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Eastern Virginia Bankshares, Inc. Releases First Quarter 2014 Results

    Eastern Virginia Bankshares, Inc. Releases First Quarter 2014 Results  PR Newswire  TAPPAHANNOCK, Va., April 28, 2014  TAPPAHANNOCK, Va., April 28, 2014 /PRNewswire/ --Eastern Virginia Bankshares, Inc. (NASDAQ: EVBS) (the "Company"), the one bank holding company of EVB (the "Bank") reported today its results of operations for the three months ended March 31, 2014.  Net income available to common shareholders during the three months ended March 31, 2014 was $1.5 million, or $0.09 per diluted share, compared to net income of $704 thousand, or $0.12 per diluted share during the same period of 2013. For the three months ended March 31, 2014, the Company reported net income of $2.0 million, an increase of $916 thousand over the net income of $1.1 million reported for the same period of 2013. The Company's results continue to be positively impacted by the extinguishment of long-term Federal Home Loan Bank advances in the third quarter of 2013, as discussed in greater detail below. The prepayment of these advances has significantly improved the Company's financial position and net interest margin as compared to the first quarter of 2013. The difference between net income and net income available to common shareholders is the effective dividend to the holders of the Company's Series A Preferred Stock.  First Quarter Highlights:    oNet interest margin (tax equivalent basis) increased 70 basis points to     3.93% for the three months ended March 31, 2014, compared to 3.23% for the     same period in 2013.   oNonperforming assets decreased $3.0 million during the first quarter of     2014 to $8.8 million, or 1.29% of total loans and other real estate owned     ("OREO") at March 31, 2014, down from 1.80% at the end of the prior     quarter.   oNet charge-offs decreased $1.3 million to $111 thousand for the three     months ended March 31, 2014, down from $1.4 million for the same period in     2013.   oProvision for loan losses decreased to $250 thousand for the three months     ended March 31, 2014, compared to $600 thousand for the same period in     2013.  For the three months ended March 31, 2014, the following key points were also significant factors in the Company's reported results:    oIncrease in net interest income by $1.2 million from the same period in     2013, principally due to a $1.4 million decrease in interest expense;   oGain on the sale of available for sale securities of $380 thousand     resulting primarily from the sale of a portion of the Company's previously     impaired agency preferred securities (FNMA & FHLMC);   oExpenses related to FDIC insurance premiums of $332 thousand, compared to     $587 thousand for the same period in 2013;   oExpenses related to collection, repossession and OREO of $67 thousand,     compared to $126 thousand for the same period in 2013; and   oIncrease in the effective dividend on preferred stock by $142 thousand     from the same period in 2013 due primarily to the dividend rate on the     Company's Series A Preferred Stock increasing from 5% to 9% on January 9,     2014.  The return on average assets ("ROA") and return on average common shareholders' equity ("ROE"), on an annualized basis, for the three months ended March 31, 2014 were 0.57% and 6.64%, respectively, compared to 0.26% and 3.75%, respectively, for the three months ended March 31, 2013.  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 improved results, and for the first quarter of 2014 a 84.8% increase in our net income when compared to the same period last year. The year over year improvement in our overall financial position and operating results is the result of our continued focus on our strategic plan, including improving our asset quality and strengthening our balance sheet through the execution of previously disclosed strategic initiatives. During the first quarter of 2014, and as a result of our decision to prepay our long-term Federal Home Loan Bank advances during the third quarter of 2013, our net interest margin increased by 70 basis points and 7 basis points when compared to the first and fourth quarters of 2013, respectively. During the first quarter of 2014 we were able to reduce net charge-offs by 92.2% when compared to the prior year and continued to show improvement in our loan and asset quality metrics with reductions in nonperforming and classified assets of 25.4% and 10.8% during the period." Shearin further commented, "Throughout the balance of 2014, we plan to continue evaluating and implementing deliberate strategies to further strengthen our financial condition, and we will use our strategic and financial flexibility to focus on growth and opportunities to increase the value of our company."  Shearin concluded, "I am also very pleased with our announcement earlier this quarter regarding the termination of the informal memorandum of understanding with the Federal Reserve Bank of Richmond and the Virginia State Corporation Commission Bureau of Financial Institutions effective March 13, 2014. The lifting of the informal memorandum of understanding marks the culmination of our hard work and execution of strategic initiatives over the last three years to improve asset quality, increase earnings, and strengthen the overall condition of the Company and EVB by the board and the management team."  