Toggle SGML Header (+)


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): April 25, 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 2.02 Results of Operations and Financial Condition.

 

On April 25, 2016, Eastern Virginia Bankshares, Inc. (the “Company”) issued a press release announcing the Company’s financial results as of and for the period ended March 31, 2016. 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 April 25, 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: April 25, 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 April 25, 2016.

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

Eastern Virginia Bankshares, Inc. Releases First Quarter 2016 Results

TAPPAHANNOCK, Va., April 25, 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 months ended March 31, 2016.

Performance Summary





Three Months Ended March 31,

(dollars in thousands, except per share data)


2016


2015

Net income (1)



$                 2,227


$                1,609

Net income available to common shareholders (1)


$                 2,227


$                1,389

Basic and diluted net income per common share


$                   0.12


$                  0.08

Return on average assets (annualized)


0.70%


0.48%

Return on average common shareholders' equity (annualized)


8.34%


5.63%

Net interest margin (tax equivalent basis)(2)


3.78%


4.00%








(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 month periods ended  March 31, 2016 and 2015 contained in this release.

The Company's results for the three months ended March 31, 2016 were directly impacted by an increase in average balances of loans, senior subordinated debt and short-term borrowings during the three months ended March 31, 2016 as compared to the same period in 2015. Loan yields declined 14 basis points for the three months ended March 31, 2016 as compared to the same period of 2015, with 8 basis points of the decline a result of lower accretion of fair value adjustments related to the acquisition of Virginia Company Bank ("VCB") in November 2014. Also, as previously disclosed, the Company engaged an independent consultant to conduct a comprehensive assessment of its operations during the first half of 2015. The assessment identified operating efficiencies and revenue enhancement opportunities. The Company has leveraged the assessment's findings and, since the second half of 2015, has begun to realize targeted increases in revenues and declines in certain noninterest expenses, particularly salaries and employee benefits expense.

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 three months ended March 31, 2016 as compared to the same period in 2015.

In announcing these results, Joe A. Shearin, President and Chief Executive Officer commented, "I am very pleased and encouraged with the continued progress we have made as a Company during the first quarter of 2016. Our employees and Board of Directors are focused and passionately working together on our company-wide efforts to grow and improve profitability while enhancing the quality of the products and services we offer to our customers. We generated strong loan growth of 3.2% during the fourth quarter of 2016, which was our fourth straight quarter of loan growth, and which contributed to loan growth of 11.4% during the last twelve months. We firmly believe that our focus on total relationship banking is a driving force of our growth."

Shearin continued, "We have kept our strategic initiatives in the forefront and continue to drive operating efficiencies and revenue enhancements that are reflected in both our bottom line and other key profitability metrics. For the first quarter of 2016, as compared to the same period of 2015, we are reporting an increase in net income available to common shareholders of 60.3%, an increase in annualized return on average assets of 22 basis points to 0.70%, and an increase in annualized return on average common shareholders' equity of 271 basis points to 8.34%. In conjunction with loan growth driving our profitability, we have focused internally on maximizing our efficiencies and enhancing our customer experience. The impact of our internal improvements is evident in the reduction of noninterest expenses by 5.5% during the first quarter of 2016 when compared to the same period of 2015. Throughout the balance of 2016 and forward, as a company we will continue to use our strategic and financial flexibility to take advantage of growth opportunities that we expect to emerge through improving market conditions and industry consolidation that we believe will improve our performance, profitability and increase the value of our company. Given our overall 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 May 20, 2016 to shareholders of record as of May 6, 2016."

For the three months ended March 31, 2016, the following were significant factors in the Company's reported results:

Operations Analysis

The following table presents 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 months ended March 31, 2016 and 2015.

Average Balance Sheet and Net Interest Margin Analysis


(dollars in thousands)



    Three Months Ended March 31,


2016


2015


Average


Income/

Yield/


Average


Income/

Yield/


Balance


Expense

Rate (1)


Balance


Expense

Rate (1)

Assets:










Securities










  Taxable

$      251,217


$         1,506

2.41%


$     213,674


$         1,202

2.28%

  Restricted securities

8,984


115

5.15%


7,787


108

5.62%

  Tax exempt (2)

10,508


100

3.84%


38,211


375

3.98%

   Total securities

270,709


1,721

2.56%


259,672


1,685

2.63%

Interest bearing deposits in other banks

8,321


10

0.48%


6,966


4

0.23%

Federal funds sold

142


-

0.00%


277


-

0.00%

Loans, net of unearned income (3)

