UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
BAY BANKS OF VIRGINIA, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER)
VIRGINIA 54-1838100
(STATE OF INCORPORATION) (IRS EMP. ID NO.)
100 S. MAIN STREET, KILMARNOCK, VA 22482
(ADDRESS OF PRINCIPAL OFFICE)
(804)435-1171
(ISSUER'S TELEPHONE NO.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 __X___yes
_____no
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the Latest practicable date: 1,168,633 shares of common
stock at March 31, 1999.
Transitional Small Business Disclosure Format ____yes __X__no
<PAGE>
BAY BANKS OF VIRGINIA, INC.
FORM 10-QSB
For the interim period ending March 31, 1999.
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS (UNAUDITED) 1-3
CONSOLIDATED BALANCE SHEETS
MARCH 1999 AND DECEMBER 1998 1
CONSOLIDATED STATEMENT OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 2
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR TO DATE MARCH 1999 AND 1998 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION 4-7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 8
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 8
ITEM 5. OTHER INFORMATION 8
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K 8
SIGNATURES 9
<PAGE>
BAY BANKS OF VIRGINIA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH DECEMBER
BALANCE SHEET CATEGORIES 1999 1998
ASSETS:
CASH DUE FROM BANKS 7,436,952 5,268,229
U. S. TREASURY SECURITIES 2,542,815 4,566,875
U. S. GOVERNMENT SECURITIES 15,177,896 17,198,694
STATE AND MUNICIPAL SECURITIES 26,249,124 25,354,483
OTHER SECURITIES 17,041,045 11,831,332
FED FUNDS SOLD 5,220,000 12,007,706
TOTAL LOANS,NET UNEARNED 116,244,188 114,988,545
LESS: LOAN LOSS RESERVE (1,041,367) (1,011,935)
NET LOANS 114,709,718 113,976,610
NET PREM., FURN., FIXT. 4,629,676 4,699,797
ACCRUED INTEREST RECEIVABLE 1,452,137 1,537,745
OTHER REAL ESTATE OWNED 1,031,338 1,179,556
OTHER ASSETS 3,351,395 2,582,685
TOTAL ASSETS 199,335,199 200,203,712
LIABILITIES
DEMAND DEPOSITS 19,278,927 19,851,650
SAVINGS AND NOW 107,103,524 105,347,377
CERTIFICATES OF DEPOSIT 51,452,534 53,656,050
TOTAL DEPOSITS 176,378,036 178,855,077
FED FUNDS PURCHASED - -
OTHER LIABILITIES 1,006,430 840,495
TOTAL LIABILITIES 177,834,985 179,695,572
SHAREHOLDERS EQUITY:
COMMON STOCK
AUTHORIZED-5,000,000 SHARES
OUTSTANDING-1,168,633 AND 1,164,728 5,843,165 5,823,640
PAID IN CAPITAL 3,605,195 3,529,924
RETAINED EARNINGS 10,843,929 10,528,706
MKT.ADJ.-SEC.-UNREALIZED 201,495 626,500
TOTAL SHAREHOLDERS EQUITY 20,493,784 20,508,140
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY 199,335,199 200,203,712
<PAGE>
BAY BANKS OF VIRGINIA, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
QUARTER END QUARTER END
MARCH 31, 1999 MARCH 1998
INTEREST INCOME
INTEREST AND FEES ON LOANS 2436585 2352341
INTEREST ON US TREASURY SECURITIES 54619 115113
INTEREST ON US GOVERNMENT SECURITIES 282717 211286
INTEREST ON MUNICIPAL SECURITIES 328507 258691
INTEREST ON OTHER SECURITIES 199891 115561
INTEREST ON FED FUNDS SOLD 107605 244564
TOTAL INTEREST INCOME 3409924 3297556
INTEREST EXPENSE
INTEREST ON INT. BEARING TRANSACTION 255982 227277
INTEREST ON SAVINGS DEPOSITS 707925 777111
INTEREST ON CERTIFICATES 656284 732712
INTEREST ON FED FUNDS PURCHASED 0 0
TOTAL INTEREST EXPENSE 1620191 1737100
NET INTEREST INCOME 1789733 1560456
PROVISION FOR LOAN LOSSES 70000 45000
NET INTEREST INCOME AFTER PROV. 1719733 1515456
NON-INTEREST INCOME
VISA INCOME 43524 38754
DEPOSIT FEES 82760 64535
TRUST DEPARTMENT FEES 122334 120670
OTHER FEES 58140 66950
SECURITIES GAINS AND LOSSES 0 0
TOTAL NON-INTEREST INCOME 306758 290909
NON-INTEREST EXPENSE
SALARIES AND BENEFITS 710524 632285
OCCUPANCY 69829 58103
FURNITURE AND EQUIPMENT 137815 175543
OTHER OPERATING 440455 498671
TOTAL NON-INTEREST EXPENSE 1358623 1364602
INCOME BEFORE TAXES 667868 441763
INCOME TAXES 164000 80000
NET INCOME 503868 361763
EARNINGS PER SHARE 0.43 0.32
<PAGE>
BANKS OF VIRGINIA, INC.
