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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): February 9, 2016

 

 

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 2.02Results of Operations and Financial Condition.

 

On February 9, 2016, Eastern Virginia Bankshares, Inc. (the “Company”) issued a press release announcing the Company’s financial results as of and for the period ended December 31, 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 9.01Financial Statements and Exhibits.

 

(d)Exhibits.

 

Exhibit No. Description
   
99.1 Press release dated February 9, 2016.

 

 

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: February 9, 2016      
       
       
  By: /s/ J. Adam Sothen  
    J. Adam Sothen  
    Executive Vice President &  
    Chief Financial Officer  

 

 

 

 

Exhibit Index

 

Exhibit No. Description
   
99.1 Press release dated February 9, 2016.

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 
Exhibit 99.1
 

Eastern Virginia Bankshares, Inc. Releases Fourth Quarter and Full Year 2015 Results

TAPPAHANNOCK, Va., Feb. 9, 2016 /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 twelve months ended December 31, 2015.

Performance Summary






Three Months Ended December 31,

(dollars in thousands, except per share data)


2015


2014

Net income (1)



$           2,168


$             731

Net income available to common shareholders (1)


$           2,168


$             382

Basic and diluted net income per common share


$             0.12


$            0.03

Return on average assets (annualized)


0.69%


0.13%

Return on average common shareholders' equity (annualized)

8.23%


1.56%

Net interest margin (tax equivalent basis) (2)


3.71%


3.94%












Twelve Months Ended December 31,

(dollars in thousands, except per share data)


2015


2014

Net income (1)



$           7,294


$          5,664

Net income available to common shareholders (1)


$           6,908


$          3,716

Basic and diluted net income per common share


$             0.38


$            0.22

Return on average assets


0.57%


0.35%

Return on average common shareholders' equity


6.76%


3.96%

Net interest margin (tax equivalent basis) (2)


3.84%


3.85%








(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 twelve month periods ended December 31, 2015 and 2014 contained in this release.

The Company's results for the three and twelve months ended December 31, 2015 were directly impacted by the acquisition and integration of Virginia Company Bank ("VCB"), which was effective November 14, 2014, including increased average loan and deposit balances during the twelve months ended December 31, 2015 as compared to the same period in 2014. Merger and merger related expenses totaled $224 thousand for the twelve months ended December 31, 2015 as compared to $1.8 million for 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 $9.0 million of its Series A Preferred Stock related to the Troubled Asset Relief Program ("TARP") that was originally issued during January 2009. During the fourth quarter of 2015, the Company completed an offer to exchange all $20.0 million of the senior subordinated notes for identical notes that were registered under the Securities Act of 1933. The issuance of the senior subordinated debt was a significant driver of higher interest expense and a lower net interest margin during the second half of 2015.

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 fourth quarter and full year of 2015. Despite a sluggish economy and competitive pressures in the low rate environment, we are reporting our third straight quarter of loan growth. During 2015, we generated strong loan and deposit growth, which caused our balance sheet to increase by 7.5%. We continued our company-wide efforts to grow and improve profitability by driving operating efficiencies, containing noninterest expenses and identifying revenue enhancement opportunities, which have meaningfully improved our financial performance when compared to the same periods last year. For the fourth quarter of 2015, as compared to the third quarter of 2015, we are reporting an increase in net income available to common shareholders of 7.9%, an increase in annualized return on average assets of 0.04% to 0.69%, and an increase in annualized return on average common shareholders' equity of 0.43% to 8.23%."

Shearin continued, "As we look forward to 2016, as a company we will continue to use our strategic and financial flexibility, leverage our strong credit culture and evaluate and implement strategies that we believe will improve our performance and profitability and increase the value of our company. Given our continued balance sheet strength and improved financial performance, I am also pleased to announce that the Board of Directors declared another cash dividend of $0.02 per share of common stock and Series B Preferred Stock payable on March 4, 2016 to shareholders of record as of February 19, 2016."

For the three months ended December 31, 2015, the following were significant factors in the Company's reported results:

For the twelve months ended December 31, 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 twelve months ended December 31, 2015 and 2014.

