Virginia Partners Bank Reports Results of Operations for the Fourth Quarter 2018

FREDERICKSBURG, VA / ACCESSWIRE / February 11, 2019 / Virginia Partners Bank (OTCQX: PTRS) (the ”Bank”) reported net income of $719 thousand for the three months ended December 31, 2018, a 215.6% increase when compared to the net loss of $622 thousand for the same period in 2017. For the twelve months ended December 31, 2018, the Bank reported net income of $2.7 million, a 298.1% increase when compared to net income of $666 thousand for the same period in 2017. Excluding tax-effected merger expense of $280 thousand for the three and twelve months ended December 31, 2018 related to the pending merger of equals with Delmar Bancorp (”Delmar”) and The Bank of Delmarva (”Delmarva”), adjusted net income (Non-GAAP) was $999 thousand and $2.9 million for the three and twelve months ended December 31, 2018, respectively. For the three months ended December 31, 2018, the Bank’s return on average assets, return on average equity and efficiency ratio was 0.68%, 6.72% and 77.76%, respectively, as compared to -0.65%, -6.72% and 87.49%, respectively, for the same period in 2017. Excluding tax-effected merger expense for the three months ended December 31, 2018, return on average assets (Non-GAAP), return on average equity (Non-GAAP) and efficiency ratio (Non-GAAP) was 0.94%, 9.34% and 69.77%, respectively. For the twelve months ended December 31, 2018, the Bank’s return on average assets, return on average equity and efficiency ratio was 0.64%, 6.51% and 76.27%, respectively, as compared to 0.18%, 1.84% and 80.35%, respectively, for the same period in 2017. Excluding tax-effected merger expense for the twelve months ended December 31, 2018, return on average assets (Non-GAAP), return on average equity (Non-GAAP) and efficiency ratio (Non-GAAP) was 0.71%, 7.20% and 74.17%, respectively.

The increase in net income for the three months ended December 31, 2018, as compared to the same period in 2017, was driven by increases in net interest income, due primarily to loan and deposit growth, and noninterest income, lower provision for loan losses and income tax expense, and partially offset by higher noninterest expense. The increase in net income for the twelve months ended December 31, 2018, as compared to the same period in 2017, was driven by increases in net interest income, due primarily to loan and deposit growth, and noninterest income, lower income tax expense, and partially offset by higher provision for loan losses and noninterest expense. The Bank’s results of operations for the three and twelve months ended December 31, 2018 were directly affected by the inclusion of Johnson Mortgage Company, LLC, which the Bank acquired a 51% ownership interest in effective January 1, 2018. In addition, the Bank’s results of operations for the three and twelve months ended December 31, 2018 were positively affected by the enactment of the ”Tax Cuts and Jobs Act” on December 22, 2017. The Tax Cuts and Jobs Act, which permanently lowered the federal corporate income tax rate from 35% to 21%, resulted in the Bank incurring less income tax expense in the three and twelve months ended December 31, 2018 when compared to the same periods of 2017.

Total assets as of December 31, 2018 were $420.7 million, an increase of $41.2 million or 10.9% from December 31, 2017. Over the same period, gross loans held for investment increased 10.8% to $322.4 million, total deposits increased 5.6% to $330.6 million including growth in non-interest bearing deposits of 20.1% to $56.7 million, and total equity increased 23.6% to $44.3 million. In addition, due to the growth in core deposits, the Bank has been able to reduce its utilization of wholesale time deposits. As of December 31, 2018, wholesale time deposits were $21.7 million, which represents a decrease of 16.9% from December 31, 2017. All of the Bank’s capital ratios continue to exceed regulatory requirements, with total risk-based capital substantially above well-capitalized regulatory requirements.

”I am pleased with our Bank’s results for the fourth quarter and full year 2018 and the continued bank-wide focus to grow our core community banking business and improve profitability,” said Lloyd B. Harrison, III, Virginia Partners Bank President & CEO. ” Net income (Non-GAAP) for the fourth quarter of 2018 improved by $171 thousand or 20.7% when compared to the third quarter of 2018. A significant portion of our net income improvement quarter over quarter was due to our efforts to reduce noninterest expense. Excluding merger expense, we were able to reduce our total noninterest expense by $137 thousand or 4.6% during the fourth quarter of 2018, as compared to the third quarter of 2018. Although loan production was strong during the fourth quarter of 2018, loan growth was essentially flat due to several large pay-offs which occurred late in the period. Despite this, our total loan growth over the full year 2018 was 10.8%, which outpaced our internal targets. We are very excited about the growth activity we are seeing in our existing markets and our current pipeline of opportunities. We believe this growth activity, combined with our emphasis on total relationship banking, positions us to deliver solid growth and increased profitability in 2019.”

