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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2005

OR

For the transition period from              to             

Commission File No. 000-23565

EASTERN VIRGINIA BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

(Registrant’s telephone number, including area code) (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 Exchange Act).    Yes  x    No  ¨

The number of shares of the registrant’s Common Stock outstanding as of May 2, 2005 was 4,885,951.

EASTERN VIRGINIA BANKSHARES, INC.

FORM 10-Q

For the Quarter Ended March 31, 2005

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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.

2

EASTERN VIRGINIA BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(dollars in thousands except per share amounts)

See Notes to Consolidated Financial Statements.

3

Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)

(Dollars in thousands)

See Notes to Consolidated Financial Statements.

4

EASTERN VIRGINIA BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5

At March 31, 2005 and December 31, 2004, investments in an unrealized loss position that are temporarily impaired were:

The unrealized loss positions at March 31, 2005 were primarily related to interest rate movements as there is minimal credit risk exposure in these investments. The Company believes that the only securities with market values impacted by credit risk are $2.91 million fair value of GMAC and $502 thousand fair market value of Ford Motor Credit. Based on financial review, management believes that the risk of default on these auto industry finance company holdings with a current market depreciation of $656 thousand is remote and monitors these investments on a continuing basis. All securities are investment grade or better. Bonds with unrealized loss positions at March 31, 2005 included 31 U. S. Treasury and federal agencies, 36 mortgage-backed securities, four collateralized mortgage obligations (CMO), three federal agency preferred stocks, 15 corporate bonds and 24 municipal bonds. Three federal agencies, three mortgage-backed securities, one CMO, two federal agency preferred stocks and seven municipal bonds have been in an unrealized loss position for 12 months or more. Management has both the intent and the ability to hold these securities until maturity.

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EVB had $4.8 million in non-performing loans at March 31, 2005.

Following is a summary pertaining to impaired loans:

No additional funds are committed to be advanced in connection with impaired loans. Nonaccrual loans excluded from impaired loan disclosure under FASB 114 amounted to $733 thousand and $850 thousand at March 31, 2005 and December 31, 2004, respectively.

As of March 31, 2005 and 2004, respectively, options to acquire 30,150 shares and 30,900 shares of common stock were not included in computing earnings per common share assuming dilution, because their effects are anti-dilutive.

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The Company made its required 2005 fiscal year contribution to the pension plan in December 2004 in the amount of $909 thousand. The Company anticipates that it will likely make its 2006 contribution in December 2005. The pension plan has a fiscal year ending September 30, providing the Company flexibility as to the calendar year in which it makes pension plan contributions.

In March 2005, the SEC issued Staff Accounting Bulleting No. 107 (SAB 107). SAB 107 expresses the views of the SEC staff regarding the interaction of FAS 123R and certain SEC rules and regulations and provides the SEC staff’s view regarding the valuation of share-based payment arrangements for public companies. SAB 107 does not impact the Corporation’s results of operations at the present time.

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. (the “Company” or “EVB”). 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.

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Critical Accounting Policies

General

The Company’s financial statements are prepared in accordance with accounting principles generally accepted 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. For example, 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) Statement of Financial Accounting Standards (SFAS) Number 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.

The Company evaluates loans individually for impairment, including loans on nonaccrual, loans past due 90 days or more, restructured loans and other loans selected by management as required by SFAS No. 114. The evaluations are based upon discounted expected cash flows or collateral valuations. If the evaluation shows that a loan is individually impaired, then a specific reserve is established for the amount of the impairment. If a loan evaluated individually is not impaired, then the loan is assessed for impairment under SFAS No. 5.

For loans without individual measures of impairment, the Company makes estimates of losses for groups of loans as required by SFAS No. 5. Loans are grouped by similar characteristics, including the type of loan, the assigned loan grade and general collateral type. A loss rate reflecting the expected loss inherent in a group of loans is derived based upon historical loss rates for each loan type, the predominant collateral type for the group and the terms of the loan. The resulting estimate of losses for groups of loans are adjusted for relevant environmental factors and other conditions of the portfolio of loans including: borrower or industry concentrations; levels and trends in delinquencies, charge-offs and recoveries; changes in risk selection; level of experience, ability and depth of lending staff; and national and economic conditions.

The amounts of estimated losses for loans individually evaluated for impairment and groups of loans are added together for a total estimate of loan losses. The estimate of losses is compared to the allowance for loan losses of the Company as of the evaluation date and, if the estimate of losses is greater that the allowance, an additional provision to the allowance would be made. If the estimate of losses is less than the allowance, the degree to which the allowance exceeds the estimate is evaluated to determine whether a reduction to the allowance would be necessary. While management uses the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the valuations. Such adjustments would be made in the relevant period and may be material to the Consolidated Financial Statements.

OVERVIEW AND FINANCIAL CONDITION

Net income decreased 12.6% to $1.7 million for the first quarter of 2005, compared to $1.9 million for the same period in 2004. Diluted earnings per share decreased 12.8% to $0.34 for the first quarter of 2005, compared to $0.39 for the first quarter of 2004. Net interest income increased $26 thousand for the quarter ended March 31, 2005 when compared to the same period in 2004. Noninterest income was up $56 thousand, or 5.2%, for the quarter when compared to the same period in 2004. Income increases were less than the noninterest expense increase of $781 thousand for the quarter.

