Eastern Virginia Bankshares, Inc. Releases First Quarter 2013 Results

    Eastern Virginia Bankshares, Inc. Releases First Quarter 2013 Results

PR Newswire

TAPPAHANNOCK, Va., April 19, 2013

TAPPAHANNOCK, Va., April 19, 2013 /PRNewswire/ -- Eastern Virginia Bankshares,
Inc. (NASDAQ: EVBS) (the "Company") reported today its results of operations
for the three months ended March 31, 2013.

Net income available to common shareholders during the three months ended
March 31, 2013 was $704 thousand, or $0.12 per diluted share, compared to net
income of $439 thousand, or $0.07 per diluted share during the same period in
2012. For the three months ended March 31, 2013, the Company reported net
income of $1.1 million, an increase of $266 thousand over the net income of
$814 thousand reported for the same period of 2012. The difference between
net income and net income to common shareholders is the deduction for the
effective dividend to the U.S. Treasury on preferred stock.

First Quarter Highlights:

  oNet income to common shareholders increased to $704 thousand or $0.12 per
    share for the quarter ended March 31, 2013, compared to $439 thousand or
    $0.07 per share for the same period in 2012.
  oNonperforming assets decreased $2.3 million to $14.3 million, or 2.12% of
    total loans and OREO at March 31, 2013, down from 2.41% one quarter ago.
  oProvision expense for the allowance for loan losses decreased to $600
    thousand for the three months ended March 31, 2013, compared to $2.9
    million for the same period in 2012.

For the three months ended March 31, 2013, the following key points also were
significant factors in the Company's reported results:

  oNet charge-offs of $1.4 million to write off uncollectible balances on
    nonperforming assets;
  oGain on the sale of available for sale securities of $467 thousand
    resulting from adjustments in the composition of the investment portfolio
    as part of the Company's overall asset/liability management strategy;
  oDecrease in net interest income by $413 thousand from the same period in
    2012;
  oImpairment losses of $10 thousand related to valuation adjustments on
    other real estate owned, compared to $615 thousand for the same period in
    2012;
  oLosses of $37 thousand on the sale of other real estate owned, compared to
    $73 thousand for the same period in 2012;
  oExpenses related to FDIC insurance premiums of $587 thousand, compared to
    $588 thousand for the same period in 2012; and
  oExpenses related to collection, repossession and other real estate owned
    of $126 thousand, compared to $305 thousand for the same period in 2012.

The return on average assets (ROA) and return on average equity (ROE), on an
annualized basis, for the three months ended March 31, 2013 were 0.26% and
3.75%, respectively compared to 0.17% and 2.44%, respectively for the three
months ended March 31, 2012.

In announcing these results, Joe A. Shearin, President and Chief Executive
Officer commented, "I am very pleased to report that our Company continues to
show steady and improved results, and for the first quarter of 2013 a 32.7%
increase in our net operating income when compared to the same period last
year. Much of our success is the direct result of our asset quality
improvements, even as the current interest rate environment continues to
negatively impact our margin." Shearin further commented, "We continue to
execute on a plan which we believe is critical to our success in the near term
including closely monitoring and aggressively addressing asset quality issues,
containing noninterest expenses and lowering our cost of funding. We were
able to achieve our goals related to this plan during the first quarter of
2013 as we reduced nonperforming assets by 14.1% from December 31, 2012 to
March 31, 2013, noninterest expenses by 2.2% compared to the prior quarter and
lowered our cost of deposits to 0.71%, compared to 0.76% in the prior
quarter."

Shearin concluded, "The first quarter of 2013 was a very exciting time for our
Company with the announcement of our entry into securities purchase agreements
with affiliates of Castle Creek Capital Partners and GCP Capital Partners and
certain other institutional investors. This capital raise will significantly
strengthen our balance sheet, allow us to pursue the previously disclosed
initiatives and provide us with financial and strategic flexibility which we
believe will contribute to the success of our Company for years to come."

