Valley Financial Corporation (Nasdaq:VYFC) announced today its
consolidated financial results for the first quarter of 2015 and
reported record net income available to common shareholders of
$1,926,000 and $0.39 per diluted share for the three months ended
March 31, 2015 as compared to $1,516,000 and $0.31 per diluted
share for the prior year's first quarter, increases of 27% and 26%
respectively. The Company's earnings for the three months ended
March 31, 2015 produced an annualized return on average total
assets ("ROA") of 0.90% and an annualized return on average
shareholder's equity ("ROE") of 12.60% as compared to 0.73% and
11.24%, respectively, for the prior year's quarter.
On November 17, 2014, the Company announced that it had entered
into a definitive agreement pursuant to which BNC Bancorp ("BNC")
will acquire all of the Company's common stock in a stock
transaction valued at approximately $101.3 million, based on the
closing price of BNC common stock on November 14, 2014. The
transaction is subject to regulatory and shareholder approvals with
expected closing on or around July 1, 2015.
In comparison to the linked quarter, net income available to
common shareholders increased $392,000 or 26% while diluted
earnings per share increased $0.08 or 26%. Absent the merger
related expenses, securities gains and other nonrecurring items,
net income available to common shareholders would have increased
$83,000 or 5% as compared to the fourth quarter 2014. The
following table is a comparison to prior periods after excluding
merger related transaction costs, securities gains and other
nonrecurring items recorded in the periods:
|
|
|
1Q 2015 |
4Q 2014 |
1Q 2014 |
Net income available to common
shareholders |
$1,926,000 |
$1,534,000 |
$1,516,000 |
Add back: Merger expenses, net
of tax benefit |
96,000 |
290,000 |
0 |
Add back: Nonrecurring payroll
tax related to RSG vesting, net of tax benefit |
34,000 |
0 |
0 |
Add back: Prior period tax
adjustments related to merger costs |
68,000 |
0 |
0 |
Subtract: Gains on sale of
securities, net of tax expense |
(217,000) |
0 |
(5,000) |
Net income available to common shareholders,
excluding post-tax nonrecurring items |
$1,907,000 |
$1,824,000 |
$1,511,000 |
$ Increase / (Decrease)
after excluding post-tax nonrecurring items |
|
$83,000 |
$396,000 |
% Increase / (Decrease)
after excluding post-tax nonrecurring items |
|
5% |
26% |
|
|
|
|
Diluted earnings per share, excluding
post-tax nonrecurring items |
$0.38 |
$0.37 |
$0.31 |
% Increase / (Decrease)
after excluding post-tax nonrecurring items |
|
3% |
23% |
Additionally, the Company announced today that its Board of
Directors declared a quarterly cash dividend of $0.04 per share,
payable on June 1, 2015 to its common shareholders of record on May
15, 2015. If the merger occurs with BNC as anticipated, this
will be the last cash dividend declared to Valley Financial common
shareholders.
Select highlights for the first quarter include:
- Net income to common shareholders of $1,926,000 and $0.39 per
diluted share, producing an annualized return on average total
assets of 0.90% and an annualized return on average shareholders'
equity of 12.60%.
- The Company recorded noninterest income of $1,576,000 during
the quarter. Excluding gains on the sale of securities,
noninterest income was $1,247,000, an increase of $179,000 or 17%
from the same prior year period and $30,000 or 2% compared to the
linked quarter.
- Nonperforming assets ("NPAs") decreased 13% or $2,678,000, from
$20,655,000 at December 31, 2014 to $17,977,000 at March 31,
2015. In comparison to March 31, 2014, NPAs decreased
$7,347,000, or 29%.
- The Company's Allowance for Loan and Lease Losses ("ALLL") to
total loans decreased 1 basis point ("bp") to 1.04% in comparison
to the 1.05% at December 31, 2014 and 6 bps from the 1.10% reported
one year earlier.
- The Company recorded an increase in average gross loans
outstanding of $45,834,000 or 8% from the same period last year and
$12,506,000 or 2% in comparison to the linked quarter (an
annualized growth rate of 8%).
