UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 1998
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 333-37225
EASTERN VIRGINIA BANKSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 54-1866052
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
307 CHURCH LANE, TAPPAHANNOCK, VIRGINIA 22560
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER (804) 443-4333
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No __
The number of shares of the registrant's Common Stock outstanding as of July 31,
1998 was 5,174,832.
<PAGE>
EASTERN VIRGINIA BANKSHARES, INC.
FORM 10-Q
For the Quarter Ended June 30, 1998
Part I
Item 1. Financial Statements 2
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Part II
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EASTERN VIRGINIA BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30 December 31
1998 (1) 1997
-------- -----------
ASSETS:
Cash and due from banks $ 9,519 $ 9,319
Interest-bearing deposits, in other banks 100 100
Federal funds sold 5,295 2,642
Securities available for sale at fair
value 44,172 38,912
Securities held to maturity at amortized
cost fair value of $39,729 and $39,350 38,882 38,362
Loans, net 227,175 224,113
Deferred income taxes 1,228 1,243
Bank premises and equipment 4,737 4,200
Accrued interest receivable 2,410 2,479
Other real estate 43 86
Federal Home Loan Bank and Federal
Reserve stock, at cost 956 824
Other assets 826 1,150
------- -------
Total assets $335,343 $323,430
------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Noninterest-bearing demand accounts $ 30,966 $ 29,095
Savings accounts and interest bearing
deposits 122,727 118,111
Time deposits 137,831 133,676
-------- -------
Total deposits 291,524 280,882
Accrued interest payable 813 794
Other liabilities 1,968 2,489
------- -------
Total liabilities 294,305 284,165
SHAREHOLDERS' EQUITY
Common stock of $2 par value per
share, authorized 50,000,000 shares,
issued and outstanding 5,174,832 and
5,188,576 respectively 10,350 10,377
Surplus 221 221
Retained earnings 30,308 28,535
Accumulated other comprehensive income 159 132
------ ------
Total shareholders' equity 41,038 39,265
Total liabilities and
shareholders' equity $335,343 $323,430
-------- -------
(1) Unaudited
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EASTERN VIRGINIA BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands except share amounts)
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
---- ---- ---- ----
INTEREST INCOME:
Loans $5,205 $4,929 $10,461 $9,634
Interest on investment securities:
Taxable 73 24 142 41
Tax exempt 447 457 898 963
Interest on securities available for
sale:
Taxable 526 661 1,095 1,326
Tax exempt - -
Dividends 18 8 31 10
Interest on federal funds sold 237 86 340 170
Interest on deposits in other banks 1 - 3 -
------ ------ ------- ------
Total interest income 6,507 6,165 12,970 12,144
INTEREST EXPENSE
Deposits 2,960 2,738 5,830 5,421
Short-term borrowings - 1 - 6
------ ------ ------- ------
Total interest expense 2,960 2,739 5,830 5,427
------ ------ ------- ------
Net interest income 3,547 3,426 7,140 6,717
PROVISION FOR LOAN LOSSES 115 88 238 172
------ ------ ------- ------
Net interest income after
provision for loan losses $3,432 $3,338 $6,902 $6,545
OTHER INCOME -
Service charges on deposit accounts 338 288 670 557
Gain (loss) on sale of available for
sale securities - (25) 8 (25)
Other operating income 193 149 381 302
------ ------ ------ -----
531 412 1,059 834
------ ------ ------ -----
OTHER EXPENSES
Salaries and benefits 1,100 821 2,018 1,613
Net occupancy expense of premises 316 292 615 561
Other operating expenses 732 675 1,437 1,212
------ ---- ------- ------
2,148 1,788 4,070 3,386
------ ------ ------- ------
Income before income taxes 1,815 1,962 3,891 3,993
INCOME TAX EXPENSE 476 494 978 996
------ ----- ----- -----
Net income $1,339 $1,468 $2,913 $2,997
------ ------ ------ -----
Earnings Per Share, basic and assuming
dilution(1) $0.26 $0.28 $ 0.56 $0.57
Dividends per share(1) 0.11 0.12 $ 0.22 $0.12
(1) Share and per share amounts for 1997 have been restated to reflect the
December 29, 1997 reorganization whereby Southside Bank and Bank of
Northumberland, Inc. shareholders exchanged their stock in those companies
for stock of the Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EASTERN VIRGINIA BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Six Months Ended
