Virginia Commerce Bancorp, Inc. Reports Improved Profit, Net Interest Margin, Efficiency Ratio And Asset Quality For First Quarter 2011

Virginia Commerce Bancorp, Inc. (the “Company”), (Nasdaq: VCBI), parent company of Virginia Commerce Bank (the “Bank”), today reported net income to common stockholders of $3.7 million, or $0.12 per diluted common share, for the first quarter of 2011, compared with net income to common stockholders of $3.2 million, or $0.11 per diluted common share, for the same period in 2010. A 20 basis point increase in the net interest margin, increased non-interest income and containment of non-interest expense drove the year-over-year improvement in earnings. However, earnings improvement was still constrained by the Company’s provisions for loan losses and an impairment loss in the Company’s securities portfolio.

Peter A. Converse, President and Chief Executive Officer, commented, “Our first quarter results are a good start to the year. Our strong core operating earnings continued to benefit from sequential increases in the net interest margin and expense containment discipline, while asset quality metrics were fairly positive across the board. Although credit costs as well as a securities impairment loss had a dampening effect on the flow of core earnings to the bottom line, it is anticipated that these expenses, especially loan loss provisioning, will have less of an impact as the year progresses and we continue to reduce our non-performing asset exposure.”

“For this just completed quarter, non-performing assets and loans 90+ days past due showed modest improvement, declining by just over $1 million. However, Troubled Debt Restructurings declined by $11.1 million, from $103.0 million to $91.9 million, the second consecutive quarterly decrease in this category. Loans 30 – 89 days past due were $10.4 million as of March 31, 2011, having declined sequentially and year-over-year from $11.6 million and $13.5 million respectively. We expect that meaningful progress in reducing problem assets will be made through the remainder of the year, without necessarily incurring the same quarterly levels of provisioning and charge-offs as experienced in the first quarter.”

Converse continued, “As I indicated last quarter, our 2011 plans include getting back on a growth track, especially in lending. While this past quarter did not evidence progress in that regard in all loan categories, we are encouraged by growth in commercial loans and the current pipeline of loan approvals, as well as recent and expected loan closings early in the second quarter. We should also benefit from hiring four new commercial loan officers and a seasoned commercial lending manager since the first of the year. While two of those new loan officers were replacement hires, the focus on commercial lending as a strategic shift is obvious.”

“As previously announced, VCBI raised approximately $2.5 million in new capital at the end of the first quarter through a registered direct placement of 426,000 shares of its common stock to one of our Directors. In conjunction with that sale, the Company also issued to this Director warrants exercisable for twice that number of original shares, which would provide additional capital proceeds of approximately $4.8 million to the Bank if fully exercised. This capital raise was a one-off transaction to enable the Director to make a substantial investment in the Company structured comparably to the registered direct placement of $10 million in gross proceeds at the end of last September. Neither transaction is indicative of a Company strategy to raise incremental amounts of capital going forward. The Board will continue to consider its options for paying off our $71 million in TARP funding through either retained earnings or a one-time capital raise. Again, the decision to increase capital through a stock sale will largely be dependent on satisfactory appreciation in our stock price and any prerequisite regulatory approval. As an additional option, we have also applied for funding under the Small Business Lending Fund to pay off our TARP funding and take advantage of the currently known features of that program.”

Converse concluded, “I would be remiss if I didn’t acknowledge the recent passing on February 22 of Bill Beauchesne, our Chief Financial Officer and Chief Operating Officer. Bill served Virginia Commerce for almost sixteen years with the highest levels of competency, dedication and integrity. The loss of our colleague is deeply and profoundly felt by all of us here at the Bank. While we conduct a thoughtful search for his permanent replacement, we have been fortunate to bring in long-time local banker, Wilmer (“Bill”) Tinley, as interim CFO. Bill has spent 44 years in banking, primarily in local community bank CFO and CEO roles. Most recently he was CFO for EagleBank in Bethesda, Maryland, from its founding and until he retired four years ago. Bill has stepped right in and is fulfilling the CFO role quite capably.”

SUMMARY REVIEW OF FINANCIAL PERFORMANCE

Net Income

For the three months ended March 31, 2011, the Company recorded net income of $5.0 million. After an effective dividend of $1.3 million to the U.S. Treasury on preferred stock, the Company reported net income to common stockholders of $3.7 million, or $0.12 per diluted common share, compared to net income to common shareholders of $3.2 million, or $0.11 per diluted common share in the first quarter of 2010. The year-over-year earnings improvement was largely attributable to a 5.5% increase in net interest income over the previous year, which was principally due to reduced interest expenses as more fully described below. However, the Company’s net income was negatively impacted primarily by provisions for loan losses and an impairment loss on securities of $732 thousand.

