Eastern Virginia Bankshares, a holding company for EVB, said Friday that it expects to enter into a written agreement with its regulators, and the bank is suspending its dividend.
The purpose: to help the bank chart a turnaround plan and stop bleeding tens of millions of dollars on bad loans and the subsequent hits to its balance sheet.
EVB President and CEO Joe Shearin said he expects the written agreement to be finalized by the end of February.
Although he wouldn’t discuss the specifics of what will be in the agreement, Shearin said most of it would be related to improving the bank’s asset quality and how best to handle bad loans.
“This is mainly a fact of non-performing assets, a slowdown in the economy and people not being able to pay according to the contract we made when we made the loans,” Shearin said.
The company also announced that it is suspending its quarterly dividend to shareholders, which is a common provision in written agreements.
It also said it is deferring and delaying the payment of its regular quarterly dividend due to the U.S. Treasury Department as part of its participation in the TARP Capital Purchase Program.
EVB received $24 million in TARP capital in 2009 and is not the first local bank that took TARP money to go under written agreement.
Central Virginia Bankshares received $11.3 million in TARP capital, and the parent of Essex Bank received $17.6 million. Both have also deferred their recent TARP payments.
Tappahannock-based EVB will join four local peers under agreement: Bank of Virginia, Virginia Business Bank, Consolidated Bank & Trust and Central Virginia Bank.
And a sixth will soon join them.
Essex Bank and its Glen Allen parent company, Community Bankers Trust Corp., have said they expect to enter a written agreement during the first quarter. (You can read more about that in an RBS story here.)
A seventh, Village Bank, recently entered into a slightly different form of regulatory agreement, known as a memorandum of understanding, with the FDIC. In the memorandum, Village agreed to carry out various practices typical of what’s included in written agreements with the Fed.
EVB has been battered by rising levels of non-performing loans and the need to set aside reserves to cover for them. It reported $39.3 million in non-performing assets at year’s end, an increase of about $12 million compared with 2009.
Shearin said EVB’s loan portfolio has been hit in all segments, as opposed to other local banks that have been hit particularly hard by construction and land development loans.
In its year-end financials released Friday, EVB reported a $12.3 million loss in 2010. The bank reported a loss of a $10.3 million in 2009.
Shearin said the company took an aggressive approach in the fourth quarter to set aside reserves to cover any further bad loans. It had $28 million set aside as provision for loan losses at year’s end.
“Hopefully that will allow us in 2011, if the economy starts to stabilize, to make a profit again, which is what we’re in the business for,” Shearin said.
He said the bank has taken a couple of its loan officers off the street and converted them to work on troubled loans. Written agreements also typically call for the hiring of personnel to specifically handle special assets.
Despite the losses and the pending written agreement, EVB remains well capitalized according to regulatory standards, and Shearin said the bank is still looking to lend as usual.
But good borrowers are hard to find.
“The problem is they aren’t coming forward, and there’s not as many as there were before. A lot are still very pessimistic about what is going on in the economy.”
At the end of 2010, EVB had $1.11 billion in assets, down almost $7 million from the end of 2009. It had $774.7 million in loans, down from $853 million in 2009. Its deposits grew during the year, reaching $868.1 million, up from $856.64 million in 2009.
EVB has 24 branches across the Richmond region, the Middle Peninsula, Northern Neck and Western Tidewater. It controls about $350 million in local deposits, or about 0.61 percent of all deposits in the Richmond market, according to the most recent FDIC statistics.
Michael Schwartz covers banks for BizSense. Please send news tips to [email protected]