EASTERN VIRGINIA BANKSHARES, INC. GLEN ALLEN, Va., Oct. 24, 2016 /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 nine months ended September 30, 2016.
Performance Summary
Three Months Ended
September 30,
(dollars in thousands, except
per share data) 2016 2015
----------------------------- ---- ----
Net income $1,999 $2,010
Basic and diluted net income
per common share $0.10 $0.11
Return on average assets
(annualized) 0.61% 0.65%
Return on average common
shareholders' equity
(annualized) 7.06% 7.80%
Net interest margin (tax
equivalent basis)(2) 3.68% 3.73%
Nine Months Ended
September 30,
(dollars in thousands, except
per share data) 2016 2015
----------------------------- ---- ----
Net income (1) $6,136 $5,126
Net income available to
common shareholders (1) $6,136 $4,740
Basic and diluted net income
per common share $0.33 $0.26
Return on average assets
(annualized) 0.63% 0.53%
Return on average common
shareholders' equity
(annualized) 7.44% 6.25%
Net interest margin (tax
equivalent basis)(2) 3.72% 3.89%
(1) The difference between net income and net income available to common
shareholders is the effective dividend to holders of the Company's Series A
Preferred Stock paid during the 2015 periods.
(2) For more information on the calculation of net interest margin on a tax
equivalent basis, see the average balance sheet and net interest margin analysis
for the three and nine month periods ended September 30, 2016 and 2015 contained
in this release.
The Company's results for the three and nine months ended September 30, 2016 were directly impacted by increases in the average balances of loans, deposits and short-term borrowings and, for the nine months ended September 30, 2016, senior subordinated debt. Results were also affected by decreases in average balances of and yields earned on tax exempt investment securities during the three and nine months ended September 30, 2016 as compared to the same periods in 2015, partially offset by increases in average balances of and yields earned on taxable securities during the same periods. Loan yields declined 1 and 13 basis points for the three and nine months ended September 30, 2016 as compared to the same periods in 2015, and for the nine month period ended September 30, 2016, were negatively affected by lower fair value adjustments related to the acquisition of Virginia Company Bank ("VCB"). Also, as previously disclosed, the Company engaged an independent consultant to conduct a comprehensive assessment of its operations during the first half of 2015. The assessment identified operating efficiencies and revenue enhancement opportunities. The Company has leveraged the assessment's findings, and since the second half of 2015, has continued to realize targeted increases in revenues and declines in certain noninterest expenses, particularly salaries and employee benefits expense. However, increases in group insurance costs due to claims and incentive compensation have largely offset the aforementioned realized declines in salaries and employee benefits expense.
In announcing these results, Joe A. Shearin, President and Chief Executive Officer commented, "I am pleased with our Company's results during the first nine months of 2016 and the continued company-wide focus to grow our balance sheet, improve profitability and enhance the quality of products and services we offer to our customers. For the first nine months of 2016, as compared to the same period of 2015, we are reporting an increase in net income available to common shareholders of 29.5%, an increase in annualized return on average assets of 10 basis points to 0.63%, and an increase in annualized return on average common shareholders' equity of 119 basis points to 7.44%. Net income increased by 4.7% during the third quarter of 2016 as compared to the second quarter of 2016 and was primarily driven by higher interest and fees on loans, and partially offset by a lower net interest margin and higher current period expenses. The increase in interest and fees on loans was driven primarily by strong loan growth. During the third quarter of 2016, we generated loan growth of 3.0% as compared to 6.3% during the first nine months of 2016 and 8.7% during the last twelve months, which outpaced our internal targets. Given our current pipeline of loan opportunities and our focus on total relationship banking, we believe that we are positioned to again deliver meaningful loan growth in the fourth quarter of 2016. The lower net interest margin was driven by lower yields on investment securities and loans as a result of the historically low rate environment as well as competitive pressures for loans. Salaries and employee benefits in the current period were again impacted by higher group insurance expense due to elevated claims, while occupancy and equipment expenses in the current period were impacted by the relocation of our corporate headquarters. The balance of our other noninterest expense categories declined in the current period and we expect them to continue to level off during the fourth quarter of 2016."
Shearin continued, "We are also very pleased to announce that on October 11, 2016 we finalized the relocation of our corporate headquarters to the Innsbrook business park in Glen Allen, Virginia. This relocation is an exciting event for our company and reflects the culmination of a successful, multi-month effort by the board and the management team. As previously announced, our new corporate headquarters allows us to integrate corporate departments from other locations throughout our footprint. We continue to believe this relocation will not only increase collaboration and productivity, but capture operating efficiencies while also providing us the space and flexibility needed to continue to grow and reach new customers. We wish to thank our directors, officers and employees for their contribution on what we believe will be a significant driver of the future success of the Company. I am also pleased to announce that the Board of Directors declared another cash dividend and has also increased the cash dividend to $0.03 per share of common stock and Series B Preferred Stock payable on November 18, 2016 to shareholders of record as of November 4, 2016."
