Exhibit 99.2
Eastern Virginia Bankshares
NEWS RELEASE
EASTERN VIRGINIA BANKSHARES, INC.
Eastern Virginia Bankshares | Contact: Ron Blevins |
330 Hospital Road | Chief Financial Officer |
Tappahannock, VA 22560 | Voice: | 804/443-8423 |
January 16, 2009
Eastern Virginia Bankshares Announces Earnings, Declares Dividend
Tappahannock, VA. - Eastern Virginia Bankshares (NASDAQ:EVBS) today reported year-to-date and fourth quarter net income, earnings per share, and a dividend declaration.
The year 2008 was influenced by economic events not seen since World War II. These events included rapidly declining interest rates, a turbulent mortgage market, and weakening values of corporate investment products. As a result, approximately 25 banks were closed by the FDIC in 2008.
While these negative forces were occurring in the economy, EVB has maintained a strong capital base and our loan portfolio continued to grow. Subsequent to year end, we received $24 million in new capital from the issuance of preferred stock to the Treasury, further enhancing our ability to aid our customers.
For the tumultuous year ended December 31, 2008, net income was $3.1 million or $0.52 per diluted share, a decrease of $5.7 million or 64.9%, compared to $8.8 million, or $1.45 per diluted share for the year ended December 31, 2007. Net interest income decreased $662 thousand or -2.0%. Loan loss provision expense increased $2.8 million or 225.1%. Total noninterest income decreased $3.1 million or 51.4%. This was primarily caused by a $4.9 million impairment in the investment portfolio. Some of this impairment was offset by a pension gain of $1.3 million. Core noninterest income increases were driven by increases in service charges on deposits of 8.7% and debit or credit card fees of 34.5%. Total noninterest expense increased $2.1 million or 8.0% with most of this coming from branch acquisitions in the first quarter, existing branch expansions, increased FDIC expense and other increased operating expenses related to branch acquisitions and expansion.
For the fourth quarter 2008, the Company reported net income of $2.2 million, or $0.38 per diluted share, an increase of $154 thousand or 7.5% compared to $2.1 million, or $0.35 per diluted share, in the fourth quarter of 2007. Net interest income for the fourth quarter of 2008 decreased $704 thousand, or 8.3%, compared to the same period in 2007. In addition, management added $615 thousand to loan loss provision due to economic uncertainties and the potential effect it could have on our loan portfolio. Noninterest income decreased 13.6% with service charges for the quarter down $24 thousand compared to 2007. Noninterest expense increased $512 thousand or 7.5%. Salaries and benefits decreased primarily from elimination of bonus accrual. However, growth in all the other categories was driven by the items mentioned above and increased legal, collection and electronic banking expenses. Tax expense decreased as the company exercised its right to tax benefits in the fourth quarter as a result of the economic assistance bill the President signed in early October. This bill allows businesses to recognize a loss for tax purposes which is different from FASB 107 ‘s normal treatment of such losses.
On a linked quarter basis, net income for the fourth quarter of 2008 increased by $5.3 million to $2.2 million compared to a loss of $3.1 million for the third quarter of 2008. Noninterest expenses increased $319 thousand for the fourth quarter as all categories rose except salaries and benefits and marketing. Part of this increase was caused by cyclical changes from rising contract charges based on annual increases, higher legal cost related to loans and the TARP program, and higher operating costs due to infrastructure changes. Net pretax income was $660 thousand, an increase of $3.4 million from quarter to quarter primarily impacted by the prior quarter securities impairment. On a quarter to quarter basis, net interest income decreased by $589 thousand reflecting the rate cuts during the fourth quarter. On a percentage basis, total interest expense decreased 2.5% while interest income decreased 5.0% as rates plummeted.
Like most of the banking industry, the fourth quarter of 2008 impacted our asset quality. Net charge-offs as a percent of year-to-date average loans outstanding was 0.60% compared to 0.15% for the same quarter in 2007 and 0.06% for the year ended December 31, 2007. Nonperforming assets as a percent of total loans plus OREO was 2.04% at December 31, 2008, compared to 0.40% at December 31, 2007. Nonperforming assets were $16.7 million at the end of December 2008 compared to $2.9 million at the end of 2007. Management recognizes that in this recessionary environment customer repayment capabilities may be stressed and creative approaches need to be taken to help the customer and protect the bank.