Operations Analysis  Net interest income for the three months ended March 31, 2014 was $9.3 million, an increase of approximately $1.2 million or 15.2% from the same period of 2013. This increase was due to a 70 basis point increase in the net interest margin (tax equivalent basis) from 3.23% (includes a tax equivalent adjustment of $39 thousand) in the first quarter of 2013 to 3.93% (includes a tax equivalent adjustment of $93 thousand) in the first quarter of 2014. The year over year decline in interest income was driven by lower yields on the loan portfolio, charge-offs, and the natural amortization of the portfolio, partially offset by the impact of higher yields on the investment portfolio and higher average balances in the loan portfolio. The average investment securities balance decreased $9.4 million to $278.6 million during the three months ended March 31, 2014 as compared to the same period in 2013, while the yield on investment securities increased 49 basis points from 2.30% to 2.79% for the first quarter of 2014. Average interest bearing deposits in other banks decreased $42.7 million to $7.5 million during the three months ended March 31, 2014 as compared to the same period in 2013, while the yield on these assets increased 2 basis points from 0.20% for the first quarter of 2013 to 0.22% for the first quarter of 2014. This decrease in excess funds was due largely to the prepayment of $107.5 million in higher rate long-term borrowings during the third quarter of 2013 and the decrease in our average deposits from the first quarter of 2013 compared to the same period in 2014. Average loans increased $4.0 million to $678.1 million during the three months ended March 31, 2014 as compared to the same period in 2013, while the yield on these assets decreased 28 basis points from 5.39% for the first quarter of 2013 to 5.11% for the first quarter of 2014. This increase in loans was due largely to the purchase of $27.2 million in performing one-to-four family residential mortgage loans in the first quarter of 2014, which was partially offset by loan decreases caused by weak loan demand in the Company's core markets, the natural amortization of the loan portfolio, early payment curtailments on outstanding credits and charge-offs. The decrease in yield on our average loans was offset by the increase in yield on investment securities and, as a result, the yield on our average interest-earning assets increased 15 basis points to 4.40% for the three months ended March 31, 2014 as compared to the same period in 2013. Average interest-earning assets were $964.3 million for the three months ended March 31, 2014, which was a decrease of approximately $48.2 million or 4.8% from the same period in 2013. Total average loans were 70.3% of total average interest-earning assets for the three months ended March 31, 2014, compared to 66.6% for the three months ended March 31, 2013. The decline in interest income from the first quarter of 2013 to the first quarter of 2014 was offset by a lower cost of funding. The Company's lower cost of funding was driven by the prepayment of $107.5 million in higher rate long-term borrowings during August 2013, the maturity of a $10.0 million higher rate long-term borrowing during September 2013, the continuation of our deposit re-pricing strategy, reductions in the level of time deposits, and increased levels of noninterest-bearing demand deposit accounts and interest-bearing checking and savings accounts with lower rates. As a result, for the three months ended March 31, 2014 the average cost of interest-bearing deposits decreased 13 basis points to 0.58%, while the average cost of interest-bearing liabilities decreased 62 basis points to 0.58%, both as compared to the same period in 2013.  Noninterest income for the three months ended March 31, 2014 was $1.9 million, a decrease of $56 thousand or 2.9% over the same period of 2013. For the three months ended March 31, 2014, the Company realized net gains of $380 thousand on the sale of available for sale securities as compared to $467 thousand for the same period in 2013. These gains were primarily the result of the Company selling a portion of its previously impaired agency preferred securities (FNMA & FHLMC). The Company sold these securities to remove classified assets from the balance sheet and increase the Company's sources of taxable income. Service charges and fees on deposit accounts increased $56 thousand, or 7.3% in the first quarter of 2014, which was primarily attributable to an increase in service charge income on checking accounts. Debit/credit card fee income decreased $24 thousand, or 7.2% in the first quarter of 2014, which was primarily attributable to a decrease in debit card income.  