<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission File Number 0-25031
VIRGINIA CAPITAL BANCSHARES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1913168
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 George Street, Fredericksburg, Virginia 22404
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(540) 899-5500
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changes since last
report)
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 10,834,560 shares of common
stock, par value $0.01 per share, were outstanding as of November 5, 1999.
<PAGE>
Virginia Capital Bancshares, Inc.
Form 10-Q
For the Quarter Ended September 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
September 30, 1999 (unaudited) and December 31, 1998.......... 3
Consolidated Statements of Income - For the Three
Months Ended September 30, 1999 and 1998 and the
Nine Months Ended September 30, 1999 and 1998 (unaudited)..... 4
Consolidated Statements of Changes in Stockholders' Equity -
For the Nine Months Ended September 30, 1999 and 1998
(unaudited).................................................. 5
Consolidated Statements of Cash Flows - For the
Nine Months Ended September 30, 1999 and 1998 (unaudited)..... 6
Notes to Consolidated Financial Statements.................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 18
PART II: OTHER INFORMATION.......................................... 18
Item 1. Legal Proceedings.......................................... 18
Item 2. Changes in Securities and Use of Proceeds.................. 18
Item 3. Defaults Upon Senior Securities............................ 18
Item 4. Submission of Matters to a Vote of Security Holders........ 18
Item 5. Other Information.......................................... 18
Item 6. Exhibits and Reports on Form 8-K........................... 19
SIGNATURES......................................................... 20
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
VIRGINIA CAPITAL BANCSHARES, INC.
Consolidated Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Assets
Cash and cash equivalents (includes interest-bearing
deposits of $22,433 in 1999; $114,963 in 1998) $ 23,495 $115,734
Investment securities
Held-to-maturity (fair value $775 in 1999; $1,003 in 1998) 762 990
Available-for-sale (cost $88,918 in 1999; $29,709 in 1998) 88,083 30,381
Federal Home Loan Bank stock, restricted, at cost 3,613 3,539
Loans receivable, net 419,468 411,791
Accrued interest receivable 3,618 2,588
Foreclosed real estate, net 674 1,177
Property and equipment, net 3,640 3,587
Other assets 7,144 6,889
-------------------------------------
Total assets $550,497 $576,676
=====================================
Liabilities and Stockholders' Equity
Liabilities
Deposits $356,954 $354,788
Official bank checks 2,897 21,064
Advances from Federal Home Loan Bank 8,000 8,000
Advances from borrowers for taxes and insurance 2,530 1,048
Accrued expenses and other liabilities 7,079 6,570
-------------------------------------
Total liabilities 377,460 391,470
-------------------------------------
Stockholders' Equity
Preferred stock, 5,000,000 shares authorized, none issued - -
Common stock, $.01 par value, 75,000,000 shares authorized,
issued and outstanding 10,885,800 at September 30, 1999 and
11,404,800 at December 31, 1998 109 114
Additional paid-in capital 104,255 112,303
Common stock acquired by stock benefit plans (15,784) (8,920)
Retained earnings, substantially restricted 84,975 81,292
Accumulated other comprehensive income (loss) (518) 417
-------------------------------------
Total stockholders' equity 173,037 185,206
-------------------------------------
Total liabilities and stockholders' equity $550,497 $576,676
=====================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
VIRGINIA CAPITAL BANCSHARES, INC.
Consolidated Statements of Income (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------------------
1999 1998 1999 1998
------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $8,000 $8,294 $24,073 $25,151
Interest on investment securities 1,706 717 5,197 2,104
------------------------------------------------------------
Total interest income 9,706 9,011 29,270 27,255
------------------------------------------------------------
Interest expense
Deposits 4,112 4,703 12,402 14,078
Advances and other borrowings 125 125 370 370
------------------------------------------------------------
Total interest expense 4,237 4,828 12,772 14,448
------------------------------------------------------------
Net interest income before provision for loan
losses 5,469 4,183 16,498 12,807
Provision for loan losses 45 146 90 415
------------------------------------------------------------
Net interest income after provision for loan
losses 5,424 4,037 16,408 12,392
------------------------------------------------------------
Noninterest income
Fees and service charges 69 68 207 224
Securities gains 73 - 250 52
Other 4 17 27 58
------------------------------------------------------------
Total noninterest income 146 85 484 334
------------------------------------------------------------
Noninterest expense
Compensation and benefits 992 757 2,793 2,219
Occupancy and equipment 209 186 608 529
Federal deposit insurance premium 51 57 163 174
Other 986 340 2,363 1,487
------------------------------------------------------------
Total noninterest expense 2,238 1,340 5,927 4,409
------------------------------------------------------------
Income before income taxes 3,332 2,782 10,965 8,317
Income taxes 1,205 1,085 4,130 3,300
------------------------------------------------------------
Net income $2,127 $1,697 $ 6,835 $ 5,017
============================================================
Net income per share
Basic $.21 - $.66 -
Diluted $.21 - $.66 -
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
VIRGINIA CAPITAL BANCSHARES, INC.
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Common
Stock Retained Accumulated
Additional Acquired Earnings, Other
Preferred Common Paid-in By Stock Substantially Comprehensive Total
Stock Stock Capital Benefit Plans Restricted Income (Loss) Equity
--------- ------- ----------- -------------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $ - $114 $112,303 $ (8,920) $81,292 $ 417 $185,206
Comprehensive income:
Net income - - - - 6,835 - 6,835
Change in net unrealized
gain (loss) on securities
available-for-sale - - - - - (935) (935)
-------------------------------------------------------------------------------------------
Comprehensive income 5,900
Dividends declared ($0.30 per
share) - - - - (3,152) - (3,152)
Shares acquired for stock
benefit plans - - - (7,396) - - (7,396)
ESOP shares committed to
be released - - 113 253 - - 366
Amortization of stock awards - - - 279 - - 279
Stock repurchases - (5) (8,161) - - - (8,166)
-------------------------------------------------------------------------------------------
Balance, September 30, 1999 $ - $109 $104,255 $(15,784) $84,975 $(518) $173,037
===========================================================================================
Balance, December 31, 1997 $ - $ - $ - $ - $79,896 $ 177 $ 80,073
Comprehensive income:
Net income - - - - 5,017 - 5,017
Change in net unrealized
gain on securities
available-for-sale - - - - - 44 44
-------------------------------------------------------------------------------------------
Comprehensive income 5,061
-------------------------------------------------------------------------------------------
Balance, September 30, 1998 $ - $ - $ - $ - $84,913 $ 221 $ 85,134
===========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
VIRGINIA CAPITAL BANCSHARES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
------------------------------
1999 1998
------------------------------
Cash flows from operating activities
<S> <C> <C>
Net income $ 6,835 $5,017
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation 317 260
Provision for loan losses 90 415
Provision for loss on real estate owned - (92)
Premium/discount on investment securities (157) (4)
Amortization of loan discounts and fees 81 326
ESOP expense 365 -
Stock award expense 279 -
Gain on sale of securities (250) (52)
(Increase) decrease in accrued interest receivable (1,030) 33
Increase in other assets (266) (2,031)
Increase in other liabilities 509 352
------------------------------
Net cash provided by operating activities 6,773 4,224
------------------------------
Cash flows from investing activities
Proceeds from redemption of securities available-for-sale 7,750 9,015
Purchase of FHLB stock (74) (91)
Purchases of securities available-for-sale (67,116) (5,244)
Principal payments on mortgaged-backed securities
held-to-maturity 291 237
Loan originations and principal payments, net (7,848) (4,420)
Purchases of equipment (374) (226)
Proceeds from sale of real estate owned 1,591 2,364
------------------------------
Net cash provided by (used in) investing activities (65,780) 1,635
------------------------------
Cash flows from financing activities
Net increase (decrease) in savings accounts 7,051 (1,672)
Net decrease in official bank checks (18,167) (748)
Net increase (decrease) in certificates of deposit (4,885) 2,001
Increase in advances by borrowers for taxes and insurance 1,482 1,714
Cash dividends paid (3,151) -
Purchase of common stock for stock benefit plans (7,396) -
Stock repurchases (8,166) -
------------------------------
Net cash provided by (used in) financing activities (33,232) 1,295
------------------------------
Net increase (decrease) in cash and cash equivalents (92,239) 7,154
Cash and cash equivalents at beginning of period 115,734 11,287
------------------------------
Cash and cash equivalents at end of period $ 23,495 $18,441
==============================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
VIRGINIA CAPITAL BANCSHARES, INC.
Notes to Consolidated Financial Statements
SEPTEMBER 30, 1999
1. The consolidated financial statements include the accounts of Virginia
Capital Bancshares, Inc. (the "Company") and its wholly-owned subsidiary
Fredericksburg Savings Bank (the "Bank"). All material intercompany
transactions and accounts have been eliminated. In the opinion of
management, the accompanying unaudited consolidated financial statements
contain all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the financial position of the Company as of
September 30, 1999, and the results of its operations for each of the
periods presented. The results of operations for the interim periods
presented are not necessarily indicative of the results of operations that
may be expected for all of 1999.
Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to the rules
and regulations of the Securities and Exchange Commission. These unaudited
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto included in the
Company's Annual Report to stockholders on Form 10-K for the year ended
December 31, 1998.
