Virginia Partners Bank Reports Results of Operations for the First Quarter 2019

FREDERICKSBURG, VA / ACCESSWIRE / April 22, 2019 / Virginia Partners Bank (OTCQX: PTRS) (the "Bank") reported net income of $545 thousand for the three months ended March 31, 2019, a 10.7% increase when compared to net income of $493 thousand for the same period in 2018. The Bank's results of operations for the three months ended March 31, 2019 were negatively impacted by merger expense of $312 thousand related to the pending merger of equals with Delmar Bancorp ("Delmar") and The Bank of Delmarva ("Delmarva"). Excluding tax-effected merger expense of $300 thousand for the three months ended March 31, 2019, adjusted net income (Non-GAAP) was $845 thousand for the three months ended March 31, 2019. For the three months ended March 31, 2019, the Bank's return on average assets, return on average equity and efficiency ratio was 0.52%, 4.92% and 78.62%, respectively, as compared to 0.52%, 5.22% and 80.26%, respectively, for the same period in 2018. Excluding tax-effected merger expense for the three months ended March 31, 2019, return on average assets (Non-GAAP), return on average equity (Non-GAAP) and efficiency ratio (Non-GAAP) was 0.81%, 7.63% and 70.62%, respectively.

The increase in net income for the three months ended March 31, 2019, as compared to the same period in 2018, was driven by increases in net interest income, due primarily to loan and deposit growth, and noninterest income, lower provision for loan losses, and partially offset by higher noninterest expense and income tax expense. The Bank's results of operations, primarily noninterest income and noninterest expense, for the three months ended March 31, 2019 and 2018 were directly affected by Johnson Mortgage Company, LLC, the Bank's majority-owned subsidiary. For the three months ended March 31, 2019, the Bank recorded a net loss of approximately $16 thousand (net of income tax benefit and noncontrolling interest) related to Johnson Mortgage Company, LLC as compared to a net loss of approximately $19 thousand (net of income tax benefit and noncontrolling interest) for the same period in 2018. In addition, the Bank's results of operations for the three months ended March 31, 2019 was negatively impacted by higher income tax expense due primarily to higher consolidated income before income taxes and the non-deductibility of merger expense. For the three months ended March 31, 2019, the Bank's effective tax rate was 27.9% as compared to 18.7% for the same period in 2018.

Total assets as of March 31, 2019 were $429.9 million, an increase of $17.2 million or 4.2% from March 31, 2018. Over the same period, gross loans held for investment increased 10.8% to $331.3 million, total investment securities – taxable decreased 13.7% to $67.4 million, total deposits decreased 2.5% to $333.4 million, however noninterest bearing deposits grew 7.5% to $56.1 million, total Federal Home Loan Bank borrowings increased 70.7% to $44.2 million and total equity increased 12.6% to $45.5 million. The decrease in investment securities - taxable was due to the strategic utilization of the cash flows from these investment securities to fund loan growth. The decrease in total deposits and the corresponding increase in total Federal Home Loan Bank borrowings were due to a decrease in money market deposits which was driven by withdrawals by several large deposit customers due to other business related needs and not due to the loss of relationships. In addition, the Bank has been able to reduce its utilization of time deposits - wholesale. As of March 31, 2019, time deposits - wholesale were $20.4 million, which represents a decrease of 14.9% from March 31, 2018. All of the Bank's capital ratios continue to exceed regulatory requirements, with total risk-based capital substantially above well-capitalized regulatory requirements.

"I am pleased with our Bank's profitability and growth to start 2019," said Lloyd B. Harrison, III, Virginia Partners Bank President & CEO. "Net income (Non-GAAP) for the first quarter of 2019 improved by $353 thousand or 71.6% when compared to the first quarter of 2018. A significant portion of our net income improvement from the first quarter of 2018 to the first quarter of 2019 was due to our efforts to grow top-line revenue and reduce noninterest expense. Net interest income for the first quarter of 2019 increased by $303 thousand or 9.6% when compared to the first quarter of 2018. Excluding merger expense, we were able to reduce our total noninterest expense by $68 thousand or 2.4% during the first quarter of 2019, as compared to the first quarter of 2018. During the first quarter of 2019, we generated loan growth of 2.8% as compared to 10.8% over the trailing twelve months, which again outpaced our internal targets. We believe this growth activity, combined with our emphasis on total relationship banking, positions us to deliver solid growth and increased profitability throughout the balance of 2019."

Harrison continued, "We continue to be very excited and focused on our pending merger of equals with Delmar and Delmarva. The Bank and Delmarva are working diligently together on this strategic partnership, and making great progress towards creating a strong banking franchise. To date we have received all necessary regulatory approvals to proceed with the merger, and late last month Delmar filed a registration statement on Form S-4 with the SEC, which included a proxy statement and a preliminary prospectus. We are very excited about the future prospects and increased efficiencies of our combined organization and look forward to maximizing the potential of this combined franchise."

About Virginia Partners Bank

Virginia Partners Bank, headquartered in Fredericksburg, Virginia, was founded in 2008 and has three branches in Fredericksburg, Virginia. In Maryland, the Bank trades under the name Maryland Partners Bank (a division of Virginia Partners Bank), and operates a full service branch and commercial banking office in La Plata, Maryland and a Loan Production Office in Annapolis, Maryland. Virginia Partners Bank also owns a controlling stake in Johnson Mortgage Company, LLC, which is a residential mortgage company headquartered in Newport News, Virginia, with branch offices in Fredericksburg and Williamsburg, Virginia. For more information, visit www.vapartnersbank.com.

For further information, please contact Lloyd B. Harrison, III, President & CEO, at 540-899-2234.

Non-GAAP Financial Measures

The accounting and reporting policies of the Bank conform to generally accepted accounting principles ("GAAP") in the United States of America and prevailing practices in the banking industry. However, management uses certain Non-GAAP financial measures to supplement the evaluation of the Bank's performance. These financial measures include net income, return on average assets, return on average equity and efficiency ratio excluding merger expense. Management believes presentations of these Non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Bank's core business. These Non-GAAP financial measures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to Non-GAAP financial measures that may be presented by other companies. Reconciliations of GAAP to Non-GAAP financial measures are included as tables at the end of this earnings release.

Cautionary Statement Regarding Forward-Looking Statements

This earnings release may contain forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward‑looking statements are not statements of historical fact and are based on assumptions and describe future plans, strategies, and expectations of management, and are inherently subject to risks and uncertainties. These statements are generally identifiable by use of words such as "believe," "expect," "intend," "anticipate," "estimate," "project," "may," "will" or similar expressions. Forward-looking statements in this earnings release may include, without limitation, statements regarding anticipated future financial performance, funding sources including loan portfolio composition, deposit and loan growth, adequacy of the allowance for loan losses and future provisions for loan losses, investment securities portfolio composition and future performance, and strategic business initiatives, including the pending merger of equals of the Bank and Delmar and Delmarva. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the effects of or changes in: management's efforts to maintain asset quality and control operating expenses; the quality, composition and growth of the loan and investment securities portfolios; interest rates; and general economic and financial market conditions. These risks and uncertainties should be considered in evaluating forward‑looking statements contained herein. We have based our forward-looking statements on management's beliefs, assumptions, expectations and projections based on information available as of the date of this earnings release. You should not place undue reliance on such statements, because the beliefs, assumptions, expectations and projections about future events on which they are based may, and often do, differ materially from actual events and, in many cases, are outside of our control. We undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Virginia Partners Bank
Balance Sheet
Unaudited

Virginia Partners Bank
Statement of Income
Unaudited