Central Virginia Bankshares Reports Full Year 2012 And Fourth Quarter 2012 Financial Results

POWHATAN, Va., March 28, 2013 /PRNewswire/ -- Central Virginia Bankshares, Inc. (OTC QB: CVBK) and Central Virginia Bank announced that the Company recorded net income of $214 thousand for the twelve months ended December 31, 2012 and, after the effect of the unpaid preferred stock dividends of $642 thousand, a net loss available to common shareholders of $428 thousand or $(0.16) per basic and diluted share.  This compares to net income of $778 thousand for the twelve months ended December 31, 2011 and, after the effect of unpaid preferred stock dividends of $642 thousand, net income available to common shareholders of $136 thousand or $0.05 per basic and diluted share.

For the fourth quarter of 2012, the Company recorded a net loss of $480 thousand and, after the effect of unpaid preferred stock dividends of $161 thousand, a net loss available to common shareholders totaled $641 thousand or $(0.24) per basic and diluted share.  This compares to the fourth quarter 2011 net income of $120 thousand and, after the effect of unpaid preferred stock dividends of $161 thousand, a net loss available to common shareholders of $41 thousand or $(0.02) per basic and diluted share.

Herb Marth, President and Chief Executive Officer commented that "our 2012 results continue to reflect the actions we've taken to strengthen your Company by improving asset quality and increasing regulatory capital ratios such that we have again become "well capitalized" for regulatory purposes.   However, despite the significant progress that we've made, we continue to face many challenges given the current economic and interest rate environment.  We're disappointed that the U.S. economy has not rebounded as quickly as we would like and that, as a result, the Federal Reserve continued to reduce interest rates in 2012 to help stimulate the economy.  These market conditions significantly impact us and many of our borrowers.  Producing income in 2013 may be more challenging for us than in the previous two years, when we were able to harvest significant gains in our investment portfolio."  

Mr. Marth further commented that "while our Company has the US Treasury to thank for providing approximately $11.4 million in TARP capital to our bank after the financial crisis, paying off TARP has become problematic for us and many other community banks in the U.S.  As of December 31, 2012, our unpaid TARP dividends totaled $1.7 million, which if declared would have reduced our tangible book value per common share from $0.94 to $0.31 at year-end 2012.  Starting next year, TARP dividend rates also will increase from the current 5% rate to 9%, which will further burden us with TARP dividends in arrears.  As you may recall, our Written Agreement with our regulators requires us to preserve capital and therefore prohibits us from paying any dividends, including TARP dividends, until our capital situation improves and we satisfy the other terms of the agreement.  While we have improved our capital situation and believe that we have stabilized the Company, we do not expect to be in a position to declare or pay our TARP dividends in the foreseeable future.  Raising additional capital to help with our TARP situation also has been problematic, as capital market options have been limited or nonexistent for banks with our profile.  As a result of these conditions, we are continuing to evaluate and pursue all of our strategic alternatives."

Mr. Marth concluded that "in spite of these significant challenges, we continue to stay focused on serving our customers and strengthening your Company.  The unwavering support we've received from our customers, shareholders, and friends is deeply gratifying to the entire CVB family."     

Highlights for 2012:

• Net loss available to common shareholders of $428 thousand for 2012 compared to net income available to common shareholders of $136 thousand for 2011.
• Provision for loan losses was $2.7 million for 2012 compared to $2.4 million for 2011.
• Non-interest income was $5.5 million for 2012, of which $2.4 million related to securities gains, compared to non-interest income of $4.7 million for 2011, of which $1.8 million related to securities gains.
• Non-interest expense remained relatively consistent at $12.5 million for 2012 compared to $12.3 million for 2011.
• Nonperforming assets declined 9% from December 31, 2011.
• Charge offs were $5.0 million for 2012 compared to $3.6 million for 2011.
• Total risk based capital for Central Virginia Bank at December 31, 2012 improved to 11.2% compared to 9.8% at December 31, 2011.

Balance Sheet
During 2012, the Company continued to shrink the balance sheet, investing in securities with low credit risk and thereby improving its regulatory risk adjusted capital position.  Average total assets were $388.3 million for the fourth quarter of 2012, a decline of $7.9 million or 2% compared to $396.2 million for the fourth quarter of 2011. Due to management's strategic decision to shrink the balance sheet and further improve the quality of its assets, the Bank has seen its risk based capital ratio improve to 11.2% at December 31, 2012 from 9.8% at December 31, 2011. 

The following table provides information regarding the changes in the Company's average balances:

Net Interest Income
Net interest income for the fourth quarter of 2012 was $2.3 million compared to $2.7 million for the fourth quarter of 2011. Net interest margin for the fourth quarter of 2012 was 2.61% compared to 2.87% for the fourth quarter of 2011. Interest income for the fourth quarter of 2012 was $3.4 million compared to $4.0 million for the fourth quarter of 2011, a decline of 15%.  Interest expense for the fourth quarter of 2012 was $1.0 million compared to $1.4 million for the fourth quarter of 2011, a decline of 29%.  The decline in interest income was due to the decrease in average earning assets of $10.2 million, which was primarily driven by a decline in the average balance of the loan portfolio and an increase in investment securities that have low credit risk and generate lower yields.  The decline in interest expense was primarily due to the strategic decision to lower interest rates on deposits and the reduction of certificates of deposits by $22.6 million.