For the three months ended September 30, 2016, the following were significant factors in the Company's reported results:
-- Increase in net interest income of $548 thousand from the same period in
2015, principally due to an increase in interest and fees on loans
driven primarily by loan growth, partially offset by increases in
interest expense associated with our interest-bearing deposits and
short-term borrowings;
-- Net interest margin (tax equivalent basis) decreased 5 basis points to
3.68% during the third quarter of 2016 as compared to 3.73% for the same
period of 2015 primarily due to the declines in yields on our investment
securities and loan portfolio and the impact of increased amounts of and
costs paid on our short-term borrowings;
-- Net accretion attributable to accounting adjustments related to the VCB
acquisition was $82 thousand for the third quarter of 2016, as compared
to $20 thousand in the same period of 2015;
-- Nonperforming assets at September 30, 2016 decreased $1.8 million from
June 30, 2016, primarily due to a $1.1 million decrease in nonaccrual
loans and a $746 thousand decrease in other real estate owned;
-- Net gain on sale of available for sale securities of $270 thousand as
compared to $71 thousand in the same period of 2015 was higher due to
the adjustments of the composition of the investment securities
portfolio as part of our overall asset/liability management strategy;
-- Increase in salaries and employee benefits of $449 thousand from the
same period in 2015, primarily due to an increase in group insurance
expense (which was driven by an increase in claims during the second and
third quarters of 2016) and other incentive compensation;
-- Collection, repossession and other real estate owned expense decreased
$83 thousand from the same period of 2015 due to decreases in collection
costs associated with classified assets; and
-- Other operating expenses increased $139 thousand during the third
quarter of 2016 as compared to the same period of 2015, primarily due to
increases in director fees and other non-loan related losses and
write-offs.
For the nine months ended September 30, 2016, the following were significant factors in the Company's reported results:
-- Increase in net interest income of $1.3 million from the same period in
2015, principally due to an increase in interest and fees on loans
driven primarily by loan growth, partially offset by an increase in
interest expense associated with our short-term borrowings and the
issuance of $20.0 million in senior subordinated debt during the second
quarter of 2015;
-- Net interest margin (tax equivalent basis) decreased 17 basis points to
3.72% during the nine months ended September 30, 2016 as compared to
3.89% for the same period of 2015 primarily due to a decline in yields
on our investment securities and loan portfolio and the impact of
interest incurred on the short-term borrowings and senior subordinated
debt;
-- Net accretion attributable to accounting adjustments related to the VCB
acquisition was $200 thousand, as compared to $422 thousand in the same
period of 2015;
-- Nonperforming assets at September 30, 2016 increased $1.0 million from
December 31, 2015, primarily due to a $1.5 million increase in loans
past due 90 days and accruing interest (of which the majority of this
increase came from a single purchased credit-impaired loan that is well
secured) and a $1.0 million increase in other real estate owned (of
which the majority of this increase came from foreclosures on several
one to four family residential investment properties owned by a single
borrower), partially offset by a decrease of $1.4 million in nonaccrual
loans. Nonperforming assets at September 30, 2016 increased $1.7
million from September 30, 2015, primarily due to a $1.5 million
increase in loans past due 90 days and accruing interest (of which the
majority of this increase came from a single purchased credit-impaired
loan that is well secured) and a $1.3 million increase in other real
estate owned, partially offset by a decrease of $1.1 million in
nonaccrual loans;
-- Net gain on sale of available for sale securities of $507 thousand as
compared to $122 thousand in the same period of 2015 was higher due to
the adjustments of the composition of the investment securities
portfolio as part of our overall asset/liability management strategy;
-- Consultant fees decreased $400 thousand from the same period in 2015,
primarily due to expenses incurred during 2015 related to the
aforementioned comprehensive assessment of our operations that were not
repeated during 2016;
-- Marketing and advertising expenses increased $249 thousand as compared
to the same period in 2015 due to the timing of advertising campaigns
and other initiatives;
-- Decrease in merger and merger related expenses of $224 thousand due to
certain costs incurred during the first quarter of 2015 associated with
the VCB acquisition that were not repeated in 2016; and
-- No effective dividend on preferred stock in the first nine months of
2016 as compared to $386 thousand from the same period of 2015. This
was due to the redemption of the remaining 14,000 shares of the
Company's Series A Preferred Stock in transactions completed during the
first half of 2015.