Operations Analysis

Net interest income for the three months ended March 31, 2013 was $8.0
million, a decrease of $413 thousand or 4.9% from the same period of 2012.
This decrease was due to a 23 basis point decrease in the net interest margin
(tax equivalent basis) from 3.46% (includes a tax equivalent adjustment of
$152 thousand) in the first quarter of 2012 to 3.23% (includes a tax
equivalent adjustment of $39 thousand) in the first quarter of 2013. The year
over year decline in interest income was also driven by the impact of
declining loan balances due to weak loan demand in our market areas,
charge-offs, the natural amortization of the portfolio, and the sale of our
credit card loan portfolio in September 2012. While the average investment
securities balance increased $40.8 million to $288.0 million during the three
months ended March 31, 2013 as compared to the same period in 2012, the yield
on investment securities declined 15 basis points from 2.45% to 2.30% for the
first quarter of 2013. The lower yield during the first quarter of 2013
resulted from portfolio restructurings, accelerated prepayments on the
Company's Agency mortgage-backed and Agency CMO securities, and investing in
lower risk, shorter duration investments. As a result, the yield on our
average interest-earning assets declined 45 basis points to 4.25% for the
three months ended March 31, 2013 as compared to the same period in 2012.
Average interest-earning assets were $1.0 billion for the three months ended
March 31, 2013, which was an increase of $11.3 million or 1.1% from the same
period in 2012. Total average loans were 66.6% of total interest-earning
assets for the three months ended March 31, 2013, compared to 72.9% for the
three months ended March 31, 2012. The decline in interest income from the
first quarter of 2012 to the first quarter of 2013 was partially offset by a
lower cost of funding. The Company's lower cost of funding was driven by the
continuation of our deposit re-pricing strategy, reductions in the level of
time deposits and money market accounts, and increased levels of
interest-bearing checking and savings accounts with lower rates. As a result,
the average cost of interest-bearing deposits decreased 29 basis points to
0.71% for the three months ended March 31, 2013 as compared to the same period
in 2012.

Noninterest income for the three months ended March 31, 2013 was $1.9 million,
a decrease of $2.0 million or 50.1% over the same period of 2012. Net gains
on the sale of available for sale securities decreased $2.1 million to $467
thousand for the three months ended March 31, 2013, down from $2.5 million for
the same period in 2012. During the first quarter of 2012 the Company began
to strategically adjust the composition of its investment portfolio by
reducing its holdings of tax-exempt securities in an effort to increase the
Company's source of taxable income. To implement this strategy the Company
sold tax-exempt securities issued by state and political subdivisions during
the first quarter of 2012, many of which were in an unrealized gain position
at the time of sale, and deployed the proceeds into taxable investment
securities issued by state and political subdivisions as well as Agency
mortgage-backed and Agency CMO securities. Other operating income increased
$93 thousand, or 32.3% in the first quarter of 2013, which was driven by
higher earnings from EVB Financial Services, Inc. and revenue from sales of
insurance products through Bankers Insurance, LLC, and offset by increased
write downs of investments in community and housing development funds.

Noninterest expense for the three months ended March 31, 2013 was $8.0
million, a decrease of $595 thousand or 7.0% over noninterest expense of $8.6
million for the three months ended March 31, 2012. Expenses related to
collection, repossession and OREO decreased $179 thousand, or 58.7% in the
first quarter of 2013 due to the decrease in the carrying balance of OREO as
well as the amount of nonperforming loans and classified assets. Salaries and
employee benefits increased $249 thousand, or 6.4% in the first quarter of
2013 primarily due to annual merit pay increases and lower deferred
compensation on loan originations. For the first quarter of 2013, noninterest
expense includes $10 thousand in impairment losses related to valuation
adjustments on OREO compared to $615 thousand for the same period in 2012. In
addition, noninterest expense for the first quarter of 2013 includes losses on
the sale of OREO of $37 thousand compared to $73 thousand for the same period
of 2012.

Balance Sheet and Asset Quality

Total assets increased $17.9 million or 1.7% between March 31, 2012 and March
31, 2013, and are up $18.1 million from December 31, 2012. Between March 31,
2012 and March 31, 2013, investment securities increased $18.5 million or 7.3%
to $273.2 million, but are down $3.7 million from December 31, 2012. Loans,
net of unearned income decreased $50.3 million or 7.0% from March 31, 2012 to
$670.8 million at March 31, 2013, and are down $13.9 million from $684.7
million as of December 31, 2012. Total deposits increased $11.5 million or
1.4% from March 31, 2012 to $855.2 million at March 31, 2013, and are up $16.8
million from $838.4 million as of December 31, 2012. Year to date average
investment securities were $278.8 million as of March 31, 2013, an increase of
$41.3 million or 17.4% compared to the same period in 2012. Year to date
average loans were $674.1 million as of March 31, 2013, a decrease of $56.1
million or 7.7% compared to the same period in 2012. Year to date average
total deposits were $842.5 million as of March 31, 2013, an increase of $6.1
million or 0.7% compared to the same period in 2012.

