WFBI Washingtonfirst Bankshares

WashingtonFirst Bankshares, Inc. (NASDAQ: WFBI) (“WashingtonFirst” or the “Company”) reported today net income of $4.4 million for the first quarter of 2017, or $0.34 per share on a fully-diluted basis, a 13% increase over the same period last year. Loans held for investment grew by $61.8 million to $1.6 billion, and total deposits increased $156.6 million, more than 10%, to $1.7 billion during the first quarter of 2017. The Company continues to improve its asset quality, shrinking the ratio of non-performing assets to total assets from 0.43% at December 31, 2016, to 0.37% as of March 31, 2017, and down from 0.80% at the same time last year. The Company also continued its practice, now in its fourth consecutive year, of returning a cash dividend to its shareholders.

Commenting on the Company’s first quarter performance, Shaza Andersen, the Company's President and CEO, said, “During the first three months of 2017 our industry and our market in particular have enjoyed continued vibrancy. As a result, we have been able to sustain our growth in both loans and deposits. And while the uptick in interest rates has dampened the strong demand for mortgage loans, we are confident that a rising interest rate environment should have a positive effect on the bank’s performance overall, relieving some of the compression on our interest rate margin. In fact, the strong results from our commercial lending team were key to driving the Company’s growth in earnings compared to the same period last year. This has allowed us to increase the dividend payment to our shareholders, and deliver on our commitment to long-term shareholder value.”

Return on average shareholders equity (ROE), an important measure of the Company's profitability, was 9.15% during the three months ended March 31, 2017, compared to 8.60% for the three months ended March 31, 2016. Management attributed the increase in ROE to the continued growth of the loans held for investment portfolio over the past twelve months. For the three months ended March 31, 2017, the Company's net interest income after provision for loan losses increased $1.8 million, or 13%, over the same period ended March 31, 2016.

The Company’s total assets reached $2.1 billion as of March 31, 2017, an increase of 17% over the last twelve months. Net loans held-for-investment and total deposits ended the first quarter at $1.6 billion and $1.7 billion, respectively, representing increases of 19% for both measurements 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.

 

WashingtonFirst Bankshares, Inc.

Consolidated Balance Sheets

(unaudited)

      March 31, 2017

December 31,2016

March 31, 2016 ($ in thousands)

Assets:

Cash and cash equivalents: Cash and due from bank balances $ 3,607 $ 3,614 $ 3,075 Federal funds sold 73,611 93,659 65,942 Interest bearing deposits 100   100   100   Cash and cash equivalents 77,318 97,373 69,117 Investment securities, available-for-sale, at fair value 297,847 280,204 257,085 Restricted stock, at cost 12,285 11,726 6,532 Loans held for sale, at lower of cost or fair value 28,250 32,109 37,439 Loans held for investment: Loans held for investment, at amortized cost 1,596,296 1,534,543 1,346,057 Allowance for loan losses (14,505 ) (13,582 ) (12,329 )

Total loans held for investment, net of allowance

1,581,791 1,520,961 1,333,728 Premises and equipment, net 6,768 6,955 7,819 Goodwill 11,420 11,420 11,420 Identifiable intangibles 1,552 1,619 1,820 Deferred tax asset, net 7,958 8,944 6,989 Accrued interest receivable 5,511 5,243 4,624 Other real estate owned 832 1,428 1,675 Bank-owned life insurance 16,465 13,880 13,611 Other assets 11,021   11,049   7,524   Total Assets $ 2,059,018   $ 2,002,911   $ 1,759,383  

Liabilities and Shareholders' Equity:

Liabilities:

Non-interest bearing deposits $ 493,514 $ 381,887 $ 358,181 Interest bearing deposits 1,185,857   1,140,854   1,049,379   Total deposits 1,679,371 1,522,741 1,407,560 Other borrowings 8,580 5,852 9,849 FHLB advances 128,350 232,097 112,220 Long-term borrowings 32,697 32,638 32,919 Accrued interest payable 1,452 947 1,404 Other liabilities 11,336   15,976   11,303   Total Liabilities 1,861,786 1,810,251 1,575,255 Commitments and contingent liabilities — —

Shareholders' Equity:

Common stock: Common Stock Voting, $0.01 par value, 50,000,000 shares authorized, 12,120,209, 10,987,652 and 10,408,055 shares issued and outstanding, respectively 121 109 103 Common Stock Non-Voting, $0.01 par value, 10,000,000 shares authorized, 816,835, 1,908,733 and 1,817,842 shares issued and outstanding, respectively 8 19 18 Additional paid-in capital 178,573 177,924 161,323 Accumulated earnings 20,718 17,187 20,931 Accumulated other comprehensive income (loss) (2,188 ) (2,579 ) 1,753   Total Shareholders' Equity 197,232   192,660   184,128   Total Liabilities and Shareholders' Equity $ 2,059,018   $ 2,002,911   $ 1,759,383       WashingtonFirst Bankshares, Inc. Consolidated Statements of Income (unaudited)   For the Three Months Ended March 31, 2017   March 31, 2016 ($ in thousands)

