Virginia Commerce Bancorp beats Q2 estimates (updated)
Virginia Commerce Bancorp Inc. (Nasdaq: VCBI) reported second-quarter earnings above analyst estimates Monday.
For the three months ended June 30, the commercial bank reported earnings of $6.9 million, or $0.28 per share, compared with earnings of $6.3 million, or $0.25 per share for the second quarter of 2006.
Seven analysts surveyed by Thomson Financial expected second quarter earnings of $0.26 per share.
“Obviously the results were better than expected, “said Stifel Nicolaus analyst Megan Malanga. “Virginia Commerce posted lower loss provisions than forecasted due to the mix of loans and credit quality trends that were generally favorable.”
Despite a challenging banking environment, Virginia Commerce said it saw a 66% decrease in loan loss provisions, and increases of almost 20% and 14% in loans and non-interest income, respectively.
The regional bank said provision expenses declined due to sequential reductions in non-performing and other identified problem loans, as well as residential construction loans which require higher reserves.
Virginia Commerce said that while overall loan growth was strong last year, it has slowed sequentially over the last two quarters due to unusually high pay-off levels and the effect of increased competition on the rate of approved loan closings.
Virginia Commerce CEO Peter A. Converse said that despite slowing loan growth, “our loan backlog is strong and 20% loan growth for 2007 is attainable depending on the continued constraint of pay-offs and competition.”
Malanga says that there is a bigger picture that people ought to be concerned about. “Virginia Commerce has traditionally been a large lender for construction building in the Northern Virginia area—one of the regions that saw a large increase in home values; and one that has experienced an exceptionally slower housing market for the past year,” said Malanga. “While they won’t be able to continue with loan growth as they have historically, they are better positioned than other banks in the area [in that] they saw this coming so they’ve been doing more commercial loans. They are an above-average [business] executor.”
Malanga thinks Virginia Commerce can do in the range of 18% loan deposit growth by the end of 2008.
Malanga’s current earnings estimate for the fiscal 2007 year is $1.09 per share; which she says is a little on the higher end. Seven analysts surveyed by Thomson Financial expect earnings of $1.07 for the fiscal year 2007, compared with earnings per share of $0.98 last year.
For fiscal year 2008, Malanga expects EPS growth to be in the high to mid-teens compared with the over all banking sector, for which Malanga anticipates earnings growth in 2008 will be flat to mid-single digits at best.
Malanga lowered her fiscal year 2008 earnings estimate to $1.27 from $1.35 today on moderating growth. The consensus of seven analysts surveyed by Thomson Financial is $1.29 for fiscal year 2008.
Malanga still maintains a "buy" rating on the stock, but lowered her target price to $20 per share from $22.
Shares of Virginia Commerce Bancorp climbed 5.23%, or $0.85, to $17.11 late Monday afternoon.
