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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): October 24, 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.) 

 

         
10900 Nuckols Road, Suite 325, Glen Allen, Virginia   23060
(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 October 24, 2016, Eastern Virginia Bankshares, Inc. (the “Company”) issued a press release announcing the Company’s financial results as of and for the period ended September 30, 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 9.01Financial Statements and Exhibits.

 

(d)Exhibits.

 

Exhibit No. Description
   
99.1 Press release dated October 24, 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: October 24, 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 October 24, 2016.

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

Eastern Virginia Bankshares, Inc. Releases Third Quarter 2016 Results

GLEN ALLEN, Va., Oct. 24, 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 nine months ended September 30, 2016.

Performance Summary





Three Months Ended September 30,

(dollars in thousands, except per share data)


2016


2015

Net income



$                 1,999


$                2,010

Basic and diluted net income per common share


$                   0.10


$                  0.11

Return on average assets (annualized)


0.61%


0.65%

Return on average common shareholders' equity (annualized)


7.06%


7.80%

Net interest margin (tax equivalent basis)(2)


3.68%


3.73%












Nine Months Ended September 30,

(dollars in thousands, except per share data)


2016


2015

Net income (1)



$                 6,136


$                5,126

Net income available to common shareholders (1)


$                 6,136


$                4,740

Basic and diluted net income per common share


$                   0.33


$                  0.26

Return on average assets (annualized)


0.63%


0.53%

Return on average common shareholders' equity (annualized)


7.44%


6.25%

Net interest margin (tax equivalent basis)(2)


3.72%


3.89%








(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 paid during the 2015 periods.

(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 nine month periods ended September 30, 2016 and 2015 contained in this release.

The Company's results for the three and nine months ended September 30, 2016 were directly impacted by increases in the average balances of loans, deposits and short-term borrowings and, for the nine months ended September 30, 2016, senior subordinated debt. Results were also affected by decreases in average balances of and yields earned on tax exempt investment securities during the three and nine months ended September 30, 2016 as compared to the same periods in 2015, partially offset by increases in average balances of and yields earned on taxable securities during the same periods. Loan yields declined 1 and 13 basis points for the three and nine months ended September 30, 2016 as compared to the same periods in 2015, and for the nine month period ended September 30, 2016, were negatively affected by lower fair value adjustments related to the acquisition of Virginia Company Bank ("VCB"). 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 continued to realize targeted increases in revenues and declines in certain noninterest expenses, particularly salaries and employee benefits expense. However, increases in group insurance costs due to claims and incentive compensation have largely offset the aforementioned realized declines in salaries and employee benefits expense.

In announcing these results, Joe A. Shearin, President and Chief Executive Officer commented, "I am pleased with our Company's results during the first nine months of 2016 and the continued company-wide focus to grow our balance sheet, improve profitability and enhance the quality of products and services we offer to our customers. For the first nine months of 2016, as compared to the same period of 2015, we are reporting an increase in net income available to common shareholders of 29.5%, an increase in annualized return on average assets of 10 basis points to 0.63%, and an increase in annualized return on average common shareholders' equity of 119 basis points to 7.44%. Net income increased by 4.7% during the third quarter of 2016 as compared to the second quarter of 2016 and was primarily driven by higher interest and fees on loans, and partially offset by a lower net interest margin and higher current period expenses. The increase in interest and fees on loans was driven primarily by strong loan growth. During the third quarter of 2016, we generated loan growth of 3.0% as compared to 6.3% during the first nine months of 2016 and 8.7% during the last twelve months, which outpaced our internal targets. Given our current pipeline of loan opportunities and our focus on total relationship banking, we believe that we are positioned to again deliver meaningful loan growth in the fourth quarter of 2016. The lower net interest margin was driven by lower yields on investment securities and loans as a result of the historically low rate environment as well as competitive pressures for loans. Salaries and employee benefits in the current period were again impacted by higher group insurance expense due to elevated claims, while occupancy and equipment expenses in the current period were impacted by the relocation of our corporate headquarters. The balance of our other noninterest expense categories declined in the current period and we expect them to continue to level off during the fourth quarter of 2016."

