Eastern Virginia Bankshares Announces Earnings, Declares Dividend

Eastern Virginia Bankshares (NASDAQ:EVBS) full year and fourth quarter net income, earnings per share, and a dividend declaration.

The Company returned to quarterly profitability in the fourth quarter, reporting net income of $763 thousand, down $1.5 million from $2.2 million for the same quarter in the prior year and up $9 .3 million from the third quarter 2009 loss that was impacted by impairment of pooled trust preferred investments. The year to year decrease is primarily attributable to a decrease of $1.5 million in tax credit as the final quarter of 2008 benefited from a delayed tax credit related to the third quarter 2008 impairment of our investment in preferred stock of the federal mortgage agencies FNMA and FHLMC. Net income before tax was up $25 thousand, compared to the same quarter in the prior year.

Net income available to common shareholders for the quarter was $390 thousand or $0.07 per common share, assuming dilution, compared with $2.2 million or $0.38 per share in the prior year fourth quarter. The difference between net income and net income available to common shareholders is the 2009 deduction for dividends and discount accretion on preferred stock related to the Company’s participation in the U. S. Treasury’s Capital Purchase Program. The preferred stock was issued in the first quarter of 2009 and, therefore did not impact 2008 net income available to common shareholders.

Highlights of the Company’s quarterly performance include:

* Net interest income increased $1.1 million, or 14.0% compared to the same quarter in 2008 and $800 thousand, or 10.0%, compared to the most recent quarter, due in large part to investment of excess liquidity and decreases in funding cost.
* Net interest margin increased to 3.54% from 3.35% in the same quarter in 2008 and from 3.23% compared to the third quarter of 2009.
* Credit quality issues continue to significantly affect net income, increasing loan loss provision to $1.7 million, compared to $1.2 million in the same quarter in 2008 and compared to $850 thousand in the second quarter of 2009.
* Dividends and accretion on $24 million of preferred stock issued to the U. S. Treasury amount to $373 thousand or $0.06 per share.
* The Company recorded a $356 thousand write down on its Community Reinvestment Act participation in low income housing projects in the Housing Equity Funds of Virginia.

Noninterest income in the fourth quarter of 2009 increased $22 thousand, or 1.6%, with the only material changes, compared to the fourth quarter of 2008 being a gain on sale of OREO in 2009 of $225 thousand, the loss of $356 thousand on CRA investments highlighted above, and no impairment charge in 2009 while there was a $194 thousand impairment in 2008.

Noninterest expense in the fourth quarter of 2009 increased $614 thousand, or 8.4%, compared to the same quarter in 2008. Personnel expense of $3.8 million was up $275 thousand, or 7.8%, from the fourth quarter of 2008, all related to a $375 thousand reversal of bonus accrual in 2008. There was no bonus accrual in the quarter for 2009. Other noninterest expense increased $297 thousand, or 11.9%, to $2.8 million in 2009 with the largest increase being $133 thousand in FDIC expense.

Return on average assets and return on average equity were 0.14% and 1.94%, respectively for the fourth quarter of 2009 compared to 0.86% and 11.23%, respectively in the fourth quarter of the prior year.

For the year ended December 31, 2009, the Company reported a net loss of $8.8 million, compared to net income of $3.1 million in 2008. Excluding the after tax impact of the securities impairment noted below, net income for year would have been $3.7 million. Net loss available to common shareholders for the year was $10.3 million or $1.73 per common share, assuming dilution, compared with $3.1 million, or $0.52 per share, net income in 2008. The difference between net income and net income available to common shareholders is the 2009 deduction for dividends and discount accretion on preferred stock related to the Company’s participation in the U. S. Treasury’s Capital Purchase Program. Material elements of the full year results, compared to 2008 include:

* Net interest income increased $100 thousand or 0.3%, compared to 2008.
* Net interest margin decreased 28 basis points from 3.59% in 2008 to 3.31% in 2009.
* Impairment loss on securities was $18.9 million in 2009, compared to $4.9 million in 2008.
* Gain on sale of OREO was $357 thousand in 2009, compared to a $229 thousand OREO impairment charge in 2008.
* Deposit service charges decreased $150 thousand or 3.8% as depositors decreased the level of overdraft activity in the challenging economy.
* Losses on CRA and other LLC investments were $476 thousand in 2009, compared to $130 thousand income in 2008.
* Noninterest expense increased $2.7 million, or 9.7%, to $30.6 million in 2009, compared to $27.9 million in 2008.
* Dividends and accretion on preferred stock discount issued to the U. S. Treasury amounted to $1.5 million, or $0.25 per share, in 2009. Participation in the Treasury’s Capital Purchase Program began in the first quarter of 2009 and did not impact the prior year.

Material components of the $2.7 million noninterest expense increase in 2009 included $1.2 million in increased FDIC premiums, $659 thousand of merger related costs related to the proposed merger with First Capital Bancorp that was terminated in November, $478 thousand, or 3.2%, increase in personnel costs of which $289 thousand was increased pension cost, $406 thousand, or 8.6%, increase in occupancy and equipment of which $317 thousand was for software maintenance and depreciation related to systems upgrades, $377 thousand increase in collection, repossession and OREO expense and $114 thousand, or 32.5%, increase in internet banking expense.