----------------
June 30 June 30
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,913 $ 2,997
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 315 302
Accretion of discounts and amortization of
premiums, net (15) -
Provision for loan losses 238 172
Losses (gains) realized on available for
sale securities (8) 25
(Increase) decrease in other assets 185 (456)
Increase (decrease) in other liabilities (502) (1,057)
------ ------
Net cash provided by operating activities 3,126 1,983
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities, calls, paydowns and
sales of available for sale securities 9,926 11,090
Purchase of securities available for sale (15,102) (3,724)
Proceeds from maturities of investment
securities 2,829 1,555
Purchase of investment securities (3,364) (1,597)
(Purchase) sale of FHLB and Federal Reserve
Bank stock (66) (91)
Net (increase) decrease in loans (3,062) (11,295)
Purchases of bank premises and equipment (852) (428)
Proceeds from sale of OREO 43 2
------- -------
Net cash (used in) investing activities (9,648) (4,488)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in noninterest bearing and
interest bearing demand deposits and
savings accounts 14,797 6,612
Net increase in certificates of deposit (4,155) (2,273)
Proceeds from sale of common stock - 53
Acquisition of common stock (27)
Dividends declared (1,140) (620)
------- -------
Net cash provided by financing activities 9,475 3,772
------ -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,953 1,267
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 11,961 14,616
------- ------
END OF PERIOD $ 14,914 $ 15,883
------- ------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest on deposits and other borrowings $ 5,830 $ 5,427
Income taxes $ 978 $ 997
See Notes to Financial Statements
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EASTERN VIRGINIA BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE RETAINED COMPREHENSIVE COMMON CAPITAL
TOTAL INCOME EARNINGS INCOME STOCK SURPLUS
----- ------ ------- ------ ----- -------
<S> <C>
Balances - January 1, 1997 $ 35,456 $ 24,977 $ (101) $ 10,374 $ 206
Comprehensive income:
Net income 2,997 2,997 2,997
Other comprehensive income,
net of tax
Unrealized gain/(loss) on
securities available for sale:
Unrealized holding gain/(loss)
arising during the period (73) (73)
Less: reclassification adjustment 25 25
Other comprehensive income, net of tax (48) (48) (48)
-------- -------
Total comprehensive income 2,949 2,949
Shares sold under dividend reinvestment
plan 73 13 60
Shares purchased and retired (20) (3) (17)
Dividends declared (620) (620) -
------ -----
BALANCES-JUNE 30, 1997 $ 37,838 $ 27,354 $ (149) $ 10,384 $ 249
------- ------- ----- ------- ------
Balances - January 1, 1998 39,265 28,535 132 10,377 221
Comprehensive income:
Net income 2,913 2,913 2,913
Other comprehensive income, net of tax
Unrealized gain/(loss) on securities
available for sale
Unrealized holding gain/(loss)
arising during the period 35 35
Less: reclassification adjustment 8 8
------ -----
Other comprehensive income, net of tax 27 27 27
------ -----
Total comprehensive income $ 2,940
Shares retired (27) (27)
Dividends declared (1,140) (1,140) - - -
------- ------ ------ ------- ----
BALANCES-JUNE 30, 1998 $ 41,038 $ 30,308 $ 159 $ 10,350 $ 221
------- ------- ------ ------- ----
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EASTERN VIRGINIA BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The Consolidated Balance Sheet as of June 30, 1998, the Consolidated
Statements of Income for the three-month and six month periods ended June 30,
1998, and June 30, 1997, the Consolidated Statement of Cash Flows for the
six-month periods ended June 30, 1998, and June 30, 1997, and the
Consolidated Statement of Changes in Shareholders' Equity for the six-month
periods ended June 30, 1998, and June 30, 1997, are unaudited and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. However, in the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
considered necessary to present fairly the financial position as of June 30,
1998. The statements should be read in conjunction with the Notes to
Consolidated Financial Statements included in Eastern Virginia Bankshares'
Annual Report for the year ended December 31, 1997.
