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Section 1: 8-K (FORM 8-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 24, 2015

 

 

Eastern Virginia Bankshares, Inc.

(Exact name of registrant as specified in its charter)

  

         
Virginia   000-23565   54-1866052

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.) 

 

         
330 Hospital Road, Tappahannock, Virginia   22560
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (804) 443-8400

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

 
 

 

Item 2.02 Results of Operations and Financial Condition.

 

On July 24, 2015, Eastern Virginia Bankshares, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the period ended June 30, 2015. A copy of the press release is being furnished as Exhibit 99.1 to this report and is incorporated by reference into this Item 2.02.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No. Description
   
99.1 Press release dated July 24, 2015.

  

 

Signatures

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

  EASTERN VIRGINIA BANKSHARES, INC.
   
Dated: July 24, 2015  
   
   
  By:  /s/ J. Adam Sothen
  J. Adam Sothen
  Executive Vice President &
  Chief Financial Officer

 

 
 

 

Exhibit Index

 

Exhibit No. Description
   
99.1 Press release dated July 24, 2015.

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1
 

Eastern Virginia Bankshares, Inc. Releases Second Quarter 2015 Results

TAPPAHANNOCK, Va., July 24, 2015 /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 and six months ended June 30, 2015.

Performance Summary





Three Months Ended June 30,

(dollars in thousands, except per share data)


2015


2014

Net income (1)



$                 1,507


$                1,655

Net income available to common shareholders (1)


$                 1,341


$                1,114

Basic net income per common share


$                   0.10


$                  0.10

Diluted net income per common share


$                   0.07


$                  0.06

Return on average assets (annualized)


0.45%


0.43%

Return on average common shareholders' equity (annualized)


5.29%


4.76%

Net interest margin (tax equivalent basis)(2)


3.93%


3.82%












Six Months Ended June 30,

(dollars in thousands, except per share data)


2015


2014

Net income (1)



$                 3,116


$                3,651

Net income available to common shareholders (1)


$                 2,730


$                2,592

Basic net income per common share


$                   0.21


$                  0.22

Diluted net income per common share


$                   0.15


$                  0.15

Return on average assets (annualized)


0.46%


0.50%

Return on average common shareholders' equity (annualized)


5.46%


5.68%

Net interest margin (tax equivalent basis)(2)


3.97%


3.88%








(1) The difference between net income and net income available to common shareholders is the effective dividend to holders of the Company's Series A Preferred Stock. 

(2) For more information on the calculation of net interest margin on a tax equivalent basis, see the average balance sheet and net interest margin analysis for the three and six month periods ended June 30, 2015 and 2014 contained in this release.

The Company's results for the three and six months ended June 30, 2015 were directly impacted by the acquisition and integration of Virginia Company Bank ("VCB"), which was effective November 14, 2014, including additional legal fees and integration costs of $224 thousand, and increased average loan and deposit balances during the first six months of 2015 as compared to the same period in 2014. Additionally, during the second quarter of 2015, the Company completed a private placement of $20.0 million in senior subordinated debt. A portion of these proceeds were used to redeem both its outstanding warrants with the U.S. Department of Treasury ("Treasury") and the remaining $9 million of its Series A Preferred Stock related to the Troubled Asset Relief Program ("TARP") that were originally issued during January 2009.

In announcing these results, Joe A. Shearin, President and Chief Executive Officer commented, "I am pleased with our Company's continued progress and results for the second quarter of 2015. Although net income decreased when compared to the same periods last year, which in part was due to current period expenses related to the execution of our strategic initiatives, we have increased net income available to common shareholders for the comparable periods. In June 2015 we repaid our remaining TARP Series A Preferred Stock, and the elimination of this high-cost source of financing drove our improved financial results for our common shareholders in 2015. This repayment, along with our repurchase of the TARP warrants from Treasury in May 2015, eliminates the Company's TARP financing. Although loan growth has been slower than we anticipated, I am very encouraged with the positive trends we saw during the second quarter related to loan growth and loan yields, particularly in the Richmond and Tidewater markets. While our net interest margin declined during the second quarter of 2015 as compared to the first quarter of 2015, due primarily to the issuance of our senior subordinated debt in April 2015, I am pleased with the overall margin performance during the current periods given the competitive pressures in the historically low rate environment."