2. The following is a reconciliation of the denominators of the basic and
diluted earnings per share computations.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
--------------------------------------------------------
<S> <C> <C>
Net income $ 2,127 $ 6,835
========================================================
Basic:
Weighted average shares outstanding 11,311,365 11,373,313
Less: Unallocated/unearned shares held by
stock benefit plans (1,197,811) (1,008,072)
Add: ESOP shares released or committed
to be released 5,740 15,401
--------------------------------------------------------
Weighted average shares outstanding - basic 10,119,294 10,380,642
========================================================
Earnings per share - basic $ .21 $ .66
========================================================
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
-------------------------------------------------------
<S> <C> <C>
Diluted:
Net Income $ 2,127 $ 6,835
=======================================================
Basic weighted average shares outstanding 10,119,294 10,380,642
Add effect of dilutive instruments:
Restricted stock awards 42,814 14,271
Stock options 26,178 8,726
=======================================================
Dilutive weighted average shares outstanding 10,188,286 10,403,639
=======================================================
Earnings per share - diluted $ .21 $ .66
=======================================================
</TABLE>
3. On June 29, 1999, the Company's Board of Directors granted options to
officers and directors to acquire 912,386 shares of the Company's stock at
an exercise price of $15.3125 per share. Additionally, the Board awarded
364,953 shares of restricted stock to officers and directors with a fair
value of $15.3125 per share. These stock options and awards vest over a
five-year period commencing July 1, 1999. Common stock acquired by stock
benefit plans at September 30, 1999 includes 866,765 shares for the
Employee Stock Ownership Plan, acquired in the Bank's conversion, and
456,192 shares for the Stock-Based Incentive Plan, acquired in the third
quarter 1999.
7
<PAGE>
PART I: FINANCIAL INFORMATION
VIRGINIA CAPITAL BANCSHARES, INC.
SEPTEMBER 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
General
Virginia Capital Bancshares, Inc. ("the Company") is the holding company
for Fredericksburg Savings Bank ("the Bank"). The Company is headquartered in
Fredericksburg, Virginia and its principal business currently consists of the
operations of the Bank. The Bank's results of operations are dependent primarily
on net interest income, which is the difference between the income earned on its
loan and investment portfolios and its cost of funds, consisting of the interest
paid on deposits and borrowings. Results of operations are also affected by the
Bank's provision for loan losses and fees and other service charges. The Bank's
noninterest expense principally consists of compensation and employee benefits,
office occupancy and equipment expense, federal deposit insurance premiums, the
cost of foreclosed real estate operations, data processing, advertising and
business promotion and other expenses. Results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in interest rates, government policies and actions of
regulatory authorities. Future changes in applicable law, regulations or
government policies may materially impact the Bank.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking
statements which are based on certain assumptions and describe future plans,
strategies and expectations of the Company. These forward-looking statements are
generally identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries include, but are not limited to,
changes in: interest rates, general economic conditions, legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including policies
of the U.S. Treasury and the Federal Reserve Board, the quality or composition
of the loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. The Company does not undertake -- and
specifically disclaims any obligation -- to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.
8
<PAGE>
Comparison of Financial Condition at September 30, 1999 and December 31, 1998
The Company's assets totaled $550.5 million at September 30, 1999, a
decrease of $26.2 million, or 4.5% from total assets of $576.7 million at
December 31, 1998. Assets decreased in the first quarter of 1999 due to the
return of excess funds received from the public offering of stock completed in
December 1998. Assets decreased in the third quarter of 1999 with the Company's
purchase of 456,192 shares of common stock for its Stock-Based Incentive Plan
Trust and the Company's repurchase of 519,000 shares of common stock. Dividends
of $.30 per share were paid totaling $3.4 million during the first nine months
of 1999. Stockholders' equity of $173 million represented 31.43% of total
assets.
Loans. Net loans receivable increased $7.7 million to $419.5 million at
September 30, 1999 from $411.8 million at December 31, 1998. One-to-four family
mortgage loans increased $6.0 million to $371.3 million at September 30, 1999
from $365.3 million at December 31, 1998. Consumer loans increased $1.5 million
to $10.5 million at September 30, 1999 from $9.1 million at December 31, 1998.
Allowance for Loan Losses. The allowance for loan losses remained
constant at $5.7 million at September 30, 1999 and December 31, 1998. At
September 30, 1999, the allowance for loan losses provided coverage of 96.80% of
total nonperforming loans of $5.9 million, an increase from 93.69% of total
nonperforming loans of $6.1 million at December 31, 1998. The adequacy of the
allowance for loan losses is evaluated monthly by management based upon a review
of significant loans, with particular emphasis on nonperforming and delinquent
loans that management believes warrant special attention. Management considers
the allowance for loan losses adequate at September 30, 1999 to cover losses
inherent in the loan portfolio.
Investment Securities. Investment securities classified as available-for-
sale totaled $88.1 million at September 30, 1999, a net increase of $57.7
million from $30.4 million at December 31, 1998. The following tables set forth
certain information regarding the amortized cost and fair value of the Company's
available-for-sale securities at September 30, 1999.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
--------------------------------
<S> <C> <C>
U.S. Treasury and agency obligations $40,769 $40,257
Corporate securities 35,826 35,071
State and local municipal bonds 5,524 5,492
Equity securities 2,931 3,989
Mutual fund 1,368 1,327
Dual index consolidated bonds 2,500 1,947
--------------------------------
$88,918 $88,083
================================
</TABLE>
Maturities of available-for-sale securities at September 30, 1999, are as
follows:
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
--------------------------------
<S> <C> <C>
Mutual fund $ 1,368 $ 1,327
Equity securities 2,931 3,989
Due in one year or less 11,325 11,313
Due after one year through five years 70,156 68,868
Due after five years through ten years 3,039 2,484
Due after ten years 99 102
--------------------------------
$88,918 $88,083
================================
</TABLE>
Deposits. Total deposits increased $2.2 million from $354.8 million at
December 31, 1998 to $357.0 million at September 30, 1999. Checking accounts
increased $1.6 million in the first nine months of 1999.
9
<PAGE>
Comparison of Operating Results for the Three Months Ended September 30, 1999
and 1998 and for the Nine Months Ended September 30, 1999 and 1998
General. Net income for the three months ended September 30, 1999
increased $430,000 to $2.1 million compared to net income of $1.7 million for
the three months ended September 30, 1998. The increase in net income during
the three-month period ended September 30, 1999 resulted primarily from a $1.3
million increase in net interest income partially offset by increases in non-
interest expenses and income taxes of $898,000 and $120,000 respectively. Net
income for the nine months ended September 30, 1999 increased $1.8 million to
$6.8 million compared to net income of $5.0 million for the nine months ended
September 30, 1998. The increase in net income during the nine month period
ended September 30, 1999 resulted primarily from a $3.7 million increase in net
interest income partially offset by increases in non-interest expenses and
income taxes of $1.5 million and $830,000, respectively.
Interest Income. Interest income for the three months ended September 30,
1999 increased $695,000 to $9.7 million, from $9.0 million for the comparable
period in 1998. Interest on mortgage loans, the largest component of interest
income, decreased $278,000 from $8.0 million for the three months ended
September 30, 1998 to $7.8 million for the three months ended September 30,
1999. The decrease in interest on mortgage loans was the result of a decline in
the average yield on mortgage loans of 27 basis points from 7.91% to 7.64%. The
decrease in interest on mortgage loans was offset by an increase in interest on
overnight and short-term deposits and investment securities of $1.0 million. The
$1.0 million increase was the result of an increase in the average balance of
overnight and short-term deposits from $14.4 million for the three month period
ended September 30, 1998 to $30.9 million for the three month period ended
September 30, 1999, and, an increase in the average balance of investment
securities from $33.4 million for the three month period ended September 30,
1998 to $92.5 million for the three month period ended September 30, 1999.
Interest income for the nine months ended September 30, 1999 increased $2.0
million, from $27.3 million for the nine month period ended September 30, 1998
to $29.3 million for the nine month period ended September 30, 1999. Interest
on mortgage loans decreased $1.1 million while interest on overnight and short-
term deposits and investment securities increased $3.1 million during this
period. The decrease in interest on mortgage loans was the result of a decline
in the average yield on mortgage loans of 38 basis points from 8.10% to 7.72%.
The $3.1 million increase in interest on overnight and short-term deposits and
investment securities was the result of an increase in the average balance of
overnight and short-term deposits from $14.6 million for the nine month period
ended September 30, 1998 to $57.1 million for the nine month period ended
September 30, 1999, and, an increase in the average balance of investment
securities from $33.9 million for the nine month period ended September 30, 1998
to $73.8 million for the nine month period ended September 30, 1999.
Interest Expense. Interest expense was $4.2 million for the three months
ended September 30, 1999, a decrease of $591,000 from $4.8 million for the three
months ended September 30, 1998. This decrease is attributable to a $22.0
million decrease in average deposits from $375.2 million for the third quarter
of 1998 to $353.2 million for the third quarter of 1999, and, a decrease of 35
basis points in the rates paid on these deposits from 5.01% to 4.66%. The
decrease in deposit accounts was due in part to withdrawals made to purchase the
Company's common stock in connection with the Bank's conversion.
