Virginia Heritage Bank Announces Results for the Third Quarter 2013
Virginia Heritage Bank (OTCBB: VGBK), announced quarterly earnings of $2.0 million after taxes, or $0.33 per share (basic) and $0.32 per share (diluted), for the period ended September 30, 2013. This is a 15% decrease compared to earnings of $2.3 million after taxes, or $0.53 per share (basic and diluted), for the same period a year ago. On a year-to-date basis, earnings were $6.5 million after taxes, or $1.30 per share (basic) and $1.26 per share (diluted) through September 30, 2013 versus $5.9 million after taxes, or $1.30 per share (basic) and $1.29 per share (diluted), in 2012.
The Bank’s third quarter results produced an annualized rate of return of 0.96% on average assets and 10.00% on average common equity compared to 1.33% and 17.91%, respectively, for the same period a year ago. On a year-to-date basis, the annualized rate of return was 1.08% on average assets and 13.34% on average common equity compared to 1.19% and 15.05%, respectively, for 2012.
Selected Highlights
At September 30, 2013, total assets were $835.2 million, an increase of $103.8 million, or 14%, from total assets at September 30, 2012.
Total gross loans, excluding loans held for sale, at September 30, 2013 were $644.2 million, an increase of $80.2 million, or 14% compared to September 30, 2012.
Asset quality continues to be strong and remained significantly better than peers. Nonperforming assets, including other real estate owned, as a percentage of total assets, decreased to 0.46% at September 30, 2013, compared to 0.75% at September 30, 2012. Annualized net charge-offs were 0% of average loans for the quarter ended September 30, 2013 and 2012, respectively.
Allowance for loan losses was $9.7 million as of September 30, 2013, or 1.51% of gross loans outstanding, excluding loans held for sale. At September 30, 2013, the Bank had nonaccrual loans of $2.3 million, performing troubled debt restructured loans of $1.5 million and loans past due 90 days or more but still accruing interest amounting to $69 thousand.
Total deposits grew to $710.7 million, an increase of $88.6 million, or 14%, compared to September 30, 2012.
At September 30, 2013, all of the Bank’s capital ratios substantially exceeded regulatory requirements.
Income Statement Review
Net interest income
Net interest income was $7.3 million and $6.5 million for quarter ended September 30, 2013 and 2012, respectively. Net interest margin was 3.49% and 3.73% for the quarter ended September 30, 2013 and 2012, respectively.
Net interest income was $21.0 million and $17.9 million for the nine months ended September 30, 2013 and 2012, respectively. Net interest margin was 3.54% and 3.70% for the nine months ended September 30, 2013 and 2012, respectively. The Bank’s growth in net interest income is directly attributable to the Bank’s asset growth.
Provision for loan losses
The Bank recognized a provision for possible loan losses of $306 thousand for the quarter ended September 30, 2013 compared to $800 thousand for the same period in 2012.
For the nine months ended September 30, 2013 and 2012, the Bank provisioned $1.5 million and $2.6 million, respectively, to the allowance for loan losses. The Bank maintains a policy of adding an appropriate amount to the allowance for loan losses to ensure adequate reserves based on, among other factors, the portfolio composition, specific credit extended by the Bank and general economic conditions.
Noninterest income
The Bank’s primary sources of noninterest income are the gain on sale of loans, gain on sale of securities, service charges and loan processing fees. Noninterest income amounted to $1.9 million for the quarter ended September 30, 2013 and was $3.8 million for the same period in 2012. Total gain on sale of loans was $1.4 million and $2.9 million for the quarter ended September 30, 2013 and 2012, respectively. In addition, the Bank recorded a loss on sale of securities available for sale of $8 thousand for the three months ended September 30, 2013 compared to a gain of $504 thousand for the same period in 2012.
Noninterest income for the nine months ended September 30, 2013 and 2012 was $8.8 million and $9.9 million, respectively. Total gain on sale of loans was $6.7 million for the nine months ended September 30, 2013 compared to $7.0 million for the nine months ended September 30, 2012. In addition, the gain on sale of securities held for sale decreased to $518 thousand for the nine months ended September 30, 2013 compared to $1.5 million for the same period in 2012.
The decrease in noninterest income for the three and nine months ended September 30, 2013 was primarily due to lower volume in mortgage originations and a reduction in securities gains.
Noninterest expense
The largest component of noninterest expense is salaries and employee benefits. Salary and employee benefits expense amounted to $3.5 million for the quarter ended September 30, 2013 and 2012. All other operating expenses were $2.4 million for the quarter ended September 30, 2013 compared to $2.6 million for the same period in 2012.
Salary and employee benefits expense was $10.9 million versus $9.5 million for the nine months ended September 30, 2013 and 2012, respectively. All other operating expenses were $7.8 million for the nine months ended September 30, 2013 and $6.9 million for the same period in 2012.