2. Eastern Virginia Bankshares (the "Company or EVB") was organized and
chartered under the laws of the Commonwealth of Virginia on September 5, 1997
and commenced operations effective December 29,1997 when Southside Bank (SSB)
and Bank of Northumberland, Inc. (BNI) became wholly owned subsidiaries of
EVB. The transaction was accounted for using the pooling-of-interest method
of accounting. Accordingly, the financial statements of EVB have been
restated for all periods presented to reflect the consolidation of SSB and
BNI into EVB.
3. The results of operations for the three-month and six-month periods ended
June 30, 1998 and 1997, are not necessarily indicative of the results to be
expected for the full year.
4. Earnings per share have been computed by dividing net income by the weighted
average number of shares outstanding for the period. Weighted average shares
used for the computation were 5,188,576 and 5,186,500 for the six months
ended June 30, 1998 and 1997.
5. EVB's amortized cost and estimated fair values of securities at June 30, 1998
are as follows:
(in thousands)
June 30, 1998
-------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- -------- -----
Available for Sale:
U.S. Government obligations $ 23,085 $ 95 $ (1) $ 23,179
Obligations of U.S. Government
agencies 18,925 184 (52) 19,057
Obligations of state/political
subdivisions 1,655 19 (2) 1,672
Other securities 264 - - 264
-------- ----- -- ------
43,929 298 (55) 44,172
Held to Maturity:
Obligations of state/political
subdivisions 37,469 933 (90) 38,312
Corporate bonds 1,413 10 (6) 1,417
-------- ----- ----- ------
38,882 943 (96) 39,729
-------- ----- ------ ------
Total $ 82,811 $1,241 $(151) $ 83,901
-------- ----- ----- ------
<PAGE>
NOTE 6. EVB'S LOAN PORTFOLIO IS COMPOSED OF THE FOLLOWING:
(in thousands)
30-Jun December 31
1998 1997
---- ----
Real estate - construction $ 6,380 $ 6,430
Real estate - mortgage 124,021 118,639
Commercial real estate 22,583 27,324
Commercial, industrial
and agricultural loans 30,606 32,901
Installment loans to individuals 50,485 45,723
All other loans 569 294
--------- ---------
Total loans 234,644 231,311
Less unearned income (3,481) (3,330)
Less allowance for loan losses (3,988) (3,868)
--------- ---------
Total net loans $ 227,175 $ 224,113
--------- ---------
EVB has $2.90 million in non-performing loans at June 30, 1998
NOTE 7. ALLOWANCE FOR LOAN LOSSES
30-Jun December 31
1998 1997
---- ----
Balance January 1 $ 3,868 $ 3,643
Provision charged against income 238 412
Recoveries of loans charged off 124 459
Loans charged off (242) (645)
------- -------
Balance at end of period $ 3,988 $ 3,869
------- -------
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial information is presented to
aid the reader in understanding and evaluating the financial condition and
results of operations of Eastern Virginia Bankshares, Inc. ("EVB" or "the
Company"). This discussion provides information about the major components of
the results of operations, financial condition, liquidity and capital resources
of the Company. This discussion should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
presented elsewhere in this report. Operating results include Southside Bank and
Bank of Northumberland, Inc. combined for all periods presented.