Shearin continued, "Over the last few years our primary focus has been on improving asset quality and strengthening our balance sheet. As a Company, we have successfully executed on this plan through our previously disclosed strategic initiatives. With healthy asset quality and our balance sheet restructuring complete, we will use our strategic and financial flexibility to focus our efforts on growth and profitability. During the first half of 2015, the Company engaged an independent consultant to conduct a comprehensive assessment of its operations. This assessment identified operating efficiencies and revenue enhancement opportunities. Throughout the balance of 2015 and forward, we plan to evaluate and implement strategies that we believe will improve our performance and profitability and will increase the value of our company. I am also pleased to announce that the Board of Directors not only declared another cash dividend but has also increased the cash dividend to $0.02 per share of common stock and Series B Preferred Stock payable on August 21, 2015 to shareholders of record as of August 7, 2015."

For the three months ended June 30, 2015, the following were significant factors in the Company's reported results:

For the six months ended June 30, 2015, the following were significant factors in the Company's reported results:

Operations Analysis

The following tables present average balances of assets and liabilities, the average yields earned on such assets (on a tax equivalent basis) and rates paid on such liabilities, and the net interest margin for the three and six months ended June 30, 2015 and 2014.

Average Balance Sheet and Net Interest Margin Analysis





(dollars in thousands)













    Three Months Ended June 30,




2015





2014



Average


Income/

Yield/


Average


Income/

Yield/


Balance


Expense

Rate (1)


Balance


Expense

Rate (1)

Assets:










Securities










  Taxable

$      221,747


$         1,185

2.14%


$     236,634


$         1,338

2.27%

  Restricted securities

7,198


96

5.35%


6,779


89

5.27%

  Tax exempt (2)

38,794


385

3.99%


29,521


294

3.99%

   Total securities

267,739


1,666

2.50%


272,934


1,721

2.53%

Interest bearing deposits in other banks

6,886


4

0.23%


5,097


4

0.31%

Federal funds sold

188


-

0.00%


121


-

0.00%

Loans, net of unearned income (3)

819,061


10,382

5.08%


685,491


8,562

5.01%

     Total earning assets

1,093,874


12,052

4.42%


963,643


10,287

4.28%

Less allowance for loan losses

(12,524)





(14,898)




Total non-earning assets

113,370





98,403




Total assets

$   1,194,720





$  1,047,148














Liabilities & Shareholders' Equity:










Interest-bearing deposits










  Checking

$      289,473


$            269

0.37%


$     259,279


$            233

0.36%

  Savings

92,733


31

0.13%


89,334


30

0.13%

  Money market savings

163,105


190

0.47%


113,929


116

0.41%

  Time deposits

233,699


444

0.76%


223,621


599

1.07%

     Total interest-bearing deposits

779,010


934

0.48%


686,163


978

0.57%

Federal funds purchased and repurchase










     agreements

8,275


13

0.63%


3,274


5

0.61%

Short-term borrowings

72,526


37

0.20%


68,547


36

0.21%

Junior subordinated debt

10,310


81

3.15%


10,310


88

3.42%

Senior subordinated debt

15,034


264

7.04%


-


-

0.00%

     Total interest-bearing liabilities

885,155


1,329

0.60%


768,294


1,107

0.58%

Noninterest-bearing liabilities










  Demand deposits

171,957





134,605




  Other liabilities

6,947





4,801




     Total liabilities

1,064,059





907,700




Shareholders' equity

130,661





139,448




 Total liabilities and shareholders' equity 

$   1,194,720





$  1,047,148














Net interest income (2)



$       10,723





$         9,180












Interest rate spread (2)(4)




3.82%





3.70%

Interest expense as a percent of










   average earning assets




0.49%





0.46%

Net interest margin (2)(5)




3.93%





3.82%











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


      $117 adjustment for 2015 and a $90 adjustment in 2014.









(3) Nonaccrual loans have been included in the computations of average loan balances.




(4) 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.









(5) Net interest margin is the net interest income, calculated on a fully taxable basis, expressed as a percentage


     of average earning assets.