The increase in salary and employee benefits expense for the nine months ended September 30, 2013 was due to additional staffing needs based on the growth of the Bank. The increase in other operating expenses for the same period was primarily due to the growth of the Bank’s customer base and related data processing and administrative expenses.
Balance Sheet Review
At September 30, 2013, total assets were $835.2 million, an increase of $103.8 million, or 14%, from total assets at September 30, 2012. Total gross loans grew 14% to $644.2 million at September 30, 2013, from $564.0 million at September 30, 2012. Loans held for sale were $16.7 million at September 30, 2013 compared to $21.7 million at September 30, 2012. During this period, the Bank’s investment portfolio increased to $133.8 million compared to $110.7 million a year ago.
Total deposits were $710.7 million at September 30, 2013, which represents a 14% increase from $622.1 million of total deposits at September 30, 2012. Total borrowings were $26.8 million at September 30, 2013 and $35.0 million at September 30, 2012. Federal Home Loan Bank advances and repurchase agreements were used to supplement deposits and fund asset growth.
Total stockholders’ equity was $94.7 million at September 30, 2013 and $68.3 million at September 30, 2012. The increase in stockholders’ equity was due to net income of $6.5 million for the nine months ended September 30, 2013 and net proceeds of $22.3 million from the Bank’s recent sale of 1,667,500 shares of its common stock at a price of $14.25 per share. Total common shares outstanding increased from 4,333,209 to 6,002,459 as a result of the common stock offering.
Management Comments
David P. Summers, Chairman of the Board and Chief Executive Officer of the Bank said:
“The third quarter results were impacted by a reduction in mortgage closed loan volume of $43 million compared to the third quarter of 2012. The recent increase in long term interest rates has caused a significant reduction in mortgage refinance activity. The increase in long term interest rates also impacted our securities sales as we incurred a loss of $8 thousand on sale of investment securities in the third quarter of 2013 compared to $504 thousand in gains in the third quarter of 2012.
“In spite of the adverse impact of higher long term rates on our mortgage results and our investment securities portfolio, our core earnings grew 21% year over year. Our net interest margin has stabilized at 3.49% for the most recent quarter and our asset quality metrics are superior to most of our peer bank competitors. Our net operating efficiency ratio for the quarter was 64% and is evidence of good cost control during a period of generally reduced economic activity. The Greater Washington region was certainly impacted by the government shutdown and we remain diligent as to assessing the longer term impact on our clients.
“We continue to focus on developing additional non-maturity deposits and expanding our commercial, commercial real estate and consumer loan portfolios. Current economic conditions remain challenging and we are dedicated to our goal of good quality growth and profitability for our shareholders.”
Virginia Heritage Bank is headquartered in Tysons Corner, Virginia. The Bank has five full service offices in Fairfax City, Chantilly, Gainesville, Tysons Corner and Dulles, Virginia. The Bank also has a mortgage division located in Chantilly, Virginia.
This release contains forward-looking statements, including our expectations with respect to future events that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management’s projections, forecasts, estimates and expectations include: fluctuation in market rates of interest and loan and deposit pricing, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. We caution readers that the list of factors above is not exclusive. The forward-looking statements are made as of the date of this release, and we may not undertake steps to update the forward-looking statements to reflect the impact of any circumstances or events that arise after the date the forward-looking statements are made. In addition, our past results of operations are not necessarily indicative of future performance.
VIRGINIA HERITAGE BANK
Balance Sheets
(Dollar amounts in thousands, except per share data)
% Change
