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Xenith Bankshares, Inc. Reports Improved Financial Performance in 2012: Net Income $7.38 Million in 2012 Compared to $4.45



Xenith Bankshares, Inc. Reports Improved Financial Performance in 2012: Net
Income $7.38 Million in 2012 Compared to $4.45 Million in 2011

RICHMOND, Va., Feb. 27, 2013 (GLOBE NEWSWIRE) -- Xenith Bankshares, Inc.
(Nasdaq:XBKS), parent company of Xenith Bank, a business-focused bank serving
the Greater Washington, D.C., and Richmond and Greater Hampton Roads, Virginia
markets, today announced financial results for the year and quarter ended
December 31, 2012. Net income was $7.38 million, or $0.70 per common share,
for the year ended December 31, 2012 compared to $4.45 million, or $0.48 per
common share, for the year ended December 31, 2011. Net income in 2012
included a $4.95 million, or $0.47 per common share, income tax benefit due to
the reversal of the valuation allowance on the company's net deferred tax
asset. In 2011, net income included a pre-tax bargain purchase gain of $8.66
million resulting from the acquisition of Virginia Business Bank.

The company reported fourth quarter 2012 net income of $332,000, or $0.03 per
common share, compared to fourth quarter 2011 net income of $215,000, or $0.02
per common share. Fourth quarter 2012 net income includes $380,000 of income
tax expense, with income tax expense of $17,000 reported in the 2011 period.

2012 Highlights

  * Book value per common share at December 31, 2012 was $7.55, an increase of
    10% from $6.88 at December 31, 2011. Tangible book value^1 at December 31,
    2012 was $6.02 per common share, an increase of 13.2% from $5.32 per
    common share at December 31, 2011.
  * Total assets increased to $563.21 million, or 18%, at December 31, 2012
    compared to $477.47 million at December 31, 2011.
  * Total deposits grew by $78.22 million, or 21%, to $453.23 million at
    December 31, 2012, compared to $375.01 million at December 31, 2011;
    noninterest bearing deposit accounts increased 57% to $74.54 million at
    December 31, 2012 compared to $47.49 million at December 31, 2011.
  * Net interest income, after provision for loan and lease losses, was $20.21
    million in 2012 compared to $12.24 million in 2011, reflecting organic
    loan growth and reduced loan loss provision.
  * Net loans at year-end 2012, including loans held for sale, increased
    $138.01 million, or 43%, compared to year-end 2011.
  * Asset quality improved with net charge-offs as a percentage of average
    loans held for investment of 0.35% for the year ended 2012, compared to
    0.58% for the year ended 2011, and nonperforming assets as a percentage of
    total assets declined to 0.95% at year-end 2012 compared to 1.40% at
    year-end 2011.
  * Capital ratios remained above regulatory standards for "well-capitalized"
    banks, with a Tier 1 leverage ratio of 12.9%, a Tier 1 risk-based capital
    ratio of 15.4%, and a total-risk based capital ratio of 16.5% at year-end
    2012.

T. Gaylon Layfield, III, President and Chief Executive Officer, commented: "We
are pleased with our progress during 2012 expanding Xenith's franchise and
growing our reach, scope and services. Our relationships with business
customers throughout our target markets are growing, as evidenced by loan and
deposit growth. In 2012, we completed integrating two acquisitions executed in
2011 and made process enhancements to strengthen risk management oversight and
efficiency. We had excellent customer retention rates from our acquisitions
and made significant progress toward resolving the classified and criticized
loans primarily acquired in our acquisition of Virginia Business Bank. Our
growth in loans and deposits contributed to an increase in shareholders'
equity to $87.55 million at December 31, 2012 compared to $80.30 million at
December 31, 2011. With nonperforming assets falling to 0.95% of total assets,
we are focused on delivering prudent growth coupled with leveraging our
infrastructure, while maintaining strong asset quality.  We continue to
evaluate strategic opportunities."

