Virginia Commerce Bancorp, Inc. (the “Company”), (Nasdaq: VCBI), parent company of Virginia Commerce Bank (the “Bank”), today reported net income to common stockholders of $3.3 million, or $0.11 per diluted common share, for the fourth quarter of 2010, compared with net income to common stockholders of $2.9 million, or $0.11 per diluted common share, for the same period in 2009. For the year ended December 31, 2010, the Company reported net income to common stockholders of $16.5 million, or $0.57 per diluted common share, compared to a net loss to common stockholders of $37.9 million, or $1.42 per diluted common share, for the year ended December 31, 2009. Higher net interest income, higher non-interest income and lower loan loss provisions drove the year-over-year improvement in earnings, while non-performing assets (“NPAs”) and loans 90+ days past due declined from $98.1 million at December 31, 2009, to $74.6 million as of December 31, 2010.

Peter A. Converse, President and Chief Executive Officer, commented, “It is gratifying to conclude 2010 with meaningful progress in earnings and asset quality. This represents a turnaround year for Virginia Commerce in contrast to our disappointing performance in 2009. Net income to common stockholders this past year of $16.5 million represented a significant improvement over the $37.9 million loss to common stockholders in 2009. Similarly, we have made great strides in reducing NPAs and loans 90+ days past due by more than 50% from their peak of $162.1 million as of March 31, 2009, to $74.6 million at year-end 2010.”

“While we have made good progress and it is satisfying, we still have our work cut out for us in 2011. We plan to again reduce NPAs significantly this year. Barring unforeseen circumstances and negative market forces, our strong core operating earnings should enable the absorption of credit and OREO costs in pursuit of this goal and still allow for continued earnings improvement. The progress we expect in 2011 should position Virginia Commerce to achieve even stronger performance in 2012.”

Converse continued, “Our plans in 2011 also involve getting back on a growth track, especially in lending. Despite economic, market and asset quality impediments to loan growth for most banks over the last two years, it is anticipated that the climate will be improving this year. Accordingly, we are taking measures to position ourselves for greater loan production that involve strategic hiring, focused marketing, increased calling efforts and restructuring sales management.”

Converse concluded, “It is also clear that net income to common stockholders will improve measurably when we are able to pay off our $71 million in TARP funding. While we could choose to earn our way out of TARP through retained earnings over the next two plus years, it is also an option to pay it off as early as the second half of this year through an equity offering. This decision will largely be dependent on satisfactory appreciation in our stock price and the prerequisite regulatory approval.”

SUMMARY REVIEW OF FINANCIAL PERFORMANCE

Net Income (Loss)

For the three months ended December 31, 2010, the Company recorded net income of $4.5 million. After an effective dividend of $1.2 million to the U.S. Treasury on preferred stock, the Company reported net income to common stockholders of $3.3 million, or $0.11 per diluted common share, compared to net income to common stockholders of $2.9 million, or $0.11 per diluted common share, for the fourth quarter of 2009. For the year ended December 31, 2010, the Company reported net income to common stockholders of $16.5 million, or $0.57 per diluted common share, compared to a net loss to common stockholders of $37.9 million, or $1.42 per diluted common share, in 2009. The year-over-year improvement in earnings was attributable to higher net interest income, higher non-interest income and significantly lower provisions for loan losses.

Core operating earnings for the three months ended December 31, 2010, were $15.0 million, up $2.4 million, or 19.1%, compared to $12.6 million for the three months ended December 31, 2009. On a sequential basis, core operating earnings for the fourth quarter of 2010 were up $346 thousand. The Company calculates core operating earnings by excluding taxes, provisions for loan losses, losses on other real estate owned, impairment losses on securities and provisions for unfunded commitments from net income. For the three months ended September 30, 2010, the Company is also excluding from net income $1.0 million in bank-owned life insurance death benefits received.

Asset Quality and Provisions For Loan Losses

Provisions for loan losses were $7.1 million for the quarter ended December 31, 2010, compared to $1.1 million in the same period in 2009, with total net charge-offs of $7.4 million in the fourth quarter of 2010 versus $6.1 million for the same period a year ago. For the year ended December 31, 2010, provisions for loan losses totaled $20.6 million compared to $81.9 million in 2009, with 2010 net charge-offs of $23.3 million significantly reduced from $53.2 million in 2009.

Total non-performing assets and loans 90+ days past due declined from $98.1 million at December 31, 2009, to $74.6 million at December 31, 2010, and decreased $7.8 million sequentially from $82.4 million at September 30, 2010, predominantly as a result of sales of Other Real Estate Owned (“OREO”). As of December 31, 2010, the allowance for loan losses represented 2.82% of total loans, up slightly from 2.80% at September 30, 2010, with such allowance covering 108.8% of total non-performing loans.

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. Overall, as of December 31, 2010, $33.6 million, or 58.7%, of non-performing loans represented acquisition, development and construction (“ADC”) loans, $13.1 million, or 22.8%, represented non-farm, non-residential loans, $7.1 million, or 12.3%, represented loans on one-to-four family residential properties, and $3.7 million, or 6.5%, represented commercial and industrial loans. Reductions in existing non-performing loans during the fourth quarter of $13.3 million were largely offset by the addition of six single family mortgages totaling $3.3 million, two commercial mortgages totaling $5.1 million and two land parcels totaling $3.9 million to non-accrual. Collateral for each of these loans was evaluated and carrying values or specific reserves adjusted accordingly.

Included in the loan portfolio are loans classified as troubled debt restructurings (“TDRs”), totaling $103.0 million, a sequential reduction from $105.6 million at the end of the third quarter. These are performing, accruing loans that represent relationships for which a modification to the contractual interest rate or repayment structure has been granted to address a financial hardship. These loans make up 4.7% of the total loan portfolio and represent $35.7 million in ADC loans, $49.7 million in non-farm, non-residential real estate loans, $12.2 million in commercial loans and $5.4 million in one-to-four family residential loans. A $2.6 million reduction in TDRs during the quarter was achieved as a result of the restructure of a $11 million commercial property back to market rates and terms.

