Virginia Commerce Bancorp, Inc. Reports Fourth Quarter and Full Year Ended December 31, 2013 Earnings and Performance

Business Wire

ARLINGTON, Va.--(BUSINESS WIRE)--

Virginia Commerce Bancorp, Inc. (the Company), ( VCBI ), parent company of Virginia Commerce Bank (the Bank), today reported its financial results for the fourth quarter and year ended December 31, 2013.

Fourth Quarter 2013 Highlights

  • Net Income Available to Common Stockholders and Earnings per Diluted Common Share : Net income available to common stockholders totaled $7.2 million, or $0.20 per diluted common share, for the fourth quarter of 2013. This compares to $4.2 million, or $0.12 per diluted common share, for the fourth quarter of 2012, and $7.0 million, or $0.20 per diluted common share, for the third quarter of 2013.
  • Adjusted Operating Earnings (a non-GAAP measure) : Adjusted operating earnings totaled $7.9 million, or $0.22 per diluted common share, for the fourth quarter of 2013. This compares to $5.3 million, or $0.16 per diluted common share, for the fourth quarter of 2012, and $7.9 million, or $0.23 per diluted common share, for the third quarter of 2013.
  • Quarterly Return on Average Assets (ROAA) of 1.04% and Return on Average Equity (ROAE) of 10.60%
  • Asset Quality: Non-performing assets (NPAs) decreased 21.7%, from $50.2 million as of December 31, 2012, to $39.4 million at December 31, 2013, while sequentially increasing $807 thousand, or 2.1%. Total troubled debt restructurings (TDRs) declined $22.6 million, or 52.1%, from December 31, 2012, to $20.8 million at December 31, 2013, and declined $987 thousand, or 4.5%, from September 30, 2013.
  • Net Interest Margin: The net interest margin was 3.70% in the fourth quarter of 2013, compared to 3.73% and 3.88% in the fourth quarter of 2012 and the sequential quarter, respectively.
  • Capital Strength and Book Value per Common Share Growth: The ratio of tangible common equity (a non-GAAP measure) improved to 9.84% at December 31, 2013, as compared to 8.69% and 9.59% at December 31, 2012, and September 30, 2013, respectively. The book value per common share increased from $7.68 at December 31, 2012, to $8.03 at December 31, 2013. Sequentially, the book value per common share increased from $7.88 at September 30, 2013.

Full Year 2013 Highlights

  • Net Income Available to Common Stockholders and Earnings per Diluted Common Share : Net income available to common stockholders totaled $27.6 million, or $0.78 per diluted common share, for 2013. This compares to $22.5 million, or $0.67 per diluted common share, for 2012.
  • Return on Average Assets (ROAA) of 0.98% and Return on Average Equity (ROAE) of 10.71%
  • Net Interest Margin: The net interest margin was 3.81% for 2013, compared to 3.74% for 2012.

SUMMARY REVIEW OF FINANCIAL PERFORMANCE

Net Income

For the three months ended December 31, 2013, the Company recorded net income available to common stockholders of $7.2 million, or $0.20 per diluted common share, compared to net income available to common stockholders of $4.2 million, or $0.12 per diluted common share, for the three months ended December 31, 2012. The year-over-year increase was primarily due to a decrease of $3.5 million in effective dividend to the U.S. Treasury on TARP preferred stock and a decrease of $3.6 million in non-interest expenses, partially offset by a decrease in net interest income after provision for loan losses of $1.5 million and a decrease in non-interest income of $2.8. The Companys net income available to common stockholders increased sequentially from $7.0 million, or $0.20 per diluted common share, for the third quarter of 2013, primarily due to a decrease in non-interest expenses of $1.6 million, partially offset by a decrease in net interest income after provision for loan losses of $854 thousand.

For the twelve months ended December 31, 2013, the Company reported net income available to common stockholders of $27.6 million, or $0.78 per diluted common share, compared to net income available to common stockholders of $22.5 million, or $0.67 per diluted common share, for the same period in 2012. The primary factors driving the year-over-year increase include the Companys repurchase of all of its TARP preferred stock during the fourth quarter of 2012, and related elimination of a $7.6 million effective dividend on preferred stock for the twelve months ended December 31, 2013, a $4.4 million decrease in non-interest expenses, a $1.4 million increase in net interest income after provision for loan losses and a decrease in provision for income taxes of $1.0 million, partially offset by a decrease in non-interest income of $9.3 million.

Adjusted operating earnings (a non-GAAP measure) for the three months ended December 31, 2013, were $7.9 million, or $0.22 per diluted common share, compared to $5.3 million, or $0.16 per diluted common share, for the same period in 2012. The year-over-year improvement in adjusted operating earnings was largely attributable to the Companys repurchase of all of its TARP preferred stock during the fourth quarter of 2012, and related elimination of a $3.5 million effective dividend on preferred stock (which included $2.1 million acceleration of the accretion of the preferred stock discount in the fourth quarter 2012) for the fourth quarter of 2013 and a decrease of $3.6 million in non-interest expenses (which includes $702 thousand of merger-related expenses in the fourth quarter of 2013), partially offset by a decrease in net interest income after provision for loan losses of $1.5 million and a decrease in non-interest income of $2.8 (which includes the impact of gains of $1.5 million generated by the sales of investment securities in the fourth quarter of 2012). On a sequential basis, adjusted operating earnings were down $52 thousand, for the three months ended December 31, 2013, primarily due to a decrease in net interest income after provision for loan losses of $854 thousand, a decrease in non-interest income of $198 thousand and an increase of $315 thousand in provision for income taxes, partially offset by a decrease of $1.6 million in non-interest expenses (which includes a sequential decrease of $453 thousand in merger-related expenses). The Company calculates adjusted operating earnings by excluding impairment loss on investment securities, realized gains and losses on sale of investment securities, merger-related expenses, acceleration of the accretion of the preferred stock discount, and certain other non-recurring items from net income available to common stockholders.

