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Section 1: DEFA14A (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 6, 2017

  

 

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)

 

x 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 February 6, 2017, Eastern Virginia Bankshares, Inc. (the “Company”) issued a press release (the “Press Release”) announcing the Company’s financial results as of and for the period ended December 31, 2016. A copy of the press release is attached hereto as Exhibit 99.1 to this report and is incorporated by reference into this Item 2.02.

 

Item 8.01 Other Events.

 

The Company also announced in the Press Release that its Board of Directors declared a cash dividend of $0.03 per share to holders of record of common stock and Series B Preferred Stock as of February 17, 2017, payable on March 3, 2017. A copy of the Press Release is attached hereto as Exhibit 99.1 to this report and is incorporated by reference into this Item 8.01.

 

The information set forth under Item 2.02 of this Current Report on Form 8-K is incorporated herein by reference.

 

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No. Description
   
99.1 Press release dated February 6, 2017.

 

 

 

 

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 6, 2017    
     
     
  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 6, 2017.

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

Eastern Virginia Bankshares, Inc. Releases Fourth Quarter and Full Year 2016 Results

GLEN ALLEN, Va., Feb. 6, 2017 /PRNewswire/ -- Eastern Virginia Bankshares, Inc. (NASDAQ: EVBS) (the "Company" or "Eastern Virginia"), the one bank holding company of EVB (the "Bank"), reported today its results of operations for the three and twelve months ended December 31, 2016.

Performance Summary






Three Months Ended December 31,

(dollars in thousands, except per share data)


2016


2015

Net income



$                 1,623


$                2,168

Basic and diluted net income per common share


$                   0.09


$                  0.12

Return on average assets (annualized)


0.48%


0.69%

Return on average common shareholders' equity (annualized)

5.72%


8.23%

Net interest margin (tax equivalent basis) (2)


3.73%


3.71%












Twelve Months Ended December 31,

(dollars in thousands, except per share data)


2016


2015

Net income (1)



$                 7,759


$                7,294

Net income available to common shareholders (1)


$                 7,759


$                6,908

Basic and diluted net income per common share


$                   0.42


$                  0.38

Return on average assets


0.60%


0.57%

Return on average common shareholders' equity


7.00%


6.76%

Net interest margin (tax equivalent basis) (2)


3.72%


3.84%








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

The Company's results for the three and twelve months ended December 31, 2016 were directly impacted by increases in the average balances of loans, deposits and short-term borrowings and, for the twelve months ended December 31, 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 twelve months ended December 31, 2016 as compared to the same periods in 2015, partially offset by increases in average balances of taxable investment securities during the same periods. Loan yields increased 3 basis points for the three months ended December 31, 2016 as compared to the same period in 2015, but decreased 9 basis points for the twelve months ended December 31, 2016, which was largely due to lower fair value adjustments related to the acquisition of Virginia Company Bank ("VCB").

In connection with the previously disclosed pending merger of equals with Southern National Bancorp of Virginia, Inc. ("Southern National"), approximately $617 thousand in merger and merger related expenses were incurred during the three and twelve months ended December 31, 2016. 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 certain salaries and employee benefits expense. However, increases in group insurance costs due to claims and in incentive compensation have largely offset the aforementioned realized declines in salaries and employee benefits expense. Related to the Company's continued commitment to drive operating efficiencies and reduce noninterest expenses, during the fourth quarter of 2016 the Company implemented a hiring freeze. In connection with this hiring freeze, through attrition and other job eliminations, the Company reduced the number of its full-time equivalent employees by 10 during the month of December 2016 and by an additional 14 during the month of January 2017. The Company currently expects this initiative to reduce salaries and employee benefits expense by approximately $1.3 million on an annualized basis.