Net Interest Income

Net interest income of $27.1 million for the fourth quarter of 2010 was up $1.9 million, or 7.4%, over the same quarter last year, due primarily to an increase in the net interest margin from 3.78% in the fourth quarter of 2009 to 3.96% for the same period in 2010. Net interest income for 2010 of $105.3 million was up 15.2%, compared to $91.4 million in 2009. On a sequential basis, the net interest margin was unchanged. The year-over-year increase in the net interest margin was driven by lower deposit costs due to significant reductions in the level of time deposits, and increased levels of demand deposits and lower rate interest-bearing transaction accounts. As a result, the average cost of interest-bearing deposits fell from 2.50% in 2009 to 1.64% in 2010, while the yield on interest-earning assets declined only seventeen basis points from 5.67% to 5.50% year-over-year. Management anticipates the net interest margin will average between 3.70% to 3.80% in 2011 as yields on loans and investment securities are expected to continue to decline.

Non-Interest Income (Loss)

For the three months ended December 31, 2010, the Company recognized $1.6 million in non-interest income, compared to a non-interest loss of $548 thousand for the three months ended December 31, 2009. For the year ended December 31, 2010, the Company recognized non-interest income of $3.7 million compared to a non-interest loss of $4.4 million in 2009. Non-interest income for the fourth quarter of 2010 included $1.2 million in losses on other real estate owned and $128 thousand in impairment losses on securities, while in the fourth quarter of 2009, non-interest income included $867 thousand in losses on other real estate owned and $1.4 million in impairment losses on securities. Fees and net gains on loans held for sale increased $1.2 million from $538 thousand in the fourth quarter of 2009, to $1.7 million in the fourth quarter of 2010 due to higher levels of refinancing activity.

Non-Interest Expense

Non-interest expense decreased $2.3 million, or 13.1%, from $17.3 million in the fourth quarter of 2009, to $15.1 million in the fourth quarter of 2010, and was up $318 thousand, or 0.6%, from $56.9 million for the year ended December 31, 2009, to $57.2 million in 2010. Non-interest expense for the fourth quarter of 2009 and year ended December 31, 2009, included a $3.0 million provision for unfunded commitments, while the Company did not recognize any non-interest expense related to unfunded commitments in 2010. The majority of these increases were due to higher legal and professional services expenses associated with the collection of non-performing loans, higher carrying expenses on other real estate owned and higher commissions paid on mortgage loans originated for sale. Despite these increases, higher levels of net interest income resulted in the efficiency ratio improving from 55.6% for the year ended December 31, 2009 to 50.6% in 2010.

Investment Securities

Investment securities increased $63.2 million, or 18.1%, year-over-year to $411.8 million at December 31, 2010, and were up $30.8 million sequentially from September 30, 2010. U.S. Government agency securities, including callable step-up bonds and collateralized mortgage obligations (CMOs) comprised a majority of the increases. The portfolio contains four pooled trust preferred securities with an amortized cost basis of $5.9 million for which the Bank performs a quarterly analysis for other than temporary impairment due to significantly depressed current market quotes. The analysis includes stress tests on the underlying collateral and cash flow estimates based on the current and projected future levels of deferrals and defaults within each pool. Since the first quarter of 2009, the Bank has recorded an aggregate impairment loss of $3.5 million on three of the four pools.

Loans

Loans, net of allowance for loan losses, decreased $60.5 million, or 2.7%, from $2.21 billion at December 31, 2009, to $2.15 billion at December 31, 2010. Non-farm, non-residential real estate loans increased $12.9 million, or 1.1%, multifamily real estate loans increased $10.5 million, or 15.7%, while ADC loans fell by $63.7 million, or 14.9%, and commercial loans were down $19.7 million, or 8.3%. Sequentially, net loans were down $28.4 million, or 1.3%. Loan production in 2010 was negatively impacted by lower economic activity and demand for credit in both the business and consumer sectors, a reallocation of lending personnel to problem loan identification and resolution, a strategic decision to restrict acquisition, development and construction lending and an increased emphasis on deposit generation and non-credit products. Lending efforts in 2011 are being focused on building greater market share in commercial lending, especially in sectors forecast for growth, such as government contract lending, professional practices and associations and select service industries, with strategic hiring, marketing campaigns, calling efforts and sales management restructuring.

Deposits

For the year ended December 31, 2010, deposits increased $17.9 million, or 0.8%, to $2.25 billion, with demand deposits increasing $25.1 million, or 10.5%, savings and interest-bearing demand deposits increasing by $216.1 million, or 21.9%, and time deposits falling $223.4 million, or 22.2%. Sequentially, deposits fell $76.3 million, or 3.3%, with demand deposits decreasing by $5.0 million, or 1.8%, savings and interest-bearing demand accounts falling $22.5 million, or 1.8%, and time deposits decreasing by $48.9 million, or 5.9%. The sequential decline in demand deposits is a result of daily and period-end fluctuations as growth in that category continued with a sequential increase in average demand deposit balances of $17.3 million, or 6.8%, to $272.8 million. The year-over-year increase in demand deposits is primarily due to successful deposit gathering efforts led by the Company’s team of eight business development officers who are focused on acquisition and retention of commercial operating funds, cash management services and other related cross-sales. The year-over-year increase in savings and interest-bearing demand deposits was due primarily to success with the Company’s MEGA Savings and MEGA Checking account products as well as its Premier Interest Checking for non-profits, with the sequential decline due primarily to a strategic reduction in balances held by one depositor. The declines in time deposits are reflective of strategic pricing of certificates of deposits relative to both the competitive market and the Company’s pricing on interest-bearing transaction accounts. The proportionate share of time deposits to total deposits has declined from a peak of 67.2% at year-end 2008 to 34.8% as of December 31, 2010, and is expected to plateau near that level. At December 31, 2010, the Bank had no brokered certificates of deposit, down from $50.1 million at the end of 2009 and $30.0 million at September 30, 2010.