(dollars in thousands)



Six Months Ended June 30,




2015





2014



Average


Income/

Yield/


Average


Income/

Yield/


Balance


Expense

Rate (1)


Balance


Expense

Rate (1)

Assets:










Securities










  Taxable

$      217,733


$         2,387

2.21%


$     238,849


$         2,845

2.40%

  Restricted securities

7,490


204

5.49%


7,006


191

5.50%

  Tax exempt (2)

38,504


760

3.98%


29,893


600

4.05%

   Total securities

263,727


3,351

2.56%


275,748


3,636

2.66%

Interest bearing deposits in other banks

6,926


8

0.23%


6,288


8

0.26%

Federal funds sold

232


-

0.00%


132


-

0.00%

Loans, net of unearned income (3)

818,059


20,573

5.07%


681,821


17,112

5.06%

     Total earning assets

1,088,944


23,932

4.43%


963,989


20,756

4.34%

Less allowance for loan losses

(12,714)





(14,842)




Total non-earning assets

113,530





98,946




Total assets

$   1,189,760





$  1,048,093














Liabilities & Shareholders' Equity:










Interest-bearing deposits










  Checking

$      285,428


$            523

0.37%


$     258,234


$            461

0.36%

  Savings

92,033


60

0.13%


89,757


60

0.13%

  Money market savings

164,421


385

0.47%


116,494


241

0.42%

  Time deposits

237,883


1,017

0.86%


224,734


1,203

1.08%

     Total interest-bearing deposits

779,765


1,985

0.51%


689,219


1,965

0.57%

Federal funds purchased and repurchase










     agreements

10,055


31

0.62%


3,329


10

0.61%

Short-term borrowings

77,453


79

0.21%


70,754


71

0.20%

Junior subordinated debt

10,310


161

3.15%


10,310


176

3.44%

Senior subordinated debt

7,558


264

7.04%


-


-

0.00%

     Total interest-bearing liabilities

885,141


2,520

0.57%


773,612


2,222

0.58%

Noninterest-bearing liabilities










  Demand deposits

166,823





132,074




  Other liabilities

6,796





4,745




     Total liabilities

1,058,760





910,431




Shareholders' equity

131,000





137,662




 Total liabilities and shareholders' equity 

$   1,189,760





$  1,048,093














Net interest income (2)



$       21,412





$       18,534












Interest rate spread (2)(4)




3.86%





3.76%

Interest expense as a percent of










   average earning assets




0.47%





0.46%

Net interest margin (2)(5)




3.97%





3.88%











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


      $232 adjustment for 2015 and a $183 adjustment in 2014.








(3) Nonaccrual loans have been included in the computations of average loan balances.




(4) 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.









(5) Net interest margin is the net interest income, calculated on a fully taxable basis, expressed as a percentage


     of average earning assets.










Interest Income and Expense

Net interest income and net interest margin

Net interest income in the second quarter of 2015 increased $1.5 million, or 16.7%, when compared to the second quarter of 2014. Net interest income for the six months ended June 30, 2015 increased $2.8 million, or 15.4%, as compared to the first half of 2014. The Company's net interest margin increased to 3.93% and 3.97% for the three and six months ended June 30, 2015, representing 11 and 9 basis point increases, respectively, over the Company's net interest margins for the three and six months ended June 30, 2014. The most significant factors impacting net interest income during these periods were as follows:

Positive Impacts:

Negative Impacts:

Total interest and dividend income

Total interest and dividend income increased 17.0% and 15.2% for the three and six months ended June 30, 2015, respectively, as compared to the same periods in 2014. The increase in total interest and dividend income during the three and six months ended June 30, 2015 was primarily driven by an increase in average loan balances and slight increases in average loan yields, and partially offset by a decrease in average investment securities balances and declines in investment securities yields.

Loans

Average loan balances increased for the three and six month periods ended June 30, 2015, as compared to the same periods in 2014, due primarily to the acquisition of VCB loans totaling $101.5 million as of November 14, 2014, net of fair value adjustments, the purchase of $11.3 million in performing one-to-four family residential mortgage loans and government guaranteed loans in June 2015, organic loan growth, the opening of a new loan production office in Chesterfield County, Virginia in the second quarter of 2014 and the origination of a line of credit to fund loan originations through Southern Trust Mortgage, LLC (balance of $12.3 million as of June 30, 2015) in the second quarter of 2014. Despite a 3% increase in loans during the current period, loan growth came in lower than our expectations. Loan growth in our rural markets, primarily on the consumer side, remains weak while competition for commercial loans, especially in the Richmond and Tidewater markets, has been and we expect will continue to be intense given the historically low rate environment. The Company's average loan balances increased $133.6 million for the three months ended June 30, 2015 and increased $136.2 million for the six months ended June 30, 2015, as compared to average loan balances for the same periods in 2014. Total average loans were 74.9% of total average interest-earning assets for the three months ended June 30, 2015, compared to 71.1% for the three months ended June 30, 2014. Total average loans were 75.1% of total average interest-earning assets for the six months ended June 30, 2015, compared to 70.7% for the six months ended June 30, 3014.