Ellis L. Gutshall, President and CEO commented, "Our first
quarter results were driven by continued asset quality improvement,
solid loan growth, increased noninterest income and continued
expense management that has become a hallmark standard at Valley
Financial Corporation. Our mortgage line of business led
noninterest income growth with a record quarter in fee income while
income earned from our brokerage line of business rebounded as
anticipated from the personnel changes that occurred in
mid-2014. Asset quality measures continued to show improvement
as we recorded our third consecutive quarter of net
recoveries. We remain excited about the pending merger with
BNC Bancorp and as anticipated, senior management has been focused
on the successful integration of Valley Bank into the BNC franchise
to ensure the transition is smooth and seamless for our customer
base."
CAPITAL LEVELS STRONG
Valley Financial Corporation's capital levels remain well above
the regulatory well-capitalized ratios. Tier 1 risk-based and
total risk-based capital ratios were 12.16% and 14.82%,
respectively, at March 31, 2015, as compared to 11.29% and 14.05%
reported at March 31, 2014. The Company's tier 1 leverage
ratio was 9.08% at March 31, 2015 in comparison to 8.48% at March
31, 2014.
ASSET QUALITY/LOAN LOSS PROVISION
Nonperforming Assets
The Company's nonperforming assets decreased 13% or $2,678,000,
from $20,655,000 at December 31, 2014 to $17,977,000 at March 31,
2015. The nonperforming assets to total assets ratio declined
19 bps to 2.10% in comparison to December 31, 2014. The
following table shows a summary of asset quality balances and
related ratios for the three-month periods presented (dollars in
thousands):
In thousands |
3/31/2015 |
12/31/2014 |
9/30/2014 |
6/30/2014 |
3/31/2014 |
Nonaccrual loans |
$2,973 |
$3,660 |
$3,571 |
$5,532 |
$2,324 |
Loans past due 90 days or more and still
accruing |
352 |
2,323 |
416 |
0 |
349 |
Performing restructured loans |
2,361 |
2,364 |
2,364 |
2,884 |
2,885 |
Foreclosed assets |
12,291 |
12,308 |
11,994 |
10,599 |
19,766 |
Total nonperforming
assets |
$17,977 |
$20,655 |
$18,345 |
$19,015 |
$25,324 |
|
|
|
|
|
|
Balances |
|
|
|
|
|
Allowance for loan losses |
$6,500 |
$6,500 |
$6,535 |
$6,640 |
$6,425 |
Loans, net of unearned income |
$627,742 |
$618,272 |
$606,541 |
$602,434 |
$584,757 |
Total assets |
$854,199 |
$901,399 |
$857,345 |
$887,089 |
$868,724 |
|
|
|
|
|
|
Ratios |
|
|
|
|
|
NPAs to total assets |
2.10% |
2.29% |
2.14% |
2.14% |
2.92% |
NPAs to total loans |
2.86% |
3.34% |
3.02% |
3.16% |
4.33% |
NPAs to total loans & foreclosed
assets |
2.81% |
3.28% |
2.97% |
3.10% |
4.19% |
ALLL to nonaccrual loans |
218.63% |
177.60% |
183.00% |
120.03% |
276.46% |
Nonaccrual loans
Nonaccrual loans at March 31, 2015 totaled $2,973,000, a
decrease of $687,000 or 19% from the linked quarter and an increase
of $649,000 or 28% from the prior year. The decrease from the
linked quarter is primarily attributable to payoffs on two
nonaccrual notes during the quarter. The following table shows
the activity in nonaccrual loans for the quarter ended (dollars in
thousands):
|
|
|
3/31/2015 |
12/31/2014 |
9/30/2014 |
6/30/2014 |
3/31/2014 |
Beginning Balance |
$3,660 |
$3,571 |
$5,532 |
$2,324 |
$3,665 |
Net customer payments |
(687) |
(2) |
(453) |
(5) |
(28) |
Additions |
0 |
818 |
0 |
3,248 |
0 |
Charge-offs |
0 |
(5) |
(7) |
0 |
(1,313) |
Loans returning to accruing
status |
0 |
0 |
0 |
0 |
0 |
Transfers to OREO |
0 |
(722) |
(1,501) |
(35) |
0 |
Ending Balance |
$2,973 |
$3,660 |
$3,571 |
$5,532 |
$2,324 |
Troubled Debt Restructurings ("TDRs")
The total recorded investment in TDRs as of March 31, 2015 was
$2,361,000, a decline of $3,000 from the $2,364,000 at
December 31, 2014 and a $524,000 decline from the $2,885,000
at March 31, 2014. The reduction from the prior year is
primarily due to one relationship that was upgraded during 2014
based upon renewal of the notes at market rate and market
terms. All TDRs were performing at March 31, 2015,
December 31, 2014 and March 31, 2014.