Asset Quality and Provision For Loan Losses

Total non-performing assets and loans 90+ days past due declined $9.4 million, or 18.6%, from $50.2 million at December 31, 2012, to $40.9 million at December 31, 2013, and increased $1.2 million sequentially from $39.7 million at September 30, 2013. The year-over-year improvement was primarily a result of net reductions in loans on non-accrual status of $7.0 million due to sales of underlying properties and note sales completed by the Company in 2013. Other real estate owned declined $3.9 million from December 31, 2012 to December 31, 2013, driven by the sale of large land parcels located in Prince Georges County, Maryland and Prince William County, Virginia. As a percentage of total assets, non-performing assets and past due loans decreased from 1.78% at December 31, 2012, to 1.49% at December 31, 2013, and increased from 1.44% at September 30, 2013. As of December 31, 2013, the allowance for loan losses represented 1.88% of total loans, compared to 1.95% and 1.98% at December 30, 2012, and September 30, 2013, respectively. The allowance for loan losses covered 120.03% of total non-performing loans as of December 31, 2013, compared to 112.77% and 137.52%, at December 31, 2012, and September 30, 2013, respectively.

As of December 31, 2013, $9.8 million, or 31.8%, of non-performing loans represented acquisition, development and construction (ADC) loans; $7.8 million, or 25.1%, represented non-farm, non-residential loans; $7.9 million, or 25.5%, represented commercial and industrial (C&I) loans; and $5.4 million, or 17.6%, represented loans on one-to-four family residential properties. As of December 31, 2013, specific reserves of $19.8 million have been established for non-performing loans and other loans determined to be impaired. The Company continues to pursue an aggressive campaign to reduce non-performing and other impaired loans and is implementing and executing various disposition strategies on an ongoing basis. These strategies are dependent upon project completion, permitting, satisfaction of contract contingencies and other factors and in a number of cases represent situations which require longer timeframes to obtain optimal principal recovery.

Included in the loan portfolio at December 31, 2013, are loans classified as troubled debt restructurings (TDRs), totaling $20.8 million, a 52.1% decrease from $43.4 million at December 31, 2012. Sequentially, total TDRs decreased $987 thousand from $21.8 million at September 30, 2013, as a result of TDR reductions of $1.9 million during the fourth quarter of 2013, led by a $1.2 million curtailment received from third-party bond financing of a restaurant property. TDRs 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. A significant portion of TDRs were performing prior to modification. These loans make up 1.0% of the total loan portfolio at December 31, 2013, and represent $8.0 million in ADC loans, $10.7 million in non-farm, non-residential real estate loans, $1.3 million in C&I loans and $768 thousand in one-to-four family residential loans. At December 31, 2013, 40.3% of the Companys TDRs were reviewable TDRs and 59.7% were permanent TDRs. Reviewable TDRs are loans that have been restructured at or will return to a market rate of interest and can include a temporary interest rate modification, partial deferral of interest or principal, or an extension of term. They can return to performing status upon six months of on-time payments following the return to a market rate of interest, but only in the fiscal year following the year of restructure. Permanent TDRs are loans that have been restructured and include a permanent interest rate reduction. They remain in a TDR status until the loan is paid off.

Classified loans were $139.5 million for the quarter ended December 31, 2013, a $21.1 million decrease from $160.6 million at December 31, 2012. Sequentially, classified loans increased $400 thousand from $139.1 million at September 30, 2013. The year-over-year decrease in classified loans was largely due to payoffs received from third-party refinancing of $10.5 million, regular payments and curtailments of $10.2 million, note sales of $3.3 million, credit upgrades totaling $1.6 million and charge-offs before recoveries of $13.2 million, partially offset by additions to classified loans totaling $17.7 million, substantially concentrated in a relationship of $10.1 million to a government contractor, primarily secured by real estate, and a relationship of $3.6 million to a commercial business, $2.8 million of which is secured by real estate.

Provision for loan losses was $1.3 million for the quarter ended December 31, 2013, down $1.2 million, or 47.9%, compared to $2.6 million in the same period in 2012. Net charge-offs were $3.3 million for the three months ended December 31, 2013, compared to $1.1 million and $2.1 million for the quarters ended December 31, 2012, and September 30, 2013, respectively. For the twelve months ended December 31, 2013, provision for loan losses totaled $7.5 million, compared to $14.8 million for the prior-year period, with twelve months ended December 31, 2013 net charge-offs amounting to $11.4 million, compared to $20.8 million in the twelve months ended December 31, 2012. The decrease in the allowance for loan losses as a percentage of total loans from December 31, 2012, to December 31, 2013, is due to higher specific reserves related to certain credits, partially offset by the decrease in total loans outstanding. As a result, the fourth quarter analysis of the adequacy of the loan loss reserve indicated that loan loss provisioning of $1.3 million was sufficient to maintain appropriate coverage. The $2.2 million increase in net charge-offs for the three months ended December 31, 2013, compared to the same period in 2012, was primarily due to net charge-offs of ADC loans increasing $1.5 million and net recoveries of non-farm, non-residential real estate loans decreasing $536 thousand.