Investment securities

Average investment securities balances declined 1.9% and 4.4% for the three and six month periods ended June 30, 2015, respectively, as compared to the same periods in 2014. These declines were the result of the Company moving towards its long term target of the investment securities portfolio comprising 20% of the Company's total assets, the lack of investment opportunities with acceptable risk-adjusted rates of return and liquidity needs to support our operations and strategic initiatives. The yields on investment securities decreased 3 and 10 basis points for the three and six months ended June 30, 2015, respectively, as compared to the same periods in 2014, driven by lower interest rates and sales/calls of higher yielding municipal securities since the first and second quarters of 2014.

Interest-bearing deposits

Average total interest-bearing deposit balances increased for the three and six month periods ended June 30, 2015, as compared to the same periods in 2014, primarily due to the acquisition of VCB's interest-bearing deposit liabilities, which totaled $85.6 million as of November 14, 2014.

Borrowings

Average total borrowings increased for the three and six month periods ended June 30, 2015, as compared to the same periods in 2014, primarily due to the issuance of $20.0 million in senior subordinated debt in April 2015, the assumption of $8.7 million in short-term FHLB advances as a result of the VCB acquisition and increased repurchase agreement balances related to a significant customer deposit relationship.

Noninterest Income

The following tables depict the components of noninterest income for the three and six months ended June 30, 2015 and 2014:



Three Months Ended June 30,





(dollars in thousands)


2015


2014


Change $


Change %

Service charges and fees on deposit accounts


$                   673


$                    837


$                 (164)


-19.6%

Debit/credit card fees


442


378


64


16.9%

Gain on sale of available for sale securities, net


26


109


(83)


-76.1%

(Loss) on sale of bank premises and equipment


(30)


-


(30)


-100.0%

Other operating income


421


315


106


33.7%

Total noninterest income


$                1,532


$                 1,639


$                 (107)


-6.5%





















Six Months Ended June 30,





(dollars in thousands)


2015


2014


Change $


Change %

Service charges and fees on deposit accounts


$                1,336


$                 1,659


$                 (323)


-19.5%

Debit/credit card fees


805


687


118


17.2%

Gain on sale of available for sale securities, net


51


489


(438)


-89.6%

(Loss) gain on sale of bank premises and equipment


(27)


5


(32)


-640.0%

Other operating income


886


691


195


28.2%

Total noninterest income


$                3,051


$                 3,531


$                 (480)


-13.6%

Key changes in the components of noninterest income for both the three and six months ended June 30, 2015, as compared to the same periods in 2014, are discussed below:

Noninterest Expense

The following tables depict the components of noninterest expense for the three and six months ended June 30, 2015 and 2014:





Three Months Ended June 30,





(dollars in thousands)



2015


2014


Change $


Change %

Salaries and employee benefits


$                 5,523


$                4,748


$                    775


16.3%

Occupancy and equipment expenses


1,392


1,267


125


9.9%

FDIC expense



254


305


(51)


-16.7%

Collection, repossession and other real estate owned


126


89


37


41.6%

(Gain) loss on sale of other real estate owned


(6)


28


(34)


-121.4%

Impairment losses on other real estate owned


-


6


(6)


-100.0%

Other operating expenses


2,910


2,076


834


40.2%

Total noninterest expenses


$               10,199


$                8,519


$                 1,680


19.7%



























Six Months Ended June 30,





(dollars in thousands)



2015


2014


Change $


Change %

Salaries and employee benefits


$               11,113


$                9,334


$                 1,779


19.1%

Occupancy and equipment expenses


2,913


2,586


327


12.6%

FDIC expense



426


637


(211)


-33.1%

Collection, repossession and other real estate owned


215


156


59


37.8%

Loss on sale of other real estate owned


26


15


11


73.3%

Impairment losses on other real estate owned


5


11


(6)


-54.5%

Other operating expenses


5,468


3,958


1,510


38.2%

Total noninterest expenses


$               20,166


$              16,697


$                 3,469


20.8%

Key changes in the components of noninterest expense for both the three and six months ended June 30, 2015, as compared to the same periods in 2014, are discussed below:

Balance Sheet and Asset Quality

Balance Sheet

Key balance sheet components as of June 30, 2015 and December 31, 2014 are as follows:



June 30,


December 31,





(dollars in thousands)


2015


2014


Change $


Change %

Total assets


$    1,219,191


$    1,181,972


$       37,219


3.1%

Securities available for sale, at fair value


227,932


214,011


13,921


6.5%

Securities held to maturity, at carrying value


30,671


32,163


(1,492)


-4.6%

Total loans


840,710


820,569


20,141


2.5%

Total deposits


957,222


939,254


17,968


1.9%

Total borrowings


132,544


102,013


30,531


29.9%

Total shareholders' equity


121,909


134,274


(12,365)


-9.2%



















Key balance sheet components as of June 30, 2015 and 2014 are as follows:












June 30,


June 30,





(dollars in thousands)


2015


2014


Change $


Change %

Total assets


$    1,219,191


$    1,056,083


$     163,108


15.4%

Securities available for sale, at fair value


227,932


227,632


300


0.1%

Securities held to maturity, at carrying value


30,671


34,077


(3,406)


-10.0%

Total loans


840,710


697,993


142,717


20.4%

Total deposits


957,222


821,526


135,696


16.5%

Total borrowings


132,544


90,552


41,992


46.4%

Total shareholders' equity


121,909


140,760


(18,851)


-13.4%

Asset Quality

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 and six months ended June 30, 2015 and 2014.



 Three months ended 


 Six months ended 



June 30,


June 30,

 (dollars in thousands) 


2015


2014


2015


2014

Net charge-offs 


$            371


$             288


$         734


$         399

Net charge-offs to average loans


0.18%


0.17%


0.18%


0.12%

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



June 30,


December 31,


June 30,

 (dollars in thousands) 


2015


2014


2014

Allowance for loan losses


$               12,287


$                13,021


$                14,618

Allowance for loan losses to period end loans


1.46%


1.59%


2.09%

Allowance for loan losses to nonaccrual loans


169.17%


196.63%


149.61%

Allowance for loan losses to nonperforming loans


163.77%


195.07%


149.61%

The following table depicts the level of nonperforming assets as of the dates presented.



June 30,


December 31,


June 30,

 (dollars in thousands) 


2015


2014


2014

Nonaccrual loans


$                 7,263


$            6,622


$                 9,770

Loans past due 90 days and accruing interest


240


53


-

  Total nonperforming loans


$                 7,503


$            6,675


$                 9,770

Other real estate owned ("OREO")


1,344


1,838


601

  Total nonperforming assets


$                 8,847


$            8,513


$               10,371








Nonperforming assets to total loans and OREO


1.05%


1.04%


1.48%

The following tables present the change in the balances of OREO and nonaccrual loans for the six months ended June 30, 2015.

OREO:





Nonaccrual Loans:











(dollars in thousands)





(dollars in thousands)


Balance at December 31, 2014



$   1,838


Balance at December 31, 2014

$      6,622

Transfers from loans



1,084


Loans returned to accrual status

(2,459)

Capitalized costs



1


Net principal curtailments

(1,309)

Sales proceeds



(1,548)


Charge-offs


(676)

Impairment losses on valuation adjustments



(5)


Loan collateral moved to OREO

(1,084)

Loss on disposition



(26)


Loans placed on nonaccrual during period

6,169

Balance at June 30, 2015



$   1,344


Balance at June 30, 2015

$      7,263

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 as of the dates presented.



June 30,


December 31,


June 30,

(dollars in thousands)


2015


2014


2014

Performing TDRs


$                      14,843


$                      15,223


$                      16,383

Nonperforming TDRs*


2,252


3,438


3,963

  Total TDRs


$                      17,095


$                      18,661


$                      20,346








*  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 Securities and Exchange Commission (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. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, income 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 and the payment of dividends; (iii) statements of future financial performance and economic conditions; (iv) statements regarding the adequacy of the allowance for loan losses; (v) statements regarding the effect of future sales of investment securities or foreclosed properties; (vi) statements regarding the Company's liquidity; (vii) statements of management's expectations regarding future trends in interest rates, real estate values, and economic conditions generally and in the Company's markets; (viii) statements regarding future asset quality, including expected levels of charge-offs; (ix) statements regarding potential changes to laws, regulations or administrative guidance; (x) statements regarding strategic initiatives of the Company or the Bank and the results of these initiatives; and (xi) 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:

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. For additional information on risk factors that could affect the Company's forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and other reports filed with the SEC.