The asset quality measures depicted below continue to reflect the Company's
efforts to prudently charge-off loans and maintain an appropriate allowance
for potential future loan losses. 

The following table depicts the net charge-off activity for the three months
ended March 31, 2013 and 2012.

                                  Three months ended
(dollars in thousands)          March 31,
                                  2013          2012
Net charge-offs                  $   1,422  $   3,861
Net charge-offs to average loans  0.86%         2.13%

The following table depicts the level of the allowance for loan losses for the
periods presented.

(dollars in thousands)              March 31,        December 31,  March 31,
                                      2013             2012          2012
Allowance for loan losses             $    19,516  $         $   
                                                       20,338        23,141
Allowance for loan losses to period   2.91%            2.97%         3.21%
end loans
Allowance for loan losses to          172.80%          171.29%       105.13%
nonaccrual loans
Allowance for loan losses to          172.80%          171.29%       103.21%
nonperforming loans

The following table depicts the level of nonperforming assets for the periods
presented.

(dollars in thousands)              March 31,        December 31,  March 31,
                                      2013             2012          2012
Nonaccrual loans                      $    11,294  $         $   
                                                       11,874        22,012
Loans past due 90 days and accruing   -                -             409
interest
 Total nonperforming loans           $    11,294  $         $   
                                                       11,874        22,421
Other real estate owned ("OREO")      2,988            4,747         5,950
 Total nonperforming assets          $    14,282  $         $   
                                                       16,621        28,371
Nonperforming assets to total loans   2.12%            2.41%         3.90%
and OREO

The following tables present the change in the balances of OREO and nonaccrual
loans for the three months ended March 31, 2013.

OREO:                                Nonaccrual Loans:
(dollars in thousands)               (dollars in thousands)
Balance at December 31,   $  4,747  Balance at December 31, 2012  $  11,874
2012
Transfers from loans      552        Loans returned to accrual     (1,601)
                                     status
Capitalized costs         -          Net principal curtailments    (1,616)
Sales proceeds            (2,264)    Charge-offs                   (176)
Impairment losses on      (10)       Loan collateral moved to OREO (552)
valuation adjustments
Loss on disposition       (37)       Loans placed on nonaccrual    3,365
                                     during period
Balance at March 31,      $  2,988  Balance at March 31, 2013     $  11,294
2013

In general, the modification or restructuring of a loan constitutes a troubled
debt restructuring ("TDR") when we grant a concession to a borrower
experiencing financial difficulty. The following table depicts the balances
of TDRs for the periods presented.

                             March 31,       December 31,      March 31,
(dollars in thousands)       2013            2012              2012
Performing TDRs              $           $            $      
                             4,900          4,433            3,997
Nonperforming TDRs*          4,895           5,089             9,702
 Total TDRs                 $           $            $     
                             9,795          9,522            13,699
* Included in nonaccrual
loans.

Additional Information About the Company and the 2013 Capital Initiative

On March 26, 2013, the Company announced that it entered into securities
purchase agreements with affiliates of Castle Creek Capital Partners and GCP
Capital Partners, and certain other institutional investors, pursuant to which
the Company expects to raise aggregate gross proceeds of $45.0 million through
private placements of approximately 4.6 million shares of common stock and 5.2
million shares of a new series of non-voting mandatorily convertible
non-cumulative preferred stock, each at $4.55 per share (together with other
related transactions, the "2013 Capital Initiative"). For more information
about the 2013 Capital Initiative, see the Company's Current Reports on Form
8-K filed with the Securities and Exchange Commission (the "SEC") on March 27,
2013 and on March 28, 2013, and the Company's Annual Report on Form 10-K filed
with the SEC on March 29, 2013.

Certain investments discussed above involve the sale of securities in private
transactions that will not be registered under the Securities Act of 1933, as
amended, and will be subject to the resale restrictions under that Act. Such
securities may not be offered or sold absent registration or an applicable
exemption from registration. This news release does not constitute an offer to
sell or a solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any state or jurisdiction in which such an offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state or jurisdiction.