Foreclosed Assets
Foreclosed assets at March 31, 2015 totaled $12,291,000, a
decrease of $17,000 from the linked quarter and $7,475,000 or 38%
from the prior year quarter. The decline year over year was
driven by the sale of the Ivy Market Building to Carilion Clinic
during the second quarter of 2014. The following table shows
the activity in foreclosed assets for the quarter ended (dollars in
thousands):
|
|
|
3/31/2015 |
12/31/2014 |
9/30/2014 |
6/30/2014 |
3/31/2014 |
Beginning Balance |
$12,308 |
$11,994 |
$10,599 |
$19,766 |
$19,705 |
Additions |
0 |
722 |
1,502 |
34 |
0 |
Capitalized improvements |
3 |
0 |
46 |
42 |
101 |
Proceeds from sales |
0 |
(210) |
(10) |
(7,750) |
(40) |
Transfers to other assets |
0 |
0 |
0 |
(1,474) |
0 |
Valuation adjustments |
0 |
(186) |
(143) |
(32) |
0 |
Gains (losses) from sales |
(20) |
(12) |
0 |
13 |
0 |
Ending Balance |
$12,291 |
$12,308 |
$11,994 |
$10,599 |
$19,766 |
Past Due Loans
At March 31, 2015, total accruing loans past due 30 - 89 days
were $1,042,000 or 0.2% of total loans, an increase from $763,000,
or 0.1%, one year ago and a decrease from $3,547,000, or 0.6%, at
December 31, 2014.
Total loans past due greater than 90 days and accruing interest
at March 31, 2015 totaled $352,000 as compared to $2,323,000 at
December 31, 2014 and $349,000 at March 31, 2014. The
March 31, 2015 balance was comprised of three loans, two of which
were paid in full and the other loan brought fully current in
April.
Impaired Loans
Impaired loans increased $531,000 or 4% from $14,738,000 at
December 31, 2014 to $15,269,000 at March 31, 2015. In
comparison to March 31, 2014, impaired loans declined $3,339,000 or
17%. The increase in the first quarter of 2015 is attributable to a
$1,269,000 participation sold buy-back on an impaired note, which
was partially offset by the payoff of two impaired residential
mortgages during the quarter.
Provision/Charge-offs
The Company recorded a negative $15,000 provision for loan
losses during the first quarter of 2015, as compared to a provision
of $518,000 for the same period last year and a negative provision
of $45,000 in the linked quarter. The Company recorded net
recoveries of $15,000 during the first quarter of 2015 as compared
to net charge-offs of $1,293,000 or 0.22% of total loans for the
first quarter of 2014.
Allowance for Loan Losses
The ratio of allowance for loan and lease losses as a percentage
of total loans decreased to 1.04% at March 31, 2015 in comparison
to 1.05% at December 31, 2014 and 1.10% a year earlier. At
March 31, 2015, the Company's total reserves amounted to
$6,500,000, of which $62,000 are specific reserves on impaired
loans and $6,438,000 are general reserves to cover inherent risks
in the loan portfolio based on the current economic
environment. The current level of the allowance for loan
losses reflects specific reserves related to impaired loans,
current risk ratings on loans, net charge-off activity, loan
growth, delinquency trends, and other credit risk factors that the
Company considers in assessing the adequacy of the allowance for
loan losses. The nonaccrual loan coverage ratio is at
219% as of March 31, 2015, an increase from 178% at December 31,
2014 but a decrease from the 276% reported at March 31, 2014.
BALANCE SHEET
Total assets at March 31, 2015 were $854,199,000, a decrease of
$47,200,000 or 5% from $901,399,000 at December 31,
2014. The principal components of the Company's assets
at the end of the period were $16,450,000 in cash and cash
equivalents, $159,031,000 in securities available-for-sale and
$627,742,000 in gross loans. In comparison, total assets
at December 31, 2014 were $901,399,000 with the principal
components consisting of $53,151,000 in cash and cash equivalents,
$177,737,000 in securities available-for-sale and $618,272,000 in
gross loans. The decline in securities available-for-sale was due
to sales totaling $12,421,000 executed late in the first
quarter.
