<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
----------------------
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 000-22747
-------------
Virginia Commonwealth Financial Corporation
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1542438
--------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
102 South Main Street, Culpeper, Virginia 22701
---------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 540-825-4800
------------
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 report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _____.
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of August 14, 2000:
Common Stock, $2.50 par value 2,356,500
----------------------------- -------------------------
Class Number of Shares
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Page No.
ITEM 1 Consolidated Financial Statements:
Consolidated Balance Sheets 3
Consolidated Statements of Income 4-5
Consolidated Statements of Changes in Stockholders' Equity 6
Consolidated Statements of Cash Flows 7-8
Notes to Financial Statements 9-10
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-14
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 14
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings 15
ITEM 2 Change in Securities 15
ITEM 3 Defaults Upon Senior Securities 15
ITEM 4 Submission of Matters to a Vote of Security Holders 15
ITEM 5 Other Information 15
ITEM 6 Exhibits and Reports on Form 8-K 15
SIGNATURES 16
-2-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000 OMITTED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------------- -----------------
(unaudited)
<S> <C>
ASSETS
Cash and due from depository institutions (non-interest
bearing deposits) $ 14,018 $ 14,426
Interest bearing deposits 7,253 -
Federal funds sold 19,955 2,123
Securities (market value: 2000, $95,843; 1999, $105,736) 96,101 106,010
Loans held for sale 5,481 4,237
Loans receivable, net 283,551 270,367
Bank premises and equipment 10,955 10,989
Interest receivable 2,928 2,980
Other real estate owned 667 902
Other assets 3,995 3,545
----------------- -----------------
Total Assets $ 444,904 $ 415,579
================= =================
LIABILITIES
Deposits:
Noninterest-bearing demand deposits $ 55,437 $ 44,293
Savings and interest-bearing demand deposits 127,913 133,690
Time deposits 195,017 183,354
----------------- -----------------
Total deposits 378,367 361,337
Repurchase agreements - 396
Federal Home Loan Bank advances 14,340 2,400
Other short-term borrowings 1,097 988
Interest payable 1,420 1,316
Other liabilities 1,552 1,955
----------------- -----------------
Total Liabilities 396,776 368,392
----------------- -----------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value; (Authorized 1,000,000 shares,
no shares outstanding) - -
Common stock, par value $2.50 per share; (Authorized
3,000,000 shares; issued and outstanding 2,356,500 shares
2000 and 1999) 5,891 5,891
Capital surplus 10,522 10,541
Retained earnings 33,103 31,868
Accumulated other comprehensive income (1,388) (1,113)
----------------- ------------------
Total Stockholders' Equity 48,128 47,187
----------------- -----------------
Total Liabilities and Stockholders' Equity $ 444,904 $ 415,579
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(000 OMITTED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
2000 1999
(unaudited) (unaudited)
<S> <C>
Interest Income
Interest and fees on loans $ 6,388 $ 5,787
Interest on investment securities:
Taxable 33 37
Nontaxable 247 254
Interest and dividends on securities available for sale:
Taxable 1,142 1,138
Nontaxable 50 42
Dividends 42 35
Interest income on federal funds sold 92 137
----------------- -----------------
Total Interest Income 7,994 7,430
----------------- -----------------
Interest Expense
Interest on deposits 3,474 3,237
Interest on Federal Home Loan Bank advances 140 43
Interest on short-term borrowings 18 19
----------------- -----------------
Total Interest Expense 3,632 3,299
----------------- -----------------
Net Interest Income 4,362 4,131
Less: Provision for loan losses 155 184
----------------- -----------------
Net Interest Income after Provision for Loan Losses 4,207 3,947
Other Income
Service charges on deposit accounts 426 348