Shearin continued, "We are also very pleased to announce that on October 11, 2016 we finalized the relocation of our corporate headquarters to the Innsbrook business park in Glen Allen, Virginia. This relocation is an exciting event for our company and reflects the culmination of a successful, multi-month effort by the board and the management team. As previously announced, our new corporate headquarters allows us to integrate corporate departments from other locations throughout our footprint. We continue to believe this relocation will not only increase collaboration and productivity, but capture operating efficiencies while also providing us the space and flexibility needed to continue to grow and reach new customers. We wish to thank our directors, officers and employees for their contribution on what we believe will be a significant driver of the future success of the Company. I am also pleased to announce that the Board of Directors declared another cash dividend and has also increased the cash dividend to $0.03 per share of common stock and Series B Preferred Stock payable on November 18, 2016 to shareholders of record as of November 4, 2016."

For the three months ended September 30, 2016, the following were significant factors in the Company's reported results:

For the nine months ended September 30, 2016, 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 nine months ended September 30, 2016 and 2015:

Average Balance Sheet and Net Interest Margin Analysis








(dollars in thousands)



    Three Months Ended September 30,


2016


2015


Average


Income/

Yield/


Average


Income/

Yield/


Balance


Expense

Rate (1)


Balance


Expense

Rate (1)

Assets:










Securities










  Taxable

$      259,888


$         1,406

2.15%


$     222,800


$         1,173

2.09%

  Restricted securities

8,982


113

5.00%


8,535


114

5.30%

  Tax exempt (2)

2,715


23

3.34%


35,907


360

3.98%

   Total securities

271,585


1,542

2.26%


267,242


1,647

2.45%

Interest bearing deposits in other banks

7,152


11

0.61%


6,856


4

0.23%

Federal funds sold

104


-

0.00%


139


-

0.00%

Loans, net of unearned income (3)

917,317


11,150

4.84%


853,421


10,443

4.85%

     Total earning assets

1,196,158


12,703

4.22%


1,127,658


12,094

4.25%

Less allowance for loan losses

(10,569)





(12,113)




Total non-earning assets

112,655





114,418




Total assets

$   1,298,244





$  1,229,963














Liabilities & Shareholders' Equity:










Interest-bearing deposits










  Checking

$      308,553


$            299

0.39%


$     295,441


$            270

0.36%

  Savings

105,482


51

0.19%


94,248


34

0.14%

  Money market savings

160,779


185

0.46%


157,323


176

0.44%

  Time deposits

234,627


543

0.92%


229,400


508

0.88%

     Total interest-bearing deposits

809,441


1,078

0.53%


776,412


988

0.50%

Federal funds purchased and repurchase










     agreements

6,221


7

0.45%


7,204


9

0.50%

Short-term borrowings

112,712


118

0.42%


103,970


56

0.21%

Junior subordinated debt

10,310


93

3.59%


10,310


83

3.19%

Senior subordinated debt

19,083


352

7.34%


19,107


348

7.23%

     Total interest-bearing liabilities

957,767


1,648

0.68%


917,003


1,484

0.64%

Noninterest-bearing liabilities










  Demand deposits

198,664





181,303




  Other liabilities

7,542





7,831




     Total liabilities

1,163,973





1,106,137




Shareholders' equity

134,271





123,826




 Total liabilities and shareholders' equity 

$   1,298,244





$  1,229,963














Net interest income (2)



$       11,055





$       10,610












Interest rate spread (2)(4)




3.54%





3.61%

Interest expense as a percent of










   average earning assets




0.55%





0.52%

Net interest margin (2)(5)




3.68%





3.73%











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

      $7 adjustment for 2016 and a $110 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.











(dollars in thousands)



Nine Months Ended September 30,




2016





2015



Average


Income/

Yield/


Average


Income/

Yield/


Balance


Expense

Rate (1)


Balance


Expense

Rate (1)

Assets:










Securities










  Taxable

$      256,890


$         4,375

2.27%


$     219,440


$         3,560

2.17%

  Restricted securities

9,021


355

5.26%


7,843


318

5.42%

  Tax exempt (2)

5,647


157

3.70%


37,629


1,120

3.98%

   Total securities

271,558


4,887

2.40%


264,912


4,998

2.52%

Interest bearing deposits in other banks

7,613


31

0.54%


6,902


12

0.23%

Federal funds sold

103


-

0.00%


201


-

0.00%

Loans, net of unearned income (3)