In announcing these results, Joe A. Shearin, President and Chief Executive Officer commented, "I am pleased with our Company's results for the fourth quarter and full year 2016. For the full year 2016, as compared to 2015, we are reporting an increase in net income available to common shareholders of 12.3%, an increase in return on average assets of 3 basis points to 0.60%, and an increase in return on average common shareholders' equity of 24 basis points to 7.00%. Net income decreased by 18.8% during the fourth quarter of 2016 as compared to the third quarter of 2016 and was primarily driven by higher current period expenses, including those related to our pending merger with Southern National, as discussed above, and partially offset by higher interest and fees on loans and a higher net interest margin. Salaries and employee benefits as well as occupancy and equipment expenses in the current period were again impacted by higher group insurance expense due to elevated claims and the relocation of our corporate headquarters. Excluding these merger and merger related expenses, our overall profitability for the fourth quarter of 2016 improved when compared to the third quarter of 2016. The increase in interest and fees on loans and the higher net interest margin were driven primarily by strong loan growth and higher yields on loans. During the fourth quarter of 2016, we generated loan growth of 10.3% as compared to 17.3% during the full year 2016, which outpaced our internal targets. Given our current pipeline of loan opportunities and our continued focus on total relationship banking, we believe that we are positioned to again deliver meaningful net interest income improvement in 2017."

Shearin continued, "2016 was a very exciting year for our Company. We have accomplished a number of the objectives identified in our strategic plan. Among our many accomplishments, perhaps the most exciting is the pending merger of equals with Southern National and the combination of EVB with Southern National's wholly owned subsidiary Sonabank. This combination brings together two successful yet distinct banking companies with complementary business lines, and will create one of the premier banking institutions headquartered in the Commonwealth of Virginia. We are very excited about the future prospects of our combined organization and look forward to maximizing the potential of this combined franchise. I am also pleased to announce that the Board of Directors declared another cash dividend of $0.03 per share of common stock and Series B Preferred Stock payable on March 3, 2017 to shareholders of record as of February 17, 2017."

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

For the twelve months ended December 31, 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 twelve months ended December 31, 2016 and 2015:

Average Balance Sheet and Net Interest Margin Analysis







(dollars in thousands)



Three Months Ended December 31,


2016


2015


Average


Income/

Yield/


Average


Income/

Yield/


Balance


Expense

Rate (1)


Balance


Expense

Rate (1)

Assets:










Securities










  Taxable

$      248,143


$         1,378

2.21%


$     238,163


$         1,374

2.29%

  Restricted securities

9,895


128

5.15%


8,327


109

5.19%

  Tax exempt (2)

4,201


39

3.73%


19,577


195

3.95%

   Total securities

262,239


1,545

2.34%


266,067


1,678

2.50%

Interest bearing deposits in other banks

18,400


14

0.30%


9,573


6

0.25%

Federal funds sold

595


-

0.00%


116


-

0.00%

Loans, net of unearned income (3)

975,226


11,946

4.87%


872,975


10,656

4.84%

     Total earning assets

1,256,460


13,505

4.28%


1,148,731


12,340

4.26%

Less allowance for loan losses

(11,101)





(11,779)




Total non-earning assets

102,475





113,278




Total assets

$   1,347,834





$  1,250,230














Liabilities & Shareholders' Equity:










Interest-bearing deposits










  Checking

$      312,283


$            304

0.39%


$     301,313


$            275

0.36%

  Savings

107,287


53

0.20%


96,213


38

0.16%

  Money market savings

168,813


207

0.49%


163,342


187

0.45%

  Time deposits

238,461


547

0.91%


240,879


584

0.96%

     Total interest-bearing deposits

826,844


1,111

0.53%


801,747


1,084

0.54%

Federal funds purchased and repurchase










     agreements

5,165


6

0.46%


4,958


6

0.48%

Short-term borrowings

134,484


156

0.46%


99,049


59

0.24%

Junior subordinated debt

10,310


97

3.74%


10,310


85

3.27%

Senior subordinated debt

19,111


351

7.31%


19,028


351

7.32%

     Total interest-bearing liabilities

995,914


1,721

0.69%


935,092


1,585

0.67%

Noninterest-bearing liabilities










  Demand deposits

209,662





181,413




  Other liabilities

7,862





7,676




     Total liabilities

1,213,438





1,124,181




Shareholders' equity

134,396





126,049




 Total liabilities and shareholders' equity

$   1,347,834





$  1,250,230














Net interest income (2)



