U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended Commission File No.
June 30, 2000 000-24002
CENTRAL VIRGINIA BANKSHARES, INC.
Virginia 54-1467806
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2036 New Dorset Road
P. O. Box 39
Powhatan, Virginia 23139
(Address of Principal Executive Office)
(804) 598-4216
(Registrant's Telephone Number, Including Area Code)
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___ (not subject to filing
requirements for the past 90 days).
As of August 14, 2000, 1,931,864 shares were outstanding.
<PAGE>
CENTRAL VIRGINIA BANKSHARES, INC.
QUARTERLY REPORT ON FORM 10-QSB
August 14, 2000
INDEX
Part I. Financial Information Page No.
------------------------------ --------
Item 1 Financial Statements
Consolidated Balance Sheets - June 30, 2000
and 1999............................................................3
Consolidated Statements of Income - Three
Months Ended June 30, 2000 and 1999
and Six Months Ended June 30, 2000 and 1999.........................4
Consolidated Statements of Cash Flows - Six
Months Ended June 30, 2000 and 1999.................................5
Notes to Consolidated Financial Statements -
June 30, 2000 and 1999 (Unaudited)..................................6
Item 2 Management's Discussion and Analysis or
Plan of Operation................................................7-12
Part II. Other Information
Item 1 Legal Proceedings...............................................12-13
Item 4 Submission of Matters to a Vote of
Security Holders...................................................13
Item 6 Exhibits and Reports on Form 8-K...................................14
Signatures..................................................................15
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<PAGE>
PART I
ITEM 1 FINANCIAL STATEMENTS
CENTRAL VIRGINIA BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, 2000 June 30, 1999
------ ------------- -------------
<S> <C> <C>
Cash and due from banks $ 6,111,641 $ 4,000,002
Federal funds sold 2,263,000 0
------------- -------------
Total cash and cash equivalents $ 8,374,641 $ 4,000,002
Securities available for sale 18,667,424 25,784,274
Securities held to maturity (approximate market
value 2000 $24,561,327; 1999 $26,929,173) 25,129,840 26,947,775
Mortgage loans held for sale 526,250 361,000
Total Loans 133,043,071 123,298,314
Less: Unearned interest (337,471) (288,914)
Reserve for loan losses (1,543,639) (1,363,551)
------------- -------------
Loans, net 131,161,961 121,645,849
------------- -------------
Bank premises and equipment, net 4,359,820 4,506,273
Accrued interest receivable 1,534,032 1,308,747
Other assets 4,410,276 2,866,934
------------- -------------
Total assets $ 194,164,244 $ 187,420,854
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand deposits $ 23,313,966 $ 23,241,917
Interest bearing demand deposits and NOW accounts 32,212,847 34,296,538
Savings deposits 18,854,740 19,369,815
Time deposits, $100,000 and over 16,613,307 15,256,141
Other time deposits 69,393,427 65,735,917
------------- -------------
$ 160,388,287 $ 157,900,328
Federal funds purchased and securities sold under repurchase
agreements 219,244 6,898,741
FHLB advance 15,000,000 5,000,000
Note payable 18,000 27,000
Accrued interest payable 414,075 350,635
Other liabilities 346,226 161,527
------------- -------------
Total liabilities $ 176,385,832 $ 170,338,231
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $1.25 par value; 6,000,000 shares authorized;
1,931,684 and 1,920,103 shares issued and outstanding in
2000 and 1999, respectively $ 2,414,605 $ 2,400,129
Surplus 4,400,845 4,306,012
Retained earnings 12,084,558 10,859,339
Accumulated other comprehensive income (1,121,596) (482,857)
------------- -------------
Total stockholders' equity $ 17,778,412 $ 17,082,623
------------- -------------
Total liabilities and stockholders' equity $ 194,164,244 $ 187,420,854
============= =============
Loan to Deposit Ratio 81.78% 77.04%
Book Value $ 9.20 $ 8.90
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
CENTRAL VIRGINIA BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $3,063,770 $2,621,538 $6,063,052 $5,115,553
Interest on securities:
U.S. Government agencies and corporations 267,360 369,565 538,222 764,708
U.S. Treasury securities 7,619 31,577 23,378 63,131