September 30, December 31, September 30, Current Year Over
Assets 2013 2012 2012 Year Year
(Unaudited) (Unaudited)
Cash and due from banks $ 23,013 $ 12,761 $ 22,647 80.34 % 1.62 %
Securities available for sale, at fair value 133,833 118,629 110,673 12.82 % 20.93 %
Loans, net of allowance for loan losses of $9,697, $8,262 and $7,786, respectively 634,466 579,284 556,169 9.53 % 14.08 %
Loans held for sale 16,727 48,136 21,662 -65.25 % -22.78 %
Premises and equipment, net 1,919 2,051 2,012 -6.44 % -4.62 %
Accrued interest receivable 2,334 2,368 2,533 -1.44 % -7.86 %
Federal Home Loan Bank stock, at cost 2,063 2,352 1,902 -12.29 % 8.46 %
Federal Reserve Bank stock, at cost 2,329 1,751 1,751 33.01 % 33.01 %
Other real estate owned, net of valuation allowance of $0, $81 and $40, respectively - - 479 360 -100.00 % -100.00 %
Bank owned life insurance 9,054 5,178 5,136 74.86 % 76.29 %
Other assets 9,468 8,584 6,610 10.30 % 43.24 %
Total assets $ 835,206 $ 781,573 $ 731,455 6.86 % 14.18 %
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits $ 191,782 $ 182,790 $ 172,475 4.92 % 11.19 %
NOW, money-market and savings deposits 106,021 85,160 77,316 24.50 % 37.13 %
Time deposits 412,941 392,188 372,274 5.29 % 10.92 %
Total deposits 710,744 660,138 622,065 7.67 % 14.26 %
Federal funds purchased - - 13,000 10,000 -100.00 % -100.00 %
Federal Home Loan Bank advances 25,000 33,000 23,000 -24.24 % 8.70 %
Securities sold under agreements to repurchase 1,822 1,600 1,993 13.88 % -8.58 %
Accrued expenses and other liabilities 2,926 4,518 6,144 -35.24 % -52.38 %
Total liabilities 740,492 712,256 663,202 3.96 % 11.65 %
Stockholders' equity:
Preferred stock, Series A, $4 par value, non-cumulative, $1,000 per share liquidation preference, 15,300 shares issued and outstanding
61 61 61 0.00 % 0.00 %
Common stock, $4 par value, 15,000,000 shares authorized, 6,002,459, 4,333,209 and 4,333,209 shares issued and outstanding, respectively
24,010 17,333 17,333 38.52 % 38.52 %
Additional paid-in capital 56,506 41,038 41,019 37.69 % 37.76 %
Retained earnings 17,350 10,927 9,187 58.78 % 88.85 %
Accumulated other comprehensive (loss) gain (3,213 ) (42 ) 653 N/M N/M
Total stockholders' equity 94,714 69,317 68,253 36.64 % 38.77 %
Total liabilities and stockholders' equity $ 835,206 $ 781,573 $ 731,455 6.86 % 14.18 %
N/M - Not Meaningful
VIRGINIA HERITAGE BANK
Statements of Income
For the Three and Nine Months Ended September 30, 2013 and 2012 (Unaudited)
(Dollar amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 % Change 2013 2012 % Change
Interest income:
Interest and fees on loans $ 7,887 $ 7,334 7.54 % $ 23,233 $ 20,616 12.69 %
Investment securities 633 679 -6.77 % 1,723 1,955 -11.87 %
Interest on deposits in other banks 24 2 1100.00 % 42 23 82.61 %
Total interest income 8,544 8,015 6.60 % 24,998 22,594 10.64 %
Interest expense:
Interest on deposits 1,223 1,395 -12.33 % 3,719 4,441 -16.26 %
Interest on federal funds purchased - - 1 100.00 % 7 2 250.00 %
Interest on Federal Home Loan Bank advances 70 86 -18.60 % 235 284 -17.25 %
Interest on securities sold under agreements to repurchase 1 1 0.00 % 2 3 -33.33 %
Total interest expense 1,294 1,483 -12.74 % 3,963 4,730 -16.22 %
Net interest income 7,250 6,532 10.99 % 21,035 17,864 17.75 %
Provision for loan losses 306 800 -61.75 % 1,458 2,610 -44.14 %
Net interest income after provision for loan losses 6,944 5,732 21.14 % 19,577 15,254 28.34 %
Noninterest income:
Gain on sale of loans 1,389 2,893 -51.99 % 6,662 7,032 -5.26 %
Service charges on deposit accounts 191 48 297.92 % 581 137 324.09 %
(Loss) gain on sale of securities available for sale (8 ) 504 -101.59 % 518 1,513 -65.76 %
Other income 305 403 -24.32 % 1,068 1,202 -11.15 %
Total noninterest income 1,877 3,848 -51.22 % 8,829 9,884 -10.67 %
Noninterest expenses:
Salaries and employee benefits 3,457 3,545 -2.48 % 10,896 9,518 14.48 %
Occupancy and equipment expense 599 526 13.88 % 1,796 1,673 7.35 %
Mortgage closing cost promotions 161 610 -73.61 % 1,162 1,236 -5.99 %
Bank franchise tax 174 156 11.54 % 523 457 14.44 %
FDIC deposit insurance assessments 123 112 9.82 % 381 284 34.15 %
Other operating expenses 1,333 1,162 14.72 % 3,933 3,288 19.62 %
Total noninterest expenses 5,847 6,111 -4.32 % 18,691 16,456 13.58 %
Income before income tax expense 2,974 3,469 -14.27 % 9,715 8,682 11.90 %
Income tax expense 971 1,123 -13.54 % 3,178 2,815 12.90 %
