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Virginia Partners Bank Reports 70.0% Increase in Net Income Excluding Merger Expense (Non-GAAP) of $1.0 Million for the Second Quarter 2019

Accesswire Friday, 19 July 2019
Virginia Partners Bank Reports 70.0% Increase in Net Income Excluding Merger Expense (Non-GAAP) of $1.0 Million for the Second Quarter 2019*FREDERICKSBURG, VA / ACCESSWIRE / July 19, 2019 / *Virginia Partners Bank (OTCQX: PTRS) (the “Bank”) reported adjusted net income (Non-GAAP, excluding tax-effected merger expense of $159 thousand) of $1.0 million for the three months ended June 30, 2019, a 70.0% increase when compared to net income of $613 thousand for the same period in 2018. For the six months ended June 30, 2019, the Bank reported adjusted net income (Non-GAAP, excluding tax-effected merger expense of $459 thousand) of $1.9 million, a 70.7% increase when compared to net income of $1.1 million for the same period in 2018. The Bank’s results of operations for the three and six months ended June 30, 2019 were negatively impacted by merger expense of $162 thousand and $474 thousand, respectively, related to the pending merger of equals with Delmar Bancorp (“Delmar”) and The Bank of Delmarva (“Delmarva”).

On a GAAP basis, the Bank reported net income of $884 thousand for the three months ended June 30, 2019, a 44.1% increase when compared to net income of $613 thousand for the same period in 2018. For the six months ended June 30, 2019, the Bank reported net income of $1.4 million, a 29.2% increase when compared to net income of $1.1 million for the same period in 2018.

For the three months ended June 30, 2019, the Bank’s return on average assets, return on average equity and efficiency ratio was 0.82%, 7.68% and 70.77%, respectively, as compared to 0.59%, 6.06% and 74.58%, respectively, for the same period in 2018. Excluding tax-effected merger expense for the three months ended June 30, 2019, return on average assets (Non-GAAP), return on average equity (Non-GAAP) and efficiency ratio (Non-GAAP) was 0.97%, 9.06% and 66.90%, respectively. For the six months ended June 30, 2019, the Bank’s return on average assets, return on average equity and efficiency ratio was 0.67%, 6.33% and 74.56%, respectively, as compared to 0.56%, 5.65% and 77.29%, respectively, for the same period in 2018. Excluding tax-effected merger expense for the six months ended June 30, 2019, return on average assets (Non-GAAP), return on average equity (Non-GAAP) and efficiency ratio (Non-GAAP) was 0.89%, 8.36% and 68.69%, respectively.

The increase in net income for the three months ended June 30, 2019, as compared to the same period in 2018, was driven by increases in net interest income, due primarily to loan growth, and noninterest income, lower provision for loan losses, and partially offset by higher noninterest expense and income tax expense. The increase in net income for the six months ended June 30, 2019, as compared to the same period in 2018, was driven by increases in net interest income, due primarily to loan growth, and noninterest income, lower provision for loan losses, and partially offset by higher noninterest expense and income tax expense. The Bank’s results of operations for the three and six months ended June 30, 2019 were positively impacted by lower provision for loan losses due primarily to lower loan growth and the overall improvement in the risks inherent in the loan portfolio over the same periods in 2018. The Bank’s results of operations, primarily noninterest income and noninterest expense, for the three and six months ended June 30, 2019 and 2018 were directly affected by Johnson Mortgage Company, LLC, the Bank’s majority-owned subsidiary. For the three months ended June 30, 2019, the Bank recorded net income of approximately $41 thousand (net of income tax expense and noncontrolling interest) related to Johnson Mortgage Company, LLC as compared to a net loss of approximately $11 thousand (net of income tax benefit and noncontrolling interest) for the same period in 2018. For the six months ended June 30, 2019, the Bank recorded net income of approximately $26 thousand (net of income tax expense and noncontrolling interest) related to Johnson Mortgage Company, LLC as compared to a net loss of approximately $30 thousand (net of income tax benefit and noncontrolling interest) for the same period in 2018. In addition, the Bank’s results of operations for the three and six months ended June 30, 2019 were negatively impacted by higher income tax expense due primarily to higher consolidated income before income taxes and the non-deductibility of merger expense. For the three months ended June 30, 2019, the Bank’s effective tax rate was 24.0% as compared to 18.6% for the same period in 2018. For the six months ended June 30, 2019, the Bank’s effective tax rate was 25.6% as compared to 18.6% for the same period in 2018.

