UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB (A)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-22955
BAY BANKS OF VIRGINIA, INC.
(Name of small business issuer in its charter)
VIRGINIA 54-1838100
(State of Incorporation) (I.R.S. Employer Identification no.)
100 SOUTH MAIN STREET, KILMARNOCK, VIRGINIA 22482
(Address of principal executive offices) (Zip Code)
Issuers telephone number............................................804.435.1171
Securities registered under Section 12(b) of the Exchange Act...............NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock ($5.00 Par Value)
(Title of Class)
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.......Yes _X_ NO ___.
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year........$15,249,477
Number of shares outstanding as of February 28, 1999..............1,164,728
As of March 29, 1999, the aggregate market value of Common Stock of Bay Banks of
Virginia, Inc. held by non-affiliates was approximately $37,853,660, based upon
the last sales price per share known to management on February 15, 1999
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1998 Annual Report to Shareholders are incorporated
by reference into Part II of this Form 10-KSB. Portions of the registrant's
definitive Proxy Statement for its' Annual Meeting of Shareholders to be held on
May 17, 1999 are incorporated by reference into Part III of this Form 10-KSB.
<PAGE>
Table of Contents
Table Description
- ----- -----------
Table I Average Balances, Income & Expense, Yields,
and Rates
Table II Volume & Rate Analysis of Changes in Net
Interest Income
Table III Investment Maturities & Average Yields
Table IV Types of Loans
Table V Loan Maturity Schedule of Selected Loans
Table VI Risk Elements
Table VII Summary of Allowance for Loan Losses
Table VIII Allocation of the Allowance for Loan Losses
Table IX Average Deposits & Rates
Table X Maturity Schedule of Time Deposits of
$100,000 or more
Table XI Return on Equity & Assets
Table XII Interest Rate Sensitivity Analysis
<PAGE>
Table I
Average Balances, Income & Expense, Yields, and Rates
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------
(Thousands) Average Annual Yield/ Average Annual Yield/
Balance Income/ Rate Balance Income/ Rate
Expense Expense
<S> <C>
ASSETS:
Investments:
- -----------
Taxable Investments $ 33,935 $ 2,128 6.27% $ 28,565 $ 1,644 5.76%
Tax-Exempt Investments (1) $ 16,885 $ 1,048 9.40% $ 15,923 $ 741 7.05%
------------------------------------------------------------
Total Investments $ 50,820 $ 3,176 6.25% $ 44,488 $ 2,386 5.36%
Loans (2) $110,026 $ 9,523 8.65% $ 103,398 $ 9,391 9.08%
Interest-bearing Deposits $ 0 $ 0 0.00% $ 0 $ 0 0.00%
Fed Funds Sold $ 11,782 $ 796 6.76% $ 8,395 $ 390 4.65%
------------------------------------------------------------
Total Interest Earning Assets $172,628 $13,495 8.13% $ 156,280 $ 12,166 8.03%
Allowance for Loan Losses ($936) ($940)
Unrealized Gains & Losses on Investments $ 688 $170
Total Non-Earning Assets $ 12,084 $ 8,868
======== =========
TOTAL ASSETS $184,465 $ 164,378
- -----------------------------------------------------------------------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Deposits:
- -------------------------
Savings Deposits $ 67,385 $ 3,102 4.60% $ 68,943 $ 3,303 4.79%
NOW Deposits $ 20,334 $ 663 3.26% $ 16,642 $ 493 2.96%
CD's (greater than) $100,000 $ 11,153 $ 616 5.52% $ 8,634 $ 403 4.67%
CD's (less than) $100,000 $ 39,173 $ 2,321 5.92% $ 30,822 $ 1,705 5.53%
Money Market Deposit Accounts $ 10,108 $ 352 3.49% $ 9,120 $ 300 3.28%
------------------------------------------------------------
Total Interest-bearing Deposits $148,152 $ 7,054 4.76% $ 134,161 $ 6,203 4.62%
Fed Funds Purchased & Sec Sold to
Repurchase $ 293 $ 11 3.82% $ 348 $ 22 6.24%
------------------------------------------------------------
Total Interest-Bearing Liabilities $148,445 $ 7,065 4.76% $ 134,509 $ 6,225 4.63%
Non-Interest-Bearing Liabilities:
- --------------------------------
Demand Deposits $ 15,784 $ 11,696
Other Liabilities $ 635 $ 434
-------- ---------
TOTAL LIABILITIES $164,864 $ 146,639
SHAREHOLDER'S EQUITY $ 19,600 $ 17,738
======== =========
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $184,464 $ 164,377
------------------------------------------------------------
Net Interest Income/Yield $ 6,430 4.04% $ 5,942 4.05%
Notes:
(1)-Yield assumes a federal tax rate of 34%
(2)-Includes Visa Program & nonaccrual loans.