Excluding taxes, loan loss provisions, the losses on other real estate owned and securities and gain on sale of securities, the Company generated core operating earnings for the three months ended March 31, 2011, of $13.6 million, up $1.1 million, or 8.9%, as compared to $12.5 million for the same period in 2010.

Asset Quality and Provisions For Loan Losses

Provisions for loan losses were $5.8 million for the three months ended March 31, 2011, compared to $4.2 million in the same period in 2010, with total net charge-offs of $11.8 million in the first quarter of 2011, versus $7.0 million for the first quarter of 2010. Total non-performing assets and loans 90+ days past due declined from $108.8 million at March 31, 2010, to $73.5 million at March 31, 2011, a reduction of 32.4%, and decreased $1.1 million sequentially from $74.6 million as of December 31, 2010. Higher provisioning for the quarter was primarily driven by the downgrade of two mid-seven figure borrowing relationships, representing a construction sub-contractor and a residential builder which required specific reserves of $3.2 million based upon a collateral analysis. Increased charge-offs were largely attributable to the decision to write down certain identified problem loans with substantial specific reserves totaling $8.2 million in anticipation of negotiated settlements or pending sales of underlying collateral properties. As of March 31, 2011, reserves for loan losses represented 2.59% of total loans, down from 2.82% at December 31, 2010, with reserves covering 103.4% of total non-performing loans as of March 31, 2011.

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 unemployment levels. Overall, as of March 31, 2011, $32.9 million, or 60.2%, of non-performing loans represented acquisition, development and construction (“ADC”) loans, $10.0 million, or 18.3%, represented non-farm, non-residential loans, $6.1 million, or 11.2%, represented loans on one-to-four family residential properties, and $5.6 million, or 10.3%, represented commercial and industrial (“C&I”) loans. Progress in reducing non-performing loans in non-farm, non-residential loans and residential ADC loans was largely offset by increases in 1) C&I non-performing loans of $1.9 million resulting primarily from moving several loans to a specialty contractor to non-accrual, 2) home equity non-performing loans of $1.8 million all attributable to a single large first lien home equity loan going to non-accrual and 3) an increase in commercial ADC non-performing loans due to a stalled mixed use project moving to non-accrual. Collateral for these new additions was evaluated and carrying values and specific reserves adjusted accordingly. Additionally, other real estate owned increased $1.7 million as a small retail center and a commercial property were taken to foreclosure during the quarter. The carrying value of these assets was also adjusted to current market conditions based upon appraisals.

Included in the loan portfolio at March 31, 2011, are loans classified as troubled debt restructurings (“TDRs”), totaling $91.9 million, a sequential reduction of $11.1 million from $103.0 million at December 31, 2010. 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. Over 85% of TDRs were performing prior to modification. These loans make up 4.2% of the total loan portfolio and represent $29.8 million in ADC loans, $46.5 million in non-farm, non-residential real estate loans, $10.1 million in C&I loans and $5.5 million in one-to-four family residential loans. The reduction in TDRs was attributable to upgrades of reviewable TDRs and adjustments to the carrying value of continuing TDRs.

Net Interest Income

Net interest income for the first quarter of 2011 of $26.2 million was up $1.4 million, or 5.5%, over the same quarter last year, as the net interest margin increased from 3.79% in the first quarter of 2010 to 3.99% for the same period in 2011. On a sequential basis, the margin was up three basis points. 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. Also, the average rate paid on savings and time deposits decreased significantly from the three-months ended March 31, 2010 to the same period 2011. As a result, the average cost of interest-bearing deposits fell from 1.88% in the first quarter of 2010, to 1.44% in the current period, while the yield on interest-earning assets declined twenty basis points from 5.59% to 5.39%. Management anticipates the net interest margin will range between 3.7% and 4.0% over the next two quarters, but may come under some pressure later in the year if short-term interest rates begin to rise.

Non-Interest Income

For the three months ended March 31, 2011, the Company recognized $1.5 million in non-interest income, compared to non-interest income of $607 thousand for the three months ended March 31, 2010. Fees and net gains on loans held-for-sale were up for the first quarter 2011 on a year-over-year basis by $175 thousand, or 50.1%. Sequentially, fees and net gains on loans held-for-sale were down $1.2 million from the fourth quarter of 2010. Included in the current quarter income is an impairment loss on securities of $732 thousand, which was partially offset by a gain on sale of securities of $503 thousand. The impairment loss on securities was due to additional deferrals and defaults by the underlying issuers of four pooled trust preferred securities. For the three months ended March 31, 2010, the Company recognized an impairment loss of $851 thousand. Management is carefully monitoring its holdings of the securities which caused the impairment losses and at this time can not be assured that there will not be further losses in the future.