895,742


10,953

4.92%


817,046


10,191

5.06%

     Total earning assets

1,174,914


12,684

4.34%


1,083,961


11,880

4.44%

Less allowance for loan losses

(11,221)





(12,906)




Total non-earning assets

111,556





113,691




Total assets

$   1,275,249





$  1,184,746














Liabilities & Shareholders' Equity:










Interest-bearing deposits










  Checking

$      303,348


$            276

0.37%


$     281,337


$            254

0.37%

  Savings

99,422


41

0.17%


91,325


30

0.13%

  Money market savings

164,539


196

0.48%


165,751


194

0.47%

  Time deposits

241,798


558

0.93%


242,114


573

0.96%

     Total interest-bearing deposits

809,107


1,071

0.53%


780,527


1,051

0.55%

Federal funds purchased and repurchase










     agreements

5,530


7

0.51%


11,735


18

0.62%

Short-term borrowings

114,696


122

0.43%


82,435


42

0.21%

Junior subordinated debt

10,310


88

3.43%


10,310


80

3.15%

Senior subordinated debt

19,033


351

7.42%


-


-

0.00%

     Total interest-bearing liabilities

958,676


1,639

0.69%


885,007


1,191

0.55%

Noninterest-bearing liabilities










  Demand deposits

180,038





161,643




  Other liabilities

7,591





6,754




     Total liabilities

1,146,305





1,053,404




Shareholders' equity

128,944





131,342




 Total liabilities and shareholders' equity 

$   1,275,249





$  1,184,746














Net interest income (2)



$       11,045





$       10,689












Interest rate spread (2)(4)




3.65%





3.89%

Interest expense as a percent of










   average earning assets




0.56%





0.45%

Net interest margin (2)(5)




3.78%





4.00%











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 $30 adjustment for 2016 and a $115 adjustment in 2015.

(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 first quarter of 2016 increased $441 thousand, or 4.2%, when compared to the first quarter of 2015. The Company's net interest margin (tax equivalent basis) decreased to 3.78% for the three months ended March 31, 2016, representing a 22 basis point decrease over the Company's net interest margin (tax equivalent basis) for the three months ended March 31, 2015. 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 largely offset in the Company's results for the quarter ended March 31, 2016, as compared to 2015, by the impact of increases in average loan balances. The most significant factors impacting net interest income during the three month period ended March 31, 2016 were as follows:

Positive Impacts:

Negative Impact:

Total interest and dividend income

Total interest and dividend income increased 7.6% for the three months ended March 31, 2016, as compared to the same period in 2015. The increase in total interest and dividend income during the three months ended March 31, 2016 was primarily driven by an increase in average loan and investment securities balances, partially offset by a decrease in average loan and investment securities yields.

Loans

Average loan balances increased for the three month period ended March 31, 2016, as compared to the same period in 2015, primarily due to organic loan growth and the purchase of $29.5 million in performing one-to-four family residential mortgage loans, consumer loans and government guaranteed loans between June 2015 and March 2016. Loan growth during the first quarter of 2016 outpaced our internal targets. However, 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 $78.7 million for the three months ended March 31, 2016 as compared to average loan balances for the same period in 2015. Total average loans were 76.2% of total average interest-earning assets for the three months ended March 31, 2016, compared to 75.4% for the three months ended March 31, 2015.

Investment securities

Average total investment securities balances increased 4.3% for the three month period ended March 31, 2016 as compared to the same period in 2015. The overall increase was the result of measured loan demand in the Company's markets, management of the Company's liquidity needs to support its operations and funds provided by deposit growth, partially offset by a lack of investment opportunities with acceptable risk-adjusted rates of return. The Company remains committed to its long-term target of managing the investment securities portfolio to comprise 20% of the Company's total assets. The yields on average investment securities decreased 7 basis points for the three months ended March 31, 2016, as compared to the same period in 2015. The decrease in yields on average investment securities during the three month period ended March 31, 2016, as compared to the same period in 2015, was driven 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. These decreases were partially offset 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.

Interest-bearing deposits

Average total interest-bearing deposit balances increased for the three month period ended March 31, 2016, as compared to the same period in 2015, primarily due to organic deposit growth that was in part driven by the Company's marketing and advertising initiatives.

Borrowings

Average total borrowings increased for the three month period ended March 31, 2016, as compared to the same period in 2015, 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 month period ended March 31, 2016, as compared to the same period in 2015, due to additional short-term FHLB advances to fund loan growth and other strategic initiatives.

