UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
x
|
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the
quarterly period ended JUNE 30, 2009
o
|
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
to
Commission
file number 0-28635
VIRGINIA
COMMERCE BANCORP, INC.
(Exact Name of
Registrant as Specified in its Charter)
VIRGINIA
|
|
54-1964895
|
(State or Other
Jurisdiction
|
|
(I.R.S. Employer
Identification No.)
|
of Incorporation
or Organization)
|
|
|
5350 LEE HIGHWAY, ARLINGTON, VIRGINIA
22207
(Address of
Principal Executive Offices)
703-534-0700
(Registrants
Telephone Number, Including Area Code)
N/A
(Former Name,
Former Address and Former Fiscal Year, If Changed Since Last Report)
Indicate by check whether
the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
x
No
o
Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§2332.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files)
x
Yes
o
No
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
|
|
Accelerated filer
x
|
|
|
|
Non-accelerated filer
o
|
|
Smaller reporting company
o
|
Indicate by check mark
whether the registrant is a shell company as defined in Rule12b-2 of the
Securities Exchange Act. Yes
o
No
x
As of August 10,
2009, the number of outstanding shares of registrants common stock, par value
$1.00 per share was: 26,693,074
PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL
STATEMENTS
VIRGINIA
COMMERCE BANCORP, INC.
CONSOLIDATED
BALANCE SHEETS
(In thousands of
dollars, except per share data)
|
|
Unaudited
|
|
Audited
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2009
|
|
2008
|
|
Assets
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
31,693
|
|
$
|
33,515
|
|
Securities (fair value: 2009, $322,100, 2008,
$337,771)
|
|
320,842
|
|
336,819
|
|
Federal funds sold
|
|
22,999
|
|
|
|
Loans held-for-sale
|
|
12,940
|
|
6,221
|
|
Loans, net of allowance for loan losses of $38,978
in 2009 and $36,475 in 2008
|
|
2,217,945
|
|
2,273,086
|
|
Bank premises and equipment, net
|
|
14,601
|
|
14,740
|
|
Accrued interest receivable
|
|
9,826
|
|
10,593
|
|
Other real estate owned
|
|
28,198
|
|
7,569
|
|
Other assets
|
|
40,450
|
|
33,379
|
|
Total assets
|
|
$
|
2,699,494
|
|
$
|
2,715,922
|
|
Liabilities
and Stockholders Equity
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
Demand deposits
|
|
$
|
239,658
|
|
$
|
194,791
|
|
Savings and interest-bearing demand deposits
|
|
759,861
|
|
518,054
|
|
Time deposits
|
|
1,191,954
|
|
1,459,297
|
|
Total deposits
|
|
$
|
2,191,473
|
|
$
|
2,172,142
|
|
Securities sold under agreement to repurchase and
federal funds purchased
|
|
165,730
|
|
187,959
|
|
Other borrowed funds
|
|
25,000
|
|
25,000
|
|
Trust preferred capital notes
|
|
65,929
|
|
65,800
|
|
Accrued interest payable
|
|
5,237
|
|
8,160
|
|
Other liabilities
|
|
3,112
|
|
3,574
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,456,481
|
|
$
|
2,462,635
|
|
Stockholders Equity
|
|
|
|
|
|
Preferred stock, net of discount, $1.00 par,
1,000,000 shares authorized, Series A; $1,000.00 stated value; 71,000
issued and outstanding
|
|
$
|
63,267
|
|
$
|
62,541
|
|
Common stock, $1.00 par, 50,000,000 shares
authorized, issued and outstanding 2009, 26,693,074; 2008, 26,575,569
|
|
26,693
|
|
26,575
|
|
Surplus
|
|
96,200
|
|
95,840
|
|
Warrants
|
|
8,520
|
|
8,520
|
|
Retained earnings
|
|
50,904
|
|
60,535
|
|
Accumulated other comprehensive (loss), net
|
|
(2,571
|
)
|
(724
|
)
|
Total stockholders equity
|
|
$
|
243,013
|
|
$
|
253,287
|
|
Total liabilities and stockholders equity
|
|
$
|
2,699,494
|
|
$
|
2,715,922
|
|
Notes
to consolidated financial statements are an integral part of these statements.
2
VIRGINIA
COMMERCE BANCORP, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands of
dollars, except per share data)
(Unaudited)
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
Interest and fees on loans
|
|
$
|
33,186
|
|
$
|
35,935
|
|
$
|
66,629
|
|
$
|
71,826
|
|
Interest and dividends on investment securities:
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
3,495
|
|
3,769
|
|
7,157
|
|
7,548
|
|
Tax-exempt
|
|
406
|
|
298
|
|
751
|
|
569
|
|
Dividends
|
|
84
|
|
100
|
|
168
|
|
192
|
|
Interest on deposits with other banks
|
|
|
|
85
|
|
|
|
102
|
|
Interest on federal funds sold
|
|
12
|
|
213
|
|
32
|
|
226
|
|
Total interest and dividend income
|
|
$
|
37,183
|
|
$
|
40,400
|
|
$
|
74,737
|
|
$
|
80,463
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
12,796
|
|
$
|
17,307
|
|
$
|
27,427
|
|
$
|
35,337
|
|
Securities sold under agreement to repurchase and
federal funds purchased
|
|
835
|
|
1,418
|
|
1,455
|
|
3,101
|
|
Other borrowed funds
|
|
269
|
|
270
|
|
534
|
|
464
|
|
Trust preferred capital notes
|
|
1,283
|
|
691
|
|
2,564
|
|
1,382
|
|
Total interest expense
|
|
$
|
15,183
|
|
$
|
19,686
|
|
$
|
31,980
|
|
$
|
40,284
|
|
Net interest income:
|
|
$
|
22,000
|
|
$
|
20,714
|
|
$
|
42,757
|
|
$
|
40,179
|
|
Provision for loan losses
|
|
18,423
|
|
3,656
|
|
31,813
|
|
7,768
|
|
Net interest income after provision for loan losses
|
|
$
|
3,577
|
|
$
|
17,058
|
|
$
|
10,944
|
|
$
|
32,411
|
|
Non-interest income:
|
|
|
|
|
|
|
|
|
|
Service charges and other fees
|
|
$
|
903
|
|
$
|
945
|
|
$
|
1,790
|
|
$
|
1,866
|
|
Non-deposit investment services commissions
|
|
122
|
|
199
|
|
279
|
|
349
|
|
Fees and net gains on loans held-for-sale
|
|
952
|
|
415
|
|
1,759
|
|
851
|
|
Impairment losses on securities (1)
|
|
(108
|
)
|
|
|
(138
|
)
|
|
|
Other
|
|
80
|
|
170
|
|
79
|
|
294
|
|
Total non-interest income
|
|
$
|
1,949
|
|
$
|
1,729
|
|
$
|
3,769
|
|
$
|
3,360
|
|
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
5,694
|
|
$
|
5,853
|
|
$
|
11,615
|
|
$
|
11,709
|
|
Occupancy expense
|
|
2,437
|
|
2,167
|
|
5,204
|
|
4,314
|
|
Data processing expense
|
|
576
|
|
542
|
|
1,176
|
|
1,081
|
|
Other operating expense
|
|
4,879
|
|
2,644
|
|
8,614
|
|
4,894
|
|
Total non-interest expense
|
|
$
|
13,586
|
|
$
|
11,206
|
|
$
|
26,609
|
|
$
|
21,998
|
|
(Loss) income before taxes
|
|
$
|
(8,060
|
)
|
$
|
7,581
|
|
$
|
(11,896
|
)
|
$
|
13,773
|
|
(Benefit) provision for income taxes
|
|
(2,876
|
)
|
2,660
|
|
(4,303
|
)
|
4,704
|
|
Net (loss) income
|
|
$
|
(5,184
|
)
|
$
|
4,921
|
|
$
|
(7,593
|
)
|
$
|
9,069
|
|
Effective dividend on preferred stock
|
|
1,251
|
|
|
|
$
|
2,038
|
|
|
|
Net (loss) income available to
common stockholders
|
|
$
|
(6,435
|
)
|
$
|
4,921
|
|
$
|
(9,631
|
)
|
$
|
9,069
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per common share, basic
|
|
$
|
(0.24
|
)
|
$
|
0.18
|
|
$
|
(0.36
|
)
|
$
|
0.34
|
|
(Loss) earnings per common share, diluted
|
|
$
|
(0.24
|
)
|
$
|
0.18
|
|
$
|
(0.36
|
)
|
$
|
0.33
|
|
Notes
to consolidated financial statements are an integral part of these statements.
(1)
|
|
Year-to-date
total other-than-temporary impairment losses
|
|
$
|
(402
|
)
|
|
|
Less: portion of loss recognized in other
comprehensive loss
|
|
264
|
|
|
|
Net impairment losses recognized in earnings
|
|
$
|
(138
|
)
|
3
VIRGINIA COMMERCE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
For the six months ended June 30, 2009 and 2008
(In thousands of dollars)
(Unaudited)
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Surplus
|
|
Warrants
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)(1)
|
|
Comprehensive
Income
|
|
Total
Stockholders
Equity
|
|
Balance,
January 1, 2008
|
|
$
|
|
|
$
|
24,023
|
|
$
|
73,672
|
|
$
|
|
|
$
|
70,239
|
|
$
|
1,209
|
|
|
|
$
|
169,143
|
|
Comprehensive
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
|
|
|
|
|
|
|
9,069
|
|
|
|
$
|
9,069
|
|
9,069
|
|
Other
comprehensive loss, unrealized holding gains arising during the period (net
of tax of $1,849)
|
|
|
|
|
|
|
|
|
|
|
|
(3,434
|
)
|
(3,434
|
)
|
(3,434
|
)
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,635
|
|
|
|
Stock
options exercised
|
|
|
|
132
|
|
168
|
|
|
|
|
|
|
|
|
|
300
|
|
Stock
option expense
|
|
|
|
|
|
288
|
|
|
|
|
|
|
|
|
|
288
|
|
Employee
stock purchase plan
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
3
|
|
10%
stock dividend paid May 2008
|
|
|
|
2,412
|
|
20,113
|
|
|
|
(22,525
|
)
|
|
|
|
|
|
|
Cash
paid in lieu of fractional shares
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
(6
|
)
|
Balance,
June 30, 2008
|
|
$
|
|
|
$
|
26,567
|
|
$
|
94,244
|
|
$
|
|
|
$
|
56,777
|
|
$
|
(2,225
|
)
|
|
|
$
|
175,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2009
|
|
$
|
62,541
|
|
$
|
26,575
|
|
$
|
95,840
|
|
$
|
8,520
|
|
$
|
60,535
|
|
$
|
(724
|
)
|
|
|
$
|
253,287
|
|
Comprehensive
Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
|
|
|
|
|
|
|
|
(7,593
|
)
|
|
|
$
|
(7,593
|
)
|
(7,593
|
)
|
Reclassification
adjustment for impairment loss on securities (net of tax of $48)
|
|
|
|
|
|
|
|
|
|
|
|
90
|
|
90
|
|
90
|
|
Other
comprehensive loss, unrealized holding losses arising during the period (net
of tax of $1,043)
|
|
|
|
|
|
|
|
|
|
|
|
(1,937
|
)
|
(1,937
|
)
|
(1,937
|
)
|
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(9,440
|
)
|
|
|
Stock
options exercised
|
|
|
|
118
|
|
46
|
|
|
|
|
|
|
|
|
|
164
|
|
Stock
option expense
|
|
|
|
|
|
314
|
|
|
|
|
|
|
|
|
|
314
|
|
Discount
on preferred stock
|
|
726
|
|
|
|
|
|
|
|
(726
|
)
|
|
|
|
|
|
|
Dividend
on preferred stock
|
|
|
|
|
|
|
|
|
|
(1,312
|
)
|
|
|
|
|
(1,312
|
)
|
Balance,
June 30, 2009
|
|
$
|
63,267
|
|
$
|
26,693
|
|
$
|
96,200
|
|
$
|
8,520
|
|
$
|
50,904
|
|
$
|
(2,571
|
)
|
|
|
$
|
243,013
|
|
Notes to consolidated financial statements are an integral part of these
statements.
(1) Total
accumulated other comprehensive income (loss) includes an other-than-temporary
impairment amount of $1.4 million, or $886 thousand, net of tax of $477
thousand.
