Virginia Heritage Bank (OTCBB: VGBK), reported net income after taxes of $1.7 million for the fourth quarter of 2011, compared to $832 thousand for the same period in 2010. The increase in net income for the quarter ended December 31, 2011 was due to the $1.3 million increase in net interest income representing strong balance sheet growth. The increase of $513 thousand in noninterest income, which consists primarily of gain on sale of loans and security gains, also contributed to the increase in net income. Net income after taxes was $0.40 per share for the fourth quarter of 2011 (basic and diluted), compared to $0.20 per share (basic and diluted) for the fourth quarter of 2010.

Net income after taxes was $5.1 million for the year ended December 31, 2011 and 2010. The after tax income for 2010 was due to the recognition of a one-time deferred income tax benefit of $2.2 million (recognized in the first quarter of 2010) relating to net operating loss carry-forwards from the Bank's early stage losses and other timing differences in the recognition of income and expense for tax purposes. For comparative purposes, the pre-tax net income increased to $7.7 million at December 31, 2011, a $3.2 million, or 71% increase over the pre-tax net income at December 31, 2010. The increase in pre-tax net income was due to the $4.2 million increase in net interest income representing strong balance sheet growth. The increase of $1.3 million in noninterest income, which consists primarily of gain on sale of loans and security gains, also contributed to the increase in net income. The net income after taxes was $1.19 per share (basic) and $1.18 (diluted) for the year ended December 31, 2011, compared to $1.33 per share (basic) and $1.32 (diluted) for the year ended December 31, 2010.

The Bank had significant balance sheet growth with total assets of $577 million at December 31, 2011, representing an increase of $125 million compared to total assets at December 31, 2010. Total gross loans were $440 million, excluding loans held for sale, at December 31, 2011, an increase of $73 million over total gross loans at December 31, 2010. Total deposits were $492 million at December 31, 2011 compared to $381 million at December 31, 2010.

Nonperforming assets, including other real estate owned, as a percentage of total assets, decreased to 0.30% at December 31, 2011, compared to 0.31% at December 31, 2010. Net charge-offs were 0.08% of average loans for the quarter ended December 31, 2011, down from 0.52% for the same period in 2010. Net charge-offs for the year-ended December 31, 2011 was 0.18% versus 0.21% at December 31, 2010.

The allowance for loan losses was $6.2 million as of December 31, 2011, or 1.39% of gross loans outstanding, excluding loans held for sale. Asset quality remained significantly better than peers at December 31, 2011 with non-accrual loans of $937 thousand, loans past due 90 days or more but still accruing interest totaling $4 thousand and other real estate owned of $820 thousand. At December 31, 2011, the Bank's nonperforming loans to total assets amounted to 0.16%.

The Bank's capital ratios, as set forth in the attached Financial Highlights schedule, are well in excess of regulatory minimums to be classified as well capitalized under the Federal Reserve's Risk-based Capital Guidelines. All three capital measures at December 31, 2011 (Total Risk-based Capital, Tier 1 Risk-based Capital, and Leverage) include $15.3 million of preferred equity issued to the U.S. Treasury under the Small Business Lending Fund program (SBLF). The Bank was one of the first institutions to participate in the SBLF program and received the funding on June 30, 2011.

David P. Summers, Chairman and Chief Executive Officer of the Bank said:

"We have just concluded our 6th year of operation and I am pleased to report that VHB is very well positioned to continue the positive growth and earnings trends into the new year. Management and the Board of Directors have developed and implemented a business plan calling for adequate capital, quality asset growth and above peer earnings. We have exceeded our goals for 2011 as evidenced by a year-end nonperforming assets to total assets ratio of just 0.30% and a total risk-based capital ratio of 13.57%. Earnings per fully diluted common share for 2011 was $1.18 with year-end book value per common share of $10.89. These performance indicators significantly exceeded our internal goals for 2011 and provide us with the momentum to leverage these extraordinary results heading into 2012.

In 2011, our mortgage department continued to increase originations with over $200 million of residential loans which was $ 20 million more production than we had in 2010. We also generated security gains of $720,000 in 2011 versus $154,000 in 2010. This was due to a favorable rate environment and more active management of our securities portfolio during 2011.

With over $73 million of net consumer, commercial and commercial real estate loan growth in 2011, coupled with $110 million of deposit growth, our core banking lines of business continue to expand their reach in the Washington metropolitan region."

