NORFOLK, Va., April 25, 2012 /PRNewswire/ -- Heritage Bankshares, Inc. ("Heritage"; the "Company") (OTCBB: HBKS), the parent of Heritage Bank (the "Bank"), today announced unaudited financial results for the first quarter of 2012.
The Company's net income for the first quarter of 2012 was a first quarter record of $630,000, compared to net income of $560,000 for the first quarter of 2011, an increase of $70,000, or 12.5%. After the impact of dividends on our outstanding preferred stock, earnings per share for the first quarter 2012 were $0.25, compared to $0.16 for the first quarter 2011.
Michael S. Ives, President and CEO of the Company and the Bank, commented:
"Once again, we have announced record quarterly net income. Of greater importance, our core banking business continues to be the source of virtually all of our net income, and we do not expect that this will change in the future."
Comparison of Operating Results for the Three Months Ended March 31, 2012 and 2011
Overview. The Company's pretax income was $882,000 for the first quarter of 2012, compared to pretax income of $833,000 for the first quarter of 2011, an increase of $49,000.
Net Interest Income. The Company's net interest income before provision for loan losses remained unchanged, comparing the first quarters of 2012 and 2011. Our average loan portfolio decreased by $1.0 million from $217.9 million in the first quarter of 2011 to $216.9 million in the first quarter of 2012, while our average investment in securities available for sale and other interest-earning assets (excluding loans) increased by $16.9 million, for a net increase in interest-earning assets of $15.9 million comparing the two quarters. Average interest-bearing liabilities increased by $14.7 million from the first quarter of 2011 to $167.3 million in the first quarter of 2012, resulting primarily from increases in average interest-bearing deposits of $16.8 million, partially offset by a $2.1 million reduction in borrowings. The average yield on our interest-earning assets was adversely impacted by lower yields on loans and an increase in the average balance of investment securities and other interest-earning assets, which was only partially offset by a decrease in the average cost of interest-bearing liabilities. As a result, our interest rate spread decreased 17 basis points from 3.97% in the first quarter of 2011 to 3.80% in the first quarter of 2012, and our net interest margin decreased 29 basis points from 4.33% in the first quarter of 2011 to 4.04% in the first quarter of 2012.
Provision for Loan Losses. There was no provision for loan losses recorded for the quarters ending March 31, 2012 and March 31, 2011.
Noninterest Income. Total noninterest income increased by $77,000, from $184,000 in the first quarter of 2011 to $261,000 in the first quarter of 2012. This increase is primarily attributable to $66,000 in income from bank-owned life insurance in the first quarter of 2012 that did not occur in the first quarter of 2011.
Noninterest Expense. Total noninterest expense was $2.1 million for the first quarter of 2012, unchanged from the first quarter of 2011. Increases in a valuation allowance for other real estate owned and occupancy expenses of $37,000 and $32,000, respectively, were mostly offset by decreases in the FDIC assessment, marketing expenses, and professional fees of $39,000, $13,000 and $12,000, respectively.
Income Taxes. The Company's income tax expense for the first quarter of 2012 was $252,000, reflecting an effective tax rate of 28.5%, compared to income tax expense of $273,000 for the first quarter of 2011, reflecting an effective tax rate of 32.8%. This reduction in rate was attributable to increases in tax-exempt interest income and other non-taxable income.
Net Income Available to Common Stockholders. Because of qualified loan growth, the dividend rate on our SBLF program preferred stock was 2.44% for the first quarter 2012, compared to a composite 5.25% rate on our TARP preferred stock for the first quarter of 2011, resulting in a decrease in dividends on preferred stock of $80,000 in the first quarter of 2012 compared to the first quarter of 2011. Net income available to common stockholders was $583,000 for the first quarter of 2012, compared to $361,000 for the first quarter of 2011, an increase of $222,000, or $0.09 per diluted share.
Financial Condition of the Company
Total Assets. The Company's total assets increased by $34.6 million, or 12.8%, from $271.6 million at March 31, 2011 to $306.2 million at March 31, 2012. The increase in assets resulted primarily from a $28.1 million increase in our aggregate cash, securities available for sale, interest-bearing deposits in other banks and federal funds sold, together with a $5.0 million increase in bank-owned life insurance.