$       11,784





$       10,755












Interest rate spread (2)(4)




3.59%





3.59%

Interest expense as a percent of










   average earning assets




0.54%





0.55%

Net interest margin (2)(5)




3.73%





3.71%











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


      $12 adjustment for 2016 and a $60 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)



Twelve Months Ended December 31,




2016





2015



Average


Income/

Yield/


Average


Income/

Yield/


Balance


Expense

Rate (1)


Balance


Expense

Rate (1)

Assets:










Securities










  Taxable

$      254,690


$         5,753

2.26%


$     224,159


$         4,934

2.20%

  Restricted securities

9,240


483

5.23%


7,965


427

5.36%

  Tax exempt (2)

5,285


196

3.71%


33,079


1,315

3.98%

   Total securities

269,215


6,432

2.39%


265,203


6,676

2.52%

Interest bearing deposits in other banks

10,324


45

0.44%


7,574


18

0.24%

Federal funds sold

227


-

0.00%


180


-

0.00%

Loans, net of unearned income (3)

925,009


45,045

4.87%


840,814


41,672

4.96%

     Total earning assets

1,204,775


51,522

4.28%


1,113,771


48,366

4.34%

Less allowance for loan losses

(10,955)





(12,327)




Total non-earning assets

109,460





113,691




Total assets

$   1,303,280





$  1,215,135














Liabilities & Shareholders' Equity:










Interest-bearing deposits










  Checking

$      308,121


$         1,170

0.38%


$     291,955


$         1,067

0.37%

  Savings

103,652


192

0.19%


93,645


131

0.14%

  Money market savings

163,913


773

0.47%


162,360


748

0.46%

  Time deposits

237,637


2,211

0.93%


236,500


2,111

0.89%

     Total interest-bearing deposits

813,323


4,346

0.53%


784,460


4,057

0.52%

Federal funds purchased and repurchase










     agreements

5,819


27

0.46%


8,065


46

0.57%

Short-term borrowings

119,366


514

0.43%


89,580


194

0.22%

Junior subordinated debt

10,310


370

3.59%


10,310


329

3.19%

Senior subordinated debt

19,071


1,405

7.37%


13,361


963

7.21%

     Total interest-bearing liabilities

967,889


6,662

0.69%


905,776


5,589

0.62%

Noninterest-bearing liabilities










  Demand deposits

195,543





174,150




  Other liabilities

7,474





7,265




     Total liabilities

1,170,906





1,087,191




Shareholders' equity

132,374





127,944




 Total liabilities and shareholders' equity

$   1,303,280





$  1,215,135














Net interest income (2)



$       44,860





$       42,777












Interest rate spread (2)(4)




3.59%





3.72%

Interest expense as a percent of










   average earning assets




0.55%





0.50%

Net interest margin (2)(5)




3.72%





3.84%











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


      $60 adjustment for 2016 and a $402 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 fourth quarter of 2016 increased $1.1 million, or 10.1%, when compared to the fourth quarter of 2015. Net interest income for the twelve months ended December 31, 2016 increased $2.4 million, or 5.7%, when compared to the same period in 2015. The Company's net interest margin (tax equivalent basis) increased to 3.73%, representing an increase of 2 basis points for the three months ended December 31, 2016 as compared to the same period in 2015. The increase in the net interest margin (tax equivalent basis) was primarily the result of increases in the average balances of and yields earned on loans. The net interest margin (tax equivalent basis) decreased to 3.72%, representing a decline of 12 basis points for the twelve months ended December 31, 2016 as compared to the same period in 2015. The decline in the net interest margin (tax equivalent basis) was primarily driven by lower loan yields as compared to 2015 as a result of competitive pressures in the historically low rate environment and 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 twelve months ended December 31, 2016, as compared to the same periods in 2015. The most significant factors impacting net interest income during the three and twelve month periods ended December 31, 2016 were as follows:

Positive Impact:

Negative Impacts:

Total interest and dividend income

Total interest and dividend income increased 9.9% and 7.3% for the three and twelve months ended December 31, 2016, respectively, as compared to the same periods in 2015. The increase in total interest and dividend income during the three months ended December 31, 2016 was primarily driven by increases in average loan balances and yields earned on those loans, partially offset by decreases in the balances of and yields earned on average investment securities balances. The increase in total interest and dividend income during the twelve months ended December 31, 2016 was primarily driven by an increase in average loan and investment securities balances, partially offset by decreases in average loan and investment securities yields.

Loans

Average loan balances increased for the three and twelve month periods ended December 31, 2016, as compared to the same periods in 2015, primarily due to organic loan growth and the purchase of $30.8 million in performing commercial and consumer loans between December 2015 and December 2016. Loan growth during the three and twelve months ended December 31, 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 $102.3 million and $84.2 million for the three and twelve months ended December 31, 2016, respectively, as compared to average loan balances for the same periods in 2015. Total average loans were 77.6% of total average interest-earning assets for the three months ended December 31, 2016, compared to 76.0% for the three months ended December 31, 2015. Total average loans were 76.8% of total average interest-earning assets for the twelve months ended December 31, 2016, compared to 75.5% for the twelve months ended December 31, 2015.

Investment securities

Average total investment securities balances changed slightly during the three and twelve months ended December 31, 2016, as compared to the same periods in 2015. These changes were the results of management of the Company's liquidity needs to support its operations, along with funds provided by deposit growth and 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 16 and 13 basis points for the three and twelve months ended December 31, 2016, respectively, as compared to the same periods in 2015. The decrease in yields on average total investment securities during the three and twelve month periods ended December 31, 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 CMBS securities and taxable municipal securities.

Interest-bearing deposits

Average total interest-bearing deposit balances increased for the three and twelve month periods ended December 31, 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 twelve month periods ended December 31, 2016, as compared to the same periods in 2015, primarily due to increased short-term borrowings, and for the twelve months ended December 31, 2016, the issuance of $20.0 million in senior subordinated debt in April 2015. Average short-term borrowings increased for the three and twelve month periods ended December 31, 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 twelve months ended December 31, 2016 and 2015:



Three Months Ended December 31,





(dollars in thousands)


2016


2015


Change $


Change %

Service charges and fees on deposit accounts


$         745


$          764


$         (19)


-2.5%

Debit card/ATM fees


428


455


(27)


-5.9%

Gain on sale of available for sale securities, net


194


102


92


90.2%

Gain (loss) on sale of bank premises and equipment


23


(20)


43


215.0%

Earnings on bank owned life insurance policies


158


156


2


1.3%

Other operating income


159


221


(62)


-28.1%

Total noninterest income


$      1,707


$       1,678


$          29


1.7%





















Twelve Months Ended December 31,





(dollars in thousands)


2016


2015


Change $


Change %

Service charges and fees on deposit accounts


$      2,966


$       2,845


$        121


4.3%

Debit card/ATM fees


1,699


1,728


(29)


-1.7%

Gain on sale of available for sale securities, net


701


224


477


212.9%

Gain on sale of held to maturity securities, net


-


10


(10)


-100.0%

Gain (loss) on sale of bank premises and equipment


14


(58)


72


124.1%

Earnings on bank owned life insurance policies


636


636


-


0.0%

Other operating income


780


1,068


(288)


-27.0%

Total noninterest income


$      6,796


$       6,453


$        343


5.3%

Key changes in the components of noninterest income for the three and twelve months ended December 31, 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 twelve months ended December 31, 2016 and 2015:





Three Months Ended December 31,





(dollars in thousands)