Capital Levels and Stockholders’ Equity

On September 29, 2010, the Company issued 1,904,766 shares of its common stock at a price of $5.25 per share in a registered direct placement with several institutional investors for total gross proceeds of $10.0 million. In addition, the Company issued to the investors warrants exercisable for shares of common stock, which, if fully exercised, would provide an additional $11.4 million in gross proceeds to the Company. The warrants each have an exercise price of $6.00 per share, which represents a 14.3% premium to the offering price of the shares of common stock sold in the registered direct placement. The Series A warrants, exercisable for a total of 952,383 shares of common stock, are exercisable for a period of seven months following the closing date. The Series B warrants, also exercisable for a total of 952,383 shares of common stock, are exercisable for a period of twelve months following the closing date.

Stockholders’ equity increased $26.7 million, or 12.2%, from $218.9 million at December 31, 2009, to $245.6 million at December 31, 2010, with $9.3 million in net proceeds from the above referenced stock issuance, net income to common stockholders of $16.5 million over the twelve-month period, a $1.9 million decrease in other comprehensive income related to the investment securities portfolio, and $1.4 million in proceeds and tax benefits related to the exercise of options by Company directors and officers, and stock option expense credits. As a result of these changes, the Company’s Tier 1 capital ratio increased from 11.48% at December 31, 2009, to 13.20% at December 31, 2010, its total qualifying capital ratio increased from 12.73% to 14.45% and its tangible common equity ratio increased from 5.68% to 6.57%. Sequentially, the Company’s Tier 1 and total qualifying capital ratios are each up 20 basis points, and its tangible common equity ratio is up 18 basis points from September 30, 2010.

CONFERENCE CALL

The Company will host a teleconference call for the financial community on January 20, 2011, at 11:00 a.m. Eastern Standard Time to discuss the fourth quarter 2010 financial results. The public is invited to listen to this conference call by dialing 866-814-1917 at least 10 minutes prior to the call.

A replay of the conference call will be available from 2:00 p.m. Eastern Standard Time on January 20, 2011, until 11:59 p.m. Eastern Standard Time on January 27, 2011. The public is invited to listen to this conference call replay by dialing 888-266-2081 and entering access code 1507552.

ABOUT VIRGINIA COMMERCE BANCORP, INC.

Virginia Commerce Bancorp, Inc. is the parent bank holding company for Virginia Commerce Bank, a Virginia state chartered bank that commenced operations in May 1988. The Bank pursues a traditional community banking strategy, offering a full range of business and consumer banking services through twenty-eight branch offices, one residential mortgage office and one wealth management services office, principally to individuals and small-to-medium size businesses in Northern Virginia and the Metropolitan Washington, D.C. area.

NON-GAAP PRESENTATIONS

The Company prepares its financial statements under accounting principles generally accepted in the United States, or “GAAP”. However, this press release also refers to certain non-GAAP financial measures that we believe, when considered together with GAAP financial measures, provide investors with important information regarding our operational performance. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.

Core operating earnings is a non-GAAP financial measure that reflects net income excluding taxes, loan loss provisions, losses on other real estate owned, impairment losses on securities and provisions for unfunded commitments from net income. For the three months ended September 30, 2010, the Company is also excluding from net income $1.0 million in bank-owned life insurance death benefits received. These excluded items are difficult to predict and we believe that core operating earnings provides the Company and investors with a valuable measure of the performance of the Company’s operational performance and a valuable tool to evaluate the Company’s financial results. Calculation of core operating earnings for the three months ended December 31, 2010, December 31, 2009, and September 30, 2010 is as follows:
   
Three Months Ended Three Months
December 31, Ended
    September 30,
(in thousands) 2010   2009     2010  
 
Net Income $ 4,542 $ 4,155 $ 6,958
Adjustments to net income:
Provision for loan losses 7,056 1,100 5,100
Loss on other real estate owned 1,233 867 713
Impairment loss on securities 128 1,403 --
Provision for unfunded commitments -- 2,960 --
Provision for income taxes 2,030 2,103 2,917
Death benefits received from bank owned life insurance -- -- (1,045 )
 
Core Operating Earnings $ 14,989 $ 12,588 $ 14,643
 

The adjusted efficiency ratio is a non-GAAP financial measure that is computed by dividing non-interest expense, before provisions for unfunded commitments, by the sum of net interest income on a tax equivalent basis and non-interest income before losses on other real estate owned. We believe that this measure provides investors with important information about our operating efficiency. Comparison of our adjusted efficiency ratio with those of other companies may not be possible because other companies may calculate the adjusted efficiency ratio differently. Calculation of the adjusted efficiency ratio for the three months and year ended December 31, 2010 and December 31, 2009 is as follows:
   
Three Months Ended Year Ended
(in thousands) December 31,   December 31,
  2010       2009       2010       2009  
Summary Operating Results:    
Non-interest expense $ 15,071 $ 17,337 $ 57,186 $ 56,868
Provision for unfunded commitments -- (2,960 ) -- (2,960 )
Total $ 15,071 $ 14,377 $ 57,186 $ 53,908
 
Net interest income $ 27,111 $ 25,243 $ 105,329 $ 91,404
Non-interest income 1,588 (548 ) 3,697 (4,352 )
Losses on other real estate owned 1,233 867 3,924 9,952
Total $ 29,932 $ 25,562 $ 112,950 $ 97,004
 