Noninterest expense for the three months ended March 31, 2014 was $8.2 million, an increase of $222 thousand or 2.8% over noninterest expense of $8.0 million for the three months ended March 31, 2013. Salaries and employee benefits increased $437 thousand, or 10.5% in the first quarter of 2014 primarily due to annual merit pay increases, lower deferred compensation on loan originations and was partially offset by lower group term insurance costs. FDIC insurance expense decreased $255 thousand, or 43.4% in the first quarter of 2014 and was driven by lower base assessment rates due to the improvement in the Bank's overall composite rating in connection with the termination (in July 2013) of the written agreement, dated February 17, 2011 (the "Written Agreement"), among the Company, the Bank, the Federal Reserve Bank of Richmond (the "Reserve Bank") and the Virginia State Corporation Commission Bureau of Financial Institutions (the "Bureau"). Expenses related to collection, repossession and OREO decreased $59 thousand, or 46.8% in the first quarter of 2014 due to the decrease in the carrying balances of OREO and classified assets. For the first quarter of 2014, noninterest expense includes $5 thousand in impairment losses related to valuation adjustments on OREO compared to $10 thousand for the same period in 2013. In addition, noninterest expense for the first quarter of 2014 includes gains on the sale of OREO of $13 thousand compared to losses of $37 thousand for the same period in 2013.  Balance Sheet and Asset Quality  Total assets decreased $36.2 million or 3.3% between March 31, 2013 and March 31, 2014, but are up $30.4 million from December 31, 2013. Between March 31, 2013 and March 31, 2014, investment securities decreased $3.4 million or 1.2% to $269.8 million, and are down $593 thousand from December 31, 2013. Loans, net of unearned income increased approximately $12.1 million or 1.8% from March 31, 2013 to $683.0 million at March 31, 2014, and are up $25.8 million from $657.2 million as of December 31, 2013. Total deposits decreased $28.3 million or 3.3% from March 31, 2013 to $826.9 million at March 31, 2014, and are down approximately $7.5 million from $834.5 million as of December 31, 2013. Total borrowings decreased $42.4 million or 32.3% from March 31, 2013 to $88.6 million at March 31, 2014, and are up approximately $33.4 million from $55.3 million as of December 31, 2013. Total shareholders' equity increased approximately $37.0 million or 36.9% from March 31, 2013 to $137.4 million at March 31, 2014, and is up approximately $4.4 million from $132.9 million as of December 31, 2013. Year to date average investment securities were $278.6 million as of March 31, 2014, a decrease of $9.4 million or 3.3% compared to the same period of 2013. Year to date average loans were $678.1 million as of March 31, 2014, an increase of $4.0 million or 0.6% compared to the same period of 2013. Year to date average total deposits were $821.8 million as of March 31, 2014, a decrease of $20.7 million or 2.5% compared to the same period of 2013. Year to date average borrowings were $86.5 million as of March 31, 2014, a decrease of $44.6 million or 34.0% compared to the same period of 2013. Year to date average shareholders' equity was $135.9 million as of March 31, 2014, an increase of approximately $35.7 million or 35.7% compared to the same period of 2013.  The asset quality measures depicted below continue to reflect the Company's efforts to prudently charge-off loans as losses are identified 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, 2014 and 2013.                                   Three months ended (dollars in thousands)         March 31,                                  2014           2013 Net charge-offs                 $     111  $   1,422 Net charge-offs to average loans 0.07%          0.86%  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,                                           2014        2013          2013 Allowance for loan losses                 $  14,906  $   14,767  $  19,516 Allowance for loan losses to period end   2.18%       2.25%         2.91% loans Allowance for loan losses to nonaccrual   180.42%     134.03%       172.80% loans Allowance for loan losses to              180.42%     134.03%       172.80% nonperforming loans  The following table depicts the level of nonperforming assets for the periods presented.  (dollars in thousands)             March 31,    December 31,    March 31,                                      2014         2013            2013 Nonaccrual loans                     $   8,262  $    11,018  $   11,294 Loans past due 90 days and accruing  -            -               - interest  Total nonperforming loans          $   8,262  $    11,018  $   11,294 Other real estate owned ("OREO")     557          800             2,988  Total nonperforming assets         $   8,819  $    11,818  $   14,282 Nonperforming assets to total loans  1.29%        1.80%           2.12% and OREO  The following tables present the change in the balances of OREO and nonaccrual loans for the three months ended March 31, 2014.  OREO:                                  Nonaccrual Loans: (dollars in thousands)                 (dollars in thousands) Balance at December 31, 2013    $ 800  Balance at December 31, 2013  $ 11,018 Transfers from loans            136    Loans returned to accrual     (3,796)                                        status Capitalized costs               -      Net principal curtailments    (715) Sales proceeds                  (387)  Charge-offs                   (209) Impairment losses on valuation  (5)    Loan collateral moved to OREO (136) adjustments Gain on disposition             13     Loans placed on nonaccrual    2,100                                        during period Balance at March 31, 2014       $ 557  Balance at March 31, 2014     $  8,262  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)          2014            2013             2013 Performing TDRs                 $            $            $                                      17,440         16,026          4,900 Nonperforming TDRs*             2,560           4,188            4,895  Total TDRs                    $            $            $                                      20,000         20,214          9,795 * Included in nonaccrual loans.  