Taking
Stock
Banking on the Bay
In "Castles on the Bay", free-lancer
Estelle Jackson writes that Virginians seeking vacation and retirement homes are
rediscovering the Platinum Coast, the commonwealth's Chesapeake Bay region. Investors seem
to be discovering something there, as well — Eastern Virginia Bankshares (Nasdaq,
EVBS: $21) in Tappahannock.
Eastern Virginia, established in 1997, is a bank holding company for  Southside Bank and Bank of Northumberland, which
have 12 retail branches in the Northern Neck and Middle Peninsula. With a market
capitalization of $104 million, Eastern Virginia may be a small fish in the banking world,
but it's getting attention from big boys.
The bank serves its local market with the usual suspects: checking accounts, savings
accounts, money market accounts and certificates of deposit. Notably, however, residential
mortgages represent more than half of its loan portfolio. That's no surprise in an area
with a booming residential real estate market. Bank consolidations have put customers in
play — good news for a small, growing bank. What's more, low interest rates and a
booming stock market have made second homes more appealing."We feel like we must
be doing some things right," says CFO Ned Stephenson. Its return on assets for 1998
— its first full year of operation — was 1.67 percent, and its return on equity
stood at 13.71 percent.
This year's numbers are equally impressive. The bank recorded net income of $1.47
million for the quarter that ended Sept. 30, an increase of 10.8 percent over the same
period in 1998. The annualized ROE was 14 percent. "I think that ultimately the
marketplace recognizes those achievements," Steph-enson says.
The July 1999 issue of U.S. Banker ranked the bank among 200 top-performing, publicly
traded community banks. The bank was ranked 27th nationwide, and was the top-rated
community bank in Virginia. E*Trade recently listed the bank among its hottest stocks.
The stock traded below $18 until late September and now stands at $21. Why? "Just
good fundamentals, and good old-fashioned making money," Stephenson says. In the past
few months in particular, he says, market makers and institutional buyers have been
picking up shares. "We've gotten on their radar. ... Those people [buy based] on the
numbers."
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