2016


2015


Change $


Change %

Salaries and employee benefits


$       5,920


$           5,244


$          676


12.9%

Occupancy and equipment expenses


1,617


1,460


157


10.8%

Telephone




213


241


(28)


-11.6%

FDIC expense



93


199


(106)


-53.3%

Consultant fees



146


161


(15)


-9.3%

Collection, repossession and other real estate owned


214


95


119


125.3%

Marketing and advertising


252


341


(89)


-26.1%

(Gain) loss on sale of other real estate owned


(9)


7


(16)


-228.6%

Merger and merger related expenses


617


-


617


100.0%

Other operating expenses


1,871


1,609


262


16.3%

Total noninterest expenses


$     10,934


$           9,357


$       1,577


16.9%



























Twelve Months Ended December 31,





(dollars in thousands)



2016


2015


Change $


Change %

Salaries and employee benefits


$     22,497


$         21,649


$          848


3.9%

Occupancy and equipment expenses


5,861


5,762


99


1.7%

Telephone




846


933


(87)


-9.3%

FDIC expense



707


821


(114)


-13.9%

Consultant fees



727


1,143


(416)


-36.4%

Collection, repossession and other real estate owned


672


519


153


29.5%

Marketing and advertising


1,519


1,359


160


11.8%

Loss on sale of other real estate owned


1


25


(24)


-96.0%

Impairment losses on other real estate owned


34


5


29


580.0%

Merger and merger related expenses


617


224


393


175.4%

Other operating expenses


6,929


6,600


329


5.0%

Total noninterest expenses


$     40,410


$         39,040


$       1,370


3.5%

Key changes in the components of noninterest expense for the three and twelve months ended December 31, 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 December 31, 2016 and 2015 are as follows:












December 31,


December 31,





(dollars in thousands)


2016


2015


Change $


Change %

Total assets


$    1,398,593


$    1,270,384


$     128,209


10.1%

Cash and due from banks


4,997


13,451


(8,454)


-62.9%

Interest bearing deposits with banks


11,919


18,304


(6,385)


-34.9%

Securities available for sale, at fair value


219,632


230,943


(11,311)


-4.9%

Securities held to maturity, at carrying value


27,956


29,698


(1,742)


-5.9%

Loans, net of unearned income


1,033,231


880,778


152,453


17.3%

Total deposits


1,051,361


988,719


62,642


6.3%

Total borrowings


208,225


148,760


59,465


40.0%

Total shareholders' equity


131,200


126,275


4,925


3.9%

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 (recovery) charge-off activity for the three and twelve months ended December 31, 2016 and 2015:



Three Months Ended December 31,


Twelve Months Ended December 31,

(dollars in thousands)


2016


2015


2016


2015

Net (recoveries) charge-offs


$         (803)


$          611


$            74


$         1,694

Net (recoveries) charge-offs to average loans (annualized)


-0.33%


0.28%


0.01%


0.20%

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



December 31,


December 31,

(dollars in thousands)


2016


2015

Allowance for loan losses


$               11,270


$                11,327

Allowance for loan losses to period end loans


1.09%


1.29%

Allowance for loan losses to nonaccrual loans


217.53%


183.43%

Allowance for loan losses to nonperforming loans


172.80%


155.34%

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



December 31,


December 31,

(dollars in thousands)


2016


2015

Nonaccrual loans


$                 5,181


$            6,175

Loans past due 90 days and accruing interest


1,341


1,117

  Total nonperforming loans


$                 6,522


$            7,292

Other real estate owned ("OREO")


2,656


520

  Total nonperforming assets


$                 9,178


$            7,812






Nonperforming assets to total loans and OREO


0.89%


0.89%

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



3,969


Loans returned to accrual status

(2,649)

Capitalized costs



26


Net principal curtailments

(3,240)

Sales proceeds



(1,824)


Charge-offs


(1,667)

Impairment losses on valuation adjustments


(34)


Loan collateral moved to OREO

(3,969)

Loss on disposition



(1)


Loans placed on nonaccrual during period

10,531

Balance at December 31, 2016



$   2,656


Balance at December 31, 2016

$        5,181

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)


2016


2015

Performing TDRs


$                      10,441


$                      15,535

Nonperforming TDRs*


2,209


1,300

  Total TDRs


$                      12,650


$                      16,835






*  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, employee initiatives and the anticipated financial impact of those initiatives, 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, including the pending merger (the "Merger") of the Company and Southern National; 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.

