Colonial Virginia Bank Announces 2010 Earnings

GLOUCESTER, Va., Jan. 25, 2011 /PRNewswire/ -- Colonial Virginia Bank (OTC Bulletin Board: CNVB) ("the Bank"), today reported net income for the year ended December 31, 2010 of $427,871, or $0.70 per share.  Comparatively, there was a net loss of ($299,960), or ($0.49) per share, in 2009.  Net interest income for 2010 was $4.6 million, up from $3.6 million the previous year.  The net interest margin increased to 4.18% as of December 31, 2010 from 3.42% as of December 31, 2009.

The improvement in annual earnings was accomplished primarily through two factors.  The aforementioned net interest margin expansion was encouraging and the result of disciplined pricing strategies in retail certificates of deposits ("CDs").  Loan growth, particularly in the second half of 2010, was significant with net loans increasing 18.7% from $65.1 million at December 31, 2009 to $77.3 million at December 31, 2010.   The average yield on interest earning assets declined only slightly from 5.70% at December 31, 2009 to 5.65% at December 31, 2010.  Conversely, funding costs decreased significantly.  The average rate on interest bearing liabilities as of December 31, 2010 fell to 1.63% from 2.53% as of December 31, 2009.  This is the result of disciplined deposit pricing practices, as many fixed rate CDs were re-priced at substantially lower rates at renewal or were redeemed.  Another major contributor to the earnings recovery was a gain of $278,726 realized by selling some targeted mortgage-backed securities, both to capitalize on the temporary unrealized gain positions and to reduce the credit risk exposure.

Total non-interest income for 2010 was $711,326 compared to $409,808 in 2009.  The difference is largely accounted for by the securities gains mentioned above.  Non-interest expenses in 2010 totaled $4.1 million, up from $3.8 million in 2009, primarily due to additional personnel costs.  The loan loss provision for the year totaled $566,700, compared to $730,200 in 2009.  The loan loss reserve as a percentage of total loans as of December 31, 2010 was 1.51%, down slightly from 1.55% at December 31, 2009.  Non-performing assets as a percentage of total assets were 0.20% at year end 2010, a slight increase from 0.18% at the end of 2009.  The ratio of net charge-offs to average loans in 2010 was 0.37% compared to 0.50% in the previous year.  The Bank has taken an aggressive posture toward charging off higher risk loans, but remains expectant that this conservative stance could result in higher recoveries in the future.  Provisions for federal income taxes totaled $156,859 in 2010; comparatively, there was a tax benefit of $232,724 in 2009, due to the operating loss.

Total assets at December 31, 2010 were $121.3 million, compared to $125.3 million at December 31, 2009, a decrease of 3.2%.  The decrease was due primarily to the pricing strategy for retail CDs discussed above and the Bank's willingness to temporarily shrink the balance sheet for the sake of improving the net interest margin.  As loan demand began to improve in the second half of the year and deposits declined, the Bank used both routine cash flows from the securities portfolio, as well as securities sales to fund these balance sheet shifts.  Total securities declined 27.0% from $37.0 million at December 31, 2009 to $27.0 million at December 31, 2010.  Total deposits were $100.3 million at December 31, 2010, a 5.3% decrease from the December 31, 2009 total of $105.9 million.  Other borrowings in the form of Federal Home Loan Bank advances totaled $7.5 million as of December 31, 2010 compared to $6.5 million at the end of 2009.  Total shareholder equity grew to $12.0 million at December 31, 2010, an increase of 3.6% from $11.6 million at December 31, 2009.

Bill Farinholt, President and CEO, stated, "2010 was an exciting, although challenging year. The trends of our major operating performance ratios continue to be encouraging.  After reporting operating losses in 2009, the return to profitability was most encouraging.   Although gains on securities sold were more than half of total net income, foundational earnings also reflected improving trends.  Additionally, even applying a conservative position toward loan charge-offs, the provision expense for possible loan losses was reduced to $566,700 in 2010 compared to $730,200 in 2009.   In this environment, it continues to be  prudent to err on the side of caution. Our capital continues to be well above regulatory standards for well capitalized banks, and we are confident of our future."

The Bank operates three full service retail bank offices, two in Gloucester County, Virginia and one at New Kent County Courthouse, and offers full investment services through its investment division under the name of Colonial Virginia Investment Services.  The Bank also offers mortgage services through Colonial Virginia Mortgage, LLC ("the mortgage company"), a 50% owned subsidiary joint with Johnson Mortgage Company, LLC ("JMC").  The services are offered through the Bank's two banking offices.  JMC is headquartered in Newport News, Virginia.

The Bank's stock is listed for trading on the Over the Counter Bulletin Board (OTCBB) under the symbol CNVB.  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