4
VIRGINIA
COMMERCE BANCORP, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Thousands of
Dollars)
(Unaudited)
|
|
Six Months Ended
June 30,
|
|
|
|
2009
|
|
2008
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(7,593
|
)
|
$
|
9,069
|
|
Adjustments to reconcile net (loss) income to net
cash (used in)
provided by
operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
1,374
|
|
1,270
|
|
Provision for loan losses
|
|
31,813
|
|
7,768
|
|
Stock based compensation expense
|
|
314
|
|
288
|
|
Deferred tax benefit
|
|
(1,245
|
)
|
(1,450
|
)
|
Accretion of trust preferred securities discount
|
|
128
|
|
|
|
Amortization of premiums and accretion of security
discounts, net
|
|
231
|
|
(86
|
)
|
Origination of loans held-for-sale
|
|
(125,894
|
)
|
(44,256
|
)
|
Sale of loans
|
|
119,688
|
|
45,683
|
|
Proceeds from gain on sale of loans
|
|
(513
|
)
|
(502
|
)
|
Impairment loss on securities
|
|
138
|
|
|
|
Changes in other assets and other liabilities:
|
|
|
|
|
|
Decrease in accrued interest receivable
|
|
768
|
|
460
|
|
Increase in other assets
|
|
(25,461
|
)
|
(7,682
|
)
|
Decrease in other liabilities
|
|
(3,384
|
)
|
(1,982
|
)
|
Net Cash (Used In) Provided by Operating Activities
|
|
$
|
(9,636
|
)
|
$
|
8,580
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
Net decrease (increase) in loans
|
|
$
|
23,327
|
|
$
|
(267,387
|
)
|
Purchase of securities available-for-sale
|
|
(58,708
|
)
|
(103,440
|
)
|
Purchase of securities held-to-maturity
|
|
(11,350
|
)
|
(7,127
|
)
|
Proceeds from principal payments on securities
available-for-sale
|
|
27,116
|
|
11,877
|
|
Proceeds from principal payments on securities
held-to-maturity
|
|
4,887
|
|
2,889
|
|
Proceeds from calls and maturities of securities
available-for-sale
|
|
49,529
|
|
60,282
|
|
Proceeds from calls and maturities of securities
available-for-sale
|
|
1,293
|
|
10,155
|
|
Purchase of bank premises and equipment
|
|
(1,235
|
)
|
(2,166
|
)
|
Net Cash Provided (Used In) In Investing Activities
|
|
$
|
34,859
|
|
$
|
(294,917
|
)
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
Net increase in deposits
|
|
$
|
19,331
|
|
$
|
230,121
|
|
Net (decrease) increase in repurchase agreements
and Federal funds purchased
|
|
(22,229
|
)
|
56,361
|
|
Net increase in other borrowed funds
|
|
|
|
25,000
|
|
Net proceeds from issuance of capital stock
|
|
164
|
|
303
|
|
Dividend paid on preferred stock
|
|
(1,312
|
)
|
|
|
Cash paid in lieu of fractional shares
|
|
|
|
(6
|
)
|
Net Cash (Used In) Provided By Financing Activities
|
|
$
|
(4,046
|
)
|
$
|
311,779
|
|
|
|
|
|
|
|
Net Increase In Cash and Cash Equivalents
|
|
21,177
|
|
25,442
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD
|
|
33,515
|
|
35,341
|
|
CASH AND CASH EQUIVALENTS END
OF PERIOD
|
|
$
|
54,692
|
|
$
|
60,783
|
|
|
|
|
|
|
|
Supplemental Schedule of
Noncash Investing Activities:
|
|
|
|
|
|
Unrealized (loss) on securities
|
|
$
|
(2,842
|
)
|
$
|
(5,283
|
)
|
Tax benefits on stock options exercised
|
|
|
|
45
|
|
Other real estate owned transferred from loans
|
|
20,629
|
|
6,045
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash
Flow Information:
|
|
|
|
|
|
Taxes Paid
|
|
$
|
|
|
$
|
5,778
|
|
Interest Paid
|
|
34,903
|
|
41,897
|
|
Notes to
consolidated financial statements are an integral part of these statements.
5
VIRGINIA COMMERCE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
1.
General
The accompanying
unaudited consolidated financial statements of Virginia Commerce Bancorp, Inc.
and its subsidiaries (the Company) have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information. All significant intercompany balances and
transactions have been eliminated. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all
adjustments and reclassifications consisting of a normal and recurring nature
considered necessary to present fairly the financial positions as of June 30,
2009, and December 31, 2008, the results of operations for the three and
six-months ended June 30, 2009, and 2008, and statements of cash flows and
stockholders equity for the six months ended June 30, 2009, and
2008. These statements should be read in
conjunction with the Companys annual report on Form 10-K for the period
ended December 31, 2008.
Operating results
for the three and six month periods ended June 30, 2009, are not
necessarily indicative of the results that may be expected for the year ending December 31,
2009, or any other period.
FAIR
VALUE MEASUREMENTS
The Company
adopted SFAS No. 157, Fair Value Measurements (SFAS
157), on January 1, 2008, to record fair value adjustments to certain
assets and liabilities and to determine fair value disclosures. SFAS 157
clarifies that fair value of certain assets and liabilities is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants.
In October 2008, the
FASB issued Staff Position No. 157-3 (FSP 157-3) to clarify the
application of SFAS 157 in a market that is not active and to provide key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. FSP 157-3 was effective upon issuance,
including prior periods for which financials statements were not issued.
SFAS 157 specifies a
hierarchy of valuation techniques based on whether the inputs to those
valuation techniques are observable or unobservable. Observable inputs reflect
market data obtained from independent sources, while unobservable inputs
reflect the Companys market assumptions. The three levels of the fair value
hierarchy under SFAS 157 based on these two types of inputs are as follows:
Level 1
|
Valuation is based on
quoted prices in active markets for identical assets and liabilities.
|
|
|
Level 2
|
Valuation is based on
observable inputs including quoted prices in active markets for similar
assets and liabilities, quoted prices for identical or similar assets and liabilities
in less active markets, and model-based valuation techniques for which
significant assumptions can be derived primarily from or corroborated by
observable data in the market.
|
|
|
Level 3
|
Valuation is based on
model-based techniques that use one or more significant inputs or assumptions
that are unobservable in the market.
|
6
The following describes
the valuation techniques used by the Company to measure certain financial
assets and liabilities recorded at fair value on a recurring basis in the
financial statements:
Securities
available for sale
:
Securities available for sale are recorded at fair value on a recurring basis.
Fair value measurement is based upon quoted market prices, when available
(Level 1). If quoted market prices are not available, fair values are measured
utilizing independent valuation techniques of identical or similar securities
for which significant assumptions are derived primarily from or corroborated by
observable market data. Third party vendors compile prices from various sources
and may determine the fair value of identical or similar securities by using
pricing models that considers observable market data (Level 2).
The following table
presents the balances of financial assets and liabilities measured at fair
value on a recurring basis as of June 30, 2009 (dollars in
thousands). Securities identified in
Note 2 as restricted securities including stock in the Federal Reserve Bank (FRB),
Federal Home Loan Bank of Atlanta (FHLB) and Community Bankers Bank (CBB)
are excluded from the table below since there is no ability to sell these
securities except when the FRB, FHLB or CBB require redemptions based on
certain portions of our capital.
|
|
|
|
Fair Value Measurements at June 30, 2009 Using
|
|
Description
|
|
Balance as of
June 30,
2009
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
246,979
|
|
$
|
|
|
$
|
246,979
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain financial assets
are measured at fair value on a nonrecurring basis in accordance with GAAP.
Adjustments to the fair value of these assets usually result from the
application of lower-of-cost-or-market accounting or write-downs of individual
assets. The following describes the
valuation techniques used by the Company to measure certain financial assets
recorded at fair value on a nonrecurring basis in the financial statements:
Loans held for
sale
: Loans held
for sale are carried at the lower of cost or market value. These loans
currently consist of one-to-four family residential loans originated for sale
in the secondary market. Fair value is based on the price secondary markets are
currently offering for similar loans using observable market data which is not
materially different than cost due to the short duration between origination
and sale (Level 2). As such, the Company records any fair value adjustments on
a nonrecurring basis. No nonrecurring fair value adjustments were recorded on
loans held for sale during the quarter ended June 30, 2009. Gains and
losses on the sale of loans are recorded within income from mortgage banking on
the Consolidated Statements of Operations.
Impaired Loans
: Loans are designated as impaired when,
in the judgment of management based on current information and events, it is
probable that not all amounts due according to the contractual terms of the
loan agreement will be collected. The measurement of loss associated with
impaired loans can be based on either the observable market price of the loan
or the fair value of the collateral. Fair value is measured based on the value
of the collateral securing the loans. Collateral may be in the form of real
estate, marketable securities or business assets including equipment,
inventory, and accounts receivable. For securities, the fair values of
marketable securities are based upon quoted market prices. The vast majority of the collateral is real
estate. The value of real estate collateral is determined utilizing an income
or market valuation approach based on an appraisal conducted by an independent,
licensed appraiser using observable market data (Level 2). However, if the
collateral is a house or building in the process of construction or if an
appraisal of the real estate property is over two years old, then the fair
value is considered Level 3. The value of business equipment is based upon an
outside appraisal if deemed significant, or the net book value on the applicable
business financial statements if not considered significant using observable
market data. Likewise, values for inventory and accounts receivables collateral
are based on financial statement balances or aging reports (Level 3). Impaired
loans are measured at fair value on a nonrecurring basis through the allowance
for loan losses. Any fair value
adjustments are recorded in the period incurred as provision for loan losses on
the Consolidated Statements of Operations.
7
Foreclosed
Assets:
Assets acquired through, or in lieu of, loan
foreclosure are held-for-sale and are initially recorded at the lesser of book
value or fair value less cost to sell at the date of foreclosure, establishing
a new cost basis. Subsequent to foreclosure, valuations are periodically
performed by Management and the assets are carried at the lower of carrying
amount or fair value less cost to sell. Revenue and expenses from operations
and changes in the valuation are included in net expenses from foreclosed
assets.
The following table
summarizes the
Companys financial assets that
were measured at fair value on a nonrecurring basis during the period (dollars
in thousands).
|
|
|
|
Carrying value at June 30, 2009 Using
|
|
Description
|
|
Balance as of
June 30,
2009
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
$
|
92,820
|
|
$
|
|
|
$
|
79,722
|
|
$
|
13,098
|
|
Foreclosed Assets
|
|
$
|
12,330
|
|
$
|
|
|
$
|
12,330
|
|
$
|
|
|
The following
methods and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate that value:
Cash and
Short-Term Investments
For those short-term
instruments, the carrying amount is a reasonable estimate of fair value.
Securities
For securities
held for investment purposes, fair values are based upon quoted market prices,
when available. If quoted market prices are not available, fair values are
measured utilizing independent valuation techniques of identical or similar
securities for which significant assumptions are derived primarily from or
corroborated by observable market data. Third party vendors compile prices from
various sources and may determine the fair value of identical or similar
securities by using pricing models that considers observable market data. The
carrying value of restricted stock approximates fair value based on the
redemption provisions of the issuers.
Loans Held-for-Sale
Fair value is
based on the price secondary markets are currently offering for similar loans
using observable market data which is not materially different than cost due to
the short duration between origination and sale.
Loan Receivables
For certain
homogeneous categories of loans, such as some residential mortgages, and other
consumer loans, fair value is estimated using the quoted market prices for
securities backed by similar loans, adjusted for differences in loan
characteristics. The fair value of other
types of loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
Deposits and
Borrowings
The fair value of
demand deposits, savings accounts, and certain money market deposits is the
amount payable on demand at the reporting date.
For all other deposits and borrowings, the fair value is determined
using the discounted cash flow method.
The discount rate was equal to the rate currently offered on similar
products.
Accrued Interest
The carrying
amounts of accrued interest approximate fair value.
8
Off-Balance Sheet
Financial Instruments
The fair value of
commitments to extend credit is estimated using the fees currently charged to
enter similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value
also considers the difference between current levels of interest rates and the
committed rates. The fair value of stand-by letters of credit is based on fees
currently charged for similar agreements or on the estimated cost to terminate
them or otherwise settle the obligations with the counterparties at the
reporting date.
At June 30,
2009, and December 31, 2008, the fair value of loan commitments and
stand-by letters of credit were deemed immaterial, and therefore, are not
included in the table below.
The
carrying amounts and estimated fair values of the Companys financial
instruments are as follows:
|
|
June 30, 2009
|
|
December 31, 2008
|
|
(Dollars in thousands)
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
Cash and short-term investments
|
|
$
|
31,693
|
|
$
|
31,693
|
|
$
|
33,515
|
|
$
|
33,515
|
|
Securities
|
|
320,842
|
|
322,100
|
|
336,819
|
|
337,771
|
|
Loans held-for-sale
|
|
12,940
|
|
12,940
|
|
6,221
|
|
6,221
|
|
Loans
|
|
2,217,945
|
|
2,233,284
|
|
2,273,086
|
|
2,313,567
|
|
Accrued interest receivable
|
|
9,826
|
|
9,826
|
|
10,593
|
|
10,593
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,181,473
|
|
$
|
2,162,993
|
|
$
|
2,172,142
|
|
$
|
2,144,292
|
|
Securities sold under agreements to repurchase and
federal funds purchased
|
|
165,730
|
|
187,314
|
|
187,959
|
|
206,124
|
|
Other borrowed funds
|
|
25,000
|
|
25,305
|
|
25,000
|
|
25,207
|
|
Trust preferred capital notes
|
|
65,929
|
|
80,953
|
|
65,800
|
|
95,016
|
|
Accrued interest payable
|
|
5,237
|
|
5,237
|
|
8,160
|
|
8,160
|
|
In the normal
course of business, the Company is subject to market risk which includes
interest rate risk (the risk that general interest rate levels will
change). As a result, the fair values of
the Companys financial instruments will change when interest rate levels
change and that change may be either favorable or unfavorable to the Company.
Management attempts to match maturities of assets and liabilities to the extent
believed necessary to minimize this risk.
9
2.
Investment Securities
Amortized cost and fair value of securities
available-for-sale and held-to-maturity as of June 30, 2009, are as
follows (dollars in thousands):
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
(Losses)
|
|
Fair
Value
|
|
Available-for-Sale:
|
|
|
|
|
|
|
|
|
|
U.S. Government Agency obligations
|
|
$
|
200,501
|
|
$
|
4,723
|
|
$
|
(328
|
)
|
$
|
204,896
|
|
Domestic corporate debt obligations
|
|
8,908
|
|
|
|
(7,044
|
)
|
1,864
|
|
Obligations of states and political subdivisions
|
|
41,663
|
|
121
|
|
(1,565
|
)
|
40,219
|
|
Restricted stock:
|
|
|
|
|
|
|
|
|
|
Federal Reserve Bank
|
|
5,597
|
|
|
|
|
|
5,597
|
|
Federal Home Loan Bank
|
|
6,010
|
|
|
|
|
|
6,010
|
|
Community Bankers Bank
|
|
145
|
|
|
|
|
|
145
|
|
|
|
$
|
262,824
|
|
$
|
4,844
|
|
$
|
(8,937
|
)
|
$
|
258,731
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity:
|
|
|
|
|
|
|
|
|
|
U.S. Government Agency obligations
|
|
$
|
15,258
|
|
$
|
396
|
|
$
|
|
|
$
|
15,654
|
|
Obligations of states and political subdivisions
|
|
46,853
|
|
862
|
|
|
|
47,715
|
|
|
|
$
|
62,111
|
|
$
|
1,258
|
|
$
|
|
|
$
|
63,369
|
|
Amortized
cost and fair value of securities available-for-sale and held-to-maturity as of
December 31, 2008, are as follows (dollars in thousands):
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
(Losses)
|
|
Fair
Value
|
|
Availablefor-sale:
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agency obligations
|
|
$
|
230,497
|
|
$
|
4,951
|
|
$
|
(14
|
)
|
$
|
235,434
|
|
Domestic
corporate debt obligations
|
|
8,817
|
|
|
|
(4,869
|
)
|
3,948
|
|
Obligations
of states and political subdivisions
|
|
30,637
|
|
49
|
|
(1,232
|
)
|
29,454
|
|
Restricted
stock:
|
|
|
|
|
|
|
|
|
|
Federal
Reserve Bank
|
|
5,597
|
|
|
|
|
|
5,597
|
|
Federal
Home Loan Bank
|
|
5,334
|
|
|
|
|
|
5,334
|
|
Community
Bankers Bank
|
|
145
|
|
|
|
|
|
145
|
|
|
|
$
|
281,027
|
|
$
|
5,000
|
|
$
|
(6,115
|
)
|
$
|
279,912
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agency obligations
|
|
$
|
18,764
|
|
$
|
347
|
|
$
|
|
|
$
|
19,111
|
|
Obligations
of state and political subdivisions
|
|
38,143
|
|
614
|
|
(9
|
)
|
38,748
|
|
|
|
$
|
56,907
|
|
$
|
961
|
|
$
|
(9
|
)
|
$
|
57,859
|
|
The amortized cost
of securities pledged as collateral for repurchase agreements, certain public
deposits, and other purposes were $213.6 million and $280.0 million at June 30,
2009, and December 31, 2008, respectively.