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 nine months ended September 30, 2016 and 2015:
Average Balance Sheet and Net Interest Margin Analysis
(dollars in thousands)
Three Months Ended September 30,
2016 2015
---- ----
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate (1) Balance Expense Rate (1)
------- ------- ------- ------- ------- -------
Assets:
Securities
Taxable $259,888 $1,406 2.15% $222,800 $1,173 2.09%
Restricted securities 8,982 113 5.00% 8,535 114 5.30%
Tax exempt (2) 2,715 23 3.34% 35,907 360 3.98%
----- --- ------ ---
Total securities 271,585 1,542 2.26% 267,242 1,647 2.45%
Interest bearing deposits in other
banks 7,152 11 0.61% 6,856 4 0.23%
Federal funds sold 104 - 0.00% 139 - 0.00%
Loans, net of unearned income (3) 917,317 11,150 4.84% 853,421 10,443 4.85%
------- ------ ------- ------
Total earning assets 1,196,158 12,703 4.22% 1,127,658 12,094 4.25%
Less allowance for loan losses (10,569) (12,113)
Total non-earning assets 112,655 114,418
------- -------
Total assets $1,298,244 $1,229,963
========== ==========
Liabilities & Shareholders' Equity:
Interest-bearing deposits
Checking $308,553 $299 0.39% $295,441 $270 0.36%
Savings 105,482 51 0.19% 94,248 34 0.14%
Money market savings 160,779 185 0.46% 157,323 176 0.44%
Time deposits 234,627 543 0.92% 229,400 508 0.88%
------- --- ------- ---
Total interest-bearing deposits 809,441 1,078 0.53% 776,412 988 0.50%
Federal funds purchased and repurchase
agreements 6,221 7 0.45% 7,204 9 0.50%
Short-term borrowings 112,712 118 0.42% 103,970 56 0.21%
Junior subordinated debt 10,310 93 3.59% 10,310 83 3.19%
Senior subordinated debt 19,083 352 7.34% 19,107 348 7.23%
------ --- ------ ---
Total interest-bearing liabilities 957,767 1,648 0.68% 917,003 1,484 0.64%
Noninterest-bearing liabilities
Demand deposits 198,664 181,303
Other liabilities 7,542 7,831
----- -----
Total liabilities 1,163,973 1,106,137
Shareholders' equity 134,271 123,826
------- -------
Total liabilities and shareholders'
equity $1,298,244 $1,229,963
========== ==========
Net interest income (2) $11,055 $10,610
======= =======
Interest rate spread (2)(4) 3.54% 3.61%
Interest expense as a percent of
average earning assets 0.55% 0.52%
Net interest margin (2)(5) 3.68% 3.73%
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
$7 adjustment for 2016 and a $110 adjustment in 2015.
(3) Nonaccrual loans have been included in the computations of average loan balances.
(4) Interest rate spread is the average yield on earning assets, calculated on a fully taxable basis, less the average
rate incurred on interest-bearing liabilities.
(5) Net interest margin is the net interest income, calculated on a fully taxable basis, expressed as a percentage
of average earning assets.
(dollars in thousands)
Nine Months Ended September 30,
2016 2015
---- ----
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate (1) Balance Expense Rate (1)
------- ------- ------- ------- ------- -------
Assets:
Securities
Taxable $256,890 $4,375 2.27% $219,440 $3,560 2.17%
Restricted securities 9,021 355 5.26% 7,843 318 5.42%
Tax exempt (2) 5,647 157 3.70% 37,629 1,120 3.98%
----- --- ------ -----
Total securities 271,558 4,887 2.40% 264,912 4,998 2.52%
Interest bearing deposits in other
banks 7,613 31 0.54% 6,902 12 0.23%
Federal funds sold 103 - 0.00% 201 - 0.00%
Loans, net of unearned income (3) 908,148 33,099 4.87% 829,976 31,016 5.00%
------- ------ ------- ------
Total earning assets 1,187,422 38,017 4.28% 1,101,991 36,026 4.37%
Less allowance for loan losses (10,906) (12,512)
Total non-earning assets 111,804 113,830
------- -------
Total assets $1,288,320 $1,203,309
========== ==========
Liabilities & Shareholders' Equity:
Interest-bearing deposits
Checking $306,723 $866 0.38% $288,802 $792 0.37%
Savings 102,432 139 0.18% 92,780 93 0.13%
Money market savings 162,267 566 0.47% 162,029 561 0.46%
Time deposits 237,360 1,664 0.94% 235,025 1,527 0.87%
------- ----- ------- -----
Total interest-bearing deposits 808,782 3,235 0.53% 778,636 2,973 0.51%
Federal funds purchased and repurchase
agreements 6,040 21 0.46% 9,112 40 0.59%
Short-term borrowings 114,289 358 0.42% 86,389 135 0.21%
Junior subordinated debt 10,310 273 3.54% 10,310 244 3.16%
Senior subordinated debt 19,058 1,054 7.39% 11,450 612 7.15%
------ ----- ------ ---
Total interest-bearing liabilities 958,479 4,941 0.69% 895,897 4,004 0.60%
Noninterest-bearing liabilities
Demand deposits 190,803 171,703
Other liabilities 7,344 7,127
----- -----
Total liabilities 1,156,626 1,074,727
Shareholders' equity 131,694 128,582
------- -------
Total liabilities and shareholders'
equity $1,288,320 $1,203,309
========== ==========
Net interest income (2) $33,076 $32,022
======= =======
Interest rate spread (2)(4) 3.59% 3.77%
Interest expense as a percent of
average earning assets 0.56% 0.49%
Net interest margin (2)(5) 3.72% 3.89%
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
$48 adjustment for 2016 and a $342 adjustment in 2015.
