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Xenith Bankshares, Inc. Reports First Quarter 2016 Results

RICHMOND, Va., May 04, 2016 (GLOBE NEWSWIRE via COMTEX) --

Xenith Bankshares, Inc. XBKS, +0.00% parent company of Xenith Bank, a business-focused bank serving the Greater Washington, D.C., Richmond and Greater Hampton Roads, Virginia markets, today announced financial results for the three months ended March 31, 2016.

Xenith Bankshares reported net income of $367 thousand, or $0.03 per common share, for the first quarter of 2016 compared to $921 thousand, or $0.07 per common share, in the first quarter of 2015 and net income of $1.5 million, or $0.11 per common share, in the fourth quarter of 2015. Results in the first quarter of 2016 include $1.0 million ($0.08 per common share, after tax) of pre-tax merger-related costs related to the company's previously-announced proposed merger with Hampton Roads Bankshares, Inc.

T. Gaylon Layfield, III, President and Chief Executive Officer, commented: "Excluding our investments in two alternative asset classes, mortgage warehouse lending and guaranteed student loans, gross loans increased $44.1 million, or 7.0%, since the end of first quarter 2015. During this same period, guaranteed student loans declined $14.3 million and mortgage warehouse loans declined $8.1 million. Excluding these same two asset classes, our annualized loan growth was 1.6% during the first quarter of 2016. While we certainly target a higher level of loan growth, pricing competition remains intense. However, our loan pipeline remains healthy and I'm pleased that, for the most part, loan yields have stabilized."

First Quarter 2016 Highlights

  • Income before income tax for the three months ended March 31, 2016 was $895 thousand compared to pre-tax income of $1.3 million for the same period of 2015 and pre-tax income of $1.9 million for the three months ended December 31, 2015. Pre-tax income for the 2016 period included $1.0 million of merger-related costs, as previously noted.
  • Net interest income in the three months ended March 31, 2016 was $7.7 million compared to $7.3 million in the three months ended March 31, 2015 and $8.2 million in the three months ended December 31, 2015. Accretion of acquired loan discounts in the three months ended March 31, 2016 was $445 thousand compared to $483 thousand in the same period of 2015 and $1.0 million in the three months ended December 31, 2015.
  • Net loans were $772.0 million at March 31, 2016, a slight decrease from $772.2 million at December 31, 2015, and an increase of $21.7 million from $751.0 million at March 31, 2015. Excluding the company's investments in a mortgage warehouse lending program through a participation arrangement, which increased $583 thousand, and guaranteed student loans, which declined $3.7 million, net loans at March 31, 2016 increased $2.9 million from December 31, 2015. Excluding the decline in mortgage warehouse loans and guaranteed student loans of $8.1 million and $14.3 million, respectively, net loans at March 31, 2016 increased $43.5 million from March 31, 2015.
  • Average interest-earning assets in the three months ended March 31, 2016 were $1.00 billion, an increase of 14.2% from $876.3 million in the three months ended March 31, 2015. Total assets at March 31, 2016 were $1.02 billion compared to $1.04 billion at December 31, 2015. Total assets at March 31, 2016 increased $28.3 million from total assets of $992.7 million at March 31, 2015.
  • Total deposits at March 31, 2016 were $872.3 million compared to $889.0 million at December 31, 2015 and $843.4 million at March 31, 2015.
  • Asset quality and coverage for loan and lease losses remained strong at March 31, 2016 with ratios of nonperforming assets to total assets of 0.85%, nonperforming assets to total loans of 1.11%, and allowance for loan and lease losses to nonaccrual loans of 88.31%.
  • Net charge-offs as a percentage of average loans were 0.06% for the three months ended March 31, 2016 compared to 0.18% for the year ended December 31, 2015.
  • The company's combined capital strength was reflected in ratios that were well above regulatory standards for "well-capitalized" banks, with a common equity Tier 1 capital ratio of 9.82%, a Tier 1 leverage ratio of 8.55%, a Tier 1 risk-based capital ratio of 9.82%, and a total risk-based capital ratio of 11.57% at March 31, 2016. Xenith Bank had a common equity Tier 1 capital ratio of 11.77%, a Tier 1 leverage ratio of 10.24%, a Tier 1 risk-based capital ratio of 11.77%, and a total risk-based capital ratio of 12.60% at March 31, 2016.

