EASTERN VIRGINIA BANKSHARES, INC. TAPPAHANNOCK, Va., Feb. 25, 2015 /PRNewswire/ -- Eastern Virginia Bankshares, Inc. (NASDAQ: EVBS) (the "Company"), the one bank holding company of EVB (the "Bank"), reported today its results of operations for the three and twelve months ended December 31, 2014.
Performance Summary
Three Months Ended December 31,
(dollars in thousands, except per share data) 2014 2013
-------------------------------------------- ---- ----
Net income (1) $731 $2,261
Net income available to common shareholders (1) $382 $1,885
Basic income per common share $0.03 $0.16
Diluted income per common share $0.03 $0.11
Return on average assets (annualized) 0.13% 0.73%
Return on average common shareholders' equity (annualized) 1.56% 8.60%
Net interest margin (tax equivalent basis)(2) 3.94% 3.86%
Twelve Months Ended December 31,
(dollars in thousands, except per share data) 2014 2013
-------------------------------------------- ---- ----
Net income (loss) (1) $5,664 $(2,632)
Net income (loss) available to common shareholders (1) $3,716 $(4,136)
Basic income (loss) per common share $0.31 $(0.45)
Diluted income (loss) per common share $0.22 $(0.45)
Return on average assets 0.35% -0.39%
Return on average common shareholders' equity 3.96% -4.98%
Net interest margin (tax equivalent basis)(2) 3.85% 3.46%
(1) The difference between net income (loss) and net income (loss) available to common shareholders is the effective dividend to holders of the Company's Series A Preferred Stock.
(2) For more information on the calculation of net interest margin on a tax equivalent basis, see the average balance sheet and net interest margin analysis for the three and twelve month periods ended December 31, 2014 and
2013 contained in this release.
The Company's results for the three and twelve months ended December 31, 2014 were directly impacted by legal and professional fees and integration costs of $1.2 million and $1.8 million, respectively related to the acquisition of Virginia Company Bank, which was effective on November 14, 2014. While the majority of these merger-related expenses have been recognized in 2014, the Company believes that additional legal and other transition expenses related to this acquisition will likely be incurred during the first half of 2015. Additionally, the Company's results continue to be positively impacted by asset quality improvements and the extinguishment of long-term Federal Home Loan Bank ("FHLB") advances in the third quarter of 2013, as discussed in greater detail below. The prepayment of these advances has significantly improved the Company's financial position and net interest margin for the twelve months ended December 31, 2014 as compared to the twelve months ended December 31, 2013.
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 of 2014 and the continued focus and execution of our strategic plans. We continue to make progress driving asset quality improvements and strengthening of our balance sheet through the execution of our previously disclosed strategic initiatives. While net income declined during the fourth quarter of 2014 as compared to the fourth quarter of 2013, these results were directly impacted by current period legal and other transition expenses related to our recently completed acquisition and integration of Virginia Company Bank. Excluding these expenses, our overall profitability for the fourth quarter of 2014 compared favorably to the third quarter of 2014. With the data processing integration of Virginia Company Bank complete, during 2015 we plan to focus our efforts on realizing cost savings and maximizing revenue enhancement opportunities from this acquisition. Despite improvement in our net interest margin during the current period, which was due in part to the net accretion of fair value acquisition accounting adjustments, competitive pressures in the historically low rate environment continue to lower asset yields and drive margin compression. Although competition for loans has been and will remain quite strong, particularly in the Richmond market, I am pleased with the organic loan growth that we have seen during the fourth quarter of 2014. I continue to be encouraged by the activity we are seeing in our markets, particularly on the Virginia Peninsula, and our current pipeline of loan opportunities."
Shearin concluded, "2014 was a very exciting time for our Company. Throughout the year we have continued to implement strategies to strengthen our financial condition and increase profitability going forward. We recently announced the redemption of an additional $5.0 million of the Company's Series A Preferred Stock that was originally issued to the U.S. Treasury under TARP. This redemption, combined with our previous $10.0 million redemption in October 2014, eliminates $15.0 million of the original $24.0 million issuance, significantly reduces a high cost source of capital and will likely improve our financial results for our common shareholders by an estimated $0.07 per fully diluted share per year. In November 2014, we announced the completion of the acquisition of Virginia Company Bank, and in late January 2015 we successfully integrated Virginia Company Bank's systems and processes into EVB. We are very excited to have combined our two great organizations and about the future prospects and synergies of our combined organization with the expansion of our branch network into the attractive and growing markets of the Virginia Peninsula. After withstanding the last several years in a difficult economy, I am pleased to announce that the Board of Directors declared a cash dividend of $0.01 per share of common stock and Series B Preferred Stock payable on March 20, 2015 to shareholders of record as of March 6, 2015. This dividend is a reflection of the great progress we have made over the past few years in implementing our strategic plan and of the strength and financial stability of our Company. As we look to 2015, we plan to use our strategic and financial flexibility to focus on growth and opportunities to increase the value of our Company."
