WFBI Washingtonfirst Bankshares

WashingtonFirst Bankshares, Inc. (“WashingtonFirst” or the “Company”) (NASDAQ: WFBI), the parent company of WashingtonFirst Bank, WashingtonFirst Mortgage, and 1st Portfolio Inc., reports net income of $5.3 million and $9.8 million for the three and six months ended June 30, 2017, respectively. Earnings per share were $0.40 and $0.74 per share on a fully-diluted basis for the three and six months ended June 30, 2017, respectively, resulting in 18% and 16% increases over the comparable periods last year. Loans held for investment grew by $104.2 million to $1.6 billion, and total deposits increased $222.0 million, an increase of 15%, to $1.7 billion during the first half of 2017. Net interest margin increased 14 basis points to 3.51% for the three months ended June 30, 2017 and 5 basis points to 3.49% for the six months ended June 30, 2017, compared to the same periods in 2016. On July 3, 2017, the Company paid its 15th consecutive quarterly cash dividend to its shareholders.

Core net income per diluted common share for the three and six months ended June 30, 2017, was $0.42 and $0.76, respectively, representing increases of 23.5% and 18.8%, respectively, compared to the same periods in the prior year. Core net income is calculated as net income adjusted for the after-tax impact of merger expenses.

Commenting on the Company’s second quarter performance, Shaza Andersen, the Company's President and CEO, said “Immediately following the announcement of the decision to merge with Sandy Spring Bancorp, our team began the work that will be needed to ensure a smooth and successful closing; however, we never lost sight of our commitments to deliver exceptional customer service and enhance shareholder value. I am so pleased to report that even with the added costs and attention associated with the merger, we have been able to meet and exceed our financial performance goals. Core net income for the second quarter were $5.7 million, or $0.42 per share on a fully diluted basis, an increase of 29% over the prior quarter."

Return on average shareholders equity was 10.54% and 9.86% during the three and six months ended June 30, 2017, respectively, compared to 9.42% and 9.01% for the same periods last year. Management attributed this increase to the continued organic growth of the loan portfolio over the past twelve months. For the three and six months ended June 30, 2017, net interest income after provision for loan losses increased $2.6 million and $4.4 million, or 19% and 16%, over the same periods ended June 30, 2016.

Total assets reached $2.1 billion as of June 30, 2017, an increase of 12% over the last twelve months. Net loans held-for-investment and total deposits ended the first half of 2017 at $1.6 billion and $1.7 billion, respectively, representing increases of 18% and 13%, respectively, over the same period last year.

About The Company

WashingtonFirst Bankshares, Inc., headquartered in Reston, Virginia, is the holding company for WashingtonFirst Bank, which operates 19 full-service banking offices throughout the Washington, D.C. metropolitan area. In addition, the Company provides wealth management services through its subsidiary, 1st Portfolio Wealth Advisors, and mortgage banking services through the Bank's subsidiary, WashingtonFirst Mortgage Corporation. The Company's common stock is traded on the NASDAQ Stock Market under the quotation symbol "WFBI" and is included in the ABA NASDAQ Community Bank Index and the Russell 2000® index. For more information about the Company, please visit: www.wfbi.com.

Cautionary Statements About Forward-Looking Information

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements of the goals, intentions, and expectations of the Company as to future trends, plans, events, results of operations and policies and regarding general economic conditions. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors which include, but are not limited to, factors discussed in our Annual Report on Form 10-K and in other documents we file with the Securities and Exchange Commission from time to time. In some cases, forward-looking statements can be identified by use of words such as “may,” “will,” “anticipates,” “believes,” “expects,” “plans,” “estimates,” “potential,” “continue,” “should,” and similar words or phrases. These statements are based upon the beliefs of the management of the Company as to the expected outcome of future events, current and anticipated economic conditions, nationally and in the Company’s market, and their impact on the operations, assets and earnings of the Company, interest rates and interest rate policy, competitive factors, judgments about the ability of the Company to successfully integrate its operations following significant transactions including, but not limited to, mergers and acquisitions, the ability to avoid customer dislocation during the period leading up to and following such transactions, and other conditions which by their nature, are not susceptible to accurate forecast and are subject to significant uncertainty. Readers are cautioned against placing undue reliance on such forward-looking statements. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.