Management evaluates
securities for other-than-temporary impairment at least on a quarterly basis,
and more frequently when economic or market concerns warrant such
evaluation. An impairment is considered
to be other-than temporary if the Company (1) intends to sell the
security, (2) more likely than not will be required to sell the security
before recovering its cost, or (3) does not expect to recover the securitys
entire amortized cost basis. Provided below is a summary of all securities
which were in an unrealized loss position at June 30, 2009, that were
evaluated for other-than-temporary impairment, and deemed to not have an
other-than-temporary impairment. Presently, the Company does not intend to sell
any of these securities, will not be required to sell these securities, and
expects to recover the entire amortized cost of all the securities.
10
For U.S. Government
Agency and obligations of states/political subdivisions, the unrealized losses
result from market or interest rate risk, while the unrealized losses
pertaining to the domestic corporate debt obligations are due to both
performance and credit ratings. For these securities, Management performed a
review of the financial performance of the underlying issuers, current levels
of payment deferrals and or defaults, the amount of additional deferrals and or
defaults that would be required before the securities would experience a break
in yield, and a present value analysis of expected future cash flows.
At June 30, 2009
|
|
Less Than 12 Months
|
|
12 Months of Longer
|
|
Total
|
|
(Dollars in thousands)
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agency obligations
|
|
$
|
24,942
|
|
$
|
(328
|
)
|
$
|
|
|
$
|
|
|
$
|
24,942
|
|
$
|
(328
|
)
|
Domestic corporate debt obligations
|
|
|
|
|
|
1,364
|
|
(5,644
|
)
|
1,364
|
|
(5,644
|
)
|
Obligations of states/political subdivisions
|
|
32,703
|
|
(1,383
|
)
|
1,918
|
|
(182
|
)
|
34,621
|
|
(1,565
|
)
|
|
|
$
|
57,645
|
|
$
|
(1,711
|
)
|
$
|
3,282
|
|
$
|
(5,826
|
)
|
$
|
60,927
|
|
$
|
(7,537
|
)
|
At December 31, 2008
|
|
Less Than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
(Dollars in thousands)
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agency obligations
|
|
$
|
5,947
|
|
$
|
(14
|
)
|
$
|
|
|
$
|
|
|
$
|
5,947
|
|
$
|
(14
|
)
|
Domestic corporate debt obligations
|
|
|
|
|
|
3,948
|
|
(4,869
|
)
|
3,948
|
|
(4,869
|
)
|
Obligations of states/political subdivisions
|
|
26,471
|
|
(1,232
|
)
|
|
|
|
|
26,471
|
|
(1,232
|
)
|
|
|
$
|
32,418
|
|
$
|
(1,246
|
)
|
$
|
3,948
|
|
$
|
(4,869
|
)
|
$
|
36,366
|
|
$
|
(6,115
|
)
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states/political subdivisions
|
|
$
|
2,134
|
|
$
|
(9
|
)
|
$
|
|
|
$
|
|
|
$
|
2,134
|
|
$
|
(9
|
)
|
As of June 30, 2009,
the Company had one collateralized debt obligation that was deemed to be
impaired based on a present value analysis of expected future cash flows. This
security had a fair value of $499 thousand, a year-to-date other-than-temporary
impairment loss of $1.5 million, of which $1.4 million of the loss is
recognized in other comprehensive loss, and $138 thousand is recognized in
earnings.
11
3.
Loans
Major classifications of
loans, excluding loans held-for-sale, are summarized as follows:
|
|
June 30, 2009
|
|
December 31, 2008
|
|
|
|
(In Thousand of Dollars)
|
|
|
|
|
|
Commercial
|
|
$
|
259,812
|
|
$
|
279,470
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
Closed end first and seconds
|
|
236,523
|
|
233,887
|
|
Home equity lines
|
|
133,176
|
|
123,366
|
|
Total Real estate-one-to-four family residential
|
|
$
|
369,699
|
|
$
|
357,253
|
|
Real estate-multi-family residential
|
|
69,616
|
|
66,611
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
Owner occupied
|
|
428,372
|
|
418,372
|
|
Non-owner occupied
|
|
613,825
|
|
592,953
|
|
Total Real estate-non-farm, non-residential
|
|
$
|
1,042,197
|
|
$
|
1,011,325
|
|
Real estate-construction:
|
|
|
|
|
|
Residential-Owner occupied
|
|
23,047
|
|
20,691
|
|
Residential-Builder
|
|
259,370
|
|
296,266
|
|
Commercial
|
|
223,916
|
|
268,119
|
|
Total Real estate-construction
|
|
$
|
506,333
|
|
$
|
585,076
|
|
Farmland
|
|
2,678
|
|
2,498
|
|
Consumer
|
|
10,532
|
|
11,698
|
|
Total Loans
|
|
$
|
2,260,867
|
|
$
|
2,313,931
|
|
Less unearned income
|
|
3,944
|
|
4,370
|
|
Less allowance for loan losses
|
|
38,978
|
|
36,475
|
|
Loans, net
|
|
$
|
2,217,945
|
|
$
|
2,273,086
|
|
4.
Allowance for Loan Loss
An analysis of the allowance for loan losses for the
six months ended June 30, 2009, June 30, 2008, and the year ended December 31,
2008 is shown below (dollars in thousands):
|
|
June 30, 2009
|
|
December 31, 2008
|
|
June 30, 2008
|
|
Allowance, at beginning of period
|
|
$
|
36,475
|
|
$
|
22,260
|
|
$
|
22,260
|
|
Provision charged against income
|
|
31,813
|
|
25,378
|
|
7,768
|
|
Recoveries added to reserve
|
|
291
|
|
158
|
|
23
|
|
Losses charged to reserve
|
|
(29,601
|
)
|
(11,321
|
)
|
(3,948
|
)
|
|
|
$
|
38,978
|
|
$
|
36,475
|
|
$
|
26,103
|
|
Information about
impaired loans as of and for June 30, 2009, and December 31, 2008, is
as follows (dollars in thousands):
|
|
June 30, 2009
|
|
December 31, 2008
|
|
Non-accrual loans for which a specific allowance
has been provided
|
|
$
|
69,200
|
|
$
|
74,843
|
|
Non-accrual loans for which no specific allowance
has been provided
|
|
36,936
|
|
36,391
|
|
Other impaired loans for which a specific allowance
has been provided
|
|
44,418
|
|
14,515
|
|
Other impaired loans for which no specific
allowance has been provided
|
|
53,822
|
|
34,794
|
|
Total Impaired loans
|
|
$
|
204,376
|
|
$
|
160,543
|
|
Allowance provided for impaired loans, included in
the allowance for loan losses
|
|
$
|
28,355
|
|
$
|
17,614
|
|
12
5.
(Loss) Earnings Per Share
The following shows the
weighted average number of shares used in computing (loss) earnings per share
and the effect on the weighted average number of shares of diluted potential
common stock. As of June 30, 2009, and 2008, there were 5,555,903 and
1,042,694 anti-dilutive stock options and warrants outstanding, respectively,
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30, 2009
|
|
June 30, 2008
|
|
June 30, 2009
|
|
June 30, 2008
|
|
|
|
|
|
Per
|
|
|
|
Per
|
|
|
|
Per
|
|
|
|
Per
|
|
|
|
|
|
Share
|
|
|
|
Share
|
|
|
|
Share
|
|
|
|
Share
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Basic (loss) earnings per share
|
|
26,691,430
|
|
$
|
(0.24
|
)
|
26,553,361
|
|
$
|
0.18
|
|
26,693,074
|
|
$
|
(0.36
|
)
|
26,542,780
|
|
$
|
0.34
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
600,540
|
|
|
|
|
|
|
|
668,434
|
|
|
|
Diluted (loss) earnings per share
|
|
26,691,430
|
|
$
|
(0.24
|
)
|
27,153,901
|
|
$
|
0.18
|
|
26,693,074
|
|
$
|
(0.36
|
)
|
27,211,214
|
|
$
|
0.33
|
|
6.
Stock Compensation Plan
At June 30, 2009,
the Company had a stock-based compensation plan. Included in salaries and
employee benefits expense for the six months ended June 30, 2009 and 2008,
is $314 thousand and $288 thousand, respectively, of stock-based compensation
expense which is based on the estimated fair value of 746,393 options granted
between January 2006 and June 2009, as adjusted, amortized on a
straight-line basis over a five year requisite service period. As of June 30,
2009, there was $1.6 million remaining of total unrecognized compensation
expense related to these option awards which will be recognized over the
remaining requisite service periods.
The fair value of each
grant is estimated at the grant date using the Black-Scholes option-pricing
model with the following weighted average assumptions for grants in 2009 and
2008:
|
|
2009
|
|
2008
|
|
Expected
volatility
|
|
30.59%
|
|
23.14%
|
|
Expected
dividends
|
|
.00%
|
|
.00%
|
|
Expected
term (in years)
|
|
7.2
|
|
7.2
|
|
Risk-free
rate
|
|
2.14%
|
|
3.35% to 3.39%
|
|
Stock option plan
activity for the six months ended June 30, 2009, is summarized below:
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
Aggregate
Intrinsic
Value
($000)
|
|
Outstanding
at January 1, 2009
|
|
2,035,458
|
|
$
|
7.73
|
|
|
|
|
|
Granted
|
|
136,709
|
|
4.31
|
|
|
|
|
|
Exercised
|
|
(117,505
|
)
|
1.39
|
|
|
|
|
|
Forfeited
|
|
(36,422
|
)
|
9.81
|
|
|
|
|
|
Outstanding
at June 30, 2009
|
|
2,018,240
|
|
$
|
7.83
|
|
4.8
|
|
|
|
Exercisable
at June 30, 2009
|
|
1,541,010
|
|
$
|
6.97
|
|
3.7
|
|
|
|
The total value of
in-the-money options exercised during the six months ended June 30, 2009,
was $443 thousand.
13
7.
Capital Requirements
A comparison of the
Companys and its wholly-owned subsidiarys, Virginia Commerce Bank (the Bank)
capital ratios as of June 30, 2009, and December 31, 2008, with the
minimum regulatory guidelines is as follows:
|
|
June 30, 2009
|
|
December 31, 2008
|
|
Minimum
Guidelines
|
|
Minimum to be
Well-Capitalized
|
|
Total Risk-Based Capital:
|
|
|
|
|
|
|
|
|
|
Company
|
|
13.97
|
%
|
14.44
|
%
|
8.00
|
%
|
|
|
Bank
|
|
13.93
|
%
|
14.41
|
%
|
8.00
|
%
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Risk-Based Capital:
|
|
|
|
|
|
|
|
|
|
Company
|
|
12.72
|
%
|
13.07
|
%
|
4.00
|
%
|
|
|
Bank
|
|
12.68
|
%
|
13.16
|
%
|
4.00
|
%
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
Leverage Ratio:
|
|
|
|
|
|
|
|
|
|
Company
|
|
11.39
|
%
|
11.76
|
%
|
4.00
|
%
|
|
|
Bank
|
|
11.35
|
%
|
11.81
|
%
|
4.00
|
%
|
5.00
|
%
|
8.
Other Borrowed Money and Lines of
Credit
The
Bank maintains a $415.6 million line of credit with the Federal Home Loan Bank
of Atlanta. The interest rate and term
of each advance from the line is dependent upon the advance and commitment
type. Advances on the line are secured
by all of the Banks qualifying first liens, second liens and home equity
lines-of-credit on one-to-four unit single-family dwellings. As of June 30, 2009, the book value of
these qualifying loans totaled approximately $194.4 million and the amount of
available credit using this collateral was $80.1 million. Advances on the line
of credit in excess of this amount, require pledging of additional assets,
including other types of loans and investment securities. As of June 30,
2009, the Bank had $25.0 million in advances outstanding.
The Bank has additional short-term lines of credit
totaling $62.0 million with nonaffiliated banks at June 30, 2009, of which
there were no balances outstanding.
9.
Trust Preferred Capital Notes
On December 19,
2002, the Company completed a private placement issuance of $15.0 million of
trust preferred securities through a newly formed, wholly-owned, subsidiary
trust (VCBI Capital Trust II) which issued $470 thousand in common equity to
the Company. These securities bear a floating rate of interest, adjusted
semi-annually, of 330 basis points over six month Libor, currently 4.40%. These
securities are callable at par beginning December 30, 2007, on any
semi-annual interest payment date, but have not been redeemed to date. On December 20,
2005, the Company completed a private placement of $25.0 million of trust
preferred securities through a newly formed, wholly-owned, subsidiary trust
(VCBI Capital Trust III) which issued $774 thousand in common equity to the
Company. These securities bear a fixed rate of interest of 6.19% until February 23,
2011, at which time they convert to a floating rate, adjusted quarterly, of 142
basis points over three month Libor. These securities are callable at par
beginning February 23, 2011.