For the three months ended December 31, 2014, the following were significant factors in the Company's reported results:
-- Acquisition of Virginia Company Bank which added three branches in the
attractive and growing markets of the Virginia Peninsula with total
assets acquired of $128.9 million, including loans and deposits of
$101.5 million and $104.4 million, respectively, net of acquisition
accounting adjustments;
-- Increase in net interest income of $1.1 million from the same period in
2013, principally due to a $1.3 million increase in interest and fees on
loans and a decrease in interest expense on deposits, partially offset
by a decrease in interest on investment securities;
-- Net interest margin (tax equivalent basis) increased 8 basis points to
3.94% during the fourth quarter of 2014 as compared to 3.86% for the
same period in 2013;
-- No provision for loan losses was required during the fourth quarter of
2014 compared to $300 thousand for the same period in 2013, reflecting
the Company's reduction in net charge-offs to $1.1 million for the
fourth quarter of 2014 from $2.4 million in the same period of 2013;
-- Decrease in nonperforming assets of $2.5 million from September 30, 2014
to December 31, 2014 due primarily to the Company's continued focus on
credit quality initiatives to improve its asset quality and resolve
nonperforming assets;
-- Gain of $42 thousand on the sale of available for sale securities during
the fourth quarter of 2014 compared to $982 thousand during the fourth
quarter of 2013. This decrease is primarily due to the sale of a portion
of the Company's previously impaired agency preferred securities (FNMA &
FHLMC) during the fourth quarter of 2013, and the Company did not
generate comparable gains on sales of securities during 2014;
-- Expenses related to FDIC insurance premiums declined to $163 thousand,
compared to $357 thousand for the same period in 2013, as the Company
faced lower FDIC insurance assessment rates following termination of its
written agreement with its federal and state banking regulators (the
"Written Agreement");
-- Other operating expenses increased $2.0 million during the fourth
quarter of 2014 as compared to the same period in 2013 and were driven
primarily by legal and professional fees and integration costs of
approximately $1.2 million associated with the acquisition of Virginia
Company Bank. Excluding these non-recurring fees, other operating
expenses during the fourth quarter of 2014 increased as compared to the
same period in 2013 primarily due to increases in telephone, consulting,
marketing, data processing and internet banking expenses; and
-- Decrease in the effective dividend on preferred stock of $27 thousand
from the same period in 2013. This was due primarily to the redemption
of 10,000 shares of the Company's Series A Preferred Stock on October
15, 2014 and partially offset by the dividend rate on the Series A
Preferred Stock increasing from 5% to 9% in the first quarter of 2014.
For the twelve months ended December 31, 2014, the following were significant factors in the Company's reported results:
-- Loss of $11.5 million on the extinguishment of $107.5 million in
long-term FHLB advances in the prior year with no such prepayment or
loss present in the current year;
-- Increase in net interest income of $3.5 million compared to 2013,
principally due to a $3.6 million decrease in interest expense,
partially offset by a decrease in interest on investment securities;
-- Net interest margin (tax equivalent basis) increased 39 basis points to
3.85% for 2014 as compared to 3.46% for 2013;
-- Provision for loan losses of $250 thousand compared to $1.9 million in
2013, reflecting a reduction in net charge-offs to $2.0 million for
2014, from $7.4 million in 2013;
-- Decrease in nonperforming assets of $3.3 million at December 31, 2014 as
compared to December 31, 2013 due to the Company's continued focus on
credit quality initiatives to improve its asset quality and resolve
nonperforming assets;
-- Gain of $538 thousand on the sale of available for sale securities
during the current year as compared to $1.5 million in the prior year;
-- Gain of $224 thousand on the sale of our former Bowling Green branch
office in the prior year with no such gain present in the current year;
-- Expenses related to FDIC insurance premiums of $921 thousand, compared
to $1.8 million for the same period in 2013;
-- Loss of $78 thousand on the sale of other real estate owned during the
current year as compared to $775 thousand in the prior year;
-- Impairment losses on other real estate owned of $24 thousand during the
current year as compared to $585 thousand in the prior year;
-- Other operating expenses increased $3.0 million during 2014 as compared
to 2013, driven primarily by legal and professional fees and integration
costs of approximately $1.8 million associated with the acquisition of
Virginia Company Bank. Excluding these non-recurring fees, other
operating expenses during the current year increased as compared to the
same period in 2013 primarily due to increases in marketing, consulting
fees, franchise taxes, data processing and internet banking expenses;
and
-- Increase in the effective dividend on preferred stock of $444 thousand
from the same period in 2013. This was due primarily to the dividend
rate of the Company's Series A Preferred Stock increasing from 5% to 9%
in the first quarter of 2014 and partially offset by the redemption of
10,000 shares of the Series A Preferred Stock on October 15, 2014.
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, 2014 and 2013.