Additional Information About the Merger and Where to Find It

In connection with the proposed merger transaction, Sandy Spring Bancorp, Inc. filed with the Securities and Exchange Commission on July 19, 2017 a Registration Statement on Form S-4 which included a Preliminary Joint Proxy Statement of Sandy Spring and the Company, and a Preliminary Prospectus of Sandy Spring, as well as other relevant documents concerning the proposed transaction. Shareholders are urged to read the Registration Statement, the Preliminary Joint Proxy Statement/Prospectus, which is available now, and the Final Joint Proxy Statement/Prospectus, when it becomes available, regarding the merger and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain or will contain important information about Sandy Spring, the Company and the proposed merger.

A free copy of the Joint Proxy Statement/Prospectus, as well as other filings containing information about Sandy Spring and the Company, may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from Sandy Spring at www.sandyspringbank.com under the tab “Investor Relations,” and then under the heading “SEC Filings” or from the Company by accessing the Company’s website at www.wfbi.com under the tab “Investor Relations,” and then selecting “SEC Filings” under the heading “Documents and Filings.” Alternatively, these documents, when available, can be obtained free of charge from Sandy Spring upon written request to Sandy Spring Bancorp, Inc., Corporate Secretary, 17801 Georgia Avenue, Olney, Maryland 20832 or by calling (800) 399-5919, or from the Company, upon written request to WashingtonFirst Bankshares, Inc., Corporate Secretary, 11921 Freedom Drive, Suite 250, Reston, Virginia 20190 or by calling (703) 840-2410.

Participants in the Solicitation

Sandy Spring and the Company and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Sandy Spring and the Company in connection with the proposed merger. Information about the directors and executive officers of Sandy Spring is set forth in the proxy statement for Sandy Spring’s 2017 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 22, 2017. Information about the directors and executive officers of WashingtonFirst is set forth in the proxy statement for the Company’s 2017 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 14, 2017. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Preliminary Joint Proxy Statement/Prospectus and, when available, the Final Joint Proxy Statement/Prospectus regarding the proposed merger. Free copies of this document may be obtained as described in the preceding paragraph.

       

WashingtonFirst Bankshares, Inc.

Consolidated Balance Sheets

(unaudited)

  June 30, 2017 December 31, 2016 June 30, 2016 ($ in thousands)

Assets:

Cash and cash equivalents: Cash and due from bank balances $ 4,049 $ 3,614 $ 3,164 Federal funds sold 25,901 93,659 96,177 Interest bearing deposits 100   100   100   Cash and cash equivalents 30,050 97,373 99,441 Investment securities, available-for-sale, at fair value 309,107 280,204 260,675 Restricted stock, at cost 10,182 11,726 4,481 Loans held for sale, at lower of cost or fair value 48,399 32,109 52,198 Loans held for investment: Loans held for investment, at amortized cost 1,638,751 1,534,543 1,391,523 Allowance for loan losses (14,074 ) (13,582 ) (12,595 ) Total loans held for investment, net of allowance 1,624,677 1,520,961 1,378,928 Premises and equipment, net 6,396 6,955 7,476 Goodwill 11,420 11,420 11,420 Identifiable intangibles 1,484 1,619 1,753 Deferred tax asset, net 7,525 8,944 6,901 Accrued interest receivable 5,778 5,243 4,546 Other real estate owned 725 1,428 2,159 Bank-owned life insurance 16,572 13,880 13,701 Other assets 10,862   11,049   9,987   Total Assets $ 2,083,177   $ 2,002,911   $ 1,853,666  

Liabilities and Shareholders' Equity:

Liabilities:

Non-interest bearing deposits $ 515,861 $ 381,887 $ 418,404 Interest bearing deposits 1,228,830   1,140,854   1,130,473  

Total deposits

1,744,691 1,522,741 1,548,877 Other borrowings 15,275 5,852 9,021 FHLB advances 73,103 232,097 61,589 Long-term borrowings 32,757 32,638 32,953 Accrued interest payable 1,390 947 969 Other liabilities 12,383   15,976   11,957   Total Liabilities 1,879,599 1,810,251 1,665,366 Commitments and contingent liabilities — — —