Net Interest Income and Net Interest Margin

Net interest income was $23.9 million for the fourth quarter of 2013 and declined $2.7 million, or 10.2%, from the same quarter last year. The net interest margin decreased three basis points from 3.73% in the fourth quarter of 2012, to 3.70% for the same period in 2013. The year-over-year decrease in the fourth quarter net interest margin was mostly due to a lower average rate earned on loans, net of unearned income, of 4.90%, as compared to 5.43% for the fourth quarter of 2012, the impact of which was largely offset by a reduction in the average time deposit rate from 1.80% in the fourth quarter of 2012 to 1.62% in the fourth quarter 2013. On a sequential basis, the net interest margin was down 18 basis points from 3.88% in the third quarter of 2013. The sequential decrease in the net interest margin was mostly due to a lower average rate earned on loans, net of unearned income, of 4.90%, as compared to 5.21% for the third quarter of 2013, the impact of which was partially offset by an improvement in the mix of interest-bearing deposits and a reduction in the average time deposit rate from 1.70% in the third quarter of 2013 to 1.62% in the fourth quarter 2013. Interest expense decreased $995 thousand to $4.8 million generated on an average total interest-bearing liability balance of $1.99 billion for the fourth quarter of 2013, from $5.8 million generated on an average total interest-bearing liability balance of $2.26 billion for the same period in 2012. The decline in interest expense is mostly attributable to a series of interest rate reductions on interest-bearing deposit products and the continued repricing and run-off of higher cost deposits in the time deposit portfolio. On a sequential basis, interest income decreased $1.6 million to $28.7 million generated on an average total interest-earning asset balance of $2.60 billion for the fourth quarter of 2013, from $30.3 million generated on an average total interest-earning asset balance of $2.62 billion for the third quarter of 2013. The declines in interest income and net interest margin were mostly attributable to the repricing of variable rate and adjustable rate loans in the existing portfolio in the current low interest rate environment, and the origination of new loans at lower rates than the average yield of the existing loan portfolio. The average rate received on total interest-earning assets was 4.44% for the fourth quarter of 2013, as compared to 4.53% for the fourth quarter of 2012, and 4.65% for the third quarter of 2013. The average rate paid on total interest-bearing liabilities was 0.96% for the fourth quarter of 2013, as compared to 1.02% for the fourth quarter of 2012, and 1.00% for the third quarter of 2013.

Non-Interest Income

For the three months ended December 31 2013, the Company recognized $1.6 million in non-interest income, compared to non-interest income of $4.4 million for the same period in 2012, and $1.8 million in the sequential quarter. Included in the fourth quarter 2012 non-interest income was a gain on sale of securities of $1.5 million, while the fourth quarter of 2013 and the sequential quarter did not include a gain or loss on sale of securities. The Company recognized non-interest income of $8.2 million for the twelve months ended December 31, 2013, compared to non-interest income of $17.5 million for the same period in 2012. For the twelve months ended December 31, 2012, non-interest income included a gain on sale of securities of $7.4 million, while non-interest income for the twelve months ended December 31, 2013, did not include a gain or loss on sale of securities.

Fees and net gains on loans held-for-sale decreased in the fourth quarter 2013, on a year-over-year basis, by $1.5 million and on a sequential quarter basis decreased by $220 thousand. The decrease can be attributed to a significantly lower volume of mortgage loans originated for sale in the secondary market in response to higher interest rates which decreased refinance activity and a focus on one-to-four family residential loans held in portfolio due to less competitive rates on mortgage products offered by correspondents in the secondary mortgage market. For the twelve months ended December 31, 2013, fees and net gains on loans held-for-sale decreased $2.4 million, or 52.8%, compared to the twelve months ended December 31, 2012. Income generated by bank-owned life insurance increased $60 thousand and $810 thousand for the three months ended December 31, 2013, and twelve months ended December 31, 2013, respectively, compared to the same periods in the prior year. The increase can be primarily attributed to $30.0 million in bank-owned life insurance assets purchased during the second half of 2012 that have contributed to earnings during the full year end December 31, 2013.

Non-Interest Expense

Non-interest expense decreased $3.6 million, or 21.2%, from $16.8 million in the fourth quarter of 2012, to $13.3 million in the fourth quarter of 2013. Sequentially, non-interest expense decreased $1.6 million, or 10.7%, from $14.9 million for the third quarter in 2013. The year-over-year decrease was primarily related to a decrease of $1.2 million in salaries and employee benefits, a decrease of $210 thousand in FDIC insurance premiums, a decrease of $2.0 million in loss on other real estate owned and a $548 thousand decrease in other operating expense, partially offset by $702 thousand in merger-related expenses during the fourth quarter of 2013. The sequential decrease was primarily related to a decrease in loss on other real estate owned of $292 thousand, a decrease of $309 thousand in other real estate owned expenses and a decrease of $453 thousand in merger-related expenses.

Investment Securities

Investment securities decreased $32.4 million, or 6.6%, year-over-year to $461.0 million at December 31, 2013, and were down $20.1 million sequentially from September 30, 2013. There was no gain or loss on sale of investment securities during the fourth quarter and twelve months ended December 31, 2013, compared to gains on sale of investment securities of $1.5 million and $7.4 million during the three and twelve months ended December 31, 2012, respectively. The investment portfolio contains two pooled trust preferred investment securities with a book value of $5.1 million, and a market value of $1.7 million at December 31, 2013, for which the Company performs a quarterly analysis to determine whether any other-than-temporary impairment exists. The analysis includes stress tests on the underlying collateral and cash flow estimates based on the current and projected future levels of deferrals, defaults, and prepayments within each pool. There was no recorded impairment loss for the three or twelve months ended December 31, 2013 and December 31, 2012.