Investments. Securities available for sale increased by $34.7 million to $52.6 million at March 31, 2012 compared to $17.9 million at March 31, 2011. Certificates of deposit, interest-bearing deposits in other banks, and federal funds sold decreased by a total of $8.4 million, from $18.4 million at March 31, 2011 to $10.0 million at March 31, 2012.
Loans. Loans held for investment, net, were $215.3 million at March 31, 2012, an increase of $800,000, or 0.4%, from the loan balance of $214.5 million at March 31, 2011.
Asset Quality. Nonperforming assets were $1,682,000, or 0.55% of assets, at March 31, 2012, compared to $263,000, or 0.10% of assets, in nonperforming assets at March 31, 2011. Other real estate owned consisted of a bank branch site that we no longer plan to utilize and an additional property obtained through foreclosure proceedings against one borrower.
Deposits. Total deposits at March 31, 2012 were $257.0 million compared to $226.4 million at March 31, 2011, an increase of $30.6 million, or 13.5%. Core deposits, which are comprised of noninterest-bearing, money market, NOW and savings deposits, increased by $43.8 million, or 24.6%, from $178.2 million at March 31, 2011 to $222.0 million at March 31, 2012. Noninterest-bearing deposits increased by $14.4 million to $94.9 million at March 31, 2012 and, as a percentage of total deposits, increased from 35.6% at March 31, 2011 to 36.9% at March 31, 2012.
Average total deposits increased by $25.6 million, or 11.2%, from $227.8 million for the three-month period ended March 31, 2011 to $253.4 million for the three-month period ended March 31, 2012. Average core deposits increased by $34.9, or 19.4%, million over the comparable three-month periods. Average noninterest-bearing deposits have increased by $8.8 million from $83.1 million in the three-month period ending March 31, 2011 to $91.9 million in the comparable period ending March 31, 2012. As a percentage of total average deposits, average noninterest-bearing deposits decreased slightly from 36.5% at March 31, 2011 to 36.3% at March 31, 2012.
Borrowed Funds. Borrowed funds increased by $2.4 million, from $8.0 million at March 31, 2011 to $10.4 million at March 31, 2012.
Capital. Stockholders' equity increased by $1.6 million, or 4.5%, from $35.2 million at March 31, 2011 to $36.8 million at March 31, 2012, primarily from an increase in earnings.
Certain reclassifications have been made to prior period financial statements to conform them to the current period presentation.
The tables attached to and incorporated within this release present in greater detail certain of the unaudited financial information described above.
Dividends
On April 25, 2012, our Board of Directors declared a $0.06 per share dividend on our common stock. The dividend will be paid on May 18, 2012 to shareholders of record on May 7, 2012.
The same day, the Board of Directors also declared a dividend on the preferred stock issued in connection with our participation in the SBLF program. Specifically, the Board declared a cash dividend of$19,500.00, which represents the expected amount of the dividend next payable by the Company under the SBLF program based on its applicable level of "Qualified Small Business Lending". This dividend shall be payable and paid on July 2, 2012 to the holders of the SBLF preferred stock of record on June18, 2012 (currently the sole shareholder of record of the SBLF preferred stock is the Secretary of the Treasury).
About Heritage
Heritage is the parent company of Heritage Bank (www.heritagebankva.com). Heritage Bank has four full-service branches in the city of Norfolk, two full-service branches in the city of Virginia Beach, and one full service branch in the city of Chesapeake. Heritage Bank provides a full range of banking services including business, personal and mortgage loans.