10
<PAGE>
For substantially the same reasons, interest expense decreased $1.7 million
from $14.5 million for the nine month period ended September 30, 1998 to $12.8
million for the same period ended September 30, 1999.
Net Interest Income. Net interest income for the third quarter of 1999 was
$5.5 million or 30.74% higher than the $4.2 million reported for the third
quarter of 1998. The net interest margin for the third quarter 1999 was 4.05%
compared to 3.61% for the third quarter of 1998. These increases primarily
resulted from investment of proceeds from the successful completion of the
mutual to stock conversion in December of 1998.
For substantially the same reason, net interest income was higher for the
nine month period ended September 30, 1999. During the first nine months of
1999, net interest income increased $3.7 million from the same period last year.
Provision for Loan Losses. The provision for loan losses decreased from
$146,000 for the third quarter of 1998 to $45,000 for the third quarter of 1999.
The provision for loan losses decreased from $415,000 for the first nine months
of 1998 to $90,000 for the first nine months of 1999. This decrease is primarily
the result of a decrease in net charge-offs from $198,000 for the first nine
months of 1998 to $89,000 for the first nine months of 1999. Management
assesses the adequacy of the allowance for loan losses based on evaluating known
and inherent risks in the loan portfolio and upon management's continuing
analysis of the factors underlying the quality of the loan portfolio. While
management believes that, based on information currently available, the
allowance for loan losses is sufficient to cover losses inherent in its loan
portfolio at this time, no assurance can be given that the level of the
allowance for loan losses will be sufficient to cover future possible loan
losses incurred by the Company or that future adjustments to the allowance for
loan losses will not be necessary if economic and other conditions differ
substantially from the economic and other conditions used by management to
determine the current level of the allowance for loan losses. Management may in
the future increase the level of the allowance for loan losses as a percentage
of total loans and non-performing loans in the event it increases the level of
commercial real estate, multifamily, or consumer lending as a percentage of its
total loan portfolio. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the allowance for loan
losses. Such agencies may require the Company to provide additions to the
allowance based upon judgements different from management.
A summary of activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------------------
1999 1998 1999 1998
------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period $5,692 $5,639 $5,684 $5,478
Provision for loan losses 45 146 90 415
Loans charged off:
Mortgage loans 52 70 88 149
Consumer loans - 23 32 52
------------------------------------------------------------
Total charge-offs 52 93 120 201
Recoveries - 3 31 3
------------------------------------------------------------
Balance at end of period $5,685 $5,695 $5,685 $5,695
============================================================
</TABLE>
11
<PAGE>
Noninterest Expense. Total noninterest expense increased $898,000 to $2.2
million for the three months ended September 30, 1999, compared to $1.3 million
for the three months ended September 30, 1998. The compensation and benefits
expense increase of $235,000 includes the Fredericksburg Savings Bank Employee
Stock Ownership Plan (ESOP) contribution made in the three months ended
September 30, 1999. Because this plan was established in December 1998, there
was no expense related to this plan in the third quarter of 1998. Benefit costs
are anticipated to increase in future years based on current actuarial estimates
and the existence of the ESOP. A new marketing program, ATM installation, the
establishment of the stock-based compensation plan, and costs associated with
being a public company resulted in increases in other noninterest expenses in
the third quarter of 1999 compared to the third quarter of 1998. The Company's
efficiency ratio increased to 39.83% for the three months ended September 30,
1999 compared to 31.40% for the three months ended September 30, 1998, primarily
due to the increase in noninterest expenses. The Company's efficiency ratio may
increase in the future with increased ESOP benefit costs and costs related to
the stock-based compensation plans.
For substantially the same reasons, noninterest expense increased $1.5
million to $5.9 million for the nine month period ended September 30, 1999,
compared to $4.4 million for the same period ended September 30, 1998. The
Company's efficiency ratio increased to 34.90% for the nine months ended
September 30, 1999 compared to 33.55% for the nine months ended September 30,
1998.
Key performance ratios are as follows:
<TABLE>
<CAPTION>
At or For the Three Months
Ended September 30,
---------------------------------
1999 1998
---------------- ---------------
<S> <C> <C> <C>
Return on average assets 1.53% 1.42%
Return on average equity 4.69% 8.05%
Net interest margin 4.05% 3.61%
Total noninterest expense to average assets 1.61% 1.13%
Efficiency ratio 39.83% 31.40%
</TABLE>
12
<PAGE>
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits, principal and interest
payments on loans, mortgage-backed and investment securities and FHLB advances.
While maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Bank has continued to
maintain the required levels of liquid assets as defined by OTS regulations.
This requirement of the OTS, which may be varied at the direction of the OTS
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings. The Bank's currently required liquidity
ratio is 4.00%. At September 30, 1999, the Bank's liquidity ratio was 19.78%.
Management's current strategy is to maintain liquidity as close as possible to
the minimum regulatory requirement and to invest any excess liquidity in higher
yielding interest-earning assets. The ratio is higher than desired at this time
due to the recent infusion of funds from the Company's public offering. The
Bank manages its liquidity position and demands for funding primarily by
investing excess funds in short-term investments and utilizing FHLB advances in
periods when the Bank's demands for liquidity exceed funding from deposit
inflows.
The Company's most liquid assets are cash and cash equivalents and
securities available-for-sale. The levels of these assets are dependent on the
Bank's operating, financing, lending and investing activities during any given
period. At September 30, 1999, the Company's cash and cash equivalents and
securities available-for-sale totalled $111.6 million, or 20.3% of the Company's
total assets.
The Bank has other sources of liquidity if a need for additional funds
arises. At September 30, 1999, the Bank had $8.0 million in advances
outstanding from the FHLB and, had an additional overall borrowing capacity from
the FHLB of $37.0 million. Depending on market conditions, the pricing of
deposit products and FHLB advances, the Bank may utilize FHLB borrowings to fund
asset growth.
At September 30, 1999, the Bank had commitments to fund loans and unused
outstanding lines of credit, unused standby letters of credit and undisbursed
proceeds of construction mortgages totaling $32.2 million. The Bank anticipates
that it will have sufficient funds available to meet its current loan
origination commitments. Certificate accounts, including IRA and Keogh
accounts, which are scheduled to mature in less than one year from September 30,
1999, totalled $184.6 million. Based upon experience, management believes the
majority of maturing certificates of deposit will remain with the Bank. In
addition, management of the Bank believes that it can adjust the rates offered
on certificates of deposit to retain deposits in changing interest rate
environments. In the event that a significant portion of these deposits are not
retained by the Bank, the Bank would be able to utilize FHLB advances to fund
deposit withdrawals, which would result in an increase in interest expense to
the extent that the average rate paid on such advances exceeds the average rate
paid on deposits of similar duration.
At September 30, 1999, the Bank exceeded all minimum regulatory capital
requirements. The following table sets forth in terms of dollars and percentages
the OTS tangible, leverage and risk-based capital requirements, and the Bank's
actual amounts and percentages at September 30,1999:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Capital Required Actual Actual Excess Excess
Requirement Percent Capital Percent Capital Percent
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tangible $ 7,881 1.5 $144,572 27.51 $136,691 26.01
- ---------------------------------------------------------------------------------------------------------------
Leverage 21,018 4.0 144,572 27.51 123,554 23.51
- ---------------------------------------------------------------------------------------------------------------
Risk-based 25,995 8.0 148,645 45.75 122,650 37.75
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Year 2000 Compliance
As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. Many existing application software products use
two-digit date fields to designate a year. As the century date change occurs,
date sensitive systems may recognize the Year 2000 as 1900 or not at all. This
inability to recognize or properly treat the Year 2000 may cause erroneous
results, ranging from system malfunctions to incorrect or incomplete processing.
The Company and the Bank have been identifying and remediating potential
problems which are associated with the "Year 2000" issues since late 1997. The
Bank conducted a comprehensive review of its computer systems in September 1997
to identify applications that could be affected by the Year 2000 issue, and
developed an implementation plan to address the issue. The Company has fully
remedied its in house accounting system, loan tracking system and other software
programs identified as mission critical by the Company. All of the hardware
associated with these systems has been checked by the Company internally, as
well as by an independent computer company, and found to be Year 2000 compliant.
The Bank's data processing is performed under agreements with BISYS, Inc.
("BISYS"), a nationwide financial service bureau, and consequently the Bank
identified BISYS as its primary mission critical service provider. BISYS has
informed the Bank in writing that all reprogramming efforts have been completed
as of September 30, 1998. Based on this information, the Bank believes BISYS
has demonstrated to be Year 2000 compliant as of December 31, 1998. The Board
of Directors has approved the Bank's Year 2000 Business Recovery Contingency
Plan which is being tested on a monthly basis.
Through September 30, 1999, the Bank has incurred $193,000 in costs
related to Year 2000 consisting primarily of hardware and software replacements
that have upgraded the Bank's computer systems in addition to addressing Year
2000. Management does not expect these costs to have a significant impact on
the Bank's financial position or results of operations. However, there can be
no assurance that the vendors' systems will be Year 2000 compliant;
consequently, the Bank could incur incremental costs to convert to another
vendor.
During the fourth quarter of 1999 and first quarter of 2000, the Bank
expects to incur additional expense for bank branch security, BISYS business
continuity services, and certain opportunity costs as a result of maintaining a
higher than normal level of cash which will not earn interest. This cash
position is in place to cover potential Year 2000 related deposit withdrawals.