Loans

Loans, net of allowance for loan losses, decreased $115.2 million, or 5.4%, from $2.14 billion at December 31, 2012, to $2.03 billion at December 31, 2013. Non-farm, non-residential real estate loans decreased $70.5 million, or 6.1%; C&I loans decreased $44.4 million, or 17.0%; ADC loans decreased $20.3 million, or 7.2%; while multifamily real estate loans increased $2.6 million, or 3.4%; one-to-four family residential loans increased $12.7 million, or 3.2%; consumer loans increased $672 thousand, or 8.1%; and farmland loans increased $372 thousand, or 7.6%, from December 31, 2012 to December 31, 2013. Sequentially, loans, net of allowance for loan losses, increased $8.7 million, or 0.43% primarily as a result of a $6.6 million, or 1.6%, increase in one-to-four family residential loans and a $10.7 million, or 15.2%, increase in multi-family real estate loans, partially offset by a $5.4 million, or 0.5%, decline in non-farm, non-residential loans, a $3.5 million, or 1.3%, decline in ADC loans and a $1.5 million, or 0.7%, decline in C&I loans. The year-over-year and sequential decreases in non-farm, non-residential real estate and ADC loans were driven by a highly competitive loan origination environment which drove increased refinancing activity and strategic loan sales and problem loan workouts initiated to improve asset quality. The year-over-year and sequential decrease in C&I loans was attributable to lower borrowing activity due to the impact of sequestration on government contracting sector borrowers and pay downs resulting from problem loan resolution activities. The year-over-year and sequential increases in one-to-four family residential loans were due to an increased emphasis on portfolio lending as a result of less competitive product offerings from secondary market correspondents.

Deposits

Total deposits at December 31, 2013, were $2.05 billion, a decrease of $192.9 million, or 8.6%, compared to December 31, 2012, with demand deposits increasing $33.0 million, or 7.9%, savings and interest-bearing demand deposits decreasing $128.9 million, or 10.7%, and time deposits decreasing $96.9 million, or 15.4%. As of December 31, 2013, non-interest bearing demand deposits represented 21.9% of total deposits, compared to 18.5% at December 31, 2012. On a linked quarter basis, deposits decreased $43.1 million, or 2.1%, with demand deposits increasing $3.8 million, or 0.85%, savings and interest-bearing demand accounts decreasing $31.7 million, or 2.9%, and time deposits decreasing $15.2 million, or 2.8%. The reduction in interest-bearing and time deposits has been intentional, resulting from a series of interest rate reductions that continued throughout 2013. As a result of deposit rate decreases and an improving deposit mix, the cost of total interest-bearing deposits and total deposits declined from 0.84% and 0.68%, respectively, for the quarter ended December 31, 2012, and 0.75% and 0.60% for the quarter ended September 30, 2013, to 0.73% and 0.57% for the quarter ended December 31, 2013.

Capital Levels and Stockholders Equity

Stockholders equity increased $24.7 million, or 10.1%, from $245.3 million at December 31, 2012, to $270.0 million at December 31, 2013, due to $27.6 million in retained earnings from net income available to common stockholders during 2013 and $8.1 million in capital surplus from proceeds and tax benefits related to the exercise of warrants and options during 2013, partially offset by a decrease in other comprehensive income of $12.6 million from December 31, 2012 to December 31, 2013. The decrease in other comprehensive income is directly related to the reduction in fair market value of marketable securities resulting from the rise in long term interest rates during 2013. As a result of these changes, the Companys Tier 1 capital ratio increased from 13.25% at December 31, 2012, to 15.96% at December 31, 2013, and its total qualifying capital ratio increased from 14.51% to 17.21% over the same period. Sequentially, the Companys Tier 1 ratio was up 38 basis points and the total qualifying capital ratio was up 37 basis points, attributable to net income available to common stockholders of $7.2 million in the fourth quarter of 2013. The Companys tangible common equity ratio increased from 8.69% at December 31, 2012, and 9.59% at September 30, 2013, to 9.84% at December 31, 2013. The 115 basis point increase in tangible common equity ratio from December 31, 2012, to December 31, 2013, is primarily due to $27.6 million in retained net income available to common stockholders during the twelve months ended December 31, 2013. Sequentially, the 25 basis point increase in tangible common equity ratio is primarily related to $7.2 million in retained net income available to common stockholders for the fourth quarter of 2013 and a decrease of $11.1 million in total tangible assets during the fourth quarter of 2013, partially offset by a decrease of $2.9 million in other comprehensive income.

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.

On October 17, 2013, the Companys stockholders approved a merger agreement pursuant to which the Company will be acquired by a subsidiary of United Bankshares, Inc. (United and such merger, the Merger). On October 21, 2013, the shareholders of United also approved the Merger. The Company and United have received regulatory approval for the Merger from the Board of Governors of the Federal Reserve System and the Virginia State Corporation Commission. The Company and United intend to consummate the Merger on January 31, 2014, subject to the satisfaction or waiver of certain customary closing conditions. For more information about this Merger, see the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission (the SEC) on January 31, 2013, the Companys Annual Report on Form 10-K filed with the SEC on March 14, 2013, the registration statement filed by United with the SEC on Form S-4 on May 29, 2013 (and all subsequent amendments thereof and prospectus supplements thereunder), and the Companys other filings with the SEC that are available on the SECs website, www.sec.gov .