CONDENSED STATEMENT OF CASHFLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES MARCH 1999 MARCH 1998
<S> <C> <C>
NET INCOME 503,868 361,763
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION 137,815 121,128
PROVISION FOR LOAN LOSS 70,000 45,000
NET (GAIN) LOSS ON SALE OF SECURITIES - -
DECREASE IN ACCRUED INTEREST RECEIVABLE 85,608 22,592
(DECREASE) IN ACCRUED INTEREST PAYABLE (122,317) 60,330
DECREASE IN OTHER ASSETS (768,710) (4,459,485)
(DECREASE) IN OTHER LIABILITIES 288,252 502,508
---------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES (377,046) (3,707,927)
CASH FLOWS FROM INVESTING ACTIVITIES
PURCHASES OF AFS SECURITIES (7,380,822) (15,083,154)
PROCEEDS FROM SALES OF AFS SECURITIES 0 0
PROCEEDS FROM MATURITIES OF AFS SECURITIES 3,196,118 2,326,564
NET (INCREASE) IN LOANS OUTSTANDING 1,255,643 271,708
NET (INCREASE) DECREASE IN FED FUNDS SOLD 6,787,706 (4,749,597)
PURCHASE OF PREMISES AND EQUIPMENT (70,121) (1,701,798)
DECREASE IN OTHER REAL ESTATE OWNED 148,218 81,312
---------------------------------------
NET CASH USED IN INVESTING ACTIVITIES 3,936,742 (18,854,965)
CASH FLOWS FROM FINANCING ACTIVITIES
NET INCREASE(DECREASE) IN DEMAND, SAVINGS, AND NOW (273,525) 15,246,412
NET INCREASE(DECREASE) IN TIME DEPOSITS (2,203,516) 9,802,556
PROCEEDS FROM ISSUANCE OF COMMON STOCK 95,426 21,305
DIVIDENDS PAID (225,000) (195,823)
---------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (2,606,615) 24,874,450
NET INCREASE (DECREASE) IN CASH 1,456,949 2,673,321
CASH AND DUE FROM AT BEGINNING OF PERIOD 5,628,229 3,302,389
CASH AND DUE FROM AT END OF PERIOD 6,725,178 5,975,710
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION(UNAUDITED)
The following discussion is intended to assist in understanding
and evaluating the results of operations and the financial condition of
Bay Banks of Virginia, Incorporated, a single bank holding company. This
discussion should be read in conjunction with the attached Balance
Sheet, Statement of Income and Statement of Cash Flows.
EARNINGS SUMMATION
For the three months ended March 1999 net income was $504
thousand as compared to $362 thousand for the comparable period in 1998,
for an increase of 39.28%. Earnings per share through the first quarter
were $.43 as compared to $.32 in 1998, which represents an increase of
34.74%. Return on Average Equity was 9.53% for 1999 and 10.12% for 1998.
Return on Average Assets was 1.01% and .91% consecutively. Management
continues to review interest rate spreads and opportunities for
improving the Net Interest Margin during this cycle of a sustained flat
yield curve.
Net Interest Income through the first quarter of 1999 was $1.79
million and for the same period in 1998 the total was $1.56 million.