Non-Interest Expense

Non-interest expense decreased $257 thousand, or 1.7%, from $14.7 million in the first quarter of 2010, to $14.5 million in the current period. The majority of the year-over-year decrease was due to the $762 thousand decrease in losses on other real estate owned. The reduction in losses on OREO offset an increase in salaries and employee benefits related to commissions payable in connection with greater than anticipated mortgage production. However, due to the $1.4 million increase in net interest income and $870 thousand increase in non-interest income year-over-year, the adjusted efficiency ratio improved from 55.4% in the first quarter of 2010, to 51.1% in the first quarter of 2011.

Investment Securities

Investment securities increased $82.9 million, or 24.8%, year-over-year to $417.1 million at March 31, 2011. U.S. Government agency securities, including callable step-up bonds, mortgage-backed securities (MBS) 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 $5.1 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 $4.2 million on three of the four pools, including a $732 thousand impairment during the first quarter of 2011.

Loans

Loans, net of allowance for loan losses, decreased $80.8 million, or 3.7%, from $2.20 billion at March 31, 2010, to $2.12 billion at March 31, 2011. Non-farm, non-residential real estate loans decreased $9.5 million, or 0.8%, multifamily real estate loans increased $17.2 million, or 23.7%, ADC loans fell by $76.2 million, or 18.1%, and C&I loans were up $2.3 million, or 1.0%. Sequentially, net loans were down $27.3 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. Progress with this strategy is evident in the first quarter of 2011 with commercial loans increasing $8.2 million sequentially, while ADC loans and non-farm, non-residential non-owner occupied loans decreased $18.5 million and $22.7 million, respectively. Additionally, efforts to grow multi-family residential, considered to be a strong local asset class, were successful with a sequential increase of $12.4 million.

Deposits

For the twelve months ended March 31, 2011, total deposits decreased $43.0 million, or 1.9%, from $2.30 billion to $2.26 billion, with demand deposits increasing $58.7 million, or 25.3%, savings and interest-bearing demand deposits increasing by $99.1 million, or 9.1%, and time deposits falling $200.8 million, or 20.5%. Sequentially, from December 31, 2010, deposits rose $9.7 million, or 0.4%, with demand deposits increasing by $25.6 million, or 9.7%, savings and interest-bearing demand accounts decreasing $13.9 million, or 1.2%, and time deposits decreasing by $1.9 million, or 0.3%. While opportunities for balance sheet growth have been limited in recent periods, the Company has focused on improving deposit mix. Demand deposit growth has been the top priority, with the year-over-year increase in demand deposits primarily due to the successful efforts of the Company’s team of eight business development officers, who are focused on acquisition and retention of commercial operating funds, treasury management services and other related cross-sales. In other deposit categories, strategic pricing and customer preference for liquidity has resulted in a desired reduction in time deposits and an increase in NOW, savings and money market accounts. The decline in time deposits as a percentage of total deposits, now at 34.5%, is generally complete as evidenced by sequential results. At March 31, 2011, the Bank had no brokered certificates of deposit, down from $80.1 million at March 31, 2010.

Capital Levels and Stockholders’ Equity

On March 31, 2011, the Company issued 426,000 shares of its common stock at a price of $5.87 per share in a registered direct placement with a Company director for total gross proceeds of approximately $2.5 million. In addition, the Company issued to the investor warrants exercisable for shares of common stock, which, if fully exercised, would provide an additional $4.8 million in gross proceeds to the Company. The warrants each have an exercise price of $5.62 per share. The Series A warrants, exercisable for a total of 426,000 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 426,000 shares of common stock, are exercisable for a period of twelve months following the closing date.

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 $29.1 million, or 13.0%, from $224.3 million at March 31, 2010, to $253.4 million at March 31, 2011, with approximately $11.8 million in net proceeds from the above referenced stock issuances, net income to common stockholders of $17.0 million over the twelve-month period, a $2.5 million decrease in other comprehensive income related to the investment securities portfolio, and $2.8 million in proceeds and tax benefits related to the exercise of options by the Company’s directors and officers, and stock option expense credits. As a result of these changes, the Company’s Tier 1 Capital ratio increased from 11.91% at March 31, 2010, to 13.96% at March 31, 2011, and its total qualifying capital ratio increased from 13.16% to 15.21%. The Bank’s ratios increased by similar levels. Sequentially, the Company’s Tier 1 and total qualifying capital ratios are each up 76 basis points, and its tangible common equity ratio is up 17 basis points from December 31, 2010, to 6.74% as of March 31, 2011.

CONFERENCE CALL

The Company will host a teleconference call for the financial community on April 20, 2011, at 11:00 a.m. Eastern Daylight Time to discuss the first quarter 2011 financial results. The public is invited to listen to this conference call by dialing 866-244-4519 at least 10 minutes prior to the call.