Net income 2,003 2,346 -14.62 % 6,537 5,867 11.42 %
Dividend on preferred stock 38 38 0.00 % 115 251 -54.18 %
Net income available to common stockholders $ 1,965 $ 2,308 -14.86 % $ 6,422 $ 5,616 14.35 %
Income per common share:
Basic $ 0.33 $ 0.53 -37.74 % $ 1.30 $ 1.30 0.00 %
Diluted $ 0.32 $ 0.53 -39.62 % $ 1.26 $ 1.29 -2.33 %
Weighted average common shares outstanding:
Basic 6,002,459 4,333,209 38.52 % 4,948,854 4,333,209 14.21 %
Diluted 6,157,646 4,357,956 41.30 % 5,084,683 4,353,460 16.80 %
VIRGINIA HERITAGE BANK
Financial Highlights (Unaudited)
(Dollar amounts in thousands, except per share data)
At or For the Quarter Ended At or For the Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Per Share Data and Shares Outstanding:
Net income (basic) (4)
$ 0.33 $ 0.53 $ 1.30 $ 1.30
Net income (diluted) (4)
0.32 0.53 1.26 1.29
Common equity book value at period end 13.23 12.22 13.23 12.22
Weighted average shares (basic) 6,002,459 4,333,209 4,948,854 4,333,209
Weighted average shares (diluted) 6,157,646 4,357,956 5,084,683 4,353,460
Shares outstanding at end of period 6,002,459 4,333,209 6,002,459 4,333,209
Asset Quality:
Nonperforming assets excluding TDR
to total assets 0.28 % 0.28 %
Nonperforming assets (1)(5)
to total assets 0.46 % 0.75 %
Nonperforming loans and past due loans (2)(5)
to total assets 0.47 % 0.76 %
to total gross loans 0.61 % 0.98 %
Allowance for loan losses to total gross loans (3) 1.51 % 1.38 %
Annualized net charge-offs to average loans outstanding 0.00 % 0.00 % 0.00 % 0.25 %
Performance Ratios:
Annualized return on average assets 0.96 % 1.33 % 1.08 % 1.19 %
Annualized return on average common stockholders' equity (6) 10.00 % 17.91 % 13.34 % 15.05 %
Net interest rate spread 3.19 % 3.33 % 3.23 % 3.34 %
Net interest margin 3.49 % 3.73 % 3.54 % 3.70 %
Efficiency ratio 64.06 % 58.87 % 62.59 % 59.31 %
Regulatory Capital Ratios:
Actual
Minimum To Be
Well Capitalized
Total risk-based capital ratio 15.84 % 10.00 %
Tier 1 risk-based capital ratio 14.59 % 6.00 %
Leverage ratio 11.77 % 5.00 %
(1)
Includes nonaccrual loans, troubled debt restructured loans and other real estate owned.
(2)
Includes nonaccrual loans, troubled debt restructured loans and loans past due 90 days or more and still accruing interest.
(3)
Excludes loans held for sale.
(4)
The net income per share data has been restated for 2012 to reflect the net income available to common shareholders after SBLF dividends.
(5)
Both nonperforming assets and nonperforming loans have been restated to include performing troubled debt restructured loans.
(6)
Annualized return on average stockholders' equity has been restated for 2012 to reflect the exclusion of preferred equity of $15.3 million (SBLF).
VIRGINIA HERITAGE BANK
Business Segments (Unaudited)
(Dollar amounts in thousands)
Nine Months Ended September 30, 2013
Retail
Banking
Mortgage
Banking
Indirect
Lending
Combined
Revenues:
Interest income $ 22,573 $ 754 $ 1,671 $ 24,998
Gains on sales of loans 342 6,320 - - 6,662
Other noninterest income 1,465 628 74 2,167
Total operating income 24,380 7,702 1,745 33,827
Expenses:
Provision for loan losses 1,421 - - 37 1,458
Interest expense 3,348 135 480 3,963
Salaries and employee benefits 6,543 3,945 408 10,896
Other noninterest expenses 5,491 2,106 198 7,795
Total operating expenses 16,803 6,186 1,123 24,112
Income tax expense 3,178 - - - - 3,178
Net income $ 4,399 $ 1,516 $ 622 $ 6,537
Total assets $ 720,970 $ 20,533 $ 93,703 $ 835,206
Nine Months Ended September 30, 2012
Retail
Banking
Mortgage
Banking
Indirect
Lending
Combined
Revenues:
Interest income $ 20,098 $ 587 $ 1,909 $ 22,594
Gains on sales of loans - - 7,032 - - 7,032
Other noninterest income 2,015 740 97 2,852
Total operating income 22,113 8,359 2,006 32,478
Expenses:
Provision for loan losses 2,337 - - 273 2,610
Interest expense 3,972 145 613 4,730
Salaries and employee benefits 5,191 4,229 98 9,518
Other noninterest expenses 4,648 2,053 237 6,938
Total operating expenses 16,148 6,427 1,221 23,796
Income tax expense 2,815 - - - - 2,815
Net income $ 3,150 $ 1,932 $ 785 $ 5,867
Total assets $ 607,221 $ 23,786 $ 100,448 $ 731,455
Note: Operating expenses for the Mortgage Banking and Indirect Lending segments consist largely of direct expenses only while the majority of the Bank's operating expenses and income tax expense is shown in the Retail Banking segment.