States and political subdivisions 367,959 390,967 737,207 789,740
Other 133,444 99,609 261,277 186,541
Interest on federal funds sold 30,522 145 30,986 310
---------- ---------- ---------- ----------
Total interest income $3,870,674 $3,513,401 $7,654,122 $6,919,983
---------- ---------- ---------- ----------
Interest expense
Interest on deposits $1,574,709 $1,476,670 $3,024,473 $2,961,986
Interest on federal funds purchased and securities
sold under repurchase agreements 9,277 100,278 55,225 193,007
Interest on FHLB borrowings 305,115 73,938 580,656 147,063
Interest on note payable 360 540 900 1,260
---------- ---------- ---------- ----------
Total interest expense $1,889,461 $1,651,426 $3,661,254 $3,303,316
---------- ---------- ---------- ----------
Net interest income $1,981,213 $1,861,975 $3,992,868 $3,616,667
Provision for loan losses 60,000 49,500 120,000 99,000
---------- ---------- ---------- ----------
Net interest income after provision for loan losses $1,921,213 $1,812,475 $3,872,868 $3,517,667
---------- ---------- ---------- ----------
Other income
Deposit fees and charges $ 292,839 $ 236,856 $ 552,796 $ 439,372
Realized gain on sale of securities available for sale - 3,140 - 3,140
Other 87,324 89,659 179,850 189,529
---------- ---------- ---------- ----------
Total other income $ 380,163 $ 329,655 $ 732,646 $ 632,041
---------- ---------- ---------- ----------
Other expenses
Salaries and wages $ 725,400 $ 617,100 $1,432,000 $1,234,900
Pensions and other employee benefits 79,780 94,436 210,097 188,037
Occupancy expense 67,600 65,767 145,904 134,212
Equipment depreciation 135,758 112,731 271,452 209,581
Equipment repairs and maintenance 54,088 67,870 106,085 113,851
Advertising and public relations 30,494 47,368 58,234 96,902
Federal insurance premiums 7,694 5,591 15,660 11,067
Office supplies, telephone and postage 103,393 113,454 209,720 229,250
Taxes and licenses 31,962 32,078 67,135 67,295
Legal and professional fees 156,339 61,746 256,729 81,700
Other operating expenses 249,760 239,591 482,292 463,454
---------- ---------- ---------- ----------
Total other expenses $1,642,268 $1,457,732 $3,255,308 $2,830,249
---------- ---------- ---------- ----------
Income before income taxes $ 659,108 $ 684,398 $1,350,206 $1,319,459
Income taxes 178,487 203,875 384,061 387,837
---------- ---------- ---------- ----------
Net income $ 480,621 $ 480,523 $ 966,145 $ 931,622
========== ========== ========== ==========
Per share of common stock:
Income before income taxes $ 0.34 $ 0.36 $ 0.70 $ 0.69
Net income $ 0.25 $ 0.25 $ 0.50 $ 0.49
Dividends paid per share $ 0.10 $ 0.10 $ 0.20 $ 0.20
Weighted average shares 1,928,508 1,916,240 1,926,356 1,916,240
Return on average assets 0.99% 1.03% 1.01% 1.01%
Return on average equity 10.90% 11.73% 11.07% 11.41%
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
CENTRAL VIRGINIA BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 966,145 $ 931,622
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation 316,595 255,502
Provision for loans losses 120,000 99,000
Amortization and accretion on securities 28,136 39,554
Realized gain on sales of securities available for sale - (3,140)
Loss on sale of foreclosed real estate 15,540 -
Change in operating assets and liabilities:
(Increase) decrease in assets:
Mortgage loans held for sale (165,478) 398,466
Accrued interest receivable (127,980) 158,848
Other assets (1,098,268) (658,515)
Increase (decrease) in liabilities:
Accrued interest payable 19,351 (25,142)
Other liabilities 6,554 (132,066)
------------- -------------
Net cash provided by operating activities $ 80,595 $ 1,064,129
------------- -------------
Cash Flows from Investing Activities
Proceeds from maturities of securities held to maturity $ 1,360,000 $ 1,125,000
Purchase of securities held to maturity - (455,400)
Proceeds from sales and maturities of securities available for sale 357,219 3,037,860
Purchase of securities available for sale (66,600) (597,500)
Net increase in loans made to customers (2,749,856) (12,176,096)
Net purchases of premises and equipment (74,208) (480,088)
Proceeds for sale of foreclosed real estate 220,735 -
Net expenditures on foreclosed real estate (9,760) (5,436)
------------- -------------
Net cash (used in) investing activities ($ 1,173,445) ($ 9,551,660)
------------- -------------