Additional Information About the Merger and Where to Find It

Investors are urged to review carefully and consider all public filings by Southern National and Eastern Virginia with the SEC, including but not limited to their Annual Reports on Form 10-K, their proxy statements, their Quarterly Reports on Form 10-Q, and their Current Reports on Form 8-K. The documents filed with the SEC may be obtained free of charge at the SEC's website at www.sec.gov. The documents filed by Southern National with the SEC may also be obtained free of charge at Southern National's website at www.sonabank.com or by requesting them in writing to Southern National Bancorp of Virginia, Inc., 6830 Old Dominion Drive, McLean, VA 22101, Attention: Investor Relations. The documents filed by Eastern Virginia with the SEC may also be obtained free of charge at Eastern Virginia's website at www.evb.org or by requesting them in writing to Eastern Virginia Bankshares, Inc., 10900 Nuckols Road, Suite 325, Glen Allen, Virginia 23060, Attention: Investor Relations.

In connection with the proposed transaction, Southern National intends to file a registration statement on Form S-4 with the SEC which will include a joint proxy statement of Southern National and Eastern Virginia and a prospectus of Southern National. A definitive joint proxy statement/prospectus will be sent to the shareholders of each company seeking the required shareholder approvals. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Before making any voting or investment decision, investors and security holders of Southern National and Eastern Virginia are urged to read carefully the entire registration statement and joint proxy statement/prospectus when they become available, including any amendments thereto, because they will contain important information about the proposed transaction. Free copies of these documents may be obtained as described above.

Southern National, Eastern Virginia, and certain of their directors and executive officers may be deemed participants in the solicitation of proxies from Southern National and Eastern Virginia shareholders in connection with the proposed transaction. Information about the directors and officers of Southern National and their ownership of Southern National common stock is set forth in the definitive proxy statement for Southern National's 2016 annual meeting of shareholders, as previously filed with the SEC on March 21, 2016. Information about the directors and officers of Eastern Virginia and their ownership of Eastern Virginia common stock is set forth in the definitive proxy statement for Eastern Virginia's 2016 annual meeting of shareholders, as previously filed with the SEC on April 21, 2016. Investors may obtain additional information regarding the interests of such participants by reading the registration statement and the joint proxy statement/prospectus when they become available. Free copies of these documents may be obtained as described above.


Contact:  Adam Sothen


Chief Financial Officer


Voice:  (804) 528-4753


Fax:     (804) 270-1215




Contact: R. Roderick Porter, President

Contact: Joe A. Shearin, President & CEO

Phone: 202-464-1130 ext. 2406

Phone: 804-528-4752

Southern National Bancorp of Virginia Inc.

Eastern Virginia Bankshares, Inc.

NASDAQ Symbol SONA

NASDAQ Symbol EVBS

Website: www.sonabank.com

Website: www.evb.org

Selected Financial Information









 (dollars in thousands, except per share data)


Three Months Ended December 31,


Twelve Months Ended December 31,

Statements of Income


2016


2015


2016


2015

Interest and dividend income


$             13,493


$          12,280


$                 51,462


$           47,964

Interest expense


1,721


1,585


6,662


5,589

   Net interest income


11,772


10,695


44,800


42,375

Provision for loan losses


-


-


17


-

   Net interest income after provision for loan losses

11,772


10,695


44,783


42,375










Service charges and fees on deposit accounts


745


764


2,966


2,845

Debit card/ATM fees


428


455


1,699


1,728

Gain on sale of available for sale securities, net


194


102


701


224

Gain on sale of held to maturity securities, net


-


-


-


10

Gain (loss) on sale of bank premises and equipment


23


(20)