On September 24,
2008, the Company completed a private placement, to its directors and certain
executive officers, of $25.0 million of trust preferred securities through a
newly formed, wholly-owned, subsidiary trust (VCBI Capital Trust IV) which
issued $775 thousand in common equity to the Company. These securities bear a fixed rate of
interest of 10.20% and are callable at par beginning September 24, 2013.
In connection with the issuance of the trust preferred securities, the Company
also issued warrants to purchase an aggregate of 1.5 million shares of common
stock to the purchasers. The warrants
have a five year term and an exercise price of $6.83 per share.
The principal asset of
each trust is a similar amount of the Companys junior subordinated debt securities
with an approximately 30 year term from issuance and like interest rates to the
trust preferred securities. The obligations of the Company with respect to the
trust preferred securities constitute a full and unconditional guarantee by the
Company of each Trusts obligations with respect to the trust preferred
securities to the extent set forth in the related guarantees. Subject to
certain exceptions and limitations, the Company may elect from
14
time to time to defer
interest payments on the junior subordinated debt securities, resulting in a
deferral of distribution payments on the related trust preferred securities. If
the Company defers interest payments on the junior subordinated debt securities,
or otherwise is in default of the obligations in respect to the trust preferred
securities, the Company would be prohibited from making dividend payments to
its shareholders, and from most purchases, redemptions or acquisitions of the
Companys common stock.
The Trust Preferred
Securities may be included in Tier 1 capital for regulatory capital adequacy
purposes up to 25.0% of Tier 1 capital after its inclusion. The portion of the
trust preferred securities not qualifying as Tier 1 capital may be included as
part of total qualifying capital in Tier 2 capital, subject to limitation.
10.
Preferred Stock and Warrant
On December 12,
2008, the Company entered into a Letter Agreement (Agreement) with the United
States Department of the Treasury (Treasury) under the Troubled Asset Relief
Program (TARP) Capital Purchase Program (CPP), whereby the Company issued
and sold to the Treasury 71 thousand shares of fixed rate cumulative perpetual
preferred stock with a par value of $1.00 and a liquidation amount of $1,000
per share, for a total price of $71.0 million.
In addition, the Treasury received a warrant to purchase 2,696,203
shares of the Companys common stock at an exercise price of $3.95 per
share. Subject to certain restrictions,
the preferred stock and the warrant are transferable by the Treasury. The allocated carrying values of the
preferred stock and the warrant, based on their relative fair values, were
$62.5 million and $8.5 million respectively.
The preferred
stock pays dividends quarterly, beginning February 2009, at a rate of 5%
per year for the first five years, then increases to 9% thereafter. The Company may redeem the preferred stock at
any time, subject to consultation with the Federal Reserve, at the liquidation amount
of $1,000 per share plus any accrued and unpaid dividends. Approval from the Treasury is required to
increase common stock dividends or to repurchase shares of the Companys common
stock prior to December 12, 2011, unless the preferred stock has been
fully redeemed.
The warrant has a
ten year term and is immediately exercisable.
However, the Treasury may only exercise or transfer one-half of the
warrant prior to the earlier of the date on which the Company receives gross
proceeds of not less than $71.0 million from qualified equity offerings on December 31,
2009. If gross proceeds of not less than
$71.0 million are received from qualified equity offerings prior to December 31,
2009, the number of shares issuable upon exercise of the warrant will be
reduced by one-half. Pursuant to the
terms of the Agreement, the Treasury will not exercise voting rights with
respect to any shares of common stock it acquires upon exercise of the warrant;
voting rights may be exercised by any other holder.
15
ITEM 2.
MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking
Statements
This managements
discussion and analysis and other portions of this report, 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 Companys
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 Companys past results are not necessarily
indicative of future performance.
Non-GAAP Presentations
This managements
discussion and analysis 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
which 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 principles generally accepted in the
United States, or GAAP.
General
The following presents
managements discussion and analysis of the consolidated financial condition
and results of operations of Virginia Commerce Bancorp, Inc. and
subsidiaries (the Company) as of the dates and for the periods indicated.
This discussion should be read in conjunction with the Companys Consolidated
Financial Statements and the Notes thereto, and other financial data appearing
elsewhere in this report. The Company is the parent bank holding company for
Virginia Commerce Bank (the 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-seven branch offices, one residential mortgage office
and one investment services office.
Headquartered in
Arlington, Virginia, Virginia Commerce serves the Northern Virginia suburbs of
Washington, D.C., including Arlington, Fairfax, Fauquier, Loudoun, Prince
William, Spotsylvania and Stafford Counties and the cities of Alexandria,
Fairfax, Falls Church, Fredericksburg, Manassas and Manassas Park. Its service
area also covers, to a lesser extent, Washington, D.C. and the nearby Maryland
counties of Montgomery and Prince Georges. The Banks customer base includes
small-to-medium sized businesses including firms that have contracts with the
U.S. government, associations, retailers and industrial businesses,
professionals and their firms, business executives, investors and consumers.
Critical Accounting
Policies
During the quarter ended June 30,
2009, there were no changes in the Companys critical accounting policies as
reflected in the last report.
The
Companys financial statements are prepared in accordance with accounting
principles generally accepted in the United States (GAAP). The financial information contained within
our statements is, to a significant extent, financial information that is based
on measures of the financial effects of transactions and events that have
already occurred. A variety of factors
could affect the ultimate value that is obtained either when earning income,
recognizing an expense, recovering an asset or relieving a liability. We use historical loss factors as one factor
in determining the inherent loss that may be present in our loan
portfolio. Actual losses could differ
significantly from the historical factors that we use. In addition, GAAP itself may change from one
previously acceptable method to another method.
16
Although
the economics of our transactions would be the same, the timing of events that
would impact our transactions could change.
The
allowance for loan losses is an estimate of the losses that are inherent in our
loan portfolio. The allowance is based
on two basic principles of accounting: (i) SFAS 5, Accounting for Contingencies, which requires that losses be
accrued when they are probable of occurring and estimable and (ii) SFAS
114, Accounting by Creditors for
Impairment of a Loan, which requires that losses be accrued based on the
differences between the value of collateral, present value of future cash flows
or values that are observable in the secondary market and the loan balance.
Our
allowance for loan losses has two basic components: the specific allowance and the unallocated
allowance. Each of these components is
determined based upon estimates that can and do change when the actual events
occur. The specific allowance is used to
individually allocate an allowance for impaired loans. Impairment testing
includes consideration of the borrowers overall financial condition, resources
and payment record, support available from financial guarantors and the fair
market value of collateral. These
factors are combined to estimate the probability and severity of inherent
losses based on the Companys calculation of the loss embedded in the
individual loan. Large groups of smaller balance, homogeneous loans are
collectively evaluated for impairment. Impaired loans which meet the criteria
for substandard, doubtful and loss are segregated from performing loans within
the portfolio. Internally classified
loans are then grouped by loan type (commercial, commercial real estate, commercial
construction, residential real estate, residential construction or
installment). The unallocated formula is used to estimate the loss of
non-classified loans. These un-criticized loans are also segregated by loan
type and allowance factors are assigned by management based on delinquencies,
loss history, trends in volume and terms of loans, effects of changes in
lending policy, the experience and depth of management, national and local
economic trends, concentrations of credit, quality of the loan review system
and the effect of external factors (i.e. competition and regulatory
requirements). The factors assigned differ by loan type. The unallocated allowance recognizes
potential losses whose impact on the portfolio has yet to be recognized by a
specific allowance. Allowance factors and the overall size of the allowance may
change from period to period based on managements assessment of the above
described factors and the relative weights given to each factor. Further
information regarding the allowance for loan losses is provided under the
caption:
Allowance for Loan Losses/Provision for Loan Loss Expense
,
later in this report.
The
Companys 1998 Stock Option Plan (the Plan), which is shareholder-approved,
permits the grant of share options to its directors and officers for up to 2.3
million shares of common stock. Option awards are generally granted with an
exercise price equal to the market price of the Companys stock at the date of
grant, generally vest based on 5 years of continuous service and have 10-year
contractual terms. The fair value of each option award is estimated on the date
of grant using a Black-Scholes option pricing model that currently uses
historical volatility of the Companys stock based on a 7.2 year expected term,
before exercise, for the options granted, and a risk-free interest rate based
on the U.S. Treasury curve in effect at the time of the grant to estimate total
stock-based compensation expense. This amount is then amortized on a
straight-line basis over the requisite service period, currently 5 years, to
salaries and benefits expense. See Note 6 to the Consolidated Financial
Statements for additional information regarding the Stock Option Plan and
related expense.
Results of Operations
For the three months
ended June 30, 2009, the Company recorded a net operating loss of $5.2
million. After an effective dividend of $1.2 million to the U.S. Treasury on
preferred stock, the Company reported a net loss to common stockholders of $6.4
million, or $0.24 per diluted common share, compared to earnings of $4.9
million, or $0.18 per diluted common share, in the second quarter of 2008. For
the six months ended June 30, 2009, the Company reported a net loss to
common stockholders of $9.6 million compared to earnings of $9.1 million for
the same period in 2008. Earnings for both the three and six- month periods
were significantly impacted by loan loss provisions of $18.4 million and $31.8
million, respectively, due to the year-over-year increase in the level of
non-performing assets and $29.3 million in net charge-offs in 2009.
On a pre-tax,
pre-provision basis, operating income of $10.4 million for the three months
ended June 30, 2009, was down $874 thousand as compared to $11.2
million for the three months ended June 30, 2008. However, the current
quarter results include a special, one-time FDIC insurance assessment of $1.2
million. On a sequential basis, pre-tax, pre-provision operating income was up
$809 thousand, despite the special assessment.
Since December 31,
2008, net loans are down $55.1 million, or 2.4%, with non-farm non-residential
loans up $30.9 million, construction loans down $78.8 million, and one-to-four
family residential loans for portfolio up $12.4
17
million. In addition,
one-to-four family residential loans originated for sale totaled $64.8 million
for the quarter ended June 30, 2009, and $125.9 million year-to-date,
compared to $22.5 million and $44.2 million for the same periods in 2008.
Year-to-date loan production
has been negatively impacted by declining economic activity and demand in both
the business and consumer sectors, a reallocation of personnel resources to
problem loan identification and resolution and a strategic decision to moderate
land acquisition, development and construction loan growth in the face of an
uncertain economy and heightened risk factors.
Going forward, lending efforts will be focused on building greater
market share in commercial and industrial lending, especially in sectors forecast
for growth, such as government contract lending and select service industries
through strategic hiring, marketing campaigns and calling efforts.
For the six months ended June 30,
2009, total deposits were up $19.3 million and included an increase in demand
deposits of $44.9 million, or 23.0%, from $194.8 million at December 31,
2008, to $239.7 million at June 30, 2009, an increase in savings and
interest-bearing demand deposits of $241.8 million, or 46.7%, and a decrease in
time deposits of $267.3 million, from $1.46 billion at December 31, 2008,
to $1.19 billion. The majority of the Banks deposits are attracted from
individuals and businesses in the Northern Virginia and the Metropolitan
Washington, D.C. area. The declines in time deposits are reflective of lower
loan volume and a strategy to reduce the Banks historically heavy reliance on
certificates of deposit as a funding source with deposit gathering efforts
increasingly focused on demand deposits as well as cross-selling activities
tied to the acquisition of savings and interest-bearing demand accounts. The
proportionate share of time deposits relative to total deposits has declined
from 67.2% at year-end 2008 to 54.4% as of June 30, 2009, and is expected
to be in the 45-50% range by the end of this year.
Repurchase agreements,
the majority of which represent funds of significant commercial demand deposit
customers, and Fed funds purchased decreased $22.2 million, or 11.8%, from
$188.0 million at December 31, 2008, to $165.7 million at June 30,
2009, with $12 million of the decline in Federal funds purchased. There were no
Federal funds purchased as of June 30, 2009.
As noted, for the six
months ended June 30, 2009, the Company recorded a net income operating
loss of $7.6 million as compared to earnings of 9.1 million for the six months
ended June 30, 2008, as net interest income increased $2.6 million, or
6.4%, non-interest income increased $409 thousand, or 12.2%, non-interest
expense rose $4.6 million, or 21.0%, and provisions for loan losses were up
$24.0 million. The Companys annualized return on average assets and return on
average equity were a negative 0.56% and 6.11% for the current six month period
compared to a positive 0.73% and 10.43% for the six months ended June 30,
2008.
For the three months
ended June 30, 2009, the Company recorded a net operating loss of $5.2
million compared to earnings of $4.9 million for the same period in 2008 as net
interest income rose $1.3 million, or 6.2%, non-interest income increased $220
thousand, or 12.7%, non-interest expense increased $2.4 million, or 21.2%, and
provisions for loan losses were up $14.8 million. The return on average assets
and return on average equity were a negative 0.77% and 8.36% for the three
months ended June 30, 2009, compared to a positive 0.76% and 11.18% for
the same period in 2008.
Stockholders equity
decreased $10.3 million, or 4.1%, from $253.3 million at December 31,
2008, to $243.0 million at June 30, 2009, with a net loss to common
stockholders of $9.6 million and a decline in other comprehensive income
related to the investment securities portfolio, net of tax.
Net
Interest Income
Net interest income is
the excess of interest earned on loans and investments over the interest paid
on deposits and borrowings, and is the Companys primary revenue source. Net
interest income is thereby affected by balance sheet growth, changes in
interest rates and changes in the mix of investments, loans, deposits and
borrowings. Net interest income increased $2.6 million, or 6.4%, from $40.2
million for the six months ended June 30, 2008, to $42.8 million for the
six month period ended June 30, 2009, and increased $1.3 million, or 6.2%,
from $20.7 million for the three months ended June 30, 2008, to $22.0
million for the three months ended June 30, 2009. Increases for both
periods were due to overall balance sheet growth as the net interest margin
declined from 3.32% for the six months ended June 30, 2008, to 3.25% for
the current six-month period while the margin increased from 3.30% for the
three months ended June 30, 2008, to 3.35% for the three months ended June 30,
2009. Year-over-year, yields on loans are down 106 basis points due to
reductions in the prime rate and increases in the level of non-performing
loans, while the cost of interest-bearing liabilities are down 96 basis points
due to the changes noted above in the funding
18
mix. With market rates
expected to remain mostly unchanged through the remainder of 2009, Management anticipates
the margin to average from 3.30% to 3.40%.