908,148


33,099

4.87%


829,976


31,016

5.00%

     Total earning assets

1,187,422


38,017

4.28%


1,101,991


36,026

4.37%

Less allowance for loan losses

(10,906)





(12,512)




Total non-earning assets

111,804





113,830




Total assets

$   1,288,320





$  1,203,309














Liabilities & Shareholders' Equity:










Interest-bearing deposits










  Checking

$      306,723


$            866

0.38%


$     288,802


$            792

0.37%

  Savings

102,432


139

0.18%


92,780


93

0.13%

  Money market savings

162,267


566

0.47%


162,029


561

0.46%

  Time deposits

237,360


1,664

0.94%


235,025


1,527

0.87%

     Total interest-bearing deposits

808,782


3,235

0.53%


778,636


2,973

0.51%

Federal funds purchased and repurchase










     agreements

6,040


21

0.46%


9,112


40

0.59%

Short-term borrowings

114,289


358

0.42%


86,389


135

0.21%

Junior subordinated debt

10,310


273

3.54%


10,310


244

3.16%

Senior subordinated debt

19,058


1,054

7.39%


11,450


612

7.15%

     Total interest-bearing liabilities

958,479


4,941

0.69%


895,897


4,004

0.60%

Noninterest-bearing liabilities










  Demand deposits

190,803





171,703




  Other liabilities

7,344





7,127




     Total liabilities

1,156,626





1,074,727




Shareholders' equity

131,694





128,582




 Total liabilities and shareholders' equity 

$   1,288,320





$  1,203,309














Net interest income (2)



$       33,076





$       32,022












Interest rate spread (2)(4)




3.59%





3.77%

Interest expense as a percent of










   average earning assets




0.56%





0.49%

Net interest margin (2)(5)




3.72%





3.89%











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

      $48 adjustment for 2016 and a $342 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 third quarter of 2016 increased $548 thousand, or 5.2%, when compared to the third quarter of 2015. Net interest income for the nine months ended September 30, 2016 increased $1.3 million, or 4.3%, when compared to the same period in 2015. The Company's net interest margin (tax equivalent basis) decreased to 3.68% and 3.72% for the three and nine months ended September 30, 2016, respectively, representing 5 and 17 basis point decreases over the Company's net interest margin (tax equivalent basis) for the three and nine months ended September 30, 2015. The declines in the net interest margin (tax equivalent basis) were primarily driven by lower loan yields as a result of competitive pressures in the historically low rate environment, and for the nine months ended September 30, 2016, lower accretion of fair value adjustments related to the VCB acquisition as well as increased interest expense as a result of the private placement of $20.0 million of senior subordinated debt in April 2015. Additionally, the average balance of and rates paid on our short-term borrowings increased as compared to the same periods in 2015. These margin pressures were largely offset by increases in average loan balances in the Company's results for the three and nine months ended September 30, 2016, as compared to the same periods in 2015. The most significant factors impacting net interest income during the three and nine month periods ended September 30, 2016 were as follows:

Positive Impact:

Negative Impacts:

Total interest and dividend income

Total interest and dividend income increased 5.9% and 6.4% for the three and nine months ended September 30, 2016, respectively, as compared to the same periods in 2015. The increase in total interest and dividend income during the three and nine months ended September 30, 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 and nine month periods ended September 30, 2016, as compared to the same periods in 2015, primarily due to organic loan growth and the purchase of $21.2 million in performing commercial and consumer loans between September 2015 and September 2016. Loan growth during the first nine months 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 $63.9 million and $78.2 million for the three and nine months ended September 30, 2016, respectively, as compared to average loan balances for the same periods in 2015. Total average loans were 76.7% of total average interest-earning assets for the three months ended September 30, 2016, compared to 75.7% for the three months ended September 30, 2015. Total average loans were 76.5% of total average interest-earning assets for the nine months ended September 30, 2016, compared to 75.3% for the nine months ended September 30, 2015.