Noninterest Income

The following table depicts the components of noninterest income for the three months ended March 31, 2016 and 2015:



Three Months Ended March 31,





(dollars in thousands)


2016


2015


Change $


Change %

Service charges and fees on deposit accounts


$                   739


$                    663


$                    76


11.5%

Other operating income


354


465


(111)


-23.9%

Debit card/ATM fees


397


363


34


9.4%

Gain on sale of available for sale securities, net


65


25


40


160.0%

(Loss) gain on sale of bank premises and equipment


(4)


3


(7)


-233.3%

Total noninterest income


$                1,551


$                 1,519


$                    32


2.1%










Key changes in the components of noninterest income the three months ended March 31, 2016, as compared to the same period in 2015, are discussed below:

Noninterest Expense

The following table depicts the components of noninterest expense for the three months ended March 31, 2016 and 2015:





Three Months Ended March 31,





(dollars in thousands)


2016


2015


Change $


Change %

Salaries and employee benefits


$                 5,248


$                5,488


$                  (240)


-4.4%

Occupancy and equipment expenses


1,430


1,514


(84)


-5.5%

FDIC expense


203


172


31


18.0%

Collection, repossession and other real estate owned


165


89


76


85.4%

Loss on sale of other real estate owned


1


32


(31)


-96.9%

Impairment losses on other real estate owned


-


5


(5)


-100.0%

Merger and merger related expenses


-


221


(221)


-100.0%

Other operating expenses


2,372


2,446


(74)


-3.0%

Total noninterest expenses


$                 9,419


$                9,967


$                  (548)


-5.5%












Key changes in the components of noninterest expense for the three months ended March 31, 2016, as compared to the same period in 2015, are discussed below:

Balance Sheet and Asset Quality

Balance Sheet

Key balance sheet components as of March 31, 2016 and December 31, 2015 are as follows:



March 31,


December 31,





(dollars in thousands)


2016


2015


Change $


Change %

Total assets


$    1,286,185


$    1,270,384


$       15,801


1.2%

Interest bearing deposits with banks


3,067


18,304


(15,237)


-83.2%

Securities available for sale, at fair value


236,496


230,943


5,553


2.4%

Securities held to maturity, at carrying value


29,472


29,698


(226)


-0.8%

Total loans


908,950


880,778


28,172


3.2%

Total deposits


998,880


988,719


10,161


1.0%

Total borrowings


149,925


148,760


1,165


0.8%

Total shareholders' equity


130,514


126,275


4,239


3.4%



















Key balance sheet components as of March 31, 2016 and 2015 are as follows:












March 31,


March 31,





(dollars in thousands)


2016


2015


Change $


Change %

Total assets


$    1,286,185


$    1,194,158


$       92,027


7.7%

Interest bearing deposits with banks


3,067


11,772


(8,705)


-73.9%

Securities available for sale, at fair value


236,496


225,797


10,699


4.7%

Securities held to maturity, at carrying value


29,472


31,495


(2,023)


-6.4%

Total loans


908,950


816,207


92,743


11.4%

Total deposits


998,880


958,157


40,723


4.3%

Total borrowings


149,925


97,722


52,203


53.4%

Total shareholders' equity


130,514


131,958


(1,444)


-1.1%










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 loan losses.

The following table depicts the net charge-off activity for the three months ended March 31, 2016 and 2015:



Three months ended March 31,

 (dollars in thousands) 


2016


2015

Net charge-offs 


$            408


$             363

Net charge-offs to average loans (annualized)


0.18%


0.18%











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



March 31,


December 31,


March 31,

 (dollars in thousands) 


2016


2015


2015

Allowance for loan losses


$               10,936


$                11,327


$                12,658

Allowance for loan losses to period end loans


1.20%


1.29%


1.55%

Allowance for loan losses to nonaccrual loans


165.31%


183.43%


159.41%

Allowance for loan losses to nonperforming loans


141.25%


155.34%


154.75%















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



March 31,


December 31,


March 31,

 (dollars in thousands) 


2016


2015


2015

Nonaccrual loans


$                 6,616


$            6,175


$                 7,940

Loans past due 90 days and accruing interest


1,127


1,117


240

  Total nonperforming loans


$                 7,743


$            7,292


$                 8,180

Other real estate owned ("OREO")