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, and the ability to realize deferred tax assets; (iii)statements of future financial performance and economic conditions; (iv) statements regarding the impact of the memorandum of understanding among the Company, the Bank, the Reserve Bank and the Bureau, dated September 5, 2013 (the "MOU") or the termination of the MOU on our financial condition, operations and capital strategies; (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 business initiatives related to and the use of proceeds from the private placements (the "Private Placements") and the rights offering (the "Rights Offering") the Company completed in 2013, including expected future interest expenses and net interest margin following the prepayment of long-term FHLB advances; 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 business initiatives related to and the     use of proceeds from the Rights Offering and the Private Placements,     including, without limitation, 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;   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, including rules to implement the Basel III     capital framework and for calculating risk-weighted assets;   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;   opossible changes to the Company's Board of Directors, including in     connection with the Private Placements and deferred dividends on the     Company's Series A 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 data)      March 31, Statement of Operations                              2014          2013 Interest and dividend income                        $           $                                                        10,376       10,577 Interest expense                                     1,115         2,540  Net interest income                               9,261         8,037 Provision for loan losses                            250           600  Net interest income after provision for loan      9,011         7,437 losses Service charges and fees on deposit accounts         822           766 Other operating income                               376           381 Debit/credit card fees                               309           333 Gain on sale of available for sale securities,       380           467 net Gain on sale of bank premises and equipment          5             1 Noninterest income                                   1,892         1,948 Salaries and employee benefits                       4,586         4,149 Occupancy and equipment expenses                     1,319         1,256 FDIC expense                                         332           587 Collection, repossession and other real estate owned 67            126 (Gain) loss on sale of other real estate owned       (13)          37 Impairment losses on other real estate owned         5             10 Other operating expenses                             1,882         1,791 Noninterest expenses                                 8,178         7,956 Income before income taxes                           2,725         1,429 Income tax expense                                   729           349  Net income                                        $          $                                                         1,996        1,080  Less: Effective dividend on preferred stock       518           376  Net income available to common shareholders       $          $                                                           1,478        704 Income per common share: basic                       $         $                                                          0.12         0.12           $         $     diluted                                              0.09         0.12 Selected Ratios Return on average assets                             0.57%         0.26% Return on average common shareholders' equity        6.64%         3.75% Net interest margin (tax equivalent basis)           3.93%         3.23% Period End Balances Loans, net of unearned income                        $  682,952  $                                                                     670,804 Total assets                                         1,057,471     1,093,682 Total deposits                                       826,934       855,230 Total borrowings                                     88,610        130,979 Total shareholders' equity                           137,374       100,327 Book value per common share                          7.79          12.66 Average Balances Loans, net of unearned income                        $  678,110  $                                                                     674,082 Total earning assets                                 964,339       1,012,571 Total assets                                         1,049,048     1,080,968 Total deposits                                       