Net interest margin for the quarter ended December 31, 2008 was 3.32% compared to 3.98% for the fourth quarter of 2007. Management funded loan growth in 2008 primarily with market deposit growth. With the Federal Reserve lowering the interest rate through much of 2008, our net interest margin decreased as much of the loan portfolio re-prices immediately while deposit cost decreases at a slower rate.
President and CEO Joe A. Shearin stated, “In these unprecedented times, as a community bank we continue to be mindful of customer needs and work with them to bridge gaps where problems related to the economy may hamper their ability to pay as well as provide safe deposit solutions for customers fleeing an uncertain market and seeking a safe harbor for their savings. We continue to increase our loan reserves for potential weakening in credit quality. While Eastern Virginia Bankshares continues to be “well capitalized” by regulatory standards, our acceptance into the Treasury Capital Purchase Plan further strengthens the company and enables us to satisfy the lending needs of our communities. This acceptance by the Treasury reinforces the strength of Eastern Virginia Bankshares, as the Treasury is investing in only the strongest of financial institutions. While the economic forecast for 2009 presents challenges for all financial institutions, we believe that Eastern Virginia Bankshares is being proactive in terms of allocating reserves to the loan portfolio and taking advantage of low-cost capital through the U. S. Treasury’s Capital Purchase Program of the Emergency Economic Stabilization Act of 2008.” I am pleased to announce that the Board of Directors declared a dividend of $0.16 per share payable on February 13, 2009 to stockholders of record as of January 30, 2009.”
For the year ended December 2008, return on average equity was 3.55% compared to 9.76% for the same period in 2007 and return on average assets was 0.31% compared to 0.99% for the twelve months ended December 31, 2007. For the quarter ended December 31, 2008, the Company’s return on average equity (ROE) and return on average assets (ROA) were 11.26% and 0.86%, respectively, compared to 9.11% and 0.90%, respectively for the quarter ended December 31, 2007.
Total assets increased by $123.4 million, or 13.3% compared to one year ago, reaching a record level of $1.05 billion at December 31, 2008. Loans increased by $110.4 million, or 15.6% at year-end 2008 from $708.8 million at year end 2007 to $819.3 million at December 31, 2008. Deposits increased $141.6 million or 21.1% from $671.9 million at December 31, 2007 to $813.5 million at year-end 2008. Average loans of $810.1 million for the fourth quarter of 2008 were up 14.9% compared to $705.1 million in the fourth quarter of 2007. Average deposits of $786.6 million for the quarter ended December 31, 2008 reflect an increase of 16.9% compared to $672.5 million in the same quarter of 2007. For the twelve months ended December 31, 2008, average earning assets were $933 million, up $101.0 million compared to average earning assets at year end 2007 of $832 million.
Forward-Looking Statements
Certain information contained in this discussion may include “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. These forward-looking statements are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Such forward-looking statements involve known and unknown risks including, but not limited to: Interest rate fluctuations and our ability to successfully manage that risk
• | Changes in general economic and business conditions |
• | Funding cost in an increasingly competitive environment |
• | Risk inherent in making loans such as repayment risks and fluctuating collateral values |
• | Risk inherent in the investment portfolio comprising approximately 14.9% of the Company’s total assets |
• | Competition within and from outside the banking industry |
• | Maintaining capital levels adequate to support our growth |
