,244 44,344 Accrued interest payable
8,333 6,601 Other liabilities � 5,827 � 5,421 Total liabilities $
2,326,117 $ 1,914,772 Stockholders� Equity Preferred stock, $1.00
par, 1,000,000 shares authorized and unissued $ -- $ -- Common
stock, $1.00 par, 50,000,000 shares authorized, issued and
outstanding 2008, 24,122,262; 2007, 21,716,392 24,122 21,716
Surplus 73,916 31,364 Retained earnings 74,387 94,218 Accumulated
other comprehensive loss, net � 2,816 � (526) Total stockholders�
equity $ 175,241 $ 146,772 Total liabilities and stockholders�
equity $ 2,501,358 $ 2,061,544 � � Virginia Commerce Bancorp, Inc.
Consolidated Statements of Income (Dollars in thousands except per
share data) Three Months Ended March 31, (Unaudited) � 2008 2007
Interest and dividend income: Interest and fees on loans $ 35,891 $
32,800 Interest and dividends on investment securities: Taxable
3,779 2,676 Tax-exempt 271 90 Dividends 92 66 Interest on deposits
with other banks 17 18 Interest on federal funds sold � 13 � 457
Total interest and dividend income $ 40,063 $ 36,107 Interest
expense: Deposits $ 18,030 $ 16,190 Securities sold under agreement
to repurchase and federal funds purchased 1,683 1,251 Other
borrowed funds 194 -- Trust preferred capital notes � 691 � 777
Total interest expense $ 20,598 $ 18,218 Net interest income: $
19,465 $ 17,889 Provision for loan losses � 4,112 � 360 Net
interest income after provision for loan losses $ 15,353 $ 17,529
Non-interest income: Service charges and other fees $ 921 $ 840
Non-deposit investment services commissions 150 184 Fees and net
gains on loans held-for-sale 436 661 Other � 124 � 177 Total
non-interest income $ 1,631 $ 1,862 Non-interest expense: Salaries
and employee benefits $ 5,856 $ 5,536 Occupancy expense 2,147 1,616
Data processing 539 567 Other operating expense � 2,250 � 1,770
Total non-interest expense $ 10,792 $ 9,489 Income before taxes on
income $ 6,192 $ 9,902 Provision for income taxes � 2,044 � 3,428
Net Income $ 4,148 $ 6,474 Earnings per common share, basic (1) $
0.16 $ 0.25 Earnings per common share, diluted (1) $ 0.15 $ 0.24
(1) Adjusted to give effect to a 10% stock dividend payable May 7,
2008. � � � � � � � Virginia Commerce Bancorp, Inc. Consolidated
Average Balances, Yields, and Rates Three Months Ended March 31,
(Unaudited) � 2008 2007 (Dollars in thousands) Average Balance �
Interest Income- Expense � Average Yields /Rates Average Balance �
Interest Income- Expense � Average Yields /Rates Assets Securities
(1) $ 320,765 $ 4,142 5.26% $ 241,140 $ 2,832 4.74% Loans, net of
unearned income (2) 2,030,623 35,891 7.10% 1,668,656 32,800 7.98%
Interest-bearing deposits in other banks 1,369 17 4.84% 1,336 18
5.59% Federal funds sold � 2,204 � � 13 � 2.32% � 35,134 � � 457 �
5.20% Total interest-earning assets $ 2,354,961 $ 40,063 6.85% $
1,946,266 $ 36,107 7.53% Other assets � 64,005 � 61,494 Total
Assets $ 2,418,966 $ 2,007,760 � Liabilities and Stockholders�
Equity Interest-bearing deposits: NOW accounts $ 146,319 $ 512
1.40% $ 156,997 $ 648 1.67% Money market accounts 206,536 1,655
3.21% 236,868 2,289 3.92% Savings accounts 164,836 1,441 3.51%
77,992 807 4.20% Time deposits � 1,215,738 � � 14,422 � 4.76% �
1,016,081 � � 12,446 � 4.97% Total interest-bearing deposits $
1,733,429 $ 18,030 4.17% $ 1,487,938 $ 16,190 4.41% Securities sold
under agreement to repurchase and federal funds purchased 234,194
1,683 2.88% 130,452 1,251 3.89% Other borrowed funds 25,000 194
3.07% -- -- -- Trust preferred capital notes � 40,000 � � 691 �
6.83% � 43,000 � � 777 � 7.23% Total interest-bearing liabilities $
2,032,623 $ 20,598 4.06% $ 1,661,390 $ 18,218 4.45% Demand deposits
and other liabilities � 213,240 � 203,465 Total liabilities $
2,245,863 $ 1,864,855 Stockholders� equity � 173,103 � 142,905
Total liabilities and stockholders� equity $ 2,418,966 $ 2,007,760
Interest rate spread 2.79% 3.08% Net interest income and margin $
19,465 3.34% $ 17,889 3.74% (1) Yields on securities
available-for-sale have been calculated on the basis of historical
cost and do not give effect to changes in the fair value of those
securities, which are reflected as a component of stockholders'
equity. Average yields on securities are stated on a tax equivalent
basis, using a 35% rate. � (2) Loans placed on non-accrual status
are included in the average balances. Net loan fees and late
charges included in interest income on loans totaled $1.29 million
and $1.34 million for the three months ended March 31, 2008 and
2007, respectively. �
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