Colonial Virginia Bank Announces 2012 Earnings

                Colonial Virginia Bank Announces 2012 Earnings

PR Newswire

GLOUCESTER, Va., Feb. 13, 2013

GLOUCESTER, Va., Feb. 13, 2013 /PRNewswire/ -- Colonial Virginia Bank (OTCBB:
CNVB) ("the Bank"), today reported results of operations for the fiscal year
ended December 31, 2012, which reflected net income after taxes of $255,007,
compared to an after tax net loss of ($373,774) in 2011. Pre-tax earnings
were $285,731 for 2012, compared to the net loss of ($585,206) in 2011. On a
per share basis, 2012 reflected earnings on a fully diluted basis of $0.42 per
share, compared to the net loss of ($0.61) per share in 2011. The Bank
experienced significant improvement in asset quality allowing for a
substantial reduction in the provision for loan loss expense. Although total
non-performing assets (including all other real estate owned) increased,
$987,000 represents the carrying value of the New Kent office building
discussed below. Actual problem loans, which would require impairment
reserves, improved.

The provision for loan loss expense of $303,325 in 2012, compared quite
favorably to $1,976,308 in 2011. Despite the substantial reduction in
provision expense, the Bank was able to maintain an Allowance for Loan and
Lease Losses ("ALLL") in excess of $2 million ($2,079,051 at December 31,
2012, compared to $2,172,370 at December 31, 2011). The ALLL represented
2.62% of outstanding loans as of the current year-end, virtually unchanged
from 2.64% the previous year-end. Net interest margin (interest income minus
interest expense divided by average earning assets) ("NIM") declined from
4.42% in 2011 to 4.29% in 2012 due, primarily, to an increase in non-accrual
loans and foreclosed properties, along with declining yields in the bond
portfolio. The decline is also a reflection of the reduction in the overall
volume of earning assets. The Bank has, however, continued its conservative
deposit pricing practices, reducing overall cost of funds to partially
mitigate the reduction of interest income. Of particular note, the net loss
in 2011 would have been worse, were it not for securities gains of $323,230.
In 2012, the Bank realized $6,867 in securities gains, although the gross
unrealized gains on available for sale securities totaled $349,589 at December
31, 2012.

Total non-interest income for the current year reflected a loss of $186,270,
compared to income of $845,584 in 2011. The current figure includes losses
through write-downs and losses on sales of other real estate owned ("OREO") of
$630,921 and a loss of $16,032 on sales of repossessed collateral. Included
in the OREO loss is $222,076 associated with the September 7, 2012 closing of
the Bank's New Kent branch and related write-down of the carrying value of the
branch land, land improvements and building. Additionally, the branch closing
required the recording of a $26,544 write-off on branch equipment. The
reduction of all overhead expenses related to the closed office, however, is
expected to enhance forward earnings. Non-interest expenses in 2012 totaled
$3.9 million, down from $4.3 million in 2011, primarily as the result of
reduced personnel cost. A portion of the reduction was associated with the
transition phase of previous CEO Bill Farinholt's retirement on June 30, 2011
(planning for which began in the second half of 2010) and included duplication
of some executive payroll expenses. 2012 represented the first full year
without the duplicative executive payroll expense.

Total assets at December 31, 2012 were $117.9 million, compared to the 2011
year-end total of $130.3 million. It should be noted the year-end 2011 level
included a large deposit of approximately $3 million on December 30, 2011 that
was temporary in nature. These funds, as expected, were withdrawn during the
first quarter of 2012. The Bank reduced its borrowings from the Federal Home
Loan Bank ("FHLB") from $7.5 million at December 31, 2011 to $1.5 million at
December 31, 2012. With weaker loan demand in 2012, the use of FHLB
alternative funding was not necessary in overall balance sheet management.
Average total assets at December 31, 2012 were $123.7 million, compared to
$124.7 million at December 31, 2011. Non-performing assets as a percentage of
total assets were 3.91% at year-end 2012, compared to 1.74% at year-end 2011.
The ratio of net charge-offs to average loans returned to historical levels
shrinking from 1.21% in 2011 to 0.49% in 2012 (the 2010 level was 0.56%). The
Bank, however, has continued an aggressive posture toward charging off higher
risk loans and not delaying recognition of problem assets. 

Total securities were $15.2 million at December 31, 2012 compared to $19.0
million a year ago. Total deposits were $102.7 million at the end of 2012,
compared to $109.6 at year-end 2011. The decrease is pursuant to the Bank's
continued effort to reduce total funding costs by allowing higher priced, rate
sensitive deposits to be withdrawn at maturity rather than paying imprudent
rates on funds not needed to maintain good liquidity. Total shareholders'
equity increased to $11.8 million at December 31, 2012 from $11.5 million at
December 31, 2011.

Bob Bailey, CEO & President, commented on his first full year as the company's
lead executive. "Although we continued to experience credit losses and
overall weak loan demand in 2012, we are very encouraged by our return to
profitability. This came despite significant expenses related to OREO
properties and the branch closure. These losses better position us for
improved earnings for many years to come. In some ways, it was a difficult
year, but also a rewarding one when you consider the loan challenges we
faced. Our staff has worked hard to turn the corner regarding asset quality.
If the economy will cooperate, we can see smoother seas ahead."