The following tables show
the average balance sheets for each of the three months and six months ended June 30,
2009 and 2008. In addition, the amounts
of interest earned on interest-earning assets, with related yields on a
tax-equivalent basis, and interest expense on interest-bearing liabilities,
with related rates, are shown. Loans
placed on a non-accrual status are included in the average balances. Net loan
fees and late charges included in interest income on loans totaled $892
thousand and $1.4 million for the three months ended June 30, 2009, and
2008, respectively, and totaled $1.7 million and $2.7 million for the six month
periods.
19
|
|
Three months ended June 30,
|
|
|
|
2009
|
|
2008
|
|
(Dollars in thousands)
|
|
Average
Balance
|
|
Interest
Income-
Expense
|
|
Average
Yields
/Rates
|
|
Average
Balance
|
|
Interest
Income-
Expense
|
|
Average
Yields
/Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities (1)
|
|
$
|
334,487
|
|
$
|
3,985
|
|
4.93
|
%
|
$
|
331,321
|
|
$
|
4,167
|
|
5.14
|
%
|
Loans, net of unearned income
|
|
2,294,007
|
|
33,186
|
|
5.81
|
%
|
2,150,165
|
|
35,935
|
|
6.71
|
%
|
Interest-bearing deposits in other banks
|
|
79
|
|
|
|
0.12
|
%
|
13,311
|
|
85
|
|
2.58
|
%
|
Federal funds sold
|
|
27,400
|
|
12
|
|
0.17
|
%
|
41,595
|
|
213
|
|
2.03
|
%
|
Total interest-earning assets
|
|
$
|
2,655,973
|
|
$
|
37,183
|
|
5.65
|
%
|
$
|
2,536,392
|
|
$
|
40,400
|
|
6.41
|
%
|
Other assets
|
|
60,769
|
|
|
|
|
|
54,700
|
|
|
|
|
|
Total Assets
|
|
$
|
2,716,742
|
|
|
|
|
|
$
|
2,591,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
229,785
|
|
$
|
717
|
|
1.25
|
%
|
$
|
167,541
|
|
$
|
689
|
|
1.65
|
%
|
Money market accounts
|
|
160,923
|
|
573
|
|
1.43
|
%
|
212,071
|
|
1,437
|
|
2.72
|
%
|
Savings accounts
|
|
304,347
|
|
1,720
|
|
2.27
|
%
|
180,939
|
|
1,367
|
|
3.03
|
%
|
Time deposits
|
|
1,264,340
|
|
9,786
|
|
3.10
|
%
|
1,346,262
|
|
13,814
|
|
4.12
|
%
|
Total interest-bearing deposits
|
|
$
|
1,959,395
|
|
$
|
12,796
|
|
2.62
|
%
|
$
|
1,906,813
|
|
$
|
17,307
|
|
3.64
|
%
|
Securities sold under agreement to repurchase and
federal funds purchased
|
|
187,897
|
|
835
|
|
1.78
|
%
|
231,347
|
|
1,418
|
|
2.46
|
%
|
Other borrowed funds
|
|
25,000
|
|
269
|
|
4.25
|
%
|
25,275
|
|
270
|
|
4.23
|
%
|
Trust preferred capital notes
|
|
65,898
|
|
1,283
|
|
7.70
|
%
|
40,000
|
|
691
|
|
6.83
|
%
|
Total interest-bearing
liabilities
|
|
$
|
2,238,190
|
|
$
|
15,183
|
|
2.72
|
%
|
$
|
2,203,435
|
|
$
|
19,686
|
|
3.58
|
%
|
Demand deposits and other liabilities
|
|
229,881
|
|
|
|
|
|
211,168
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,468,071
|
|
|
|
|
|
$
|
2,414,603
|
|
|
|
|
|
Stockholders equity
|
|
248,671
|
|
|
|
|
|
176,489
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
2,716,742
|
|
|
|
|
|
$
|
2,591,092
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
2.93
|
%
|
|
|
|
|
2.83
|
%
|
Net interest income and margin
|
|
|
|
$
|
22,000
|
|
3.35
|
%
|
|
|
$
|
20,714
|
|
3.30
|
%
|
(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 loans and securities are
stated on a tax equivalent basis, using a 35% rate.
20
|
|
Six months ended June 30,
|
|
|
|
2009
|
|
2008
|
|
(Dollars in thousands)
|
|
Average
Balance
|
|
Interest
Income-
Expense
|
|
Average
Yields
/Rates
|
|
Average
Balance
|
|
Interest
Income
Expense
|
|
Average
Yields
/Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities (1)
|
|
$
|
336,576
|
|
$
|
8,076
|
|
4.95
|
%
|
$
|
326,155
|
|
$
|
8,309
|
|
5.20
|
%
|
Loans, net of unearned income
|
|
2,303,301
|
|
66,629
|
|
5.84
|
%
|
2,090,394
|
|
71,826
|
|
6.90
|
%
|
Interest-bearing deposits in other banks
|
|
91
|
|
|
|
0.12
|
%
|
7,340
|
|
102
|
|
2.79
|
%
|
Federal funds sold
|
|
34,354
|
|
32
|
|
0.18
|
%
|
21,899
|
|
226
|
|
2.04
|
%
|
Total interest-earning assets
|
|
$
|
2,674,322
|
|
$
|
74,737
|
|
5.66
|
%
|
$
|
2,445,788
|
|
$
|
80,463
|
|
6.62
|
%
|
Other assets
|
|
57,411
|
|
|
|
|
|
58,133
|
|
|
|
|
|
Total Assets
|
|
$
|
2,731,733
|
|
|
|
|
|
$
|
2,503,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
210,409
|
|
$
|
1,326
|
|
1.27
|
%
|
$
|
156,930
|
|
$
|
1,201
|
|
1.53
|
%
|
Money market accounts
|
|
155,362
|
|
1,151
|
|
1.49
|
%
|
209,303
|
|
3,093
|
|
2.96
|
%
|
Savings accounts
|
|
273,059
|
|
3,159
|
|
2.33
|
%
|
172,887
|
|
2,808
|
|
3.26
|
%
|
Time deposits
|
|
1,343,894
|
|
21,791
|
|
3.27
|
%
|
1,281,000
|
|
28,235
|
|
4.42
|
%
|
Total interest-bearing deposits
|
|
$
|
1,982,724
|
|
$
|
27,427
|
|
2.79
|
%
|
$
|
1,820,120
|
|
$
|
35,337
|
|
3.89
|
%
|
Securities sold under agreement to repurchase and
federal funds purchased
|
|
186,561
|
|
1,455
|
|
1.57
|
%
|
232,771
|
|
3,101
|
|
2.67
|
%
|
Other borrowed funds
|
|
25,000
|
|
534
|
|
4.25
|
%
|
25,138
|
|
464
|
|
3.66
|
%
|
Trust preferred capital notes
|
|
65,865
|
|
2,564
|
|
7.74
|
%
|
40,000
|
|
1,382
|
|
6.83
|
%
|
Total interest-bearing
liabilities
|
|
$
|
2,260,150
|
|
$
|
31,980
|
|
2.85
|
%
|
$
|
2,118,029
|
|
$
|
40,284
|
|
3.81
|
%
|
Demand deposits and other liabilities
|
|
221,005
|
|
|
|
|
|
211,456
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,481,155
|
|
|
|
|
|
$
|
2,329,485
|
|
|
|
|
|
Stockholders equity
|
|
250,578
|
|
|
|
|
|
174,436
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
2,731,733
|
|
|
|
|
|
$
|
2,503,921
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
2.81
|
%
|
|
|
|
|
2.81
|
%
|
Net interest income and margin
|
|
|
|
$
|
42,757
|
|
3.25
|
%
|
|
|
$
|
40,179
|
|
3.32
|
%
|
(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 loans and securities are
stated on a tax equivalent basis, using a 35% rate.
21
Allowance for Loan Losses
/ Provision for Loan Loss Expense
The provision for loan
losses is based upon managements estimate of the amount required to maintain
an adequate allowance for loan losses reflective of the risks in the loan
portfolio. Provisions for loan losses were $18.4 million for the three months
ended June 30, 2009, compared to $3.7 million in the same period in 2008,
due to an increase in non-performing assets and loans 90+ days past due from
$43.9 million at June 30, 2008, to $139.6 million at June 30, 2009.
For the six months ended June 30, 2009, provisions totaled $31.8 million
compared to $7.8 million for the six months ended June 30, 2008, with 2009
year-to-date net charge-offs of $29.3 million compared to $3.9 million in the
first half of 2008.
The higher levels of
provisions and net-charge-offs are attributable to Managements focus on
aggressive problem loan resolution, as total non-performing assets and loans
90+ days past due declined by $22.5 million during the quarter from $162.1
million, or 5.84% of total assets, to $139.6 million, or 5.17% of total assets.
Non-accrual loans decreased by $19.7 million, loans 90+ days past due decreased
by $18.6 million and other real estate owned (foreclosed properties) increased
by $15.7 million. In addition to the quarterly decline in non-accruals and
loans 90+ days past due, loans past due 30 to 89 days were reduced
significantly from $55.7 million at March 31, 2009, to $19.2 million. See Risk
Elements and Non-performing Assets for additional discussion relating to
non-performing assets and impaired loans.
Management feels that the
allowance for loan losses is adequate at June 30, 2009. However, there can
be no assurance that additional provisions for loan losses will not be required
in the future, including as a result of possible changes in the economic
assumptions underlying managements estimates and judgments, adverse
developments in the economy, on a national basis or in the Companys market
area, or changes in the circumstances of particular borrowers.
The Company generates a quarterly
analysis of the allowance for loan losses, with the objective of quantifying
portfolio risk into a dollar figure of inherent losses, thereby translating the
subjective risk value into an objective number.
Emphasis is placed on semi-annual independent external loan reviews and
monthly internal reviews. The
determination of the allowance for loan losses is based on applying and summing
the results of eight qualitative factors and one quantitative factor to each
category of loans along with any specific allowance for impaired and adversely
classified loans within the particular category. Each factor is assigned a
percentage weight and that total weight is applied to each loan category. The
resulting sum from each loan category is then combined to arrive at a total
allowance for all categories. Factors are different for each loan category.
Qualitative factors include: levels and trends in delinquencies and
non-accruals, trends in volumes and terms of loans, effects of any changes in
lending policies, the experience, ability and depth of management, national and
local economic trends and conditions, concentrations of credit, quality of the
Companys loan review system, and regulatory requirements. The total allowance
required thus changes as the percentage weight assigned to each factor is
increased or decreased due to its particular circumstance, as the various types
and categories of loans change as a percentage of total loans and as specific
allowances are required on impaired loans.
22
The following schedule summarizes the
changes in the allowance for loan losses:
|
|
Six Months
|
|
Six Months
|
|
Twelve Months
|
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
|
|
June 30, 2009
|
|
June 30, 2008
|
|
December 31, 2008
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Allowance, at beginning of period
|
|
$
|
36,475
|
|
$
|
22,260
|
|
$
|
22,260
|
|
Provision charged against income
|
|
31,813
|
|
7,768
|
|
25,378
|
|
Recoveries:
|
|
|
|
|
|
|
|
Consumer loans
|
|
55
|
|
21
|
|
65
|
|
Commercial
|
|
64
|
|
|
|
16
|
|
Real estate one-to-four family residential:
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
|
|
|
48
|
|
Home equity loans and liens
|
|
2
|
|
2
|
|
2
|
|
Real estate-nonfarm, nonresidential
|
|
|
|
|
|
27
|
|
Real estate-construction
|
|
170
|
|
|
|
|
|
Losses charged to reserve:
|
|
|
|
|
|
|
|
Consumer loans
|
|
(177
|
)
|
(150
|
)
|
(392
|
)
|
Commercial loans
|
|
(3,240
|
)
|
(1,993
|
)
|
(3,436
|
)
|
Real Estate one-to-four family residential:
|
|
|
|
|
|
|
|
Permanent first and second
|
|
(1,156
|
)
|
(592
|
)
|
(769
|
)
|
Home equity loans and liens
|
|
(826
|
)
|
|
|
(314
|
)
|
Real estate-multi-family residential
|
|
|
|
(94
|
)
|
(95
|
)
|
Real estate-nonfarm, nonresidential
|
|
(211
|
)
|
|
|
(2
|
)
|
Real estate-construction
|
|
(23,991
|
)
|
(1,119
|
)
|
(6,313
|
)
|
Net recoveries (charge-offs)
|
|
(29,310
|
)
|
(3,925
|
)
|
(11,163
|
)
|
Allowance, at end of period
|
|
$
|
38,978
|
|
$
|
26,103
|
|
$
|
36,475
|
|
|
|
|
|
|
|
|
|
Ratio of net charge-offs to average total loans
outstanding during period
|
|
1.27
|
%
|
0.19
|
%
|
0.51
|
%
|
Allowance for loan losses to total loans
|
|
1.72
|
%
|
1.18
|
%
|
1.58
|
%
|
Risk
Elements and Non-performing Assets
Non-performing
assets consist of non-accrual loans and other real estate owned (foreclosed
properties). For the six months ended June 30,
2009, the total non-performing assets and loans 90+ days past due and still
accruing interest increased by $14.7 million, or 11.8%, from $124.9 million at December 31,
2008, to $139.6 million at June 30, 2009. As a result, the ratio of
non-performing assets and loans 90+ days past due and still accruing to total
assets increased from 4.60% at December 31, 2008, to 5.17% at June 30,
2009. In addition, other impaired loans, which include loans well-secured and
currently performing, but in some instances requiring higher reserve levels and
troubled debt restructurings, performing in accordance with their modified
terms, increased from $49.3 million at December 31,
2008, to $98.2 million at June 30, 2009.