Efficiency Ratio, adjusted 50.4 % 56.2 % 50.6 % 55.6 %
 

The tangible common equity ratio is a non-GAAP financial measure representing the ratio of tangible common equity to tangible assets. Tangible common equity and tangible assets are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible common equity for the Company by excluding the balance of intangible assets and outstanding preferred stock issued to the U.S. Treasury from total stockholders’ equity. We calculate tangible assets by excluding the balance of intangible assets from total assets. We had no intangible assets for the periods presented. We believe that this is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of regulatory capital ratios. Accordingly, we believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our capital position and ratios. However, these non-GAAP financial measures are supplemental and are not substitutes for an analysis based on a GAAP measure. As other companies may use different calculations for non-GAAP measures, our presentation may not be comparable to other similarly titled measures reported by other companies. Calculation of the Company’s tangible common equity ratio as of December 31, 2010, December 31, 2009, September 30, 2010, and June 30, 2010 is as follows:
     
(in thousands) As of December 31,

September 30,

June 30,
2010   2009   2010   2010
Tangible common equity:  
Total stockholders’ equity $ 245,594 $ 218,868 $ 247,012 $ 230,331
 
Less:
Outstanding TARP senior preferred stock 65,445 63,993 65,082 64,719
Intangible assets -- -- -- --
Tangible common equity $ 180,149 $ 154,875 $ 181,930 $ 165,612
 
Total tangible assets $ 2,741,648 $ 2,725,297 $ 2,846,003 $ 2,826,807
 
Tangible common equity ratio 6.57 % 5.68 % 6.39 % 5.86 %
 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains 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, including but not limited to our outlook on earnings, including our future net interest margin, and statements regarding asset quality, projected growth, capital position, our plans regarding and expected future levels of our non-performing assets, business opportunities in our markets, and general economic conditions. When we use words such as “may”, “will”, “anticipates”, “believes”, “expects”, “plans”, “estimates”, “potential”, “continue”, “should”, and similar words or phrases, you should consider them as identifying forward-looking statements. These forward-looking statements are not guarantees of future performance. These statements are based upon current and anticipated economic conditions, nationally and in the Company’s market, interest rates and interest rate policy, expected yields on loans and investment securities, 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 release and the forward-looking statements are based, actual future operations and results may differ materially from those indicated herein. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company’s past results are not necessarily indicative of future performance. For additional information regarding factors that could affect the Company's operations and results, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, and other reports filed with and furnished to the Securities and Exchange Commission.
 
Virginia Commerce Bancorp, Inc.
Financial Highlights
(Dollars in thousands, except per share data)
(Unaudited)
 
 
  Three Months Ended December 31,   Year Ended December 31,
  2010       2009     % Change       2010       2009       % Change  
Summary Operating Results:          
Interest and dividend income $ 37,106 $ 38,273 -3.0 % $ 148,826 $ 150,633 -1.2 %
Interest expense 9,995 13,030 -23.3 % 43,497 59,229 -26.6 %
Net interest income 27,111 25,243 7.4 % 105,329 91.404 15.2 %
Provision for loan losses 7,056 1,100 541.5 % 20,594 81,913 -74.9 %
Non-interest income (charges) 1,588 (548 ) 389.8 % 3,697 (4,352 ) 184.9 %
Non-interest expense 15,071 17,337 -13.1 % 57,186 56,868 0.6 %
Income (loss) before income taxes 6,572 6,258 5.0 % 31,246 (51,729 ) -160.4 %
Net income (loss) $ 4,542 $ 4,155 9.3 % $ 21,540 $ (33,325 ) -164.6 %
Effective dividend on preferred stock 1,250 1,251 -0.1 % 5,002 4,539 10.2 %
Net income (loss) available to common stockholders $ 3,292 $ 2,904 13.4 % $ 16,538 $ (37,864 ) -143.7 %
 
Performance Ratios:
Return on average assets 0.64 % 0.60 % 0.77 % -1.22 %
Return on average equity 7.26 % 7.53 % 9.22 % -13.89 %
Net interest margin 3.96 % 3.78 % 3.90 % 3.45 %
Efficiency ratio, adjusted 50.35 % 56.24 % 50.63 % 55.57 %
 
Per Share Data:
Earnings (loss) per common share-basic $ 0.11 $ 0.11 0.0 % $ 0.60 $ (1.42 ) 142.3 %
Earnings (loss) per common share-diluted $ 0.11 $ 0.11 0.0 % $ 0.57 $ (1.42 ) 140.1 %
Average number of shares outstanding:
Basic 28,936,750 26,728,300 27,603,741 26,692,570
Diluted 30,013,335 27,014,836 28,875,993 26,692,570
 
 
 
As of December 31,      
  2010       2009     % Change     09/30/10       06/30/10  
Selected Balance Sheet Data:
Loans, net $ 2,149,591 $ 2,210,064 -2.7 % $ 2,178,034 $ 2,187,912
Investment securities 411,761 348,585 18.1 % 380,915 379,212
Assets 2,741,648 2,725,297 0.6 % 2,846,003 2,826,807
Deposits 2,247,201 2,229,327 0.8 % 2,323,478 2,314,086
Stockholders’ equity 245,594 218,868 12.2 % 247,012 230,331
Book value per common share $ 6.03 $ 5.53 9.0 % $ 6.09 $ 5.91
 
Capital Ratios (% of risk weighted assets):
Tier 1 capital:
Company 13.20 % 11.48 % 13.00 % 12.13 %
Bank 12.87 % 11.41 % 12.60 % 12.09 %
Total qualifying capital:
Company 14.45 % 12.73 % 14.25 % 13.38 %
Bank 14.12 % 12.66 % 13.85 % 13.34 %
Tier 1 leverage:
Company 11.07 % 10.29 % 10.84 % 10.37 %
Bank 10.86 % 10.23 % 10.52 % 10.36 %
Tangible common equity:
Company 6.57 % 5.68 % 6.39 % 5.86 %
Bank (1) 11.01 % 10.32 % 10.60 % 10.39 %
 

(1) Calculated by dividing total stockholders’ equity by total assets, as the Bank has no intangible assets or non-common equity.
           