OVERVIEW AND FINANCIAL CONDITION
On December 29, 1997, EVB brought together into one holding company two
independent community banks, Southside Bank and Bank of Northumberland, Inc.
Total assets on June 30, 1998 were $335.3 million, up $ 11.9 million or 3.7%
from $ 323.4 million at December 31, 1997. For the first six months of 1998,
total assets averaged $335.2 million, 7.4 % above the first six months of 1997
average of $312.1 million.
Total loans, net of unearned income, amounted to $231.2 million at June 30,
1998, an increase of $ 3.2 million or 1.4 % from $ 228.0 million at December 31,
1997. At June 30, 1998 total loans net of unearned income and allowance for loan
losses were $227.2 million. Net loans as a percent of total assets were 67.7% at
June 30, 1998, as compared to 69.3% at December 31, 1997. Net loan volume for
the first six months of 1998 was $ 3.1 million as compared to $ 11.2 million for
the first six months of 1997. Slower loan growth in 1998 versus 1997 is related
to a consumer trend toward secondary market, long-term, fixed-rate mortgages and
away from the Company's variable rate mortgages.
On June 30, 1998, the securities portfolio totaled $83.1 million, which was $5.8
million or 7.5% higher than at December 31, 1997. In the first six months of
1998, as funds became available they were utilized for lending activities and to
the extent that deposit growth outpaced loan demand, funds were invested in the
securities portfolio. Funds that are invested in the securities portfolio are
part of the effort to balance the interest rate risk . Federal funds sold were
$5.3 million on June 30, 1998, $2.7 million or 100.4% higher than the $2.6
million outstanding at December 31, 1997. This significant increase in Federal
Funds Sold is primarily the result of management's intent to increase liquidity
above December 31, 1997 levels and, to a lesser degree, a result of soft loan
demand.
Financial Accounting Standards Board Pronouncement # 115 requires the Company to
show the effect of market changes in the value of securities available for sale
(AFS). The market value of securities available for sale at June 30, 1998, was
$44.2 million as compared to $38.9 million at year end 1997. The effect of the
change in market value of AFS securities, net of income taxes, is reflected in a
line titled Accumulated other comprehensive income in Stockholders' Equity,
which was $159 thousand at June 30, 1998, an increase of $27 thousand from 1997
year end. Stable interest rates during the first quarter of 1998 have resulted
in stable securities values with a minimal increase in value as compared to 1997
year end.. This $27 thousand increase in the unrealized gain on AFS securities
is also reflected under the Other Comprehensive Income category on the
Consolidated Statement of Changes in Shareholders' Equity Statement.
Total deposits increased $10.6 million or 3.8% to $291.5 million at June 30,
1998, compared to $280.9 million at December 31, 1997. EVB offers attractive,
yet competitive rates, that continue to contribute to increased deposits.
<PAGE>
RESULTS OF OPERATIONS
Eastern Virginia Bankshares, Inc. reported lower earnings for the second quarter
of 1998. Net income for the quarter was $1.3 million, a decrease of $128
thousand from the second quarter 1997 earnings of $1.5 million. Net income for
the first six months of 1998 amounted to $2.9 million, decreasing $84 thousand
or 2.8% from $3.0 million for the first six months of 1997. Net income for the
first six months was negatively impacted by merger expenses of $93 thousand and
differences in the timing of expense recognition compared to 1997 by $127
thousand. The yield on earning assets was 8.24% and 8.33% for the quarter and
the first six months of 1998 respectively, as compared to 8.42% and 8.34% for
the same periods in 1997. The cost of interest bearing liabilities for the three
month and six month periods ended June 30, 1998 was 4.53% and 4.52% as compared
to 4.45% and 4.43% for the comparable periods in 1997.
Return on average assets was 1.64% for the quarter and 1.76% for the first six
months of 1998, compared with 1.88% and 1.93% for the same periods in 1997, and
1.68% for the year 1997. EVB's return on average equity was 13.03% and 14.41%
for the quarter and the first six months of 1998, compared to 15.63% and 16.24%
for the same periods in 1997, and 13.97% for the year 1997.