Shareholders' Equity:

Common stock: Common Stock Voting, $0.01 par value, 50,000,000 shares authorized, 12,334,863, 10,987,652 and 10,431,016 shares issued and outstanding, respectively 123 109 104 Common Stock Non-Voting, $0.01 par value, 10,000,000 shares authorized, 742,278, 1,908,733 and 1,817,842 shares issued and outstanding, respectively 7 19 18 Additional paid-in capital 179,915 177,924 161,679 Accumulated earnings 25,140 17,187 24,594 Accumulated other comprehensive income (loss) (1,607 ) (2,579 ) 1,905   Total Shareholders' Equity 203,578   192,660   188,300  

Total Liabilities and Shareholders' Equity

$ 2,083,177   $ 2,002,911   $ 1,853,666          

WashingtonFirst Bankshares, Inc.

Consolidated Statements of Income

(unaudited)

 

 

For the Three Months Ended For the Six Months Ended June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016 ($ in thousands)

Interest and dividend income:

Interest and fees on loans $ 19,872 $ 16,836 $ 38,651 $ 33,227 Interest and dividends on investments: Taxable 1,354 1,178 2,619 2,170 Tax-exempt 61 19 126 41 Dividends on other equity securities 161 81 357 152 Interest on Federal funds sold and other short-term investments 81   68   155   136 Total interest and dividend income 21,529 18,182 41,908 35,726

Interest expense:

Interest on deposits 2,902 2,200 5,319 4,195 Interest on borrowings 1,052   981   2,277   1,977 Total interest expense 3,954   3,181   7,596   6,172 Net interest income 17,575 15,001 34,312 29,554 Provision for loan losses 925   980   1,940   1,605 Net interest income after provision for loan losses 16,650 14,021 32,372 27,949

Non-interest income:

Service charges on deposit accounts 40 81 88 160 Earnings on bank-owned life insurance 107 90 192 180 Gain on sale of loans, net 4,601 5,287 7,250 8,029 Mortgage banking activities 925 1,358 1,869 2,557 Wealth management income 519 443 1,019 871 Gain on sale of available-for-sale investment securities, net — 1,077 — 1,152 Gain on debt extinguishment — — 301 — Other operating income 372   154   678   322 Total non-interest income 6,564 8,490 11,397 13,271

Non-interest expense:

Compensation and employee benefits 7,134 7,251 14,568 13,949 Mortgage commission 2,140 2,102 3,410 3,208 Premises and equipment 1,849 1,863 3,563 3,680 Data processing 1,164 1,121 2,170 2,125 Professional fees 194 350 465 669 Merger expenses 532 — 532 — Mortgage loan processing expenses 318 354 517 550 Debt extinguishment — 1,044 — 1,044 Other operating expenses 1,737   1,450   3,539   2,811 Total non-interest expense 15,068   15,535   28,764   28,036 Income before provision for income taxes 8,146 6,976 15,005 13,184 Provision for income taxes 2,809   2,578   5,232   4,862 Net income $ 5,337   $ 4,398   $ 9,773   $ 8,322   Earnings per common share: (1) Basic earnings per common share $ 0.41 $ 0.34 $ 0.75 $ 0.65 Diluted earnings per common share $ 0.40 $ 0.34 $ 0.74 $ 0.64 (1) Prior periods adjusted for 5% stock dividend issued in December 2016         For the Three Months Ended For the Six Months Ended June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016 ($ in thousands, except per share data)

Performance Ratios:

Return on average assets

 

1.05

% 0.98 % 0.98 % 0.96 % Return on average shareholders' equity

 

10.54

% 9.42 % 9.86 % 9.01 % Yield on average interest-earning assets

 

4.31

% 4.10 % 4.27 % 4.17 % Rate on average interest-earning liabilities

 

1.16

% 1.02 % 1.11 % 1.02 % Net interest spread

 

3.15

% 3.08 % 3.16 % 3.15 % Net interest margin

 

3.51

% 3.37 % 3.49 % 3.44 % Efficiency ratio (1)

 

62.42

% 64.65 % 63.35 % 64.77 % Net charge-offs to average loans held for investment (2)

 

0.34

% 0.21 % 0.18 % 0.19 %

 