Harrison continued, ”2018 was a very exciting year for our Bank. We have accomplished a number of the objectives identified in our strategic plan. Among our many accomplishments, perhaps the most exciting is the pending merger of equals with Delmar and Delmarva. This transaction will create a strategic partnership between the Bank and Delmarva in which each bank will continue to operate as independent subsidiaries of Delmar. This strategic partnership will allow each bank to leverage the strength of its local community banking franchise and expand the breadth of products and services offered to its existing customer base. This affiliate bank model preserves what is best about community banking, the identities and leadership that make them successful, while achieving scale in a rapidly consolidating industry. We are very excited about the future prospects and increased efficiencies of our combined organization and look forward to maximizing the potential of this combined franchise.”

About Virginia Partners Bank

Virginia Partners Bank, headquartered in Fredericksburg, Virginia, was founded in 2008 and has three branches in Fredericksburg, Virginia. In Maryland, the Bank trades under the name Maryland Partners Bank (a division of Virginia Partners Bank), and operates a full service branch and commercial banking office in La Plata, Maryland and a Loan Production Office in Annapolis, Maryland. Virginia Partners Bank also owns a controlling stake in Johnson Mortgage Company, LLC, which is a residential mortgage company headquartered in Newport News, Virginia, with a branch office in Williamsburg, Virginia. For more information, visit www.vapartnersbank.com.

For further information, please contact Lloyd B. Harrison, III, President & CEO, at 540-899-2234.

Non-GAAP Financial Measures

The accounting and reporting policies of the Bank conform to generally accepted accounting principles (”GAAP”) in the United States of America and prevailing practices in the banking industry. However, management uses certain Non-GAAP financial measures to supplement the evaluation of the Bank’s performance. These financial measures include net income, return on average assets, return on average equity and efficiency ratio excluding merger expense. Management believes presentations of these Non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Bank’s core business. These Non-GAAP financial measures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to Non-GAAP financial measures that may be presented by other companies. Reconciliations of GAAP to Non-GAAP financial measures are included as tables at the end of this earnings release.

Cautionary Statement Regarding Forward-Looking Statements

This earnings release may contain forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and are based on assumptions and describe future plans, strategies, and expectations of management, and are inherently subject to risks and uncertainties. These statements are generally identifiable by use of words such as ”believe,””expect,””intend,””anticipate,””estimate,””project,””may,””will” or similar expressions. Forward-looking statements in this earnings release may include, without limitation, statements regarding anticipated future financial performance, funding sources including loan portfolio composition, deposit and loan growth, adequacy of the allowance for loan losses and future provisions for loan losses, investment securities portfolio composition and future performance, strategic business initiatives, including the pending merger of equals of the Bank and Delmar and Delmarva, and future tax savings or other effects of the Tax Cuts and Jobs Act. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the effects of or changes in: management’s efforts to maintain asset quality and control operating expenses; the quality, composition and growth of the loan and investment securities portfolios; interest rates; and general economic and financial market conditions. These risks and uncertainties should be considered in evaluating forward‑looking statements contained herein. We have based our forward-looking statements on management’s beliefs, assumptions, expectations and projections based on information available as of the date of this earnings release. You should not place undue reliance on such statements, because the beliefs, assumptions, expectations and projections about future events on which they are based may, and often do, differ materially from actual events and, in many cases, are outside of our control. We undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Virginia Partners Bank
Balance Sheet
Unaudited

December 31,

2018

December 31,

2017

ASSETS

Cash
and due from banks

$
4,274,718

$
4,519,670

Federal funds sold

1,475,000

1,077,000

Interest bearing deposits in other banks

2,000,000

Investment securities – taxable

69,173,081

61,808,620

Investment securities – tax-exempt

7,982,318

8,108,932

Loans
held for sale

2,949,999

–

Loans, net of unearned income

322,352,820

290,819,431

Less:
Allowance for loan losses

(4,010,192
)

(3,604,467
)

Premises and equipment, net

3,808,223

4,022,676

Accrued interest receivable

1,013,507

902,314

Deferred income taxes, net

1,593,466

1,303,856

Bank
owned life insurance

7,606,796

7,386,992

Other
assets

452,170

1,131,139

Total Assets

$
420,671,906

$
379,476,163

LIABILITIES

Non-interest bearing deposits

$
56,675,694

$
47,189,276

Interest bearing demand deposits

18,085,701

19,300,671

Savings and money market deposits

99,527,490

94,174,731

Time
deposits – retail

134,529,931

126,249,735

Time
deposits – wholesale

21,745,000

26,163,000

Total deposits

330,563,816

313,077,413

FHLB
advances

43,000,000

28,500,000

Other
borrowings

1,757,017

1,494,228

Accrued expenses and other liabilities

1,076,240

597,906

Total Liabilities

376,397,073

343,669,547

EQUITY

Common stock

20,425,905

17,190,145

Capital surplus

19,216,143

16,571,384

Retained earnings

2,810,211

2,028,691

Noncontrolling interest in consolidated subsidiaries

603,170

–

Accumulated other comprehensive loss

(1,432,909
)

(649,912
)

