Eastern Virginia Bankshares,
Inc. EVBS (the "Company"), the holding company for EVB (the "Bank"),
announced today the prepayment of $107.5 million of long-term Federal Home
Loan Bank ("FHLB") advances, successfully completing one of the Company's
previously disclosed strategic initiatives. This transaction immediately
improves the Company's financial position by increasing the Company's net
interest margin and is a significant step towards optimizing the Company's
balance sheet. The borrowings extinguished were fixed rate advances with a
weighted average remaining maturity of 3.5 years and a current weighted
average interest rate of 4.14%; $94.0 million of the prepaid FHLB advances
were callable quarterly by the FHLB. The repayment of the FHLB advances
triggered a prepayment penalty of $11.5 million, or $0.67 per fully diluted
share, all of which will be recognized in the third quarter of 2013 and which
the Company expects to be offset in future periods by a higher net interest
margin. The remaining $10.0 million of long-term FHLB advances will be paid
off at maturity in September 2013.
Joe A. Shearin, President and Chief Executive Officer commented, "We continue
to evaluate and implement strategies to strengthen our financial condition and
increase profitability going forward. In this low interest rate environment,
these high cost long-term borrowings have created a sizeable amount of
negative pressure on our balance sheet. Prepayment of these advances has
allowed us to utilize excess liquidity, modestly shrink the balance sheet,
improve our net interest margin and reduce our reliance on non-core funding
while maintaining a prudent interest rate risk profile."
Results of the Transaction
The Company expects the prepayment of these long-term FHLB advances to:
o Eliminate an estimated $4.5 million in annualized interest cost going
forward, reducing the Company's overall future cost of funds.
o Improve the Company's annualized net interest margin by approximately 65
basis points.
o Reduce the Company's cash on hand and short-term investments, which earn
only modest returns in the current interest rate environment.
o Better position the Company to compete in the current interest rate
environment while maintaining a flexible liquidity position for future
opportunities.
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