Total liabilities at March 31, 2015 were $791,001,000, a
decrease of $50,158,000 or 6% from $841,159,000 at December 31,
2014. Deposits decreased $34,430,000 or 5% to
$682,595,000 from the $717,025,000 level at December 31, 2014 while
FHLB borrowings decreased $15,000,000 from $58,000,000 to
$43,000,000. The decrease in deposits was primarily due
to seasonal outflows from our municipal depositors to meet cash
needs until their next collection season.
Total shareholders' equity at March 31, 2015 was $63,198,000, an
increase of $2,958,000 or 5% from $60,240,000 at December 31, 2014.
The Company's tangible book value per share (defined as total
capital, including AOCI, divided by outstanding common shares)
increased 4% from $12.21 at December 31, 2014 to $12.76 at March
31, 2015.
The following table includes the quarterly average balance for
our primary balance sheet components (dollars in
thousands):
|
Quarterly Average
Balances, Primary Balance Sheet Components |
|
Dollars in thousands |
|
3/31/2015 |
12/31/2014 |
9/30/2014 |
6/30/2014 |
3/31/2014 |
Assets |
871,418 |
868,470 |
858,860 |
864,790 |
839,395 |
Loans, net of unearned income |
624,423 |
611,916 |
600,875 |
591,657 |
578,589 |
Securities |
174,917 |
182,784 |
193,033 |
197,263 |
195,927 |
Earning assets |
811,240 |
810,581 |
803,224 |
807,610 |
780,960 |
Deposits |
684,866 |
699,580 |
684,835 |
695,693 |
674,958 |
Noninterest-bearing deposits |
111,268 |
111,070 |
101,594 |
102,860 |
95,338 |
Borrowings |
115,703 |
100,867 |
109,160 |
108,150 |
107,301 |
Interest-bearing liabilities |
689,300 |
689,376 |
692,401 |
700,984 |
686,921 |
Shareholders' equity |
62,147 |
58,824 |
57,272 |
54,338 |
51,218 |
NET INTEREST INCOME
|
For the Three Months
Ended |
|
|
Dollars in thousands |
|
|
3/31/2015 |
12/31/2014 |
Change |
|
3/31/2014 |
Change |
|
|
|
|
|
|
|
|
|
Average interest-earning assets |
$811,240 |
$810,581 |
$659 |
|
$780,960 |
$30,280 |
|
Interest income (FTE) |
$8,050 |
$8,183 |
$(133) |
|
$8,105 |
$(55) |
|
Yield on interest-earning assets |
4.02% |
4.00% |
2 |
bps |
4.21% |
(19) |
bps |
Average interest-bearing liabilities |
$689,300 |
$689,376 |
$(76) |
|
$686,921 |
$2,379 |
|
Interest expense |
$1,106 |
$1,123 |
$(17) |
|
$1,098 |
$8 |
|
Cost of funds |
0.56% |
0.56% |
0 |
bps |
0.57% |
(1) |
bps |
Net Interest Income (FTE) |
$6,944 |
$7,060 |
$(116) |
|
$7,007 |
$(63) |
|
Net Interest Margin (FTE) |
3.47% |
3.46% |
1 |
bps |
3.64% |
(17) |
bps |
In comparison to the fourth quarter of 2014, tax-equivalent net
interest income decreased $116,000 or 2% to
$6,944,000. Average interest-earning assets increased $659,000
while the net interest margin increased 1 bp during the three-month
period to 3.47%. The cost of funds remained flat at 0.56%.
In comparison to the three months ended March 31, 2014,
tax-equivalent net interest income decreased $63,000, or 1%,
despite average interest-earning assets increasing by $30,280,000
or 4%. The decline is attributable to margin compression as
our tax-equivalent net interest margin decreased 17 basis points to
3.47% in the first quarter of 2015. The impact of the low
interest rate environment continued to depress asset yields as the
yield on earning assets fell 19 bps in comparison to the first
quarter 2014.