As of December 31,      
  2010       2009     09/30/10       06/30/10  
 
Asset Quality:
Non-performing assets:
Non-accrual loans:
Commercial $ 3,719 $ 6,929 $ 5,176 $ 5,346
Real estate-one-to-four family residential:
Closed end first and seconds 5,284 5,769 6,554 4,369
Home equity lines   1,529     420     724     630  
Total Real estate-one-to-four family residential $ 6,813 $ 6,189 $ 7,278 $ 4,999
Real estate-multi-family residential -- -- -- --
Real estate-non-farm, non-residential:
Owner Occupied 8,942 8,600 5,251 8,045
Non-owner occupied   4,114     6,506     1,204     8,298  
Total Real estate-non-farm, non-residential $ 13,056 $ 15,106 $ 6,455 $ 16,343
Real estate-construction:
Residential-Owner Occupied -- 517 -- --
Residential-Builder 27,189 30,110 31,138 30,877
Commercial   6,361     6,911     6,861     6,911  
Total Real estate-construction: $ 33,550 $ 37,538 $ 37,999 $ 37,788
Consumer   19     47     110     122  
Total Non-accrual loans 57,157 65,809 57,018 64,598
OREO   17,165     28,499     24,395     26,477  
Total non-performing assets $ 74,322 $ 94,308 $ 81,413 $ 91,075
 
Loans 90+ days past due and still accruing:
Commercial $ -- $ 3,797 $ 149 $ 264
Real estate-one-to-four family residential:
Closed end first and seconds -- -- -- 280
Home equity lines   242     --     369     --  
Total Real estate-one-to-four family residential $ 242 $ -- $ 369 $ 280
Real estate-multi-family residential -- -- -- --
Real estate-non-farm, non-residential:
Owner Occupied -- -- 361 --
Non-owner occupied   --     --     --     --  
Total Real estate-non-farm, non-residential $ -- $ -- $ 361 $ --
Real estate-construction:
Residential-Owner Occupied -- -- -- --
Residential-Builder -- 26 -- --
Commercial   --     --     --     --  
Total Real estate-construction: $ -- $ 26 $ -- $ --
Consumer   --     3     100     --  
Total loans 90+ days past due and still accruing $ 242 $ 3,826 $ 979 $ 544
 
Total non-performing assets and past due loans $ 74,564 $ 98,134 $ 82,392 $ 91,619
 
Troubled debt restructurings $ 102,996 $ 71,885 $ 105,617 $ 96,976
 
Non-performing assets
to total loans: 3.36 % 4.14 % 3.63 % 4.04 %
to total assets: 2.71 % 3.46 % 2.86 % 3.22 %
Non-performing assets and past due loans
to total loans: 3.37 % 4.31 % 3.67 % 4.06 %
to total assets: 2.72 % 3.60 % 2.90 % 3.24 %
Allowance for loan losses to total loans 2.82 % 2.86 % 2.80 % 2.77 %
Allowance for loan losses to non-performing loans 108.79 % 93.56 % 108.24 % 95.71 %
 
Total allowance for loan losses $ 62,442 $ 65,152 $ 62,776 $ 62,345

         
As of December 31,      
  2010       2009     09/30/10       06/30/10  
 
Loans 30 to 89 days past due
Commercial $ 2,622 $ 866 $ 1,237 $ 73
Real estate-one-to-four family residential:
Closed end first and seconds 4,109 352 1,813 3,374
Home equity lines   2,605     139     786     830  
Total Real estate-one-to-four family residential $ 6,714 $ 491 $ 2,599 $ 4,204
Real estate-multi-family residential -- -- -- --
Real estate-non-farm, non-residential:
Owner Occupied 1,909 1,854 12,463 1,612
Non-owner occupied   --     --     174     2,129  
Total Real estate-non-farm, non-residential $ 1,909 $ 1,854 $ 12,637 $ 3,741
Real estate-construction:
Residential-Owner Occupied -- -- -- --
Residential-Builder -- 1,370 1,372 2,270
Commercial   --     --     --     --  
Total real estate-construction: $ -- $ 1,370 $ 1,372 $ 2,270
Farmland -- -- -- --
Consumer   347     141     36     55  
Total loans 30 to 89 days past due $ 11,592 $ 4,722 $ 17,881 $ 10,343
 
For nine For six
For the year ended months months
December 31, ended   ended
  2010       2009     09/30/10       06/30/10  
 
Net charge-offs
Commercial $ 4,903 $ 15,578 $ 3,919 $ 3,748
Real estate-one-to-four family residential:
Closed end first and seconds 3,402 1,825 2,368 2,249
Home equity lines   254     1,465     77     88  
Total Real estate-one-to-four family residential $ 3,656 $ 3,290 $ 2,445 $ 2,337
Real estate-multi-family residential 1,050 -- -- --
Real estate-non-farm, non-residential:
Owner Occupied 2,663 1,901 1,350 1,273
Non-owner occupied   2,540     58     1,479     1,336  
Total Real estate-non-farm, non-residential $ 5,203 $ 1,959 $ 2,829 $ 2,609
Real estate-construction:
Residential-Owner Occupied 324 1,012 368 116
Residential-Builder 8,077 17,556 6,361 2,581
Commercial   (233 )   13,492     (233 )   (283 )
Total real estate-construction: $ 8,168 $ 32,060 $ 6,496 $ 2,414
Farmland -- -- -- --
Consumer   325     349     225     138  
Total net charge-offs $ 23,305 $ 53,236 $ 15,914 $ 11,246
Net charge-offs to average loans outstanding 1.03 % 2.34 % 0.70 % 0.49 %
 