Average Balance Sheet and Net Interest Margin Analysis
(dollars in thousands)
Three Months Ended December 31,
2014 2013
---- ----
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate (1) Balance Expense Rate (1)
------- ------- ------- ------- ------- -------
Assets:
Securities
Taxable $222,145 $1,141 2.04% $237,411 $1,418 2.37%
Restricted securities 7,345 105 5.67% 5,729 71 4.92%
Tax exempt (2) 27,878 273 3.89% 29,985 310 4.10%
------ --- ------ ---
Total securities 257,368 1,519 2.34% 273,125 1,799 2.61%
Interest bearing deposits in other banks 8,809 5 0.23% 7,176 5 0.28%
Federal funds sold 359 - 0.00% 82 - 0.00%
Loans, net of unearned income (3) 766,664 9,820 5.08% 661,614 8,552 5.13%
------- ----- ------- -----
Total earning assets 1,033,200 11,344 4.36% 941,997 10,356 4.36%
Less allowance for loan losses (14,071) (16,861)
Total non-earning assets 104,762 101,738
------- -------
Total assets $1,123,891 $1,026,874
========== ==========
Liabilities & Shareholders' Equity:
Interest-bearing deposits
Checking $274,387 $250 0.36% $256,152 $234 0.36%
Savings 90,133 30 0.13% 90,107 31 0.14%
Money market savings 136,376 145 0.42% 115,009 115 0.40%
Time deposits 234,735 525 0.89% 234,121 679 1.15%
------- --- ------- ---
Total interest-bearing deposits 735,631 950 0.51% 695,389 1,059 0.60%
Federal funds purchased and repurchase
agreements 8,431 13 0.61% 3,647 6 0.65%
Short-term borrowings 76,441 41 0.21% 45,662 25 0.22%
Trust preferred debt 10,310 81 3.12% 10,310 89 3.42%
------ --- ------ ---
Total interest-bearing liabilities 830,813 1,085 0.52% 755,008 1,179 0.62%
Noninterest-bearing liabilities
Demand deposits 155,469 133,354
Other liabilities 3,542 6,032
----- -----
Total liabilities 989,824 894,394
Shareholders' equity 134,067 132,480
------- -------
Total liabilities and shareholders' equity $1,123,891 $1,026,874
========== ==========
Net interest income (2) $10,259 $9,177
======= ======
Interest rate spread (2)(4) 3.84% 3.74%
Interest expense as a percent of
average earning assets 0.42% 0.50%
Net interest margin (2)(5) 3.94% 3.86%
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
$83 adjustment for 2014 and a $95 adjustment in 2013.
(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,
2014 2013
---- ----
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate (1) Balance Expense Rate (1)
------- ------- ------- ------- ------- -------
Assets:
Securities
Taxable $232,639 $5,171 2.22% $250,474 $5,443 2.17%
Restricted securities 7,075 387 5.47% 7,796 323 4.14%
Tax exempt (2) 28,466 1,133 3.98% 23,857 959 4.02%
------ ----- ------ ---
Total securities 268,180 6,691 2.49% 282,127 6,725 2.38%
Interest bearing deposits in other banks 7,354 18 0.24% 39,537 105 0.27%
Federal funds sold 191 - 0.00% 162 - 0.00%
Loans, net of unearned income (3) 706,812 35,555 5.03% 669,520 35,487 5.30%
------- ------ ------- ------
Total earning assets 982,537 42,264 4.30% 991,346 42,317 4.27%
Less allowance for loan losses (14,547) (18,527)
Total non-earning assets 100,162 97,047
------- ------
Total assets $1,068,152 $1,069,866
========== ==========
Liabilities & Shareholders' Equity:
Interest-bearing deposits
Checking $262,765 $949 0.36% $248,675 $929 0.37%
Savings 90,015 120 0.13% 90,065 142 0.16%
Money market savings 120,541 498 0.41% 123,559 515 0.42%
Time deposits 225,795 2,343 1.04% 250,506 3,090 1.23%
------- ----- ------- -----
Total interest-bearing deposits 699,116 3,910 0.56% 712,805 4,676 0.66%
Federal funds purchased and repurchase
agreements 4,698 28 0.60% 3,489 21 0.60%
Short-term borrowings 72,565 151 0.21% 16,963 38 0.22%
Long-term borrowings - - 0.00% 73,278 2,958 4.04%
Trust preferred debt 10,310 339 3.29% 10,310 352 3.41%
------ --- ------ ---
Total interest-bearing liabilities 786,689 4,428 0.56% 816,845 8,045 0.98%
Noninterest-bearing liabilities
Demand deposits 139,991 127,211
Other liabilities 4,171 6,732
----- -----
Total liabilities 930,851 950,788
Shareholders' equity 137,301 119,078
------- -------
Total liabilities and shareholders' equity $1,068,152 $1,069,866
========== ==========
Net interest income (2) $37,836 $34,272
======= =======
Interest rate spread (2)(4) 3.74% 3.29%
Interest expense as a percent of
average earning assets 0.45% 0.81%
Net interest margin (2)(5) 3.85% 3.46%
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
$346 adjustment for 2014 and a $293 adjustment in 2013.