A replay of the conference call will be available from 2:00 p.m. Eastern Daylight Time on April 20, 2011, until 11:59 p.m. Eastern Daylight Time on April 27, 2011. The public is invited to listen to this conference call replay by dialing 888-266-2081 and entering access code 1525816.

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 gain on sale of securities. 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 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 March 31, 2011, March 31, 2010 and December 31, 2010 is as follows:
 
Three Months Ended
March 31,
(in thousands) 2011   2010
 
Net Income $ 4,966 $ 4,469
Adjustments to net income:
Provision for loan losses 5,843 4,238
Loss on other real estate owned 156 918
Impairment loss on securities 732 851
Gain on sale of securities (503 ) --
Provision for income taxes 2,400 2,009
 
Core Operating Earnings $ 13,594 $ 12,485

The adjusted efficiency ratio is a non-GAAP financial measure that is computed by dividing non-interest expense, by the sum of net interest income on a tax equivalent basis and non-interest income before losses on other real estate owned, impairment losses on securities and gain on sale of securities. 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 ended March 31, 2011 and March 31, 2010 is as follows:
 
Three Months Ended
(in thousands) March 31,
  2011       2010  
Summary Operating Results:  
Non-interest expense $ 14,450 $ 14,707
 
Net interest income $ 26,183 $ 24,816
Non-interest income 1,476 607
Impairment loss on securities 732 851
Gain on sale of securities (503 ) --
Total (1) $ 27,888 $ 26,274
 
Efficiency Ratio, adjusted 51.1 % 55.4 %
 

(1) Tax Equivalent Income of $28,254 for 2011 and $26,564 for 2010.

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 March 31, 2011, March 31, 2010, December 31, 2010 and September 30, 2010 is as follows:

     
(in thousands) As of March 31,   December 31,   September 30,
  2011       2010       2010       2010  
Tangible common equity:  
Total stockholders’ equity $ 253,373 $ 224,259 $ 245,594 $ 247,012
 
Less:
Outstanding TARP senior preferred stock 65,873 64,356 65,445 65,082
Intangible assets -- -- -- --
Tangible common equity $ 187,500 $ 159,903 $ 180,149 $ 181,930
 
Total tangible assets $ 2,783,633 $ 2,803,004 $ 2,741,648 $ 2,846,003
 
 
Tangible common equity ratio 6.74 % 5.70 % 6.57 % 6.39 %
 

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, 2010, 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 March 31,
  2011       2010     % Change    
Summary Operating Results:    
Interest and dividend income $ 35,517 $ 36,727 -3.3 %
Interest expense 9,334 11,911 -21.6 %
Net interest income 26,183 24,816 5.5 %
Provision for loan losses 5,843 4,238 37.9 %
Non-interest income (charges) 1,476 607 143.2 %
Non-interest expense 14,450 14,707 -1.7 %
Income before income taxes 7,366 6,478 13.7 %
Net income $ 4,966 $ 4,469 11.1 %
Effective dividend on preferred stock 1,315 1,250 5.1 %
Net income available to common stockholders $ 3,651 $ 3,219 13.5 %
 
Performance Ratios:
Return on average assets 0.73 % 0.65 %
Return on average equity 8.09 % 8.16 %
Net interest margin 3.99 % 3.79 %
Efficiency ratio, adjusted 51.14 % 55.36 %
 
Per Share Data:
Earnings per common share-basic $ 0.13 $ 0.12 8.3 %
Earnings per common share-diluted $ 0.12 $ 0.11 9.1 %
Average number of shares outstanding:
Basic 29,264,610 26,933,923
Diluted 30,404,089 28,010,878
 
 
 
As of March 31,

As of
  2011       2010     % Change   12/31/10       09/30/10  
Selected Balance Sheet Data:
Loans, net $ 2,122,309 $ 2,203,156 -3.7 % $ 2,149,591 $ 2,178,034
Investment securities 417,071 334,160 24.8 % 411,761 380,915
Assets 2,783,633 2,803,004 -0.7 % 2,741,648 2,846,003
Deposits 2,256,970 2,299,989 -1.9 % 2,247,201 2,323,478
Stockholders’ equity 253,373 224,259 13.0 % 245,594 247,012
Book value per common share $ 6.18 $ 5.69 8.6 % $ 6.03 $ 6.09
 
Capital Ratios (% of risk weighted assets):
Tier 1 capital:
Company 13.96 % 11.91 % 13.20 % 12.96 %
Bank 13.57 % 11.81 % 12.87 % 12.55 %
Total qualifying capital:
Company 15.21 % 13.16 % 14.45 % 14.21 %
Bank 14.82 % 13.06 % 14.12 % 13.80 %
Tier 1 leverage:
Company 11.48 % 10.34 % 11.07 % 10.84 %
Bank 11.16 % 10.29 % 10.76 % 10.52 %
Tangible common equity:
Company 6.74 % 5.70 % 6.57 % 6.39 %
Bank (1) 11.09 % 10.20 % 11.01 % 10.60 %

(1) Calculated by dividing total stockholders’ equity by total assets, as the Bank has no intangible assets or non-common equity.
       