Cash Flows from Financing Activities
Net increase in deposits $ 8,177,286 $ 3,173,527
Net increase (decrease) in federal funds purchased and securities
sold under repurchase agreements (53,798) 1,818,549
Repayment of FHLB borrowings (4,000,000) -
Repayment of note payable (9,000) (9,000)
Net proceeds from issuance of common stock 73,816 74,768
Dividends paid (385,065) (383,115)
------------- -------------
Net cash provided by financing activities $ 3,803,239 $ 4,674,729
------------- -------------
Increase (decrease) in cash and cash equivalents $ 2,710,389 ($ 3,812,802)
Cash and cash equivalents:
Beginning 5,664,252 7,812,804
------------- -------------
Ending $ 8,374,641 $ 4,000,002
============= =============
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $ 3,641,903 $ 3,328,458
============= =============
Income Taxes $ 350,005 $ 369,403
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
CENTRAL VIRGINIA BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Unaudited)
Note 1 Basis of Presentation
These interim financial statements are unaudited; however, such information
reflects all adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim periods presented. All adjustments
are of a normal recurring nature.
Note 2 Comprehensive Income
A reconciliation from net income to total comprehensive income for the three
months and six months ended June 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net income $ 480,621 $ 480,523 $ 966,145 $ 931,622
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising
during the period on securities available
for sale, net of deferred income taxes (14,279) (426,766) 36,717 (657,784)
--------- --------- ---------- ---------
Total comprehensive income $ 466,342 $ 53,757 $1,002,862 $ 273,838
========= ========= ========== =========
</TABLE>
Note 3 Commitments and Contingencies
As previously reported in the Company's Quarterly Report on Form 10-QSB for the
period ended March 31, 2000, the Bank is a party to lawsuits filed by Old
Republic National Title Insurance Company, in its own name and on behalf of
twelve mortgage lenders insured by Old Republic, in the Circuit Court for the
County of Chesterfield, Virginia and by the trustee in bankruptcy for Alliance
Title and Escrow, Ltd. in the United States Bankruptcy Court for the Eastern
District of Virginia. Both lawsuits arise primarily from the alleged
misappropriation of funds by the president of Alliance Title from the Alliance
Title accounts maintained with the Bank.
In August 2000, the Bank, Old Republic and Alliance Title reached an agreement
in principle to settle the lawsuits. The parties are currently finalizing the
details of the settlement, which will be submitted to the United States
Bankruptcy Court for its approval. The Bank expects to obtain such court
approval in the third quarter of 2000. The parties will be required to keep the
terms of the settlement confidential.
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<PAGE>
ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The Company's net income totaled $480,621 in the second quarter of
2000, compared to $480,523 in the second quarter of 1999. These results reflect
an increase in net interest income as well as increases in other income and
other expenses. For the quarter, total interest income rose 10.2%, while net
interest income rose 6.4%. The primary source of the increases in interest
income was in interest and fees on loans, which rose 16.9%, compared to the same
quarter in 1999. Total other income rose 15.3%, primarily in deposit fees and
charges, while other expenses increased 12.7%. The increase in other expenses is
primarily the result of legal fees incurred in defense of a lawsuit filed
against the Bank in May 1999. (See Legal Proceedings in Part II.) An agreement
in principle has been reached to settle the suit but has yet to be finalized.
The settlement as agreed upon will have no impact on future earnings of the
Company. Final settlement is expected in the third quarter of this year.
Net income per common share for the second quarter of 2000 and 1999 was
$.25. The Company's annualized return on average equity was 10.90% in the second
quarter of 2000, compared to 11.73% for the second quarter of 1999, while the
return on average assets amounted to .99% and 1.03% for these periods
respectively.
