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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Commission File No. 000-23565

EASTERN VIRGINIA BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

217 Duke Street, Tappahannock, Virginia 22560

(Address of principal executive offices)

Registrant’s telephone number (804) 443-8423

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes  x  No  ¨

The number of shares of the registrant’s Common Stock outstanding as of April 30, 2003 was 4,851,057.

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EASTERN VIRGINIA BANKSHARES, INC.

FORM 10-Q

For the Quarter Ended March 31, 2003

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands)

See Notes to Consolidated Financial Statements

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income (Unaudited)

(Dollars in thousands except share amounts)

See Notes to Consolidated Financial Statements

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)

(Dollars in thousands)

See Notes to Consolidated Financial Statements

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PART 1 - FINANCIAL INFORMATION

ITEM 1. Financial Statements

EASTERN VIRGINIA BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands)

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Note 7. EVB’s loan portfolio is composed of the following:

EVB has $3.9 million in non-performing loans at March 31, 2003.

Note 8. Allowance for Loan Losses

Note 9. Earnings Per Share

The following table shows the weighted average number of shares used in computing earnings per share and the effect on the weighted average number of shares of diluted potential common stock. Potential dilutive common stock had no effect on earnings per share otherwise available to shareholders

Note 10. Accounting Rule Changes

There were no new Financial Accounting Standards Board promulgations in the first quarter of 2003 that will impact Eastern Virginia Bankshares, Inc.

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PART 1 - FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial information is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Eastern Virginia Bankshares, Inc. This discussion provides information about the major components of the results of operations, financial condition, liquidity and capital resources of the Company. This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements presented elsewhere in this report. Operating results include Southside Bank, Bank of Northumberland, Inc., Hanover Bank and subsidiaries of the banks combined for all periods presented.

Forward-Looking Statements

Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Such forward-looking statements involve known and unknown risks including, but not limited to, changes in general economic and business conditions, interest rate fluctuations, competition within and from outside the banking industry, new products and services in the banking industry, risk inherent in making loans such as repayment risks and fluctuating collateral values, problems with technology utilized by the Company, changing trends in customer profiles and changes in laws and regulations applicable to the Company. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Critical Accounting Policies

General

The Company’s financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). The financial information contained within our statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. We use historical loss factors as one factor in determining the inherent loss that may be present in our loan portfolio. Actual losses could differ substantially from the historical factors that we use. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.

Allowance for Loan Losses

The allowance for loan losses is an estimate of the losses that may be sustained in our loan portfolio. The allowance is based on two basic principles of accounting: (i) SFAS 5, Accounting for Contingencies, which requires that losses be accrued when they are probable of occurring and estimable and (ii) SFAS 114, Accounting by Creditors for Impairment of a Loan, which requires that losses be accrued based on the differences between the value of the collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.

Our allowance for loan losses has two basic components: the formula allowance and the specific allowance. Each of these components is determined based upon estimates that can and do change when the actual events occur. The formula allowance uses historical loss as an indicator of future losses and, as a result, could differ from the loss incurred in the future. However, since the history is updated with the most recent loss information, the errors that might otherwise occur are mitigated. The formula allowance is revised as deemed appropriate to capture losses that are attributable to economic events and industry or geographic sectors whose impact on the portfolio have occurred but have yet to be recognized in the specific allowance. The specific allowance uses various techniques to arrive at an estimate of loss. Historical loss information, current level of nonaccrual loans, current level of unsecured loans past due 30 to 89 days and the fair market value of collateral are used to estimate these losses. The use of these values is inherently subjective and our actual losses could be greater or less than the estimates.

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OVERVIEW AND FINANCIAL CONDITION

Eastern Virginia Bankshares (EVB) reported record first quarter net income and earnings per share for 2003, primarily based on the benefits of strategic initiatives beginning in the year 2000 and an improvement in credit quality. Hanover Bank which began operations in 2000 and opened two new branches in 2001 had an improvement of $225 thousand in its net income, compared to first quarter 2002. Net interest income improved $825 thousand compared to the first quarter of 2002 as the Company continued to benefit from a low and stable interest rate environment. Loan loss provision expense decreased $128 thousand as nonperforming loans decreased by 30% from March 31, 2002. These improvements were partially offset by an increase of $901 thousand in noninterest expense, including an increase of $209 thousand in consultant fees as the Company moved forward with the re-engineering process discussed in the 2002 Annual Report.