</TABLE>
<PAGE>
Table II
Volume & Rate Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>
(Thousands) 1998 vs. 1997 1997 vs. 1996
--------------- ---------------
Total Total
Volume Rate Change Volume Rate Change
------ ---- ------ ------ ---- ------
<S> <C>
Investments:
Taxable Investments $ 309 $ 175 $ 484 ($64) ($37) ($101)
Tax-Exempt Investments $ 45 $ 262 $ 306 $4 ($167) ($163)
-----------------------------------------------
Total Investments $ 354 $ 437 $ 791 ($60) ($204) ($264)
Loans $ 602 ($470) $ 132 $482 $267 $749
Interest-bearing Deposits $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Fed Funds Sold $ 157 $ 249 $ 406 $234 ($181) $ 53
===============================================
Total Interest Earning Assets $1,113 $ 215 $1,329 $656 ($118) $538
Interest-bearing Deposits:
- -------------------------
Savings Deposits ($75) ($126) ($200) ($197) ($219) ($416)
NOW Deposits $ 109 $ 60 $169 $ 48 ($14) $ 34
CD's (greater than) $100,000 $ 118 $ 95 $213 $107 $32 $139
CD's (less than) $100,000 $ 462 $154 $616 $280 $51 $331
Money Market Deposit Accounts $ 32 $ 20 $ 53 ($9) $26 $ 17
-----------------------------------------------
Total Interest-bearing Deposits $ 647 $204 $851 $229 ($125) $104
Fed Funds Purchased & Sec Sold to ($3) ($7) ($11) $ 0 $22 $ 22
Repurchase ===============================================
Total Interest-Bearing Liabilities $ 645 $195 $840 $229 ($103) $126
Change in Net Interest Income $ 468 $ 20 $488 $427 ($15) $413
</TABLE>
Notes:
- -----
Changes in interest due to volume are calculated by multiplying the change in
volume by the old rate. Changes in interest due to rates are calculated by
multiplying the change in rates by the new volume.
<PAGE>
Table III
Investment Maturities & Average Yields
as of 12/31/98
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
(Thousands) One Year
or Less One to
or No Five Five to Over Ten
Maturity Years Ten Years Years Total
- --------------------------------------------------------------------------------------------
<S> <C>
U.S. Agency Securities:
Book Value $0 $ 8,602 $ 6,644 $ 1,391 $16,637
Market Value $0 $ 8,651 $ 6,657 $ 1,403 $16,712
Weighted average yield 0.00% 5.94% 6.23% 6.22% 6.08%
- --------------------------------------------------------------------------------------------
U.S. Treasury Securities:
Book Value $2,999 $ 496 $ 1,046 $ 0 $ 4,542
Market Value $3,010 $ 510 $ 1,046 $ 0 $ 4,567
Weighted average yield 5.63% 6.00% 7.32% 0.00% 6.05%
- --------------------------------------------------------------------------------------------
State & Municipal Securities:
Book Value $ 1,862 $ 8,856 $12,619 $ 812 $24,149
Market Value $ 1,880 $ 9,085 $12,922 $ 818 $24,705
Weighted average yield 7.76% 7.55% 7.05% 6.59% 7.27%
- --------------------------------------------------------------------------------------------
Other Securities:
Book Value $ 761 $ 4,141 $ 6,593 $ 11 $11,507
Market Value $ 765 $ 4,209 $ 6,846 $ 11 $11,831
Weighted average yield 6.16% 6.16% 6.26% 0.00% 6.21%
- --------------------------------------------------------------------------------------------
Total Securities:
Book Value $ 5,623 $ 22,094 $26,903 $ 2,214 $56,835
Market Value $ 5,655 $ 22,455 $27,472 $ 2,233 $57,815
Weighted average yield 6.41% 6.63% 6.66% 6.32% 6.61%
</TABLE>
Notes:
Yields on tax-exempt securities have been computed on a tax-equivalent basis,
assuming a tax rate of 34%.
<PAGE>
Table IV
Types of Loans
(Thousands) 12/31/98 12/31/97
-------- --------
Commercial $ 11,290 $ 9,020
Real Estate - Construction $ 1,519 $ 3,014
Real Estate - Mortgage $ 83,073 $ 76,541
Installment and Other (includes Visa program) $ 18,697 $ 16,222
-------- --------
Total $114,579 $104,796
Notes:
Deferred loan costs & fees not included.
Allowance for loan losses not included.