Costs for these additional services are estimated to be $50,000.
14
<PAGE>
The Bank has determined that Year 2000 non-compliance by any individual
loan customer would have no material impact on the Bank. The risks associated
with the Year 2000 issue, however, could go beyond the Bank's own ability to
solve Year 2000 problems. Should suppliers of critical services fail in their
efforts to be Year 2000 compliant, it could have significant adverse financial
results for the Bank. The Bank's risk management strategy for its mission-
critical systems focuses on its highest priority system, BISYS, the financial
service bureau.
Because the Company depends substantially on its computer systems and those
of third parties, the failure of these systems to be Year 2000 compliant could
cause substantial disruption of the Company's business and could have a material
adverse financial impact on the Company. Failure to resolve Year 2000 issues
presents the following risks to the Company, which it believes reflects its most
reasonably likely worst-case scenario: the Company could lose customers to other
financial institutions, resulting in a loss of revenue, if the Company's third-
party service bureau is unable to properly process customer transactions;
governmental agencies, such as the Federal Reserve Bank of Richmond, and
correspondent institutions could fail to provide funds to the Company, which
could materially impair the Company's liquidity and affect the Company's ability
to fund loans and deposit withdrawals; concern on the part of depositors that
Year 2000 issues could impair access to their deposit account balances could
result in the Company experiencing deposit outflows before December 31, 1999;
and the Company could incur increased personnel costs if additional staff is
required to perform functions that inoperative systems would have otherwise
performed.
There can be no assurances that the Company's Year 2000 plan will
effectively address the Year 2000 issue, that the Company's estimates of the
timing and costs of completing the plan will ultimately be accurate or that the
impact of any failure of the Company or its third-party vendors and service
providers to be Year 2000 compliant will not have a material adverse effect on
the Company's business, financial condition or results of operations.
The Company has developed and tested a Year 2000 Business Recovery
Contingency Plan that calls for the Company to resort to manual processing of
transactions until the computer systems resume operation. The Year 2000
Business Recovery Contingency Plan is being tested on a monthly basis. As part
of this plan, the Bank has included a Cash and Liquidity Management Policy to
address its customers anticipated cash needs beginning in September 1999.
Internally, the Company will continue to make changes to its contingency plan as
circumstances may warrant.
The Bank will continue to concentrate on customer awareness and monthly
testing of its business recovery plan. In 1999, the Bank made available to its
customers a Y2K checklist and Y2K preparedness and scam alert brochures and
disclosed its Y2K Readiness Disclosure on its internet web site.
This disclosure is a Year 2000 Readiness disclosure as defined in the Year
2000 Information and Disclosure Act.
15
<PAGE>
Pending Legislation
Pending legislation designed to modernize the regulation of the financial
services industry expands the ability of bank holding companies to affiliate
with other types of financial services companies such as insurance companies and
investment banking companies. However, the legislation provides that companies
that acquire control of a single savings association after May 4, 1999 (or that
filed an application for that purpose after that date) are not entitled to the
unrestricted activities formerly allowed for a unitary savings and loan holding
company. Rather, these companies will have authority to engage in the
activities permitted "a financial holding company" under the new legislation,
including insurance and securities-related activities, and the activities
currently permitted for multiple savings and loan holdings companies, but
generally not in commercial activities. The authority for unrestricted
activities is grandfathered for unitary savings and loan holding companies, such
as the Company, that existed prior to May 4, 1999. However, the authority for
unrestricted activities would not apply to any company that acquired the
Company.
16
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
----------------------------------------------------------
As of September 30, 1999, there have been no material changes in
information regarding quantitative and qualitative disclosures about market risk
from the information presented as of December 31, 1998 in the Company's Annual
Report on Form 10-K.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
-----------------
Neither the Company nor the Bank are involved in any pending legal
proceedings other than routine legal proceedings occurring in the ordinary
course of business, which in the aggregate involve amounts which are believed by
management to be immaterial to the financial condition and results of the
operation of the Company and the Bank.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
-----------------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
-------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION.
-----------------
None.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ((S)249.308 OF THIS CHAPTER).
-------------------------------------------------------------
(a) Exhibits
<TABLE>
<S> <C>
3.1 Amended and Restated Articles of Incorporation of Virginia Capital
Bancshares, Inc.
3.2 Amended and Restated Bylaws of Virginia Capital Bancshares, Inc.
4.1 Draft Stock Certificate of Virginia Capital Bancshares, Inc.(1)
27.0 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
On August 27, 1999, the Company filed a Form 8-K in regard to its August
27, 1999 press release announcing that the Company had received regulatory
clearance to repurchase up to 5% of its outstanding common stock.
____________________
(1) Incorporated herein by reference into this document from the Exhibits to
Form S-1, Registration Statement and amendments thereto, initially filed on
September 11, 1998, Registration No. 33-63309.
18
<PAGE>
SIGNATURE
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 hereunto duly authorized.
VIRGINIA CAPITAL BANCSHARES, INC.
Dated: November 15, 1999 By: /s/ Samuel C. Harding
----------------------
Samuel C. Harding, Jr.
President
(principal executive officer)
Dated: November 15, 1999 By: /s/ Peggy J. Newman
-------------------
Peggy J. Newman
Executive Vice President, Treasurer
and Secretary
(principal financial and accounting officer)
19
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT AND RESTATEMENT OF
VIRGINIA CAPITAL BANCSHARES, INC.
---------------------------------------------------------------
ONE
The name of the corporation is Virginia Capital Bancshares, Inc.
TWO
The Articles of Incorporation of Virginia Capital Bancshares, Inc. have
been amended and restated as attached.
THREE
The Amended and Restated Articles of Incorporation of Virginia Capital
Bancshares, Inc. do not provide for an exchange, reclassification or
cancellation of issued shares.
FOUR
The Amended and Restated Articles of Incorporation of Virginia Capital
Bancshares, Inc. were adopted by unanimous consent of the Board of Directors on
November 24, 1998.
FIVE
The Amended and Restated Articles of Incorporation of Virginia Capital
Bancshares, Inc. were adopted by unanimous consent of the Board of Directors on
November 24, 1998, pursuant to Section 13.1-709 of the Virginia Stock
Corporation Act, under which a corporation's board of directors may amend the
articles of incorporation if the corporation has not yet issued shares. As of
November 24, 1998, Virginia Capital Bancshares, Inc. had not issued any shares.
The undersigned President and Director declares that the facts herein
stated are true as of November 25, 1998.
VIRGINIA CAPITAL BANCSHARES, INC.
By: /s/ Samuel C. Harding, Jr.
--------------------------
Samuel C. Harding, Jr.
President and Director
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
VIRGINIA CAPITAL BANCSHARES, INC.
FIRST: The name of the Corporation is Virginia Capital Bancshares, Inc.
-----
sometimes referred to as the "Corporation").
SECOND: The name of the Corporation's Registered Agent is Samuel C.
------
Harding, Jr. who is a resident of the Commonwealth of Virginia and is named
herein as an initial director of the Corporation. The post office address of
the Corporation's registered agent is 400 George Street, Fredericksburg,
Virginia 22404, located in the City of Fredericksburg.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the Virginia Stock
Corporation Act.
FOURTH:
------
A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is eighty million (80,000,000)
consisting of:
1. Five million (5,000,000) shares of Preferred Stock, par value
one cent ($.01) per share (the "Preferred Stock"); and
2. Seventy-five million (75,000,000) shares of Common Stock, par
value one cent ($.01) per share (the "Common Stock").
B. Except to the extent to which the Board of Directors shall have
specified voting power with respect to any other class of stock and except
as otherwise provided by law, the exclusive voting power shall be vested in
the Common Stock, the holders thereof being entitled to one vote for each
share of such Common Stock standing in his or her name on the books of the
Corporation. Subject to any rights and preferences of any other class of
stock, holders of Common Stock are entitled to such dividends as may be
declared by the Board of Directors out of funds lawfully available
therefor. Upon any liquidation, dissolution or winding up of the affairs
of the Corporation, whether voluntary or involuntary, holders of Common
Stock are entitled to receive pro rata the remaining assets of the
Corporation after the holders of any class of stock ranking prior to the
Common Stock have been paid in full any sums to which they may be entitled.
C. Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board of
Directors, each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be identical. The voting powers and
the preferences and relative, participating, optional and other special
<PAGE>
rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding; and the Board of Directors of the
Corporation is hereby expressly granted authority to fix by amendment to
these Articles of Incorporation (which amendment, pursuant to Virginia law,
may become effective without stockholder action) adopted prior to the
issuance of any shares of a particular series of Preferred Stock, the
voting powers and the designations, preferences and relative, optional and
other special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of the
foregoing, the following:
1. The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which
number may be increased or decreased (but not below the number
of shares then outstanding) from time to time by like action
of the Board of Directors;
2. The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if
any, of such dividends payable on any other class or classes
or series of the same or other classes of stock and whether
(and the dates from which) such dividends shall be cumulative
or noncumulative;
3. The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for,
shares of any other class or classes or of any series of the
same or any other class or classes of stock of the Corporation
or any other corporation and the terms and conditions of such
conversion or exchange;
4. Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time
or times at which, and the terms and conditions on which,
Preferred Stock of such series may be redeemed;
5. The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding up of the Corporation;
6. The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
7. The voting powers, if any, of the holders of such series of
Preferred Stock.