Selected Financial Information







 (dollars in thousands, except per share data) 


Three months ended June 30,


Six months ended June 30, 

Statements of Income


2015


2014


2015


2014

Interest and dividend income 


$        11,935


$         10,197


$      23,700


$        20,573

Interest expense


1,329


1,107


2,520


2,222

   Net interest income


10,606


9,090


21,180


18,351

Provision for loan losses


-


-


-


250

   Net interest income after provision for loan losses


10,606


9,090


21,180


18,101










Service charges and fees on deposit accounts


673


837


1,336


1,659

Other operating income


421


315


886


691

Debit/credit card fees


442


378


805


687

Gain on sale of available for sale securities, net


26


109


51


489

(Loss) gain on sale of bank premises and equipment


(30)


-


(27)


5

Noninterest income


1,532


1,639


3,051


3,531










Salaries and employee benefits


5,523


4,748


11,113


9,334

Occupancy and equipment expenses


1,392


1,267


2,913


2,586

FDIC expense


254


305


426


637

Collection, repossession and other real estate owned


126


89


215


156

(Gain) loss on sale of other real estate owned


(6)


28


26


15

Impairment losses on other real estate owned


-


6


5


11

Other operating expenses


2,910


2,076


5,468


3,958

Noninterest expenses


10,199


8,519


20,166


16,697










Income before income taxes


1,939


2,210


4,065


4,935

Income tax expense


432


555


949


1,284

   Net income 


$          1,507


$           1,655


$        3,116


$          3,651

   Less: Effective dividend on preferred stock


166


541


386


1,059

   Net income available to common shareholders


$          1,341


$           1,114


$        2,730


$          2,592

Net income per common share: basic


$            0.10


$             0.10


$          0.21


$            0.22

                                                   diluted


$            0.07


$             0.06


$          0.15


$            0.15

Selected Ratios









Return on average assets (annualized)


0.45%


0.43%


0.46%


0.50%

Return on average common shareholders' equity (annualized)


5.29%


4.76%


5.46%


5.68%

Net interest margin (tax equivalent basis)


3.93%


3.82%


3.97%


3.88%

Period End Balances









Investment securities


$      266,721


$       268,939


$    266,721


$      268,939

Loans, net of unearned income


840,710


697,993


840,710


697,993

Total assets


1,219,191


1,056,083


1,219,191


1,056,083

Total deposits


957,222


821,526


957,222


821,526

Total borrowings


132,544


90,552


132,544


90,552

Total shareholders' equity


121,909


140,760


121,909


140,760

Book value per common share


7.79


8.07


7.79


8.07

Average Balances









Investment securities


$      267,739


$       272,934


$    263,727


$      275,748

Loans, net of unearned income


819,061


685,491


818,059


681,821

Total earning assets


1,093,874


963,643


1,088,944


963,989

Total assets


1,194,720


1,047,148


1,189,760


1,048,093

Total deposits


950,967


820,768


946,588


821,293

Total borrowings


106,145


82,131


105,376


84,393

Total shareholders' equity


130,661


139,448


131,000


137,662

Asset Quality at Period End









Allowance for loan losses


$        12,287


$         14,618


$      12,287


$        14,618

Nonperforming assets


8,847


10,371


8,847


10,371

Net charge-offs 


371


288


734


399

Net charge-offs to average loans


0.18%


0.17%


0.18%


0.12%

Allowance for loan losses to period end loans


1.46%


2.09%


1.46%


2.09%

Allowance for loan losses to nonaccrual loans


169.17%


149.61%


169.17%


149.61%

Allowance for loan losses to nonperforming loans


163.77%


149.61%


163.77%


149.61%

Nonperforming assets to total assets


0.73%


0.98%


0.73%


0.98%

Nonperforming assets to total loans and other real estate owned


1.05%


1.48%


1.05%


1.48%

Other Information









Number of shares outstanding - period end


13,023,550


11,862,367


13,023,550


11,862,367

Average shares outstanding - basic


13,023,550


11,862,367


13,004,595


11,862,367

Average shares outstanding - diluted


18,263,742


17,102,559


18,244,787


17,102,559

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



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