Eastern Virginia Bankshares

10-K 1 d10k.htm EASTERN VIRGINIA BANKSHARES, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2007 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-23565 EASTERN VIRGINIA BANKSHARES, INC. (Exact name of registrant as specified in its charter) VIRGINIA 54-1866052 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 330 Hospital Road, Tappahannock, Virginia 22560 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (804) 443-8423 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $2 Par Value The Nasdaq Stock Market, LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x 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 ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “ large accelerated filer” , “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2007 was approximately $129.4 million. The number of shares of the registrant’s Common Stock outstanding as of February 29, 2008 was 5,906,969. DOCUMENTS INCORPORATED BY REFERENCE Portions of the 2007 Annual Report to Shareholders are incorporated by reference into Part I and Part II, and portions of the 2008 definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held April 17, 2008 are incorporated by reference into Part III. EASTERN VIRGINIA BANKSHARES, INC. FORM 10-K For the Year Ended December 31, 2007 INDEX Part I Item 1. Business 3 Item 1A. Risk Factors 15 Item 1B. Unresolved Staff Comments 20 Item 2. Properties 21 Item 3. Legal Proceedings 21 Item 4. Submission of Matters to a Vote of Security Holders 21 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 Item 6. Selected Financial Data 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 23 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 42 Item 8. Financial Statements and Supplementary Data 44 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 44 Item 9A. Controls and Procedures 45 Item 9B. Other Information 45 Part III Item 10. Directors, Executive Officers and Corporate Governance 45 Item 11. Executive Compensation 46 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 47 Item 13. Certain Relationships and Related Transactions, and Director Independence 47 Item 14. Principal Accounting Fees and Services 47 Part IV Item 15. Exhibits, Financial Statement Schedules 47 Signatures 49 2 PART I Item 1. Business General Eastern Virginia Bankshares, Inc. (“the Company”, “our Company”, “we”, “our” or us”) is a bank holding company headquartered in Tappahannock, Virginia (45 miles northeast of Richmond, Virginia). Through our wholly-owned bank subsidiary, EVB, we operate 23 full service branches in eastern Virginia. EVB is a community bank targeting small to medium-sized businesses and consumers in our traditional coastal plain markets and the emerging suburbs outside of the Richmond and Greater Tidewater areas. We provide a broad range of personal and commercial banking services including commercial, consumer and real estate loans. We complement our lending operations with an array of retail and commercial deposit products and fee-based services. Our services are delivered locally by well-trained and experienced bankers, whom we empower to make decisions at the local level, so they can provide timely lending decisions and respond promptly to customer inquiries. We believe that, by offering our customers personalized service and a breadth of products, we can compete effectively as we expand within our existing markets and into new markets. Until April 2006, we operated as an affiliation of three separate community banks. Two of the banks, Bank of Northumberland, Inc. and Southside Bank, were established in 1910. Seeking to accelerate our growth in a higher growth adjacent market, we started a de novo bank, Hanover Bank, in 2000. At the beginning of 2003, we launched our Standards of Excellence Engagement. The first phase created a risk management department, consolidated human resources and standardized operations to identify best practices and implement uniformity throughout our company. The second phase, completed in 2005, centralized asset/liability management, accounting, and loan and deposit operations. In April 2006, we completed the final phase of the Standards of Excellence Engagement when our three subsidiary banks merged and the surviving bank was rebranded as EVB. In 2007, we began seeing the benefits of the consolidation as noninterest expense was managed effectively and was relatively flat compared to 2006. In addition, at the end of 2006, we relocated our Airpark branch to the newly built Kings Charter branch which positioned us to better serve the business and consumer communities with a larger branch and easier access. Late in 2007, we opened a new branch in New Kent County, Virginia which established the bank in a new market which we feel is in a major growth stage and positions us to grow with the county. In December 2007, we announced plans to purchase two branches from Millennium Bank placing us in two new Virginia markets: Henrico County and Colonial Heights. This transaction is expected to occur in March 2008 and management anticipates adding approximately $80 million in deposits and $40 million in loans. We plan to continue these strategies of building new branches in growing markets and purchasing other locations as the opportunities arise. In 2007, EVB moved away from internal improvements of the company’s infrastructure to growing the bank. The table below demonstrates the growth over the last five years from December 31, 2002 to December 31, 2007. During that time, we have: • increased our total assets from $540.3 million to $926.7 million; • increased our total loans from $399.1 million to $708.8 million; • increased our total deposits from $469.1 million to $671.9 million; and • expanded our branch network from 16 to 23 locations. EVB Financial Services, Inc., a wholly owned subsidiary of EVB, has 100% ownership of EVB Investments, Inc. and a 50% ownership interest in EVB Mortgage, LLC. The mortgage company operates with a partner in generating various real estate loans for sale in the mortgage loan markets, earning interest and fees from these loans prior to sale while retaining no servicing rights after the sale. For a fee, EVB Investments Inc. provides securities, brokerage and investment advisory services through its sales force and its 5.15% ownership in Bankers Investment Group, LLC, which provides them with a brokerage firm through which it sells investment services. 3 The bank also has a 75% ownership interest in EVB Title, LLC and a 2.33% interest in Virginia Bankers Insurance Center, LLC. EVB Title, LLC sells title insurance, while Virginia Bankers Insurance Center, LLC acts as a broker for selling insurance products for its member banks. Through these investments, we are able to augment our fee income by providing financial products and services that are complementary to traditional banking products. These investments give us and our customer’s access to experienced professionals while we avoid making large investments to develop these capabilities internally. Recent Developments In addition to the new branches mentioned earlier, the company is relocating the Village Branch in Mechanicsville to a town landmark, the Windmill, which dominates the entrance to the town in Hanover county. This location positions us right off one of the main thoroughfares in the county giving us both better exposure in the market and an attractive branch for servicing our customers. Available Information We maintain Internet websites at www.bankevb.com for our bank and at www.evb.org for our corporation. Among other items, the bank site offers our customer’s information about our products, locations and is the site to access online banking.

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