2
<PAGE>
D. 1. Notwithstanding any other provision of these Articles of
Incorporation, in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly
or indirectly, by a person who, as of any record date for the
determination of stockholders entitled to vote on any matter,
beneficially owns in excess of 10% of the then-outstanding
shares of Common Stock (the "Limit"), be entitled, or
permitted to any vote in respect of the shares held in excess
of the Limit. The number of votes which may be cast by any
record owner by virtue of the provisions hereof in respect of
Common Stock beneficially owned by such person beneficially
owning shares in excess of the Limit shall be a number equal
to the total number of votes which a single record owner of
all Common Stock beneficially owned by such person would be
entitled to cast, (subject to the provisions of this Article
FOURTH) multiplied by a fraction, the numerator of which is
the number of shares of such class or series which are both
beneficially owned by such person and owned of record by such
record owner and the denominator of which is the total number
of shares of Common Stock beneficially owned by such person
owning shares in excess of the Limit.
2. The following definitions shall apply to this Section D of
this Article FOURTH:
a. "Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, as in effect
on the date of filing of these Articles of Incorporation.
b. "Beneficial ownership" shall be determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, (or any
successor rule or statutory provision), or, if said Rule
13d-3 shall be rescinded and there shall be no successor
rule or provision thereto, pursuant to said Rule 13d-3 as
in effect on the date of filing of these Articles of
Incorporation; provided, however, that a person shall, in
any event, also be deemed the "beneficial owner" of any
Common Stock:
(1) which such person or any of its affiliates
beneficially owns, directly or indirectly; or
(2) which such person or any of its affiliates has: (i)
the right to acquire (whether such right is
exercisable immediately or only after the passage
of time), pursuant to any agreement, arrangement or
3
<PAGE>
understanding (but shall not be deemed to be the
beneficial owner of any voting shares solely by
reason of an agreement, contract, or other
arrangement with this Corporation to effect any
transaction which is described in any one or more
of clauses 1 through 5 of Section A of Article
EIGHTH of these Articles of Incorporation ("Article
EIGHTH")), or upon the exercise of conversion
rights, exchange rights, warrants, or options or
otherwise, or (ii) sole or shared voting or
investment power with respect thereto pursuant to
any agreement, arrangement, understanding,
relationship or otherwise (but shall not be deemed
to be the beneficial owner of any voting shares
solely by reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a
public solicitation of proxies for such meeting,
with respect to shares of which neither such person
nor any such Affiliate is otherwise deemed the
beneficial owner); or
(3) which are beneficially owned, directly or
indirectly, by any other person with which such
first mentioned person or any of its Affiliates
acts as a partnership, limited partnership,
syndicate or other group pursuant to any agreement,
arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any
shares of capital stock of this Corporation; and
provided further, however, that: (1) no Director or
Officer of this Corporation (or any Affiliate of
any such Director or Officer) shall, solely by
reason of any or all of such Directors or Officers
acting in their capacities as such, be deemed, for
any purposes hereof, to beneficially own any Common
Stock beneficially owned by any other such Director
or Officer (or any Affiliate thereof); and (2)
neither any employee stock ownership or similar
plan of this Corporation or any subsidiary of this
Corporation, nor any trustee with respect thereto
or any Affiliate of such trustee (solely by reason
of such capacity of such trustee), shall be deemed,
for any purposes hereof, to beneficially own any
Common Stock held under any such plan. For purposes
only of computing the percentage of beneficial
ownership of Common Stock of a person, the
outstanding Common Stock shall include shares
deemed owned by such person through
4
<PAGE>
application of this subsection but shall not
include any other Common Stock which may be
issuable by this Corporation pursuant to any
agreement, or upon exercise of conversion rights,
warrants or options, or otherwise. For all other
purposes, the outstanding Common Stock shall
include only Common Stock then outstanding and
shall not include any Common Stock which may be
issuable by this Corporation pursuant to any
agreement, or upon the exercise of conversion
rights, warrants or options, or otherwise.
c. The "Limit" shall mean 10% of the then-outstanding shares
of Common Stock.
d. A "person" shall include an individual, a firm, a group
acting in concert, a corporation, a partnership, an
association, a joint venture, a pool, a joint stock
company, a trust, an unincorporated organization or
similar company, a syndicate or any other group formed
for the purpose of acquiring, holding or disposing of
securities or any other entity.
3. The Board of Directors shall have the power to construe and
apply the provisions of this section and to make all
determinations necessary or desirable to implement such
provisions, including but not limited to matters with
respect to: (i) the number of shares of Common Stock
beneficially owned by any person; (ii) whether a person is
an affiliate of another; (iii) whether a person has an
agreement, arrangement, or understanding with another as to
the matters referred to in the definition of beneficial
ownership; (iv) the application of any other definition or
operative provision of the section to the given facts; or
(v) any other matter relating to the applicability or effect
of this section.
4. The Board of Directors shall have the right to demand that
any person who is reasonably believed to beneficially own
Common Stock in excess of the Limit (or holds of record
Common Stock beneficially owned by any person in excess of
the Limit) supply the Corporation with complete information
as to: (i) the record owner(s) of all shares beneficially
owned by such person who is reasonably believed to own
shares in excess of the Limit; and (ii) any other factual
matter relating to the applicability or effect of this
section as may reasonably be requested of such person.
5. Except as otherwise provided by law or expressly provided in
this Section D, the presence, in person or by proxy, of the
holders of
5
<PAGE>
record of shares of capital stock of the Corporation
entitling the holders thereof to cast a majority of the
votes (after giving effect, if required, to the provisions
of this Section D) entitled to be cast by the holders of
shares of capital stock of the Corporation entitled to vote
shall constitute a quorum at all meetings of the
stockholders, and every reference in these Articles of
Incorporation to a majority or other proportion of capital
stock (or the holders thereof) for purposes of determining
any quorum requirement or any requirement for stockholder
consent or approval shall be deemed to refer to such
majority or other proportion of the votes (or the holders
thereof) then entitled to be cast in respect of such capital
stock.
6. Any constructions, applications, or determinations made by
the Board of Directors pursuant to this section in good
faith and on the basis of such information and assistance as
was then reasonably available for such purpose shall be
conclusive and binding upon the Corporation and its
stockholders.
7. In the event any provision (or portion thereof) of this
Section D shall be found to be invalid, prohibited or
unenforceable for any reason, the remaining provisions (or
portions thereof) of this Section shall remain in full force
and effect, and shall be construed as if such invalid,
prohibited or unenforceable provision had been stricken
herefrom or otherwise rendered inapplicable, it being the
intent of this Corporation and its stockholders that each
such remaining provision (or portion thereof) of this
Section D remain, to the fullest extent permitted by law,
applicable and enforceable as to all stockholders, including
stockholders owning an amount of stock over the Limit,
notwithstanding any such finding.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the powers
and authority expressly conferred upon them by statute or by these Articles
of Incorporation or the Bylaws of the Corporation, the Directors are hereby
empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation.
B. The Directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
6
<PAGE>
C. Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special
meeting of stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders.
D. Special meetings of stockholders of the Corporation may be called
only by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board or as otherwise provided in the Bylaws. The
term "Whole Board" shall mean the total number of authorized directorships
(whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board for
adoption).
E. The holders of the Common Stock have no pre-emptive rights or
other rights to subscribe to any other shares of Common Stock or other
securities of the Corporation. Holders of the Common Stock or any other
equity securities of the Corporation have no right to cumulate votes for
the election of directors.
SIXTH:
-----
A. The number of Directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The Directors shall be divided into three
classes, as nearly equal in number as reasonably possible, with the term of
office of the first class to expire at the first annual meeting of
stockholders, the term of office of the second class to expire at the
annual meeting of stockholders one year thereafter and the term of office
of the third class to expire at the annual meeting of stockholders two
years thereafter with each Director to hold office until his or her
successor shall have been duly elected and qualified. At each annual
meeting of stockholders following such initial classification and election,
Directors elected to succeed those Directors whose terms expire shall be
elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election with each Director to hold
office until his or her successor shall have been duly elected and
qualified.
B. Subject to the rights of holders of any series of Preferred Stock
outstanding, the newly created directorships resulting from any increase in
the authorized number of Directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of
the Directors then in office, though less than a quorum, and Directors so
chosen shall hold office for a term expiring at the next annual meeting of
stockholders at which Directors are elected and until their successors
shall be elected and qualified. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
C. Advance notice of stockholder nominations for the election of
Directors and of business to be brought by stockholders before any meeting
of the stockholders of the Corporation shall be given in the manner
provided in the Bylaws of the Corporation.
7
<PAGE>
D. Subject to the rights of holders of any series of Preferred Stock
then outstanding, any Director, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 80 percent of the voting power
of all of the then-outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of Directors (after giving
effect to the provisions of Article FOURTH of these Articles of
Incorporation ("Article FOURTH")), voting together as a single class.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend or
-------
repeal Bylaws of the Corporation. Any adoption, amendment or repeal of the
Bylaws of the Corporation by the Board of Directors shall require the approval
of a majority of the Whole Board. The stockholders shall also have power to
adopt, amend or repeal the Bylaws of the Corporation; provided, however, that,
in addition to any vote of the holders of any class or series of stock of this
Corporation required by law or by these Articles of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of Directors (after giving effect to
the provisions of Article FOURTH), voting together as a single class, shall be
required to adopt, amend or repeal any provisions of the Bylaws of the
Corporation.