Commissions and fees from fiduciary activities 190 163
Investment fee income 39 32
Other operating income 82 113
Gains (losses) on securities available for sale 53 -
Fees on mortgage loans sold 102 203
----------------- -----------------
Total Other Income 892 859
----------------- -----------------
Other Expense
Compensation and employee benefits 1,898 1,756
Net occupancy expense 479 442
Computer services 259 117
Professional fees 103 142
Other operating expenses 716 725
----------------- -----------------
Total Other Expense 3,455 3,182
----------------- -----------------
Income Before Income Tax Expense 1,644 1,624
Income tax expense 453 429
----------------- -----------------
Net Income $ 1,191 $ 1,195
================= =================
Earnings per Share, basic and assuming dilution $ .51 $ .51
================= =================
Dividends per Share $ .25 $ .22
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(000 OMITTED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
2000 1999
(unaudited) (unaudited)
<S> <C>
Interest Income
Interest and fees on loans $ 12,605 $ 11,450
Interest on investment securities:
Taxable 71 69
Nontaxable 496 500
Interest and dividends on securities available for sale:
Taxable 2,277 2,282
Nontaxable 100 83
Dividends 71 66
Interest income on federal funds sold 128 207
----------------- -----------------
Total Interest Income 15,748 14,657
----------------- -----------------
Interest Expense
Interest on deposits 6,814 6,398
Interest on Federal Home Loan Bank advances 187 83
Interest on short-term borrowings 62 41
----------------- -----------------
Total Interest Expense 7,063 6,522
----------------- -----------------
Net Interest Income 8,685 8,135
Less: Provision for loan losses 309 375
----------------- -----------------
Net Interest Income after Provision for Loan Losses 8,376 7,760
Other Income
Service charges on deposit accounts 807 664
Commissions and fees from fiduciary activities 365 326
Investment fee income 79 83
Other operating income 160 203
Gains (losses) on securities available for sale 52 5
Fees on mortgage loans sold 185 445
----------------- -----------------
Total Other Income 1,648 1,726
----------------- -----------------
Other Expense
Compensation and employee benefits 3,708 3,465
Net occupancy expense 941 866
Computer services 405 232
Professional fees 186 216
Other operating expenses 1,457 1,424
----------------- -----------------
Total Other Expense 6,697 6,203
----------------- -----------------
Income Before Income Tax Expense 3,327 3,283
Income tax expense 914 916
----------------- -----------------
Net Income $ 2,413 $ 2,367
================= =================
Earnings per Share, basic and assuming dilution $ 1.02 $ 1.01
================= =================
Dividends per Share $ .50 $ .43
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(000 OMITTED)
<TABLE>
<CAPTION>
Accumulated
Other
Common Capital Comprehensive Retained Comprehensive
Stock Surplus Income Earnings Income Total
<S> <C>
Balance, January 1, 1999 $ 5,802 $ 10,084 $ 839 $ 29,680 $ - $ 46,405
Net income - - - 2,367 2,367 2,367
Other Comprehensive Income, net of tax:
Unrealized losses on securities
available for sale during the
period, net of tax
of ($668,000) - - - - (1,285) -
Add reclassification
adjustment, net of tax
of ($2,000) - - - - (3) -
-------------
Other comprehensive income - - (1,288) (1,288) (1,288)
-------------
Comprehensive income - - - - $ 1,079
=============
Cash dividends - - - (1,022) (1,022)
5% stock dividend 73 311 - (384) - -
Stock options exercised 3 5 - - - 8
Cash paid in lieu of fractional
shares - - - (6) - (6)
Issuance of common stock
under dividend
reinvestment plan 12 134 - - - 146
-------------- ------------- ----------------- ------------- ------------- -----------
Balance, June 30, 1999 $ 5,890 $ 10,534 $ (449) $ 30,635 $ - $ 46,610
============== ============= ================ ============= ============= ===========
Balance, January 1, 2000 $ 5,891 $ 10,541 $ (1,113) $ 31,868 $ - $ 47,187
Net income - - - 2,413 2,413 2,413
Other Comprehensive Income, net of tax:
Unrealized losses on securities
available for sale during the
period, net of tax
of ($144,000) - - - - (241) -
Add reclassification