The Bank operates two full service retail bank offices in Gloucester County,
Virginia. The Bank offered mortgage services through Colonial Virginia
Mortgage, LLC ("the mortgage company"), a 50% owned subsidiary joint with
Johnson Mortgage Company, LLC ("JMC") from 2005 through 2012. JMC is
headquartered in Newport News, Virginia. The Bank has elected to terminate
these services in the first quarter of 2013, as profitability has not met
expectations. The Bank will retain the name of the LLC and continue in an
informal relationship with JMC, excluding any contractual arrangements. The
Bank terminated its investment services division, Colonial Virginia Investment
Services ("CVIS") during 2012, but structured a referral relationship with
Lions Bridge Financial (previous press release June 14, 2012) to accommodate
existing Bank investment clients and build future relationships. The Lions
Bridge relationship involves no ownership by the Bank.

The Bank's stock is listed for trading on the OTC Markets marketplace under
the symbol CNVB ( . Additional
information regarding the bank's products and services, as well as access to
its regulatory filings, are available on the bank's web site at

Use of Certain Non-GAAP Financial Measures. In addition to results presented
in accordance with United States generally accepted accounting principles
(GAAP), this earnings release includes certain non-GAAP financial measures,
which are reconciled to their equivalent GAAP financial measures below.
Management believes these non-GAAP financial measures provide information
useful to investors in understanding the corporation's performance trends and
facilitate comparisons with its peers. Specifically, management believes the
exclusion of a significant recovery of income recognized in a single
accounting period permits a comparison of results for ongoing business
operations, and it is on this basis that management internally assesses the
corporation's performance and establishes goals for future periods.

Although the corporation's management believes the non-GAAP financial measures
presented in this earnings release enhance investors' understandings of its
performance, these non-GAAP financial measures should not be considered an
alternative to GAAP-basis financial statements.

Forward-Looking Statements. The statements contained in this press release
that are not historical facts may constitute "forward-looking statements" as
defined by the federal securities laws. These statements may address issues
that involve estimates and assumptions made by management; risks and
uncertainties, and actual results could differ materially from historical
results or those anticipated by such statements. Factors that could have a
material adverse effect on the operations and future prospects of the
corporation include, but are not limited to, changes in: (1) interest rates,
(2) general economic conditions, (3) demand for loan products, (4) the
legislative/regulatory climate, (5) monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, (6) the quality or composition of the loan or investment portfolios,
(7) deposit flows, (8) competition, (9) demand for financial services in the
Bank's market area, (10) technology, (11) reliance on third parties for key
services, and (12) accounting principles, policies and guidelines. These risks
and uncertainties should be considered in evaluating the forward-looking
statements contained herein, and readers are cautioned not to place undue
reliance on such statements, which speak only as of their dates.

Balance Sheet ($)                                                  Y-Y
                                           2012 YTD    2011 YTD    Ch (%)
Loans Held for Investment, before Reserves 79,116,328  82,084,053  (3.62)
Loan Loss Reserve                          2,079,051   2,172,370   (4.30)
Net Loans Receivable                      77,037,277  79,911,683  (3.60)
Total Assets                               117,864,706 130,265,508 (9.52)
Deposits                                   102,680,780 109,560,601 (6.28)
Common Equity                              11,836,517  11,534,854  2.62
Total Shareholders' Equity                 11,836,517  11,534,854  2.62
Shares Outstanding (actual)                610,175     610,175     0.00
Income Statement ($)                                               Y-Y
                                           2012 YTD    2011 YTD    Ch (%)
Net Interest Income                        4,683,683   4,886,095   (4.14)
Provision for Loan Losses                  303,325     1,976,308   (84.65)
Noninterest Income                         (186,270)   845,584     (122.03)
Noninterest Expense                        3,908,357   4,340,577   (9.96)
Net Income (Loss) Before Taxes             285,731     (585,206)   148.83
Provision (Benefit) for Taxes              30,724      (211,432)   114.53
Net Income (Loss)                          255,007     (373,774)   168.23
Per Share Items ($)                                                Y-Y
                                           2012 YTD    2011 YTD    Ch (%)
Book Value Per Share                       19.40       18.90       2.62
Diluted EPS                               0.42        (0.61)      168.85
Dividends Declared                         0.00        0.00        --
Performance Ratios (%)                                             Y-Y
                                           2012 YTD    2011 YTD    Ch (bp)
ROAA                                       0.23        (0.28)      51
ROAE                                       2.38        (2.86)      524
Net Interest Margin                        4.29        4.42        (13)
Loans / Deposits                           77.05       74.92       213
Efficiency Ratio                           84.39       78.07       632
Balance Sheet Ratios (%)                                           Y-Y
                                           2012 YTD    2011 YTD    Ch (bp)
Tangible Equity / Tangible Assets          10.04       8.85        119
Equity / Assets                            10.04       8.85        119
Asset Quality Ratios (%)                                           Y-Y
                                           2012 YTD    2011 YTD    Ch (bp)
Nonperforming Assets / Assets              3.91        1.74        217
Loan Loss Reserves / Gross Loans           2.62        2.64        (2)
Loan Loss Reserves / Nonperforming Loans   89.51       259.12      (16,961)
Net Charge-offs / Avg Loans                0.49        1.21        (72)
Regulatory Capital Ratios (%)                                      Y-Y
                                           2012 YTD    2011 YTD    Ch (bp)
Tier 1 Capital Ratio                       13.75       12.63       112

SOURCE Colonial Virginia Bank

Contact: Kenneth E. Smith, Executive Vice President & CFO of Colonial Virginia
Bank, +1-804-695-9300
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