Total assets as of June 30, 2019 were $437.0 million, an increase of $19.7 million or 4.7% from June 30, 2018. Over the same period, gross loans held for investment increased 4.4% to $329.6 million, total investment securities - taxable decreased 11.9% to $65.5 million, total deposits decreased 4.3% to $334.2 million, however noninterest bearing deposits grew 15.6% to $61.6 million, total Federal Home Loan Bank borrowings increased 108.3% to $47.9 million and total equity increased 15.2% to $47.3 million. The decrease in investment securities - taxable was due to the strategic utilization of the cash flows from these investment securities to fund loan growth. The decrease in total deposits and the corresponding increase in total Federal Home Loan Bank borrowings were due to a decrease in money market deposits which was driven by withdrawals by several large deposit customers due to other business related needs and not due to the loss of relationships. In addition, the Bank has been able to reduce its utilization of time deposits - wholesale. As of June 30, 2019, time deposits - wholesale were $20.9 million, which represents a decrease of 12.8% from June 30, 2018. 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 profitability and growth during the first half of 2019,” said Lloyd B. Harrison, III, Virginia Partners Bank President & CEO. “Net income (Non-GAAP) for the second quarter of 2019 improved by $430 thousand or 70.0% when compared to the second quarter of 2018. The net income improvement from the second quarter of 2018 to the second quarter of 2019 was due primarily to higher net interest income, lower provision for loan losses and total noninterest expense excluding merger expense, and a net income contribution from Johnson Mortgage Company, LLC. Net interest income for the second quarter of 2019 increased by $87 thousand or 2.5% when compared to the second quarter of 2018 and was due to our efforts to grow top-line revenue. During the second quarter of 2019, Johnson Mortgage Company, LLC recorded its highest level of net income since the Bank acquired its majority-ownership at the beginning of 2018 and was the primary driver of the higher total noninterest income and total noninterest expense as compared to the second quarter of 2018. The overall increase in Johnson Mortgage Company, LLC’s profitability was due to a higher volume of loan closings which lead to a 92.9% increase in mortgage banking income from the second quarter of 2018 to the second quarter of 2019. Despite a higher total noninterest expense contribution from Johnson Mortgage Company, LLC, excluding merger expense, we were able to reduce our total noninterest expense by $61 thousand or 2.1% during the second quarter of 2019, as compared to the second quarter of 2018. Although loan production was strong during the second quarter of 2019, loan balances declined due to several large pay-offs which occurred late in the period. Despite this, our total loan growth over the first half of 2019 was 2.2% and 4.4% over the trailing twelve months. We continue to remain optimistic about the growth activity we are seeing in our current 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 throughout the balance of 2019.”

Harrison continued, “We continue to be very excited and focused on our pending merger of equals with Delmar and Delmarva. Earlier this month Delmar’s registration statement on Form S-4, which included a proxy statement and prospectus, was declared effective by the SEC. As such, the Bank has commenced its mailing to shareholders for its special meeting to occur on August 12, 2019 and we remain on track to close the merger during the third quarter of 2019. 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 branch offices in Fredericksburg and 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, and strategic business initiatives, including the pending merger of equals of the Bank and Delmar and Delmarva. 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* *June 30,
2019* *June 30,
2018*


*ASSETS*

Cash and due from banks
$ 4,721,816 $ 4,843,510
Federal funds sold
7,748,000 -
Interest bearing deposits in other banks
2,000,000 2,000,000
Investment securities - taxable
65,461,222 74,310,778
Investment securities - tax-exempt
8,172,004 7,953,355
Loans held for sale
5,481,331 1,719,978
Loans, net of unearned income
329,579,554 315,818,250
Less: Allowance for loan losses
(4,095,692 ) (3,914,848 )
Premises and equipment, net
3,754,435 3,920,617
Accrued interest receivable
1,108,553 948,646
Deferred income taxes, net
1,171,929 1,533,598
Bank owned life insurance
7,711,961 7,496,825
Right of use asset
3,619,916 -
Other assets
560,656 689,779
*Total Assets*
*$ * *436,995,685 * *$ * *417,320,488 *


*LIABILITIES*

Noninterest bearing deposits
$ 61,551,631 $ 53,256,674
Interest-bearing demand deposits
19,659,938 18,985,673
Savings and money market deposits
94,678,103 121,346,954
Time deposits - retail
137,415,877 131,757,287
Time deposits - wholesale
20,905,000 23,982,000
Total deposits
334,210,549 349,328,588
Federal funds purchased
- 1,604,000
Federal Home Loan Bank borrowings
47,900,000 23,000,000
Warehouse line of credit
1,200,194 6,154
Other borrowings
1,426,981 1,472,183
Lease liability
3,638,387 -
Accrued expenses and other liabilities
1,287,741 815,938
*Total Liabilities*
*389,663,852 * *376,226,863 *


*EQUITY*

Common stock
20,425,905 19,785,905
Capital surplus
19,226,164 18,562,728
Retained earnings
5,462,524 2,810,211
Noncontrolling interest in consolidated subsidiaries
635,117 600,198
Accumulated other comprehensive income (loss)
152,871 (1,771,562 )
Net income
1,429,252 1,106,145
*Total Equity*
*47,331,833 * *41,093,625 *
*Total Liabilities and Equity*
*$ * *436,995,685 * *$ * *417,320,488 * *Virginia Partners Bank
Statement of Income
Unaudited* *For the Quarter Ending
June 30,* *For the Six Months Ending
June 30,*