Total assets on March 31, 2003 were $546.5 million, up $62.6 million or 12.9% from $483.9 million at March 31, 2002. For the first three months of 2003, total assets averaged $539.5 million, 15.1% above the first three months of 2002 average of $468.6 million. Total loans, net of unearned income, amounted to $406.4 million at March 31, 2003, an increase of $39.6 million or 10.8 % from $ 366.8.0 million at March 31, 2002. At March 31, 2003, total loans, net of unearned income and allowance for loan losses, were $400.5 million. Net loans as a percent of total assets were 73.3% at March 31, 2003, as compared to 74.7% at March 31, 2002. Net loan volume for the first three months of 2003 was $7.1 million as compared to $18.5 million for the first three months of 2002. Decreased loan growth in 2003 versus 2002 is related primarily to a slow economy and the efforts of several senior lenders being partially directed to the re-engineering effort in 2003.

On March 31, 2003, the securities portfolio totaled $104.8 million, which was up $17.9 million or 20.6 %, compared to March 31, 2002. Funds that are invested in the securities portfolio are part of the effort to balance the interest rate risk and to provide liquidity. Federal funds sold were $10.1 million on March 31, 2003, compared to $9.1 million one year ago.

Financial Accounting Standards Board Pronouncement #115 requires the Company to show the effect of market changes in the value of securities available for sale. The effect of the change in market value of securities, net of income taxes, is reflected in a line titled Accumulated other comprehensive income in the Shareholders’ Equity section of the Balance Sheet and was $2.5 million at March 31, 2003, an increase of $1.6 million from March 31, 2002. This increase in the equity effect of the change in the value of securities results primarily from appreciation caused by a decrease in market interest rates compared to one year ago.

Total deposits of $472.5 million at quarter end represented an increase of $51.9 million or 12.3 % from $420.6 million one year ago. EVB offers attractive, yet competitive rates, to maintain a strong stable deposit base. All categories of deposits experienced growth during the past year with noninterest-bearing demand deposits up 13.6% and interest-bearing deposits up 12.2%. The quarter reflected a decrease in noninterest-bearing demand accounts that was more than offset by an increase in savings, money market and certificates of deposit.

RESULTS OF OPERATIONS

Eastern Virginia Bankshares, Inc. reported increased earnings for the first quarter of 2003. Net income for the quarter was $1.7 million, an increase of $98 thousand from first quarter 2002 earnings of $1.6 million. Net income for the first quarter was impacted by an increased net interest margin compared to first quarter 2002. Noninterest expense increased $901 thousand compared to the first quarter of 2002 as the Company added infrastructure and experienced increased consultant fees of $209 thousand related to work on its re-engineering plan. Yield on earning assets was 7.08% for the quarter, as compared to 7.73% for the same period in 2002. The cost of interest bearing liabilities for the three month period ended March 31, 2003 was 2.53% as compared to 3.37% for the comparable period in 2002. Return on average assets was 1.29% for the quarter, compared with 1.39% for the same period in 2002. EVB’s return on average equity was 13.20% for the quarter, compared to 13.70% for the same period in the prior year.

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Net Interest Income

Net interest income totaled $6.1 million for the quarter, an $825 thousand increase over the Company’s performance for the first quarter of 2002. The increase in net interest income results primarily from an increase in average earning assets and an increase in net interest margin on a taxable equivalent basis. Average earning assets increased 14.6% to $514.9 million from $449.2 million for the first three months of 2002. Compared to the same period in 2002, average loans increased 13.3%, average securities increased 16.9% and average federal funds sold increased 104.7%. The net interest margin for the three month period ended March 31, 2003 was 4.96%, compared to 4.93% for the comparable period in the prior year. The increase in net interest margin results from a 65 basis point decrease in yield on average earning assets which was more than offset by an 84 basis point decrease in the cost of interest bearing funds. With an asset/liability mix that was positioned at year end for stable interest rates, the net interest margin has expanded each month of the first quarter as certificates of deposit issued in the higher interest rate environment of prior years are maturing and being renewed at much lower market rates.