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.

Adjusted operating earnings is a non-GAAP financial measure that reflects net income available to common stockholders excluding impairment loss on investment securities, realized gains and losses on sale of investment securities, merger-related expenses, acceleration of the accretion of the preferred stock discount, and certain other non-recurring items. These excluded items are difficult to predict and we believe that adjusted operating earnings provides the Company and investors with a valuable measure of the Companys operational performance and a valuable tool to evaluate the Companys financial results. Calculation of adjusted operating earnings for the three months ended December 31, 2013, December 31, 2012, and September 30, 2013, is as follows:

...
   
Three Months

Ended

December 31,

Three Months

Ended

September 30,

(Dollars in thousands) 2013   2012 2013
 
Net Income Available to Common Stockholders $
7,183 $ 4,230 $ 6,953 Adjustments to net income available to common stockholders: Realized gain on sale of investment securities -- (1,454 ) -- Merger-related expenses 702 -- 1,155 Net tax effect adjustment 5 509 (166 ) Acceleration of the accretion of the preferred stock discount   --   2,061     --     Adjusted Operating Earnings $ 7,890 $ 5,346 $ 7,942     Earnings per common share-diluted $ 0.20 $ 0.12 $ 0.20 Adjustments to earnings per common share-diluted Realized gain on sale of investment securities, net tax affect -- $ (0.02 ) -- Merger-related expenses, net tax affect $ 0.02 -- $ 0.03 Acceleration of the accretion of the preferred stock discount   -- $ 0.06     --     Adjusted operating earnings per common share-diluted $ 0.22 $ 0.16 $ 0.23  

The adjusted efficiency ratio is a non-GAAP financial measure that is computed by dividing non-interest expense excluding merger-related expenses, by the sum of net interest income on a tax equivalent basis, and non-interest income excluding realized gains and losses on sale of investment securities, merger-related expenses and certain other non-recurring items. 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 and twelve months ended December 31, 2013 and 2012 is as follows:

   
Three Months Ended Twelve Months Ended

(Dollars in thousands)

December 31,   December 31,
2013   2012   2013   2012
Summary Operating Results:    
Non-interest expense $ 13,268 $ 16,843 $ 59,818 $ 64,239
Merger-related expenses   702     --     2,723     --  
Adjusted non-interest expense $ 12,566 $ 16,843 $ 57,095 $ 64,239
 
Net interest income $ 23,898 $ 26,603 $ 100,737 $ 106,667
 
Non-interest income 1,624 4,375 8,200 17,470
Gain on sale of investment securities   --     (1,454 )   --     (7,430 )
Adjusted non-interest income $ 1,624 $ 2,921 $ 8,200 $ 10,040
 
Tax equivalent adjustment $ 292 $ 355 $ 1,345 $ 1,446
 
Total net interest income and non-interest income,

adjusted

$ 25,814 $ 29,879 $ 110,282 $ 118,153
 
Efficiency Ratio, adjusted 48.68 % 56.37 % 51.77 % 54.37 %
 

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, and no preferred stock was outstanding during the periods presented. We believe that this is consistent with the treatment by 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, 2013, December 31, 2012, September 30, 2013 and June 30, 2013 is as follows:

     
(Dollars in thousands) As of December 31 September 30, June 30,
2013   2012 2013 2013
Tangible common equity:  
Total stockholders’ equity $ 270,038 $ 245,309 $ 264,253 $ 253,764
 
Less:
Outstanding TARP senior preferred stock -- -- -- --
Intangible assets   --     --     --     --
Tangible common equity $ 270,038 $ 245,309 $ 264,253 $ 253,764
 
Total tangible assets $ 2,745,269 $ 2,823,692 $ 2,756,322 $ 2,836,235
 
Tangible common equity ratio 9.84 % 8.69 % 9.59 % 8.95 %
 

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 potential benefits and impacts of a merger between the Company and United Bankshares, Inc., our outlook on earnings, including our future net interest margin, and statements regarding asset quality, our loan and investment security portfolios, our deposit portfolio and anticipated changes to our deposit costs and balances, projected growth, capital position, capital strategies, our plans regarding and expected future levels of our non-performing assets, business opportunities in our market and other strategic initiatives or transactions, 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, 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, 2012, and other reports filed with and furnished to the Securities and Exchange Commission, and the registration statement filed by United with the SEC on Form S-4 on May 29, 2013 (and all subsequent amendments thereof and prospectus supplements thereunder).

 
Virginia Commerce Bancorp, Inc.
Financial Highlights
(Dollars in thousands, except per share data)
(Unaudited)
 
 
  Three Months Ended December 31,   Twelve Months Ended December 31,
2013   2012   % Change   2013   2012   % Change
Summary Financial Results:          
Interest and dividend income $ 28,727 $ 32,427 -11.4 % $ 121,298 $ 132,938 -8.8 %
Interest expense 4,829 5,824 -17.1 % 20,561 26,271 -21.7 %
Net interest income 23,898 26,603 -10.2 % 100,737 106,667 -5.6 %
Provision for loan losses 1,333 2,559 -47.9 % 7,540 14,826 -49.1 %
Non-interest income 1,624 4,375 -62.9 % 8,200 17,470 -53.1 %
Non-interest expense 13,268 16,843 -21.2 % 59,818 64,239 -6.9 %
Income before income taxes 10,921 11,576 -5.7 % 41,579 45,072 -7.7 %
Net income $ 7,183 $ 7,752 -7.3 % $ 27,635 $ 30,100 -8.2 %
Effective dividend on preferred stock $ -- $ 3,522 -100.0 % $ -- $ 7,612 -100.0 %
Net income available to common stockholders $ 7,183 $ 4,230 69.8 % $ 27,635 $ 22,488 22.9 %
 