Loans are placed
in non-accrual status when in the opinion of management the collection of
additional interest is unlikely or a specific loan meets the criteria for
non-accrual status established by regulatory authorities. No interest is taken into income on
non-accrual loans. A loan remains on
non-accrual status until the loan is current as to both principal and interest
or the borrower demonstrates the ability to pay and remain current, or both
Foreclosed real properties include properties that have been substantively
repossessed or acquired in complete or partial satisfaction of debt. Such
properties, which are held for resale, are carried at the lower of cost or fair
value, including a reduction for the estimated selling expenses, or principal
balance of the related loan. Troubled debt restructurings continue to be tested
for impairment for a period of one year from their modification date.
Non-performing loans
continue to be concentrated in residential and commercial construction and land
development loans in outer sub-markets hardest hit by the residential downturn
and commercial and consumer credits experiencing the after shocks in
sub-contracting businesses and workforce employment. Additions to
non-performing loans in the second quarter included $3.3 million in one-to-four
family residential loans and $7.7 million in non-owner occupied, non-farm,
non-residential loans which were predominantly located in outer sub-markets and
negatively impacted by higher vacancy and delinquent rents. Additionally, a $2.4
million commercial and industrial loan impacted by fraud and embezzlement was
added. Overall, as of June 30, 2009, $74.6 million, or 70.3%, of
non-performing loans represented acquisition, development and construction
loans, $14.9 million, or 14.1%, represented
23
non-farm, non-residential
loans, $12.3 million, or 11.6%, represented commercial and industrial loans and
$4.3 million, or 4.1%, represented loans on one-to-four family residential
properties.
Total
non-performing assets consist of the following:
|
|
June 30, 2009
|
|
June 30, 2008
|
|
December 31, 2008
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
Non-accrual loans:
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
12,259
|
|
$
|
1,951
|
|
$
|
12,178
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
Closed end first and seconds
|
|
3,843
|
|
173
|
|
|
|
Home equity lines
|
|
494
|
|
395
|
|
320
|
|
Total Real estate-one-to-four family residential
|
|
$
|
4,337
|
|
$
|
568
|
|
$
|
320
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
Owner occupied
|
|
6,462
|
|
2,534
|
|
4,976
|
|
Non-owner occupied
|
|
8,460
|
|
411
|
|
1,210
|
|
Total Real estate-non-farm, non-residential
|
|
$
|
14,922
|
|
$
|
2,945
|
|
$
|
6,186
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
Residential-Owner occupied
|
|
2,389
|
|
3,889
|
|
4,543
|
|
Residential-Builder
|
|
53,251
|
|
23,278
|
|
48,178
|
|
Commercial
|
|
18,955
|
|
1,513
|
|
39,819
|
|
Total Real estate-construction:
|
|
$
|
74,595
|
|
$
|
28,680
|
|
$
|
92,540
|
|
Consumer
|
|
23
|
|
40
|
|
10
|
|
Total Non-accrual loans
|
|
106,136
|
|
34,184
|
|
$
|
111,234
|
|
OREO
|
|
28,198
|
|
6,091
|
|
7,569
|
|
Total non-performing assets
|
|
$
|
134,334
|
|
$
|
40,275
|
|
$
|
118,803
|
|
Loans 90+ days past due and still accruing
|
|
5,232
|
|
3,641
|
|
6,118
|
|
Total non-performing assets and past due loans
|
|
$
|
139,566
|
|
$
|
43,916
|
|
$
|
124,921
|
|
|
|
|
|
|
|
|
|
Non-performing assets
|
|
|
|
|
|
|
|
to total loans:
|
|
5.95
|
%
|
1.82
|
%
|
5.13
|
%
|
to total assets:
|
|
4.98
|
%
|
1.52
|
%
|
4.37
|
%
|
Non-performing assets and past due loans
|
|
|
|
|
|
|
|
to total loans:
|
|
6.18
|
%
|
1.99
|
%
|
5.40
|
%
|
to total assets:
|
|
5.17
|
%
|
1.65
|
%
|
4.60
|
%
|
Residential, Acquisition, Development and Construction
|
|
As of June 30, 2009
|
|
|
|
Total
Outstandings
|
|
Percentage
of Total
|
|
Non-accrual
Loans
|
|
Non-accruals
as a % of
Outstandings
|
|
Net charge-
offs as a % of
Outstandings
|
|
By County/Jurisdiction of
Origination:
|
|
|
|
|
|
|
|
|
|
|
|
District of Columbia
|
|
$
|
19,958
|
|
7.1
|
%
|
$
|
|
|
|
|
|
|
Montgomery, MD
|
|
11,069
|
|
3.9
|
%
|
4,413
|
|
1.6
|
%
|
0.7
|
%
|
Prince Georges, MD
|
|
33,885
|
|
12.0
|
%
|
10,016
|
|
3.5
|
%
|
1.3
|
%
|
Other Counties in MD
|
|
5,711
|
|
2.0
|
%
|
344
|
|
0.1
|
%
|
0.4
|
%
|
Arlington/Alexandria, VA
|
|
48,225
|
|
17.1
|
%
|
5,698
|
|
2.0
|
%
|
|
|
Fairfax, VA
|
|
73,948
|
|
26.2
|
%
|
15,347
|
|
5.4
|
%
|
0.5
|
%
|
Culpeper/Fauquier, VA
|
|
1,762
|
|
0.6
|
%
|
320
|
|
0.1
|
%
|
|
|
Frederick, VA
|
|
6,750
|
|
2.4
|
%
|
6,750
|
|
2.4
|
%
|
0.8
|
%
|
Loudoun, VA
|
|
29,280
|
|
10.4
|
%
|
770
|
|
0.3
|
%
|
0.2
|
%
|
Prince William, VA
|
|
13,083
|
|
4.6
|
%
|
4,009
|
|
1.4
|
%
|
0.2
|
%
|
Spotsylvania, VA
|
|
1,491
|
|
0.5
|
%
|
|
|
|
|
|
|
Stafford, VA
|
|
21,851
|
|
7.7
|
%
|
4,898
|
|
1.7
|
%
|
|
|
Other Counties in VA
|
|
15,293
|
|
5.4
|
%
|
3,075
|
|
1.1
|
%
|
0.3
|
%
|
Outside VA, D.C. & MD
|
|
111
|
|
0.0
|
%
|
|
|
|
|
0.4
|
%
|
|
|
$
|
282,417
|
|
100.0
|
%
|
$
|
55,640
|
|
19.6
|
%
|
4.8
|
%
|
24
Commercial, Acquisition,
Development and Construction
|
|
As of June 30, 2009
|
|
|
|
Total
Outstandings
|
|
Percentage
of Total
|
|
Non-accrual
Loans
|
|
Non-accruals
as a % of
Outstandings
|
|
Net charge-
offs as a % of
Outstandings
|
|
By County/Jurisdiction of
Origination:
|
|
|
|
|
|
|
|
|
|
|
|
District of Columbia
|
|
$
|
11,315
|
|
5.1
|
%
|
$
|
|
|
|
|
|
|
Montgomery, MD
|
|
1,422
|
|
0.6
|
%
|
|
|
|
|
|
|
Prince Georges, MD
|
|
10,155
|
|
4.5
|
%
|
|
|
|
|
|
|
Other Counties in MD
|
|
7,747
|
|
3.5
|
%
|
|
|
|
|
|
|
Arlington/Alexandria, VA
|
|
3,220
|
|
1.4
|
%
|
|
|
|
|
|
|
Fairfax, VA
|
|
25,357
|
|
11.3
|
%
|
1,513
|
|
0.7
|
%
|
4.6
|
%
|
Henrico, VA
|
|
11,798
|
|
5.3
|
%
|
|
|
|
|
|
|
Loudoun, VA
|
|
42,049
|
|
18.8
|
%
|
15,181
|
|
6.8
|
%
|
|
|
Prince William, VA
|
|
57,112
|
|
25.5
|
%
|
2,261
|
|
1.0
|
%
|
|
|
Spotsylvania, VA
|
|
10,498
|
|
4.7
|
%
|
|
|
|
|
|
|
Stafford, VA
|
|
37,489
|
|
16.7
|
%
|
|
|
|
|
|
|
Other Counties in VA
|
|
5,754
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
$
|
223,916
|
|
100.0
|
%
|
$
|
18,955
|
|
8.5
|
%
|
4.6
|
%
|
Concentrations of
Credit Risk
The Bank does a general
banking business, serving the commercial and personal banking needs of its
customers. The Banks market area consists of the Northern Virginia suburbs of
Washington, D.C., including Arlington Fairfax, Fauquier, Loudoun, Prince
William, Spotsylvania and Stafford Counties, the cities of Alexandria, Fairfax,
Falls Church, Fredericksburg, Manassas and Manassas Park, and to some extent
the Maryland suburbs and the city of Washington D.C. Substantially all of the Companys loans are
made within its market area.
The ultimate
collectibility of the Banks loan portfolio and the ability to realize the
value of any underlying collateral, if needed, are influenced by the economic
conditions of the market area. The Companys operating results are therefore
closely related to the economic conditions and trends in the Metropolitan
Washington, D.C. area.
At June 30, 2009,
the Company had $1.62 billion, or 71.8%, of total loans concentrated in
commercial real estate. Commercial real estate for purposes of this discussion
includes all construction loans, loans secured by multi-family residential
properties and loans secured by non-farm, non-residential properties. At December 31,
2008, commercial real estate loans were $1.66 billion, or 72.0%, of total
loans. Total construction loans of $506.3 million at June 30, 2009,
represented 22.4% of total loans, loans secured by multi-family residential
properties of $69.6 million represented 3.1% of total loans, and loans secured
by non-farm, non-residential properties of $1.04 billion represented 46.1%.
Construction loans at June 30,
2009, included $259.4 million in loans to commercial builders of single family
residential property and $23.0 million to individuals on single family
residential property, representing 11.5% and 1.0% of total loans, respectively,
and together representing 12.5% of total loans. These loans are made to a
number of unrelated entities and generally have a term of twelve to eighteen
months. In addition, the Company had
$223.9 million of construction loans on non-residential commercial property at June 30,
2009, representing 9.9% of total loans. These total construction loans of
$506.3 million include $176.4 million in land acquisition and or development
loans on residential property and $100.8 million in land acquisition and or
development loans on commercial property, together totaling $277.3 million, or
12.3% of total loans. Further adverse developments in the Northern Virginia
real estate market or economy, including substantial increases in mortgage
interest rates, slower housing sales, and increased commercial property vacancy
rates, could have further adverse impacts on these groups of loans and the Banks
income and financial position. At June 30, 2009, the Company had no other
concentrations of loans in any one industry exceeding 10% of its total loan
portfolio. An industry for this purpose
is defined as a group of counterparties that are engaged in similar activities
and have similar economic characteristics that would cause their ability to
meet contractual obligations to be similarly affected by changes in economic or
other conditions.
The Bank has established
formal policies relating to the credit and collateral requirements in loan originations
including policies that establish limits on various loan types as a percentage
of total loans and total capital. Loans
to purchase real property are generally collateralized by the related property
with limitations based on the propertys appraised value. Credit approval is
primarily a function of collateral and the evaluation of the creditworthiness
of the individual borrower, guarantors and or the individual project.
25
The federal banking regulators
have issued guidance for those institutions which are deemed to have
concentrations in commercial real estate lending. Pursuant to the supervisory criteria
contained in the guidance for identifying institutions with a potential
commercial real estate concentration risk, institutions which have (1) total
reported loans for construction, land development, and other land which
represent in total 100% or more of an institutions total risk-based capital; or
(2) total commercial real estate loans representing 300% or more of the
institutions total risk-based capital and the institutions commercial real
estate loan portfolio has increased 50% or more during the prior 36 months are
identified as having potential commercial real estate concentration risk. Institutions
which are deemed to have concentrations in commercial real estate lending are
expected to employ heightened levels of risk management with respect to their
commercial real estate portfolios, and may be required to hold higher levels of
capital. The Company, like many
community banks, has a concentration in commercial real estate loans. Management has extensive experience in
commercial real estate lending, and has implemented and continues to maintain
heightened portfolio monitoring and reporting, and strong underwriting criteria
with respect to its commercial real estate portfolio. The Company is well capitalized. Nevertheless, it is possible that the Company
could be required to maintain higher levels of capital as a result of our
commercial real estate concentrations, which could require us to obtain
additional capital, and may adversely affect shareholder returns.
Non-Interest
Income
Non-interest income
increased $409 thousand, or 12.2%, from $3.4 million for the six months ended June 30,
2008, to $3.8 million for the same period ended June 30, 2009, and
increased $220 thousand, or 12.7%, from $1.7 million for the three months ended
June 30, 2008, to $1.9 million in the current period. Higher levels of
fees and net gains on mortgage loans originated-for-sale account for the
majority of the increase in non-interest income year-over-year.
Non-Interest Expense
For the six months ended June 30,
2009, non-interest expense increased $4.6 million, or 21.0%, compared to the
same period in 2008, and increased $2.4 million, or 21.2%, from $11.2 million
for the three months ended June 30, 2008, to $13.6 million for the three
months ended June 30, 2009. The majority of the year-over-year increases
were due to significantly higher FDIC insurance premiums, including a special
one-time assessment of $1.2 million in the second quarter, as well as higher
legal and professional services expenses associated with the collection of
non-performing loans and OREO. As a result of these increases in expenses, the efficiency
ratio rose from 49.9% in the second quarter of 2008 to 56.7% in the current
period.
Provision for Income
Taxes
The Companys income tax provisions are
adjusted for non-deductible expenses and non-taxable interest after applying
the U.S. federal income tax rate of 35%.
For the six months ended June 30, 2009, the Company recorded an
income tax benefit of $4.3 million as compared to a provision of $4.7 million
for the same period in 2008, and the Company recorded a benefit of $2.9 million
for the three months ended June 30, 2009, as compared to a provision of
$2.7 million in 2008. The effects of non-deductible expenses and non-taxable
income on the Companys income tax provisions are minimal.