The Company plans to file with the SEC and mail to its shareholders a proxy
statement in connection with the transactions contemplated by the securities
purchase agreements (the "Proxy Statement"). The Company and its respective
directors and executive officers may be deemed to be participants in the
solicitation of proxies. The Proxy Statement will contain important
information about the Company and related matters, including the current
security holdings of the Company's respective officers and directors. Security
holders are urged to read the Proxy Statement carefully when it becomes
available.

The written materials described above and other documents filed by the Company
with the SEC will be available free of charge from the SEC's website at
www.sec.gov. In addition, free copies of these documents may also be obtained
by directing a written request to: Patricia Gallagher, Eastern Virginia
Bankshares, Inc., 330 Hospital Road, P.O. Box 1455, Tappahannock, Virginia
22560.

http://www.bankevb.com

Contact: Adam Sothen
Chief Financial Officer
Voice: (804) 443-8404
Fax: (804) 445-1047

Forward Looking Statements

Certain statements contained in this release that are not historical facts may
constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. In addition, certain statements may be
contained in the Company's future filings with the SEC, in press releases, and
in oral and written statements made by or with the approval of the Company
that are not statements of historical fact and constitute forward-looking
statements within the meaning of the Act. Examples of forward-looking
statements include, but are not limited to: (i)projections of revenues,
expenses, income or loss, earnings or loss per share, the payment or
nonpayment of dividends, capital structure and other financial items;
(ii)statements of plans, objectives and expectations of the Company or its
management or Board of Directors, including those relating to products or
services, the performance or disposition of portions of the Company's asset
portfolio, future changes to the Bank's branch network, the payment of
dividends, the ability to realize deferred tax assets; (iii)statements of
future economic performance; (iv) statements regarding the impact of the
Written Agreement on our financial condition, operations and capital
strategies, including strategies related to payment of dividends on the
Company's outstanding common and preferred stock and to payment of interest on
the Company's outstanding Junior Subordinated Debentures related to the
Company's trust preferred debt; (v) statements regarding the adequacy of the
allowance for loan losses; (vi) statements regarding the effect of future
sales of investment securities or foreclosed properties; (vii) statements
regarding the Company's liquidity; (viii) statements of management's
expectations regarding future trends in interest rates, real estate values,
and economic conditions generally and in the Company's markets;
(ix)statements regarding future asset quality, including expected levels of
charge-offs; (x) statements regarding potential changes to laws, regulations
or administrative guidance; (xi) statements regarding our 2013 Capital
Initiative and business initiatives related to the capital initiative; and
(xii) statements of assumptions underlying such statements. Words such as
"believes," "anticipates," "expects," "intends," "targeted," "continue,"
"remain," "will," "should," "may" and other similar expressions are intended
to identify forward-looking statements but are not the exclusive means of
identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause
actual results to differ materially from those in such statements. Factors
that could cause actual results to differ from those discussed in the
forward-looking statements include, but are not limited to:

  ofactors that adversely affect the Company's 2013 Capital Initiative and
    related business initiatives, including, without limitation, failure to
    obtain shareholder approval of the private placements or to satisfy any
    other condition to the closing of the private placements; changes in
    market conditions that adversely affect the Company's ability to dispose
    of or work out assets adversely classified by us on advantageous terms or
    at all; changes in market and interest rate conditions that adversely
    affect the Company's ability to restructure its FHLB advances on
    advantageous terms;
  othe Company's ability and efforts to assess, manage and improve its asset
    quality;
  othe strength of the economy in the Company's target market area, as well
    as general economic, market, political, or business factors;
  ochanges in the quality or composition of the Company's loan or investment
    portfolios, including adverse developments in borrower industries, decline
    in real estate values in its markets, or in the repayment ability of
    individual borrowers or issuers;
  othe effects of the Company's adjustments to the composition of its
    investment portfolio;
  othe impact of government intervention in the banking business;
  oan insufficient allowance for loan losses;
  othe Company's ability to meet the capital requirements of its regulatory
    agencies;
  ochanges in laws, regulations and the policies of federal or state
    regulators and agencies;
  oadverse reactions in financial markets related to the budget deficit of
    the United States government;
  ochanges in the interest rates affecting the Company's deposits and loans;
  othe loss of any of the Company's key employees;
  ochanges in the Company's competitive position, competitive actions by
    other financial institutions and the competitive nature of the financial
    services industry and the Company's ability to compete effectively against
    other financial institutions in its banking markets;
  othe Company's potential growth, including its entrance or expansion into
    new markets, the opportunities that may be presented to and pursued by it
    and the need for sufficient capital to support that growth;
  ochanges in government monetary policy, interest rates, deposit flow, the
    cost of funds, and demand for loan products and financial services;
  othe Company's ability to maintain internal control over financial
    reporting;
  othe Company's ability to raise capital as needed by its business;
  othe Company's reliance on secondary sources, such as Federal Home Loan
    Bank advances, sales of securities and loans, federal funds lines of
    credit from correspondent banks and out-of-market time deposits, to meet
    its liquidity needs;
  othe Company's ability to comply with the Written Agreement, which requires
    it to designate a significant amount of resources to complying with the
    agreement and may have a material adverse effect on the Company's
    operations and the value of its securities;
  opossible changes to the Company's Board of Directors, including in
    connection with the private placements and deferred dividends on the
    Company's Capital Purchase Program preferred stock; and
  oother circumstances, many of which are beyond the Company's control.