Average Balance Sheet and Net Interest Margin Analysis





(dollars in thousands)



    Three Months Ended December 31,




2015





2014



Average


Income/

Yield/


Average


Income/

Yield/


Balance


Expense

Rate (1)


Balance


Expense

Rate (1)

Assets:










Securities










  Taxable

$      238,163


$         1,374

2.29%


$     222,145


$         1,141

2.04%

  Restricted securities

8,327


109

5.19%


7,345


105

5.67%

  Tax exempt (2)

19,577


195

3.95%


27,878


273

3.89%

   Total securities

266,067


1,678

2.50%


257,368


1,519

2.34%

Interest bearing deposits in other banks

9,573


6

0.25%


8,809


5

0.23%

Federal funds sold

116


-

0.00%


359


-

0.00%

Loans, net of unearned income (3)

872,975


10,656

4.84%


766,664


9,820

5.08%

     Total earning assets

1,148,731


12,340

4.26%


1,033,200


11,344

4.36%

Less allowance for loan losses

(11,779)





(14,071)




Total non-earning assets

113,278





104,762




Total assets

$   1,250,230





$  1,123,891














Liabilities & Shareholders' Equity:










Interest-bearing deposits










  Checking

$      301,313


$            275

0.36%


$     274,387


$            250

0.36%

  Savings

96,213


38

0.16%


90,133


30

0.13%

  Money market savings

163,342


187

0.45%


136,376


145

0.42%

  Time deposits

240,879


584

0.96%


234,735


525

0.89%

     Total interest-bearing deposits

801,747


1,084

0.54%


735,631


950

0.51%

Federal funds purchased and repurchase










     agreements

4,958


6

0.48%


8,431


13

0.61%

Short-term borrowings

99,049


59

0.24%


76,441


41

0.21%

Junior subordinated debt

10,310


85

3.27%


10,310


81

3.12%

Senior subordinated debt

19,028


351

7.32%


-


-

0.00%

     Total interest-bearing liabilities

935,092


1,585

0.67%


830,813


1,085

0.52%

Noninterest-bearing liabilities










  Demand deposits

181,413





155,469




  Other liabilities

7,676





3,542




     Total liabilities

1,124,181





989,824




Shareholders' equity

126,049





134,067




 Total liabilities and shareholders' equity

$   1,250,230





$  1,123,891














Net interest income (2)



$       10,755





$       10,259












Interest rate spread (2)(4)




3.59%





3.84%

Interest expense as a percent of










   average earning assets




0.55%





0.42%

Net interest margin (2)(5)




3.71%





3.94%











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


      $60 adjustment for 2015 and a $83 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)



Twelve Months Ended December 31,




2015





2014



Average


Income/

Yield/


Average


Income/

Yield/


Balance


Expense

Rate (1)


Balance


Expense

Rate (1)

Assets:










Securities










  Taxable

$      224,159


$         4,934

2.20%


$     232,639


$         5,171

2.22%

  Restricted securities

7,965


427

5.36%


7,075


387

5.47%

  Tax exempt (2)

33,079


1,315

3.98%


28,466


1,133

3.98%

   Total securities

265,203


6,676

2.52%


268,180


6,691

2.49%

Interest bearing deposits in other banks

7,574


18

0.24%


7,354


18

0.24%

Federal funds sold

180


-

0.00%


191


-

0.00%

Loans, net of unearned income (3)

840,814


41,672

4.96%


706,812


35,555

5.03%

     Total earning assets

1,113,771


48,366

4.34%


982,537


42,264

4.30%

Less allowance for loan losses

(12,327)





(14,547)




Total non-earning assets

113,691





100,162




Total assets

$   1,215,135





$  1,068,152














Liabilities & Shareholders' Equity:










Interest-bearing deposits










  Checking

$      291,955


$         1,067

0.37%


$     262,765


$            949

0.36%

  Savings

93,645


131

0.14%


90,015


120

0.13%

  Money market savings

162,360


748

0.46%


120,541


498

0.41%

  Time deposits

236,500


2,111

0.89%


225,795


2,343

1.04%

     Total interest-bearing deposits

784,460


4,057

0.52%


699,116


3,910

0.56%

Federal funds purchased and repurchase










     agreements

8,065


46

0.57%


4,698


28

0.60%

Short-term borrowings

89,580


194

0.22%


72,565


151

0.21%

Junior subordinated debt

10,310


329

3.19%


10,310


339

3.29%

Senior subordinated debt

13,361


963

7.21%


-


-

0.00%

     Total interest-bearing liabilities

905,776


5,589

0.62%


786,689


4,428

0.56%

Noninterest-bearing liabilities










  Demand deposits

174,150





139,991




  Other liabilities

7,265





4,171




     Total liabilities

1,087,191





930,851




Shareholders' equity

127,944





137,301




 Total liabilities and shareholders' equity

$   1,215,135





$  1,068,152














Net interest income (2)



$       42,777





$       37,836












Interest rate spread (2)(4)




3.72%





3.74%

Interest expense as a percent of










   average earning assets




0.50%





0.45%

Net interest margin (2)(5)




3.84%





3.85%











Notes:










(1) Yields are 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


      $402 adjustment for 2015 and a $346 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 fourth quarter of 2015 increased $519 thousand, or 5.1%, when compared to the fourth quarter of 2014. Net interest income for the twelve months ended December 31, 2015 increased $4.9 million, or 13.0%, as compared to the same period in 2014. The Company's net interest margin (tax equivalent basis) decreased to 3.71% and 3.84% for the three and twelve months ended December 31, 2015, representing 23 and 1 basis point decreases, respectively, over the Company's net interest margins (tax equivalent basis) for the three and twelve months ended December 31, 2014. The quarter-over-quarter decline in the net interest margin (tax equivalent basis) was primarily driven by lower loan yields as a result of competitive pressures in the historically low rate environment, lower accretion of fair value adjustments related to the VCB acquisition and increased interest expense as a result of the private placement of $20.0 million of senior subordinated debt in April 2015. These margin pressures were mostly offset in the Company's results for the year ended December 31, 2015, as compared to 2014, by the impacts of increases in average loan balances. The most significant factors impacting net interest income during the three and twelve month periods ended December 31, 2015 were as follows:

Positive Impacts:

Negative Impact:

Total interest and dividend income

Total interest and dividend income increased 9.0% and 14.4% for the three and twelve months ended December 31, 2015, respectively, as compared to the same periods in 2014. The increase in total interest and dividend income during the three months ended December 31, 2015 was primarily driven by an increase in average loan and investment securities balances and an increase in average investment securities yields, partially offset by a decrease in average loan yields. The increase in total interest and dividend income during the twelve months ended December 31, 2015, as compared to 2014, was primarily driven by an increase in average loan balances and was partially offset by a decrease in average loan yields.

Loans

Average loan balances increased for the three and twelve month periods ended December 31, 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 $21.6 million in performing one-to-four family residential mortgage loans, consumer loans and government guaranteed loans between June 2015 and December 2015, organic loan growth and the opening of a new loan production office in Chesterfield County, Virginia in the second quarter of 2014. Despite a 2.3% increase in loans during the fourth quarter of 2015 which was in line with internal targets, loan growth came in slightly below our expectations for the year. Loan growth in our rural markets, especially with respect to consumer loans, 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 $106.3 million for the three months ended December 31, 2015 and increased $134.0 million for the twelve months ended December 31, 2015, as compared to average loan balances for the same periods in 2014. Total average loans were 76.0% of total average interest-earning assets for the three months ended December 31, 2015, compared to 74.2% for the three months ended December 31, 2014. Total average loans were 75.5% of total average interest-earning assets for the twelve months ended December 31, 2015, compared to 71.9% for the twelve months ended December 31, 2014.

Investment securities

Average total investment securities balances increased 3.4% for the three month period ended December 31, 2015, but declined 1.1% for the twelve month period ended December 31, 2015, as compared to the same periods in 2014. The overall decline during 2015 was 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 average investment securities increased 16 and 3 basis points for the three months and twelve months ended December 31, 2015, respectively, as compared to the same periods in 2014. The increase in yields on average investment securities during the three month period ended December 31, 2015, as compared to the same period in 2014, was driven by higher interest rates and a greater allocation of the investment securities portfolio to higher yielding Agency CMO securities, Agency CMBS securities and taxable municipal securities. These increases were partially offset by a lower allocation of the investment securities portfolio to SBA Pool securities and tax exempt municipal securities, both of which also tend to be higher-yielding segments of the Company's investment securities portfolio.

Interest-bearing deposits

Average total interest-bearing deposit balances increased for the three and twelve month periods ended December 31, 2015, as compared to the same periods in 2014, primarily due to the assumption of VCB's interest-bearing deposit liabilities, which totaled $85.6 million as of November 14, 2014, and organic deposit growth that was in part driven by the Company's marketing and advertising initiatives.

Borrowings

Average total borrowings increased for the three and twelve month periods ended December 31, 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 and increased short-term borrowings. Average short-term borrowings increased for the three and twelve month periods ended December 31, 2015, as compared to the same periods in 2014, due to the assumption of $8.7 million in short-term FHLB advances as a result of the VCB acquisition, as well as additional short-term FHLB advances to fund loan growth and other strategic initiatives.