Operating Results

Interest income for 2012 was $25.98 million, up 38%, from $18.89 million in
2011, reflecting an increase of $160.20 million, or 48%, in average
interest-earning assets over 2011. Interest expense for 2012 was $3.95
million, an increase of approximately $1.30 million over 2011, reflecting
significant core deposit growth and the expiration of purchase accounting
adjustments that lowered interest expense in 2011 by $1.05
million. Noninterest bearing deposits increased $27.05 million over year-end
2011, and interest-bearing deposits increased approximately $51.17 million for
the year ended 2012 compared to the year ended 2011. Net interest income was
$22.03 million for the year ended 2012, compared to $16.25 million for the
year ended 2011, an increase of 36%.  Average interest-earning assets as a
percentage of total assets were 94.9% and 92.5%, respectively, for the years
ended 2012 and 2011.

"Growing Xenith's loan portfolio generated increased interest income and, we
believe, demonstrated our ability to win and retain valuable relationships in
a competitive environment," explained Layfield. "While increased deposits
resulted in higher year-over-year interest expense, a significant portion of
the growth in deposits came from core noninterest bearing deposit accounts and
other core interest-bearing deposit accounts. Ongoing progress in building and
diversifying our deposit portfolio is helping support our loan growth."

Beginning in March 2012, the bank began participating in a mortgage warehouse
lending program with a larger commercial bank in its nationwide program of
investing in residential mortgages for sale in the secondary market. The
company classifies these loans as held for sale.  "We view our participation
in this program as an opportunity to contribute to our earnings; although, it
is not a growing area of emphasis," explained Layfield. "We believe the
economics of this program provide us with solid risk-adjusted returns. We
continue to monitor this program as interest rates and other business factors
evolve."

Net interest margin in 2012 was 4.47% compared to 4.88% in 2011, a decrease of
41 basis points. For the years ended 2012 and 2011, acquisition accounting
adjustments include loan discount accretion (interest income) of $3.34 million
and $3.57 million, respectively, and a reduction in interest expense of $1.05
million in 2011 with no reduction in 2012. Excluding the effect of these
acquisition accounting adjustments, net interest margin for 2012 was 3.79%, an
increase of 30 basis points from 3.49% in 2011. Layfield noted: "We worked
diligently in 2012 to manage interest expense and we continue to analyze our
funding mix and cost in this protracted low-rate environment. In light of the
Federal Reserve's stated policy to keep interest rates at historically low
levels for a prolonged period and intense market competition, we expect our
net interest margin to be under pressure."

Noninterest expenses in 2012 were $18.14 million compared to $16.71 million in
2011, an increase of 9%. The increase in noninterest expense was primarily due
to higher compensation and benefits expenses, including hiring relationship
managers and support personnel related to the acquisition of Paragon
Commercial Bank's Richmond branch in the third quarter of 2011.

Net interest income for the fourth quarter ended December 31, 2012 was $5.56
million compared to $5.79 million for the 2011 period, primarily due to lower
accretion in the 2012 period. The provision for loan and lease losses in the
fourth quarter of 2012 was $436,000 compared to $905,000 in the fourth quarter
of 2011, which was also impacted by higher accretion in the 2011
period. Noninterest expenses in the fourth quarter of 2012 were $4.56 million
compared to $4.87 million in the same period of 2011. Income tax expense of
$380,000 in the fourth quarter of 2012 included the effect of nondeductible
expenses related to incentive stock options.

"We have invested and plan to invest in people who provide revenue generating
capability," explained Layfield. "We think it's imperative to invest to build
long-term value, recognizing that it may negatively impact earnings in the
short run. We plan to add individuals to support growth in our most promising
markets and business segments. For example, Northern Virginia offers strong
lending opportunities as we look to grow our government contractor lending
business. In 2012, we also invested in enterprise risk management systems and
processes to ensure our risk management activities and governance match the
demands of a growing financial institution. We also launched a suite of
electronic treasury management and ACH products we expect will enable us to
expand business banking relationships and generate fee income that will
contribute to net income growth."