*2019* *2018* *2019* *2018*


*INTEREST INCOME*

Interest and fees on loans
$ 4,299,140 $ 3,803,847 $ 8,462,753 $ 7,389,927
Interest on federal funds sold
6,277 13,036 15,624 21,181
Interest on deposits with banks
21,844 13,647 44,754 25,888
Investment securities - taxable
437,186 481,889 886,991 871,560
Investment securities - tax-exempt
42,376 42,376 84,753 84,753
Total interest income
4,806,823 4,354,795 9,494,875 8,393,309
*INTEREST EXPENSE*

Interest-bearing demand deposits
16,125 9,328 30,889 18,070
Savings and money market deposits
158,124 152,765 311,818 273,256
Time deposits - retail
695,033 535,604 1,318,701 1,049,343
Time deposits - wholesale
83,566 92,904 164,602 184,152
Total interest expense on deposits
952,848 790,601 1,826,010 1,524,821
Interest on federal funds purchased
4,052 196 15,966 1,784
Interest on Federal Home Loan Bank borrowings
281,114 97,107 565,905 196,873
Interest on warehouse line of credit
24,932 9,561 44,674 16,618
Interest on other borrowings
27,090 27,494 54,281 55,041
Total interest expense
1,290,036 924,959 2,506,836 1,795,137
*Net interest income*
*3,516,787 * *3,429,836 * *6,988,039 * *6,598,172 *
Provision for loan losses
- 213,000 84,500 313,000
*Net interest income after provision*
*3,516,787 * *3,216,836 * *6,903,539 * *6,285,172 *
*NONINTEREST INCOME*

Service charges and fees
90,597 82,385 169,435 152,713
Securities (losses), net
- (12,500 ) - (12,500 )
Mortgage banking income
485,129 251,544 765,523 445,153
Earnings on bank owned life insurance policies
53,080 55,381 105,165 109,833
Other noninterest income
35,289 11,143 40,512 29,072
*Total noninterest income*
664,095 387,953 1,080,635 724,271
*NONINTEREST EXPENSE*

Salaries and employee benefits
1,555,238 1,575,184 3,151,605 3,121,689
Occupancy and equipment expense
252,908 243,109 512,739 505,946
Professional services
144,958 193,330 279,051 380,738
Data processing
305,029 299,634 593,861 605,250
Promotion and marketing
43,234 57,975 80,971 115,950
FDIC assessment
25,000 32,000 47,800 77,400
Merger expense
162,440 - 474,467 -
Other operating expense
478,018 463,773 891,932 879,920
Total noninterest expense
2,966,825 2,865,005 6,032,426 5,686,893
*Consolidated income before income taxes*
*1,214,057 * *739,784 * *1,951,748 * *1,322,550 *
Income tax expense
279,176 139,822 490,549 253,207
*Consolidated net income*
*$ * *934,881 * *$ * *599,962 * *$ * *1,461,199 * *$ * *1,069,343 *


Net (income) loss attributable to noncontrolling interest
(51,098 ) 13,514 (31,947 ) 36,802
*Net income *
*$ * *883,783 * *$ * *613,476 * *$ * *1,429,252 * *$ * *1,106,145 * *Reconciliation of Non-GAAP Financial Measures* *For the Quarter Ending* *For the Six Months Ending*

*June 30, * *June 30, *

*2019* *2018* *2019* *2018*
*Net income excluding merger expense*

Net income
$ 883,783 $ 613,476 $ 1,429,252 $ 1,106,145
Merger expense
162,440 - 474,467 -
Income tax effect of adjustment
(3,167 ) - (15,245 ) -
Net income excluding merger expense (Non-GAAP)
$ 1,043,056 $ 613,476 $ 1,888,474 $ 1,106,145


*Return on average assets excluding merger expense (1)*

Return on average assets
0.82 % 0.59 % 0.67 % 0.56 %
Effect to adjust for merger expense
0.15 % 0.00 % 0.22 % 0.00 %
Return on average assets excluding merger expense (Non-GAAP)
0.97 % 0.59 % 0.89 % 0.56 %


*Return on average equity excluding merger expense (1)*

Return on average equity
7.68 % 6.06 % 6.33 % 5.65 %
Effect to adjust for merger expense
1.38 % 0.00 % 2.03 % 0.00 %
Return on average equity excluding merger expense (Non-GAAP)
9.06 % 6.06 % 8.36 % 5.65 %


*Efficiency ratio excluding merger expense*

Efficiency ratio
70.77 % 74.58 % 74.56 % 77.29 %
Effect to adjust for merger expense
-3.87 % 0.00 % -5.87 % 0.00 %
Efficiency ratio excluding merger expense (Non-GAAP)
66.90 % 74.58 % 68.69 % 77.29 %


(1) Annualized for the quarter and six months ending June 30, 2019 and 2018, respectively.


*SOURCE: * Virginia Partners Bank Fredericksburg VA
View source version on accesswire.com:
https://www.accesswire.com/552587/Virginia-Partners-Bank-Reports-700-Increase-in-Net-Income-Excluding-Merger-Expense-Non-GAAP-of-10-Million-for-the-Second-Quarter-2019
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