The Company's net income for the six months ended June 30, 2000 totaled
$966,145, an increase of $34,523, or 3.7% over the first six months of 1999. The
2000 results reflect primarily a 10.4% increase in net interest income as well
as a 15.9% increase in other income and a 15.0% increase in other expenses. Net
income per common share for the first six months of 2000 was $.50 compared to
$.49 for the same period in 1999. The Company's annualized return on average
equity was 11.07% for the six months ended June 30, 2000, compared to 11.41% for
the six months ended June 30, 1999. The return on average assets amounted to
1.01% for each of these same periods.
Net Interest Income. The Company's net interest income was $1,981,213
for the second quarter of 2000, compared to $1,861,975 for the second quarter of
1999. The increase in net interest income in 2000 was attributable primarily to
an increase in interest earning assets. Average interest earning assets were
$182.2 million for the second quarter of 2000, compared to $172.6 million for
the second quarter of 1999. Average loans increased $15.2 million, or 12.8%, to
account for the majority of the increase. For the six months ended June 30,
1999, average interest earning assets rose 6.6% to $183.1 million compared to
the same period in 1999.
The net interest margin is a measure of net interest income
performance. It represents the difference between interest income; including net
loan fees earned, and interest expense, reflected as a percentage of average
interest earning assets. The Company's net interest margin was 4.49% for the
second quarter of 2000 and 4.53% for the first six months of 2000, compared to
4.47% and 4.40% for the same periods in 1999, respectively.
Non-Interest Income. In the second quarter of 2000, the Company's total
non-interest income totaled $380,163, an increase of 15.3%, or $50,508, compared
to 1999. For the first six months of 2000, non-interest income increased by
$100,605 or 15.9% compared to 1999. The increases for each period are primarily
due to increases in deposit fees and charges. These fees increased 23.6% for the
quarter and 25.8% for the six months ended June 30, 2000. The increases in these
fees are the result of an increase in
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<PAGE>
the number of deposit accounts as well as changes in the amounts of the fees in
reaction to local market rates.
Non-Interest Expense. The Company's total non-interest expenses for the
second quarter and six months ended June 30, 2000 increased $184,536 and
$425,059, respectively, compared to the same periods in 1999. Expenses related
to salaries and employee benefits not treated as an adjustment to the yield of
loans originated in 2000 increased by 13.2% for the quarter and 15.4% for the
first six months compared to 1999. Increases in equipment depreciation of 20.4%
for the quarter and 29.5% for the six-month period reflect the upgrade of much
of the Company's processing equipment over the past year. This equipment had
either become outdated or lacked the capacity to efficiently handle the
increased number of transactions processed daily as the Company has grown in
size. Decreases in equipment repairs and maintenance expense shows that the new
equipment purchased helps pay for itself in reduced cost to keep the equipment
operating properly.
Expenses for advertising and public relations decreased 35.6% for the
quarter and 39.9% for the six-month period. Office supplies, telephone, and
postage expense decreased 8.9% and 8.5% for the same periods, respectively.
These decreases are examples of the company's success in the current year of
closely monitoring expenses.
The increase of $94,593 for the quarter and $175,029 for the six-month
period in legal and professional fees reflects the costs incurred to defend the
Bank in the lawsuit previously mentioned.
Income Taxes. The Bank reported income taxes of $178,487 for the second
quarter and $384,061 for the first six months of 2000, compared to $203,875 and
$387,837 for the same periods in 1999, respectively. These amounts yielded
effective tax rates of 27.1% for the quarter and 28.4% for the first six months
of 2000, compared to 29.8% and 29.4% for the same periods in 1999, respectively.
Financial Condition
Loan Portfolio. The Company is an active residential mortgage and
residential construction lender and generally extends commercial loans to small
and medium sized businesses within its primary service area. The Company's
commercial lending activity extends across its primary service area of Powhatan,
Cumberland and western Chesterfield Counties. Consistent with its focus on
providing community-based financial services, the Company does not attempt to
diversify its loan portfolio geographically by making significant amounts of
loans to borrowers outside of its primary service area.
