Colonial Virginia Bank Announces 1st Quarter 2011 Earnings

GLOUCESTER, Va., May 2, 2011 /PRNewswire/ -- Colonial Virginia Bank (OTCBB: CNVB) ("the Bank") today reported net income of $127,891 or $0.21 per share assuming dilution, for the quarter ended March 31, 2011, compared to $121,356 or $0.20 per share assuming dilution, for the same period in 2010.  Return on average assets was 0.44% for the current quarter compared to 0.41% for March 31, 2010.  

The Bank relies primarily on net interest income (interest income on loans and investment minus interest expense on deposits) for its overall net income.  Net interest income for the quarter-ended March 31, 2011 was $1,206,368, compared to $1,107,535 for the same period in 2010.  The Bank has continued to enjoy the prolonged lower interest rate environment allowing for ongoing downward re-pricing of higher cost, longer term CDs, decreasing its overall cost of funds.  The average rate on interest-bearing liabilities during the first quarter of this year was 1.26%, reflecting continued reduction from an average rate of 1.84% for the same period last year.  Average yield on earning assets reflected a moderate decrease, 5.55% March 31, 2011 compared to 5.86% March 31, 2010.  The resultant net interest margin was 4.41% March 31, 2011 compared to 4.14% for the same period in 2010.  

Non-interest income for the quarter ended March 31, 2011 was $221,747 compared to $107,595 in the same period in 2010.  The current quarter reflected gains on sale of securities of $121,100 compared to $4,512 for the same period in 2010.  Non-interest expenses increased to $1,100,374 this quarter from $987,524 in the first quarter of 2010. Personnel expense reflected the majority of this increase as the Bank began its succession plan for the pending retirement June 30, 2011 of President & CEO Bill Farinholt.  As released in an October 2010 press release, Mr. Farinholt's replacement was hired September 1, 2010.  Thus a temporary "duplication" of this executive expense exists in the first quarter year over year comparison. Expense provisions for potential loan losses for the current quarter were $151,030 compared to $66,050 for the same period last year.  The increased expense was due to both moderate increases in charge-offs and Management's cautious concern of the lingering effects of economic pressures and the associated effect on overall credit risk.  The reserve allowance for potential loan losses ("ALLL") increased to $1,288,336 (1.61% of total loans) as of March 31, 2011 compared to $1,190,595 (1.51% of total loans) at December 31, 2010 and $1,085,641 (1.54% of total loans) at March 31, 2010.  Provisions for income taxes were $48,500 in the first quarter of this year and $40,200 in the first quarter of 2010.

Asset growth remained virtually flat as reflected by the total of $123.0 million as of March 31, 2011, compared to $121.3 million December 31, 2010 and $121.9 million at March 31, 2010.  This is indicative of Management's marshalling of expensive deposit growth at a time when appropriate asset employment (modest loan demand and unattractive yields in the bond market) remains challenging.  Net loans at current quarter-end were $78.4 million, representing increases of 1.42% and 12.81% over $77.3 million and $69.5 million reported December 31, 2010 and March 31, 2010, respectively.  Current quarter-end securities totaled $22.8 million compared to $27.0 million at year-end 2010 and $35.7 million at March 31, 2010.  Total deposits were $103.9 million at March 31, 2011 compared to $100.3 million and $101.0 million at December 31, 2010 and March 31, 2010, respectively.  The relatively flat growth trends are discussed above associated with the Bank's philosophy emphasizing quality over quantity in the areas of credit risk net interest income efficiency.  Total shareholder equity was $12.0 million at current quarter-end; this compares to $12.0 million at year-end 2010 and $11.9 million at March 31, 2010.

Bill Farinholt, President and CEO, stated, "Our Bank has maintained its aggressive posture regarding recognition of problem assets and cautious review of deteriorating credit quality of individual borrowers.  As a result, the current quarter reflected an annualized level for net loan charge-offs of 0.27% of average loans.  This compared quite favorably to the fourth quarter 2010 level of 1.37% as the Bank aggressively recognized losses prior to year-end. The current quarter, however, was less satisfying than the 0.06% recorded for the quarter-ended March 31, 2010.  We are confident that our approach to credit risk management is prudent and will reflect long-term benefits.  Some media coverage continues to state that banks are not lending like they used to.  While it's true that credit underwriting standards have stiffened considerably under economic stress, our Bank is committed to both sound lending and responsive community partnership.  We believe we can balance the two and return value to our shareholders."

The Bank operates three full service retail bank offices, two in Gloucester County, Virginia, and a third in the Maidstone Village development at New Kent courthouse. The Bank offers full investment services through its investment division under the name of Colonial Virginia Investment Services and mortgage services through Colonial Virginia Mortgage, LLC ("the mortgage company"), a 50% owned subsidiary joint with Johnson Mortgage Company, LLC ("JMC").  

The Bank's stock is listed for trading on the Over the Counter Bulletin Board (OTCBB) under the symbol CNVB. The bank's primary market maker is Davenport & Company LLC, Richmond, VA.

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.

SOURCE Colonial Virginia Bank