Virginia Heritage Bank
David Summers, 703-277-2200
or
Chris Brockett, 703-277-2200
Virginia Heritage Bank (OTCBB: VGBK), announced quarterly earnings of $2.0 million after taxes, or $0.33 per share (basic) and $0.32 per share (diluted), for the period ended September 30, 2013. This is a 15% decrease compared to earnings of $2.3 million after taxes, or $0.53 per share (basic and diluted), for the same period a year ago. On a year-to-date basis, earnings were $6.5 million after taxes, or $1.30 per share (basic) and $1.26 per share (diluted) through September 30, 2013 versus $5.9 million after taxes, or $1.30 per share (basic) and $1.29 per share (diluted), in 2012.
The Bank’s third quarter results produced an annualized rate of return of 0.96% on average assets and 10.00% on average common equity compared to 1.33% and 17.91%, respectively, for the same period a year ago. On a year-to-date basis, the annualized rate of return was 1.08% on average assets and 13.34% on average common equity compared to 1.19% and 15.05%, respectively, for 2012.
Selected Highlights
At September 30, 2013, total assets were $835.2 million, an increase of $103.8 million, or 14%, from total assets at September 30, 2012.
Total gross loans, excluding loans held for sale, at September 30, 2013 were $644.2 million, an increase of $80.2 million, or 14% compared to September 30, 2012.
Asset quality continues to be strong and remained significantly better than peers. Nonperforming assets, including other real estate owned, as a percentage of total assets, decreased to 0.46% at September 30, 2013, compared to 0.75% at September 30, 2012. Annualized net charge-offs were 0% of average loans for the quarter ended September 30, 2013 and 2012, respectively.
Allowance for loan losses was $9.7 million as of September 30, 2013, or 1.51% of gross loans outstanding, excluding loans held for sale. At September 30, 2013, the Bank had nonaccrual loans of $2.3 million, performing troubled debt restructured loans of $1.5 million and loans past due 90 days or more but still accruing interest amounting to $69 thousand.
Total deposits grew to $710.7 million, an increase of $88.6 million, or 14%, compared to September 30, 2012.
At September 30, 2013, all of the Bank’s capital ratios substantially exceeded regulatory requirements.
Income Statement Review
Net interest income
Net interest income was $7.3 million and $6.5 million for quarter ended September 30, 2013 and 2012, respectively. Net interest margin was 3.49% and 3.73% for the quarter ended September 30, 2013 and 2012, respectively.
Net interest income was $21.0 million and $17.9 million for the nine months ended September 30, 2013 and 2012, respectively. Net interest margin was 3.54% and 3.70% for the nine months ended September 30, 2013 and 2012, respectively. The Bank’s growth in net interest income is directly attributable to the Bank’s asset growth.
Provision for loan losses
The Bank recognized a provision for possible loan losses of $306 thousand for the quarter ended September 30, 2013 compared to $800 thousand for the same period in 2012.
For the nine months ended September 30, 2013 and 2012, the Bank provisioned $1.5 million and $2.6 million, respectively, to the allowance for loan losses. The Bank maintains a policy of adding an appropriate amount to the allowance for loan losses to ensure adequate reserves based on, among other factors, the portfolio composition, specific credit extended by the Bank and general economic conditions.
Noninterest income
The Bank’s primary sources of noninterest income are the gain on sale of loans, gain on sale of securities, service charges and loan processing fees. Noninterest income amounted to $1.9 million for the quarter ended September 30, 2013 and was $3.8 million for the same period in 2012. Total gain on sale of loans was $1.4 million and $2.9 million for the quarter ended September 30, 2013 and 2012, respectively. In addition, the Bank recorded a loss on sale of securities available for sale of $8 thousand for the three months ended September 30, 2013 compared to a gain of $504 thousand for the same period in 2012.
Noninterest income for the nine months ended September 30, 2013 and 2012 was $8.8 million and $9.9 million, respectively. Total gain on sale of loans was $6.7 million for the nine months ended September 30, 2013 compared to $7.0 million for the nine months ended September 30, 2012. In addition, the gain on sale of securities held for sale decreased to $518 thousand for the nine months ended September 30, 2013 compared to $1.5 million for the same period in 2012.
The decrease in noninterest income for the three and nine months ended September 30, 2013 was primarily due to lower volume in mortgage originations and a reduction in securities gains.
Noninterest expense
The largest component of noninterest expense is salaries and employee benefits. Salary and employee benefits expense amounted to $3.5 million for the quarter ended September 30, 2013 and 2012. All other operating expenses were $2.4 million for the quarter ended September 30, 2013 compared to $2.6 million for the same period in 2012.
Salary and employee benefits expense was $10.9 million versus $9.5 million for the nine months ended September 30, 2013 and 2012, respectively. All other operating expenses were $7.8 million for the nine months ended September 30, 2013 and $6.9 million for the same period in 2012.