Performance Ratios:
Return on average assets 1.04 % 1.03 % 0.98 % 1.01 %
Return on average equity 10.60 % 10.20 % 10.71 % 10.11 %
Net interest margin 3.70 % 3.73 % 3.81 % 3.74 %
Efficiency ratio, adjusted 48.68 % 56.37 % 51.77 % 54.37 %
 
Per Share Data:
Earnings per common share-basic $ 0.21 $ 0.13 61.5 % $ 0.84 $ 0.71 18.3 %
Earnings per common share-diluted $ 0.20 $ 0.12 66.7 % $ 0.78 $ 0.67 16.4 %
Average number of shares outstanding:
Basic 33,616,647 31,864,436 32,931,283 31,750,958
Diluted 35,964,198 33,874,852 35,454,002 33,702,769
 
 
 
As of December 31, As of
2013   2012   % Change 09/30/13   % Change
Selected Balance Sheet Data:
Loans, net of allowance for loan losses $ 2,027,694 $ 2,142,872 -5.4 % $ 2,018,996 0.4 %
Investment securities 461,046 493,424 -6.6 % 481,177 -4.2 %
Assets 2,745,269 2,823,692 -2.8 % 2,756,322 -0.4 %
Deposits 2,052,501 2,245,392 -8.6 % 2,095,584 -2.1 %
Stockholders’ equity 270,038 245,309 10.1 % 264,253 2.2 %
Book value per common share $ 8.03 $ 7.68 4.6 % $ 7.88 1.9 %
 
Capital Ratios (% of risk weighted assets):
Tier 1 capital:
Company 15.96 % 13.25 % 15.58 %
Bank 14.45 % 12.82 % 14.93 %
Total qualifying capital:
Company 17.21 % 14.51 % 16.84 %
Bank 15.71 % 14.08 % 16.19 %
Tier 1 leverage:
Company 12.56 % 10.29 % 12.07 %
Bank 11.55 % 10.05 % 11.80 %
Tangible common equity:
Company 9.84 % 8.69 % 9.59 %
 
       
(Dollars in thousands) As of December 31, As of
2013   2012 9/30/2013   6/30/2013
 
Asset Quality:
Non-performing assets:
Non-accrual loans:
Commercial $ 7,893 $ 3,317 $ 2,663 $ 7,249
Real estate-one-to-four family residential:
Permanent first and second 3,239 3,606 2,655 2,884
Home equity loans and lines   2,206     2,498     2,382     2,230  
Total real estate-one-to-four family residential $ 5,445 $ 6,104 $ 5,037 $ 5,114
Real estate-multi-family residential -- -- -- --
Real estate-non-farm, non-residential:
Owner-occupied 4,560 1,791 4,571 5,302
Non-owner-occupied   3,195     3,864     3,239     3,309  
Total real estate-non-farm, non-residential $ 7,755 $ 5,655 $ 7,810 $ 8,611
Real estate-construction:
Residential 4,236 16,976 4,112 4,628
Commercial   5,563     5,860     8,976     8,978  
Total real estate-construction $ 9,799 $ 22,836 $ 13,088 $ 13,606
Consumer   14     17     23     16  
Total non-accrual loans $ 30,906 $ 37,929 $ 28,621 $ 34,596
OREO   8,445     12,302     9,923     11,290  
Total non-performing assets $ 39,351 $ 50,231 $ 38,544 $ 45,886
 
Loans 90+ days past due and still accruing:
Commercial $ 580 $ -- $ 250 $ --
Real estate-one-to-four family residential:
Permanent first and second 949 -- 876 1,074
Home equity loans and lines   --     --     --     --  
Total real estate-one-to-four family residential $ 949 $ -- $ 876 $ 1,074
Real estate-multi-family residential -- -- -- --
Real estate-non-farm, non-residential:
Owner-occupied -- -- -- --
Non-owner-occupied   --     --     --     --  
Total real estate-non-farm, non-residential $ -- $ -- $ -- $ --
Real estate-construction:
Residential -- -- -- --
Commercial   --     --     --     --  
Total real estate-construction $ -- $ -- $ -- $ --
Consumer   --     --     --     --  
Total loans 90+ days past due and still accruing $ 1,529 $ -- $ 1,126 $ 1,074
 
Total non-performing assets and past due loans $ 40,880 $ 50,231 $ 39,670 $ 46,960
 
Troubled debt restructurings $ 20,807 $ 43,448 $ 21,794 $ 26,890
 
Non-performing assets
to total loans: 1.90 % 2.29 % 1.87 % 2.14 %
to total assets: 1.43 % 1.78 % 1.40 % 1.62 %
Non-performing assets and past due loans
to total loans: 1.98 % 2.29 % 1.92 % 2.19 %
to total assets: 1.49 % 1.78 % 1.44 % 1.66 %
Allowance for loan losses to total loans 1.88 % 1.95 % 1.98 % 1.92 %
Allowance for loan losses to non-performing loans 120.03 % 112.77 % 137.52 % 115.31 %
 