Balance Sheet and Asset Quality

The company grew total assets to $563.21 million at December 31, 2012, up 18%,
compared to $477.47 million at year-end 2011. Total deposits were $453.23
million at December 31, 2012 compared to $375.01 million at year-end 2011.
 Loans held for investment at December 31, 2012 were $379.01 million compared
to $321.86 million at year-end 2011, whereas loans held for sale were $80.9
million at December 31, 2012 with no amounts outstanding at year-end 2011.

"We continue to pursue our strategy of building a diverse portfolio of
commercial loans in a variety of industries," explained Layfield. "Unlike many
banks that are heavily reliant on real estate lending, we finished the year
with 53% commercial and industrial loans and 39% commercial real estate loans,
with the balance of the portfolio consisting of residential and consumer
loans. We have a strategy of having an asset-sensitive balance sheet and the
majority of Xenith's loans and deposits are variable rate, which we believe
positions us best in a rising interest rate environment."

Layfield added that as a result of a clear focus on working out of the
classified and criticized loans primarily acquired in the acquisition of
Virginia Business Bank, Xenith's nonperforming assets as a percentage of total
assets declined to 0.95% at year-end 2012 compared to 1.40% at year-end 2011.
The company's provision for loan and lease losses was $1.82 million in 2012
compared to $4.01 million in 2011. The bank does not provide for loans held
for sale as any decline in their value would be a direct charge to income. The
bank had no charges against loans held for sale in 2012.

The bank's allowance for loan and lease losses to nonaccrual loans was 96.16%
at December 31, 2012 compared to 73.01% at year-end 2011. The bank's allowance
for loan and lease losses was 1.27% of total loans held for investment at
year-end 2012 compared to 1.31% at year-end 2011.

Layfield concluded: "We have the capital strength to pursue lending
opportunities in our key markets, invest in the best people, and consider
strategic opportunities. The Greater Washington, D.C. area economy in
particular offers great opportunity for Xenith. It is one of the strongest
economies in the country, and we have considerable experience in lending to
government contractors and other small to medium sized businesses. We have
resolved many of our nonperforming and under-performing purchased loans, and
while our focus on further improvement continues undaunted, we believe our
capital strength, solid asset quality ratios, and stable loan and deposit
portfolios position us to concentrate our attention on growth throughout 2013
and beyond. Our paramount focus is on increasing shareholder value in a
prudent manner, and we intend to continue executing with that focus top of
mind."

Profile

Xenith Bankshares, Inc. is the holding company for Xenith Bank. Xenith Bank is
a full-service, locally-managed commercial bank, specifically targeting the
banking needs of middle market and small businesses, local real estate
developers and investors, private banking clients, and select retail banking
clients. As of December 31, 2012, the Company had total assets of $563.2
million and total deposits of $453.2 million. Xenith Bank's target markets are
Greater Washington, DC, Richmond, VA, and Greater Hampton Roads, VA
metropolitan statistical areas. The Company is headquartered in Richmond,
Virginia and currently has six branch locations in Tysons Corner, Richmond and
Suffolk, Virginia. Xenith Bankshares common stock trades on the NASDAQ Capital
Market under the symbol "XBKS."

For more information about Xenith Bankshares and Xenith Bank, visit our
website: https://www.xenithbank.com/

The Xenith Bankshares, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=15500

All statements other than statements of historical facts contained in this
press release are forward-looking statements. Forward-looking statements made
in this press release reflect beliefs, assumptions and expectations of future
events or results, taking into account the information currently available to
Xenith Bankshares, Inc. These beliefs, assumptions and expectations may change
as a result of many possible events, circumstances or factors, not all of
which are currently known to Xenith Bankshares. If a change occurs, Xenith
Bankshares' business, financial condition, liquidity, results of operations
and prospects may vary materially from those expressed in, or implied by, the
forward-looking statements. Accordingly, you should not place undue reliance
on these forward-looking statements. Factors that may cause actual results to
differ materially from those contemplated by these forward-looking statements
include the risks discussed in Xenith Bankshares' public filings with the
Securities and Exchange Commission, including those outlined in Part I, Item
1A, "Risk Factors" of Xenith Bankshares' Annual Report on Form 10-K for the
year ended December 31, 2012. Except as required by applicable law or
regulations, Xenith Bankshares does not undertake, and specifically disclaims
any obligation, to update or revise any forward-looking statement.