(3) Nonaccrual loans have been included in the computations of average loan balances.
(4) Interest rate spread is the average yield on earning assets, calculated on a fully taxable basis, less the average
rate incurred on interest-bearing liabilities.
(5) Net interest margin is the net interest income, calculated on a fully taxable basis, expressed as a percentage
of average earning assets.
Interest Income and Expense
Net interest income and net interest margin
Net interest income in the third quarter of 2016 increased $548 thousand, or 5.2%, when compared to the third quarter of 2015. Net interest income for the nine months ended September 30, 2016 increased $1.3 million, or 4.3%, when compared to the same period in 2015. The Company's net interest margin (tax equivalent basis) decreased to 3.68% and 3.72% for the three and nine months ended September 30, 2016, respectively, representing 5 and 17 basis point decreases over the Company's net interest margin (tax equivalent basis) for the three and nine months ended September 30, 2015. The declines in the net interest margin (tax equivalent basis) were primarily driven by lower loan yields as a result of competitive pressures in the historically low rate environment, and for the nine months ended September 30, 2016, lower accretion of fair value adjustments related to the VCB acquisition as well as increased interest expense as a result of the private placement of $20.0 million of senior subordinated debt in April 2015. Additionally, the average balance of and rates paid on our short-term borrowings increased as compared to the same periods in 2015. These margin pressures were largely offset by increases in average loan balances in the Company's results for the three and nine months ended September 30, 2016, as compared to the same periods in 2015. The most significant factors impacting net interest income during the three and nine month periods ended September 30, 2016 were as follows:
Positive Impact:
-- Increases in average loan balances, primarily due to organic loan growth
and loan purchases, partially offset by lower loan yields.
Negative Impacts:
-- Decreases in average yields earned on investment securities, primarily
tax exempt investment securities, partially offset by increases in
average balances of total investment securities;
-- Private placement of $20.0 million of senior subordinated debt during
the second quarter of 2015 resulting in increases to total average
interest-bearing liabilities and related interest expense for the nine
months ended September 30, 2016;
-- Increases in average short-term borrowings balances and rates paid,
primarily due to loan growth outpacing deposit growth and other
strategic initiatives; and
-- The Company experienced higher average interest-bearing deposit balances
during the three and nine months ended September 30, 2016 over the
comparable 2015 periods, primarily due to customer growth. The rates
paid on total average interest-bearing deposits increased 3 and 2 basis
points for the three and nine months ended September 30, 2016,
respectively, over the comparable periods in 2015. The result was an
increase in interest expense attributable to the Company's deposit
portfolio.
Total interest and dividend income
Total interest and dividend income increased 5.9% and 6.4% for the three and nine months ended September 30, 2016, respectively, as compared to the same periods in 2015. The increase in total interest and dividend income during the three and nine months ended September 30, 2016 was primarily driven by an increase in average loan and investment securities balances, partially offset by a decrease in average loan and investment securities yields.
Loans
Average loan balances increased for the three and nine month periods ended September 30, 2016, as compared to the same periods in 2015, primarily due to organic loan growth and the purchase of $21.2 million in performing commercial and consumer loans between September 2015 and September 2016. Loan growth during the first nine months of 2016 outpaced our internal targets. However, loan growth in our rural markets, especially with respect to consumer loans, remains weak while competition for commercial loans, especially in the Richmond and Tidewater markets, has been and we expect will continue to be intense given the historically low rate environment. The Company's average loan balances increased $63.9 million and $78.2 million for the three and nine months ended September 30, 2016, respectively, as compared to average loan balances for the same periods in 2015. Total average loans were 76.7% of total average interest-earning assets for the three months ended September 30, 2016, compared to 75.7% for the three months ended September 30, 2015. Total average loans were 76.5% of total average interest-earning assets for the nine months ended September 30, 2016, compared to 75.3% for the nine months ended September 30, 2015.