(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
Net interest income in the fourth quarter of 2014 increased $1.1 million, or 12.0%, when compared to the fourth quarter of 2013. Net interest income in the twelve months ended December 31, 2014 increased $3.5 million, or 10.3%, when compared to the same period in 2013. The Company's net interest margin increased to 3.94% and 3.85% for the three and twelve months ended December 31, 2014, representing 8 and 39 basis point increases, respectively, over the Company's net interest margins for the three and twelve months ended December 31, 2013. The most significant factors impacting net interest income during these periods were as follows:
Positive Impacts:
-- Acquisition of Virginia Company Bank and the related loans and deposits;
-- Increasing average loan balances primarily due to the acquisition of
Virginia Company Bank;
-- Extinguishment of higher-rate long-term FHLB advances during the third
quarter of 2013, which drove declines in the Company's interest expense
and rate paid on average interest-bearing liabilities; and
-- Decreases in the average balances of and average rates paid on total
interest-bearing deposits for the twelve months ended December 31, 2014.
The three months ended December 31, 2014 was also positively impacted by
decreases in the average rates paid on total interest-bearing deposits,
but was partially offset by higher average balances over the comparable
2013 period due to deposits added to the Company's balance sheet from
the Virginia Company Bank acquisition.
Negative Impacts:
-- Decreasing yields on the Company's loan portfolio;
-- Decreases in the average balances of and average rates earned on total
investment securities for the three months ended December 31, 2014. The
twelve months ended December 31, 2014 was also negatively impacted by
decreases in the average balances of total investment securities, but
was partially offset by higher average rates earned over the comparable
2013 period; and
-- Decreases in average short-term investment balances for the twelve
months ended December 31, 2014.
Total interest income
Total interest income increased 9.7% for the three months ended December 31, 2014 but decreased 0.3% for the twelve month period ended December 31, 2014, as compared to the same periods in 2013, respectively. The increase in total interest income during the three months ended December 31, 2014 was primarily driven by an increase in average loan balances and partially offset by a decrease in average investment securities and declines in loan and investment securities yields. The slight decrease in total interest income during the twelve months ended December 31, 2014 was primarily driven by declines in the yield on the loan portfolio and a decrease in average investment securities. These declines were mostly offset by higher yields on investment securities and higher average loan balances.
Loans
Average loan balances increased for both the three and twelve month periods ended December 31, 2014, as compared to the same periods in 2013, due primarily to the acquisition of Virginia Company Bank loans totaling $101.5 million, net of credit and liquidity marks, the purchase of $27.2 million in performing one-to-four family residential mortgage loans in the first quarter of 2014, the opening of a new loan production office in Chesterfield County, Virginia in the second quarter of 2014 and the origination of a line of credit to fund loan originations through Southern Trust Mortgage, LLC (balance of $10.9 million as of December 31, 2014) in the second quarter of 2014. These additions to the Company's loan portfolio were partially offset by weak loan demand in the Company's markets as a result of the continuing challenging economic conditions, such that the Company's average loan balances increased $105.1 million and $37.3 million for the three and twelve months ended December 31, 2014, respectively, as compared to average loan balances for the same periods in 2013. In addition, due to the continuing low interest rate environment and competitive pressures, loans were originated during the fourth quarter and full year 2014 at much lower yields than seasoned loans in the Company's loan portfolio, which has contributed significantly to average yields on the loan portfolio declining 5 and 27 basis points for the three and twelve months ended December 31, 2014, respectively, as compared to the same periods in 2013. Total average loans were 74.2% of total average interest-earning assets for the three months ended December 31, 2014, compared to 70.2% for the three months ended December 31, 2013. Total average loans were 71.9% of total average interest-earning assets for the twelve months ended December 31, 2014, compared to 67.5% for the twelve months ended December 31, 2013.
Investment securities
Average investment securities balances declined 5.8% and 4.9% for the three and twelve month periods ended December 31, 2014, respectively, as compared to the same periods in 2013, due to the Company's efforts to rebalance the securities portfolio and provide additional liquidity, while the yields on investment securities decreased 27 basis points and increased 11 basis points for the three and twelve months ended December 31, 2014, respectively, as compared to the same periods in 2013. For the three month period, decreasing yields on the investment securities portfolio were driven by lower interest rates over the comparable period and sales/calls of higher yielding municipal securities during the fourth quarter of 2014. For the twelve month period, increasing yields on the investment securities portfolio were driven by increases in interest rates over the comparable period and portfolio rebalancing efforts during late 2013 and the first half of 2014, which largely consisted of accelerated prepayments on lower yield Agency mortgage-backed and Agency CMO securities and allocating a greater proportion of the portfolio to SBA Pool securities and higher yielding, longer duration municipal securities.