Forward Looking Statements
The press release contains statements that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements address future events, developments or results and typically use words such as believe, anticipate, expect, intend, plan, forecast, outlook, or estimate. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Heritage's actual results, performance, achievements, and business strategy to differ materially from the anticipated results, performance, achievements or business strategy expressed or implied by such forward-looking statements. Factors that could cause such actual results, performance, achievements and business strategy to differ materially from anticipated results, performance, achievements and business strategy include: general and local economic conditions, competition, significant increases in capital requirements or other significant changes in regulatory requirements, customer demand for Heritage's banking products and services, and the risks and uncertainties described in Heritage's most recent Form 10-K filed with the Securities and Exchange Commission. Heritage disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
HERITAGE BANKSHARES, INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands) | ||||||||
At March 31, | ||||||||
2012 | 2011 | |||||||
(unaudited) | (audited) | |||||||
ASSETS | ||||||||
Cash and due from banks | $ 5,989 | $ 4,133 | ||||||
Interest-bearing deposits in other banks | 9,988 | 16,460 | ||||||
Federal funds sold | 16 | 399 | ||||||
Total cash and cash equivalents | 15,993 | 20,992 | ||||||
Certificates of deposit in other banks | - | 1,526 | ||||||
Securities available for sale, at fair value | 52,549 | 17,878 | ||||||
Loans, net | ||||||||
Held for investment, net of allowance for loan losses | 215,346 | 214,507 | ||||||
Held for sale | - | - | ||||||
Accrued interest receivable | 754 | 663 | ||||||
Stock in Federal Reserve Bank, at cost | 594 | 592 | ||||||
Stock in Federal Home Loan Bank of Atlanta, at cost | 891 | 1,773 | ||||||
Premises and equipment, net | 10,994 | 11,032 | ||||||
Other real estate owned | 1,682 | 263 | ||||||
Bank-owned life insurance | 5,559 | 597 | ||||||
Other assets | 1,887 | 1,782 | ||||||
Total assets | $ 306,249 | $ 271,605 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Liabilities | ||||||||
Deposits | ||||||||
Noninterest-bearing | $ 94,927 | $ 80,558 | ||||||
Interest-bearing | 162,049 | 145,809 | ||||||
Total deposits | 256,976 | 226,367 | ||||||
Federal Home Loan Bank Advances | 7,300 | 6,000 | ||||||
Securities sold under agreements to repurchase | 2,414 | 1,020 | ||||||
Other borrowings | 703 | 1,010 | ||||||
Accrued interest payable | 54 | 98 | ||||||
Other liabilities | 2,044 | 1,919 | ||||||
Total liabilities | 269,491 | 236,414 | ||||||
Stockholders' equity | ||||||||
Preferred stock, no par value - 1,000,000 shares authorized: | ||||||||
Fixed rate cumulative perpetual preferred stock, Series A, | ||||||||
0 shares and 7,497 shares issued and outstanding at March 31, | ||||||||
2012 and March 31, 2011, respectively | - | 7,497 | ||||||
Fixed rate cumulative perpetual preferred stock, Series B, | ||||||||
0 shares and 303 shares issued and outstanding at March 31, | ||||||||
2012 and March 31, 2011, respectively | - | 303 | ||||||
Senior non-cumulative perpetual preferred stock, SeriesC, | ||||||||
7,800 shares and 0 shares issued and outstanding at March 31, | ||||||||
2012 and March 31, 2011, respectively | 7,800 | - | ||||||
Common stock, $5 par value - 6,000,000 shares authorized; | ||||||||
2,305,965 and 2,307,502 shares issued and outstanding | ||||||||
at March 31, 2012 and March 31, 2011, respectively | 11,530 | 11,538 | ||||||
Additional paid-in capital | 6,729 | 6,674 | ||||||
Retained earnings | 10,411 | 9,007 | ||||||
Discount on preferred stock | - | (164) | ||||||
Accumulated other comprehensive income, net | 288 | 336 | ||||||
Total stockholders' equity | 36,758 | 35,191 | ||||||
Total liabilities and stockholders' equity | $ 306,249 | $ 271,605 | ||||||
HERITAGE BANKSHARES, INC. | ||||