<PAGE>
Table V
Loan Maturity Schedule of Selected Loans
as of December 31, 1998
<TABLE>
<CAPTION>
One Year or Less One to Five Years Over Five Years
(Thousands) Fixed Variable Fixed Variable Fixed Variable
Rate Rate Rate Rate Rate Rate
---- ---- ---- ---- ---- ----
<S> <C>
Commercial $4,893 $ 5,412 $ 564 $ 0 $ 284 $ 0
Real Estate - Construction $ 773 $ 0 $ 0 $ 0 $ 0 $ 0
Real Estate - Mortgage $ 803 $20,858 $10,195 $40,326 $11,320 $105
Installment and Other (includes Visa program) $1,311 $ 8,835 $ 6,471 $ 114 $ 1,409 $156
----------------------------------------------------------------
Totals $7,781 $35,105 $17,230 $40,440 $13,013 $261
</TABLE>
Notes:
Loans with immediate repricing are shown in the 'One Year or Less' category.
<PAGE>
Table VI
Risk Elements
(Thousands) 12/31/1998 12/31/1997
Non-accrual Loans $ 79 $ 126
Restructured Loans $ 0 $ 0
Foreclosed Properties $1,160 $1,379
Total Non-performing Assets $1,238 $1,505
Loans past due 90+ days as to principal or $ 232 $ 594
interest payments & accruing interest
For non-accrual & restructured loans, Gross $ 4 $ 17
interest income which would have been recorded
under original loan terms for the year ended
For non-accrual & restructured loans, Gross $ 4 $ 17
interest income recorded for the year ended
Potential problem loans as of 12/31/98 not $ 236 n/a
reported above:
Notes:
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding
unpaid principal balances reduced by any charge-offs or specific valuation
accounts and net of any unearned discount and fees and costs on originating
loans.
Loan origination fees and certain direct origination costs for real estate
mortgage loans are capitalized and recognized as an adjustment of the yield of
the related loans.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash payments are
received.
The allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on past loan loss experience, known
and inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
<PAGE>
Table VII
Summary of Allowance for Loan Losses
12/31/98 12/31/97
-----------------------
Balance, beginning of period $ 861 $ 1,020
Loans charged off:
Commercial & other $ 20 $ 15
Real estate - construction $ 0 $ 0
Real estate - mortgage $ 30 $ 228
Installment & Other (including Visa $ 27 $ 125
program)
Total loans charged off ($77) ($368)
Recoveries of loans previously charged off:
Commercial & other $ 6 $ 0
Real estate - construction $ 0 $ 0
Real estate - mortgage $ 1 $ 0
Installment & Other (including Visa $ 12 $ 6
program)
Total recoveries $ 20 $ 6
-----------------------
Net charge offs ($57) ($362)
Provision for loan losses $ 208 $ 203
======================
Balance, end of period $ 1,012 $ 861
Average loans outstanding during the period $110,026 $103,398
Ratio of net charge-offs during the 0.05% 0.35%
period to average loans outstanding
during the period
See Note 1 to Financial Statements, Loans receivable paragraph,for a description
of the factors which influenced management's determination of the provision
charged to operating expense.
<PAGE>
Table VIII
Allocation of the Allowance for Loan Losses
12/31/98 12/31/97
(Thousands) Amount Percent Amount Percent
------ ------- ------ -------
Commercial $90 8.90% $84 9.76%
Real estate - construction $5 0.52% $9 1.04%
Real estate - mortgage $758 74.92% $659 76.62%
Installment & Other (including Visa program) $159 15.68% $108 12.59%
------ ------- ---- -------
Total $1,012 100.00% $861 100.00%
<PAGE>
Table IX
Average Deposits & Rates
1998 1997
(Thousands) Average Yield/ Average Yield/
Balance Rate Balance Rate
------- ------ ------- ------
Non-interest bearing Demand Deposits $15,784 0.00% $11,696 0.00%
Interest bearing Deposits:
NOW Accounts $20,334 3.26% $16,642 2.96%
Regular Savings $67,385 4.60% $68,943 4.79%
Money Market Deposit Accounts $10,108 3.49% $9,120 3.28%
Time Deposits:
CD's $100,000 or more $11,153 5.52% $8,634 4.67%
CD's (less than) $100,000 $39,173 5.92% $30,822 5.53%
Total Interest bearing Deposits $148,152 4.76% $134,161 4.62%
-------- ----- -------- -----
Total Average Deposits $163,936 4.30% $145,857 4.25%
<PAGE>
Table X
Maturity Schedule of Time Deposits of $100,000 or more
(Thousands) 12/31/98 12/31/97
---------- ----------
3 months or less $2,280 $4,700
3-6 months $5,338 $1,978