NONINTEREST INCOME
|
For the Three Months
Ended |
|
Dollars in thousands |
|
3/31/2015 |
12/31/2014 |
$ |
% |
3/31/2014 |
$ |
% |
Noninterest income: |
|
|
|
|
|
|
|
Service charges on deposit
accounts |
$509 |
$554 |
$(45) |
(8)% |
$452 |
$57 |
13% |
Mortgage fee income |
234 |
200 |
34 |
17% |
92 |
142 |
154% |
Brokerage fee income, net |
267 |
180 |
87 |
48% |
247 |
20 |
8% |
Bank owned life insurance
income |
169 |
172 |
(3) |
(2)% |
165 |
4 |
2% |
Realized gain on sale of
securities |
329 |
0 |
329 |
N/M |
7 |
322 |
4,600% |
Other income |
68 |
111 |
(43) |
(39)% |
112 |
(44) |
(39)% |
Total noninterest
income |
$1,576 |
$1,217 |
$359 |
29% |
$1,075 |
$501 |
47% |
In comparison to the fourth quarter of 2014, noninterest income
increased $359,000 or 29%. Excluding gains on the sale of
securities, noninterest income increased $30,000 or 2%. The
quarterly increase was driven by increases from our brokerage and
mortgage lines of business, offset by lower service charges
(primarily NSF charges) and other income. The decrease in
other income is due to a revaluation of our tax incentive agreement
receivable based on updated cash flow projections. Annualized
total noninterest income, exclusive of gains realized on the sale
of securities, was 0.61% of average earning assets for the period
compared to 0.60% in the prior year.
In comparison to the three months ended March 31, 2014,
noninterest income increased $501,000, or 47%. Excluding gains on
the sale of securities, noninterest income increased $179,000 or
17% compared to the same period last year. Mortgage fee income
increased $142,000 or 154% while service charge income grew $57,000
or 13%. Other income declined due to the revaluation of the
tax incentive agreement receivable as mentioned
above. Annualized total noninterest income, exclusive of gains
realized on the sale of securities, was 0.61% of average earning
assets for the period compared to 0.55% in the prior year.
NONINTEREST EXPENSE
|
For the Three Months
Ended |
|
Dollars in thousands |
|
3/31/2015 |
12/31/2014 |
$ |
% |
3/31/2014 |
$ |
% |
Noninterest expense: |
|
|
|
|
|
|
|
Compensation expense |
$3,132 |
$3,231 |
$(99) |
(3)% |
$3,086 |
$46 |
1% |
Occupancy and equipment
expense |
503 |
477 |
26 |
5% |
490 |
13 |
3% |
Data processing expense |
430 |
428 |
2 |
0% |
403 |
27 |
7% |
Insurance expense |
232 |
230 |
2 |
1% |
221 |
11 |
5% |
Professional fees |
114 |
123 |
(9) |
(7)% |
138 |
(24) |
(17)% |
Foreclosed asset expense,
net |
191 |
355 |
(164) |
(46)% |
158 |
33 |
21% |
Merger transaction costs |
102 |
439 |
(337) |
(77)% |
0 |
102 |
N/M |
Other operating expense |
838 |
827 |
11 |
1% |
837 |
1 |
0% |
Total noninterest
expense |
$5,542 |
$6,110 |
$(568) |
(9)% |
$5,333 |
$209 |
4% |
In comparison to the fourth quarter of 2014, noninterest expense
decreased by $568,000 or 9%, driven by a $337,000 or 77% decrease
in merger transaction costs and a $164,000 or 46% decrease in
foreclosed asset expense (driven by reduced impairment
charges). Compensation expense decreased 99,000 or 3% from the
fourth quarter of 2014 due to lower incentive and bonus accruals as
a result of the pending merger. The Company's efficiency ratio for
the first quarter of 2015 was 66.95% as compared to 73.04% for the
fourth quarter of 2014. (The efficiency ratio is computed by
dividing noninterest expenses by the sum of fully taxable
equivalent net interest income and fully taxable equivalent
noninterest income, less gains (losses) on the sale of
securities). Excluding merger transaction costs, the
efficiency ratio would have been 65.71% in the first quarter of
2015 and 67.80% in the fourth quarter of 2014. The improved
efficiency ratio is due to lower noninterest expenses and higher
noninterest income.