Mortgage origination volume $ 200,006 $ 216,927 $ 314,345 $ 339,563   Assets under management $ 313,811 $ 245,074 $ 313,811 $ 245,074  

Per Share Data: (3)

Basic earnings per common share $ 0.41 $ 0.34 $ 0.75 $ 0.65 Fully diluted earnings per common share $ 0.40 $ 0.34 $ 0.74 $ 0.64 Weighted average basic shares outstanding

 

13,024,517

12,851,828 12,972,120 12,836,294 Weighted average diluted shares outstanding

 

13,334,847

13,075,908 13,292,573 13,064,628

(1) The efficiency ratio is calculated as total non-interest expense (less debt extinguishment costs) divided by the sum of net interest income and total non-interest income (less gain on sale of AFS securities and gain on debt extinguishment). This non-GAAP financial measure is presented to facilitate an understanding of the Company's performance.

(2) Annualized

(3) 2016 amounts have been adjusted to reflect the 5% stock dividend issued in December 2016

          June 30, 2017 December 31, 2016 June 30, 2016

Capital Ratios:

Total risk-based capital ratio

13.65

%

13.99

%

14.52

% Tier 1 risk-based capital ratio

11.40

%

 

%

12.02

% Common equity tier 1 risk-based capital ratio

10.95

%

11.15

%

11.49

%

Tier 1 leverage ratio

9.89

%

10.14

%

10.07

% Tangible common equity to tangible assets (1)

9.21

%

9.03

%

9.52

%  

Per Share Capital Data: (2)

Book value per common share $ 15.57 $ 14.94 $ 14.64 Tangible book value per common share $ 14.58 $ 13.93 $ 13.62 Common shares outstanding

13,077,141

12,896,385

12,860,836

(1) This is a non-GAAP financial measure. Refer to the table below outlining the reconciliation of tangible common equity to tangible assets.

(2) June 30, 2016, amounts have been adjusted to reflect the 5% stock dividend issued in December 2016

    Average Balances, Interest Income and Expense and Average Yield and Rates (QTD)     For the Three Months Ended June 30, 2017   June 30, 2016 AverageBalance   Income/Expense   Yield/Rate (6) AverageBalance   Income/Expense   Yield/Rate (6) ($ in thousands) Assets Interest-earning assets: Loans held for sale $ 33,778 $ 348 4.08 % $ 45,638 $ 438 3.79 % Loans held for investment (1) 1,593,774 19,524 4.85 % 1,366,656 16,398 4.75 % Investment securities - taxable 287,861 1,354 1.86 % 278,690 1,178 1.67 % Investment securities - tax-exempt (2) 14,346 91 2.52 % 3,822 29 3.01 % Other equity securities 12,454 161 5.16 % 6,636 81 4.89 % Interest-bearing balances 100 — 1.02 % 100 — 0.60 % Federal funds sold   38,976     81   0.82 %   55,722     68   0.49 %

Total interest earning assets

1,981,289 21,559 4.31 % 1,757,264 18,192 4.10 % Non-interest earning assets: Cash and due from banks 3,168 2,712 Premises and equipment 6,655 7,713 Other real estate owned 794 2,044 Other assets (3) 53,062 45,829 Less: allowance for loan losses   (14,578 )   (12,153 ) Total non-interest earning assets   49,101     46,145   Total Assets $ 2,030,390   $ 1,803,409     Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing demand deposits $ 144,326 $ 114 0.32 % $ 124,079 $ 90 0.29 % Money market deposit accounts 276,650 636 0.92 % 265,727 393 0.59 % Savings accounts 202,785 359 0.71 % 215,544 382 0.71 % Time deposits   574,495     1,793   1.25 %   485,482     1,335   1.11 % Total interest-bearing deposits 1,198,256 2,902 0.97 % 1,090,832 2,200 0.81 % FHLB advances 128,519 503 1.55 % 114,435 445 1.54 % Other borrowings and long-term borrowings   39,668     549   5.54 %   39,372     536   5.45 %

Total interest-bearing liabilities

1,366,443 3,954 1.16 % 1,244,639 3,181 1.02 % Non-interest-bearing liabilities: Demand deposits 448,835 361,191 Other liabilities   11,974     9,786   Total non-interest-bearing liabilities   460,809     370,977   Total Liabilities 1,827,252 1,615,616 Shareholders’ Equity   203,138     187,793   Total Liabilities and Shareholders’ Equity $ 2,030,390   $ 1,803,409       Interest Spread (4) $ 17,605   3.15 % $ 15,011   3.08 % Net Interest Margin (2)(5) 3.51 % 3.37 %      

(1)

 

Includes loans placed on non-accrual status.