14


(58)

Earnings on bank owned life insurance policies


158


156


636


636

Other operating income


159


221


780


1,068

Noninterest income


1,707


1,678


6,796


6,453










Salaries and employee benefits


5,920


5,244


22,497


21,649

Occupancy and equipment expenses


1,617


1,460


5,861


5,762

Telephone


213


241


846


933

FDIC expense


93


199


707


821

Consultant fees


146


161


727


1,143

Collection, repossession and other real estate owned


214


95


672


519

Marketing and advertising


252


341


1,519


1,359

(Gain) loss on sale of other real estate owned


(9)


7


1


25

Impairment losses on other real estate owned


-


-


34


5

Merger and merger related expenses


617


-


617


224

Other operating expenses


1,871


1,609


6,929


6,600

Noninterest expenses


10,934


9,357


40,410


39,040










Income before income taxes


2,545


3,016


11,169


9,788

Income tax expense


922


848


3,410


2,494

   Net income


$               1,623


$            2,168


$                   7,759


$             7,294

   Less: Effective dividend on preferred stock


-


-


-


386

   Net income available to common shareholders


$               1,623


$            2,168


$                   7,759


$             6,908

Net income per common share: basic and diluted


$                 0.09


$              0.12


$                     0.42


$               0.38




























Selected Financial Information









 (dollars in thousands, except per share data)


Three Months Ended December 31,


Twelve Months Ended December 31,

Selected Ratios


2016


2015


2016


2015

Return on average assets (annualized)


0.48%


0.69%


0.60%


0.57%

Return on average common shareholders' equity (annualized)

5.72%


8.23%


7.00%


6.76%

Net interest margin (tax equivalent basis)


3.73%


3.71%


3.72%


3.84%

Period End Balances









Investment securities


$           259,145


$        269,600


$               259,145


$         269,600

Loans, net of unearned income


1,033,231


880,778


1,033,231


880,778

Total assets


1,398,593


1,270,384


1,398,593


1,270,384

Total deposits


1,051,361


988,719


1,051,361


988,719

Total borrowings


208,225


148,760


208,225


148,760

Total shareholders' equity


131,200


126,275


131,200


126,275

Book value per common share


8.47


8.11


8.47


8.11

Average Balances









Investment securities


$           262,239


$        266,067


$               269,215


$         265,203

Loans, net of unearned income


975,226


872,975


925,009


840,814

Total earning assets


1,256,460


1,148,731


1,204,775


1,113,771

Total assets


1,347,834


1,250,230


1,303,280


1,215,135

Total deposits


1,036,506


983,160


1,008,866


958,610

Total borrowings


169,070


133,345


154,566


121,316

Total shareholders' equity


134,396


126,049


132,374


127,944

Asset Quality at Period End









Allowance for loan losses


$             11,270


$          11,327


$                 11,270


$           11,327

Nonperforming assets


9,178


7,812


9,178


7,812

Net (recoveries) charge-offs


(803)


611


74


1,694

Net (recoveries) charge-offs to average loans (annualized)

-0.33%


0.28%


0.01%


0.20%

Allowance for loan losses to period end loans


1.09%


1.29%


1.09%


1.29%

Allowance for loan losses to nonaccrual loans


217.53%


183.43%


217.53%


183.43%

Allowance for loan losses to nonperforming loans


172.80%


155.34%


172.80%


155.34%

Nonperforming assets to total assets


0.66%


0.61%


0.66%


0.61%

Nonperforming assets to total loans and other real estate owned

0.89%


0.89%


0.89%


0.89%

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


13,116,600


13,029,550


13,089,192


13,017,175

Average common shares outstanding - diluted


18,356,792


18,269,742


18,329,384


18,257,367





















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