EIGHTH:
------
A. In addition to any affirmative vote required by law or these
Articles of Incorporation, and except as otherwise expressly provided in
this Article EIGHTH:
1. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with: (i) any Interested
Stockholder (as hereinafter defined); or (ii) any other
corporation (whether or not itself an Interested Stockholder)
which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an Interested
Stockholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions)
to or with any Interested Stockholder, or any Affiliate of any
Interested Stockholder, of any assets of the Corporation or
any Subsidiary having an aggregate Fair Market Value (as
hereinafter defined) equaling or exceeding 25% or more of the
combined assets of the Corporation and its Subsidiaries; or
3. the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any
Interested Stockholder or any Affiliate of any Interested
Stockholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market
Value (as hereinafter defined) equaling or
8
<PAGE>
exceeding 25% of the combined Fair Market Value of the
outstanding common stock of the Corporation and its
Subsidiaries, except for any issuance or transfer pursuant to
an employee benefit plan of the Corporation or any Subsidiary
thereof; or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested
Stockholder; or
5. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which
has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder or any Affiliate of any Interested
Stockholder;
shall require the affirmative vote of the holders of at least 80% of the
voting power of the then-outstanding shares of stock of the Corporation
entitled to vote in the election of Directors (the "Voting Stock") (after
giving effect to the provisions of Article FOURTH), voting together as a
single class. Such affirmative vote shall be required notwithstanding the
fact that no vote may be required, or that a lesser percentage may be
specified, by law or by any other provisions of these Articles of
Incorporation, in any agreement with any national securities exchange or
otherwise.
The term "Business Combination" as used in this Article EIGHTH shall
mean any transaction which is referred to in any one or more of paragraphs
1 through 5 of Section A of this Article EIGHTH.
B. The provisions of Section A of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only the affirmative vote of the majority of the
outstanding shares of capital stock entitled to vote after giving effect to
the provisions of Article FOURTH, or such vote (if any), as is required by
law or by these Articles of Incorporation, if, in the case of any Business
Combination that does not involve any cash or other consideration being
received by the stockholders of the Corporation solely in their capacity as
stockholders of the Corporation, the condition specified in the following
paragraph 1 is met or, in the case of any other Business Combination, all
of the conditions specified in either of the following paragraphs 1 or 2
are met:
1. The Business Combination shall have been approved by a
majority of the Disinterested Directors (as hereinafter
defined).
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<PAGE>
2. All of the following conditions shall have been met:
a. The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business
Combination of consideration other than cash to be
received per share by the holders of Common Stock in such
Business Combination shall at least be equal to the
higher of the following:
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage
commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Stockholder or any of
its Affiliates for any shares of Common Stock
acquired by it: (i) within the two-year period
immediately prior to the first public announcement
of the proposal of the Business Combination (the
"Announcement Date"); or (ii) in the transaction in
which it became an Interested Stockholder,
whichever is higher; or
(2) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the
Interested Stockholder became an Interested
Stockholder (such latter date is referred to in
this Article EIGHTH as the "Determination Date"),
whichever is higher.
b. The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business
Combination of consideration other than cash to be
received per share by holders of shares of any class of
outstanding Voting Stock other than Common Stock shall be
at least equal to the highest of the following (it being
intended that the requirements of this subparagraph (b)
shall be required to be met with respect to every such
class of outstanding Voting Stock, whether or not the
Interested Stockholder has previously acquired any shares
of a particular class of Voting Stock):
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage
commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Stockholder for any
shares of such class of Voting Stock acquired by
it: (i) within the two-year period immediately
prior to the
10
<PAGE>
Announcement Date; or (ii) in the transaction in
which it became an Interested Stockholder,
whichever is higher; or
(2) (if applicable) the highest preferential amount per
share to which the holders of shares of such class
of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution
or winding up of the Corporation; or
(3) the Fair Market Value per share of such class of
Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher.
c. The consideration to be received by holders of a
particular class of outstanding Voting Stock (including
Common Stock) shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of
such class of Voting Stock. If the Interested Stockholder
has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration
to be received per share by holders of shares of such
class of Voting Stock shall be either cash or the form
used to acquire the largest number of shares of such
class of Voting Stock previously acquired by the
Interested Stockholder. The price determined in
accordance with subparagraph B.2 of this Article EIGHTH
shall be subject to appropriate adjustment in the event
of any stock dividend, stock split, combination of shares
or similar event.
d. After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of
such Business Combination: (1) except as approved by a
majority of the Disinterested Directors (as hereinafter
defined), there shall have been no failure to declare and
pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) on any outstanding
stock having preference over the Common Stock as to
dividends or liquidation; (2) there shall have been: (i)
no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a
majority of the Disinterested Directors; and (ii) an
increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar
transaction
11
<PAGE>
which has the effect of reducing the number of
outstanding shares of the Common Stock, unless the
failure to so increase such annual rate is approved by a
majority of the Disinterested Directors, and (3) neither
such Interested Stockholder or any of its Affiliates
shall have become the beneficial owner of any additional
shares of Voting Stock except as part of the transaction
which results in such Interested Stockholder becoming an
Interested Stockholder.
e. After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall
not have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided, directly or indirectly, by the Corporation,
whether in anticipation of or in connection with such
Business Combination or otherwise.
f. A proxy or information statement describing the proposed
Business Combination and complying with the requirements
of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (or any subsequent
provisions replacing such Act, and the rules or
regulations thereunder) shall be mailed to stockholders
of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not
such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
C. For the purposes of this Article EIGHTH:
1. A "Person" shall include an individual, a firm, a group
acting in concert, a corporation, a partnership, an
association, a joint venture, a pool, a joint stock company,
a trust, an unincorporated organization or similar company,
a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities or any other
entity.
2. "Interested Stockholder" shall mean any person (other than
the Corporation or any Holding Company or Subsidiary
thereof) who or which:
a. is the beneficial owner, directly or indirectly, of more
than 10% of the voting power of the outstanding Voting
Stock; or
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<PAGE>
b. is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in
question was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the
then outstanding Voting Stock; or
c. is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the
two-year period immediately prior to the date in question
beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the
course of a transaction or series of transactions not
involving a public offering within the meaning of the
Securities Act of 1933, as amended.
3. For purposes of this Article EIGHTH, "beneficial ownership"
shall be determined in the manner provided in Section D of
Article FOURTH hereof.
4. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of
1934, as in effect on the date of filing of these Articles
of Incorporation.
5. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or
indirectly, by the Corporation; provided, however, that for
the purposes of the definition of Interested Stockholder set
forth in Paragraph 2 of this Section C, the term
"Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly
or indirectly, by the Corporation.
6. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested
Stockholder and was a member of the Board of Directors prior
to the time that the Interested Stockholder became an
Interested Stockholder, and any Director who is thereafter
chosen to fill any vacancy of the Board of Directors or who
is elected and who, in either event, is unaffiliated with
the Interested Stockholder and in connection with his or her
initial assumption of office is recommended for appointment
or election by a majority of Disinterested Directors then on
the Board of Directors.
7. "Fair Market Value" means:
a. in the case of stock, the highest closing sales price
of the stock during the 30-day period immediately
preceding the date in question of a share of such stock
on the National
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<PAGE>
Association of Securities Dealers Automated Quotation
System or any system then in use, or, if such stock is
admitted to trading on a principal United States
securities exchange registered under the Securities
Exchange Act of 1934, as amended, Fair Market Value
shall be the highest sale price reported during the 30-
day period preceding the date in question, or, if no
such quotations are available, the Fair Market Value on
the date in question of a share of such stock as
determined by the Board of Directors in good faith, in
each case with respect to any class of stock,
appropriately adjusted for any dividend or distribution
in shares of such stock or any stock split or
reclassification of outstanding shares of such stock
into a greater number of shares of such stock or any
combination or reclassification of outstanding shares
of such stock into a smaller number of shares of such
stock; and
b. in the case of property other than cash or stock, the
Fair Market Value of such property on the date in
question as determined by the Board of Directors in
good faith.
8. Reference to "Highest Per Share Price" shall in each case
with respect to any class of stock reflect an appropriate
adjustment for any dividend or distribution in shares of
such stock or any stock split or reclassification of
outstanding shares of such stock into a greater number of
shares of such stock or any combination or reclassification
of outstanding shares of such stock into a smaller number of
shares of such stock.
9. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than
cash to be received" as used in Subparagraphs (a) and (b) of
Paragraph 2 of Section B of this Article EIGHTH shall
include the shares of Common Stock and/or the shares of any
other class of outstanding Voting Stock retained by the
holders of such shares.
D. A majority of the Disinterested Directors of the Corporation shall
have the power and duty to determine for the purposes of this Article
EIGHTH, on the basis of information known to them after reasonable inquiry:
(a) whether a person is an Interested Stockholder; (b) the number of shares
of Voting Stock beneficially owned by any person; (c) whether a person is
an Affiliate or Associate of another; and (d) whether the assets which are
the subject of any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the Corporation or
any Subsidiary in any Business Combination has an aggregate Fair Market
Value equaling or exceeding 25% of the combined Fair Market Value of the
Common Stock of the Corporation and its Subsidiaries.