(2)

Yield and income presented on a fully taxable equivalent basis using a federal statutory rate of 35 percent.

(3)

Includes intangibles, deferred tax asset, accrued interest receivable, bank-owned life insurance and other assets.

(4)

Interest spread is the average yield earned on earning assets, less the average rate incurred on interest bearing liabilities.

(5)

Net interest margin is net interest income, expressed as a percentage of average earning assets.

(6)

Annualized income/expense is used for the yield/rate.

    Average Balances, Interest Income and Expense and Average Yield and Rates (YTD)     For the Six Months Ended June 30, 2017   June 30, 2016 AverageBalance   Income/Expense   Yield/Rate (6) AverageBalance   Income/Expense   Yield/Rate (6) ($ in thousands)

Assets

Interest-earning assets:

Loans held for sale $ 27,817 $ 573 4.09 % $ 37,326 $ 728 3.86 % Loans held for investment (1) $ 1,580,216 $ 38,078 4.79 % $ 1,349,597 $ 32,499 4.76 % Investment securities - taxable 279,218 2,619 1.87 % 250,511 2,170 1.71 % Investment securities - tax-exempt (2) 14,486 187 2.58 % 3,955 61 3.03 % Other equity securities 14,069 357 5.11 % 6,429 152 4.77 % Interest-bearing balances 100 — 0.79 % 71 1 2.96 % Federal funds sold   39,195     155   0.79 %   48,656     135   0.56 % Total interest earning assets 1,955,101 41,969 4.27 % 1,696,545 35,746 4.17 %

Non-interest earning assets:

Cash and due from banks 3,283 2,346 Premises and equipment 6,799 7,672 Other real estate owned 938 1,238 Other assets (3) 51,510 47,376 Less: allowance for loan losses   (14,259 )   (12,283 ) Total non-interest earning assets   48,271     46,349   Total Assets $ 2,003,372   $ 1,742,894    

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing demand deposits $ 136,926 $ 223 0.33 % $ 119,396 $ 176 0.30 % Money market deposit accounts 267,431 1,088 0.82 % 281,590 831 0.59 % Savings accounts 205,081 721 0.71 % 193,493 681 0.71 % Time deposits   554,373     3,287   1.20 %   462,137     2,507   1.09 %

Total interest-bearing deposits

1,163,811 5,319 0.92 % 1,056,616 4,195 0.80 % FHLB advances 174,646 1,185 1.35 % 113,072 899 1.57 % Other borrowings and long-term borrowings   39,417     1,092   5.57 %   39,485     1,078   5.47 % Total interest-bearing liabilities 1,377,874 7,596 1.11 % 1,209,173 6,172 1.02 %

Non-interest-bearing liabilities:

Demand deposits 413,091 335,292 Other liabilities   12,554     12,787   Total non-interest-bearing liabilities   425,645     348,079   Total Liabilities 1,803,519 1,557,252 Shareholders’ Equity   199,853     185,642   Total Liabilities and Shareholders’ Equity $ 2,003,372   $ 1,742,894       Interest Spread (4) $ 34,373   3.16 % $ 29,574   3.15 % Net Interest Margin (2)(5) 3.49 % 3.44 %      

(1)

 

Includes loans placed on non-accrual status.

(2)

Yield and income presented on a fully taxable equivalent basis using a federal statutory rate of 35 percent.

(3)

Includes intangibles, deferred tax asset, accrued interest receivable, bank-owned life insurance and other assets.

(4)

Interest spread is the average yield earned on earning assets, less the average rate incurred on interest bearing liabilities.

(5)

Net interest margin is net interest income, expressed as a percentage of average earning assets.

(6)

Annualized income/expense is used for the yield/rate.