Investment securities
Average total investment securities balances increased 1.6% and 2.5% for the three and nine month periods ended September 30, 2016, respectively, as compared to the same periods in 2015. The overall increase was the result of management of the Company's liquidity needs to support its operations, along with funds provided by deposit growth and measured loan demand in the Company's markets, partially offset by a lack of investment opportunities with acceptable risk-adjusted rates of return. The Company remains committed to its long-term target of managing the investment securities portfolio to comprise 20% of the Company's total assets. The yields on total average investment securities decreased 19 and 12 basis points for the three and nine months ended September 30, 2016, respectively, as compared to the same periods in 2015. The decrease in yields on average total investment securities during the three and nine month periods ended September 30, 2016, as compared to the same periods in 2015, was driven by a lower allocation of the total investment securities portfolio to SBA Pool securities and tax exempt municipal securities, both of which also tend to be higher-yielding segments of the Company's investment securities portfolio. These decreases were partially offset by higher interest rates and a greater allocation of the total investment securities portfolio to higher yielding Agency CMO securities, Agency CMBS securities and taxable municipal securities.
Interest-bearing deposits
Average total interest-bearing deposit balances increased for the three and nine month periods ended September 30, 2016, as compared to the same periods in 2015, primarily due to organic deposit growth that was in part driven by the Company's marketing and advertising initiatives as well as new products and services.
Borrowings
Average total borrowings increased for the three and nine month periods ended September 30, 2016, as compared to the same periods in 2015, primarily due to increased short-term borrowings, and for the nine months ended September 30, 2016, the issuance of $20.0 million in senior subordinated debt in April 2015. Average short-term borrowings increased for the three and nine month periods ended September 30, 2016, as compared to the same periods in 2015, due to additional short-term FHLB advances taken to fund loan growth and other strategic initiatives.
Noninterest Income
The following tables depict the components of noninterest income for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended September 30,
(dollars in thousands) 2016 2015 Change $ Change %
--------------------- ---- ---- -------- -------
Service charges and fees on deposit
accounts $754 $745 $9 1.2%
Debit card/ATM fees 426 468 (42) -9.0%
Gain on sale of available for sale
securities, net 270 71 199 280.3%
Gain on sale of held to maturity
securities, net - 10 (10) -100.0%
(Loss) on sale of bank premises and
equipment - (11) 11 100.0%
Earnings on bank owned life
insurance policies 160 156 4 2.6%
Other operating income 256 285 (29) -10.2%
----------------------
Total noninterest income $1,866 $1,724 $142 8.2%
====== ====== ==== ===
Nine Months Ended September 30,
(dollars in thousands) 2016 2015 Change $ Change %
--------------------- ---- ---- -------- -------
Service charges and fees on deposit
accounts $2,221 $2,081 $140 6.7%
Debit card/ATM fees 1,271 1,273 (2) -0.2%
Gain on sale of available for sale
securities, net 507 122 385 315.6%
Gain on sale of held to maturity
securities, net - 10 (10) -100.0%
(Loss) on sale of bank premises and
equipment (9) (38) 29 76.3%
Earnings on bank owned life
insurance policies 478 479 (1) -0.2%
Other operating income 621 848 (227) -26.8%
----------------------
Total noninterest income $5,089 $4,775 $314 6.6%
====== ====== ==== ===
Key changes in the components of noninterest income for the three and nine months ended September 30, 2016, as compared to the same periods in 2015, are discussed below:
-- Service charges and fees on deposit accounts increased primarily due to
increases in overdraft and NSF fees on checking accounts;
-- Gain on sale of available for sale securities, net increased primarily
as a result of the Company adjusting the composition of the investment
securities portfolio as part of the Company's overall asset/liability
management strategy; and
-- Other operating income decreased primarily due to lower earnings from
the Bank's subsidiaries. Additionally, other operating income includes
earnings from the Bank's investment in Bankers Title, LLC and losses
from the Bank's investment in housing equity funds.