Interest bearing deposits in other banks
Average interest bearing deposits in other banks increased slightly for the three months ended December 31, 2014 but decreased significantly for the twelve months ended December 31, 2014, as compared to the same periods in 2013, due to the overall decrease in our average total deposits, the purchase of $27.2 million in performing one-to-four family mortgage loans in the first quarter of 2014 and declines in average total borrowings that were largely due to extinguishing the Company's long-term FHLB advances during the third quarter of 2013.
Interest-bearing deposits
Average total interest-bearing deposit balances and related rates paid decreased for the twelve month period ended December 31, 2014, as compared to the same period in 2013, contributing to the reductions in interest expense during the full year 2014. Retail deposits continued to shift from higher priced certificates of deposit and money market savings accounts to lower priced checking (or "NOW") accounts. Average total interest-bearing deposit balances increased for the three month period ended December 31, 2014, as compared to the same period in 2013, due to the acquisition of Virginia Company Bank interest-bearing deposit liabilities, which totaled $85.6 million.
Borrowings
Average total borrowings increased for the three month period ended December 31, 2014, as compared to the same period in 2013, primarily due to additional short-term advances used to purchase $27.2 million of performing one-to-four family residential mortgage loans in January 2014. Average total borrowings and related rates paid decreased for the twelve month period ended December 31, 2014, as compared to the same period in 2013, significantly driving the reduction in interest expense in the full year 2014. Average total borrowings and related rates paid decreased primarily due to the extinguishment of higher rate long-term FHLB advances during the third quarter of 2013. The long-term FHLB advances were replaced with short-term FHLB advances at a significantly lower rate and lower principal balance.
Noninterest Income
The following tables depict the components of noninterest income for the three and twelve months ended December 31, 2014 and 2013:
Three Months Ended December 31,
(dollars in thousands) 2014 2013 Change $ Change %
--------------------- ---- ---- -------- -------
Service charges and fees on deposit accounts $773 $944 $(171) -18.1%
Debit/credit card fees 346 370 (24) -6.5%
Gain on sale of available for sale securities, net 42 982 (940) -95.7%
Gain on sale of bank premises and equipment 1 - 1 100.0%
Other operating income 377 259 118 45.6%
---------------------- --- --- --- ----
Total noninterest income $1,539 $2,555 $(1,016) -39.8%
====== ====== ======= =====
Twelve Months Ended December 31,
(dollars in thousands) 2014 2013 Change $ Change %
--------------------- ---- ---- -------- -------
Service charges and fees on deposit accounts $3,257 $3,286 $(29) -0.9%
Debit/credit card fees 1,416 1,469 (53) -3.6%
Gain on sale of available for sale securities, net 538 1,507 (969) -64.3%
Gain on sale of bank premises and equipment 6 249 (243) -97.6%
Other operating income 1,458 1,237 221 17.9%
---------------------- ----- ----- --- ----
Total noninterest income $6,675 $7,748 $(1,073) -13.8%
====== ====== ======= =====
Key changes in the components of noninterest income for both the three and twelve months ended December 31, 2014, as compared to the same periods in 2013, are discussed below:
-- Service charges and fees on deposit accounts decreased for both the
three and twelve months ended December 31, 2014, as compared to the same
periods in 2013, due to decreases in service charge and overdraft fees
on checking accounts;
-- Gain on sale of available for sale securities, net decreased as the
Company recognized gains during the fourth quarter of 2013 primarily due
to the sale of a portion of its previously impaired agency preferred
securities (FNMA & FHLMC), and the Company did not generate comparable
gains during 2014;
-- Gain on sale of bank premises and equipment decreased as the Company
sold its former Bowling Green branch office during the third quarter of
2013 (which generated a gain of $224 thousand) with no such gain being
recognized during 2014; and
-- Other operating income increased for both the three and twelve months
ended December 31, 2014, as compared to the same periods in 2013,
primarily due to higher earnings from sales of insurance products
through Bankers Insurance, LLC and higher earnings from bank owned life
insurance policies during 2014. Additionally, other operating income for
both the three and twelve months ended December 31, 2014 includes
earnings from the Bank's investments in Southern Trust Mortgage, LLC
(acquired 4.9% ownership on May 15, 2014) and Bankers Title, LLC
(acquired 6.0% ownership on October 1, 2014).