Noninterest Income

Noninterest income was $862 thousand for the quarter, a 19.1% increase from the first quarter 2002 noninterest income of $724 thousand. Realized gains on sale of available for sale securities increased $73 thousand to $75 thousand and provided the largest source of noninterest income increase. Service charges on deposit accounts of $526 thousand reflected a 6.5% increase from $494 thousand in the quarter ended March 31, 2002, primarily the result of an increased volume of deposit accounts. Non deposit investment service fees were up $44 thousand or 86.3% while other operating income decreased 6.2% to $166 thousand, compared to $177 thousand in the three months ended March 31, 2002.

Noninterest Expense

Total noninterest expense increased $901 thousand or 26.8% from $3.37 million for the first quarter of 2002 to $4.27 million in 2003. The increase in noninterest expense is the result of overall growth of the Company including expenses related to re-engineering efforts discussed earlier in this report. Salary and benefits expense increased $529 thousand or 27.3% to $2.46 million from $1.94 million in the first quarter of 2002. Material factors in this increase include $97 thousand in benefits as both medical insurance and pension costs went up, $48 thousand in the investment subsidiary, $105 thousand for the new Gloucester Point office opened during the first quarter of 2003, $100 thousand in normal salary increases and approximately $200 thousand related to growth and infrastructure development to re-engineer the Company.

Net occupancy and equipment expense increased $121 thousand or 29.4 % compared to the same quarter in 2002 to $533 thousand. The largest contributors to the occupancy expense increase are the new Gloucester Point branch office and depreciation in the Operations Center on a new mainframe computer installed in the fourth quarter of 2002.

All other noninterest expense increased $251 thousand or 24.6% to $1.27 million for the first quarter of 2003 from $1.02 million for the same period in 2002. The largest contributor to the other noninterest expense increase was consultant fees which increased $209 thousand to $235 thousand compared to $26 thousand in the first quarter of 2002. Consultant fee expense is largely related to the company-wide re-engineering project which is expected to continue through the second quarter of 2003.

Income Taxes

Income tax expense for the first quarter of 2003 was $664 thousand, compared to $572 thousand for the same period in 2002. Income taxes reflect an effective tax rate of 28.0% in the first quarter of 2003 as compared to 26.2% for the first three months of 2002 and 27.7% for the full year 2002.

ASSET QUALITY

The Company’s allowance for loan losses is an estimate of the amount needed to provide for potential losses in the loan portfolio. In determining the adequacy of the allowance, management considers the Company’s historical loss experience, the size and composition of the loan portfolio, specific impaired loans, the overall level of nonperforming loans, the value and adequacy of collateral and guarantors, and economic conditions. Total nonperforming assets, which consist of nonaccrual loans and foreclosed properties were $3.92 million at March 31, 2003, compared to $5.55 million at March 31, 2002, reflecting a $1.63 million or 29.4% improvement. Nonperforming assets are up $498 thousand from $3.4 million at 2002 year end. EVB’s reporting of nonperforming loans is somewhat more conservative than its peers as

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it reports all loans that have been over 90 days delinquent and have not been brought completely current as nonperforming, without regard to how well secured the loan may be or how remote the risk of loss. Nonperforming assets are composed largely (66.4%) of loans secured by real estate in the Company’s market area. Based on estimated fair values of the related real estate, management considers these amounts recoverable, with any individual deficiency well covered by the allowance for loan losses. Total loan charge-offs, less recoveries, amounted to $75 thousand for the quarter, representing an annualized ratio of net charge-offs to total average loans, net of unearned income, of 0.08%. This compares to first quarter 2002 net charge-offs of $98 thousand or an annualized ratio of net charge-offs of 0.11% and 2002 full year charge-offs of $1.0 million or 0.26% of average loans.

