- The Washington Times - Monday, April 18, 2005

Financial industry analysts are predicting steady gains this year for Virginia Commerce Bank, even as many other banks suffer setbacks from rising interest rates.

The Arlington bank is scheduled to offer its investors a 5-for-4 stock split May 9 while it moves ahead with its expansion plans.

In each of the last 10 years, the bank has given shareholders either a stock dividend or a stock split.

Virginia Commerce “remains one of our favorite small-cap bank stocks,” said Mark A. Muth, a research analyst for the financial firm Financial Institutions Group. “While bank stocks in general may face a difficult year in 2005, given potential sector rotation out of the stocks, we believe that [Virginia Commerce] will outperform peers as the company’s robust growth will allow the stock to grow through easing sector valuations.”

Virginia Commerce has 11.2 million shares outstanding. Its stock, [Nasdaq: VCBI] has risen 16 percent in the last year.

About 70 percent of its lending is focused on commercial real estate and construction.

Earlier this month, the bank announced it is starting an equipment-leasing business, which will be directed at its commercial customers.

It also plans to open two new branches in the next eight months.

The rising fortunes of Virginia Commerce result at least in part from the growing Northern Virginia economy.

“We are in a great market,” said Peter Converse, the bank’s chief executive officer for the last 11 years. “We seem to be doing the best job of maximizing the opportunities the market presents.”

The bank’s first quarter net income rose to $4.3 million, 40 percent more than the $3.1 million in the same period a year earlier.

The bank holds deposits of more than $1 billion from about 30,000 customers, most of them in Northern Virginia.

The stock closed at $27.60 per share yesterday on the Nasdaq Stock Market, up $1.60, or 6.15 percent, from Friday’s close.

Despite rising income, the bank has tried to stay true to its original mission since it was founded in 1988 of serving the local community.

“We’re a typical community bank,” Mr. Converse said.

One of the bank’s key investments has been in its 215 employees, he said.

They get most of the credit for Virginia Commerce’s ability to win new depositors and loan customers, he said.

“We try to hire the best of the best in bank personnel,” Mr. Converse said.

Their compensation includes generous incentive bonuses for bringing in new customers.

The question among stock analysts is whether Virginia Commerce can continue to hold on to its growth rate as more banks try to cash in on the Washington area’s strong economy.

“Banks generally flock to high-growth markets,” said Brad Ness, a research analyst for the Arlington investment banking firm of Friedman, Billings & Ramsey. “At the end of the day, [Virginia Commerce is] a small bank, and they need to compete against the big banks.”

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