Operating Results

First Quarter 2016 compared to First Quarter 2015

Total interest income for the three months ended March 31, 2016 was $9.6 million compared to $8.7 million for the three months ended March 31, 2015. For the three-month period of 2016, total interest income reflected average interest-earning assets of $1.00 billion compared to $876.3 million in interest-earning assets in the same period of 2015, a 14.2% increase. Asset yields in the 2016 period were 3.89% compared to yields of 4.05% in the 2015 period. The decline in asset yields was primarily due to higher average balances of interest-bearing cash deposits, including fed funds sold, in the 2016 period, partially offset by higher average balances of investments and loans held for investment and lower average balances of loans associated with the company's participation in a mortgage warehouse lending program in the 2016 period, which have lower yields than other loan categories. Accretion from acquired loan discounts was $445 thousand in the first quarter of 2016 compared to $483 thousand in the first quarter of 2015.

Total interest expense for the three months ended March 31, 2016 was $1.9 million compared to $1.5 million for the three months ended March 31, 2015. Average interest-bearing liabilities in the 2016 period increased to $795.2 million from $696.9 million in the same period of 2015, a 14.1% increase. The cost of liabilities was 0.93% in the 2016 period compared to cost of 0.85% in the 2015 period. The higher cost of liabilities in the 2016 period is primarily due to the cost related to the previously-reported issuance and sale of the company's $8.5 million aggregate principal amount of subordinated notes due 2025 in the second quarter of 2015.

Net interest margin in first quarter of 2016 was 3.15% compared to 3.38% in first quarter of 2015. Net interest margin excluding accretion of acquired loan discounts was 2.97% in the first quarter of 2016, down from 3.15% in the first quarter of 2015.

Net interest income after provision for loan and lease losses was $7.5 million for the three months ended March 31, 2016 compared to $6.7 million in the same period of 2015. Net interest income after provision for loan and lease losses in the 2016 period reflected $190 thousand in loan and lease loss provision expense compared to $565 thousand of provision expense in the 2015 period. Provision for loan and lease losses in the 2015 period reflected greater loan growth and higher provision for the unguaranteed portion of the company's student loan portfolio compared to the 2016 period.

Total noninterest income was $365 thousand in the first quarter of 2016 compared to $412 thousand in the first quarter of 2015. Noninterest income in the 2015 included gains on sales of investment securities, for which there were none in the 2016 period, while in the 2016 period, noninterest income included higher earnings from bank owned life insurance due to additional investment in the second quarter of 2015.

Noninterest expense in the first quarter of 2016 was $7.0 million, which included $1.0 million of costs related to the proposed merger with Hampton Roads Bankshares, Inc., compared to $5.8 million in the first quarter of 2015.

First Quarter 2016 compared to Fourth Quarter 2015

Total interest income for the three months ended March 31, 2016 and December 31, 2015 was $9.6 million and $10.0 million, respectively. For the first quarter of 2016, total interest income reflected average interest-earning assets of $1.00 billion compared to $980.7 million in interest-earning assets in the fourth quarter of 2015. Asset yields were 3.89% in the first quarter of 2016 compared to asset yields of 4.14% in the last quarter of 2015. Accretion from acquired loans was $445 thousand in the first quarter of 2016 and $1.04 million in the fourth quarter of 2015.

Total interest expense for the three months ended March 31, 2016 and December 31, 2015 was $1.9 million and $1.8 million, respectively. Average interest-bearing liabilities in the first quarter of 2016 increased to $795.2 million from $791.1 million in the fourth quarter of 2015. The cost of total liabilities was 0.93% and 0.90% in the first quarter of 2016 and fourth quarter of 2015, respectively.

Net interest margin in the first of quarter 2016 was 3.15% compared to 3.42% in the fourth quarter of 2015. Net interest margin excluding accretion of acquired loan discounts was 2.97% in the first quarter of 2016 compared to 2.99% in the fourth quarter of 2015.

Net interest income after provision for loan and lease losses was $7.5 million for the three months ended March 31, 2016 compared to $7.2 million in the three months ended December 31, 2015. Net interest income after provision in the first quarter of 2016 reflected $190 thousand in loan and lease loss provision, while net interest income after provision in the fourth quarter of 2015 included $991 thousand in provision expense. Lower provision expense in the first quarter of 2016 was primarily the result of lower specific reserves for and upgrades in risk ratings on certain loans and lower loan growth.

Total noninterest income was $365 thousand in the first quarter of 2016 compared to $461 thousand in the fourth quarter of 2015. Noninterest income in the first quarter of 2016 reflected losses on the valuation of customer-related derivatives, whereas in the fourth quarter of 2015, noninterest income included gains from these derivatives and rabbi trust assets.

Noninterest expense in the first quarter of 2016 was $7.0 million, including $1.0 million in merger-related costs, compared to $5.8 million in the fourth quarter of 2016. The company's efficiency ratio for the first quarter of 2016 was 87% (74% [1] excluding merger-related costs) compared to 76% for the first quarter of 2015 and 66% for the fourth quarter of 2015.

Balance Sheet

Loans after allowance for loan and lease losses remained relatively flat at...


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