Liquidity
The Companys principal
sources of liquidity and funding are its deposit base. The level of deposits
necessary to support the Companys lending and investment activities is
determined through monitoring loan demand. Considerations in managing the
Companys liquidity position include, but are not limited to, scheduled cash
flows from existing loans and investment securities, anticipated deposit
activity including the maturity of time deposits, and projected needs from
anticipated extensions of credit. The Companys liquidity position is monitored
daily by management to maintain a level of liquidity conducive to efficiently
meet current needs and is evaluated for both current and longer term needs as
part of the asset/liability management process.
The Company measures
total liquidity through cash and cash equivalents, securities
available-for-sale, mortgage loans held-for-sale, other loans and investment
securities maturing within one year, less securities pledged as collateral for
repurchase agreements, public deposits and other purposes, and less any
outstanding federal funds purchased.
These liquidity sources decreased $26.1 million, or 4.3%, from $637.7
million at December 31, 2008, to $611.6 million at June 30, 2009, due
mostly to a decline in the level of loans maturing within one year.
26
Additional sources of
liquidity available to the Company include the capacity to borrow funds through
established short-term lines of credit with various correspondent banks, and
the Federal Home Loan Bank of Atlanta. Available funds from these liquidity
sources were approximately $452.6 million and $458.9 million at June 30,
2009, and December 31, 2008, respectively. The Banks available line of
credit with the Federal Home Loan Bank of Atlanta, which requires the pledging
of collateral in the form of certain loans and or securities, is $415.6 million
of which $80.1 million was available as of June 30, 2009, based on
presently pledged collateral.
Off-Balance Sheet
Arrangements
The Company enters into
certain off-balance sheet arrangements in the normal course of business to meet
the financing needs of its customers.
These off-balance sheet arrangements include commitments to extend
credit, standby letters of credit and financial guarantees which would impact
the Companys liquidity and capital resources to the extent customers accept
and or use these commitments. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the balance sheet. With the exception of
these off-balance sheet arrangements, and the Companys obligations in
connection with its trust preferred capital notes, the Company has no
off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on the Companys financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources, that is material to investors.
Commitments to extend
credit, which amounted to $477.7 million at June 30, 2009, and $500.7
million at December 31, 2008, represent legally binding agreements to lend
to a customer as long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
Standby letters of credit
are conditional commitments issued by the Company guaranteeing the performance
of a customer to a third party. Those guarantees are primarily issued to
support public and private borrowing arrangements. At June 30, 2009, and December 31,
2008, the Company had $57.6 million and $68.1 million, respectively, in
outstanding performance standby letters of credit.
Contractual Obligations
Since December 31,
2008, there have been no significant changes in the Companys contractual
obligations.
Capital
The assessment of capital
adequacy depends on a number of factors such as asset quality, liquidity,
earnings performance, changing competitive conditions and economic forces, and
the overall level of growth. The adequacy of the Companys current and future
capital is monitored by management on an ongoing basis. Management seeks to
maintain a capital structure that will assure an adequate level of capital to
support anticipated asset growth and to absorb potential losses.
Both the Companys and
the Banks capital levels continue to meet regulatory requirements. The primary indicators relied on by bank
regulators in measuring the capital position are the Tier 1 risk-based capital,
total risk-based capital, and leverage ratios.
Tier 1 capital consists of common and qualifying preferred stockholders
equity, less goodwill, and for the Company includes certain minority interests
relating to bank subsidiary issued shares, and a limited amount of restricted
core capital elements. Restricted core
capital elements include qualifying cumulative preferred stock interests,
certain minority interests in subsidiaries and qualifying trust preferred
securities. All of the $71 million in preferred stock interests issued to the
Treasury under the Capital Purchase Program qualify as Tier 1 capital. Total
risk-based capital consists of Tier 1 capital, qualifying subordinated debt,
and a portion of the allowance for loan losses, and for the Company, a limited
amount of excess restricted core capital elements. Risk-based capital ratios are calculated with
reference to risk-weighted assets. The
leverage ratio compares Tier 1 capital to total average assets. The Banks Tier 1 risk-based capital ratio
was 12.68% at June 30, 2009, compared to 13.16% at December 31, 2008,
and its total risk-based capital ratio was 13.93% at June 30, 2009,
compared to 14.41% at December 31, 2008. These ratios are in excess of the
mandated minimum requirement of 4.00% and 8.00%, respectively. The Banks
leverage ratio was 11.35% at June 30, 2009, compared to 11.81% at December 31,
2008. The Companys Tier 1 risk-based capital ratio, total risk-based capital
ratio, and leverage ratio was 12.72%, 13.97%, and 11.39%, respectively, at June 30,
2009, compared to 13.07%, 14.44%, and 11.76% at December 31,
27
2008. The decrease in
these capital ratios in 2009, are due to net operating losses and dividends
paid on preferred stock to the U.S. Treasury.
The ability of the
Company to continue to grow is dependent on its earnings and the ability to
obtain additional funds for contribution to the Banks capital, through
borrowing, the sale of additional common stock, or through the issuance of
additional trust preferred securities or other qualifying securities. In the
event that the Company is unable to obtain additional capital for the Bank on a
timely basis, the growth of the Company and the Bank may be curtailed, and the
Company and the Bank may be required to reduce their level of assets in order
to maintain compliance with regulatory capital requirements. Under those
circumstances net income and the rate of growth of net income may be adversely
affected.
Guidance by the federal
banking regulators provides that banks which have concentrations in
construction, land development or commercial real estate loans (other than
loans for majority owner occupied properties) would be expected to maintain
higher levels of risk management and, potentially, higher levels of capital. It
is possible that we may be required to maintain higher levels of capital than
we would otherwise be expected to maintain as a result of our levels of
construction, development and commercial real estate loans, which may require
us to obtain additional capital.
The Federal Reserve has
revised the capital treatment of trust preferred securities. As a result, the
capital treatment of trust preferred securities has been revised to provide
that beginning in 2011, such securities can be counted as Tier 1 capital at the
holding company level, together with other restricted core capital elements, up
to 25% of total capital (net of goodwill), and any excess as Tier 2 capital,
subject to limitation. At June 30,
2009, trust preferred securities represented 20.6% of the Companys Tier 1
capital and 18.8% of its total risk-based capital. See Note 9 to the Consolidated
Financial Statements for further information regarding trust preferred
securities.
Capital Issuances.
As noted above, during 2008,
the
Company accepted an investment by Treasury under the Capital Purchase Program.
In connection with that investment, the Company entered into and consummated a
Securities Purchase Agreement with the Treasury, pursuant to which the Company
issued 71,000 shares of the Companys Fixed Rate Cumulative Perpetual Preferred
Stock, Series A (Series A Preferred Stock), having a liquidation
amount per share equal to $1,000, for a total purchase price of $71 million.
The Series A Preferred Stock pays cumulative dividends at a rate of 5% per
year for the first five years and thereafter at a rate of 9% per year. Subject to consultation with the Companys
and Banks federal regulators, the Company may, at its option, redeem the Series A
Preferred Stock at the liquidation amount plus accrued and unpaid
dividends. The Series A Preferred
Stock is non-voting, except in limited circumstances. Prior to the third anniversary of issuance,
unless the Company has redeemed all of the Series A Preferred Stock or the
Treasury has transferred all of the Series A Preferred Stock to a third
party, the consent of the Treasury will be required for the Company to increase
its common stock dividend or repurchase its common stock or other equity or
capital securities, other than in connection with benefit plans consistent with
past practice and certain other circumstances specified in the Purchase Agreement.
In
connection with the purchase of the Series A Preferred Stock, the Treasury
was issued a warrant (the Warrant) to purchase 2,696,203 shares of the
Companys common stock at an initial exercise price of $3.95 per share. The Warrant provides for the adjustment of
the exercise price and the number of shares of the common stock issuable upon
exercise pursuant to customary anti-dilution provisions, such as upon stock
splits or distributions of securities or other assets to holders of the common stock,
and upon certain issuances of the common stock (or securities exercisable or
exchangeable for, or convertible into, common stock) at or below 90% of the
market price of the common stock on the trading day prior to the date of the
agreement on pricing such securities.
The Warrants expire ten years from the date of issuance. The number of shares of common stock issuable
pursuant to the Warrant will be reduced by one-half if, on or prior to December 31,
2009, the Company receives aggregate gross cash proceeds of not less than $71
million from qualified equity offerings announced after October 13,
2008. If the Company redeems the Series A
Preferred Stock in full prior to exercise of the Warrant, the Warrant will be
liquidated based upon the then current fair market value of the common
stock. The Treasury has agreed not to
exercise voting power with respect to any shares of common stock issued upon
exercise of the Warrant.
Recent Accounting
Pronouncements
In April 2009,
the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies. FSP FAS 141(R)-1 amends and clarifies SFAS
141(R) to address application issues on initial recognition and
measurement, subsequent measurement and accounting, and disclosure of assets
and liabilities arising from contingencies in a business combination. The FSP is effective for assets and
liabilities arising from contingencies in business combinations for which the
acquisition date is on or after
28
the beginning of
the first annual reporting period beginning on or after December 15,
2008. The Company does not expect the
adoption of FSP FAS 141(R)-1 to have a material impact on its consolidated
financial statements.
In April 2009,
the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly.
FSP FAS 157-4 provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased.
The FSP also includes guidance on identifying circumstances that indicate
a transaction is not orderly. FSP FAS
157-4 is effective for interim and annual periods ending after June 15,
2009, and shall be applied prospectively.
Earlier adoption is permitted for periods ending after March 15,
2009. The Company does not expect the
adoption of FSP FAS 157-4 to have a material impact on its consolidated
financial statements.
In April 2009,
the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments. FSP FAS
107-1 and APB 28-1 amends SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies as well
as in annual financial statements. In
addition, the FSP amends APB Opinion No. 28, Interim Financial Reporting,
to require those disclosures in summarized financial information at interim
reporting periods. The FSP is effective
for interim periods ending after June 15, 2009, with earlier adoption permitted
for periods ending after March 15, 2009.
The Company does not expect the adoption of FSP FAS 107-1 and APB 28-1
to have a material impact on its consolidated financial statements.
In April 2009,
the FASB issued FSP FAS 115-1 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments. FSP
FAS 115-1 and FAS 124-2 amends other-than-temporary impairment guidance for
debt securities to make guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities. The FSP does not
amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. FSP FAS 115-1 and FAS 124-2 is effective for
interim and annual periods ending after June 15, 2009, with earlier
adoption permitted for periods ending after March 15, 2009. The Company does not expect the adoption of
FSP FAS 115-1 and FAS 124-2 to have a material impact on its consolidated
financial statements.
In April 2009, the
Securities and Exchange Commission issued Staff Accounting Bulletin No. 111
(SAB 111). SAB 111 amends and replaces
SAB Topic 5.M. in the SAB Series entitled Other Than Temporary Impairment
of Certain Investments in Debt and Equity Securities. SAB 111 maintains the SEC Staffs previous
views related to equity securities and amends Topic 5.M. to exclude debt
securities from its scope. The Company
does not expect the implementation of SAB 111 to have a material impact on its
consolidated financial statements.
In May 2009, the
FASB issued Statement of Financial Accounting Standards No. 165, Subsequent
Events. SFAS 165 establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. SFAS 165 is effective for
interim and annual periods ending after June 15, 2009. The Company does not expect the adoption of
SFAS 165 to have a material impact on its consolidated financial statements.
In June 2009, the
FASB issued Statement of Financial Accounting Standards No. 166, Accounting
for Transfers of Financial Assets an amendment of FASB Statement No. 140. SFAS 166 provides guidance to improve the
relevance, representational faithfulness, and comparability of the information
that a reporting entity provides in its financial statements about a transfer
of financial assets; the effects of a transfer on its financial position,
financial performance, and cash flows; and a transferors continuing
involvement, if any, in transferred financial assets. SFAS 166 must be applied
as of the beginning of the first annual reporting period that begins after November 15,
2009 and for interim periods within that first annual reporting period. Earlier application is prohibited. The Company does not expect the adoption of
SFAS 166 to have a material impact on its consolidated financial statements.
In June 2009, the
FASB issued Statement of Financial Accounting Standards No. 167, Amendments
to FASB Interpretation No. 46(R).
SFAS 167 improves financial reporting by enterprises involved with
variable interest entities. SFAS 167
will be effective as of the beginning of the first annual reporting period that
begins after November 15, 2009 and for interim periods within that first
annual reporting period. Earlier
application is prohibited. The Company
does not expect the adoption of SFAS 167 to have a material impact on its
consolidated financial statements.
29
In June 2009, the
FASB issued Statement of Financial Accounting Standards No. 168, The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles a replacement of FASB Statement No. 162. SFAS 168 establishes the FASB Accounting
Standards Codification, which will become the source of authoritative U.S.
generally accepted accounting principles (GAAP) recognized by the FASB to be
applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission under authority
of federal securities laws are also sources of authoritative GAAP for SEC
registrants. On the effective date, the
Codification will supersede all then-existing non-SEC accounting and reporting
standards. All other nongrandfathered
non-SEC accounting literature not included in the Codification will become
nonauthoritative. SFAS 168 is effective
for financial statements issued for interim and annual periods ending after September 15,
2009. The Company does not expect the adoption of SFAS 168 to have a material
impact on its consolidated financial statements.
In June 2009, the
Securities and Exchange Commission issued Staff Accounting Bulletin No. 112
(SAB 112). SAB 112 revises or rescinds portions of the interpretative guidance
included in the codification of SABs in order to make the interpretive guidance
consistent with current U.S. GAAP. The
Company does not expect the adoption of SAB 112 to have a material impact on
its consolidated financial statements.
Internet Access To
Company Documents
The Company provides
access to its SEC filings through the Banks Web site at www.vcbonline.com.