CONSOLIDATED STATEMENTS OF INCOME | ||||
(in thousands, except per share data) | Three Months Ended | |||
March 31, | ||||
2012 | 2011 | |||
(unaudited) | (unaudited) | |||
Interest income | ||||
Interest income and fees on loans | $ 2,668 | $ 2,855 | ||
Interest on taxable investment securities | 276 | 148 | ||
Dividends on FRB and FHLB stock | 12 | 12 | ||
Interest on federal funds sold | - | - | ||
Other interest income | 6 | 27 | ||
Total interest income | 2,962 | 3,042 | ||
Interest expense | ||||
Deposits | 251 | 305 | ||
Borrowings | 9 | 16 | ||
Total interest expense | 260 | 321 | ||
Net interest income | 2,702 | 2,721 | ||
Provision for loan losses | - | - | ||
Net interest income after provision for loan losses | 2,702 | 2,721 | ||
Noninterest income | ||||
Service charges on deposit accounts | 68 | 92 | ||
Late charges and other fees on loans | 47 | 16 | ||
Income from bank-owned life insurance | 66 | - | ||
Other | 80 | 76 | ||
Total noninterest income | 261 | 184 | ||
Noninterest expense | ||||
Compensation | 1,099 | 1,083 | ||
Data processing | 155 | 144 | ||
Occupancy | 223 | 191 | ||
Furniture and equipment | 138 | 146 | ||
Taxes and licenses | 79 | 85 | ||
Professional fees | 107 | 119 | ||
FDIC assessment | 40 | 79 | ||
Marketing | 26 | 39 | ||
Telephone | 32 | 32 | ||
Loss on sale or impairment of other real estate owned | 37 | - | ||
Other | 145 | 154 | ||
Total noninterest expense | 2,081 | 2,072 | ||
Income before provision for income taxes | 882 | 833 | ||
Provision for income taxes | 252 | 273 | ||
Net income | $ 630 | $ 560 | ||
Preferred stock dividend and accretion of discount | $ (47) | $ (199) | ||
Net income available to common stockholders | $ 583 | $ 361 | ||
Earnings per common share | ||||
Basic | $ 0.25 | $ 0.16 | ||
Diluted | $ 0.25 | $ 0.16 | ||
Dividends per share | $ 0.06 | $ 0.06 | ||
Weighted average shares outstanding - basic | 2,305,820 | 2,307,502 | ||
Effect of dilutive stock options | 39,239 | 10,589 | ||
Weighted average shares outstanding - diluted | 2,345,059 | 2,318,091 | ||
HERITAGE BANKSHARES, INC. | |||
OTHER SELECTED FINANCIAL INFORMATION | |||
(Unaudited) | |||
(in thousands, except share, per share data, and ratios) | |||
Three Months Ended | |||
March 31, | |||
2012 | 2011 | ||
Financial ratios | |||
Annualized return on average assets (1) | 0.85% | 0.83% | |
Annualized return on average common equity (2) | 8.74% | 8.22% | |
Average equity to average assets | 12.33% | 13.58% | |
Equity to assets, at period-end | 12.00% | 12.96% | |
Net interest margin (3) | 4.04% | 4.33% | |
Per common share | |||
Earnings per share - basic | $ 0.25 | $ 0.16 | |
Earnings per share - diluted | $ 0.25 | $ 0.16 | |
Book value per share | $ 12.56 | $ 11.94 | |
Dividends declared per share | $ 0.06 | $ 0.06 | |
Common stock outstanding | 2,305,965 | 2,307,502 | |
Weighted average shares outstanding - basic | 2,305,820 | 2,307,502 | |
Weighted average shares outstanding - diluted | 2,345,059 | 2,318,091 | |
Asset quality | |||
Nonaccrual loans | $ - | $ - | |
Accruing loans past due 90 days or more | - | - | |
Total nonperforming loans | - | - | |
Other real estate owned, net | 1,682 | 263 | |
Total nonperforming assets | $ 1,682 | $ 263 | |
Nonperforming assets to total assets | 0.55% | 0.10% | |
Allowance for loan losses | |||
Balance, beginning of period | $ 2,091 | $ 2,090 | |
Provision for loan losses | - | - | |
Loans charged-off | (1) | (1) | |
Recoveries | 20 | 4 | |
Balance, end of period | $ 2,110 | $ 2,093 | |
Allowance for loan losses to gross loans held for | |||
investment, net of unearned fees and costs | 0.97% | 0.97% | |
(1) Return is defined as net income, after tax, before preferred stock dividend and accretion of discount divided by average total assets. | |||
(2) Return is defined as net income, after tax, before preferred stock dividend and accretion of discount divided by average common equity. | |||
(3) Tax equivalency calculations have been included in the computation of net interest margin and net interest spread. | |||
SOURCE Heritage Bankshares, Inc.