In comparison to the three months ended March 31, 2014,
noninterest expense increased $209,000 or 4%. Excluding merger
transaction costs, noninterest expenses grew just $107,000 or
2%. Compensation expense increased $46,000 or 1% due to equity
increases to all employees on January 1, 2015, offset by lower
incentive and bonus accruals. The 7% or $27,000 increase in
data processing expense was driven by higher debit card
transactions and internet banking processing costs while the 21% or
$33,000 increase in foreclosed asset expenses is due to development
costs on several of our OREO properties. The 17% or $24,000
reduction in professional fees is due to lower audit and consulting
fees as a result of the pending merger. The Company's
efficiency ratio for the first quarter of 2015 was 66.95%, slightly
increased from the 65.36% for the same quarter last year.
About Valley Financial Corporation
Valley Financial Corporation is the holding company for Valley
Bank, which opened in 1995 and engages in a general commercial and
retail banking business in the Roanoke Valley, emphasizing the
needs of small businesses, professional concerns and
individuals. Valley Bank currently operates from nine
full-service offices at 36 Church Avenue, 110 McClanahan Street,
1518 Hershberger Road, 3850 Keagy Road (near Lewis-Gale Hospital),
1327 Grandin Road in Roanoke City, 4467 Starkey Road and 4003
Challenger Avenue in Roanoke County, 8 East Main Street in the City
of Salem and 1003 Hardy Road in the Town of
Vinton. Additionally, the Bank operates its wealth management
subsidiary, Valley Wealth Management Services, Inc. at 36 Church
Avenue in Roanoke City and its Mortgage Office at 3565 Electric
Road, SW, Suite J in Roanoke County.
The Bank's Internet site at www.myvalleybank.com is available
for online banking and extensive investor information.
The Common Stock of Valley Financial Corporation is traded on
the NASDAQ Capital Market under the symbol VYFC.
Non-GAAP Financial Measures
This report refers to the overhead efficiency ratio, which is
computed by dividing non-interest expense by the sum of net
interest income on a tax equivalent basis and non-interest income
excluding gains or losses on securities, fixed assets and
foreclosed assets. This is a non-GAAP financial measure that we
believe provides investors with important information regarding our
operational efficiency. Comparison of our efficiency ratio with
those of other companies may not be possible, because other
companies may calculate the efficiency ratio differently. Such
information is not in accordance with generally accepted accounting
principles in the United States (GAAP) and should not be construed
as such. Management believes such financial information is
meaningful to the reader in understanding operating performance,
but cautions that such information not be viewed as a substitute
for GAAP. Valley Financial Corporation, in referring to its net
income, is referring to income under GAAP.
The reconciliation of tax-equivalent net interest income, which
is not a measurement under GAAP, to net interest income, is
reflected in the table below.
|
|
|
Three Months
Ended |
|
|
|
In
Thousands |
3/31/2015 |
3/31/2014 |
Net interest income, non tax-equivalent |
$6,874 |
$6,910 |
Less: tax-exempt interest income |
(136) |
(189) |
Add: tax-equivalent of tax-exempt interest
income |
206 |
286 |
Net interest income, tax-equivalent |
$6,944 |
$7,007 |
Forward Looking Statements
Information in this press release contains "forward-looking
statements." These statements involve risks and uncertainties
that could cause actual results to differ materially, including
without limitation, the effects of future economic conditions,
governmental fiscal and monetary policies, legislative and
regulatory changes, the risks of changes in interest rates, the
ability to close the proposed merger with BNC on the proposed terms
and schedule, or at all, difficulties related to integration of the
proposed merger and unexpected costs, charges or expense resulting
from the proposed merger and the effects of
competition. Additional factors that could cause actual
results to differ materially are discussed in Valley Financial
Corporation's recent filings with the Securities and Exchange
Commission, included but not limited to its Annual Report on Form
10-K and its other periodic reports.
