Bank of Virginia Reports First Quarter 2011 Results

Bank of Virginia (Nasdaq:BOVA) (www.bankofva.com), announced financial results for the first quarter of 2011.

For the quarter ended March 31, 2011, the Bank reported a net loss of $1.77 million, or ($0.16) per share, compared with a net loss of $358,000 or ($0.08) per share for the quarter ended March 31, 2010. The loss was driven primarily by increases in the provision for losses on impaired loans and credit-related charge-offs. The net interest margin, at 3.12% for first quarter 2011, remained at the same level as for first quarter 2010, reflecting substantial and roughly equal declines in both deposit costs and the yield on earning assets. Net interest income declined $148,000 to $1.46 million for the quarter ended March 31, 2011, compared to $1.61 million for the quarter ended March 31, 2010, as average earning assets declined $19.5 million. On a linked quarter basis, net interest income declined $185,000 in the first quarter of 2011 from the $1.65 million recorded for the quarter ended December 31, 2010.

"While we are disappointed at the need to increase our provision for losses, we believe that our strengthened credit risk management and lending practices and the addition of a talented new senior credit team will result in sustained improvements in the Bank's credit portfolio for years to come," commented Jack Zoeller, Chairman and CEO.

Well Capitalized

The bank remained well-capitalized at March 31, 2011, with a total risk-based capital ratio of 11.6%. This compares to the 10% minimum total risk-based capital requirement to be considered well-capitalized. At March 31, 2011, the Bank's Tier 1 leverage ratio was 7.1% compared with 7.9% at December 31, 2010, which exceeded the well-capitalized threshold of 4.0%. The Bank's tier one capital to risk-weighted assets ratio was 10.3% on March 31, 2011, substantially exceeding the well capitalized threshold of 5.0%. The Bank's total capital declined $1.8 million in the first quarter of 2011 to $15.2 million from $17.0 million at December 31, 2010.

Review of the balance sheet

The Bank's total assets decreased $4.5 million to $204.7 million at March 31, 2011, compared to $209.2 million at December 31, 2010. Net loans declined $9.7 million from $139.7 million at December 31, 2010 to $130.0 million at March 31, 2011. The decline in loan balances was attributable to additional loan charge-offs and increased reserves as well as efforts to reduce the exposure to commercial real estate and construction loans. Net securities available for sale declined $10.9 million to $24.1 million from $35.0 million at December 31, 2010. Offsetting the decreases in loans and securities was an increase of $14.5 million in cash and cash equivalents to $40.2 million at March 31, 2011.

During first quarter 2011, the level of nonperforming assets increased $4.9 million, from $7.5 million at December 31, 2010 to $12.4 million at March 31, 2011 and impaired loans increased $3.1 million, from $22.3 million at December 31, 2010 to $25.4 million at March 31, 2011. The Bank reported net charge offs of $644,000 for the first quarter of 2011 and a $900,000 increase in the allowance for loan losses, from $6.8 million at December 31, 2010 to $7.7 million at March 31, 2011.

The liability side of the balance sheet shows total deposits down moderately to $178.5 million at March 31, 2011, compared to $181.2 million at year end 2010. This decrease is attributable to a strategic decision to target lower cost deposits and reduce deposit balances to align more closely with current loan balances. Total liabilities were $189.5 million and $192.2 million at March 31, 2011 and December 31, 2010, respectively.  

Recent Changes

During the first quarter of 2011, the Bank continued to strengthen its Board and senior management team with the appointment of new, highly qualified directors and senior executives. Hunter R. Hollar, retired CEO of Sandy Spring Bank, and David C. Bushnell, retired senior risk officer of Citigroup, were elected Directors. Another new Director, Todd S. Thompson, former CFO of Citigroup, was elected to the Board in April 2011, subject to regulatory approval. Also in the first quarter, Nancy Corsiglia was elected Chief Financial Officer and subsequently, Roy Barzel was hired as Chief Credit Officer, subject to regulatory approval.

