Village Bank and Trust Financial Corp. (VBFC)

[Enterprising Investor]

Village Bank and Trust Financial Corp Reports Results of Operations for the First Quarter 2015 (5/15/15)

Midlothian, Virginia, May 15, 2015. Village Bank and Trust Financial Corp. (the "Company") (NASDAQ symbol: VBFC), parent company of Village Bank (the "Bank"), today reported a first quarter 2015 net loss of $(5,000), an improvement from a net loss of $(336,000) for the fourth quarter of 2014 and a net loss of $(657,000) for the first quarter of 2014. Net income (loss) available to common shareholders, which deducts from net income (loss) the dividends on preferred stock and, for the first quarter of 2015, the benefit of forgiveness of principal and accrued dividends on preferred stock, amounted to net income of $6,451,000 ($15.40 per fully diluted common share) in the first quarter of 2015, compared to a net loss of $(710,000) ($(2.11) per fully diluted common share) for the fourth quarter of 2014, and a net loss of $(971,000) ($(2.91) per fully diluted common share) for the first quarter of 2014.

First quarter results were materially impacted by the following factors:

Net Interest income declined by $104,000, or 3%, from the fourth quarter of

2014, and by $335,000, or 10%, from the first quarter of 2014. Key drivers of the period to period changes included:

o Average outstanding loans in the first quarter of 2015 were 5% higher than the fourth quarter of 2014 and 2% higher than the first quarter of 2014. Loan yields were lower due to the growth in lower margin, higher quality government guaranteed student loans and lower loan yields on new originations. As a result, interest income on loans declined by $105,000 from the fourth quarter of 2014.

o First quarter interest income from securities held for sale was 31% lower than the fourth quarter of 2014 and 53% lower than the first quarter of 2014. This was the result of the Company's efforts during the fourth quarter of 2014 to substantially reduce exposure to rising interest rates, which continued during the first quarter of 2015. In total, during the fourth quarter of 2014 and the first quarter of 2015, the Company sold $23 million of higher yielding fixed rate securities with maturities exceeding eight years and has been reinvesting proceeds back into the adjustable rate guaranteed student loans and shorter duration fixed and floating rate securities.

o We continued to grow core consumer and business relationships and improve the mix of our deposit base which lowered our deposit costs by four basis points for the quarter and by 10 basis points from the first quarter of 2014. We grew our core low cost deposits (DDA, NOW, Money Market and Savings) by $3,978,000 during the quarter and $15,284,000 over the last twelve months. Noninterest bearing deposits accounted for 20% of total deposits at March 31, 2015 and December 31, 2014 compared to 16% at March 31, 2014. Continued growth in these low cost deposits has allowed us to reduce our reliance on more expensive time deposits and borrowings.

There was no provision for loan losses in the first quarter of 2015 or the fourth quarter of 2014 compared to $100,000 provided in the first quarter of 2014.

Total noninterest income increased 27% from the fourth quarter of 2014 and 30% from the first quarter of 2014. Key drivers of the period to period changes included:

o Village Bank Mortgage Corporation had pretax income of $222,000 for the first quarter of 2015 compared to a pretax loss of $9,500 for the fourth quarter of 2014 and a pretax loss of $401,000 for the first quarter of 2014. The significant improvement in the mortgage company's pretax income in

2015 is primarily due to an increase in purchase activity of first time homebuyers and a brief burst in refinancing activity as mortgage rates temporarily fell during the first quarter. Village Bank Mortgage Corporation is very active in the first time homebuyer and lower sales price segments and these segments were soft during 2014. After the loss in the first quarter of 2014, management reduced staffing and overhead expenses and was able to generate pretax profit of $251,000 for the final three
quarters of the year.

o Bank service charges (fees earned on consumer and business banking relationships) were 3% lower than the fourth quarter of 2014 and 13% higher than the first quarter of 2014.

As a result of ongoing productivity and efficiency initiatives, total noninterest expenses (excluding OREO expense) during the first quarter of 2015 were 5% lower than the first quarter of 2014, even with $70,000 in higher commission expense related to the substantial increase in mortgage origination volumes.

Noninterest expenses in the Bank were 1% lower than the fourth quarter of 2014 and 7% lower than the first quarter of 2014.

Expenses related to foreclosed assets amounted to $132,000, a decrease of $62,000 from the fourth quarter of 2014 and a decrease of $151,000 from the first quarter of 2014.

The net income available to common shareholders of $6,451,000 for the first quarter of 2015 was primarily attributable to forgiveness of preferred stock and accrued dividends amounting to $6,619,000 as discussed under Capital.

Asset Quality

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Over the last twelve months, Classified Assets decreased by $27,375,000, or 51%, and NPAs (nonaccrual loans and foreclosed real estate) declined by $12,341,000, or 39%.

NPAs represented 4.4% of total assets at March 31, 2015 compared to 7.0% at the same time in 2014.

Capital

As previously announced on March 27, 2014, the Company successfully completed a rights offering to shareholders and concurrent standby offering to Kenneth R. Lehman in which the Company issued an aggregate of 1,051,866 shares of common stock (the total number of shares offered) at $13.87 per share for aggregate proceeds of $14,589,381 (including the value of the Company's Series A preferred stock exchanged by Mr. Lehman for shares of common stock of $4,618,813). In connection with the standby offering Mr. Lehman forgave preferred stock with a principal value of $4,404,000 and related accrued and unpaid dividends of $2,215,000 which benefited common shareholders.
From the cash proceeds of this offering, the Company made a capital contribution of $5,000,000 to the Bank. With this capital contribution, the Bank's capital ratios surpass the requirements established by our agreements with our regulators.

The actions we are taking to reduce expenses, grow revenues and improve asset quality are expected to improve profitability which would increase our Tier I capital and position us to recover some or all of the valuation allowance established against our deferred tax asset. The valuation allowance amounts to $12,289,000 at March 31, 2015 and its recovery would have a significant impact on the capital of the Company and the Bank.

About Village Bank and Trust Financial Corp.

Village Bank and Trust Financial Corp. was organized under the laws of the Commonwealth of Virginia as a bank holding company whose activities consist of investment in its wholly-owned subsidiary, Village Bank. Village Bank is a full-service Virginia-chartered community bank headquartered in Midlothian, Virginia with deposits insured by the Federal Deposit Insurance Corporation. The Bank has eleven branch offices. Village Bank and its wholly-owned subsidiary, Village Bank Mortgage Corporation, offer a complete range of financial products and services, including commercial loans, consumer credit, mortgage lending, checking and savings accounts, certificates of deposit, and 24-hour banking.

http://www.sec.gov/Archives/edgar/data/1290476/000114420415031240/v410883_ex99-1.htm