^1 Please see the discussion of non-GAAP financial measures at the end of the
financial tables.

                      -Selected Financial Tables Follow-

                                                              
 XENITH BANKSHARES, INC. AND SUBSIDIARY                       
 CONDENSED CONSOLIDATED BALANCE SHEETS                        
 AS OF DECEMBER 31, 2012 AND DECEMBER 31,                     
2011 
                                                              
                                            (Unaudited)       
(in thousands, except share data)          December 31, 2012 December 31, 2011
Assets                                                        
Cash and cash equivalents                                     
Cash and due from banks                     $ 9,457           $ 50,540
Federal funds sold                          2,906             5,255
Total cash and cash equivalents             12,363            55,795
Securities available for sale, at fair      57,551            68,466
value
Loans held for sale                         80,867            --
Loans held for investment, net of
allowance for loan and lease losses, 2012   379,006           321,859
- $4,875; 2011 - $4,280
Premises and equipment, net                 5,397             6,009
Other real estate owned                     276               808
Goodwill and other intangible assets, net   15,989            16,354
Accrued interest receivable                 1,606             1,475
Deferred tax asset                          4,094             --
Other assets                                6,057             6,699
Total assets                                $ 563,206         $ 477,465
Liabilities and Shareholders' Equity                          
Deposits                                                      
Demand and money market                     $ 317,526         $ 228,031
Savings                                     4,069             3,517
Time                                        131,636           143,459
Total deposits                              453,231           375,007
Accrued interest payable                    232               351
Borrowings                                  20,000            20,000
Other liabilities                           2,196             1,803
Total liabilities                           475,659           397,161
Shareholders' equity                                          
Preferred stock, $1.00 par value, $1,000
liquidation value, 25,000,000 shares
authorized as of December 31, 2012 and      8,381             8,381
2011; 8,381 shares issued and outstanding
as of December 31, 2012 and 2011,
respectively
Common stock, $1.00 par value, 100,000,000
shares authorized as of December 31, 2012
and 2011; 10,488,060 and 10,446,928 shares  10,488            10,447
issued and outstanding as of December 31,
2012 and 2011, respectively
Additional paid-in capital                  71,414            70,964
Accumulated deficit                         (3,660)           (10,950)
Accumulated other comprehensive income,     924               1,462
net of tax
Total shareholders' equity                  87,547            80,304
Total liabilities and shareholders' equity  $ 563,206         $ 477,465

                                                              
 XENITH BANKSHARES, INC. AND SUBSIDIARY 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) 
 FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 
 
                                            (Unaudited)       
(in thousands, except per share data)      December 31, 2012 December 31, 2011
Interest income                                               
Interest and fees on loans                  $ 24,254          $ 16,879
Interest on securities                      1,437             1,806
Interest on federal funds sold and          285               206
deposits in other banks
Total interest income                       25,976            18,891
Interest expense                                              
Interest on deposits                        2,656             1,420
Interest on time certificates of $100,000   919               673
and over
Interest on federal funds purchased and     372               553
borrowed funds
Total interest expense                      3,947             2,646
Net interest income                         22,029            16,245
Provision for loan and lease losses         1,819             4,005
Net interest income after provision for     20,210            12,240
loan and lease losses
Noninterest income                                            
Service charges on deposit accounts         304               208
Net loss on sale and write-down of OREO     (11)              (17)
Gains on sales of securities                220               65
Bargain purchase gain                       --                8,658
Loss on the write-down of equipment and     --                (79)
other assets
Other                                       230               160
Total noninterest income                    743               8,995
Noninterest expense                                           
Compensation and benefits                   10,579            9,120
Occupancy                                   1,439             1,472
FDIC insurance                              326               292
Bank franchise taxes                        615               420
Technology                                  1,580             1,529
Communications                              272               311
Insurance                                   295               168
Professional fees                           1,187             1,777
OREO expenses                               16                193
Amortization of intangible assets           365               225
Other expenses                              1,470             1,206
Total noninterest expense                   18,144            16,713
Income before income tax                    2,809             4,522
Income tax benefit (expense)                4,570             (75)
Net income                                  7,379             4,447
Earnings per common share (basic and        $ 0.70            $ 0.48
diluted):