Total provision for loan losses $ 20,594 $ 81,913 $ 13,538 $ 8,438

   
As of December 31,  
  2010     2009   % Change     09/30/10   % Change  
     
Loan Portfolio:
Commercial $ 218,600 $ 238,327 -8.3 % $ 207,909 5.14 %
Real estate-one to four family residential:
Closed end first and seconds 269,514 271,501 -0.7 % 288,318 -6.5 %
Home equity lines   131,397   135,233 -2.8 %   134,159 -2.1 %
Total Real estate-one-to-four family residential $ 400,911 $ 406,734 -1.4 % $ 422,477 -5.1 %
Real estate-multifamily residential 77,316 66,799 15.7 % 86,896 -11.0 %
Real estate-non-farm, non-residential:
Owner Occupied 464,368 452,776 2.6 % 476,812 -2.61 %
Non-owner occupied   674,448   673,169 0.2 %   662,695 1.77 %
Total Real estate-non-farm, non-residential $ 1,138,816 $ 1,125,945 1.1 % $ 1,139,507 -0.06 %
Real estate-construction:
Residential-Owner Occupied 16,819 15,161 10.9 % 15,152 11.0 %
Residential-Builder 160,763 224,855 -28.5 % 174,896 -8.08 %
Commercial   187,028   188,276 -0.7 %   185,444 0.85 %
Total Real estate-construction: $ 364,610 $ 428,292 -14.9 % $ 375,492 -2.9 %
Farmland 2,418 2,675 -9.6 % 2,410 0.33 %
Consumer   12,557   10,368 21.1 %   9,794 28.2 %
Total loans $ 2,215,228 $ 2,279,140 -2.8 % $ 2,244,485 -1.3 %
Less unearned income 3,195 3,924 -18.6 % 3,675 -13.1 %
Less allowance for loan losses   62,442   65,152 -4.2 %   62,776 -0.5 %
Loans, net $ 2,149,591 $ 2,210,064 -2.7 % $ 2,178,034 -1.3 %
   
As of December 31, 2010
Residential, Acquisition, Development and Construction       Non-accruals   Net charge-
Total

Percentage
Non-accrual as a % of offs as a % of
By County/Jurisdiction of Origination: Outstandings  

of Total
Loans   Outstandings   Outstandings
District of Columbia $ 3,971 2.2 % $ -- -- 0.3 %
Montgomery, MD 2,336 1.3 % 4,108 2.3 % 2.0 %
Prince Georges, MD 18,594 10.5 % 739 0.4 % 0.2 %
Other Counties in MD 5,416 3.1 % 1,077 0.6 % 0.9 %
Arlington/Alexandria, VA 23,935 13.5 % 2,848 1.6 % --
Fairfax, VA 40,586 22.8 % 2,284 1.3 % 0.2 %
Culpeper/Fauquier, VA 4,447 2.5 % 3,695 2.1 % 0.8 %
Frederick, VA 6,281 3.5 % 6,250 3.5 % --
Loudoun, VA 32,846 18.5 % 770 0.4 % --
Prince William, VA 7,867 4.4 % 1,054 0.6 % --
Spotsylvania, VA 296 0.2 % -- -- --
Stafford, VA 20,421 11.5 % 4,364 2.5 % 0.2 %
Other Counties in VA 8,987 5.1 % -- -- 0.1 %
Outside VA, D.C. & MD   1,599 0.9 %   -- --   --  
$ 177,582 100.0 % $ 27,189 15.3 % 4.7 %
   
As of December 31, 2010
Commercial, Acquisition, Development and Construction       Non-accruals   Net charge-
Total

Percentage
Non-accrual as a % of offs as a % of
By County/Jurisdiction of Origination: Outstandings  

of Total
Loans   Outstandings   Outstandings
District of Columbia $ 10,214 5.5 % $ -- -- --
Montgomery, MD 1,365 0.7 % -- -- --
Prince Georges, MD 12,492 6.7 % -- -- --
Other Counties in MD 3,396 1.8 % -- -- --
Arlington/Alexandria, VA 9,312 5.0 % -- -- --
Fairfax, VA 28,390 15.1 % 2,800 1.5 % -0.1 %
Culpeper/Fauquier, VA 3,020 1.6 % -- -- --
Henrico, VA 849 0.5 % -- -- --
Loudoun, VA 24,790 13.3 % 1,497 0.8 % --
Prince William, VA 58,198 31.1 % 2,064 1.1 % --
Spotsylvania, VA 2,715 1.5 % -- -- --
Stafford, VA 29,801 15.9 % -- -- --
Other Counties in VA 2,486 1.3 % -- -- --
Outside VA, D.C. & MD   -- --     -- --   --  
$ 187,028 100.0 % $ 6,361 3.4 % -0.1 %

   
As of December 31, 2010

Non-Farm/Non-Residential By County/Jurisdiction of Origination:

TotalOutstandings
 

Percentageof Total
     

Non-accrualLoans
 

Non-accrualsas a % ofOutstandings
 

Net charge-offs as a % ofOutstandings
District of Columbia $ 79,822   7.0% $ --   --   --
Montgomery, MD 35,477 3.1% -- -- 0.1%
Prince Georges, MD 47,455 4.2% 719 0.1% --
Other Counties in MD 53,048 4.7% -- -- --
Arlington/Alexandria, VA 180,863 15.8% 2,341 0.2% --
Fairfax, VA 262,366 23.0% 3,699 0.3% --
Culpeper/Fauquier, VA 5,728 0.5% -- -- --
Frederick, VA 7,289 0.6% -- -- --
Henrico, VA 29,365 2.6% -- -- 0.1%
Loudoun, VA 117,906 10.4% 2,102 0.2% 0.2%
Prince William, VA 206,443 18.1% 909 0.1% --
Spotsylvania, VA 20,102 1.8% -- -- --
Stafford, VA 21,382 1.9% -- -- --
Other Counties in VA 63,889 5.6% 3,286 0.3% 0.1%
Outside VA, D.C. & MD   7,681 0.7%   -- -- --
$ 1,138,816 100.0% $ 13,056 1.1% 0.5%
 
Of this total of $1.1 billion in non-farm/non-residential real estate loans, approximately $71.0 million will mature in 2011, $70.1 million in 2012 and $101.7 million in 2013.
 