Total allowance for loan losses $ 38,932 $ 42,773 $ 40,909 $ 41,131
 
   
(Dollars in thousands) As of December 31 As of
2013   2012 9/30/13   6/30/13
   
Loans 30 to 89 days past due and still accruing
Commercial $ 3,214 $ 366 $ 6,292 $ 8,165
Real estate-one-to-four family residential:
Permanent first and second 1,401 2,089 3,920 3,817
Home equity loans and lines   239     223     150     198  
Total real estate-one-to-four family residential $ 1,640 $ 2 ,312 $ 4,070 $ 4,015
Real estate-multi-family residential -- -- -- --
Real estate-non-farm, non-residential:
Owner-occupied 1,452 1,688 3,542 2,094
Non-owner-occupied   780     1,661     2,463     1,572  
Total real estate-non-farm, non-residential $ 2,232 $ 3,349 $ 6,005 $ 3,666
Real estate-construction:
Residential 240 -- 283 530
Commercial   --     --     --     --  
Total real estate-construction $ 240 $ -- $ 283 $ 530
Consumer 39 39 46 3
Farmland   --     --     --     --  
Total loans 30 to 89 days past due $ 7,365 $ 6,066 $ 16,696 $ 16,379
 

For the three months ended

For the twelve months ended

December 31,

December 31,

2013   2012 2013   2012
 
Net charge-offs
Commercial $ 366 $ (106 ) $ 2,737 $ 4,869
Real estate-one-to-four family residential:
Permanent first and second $ (43 ) 189 $ (12 ) 1,480
Home equity loans and lines   66     94     294     1,945  
Total real estate-one-to-four family residential $ 23 $ 283 $ 282 $ 3,425
Real estate-multi-family residential -- -- -- ($118 )
Real estate-non-farm, non-residential:
Owner-occupied $ (1 ) -- $ 152 2,820
Non-owner-occupied   (502 )   (1,039 )   1,040     2,486  
Total real estate-non-farm, non-residential $ (503 ) $ (1,039 ) $ 1,192 $ 5,306
Real estate-construction:
Residential $ 104 $ 1,961 $ 310 $ 6,489
Commercial   3,308     (19 )   6,809     559  
Total real estate-construction $ 3,412 $ 1,942 $ 7,119 $ 7,048
Consumer 12 (7 ) 50 251
Farmland   --     --     --     --  
Total net charge-offs $ 3,310 $ 1,073 $ 11,380 $ 20,781
Net charge-offs to average loans outstanding 0.16 % 0.05 % 0.53 % 0.95 %
 
Total provision for loan losses $ 1,333 $ 2,559 $ 7,540 $ 14,826
 

Classes of total loans by risk rating as of December 31, 2013, are summarized as follows (dollars in thousands):

           
Special Total
Internal Risk Rating Grades   Pass   Watch   Mention   Substandard   Doubtful   Loans
 
Commercial $ 156,975 $ 26,395 $ 7,789 $ 24,083 $ 1,415 $ 216,657
Real estate-one-to-four family residential:
Permanent first and second 261,441 10,294 13,003 18,888 -- 303,626
Home equity loans and lines   99,495   2,649   1,537   3,752   1,483   108,916
Total real estate-one-to-four family residential $ 360,936 $ 12,943 $ 14,540 $ 22,640 $ 1,483 $ 412,542
Real estate-multi-family residential 77,562 3,475 -- -- -- 81,037
Real estate-non-farm, non-residential:
Owner-occupied 336,322 34,107 26,192 30,433 -- 427,054
Non-owner-occupied   524,883   78,938   20,957   32,936   --   657,714
Total real estate-non-farm, non-residential $ 861,205 $ 113,045 $ 47,149 $ 63,369 -- $ 1,084,768
Real estate-construction:
Residential 123,030 9,077 18,751 6,097 -- 156,955
Commercial   64,152   15,135   5,121   20,355   --   104,763
Total real estate-construction $ 187,182 $ 24,212 $ 23,872 $ 26,452 -- $ 261,718
Consumer 8,456 195 181 106 -- 8,938
Farmland     2,303     2,957     --     --     --     5,260
Total   $ 1,654,619   $ 183,222   $ 93,531   $ 136,650   $ 2,898   $ 2,070,920
 

Classes of total loans by risk rating as of December 31, 2012, are summarized as follows (dollars in thousands):

           
Special Total
Internal Risk Rating Grades   Pass   Watch   Mention   Substandard   Doubtful   Loans
 
Commercial $ 202,088 $ 25,048 $ 11,976 $ 19,822 $ 2,073 $ 261,007
Real estate-one-to-four family residential:
Permanent first and second 235,672 15,585 12,233 19,038 112 282,640
Home equity loans and lines   106,872   2,724   1,871   4,165   1,543   117,175
Total real estate-one-to-four family residential $ 342,544 $ 18,309 $ 14,104 $ 23,203 $ 1,655 $ 399,815
Real estate-multi-family residential 73,317 5,080 -- -- -- 78,397
Real estate-non-farm, non-residential:
Owner-occupied 384,923 46,123 35,675 19,757 -- 486,478
Non-owner-occupied   488,415   108,868   30,094   41,378   --   668,755
Total real estate-non-farm, non-residential $ 873,338 $ 154,991 $ 65,769 $ 61,135 $ -- $ 1,155,233
Real estate-construction:
Residential 104,835 17,651 20,720 26,771 -- 169,977
Commercial   41,336   18,645   26,281   25,800   --   112,062
Total real estate-construction $ 146,171 $ 36,296 $ 47,001 $ 52,571 $ -- $ 282,039
Consumer 7,744 208 219 95 -- 8,266
Farmland     1,000     3,888     --     --     --     4,888
Total   $ 1,646,202   $ 243,820   $ 139,069   $ 156,826   $ 3,728   $ 2,189,645
 