As of March 31, As of
  2011       2010     12/31/10       09/30/10  
 
Asset Quality:
Non-performing assets:
Non-accrual loans:
Commercial $ 5,622 $ 9,931 $ 3,719 $ 5,176
Real estate-one-to-four family residential:
Closed end first and seconds 2,781 4,610 5,285 6,554
Home equity lines   3,325     693     1,529     724  
Total Real estate-one-to-four family residential $ 6,106 $ 5,303 $ 6,814 $ 7,278
Real estate-multi-family residential -- -- -- --
Real estate-non-farm, non-residential:
Owner Occupied 8,016 9,019 8,942 5,251
Non-owner occupied   1,988     14,871     4,114     1,204  
Total Real estate-non-farm, non-residential $ 10,004 $ 23,890 $ 13,056 $ 6,455
Real estate-construction:
Residential-Owner Occupied -- -- -- --
Residential-Builder 24,234 36,078 27,189 31,138
Commercial   8,625     6,911     6,361     6,861  
Total Real estate-construction: $ 32,859 $ 42,989 $ 33,550 $ 37,999
Consumer   18     119     19     110  
Total Non-accrual loans 54,609 82,232 57,158 57,018
OREO   18,879     26,269     17,165     24,395  
Total non-performing assets $ 73,488 $ 108,501 $ 74,323 $ 81,413
 
Loans 90+ days past due and still accruing:
Commercial $ -- $ 45 $ -- $ 149
Real estate-one-to-four family residential:
Closed end first and seconds -- 238 -- --
Home equity lines   --     --     242     369  
Total Real estate-one-to-four family residential $ -- $ 238 $ 242 $ 369
Real estate-multi-family residential -- -- -- --
Real estate-non-farm, non-residential:
Owner Occupied 25 -- -- 361
Non-owner occupied   --     --     --     --  
Total Real estate-non-farm, non-residential $ 25 $ -- $ -- $ 361
Real estate-construction:
Residential-Owner Occupied -- -- -- --
Residential-Builder -- 26 -- --
Commercial   --     --     --     --  
Total Real estate-construction: $ -- $ 26 $ -- $ --
Consumer   --     9     --     100  
Total loans 90+ days past due and still accruing $ 25 $ 318 $ 242 $ 979
 
Total non-performing assets and past due loans $ 73,513 $ 108,819 $ 74,565 $ 82,392
 
Troubled debt restructurings $ 91,876 $ 80,993 $ 102,996 $ 105,617
 
Non-performing assets
to total loans: 3.37 % 4.78 % 3.36 % 3.63 %
to total assets: 2.64 % 3.87 % 2.71 % 2.86 %
Non-performing assets and past due loans
to total loans: 3.37 % 4.79 % 3.37 % 3.67 %
to total assets: 2.64 % 3.88 % 2.72 % 2.90 %
Allowance for loan losses to total loans 2.59 % 2.75 % 2.82 % 2.80 %
Allowance for loan losses to non-performing loans 103.35 % 75.60 % 108.79 % 108.24 %
 
Total allowance for loan losses $ 56,465 $ 62,407 $ 62,442 $ 62,776

     
As of March 31,

As of
  2011       2010     12/31/10       09/30/10  
 
Loans 30 to 89 days past due and still accruing
Commercial $ 1,063 $ 393 $ 2,622 $ 1,237
Real estate-one-to-four family residential:
Closed end first and seconds 2,376 1,223 4,109 1,813
Home equity lines   89     3,225     2,605     786  
Total Real estate-one-to-four family residential $ 2,465 $ 4,458 $ 6,714 $ 2,599
Real estate-multi-family residential 495 -- -- --
Real estate-non-farm, non-residential:
Owner Occupied -- 2,184 1,909 12,463
Non-owner occupied   5,940     5,277     --     174  
Total Real estate-non-farm, non-residential $ 5,940 $ 7,461 $ 1,909 $ 12,637
Real estate-construction:
Residential-Owner Occupied -- -- -- --
Residential-Builder 378 1,079 -- 1,372
Commercial   --     --     --     --  
Total real estate-construction: $ 378 $ 1,079 $ -- $ 1,372
Farmland -- -- -- --
Consumer   63     110     347     36  
Total loans 30 to 89 days past due $ 10,404 $ 13,501 $ 11,592 $ 17,881
 
For twelve For nine
For the three months months months
ended March 31, ended   ended
  2011       2010     12/31/10       09/30/10  
 