Noninterest Expense
The following tables depict the components of noninterest expense for the three and twelve months ended December 31, 2014 and 2013:
Three Months Ended December 31,
(dollars in thousands) 2014 2013 Change $ Change %
--------------------- ---- ---- -------- -------
Salaries and employee benefits $4,996 $4,443 $553 12.4%
Occupancy and equipment expenses 1,237 1,366 (129) -9.4%
FDIC expense 163 357 (194) -54.3%
Collection, repossession and other real estate owned 118 93 25 26.9%
Loss (gain) on sale of other real estate owned 12 (48) 60 125.0%
Impairment losses on other real estate owned 13 5 8 160.0%
Other operating expenses 3,940 1,969 1,971 100.1%
------------------------ ----- ----- ----- -----
Total noninterest expenses $10,479 $8,185 $2,294 28.0%
======= ====== ====== ====
Twelve Months Ended December 31,
(dollars in thousands) 2014 2013 Change $ Change %
--------------------- ---- ---- -------- -------
Salaries and employee benefits $18,982 $17,156 $1,826 10.6%
Occupancy and equipment expenses 5,109 5,226 (117) -2.2%
FDIC expense 921 1,765 (844) -47.8%
Collection, repossession and other real estate owned 323 540 (217) -40.2%
Loss on sale of other real estate owned 78 775 (697) -89.9%
Impairment losses on other real estate owned 24 585 (561) -95.9%
Loss on extinguishment of debt - 11,453 (11,453) -100.0%
Other operating expenses 10,367 7,401 2,966 40.1%
------------------------ ------ ----- ----- ----
Total noninterest expenses $35,804 $44,901 $(9,097) -20.3%
======= ======= ======= =====
Key changes in the components of noninterest expense for both the three and twelve months ended December 31, 2014, as compared to the same periods in 2013, are discussed below:
-- Salaries and employee benefits increased for both the three and twelve
month periods due to annual merit increases, increased restricted stock
expense, lower deferred compensation on loan originations and higher
group term insurance costs, partially offset by an increase in the
actuarial pension benefit recognized. Additionally, the Bank incurred
higher personnel costs associated with increased staff levels and
support positions associated with the addition of three branches through
the acquisition of Virginia Company Bank;
-- FDIC insurance expense decreased for both the three and twelve month
periods due to lower base assessment rates resulting from the
improvement in the Bank's overall composite rating in connection with
the termination of the Written Agreement in July 2013, and corresponding
decreases in FDIC insurance assessment rates during 2014;
-- Collection, repossession and other real estate owned expenses decreased
for the twelve month period due to declines in carrying balances of and
costs associated with other real estate owned and classified assets;
-- Loss on the sale of other real estate owned declined for the twelve
month period primarily due to the Company's strategic initiative to
remove risk from its balance sheet by expediting the resolution and
disposition of other real estate owned during the fourth quarter of
2013, lower other real estate owned balances during 2014 and
stabilization of real estate prices in our markets;
-- Impairment losses on other real estate owned decreased for the twelve
month period as other real estate owned balances have continued to
decline and real estate prices in our markets have continued to
stabilize;
-- Loss on extinguishment of debt of $11.5 million was recognized in August
2013 due to the prepayment of $107.5 million in long-term FHLB advances
with no such loss or prepayment present in 2014; and
-- Other operating expenses increased for both the three and twelve month
periods primarily due to costs related to the Company's acquisition of
Virginia Company Bank (including legal, consulting and professional
services, marketing and integration costs). Other operating expenses
also increased due to higher franchise taxes, director expenses, and
increased customer check and coupon incentives, partially offset by a
decrease in ATM charge-off expense. For the twelve month period ended
December 31, 2014, loan expenses and telephone costs were lower than the
comparable period in 2013, and were partially offset by consultant fees
which were elevated due to additional services related to compliance and
loan operations and outsourcing of the Bank's core information
technology processing.
Balance Sheet and Asset Quality
Balance Sheet
Key balance sheet components as of December 31, 2014 and 2013 are as follows:
December 31, December 31,
(dollars in thousands) 2014 2013 Change $ Change %
--------------------- ---- ---- -------- -------
Total assets $1,181,972 $1,027,074 $154,898 15.1%
Securities available for sale, at fair value 214,011 234,935 (20,924) -8.9%
Securities held to maturity, at carrying value 32,163 35,495 (3,332) -9.4%
Total loans 820,569 657,197 163,372 24.9%
Total deposits 939,254 834,462 104,792 12.6%
Total borrowings 102,013 55,259 46,754 84.6%
Total shareholders' equity 134,274 132,949 1,325 1.0%
Asset Quality
The asset quality measures depicted below continue to reflect the Company's efforts to prudently charge-off loans as losses are identified and maintain an appropriate allowance for potential future loan losses.
The following table depicts the net charge-off activity for the three and twelve months ended December 31, 2014 and 2013.
Three months ended Twelve months ended
------------------ -------------------
(dollars in thousands) December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
Net charge-offs $1,120 $2,427 $1,996 $7,421
Net charge-offs to average loans 0.58% 1.46% 0.28% 1.11%
The following table depicts the level of the allowance for loan losses as of the dates presented.