NET INTEREST INCOME
Net interest income totaled $3.4 million for the quarter and $6.9 million for
the first six months of 1998, a $94 thousand increase over the Company's
performance for the second quarter of 1997 and a $357 thousand increase over the
first six months of 1997. The net interest margin for the three month and six
month periods ended June 30, 1998 was 4.56% and 4.65% compared to 4.77% and
4.69% for the comparable periods in the prior year. The deterioration in net
interest margin results from a combination of small decreases in loan yield
combined with a small increase in cost of interest bearing funds. Loan yield was
negatively impacted by soft demand for the Company's variable rate residential
mortgage product while interest cost increased because of the success of a newly
introduced Super Saver product.
NONINTEREST INCOME
Total noninterest income was $531 thousand for the quarter and $1.1 million for
the first six months, a 28.9% increase from the second quarter of 1997, and a
27.0% increase over the first six months of 1997. There were no gains or losses
on securities sales during the quarter compared to a $25 thousand loss in 1997.
For the six months ended June 30, 1998, securities gains totaled $8 thousand
compared to a $25 thousand loss for the same period in 1997. Service charges on
deposit accounts and other income increased $50 thousand for the quarter and
$113 thousand for the first six months, compared to 1997.
NONINTEREST EXPENSE
Total noninterest expense increased $360 thousand or 20.2% from $1.79 million
for the second quarter of 1997 to $2.15 million for the same quarter in 1998,
and $684 thousand or 20.2% for the six months ended June 30, 1998. Salary
expense increased $279 thousand or 34% for the quarter vs. 1997, and $405
thousand or 25.1% from the first six months of 1997, as the result of increases
in salaries and benefits and increased staffing for new branches opened in
Deltaville and Gloucester by Southside Bank in the fourth quarter of 1997 and
second quarter of 1998. Merger expenses of $93 thousand were incurred in the
first six months of 1998 compared to no comparable expense in the first six
months of 1997. Advertising/Marketing/Donations/Public Relations expense
increased $18 thousand for the quarter vs. same quarter of 1997, and $71
thousand or 86% for the first six months of 1998 as compared to the same period
in 1997. The increase over 1997 was related to additional expenses associated
with the opening of a new branch in Gloucester County, together with the early
funding of budgeted expenses. Net occupancy expense increased $24 thousand or
8.2% compared to the same quarter of 1997 and increased $54 thousand or 9.6%
from $561 thousand in the first six months of 1997 to $615 thousand for the
first six months of 1998, again primarily impacted by the opening of the new
Deltaville and Gloucester offices, and by depreciation expense related to
investments in technology. All other noninterest expenses increased $39 thousand
or 6.4% to $666 thousand for the second quarter of 1998 from $627 thousand for
the same period in 1997, primarily related to increased data processing expense
to achieve future savings. For the six month period ended June 30, 1998, all
other expenses increased $61 thousand or 5.4% to $1.19 million from $1.13
million in 1997, again primarily related to data processing expenses incurred to
achieve future savings.
<PAGE>
ASSET QUALITY
Asset quality continues to be good based on management review. Loan quality is
the result of management employing conservative loan underwriting standards
while meeting the needs of customers. Total nonperforming assets, which consist
of nonaccrual loans and foreclosed properties were $2.9 million at June 30,
1998, and $3.1 million at year end 1997, reflecting a 5.4% decrease from 1997
year end. Nonperforming assets are composed largely of commercial real estate
mortgage loans secured by real estate in the Company's market area. Based on
estimated fair values of the related real estate, management considers these
amounts recoverable, with any individual deficiency well covered by the
allowance for loan losses.