Noninterest Income

The following tables depict the components of noninterest income for the three and twelve months ended December 31, 2015 and 2014:


Three Months Ended December 31,





(dollars in thousands)


2015


2014


Change $


Change %

Service charges and fees on deposit accounts

$         764


$          773


$        (9)


-1.2%

Other operating income

377


377


-


0.0%

Debit/credit card fees

455


346


109


31.5%

Gain on sale of available for sale securities, net

102


42


60


142.9%

(Loss) gain on sale of bank premises and equipment


(20)


1


(21)


-2100.0%

Total noninterest income

$      1,678


$       1,539


$     139


9.0%


















Twelve Months Ended December 31,





(dollars in thousands)


2015


2014


Change $


Change %

Service charges and fees on deposit accounts

$      2,845


$       3,257


$    (412)


-12.6%

Other operating income

1,704


1,458


246


16.9%

Debit/credit card fees

1,728


1,416


312


22.0%

Gain on sale of available for sale securities, net

224


538


(314)


-58.4%

Gain on sale of held to maturity securities, net

10


-


10


100.0%

(Loss) gain on sale of bank premises and equipment


(58)


6


(64)


-1066.7%

Total noninterest income

$      6,453


$       6,675


$    (222)


-3.3%

















Key changes in the components of noninterest income for both the three and twelve months ended December 31, 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 twelve months ended December 31, 2015 and 2014:





Three Months Ended December 31,





(dollars in thousands)



2015


2014


Change $


Change %

Salaries and employee benefits


$       5,244


$      4,996


$        248


5.0%

Occupancy and equipment expenses


1,460


1,237


223


18.0%

FDIC expense



199


163


36


22.1%

Collection, repossession and other real estate owned

95


118


(23)


-19.5%

Loss on sale of other real estate owned

7


12


(5)


-41.7%

Impairment losses on other real estate owned

-


13


(13)


-100.0%

Merger and merger related expenses

-


1,248


(1,248)


-100.0%

Other operating expenses


2,352


2,692


(340)


-12.6%

Total noninterest expenses


$       9,357


$    10,479


$   (1,122)


-10.7%



























Twelve Months Ended December 31,





(dollars in thousands)



2015


2014


Change $


Change %

Salaries and employee benefits


$     21,649


$    18,982


$     2,667


14.1%

Occupancy and equipment expenses


5,762


5,109


653


12.8%

FDIC expense



821


921


(100)


-10.9%

Collection, repossession and other real estate owned

519


323


196


60.7%

Loss on sale of other real estate owned

25


78


(53)


-67.9%

Impairment losses on other real estate owned

5


24


(19)


-79.2%

Merger and merger related expenses

224


1,831


(1,607)


-87.8%

Other operating expenses


10,035


8,536


1,499


17.6%

Total noninterest expenses


$     39,040


$    35,804


$     3,236


9.0%












Key changes in the components of noninterest expense for both the three and twelve months ended December 31, 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 December 31, 2015 and 2014 are as follows:












December 31,


December 31,





(dollars in thousands)


2015


2014


Change $


Change %

Total assets


$  1,270,384


$  1,181,972


$   88,412


7.5%

Securities available for sale, at fair value


230,943


214,011


16,932


7.9%

Securities held to maturity, at carrying value


29,698


32,163


(2,465)


-7.7%

Total loans


880,778


820,569


60,209


7.3%

Total deposits


988,719


939,254


49,465


5.3%

Total borrowings


148,760


102,013


46,747


45.8%

Total shareholders' equity


126,275


134,274


(7,999)


-6.0%



















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 twelve months ended December 31, 2015 and 2014:



 Three months ended


 Twelve months ended



December 31,


December 31,

 (dollars in thousands)


2015


2014


2015


2014

Net charge-offs


$    611


$  1,120


$ 1,694


$ 1,996

Net charge-offs to average loans (annualized)


0.28%


0.58%


0.20%


0.28%

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



December 31,


December 31,

 (dollars in thousands)


2015


2014

Allowance for loan losses


$     11,327


$      13,021

Allowance for loan losses to period end loans


1.29%


1.59%

Allowance for loan losses to nonaccrual loans


183.43%


196.63%

Allowance for loan losses to nonperforming loans


155.34%


195.07%






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



December 31,


December 31,

 (dollars in thousands)


2015


2014

Nonaccrual loans


$       6,175


$    6,622

Loans past due 90 days and accruing interest


1,117


53

  Total nonperforming loans


$       7,292


$    6,675

Other real estate owned ("OREO")


520


1,838

  Total nonperforming assets


$       7,812


$    8,513






Nonperforming assets to total loans and OREO


0.89%


1.04%

The following tables present the change in the balances of OREO and nonaccrual loans for the twelve months ended December 31, 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

1,966


Loans returned to accrual status

(4,765)

Capitalized costs

1


Net principal curtailments

(2,650)

Sales proceeds

(3,255)


Charge-offs


(1,680)

Impairment losses on valuation adjustments

(5)