    Composition of Loans Held for Investment     June 30, 2017  

December 31,2016

  June 30, 2016 ($ in thousands) Construction and development $ 285,277 $ 288,193 $ 270,476 Commercial real estate- owner occupied 264,358 231,414 226,949 Commercial real estate- non-owner occupied 607,206 557,846 465,445 Residential real estate 307,575 287,250 254,520 Real estate loans 1,464,416 1,364,703 1,217,390 Commercial and industrial 170,260 165,172 166,941 Consumer 4,075 4,668 7,192 Total loans 1,638,751 1,534,543 1,391,523 Less: allowance for loan losses 14,074 13,582 12,595 Net loans $ 1,624,677 $ 1,520,961 $ 1,378,928     Composition of Deposits     June 30, 2017  

December 31,2016

  June 30, 2016 ($ in thousands) Demand deposit accounts $ 515,861 $ 381,887 $ 418,404 NOW accounts 189,903 134,938 153,261 Money market accounts 278,148 270,794 253,207 Savings accounts 194,551 209,961 231,934 Time deposits up to $250,000 408,919 386,095 349,306 Time deposits over $250,000 157,309 139,066 142,765 Total deposits $ 1,744,691 $ 1,522,741 $ 1,548,877     Allowance and Asset Quality Ratios     June 30, 2017  

December 31,2016

  June 30, 2016 Allowance for loan losses to loans held for investment 0.86 % 0.89 % 0.91 % Adjusted allowance for loan losses to loans held for investment (1) 1.05 % 1.11 % 1.22 % Allowance for loan losses to non-accrual loans 348.11 % 236.37 % 169.81 % Allowance for loan losses to non-performing assets 73.77 % 159.10 % 95.38 % Non-performing assets to total assets 0.92 % 0.43 % 0.71 %

(1)

 

This is a non-GAAP financial measure. Refer to the table below outlining the reconciliation of GAAP Allowance Ratio to Adjusted Allowance Ratio.

  Non-Performing Assets     June 30, 2017  

December 31,2016

  June 30, 2016 ($ in thousands) Non-accrual loans $ 4,043 $ 5,746 $ 7,417 90+ days still accruing 13,057 2 13 Trouble debt restructurings still accruing 1,252 1,361 3,616 Other real estate owned 725   1,428   2,159 Total non-performing assets $ 19,077   $ 8,537   $ 13,205     Reconciliation of Net Income to Core Net Income (1)     For the Three Months Ended   For the Six Months Ended June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016 ($ in thousands) Net Income $ 5,337 $ 4,398 $ 9,773 8,322 Add: Merger Expenses 532 — 532 — Less: Tax effect (212 ) — (212 ) — Core Net Income 5,657   4,398 10,093   8,322

(1)

 

Core net income is calculated as net income adjusted for the after-tax impact of merger expenses and is a non-GAAP financial measure that is presented to facilitate a comparison of the Company's earnings without merger expenses. This table provides a reconciliation between GAAP Net Income amounts and this non-GAAP financial measure.

    Reconciliation of Tangible Common Equity to Tangible Assets Ratio (1)     June 30, 2017  

December 31,2016

  June 30, 2016 ($ in thousands)

Tangible Common Equity:

Common Stock Voting $ 123 $ 109 $ 104 Common Stock Non-Voting 7 19 18 Additional paid-in capital - common 179,915 177,924 161,679 Accumulated earnings 25,140 17,187 24,594 Accumulated other comprehensive income/(loss) (1,607 ) (2,579 ) 1,905   Total Common Equity $ 203,578   $ 192,660   $ 188,300    

Less Intangibles:

Goodwill $ 11,420 $ 11,420 $ 11,420 Identifiable intangibles 1,484   1,619   1,753   Total Intangibles $ 12,904   $ 13,039   $ 13,173     Tangible Common Equity $ 190,674   $ 179,621   $ 175,127    

Tangible Assets:

Total Assets $ 2,083,177 $ 2,002,911 $ 1,853,666  

Less Intangibles:

Goodwill $ 11,420 $ 11,420 $ 11,420 Identifiable intangibles 1,484   1,619   1,753   Total Intangibles $ 12,904   $ 13,039   $ 13,173     Tangible Assets $ 2,070,273   $ 1,989,872   $ 1,840,493     Tangible Common Equity to Tangible Assets (1) 9.21 % 9.03 % 9.52 %

(1)

 

Tangible common equity to tangible assets ratio is a non-GAAP financial measure that is presented to facilitate an understanding of the Company's capital structure. This table provides a reconciliation between certain GAAP amounts and this non-GAAP financial measure.