The increase in salary and employee benefits expense for the nine months ended September 30, 2013 was due to additional staffing needs based on the growth of the Bank. The increase in other operating expenses for the same period was primarily due to the growth of the Bank’s customer base and related data processing and administrative expenses.
Balance Sheet Review
At September 30, 2013, total assets were $835.2 million, an increase of $103.8 million, or 14%, from total assets at September 30, 2012. Total gross loans grew 14% to $644.2 million at September 30, 2013, from $564.0 million at September 30, 2012. Loans held for sale were $16.7 million at September 30, 2013 compared to $21.7 million at September 30, 2012. During this period, the Bank’s investment portfolio increased to $133.8 million compared to $110.7 million a year ago.
Total deposits were $710.7 million at September 30, 2013, which represents a 14% increase from $622.1 million of total deposits at September 30, 2012. Total borrowings were $26.8 million at September 30, 2013 and $35.0 million at September 30, 2012. Federal Home Loan Bank advances and repurchase agreements were used to supplement deposits and fund asset growth.
Total stockholders’ equity was $94.7 million at September 30, 2013 and $68.3 million at September 30, 2012. The increase in stockholders’ equity was due to net income of $6.5 million for the nine months ended September 30, 2013 and net proceeds of $22.3 million from the Bank’s recent sale of 1,667,500 shares of its common stock at a price of $14.25 per share. Total common shares outstanding increased from 4,333,209 to 6,002,459 as a result of the common stock offering.
Management Comments
David P. Summers, Chairman of the Board and Chief Executive Officer of the Bank said:
“The third quarter results were impacted by a reduction in mortgage closed loan volume of $43 million compared to the third quarter of 2012. The recent increase in long term interest rates has caused a significant reduction in mortgage refinance activity. The increase in long term interest rates also impacted our securities sales as we incurred a loss of $8 thousand on sale of investment securities in the third quarter of 2013 compared to $504 thousand in gains in the third quarter of 2012.
“In spite of the adverse impact of higher long term rates on our mortgage results and our investment securities portfolio, our core earnings grew 21% year over year. Our net interest margin has stabilized at 3.49% for the most recent quarter and our asset quality metrics are superior to most of our peer bank competitors. Our net operating efficiency ratio for the quarter was 64% and is evidence of good cost control during a period of generally reduced economic activity. The Greater Washington region was certainly impacted by the government shutdown and we remain diligent as to assessing the longer term impact on our clients.
“We continue to focus on developing additional non-maturity deposits and expanding our commercial, commercial real estate and consumer loan portfolios. Current economic conditions remain challenging and we are dedicated to our goal of good quality growth and profitability for our shareholders.”
Virginia Heritage Bank is headquartered in Tysons Corner, Virginia. The Bank has five full service offices in Fairfax City, Chantilly, Gainesville, Tysons Corner and Dulles, Virginia. The Bank also has a mortgage division located in Chantilly, Virginia.
This release contains forward-looking statements, including our expectations with respect to future events that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management’s projections, forecasts, estimates and expectations include: fluctuation in market rates of interest and loan and deposit pricing, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. We caution readers that the list of factors above is not exclusive. The forward-looking statements are made as of the date of this release, and we may not undertake steps to update the forward-looking statements to reflect the impact of any circumstances or events that arise after the date the forward-looking statements are made. In addition, our past results of operations are not necessarily indicative of future performance.
VIRGINIA HERITAGE BANK
Balance Sheets
(Dollar amounts in thousands, except per share data)
% Change
September 30, December 31, September 30, Current Year Over