Noninterest Expense
The following tables depict the components of noninterest expense for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended September 30,
(dollars in thousands) 2016 2015 Change $ Change %
--------------------- ---- ---- -------- -------
Salaries and employee benefits $5,843 $5,394 $449 8.3%
Occupancy and equipment expenses 1,474 1,396 78 5.6%
Telephone 216 285 (69) -24.2%
FDIC expense 207 196 11 5.6%
Consultant fees 127 92 35 38.0%
Collection, repossession and other real estate
owned 126 209 (83) -39.7%
Marketing and advertising 329 355 (26) -7.3%
Loss (gain) on sale of other real estate owned 7 (8) 15 187.5%
Impairment losses on other real estate owned 34 - 34 100.0%
Other operating expenses 1,737 1,598 139 8.7%
------------------------ ----- ----- --- ---
Total noninterest expenses $10,100 $9,517 $583 6.1%
======= ====== ==== ===
Nine Months Ended September 30,
(dollars in thousands) 2016 2015 Change $ Change %
--------------------- ---- ---- -------- -------
Salaries and employee benefits $16,577 $16,405 $172 1.0%
Occupancy and equipment expenses 4,244 4,303 (59) -1.4%
Telephone 633 692 (59) -8.5%
FDIC expense 614 622 (8) -1.3%
Consultant fees 581 981 (400) -40.8%
Collection, repossession and other real estate
owned 458 424 34 8.0%
Marketing and advertising 1,267 1,018 249 24.5%
Loss on sale of other real estate owned 10 18 (8) -44.4%
Impairment losses on other real estate owned 34 5 29 580.0%
Merger and merger related expenses - 224 (224) -100.0%
Other operating expenses 5,058 4,991 67 1.3%
------------------------ ----- ----- --- ---
Total noninterest expenses $29,476 $29,683 $(207) -0.7%
======= ======= ===== ====
Key changes in the components of noninterest expense for the three and nine months ended September 30, 2016, as compared to the same periods in 2015, are discussed below:
-- Salaries and employee benefits increased primarily due to an increase in
group insurance expense (which was driven by an increase in claims
during the second and third quarters of 2016) and other incentive
compensation;
-- Consultant fees decreased during the first nine months of 2016 as
compared to the same period of 2015, primarily due to expenses incurred
related to the aforementioned comprehensive assessment of our operations
that was completed during 2015;
-- Collection, repossession and other real estate owned expenses decreased
during the third quarter of 2016 as compared to the same period of 2015
due to decreases in collection costs associated with classified assets;
-- Marketing and advertising expenses increased during the first nine
months of 2016 as compared to the same period of 2015 due to the timing
of advertising campaigns and other initiatives;
-- Merger and merger related expenses incurred during the first half of
2015 were related to the acquisition of VCB in 2014, and no similar
expenses were incurred during the same period in 2016; and
-- Other operating expenses increased during the third quarter of 2016 as
compared to the same period of 2015, primarily due to increases in
director fees and other non-loan related losses and write-offs.
Balance Sheet and Asset Quality
Balance Sheet
Key balance sheet components as of September 30, 2016 and December 31, 2015 are as follows:
September 30, December 31,
(dollars in
thousands) 2016 2015 Change $ Change %
----------- ---- ---- -------- -------
Total assets $1,314,896 $1,270,384 $44,512 3.5%
Cash and due from
banks 6,297 13,451 (7,154) -53.2%
Interest bearing
deposits with
banks 13,676 18,304 (4,628) -25.3%
Securities
available for
sale, at fair
value 232,925 230,943 1,982 0.9%
Securities held to
maturity, at
carrying value 28,549 29,698 (1,149) -3.9%
Loans, net of
unearned income 936,624 880,778 55,846 6.3%
Total deposits 1,010,290 988,719 21,571 2.2%
Total borrowings 162,495 148,760 13,735 9.2%
Total shareholders'
equity 134,645 126,275 8,370 6.6%
Key balance sheet components as of September 30, 2016 and 2015 are as follows:
September 30, September 30,
(dollars in
thousands) 2016 2015 Change $ Change %
----------- ---- ---- -------- -------
Total assets $1,314,896 $1,242,387 $72,509 5.8%
Cash and due from
banks 6,297 12,598 (6,301) -50.0%
Interest bearing
deposits with
banks 13,676 11,661 2,015 17.3%
Securities
available for
sale, at fair
value 232,925 229,608 3,317 1.4%
Securities held to
maturity, at
carrying value 28,549 29,964 (1,415) -4.7%
Loans, net of
unearned income 936,624 861,393 75,231 8.7%
Total deposits 1,010,290 974,801 35,489 3.6%
Total borrowings 162,495 135,225 27,270 20.2%
Total shareholders'
equity 134,645 124,943 9,702 7.8%
Asset Quality
The asset quality measures depicted below continue to reflect the Company's efforts to prudently charge-off loans as losses are identified and maintain an appropriate allowance for loan losses.