Investment securities

Average total investment securities balances increased 1.6% and 2.5% for the three and nine month periods ended September 30, 2016, respectively, as compared to the same periods in 2015. The overall increase was the result of management of the Company's liquidity needs to support its operations, along with funds provided by deposit growth and measured loan demand in the Company's markets, 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 total average investment securities decreased 19 and 12 basis points for the three and nine months ended September 30, 2016, respectively, as compared to the same periods in 2015. The decrease in yields on average total investment securities during the three and nine month periods ended September 30, 2016, as compared to the same periods in 2015, was driven by a lower allocation of the total 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 total 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 and nine month periods ended September 30, 2016, as compared to the same periods in 2015, primarily due to organic deposit growth that was in part driven by the Company's marketing and advertising initiatives as well as new products and services.

Borrowings

Average total borrowings increased for the three and nine month periods ended September 30, 2016, as compared to the same periods in 2015, primarily due to increased short-term borrowings, and for the nine months ended September 30, 2016, the issuance of $20.0 million in senior subordinated debt in April 2015. Average short-term borrowings increased for the three and nine month periods ended September 30, 2016, as compared to the same periods in 2015, due to additional short-term FHLB advances taken to fund loan growth and other strategic initiatives.

Noninterest Income

The following tables depict the components of noninterest income for the three and nine months ended September 30, 2016 and 2015:



Three Months Ended September 30,





(dollars in thousands)


2016


2015


Change $


Change %

Service charges and fees on deposit accounts


$                   754


$                    745


$                      9


1.2%

Debit card/ATM fees


426


468


(42)


-9.0%

Gain on sale of available for sale securities, net


270


71


199


280.3%

Gain on sale of held to maturity securities, net


-


10


(10)


-100.0%

(Loss) on sale of bank premises and equipment


-


(11)


11


100.0%

Earnings on bank owned life insurance policies


160


156


4


2.6%

Other operating income


256


285


(29)


-10.2%

Total noninterest income


$                1,866


$                 1,724


$                  142


8.2%





















Nine Months Ended September 30,





(dollars in thousands)


2016


2015


Change $


Change %

Service charges and fees on deposit accounts


$                2,221


$                 2,081


$                  140


6.7%

Debit card/ATM fees


1,271


1,273


(2)


-0.2%

Gain on sale of available for sale securities, net


507


122


385


315.6%

Gain on sale of held to maturity securities, net


-


10


(10)


-100.0%

(Loss) on sale of bank premises and equipment


(9)


(38)


29


76.3%

Earnings on bank owned life insurance policies


478


479


(1)


-0.2%

Other operating income


621


848


(227)


-26.8%

Total noninterest income


$                5,089


$                 4,775


$                  314


6.6%



















Key changes in the components of noninterest income for the three and nine months ended September 30, 2016, as compared to the same periods in 2015, are discussed below:

Noninterest Expense

The following tables depict the components of noninterest expense for the three and nine months ended September 30, 2016 and 2015:





Three Months Ended September 30,





(dollars in thousands)



2016


2015


Change $


Change %

Salaries and employee benefits


$                 5,843


$                5,394


$                    449


8.3%

Occupancy and equipment expenses


1,474


1,396


78


5.6%

Telephone




216


285


(69)


-24.2%

FDIC expense



207


196


11


5.6%

Consultant fees



127


92


35


38.0%

Collection, repossession and other real estate owned


126


209


(83)


-39.7%

Marketing and advertising


329


355


(26)


-7.3%

Loss (gain) on sale of other real estate owned


7


(8)


15


187.5%

Impairment losses on other real estate owned


34


-


34


100.0%

Other operating expenses


1,737


1,598


139


8.7%

Total noninterest expenses


$               10,100


$                9,517


$                    583


6.1%



























Nine Months Ended September 30,





(dollars in thousands)



2016


2015


Change $


Change %

Salaries and employee benefits


$               16,577


$              16,405


$                    172


1.0%

Occupancy and equipment expenses


4,244


4,303


(59)


-1.4%

Telephone




633


692


(59)


-8.5%

FDIC expense



614


622


(8)


-1.3%

Consultant fees



581


981


(400)


-40.8%

Collection, repossession and other real estate owned


458


424


34


8.0%

Marketing and advertising


1,267


1,018


249


24.5%

Loss on sale of other real estate owned


10


18


(8)


-44.4%

Impairment losses on other real estate owned


34


5


29


580.0%

Merger and merger related expenses


-


224


(224)


-100.0%

Other operating expenses


5,058


4,991


67


1.3%

Total noninterest expenses


$               29,476


$              29,683


$                  (207)