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Total assets on March 31, 2005 were $697.4 million, up $16.1 million, or 2.4%, from $681.3 million at March 31, 2004 and up $1.1 million, or 0.2%, from $696.3 million at December 31, 2004. For the quarter, total assets averaged $692.8 million, 2.3% above the first quarter 2004 average of $677.3 million. Total loans, net of unearned income, amounted to $521.1 million at March 31, 2005, an increase of $33.3 million, or 6.8%, from $487.8 million at March 31, 2004, and up $8.6 million, or 1.7%, from $512.6 million at December 31, 2004. Net loans as a percent of total assets were 73.8% at March 31, 2005, as compared to 70.6% at March 31, 2004 and 72.6% at 2004 year end. Net loan volume for the first three months of 2005 was $8.8 million, compared to $920 thousand for the first three months of 2004.

At March 31, 2005, the securities portfolio totaled $121.8 million, down $25.7 million, or 17.4%, from $147.5 million at March 31, 2004 and down $11.9 million, or 8.9%, from $133.7 million at December 31, 2004. Most of the funds that are invested in the securities portfolio are part of the effort to balance interest rate risk and to provide liquidity. Federal funds sold at March 31, 2005 were $2.9 million, compared to $1.9 million in federal funds purchased at March 31, 2004 and $8.3 million net federal funds purchased at December 31, 2004.

Total deposits of $592.7 million at March 31, 2005 represented an increase of $10.7 million, or 1.8%, from $582.0 million one year ago and an increase of $2.8 million, or 0.5%, from $589.9 million at December 31, 2004. EVB offers attractive, yet competitive, rates to maintain a strong stable deposit base. Noninterest-bearing demand deposits are up $7.6 million or 9.5% and interest-bearing deposits are up $3.1 million or 0.6%, compared to March 31, 2004.

Financial Accounting Standards Board Pronouncement Number 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 (loss), net” in the Shareholders’ Equity section of the Consolidated Balance Sheet and was ($887 thousand) at March 31, 2005, decreases of $3.6 million from March 31, 2004 and $1.5 million from December 31, 2004. The unrealized gain or (loss) on securities is as of one specific point in time and fluctuates significantly depending on interest rate changes. This decrease in the equity effect of the change in the value of securities results primarily from declining market values caused by increases in market interest rates compared to one year and three months ago.

RESULTS OF OPERATIONS

Net income for the quarter ended March 31, 2005 was $1.7 million, a decrease of $241 thousand from first quarter 2004 earnings of $1.9 million. The primary factor in the earnings decrease was an increase of 14.6% in noninterest expense while average earning assets were increasing only 3.0%.

Net interest income increased $26 thousand for the quarter ended March 31, 2005, compared to the same period in 2004. Noninterest income excluding gains on securities sales was up $12 thousand compared to the same quarter in 2004. Gain on sale or call of securities was up $44 thousand for the quarter. Loan loss provision decreased $332 thousand for the quarter to $8 thousand as several loans with specific impairment reserves were paid in full. Noninterest expense increased $781 thousand for the quarter compared to the comparable period in 2004, including $150 thousand for consulting fees related to a Phase II Standards of Excellence Engagement. This re-engineering project to consolidate loan operations and deposit operations is on schedule for completion by the end of the second quarter and is projected to provide major improvements in the delivery of service quality, while improving overall efficiencies within our entire Company Also included in the noninterest expense increase is $88 thousand of direct expense related to the Central Garage branch that opened in December 2004.

Yield on earning assets was 6.48% for the quarter as compared to 6.52% for the same period in 2004. The cost of interest bearing liabilities was 2.10% as compared to 1.97% for the comparable period in 2004. Return on average assets was 0.98% compared to 1.14% for the first three months of 2004. EVB’s return on average equity was 11.24% compared to 13.42% for the quarter ended March 31, 2004.

Net Interest Income

Net interest income totaled $7.3 million for the quarter, a $26 thousand increase over the Company’s performance for the first quarter of 2004. Average earning assets increased 3.0% to $642.5 million for the quarter from $623.9 million for the first quarter of 2004. Compared to the same period in 2004, average loans increased 5.7%, average securities decreased 6.3% and average federal funds sold decreased 22.5%. The fully tax equivalent net interest margin for the three-month period ended March 31, 2005 was 4.70%, compared to 4.82% for the comparable period in the prior year.

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The decrease in net interest margin resulted from a four basis point decrease in the yield on average earning assets while the cost of interest-bearing funds increased 13 basis points. While the net interest margin decreased 12 basis points compared to the first quarter of 2004, it was above the net interest margin for the final three quarters of 2004. A table that discloses the fully tax equivalent net interest income calculations for the quarter ended March 31, 2005 and 2004 follows on the next page.

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Average Balance, Income and Expense, Yields and Rates (1)