     
As of December 31,        
2010   2009   % Change   9/30/10   % Change
   
Investment Securities (at book value):
Available-for-sale:
U.S. Government Agency obligations $ 310,610 $ 247,134 25.7 % $ 279,631 11.1 %
Pooled trust preferred securities 430 2,031 -78.8 % 1,198 -64.1 %
Obligations of states and political subdivisions   63,463   42,356 49.8 %   61,232 3.6 %
$ 374,503 $ 291,521 28.5 % $ 342,061 9.5 %
Held-to-maturity:
U.S. Government Agency obligations $ 6,113 $ 12,323 -50.4 % $ 7,047 -13.3 %
Obligations of states and political subdivisions   31,145   44,741 -30.4 %   31,807 -2.1 %
$ 37,258 $ 57,064 -34.7 % $ 38,854 -4.1 %
 

       
Virginia Commerce Bancorp, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
As of December 31,
(Unaudited)
 
2010 2009
Assets
Cash and due from banks $ 36,932 $ 25,211
Investment securities (fair value: 2010, $412,654; 2009, $349,836) 411,761 348,585
Restricted stocks, at cost 11,751 11,751
Federal funds sold 10,455 --
Loans held-for-sale 10,049 6,492
Loans, net of allowance for loan losses of $62,442 in 2010 and $65,152 in 2009 2,149,591 2,210,064
Bank premises and equipment, net 12,000 13,794
Accrued interest receivable 10,003 10,537

Other real estate owned, net of valuation allowance of $6,782 in 2010, and $9,067 in 2009

17,165
28,499
Other assets   71,941     70,364
Total assets $ 2,741,648   $ 2,725,297
Liabilities and Stockholders’ Equity
Deposits
Demand deposits $ 264,744 $ 239,604
Savings and interest-bearing demand deposits 1,201,288 985,152
Time deposits   781,169     1,004,571
Total deposits $ 2,247,201 $ 2,229,327
Securities sold under agreement to repurchase and federal funds purchased 152,726 176,729
Other borrowed funds 25,000 25,000
Trust preferred capital notes 66,314 66,057
Accrued interest payable 2,751 4,014
Other liabilities   2,062     5,302
Total liabilities $ 2,496,054 $ 2,506,429
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 $ 65,445 $ 63,993
Common stock, $1.00 par, 50,000,000 shares authorized, issued and outstanding 2010, 28,962,935 including 9,335 in unvested restricted stock issued; 2009, 26,744,545 28,954 26,745
Surplus 105,056 96,588
Warrants 8,520 8,520
Retained earnings 39,208 22,671
Accumulated other comprehensive income, net   (1,589 )   351
Total stockholders’ equity $ 245,594   $ 218,868
Total liabilities and stockholders’ equity $ 2,741,648   $ 2,725,297
 

   
Virginia Commerce Bancorp, Inc.
Consolidated Statements of Operations
(Dollars in thousands except per share data)
(Unaudited)
 
Three Months Ended Year Ended
December 31,   December 31,
2010   2009   2010   2009
Interest and dividend income:    
Interest and fees on loans $ 33,461 $ 34,212 $ 133,599 $ 134,548
Interest and dividends on investment securities:
Taxable 2,919 3,527 12,641 14,050
Tax-exempt 587 414 2,043 1,591
Dividends on restricted stocks 89 90 356 355
Interest on federal funds sold   50     30     187     89
Total interest and dividend income $ 37,106   $ 38,273   $ 148,826   $ 150,633
Interest expense:
Deposits $ 7,490 $ 10,522 $ 33,462 $ 49,598

Securities sold under agreement to repurchase and federal funds purchased
990 998 4,012 3,475
Other borrowed funds 271 271 1,077 1,077
Trust preferred capital notes   1,244     1,239     4,946     5,079
Total interest expense $ 9,995   $ 13,030   $ 43,497   $ 59,229
Net interest income $ 27,111 $ 25,243 $ 105,329 $ 91,404
Provision for loan losses   7,056     1,100     20,594     81,913
Net interest income after provision for loan losses $ 20,055   $ 24,143   $ 84,735   $ 9,491
Non-interest income (charges):
Service charges and other fees $ 821 $ 923 $ 3,376 $ 3,606
Non-deposit investment services commissions 302 156 831 600
Fees and net gains on loans held-for-sale 1,700 538 3,437 2,912
Loss on other real estate owned (1,233) (867) (3,924) (9,952)
Gain on sale of securities -- -- 139 --
Impairment loss on securities (128) (1,403) (1,647) (1,821)
Other   126     105     1,485     303
Total non-interest income (charges) $ 1,588   $ (548)   $ 3,697   $ (4,352)
Non-interest expense:
Salaries and employee benefits $ 6,751 $ 5,780 $ 24,990 $ 23,040
Occupancy expense 2,417 2,583 9,951 10,253
FDIC insurance 1,324 1,311 5,277 5,411
Provision for unfunded commitments -- 2,960 -- 2,960
Franchise tax expense 720 775 2,875 3,100
Data processing expense 644 662 2,450 2,436
Other operating expense   3,215     3,266     11,643     9,668
Total non-interest expense $ 15,071   $ 17,337   $ 57,186   $ 56,868
Income (loss) before taxes $ 6,572 $ 6,258 $ 31,246 $ (51,729)
Provision (benefit) for income taxes   2,030     2,103     9,706     (18,404)
Net income (loss) $ 4,542   $ 4,155   $ 21,540   $ (33,325)
Effective dividend on preferred stock   1,250     1,251     5,002     4,539
Net income (loss) available to common stockholders $ 3,292 $ 2,904 $ 16,538 $ (37,864)
Earnings (loss) per common share, basic $ 0.11 $ 0.11 $ 0.60 $ (1.42)
Earnings (loss) per common share, diluted $ 0.11 $ 0.11 $ 0.57 $ (1.42)
 