Net interest income for the year ended 2012 was $9.9 million compared to $10.7 million for the year ended 2011. Net interest margin for the year ended 2012 was 2.76% compared to 2.87% for the year ended 2011. Interest income for the year ended 2012 was $14.4 million compared to $17.0 million for the year ended 2011, a decline of 15%.  Interest expense for the year ended 2012 was $4.5 million compared to $6.3 million for the year ended 2011, a decline of 29%.  The decline in interest income was due to the decrease in average earning assets of $13.0 million, which was primarily driven by a decline in the average balance of the loan portfolio and an increase in investment securities that have low credit risk and generate lower yields.  The decline in interest expense was primarily due to the strategic decision to lower interest rates on deposits and the reduction of certificates of deposits by $26.7 million.

The following table provides the yield on average earning assets, average interest bearing liabilities, and net interest margin for the three months and twelve months ended December 31, 2012 and 2011:

Non-interest income
Total non-interest income for the fourth quarter of 2012 was $997 thousand, an increase of $56 thousand or 6% compared to $941 thousand for the fourth quarter of 2011. The increase is due primarily to an increase of $88 thousand related to deposit fees and charges, and other service charges, commissions and fees; offset by a decrease of $42 thousand in the gain on sales of securities for the fourth quarter of 2012 compared to the fourth quarter of 2011.  

Total non-interest income for the year ended 2012 was $5.5 million, an increase of $0.8 million or 17% compared to $4.7 million for the year ended 2011. The increase is due primarily to an increase of $0.6 million related to the gain on sale of securities for the year ended 2012 compared to 2011.  

Non-interest expense
Total non-interest expense for the fourth quarter of 2012 was $3.2 million, an increase of $0.2 million or 7% compared to $3.0 million for the fourth quarter of 2011. The increase is due primarily to the following:

• Salaries and benefits were $1.2 million for the fourth quarter of 2012, an increase of $185 thousand compared to the fourth quarter of 2011.
• Office supplies, telephone and postage expenses were $137 thousand for the fourth quarter 2012, an increase of $21 thousand compared to the fourth quarter of 2011.
• Legal, professional and consulting fees were $245 thousand for the fourth quarter of 2012, an increase of $116 thousand compared to the fourth quarter of 2011.
• The increases to non-interest expense were offset by decreases in FDIC insurance expenses of $12 thousand, decreases in the net costs related to OREO of $23 thousand, and decreases in data processing charges of $90 thousand for the fourth quarter of 2012 compared to the fourth quarter of 2011.

Total non-interest expense for the year ended 2012 was $12.5 million, an increase of $0.2 million or 2% compared to $12.3 million for the year ended 2011. The increase is due primarily to the following:

• Net costs related to OREO were $1.0 million for the year ended 2012, an increase of $404 thousand compared to the year ended 2011.
• Legal, professional and consulting fees were $1.0 million for the year ended 2012, an increase of $32 thousand compared to the year ended 2011.
• The increases to non-interest expense were offset primarily by decreases in FDIC insurance expenses of $218 thousand for the year ended 2012 compared to the year ended 2011.

The Company continues to closely manage all expense categories to identify opportunities where savings may be recognized. Reducing expenses will improve current and benefit future periods and is consistent with the goal of improving the Company's efficiency ratio.  The Company's efficiency ratio for the fourth quarter of 2012 was 95.68% compared to 82.77% for the fourth quarter of 2011.

Asset Quality
Total non-performing assets at the end of the fourth quarter were $39.1 million, a decrease of $1.2 million or 3% compared to $40.3 million at September 30, 2012 and a decrease of $3.7 million or 9% compared to $42.8 million at December 31, 2011. The change from December 31, 2011 to December 31, 2012 resulted primarily from a $2.0 million decrease in other real estate owned, a decrease of $1.8 million in loans past due 90 days and still accruing, and a $1.9 million decrease in other non-performing assets.  This was offset by an increase of $1.8 million of restructured loans, which were performing within their modified terms, and an increase of $0.2 million in non-accrual loans. The Company continues to focus on improving the quality of the loan portfolio and reducing non-performing assets. 

The allowance for loan losses was $7.2 million or 3.68% of loans at December 31, 2012, compared to $7.3 million or 3.70% of loans at September 30, 2012 and $9.3 million or 4.16% of loans at December 31, 2011.

At the end of the fourth quarter of 2012, the Bank's total risk based capital ratio, tier 1 risk-based capital ratio and leverage ratio remain above levels to be "well capitalized" for regulatory purposes.

About Central Virginia Bankshares, Inc.
Central Virginia Bankshares, Inc. is the parent of Central Virginia Bank, a 39 year old $387 million community bank with its headquarters and main office in Powhatan County, and six additional branch offices; two branches in the adjacent County of Cumberland, three branches in western Chesterfield County, and one branch in western Henrico County. Central Virginia Bankshares, Inc. is quoted on the over-the-counter market under the symbol CVBK.

Cautionary Statement about Forward-Looking Information
In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about our future financial performance and business. We make forward-looking statements when we use words such as "believe," "expect," "anticipate," "estimate," "should," "may," "can," "will," "outlook," "project," "appears" or similar expressions.  Forward-looking statements in this news release include, among others, statements about our future capital raise.

Do not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from expectations including: current and future economic and market conditions, including the effects of further declines in housing prices and high unemployment rates; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; the terms of capital investments or other financial assistance provided by the U.S. government; financial services reform; recognition of other than-temporary impairment on securities held in our available-for-sale portfolio; the effect of changes in interest rates on our net interest margin; our ability to sell more products to our customers; the effect of the economic recession on the demand for our products and services; changes in our accounting policies or in accounting standards or in how accounting standards are to be applied; mergers and acquisitions; federal and state regulations; reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations; the loss of checking and saving account deposits to other investments such as the stock market; and fiscal and monetary policies of the Federal Reserve Board. There is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if credit markets, housing prices, and unemployment do not improve. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition.

Website: www.centralvabank.com            

SOURCE Central Virginia Bankshares, Inc.