Interest and dividend income:

Interest and fees on loans $ 18,779 $ 16,391 Interest and dividends on investments: Taxable 1,265 992 Tax-exempt 65 21 Dividends on other equity securities 196 72 Interest on Federal funds sold and other short-term investments 74   68 Total interest and dividend income 20,379 17,544

Interest expense:

Interest on deposits 2,417 1,995 Interest on borrowings 1,225   996 Total interest expense 3,642   2,991 Net interest income 16,737 14,553 Provision for loan losses 1,015   625 Net interest income after provision for loan losses 15,722 13,928

Non-interest income:

Service charges on deposit accounts 48 79 Earnings on bank-owned life insurance 85 90 Gain on sale of loans, net 2,649 2,742 Mortgage banking activities 944 1,199 Wealth management income 500 428 Gain on sale of available-for-sale investment securities, net — 75 Gain on debt extinguishment 301 — Other operating income 306   168 Total non-interest income 4,833 4,781

Non-interest expense:

Compensation and employee benefits 8,704 7,804 Premises and equipment 1,714 1,817 Data processing 1,006 1,005 Professional fees 271 319 Mortgage loan processing expenses 199 195 Other operating expenses 1,802   1,361 Total non-interest expense 13,696   12,501 Income before provision for income taxes 6,859 6,208 Provision for income taxes 2,423   2,284 Net income 4,436   3,924   Earnings per common share: (1) Basic earnings per common share $ 0.34 $ 0.31 Diluted earnings per common share $ 0.34 $ 0.30  

(1) Prior periods adjusted for 5% stock dividend issued in December 2016

    For the Three Months Ended March 31, 2017   March 31, 2016 ($ in thousands, except per share data)

Performance Ratios:

Return on average assets 0.91 % 0.94 % Return on average shareholders' equity 9.15 % 8.60 % Yield on average interest-earning assets 4.23 % 4.25 % Rate on average interest-earning liabilities 1.06 % 1.02 % Net interest spread 3.17 % 3.23 % Net interest margin 3.47 % 3.51 % Efficiency ratio (1) 64.39 % 64.91 % Net charge-offs to average loans held for investment (2) 0.02 % 0.18 %   Mortgage origination volume $ 114,339 $ 122,636   Assets under management $ 306,841 $ 236,672  

Per Share Data: (3)

Basic earnings per common share $ 0.34 $ 0.31 Fully diluted earnings per common share $ 0.34 $ 0.30 Weighted average basic shares outstanding 12,919,141 12,820,761 Weighted average diluted shares outstanding 13,219,029 13,066,694  

(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

        March 31, 2017 December 31, 2016 March 31, 2016

Capital Ratios:

Total risk-based capital ratio 13.90 % 13.99 % 14.74 % Tier 1 risk-based capital ratio 11.53 % 11.61 % 12.16 % Common equity tier 1 risk-based capital ratio 11.07 % 11.15 % 11.62 % Tier 1 leverage ratio 9.86 % 10.14 % 10.55 % Tangible common equity to tangible assets (1) 9.01 % 9.03 % 9.79 %  

Per Share Capital Data: (2)

Book value per common share $ 15.25 $ 14.94 $ 14.34 Tangible book value per common share $ 14.24 $ 13.93 $ 13.31 Common shares outstanding 12,937,044 12,896,385 12,836,728  

(1)

 

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

(2)

March 31, 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 March 31, 2017   March 31, 2016

AverageBalance

 

Income/Expense

 

Yield/Rate (6)

AverageBalance

 

Income/Expense

 

Yield/Rate (6)