    Reconciliation of GAAP Allowance Ratio to Adjusted Allowance Ratio (1)     June 30, 2017  

December 31,2016

  June 30, 2016 ($ in thousands) GAAP allowance for loan losses $ 14,074 $ 13,582 $ 12,595 GAAP loans held for investment, at amortized cost 1,638,751 1,534,543 1,391,523   GAAP allowance for loan losses to total loans held for investment 0.86 % 0.89 % 0.91 %   GAAP allowance for loan losses $ 14,074 $ 13,582 $ 12,595 Plus: Credit purchase accounting marks 3,138   3,537   4,383   Adjusted allowance for loan losses $ 17,212   $ 17,119   $ 16,978     GAAP loans held for investment, at amortized cost $ 1,638,751 $ 1,534,543 $ 1,391,523 Plus: Credit purchase accounting marks 3,138   3,537   4,383   Adjusted loans held for investment, at amortized cost $ 1,641,889   $ 1,538,080   $ 1,395,906     Adjusted allowance for loan losses to total loans held for investment (1) 1.05 % 1.11 % 1.22 %

(1)

 

This is a non-GAAP financial measure. Credit purchase accounting marks are GAAP marks under purchase accounting guidance.

    Segment Reporting - 2017 (QTD)     For the Three Months Ended June 30, 2017 CommercialBank   MortgageBank   WealthManagement  

Other (1)

  ConsolidatedTotals ($ in thousands) Interest and dividend income 21,180 349 — — 21,529 Interest expense 3,408 — — 546   3,954 Net interest income 17,772 349 — (546 ) 17,575 Provision for loan losses 925 — — —   925 Net interest income after provision for loan losses 16,847 349 — (546 ) 16,650   Non-interest income 482 5,525 519 38 6,564 Compensation and employee benefits 4,912 1,722 243 257 7,134 Mortgage commission — 2,140 — — 2,140 Premises and equipment 1,611 165 32 41 1,849 Data processing 1,087 61 16 — 1,164 Professional fees 101 7 2 84 194 Merger expenses 14 — — 518 532 Mortgage loan processing expenses — 318 — — 318 Other operating expenses 1,381 237 67 52   1,737 Income/(loss) before provision for income taxes 8,223 1,224 159 (1,460 ) 8,146   Total assets 2,017,556 60,759 3,904 958   2,083,177

(1)

 

Includes parent company and intercompany eliminations

    Segment Reporting - 2017 (YTD)     For the Six Months Ended June 30, 2017 CommercialBank   MortgageBank   WealthManagement  

Other (1)

  ConsolidatedTotals

($ in thousands)

Interest and dividend income 41,335 573 — — 41,908 Interest expense 6,511 — — 1,085   7,596 Net interest income 34,824 573 — (1,085 ) 34,312 Provision for loan losses 1,940 — — —   1,940 Net interest income after provision for loan losses 32,884 573 — (1,085 ) 32,372   Non-interest income 1,222 9,118 1,019 38 11,397 Compensation and employee benefits 10,159 3,369 546 494 14,568 Mortgage commission — 3,410 — — 3,410 Premises and equipment 3,083 333 65 82 3,563 Data processing 2,026 121 23 — 2,170 Professional fees 270 18 3 174 465 Merger expenses 14 — — 518 532 Mortgage loan processing expenses — 517 — — 517 Other operating expenses 2,761 522 141 115   3,539 Income/(loss) before provision for income taxes 15,793 1,401 241 (2,430 ) 15,005   Total assets 2,017,556 60,759 3,904 958   2,083,177

(1)

 

Includes parent company and intercompany eliminations

 

Additional Discussion and Analysis

Consolidated net income for the three and six months ended June 30, 2017, was $5.3 million and $9.8 million, respectively, representing increases of $0.9 million and $1.5 million, or 21% and 17%, respectively, over the $4.4 million and $8.3 million earned during the three and six months ended June 30, 2016, respectively. Net income per diluted common share for the three and six months ended June 30, 2017 was $0.40 and $0.74, respectively, representing increases of 18% and 16%, respectively, over the $0.34 and $0.64 per diluted common share earning during the three and six months ended June 30, 2016, respectively.