6-12 months $2,775 $2,212
Over 12 months $2,159 $2,142
---------- ----------
Totals $12,552 $11,032
<PAGE>
Table XI
Return on Equity & Assets
1998 1997
---- ----
Return on Assets 1.00% 1.21%
Return on Equity 10.45% 11.64%
Dividend Payout Ratio 41.93% 36.85%
Equity to Assets Ratio 9.59% 10.41%
<PAGE>
<TABLE>
<CAPTION>
Table XII
Interest Rate Sensitivity Analysis
as of 12/31/98
Within 3 3-12 Over 5
Months Months 1-5 Years Years Total
(Thousands) -------- ------ --------- ------ -----
<S> <C>
Fed Funds Sold $12,008 $ 0 $ 0 $ 0 $ 12,008
Investments $ 2,254 $ 3,626 $24,617 $28,307 $ 58,804
Loans $25,325 $27,487 $49,669 $12,061 $114,542
======== ======== ======= ======= ========
Total Earning Assets $39,587 $31,113 $74,286 $40,368 $185,354
NOW Accounts $10,629 $ 0 $13,836 $ 0 $ 24,465
MMDA's $ 8,173 $ 0 $ 3,101 $ 0 $ 11,274
Savings $42,491 $ 0 $26,531 $ 0 $ 69,022
CD's (less than) $100,000 $ 9,981 $22,233 $ 8,936 $ 0 $ 41,150
CD's (greater than or equal to) $100,000 $ 3,550 $ 6,729 $ 2,227 $ 0 $ 12,506
-------- ------- ------- ------- --------
Total Deposits $74,824 $28,962 $54,631 $ 0 $158,417
======== ======= ======= ======= ========
Fed Funds Purchased & Sec Sold to Repurchase $ 586 $ 0 $ 0 $ 0 $ 586
======== ======= ======= ======== ========
Total Interest Bearing Liabilities $75,410 $28,962 $54,631 $ 0 $159,003
Rate Sensitive Gap ($35,823) $ 2,151 $19,655 $40,368 $ 26,351
Cumulative Gap ($35,823) ($33,672) ($14,017) $26,351
</TABLE>
<PAGE>
Year 2000 Issues:
The company estimates the cost of Y2K to be $262 thousand for the year ended
December 31, 1998. As this process develops, costs of implementation are
estimated to be $75 thousand for 1999 and 2000. Management has developed and
tested a five-part plan to prepare for potential Year 2000 malfunctions. System
testing has been performed in accordance with Federal Reserve Bank regulations
and FFIEC guidelines. Management anticipates little or no disruption in the
delivery of services. However, there can be no guarantee that no disruptions
will occur as a result of Year 2000. Presently management does not expect that
any problems currently anticipated will have a materially adverse impact on its'
business.
Annual Report - page 1:
The name of the accounting firm who opined on the financial statements is
Eggleston Smith P.C., of Newport News, Virginia.
Annual Report - page 6:
The amount of loans on which the accrual of interest has been discontinued is
disclosed in Note 3 to the Financial Statements. In general, it is the Bank's
policy to place all loans 90 days past due on nonaccrual status. In both 1998
and 1997 the amount of loans 90 days past due and still accruing interest was
not material. Those loans were well secured and in the process of collection
consistent with regulatory practices. The amount of these loans is disclosed in
the statistical Guide 3 tables included in this amendment.
<PAGE>
Bay Banks of Virginia
100 South Main Street
Post Office Box 1869
Kilmarnock, Virginia 22482
November 10, 1999
John W. Sniegon, Assistant Chief Accountant
Division of Corporation Finance
Mail Stop 4-8
United States Securities and Exchange Commission
Washington, D.C. 20549
Re: Form 10-KSB filed March 31, 1999, File No. 0-22955
Dear Mr. Sniegon,
In response to your letter dated August 4, 1999, copy attached, we have amended
our Form 10-KSB. A copy of that amendment is being filed on the EDGAR system,
and another copy is provided with this letter.
Industry Guide 3
The amendment includes Guide 3 information for the year ended December 31, 1998
and 1997.
Year 2000 Issues
The Year 2000 issues discussed in your letter are included in the amendment.
Annual Report - page 1
The name of our accounting firm, Eggleston Smith P.C., was omitted due to a
clerical error in the EDGAR process.
Annual Report - page 6
The amount of loans 90 days past due and accruing interest are disclosed in the
Guide 3 tables included in this amendment. Please refer to the amendment for
further information. We will include our policy regarding such loans in the
notes to financial statements in future reports.
If you have any further questions or concerns, you may contact Deb Evans, our
Regulatory Accountant.
Sincerely,
/s/ Austin L. Roberts, III
Austin L. Roberts, III
President & Chief Executive Officer