The principal economic risk associated with each of the categories of
loans in the Company's portfolio is the creditworthiness of its borrowers.
Within each category, such risk is increased or decreased depending on
prevailing economic conditions. The risk associated with the real estate
mortgage loans and installment loans to individuals varies based upon employment
levels, consumer confidence, fluctuations in value of residential real estate
and other conditions that affect the ability of consumers to repay indebtedness.
The risk associated with commercial, financial and agricultural loans varies
based upon the strength and activity of the local economies of the Company's
market areas. The risk associated with real estate construction loans varies
based upon the supply of and demand for the type of real estate under
construction. Many of the Bank's real estate construction loans are for pre-sold
or contract homes.
At June 30, 2000 loans increased $2.6 million from December 31, 1999
and $9.5 million from June 30, 1999. The loan to deposit ratio was 81.78% at
June 30, 2000, compared to 84.47% at December 31, 1999, and
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<PAGE>
77.04% at June 30, 1999. As of June 30, 2000, real estate loans accounted for
53.6% of the loan portfolio, consumer loans were 24.5%, and commercial and
industrial loans totaled 22.1%.
Asset Quality. Non-performing loans include non-accrual loans, loans 90
days or more past due and restructured loans. Non-accrual loans are loans on
which interest accruals have been discontinued. Loans which reach non-accrual
status may not be restored to accrual status until all delinquent principal and
interest has been paid, or the loan becomes both well secured and in the process
of collection. Restructured loans are loans with respect to which a borrower has
been granted a concession on the interest rate or the original repayment terms
because of financial difficulties.
The following table summarizes non-performing loans:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Loans accounted for on a non-accrual basis $ 608 $ 109 $ 230
Loans contractually past due 90 days or more as to
interest or principal payments (not included in
non-accrual loans above) 596 1,680 402
Loans restructured and in compliance with modified terms
(not included in non-accrual loans or loans
contractually past due 90 days or more above) -- -- --
------ ------ -----
Total $1,204 $1,789 $ 632
====== ====== =====
</TABLE>
Management is not aware of any other loans at June 30, 2000 which
involve serious doubts as to the ability of such borrowers to comply with the
existing payment terms.
Management has analyzed the potential risk of loss on the Company's
loan portfolio, given the loan balances and the value of the underlying
collateral, and has recognized losses where appropriate. Non-performing loans
are closely monitored on an ongoing basis as part of the Company's loan review
process. Management reviews the loan loss allowance at the end of each month.
Based primarily on the Company's loan classification system, which classifies
problem credits as substandard, doubtful or loss, additional provisions for
losses are made monthly. The ratio of the allowance for loan losses to total
loans was 1.11%, 1.14% and 1.11% at June 30, 2000, December 31, 1999 and June
30, 1999, respectively. At June 30, 2000 the ratio of the allowance for loan
losses to non-performing loans was 128.2%, compared to 83.1% at December 31,
1999 and 215.8% at June 30, 1999.
Management evaluates non-performing loans relative to their collateral
value and makes appropriate reductions in the carrying value of those loans
based on that review. Management believes, based on its review, that the Company
has adequate reserves to cover any future write down that may be required on
these loans.
For each period presented, the provision for loan losses charged to
operations is based on management's judgment after taking into consideration all
factors connected with the collectibility of the existing portfolio. Management
evaluates the loan portfolio in light of economic conditions, changes in the
nature and value of the portfolio, industry standards and other relevant
factors. Specific factors considered by management in determining the amounts
charged to operations include internally generated loan review reports, previous
loan loss experience with the borrower, the status of past due interest and
principal payments on the loan, the quality of financial information supplied by
the borrower and the general financial condition of the borrower.
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<PAGE>
The provision for loan losses totaled $60,000 for the quarter ended
June 30, 2000 and $49,500 for the quarter ended June 30, 1999. For the six month
periods ended June 30, 2000 and 1999, the provision for loan losses was $120,000
and $99,000, respectively. In the opinion of management, the provision charged
to operations has been sufficient to absorb the current year's net loan losses
while continuing to increase the allowance for loan losses.