ADDITIONAL INFORMATION
This press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. In connection with the proposed merger,
on April 15, 2015, the SEC declared effective BNC's registration
statement on Form S-4 that included a Definitive Proxy Statement of
the Company and that also constitutes a Prospectus of BNC, as well
as other relevant documents concerning the proposed transaction. On
April 16, 2015, the Company commenced mailing the definitive proxy
statement/prospectus to shareholders of the
Company. SHAREHOLDERS ARE STRONGLY URGED TO READ THE
PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER AND OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT
INFORMATION REGARDING THE PROPOSED MERGER. A free
copy of the Proxy Statement/Prospectus, as well as other filings
containing information about BNC or the Company, may be obtained at
the SEC's Internet site (http://www.sec.gov). In addition, (i)
free copies of documents filed by BNC with the SEC may be obtained
on the BNC website at www.bncbancorp.com or by requesting them in
writing from Drema Michael, BNC Bancorp, 3980 Premier Drive, Suite
210, High Point, North Carolina 27265, or by telephone at (336)
869-9200; and (ii) free copies of documents filed by the Company
with the SEC may be obtained on the Company's website at
www.myvalleybank.com or by requesting them in writing from Kimberly
Snyder, Valley Financial Corporation, 36 Church Avenue, S.W., P.O.
Box 2740, Roanoke, VA 24011, or by telephone at (540)
342-2265.
The Company, BNC and their respective directors and executive
officers may be deemed to be participants in the solicitation of
proxies from the Company's shareholders in connection with the
proposed merger. Information about the directors and executive
officers of BNC and the Company and other persons who may be deemed
participants in the solicitation will be included in the Proxy
Statement/Prospectus. Information about the company's
executive officers and directors can also be found in the Company's
definitive proxy statement filed with the SEC on April 16,
2015. Information about BNC's executive officers and directors
can also be found in BNC's Registration Statement filed with the
SEC on Form S-4/A on April 14, 2015. Additional information
regarding the interests of those persons and other persons who may
be deemed participants in the transaction may be obtained by
reading the Proxy Statement/Prospectus regarding the proposed
merger. You may obtain free copies of each document as
described in the preceding paragraph.
VALLEY FINANCIAL
CORPORATION |
CONSOLIDATED BALANCE
SHEETS |
|
|
|
|
(Unaudited) |
(Audited) |
Assets |
March 31, 2015 |
December 31,
2014 |
Cash and due from banks |
$7,715 |
$10,316 |
Interest bearing deposits |
8,735 |
42,835 |
Total cash and cash
equivalents |
16,450 |
53,151 |
Securities available for
sale |
159,031 |
177,737 |
Loans, net of allowance for
loan losses, 3/31/15 and 12/31/14: $6,500 |
621,242 |
611,772 |
Foreclosed assets |
12,291 |
12,308 |
Premises and equipment,
net |
9,169 |
9,298 |
Bank owned life insurance |
19,712 |
19,543 |
Accrued interest
receivable |
2,279 |
2,374 |
Other assets |
14,025 |
15,216 |
Total
assets |
$854,199 |
$901,399 |
Liabilities and Shareholders'
Equity |
|
|
Liabilities: |
|
|
Non-interest bearing
deposits |
$28,664 |
$27,082 |
Interest bearing deposits |
653,931 |
689,943 |
Total deposits |
682,595 |
717,025 |
Securities sold under
agreements to repurchase |
29,828 |
29,778 |
FHLB borrowings |
43,000 |
58,000 |
Junior subordinated
debentures |
27,326 |
27,356 |
Accrued interest payable |
425 |
414 |
Other liabilities |
7,827 |
8,586 |
Total liabilities |
791,001 |
841,159 |
|
|
|
Shareholders' equity: |
|
|
Preferred stock, no par value;
10,000,000 shares authorized; no shares issued and outstanding at
March 31, 2015 and December 31, 2014 |
0 |
0 |
Common stock, no par value;
10,000,000 shares authorized; 4,951,653 shares issued and
outstanding at March 31, 2015 and 4,932,035 shares issued and
outstanding at December 31, 2014 |
