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Colonial Virginia Bank Announces 2012 Earnings

GLOUCESTER, Va., Feb. 13, 2013 /PRNewswire/ -- Colonial Virginia Bank (OTCBB: CNVB) ("the Bank"), today reported results of operations for the fiscal year ended December 31, 2012, which reflected net income after taxes of $255,007, compared to an after tax net loss of ($373,774) in 2011.  Pre-tax earnings were $285,731 for 2012, compared to the net loss of ($585,206) in 2011.  On a per share basis, 2012 reflected earnings on a fully diluted basis of $0.42 per share, compared to the net loss of ($0.61) per share in 2011.  The Bank experienced significant improvement in asset quality allowing for a substantial reduction in the provision for loan loss expense.  Although total non-performing assets (including all other real estate owned) increased, $987,000 represents the carrying value of the New Kent office building discussed below.  Actual problem loans, which would require impairment reserves, improved.

The provision for loan loss expense of $303,325 in 2012, compared quite favorably to $1,976,308 in 2011.  Despite the substantial reduction in provision expense, the Bank was able to maintain an Allowance for Loan and Lease Losses ("ALLL") in excess of $2 million ($2,079,051 at December 31, 2012, compared to $2,172,370 at December 31, 2011).  The ALLL represented 2.62% of outstanding loans as of the current year-end, virtually unchanged from 2.64% the previous year-end.  Net interest margin (interest income minus interest expense divided by average earning assets) ("NIM") declined from 4.42% in 2011 to 4.29% in 2012 due, primarily, to an increase in non-accrual loans and foreclosed properties, along with declining yields in the bond portfolio.  The decline is also a reflection of the reduction in the overall volume of earning assets.  The Bank has, however, continued its conservative deposit pricing practices, reducing overall cost of funds to partially mitigate the reduction of interest income.  Of particular note, the net loss in 2011 would have been worse, were it not for securities gains of $323,230.  In 2012, the Bank realized $6,867 in securities gains, although the gross unrealized gains on available for sale securities totaled $349,589 at December 31, 2012.

Total non-interest income for the current year reflected a loss of $186,270, compared to income of $845,584 in 2011.  The current figure includes losses through write-downs and losses on sales of other real estate owned ("OREO") of $630,921 and a loss of $16,032 on sales of repossessed collateral.  Included in the OREO loss is $222,076 associated with the September 7, 2012 closing of the Bank's New Kent branch and related write-down of the carrying value of the branch land, land improvements and building.  Additionally, the branch closing required the recording of a $26,544 write-off on branch equipment.  The reduction of all overhead expenses related to the closed office, however, is expected to enhance forward earnings.  Non-interest expenses in 2012 totaled $3.9 million, down from $4.3 million in 2011, primarily as the result of reduced personnel cost.  A portion of the reduction was associated with the transition phase of previous CEO Bill Farinholt's retirement on June 30, 2011 (planning for which began in the second half of 2010) and included duplication of some executive payroll expenses.  2012 represented the first full year without the duplicative executive payroll expense.

Total assets at December 31, 2012 were $117.9 million, compared to the 2011 year-end total of $130.3 million.  It should be noted the year-end 2011 level included a large deposit of approximately $3 million on December 30, 2011 that was temporary in nature.  These funds, as expected, were withdrawn during the first quarter of 2012.  The Bank reduced its borrowings from the Federal Home Loan Bank ("FHLB") from $7.5 million at December 31, 2011 to $1.5 million at December 31, 2012.  With weaker loan demand in 2012, the use of FHLB alternative funding was not necessary in overall balance sheet management. Average total assets at December 31, 2012 were $123.7 million, compared to $124.7 million at December 31, 2011.  Non-performing assets as a percentage of total assets were 3.91% at year-end 2012, compared to 1.74% at year-end 2011.  The ratio of net charge-offs to average loans returned to historical levels shrinking from 1.21% in 2011 to 0.49% in 2012 (the 2010 level was 0.56%).  The Bank, however, has continued an aggressive posture toward charging off higher risk loans and not delaying recognition of problem assets.  

Total securities were $15.2 million at December 31, 2012 compared to $19.0 million a year ago.  Total deposits were $102.7 million at the end of 2012, compared to $109.6 at year-end 2011.  The decrease is pursuant to the Bank's continued effort to reduce total funding costs by allowing higher priced, rate sensitive deposits to be withdrawn at maturity rather than paying imprudent rates on funds not needed to maintain good liquidity.  Total shareholders' equity increased to $11.8 million at December 31, 2012 from $11.5 million at December 31, 2011.

Bob Bailey, CEO & President, commented on his first full year as the company's lead executive.  "Although we continued to experience credit losses and overall weak loan demand in 2012, we are very encouraged by our return to profitability.  This came despite significant expenses related to OREO properties and the branch closure.  These losses better position us for improved earnings for many years to come.  In some ways, it was a difficult year, but also a rewarding one when you consider the loan challenges we faced.  Our staff has worked hard to turn the corner regarding asset quality.  If the economy will cooperate, we can see smoother seas ahead."