Net charge-offs
Commercial $ 395 $ 2,491 $ 4,903 $ 3,919
Real estate-one-to-four family residential:
Closed end first and seconds 1,597 1,964 3,402 2,368
Home equity lines   729     (14 )   254     77  
Total Real estate-one-to-four family residential $ 2,326 $ 1,950 $ 3,656 $ 2,445
Real estate-multi-family residential -- -- 1,050 --
Real estate-non-farm, non-residential:
Owner Occupied 54 760 2,663 1,350
Non-owner occupied   1,530     188     2,540     1,479  
Total Real estate-non-farm, non-residential $ 1,584 $ 948 $ 5,203 $ 2,829
Real estate-construction:
Residential-Owner Occupied -- 116 324 368
Residential-Builder 910 953 8,077 6,361
Commercial   6,595     (125 )   (233 )   (233 )
Total real estate-construction: $ 7,505 $ 944 $ 8,168 $ 6,496
Farmland -- -- -- --
Consumer   10     650     324     225  
Total net charge-offs $ 11,820 $ 6,983 $ 23,304 $ 15,914
Net charge-offs to average loans outstanding 0.54 % 0.31 % 1.03 0.70 %
 
Total provision for loan losses $ 5,843 $ 4,238 $ 20,594 $ 13,538

   
As of March 31,

As of
 
2011   2010   % Change 12/31/10   % Change
     
Loan Portfolio:
Commercial $ 226,845 $ 224,498 1.0 % $ 218,600 3.8 %
Real estate-one to four family residential:
Closed end first and seconds 265,696 278,708 -4.7 % 269,514 -1.4 %
Home equity lines   126,413   134,638 -6.1 %   131,397 -3.8 %
Total Real estate-one-to-four family residential $ 392,109 $ 413,346 -5.1 % $ 400,911 -2.2 %
Real estate-multifamily residential 89,771 72,560 23.7 % 77,316 16.1 %
Real estate-non-farm, non-residential:
Owner Occupied 462,744 464,338 -0.3 % 464,368 -0.3 %
Non-owner occupied   651,729   659,687 -1.2 %   674,448 -3.4 %
Total Real estate-non-farm, non-residential $ 1,114,473 $ 1,124,025 -0.8 % $ 1,138,816 -2.1 %
Real estate-construction:
Residential-Owner Occupied 16,285 17,707 -8.0 % 16,819 -3.2 %
Residential-Builder 149,262 210,600 -29.1 % 160,763 -7.2 %
Commercial   180,544   194,019 -6.9 %   187,028 -3.5 %
Total Real estate-construction: $ 346,091 $ 422,326 -18.1 % $ 364,610 -5.1 %
Farmland 2,456 2,673 -8.1 % 2,418 1.6 %
Consumer   10,650   10,014 6.4 %   12,557 -15.2 %
Total loans $ 2,182,395 $ 2,269,442 -3.8 % $ 2,215,228 -1.5 %
Less unearned income 3,621 3,879 -6.7 % 3,195 13.3 %
Less allowance for loan losses   56,465   62,407 -9.5 %   62,442 -9.6 %
Loans, net $ 2,122,309 $ 2,203,156 -3.7 % $ 2,149,591 -1.3 %
   
As of March 31, 2011
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 $ 3,347 2.0 % $ -- -- --
Montgomery, MD 1,250 0.8 % 535 0.3 % --
Prince Georges, MD 18,887 11.4 % 5,283 3.2 % --
Other Counties in MD 4,796 2.9 % -- -- --
Arlington/Alexandria, VA 24,240 14.6 % 2,236 1.4 % --
Fairfax, VA 39,405 23.7 % 826 0.5 % 0.1 %
Culpeper/Fauquier, VA 4,445 2.7 % 3,695 2.2 % --
Frederick, VA 6,281 3.8 % 6,250 3.8 % --
Loudoun, VA 32,456 19.6 % -- -- 0.4 %
Prince William, VA 7,864 4.8 % 1,045 0.6 % --
Spotsylvania, VA 297 0.2 % -- -- --
Stafford, VA 20,411 12.3 % 4,364 2.6 % --
Other Counties in VA 1,762 1.1 % -- -- --
Outside VA, D.C. & MD   106 0.1 %   -- --   --  
$ 165,547 100.0 % $ 24,234 14.5 % 0.5 %
   