NONPERFORMING ASSETS
JUNE 30 DECEMBER 31
1998 1997
---- ----
Nonaccrual loans $ 2,896 $ 3,022
Restructured loans - -
Other real estate owned 43 86
-------- ---------
Total nonperforming assets $ 2,939 $ 3,108
-------- ---------
Loans past due 90 days and
accruing interest $ 1,213 $ 927
Nonperforming assets to total
loans and other real estate 1.27% 1.36%
Allowance for loan losses to
nonaccrual loans 137.71% 127.99%
Allowance for loan losses to
period end loans 1.73% 1.70%
Total loan charge-offs, less recoveries, amounted to $26 thousand for the
quarter and $118 thousand for the first six months of 1998, representing an
annualized ratio of net charge-offs to total average loans, net of unearned
income, of 0.01% and 0.05% for the three month and six month periods ended June
30, 1998. This compares to 1997 full year charge-offs of $187 thousand or 0.09%
of average loans.
Nonperforming loans at June 30, 1998 were $2.90 million, or 1.25% of total
loans, compared to $3.02 million or 1.31% at 1997 year end Also included in
nonperforming loans are loans considered impaired on which management is
concerned about the ability of the customer to repay the loan and related
interest at the original contractual terms. At June 30, 1998, impaired loans
totaled $526 thousand upon which an allowance is included in the total loan
portfolio allowance for loan losses. Interest income recognized on impaired
loans as of June 30, 1998, was $12 thousand. The average balance of impaired
loans for the first six months of 1998 was $1.07 million Loans past due 90 days
or more and still accruing interest because they were well secured and in the
process of collection were $1.21 million at June 30, 1998, and $927 thousand at
December 31, 1997.
The allowance for loan losses has increased to $3.99 million at June 30, 1998,
as compared to $3.87 million at December 31, 1997. The allowance increased $120
thousand in the first six months of 1998 as compared to $98 thousand for the
first six months of 1997. The increase in the allowance for loan losses during
both periods was the result of increased lending activity in the loan portfolio.
The ratio of allowance for loan losses to total loans was 1.73% at June 30,
1998, and 1.70% at year end 1997.
EVB closely monitors those loans that are deemed to be potential problem loans.
Loans are viewed as potential problem loans according to the ability of such
borrowers to comply with current repayment terms. These loans are subject to
constant management attention, and their status is reviewed on a regular basis.
The potential problem loans identified at June 30, 1998 are generally secured by
residential and commercial real estate with appraised values that exceed the
principal balance. At June 30, 1998, potential problem loans were approximately
$1.33 million including 3 lending relationships with principal balances in
excess of $100,000 which had an aggregate principal balance outstanding of $626
thousand.
<PAGE>
LIQUIDITY
Liquidity represents the Company's ability to meet present and future deposit
withdrawals, to fund loans, to maintain reserve requirements and to operate the
organization. To meet its liquidity needs, EVB maintains cash reserves,
primarily as federal funds sold and has an adequate flow of funds from maturing
loans, securities and short-term investments. In addition, EVB's subsidiary
banks maintain borrowing arrangements with major regional banks and with the
Federal Home Loan Bank. Management considers its sources of liquidity to be
ample to meet its estimated liquidity needs.
CAPITAL RESOURCES
EVB's strong capital position provides the resources and flexibility to support
asset growth, absorb potential losses and to expand the Company's franchise when
appropriate. The Company's risk-based capital position at June 30, 1998 was
$40.879 million, or 19.77% of risk-weighted assets, for Tier 1 capital and
$43.464 million, or 21.16% for total risk based capital.
Tier 1 capital consists primarily of common shareholders' equity, while total
risk based capital adds the allowance for loan losses to Tier 1. Risk weighted
assets are determined by assigning various levels of risk to different
categories of assets and off-balance sheet activities. Under current risk based
capital standards, all banks are required to have Tier 1 Capital of at least 4%
and total capital of 8%.
PART I - FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk since 1997 year end.