Loan collateral moved to OREO

(1,966)

Loss on disposition

(25)


Loans placed on nonaccrual during period

10,614

Balance at December 31, 2015

$      520


Balance at December 31, 2015

$        6,175















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:



December 31,


December 31,

(dollars in thousands)


2015


2014

Performing TDRs


$       15,535


$       15,223

Nonperforming TDRs*


1,300


3,438

  Total TDRs


$       16,835


$       18,661






*  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 (the "Exchange Act"), 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 within the meaning of the Exchange Act. 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 December 31,


Twelve months ended December 31,

Statements of Income


2015


2014


2015


2014

Interest and dividend income


$             12,280


$          11,261


$             47,964


$           41,918

Interest expense


1,585


1,085


5,589


4,428

   Net interest income


10,695


10,176


42,375


37,490

Provision for loan losses


-


-


-


250

   Net interest income after provision for loan losses

10,695


10,176


42,375


37,240










Service charges and fees on deposit accounts


764


773


2,845


3,257

Other operating income


377


377


1,704


1,458

Debit/credit card fees


455


346


1,728


1,416

Gain on sale of available for sale securities, net


102


42


224


538

Gain on sale of held to maturity securities, net


-


-


10


-

(Loss) gain on sale of bank premises and equipment


(20)


1


(58)


6

Noninterest income


1,678


1,539


6,453


6,675










Salaries and employee benefits


5,244


4,996


21,649


18,982

Occupancy and equipment expenses


1,460


1,237


5,762


5,109

FDIC expense


199


163


821


921

Collection, repossession and other real estate owned

95


118


519


323

Loss on sale of other real estate owned


7


12


25


78

Impairment losses on other real estate owned


-


13


5


24

Merger and merger related expenses


-


1,248


224


1,831

Other operating expenses


2,352


2,692


10,035


8,536

Noninterest expenses


9,357


10,479


39,040


35,804










Income before income taxes


3,016


1,236


9,788


8,111

Income tax expense


848


505


2,494


2,447

   Net income


$               2,168


$               731


$               7,294


$             5,664

   Less: Effective dividend on preferred stock


-


349


386


1,948

   Net income available to common shareholders

$               2,168


$               382


$               6,908


$             3,716

Net income per common share: basic and diluted


$                 0.12


$              0.03


$                 0.38


$               0.22










Selected Ratios









Return on average assets (annualized)


0.69%


0.13%


0.57%


0.35%

Return on average common shareholders' equity (annualized)

8.23%


1.56%


6.76%


3.96%

Net interest margin (tax equivalent basis)


3.71%


3.94%


3.84%


3.85%

Period End Balances









Investment securities


$           269,600


$        253,707


$           269,600


$         253,707

Loans, net of unearned income


880,778


820,569


880,778


820,569

Total assets


1,270,384


1,181,972


1,270,384


1,181,972

Total deposits


988,719


939,254


988,719


939,254

Total borrowings


148,760


102,013


148,760


102,013

Total shareholders' equity


126,275


134,274


126,275


134,274

Book value per common share


8.11


7.67


8.11


7.67

Average Balances









Investment securities


$           266,067


$        257,368


$           265,203


$         268,180

Loans, net of unearned income


872,975


766,664


840,814


706,812

Total earning assets


1,148,731


1,033,200


1,113,771


982,537

Total assets


1,250,230


1,123,891


1,215,135


1,068,152

Total deposits


983,160


891,100


958,610


839,107

Total borrowings


133,345


95,182


121,316


87,573

Total shareholders' equity


126,049


134,067


127,944


137,301

Asset Quality at Period End









Allowance for loan losses


$             11,327


$          13,021


$             11,327


$           13,021

Nonperforming assets


7,812


8,513


7,812


8,513

Net charge-offs


611


1,120


1,694


1,996

Net charge-offs to average loans


0.28%


0.58%


0.20%


0.28%

Allowance for loan losses to period end loans


1.29%


1.59%


1.29%


1.59%

Allowance for loan losses to nonaccrual loans


183.43%


196.63%


183.43%


196.63%

Allowance for loan losses to nonperforming loans


155.34%


195.07%


155.34%


195.07%

Nonperforming assets to total assets


0.61%


0.72%


0.61%


0.72%

Nonperforming assets to total loans and other real estate owned

0.89%


1.04%


0.89%


1.04%

Other Information









Number of shares outstanding - period end


13,029,550


12,978,934


13,029,550


12,978,934

Average shares outstanding - basic


13,029,550


12,461,440


13,017,175


12,014,862

Average shares outstanding - diluted


18,269,742


17,701,632


18,257,367


17,255,054










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



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