($ in thousands) Assets Interest-earning assets: Loans held for sale $ 21,790 $ 224 4.12 % $ 29,015 $ 290 3.96 % Loans held for investment (1) 1,566,507 18,555 4.74 % 1,332,538 16,101 4.78 % Investment securities - taxable 270,479 1,265 1.87 % 222,333 992 1.77 % Investment securities - tax-exempt (2) 14,628 97 2.63 % 4,089 31 3.06 % Other equity securities 15,702 196 5.08 % 6,223 72 4.64 % Interest-bearing balances 100 — 0.56 % 43 — 0.94 % Federal funds sold   39,417     74 0.76 %   41,590     68 0.65 % Total interest earning assets 1,928,623 20,411 4.23 % 1,635,831 17,554 4.25 % Non-interest earning assets: Cash and due from banks 3,399 1,981 Premises and equipment 6,944 7,630 Other real estate owned 1,083 432 Other assets (3) 49,941 48,919 Less: allowance for loan losses   (13,936 )   (12,414 ) Total non-interest earning assets   47,431     46,548   Total Assets $ 1,976,054   $ 1,682,379     Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing demand deposits $ 129,444 $ 109 0.34 % $ 114,714 $ 86 0.30 % Money market deposit accounts 258,109 452 0.71 % 297,453 438 0.59 % Savings accounts 207,403 362 0.71 % 171,442 300 0.70 % Time deposits   534,027     1,494 1.13 %   438,791     1,171 1.07 % Total interest-bearing deposits 1,128,983 2,417 0.87 % 1,022,400 1,995 0.78 % FHLB advances 221,285 682 1.23 % 111,710 454 1.61 % Other borrowings and long-term borrowings   39,164     543 5.61 %   39,599     542 5.48 % Total interest-bearing liabilities 1,389,432 3,642 1.06 % 1,173,709 2,991 1.02 % Non-interest-bearing liabilities: Demand deposits 376,949 309,393 Other liabilities   13,142     15,786   Total non-interest-bearing liabilities   390,091     325,179   Total Liabilities 1,779,523 1,498,888 Shareholders’ Equity   196,531     183,491   Total Liabilities and Shareholders’ Equity $ 1,976,054   $ 1,682,379     Interest Spread (4)   3.17 %   3.23 % Net Interest Margin (2)(5) $ 16,769 3.47 % $ 14,563 3.51 %  

(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   March 31, 2017   December 31, 2016   March 31, 2016 ($ in thousands) Construction and development $ 267,657 $ 288,193 $ 259,804 Commercial real estate- owner occupied 257,928 231,414 217,183 Commercial real estate- non-owner occupied 588,303 557,846 454,105 Residential real estate   308,465   287,250   246,538 Real estate loans 1,422,353 1,364,703 1,177,630 Commercial and industrial 169,884 165,172 162,311 Consumer   4,059   4,668   6,116 Total loans 1,596,296 1,534,543 1,346,057 Less: allowance for loan losses   14,505   13,582   12,329 Net loans $ 1,581,791 $ 1,520,961 $ 1,333,728   Composition of Deposits   March 31, 2017   December 31, 2016   March 31, 2016 ($ in thousands) Demand deposit accounts $ 493,514 $ 381,887 $ 358,181 NOW accounts 150,578 134,938 121,099 Money market accounts 253,476 270,794 269,057 Savings accounts 208,383 209,961 188,003 Time deposits up to $250,000 428,122 386,095 355,227 Time deposits over $250,000   145,298   139,066   115,993 Total deposits $ 1,679,371 $ 1,522,741 $ 1,407,560   Allowance and Asset Quality Ratios   March 31, 2017   December 31, 2016   March 31, 2016 Allowance for loan losses to loans held for investment 0.91 % 0.89 % 0.92 % Adjusted allowance for loan losses to loans held for investment (1) 1.12 % 1.11 % 1.25 % Allowance for loan losses to non-accrual loans 265.90 % 236.37 % 140.26 % Allowance for loan losses to non-performing assets 192.27 % 159.10 % 87.69 % Non-performing assets to total assets 0.37 % 0.43 % 0.80 %

 

(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   March 31, 2017   December 31, 2016   March 31, 2016 ($ in thousands) Non-accrual loans $ 5,455 $ 5,746 $ 8,790 90+ days still accruing — 2 — Trouble debt restructurings still accruing 1,257 1,361 3,594 Other real estate owned   832   1,428   1,675 Total non-performing assets $ 7,544 $ 8,537 $ 14,059     Reconciliation of Tangible Common Equity to Tangible Assets Ratio (1)   March 31, 2017   December 31, 2016   March 31, 2016 ($ in thousands)

Tangible Common Equity:

Common Stock Voting $ 121 $ 109 $ 103 Common Stock Non-Voting 8 19 18 Additional paid-in capital - common 178,573 177,924 161,323 Accumulated earnings 20,718 17,187 20,931 Accumulated other comprehensive income/(loss) (2,188 ) (2,579 ) 1,753   Total Common Equity $ 197,232   $ 192,660   $ 184,128    

Less Intangibles:

Goodwill $ 11,420 $ 11,420 $ 11,420 Identifiable intangibles 1,552   1,619   1,820   Total Intangibles $ 12,972   $ 13,039   $ 13,240     Tangible Common Equity $ 184,260   $ 179,621   $ 170,888    

Tangible Assets:

Total Assets $ 2,059,018 $ 2,002,911 $ 1,759,383  

Less Intangibles:

