Community Bank of Northern Virginia Announces Record First Quarter Earnings.Business Editors STERLING, Va.--(BUSINESS WIRE)--April 17, 2003 Community Bank of Northern Virginia Northern Virginia (NoVA) consists of Arlington, Fairfax, Loudoun, and Prince William counties and the independent cities of Alexandria, Falls Church, Fairfax, Manassas, and Manassas Park. (Nasdaq:CBNV CBNV Community Bank of Northern Virginia ) today announced record first quarter 2003 net income of $2,618,510, or $0.25 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. common share, compared to $1,070,573, or $0.11 per diluted common share for the same period last year. Return on average equity for the first quarter 2003 was 20.23% compared to 11.16% for the same period last year. Return on average assets for the first quarter 2003 was 1.61% compared to 0.71% for the same quarter last year. Comparing the first quarter of 2003 and 2002, net interest income increased 14.8% as the net interest margin increased from 4.01% in 2002 to 4.22% in 2003. Net interest income increased as the decline in the Bank's cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. outpaced the decline in earning asset Earning asset An asset that generates income, e.g., income from rental property. yield. The provision for possible loan losses declined by $1.6 million as the Bank was able to reduce its reserves associated with potential recourse The right of an individual who is holding a Commercial Paper, such as a check or promissory note, to receive payment on it from anyone who has signed it if the individual who originally made it is unable, or refuses, to tender payment. obligations by $543,000 in 2003. Last year's first quarter provision expense included an additional $1.2 million to address concerns related to the credit quality of the wholesale mortgage loan portfolio. The Bank closed its wholesale mortgage division in March 2002 due to these credit quality concerns and exited the mortgage origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real business effective December December: see month. 31, 2002. Both other income and operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. declined dramatically in 2003 compared to 2002 as a consequence of the Bank's exit from the mortgage origination business. Other income in 2003 includes securities gains of $431,000 and losses on the sale of OREO of $110,000. No securities gains or OREO losses were recognized in the same period in 2002. The efficiency ratio improved to 53.79% for 2003 from 82.53% for 2002, reflecting the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. effects of the elimination of the mortgage division and a bank-wide focus on expense control. David P. Summers, President and Chief Executive Officer, stated, "We are pleased to report record quarterly earnings for the third consecutive quarter. Our renewed focus on core banking activities and community investment has yielded very positive results that have been achieved despite the conflict in Iraq Iraq or Irak (both: ēräk`, ĭrăk`), officially Republic of Iraq, republic (2005 est. pop. 26,075,000), 167,924 sq mi (434,924 sq km), SW Asia. and a less than robust domestic economy." Asset quality continues to improve as the Bank's non-performing asset ratio stood at 0.56% at March 31 2003, compared to 0.84% at March 31, 2002 and 0.69% at December 31, 2002. The allowance for possible loan losses to loans held for investment stood at 1.25% at March 31, 2003 compared to 0.85% at March 31, 2002. The Bank continues to maintain a separate valuation allowance related to off-balance sheet recourse exposure that stood at $2.3 million at March 31, 2003. Total assets as of March 31, 2003, were $704.7 million, an increase of 12% from March 31, 2002. Total deposits increased 2% to $549.2 million and total loans held for investment increased 15% to $432.3 million. In addition, stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. totaled approximately $52.9 million at March 31, 2003. Branch expansion continues with two branch locations identified in Chantilly and Reston, Virginia Reston is an internationally known planned community whose goal was to revolutionize post-World War II concepts of land use and residential/corporate development in American suburbia. . Management intends to open these locations in the second and third quarter of 2003, respectively. Based upon the planned branch expansion and the recent bank merger activity in the region, Community Bank may be afforded an opportunity for increased market share. Community Bank of Northern Virginia (http://www.cbnv.com/) began banking activities in 1992 upon receiving its charter from the Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). State