"We are on the cusp of completing the Bank's transition to a new era of credit risk management, and we want to be appropriately reserved and also prepared for renewed and measured loan growth," said Jack Zoeller, Chairman and CEO.  "As for our deposit strategy, the benefits of our tighter pricing have not yet been fully realized, but we anticipate improved net interest margins later in the year, as our new lending goals begin to be achieved. Overall, we are encouraged by the progress we have made in the face of ongoing challenges in the Central Virginia economic environment," Zoeller continued. 

About Bank of Virginia

Bank of Virginia, a Virginia state chartered bank headquartered in Midlothian, Virginia, currently operates five full-service offices in the counties of Chesterfield and Henrico, Virginia. Bank of Virginia's common stock is traded on the NASDAQ stock market under the quotation symbol "BOVA". Additional investor relations information can be found on the internet at www.bankofva.com. Bank of Virginia is a member of the FDIC and Equal Housing Lender.

DISCLAIMER

This news release may include forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include: changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Bank's periodic filings with the Board of Governors of the Federal Reserve System, including the Bank's annual report on Form 10-K as filed with the Board of Governors of the Federal Reserve. Pursuant to the Private Securities Litigation Reform Act of 1995, the Bank does not undertake to update forward-looking statements contained within this news release.

BANK OF VIRGINIA
Balance Sheets
(dollars in thousands)	March 31,	December 31,
	2011	2010
Assets	(Unaudited)	(Audited)
Cash and due from banks	$ 4,583	$ 25,641
Federal funds sold and interest-bearing deposits with banks	35,624	43
Total cash and cash equivalents	40,207	25,684
Securities available for sale, at fair market value	24,091	34,956
Restricted securities	1,428	1,435
Loans, net of allowance for loan losses of $7,671 and
$6,832 in 2011 and 2010, respectively	130,027	139,740
Premises and equipment, net	5,625	5,655
Accrued interest receivable	614	774
Other real estate owned, net of valuation allowance	2,173	551
Other assets	542	395
Total assets	$ 204,707	$ 209,190
Liabilities and Stockholders' Equity
Deposits
Non-interest-bearing	$ 15,639	$ 14,506
Savings and interest-bearing demand	28,581	26,489
Time, $100,000 and over	61,898	64,149
Other time	72,393	76,097
Total deposits	178,511	181,241
Accrued expenses and other liabilities	982	969
FHLB Borrowings	10,000	10,000
Total liabilities	189,493	192,210
Stockholders' Equity
Preferred stock, $5 par value, 5,000,000 shares authorized, none issued	--	--
Common stock, $1 par value, 40,000,000 shares authorized, 11,328,182
shares issued and outstanding in 2011 and 2010, respectively	11,328	11,328
Additional paid-in capital	24,612	24,611
Retained deficit	(21,044)	(19,277)
Accumulated other comprehensive income	318	318
Total stockholders' equity	15,214	16,980
Total liabilities and stockholders' equity	$ 204,707	$ 209,190

BANK OF VIRGINIA
Statements of Operations
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
(in thousands except per share data)
	March 31,	March 31,
	2011	2010
Interest Income:
Interest and fees on loans	$ 2,078	$ 2,450
Investment securities	283	365
Interest on federal funds sold and interest-bearing deposits	11	2
Total interest income	2,372	2,817
Interest Expense:
Interest on deposits	800	1,094
Interest on fed funds purchased and FHLB borrowings	111	114
Total interest expense	911	1,208
Net Interest Income	1,461	1,609
Provision for loan losses	1,483	326
Net interest (loss) income after provision
for loan losses	(22)	1,283
Non-interest Income:
Service charges on deposit accounts	45	37
Net gain on available for sale securities	35	94
Other fee income	76	30
Total non-interest income	156	161
Non-interest Expense:
Salaries and employee benefits	946	830
Occupancy expense	170	173
Equipment expense	76	89
Data processing expense	83	110
Marketing expense	38	31
Legal and professional fees	226	207
FDIC insurance assessments	145	150
Other operating expenses	217	212
Total non-interest expenses	1,901	1,802
Net loss	$ (1,767)	$ (358)
Loss per share, basic	$ (0.16)	$ (0.08)
Loss per share, diluted	$ (0.16)	$ (0.08)
Weighted Average Shares Outstanding, basic	11,328,182	4,551,866
Weighted Average Shares Outstanding, diluted	11,328,182	4,551,866