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<PAGE>
A majority of the Disinterested Directors shall have the further power to
interpret all of the terms and provisions of this Article EIGHTH.
E. Nothing contained in this Article EIGHTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by
law.
F. Notwithstanding any other provisions of these Articles of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of
any particular class or series of the Voting Stock required by law, these
Articles of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of at least 80 percent of the voting power
of all of the then-outstanding shares of the Voting Stock (after giving
effect to the provisions of Article FOURTH), voting together as a single
class, shall be required to alter, amend or repeal this Article EIGHTH.
NINTH: The Board of Directors of the Corporation, when evaluating any
-----
offer of another Person (as defined in Article EIGHTH hereof) to: (A) make a
tender or exchange offer for any equity security of the Corporation; (B) merge
or consolidate the Corporation with another corporation or entity; or (C)
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation, may, in connection with the exercise of its judgment
in determining what is in the best interest of the Corporation and its
stockholders, give due consideration to all relevant factors, including, without
limitation, those factors that Directors of any subsidiary of the Corporation
may consider in evaluating any action that may result in a change or potential
change in the control of the subsidiary, and the social and economic effect of
acceptance of such offer: on the Corporation's present and future customers and
employees and those of its Subsidiaries (as defined in Article EIGHTH hereof);
on the communities in which the Corporation and its Subsidiaries operate or are
located; on the ability of the Corporation to fulfill its corporate objective as
a savings and loan holding company under applicable laws and regulations; and on
the ability of its subsidiary savings bank to fulfill the objectives of a stock
form savings bank under applicable statutes and regulations.
TENTH:
-----
A. Each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or
an Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a Director, Officer, employee or agent or in any other
capacity while serving as a Director, Officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Virginia Stock Corporation Act, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide
prior to
15
<PAGE>
such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as
provided in Section C hereof with respect to proceedings to enforce rights
to indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
B. The right to indemnification conferred in Section A of this
Article TENTH shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Virginia Stock Corporation Act requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a Director or
Officer (and not in any other capacity in which service was or is rendered
by such indemnitee, including, without limitation, services to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim. If successful
in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking, the indemnitee shall be entitled to be paid also the
expenses of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that, the indemnitee has not met any applicable
standard for indemnification set forth in the Virginia Stock Corporation
Act. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee has
met the applicable standard of conduct set forth in the Virginia Stock
Corporation Act, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders)
that the indemnitee has not met such applicable standard of conduct, shall
create a
16
<PAGE>
presumption that the indemnitee has not met the applicable standard of
conduct or, in the case of such a suit brought by the indemnitee, be a
defense to such suit. In any suit brought by the indemnitee to enforce a
right to indemnification or to an advancement of expenses hereunder, or by
the Corporation to recover an advancement of expenses pursuant to the terms
of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article TENTH or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Articles of Incorporation, Bylaws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
subsidiary or Affiliate or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether
or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Virginia Stock
Corporation Act.
F. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and Officers of
the Corporation.
ELEVENTH: A Director of this Corporation shall not be personally liable to
--------
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability: (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 13.1-692 of the Virginia Stock Corporation
Act; or (iv) for any transaction from which the Director derived an improper
personal benefit. If the Virginia Stock Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal liability of
Directors, then the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Virginia Stock
Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.
TWELFTH: The Corporation reserves the right to amend or repeal any
-------
provision contained in these Articles of Incorporation in the manner prescribed
by the laws of the Commonwealth of Virginia and all rights conferred upon
stockholders are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of these Articles of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by these
17
<PAGE>
Articles of Incorporation, the affirmative vote of the holders of at least 80
percent of the voting power of all of the then-outstanding shares of the capital
stock of the Corporation entitled to vote generally in the election of Directors
(after giving effect to the provisions of Article FOURTH), voting together as a
single class, shall be required to amend or repeal this Article TWELFTH, Section
D of Article FOURTH, Sections C or D of Article FIFTH, Article SIXTH, Article
SEVENTH, Article EIGHTH or Article TENTH.
18
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EXHIBIT 3.2
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VIRGINIA CAPITAL BANCSHARES, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
--------- --------------
An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
--------- ----------------
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of Directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board").
Section 3. Notice of Meetings.
--------- ------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Virginia Stock Corporation Act or the Articles of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
--------- ------
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy (after giving effect to the provisions of Article FOURTH of the
Corporation's Articles of Incorporation), shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law. Where a separate vote by a class or classes is
required, a majority of the shares of such class
<PAGE>
or classes present in person or represented by proxy (after giving effect to the
provisions of Article FOURTH of the Corporation's Articles of Incorporation)
shall constitute a quorum entitled to take action with respect to that vote on
that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present in person or by proxy constituting a quorum, then except as otherwise
required by law, those present in person or by proxy at such adjourned meeting
shall constitute a quorum, and all matters shall be determined by a majority of
the votes cast at such meeting.
Section 5. Organization.
--------- ------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board of the Corporation or, in
his or her absence, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present, in person or by proxy, shall call
to order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. Conduct of Business.
--------- -------------------
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedures at the meeting, including such regulation
of the manner of voting and the conduct of discussion as seem to him or her in
order. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
(b) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting: (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed
to and received at the principal executive offices of the Corporation not less
than ninety (90) days prior to the date of the annual meeting; provided,
however, that in the event that less than one hundred (100) days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set forth as to each
matter such stockholder proposes to bring before the annual meeting: (i) a
brief
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<PAGE>
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting; (ii) the name
and address, as they appear on the Corporation's books, of the stockholder
proposing such business; (iii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by such stockholder; and
(iv) any material interest of such stockholder in such business. Notwithstanding
anything in these Bylaws to the contrary, no business shall be brought before or
conducted at an annual meeting except in accordance with the provisions of this
Section 6(b). The Officer of the Corporation or other person presiding over the
annual meeting shall, if the facts so warrant, determine and declare to the
meeting that business was not properly brought before the meeting in accordance
with the provisions of this Section 6(b) and, if he should so determine, he
shall so declare to the meeting and any such business so determined to be not
properly brought before the meeting shall not be transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the procedures
set forth in these Bylaws shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders at which directors are to be elected
only: (i) by or at the direction of the Board of Directors; or (ii) by any
stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in this Section
6(c). Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made by timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered or
mailed to and received at the principal executive offices of the Corporation not
less than ninety (90) days prior to the date of the meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth: (i) as to each person whom such stockholder proposes to
nominate for election or re-election as a Director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (ii) as to the stockholder giving
the notice (x) the name and address, as they appear on the Corporation's books,
of such stockholder and (y) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such stockholder. At the request
of the Board of Directors, any person nominated by the Board of Directors for
election as a Director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
Director of the Corporation unless nominated in accordance with the provisions
of this Section 6(c). The Officer of the Corporation or other person presiding
at the meeting shall, if the facts so warrant, determine that a nomination was
not made in accordance with such provisions and, if he or she shall so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
3
<PAGE>
Section 7. Proxies and Voting.
--------- ------------------
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting. Any facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be made by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or his or her proxy, a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state the name of
the stockholder or proxy voting and such other information as may be required
under the procedures established for the meeting. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Articles of Incorporation, all other
matters shall be determined by a majority of the votes cast.
Section 8. Stock List.
--------- ----------
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 9. Consent of Stockholders in Lieu of Meeting.
--------- ------------------------------------------
4
<PAGE>
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number, Term of Office and Limitations.
--------- ------------------------------------------------------
The business and affairs of the Corporation shall be under the direction of
its Board of Directors. The number of Directors who shall constitute the Whole
Board shall be such number as the Board of Directors shall from time to time
have designated, except that in the absence of such designation shall be nine.
The Board of Directors shall annually elect a Chairman of the Board from among
its members who shall, when present, preside at its meetings.
The Directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the annual meeting of
stockholders one year thereafter and the term of office of the third class to
expire at the annual meeting of stockholders two years thereafter, with each
Director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, Directors elected to
succeed those Directors whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their election, with each Director to hold office until his or her successor
shall have been duly elected and qualified.
No person of an age seventy-two (72) years of age or older will be eligible
for election, reelection, appointment, or reappointment to the Board of
Directors of the Corporation and no Director shall serve as such beyond the
annual meeting of the Corporation immediately following the attainment of
seventy-two (72) years of age; provided that the age limitations set forth in
this Section 1 of Article II shall not apply to any director of the Corporation
who was both a Director of the Corporation as of June 30, 1999 and is seventy-
two (72) years of age or older as of June 30, 1999.
Section 2. Vacancies and Newly Created Directorships.
--------- -----------------------------------------
Subject to the rights of the holders of any class or series of Preferred
Stock, and unless the Board of Directors otherwise determines, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the Directors then in office, though less than a
quorum, and Directors so chosen shall hold office for a term expiring at the
next annual meeting of stockholders at which Directors are elected and until
such Director's successor shall have been duly elected and qualified. No
5
<PAGE>
decrease in the number of authorized directors constituting the Board shall
shorten the term of any incumbent Director.