• | The ability to successfully manage our growth or implement our growth strategies if we are unable to identify attractive markets, locations or opportunities to expand in the future |
• | Reliance on our management team, including our ability to attract and retain key personnel |
• | New products and services in the banking industry |
• | Problems with technology utilized by the Company |
• | Changing trends in customer profiles |
• | Integration of newly acquired branches or businesses, including maintaining cost controls and asset quality |
• | Changes in laws and regulations applicable to the Company |
Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
Selected Financial Information | | Three months Ended | | Twelve months Ended |
(dollars in thousands, except per share data) | | December 31, | | December 31, |
Income Statements | | 2008 | | 2007 | | 2008 | | 2007 |
Interest income | | $ 14,415 | | $ 15,091 | | $ 59,386 | | $ 58,201 |
Interest expense | | 6,643 | | 6,615 | | 26,809 | | 24,962 |
| | | | | | | | |
Net interest income | | 7,772 | | 8,476 | | 32,577 | | 33,239 |
Provision for loan losses | | 1,225 | | 610 | | 4,025 | | 1,238 |
Net interest income after provision | | 6,547 | | 7,866 | | 28,552 | | 32,001 |
Service charges on deposits | | 989 | | 1,013 | | 3,991 | | 3,671 |
Other noninterest income | | 238 | | 257 | | 1,083 | | 1,132 |
Debit/ credit card fees | | 291 | | 273 | | 1,135 | | 844 |
Investment services | | 94 | | 99 | | 293 | | 447 |
Recurring noninterest income | | 1,612 | | 1,642 | | 6,502 | | 6,094 |
Gain on LLC investments and sale of fixed assets | | - | | - | | (229) | | - |
Gain on securities available for sales | | - | | - | | 44 | | 14 |
Impairment - securities | | (194) | | - | | (4,933) | | - |
Actuarial gain - pension curtailment | | - | | - | | 1,328 | | - |
Gain (loss) on sale of OREO, fixed assets and LLC | | - | | - | | 258 | | 2 |
Nonrecurring noninterest income (loss) | | (194) | | - | | (3,532) | | 16 |
Noninterest income | | 1,418 | | 1,642 | | 2,970 | | 6,110 |
Salaries and benefits | | 3,510 | | 3,655 | | 14,776 | | 14,547 |
Occupancy and equipment | | 1,291 | | 1,137 | | 4,734 | | 4,282 |
Other noninterest expense | | 2,504 | | 2,001 | | 8,435 | | 7,045 |
Noninterest expense | | 7,305 | | 6,793 | | 27,945 | | 25,874 |
Income tax expense | | (1,560) | | 649 | | 500 | | 3,483 |
| | | | | | | | |
Net income | | $ 2,220 | | $ 2,066 | | $ 3,077 | | $ 8,754 |
| | | | | | | | |
Earnings per share: basic | | $ 0.38 | | $ 0.34 | | $ 0.52 | | $ 1.45 |
diluted | | $ 0.38 | | $ 0.34 | | $ 0.52 | | $ 1.45 |
| | | | | | | | |
Selected Ratios | | | | | | | | |
Return on average assets | | 0.86% | | 0.90% | | 0.31% | | 0.99% |
Return on average equity | | 11.26% | | 9.11% | | 3.55% | | 9.76% |
Net interest margin | | 3.32% | | 3.98% | | 3.57% | | 4.06% |
| | | | | | | | |
Balance Sheets at Period End | | | | | | | | |
Loans, net of unearned interest | | $ - | | $ - | | $ 819,265 | | $ 708,817 |
Total assets | | - | | - | | 1,050,139 | | 926,711 |
Deposits | | - | | - | | 813,533 | | 671,900 |
Other borrowings | | - | | - | | 148,546 | | 154,480 |
Shareholders' equity | | - | | - | | 80,630 | | 90,769 |
Book value per share | | - | | - | | 13.67 | | 15.30 |
| | | | | | | | |
Average Balance Sheets for the Quarter and year to date | | | | | | |
Loans, net of unearned interest | | $ 810,139 | | $ 705,101 | | 773,838 | | 681,456 |
Total assets | | 1,022,091 | | 913,347 | | 996,408 | | 883,903 |
Deposits | | 786,552 | | 672,488 | | 753,719 | | 660,138 |
Other borrowings | | 150,531 | | 138,892 | | 148,346 | | 122,731 |
Shareholders' equity | | 78,400 | | 89,993 | | 86,578 | | 89,659 |
| | | | | | | | |
Asset Quality at Period End | | | | | | | | |
Allowance for loan losses | | $ - | | $ - | | 10,542 | | 7,888 |
Nonperforming assets | | - | | - | | 16,724 | | 2,863 |
Net charge-offs | | 1,216 | | 272 | | 1,860 | | 401 |
Net charge-offs to average loans | | 0.60% | | 0.15% | | 0.24% | | 0.06% |
Loan loss reserve % of total loans | | - | | - | | 1.29% | | 1.11% |
Nonperforming assets % of total loans & OREO | | - | | - | | 2.04% | | 0.40% |