898


520


1,755

  Total nonperforming assets


$                 8,641


$            7,812


$                 9,935








Nonperforming assets to total loans and OREO


0.95%


0.89%


1.21%








The following tables present the change in the balances of OREO and nonaccrual loans for the three months ended March 31, 2016:

OREO:





Nonaccrual Loans:











(dollars in thousands)





(dollars in thousands)


Balance at December 31, 2015



$      520


Balance at December 31, 2015

$        6,175

Transfers from loans



466


Loans returned to accrual status

(489)

Capitalized costs



-


Net principal curtailments

(787)

Sales proceeds



(87)


Charge-offs


(654)

Impairment losses on valuation adjustments



-


Loan collateral moved to OREO

(466)

Loss on disposition



(1)


Loans placed on nonaccrual during period

2,837

Balance at March 31, 2016



$      898


Balance at March 31, 2016

$        6,616










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:



March 31,


December 31,


March 31,

(dollars in thousands)


2016


2015


2015

Performing TDRs


$                      15,158


$                      15,535


$                      14,881

Nonperforming TDRs*


1,209


1,300


3,685

  Total TDRs


$                      16,367


$                      16,835


$                      18,566








*  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 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 Company's liquidity; (vi) statements of management's expectations regarding future trends in interest rates, real estate values, business opportunities and economic conditions generally and in the Company's markets; (vii) statements regarding future asset quality, including expected levels of charge-offs; (viii) statements regarding potential changes to laws, regulations or administrative guidance; (ix) statements regarding strategic initiatives of the Company or the Bank and the results of these initiatives; and (x) 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, 2015 and other reports filed with the SEC.

Selected Financial Information





 (dollars in thousands, except per share data) 


Three months ended March 31,

Statements of Income


2016


2015

Interest and dividend income 


$             12,654


$          11,765

Interest expense


1,639


1,191

   Net interest income


11,015


10,574

Provision for loan losses


17


-

   Net interest income after provision for loan losses


10,998


10,574






Service charges and fees on deposit accounts


739


663

Other operating income


354


465

Debit card/ATM fees


397


363

Gain on sale of available for sale securities, net


65


25

(Loss) gain on sale of bank premises and equipment


(4)


3

Noninterest income


1,551


1,519






Salaries and employee benefits


5,248


5,488

Occupancy and equipment expenses


1,430


1,514

FDIC expense


203


172

Collection, repossession and other real estate owned


165


89

Loss on sale of other real estate owned


1


32

Impairment losses on other real estate owned


-


5

Merger and merger related expenses


-


221

Other operating expenses


2,372


2,446

Noninterest expenses


9,419


9,967






Income before income taxes


3,130


2,126

Income tax expense


903


517

   Net income 


$               2,227


$            1,609

   Less: Effective dividend on preferred stock


-


220

   Net income available to common shareholders


$               2,227


$            1,389

Net income per common share: basic and diluted


$                 0.12


$              0.08






Selected Ratios





Return on average assets (annualized)


0.70%


0.48%

Return on average common shareholders' equity (annualized)


8.34%


5.63%

Net interest margin (tax equivalent basis)


3.78%


4.00%

Period End Balances





Investment securities


$           275,013


$        264,707

Loans, net of unearned income


908,950


816,207

Total assets


1,286,185


1,194,158

Total deposits


998,880


958,157

Total borrowings


149,925


97,722

Total shareholders' equity


130,514


131,958

Book value per common share


8.44


7.87

Average Balances





Investment securities


$           270,709


$        259,672

Loans, net of unearned income


895,742


817,046

Total earning assets


1,174,914


1,083,961

Total assets


1,275,249


1,184,746

Total deposits


989,145


942,170

Total borrowings


149,569


104,480

Total shareholders' equity


128,944


131,342

Asset Quality at Period End





Allowance for loan losses


$             10,936


$          12,658

Nonperforming assets


8,641


9,935

Net charge-offs 


408


363

Net charge-offs to average loans


0.18%


0.18%

Allowance for loan losses to period end loans


1.20%


1.55%

Allowance for loan losses to nonaccrual loans


165.31%


159.41%

Allowance for loan losses to nonperforming loans


141.25%


154.75%

Nonperforming assets to total assets


0.67%


0.83%

Nonperforming assets to total loans and other real estate owned

0.95%


1.21%

Other Information





Number of shares outstanding - period end


13,093,135


13,023,550

Average shares outstanding - basic


13,035,249


12,985,429

Average shares outstanding - diluted


18,275,441


18,225,621






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



(Back To Top)