Securities
The Company's securities portfolio serves several purposes. Portions of
the portfolio secure certain public and trust deposits. The remaining portions
are held as investments or used to assist the Company in liquidity and asset
liability management. During the first six months of 2000, total securities
decreased 3.6% to $43.8 million or 22.6% of total assets at June 30, 2000. At
December 31, 1999, total securities were $45.4 million, or 24.0% of total assets
and at June 30, 1999, total securities were $52.7 million, or 28.1% of total
assets.
The securities portfolio consists of two components, securities held to
maturity and securities available for sale. Securities are classified as held to
maturity when management has the intent and the Company has the ability at the
time of purchase to hold the securities to maturity. Securities held to maturity
are carried at cost adjusted for amortization of premiums and accretion of
discounts. Securities to be held for indefinite periods of time are classified
as available for sale and accounted for at the lower of cost or market value.
Securities available for sale include securities that may be sold in response to
changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, general liquidity needs and other similar factors. The
Company's recent purchases of investment securities have generally been limited
to securities of high credit quality with short to medium term maturities.
The fully taxable equivalent annualized average yield on the entire
portfolio was 7.19% for the second quarter of 2000 and 6.94% for the first six
months of 2000, compared to 7.06% and 7.05% for the same periods in 1999. The
book value of the portfolio exceeded the market value by $1,718,411 at June 30,
2000.
Deposits and Short-Term Borrowings
The Company's predominate source of funds is depository accounts. The
Company's deposit base is comprised of demand deposits, savings and money market
accounts and other time deposits. The Company's deposits are provided by
individuals and businesses located within the communities served.
Total deposits grew by 5.4% between December 31, 1999 and June 30,
2000. The average aggregate interest rate paid on deposits was 4.03% in the
second quarter of 2000 and 3.93% for the first six months of 2000, compared to
3.79% and 3.83% for the same periods in 1999. The majority of the Company's
deposits are higher yielding time deposits because most of its customers are
individuals who seek higher yields than those offered on savings and demand
accounts.
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<PAGE>
The following table is a summary of time deposits of $100,000 or more
by remaining maturities at June 30, 2000:
June 30, 2000
Time Deposits
-------------
(Dollars in Thousands)
Three months or less $ 2,255
Three to twelve months 5,206
Over twelve months 9,152
-------
Total $16,613
=======
Capital Resources
The assessment of capital adequacy depends on a number of factors such
as asset quality, liquidity, earnings performance and changing competitive
conditions and economic forces. The Company seeks to maintain a strong capital
base to support its growth and expansion activities, to provide stability to
current operations and to promote public confidence.
Banking regulations also require the Bank to maintain certain minimum
capital levels in relation to Bank assets. Capital is measured using a leverage
ratio as well as based on risk-weighting assets according to regulatory
guidelines. A comparison of the Bank's actual regulatory capital as of June 30,
2000, with minimum requirements, as defined by regulation, is shown below:
Minimum Actual
Requirements June 30, 2000
------------ -------------
Tier 1 risk-based capital 4.0% 12.22%
Total risk-based capital 8.0% 13.30%
Leverage ratio 3.0% 9.04%
Liquidity and Interest Rate Sensitivity
Liquidity. Liquidity is the ability to meet present and future
financial obligations through either the sale or maturity of existing assets or
the acquisition of additional funds through liability management. Liquid assets
include cash, interest bearing deposits with banks, federal funds sold,
investments and loans maturing within one year. The Company's ability to obtain
deposits and purchase funds at favorable rates determines its liability
liquidity. As a result of the Company's management of liquid assets and the
ability to generate liquidity through liability funding, management believes
that the Company maintains overall liquidity sufficient to satisfy its
depositors' requirements and meet its customers' credit needs.
Additional sources of liquidity available to the Company include, but
are not limited to, loan repayments, the ability to obtain deposits through the
adjustment of interest rates and the purchasing of federal funds. To further
meet its liquidity needs, the Company also has access to the Federal Reserve
System and well as the Federal Home Loan Bank of Atlanta. In the past, growth in
deposits and proceeds from the maturity of investment securities have been
sufficient to fund the net increase in loans.