Section 3. Regular Meetings.
--------- ----------------
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
--------- ----------------
Special meetings of the Board of Directors may be called by one-third (1/3)
of the Directors then in office (rounded up to the nearest whole number), by the
Chairman of the Board or the President or, in the event that the Chairman of the
Board or President are incapacitated or otherwise unable to call such meeting,
by the Secretary, and shall be held at such place, on such date, and at such
time as they, or he or she, shall fix. Notice of the place, date, and time of
each such special meeting shall be given each Director by whom it is not waived
by mailing written notice not less than five (5) days before the meeting or by
telegraphing or telexing or by facsimile transmission of the same not less than
twenty-four (24) hours before the meeting. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
--------- ------
At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend
any meeting, a majority of those present may adjourn the meeting to another
place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
--------- -------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
-------------------
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the Directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
6
<PAGE>
Section 8. Powers.
--------- ------
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any Officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any Officer upon
any other person for the time being;
(5) To confer upon any Officer of the Corporation the power to
appoint, remove and suspend subordinate Officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for Directors, Officers, employees and
agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for Directors, Officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and affairs;
and
(9) To fix the Compensation of officers and employees of the
Corporation and its subsidiaries as it may determine.
Section 9. Compensation of Directors.
--------- -------------------------
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.
7
<PAGE>
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
--------- ------------------------------------
The Board of Directors, by a vote of a majority of the Board of Directors,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for these committees and any others provided for herein,
elect a Director or Directors to serve as the member or members, designating, if
it desires, other Directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so
designated may exercise the power and authority of the Board of Directors to
declare a dividend and to authorize the issuance of stock if the resolution
which designates the committee or a supplemental resolution of the Board of
Directors shall so provide. In the absence or disqualification of any member of
any committee and any alternate member in his or her place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in
the place of the absent or disqualified member.
Section 2. Conduct of Business.
--------- -------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings. The quorum requirements for each such
committee shall be a majority of the members of such committee unless otherwise
determined by the Board of Directors by a majority vote of the Board of
Directors which such quorum determined by a majority of the Board may be one-
third of such members and all matters considered by such committees shall be
determined by a majority vote of the members present. Action may be taken by any
committee without a meeting if all members thereof consent thereto in writing,
and the writing or writings are filed with the minutes of the proceedings of
such committee.
Section 3. Nominating Committee.
---------- --------------------
The Board of Directors shall appoint a Nominating Committee of the Board,
consisting of not less than three (3) members. The Nominating Committee shall
have authority: (a) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation pursuant to Section 6(c)(ii)
of Article I of these Bylaws in order to determine compliance with such Bylaw;
and (b) to recommend to the Whole Board nominees for election to the Board of
Directors to replace those Directors whose terms expire at the annual meeting of
stockholders next ensuing.
8
<PAGE>
ARTICLE IV - OFFICERS
Section 1. Generally.
--------- ---------
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a Chairman of the Board, Chief
Executive Officer, a President, one or more Vice Presidents, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The Chairman of the Board shall be chosen from among the Directors.
Any number of offices may be held by the same person.
(b) The term of office of all Officers shall be until the next annual
election of Officers and until their respective successors are chosen but any
Officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of Directors then constituting the Board of
Directors.
(c) All Officers chosen by the Board of Directors shall have such
powers and duties as generally pertain to their respective Offices, subject to
the specific provisions of this ARTICLE IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. Chairman of the Board of Directors.
--------- ----------------------------------
The Chairman of the Board, subject to the provisions of these Bylaws and to
the direction of the Board of Directors, when present shall preside at all
meetings of the stockholders of the Corporation. The Chairman of the Board
shall perform such duties designated to him by the Board of Directors and which
are delegated to him or her by the Board of Directors by resolution of the Board
of Directors.
Section 3. President and Chief Executive Officer.
--------- -------------------------------------
The President and Chief Executive Officer shall have general responsibility
for the management and control of the business and affairs of the Corporation
and shall perform all duties and have all powers which are commonly incident to
the office of President and Chief Executive Officer or which are delegated to
him or her by the Board of Directors. Subject to the direction of the Board of
Directors, the President and Chief Executive Officer shall have power to sign
all stock certificates, contracts and other instruments of the Corporation which
are authorized and shall have general supervision of all of the other Officers
(other than the Chairman of the Board), employees and agents of the Corporation.
Section 4. Vice President.
---------- --------------
The Vice President or Vice Presidents shall perform the duties of the
President in his absence or during his inability to act. In addition, the Vice
Presidents shall perform the duties and exercise the powers usually incident to
their respective offices and/or such other duties and powers as may be properly
assigned to them by the Board of Directors, the Chairman of the Board or the
President.
9
<PAGE>
A Vice President or Vice Presidents may be designated as Executive Vice
President or Senior Vice President.
Section 5. Secretary.
--------- ---------
The Secretary or Assistant Secretary shall issue notices of meetings, shall
keep their minutes, shall have charge of the seal and the corporate books, shall
perform such other duties and exercise such other powers as are usually incident
to such office and/or such other duties and powers as are properly assigned
thereto by the Board of Directors, the Chairman of the Board or the President.
Subject to the direction of the Board of Directors, the Secretary shall have the
power to sign all stock certificates.
Section 6. Treasurer.
---------- ----------
The Treasurer shall be the Comptroller of the Corporation and shall have
the responsibility for maintaining the financial records of the Corporation. He
or she shall make such disbursements of the funds of the Corporation as are
authorized and shall render from time to time an account of all such
transactions and of the financial condition of the Corporation. The Treasurer
shall also perform such other duties as the Board of Directors may from time to
time prescribe. Subject to the direction of the Board of Directors, the
Treasurer shall have the power to sign all stock certificates.
Section 7. Assistant Secretaries and Other Officers.
--------- -----------------------------------------
The Board of Directors may appoint one or more Assistant Secretaries and
such other Officers who shall have such powers and shall perform such duties as
are provided in these Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 8. Action with Respect to Securities of Other Corporations.
---------- --------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or any
Officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
--------- ---------------------
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board or the President, and by
the Secretary or an Assistant Secretary, or any Treasurer or Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.
10
<PAGE>
Section 2. Transfers of Stock.
--------- ------------------
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
--------- -----------
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the next day preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment or rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
--------- --------------------------------------
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
--------- -----------
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
Section 1. Notices.
--------- -------
11
<PAGE>
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, Director, Officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier. Any such notice shall be addressed to such stockholder, Director,
Officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telegram or
mailgram or other courier, shall be the time of the giving of the notice.
Section 2. Waivers.
--------- -------
A written waiver of any notice, signed by a stockholder, Director, Officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, Director, Officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
--------- --------------------
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
--------- --------------
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
an assistant to the Treasurer.
Section 3. Reliance Upon Books, Reports and Records.
--------- ----------------------------------------
Each Director, each member of any committee designated by the Board of
Directors, and each Officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its Officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such Director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
--------- -----------
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
12
<PAGE>
Section 5. Time Periods.
--------- ------------
In applying any provision of these Bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII - AMENDMENTS
The Board of Directors may amend, alter or repeal these Bylaws at any
meeting of the Board, provided notice of the proposed change was given not less
than two (2) days prior to the meeting. The stockholders shall also have power
to amend, alter or repeal these Bylaws at any meeting of stockholders provided
notice of the proposed change was given in the notice of the meeting; provided,
however, that, notwithstanding any other provisions of the Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the voting stock required by law, the Articles of Incorporation, any
Preferred Stock Designation or these Bylaws, the affirmative votes of the
holders of at least 80% of the voting power of all the then-outstanding shares
of the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal any provisions of these Bylaws.
The above Amended and Restated Bylaws are effective as of August 10, 1999.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q and is qualified in its entirety by reference to the unaudited financial
statements contained therein.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,061
<INT-BEARING-DEPOSITS> 22,433
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 88,083
<INVESTMENTS-CARRYING> 762
<INVESTMENTS-MARKET> 775
<LOANS> 425,153
<ALLOWANCE> (5,685)
<TOTAL-ASSETS> 550,497
<DEPOSITS> 356,954
<SHORT-TERM> 3,000
<LIABILITIES-OTHER> 17,506
<LONG-TERM> 0
0
0
<COMMON> 109
<OTHER-SE> 172,928
<TOTAL-LIABILITIES-AND-EQUITY> 550,497
<INTEREST-LOAN> 24,073
<INTEREST-INVEST> 5,197
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 29,270
<INTEREST-DEPOSIT> 12,402
<INTEREST-EXPENSE> 12,772
<INTEREST-INCOME-NET> 16,498
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 250
<EXPENSE-OTHER> 5,927
<INCOME-PRETAX> 10,965
<INCOME-PRE-EXTRAORDINARY> 10,965
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,835
<EPS-BASIC> 0.66
<EPS-DILUTED> 0.66
<YIELD-ACTUAL> 7.16
<LOANS-NON> 4,478
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,375
<LOANS-PROBLEM> 380
<ALLOWANCE-OPEN> 5,684
<CHARGE-OFFS> 120
<RECOVERIES> 31
<ALLOWANCE-CLOSE> 5,685
<ALLOWANCE-DOMESTIC> 3,532
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,153
</TABLE>