This is an increase 14.69% over 1998. The Net Interest Margin on a fully
tax equivalent basis for the year to date 1999 was 5.46%, up from 5.24%
for the comparable period in 1998. Average interest earning assets
totaled $187.65 million. As a result, interest-bearing assets exceeded
interest- bearing liabilities by $29.21 million, or 18.43%. Earning
assets as a percentage of total average assets at quarter end 1999 was
94.19% and for 1998 was 94.05%.
PROVISION/ALLOWANCE FOR LOAN LOSSES
Increases in the Provision for Loan Losses were $70,000
through the three months. The total allowance for loan losses as of
March 31 was $1,041,367. The Loan Loss Provision as a percentage of
Average Total Loans through the first quarter of 1999 was .90%.
As of March 31, 1999, loans on Non-Accrual status totaled
$51,123. Loans on Non-Accrual status as of March 31, 1998 were $347,224.
Loans still accruing interest but delinquent 90 days were $487,056 at
quarter end 1999 as compared to $1,412,603 for quarter end 1998.
The Allowance for Loan Losses is analyzed for adequacy on a
quarterly basis to determine the necessary provision. A loan by loan
review is conducted on all loan classes and inherent losses on these
individual loans are determined. This valuation is then compared to
historical data in an effort to determine the prevailing trends. A third
component of the process is the analysis of a tabular presentation of
loss allocation percentages by loan type. Through this process the
Holding Company assesses the appropriate provision for the coming
quarter. As of March 31, 1999, management deemed the loan loss reserve
reasonable for the loss risk identified in the loan portfolio.
<PAGE>
NON INTEREST INCOME
Other Income through the first quarter of 1999 totaled $306,758
as compared to $290,909 for 1998. Other Income for the Company is
composed of Visa Merchant Fees, Deposit Fees, Trust Department Income,
Miscellaneous Income, and Gains on the Sale of Securities. Of these
categories, the Visa program, Deposit Fees and the Trust Department
contribute the majority. Through the three months ended March 31, 1999
Visa Fees were $43,524, Deposit Fees were $82,760, and Trust Income was
$122,334.
NON INTEREST EXPENSE
Non Interest Expense totaled $1.36 million through the first
quarter of 1999 as compared to $1.36 million for comparable period in
1998. Non Interest Expenses include Salaries and Benefits, Occupancy
Expense, Furniture and Equipment Expense and Other Operating Expense. Of
these categories, Salaries and Benefits are the major expense. Through
the three months ended March 31, 1999, Salary and Benefit Expense was
$710,524, Occupancy was $69,829, Furniture and Equipment was $137,815
and Other Operating was $440,455. Bay Banks of Virginia acquired two
branches from the former Signet Bank of Richmond, Virginia in February
of 1998. Associated with the acquisition were the normal expenses of
purchase, many of which were realized in the first quarter of 1998 as
non-recurring.
FINANCIAL CONDITION
Total Assets at first quarter end of 1999 were $199.33 million as
compared to $200.20 million at December 30, 1998. This represents a
nominal decrease of .04% during the three month period.
Total Loans through the first quarter were $116.24 million as
compared to $103.96 million for the comparable period in 1998. Total
Loans at year end 1998 were $114.99 million, resulting in an increase of
1.09% through the three months ended March 31, 1999. Management
continues to focus on new products and services that will further
stimulate lending activity in our market area.
Through the first three months of 1999, charged off loans
totaled $41,744. For the comparable period in 1998 total loans charged
off were $2,840.
As of March 31, 1999, the Holding Company held $61.01 million in
investment securities. This compares with December 1998 balances of
$58.95 million. This represents an increase of 3.50% of the total
portfolio during the three months ended March 31, 1999.
As of March 31, 1999, total deposits were $177.83 million as
compared to $176.14 million at quarter end 1998 and $178.85 at year end
1998. This represents a net decrease of $1.02 million or .57% for the
three months ended March 31, 1999. For the period of March 31, 1999 to
1998, Non Interest-bearing Demand Deposits increased to $20.46 million,
and Interest-bearing Transaction Accounts increased to $36.24 million.
Savings and certificates of deposit increased to $121.22 million.
<PAGE>
The Bank of Lancaster maintained $1.03 million on Other Real
Estate Owned as of March 31, 1999. For the comparable period in 1998 the
balance was $1.18 million. The Bank of Lancaster is aggressively
marketing all properties on OREO, and further, management expects no
loss on any of these properties.