After accessing the Web site, the filings are available upon selecting about
us/stock information/financial information. Reports available include the
annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to those reports as soon as
reasonably practicable after the reports are electronically filed or furnished
to the SEC.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
In the normal course of
business, the Company is exposed to market risk, or interest rate risk, as its
net income is largely dependent on its net interest income. Market risk is
managed by the Companys Asset/Liability Management Committee that formulates
and monitors the performance of the Company based on established levels of
market risk as dictated by policy. In setting tolerance levels, or limits on
market risk, the Committee considers the impact on earnings and capital, the
level and general direction of interest rates, liquidity, local economic
conditions and other factors. Interest rate risk, or interest sensitivity, can
be defined as the amount of forecasted net interest income that may be gained
or lost due to favorable or unfavorable movements in interest rates. Interest
rate risk, or sensitivity, arises when the maturity or repricing of
interest-earning assets differs from the maturing or repricing of
interest-bearing liabilities and as a result of the difference between total
interest-earning assets and interest-bearing liabilities. The Company seeks to
manage interest rate sensitivity while enhancing net interest income by
periodically adjusting this asset/liability position.
One of the
tools used by the Company to assess interest sensitivity on a monthly basis is
the static gap analysis that measures the cumulative differences between the
amounts of assets and liabilities maturing or repricing within various time
periods. It is the Companys goal to limit the one-year cumulative difference,
or gap, in an attempt to limit changes in future net interest income from
changes in market interest rates. The following table shows a static gap
analysis reflecting the earlier of the maturity or repricing dates for various
assets, including prepayment and amortization estimates, and liabilities as of June 30,
2009. At that point in time, the Company had a cumulative net liability
sensitive one-year gap position of $335.9 million, or a negative 12.83% of
total interest-earning assets.
This position would
generally indicate that over a period of one-year net interest earnings should
decrease in a rising interest rate environment as more liabilities would
reprice than assets and should increase in a falling interest rate environment.
However, this measurement of interest rate risk sensitivity represents a static
position as of a single day and is not necessarily indicative of the Companys
position at any other point in time, does not take into account the differences
in sensitivity of yields and costs of specific assets and liabilities to
changes in market rates, and it does not take into account the specific timing
of when changes to a specific asset or liability will occur. More accurate measures
of interest sensitivity are provided to the Company using earnings simulation
models.
30
At June 30, 2009
|
|
Interest Sensitivity Periods
|
|
|
|
Within
|
|
91 to 365
|
|
Over 1 to 5
|
|
Over
|
|
|
|
(Dollars
in thousands)
|
|
90 Days
|
|
Days
|
|
Years
|
|
5 Years
|
|
Total
|
|
Interest Earning Assets
|
|
|
|
|
|
|
|
|
|
|
|
Securities, at amortized cost
|
|
$
|
61,232
|
|
$
|
32,287
|
|
$
|
104,088
|
|
$
|
127,328
|
|
$
|
324,935
|
|
Federal funds sold
|
|
22,999
|
|
|
|
|
|
|
|
22,999
|
|
Loans held-for-sale
|
|
12,940
|
|
|
|
|
|
|
|
12,940
|
|
Loans, net of unearned income
|
|
808,362
|
|
269,504
|
|
915,925
|
|
263,132
|
|
2,256,923
|
|
Total interest earning assets
|
|
$
|
905,533
|
|
$
|
301,791
|
|
$
|
1,020,013
|
|
$
|
390,460
|
|
$
|
2,617,797
|
|
Interest-bearing Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
115,898
|
|
$
|
|
|
$
|
115,897
|
|
$
|
|
|
$
|
231,795
|
|
Money market accounts
|
|
79,705
|
|
|
|
79,705
|
|
|
|
159,410
|
|
Savings accounts
|
|
184,328
|
|
|
|
184,328
|
|
|
|
368,656
|
|
Time deposits
|
|
420,589
|
|
636,965
|
|
134,365
|
|
35
|
|
1,191,954
|
|
Securities sold under agreement to
repurchase and federal
funds
purchased
|
|
90,730
|
|
|
|
25,000
|
|
50,000
|
|
165,730
|
|
Trust preferred capital notes
|
|
|
|
15,000
|
|
25,000
|
|
25,000
|
|
65,000
|
|
Other borrowed funds
|
|
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Total interest-bearing liabilities
|
|
$
|
891,250
|
|
$
|
651,965
|
|
$
|
589,295
|
|
$
|
75,035
|
|
$
|
2,207,545
|
|
Cumulative maturity / interest
sensitivity gap
|
|
$
|
14,283
|
|
$
|
(335,891
|
)
|
$
|
94,827
|
|
$
|
410,252
|
|
$
|
410,252
|
|
As % of total earnings assets
|
|
0.55
|
%
|
-12.83
|
%
|
3.62
|
%
|
15.67
|
%
|
|
|
In order to more closely
measure interest sensitivity, the Company uses earnings simulation models on a
quarterly basis. These models utilize the Companys financial data and various
management assumptions as to balance sheet growth and mix, interest rates,
operating expenses and other non-interest income sources to forecast a base
level of earnings over a one-year period. This base level of earnings is then
shocked assuming a 200 basis points higher and lower level of interest rates
(but not below zero) over the forecasted period. The most recent earnings
simulation model was run based on data as of June 30, 2009, and the model
projected that forecasted net interest income over a one-year period would
decrease by 4.7% if interest rates were to be 200 basis points higher than
expected, and forecasted net interest income would increase by 0.9% if interest
rates were to be 100 basis points lower than expected. As noted above, normally
these earnings models are shocked downward 200 basis points; however, as the
Federal funds target rate dropped to a range of 0% to 0.25%, the prime lending
rate to 3.25%, and treasury yields to historically low levels, a downward shock
in rates of that magnitude was not deemed practical, or likely to occur.
Management believes the modeled results are consistent with the short duration
of its balance sheet and given the many variables that effect the actual timing
of when assets and liabilities will reprice, including interest rate floors.
Since the earnings model uses numerous assumptions regarding the effect of
changes in interest rates on the timing and extent of repricing
characteristics, future cash flows and customer behavior, the model cannot
precisely estimate net income and the effect on net income from sudden changes
in interest rates. Actual results will differ from simulated results noted
above due to the timing, magnitude and frequency of interest rate changes and
changes in market conditions and management strategies, among other factors.
ITEM 4.
CONTROLS AND PROCEDURES
The Companys management,
under the supervision and with the participation of the Companys Chief
Executive Officer and Chief Financial Officer, evaluated, as of the last day of
the period covered by this report, the effectiveness of the design and
operation of the Companys disclosure controls and procedures, as defined in Rule
31
13a-15(e) under the
Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Companys disclosure
controls and procedures were effective. There were no changes in the Companys
internal control over financial reporting (as defined in Rule 13a-15 under
the Securities Act of 1934) during the quarter ended June 30, 2009, that
has materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 1A. Risk Factors
There have been no
material changes to the risk factors as previously disclosed in the Companys Form 10-K
for the year ended December 31, 2008, except for the increase in the
level of non-performing assets and loan loss provisions discussed under Risk
Elements and Non-performing assets.
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds
(a)
Sales of Unregistered Securities.
- None
(b)
Use of Proceeds.-
Not Applicable.
(c)
Issuer Purchases of Securities.
- None
Item 3. Defaults Upon Senior Securities.- None
Item 4. Submission of Matters to a Vote of Security
Holders
On April 29, 2009,
the annual meeting of shareholders of the Company was held for the purpose of
electing eight (8) directors to serve until the next annual meeting and
until their successors are duly elected and qualified.
The name of each director
elected at the meeting, and the votes cast for such persons, who constitute the
entire Board of Directors in office following the meeting, are set forth below.
Name
|
|
For
|
|
Withheld
|
|
Broker Non-votes
|
|
Leonard Adler
|
|
22,101,705
|
|
803,696
|
|
none
|
|
Michael Anzilotti
|
|
21,035,146
|
|
1,870,255
|
|
none
|
|
Peter A. Converse
|
|
21,052,288
|
|
1,853,113
|
|
none
|
|
W. Douglas Fisher
|
|
22,110,070
|
|
795,331
|
|
none
|
|
David M. Guernsey
|
|
22,104,437
|
|
800,964
|
|
none
|
|
Robert H. LHommedieu
|
|
20,954,385
|
|
1,951,016
|
|
none
|
|
Norris E. Mitchell
|
|
22,155,702
|
|
749,699
|
|
none
|
|
Arthur L. Walters
|
|
22,079,849
|
|
825,552
|
|
none
|
|
Additionally, on April 29,
2009, at the annual meeting of shareholders, shareholders approved a nonbinding
advisory resolution approving the compensation of our executive officers. Results of the vote were 20,541,363 for,
1,847,340 against and 516,698 abstained.
Item 5. Other Information.
(a)
Required 8-K
Disclosures.
None
(b)
Changes in Procedures for
Director Nominations by Securityholders.
None
32
Item 6. Exhibits
Exhibit No.
|
|
Description
|
3.1
|
|
Articles of
Incorporation of Virginia Commerce Bancorp, Inc., as amended (1)
|
3.2
|
|
Articles of Amendment
to the Articles of Incorporation relating to the Series A Preferred
Stock (2)
|
3.2
|
|
Bylaws of Virginia Commerce
Bancorp, Inc. (3)
|
4.1
|
|
Junior Subordinated
Indenture, dated as of December 19, 2002 between Virginia Commerce
Bancorp, Inc. and The Bank of New York, as Indenture Trustee (4)
|
4.2
|
|
Amended and Restated
Declaration of Trust, dated as of December 19, 2002 among Virginia
Commerce Bancorp, Inc., The Bank of New York, as Property Trustee, The
Bank of New York (Delaware), as Delaware Trustee, and Peter A. Converse,
William K. Beauchesne and Marcia J. Hopkins as Administrative Trustees (4)
|
4.3
|
|
Guarantee Agreement
dated as of December 19, 2002, between Virginia Commerce
Bancorp, Inc. and The Bank of New York, as Guarantee Trustee (4)
|
4.4
|
|
Junior Subordinated
Indenture, dated as of December 20, 2005 between Virginia Commerce
Bancorp, Inc. and Wilmington Trust Company, as Trustee (4)
|
4.5
|
|
Amended and Restated
Declaration of Trust, dated as December 20, 2005, between Virginia
Commerce Bancorp, Inc. and Wilmington Trust Company, as Delaware Trustee
and Institutional Trustee, and Peter A. Converse, William K. Beauchesne and
Marcia J. Hopkins as Administrative Trustees (4)
|
4.6
|
|
Guarantee Agreement
dated as of December 20, 2005, between Virginia Commerce
Bancorp, Inc. and Wilmington Trust Company, as Guarantee Trustee (4)
|
4.7
|
|
Junior Subordinated
Indenture, dates as of September 24, 2008, between Virginia Commerce
Bancorp, Inc. and Wilmington Trust Company, as Indenture Trustee (5)
|
4.8
|
|
Amended and Restated
Declaration of Trust, dated as of September 24, 2008 among Virginia
Commerce Bancorp, Inc., Wilmington Trust Company, as Property Trustee,
Wilmington Trust Company (Delaware), as Delaware Trustee, and Peter A.
Converse, William K. Beauchesne and Jennifer Manning as Administrative
Trustees (5)
|
4.9
|
|
Guarantee Agreement
dated as of September 24, 2008, between Virginia Commerce
Bancorp, Inc. and Wilmington Trust Company, as Guarantee Trustee (5)
|
4.10
|
|
Warrant to Purchase
Common Stock issued in connection with 2008 Trust Preferred Securities (5)
|
4.11
|
|
Warrant to Purchase
Common Stock issued pursuant to Capital Purchase Program (6)
|
10.1
|
|
Amended and Restated
1998 Stock Option Plan (7)
|
10.2
|
|
Virginia Commerce
Bancorp Amended and Restated Employee Stock Purchase Plan (8)
|
10.3
|
|
2008 Virginia Commerce
Bank Executive and Director Deferred Compensation Plan (9)
|
11
|
|
Statement Regarding
Computation of Per Share Earnings
|
|
|
See
Note 4 to the Consolidated Financial Statements included in this report
|
21
|
|
Subsidiaries of the
Registrant:
|
|
|
Virginia
Commerce Bank-Virginia
|
|
|
VCBI
Capital Trust II-Delaware
|
|
|
VCBI
Capital Trust III-Delaware
|
|
|
VCBI
Capital Trust IV-Delaware
|
|
|
Subsidiaries of
Virginia Commerce Bank:
|
|
|
Northeast
Land and Investment Company-Virginia
|
|
|
Virginia
Commerce Insurance Agency, L.L.C.-Virginia
|
31.1
|
|
Certification of Peter
A. Converse, Chief Executive Officer
|
31.2
|
|
Certification of
William K. Beauchesne, Treasurer and Chief Financial Officer
|
32.1
|
|
Certification of Peter
A. Converse Chief Executive Officer
|
32.2
|
|
Certification of
William K. Beauchesne, Treasurer and Chief Financial Officer
|
(1)
Incorporated by reference to the same
numbered exhibit to the Companys Quarterly Report on Form 10-K for the
quarter ended March 31, 2006.
(2)
Incorporated by reference to exhibit 3.1
to the Companys Current Report on Form 8-K filed on December 15, 2008.
(3)
Incorporated by reference to exhibit 3.2
to the Companys Current Report on Form 8-K filed July 27, 2007.
(4)
Not filed in accordance with the
provisions of Item 601(b)(4)(iii) of Regulation S-K. Virginia Commerce
Bancorp, Inc. agrees to provide a copy of these documents to the
Commission upon request.
33
(5) Incorporated by reference to the Companys
current report on Form 8-K filed on September 25, 2008.
(6)
Incorporated by reference to exhibit 4.1 to
the Companys Current Report on Form 8-K filed on December 15, 2008.
(7)
Incorporated by reference to exhibit 4 to
the Companys Registration Statement on Form S-8 (No. 333-142447).
(8)
Incorporated by reference to exhibit 4 to
the Companys Registration Statement on Form S-8 (No. 333-109079).
(9)
Incorporated by reference to the Companys
Annual Report on Form 10-K for the year ended December 31, 2006.
34
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: August 10,
2009
|
BY
|
/s/
Peter A. Converse
|
|
Peter A. Converse,
Chief Executive Officer
|
|
|
|
|
|
|
Date: August 10,
2009
|
BY
|
/s/
William K. Beauchesne
|
|
William K. Beauchesne,
Treasurer and Chief Financial Officer
|
35
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