Goodwill $ 11,420 $ 11,420 $ 11,420 Identifiable intangibles 1,552   1,619   1,820   Total Intangibles $ 12,972   $ 13,039   $ 13,240     Tangible Assets $ 2,046,046   $ 1,989,872   $ 1,746,143     Tangible Common Equity to Tangible Assets (1) 9.01

%

9.03 % 9.79 %

(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)   March 31, 2017   December 31, 2016   March 31, 2016 ($ in thousands) GAAP allowance for loan losses $ 14,505 $ 13,582 $ 12,329 GAAP loans held for investment, at amortized cost 1,596,296 1,534,543 1,346,057   GAAP allowance for loan losses to total loans held for investment 0.91 % 0.89 % 0.92 %   GAAP allowance for loan losses $ 14,505 $ 13,582 $ 12,329 Plus: Credit purchase accounting marks 3,355   3,537   4,555   Adjusted allowance for loan losses $ 17,860   $ 17,119   $ 16,884     GAAP loans held for investment, at amortized cost $ 1,596,296 $ 1,534,543 $ 1,346,057 Plus: Credit purchase accounting marks 3,355   3,537   4,555   Adjusted loans held for investment, at amortized cost $ 1,599,651   $ 1,538,080   $ 1,350,612     Adjusted allowance for loan losses to total loans held for investment (1) 1.12 % 1.11 % 1.25 %

(1)

 

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

          Segment Reporting (QTD)                     For the Three Months Ended March 31, 2017

CommercialBank

MortgageBank

WealthManagement

Other (1)

ConsolidatedTotals

($ in thousands) Interest and dividend income $ 20,155 $ 224 $ — $ — $ 20,379 Interest expense 3,103   —   —   539   3,642 Net interest income 17,052 224 — (539 ) 16,737 Provision for loan losses 1,015

 

—   —   —   1,015 Net interest income after provision for loan losses 16,037 224 — (539 ) 15,722   Non-interest income 740 3,593 500 — 4,833 Non-interest expense 9,206   3,640   418   432   13,696 Income/(loss) before provision for income taxes $ 7,571   $ 177   $ 82   $ (971 ) $ 6,859   Total assets $ 2,013,084   $ 40,885   $ 3,799   $ 1,250   $ 2,059,018

(1)

 

Includes parent company and intercompany eliminations

Additional Discussion and Analysis

Consolidated net income for the three months ended March 31, 2017, was $4.4 million ($0.34 per diluted common share), an increase of $0.5 million, or 13%, over the $3.9 million ($0.30 per diluted common share) earned during the three months ended March 31, 2016.

As of March 31, 2017, the Company reported total assets of $2.1 billion, compared to $2.0 billion as of December 31, 2016 and $1.8 billion as of March 31, 2016. During the three months ended March 31, 2017, total loans held for investment increased $61.8 million or 4.0% to $1.6 billion. This increase is attributable to organic loan growth from our existing lending team. During the three months ended March 31, 2017, total deposits increased $156.6 million or 10.3% 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 3.47% for the three months ended March 31, 2017, compared to 3.51% for the same period in 2016. This decrease is primarily attributable to competitive pressure for incremental loans and deposits. On a linked quarter basis, net interest margin increased from 3.40% for the three months ended December 31, 2016, to 3.47% for the three months ended March 31, 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 1.12% as of March 31, 2017, compared to 1.25% as of March 31, 2016. This decrease is attributable to net charge-offs of $0.1 million, which had been substantially reserved for previously, and credit mark accretion during the quarter ended March 31, 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 continue to decline. The ratio of non-performing assets to total assets decreased to 0.37% as of March 31, 2017, compared to 0.80% as of March 31, 2016.

Non-interest income grew during the three months ended March 31, 2017, by $0.1 million, compared to the same period ended March 31, 2016. Non-interest income was negatively impacted by higher interest rates which resulted in lower mortgage origination volume during the first quarter 2017, compared to the same period last year. During the three months ended March 31, 2017, the mortgage subsidiary originated $114.3 million in total mortgage loan volume, a slight decrease from the $122.6 million in total mortgage volume originated during the first quarter of 2016. The Company recognized a debt termination gain of $0.3 million during the three months ended March 31, 2017. As of March 31, 2017, the Company's wealth management business unit had $306.8 million in assets under management, an increase of 29.6% over the same period last year.

Non-interest expense grew during the three months ended March 31, 2017, by $1.2 million compared to the same period ended March 31, 2016, primarily as a result of an increase in compensation and employee benefits.

During the three months ended March 31, 2017, total shareholders’ equity increased $4.6 million, or 2.4%, to $197.2 million due primarily to earnings offset by dividends of $0.9 million and changes in accumulated other comprehensive loss. Tangible book value per common share increased to $14.24 as of March 31, 2017, compared to $13.31 as of March 31, 2016. The Company remains "well-capitalized" under the regulatory framework.

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