Assets 2013 2012 2012 Year Year
(Unaudited) (Unaudited)
Cash and due from banks $ 23,013 $ 12,761 $ 22,647 80.34 % 1.62 %
Securities available for sale, at fair value 133,833 118,629 110,673 12.82 % 20.93 %
Loans, net of allowance for loan losses of $9,697, $8,262 and $7,786, respectively 634,466 579,284 556,169 9.53 % 14.08 %
Loans held for sale 16,727 48,136 21,662 -65.25 % -22.78 %
Premises and equipment, net 1,919 2,051 2,012 -6.44 % -4.62 %
Accrued interest receivable 2,334 2,368 2,533 -1.44 % -7.86 %
Federal Home Loan Bank stock, at cost 2,063 2,352 1,902 -12.29 % 8.46 %
Federal Reserve Bank stock, at cost 2,329 1,751 1,751 33.01 % 33.01 %
Other real estate owned, net of valuation allowance of $0, $81 and $40, respectively - - 479 360 -100.00 % -100.00 %
Bank owned life insurance 9,054 5,178 5,136 74.86 % 76.29 %
Other assets 9,468 8,584 6,610 10.30 % 43.24 %
Total assets $ 835,206 $ 781,573 $ 731,455 6.86 % 14.18 %
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits $ 191,782 $ 182,790 $ 172,475 4.92 % 11.19 %
NOW, money-market and savings deposits 106,021 85,160 77,316 24.50 % 37.13 %
Time deposits 412,941 392,188 372,274 5.29 % 10.92 %
Total deposits 710,744 660,138 622,065 7.67 % 14.26 %
Federal funds purchased - - 13,000 10,000 -100.00 % -100.00 %
Federal Home Loan Bank advances 25,000 33,000 23,000 -24.24 % 8.70 %
Securities sold under agreements to repurchase 1,822 1,600 1,993 13.88 % -8.58 %
Accrued expenses and other liabilities 2,926 4,518 6,144 -35.24 % -52.38 %
Total liabilities 740,492 712,256 663,202 3.96 % 11.65 %
Stockholders' equity:
Preferred stock, Series A, $4 par value, non-cumulative, $1,000 per share liquidation preference, 15,300 shares issued and outstanding
61 61 61 0.00 % 0.00 %
Common stock, $4 par value, 15,000,000 shares authorized, 6,002,459, 4,333,209 and 4,333,209 shares issued and outstanding, respectively
24,010 17,333 17,333 38.52 % 38.52 %
Additional paid-in capital 56,506 41,038 41,019 37.69 % 37.76 %
Retained earnings 17,350 10,927 9,187 58.78 % 88.85 %
Accumulated other comprehensive (loss) gain (3,213 ) (42 ) 653 N/M N/M
Total stockholders' equity 94,714 69,317 68,253 36.64 % 38.77 %
Total liabilities and stockholders' equity $ 835,206 $ 781,573 $ 731,455 6.86 % 14.18 %
N/M - Not Meaningful
VIRGINIA HERITAGE BANK
Statements of Income
For the Three and Nine Months Ended September 30, 2013 and 2012 (Unaudited)
(Dollar amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 % Change 2013 2012 % Change
Interest income:
Interest and fees on loans $ 7,887 $ 7,334 7.54 % $ 23,233 $ 20,616 12.69 %
Investment securities 633 679 -6.77 % 1,723 1,955 -11.87 %
Interest on deposits in other banks 24 2 1100.00 % 42 23 82.61 %
Total interest income 8,544 8,015 6.60 % 24,998 22,594 10.64 %
Interest expense:
Interest on deposits 1,223 1,395 -12.33 % 3,719 4,441 -16.26 %
Interest on federal funds purchased - - 1 100.00 % 7 2 250.00 %
Interest on Federal Home Loan Bank advances 70 86 -18.60 % 235 284 -17.25 %
Interest on securities sold under agreements to repurchase 1 1 0.00 % 2 3 -33.33 %
Total interest expense 1,294 1,483 -12.74 % 3,963 4,730 -16.22 %
Net interest income 7,250 6,532 10.99 % 21,035 17,864 17.75 %
Provision for loan losses 306 800 -61.75 % 1,458 2,610 -44.14 %
Net interest income after provision for loan losses 6,944 5,732 21.14 % 19,577 15,254 28.34 %
Noninterest income:
Gain on sale of loans 1,389 2,893 -51.99 % 6,662 7,032 -5.26 %
Service charges on deposit accounts 191 48 297.92 % 581 137 324.09 %
(Loss) gain on sale of securities available for sale (8 ) 504 -101.59 % 518 1,513 -65.76 %
Other income 305 403 -24.32 % 1,068 1,202 -11.15 %
Total noninterest income 1,877 3,848 -51.22 % 8,829 9,884 -10.67 %
Noninterest expenses:
Salaries and employee benefits 3,457 3,545 -2.48 % 10,896 9,518 14.48 %
Occupancy and equipment expense 599 526 13.88 % 1,796 1,673 7.35 %
Mortgage closing cost promotions 161 610 -73.61 % 1,162 1,236 -5.99 %
Bank franchise tax 174 156 11.54 % 523 457 14.44 %
FDIC deposit insurance assessments 123 112 9.82 % 381 284 34.15 %
Other operating expenses 1,333 1,162 14.72 % 3,933 3,288 19.62 %
Total noninterest expenses 5,847 6,111 -4.32 % 18,691 16,456 13.58 %
Income before income tax expense 2,974 3,469 -14.27 % 9,715 8,682 11.90 %
Income tax expense 971 1,123 -13.54 % 3,178 2,815 12.90 %
Net income 2,003 2,346 -14.62 % 6,537 5,867 11.42 %