The following table depicts the net charge-off activity for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2016 2015 2016 2015
--------------------- ---- ---- ---- ----
Net charge-offs $ - $349 $877 $1,083
Net charge-offs to average loans
(annualized) 0.00% 0.16% 0.13% 0.17%
The following table depicts the level of the allowance for loan losses as of the dates presented:
September 30, December 31, September 30,
(dollars
in
thousands) 2016 2015 2015
---------- ---- ---- ----
Allowance
for
loan
losses $10,467 $11,327 $11,938
Allowance
for
loan
losses
to
period
end
loans 1.12% 1.29% 1.39%
Allowance
for
loan
losses
to
nonaccrual
loans 221.32% 183.43% 203.85%
Allowance
for
loan
losses
to
nonperforming
loans 142.94% 155.34% 171.48%
The following table depicts the level of nonperforming assets as of the dates presented:
September 30, December 31, September 30,
(dollars
in
thousands) 2016 2015 2015
---------- ---- ---- ----
Nonaccrual
loans $4,729 $6,175 $5,856
Loans
past
due 90
days
and
accruing
interest 2,594 1,117 1,105
----- ----- -----
Total
nonperforming
loans $7,323 $7,292 $6,961
Other
real
estate
owned
("OREO") 1,534 520 233
----- --- ---
Total
nonperforming
assets $8,857 $7,812 $7,194
====== ====== ======
Nonperforming
assets
to
total
loans
and
OREO 0.94% 0.89% 0.83%
The following tables present the change in the balances of OREO and nonaccrual loans for the nine months ended September 30, 2016:
OREO: Nonaccrual
Loans:
----- -----------
(dollars in (dollars in
thousands) thousands)
Balance at $520 Balance at
December 31, December 31,
2015 2015 $6,175
Transfers from 2,518 Loans
loans returned to
accrual
status (2,177)
Capitalized 14 Net principal
costs curtailments (2,202)
Sales proceeds (1,474) Charge-
offs (1,211)
Impairment (34) Loan
losses on collateral
valuation moved to
adjustments OREO (2,518)
Loss on Loans placed
disposition on
nonaccrual
during
(10) period 6,662
--- -----
Balance at $1,534 Balance at
September 30, September
2016 30, 2016 $4,729
====== ======
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:
September 30, December 31, September 30,
(dollars in
thousands) 2016 2015 2015
----------- ---- ---- ----
Performing
TDRs $14,590 $15,535 $15,426
Nonperforming
TDRs* 1,299 1,300 1,186
----- ----- -----
Total TDRs $15,889 $16,835 $16,612
======= ======= =======
* Included in nonaccrual loans.
Forward Looking Statements
Certain statements contained in this release that are not historical facts may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended. In addition, certain statements may be contained in the Company's future filings with the Securities and Exchange Commission (the "SEC"), in press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute forward-looking statements within the meaning of the Exchange Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, income or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of the Company or its management or Board of Directors, including those relating to products or services, the performance of portions of the Company's asset portfolio, future changes to the Bank's branch network and the payment of dividends; (iii) statements of future financial performance and economic conditions; (iv) statements regarding the adequacy of the allowance for loan losses; (v) statements regarding the Company's liquidity; (vi) statements of management's expectations regarding future trends in interest rates, real estate values, business opportunities and economic conditions generally and in the Company's markets; (vii) statements regarding future asset quality, including expected levels of charge-offs; (viii) statements regarding potential changes to laws, regulations or administrative guidance; (ix) statements regarding strategic initiatives of the Company or the Bank and the results of these initiatives; and (x) statements of assumptions underlying such statements. Words such as "believes," "anticipates," "expects," "intends," "targeted," "continue," "remain," "will," "should," "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
-- factors that adversely affect the Company's and the Bank's strategic and
business initiatives, 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 or in the repayment ability of individual borrowers or
issuers;
-- concentrations in segments of the loan portfolio or declines in real
estate values in the Company's markets;
-- the effects of the Company's adjustments to the composition of its
investment portfolio;
-- the strength of the Company's counterparties;
-- 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 with respect to the implementation of
the Basel III capital framework and related rules for calculating
risk-weighted assets;
-- changes in the interest rates affecting the Company's deposits and
loans;
-- the loss of any of the Company's key employees;
-- failure, interruption or breach of any of the Company's communication or
information systems, including those provided by external vendors;
-- the effects of cyber-attacks or other security breaches;
-- 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;
-- future mergers or acquisitions, if any;
-- 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;
-- 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, and federal funds lines of
credit from correspondent banks 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. For additional information on risk factors that could affect the Company's forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended December 31, 2015 and other reports filed with the SEC.