-0.7%












Key changes in the components of noninterest expense for the three and nine months ended September 30, 2016, as compared to the same periods in 2015, are discussed below:

Balance Sheet and Asset Quality

Balance Sheet

Key balance sheet components as of September 30, 2016 and December 31, 2015 are as follows:



September 30,


December 31,





(dollars in thousands)


2016


2015


Change $


Change %

Total assets


$    1,314,896


$    1,270,384


$       44,512


3.5%

Cash and due from banks


6,297


13,451


(7,154)


-53.2%

Interest bearing deposits with banks


13,676


18,304


(4,628)


-25.3%

Securities available for sale, at fair value


232,925


230,943


1,982


0.9%

Securities held to maturity, at carrying value


28,549


29,698


(1,149)


-3.9%

Loans, net of unearned income


936,624


880,778


55,846


6.3%

Total deposits


1,010,290


988,719


21,571


2.2%

Total borrowings


162,495


148,760


13,735


9.2%

Total shareholders' equity


134,645


126,275


8,370


6.6%



















Key balance sheet components as of September 30, 2016 and 2015 are as follows:



September 30,


September 30,





(dollars in thousands)


2016


2015


Change $


Change %

Total assets


$    1,314,896


$    1,242,387


$       72,509


5.8%

Cash and due from banks


6,297


12,598


(6,301)


-50.0%

Interest bearing deposits with banks


13,676


11,661


2,015


17.3%

Securities available for sale, at fair value


232,925


229,608


3,317


1.4%

Securities held to maturity, at carrying value


28,549


29,964


(1,415)


-4.7%

Loans, net of unearned income


936,624


861,393


75,231


8.7%

Total deposits


1,010,290


974,801


35,489


3.6%

Total borrowings


162,495


135,225


27,270


20.2%

Total shareholders' equity


134,645


124,943


9,702


7.8%



















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 and nine months ended September 30, 2016 and 2015:








Three Months Ended September 30,


Nine Months Ended September 30,

 (dollars in thousands) 


2016


2015


2016


2015

Net charge-offs 


$                    -


$               349


$             877


$            1,083

Net charge-offs to average loans (annualized)


0.00%


0.16%


0.13%


0.17%



















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



September 30,


December 31,


September 30,

 (dollars in thousands) 


2016


2015


2015

Allowance for loan losses


$               10,467


$                11,327


$                11,938

Allowance for loan losses to period end loans


1.12%


1.29%


1.39%

Allowance for loan losses to nonaccrual loans


221.32%


183.43%


203.85%

Allowance for loan losses to nonperforming loans


142.94%


155.34%


171.48%








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



September 30,


December 31,


September 30,

 (dollars in thousands) 


2016


2015


2015

Nonaccrual loans


$                 4,729


$            6,175


$                 5,856

Loans past due 90 days and accruing interest


2,594


1,117


1,105

  Total nonperforming loans


$                 7,323


$            7,292


$                 6,961

Other real estate owned ("OREO")


1,534


520


233

  Total nonperforming assets


$                 8,857


$            7,812


$                 7,194








Nonperforming assets to total loans and OREO


0.94%


0.89%


0.83%








The following tables present the change in the balances of OREO and nonaccrual loans for the nine months ended September 30, 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



2,518


Loans returned to accrual status

(2,177)

Capitalized costs



14


Net principal curtailments

(2,202)

Sales proceeds



(1,474)


Charge-offs


(1,211)

Impairment losses on valuation adjustments



(34)


Loan collateral moved to OREO

(2,518)

Loss on disposition



(10)


Loans placed on nonaccrual during period

6,662

Balance at September 30, 2016



$   1,534


Balance at September 30, 2016

$        4,729










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:



September 30,


December 31,


September 30,

(dollars in thousands)


2016


2015


2015

Performing TDRs


$                      14,590


$                      15,535


$                      15,426

Nonperforming TDRs*


1,299


1,300


1,186

  Total TDRs


$                      15,889


$                      16,835


$                      16,612








*  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 September 30,


Nine Months Ended September 30,

Statements of Income


2016


2015


2016


2015

Interest and dividend income 


$             12,696


$          11,984


$             37,969


$           35,684

Interest expense


1,648


1,484


4,941


4,004

   Net interest income


11,048


10,500


33,028


31,680

Provision for loan losses


-


-


17


-

   Net interest income after provision for loan losses


11,048


10,500


33,011


31,680










Service charges and fees on deposit accounts


754


745


2,221


2,081

Debit card/ATM fees


426


468


1,271


1,273

Gain on sale of available for sale securities, net


270


71


507


122

Gain on sale of held to maturity securities, net


-


10


-


10

(Loss) on sale of bank premises and equipment


-


(11)