Dividend on preferred stock 38 38 0.00 % 115 251 -54.18 %
Net income available to common stockholders $ 1,965 $ 2,308 -14.86 % $ 6,422 $ 5,616 14.35 %
Income per common share:
Basic $ 0.33 $ 0.53 -37.74 % $ 1.30 $ 1.30 0.00 %
Diluted $ 0.32 $ 0.53 -39.62 % $ 1.26 $ 1.29 -2.33 %
Weighted average common shares outstanding:
Basic 6,002,459 4,333,209 38.52 % 4,948,854 4,333,209 14.21 %
Diluted 6,157,646 4,357,956 41.30 % 5,084,683 4,353,460 16.80 %
VIRGINIA HERITAGE BANK
Financial Highlights (Unaudited)
(Dollar amounts in thousands, except per share data)
At or For the Quarter Ended At or For the Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Per Share Data and Shares Outstanding:
Net income (basic) (4)
$ 0.33 $ 0.53 $ 1.30 $ 1.30
Net income (diluted) (4)
0.32 0.53 1.26 1.29
Common equity book value at period end 13.23 12.22 13.23 12.22
Weighted average shares (basic) 6,002,459 4,333,209 4,948,854 4,333,209
Weighted average shares (diluted) 6,157,646 4,357,956 5,084,683 4,353,460
Shares outstanding at end of period 6,002,459 4,333,209 6,002,459 4,333,209
Asset Quality:
Nonperforming assets excluding TDR
to total assets 0.28 % 0.28 %
Nonperforming assets (1)(5)
to total assets 0.46 % 0.75 %
Nonperforming loans and past due loans (2)(5)
to total assets 0.47 % 0.76 %
to total gross loans 0.61 % 0.98 %
Allowance for loan losses to total gross loans (3) 1.51 % 1.38 %
Annualized net charge-offs to average loans outstanding 0.00 % 0.00 % 0.00 % 0.25 %
Performance Ratios:
Annualized return on average assets 0.96 % 1.33 % 1.08 % 1.19 %
Annualized return on average common stockholders' equity (6) 10.00 % 17.91 % 13.34 % 15.05 %
Net interest rate spread 3.19 % 3.33 % 3.23 % 3.34 %
Net interest margin 3.49 % 3.73 % 3.54 % 3.70 %
Efficiency ratio 64.06 % 58.87 % 62.59 % 59.31 %
Regulatory Capital Ratios:
Actual
Minimum To Be
Well Capitalized
Total risk-based capital ratio 15.84 % 10.00 %
Tier 1 risk-based capital ratio 14.59 % 6.00 %
Leverage ratio 11.77 % 5.00 %
(1)
Includes nonaccrual loans, troubled debt restructured loans and other real estate owned.
(2)
Includes nonaccrual loans, troubled debt restructured loans and loans past due 90 days or more and still accruing interest.
(3)
Excludes loans held for sale.
(4)
The net income per share data has been restated for 2012 to reflect the net income available to common shareholders after SBLF dividends.
(5)
Both nonperforming assets and nonperforming loans have been restated to include performing troubled debt restructured loans.
(6)
Annualized return on average stockholders' equity has been restated for 2012 to reflect the exclusion of preferred equity of $15.3 million (SBLF).
VIRGINIA HERITAGE BANK
Business Segments (Unaudited)
(Dollar amounts in thousands)
Nine Months Ended September 30, 2013
Retail
Banking
Mortgage
Banking
Indirect
Lending
Combined
Revenues:
Interest income $ 22,573 $ 754 $ 1,671 $ 24,998
Gains on sales of loans 342 6,320 - - 6,662
Other noninterest income 1,465 628 74 2,167
Total operating income 24,380 7,702 1,745 33,827
Expenses:
Provision for loan losses 1,421 - - 37 1,458
Interest expense 3,348 135 480 3,963
Salaries and employee benefits 6,543 3,945 408 10,896
Other noninterest expenses 5,491 2,106 198 7,795
Total operating expenses 16,803 6,186 1,123 24,112
Income tax expense 3,178 - - - - 3,178
Net income $ 4,399 $ 1,516 $ 622 $ 6,537
Total assets $ 720,970 $ 20,533 $ 93,703 $ 835,206
Nine Months Ended September 30, 2012
Retail
Banking
Mortgage
Banking
Indirect
Lending
Combined
Revenues:
Interest income $ 20,098 $ 587 $ 1,909 $ 22,594
Gains on sales of loans - - 7,032 - - 7,032
Other noninterest income 2,015 740 97 2,852
Total operating income 22,113 8,359 2,006 32,478
Expenses:
Provision for loan losses 2,337 - - 273 2,610
Interest expense 3,972 145 613 4,730
Salaries and employee benefits 5,191 4,229 98 9,518
Other noninterest expenses 4,648 2,053 237 6,938
Total operating expenses 16,148 6,427 1,221 23,796
Income tax expense 2,815 - - - - 2,815
Net income $ 3,150 $ 1,932 $ 785 $ 5,867
Total assets $ 607,221 $ 23,786 $ 100,448 $ 731,455
Note: Operating expenses for the Mortgage Banking and Indirect Lending segments consist largely of direct expenses only while the majority of the Bank's operating expenses and income tax expense is shown in the Retail Banking segment.
Virginia Heritage Bank
David Summers, 703-277-2200
or
Chris Brockett, 703-277-2200
