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Virginia Heritage Bank Reports Strong Growth and Improves Operating Performance

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^{Published in Business and Finance on Tuesday, January 27th 2009 at 8:16 GMT, Last Modified on 2009-01-27 08:18:58 by Market Wire}  

FAIRFAX, Va.--([ BUSINESS WIRE ])--Virginia Heritage Bank (OTCBB: VGBK), a de novo bank which began operations in early 2006, reported a net loss of $185 thousand in the fourth quarter of 2008, compared to an $876 thousand loss for the same period in 2007. The 2008 quarter included a $264 thousand provision for loan losses due primarily to significant growth of the loan portfolio. On a per share basis, the fourth quarter loss was $(.05) per share (basic and diluted), compared to a loss of $(0.39) per share (basic and diluted) for the fourth quarter of 2007.

At December 31, 2008, the year-to-date net loss was $1.7 million, compared to a net loss of $3.4 million for the same period in 2007. The 2008 year-to-date loss included $1.6 million for provision for loan losses due primarily to significant growth of the loan portfolio. The loss per share (basic and diluted) was $(0.45) for the year ended December 31, 2008, compared to a loss of $(2.00) per share (basic and diluted) for the year ended December 31, 2007.

The following table illustrates the Bank's net income (loss) before and after provision for loan losses for the periods indicated (in thousands).

The Bank had significant balance sheet growth with total assets of $242.2 million at December 31, 2008, representing an increase of $113.4 million compared to December 31, 2007. Total gross loans were $198.0 million, excluding loans held for sale, at December 31, 2008, an increase of $128.6 million over total gross loans at December 31, 2007. Total deposits were $171.3 million at December 31, 2008 compared to $95.8 million at December 31, 2007.

Nonperforming assets, including other real estate owned, as a percentage of total assets, increased to .09% at December 31, 2008, compared to 0% at December 31, 2007. Annualized net charge-offs were .11% of average loans for 2008, up from 0% in 2007.

The allowance for loan losses was $2.3 million as of December 31, 2008, or 1.14% of gross loans outstanding, excluding loans held for sale. Asset quality remains strong with no loans past due 90 days or more but still accruing interest, total non-accrual loans of $44 thousand and other real estate owned of $170 thousand .

The Bank's capital ratios, as set forth in the attached Financial Highlights schedule, are substantially in excess of regulatory requirements.

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

"We are encouraged with our progress and continue to be ahead of the financial targets established by the Board of Directors in mid 2007. The fourth quarter of 2008 was a challenging period with the Federal Reserve reducing short term rates by 2% which caused our net interest margin to contract. Continued deterioration in local economic conditions resulted in a slowing of our balance sheet growth with less demand for consumer and commercial borrowing. However, we still managed to originate over $216 million of mortgage, automobile, commercial and commercial real estate loans during 2008. During the fourth quarter, we also determined that we would not participate in the U.S. Treasury "Capital Purchase Program" (TARP). With our strong capital position and the political uncertainty associated with this program, we determined it was not in the best interests of VHB and our shareholders. In spite of the unprecedented disruptions in the financial markets and the deep recession we currently find ourselves in, management and the Board of Directors of VHB see opportunities in 2009 to continue our strong balance sheet growth and strategic branch expansion within the northern Virginia market."

Attached to this release is a graph showing our progress over the previous eight quarters.

Virginia Heritage Bank is headquartered in Fairfax City, Virginia. The Bank has three full service offices in Fairfax City, Chantilly and Gainesville, 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.