Corporation Commission through the acquisition of assets Acquisition of assets A merger or consolidation in which an acquirer purchases the selling firm's assets. and liabilities of an existing bank. Community Bank is a full-service banking institution that operates eleven branch offices and fourteen automated teller machines automated teller machine (ATM), device used by bank customers to process account transactions. Typically, a user inserts into the ATM a special plastic card that is encoded with information on a magnetic strip. . The primary services offered by its 110 full-time equivalent Full-time equivalent (FTE) is a way to measure a worker's involvement in a project, or a student's enrollment at an educational institution. An FTE of 1.0 means that the person is equivalent to a full-time worker, while an FTE of 0.5 signals that the worker is only half-time. employees include retail banking, home banking and commercial banking. This press release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. with respect to the plans, objectives, future performance and business of Community Bank of Northern Virginia. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) competitive pressure in the banking industry increase significantly; (2) changes in the interest rate environment reduce margins; (3) general economic conditions either nationally or regionally are less favorable than expected, resulting in, among other things, a deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in credit quality; (4) changes occur in the regulatory environment; (5) changes occur in business conditions; (6) changes occur in the securities markets; and (7) the Bank's loan loss reserve to address credit quality concerns may be inadequate, and additional reserves are necessary; (8) strategies to enhance earnings and/or shareholder value are not implemented or fail to have the effects anticipated; (9) recent bank merger activity may not result in the Bank's realizing its goals of increased market share and additional branch expansion, and (10) litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Bank's second mortgage lending Second mortgage lending Loans secured by real estate previously pledged in a first mortgage. does not have the effects anticipated and liabilities resulting from the litigation are greater than expected.
COMMUNITY BANK OF NORTHERN VIRGINIA
FINANCIAL HIGHLIGHTS
(Unaudited)
Quarter Ended
---------------------------
3/31/03 3/31/02
------------- -------------
Book value per share $5.25 $4.47
Weighted average shares outstanding 10,022,210 9,234,546
Potential dilutive common shares 10,300,689 9,528,041
Balance Sheet (averages)
-------------------------------------------
Investments $208,944,603 $100,176,129
Gross Loans $429,444,630 $482,839,339
Deposits $517,077,489 $527,865,253
Total Assets $661,669,692 $613,360,611
Operations
-------------------------------------------
Interest income $9,916,713 $10,705,432
Interest expense 3,355,698 4,991,114
------------- -------------
Net interest income 6,561,015 5,714,318
Provision for possible loan losses (143,000) 1,439,500
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Net interest income after provision
For possible loan losses 6,704,015 4,274,818
Other income 1,193,996 12,007,765
Operating expenses 4,027,681 14,668,880
------------- -------------
Income before taxes 3,870,330 1,613,703
Applicable income taxes 1,251,820 543,130
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Net income $2,618,510 $1,070,573
============= =============
Basic earnings per share of common stock $0.26 $0.12
Diluted earnings per share of common stock $0.25 $0.11
Dividends per share $0.07 $0.05
Ratios
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Return on average assets 1.61% .71%
Return on average equity 20.23% 11.16%
Gross loans to deposits 79.76% 84.97%
Net interest margin (tax equivalent) 4.22% 4.01%
Overhead ratio 1.74% 1.76%
Operating efficiency 53.79% 82.53%
Non-performing assets to total assets 0.56% 0.84%
Net charge-offs to average loans held
for
investment (annualized) 0.14% 0.15%
Allowance for possible loan losses
to loans held for investment 1.25% 0.85%
Regulatory Capital Ratios-End of Period
-------------------------------------------
Tier 1 risk-based capital ratio 10.70% 9.03%
Combined Tier 1 and Tier 2
risk-based capital ratio 11.83% 9.69%
Leverage ratio 7.83% 7.23%
STOCK TRADING PRICE
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Bid Ask
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03/31/03 $18.89 $18.98
12/31/02 $11.25 $11.28
09/30/02 $10.40 $10.95
06/30/02 $10.15 $10.74
03/31/02 $11.20 $11.43
12/31/01 $11.75 $12.49
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