24,703 |
23,987 |
Retained earnings |
38,453 |
36,725 |
Accumulated other comprehensive
income |
42 |
(472) |
Total shareholders' equity |
63,198 |
60,240 |
Total liabilities and
shareholders' equity |
$854,199 |
$901,399 |
VALLEY FINANCIAL
CORPORATION |
CONSOLIDATED STATEMENTS
OF OPERATIONS |
|
|
|
Three Months
Ended (Unaudited) |
|
3/31/2015 |
3/31/2014 |
Interest income |
|
|
Interest and fees on loans |
$6,994 |
$6,778 |
Interest on securities -
taxable |
844 |
1,038 |
Interest on securities -
nontaxable |
136 |
189 |
Interest on deposits in
banks |
6 |
3 |
Total interest income |
7,980 |
8,008 |
Interest expense |
|
|
Interest on deposits |
564 |
564 |
Interest on borrowings |
542 |
534 |
Total interest expense |
1,106 |
1,098 |
Net interest income |
6,874 |
6,910 |
Provision for loan
losses |
(15) |
518 |
Net interest income after
provision for loan losses |
6,889 |
6,392 |
Noninterest income |
|
|
Service charges on deposit
accounts |
509 |
452 |
Mortgage fee income |
234 |
92 |
Brokerage fee income, net |
267 |
247 |
Bank owned life insurance
income |
169 |
165 |
Realized gain on sale of
securities |
329 |
7 |
Other income |
68 |
112 |
Total noninterest income |
1,576 |
1,075 |
Noninterest expense |
|
|
Compensation expense |
3,132 |
3,086 |
Occupancy and equipment
expense |
503 |
490 |
Data processing expense |
430 |
403 |
Insurance expense |
232 |
221 |
Professional fees |
114 |
138 |
Foreclosed asset expense,
net |
191 |
158 |
Merger transaction costs |
102 |
0 |
Other operating expense |
838 |
837 |
Total noninterest expense |
5,542 |
5,333 |
Income before income taxes |
2,923 |
2,134 |
Income tax expense |
997 |
618 |
Net income available to common
shareholders |
$1,926 |
$1,516 |
Earnings per share |
|
|
Basic earnings per common share |
$0.39 |
$0.32 |
Diluted earnings per common share |
$0.39 |
$0.31 |
Weighted average common shares
outstanding |
4,940,736 |
4,806,323 |
Diluted average common shares
outstanding |
4,980,857 |
4,854,969 |
Dividends declared per common share |
$0.04 |
$0.04 |
VALLEY FINANCIAL
CORPORATION |
FINANCIAL
HIGHLIGHTS |
(Unaudited) |
|
|
|
Three Months
Ended |
|
3/31/2015 |
3/31/2014 |
PER COMMON SHARE |
|
|
Earnings per share - basic |
$0.39 |
$0.32 |
Earnings per share -
diluted |
$0.39 |
$0.31 |
Tangible book value per
share |
$12.76 |
$10.86 |
|
|
|
FINANCIAL RATIOS |
|
|
Return on average assets |
0.90% |
0.73% |
Return on average shareholders'
equity |
12.60% |
11.24% |
Net interest margin (FTE)1 |
3.47% |
3.64% |
Efficiency - Consolidated |
66.95% |
65.36% |
Net charge-off to average
loans |
0.00% |
0.22% |
Total risk based capital -
Consolidated |
14.82% |
14.05% |
Total risk based capital - Bank
only |
14.67% |
13.94% |
|
|
|
ALLOWANCE FOR LOAN
LOSSES |
|
|
(in thousands) |
|
|
Beginning balance |
$6,500 |
$7,200 |
Provision for loan losses |
(15) |
518 |
Charge-offs |
0 |
(1,316) |
Recoveries |
15 |
23 |
Ending balance |
$6,500 |
$6,425 |
|
|
|
ASSET QUALITY RATIOS |
|
|
Nonperforming assets to total
assets |
2.10% |
2.92% |
Allowance for loan losses to
total loans |
1.04% |
1.10% |
Allowance for loan losses to
nonaccrual loans |
218.6% |
276.5% |
|
|
|
COMPOSITION OF RISK
ASSETS |
|
|
(in thousands) |
|
|
Nonperforming
assets: |
|
|
Loans 90 days past due and
accruing interest |
$352 |
$349 |
Nonaccrual loans |
2,973 |
2,324 |
Accruing Troubled Debt
Restructurings |
2,361 |
2,885 |
Foreclosed assets |
12,291 |
19,766 |
Total nonperforming assets |
$17,977 |
$25,324 |
|
|
|
1 The net interest margin is
calculated by dividing the tax equivalent net interest income by
total average earning assets. The reconciliation of
tax-equivalent net interest income, which is not a measurement
under GAAP, to net interest income, is reflected in the table in
"Non-GAAP Financial Measures." |
CONTACT: For Further Information Contact:
Ellis L. Gutshall, President and Chief Executive Officer
Kimberly B. Snyder, Executive Vice President and
Chief Financial Officer
(540) 342-2265
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