Classes of total loans by risk rating as of September 30, 2013, are summarized as follows (dollars in thousands):

           
Special Total
Internal Risk Rating Grades   Pass   Watch   Mention   Substandard   Doubtful   Loans
 
Commercial $ 162,914 $ 21,739 $ 8,257 $ 23,497 $ 1,790 $ 218,197
Real estate-one-to-four family residential:
Permanent first and second 253,358 9,222 14,197 19,333 -- 296,110
Home equity loans and lines   100,070   2,606   1,800   3,881   1,487   109,844
Total real estate-one-to-four family residential $ 353,428 $ 11,828 $ 15,997 $ 23,214 $ 1,487 $ 405,954
Real estate-multi-family residential 66,782 3,548 -- -- -- 70,330
Real estate-non-farm, non-residential:
Owner-occupied 353,479 36,235 23,069 26,198 -- 438,981
Non-owner-occupied   505,643   91,680   20,785   33,098   --   651,206
Total real estate-non-farm, non-residential $ 859,122 $ 127,915 $ 43,854 $ 59,296 $ -- $ 1,090,187
Real estate-construction:
Residential 124,733 11,634 18,402 5,919 -- 160,688
Commercial   64,946   15,201   584   23,777   --   104,508
Total real estate-construction $ 189,679 $ 26,835 $ 18,986 $ 29,696 $ -- $ 265,196
Consumer 8,307 183 175 119 -- 8,784
Farmland     2,328     3,232     --     --     --     5,560
Total   $ 1,642,560   $ 195,280   $ 87,269   $ 135,822   $ 3,277   $ 2,064,208
 

Classes of total loans by risk rating as of June 30, 2013, are summarized as follows (dollars in thousands):

           
Special Total
Internal Risk Rating Grades   Pass   Watch   Mention   Substandard   Doubtful   Loans
 
Commercial $ 180,358 $ 24,555 $ 10,389 $ 30,830 $ 1,790 $ 247,922
Real estate-one-to-four family residential:
Permanent first and second 252,596 9,390 14,671 20,416 111 297,184
Home equity loans and lines   101,633   2,875   1,541   3,729   1,489   111,267
Total real estate-one-to-four family residential $ 354,229 $ 12,265 $ 16,212 $ 24,145 $ 1,600 $ 408,451
Real estate-multi-family residential 64,416 5,026 -- -- -- 69,442
Real estate-non-farm, non-residential:
Owner-occupied 364,632 46,316 34,076 18,797 -- 463,821
Non-owner-occupied   492,768   115,700   20,863   39,625   --   668,956
Total real estate-non-farm, non-residential $ 857,400 $ 162,016 $ 54,939 $ 58,422 $ -- $ 1,132,777
Real estate-construction:
Residential 124,428 13,330 19,179 6,732 -- 163,669
Commercial   36,520   10,701   32,503   23,611   --   103,335
Total real estate-construction $ 160,948 $ 24,031 $ 51,682 $ 30,343 $ -- $ 267,004
Consumer 8,503 192 172 149 -- 9,016
Farmland     2,350     3,732     --     --     --     6,082
Total   $ 1,628,204   $ 231,817   $ 133,394   $ 143,889   $ 3,390   $ 2,140,694
 
...
     
Troubled Debt Restructurings (TDRs) -

By Loan Type

As of December 31, 2013 Reviewable TDRs Permanent TDRs Total TDRs
(Dollars in thousands) # of     As % of # of     As % of # of     As % of
Loans   Balance   Balance Loans   Balance   Balance Loans   Balance   Balance
Loan Type:
Commercial -- -- 0.0 % 2 $ 1,332 10.7 % 2 $ 1,332 6.4 %
Real estate-one-to-four family residential:
Permanent first and second 2 768 9.2 % -- -- 0.0 % 2 768 3.7 %
Home equity loans and lines --   -- 0.0 % --   -- 0.0 % --   -- 0.0 %
Total real estate-one-to-four family residential 2 $ 768 9.2 % -- -- 0.0 % 2 $ 768 3.7 %
Real estate-multi-family residential -- -- 0.0 % -- -- 0.0 % -- -- 0.0 %
Real estate-non-farm, non-residential:
Owner-occupied 4 6,836 81.5 % -- -- 0.0 % 4 6,836 32.9 %
Non-owner-occupied 1   780 9.3 % 3   3,077 24.8 % 4   3,857 18.5 %
Total real estate-non-farm, non-residential 5 $ 7,616 90.8 % 3 $ 3,077 24.8 % 8 $ 10,693 51.4 %
Real estate-construction:
Residential -- -- 0.0 % -- -- 0.0 % -- -- 0.0 %
Commercial --   -- 0.0 % 4   8,014 64.5 % 4   8,014 38.5 %
Total real estate-construction -- -- 0.0 % 4 $ 8,014 64.5 % 4 $ 8,014 38.5 %
Consumer -- -- 0.0 % -- -- 0.0 % -- -- 0.0 %
Farmland --   -- 0.0 % --   -- 0.0 % --   -- 0.0 %
Total 7 $ 8,384 100.0 % 9 $ 12,423 100.0 % 16 $ 20,807 100.0 %
Contact:
Virginia Commerce Bancorp, Inc.
Mark S. Merrill
Chief Financial Officer
703-633-6120
mmerrill@vcbonline.com

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