As of March 31, 2011
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 $ 10,084 5.6 % $ -- -- --
Montgomery, MD -- 0.0 % -- -- --
Prince Georges, MD 12,491 6.9 % -- -- --
Other Counties in MD 3,376 1.9 % -- -- --
Arlington/Alexandria, VA 9,312 5.2 % 3,153 1.8 % --
Fairfax, VA 27,799 15.4 % 2,800 1.6 % --
Culpeper/Fauquier, VA 3,020 1.7 % -- -- --
Frederick, VA 2,399 1.3 % -- -- --
Henrico, VA 864 0.5 % -- -- --
Loudoun, VA 20,153 11.2 % 608 0.3 % 2.5 %
Prince William, VA 55,992 30.9 % 2,064 1.1 % 1.2 %
Spotsylvania, VA 1,740 1.0 % -- --
Stafford, VA 28,301 15.6 % -- -- --
Other Counties in VA 5,013 2.8 % -- -- --
Outside VA, D.C. & MD   -- 0.0 %   -- --   --  
$ 180,544 100.0 % $ 8,625 4.8 % 3.7 %

   
As of March 31, 2011
Non-Farm/Non-Residential       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 $ 81,357 7.3 % $ -- -- --
Montgomery, MD 34,534 3.1 % -- -- --
Prince Georges, MD 47,778 4.3 % -- -- --
Other Counties in MD 44,482 4.0 % -- -- --
Arlington/Alexandria, VA 180,094 16.2 % 2,296 0.2 % --
Fairfax, VA 257,562 23.0 % 4,847 0.4 % --
Culpeper/Fauquier, VA 5,709 0.5 % -- -- --
Frederick, VA 6,347 0.6 % -- -- --
Henrico, VA 28,565 2.6 % -- -- --
Loudoun, VA 113,903 10.2 % 1,952 0.2 % 0.1 %
Prince William, VA 209,558 18.8 % 909 0.1 % --
Spotsylvania, VA 16,922 1.5 % -- -- --
Stafford, VA 20,737 1.9 % -- -- --
Other Counties in VA 58,151 5.2 % -- -- --
Outside VA, D.C. & MD   8,774 0.8 %   -- --   --  
$ 1,114,473 100.0 % $ 10,004 0.9 % 0.1 %
 

Of this total of $1.1 billion in non-farm/non-residential real estate loans, approximately $56.0 million will mature in 2011, $73.9 million in 2012 and $99.1 million in 2013.
       
As of March 31,       As of    
2011   2010   % Change   12/31/10   % Change
 
Investment Securities (at book value):
Available-for-sale:
U.S. Government Agency obligations $ 316,868 $ 234,811 34.9 % $ 310,610 2.0 %
Pooled trust preferred securities 444 1,772 -74.9 % 430 3.3 %
Obligations of states and political subdivisions   64,584   43,209 49.5 %   63,463 1.8 %
$ 381,896 $ 279,792 36.5 % $ 374,503 2.0 %
Held-to-maturity:
U.S. Government Agency obligations $ 5,459 $ 10,906 -49.9 % $ 6,113 -10.7 %
Obligations of states and political subdivisions   29,717   43,462 -31.6 %   31,145 -4.6 %
$ 35,176 $ 54,368 -35.3 % $ 37,258 -5.6 %

   
Virginia Commerce Bancorp, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
As of March 31,
(Unaudited)
 
2011   2010  
Assets
Cash and due from banks $ 41,089 $ 24,347
Investment securities (fair value: 2011, 418,124; 2010, $335,262) 417,072 334,160
Restricted stocks, at cost 11,751 11,751
Federal funds sold 85,399 108,645
Loans held-for-sale 4,650 3,005
Loans, net of allowance for loan losses of $56,465 in 2011 and $62,407 in 2010 2,122,309 2,203,156
Bank premises and equipment, net 11,666 13,253
Accrued interest receivable 10,832 10,013

Other real estate owned, net of valuation allowance of $6,543 in 2011, and $5,771 in 2010
18,879 26,269
Other assets   59,986     68,405  
Total assets $ 2,783,633   $ 2,803,004  
Liabilities and Stockholders’ Equity
Deposits
Demand deposits $ 290,385 $ 231,726
Savings and interest-bearing demand deposits 1,187,395 1,088,254
Time deposits   779,190     980,009  
Total deposits $ 2,256,970 $ 2,299,989
Securities sold under agreement to repurchase and federal funds purchased $ 177,732 179,073
Other borrowed funds $ 25,000 25,000
Trust preferred capital notes 66,378 66,121
Accrued interest payable 2,753 3,697
Other liabilities   1,427     4.865  
Total liabilities $ 2,530,260 $ 2,578,745
Stockholders’ Equity
Preferred stock, net of discount, $1.00 par, 1,000,000 shares authorized, Series A; $1,000 stated value; 71,000 issued and outstanding $ 65,873 $ 64,356
Common stock, $1.00 par, 50,000,000 shares authorized, issued and outstanding 2011, 29,552,737 including 38,748 in unvested restricted stock issued; 2010, 26,933,923 29,514 26,934
Surplus 107,372 96,868
Warrants 8,520 8,520
Retained earnings 42,859 25,890
Accumulated other comprehensive income, net   (765 )   1,691  
Total stockholders’ equity $ 253,373   $ 224,259  
Total liabilities and stockholders’ equity $ 2,783,633   $ 2,803,004  