FORM 10-Q PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which the registrant or any of its
subsidiaries, directors or officers is a party or by which they, or any of them,
are threatened. The only litigation in which EVB and its subsidiaries are
involved are collection suits involving delinquent loan accounts in the normal
course of business.
ITEM 2. CHANGES IN SECURITIES (not applicable)
ITEM 3. DEFAULTS UPON SENIOR SECURITIES (not applicable)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 21, 1998, the following
proposals were adopted by the margins indicated.
1. To elect a Board of Directors to hold office until the next annual
meeting of shareholders and until their successors are elected and
qualified.
Number of Shares
For Abstain
Thomas M. Boyd, Jr. 3,264,469 4,977
W. Rand Cook 3,264,469 4,977
Robert L. Covington 3,264,469 4,977
L. Edelyn Dawson, Jr. 3,264,469 4,977
Lewis R. Reynolds 3,264,469 4,977
F. L. Garrett, III 3,264.469 4.977
G. Warren Haynie, Jr. 3,264,469 4,977
Eric A. Johnson 3,264,469 4,977
William L. Lewis 3,264,469 4,977
<PAGE>
2. To ratify the appointment by the Board of Directors of Yount, Hyde &
Barbour, P.C. as the Company's independent auditors for the ensuing year.
For 3,234,565
Against 0
Abstain 34,881
ITEM 5. OTHER INFORMATION (not applicable)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Exhibit Name
11 Statement re: Computation of Per Share Earnings - Included under
Part I, Item I, Note 4 of this Form 10-Q.
27 Financial Data Schedule - Included herein as Exhibit 27 on page 13
(b) No reports on Form 8-K were filed during the second quarter of 1998.
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 thereunto duly authorized.
Eastern Virginia Bankshares, Inc.
/s/ Thomas M. Boyd, Jr. President and Chief Executive Officer
- -------------------------
/s/ Thomas E. Stephenson Vice President, Chief Financial Officer
- --------------------------
Date: July 31, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from consolidated
balance sheet and consolidated incom statement and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 9,519 9,519
<INT-BEARING-DEPOSITS> 100 100
<FED-FUNDS-SOLD> 5,295 5,295
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 44,172 44,172
<INVESTMENTS-CARRYING> 38,882 38,882
<INVESTMENTS-MARKET> 39,729 39,729
<LOANS> 231,281 231,281
<ALLOWANCE> 3,901 3,901
<TOTAL-ASSETS> 335,343 335,343
<DEPOSITS> 291,524 291,524
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 2,781 2,781
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 10,350 10,350
<OTHER-SE> 30,688 30,688
<TOTAL-LIABILITIES-AND-EQUITY> 335,343 335,343
<INTEREST-LOAN> 10,461 5,205
<INTEREST-INVEST> 2,166 1,064
<INTEREST-OTHER> 343 238
<INTEREST-TOTAL> 12,970 6,507
<INTEREST-DEPOSIT> 5,830 2,960
<INTEREST-EXPENSE> 5,830 2,960
<INTEREST-INCOME-NET> 6,902 3,432
<LOAN-LOSSES> 238 115
<SECURITIES-GAINS> 8 0
<EXPENSE-OTHER> 4,070 2,148
<INCOME-PRETAX> 3,891 1,815
<INCOME-PRE-EXTRAORDINARY> 2,913 1,339
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,913 1,339
<EPS-PRIMARY> 0.56 0.26
<EPS-DILUTED> 0.56 0.26
<YIELD-ACTUAL> 4.50 4.42
<LOANS-NON> 2,896 2,896
<LOANS-PAST> 1,213 1,213
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 1,327 1,327
<ALLOWANCE-OPEN> 3,868 3,900
<CHARGE-OFFS> 242 121
<RECOVERIES> 124 95
<ALLOWANCE-CLOSE> 3,988 3,988
<ALLOWANCE-DOMESTIC> 3,988 3,988
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