LIQUIDITY AND CAPITAL RESOURCES
Bay Banks of Virginia maintains adequate short-term assets to
meet liquidity needs that are anticipated by management. Federal Funds
Sold and investments that mature in one year or less provide the major
sources of funding for liquidity needs. At March 31, 1999 Federal Funds
Sold totaled $5.22 million and securities maturing in one year or less
totaled $4.99 million, for a total pool of $10.21 million. The liquidity
ratio as of March 31, 1999 was 39.34% as compared to 44.69% for the
prior period. Bay Banks of Virginia determines this ratio by dividing
net liabilities into the sum of cash and due from, un-pledged investment
securities and Federal Funds Sold. Management, through historical
analysis, has deemed 15% an adequate liquidity ratio. As excess funds
are diverted from Federal Funds to loans and investments, this ratio
will decline to levels more consistent with prior periods.
Total shareholder equity at March 31, 1999 was $20.49 million
as compared to $18.84 million for the same period 1998. This represents
an increase of 8.75% over March 1998. Shareholder equity at year-end
1998 was $20.51 million. Shareholder equity was impacted by unrealized
gains on securities in the amount of $201,495 at quarter end 1999, while
these unrealized gains at year-end were $626,500.
The Holding Company is required to maintain minimum amounts of
Capital to Total Risk Weighted Assets, as defined by FFIEC guidelines.
As of quarter end 1999, the Company maintained Tier 1 Capital of $18.25
million, Tier 2 Capital of $1.04 million and Total Risk Based Capital of
$16.70 million. Net Risk Weighted Assets totaled $126.91 million. As of
March 31, 1999, the Holding Company maintained 14.38% and 13.16% Tier 1
and Total Capital Ratios. The respective minimums are 5.50% and 6.00%.
The Holding Company's Leverage Ratio at March 31, 1999 was 7.93% with a
regulatory minimum of 3.00%.
Book Value per share of common stock for the 1999 interim period
was $15.33 and for 1998 the book value per share was $15.25. Cash
dividends paid through March 31, 1999 were $221,488. Total number of
shares outstanding at March 31, 1999 was 1,168,633.
<PAGE>
Part I Item 1. Financial Information
Bank of Lancaster
Notes to Consolidated Financial Statements
Bay Banks of Virginia, Inc. owns 100% of the Bank of Lancaster.
The consolidated financial statements include the accounts of the
Bank of Lancaster and Bay Banks of Virginia, Incorporated.
The accounting and reporting policies of the registrant conform to
generally accepted accounting principals and to the general practices
within the banking industry. This interim statement has not been
audited, however, in management's opinion, it reflects a fair and
accurate presentation of the consolidated financial statements.
These financial statements should be read in conjunction with the
financial statements and notes to financial statements included in the
registrants 1997 Annual Report to Shareholders.
<PAGE>
PART 2.
ITEM 1. LEGAL PROCEEDINGS
None to report.
ITEM 2. CHANGES IN SECURITIES
See ITEM 4.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None to report.
ITEM 5. OTHER INFORMATION
None to report.
ITEM 13: EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
Exhibit Index
(2) Plan of reorganization. N/A
(3) (i)(ii)Articles of Incorporation and Bylaws. N/A
(4) (i)Rights of Holders. N/A
(10) (ii)(A)Material Contracts. N/A
(11) Statement: Computation of Earnings per Share N/A
(15) Letter: Unaudited financial information N/A
(18) Letter: Change in accounting principals N/A
(19) Report furnished to security holders N/A
Published report regarding matters submitted
to a vote of security holders N/A
(23) Consent of council N/A
(24) Power of Attorney N/A
(27) Financial Data Schedule Attached
(99) Additional Exhibits N/A
(b) No filings were made on Form 8-K for the period.
<PAGE>
SIGNATURES
BAY BANKS OF VIRGINIA
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.
Bay Banks of Virginia
---------------------
(Registrant)
5/14/1998 s/s Austin L. Roberts, III
---------------------------
President and
Chief Executive Officer
5/14/1998 s/s Paul T. Sciacchitano
-------------------------
Executive Vice President and
Chief Financial Officer
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