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(unaudited)
	Three Months Ended			Three Months Ended
	March 31, 2011			March 31, 2010
	Average	Interest	Yield/Rate	Average	Interest	Yield/Rate
	Balance	(1)	(1)	Balance	(1)	(1)
Earning Assets:
Loans (2)	142,940	2,078	5.90%	170,650	2,450	5.82%
Securities Available for Sale	31,041	283	3.70%	35,572	365	4.16%
Federal funds sold and interest-bearing balances	15,796	11	0.28%	3,015	2	0.27%
Total Earning Assets	189,777	2,372	5.07%	209,237	2,817	5.46%
Other Assets	25,865			14,250
Allowance for Loan Losses	(6,905)			(5,249)
Total	$ 208,737			$ 218,238
Interest-Bearing Liabilities:
Demand Deposits	$ 7,739	$ 6	0.31%	$ 6,542	$ 6	0.37%
Savings and Money Market	20,020	35	0.71%	24,211	62	1.04%
Time Deposits	137,895	759	2.23%	145,322	1,026	2.86%
Total Deposits	165,654	800	1.96%	176,075	1,094	2.52%
Federal Funds Purchased and Repurchase Agreements	--	--	0.00%	41	$ --	0.25%
FHLB Borrowings	10,000	111	4.50%	10,000	114	4.62%
Total Interest-bearing liabilities	175,654	911	2.10%	186,116	1,208	2.63%
Demand Deposits	14,613			13,791
Other Liabilities	974			990
Stockholders' Equity	17,496			17,341
Total	$ 208,737			$ 218,238
Net Interest Income, tax equivalent		$ 1,461			$ 1,609
Net Interest Rate Spread (3)			2.97%			2.83%
Net Interest Margin (4)			3.12%			3.12%
(1) There are currently no tax-exempt assets and tax equivalent yields are not presented.
(2) Non-accrual loans are generally included in average balances outstanding but with no related interest income during the period of non-accrual.
(3) Represents the difference between the yield on earning assets and cost of funds.
(4) Represents net interest income divided by average interest earning assets.

	March 31,	December 31,
Capital ratios:	2011	2010
Tier 1 leverage	7.1%	7.9%
Tier 1 capital to risk-weighted assets	10.3%	10.9%
Total regulatory capital to risk-weighted assets	11.6%	12.2%
Total equity to total assets	7.4%	8.1%

Bank of Virginia
Quarterly Earnings Summary
(Unaudited)
	2011	2010
(dollars in thousands)	March 31	March 31	June 30	Sept 30	Dec 31
Interest income	$ 2,372	$ 2,817	$ 2,620	$ 2,755	$ 2,640
Interest expense	911	1,208	1,145	1,105	994
Net interest income	1,461	1,609	1,475	1,650	1,646
Provision for loan losses	1,483	326	162	4,842	3,688
Net interest (loss) income
after provision for loan losses	(22)	1,283	1,313	(3,192)	(2,042)
Other income	121	67	75	60	86
Securities gains	35	94	--	15	435
Other expenses	1,901	1,802	1,652	1,771	2,119
Loss income before income taxes	(1,767)	(358)	(264)	(4,888)	(3,640)
Income taxes	--	--	--	--	--
Net loss	$ (1,767)	$ (358)	$ (264)	$ (4,888)	$ (3,640)
Basic and diluted loss per share	$ (0.16)	$ (0.08)	$ (0.06)	$ (1.07)	$ (0.60)
Weighted-average basic and diluted shares	11,328,182	4,551,866	4,551,866	4,551,866	6,057,714

CONTACT: Jack Zoeller
         Chairman and CEO, 804-763-1333