 
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
($ in thousands, except per share data)
                                                                         
PERFORMANCE       Quarter Ended                                 Year Ended
RATIOS
                  December   September  June   March  December           
                  31,        30,        30,    31,    31,
                  2012       2012       2012   2012   2011      2012    2011
Net interest      4.18%      4.54%      4.75%  4.44%  5.18%     4.47%   4.88%
margin (1)
Return on average 0.24%      4.38%      0.67%  0.26%  0.18%     1.42%   1.24%
assets (2)
Return on average 1.68%      31.86%     4.56%  1.73%  1.10%     9.89%   7.01%
common equity (3)
Efficiency ratio  80%        75%        76%    88%    81%       80%     66%
(4)
Net income         $ 332      5,903      832    312    215       7,379   4,447
Earnings per
common share       $ 0.03     0.56       0.08   0.03   0.02      0.70    0.48
(basic and
diluted)
______________________________
(1) Net interest margin is the percentage of net interest income divided by
average interest-earning assets.
(2) Return on average assets is net income for the respective period
(annualized for quarter periods) divided by average assets for the respective
period.
(3) Return on average equity is net income for the respective period
(annualized for quarter periods) divided by average equity for the respective
period.
(4) Efficiency ratio is noninterest expenses divided by the sum of net
interest income and noninterest income.

ASSET QUALITY RATIOS     Quarter Ended                                        
                         December   September   June 30,   March  December    
                         31,        30,                    31,    31,
                         2012       2012        2012       2012   2011        
Net charge-offs as a
percentage of average    0.35%      0.28%       0.23%      0.13%  0.58%       
loans held for
investment
Allowance for loan and
lease losses (ALLL) as a
percentage of total      1.27%      1.37%       1.32%      1.26%  1.31%       
loans held for
investment (1)
ALLL plus remaining
discounts (fair value
adjustments) on acquired 3.32%      3.91%       4.48%      4.67%  5.38%       
loans as a percentage of
total loans held for
investment (2)
ALLL to nonaccrual loans 96.16%     95.94%      77.15%     71.98% 73.01%      
(1)
Nonperforming assets as
a percentage of total    1.39%      1.52%       1.86%      1.89%  2.05%       
loans held for
investment
Nonperforming assets as
a percentage of total    0.95%      0.93%       1.16%      1.26%  1.40%       
assets
______________________________
(1) ALLL excludes discounts (fair value adjustments) on acquired loans.
(2) Ratio is a non-GAAP financial measure calculated as the sum of ALLL and
discounts (fair value adjustments) on acquired loans held for investment
divided by the sum of total loans held for investment and discounts on
loans. See discussion of non-GAAP financial measures below.
 

                                                                             
CAPITAL RATIOS      Quarter Ended                                            
                    December   September   June 30,   March    December      
                    31,        30,                    31,      31,
                    2012       2012        2012       2012     2011          
Tier 1 leverage     12.90%     13.02%      13.35%     13.53%   13.42%        
ratio
Tier 1 risk-based   15.39%     17.01%      16.24%     16.70%   17.86%        
capital ratio
Total risk-based    16.52%     18.24%      17.41%     17.80%   19.08%        
capital ratio
Book value per       $ 7.55     7.54        7.01       6.91     6.88         
common share (1)
Tangible book value
per common share     $ 6.02     6.00        5.46       5.35     5.32         
(2)
______________________________
(1) Book value per common share is total shareholders' equity less preferred
stock divided by common shares outstanding at the end of the respective
period.
(2) Tangible book value per common share is a non-GAAP financial measure
calculated as total shareholders' equity less the sum of preferred stock and
goodwill and other intangible assets divided by common shares outstanding at
the end of the respective period. See discussion of non-GAAP financial
measures below.