As of June 30, 2017, total assets were $2.1 billion, compared to $2.0 billion as of December 31, 2016, and $1.9 billion as of June 30, 2016. During the six months ended June 30, 2017, total loans held for investment increased $104.2 million or 6.8% to $1.6 billion. This increase is attributable to organic loan growth from our existing lending team. During the six months ended June 30, 2017, total deposits increased $222.0 million or 14.6% to $1.7 billion. The increase in deposits is primarily attributable to deposit growth in our branch network and commercial customers.

The net interest margin was 3.51% and 3.49% for the three and six months ended June 30, 2017, respectively, compared to 3.37% and 3.44% for the same periods in 2016. This increase is primarily attributable to increases in market rates. On a linked quarter basis, our net interest margin increased from 3.47% for the three months ended March 31, 2017, to 3.51% for the three months ended June 30, 2017. The Company remains focused on its pricing discipline on both sides of the balance sheet and on all factors contributing to net income.

The adjusted allowance for loan losses to adjusted total loans held for investment, which includes credit purchase accounting marks, was 1.05% as of June 30, 2017, compared to 1.22% as of June 30, 2016. This decrease is attributable to net charge-offs of $1.4 million, which had been substantially reserved for previously, and credit mark accretion during the quarter ended June 30, 2017. A reconciliation of the allowance for loan losses and related ratios to the adjusted allowance for loan losses and related ratios is included herein. Non-performing assets increased by $10.5 million during the quarter ended June 30, 2017, primarily due to the default of two commercial real estate loans, related to a common guarantor, totaling $13.1 million. The Company is pursuing collection efforts on these loans and believes the collateral to be of sufficient value to protect the Company against loss with tenant rent payments sufficient to service the loans. As a result of these payment defaults, the ratio of non-performing assets to total assets increased to 0.92% as of June 30, 2017, compared to 0.71% as of June 30, 2016.

Non-interest income for the three and six months ended June 30, 2017, was $6.6 million and $11.4 million, respectively, each representing a decrease of $1.9 million compared to the $8.5 million and $13.3 million of non-interest income for the three and six month periods ended June 30, 2016, respectively. Non-interest income was negatively impacted by higher interest rates which resulted in lower mortgage origination volume during the first half of 2017, compared to the same period last year. During the three and six months ended June 30, 2017, the mortgage subsidiary originated $200.0 million and $314.3 million in total mortgage loan volume, a slight decrease from the $216.9 million and $339.6 million in total mortgage volume originated during the three and six months ended June 30, 2016, respectively. As of June 30, 2017, the Company's wealth management business unit had $313.8 million in assets under management, an increase of 28.0% over the same period last year. The Company did not sell any investment securities during 2017; however, during the three and six months ended June 30, 2016, the Company sold investment securities resulting in $1.1 million and $1.2 million, respectively, of gains on the sale of investments.

Non-interest expense decreased during the three months ended June 30, 2017, by $0.5 million, and increased during the six months ended June 30, 2017, by $0.7 million compared to the same periods ended June 30, 2016, primarily as a result of $0.5 million in merger expenses incurred during the second quarter of 2017 and a one-time $1.0 million debt termination expense incurred during the second quarter of 2016.

During the six months ended June 30, 2017, total shareholders’ equity increased $10.9 million, or 5.7%, to $203.6 million due primarily to earnings and additional paid in capital from the exercise of stock options offset by dividends of $1.8 million and changes in accumulated other comprehensive loss. Tangible book value per common share increased to $14.58 as of June 30, 2017, compared to $13.62 as of June 30, 2016. The Company remains "well-capitalized" under the regulatory framework.

View source version on businesswire.com: http://www.businesswire.com/news/home/20170720006416/en/

WashingtonFirst Bankshares Inc.Matthew R. Johnson, 703-840-2410Executive Vice President & Chief Financial OfficerMJohnson@wfbi.com