(9)


(38)

Earnings on bank owned life insurance policies


160


156


478


479

Other operating income


256


285


621


848

Noninterest income


1,866


1,724


5,089


4,775










Salaries and employee benefits


5,843


5,394


16,577


16,405

Occupancy and equipment expenses


1,474


1,396


4,244


4,303

Telephone


216


285


633


692

FDIC expense


207


196


614


622

Consultant fees


127


92


581


981

Collection, repossession and other real estate owned


126


209


458


424

Marketing and advertising


329


355


1,267


1,018

Loss (gain) on sale of other real estate owned


7


(8)


10


18

Impairment losses on other real estate owned


34


-


34


5

Merger and merger related expenses


-


-


-


224

Other operating expenses


1,737


1,598


5,058


4,991

Noninterest expenses


10,100


9,517


29,476


29,683










Income before income taxes


2,814


2,707


8,624


6,772

Income tax expense


815


697


2,488


1,646

   Net income 


$               1,999


$            2,010


$               6,136


$             5,126

   Less: Effective dividend on preferred stock


-


-


-


386

   Net income available to common shareholders


$               1,999


$            2,010


$               6,136


$             4,740

Net income per common share: basic and diluted


$                 0.10


$              0.11


$                 0.33


$               0.26



















Selected Financial Information









 (dollars in thousands, except per share data) 


Three Months Ended September 30,


Nine Months Ended September 30,

Selected Ratios


2016


2015


2016


2015

Return on average assets (annualized)


0.61%


0.65%


0.63%


0.53%

Return on average common shareholders' equity (annualized)


7.06%


7.80%


7.44%


6.25%

Net interest margin (tax equivalent basis)


3.68%


3.73%


3.72%


3.89%

Period End Balances









Investment securities


$           271,139


$        267,833


$           271,139


$         267,833

Loans, net of unearned income


936,624


861,393


936,624


861,393

Total assets


1,314,896


1,242,387


1,314,896


1,242,387

Total deposits


1,010,290


974,801


1,010,290


974,801

Total borrowings


162,495


135,225


162,495


135,225

Total shareholders' equity


134,645


124,943


134,645


124,943

Book value per common share


8.74


8.02


8.74


8.02

Average Balances









Investment securities


$           271,585


$        267,242


$           271,558


$         264,912

Loans, net of unearned income


917,317


853,421


908,148


829,976

Total earning assets


1,196,158


1,127,658


1,187,422


1,101,991

Total assets


1,298,244


1,229,963


1,288,320


1,203,309

Total deposits


1,008,105


957,715


999,585


950,339

Total borrowings


148,326


140,591


149,697


117,261

Total shareholders' equity


134,271


123,826


131,694


128,582

Asset Quality at Period End









Allowance for loan losses


$             10,467


$          11,938


$             10,467


$           11,938

Nonperforming assets


8,857


7,194


8,857


7,194

Net charge-offs 


-


349


877


1,083

Net charge-offs to average loans


0.00%


0.16%


0.13%


0.17%

Allowance for loan losses to period end loans


1.12%


1.39%


1.12%


1.39%

Allowance for loan losses to nonaccrual loans


221.32%


203.85%


221.32%


203.85%

Allowance for loan losses to nonperforming loans


142.94%


171.48%


142.94%


171.48%

Nonperforming assets to total assets


0.67%


0.58%


0.67%


0.58%

Nonperforming assets to total loans and other real estate owned

0.94%


0.83%


0.94%


0.83%

Other Information









Number of common shares outstanding - period end


13,116,600


13,029,550


13,116,600


13,029,550

Average common shares outstanding - basic


13,105,923


13,029,550


13,079,989


13,013,005

Average common shares outstanding - diluted


18,346,115


18,269,742


18,320,181


18,253,197



















Contact: Adam Sothen
Chief Financial Officer
Voice: (804) 528-4753
Fax: (804) 270-1215



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