The Bank operates two full service retail bank offices in Gloucester County, Virginia.  The Bank offered mortgage services through Colonial Virginia Mortgage, LLC ("the mortgage company"), a 50% owned subsidiary joint with Johnson Mortgage Company, LLC ("JMC") from 2005 through 2012.  JMC is headquartered in Newport News, Virginia.  The Bank has elected to terminate these services in the first quarter of 2013, as profitability has not met expectations.  The Bank will retain the name of the LLC and continue in an informal relationship with JMC, excluding any contractual arrangements.  The Bank terminated its investment services division, Colonial Virginia Investment Services ("CVIS") during 2012, but structured a referral relationship with Lions Bridge Financial (previous press release June 14, 2012) to accommodate existing Bank investment clients and build future relationships.  The Lions Bridge relationship involves no ownership by the Bank.

The Bank's stock is listed for trading on the OTC Markets marketplace under the symbol CNVB (http://www.otcmarkets.com/stock/CNVB/quote) .  Additional information regarding the bank's products and services, as well as access to its regulatory filings, are available on the bank's web site at http://www.colonialvabank.com.

Use of Certain Non-GAAP Financial Measures. In addition to results presented in accordance with United States generally accepted accounting principles (GAAP), this earnings release includes certain non-GAAP financial measures, which are reconciled to their equivalent GAAP financial measures below. Management believes these non-GAAP financial measures provide information useful to investors in understanding the corporation's performance trends and facilitate comparisons with its peers. Specifically, management believes the exclusion of a significant recovery of income recognized in a single accounting period permits a comparison of results for ongoing business operations, and it is on this basis that management internally assesses the corporation's performance and establishes goals for future periods.

Although the corporation's management believes the non-GAAP financial measures presented in this earnings release enhance investors' understandings of its performance, these non-GAAP financial measures should not be considered an alternative to GAAP-basis financial statements.

Forward-Looking Statements. The statements contained in this press release that are not historical facts may constitute "forward-looking statements" as defined by the federal securities laws. These statements may address issues that involve estimates and assumptions made by management; risks and uncertainties, and actual results could differ materially from historical results or those anticipated by such statements. Factors that could have a material adverse effect on the operations and future prospects of the corporation include, but are not limited to, changes in: (1) interest rates, (2) general economic conditions, (3) demand for loan products, (4) the legislative/regulatory climate, (5) monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, (6) the quality or composition of the loan or investment portfolios, (7) deposit flows, (8) competition, (9) demand for financial services in the Bank's market area, (10) technology, (11) reliance on third parties for key services, and (12) accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and readers are cautioned not to place undue reliance on such statements, which speak only as of their dates.  













Balance Sheet ($)



Y-Y


2012 YTD

2011 YTD

Ch (%)

Loans Held for Investment, before Reserves

79,116,328

82,084,053

(3.62)

Loan Loss Reserve

2,079,051

2,172,370

(4.30)

Net Loans Receivable 

77,037,277

79,911,683

(3.60)

Total Assets

117,864,706

130,265,508

(9.52)

Deposits

102,680,780

109,560,601

(6.28)

Common Equity

11,836,517

11,534,854

2.62

Total Shareholders' Equity

11,836,517

11,534,854

2.62

Shares Outstanding (actual)

610,175

610,175

0.00





Income Statement ($)



Y-Y


2012 YTD

2011 YTD

Ch (%)

Net Interest Income

4,683,683

4,886,095

(4.14)

Provision for Loan Losses

303,325

1,976,308

(84.65)

Noninterest Income

(186,270)

845,584

(122.03)

Noninterest Expense

3,908,357

4,340,577

(9.96)

Net Income (Loss) Before Taxes

285,731

(585,206)

148.83

Provision (Benefit) for Taxes

30,724

(211,432)

114.53

Net Income (Loss)

255,007

(373,774)

168.23





Per Share Items ($)



Y-Y


2012 YTD

2011 YTD

Ch (%)

Book Value Per Share

19.40

18.90

2.62

Diluted EPS 

0.42

(0.61)

168.85

Dividends Declared

0.00

0.00

--





Performance Ratios (%)



Y-Y


2012 YTD

2011 YTD

Ch (bp)

ROAA

0.23

(0.28)

51

ROAE

2.38

(2.86)

524

Net Interest Margin

4.29

4.42

(13)

Loans / Deposits

77.05

74.92

213

Efficiency Ratio

84.39

78.07

632





Balance Sheet Ratios (%)



Y-Y


2012 YTD

2011 YTD

Ch (bp)

Tangible Equity / Tangible Assets

10.04

8.85

119

Equity / Assets

10.04

8.85

119





Asset Quality Ratios (%)



Y-Y


2012 YTD

2011 YTD

Ch (bp)

Nonperforming Assets / Assets

3.91

1.74

217

Loan Loss Reserves / Gross Loans

2.62

2.64

(2)

Loan Loss Reserves / Nonperforming Loans

89.51

259.12

(16,961)

Net Charge-offs / Avg Loans

0.49

1.21

(72)





Regulatory Capital Ratios (%)



Y-Y


2012 YTD

2011 YTD

Ch (bp)

Tier 1 Capital Ratio

13.75

12.63

112

 

 

SOURCE Colonial Virginia Bank

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