Although the Company believes that its expectations with respect to the
forward-looking statements are based upon reliable assumptions and projections
within the bounds of its knowledge of its business and operations, there can
be no assurance that actual results, performance, actions or achievements of
the Company will not differ materially from any future results, performance,
actions or achievements expressed or implied by such forward-looking
statements. Readers should not place undue reliance on such statements, which
speak only as of the date of this report. The Company does not undertake any
steps to update any forward-looking statement that may be made from time to
time by it or on its behalf.



Selected Financial Information                  Three months ended
(dollars in thousands, except per share        March 31,
data)
Statement of Operations                         2013             2012
Interest and dividend income                   $   10,577    $  11,554
Interest expense                                2,540            3,104
 Net interest income                          8,037            8,450
Provision for loan losses                       600              2,900
 Net interest income after provision for      7,437            5,550
loan losses
Service charges and fees on deposit accounts    766              769
Other operating income                          381              288
Debit/credit card fees                          333              319
Gain on sale of available for sale securities,  467              2,531
net
Gain on sale of bank premises and equipment     1                -
Noninterest income                              1,948            3,907
Salaries and employee benefits                  4,149            3,900
Occupancy and equipment expenses                1,256            1,271
FDIC expense                                    587              588
Collection, repossession and other real estate  126              305
owned
Loss on sale of other real estate owned         37               73
Impairment losses on other real estate owned    10               615
Other operating expenses                        1,791            1,799
Noninterest expenses                            7,956            8,551
Income before income taxes                      1,429            906
Income tax expense                              349              92
 Net income                                   $    1,080   $     814
 Less: Effective dividend on preferred stock  376              375
 Net income available to common shareholders  $      704  $     439
Income per common share: basic and diluted      $     0.12  $    0.07
Selected Ratios
Return on average assets                        0.26%            0.17%
Return on average common equity                 3.75%            2.44%
Net interest margin (tax equivalent basis)      3.23%            3.46%
Period End Balances
Loans, net of unearned income                   $  670,804     $ 721,152
Total assets                                    1,093,682        1,075,794
Total deposits                                  855,230          843,739
Total borrowings                                130,979          129,954
Total shareholders' equity                      100,327          95,533
Book value per common share                     12.66            11.89
Average Balances
Loans, net of unearned income                   $  674,082     $ 730,159
Total earning assets                            1,012,571        1,001,296
Total assets                                    1,080,968        1,069,987
Total deposits                                  842,546          836,445
Total borrowings                                131,102          130,594
Total shareholders' equity                      100,127          96,506
Asset Quality at Period End
Allowance for loan losses                       $   19,516    $  23,141
Nonperforming assets                            14,282           28,371
Net charge-offs                                1,422            3,861
Net charge-offs to average loans                0.86%            2.13%
Allowance for loan losses to period end loans   2.91%            3.21%
Allowance for loan losses to nonaccrual loans   172.80%          105.13%
Nonperforming assets to total assets            1.31%            2.64%
Nonperforming assets to total loans and other   2.12%            3.90%
real estate owned
Other Information
Number of shares outstanding - period end       6,069,551        6,032,527
Average shares outstanding - basic and diluted  6,069,551        6,029,041


SOURCE Eastern Virginia Bankshares, Inc.

Website: http://www.bankevb.com
 
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