Net
income

2,652,313

666,308

Total Equity

44,274,833

35,806,616

Total Liabilities and Equity

$
420,671,906

$
379,476,163

Virginia Bank Partners
Statement of Income
Unaudited

For the Quarter Ending

December 31,

For the Twelve Months Ending

December 31,

2018

2017

2018

2017

INTEREST INCOME

Interest on loans

$
4,023,304

$
3,368,445

$
15,095,537

$
12,485,037

Fees
on loans

111,073

83,735

491,743

393,617

Interest on federal funds sold

5,681

9,983

29,756

25,820

Interest on deposits with banks

21,377

11,155

67,792

45,486

Investment securities – taxable

454,419

364,891

1,790,740

1,750,814

Investment securities – tax-exempt

42,377

49,487

169,506

229,350

Total interest income

4,658,231

3,887,696

17,645,074

14,930,124

INTEREST EXPENSE

Interest bearing demand deposits

10,401

9,414

38,244

34,577

Savings and money market deposits

163,827

99,032

597,046

367,119

Time
deposits – retail

625,236

515,423

2,246,603

1,803,190

Time
deposits – wholesale

87,450

97,247

360,503

383,648

Total interest expense on deposits

886,914

721,116

3,242,396

2,588,534

FHLB
advances

186,174

101,745

502,567

461,973

Interest on federal funds purchased

7,148

1,188

12,523

4,715

Interest on other borrowings

47,270

27,691

163,742

111,511

Total interest expense

1,127,506

851,740

3,921,228

3,166,733

Net interest income

3,530,725

3,035,956

13,723,846

11,763,391

Provision for loan losses

29,000

182,500

408,600

383,345

Net interest income after provision

3,501,725

2,853,456

13,315,246

11,380,046

NONINTEREST INCOME

Service charges and fees

83,297

73,815

320,920

287,185

Securities (losses), net

–

(110,341
)

(20,614
)

(104,957
)

Gain
on the sale of assets

–

46,938

Mortgage banking income

395,223

6,014

1,165,883

61,186

Earnings on bank owned life insurance policies

54,517

57,236

219,805

196,117

Other
noninterest income

19,942

5,251

81,301

51,369

Total noninterest income

552,979

31,975

1,767,295

537,838

NONINTEREST EXPENSE

Salaries and employee benefits

1,628,048

1,337,473

6,426,228

5,118,906

Occupancy and equipment expense

247,911

242,899

1,001,123

935,124

Professional services

165,943

345,656

715,749

846,843

Data
processing

300,849

362,563

1,239,549

1,288,797

Promotion and marketing

17,891

26,414

184,716

152,239

FDIC
assessment

29,000

42,000

141,400

140,614

Merger expense

326,812

–

326,812

–

Other
operating expense

467,626

446,068

1,829,671

1,542,925

Total noninterest expense

3,184,080

2,803,073

11,865,248

10,025,448

Consolidated income before income taxes

870,624

82,358

3,217,293

1,892,436

Income tax expense

139,535

704,119

598,810

1,226,128

Consolidated net income (loss)

$
731,089

$
(621,761
)

$
2,618,483

$
666,308

Net
(income) loss attributable to noncontrolling interest

(12,388
)

–

33,830

–

Net income (loss)

$
718,701

$
(621,761
)

$
2,652,313

$
666,308

Reconciliation of Non-GAAP Financial Measures

For the Quarter Ending

For the Twelve Months Ending

December 31,

2018

2017

2018

2017

Net income (loss) excluding merger expense

Net
income (loss)

$
718,701

$
(621,61
)

$
2,652,313

$
666,308

Merger expense

326,812

–

326,812

–

Income tax effect of adjustment

(46,865
)

–

(46,865
)

–

Net
income (loss) excluding merger expense (Non-GAAP)

$
998,648

$
(621,761
)

$
2,932,260

$
666,308

Return on average assets excluding merger expense
(1)

Return on average assets

0.68
%

-0.65
%

0.64
%

0.18
%

Effect to adjust for merger expense

0.26
%

0.00
%

0.07
%

0.00
%

Return on average assets excluding merger expense (Non-GAAP)

0.94
%

-0.65
%

0.71
%

0.18
%

Return on average equity excluding merger expense
(1)

Return on average equity

6.72
%

-6.72
%

6.51
%

1.84
%

Effect to adjust for merger expense

2.62
%

0.00
%

0.69
%

0.00
%

Return on average equity excluding merger expense (Non-GAAP)

9.34
%

-6.72
%

7.20
%

1.84
%

Efficiency ratio excluding merger expense

Efficiency ratio

77.76
%

87.49
%

76.27
%

80.35
%

Effect to adjust for merger expense

-7.99
%

0.00
%

-2.10
%

0.00
%

Efficiency ratio excluding merger expense (Non-GAAP)

69.77
%

87.49
%

74.17
%

80.35
%

(1) Annualized for the quarter ending December 31, 2018 and 2017, respectively.

SOURCE: Virginia Partners Bank

ReleaseID: 534960

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