“After a process of evaluating our credit portfolio in this difficult economic environment, and in light of recent evidence that suggests that economic growth may remain weak for an extended period, EVBS announces that it has significantly increased its provision for loan losses,” said president and chief executive office Joe A. Shearin. “While this action has an immediate recognition of a loss for the quarter and the results of operations year to date, it is necessary as we aggressively identify and resolve our problem loans,” he said.

For the three months ended June 30, EVBS reported a net operating loss of $6 million, an increase of $4.2 million over the net operating loss for the same period of 2009. The net loss to common shareholders increased to $6.3 million, or $1.06 per common share, assuming dilution, compared to a net loss of $2.1 million or $0.36 per common share in 2009.

For the first six months of 2010, the net operating loss was $4.6 million, an increase of $3.6 million over the net operating loss of $1 million reported for the same period of 2009. The net loss to common shareholders increased to $5.4 million, or $0.90 per common share, assuming dilution, compared to a net loss of $1.8 million in 2009 or $0.30 per common share.

Continued economic weaknesses necessitated a significant increase in or provision for loan losses and was the primary driver of financial results for the quarter. For the three and six months ended June 30, the provision for loan losses was $12.5 million and $14.5 million, respectively, as compared to $750,000 and $1.7 million for the same periods of 2009. The difference between net operating loss and net loss to common shareholders is the deduction for the effective dividend to the U.S. Treasury on preferred stock.

“The economic environment remains very weak and continues to negatively impact our loan portfolio. We continue to see declining real estate values and increased stress on our customers’ ability to pay their loans as agreed, due to historically high unemployment levels. We remain very diligent and focused on the day-to-day management of the credit quality of our loan portfolio and believe that our decision to take this action to increase our reserve for loan losses is in the best interest of our company. We are fully committed to quickly and aggressively addressing our problem loans,” Shearin said.

On a more positive note, net interest income for the three months ended June 30 was $8.9 million, an increase of $786,000 of 9.2 percent over the same quarter of last year. This increase was primarily due to an increase in the net interest margin from 3.3 percent in the second quarter of 2009 to 3.65 percent for the second quarter of 2010. Net interest income for the six months ended June 30, 2010 was $18 million, an increase of $2.2 million or 14 percent the same period of last year.

Noninterest income for the three months ended June 30 was $3.1 million, an increase of $5.4 million over the noninterest loss of $2.3 million reported for the same period of 2009. For the second quarter of 2010, noninterest income includes $1.5 million in gains on the sale of investment securities and $78,000 in charge-offs on investment securities, while during the second quarter of 2009, noninterest loss included $29,000 in gains on the sale of investment securities and $3.9 million in impairment losses on investment securities. For the six months ended June 30, 2010, noninterest income was $5.2 million, compared to a noninterest loss of $712,000 for the same period of 2009, Shearin reported.

For the three months ended June 30, the provision for loan losses were $12.6 million, an increase of $11.9 million over the $750,000 reported for the same period of 2009. Total net charge-offs for the second quarter of 2010 were $6 million compared to $405,000 for the same period a year earlier. For the six months ended June 30, the provision for loans losses were $14.5 million, an increase of $12.8 million over the $1.7 million reported for the same period in 2009. Total net charge-offs for the year to June 30 were $6.6 million compared to $705,000 for the first six months of 2009. As of June 30, 2010, the allowance for loan losses represented 2.37 percent of total loans, up from 1.57 percent at March 31, 2010, and 1.38 percent at June 30, 2009. As of June 30, 2010, this allowance covers 86.7 percent of nonaccrual loans and 54.6 percent of nonperforming loans, Shearing said.