AVERAGE       Quarter Ended                                   Year Ended
BALANCES (1)
              December   September June 30, March    December           
              31,        30,                31,      31,
              2012       2012      2012     2012     2011     2012     2011
Total assets   $ 558,133  539,544   495,602  483,393  483,170  519,330  359,726
Loans held     $ 72,676   75,396    45,451   4,255    --       49,579   --
for sale
Loans held
for
investment,
net of         $ 351,335  333,346   324,882  320,251  301,960  332,507  224,175
allowance for
loan and
lease losses
Total          $ 447,829  434,640   391,591  380,570  380,318  413,808  268,318
deposits
Shareholders'  $ 87,623   82,485    81,368   80,521   80,303   83,010   65,769
equity
______________________________
(1) Average balances are computed on a daily basis.

END OF PERIOD BALANCES  Quarter Ended                                         
                        December 31, September June 30, March 31, December    
                                     30,                          31,
                        2012         2012      2012     2012      2011        
Total assets             $ 563,206    558,011   523,594  495,190   477,465    
Loans held for sale      $ 80,867     74,632    76,976   29,098    --         
Loans held for
investment, net of       $ 379,006    336,495   321,991  324,980   321,859    
allowance for loan and
lease losses
Total deposits           $ 453,231    448,144   419,316  392,263   375,007    
Shareholders' equity     $ 87,547     87,172    81,593   80,587    80,304     
 
 

RECONCILIATION OF GAAP TO                                              
NON-GAAP FINANCIAL MEASURES 
                               Quarter Ended
                               December   September June 30, March    December
                               31,        30,                31,      31,
ALLL + Discount / Gross Loans  2012       2012      2012     2012     2011
Allowance for loan and lease    $ 4,875    4,658     4,323    4,137    4,280
losses
 Add: Discounts (fair value     $ 8,133    9,040     10,764   11,799   14,007
adjustments) on acquired loans
Total ALLL + discounts on       $ 13,008   13,698    15,087   15,936   18,287
acquired loans
Gross loans held for
investment + discounts (fair    $ 392,014  350,193   337,078  340,916  340,146
value adjustments) on acquired
loans
ALLL plus discounts (fair
value adjustments) on acquired 3.32%      3.91%     4.48%    4.67%    5.38%
loans as a percentage of total
loans held for investment
                                                                       
                                                                       
Tangible book value per common                                         
share
Total shareholders' equity      $ 87,547   87,172    81,593   80,587   80,304
 Deduct: Preferred stock        $ 8,381    8,381     8,381    8,381    8,381
Common shareholders' equity     $ 79,166   78,791    73,212   72,206   71,923
 Deduct: Goodwill and other     $ 15,989   16,080    16,172   16,263   16,354
intangible assets
Tangible common shareholders'   $ 63,177   62,711    57,040   55,943   55,569
equity
Common shares outstanding       10,488     10,447    10,447   10,447   10,447
Tangible book value per common  $ 6.02     6.00      5.46     5.35     5.32
share
______________________________                                         
Allowance for loan and lease losses (ALLL) plus discounts on acquired loans as
a percentage of total loans held for investment and tangible book value per
share are supplemental financial measures that are not required by, or
presented in accordance with, U.S. GAAP. Management believes that ALLL plus
discounts on acquired loans held for investment is meaningful because it is
one of the measures we use to assess our asset quality. Management believes
that tangible book value per common share is meaningful because it is one of
the measures we use to assess capital adequacy. Set forth above are
reconciliations of each of these non-GAAP financial measures calculated and
reported in accordance with GAAP. Book value is the same as shareholders'
equity presented on our consolidated balance sheets. Our calculations of these
non-GAAP financial measures may not be comparable to the calculation of
similarly titled measures reported by other companies.

CONTACT: Thomas W. Osgood
         Executive Vice President, Chief Financial Officer,
         Chief Administrative Officer and Treasurer
         (804) 433-2209
         tosgood@xenithbank.com

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