 
Virginia Commerce Bancorp, Inc.
Consolidated Statements of Operations
(Dollars in thousands except per share data)
(Unaudited)
 
Three Months Ended
March 31,
  2011       2010  
Interest and dividend income:  
Interest and fees on loans $ 31,923 $ 32,905
Interest and dividends on investment securities:
Taxable 2,861 3,280
Tax-exempt 592 426
Dividends on restricted stocks 96 88
Interest on federal funds sold   45       28  
Total interest and dividend income $ 35,517     $ 36,727  
Interest expense:
Deposits $ 7,023 $ 9,428

Securities sold under agreement to repurchase and federal funds purchased
934 989
Other borrowed funds 266 266
Trust preferred capital notes   1,111       1,228  
Total interest expense $ 9,334     $ 11,911  
Net interest income $ 26,183 $ 24,816
Provision for loan losses   5,843       4,238  
Net interest income after provision for loan losses $ 20,340     $ 20,578  
Non-interest income (charges):
Service charges and other fees $ 792 $ 876
Non-deposit investment services commissions 253 129
Fees and net gains on loans held-for-sale 521 346
Gain on sale of securities 503 --
Impairment loss on securities (732 ) (851 )
Other   139       107  
Total non-interest income (charges) $ 1,476     $ 607  
Non-interest expense:
Salaries and employee benefits $ 6,659 $ 5,995
Occupancy expense 2,470 2,710
FDIC insurance 1,289 1,309
Loss on other real estate owned 156 918
Franchise tax expense 772 717
Data processing expense 655 674
Other operating expense   2,449       2,384  
Total non-interest expense $ 14,450     $ 14,707  
Income before taxes $ 7,366 $ 6,478
Provision for income taxes   2,400       2,009  
Net income $ 4,966     $ 4,469  
Effective dividend on preferred stock $ 1,315       1,250  
Net income available to common stockholders $ 3,651 $ 3,219
Earnings per common share, basic $ 0.13 $ 0.12
Earnings per common share, diluted $ 0.12 $ 0.11

           
Virginia Commerce Bancorp, Inc.
Consolidated Average Balances, Yields, and Rates
Three Months Ended March 31,
(Unaudited)
                   
2011 2010
Interest Average Interest Average
Average Income- Yields Average Income- Yields
(Dollars in thousands) Balance   Expense   /Rates Balance   Expense   /Rates
Assets
Securities (1) $ 406,103 $ 3,453 3.59 % $ 338,138 $ 3,706 4.55 %
Restricted stock 11,752 96 3.31 % 11,752 88 3.00 %
Loans, net of unearned income (2) 2,203,117 31,923 5.89 % 2,280,980 32,905 5.86 %
Interest-bearing deposits in other banks 388 -- 0.13 % 98 -- 0.04 %
Federal funds sold   67,622     45   0.27 %   48,732     28   0.23 %
Total interest-earning assets $ 2,688,982 $ 35,517 5.39 % $ 2,679,700 $ 36,727 5.59 %
Other assets   84,679   93,712
Total Assets $ 2,773,661 $ 2,773,412
 
Liabilities and Stockholders’ Equity
Interest-bearing deposits:
NOW accounts $ 321,564 $ 653 0.82 % $ 281,142 $ 812 1.17 %
Money market accounts 177,183 469 1.07 % 146,609 492 1.36 %
Savings accounts 692,647 1,916 1.12 % 603,703 2,497 1.68 %
Time deposits   783,462     3,985   2.06 %   1,002,008     5,627   2.28 %
Total interest-bearing deposits $ 1,974,856 $ 7,023 1.44 % $ 2,033,462 $ 9,428 1.88 %
Securities sold under agreement to repurchase and federal funds purchased 166,272 934 2.28 % 181,955 989 2.20 %
Other borrowed funds 25,000 266 4.25 % 25,000 266 4.25 %
Trust preferred capital notes   66,346     1,111   6.70 %   66,090     1,228   7.43 %
Total interest-bearing liabilities $ 2,232,474 $ 9,334 1.70 % $ 2,306,507 $ 11,911 2.09 %
Demand deposits and other liabilities   292,094   244,836
Total liabilities $ 2,524,568 $ 2,551,343
Stockholders’ equity   249,093   222,069
Total liabilities and stockholders’ equity $ 2,773,661 $ 2,773,412
Interest rate spread 3.69 % 3.50 %
Net interest income and margin $ 26,183 3.99 % $ 24,816 3.79 %
 

(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 $687 thousand and $747 thousand for the three months ended March 31, 2011 and 2010, respectively.

Copyright Business Wire 2010

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