(dollars in thousands) December 31, December 31,
2014 2013
---- ----
Allowance for loan losses $13,021 $14,767
Allowance for loan losses to period end loans 1.59% 2.25%
Allowance for loan losses to nonaccrual loans 196.63% 134.03%
Allowance for loan losses to nonperforming loans 195.07% 134.03%
The following table depicts the level of nonperforming assets as of the dates presented.
(dollars in thousands) December 31, December 31,
2014 2013
---- ----
Nonaccrual loans $6,622 $11,018
Loans past due 90 days and
accruing interest 53 -
--- ---
Total nonperforming loans $6,675 $11,018
Other real estate owned
("OREO") 1,838 800
----- ---
Total nonperforming assets $8,513 $11,818
====== =======
Nonperforming assets to total
loans and OREO 1.04% 1.80%
The following tables present the change in the balances of OREO and nonaccrual loans for the twelve months ended December 31, 2014.
OREO: Nonaccrual Loans:
(dollars in thousands) (dollars in thousands)
Balance at December 31, 2013 $800 Balance at December 31, 2013 $11,018
Transfers from loans 1,657 Loans returned to accrual status (7,539)
Acquired from Virginia Company Bank 103 Net principal curtailments (5,528)
Capitalized costs - Charge-offs (1,562)
Sales proceeds (620) Loan collateral moved to OREO (1,657)
Impairment losses on valuation adjustments (24) Acquired from Virginia Company Bank 13
Loss on disposition (78) Loans placed on nonaccrual during period 11,877
--- ------
Balance at December 31, 2014 $1,838 Balance at December 31, 2014 $6,622
====== ======
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) 2014 2013
---- ----
Performing TDRs $15,223 $16,026
Nonperforming TDRs* 3,438 4,188
----- -----
Total TDRs $18,661 $20,214
======= =======
* Included in nonaccrual loans.
Forward Looking Statements
Certain statements contained in this release that are not historical facts may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, certain statements may be contained in the Company's future filings with the Securities and Exchange Commission (the "SEC"), in press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of the Company or its management or Board of Directors, including those relating to products or services, the performance or disposition of portions of the Company's asset portfolio, future changes to the Bank's branch network, the payment of dividends, and the ability to realize deferred tax assets; (iii) statements of future financial performance and economic conditions; (iv) statements regarding the adequacy of the allowance for loan losses; (v) statements regarding the effect of future sales of investment securities or foreclosed properties; (vi) statements regarding the Company's liquidity; (vii) statements of management's expectations regarding future trends in interest rates, real estate values, and economic conditions generally and in the Company's markets; (viii) statements regarding future asset quality, including expected levels of charge-offs; (ix) statements regarding potential changes to laws, regulations or administrative guidance; (x) statements regarding strategic initiatives of the Company or the Bank and the results of these initiatives, including the Company's acquisition of Virginia Company Bank (or "VCB") and transactions to redeem or refinance the Company's Series A Preferred Stock; and (xi) statements of assumptions underlying such statements. Words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
-- factors that adversely affect the Company's and the Bank's business
initiatives, including the Company's acquisition and integration of VCB
and other factors that could impact the business of the combined
organization, including, without limitation, changes in the economic or
business conditions in the Company's markets;
-- the Company's ability and efforts to assess, manage and improve its
asset quality;
-- the strength of the economy in the Company's target market area, as well
as general economic, market, political, or business factors;
-- changes in the quality or composition of the Company's loan or
investment portfolios, including adverse developments in borrower
industries, decline in real estate values in its markets, or in the
repayment ability of individual borrowers or issuers;
-- the effects of the Company's adjustments to the composition of its
investment portfolio;
-- the impact of government intervention in the banking business;
-- an insufficient allowance for loan losses;
-- the Company's ability to meet the capital requirements of its regulatory
agencies;
-- changes in laws, regulations and the policies of federal or state
regulators and agencies, including rules to implement the Basel III
capital framework and for calculating risk-weighted assets;
-- adverse reactions in financial markets related to the budget deficit of
the United States government;
-- changes in the interest rates affecting the Company's deposits and
loans;
-- the loss of any of the Company's key employees;
-- changes in the Company's competitive position, competitive actions by
other financial institutions and the competitive nature of the financial
services industry and the Company's ability to compete effectively
against other financial institutions in its banking markets;
-- the Company's potential growth, including its entrance or expansion into
new markets, the opportunities that may be presented to and pursued by
it and the need for sufficient capital to support that growth;
-- changes in government monetary policy, interest rates, deposit flow, the
cost of funds, and demand for loan products and financial services;
-- the Company's ability to maintain internal control over financial
reporting;
-- the Company's ability to realize its deferred tax assets, including in
the event the Company experiences an ownership change as defined by
section 382 of the code;
-- the Company's ability to raise capital as needed by its business;
-- the Company's reliance on secondary sources, such as Federal Home Loan
Bank advances, sales of securities and loans, federal funds lines of
credit from correspondent banks and out-of-market time deposits, to meet
its liquidity needs; and
-- other circumstances, many of which are beyond the Company's control.
