Virginia Commerce Bancorp Reports Operating Results (10-Q)

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Aug 10, 2009
Virginia Commerce Bancorp (VCBI, Financial) filed Quarterly Report for the period ended 2009-06-30.

Virginia Commerce Bancorp Inc. is the holding company for Virginia Commerce Bank. The Company engages in a general commercial banking business through its sole direct subsidiary the Bank. Virginia Commerce Bancorp has a market cap of $93.14 million; its shares were traded at around $3.49 with and P/S ratio of 0.56. Virginia Commerce Bancorp had an annual average earning growth of 25.3% over the past 5 years.

Highlight of Business Operations:

For the three months ended June 30, 2009, the Company recorded a net operating loss of $5.2 million. After an effective dividend of $1.2 million to the U.S. Treasury on preferred stock, the Company reported a net loss to common stockholders of $6.4 million, or $0.24 per diluted common share, compared to earnings of $4.9 million, or $0.18 per diluted common share, in the second quarter of 2008. For the six months ended June 30, 2009, the Company reported a net loss to common stockholders of $9.6 million compared to earnings of $9.1 million for the same period in 2008. Earnings for both the three and six- month periods were significantly impacted by loan loss provisions of $18.4 million and $31.8 million, respectively, due to the year-over-year increase in the level of non-performing assets and $29.3 million in net charge-offs in 2009.

On a pre-tax, pre-provision basis, operating income of $10.4 million for the three months ended June 30, 2009, was down $874 thousand as compared to $11.2 million for the three months ended June 30, 2008. However, the current quarter results include a special, one-time FDIC insurance assessment of $1.2 million. On a sequential basis, pre-tax, pre-provision operating income was up $809 thousand, despite the special assessment.

For the six months ended June 30, 2009, total deposits were up $19.3 million and included an increase in demand deposits of $44.9 million, or 23.0%, from $194.8 million at December 31, 2008, to $239.7 million at June 30, 2009, an increase in savings and interest-bearing demand deposits of $241.8 million, or 46.7%, and a decrease in time deposits of $267.3 million, from $1.46 billion at December 31, 2008, to $1.19 billion. The majority of the Banks deposits are attracted from individuals and businesses in the Northern Virginia and the Metropolitan Washington, D.C. area. The declines in time deposits are reflective of lower loan volume and a strategy to reduce the Banks historically heavy reliance on certificates of deposit as a funding source with deposit gathering efforts increasingly focused on demand deposits as well as cross-selling activities tied to the acquisition of savings and interest-bearing demand accounts. The proportionate share of time deposits relative to total deposits has declined from 67.2% at year-end 2008 to 54.4% as of June 30, 2009, and is expected to be in the 45-50% range by the end of this year.

As noted, for the six months ended June 30, 2009, the Company recorded a net income operating loss of $7.6 million as compared to earnings of 9.1 million for the six months ended June 30, 2008, as net interest income increased $2.6 million, or 6.4%, non-interest income increased $409 thousand, or 12.2%, non-interest expense rose $4.6 million, or 21.0%, and provisions for loan losses were up $24.0 million. The Companys annualized return on average assets and return on average equity were a negative 0.56% and 6.11% for the current six month period compared to a positive 0.73% and 10.43% for the six months ended June 30, 2008.

For the three months ended June 30, 2009, the Company recorded a net operating loss of $5.2 million compared to earnings of $4.9 million for the same period in 2008 as net interest income rose $1.3 million, or 6.2%, non-interest income increased $220 thousand, or 12.7%, non-interest expense increased $2.4 million, or 21.2%, and provisions for loan losses were up $14.8 million. The return on average assets and return on average equity were a negative 0.77% and 8.36% for the three months ended June 30, 2009, compared to a positive 0.76% and 11.18% for the same period in 2008.

Net interest income is the excess of interest earned on loans and investments over the interest paid on deposits and borrowings, and is the Companys primary revenue source. Net interest income is thereby affected by balance sheet growth, changes in interest rates and changes in the mix of investments, loans, deposits and borrowings. Net interest income increased $2.6 million, or 6.4%, from $40.2 million for the six months ended June 30, 2008, to $42.8 million for the six month period ended June 30, 2009, and increased $1.3 million, or 6.2%, from $20.7 million for the three months ended June 30, 2008, to $22.0 million for the three months ended June 30, 2009. Increases for both periods were due to overall balance sheet growth as the net interest margin declined from 3.32% for the six months ended June 30, 2008, to 3.25% for the current six-month period while the margin increased from 3.30% for the three months ended June 30, 2008, to 3.35% for the three months ended June 30, 2009. Year-over-year, yields on loans are down 106 basis points due to reductions in the prime rate and increases in the level of non-performing loans, while the cost of interest-bearing liabilities are down 96 basis points due to the changes noted above in the funding

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