               
Virginia Commerce Bancorp, Inc.
Consolidated Average Balances, Yields, and Rates
Three Months Ended December 31,
(Unaudited)
                   
2010 2009
(Dollars in thousands)

AverageBalance
 

InterestIncome-Expense
 

AverageYields/Rates

AverageBalance
 

InterestIncome-Expense
 

AverageYields/Rates
Assets
Securities (1) $ 406,243 $ 3,506 3.64 % $ 361,179 $ 3,941 4.51 %
Restricted stock 11,752 89 3.06 % 11,752 90 3.08 %
Loans, net of unearned income (2) 2,241,720 33,461 5.93 % 2,245,065 34,212 6.06 %
Interest-bearing deposits in other banks 385 0 0.08 % 93 -- 0.04 %
Federal funds sold   81,314     50   0.24 %   53,164     30   0.22 %
Total interest-earning assets $ 2,741,414 $ 37,106 5.41 % $ 2,671,253 $ 38,273 5.71 %
Other assets   71,761   73,674
Total Assets $ 2,813,175 $ 2,744,927
 
Liabilities and Stockholders’ Equity
Interest-bearing deposits:
NOW accounts $ 340,856 $ 593 0.69 % $ 252,373 $ 771 1.21 %
Money market accounts 168,790 454 1.07 % 155,725 558 1.42 %
Savings accounts 713,964 2,283 1.27 % 542,167 2,493 1.82 %
Time deposits   794,684     4,160   2.08 %   1,059,948     6,700   2.51 %
Total interest-bearing deposits $ 2,018,294 $ 7,490 1.47 % $ 2,010,213 $ 10,522 2.08 %
Securities sold under agreement to repurchase and federal funds purchased 182,480 990 2.15 % 178,779 998 2.21 %
Other borrowed funds 25,000 271 4.25 % 25,000 271 4.25 %
Trust preferred capital notes   66,281     1,244   7.34 %   66,026     1,239   7.34 %
Total interest-bearing liabilities $ 2,292,055 $ 9,995 1.73 % $ 2,280,018 $ 13,030 2.27 %
Demand deposits and other liabilities   272,813   246,104
Total liabilities $ 2,564,868 $ 2,526,122
Stockholders’ equity   248,307   218,805
Total liabilities and stockholders’ equity $ 2,813,175 $ 2,744,927
Interest rate spread 3.68 % 3.44 %
Net interest income and margin $ 27,111 3.96 % $ 25,243 3.78 %
 
(1) Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which are reflected as a component of stockholders’ equity. Average yields on securities are stated on a tax equivalent basis, using a 35% rate.
 
(2) Loans placed on non-accrual status are included in the average balances. Net loan fees and late charges included in interest income on loans totaled $1.0 million and $300 thousand for the three months ended December 31, 2010, and 2009, respectively.
 

               
Virginia Commerce Bancorp, Inc.
Consolidated Average Balances, Yields, and Rates
Year Ended December 31,
(Unaudited)
   
2010 2009
(Dollars in thousands)

AverageBalance
 

InterestIncome-Expense
 

AverageYields/Rates

AverageBalance
 

InterestIncome-Expense
 

AverageYields/Rates
Assets
Securities (1) $ 372,480 $ 14,684 4.12 % $ 334,873 $ 15,641 4.82 %
Restricted stock 11,752 356 3.03 % 11,589 355 3.06 %
Loans, net of unearned income (2) 2,259,560 133,599 5.92 % 2,279,294 134,548 5.91 %
Interest-bearing deposits in other banks 249 0 0.09 % 91 0 0.09 %
Federal funds sold   79,882     187   0.23 %   42,718     89   0.20 %
Total interest-earning assets $ 2,723,923 $ 148,826 5.50 % $ 2,668,565 $ 150,633 5.67 %
Other assets   79,140   67,737
Total Assets $ 2,803,063 $ 2,736,302
 
Liabilities and Stockholders’ Equity
Interest-bearing deposits:
NOW accounts $ 335,716 $ 2,971 0.89 % $ 228,189 $ 2,825 1.24 %
Money market accounts 157,071 1,872 1.19 % 157,216 2,302 1.46 %
Savings accounts 663,479 9,759 1.47 % 381,042 7,764 2.04 %
Time deposits   882,832     18,860   2.14 %   1,221,328     36,707   3.01 %
Total interest-bearing deposits $ 2,039,098 $ 33,462 1.64 % $ 1,987,775 $ 49,598 2.50 %
Securities sold under agreement to repurchase and federal funds purchased 183,338 4,012 2.19 % 186,106 3,475 1.87 %
Other borrowed funds 25,000 1,077 4.25 % 25,000 1,077 4.25 %
Trust preferred capital notes   66,186     4,946   7.37 %   65,930     5,079   7.60 %
Total interest-bearing liabilities $ 2,313,622 $ 43,497 1.88 % $ 2,264,811 $ 59,229 2.62 %
Demand deposits and other liabilities   255,871   231,554
Total liabilities $ 2,569,493 $ 2,496,365
Stockholders’ equity   233,570   239,937
Total liabilities and stockholders’ equity $ 2,803,063 $ 2,736,302
Interest rate spread 3.62 % 3.05 %
Net interest income and margin $ 105,329 3.90 % $ 91,404 3.45 %
 
(1) Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which are reflected as a component of stockholders’ equity. Average yields on securities are stated on a tax equivalent basis, using a 35% rate.
 
(2) Loans placed on non-accrual status are included in the average balances. Net loan fees and late charges included in interest income on loans totaled $3.0 million and $3.3 million for the year ended December 31, 2010, and 2009, respectively.

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