The allowance for loan losses increased to $5.97 million at March 31, 2003, as compared to $5.75 million at December 31, 2002. The allowance increased $222 thousand in the first three months of 2003 as compared to $327 thousand for the first three months of 2002. The increase in the allowance for loan losses during both periods was the result of increased lending activity in the loan portfolio and management’s review of the level of nonperforming loans. The ratio of allowance for loan losses to total loans was 1.47 % at March 31, 2003, compared to 1.44% at year end and 1.51% at March 31, 2002.

Also included in nonperforming loans are loans considered impaired on which management is concerned about the ability of the customer to repay the loan and related interest at the original contractual terms. At March 31, 2003, the Company reported $762 thousand of impaired loans. The average balance of impaired loans for the first three months of 2003 was $628 thousand.

EVB closely monitors those loans that are deemed to be potential problem loans. Loans are viewed as potential problem loans according to the ability of such borrowers to comply with current repayment terms. These loans are subject to constant management attention, and their status is reviewed on a regular basis. The potential problem loans identified at March 31, 2003 are generally secured by residential and commercial real estate with appraised values that exceed the principal balance. At March 31, 2003, potential problem loans, most of which are included in the nonperforming asset figures above, were approximately $850 thousand with no lending relationships with principal balances in excess of $100,000.

LIQUIDITY

Liquidity represents the Company’s ability to meet present and future deposit withdrawals, to fund loans, to maintain reserve requirements and to operate the organization. To meet its liquidity needs, EVB maintains cash reserves, primarily as federal funds sold and has an adequate flow of funds from maturing loans, securities and short-term investments. In addition, EVB’s subsidiary banks maintain borrowing arrangements with major regional banks, the Federal Reserve Bank and with the Federal Home Loan Bank. Management considers its sources of liquidity to be ample to meet its estimated liquidity needs.

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CAPITAL RESOURCES

EVB’s strong capital position provides the resources and flexibility to support asset growth, absorb potential losses and to expand the Company’s franchise when appropriate. The Company’s risk-based capital position at March 31, 2003 was $50.68 million, or 13.76% of risk-weighted assets for Tier 1 capital and $55.30 million, or 15.02% for total risk based capital.

Tier 1 capital consists primarily of common shareholders’ equity, while total risk based capital adds a portion of the allowance for loan losses to Tier 1. Risk weighted assets are determined by assigning various levels of risk to different categories of assets and off-balance sheet activities. Under current risk based capital standards, all banks are required to have Tier 1 Capital of at least 4% and total capital of 8%.

Inflation

In financial institutions, unlike most other industries, virtually all of the assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on a bank’s performance than the effects of general levels of inflation. While interest rates are significantly impacted by inflation, neither the timing nor the magnitude of the changes are directly related to price level movements. The impact of inflation on interest rates, loan demand, and deposits are reflected in the consolidated financial statements.

PART I - FINANCIAL INFORMATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk since 2002 year end.

Item 4. Controls and Procedures

Within 90 days prior to the date of this report, the Company’s Chief Executive Officer and Chief Financial Officer completed an evaluation of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer believe that the disclosure controls and procedures are effective with respect to timely communicating to them all material information required to be disclosed in this report as it relates to the Company and its subsidiaries.

FORM 10-Q PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There are no material legal proceedings to which the registrant or any of its subsidiaries, directors or officers is a party or by which they, or any of them, are threatened. The only litigation in which EVB and its subsidiaries are involved are collection suits involving delinquent loan accounts in the normal course of business.

Item 2. Changes in Securities (not applicable)

Item 3. Defaults Upon Senior Securities (not applicable)

Item 4. Submission of Matters to a Vote of Security Holders (not applicable)

Item 5. Other Information (not applicable)

Item 6. Exhibits and Reports on Form 8-K

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EASTERN VIRGINIA BANKSHARES, INC.

Date: April 30, 2003

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SECTION 302 CERTIFICATION

I, Joe A. Shearin, President and Chief Executive Officer of the Company, certify that:

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SECTION 302 CERTIFICATION

I, Ronald L. Blevins, Sr. Vice President and Chief Financial Officer of the Company, certify that:

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