Virginia Heritage Bank is headquartered in Tysons Corner, Virginia. The Bank has five full service offices in Fairfax City, Chantilly, Gainesville, Tysons Corner and Dulles, Virginia. The Bank also has a mortgage division located in Chantilly, Virginia.

This release contains forward-looking statements, including our expectations with respect to future events that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations include: fluctuation in market rates of interest and loan and deposit pricing, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. Other risks that can affect the Bank are detailed from time to time in our quarterly and annual reports filed with the Board of Governors of the Federal Reserve System. We caution readers that the list of factors above is not exclusive. The forward-looking statements are made as of the date of this release, and we may not undertake steps to update the forward-looking statements to reflect the impact of any circumstances or events that arise after the date the forward-looking statements are made. In addition, our past results of operations are not necessarily indicative of future performance.

               
VIRGINIA HERITAGE BANK
FINANCIAL HIGHLIGHTS (Unaudited)
($ in thousands except per share data)
 
At or For the Quarter Ended At or For the Year Ended
December 31, December 31,

2011

2010

% Change

2011

2010

% Change

Statement of Operations Data:

Interest income $7,232 $5,958 21.38 % $26,139 $21,479 21.70 %
Interest expense 1,678 1,730 -3.01 % 6,895 6,463 6.68 %
Net interest income 5,554 4,228 31.36 % 19,244 15,016 28.16 %
Provision for loan losses 729 525 38.86 % 2,037 2,002 1.75 %
Total noninterest income 2,497 1,984 25.86 % 7,141 5,848 22.11 %
Total noninterest expense 4,743 4,423 7.23 % 16,609 14,344 15.79 %
Net income before taxes 2,579 1,264 104.03 % 7,739 4,518 71.29 %
Income tax expense (benefit) 862 432 99.54 % 2,601 (629 ) N/M
Net income after taxes 1,717 832 106.37 % 5,138 5,147 -0.17 %
 

Per Share Data and Shares Outstanding:

Net income (basic) $0.40 $0.20 $1.19 $1.33
Net income (diluted) 0.40 0.20 1.18 1.32
Common equity book value at period end 10.89 9.39 10.89 9.39
Weighted average shares (basic) 4,333,209 4,152,684 4,333,209 3,881,896
Weighted average shares (diluted) 4,335,387 4,157,693 4,337,566 3,885,276
 

Selected Balance Sheet Data:

Assets $577,496 $452,507 27.62 %
Total gross loans (3) 440,416 367,257 19.92 %
Loans held for sale 16,861 11,366 48.35 %
Securities available for sale, at fair value 98,821 40,340 144.97 %
Deposits 491,713 381,426 28.91 %
Repurchase agreements 1,750 2,920 -40.07 %
FHLB advances 18,000 25,000 -28.00 %
Stockholders' equity 62,476 41,371 51.01 %
 

Asset Quality:

Non-performing assets (1)
to total assets 0.30 % 0.31 %
Non-performing loans and past due loans (2)
to total assets 0.16 % 0.80 %
to total loans 0.21 % 0.98 %
Allowance for loan losses to total loans (3) 1.39 % 1.31 %
Net charge-offs to average loans outstanding 0.08 % 0.52 % 0.18 % 0.21 %
 

Performance Ratios:

Return on average assets 1.21 % 0.73 % 1.00 % 1.29 %
Return on average stockholders' equity 11.07 % 8.78 % 9.91 % 14.81 %
Net interest rate spread 3.62 % 3.38 % 3.47 % 3.43 %
Net interest margin 3.92 % 3.73 % 3.79 % 3.81 %
Efficiency ratio 58.91 % 71.20 % 62.95 % 68.75 %
 

Minimum To Be

Regulatory Capital Ratios:

Actual

Well Capitalized

Total risk-based capital ratio 13.57 % 10.00 %
Tier 1 risk-based capital ratio 12.42 % 6.00 %
Leverage ratio 10.87 % 5.00 %
 
(1) Includes non-accrual loans and other real estate owned.
(2) Includes non-accrual loans and loans past due 90 days or more and still accruing interest.
(3) Excludes loans held for sale.
N/M - Not meaningful

Virginia Heritage Bank
David Summers, 703-277-2200
Chris Brockett, 703-277-2200