Selected Financial Information
(dollars in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30,
Statements of Income 2016 2015 2016 2015
-------------------- ---- ---- ---- ----
Interest and dividend income $12,696 $11,984 $37,969 $35,684
Interest expense 1,648 1,484 4,941 4,004
----- ----- ----- -----
Net interest income 11,048 10,500 33,028 31,680
Provision for loan losses - - 17 -
--- --- --- ---
Net interest income after provision for loan losses 11,048 10,500 33,011 31,680
Service charges and fees on deposit accounts 754 745 2,221 2,081
Debit card/ATM fees 426 468 1,271 1,273
Gain on sale of available for sale securities, net 270 71 507 122
Gain on sale of held to maturity securities, net - 10 - 10
(Loss) on sale of bank premises and equipment - (11) (9) (38)
Earnings on bank owned life insurance policies 160 156 478 479
Other operating income 256 285 621 848
--- --- --- ---
Noninterest income 1,866 1,724 5,089 4,775
----- ----- ----- -----
Salaries and employee benefits 5,843 5,394 16,577 16,405
Occupancy and equipment expenses 1,474 1,396 4,244 4,303
Telephone 216 285 633 692
FDIC expense 207 196 614 622
Consultant fees 127 92 581 981
Collection, repossession and other real estate owned 126 209 458 424
Marketing and advertising 329 355 1,267 1,018
Loss (gain) on sale of other real estate owned 7 (8) 10 18
Impairment losses on other real estate owned 34 - 34 5
Merger and merger related expenses - - - 224
Other operating expenses 1,737 1,598 5,058 4,991
----- ----- ----- -----
Noninterest expenses 10,100 9,517 29,476 29,683
------ ----- ------ ------
Income before income taxes 2,814 2,707 8,624 6,772
Income tax expense 815 697 2,488 1,646
--- --- ----- -----
Net income $1,999 $2,010 $6,136 $5,126
Less: Effective dividend on preferred stock - - - 386
--- --- --- ---
Net income available to common shareholders $1,999 $2,010 $6,136 $4,740
====== ====== ====== ======
Net income per common share: basic and diluted $0.10 $0.11 $0.33 $0.26
Selected Financial Information
(dollars in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30,
Selected Ratios 2016 2015 2016 2015
--------------- ---- ---- ---- ----
Return on average assets (annualized) 0.61% 0.65% 0.63% 0.53%
Return on average common shareholders' equity (annualized) 7.06% 7.80% 7.44% 6.25%
Net interest margin (tax equivalent basis) 3.68% 3.73% 3.72% 3.89%
Period End Balances
-------------------
Investment securities $271,139 $267,833 $271,139 $267,833
Loans, net of unearned income 936,624 861,393 936,624 861,393
Total assets 1,314,896 1,242,387 1,314,896 1,242,387
Total deposits 1,010,290 974,801 1,010,290 974,801
Total borrowings 162,495 135,225 162,495 135,225
Total shareholders' equity 134,645 124,943 134,645 124,943
Book value per common share 8.74 8.02 8.74 8.02
Average Balances
----------------
Investment securities $271,585 $267,242 $271,558 $264,912
Loans, net of unearned income 917,317 853,421 908,148 829,976
Total earning assets 1,196,158 1,127,658 1,187,422 1,101,991
Total assets 1,298,244 1,229,963 1,288,320 1,203,309
Total deposits 1,008,105 957,715 999,585 950,339
Total borrowings 148,326 140,591 149,697 117,261
Total shareholders' equity 134,271 123,826 131,694 128,582
Asset Quality at Period End
---------------------------
Allowance for loan losses $10,467 $11,938 $10,467 $11,938
Nonperforming assets 8,857 7,194 8,857 7,194
Net charge-offs - 349 877 1,083
Net charge-offs to average loans 0.00% 0.16% 0.13% 0.17%
Allowance for loan losses to period end loans 1.12% 1.39% 1.12% 1.39%
Allowance for loan losses to nonaccrual loans 221.32% 203.85% 221.32% 203.85%
Allowance for loan losses to nonperforming loans 142.94% 171.48% 142.94% 171.48%
Nonperforming assets to total assets 0.67% 0.58% 0.67% 0.58%
Nonperforming assets to total loans and other real estate owned 0.94% 0.83% 0.94% 0.83%
Other Information
-----------------
Number of common shares outstanding - period end 13,116,600 13,029,550 13,116,600 13,029,550
Average common shares outstanding - basic 13,105,923 13,029,550 13,079,989 13,013,005
Average common shares outstanding - diluted 18,346,115 18,269,742 18,320,181 18,253,197
Contact: Adam Sothen
Chief Financial Officer
Voice: (804) 528-4753
Fax: (804) 270-1215
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/eastern-virginia-bankshares-inc-releases-third-quarter-2016-results-300349303.html
SOURCE Eastern Virginia Bankshares, Inc.