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.
Selected Financial Information Three months ended Twelve months ended
------------------ -------------------
(dollars in thousands, except per share data) December 31, December 31,
------------ ------------
Statements of Operations 2014 2013 2014 2013
------------------------ ---- ---- ---- ----
Interest and dividend income $11,261 $10,262 $41,918 $42,024
Interest expense 1,085 1,179 4,428 8,045
----- ----- ----- -----
Net interest income 10,176 9,083 37,490 33,979
Provision for loan losses - 300 250 1,850
--- --- --- -----
Net interest income after provision for loan losses 10,176 8,783 37,240 32,129
Service charges and fees on deposit accounts 773 944 3,257 3,286
Other operating income 377 259 1,458 1,237
Debit/credit card fees 346 370 1,416 1,469
Gain on sale of available for sale securities, net 42 982 538 1,507
Gain on sale of bank premises and equipment 1 - 6 249
--- --- --- ---
Noninterest income 1,539 2,555 6,675 7,748
----- ----- ----- -----
Salaries and employee benefits 4,996 4,443 18,982 17,156
Occupancy and equipment expenses 1,237 1,366 5,109 5,226
FDIC expense 163 357 921 1,765
Collection, repossession and other real estate owned 118 93 323 540
Loss (gain) on sale of other real estate owned 12 (48) 78 775
Impairment losses on other real estate owned 13 5 24 585
Loss on extinguishment of debt - - - 11,453
Other operating expenses 3,940 1,969 10,367 7,401
----- ----- ------ -----
Noninterest expenses 10,479 8,185 35,804 44,901
------ ----- ------ ------
Income (loss) before income taxes 1,236 3,153 8,111 (5,024)
Income tax expense (benefit) 505 892 2,447 (2,392)
--- --- ----- ------
Net income (loss) $731 $2,261 $5,664 $(2,632)
Less: Effective dividend on preferred stock 349 376 1,948 1,504
--- --- ----- -----
Net income (loss) available to common shareholders $382 $1,885 $3,716 $(4,136)
==== ====== ====== =======
Income (loss) per common share: basic $0.03 $0.16 $0.31 $(0.45)
diluted $0.03 $0.11 $0.22 $(0.45)
Selected Ratios
---------------
Return on average assets 0.13% 0.73% 0.35% -0.39%
Return on average common shareholders' equity 1.56% 8.60% 3.96% -4.98%
Net interest margin (tax equivalent basis) 3.94% 3.86% 3.85% 3.46%
Period End Balances
-------------------
Investment securities $246,174 $270,430 $246,174 $270,430
Loans, net of unearned income 820,569 657,197 820,569 657,197
Total assets 1,181,972 1,027,074 1,181,972 1,027,074
Total deposits 939,254 834,462 939,254 834,462
Total borrowings 102,013 55,259 102,013 55,259
Total shareholders' equity 134,274 132,949 134,274 132,949
Book value per common share 7.67 7.41 7.67 7.41
Average Balances
----------------
Investment securities $257,368 $273,125 $268,180 $282,127
Loans, net of unearned income 766,664 661,614 706,812 669,520
Total earning assets 1,033,200 941,997 982,537 991,346
Total assets 1,123,891 1,026,874 1,068,152 1,069,866
Total deposits 891,100 828,743 839,107 840,016
Total borrowings 95,182 59,619 87,573 104,040
Total shareholders' equity 134,067 132,480 137,301 119,078
Asset Quality at Period End
---------------------------
Allowance for loan losses $13,021 $14,767 $13,021 $14,767
Nonperforming assets 8,513 11,818 8,513 11,818
Net charge-offs 1,120 2,427 1,996 7,421
Net charge-offs to average loans 0.58% 1.46% 0.28% 1.11%
Allowance for loan losses to period end loans 1.59% 2.25% 1.59% 2.25%
Allowance for loan losses to nonaccrual loans 196.63% 134.03% 196.63% 134.03%
Allowance for loan losses to nonperforming loans 195.07% 134.03% 195.07% 134.03%
Nonperforming assets to total assets 0.72% 1.15% 0.72% 1.15%
Nonperforming assets to total loans and other real estate owned 1.04% 1.80% 1.04% 1.80%
Other Information
-----------------
Number of shares outstanding - period end 12,978,934 11,862,367 12,978,934 11,862,367
Average shares outstanding - basic 12,461,440 11,841,671 12,014,862 9,204,847
Average shares outstanding - diluted 17,701,632 17,081,863 17,255,054 9,204,847
Eastern Virginia Bankshares, Inc. Contact: Adam Sothen
330 Hospital Road Chief Financial Officer
Tappahannock, VA 22560 Voice: (804) 443-8404
Fax: (804) 445-1047
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/eastern-virginia-bankshares-inc-releases-fourth-quarter-and-year-to-date-2014-results-300040597.html
SOURCE Eastern Virginia Bankshares, Inc.