821,825       842,546 Total borrowings                                     86,513        131,102 Total shareholders' equity                           135,856       100,127 Asset Quality at Period End Allowance for loan losses                            $           $                                                        14,906       19,516 Nonperforming assets                                 8,819         14,282 Net charge-offs                                     111           1,422 Net charge-offs to average loans                     0.07%         0.86% Allowance for loan losses to period end loans        2.18%         2.91% Allowance for loan losses to nonaccrual loans        180.42%       172.80% Nonperforming assets to total assets                 0.83%         1.31% Nonperforming assets to total loans and other real   1.29%         2.12% estate owned Other Information Number of shares outstanding - period end            11,862,367    6,069,551 Average shares outstanding - basic                   11,862,367    6,069,551 Average shares outstanding - diluted                 17,102,559    6,069,551  Average Balance Sheet and Net Interest Margin Analysis (dollars in thousands)                                   Three Months Ended March 31,                                   2014                          2013                      Average      Income/    Yield/  Average    Income/ Yield/                      Balance      Expense    Rate    Balance    Expense Rate                                              (1)                        (1) Assets: Securities  Taxable            $ 241,088   $        2.54%   $ 265,861 $     2.17%                                   1,507                        1,422  Restricted         7,237        102        5.72%   9,228      86      3.78% securities  Tax exempt (2)     30,269       306        4.10%   12,893     127     3.99%  Total securities  278,594      1,915      2.79%   287,982    1,635   2.30% Interest bearing deposits in other    7,492        4          0.22%   50,153     25      0.20% banks Federal funds sold   143          -          0.00%   354        -       0.00% Loans, net of        678,110      8,550      5.11%   674,082    8,956   5.39% unearned income (3)  Total earning   964,339      10,469     4.40%   1,012,571  10,616  4.25% assets Less allowance for   (14,784)                        (20,363) loan losses Total non-earning    99,493                          88,760 assets Total assets         $ 1,049,048                     $                                                      1,080,968 Liabilities & Shareholders' Equity: Interest-bearing deposits  Checking           $ 257,179   $      0.36%   $ 244,545 $    0.39%                                   228                            236  Savings            90,185       30         0.13%   88,266     39      0.18%  Money market       119,087      125        0.43%   132,346    150     0.46% savings  Large dollar certificates of      100,768      301        1.21%   126,782    430     1.38% deposit (4)  Other certificates 125,092      303        0.98%   133,021    419     1.28% of deposit  Total interest-bearing     692,311      987        0.58%   724,960    1,274   0.71% deposits Federal funds purchased and repurchase  agreements      3,218        5          0.63%   3,292      5       0.62% Short-term           72,985       35         0.19%   -          -       0.00% borrowings Long-term borrowings -            -          0.00%   117,500    1,174   4.05% Trust preferred debt 10,310       88         3.46%   10,310     87      3.42%  Total interest-bearing     778,824      1,115      0.58%   856,062    2,540   1.20% liabilities Noninterest-bearing liabilities  Demand deposits    129,514                         117,586  Other liabilities  4,854                           7,193  Total           913,192                         980,841 liabilities Shareholders' equity 135,856                         100,127 Total liabilities                                   $ and shareholders'    $ 1,049,048                     1,080,968 equity Net interest income (2)           $                           $                                     9,354                        8,076 Interest rate spread (2)(5)                  3.82%                      3.05% Interest expense as a percent of  average earning assets                    0.47%                      1.02% Net interest margin (2)(6)                   3.93%                      3.23% Notes: (1) Yields are annualized and based on average daily balances. (2) Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%, with a  $93 adjustment for 2014 and a $39 adjustment in 2013. (3) Nonaccrual loans have been included in the computations of average loan balances. (4) Large dollar certificates of deposit are certificates issued in amounts of $100 or greater. (5) Interest rate spread is the average yield on earning assets, calculated on a fully taxable basis, less the average  rate incurred on interest-bearing liabilities. (6) Net interest margin is the net interest income, calculated on a fully taxable basis, expressed as a percentage  of average earning assets.  Contact: Adam Sothen Chief Financial Officer Voice: (804) 443-8404 Fax: (804) 445-1047  SOURCE Eastern Virginia Bankshares, Inc.  Website: http://www.bankevb.com  
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