Village Bank and Trust Financial Corp Reports Results of Operations for the Fourth Quarter 2015 (3/28/15)
Midlothian, Virginia, March 28, 2016. Village Bank and Trust Financial Corp. (the “Company”) (NASDAQ symbol: VBFC), parent company of Village Bank (the “Bank”), today reported fourth quarter 2015 earnings of $96,000 and a net loss available to common shareholders, which deducts from net income the dividends and discount accretion on its preferred stock, of $78,000, or $0.06 per fully diluted common share. For the year ended December 31, 2015, the Company had net income of $646,000 and a net income available to common shareholders of $6,591,000, or $5.49 per fully diluted share. The net income available to common shareholders for the year ended December 31, 2015 was positively impacted by the forgiveness of principal and dividends on preferred stock amounting to $6,619,000 associated with the rights offering to shareholders and concurrent standby offering completed in March 2015. Those results compare to a net loss of $336,000 and a net loss available to common shareholders of $710,000, or $2.11 per fully diluted common share, for the fourth quarter of 2014, and a net loss of $1,037,000 and a net loss available to common shareholders of $2,473,000, or $7.39 per fully diluted common share, for the year ended December 31, 2014.
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Q4 2015 results were impacted by the following factors:
· Recovery of loan losses of $2,000,000. This favorable adjustment was due primarily to credit quality improvements and an enhanced model for evaluating inherent losses in the Bank’s loan portfolio.
· Write down of asset held for sale of $1,962,000. We recorded a write down of $1,962,000 on our previous headquarters at the Watkins Centre (“Watkins”) based on active negotiations with prospective buyers and our expectations of its net realizable value. This write down coupled with the $675,000 write down in Q2 resulted in a write down of the carrying value of Watkins of $2,637,000 for 2015.
· Seasonality of Village Bank Mortgage Corporation revenue and pretax income. In the mortgage business, revenues and earnings typically decline in Q4 from Q3. The mortgage company’s Q4 pretax income of $1,339 represented a decline of $369,000 from the pretax income experienced in Q3 2015 and an improvement of $11,000 from the pretax loss experienced in Q4 2014. Gains on the sale of mortgage loans during Q4 declined by $562,000 from Q3 and increased by $282,000 from Q4 2014.
· Noninterest expense declined. Noninterest expenses for Q4 2015, excluding the write down on Watkins, declined by $202,000, or 4%, from Q3 2015, and increased by $254,000, or 5%, from Q4 2014.
Asset Quality
· Continued improvement in asset quality during the fourth quarter of 2015 (in thousands).
· NPAs (nonaccrual loans and foreclosed real estate) were reduced by $10,149,000, or 50%, during 2015.
· Classified Assets, a broader measure of problem assets, declined by $15,309,000, or 50%, during 2015.
· Although OREO expense increased in Q4 2015 compared to Q3 2015, for the year 2015 it declined by $1,091,000, or 88%, from $1,244,000 in 2014 to $153,000 in 2015.
Earnings
Earnings have improved in 2015 with net income amounting to $646,000 compared to a net loss of $1,037,000 for 2014. This improvement of $1,683,000 is primarily a result of the following factors (in thousands): · The recovery of loan losses recorded in 2015 was due primarily to credit quality improvements and an enhanced model for evaluating inherent losses in the Bank’s loan portfolio.
· Overall, the mortgage lending market has improved in 2015 compared to 2014 resulting in the significant improvement in net income from mortgage operations. For 2015, the mortgage company sold $208,479,000 in mortgage loans resulting in gains on sale of $6,076,000, compared to $162,983,000 and $4,449,000, respectively, in 2014.
· The write down of assets held for sale relates primarily to Watkins and was a result of our assessment of its net realizable value based on active negotiations for its sale.
· As the real estate market has improved in 2015, we have experienced an improvement in the impact of foreclosed assets on our profitability as demonstrated in the following table:
As we have reduced our nonperforming assets, we expect the impact of foreclosed assets on our profitability to decline.
Capital
The capital of the Company and the Bank improved in 2015. The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015, and is no longer obligated to report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies. The Bank’s capital ratios at the indicated dates were as follows:
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 (“FDIC”). 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.
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