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Central Virginia Bankshares Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 14, 2009 06:18PM

Central Virginia Bankshares Inc. (CVBK) filed Quarterly Report for the period ended 2009-06-30. CENTRAL VA BANKSHARES INC. is a bank holding company engaged in general community and commercial banking business through its subsidiary. Central Virginia Bankshares Inc. has a market cap of $11.1 million; its shares were traded at around $4.25 with and P/S ratio of 0.5. The dividend yield of Central Virginia Bankshares Inc. stocks is 4.9%. Central Virginia Bankshares Inc. had an annual average earning growth of 5.3% over the past 5 years.

Highlight of Business Operations:

For the quarter ended June 30, 2009, the Company reported a loss of $95,356 compared to earnings of $909,577 in the quarter ended June 30, 2008. The decline in net income is $1,004,933 or 110.5 percent when compared to earnings in the second quarter of 2008. Net income available to common shareholders was a loss of $255,943 after accrued dividends and accretion of discount on preferred stock totaling $160,588. Basic and diluted earnings on a per share basis were ($0.10), a decrease of $0.45 or 128.6 percent. For the six-month period in 2009, net income was $165,780 compared to earnings of $1,805,082 for the same period in 2008. Net income available to common shareholders for the six-month period of 2009 was a loss of $103,447 after accrued dividends and accretion of discount on preferred stock totaling $269,227. Basic and diluted earnings on a per share basis were ($0.04), a decrease of $0.74 or 105.7 percent for basic earnings per share and a decrease of $0.73 or 105.8 percent for diluted earnings per share compared to the same period in 2008.

The decrease during the second quarter is the result of net interest margin compression, which was impacted by the loss of interest income from the decline in earning assets of over $18 million due to the non-cash write-down of perpetual preferred stock issued by Fannie Mae and Freddie Mac (collectively, “the GSE”) during the third quarter of 2008, an additional loss of interest income from the $11.5 million of non-accrual loans and other real estate, the non-cash write-down of $1,050,000 in Collateralized Debt Obligation (CDO) securities during the second quarter of 2009, an industry wide FDIC special assessment of $225,000, and contributions to the Bank’s provision for loan losses of $550,000 compared to $300,000 for the second quarter of 2008.

Excluding the loss on the write-down of CDO securities, the net gains on sale of securities and the special assessment from the FDIC during the second quarter of 2009, net income available to common shareholders for the six-month period was $523,091 or $.20 per basic and diluted shares. For the six-month period ended June 30, 2008 comparable net income available to common shareholders, net of gains of sale of securities, was $1,151,000 or $0.45 and $0.44 per basic and diluted shares respectively.

Net Interest Income. The Company’s net interest income was $3,374,437 in the second quarter of 2009, compared to $3,754,869 for the second quarter of 2008, a decrease of $380,432 or 10.1 percent. This decrease is primarily the result of the effect of shrinking interest margins. The net interest margin for the second quarter of 2009 was 2.93 percent compared to 3.29 percent in the second quarter of 2008. Factors that were present during the latter part of 2008 continued to impact net interest margin during the first and second quarters of 2009. These factors include the absence of earning assets totaling over $19 million from the write off of Fannie Mae and Freddie Mac preferred stock and CDO investments, the effect on non-accruing loans and other real estate that are no longer earning income due to their status, and the prevailing low market rate environment. Average earning assets were $474.0 million at June 30, 2009, a decrease of $4.3 million or 0.9 percent from $478.3 million in the second quarter of 2008. The tax-equivalent yield on total interest earning assets dropped to 5.61 percent in 2009 from 6.50 percent in 2008 resulting in a decrease of $1.1 million in total interest income. Interest expense also decreased as the yield on interest-bearing liabilities decreased to 2.95 percent in the second quarter of 2009 compared to 3.61 percent in 2008 resulting in a decrease of $648,952 in total interest expense to $3.2 million compared to $3.8 million in the second quarter of 2008. This decrease in total interest expense occurred in spite of an increase in average interest-bearing liabilities of $7.0 million or 1.7 percent to $431.2 million in the second quarter of 2009 compared to $424.1 million in the second quarter of 2008. The changes in average interest-bearing liabilities were in interest-bearing deposits, up $9.4 million or 2.9 percent; FHLB advances down $5.5 million or 9.3 percent; federal funds purchased and repurchase agreements up $3.1 million or 9.5 percent. These additional funds were utilized to fund loan growth, the average of which was up $17.4 million or 6.1 percent.

For the six-month period ended June 30, 2009, net interest income totaled $6,393,910, a decrease of 14.8 percent or $1.1 million compared to $7,509,355 for the same period in 2008. The net interest margin for the 2009 period was 2.77 percent compared to 3.35 percent in 2008. Interest and fees on loans decreased $1,106,922 or 11.1 percent as the volume of loans increased $5,527,328 million, or 1.9 percent, from December 31, 2008 to June 30, 2009. Interest on securities decreased $1,247,661 and interest on federal funds sold increased $7,596. Combined, total interest income was down $2,346,987 or 15.3 percent. Total interest expense decreased 15.7 percent as interest on deposits decreased $919,873 or 14.8 percent as the volume of deposits increased 8.5 percent. Interest on borrowings decreased $311,669, or 18.7 percent.

During the second quarter of 2009, average loans totaled $300.4 million, an increase of $17.5 million or 6.1 percent from $282.9 million in the second quarter of 2008, while average investment securities totaled $166.8 million, a decrease of $28.5 million from $195.3 million in the second quarter of 2008. The fully taxable equivalent annualized yield on loans decreased to 6.03 percent from 6.90 percent in the comparable quarter of 2008, while investment securities in the second quarter of 2009 yielded 5.08 percent, compared to 5.92 percent in the second quarter of 2008. The decrease in loan yields reflects the effects of a reduction in the prime interest rate from 5.0 percent during the first quarter of 2008 to its current level of 3.25 percent during the second quarter of 2009. Like the yield on the loan portfolio, security yields have been affected by the declining rate environment as reinvestment of $42.2 million in called securities have been at lower yields, and the reduction in higher yielding assets from the write-down of the CDO security investments in 2009 and Fannie Mae and Freddie Mac preferred stock security investments in 2008. Average total deposits for the second quarter of 2009 increased by $6.2 million or 1.7 percent, to $373.4 million from $367.2 million in the second quarter of 2008. Total interest bearing deposits in the second quarter averaged $336.2 million, an increase of $9.4 million or 2.8 percent as compared to $326.8 million in the second quarter of 2008. Total borrowings averaged $95.0 million in the second quarter of 2009 compared to $97.3 million in the comparable quarter of 2008.

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