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<PAGE>
Interest Rate Sensitivity. In conjunction with maintaining a
satisfactory level of liquidity, management must also control the degree of
interest rate risk assumed on the balance sheet. Managing this risk involves
regular monitoring of the interest sensitive assets relative to interest
sensitive liabilities over specific time intervals.
Effects of Inflation
Inflation significantly affects industries having high proportions of
fixed assets or high levels of inventories. Although the Company is not
significantly affected in these areas, inflation does have an impact on the
growth of assets. As assets grow rapidly, it becomes necessary to increase
equity capital at proportionate levels to maintain the appropriate equity to
asset ratios. Traditionally, the Company's earnings and high capital retention
levels have enabled the Company to meet these needs.
The Company's reported earnings results have been affected by
inflation, but isolating the effect is difficult. The different types of income
and expense are affected in various ways. Interest rates are affected by
inflation, but the timing and magnitude of the changes may not coincide with
changes in the consumer price index. Management actively monitors interest rate
sensitivity in order to minimize the effects of inflationary trends on interest
rates. Other areas of non-interest expenses may be more directly affected by
inflation.
Forward-Looking Statements
Certain information contained in this discussion may include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements are generally identified by phrases
such as "the Company expects," "the Company believes" or words of similar
import. Such forward-looking statements involve known and unknown risks
including, but not limited to, changes in general economic and business
conditions, interest rate fluctuations, competition within and from outside the
banking industry, new products and services in the banking industry, risk
inherent in making loans such as repayment risks and fluctuating collateral
values, problems with technology utilized by the Company, changing trends in
customer profiles and changes in laws and regulations applicable to the Company.
Although the Company believes that its expectations with respect to the
forward-looking statements are based upon reliable assumptions within the bounds
of its knowledge of its business and operations, there can be no assurance that
actual results, performance or achievements of the Company will not differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements.
PART II
ITEM 1 LEGAL PROCEEDINGS
As previously reported in the Company's Quarterly Report on Form 10-QSB
for the period ended March 31, 2000, the Bank is a party to lawsuits filed by
Old Republic National Title Insurance Company, in its own name and on behalf of
twelve mortgage lenders insured by Old Republic, in the Circuit Court for the
County of Chesterfield, Virginia and by the trustee in bankruptcy for Alliance
Title and Escrow, Ltd. in the United States Bankruptcy Court for the Eastern
District of Virginia. Both lawsuits arise primarily from the alleged
misappropriation of funds by the president of Alliance Title from the Alliance
Title accounts maintained with the Bank.
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<PAGE>
In August 2000, the Bank, Old Republic and Alliance Title reached an
agreement in principle to settle the lawsuits. The parties are currently
finalizing the details of the settlement, which will be submitted to the United
States Bankruptcy Court for its approval. The Bank expects to obtain such court
approval in the third quarter of 2000. The parties will be required to keep the
terms of the settlement confidential.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Shareholders meeting was held on April 25, 2000.
(b) Directors elected at the meeting for a three year term were:
1. Elwood C. May
2. Charles B. Goodman
Directors with continuing terms were:
1. Ralph Larry Lyons
2. Garland L. Blanton, Jr.
3. Charles W. Binford
4. John B. Larus
5. James T. Napier
6. Fleming V. Austin
(c) Matters voted upon:
1. Election of Elwood C. May as a director for a three year term:
Votes for...................1,545,724
Votes withheld..................8,400
2. Election of Charles B. Goodman as a director for a three year
term:
Votes for...................1,545,724
Votes withheld..................8,400
3. Ratification of Auditors:
Votes for...................1,545,319
Votes against...................3,538
Votes abstained.................5,268
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<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON 8-K
(a) Exhibits:
3.1 Articles of Incorporation, as amended (restated in
electronic format)
27 Financial Data Schedule
(b) Form 8-K. No reports were filed on Form 8-K in the period for
which this report is filed.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTRAL VIRGINIA BANKSHARES, INC.
---------------------------------
(Registrant)
Date: August 14, 2000 /s/ Ralph Larry Lyons
----------------------------------------------
Ralph Larry Lyons, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 2000 /s/ Charles F. Catlett, III
----------------------------------------------
Charles F. Catlett, III, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