adjustment, net of tax
of ($18,000) - - - - (34) -
-------------
Other comprehensive income - - (275) (275) (275)
-------------
Comprehensive income - - - - $ 2,138
=============
Cash dividends - - - (1,178) (1,178)
Cash paid in lieu of fractional
shares - (19) - - - (19)
-------------- ------------- ----------------- ------------- ------------- -----------
Balance, June 30, 2000 $ 5,891 $ 10,522 $ (1,388) $ 33,103 $ - $ 48,128
============== ============= ================ ============= ============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 OMITTED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
2000 1999
(unaudited) (unaudited)
<S> <C>
OPERATING ACTIVITIES
Net income $ 2,413 $ 2,367
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 309 375
Deferred tax expense (benefit) (50) (47)
Depreciation and amortization 500 483
Pension (income) expense - -
(Gain) loss on sale of securities available for sale (52) -
Loss on sale of other real estate 28 5
Amortization (accretion) of premiums and
discounts on securities 58 (30)
Fees on mortgage loans sold (185) (445)
Proceeds from sale of mortgage loans 11,950 30,373
Purchase of loans for sale (11,765) (29,928)
Changes in assets and liabilities:
Decrease (increase) in interest receivable 51 (135)
(Increase) in other assets (376) (284)
Increase in interest payable 105 34
(Decrease) in other liabilities (404) (520)
----------------- ------------------
Net cash provided by operating activities 2,582 2,871
----------------- -----------------
INVESTING ACTIVITIES
Proceeds from sale of securities available for sale 3,306 4,000
Proceeds from maturities of investment securities 1,275 462
Proceeds from maturities and principal payments
of securities available for sale 6,451 13,263
Purchase of investment securities (215) (2,396)
Purchase of securities available for sale (1,211) (14,434)
Purchase of premises and equipment (466) (782)
Additions to other real estate (24) (225)
Proceeds from sale of other real estate 210 485
Net (increase) in loans (14,716) (8,769)
----------------- ------------------
Net cash used in investing activities (5,390) (8,396)
----------------- ------------------
</TABLE>
-7-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 OMITTED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
2000 1999
(unaudited) (unaudited)
<S> <C>
FINANCING ACTIVITIES
Net increase in demand, money market and
savings deposits 5,367 9,838
Net increase in time deposits 11,663 3,185
Net (decrease) increase in repurchase agreements (396) 18
Proceeds from Federal Home Loan Bank advances 12,000 960
Net increase in short-term borrowings 49 11
Common stock issued - 146
Stock options exercised - 8
Fractional shares paid (19) (6)
Cash dividends paid on common stock (1,178) (1,022)
----------------- ------------------
Net cash provided by financing activities 27,486 13,138
----------------- -----------------
Increase in cash and cash equivalents 24,678 7,613
CASH AND CASH EQUIVALENTS
Beginning of the period 16,548 17,741
----------------- -----------------
End of the period $ 41,226 $ 25,354
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
-8-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999
1. In the opinion of management, the accompanying financial statements contain
all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position as of June 30, 2000 and December 31,
1999, and the results of operations and cash flows for the six months ended
June 30, 2000 and 1999. The statements should be read in conjunction with
the Notes to Financial Statements included in the Company's Annual Report
for the year ended December 31, 1999.
2. The results of operations for the six month period ended June 30, 2000 and
1999 are not necessarily indicative of the results to be expected for the
full year.
3. The Company's securities portfolio is composed of the following (000
omitted):
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- ------
Securities Held to Maturity:
----------------------------
June 30, 2000
-------------
(unaudited)
<S> <C>
Obligations of States and Political Subdivisions $ 22,451 $ 22,196
U.S. Government Securities 3 3
----------------- -----------------
$ 22,454 $ 22,199
================= =================
December 31, 1999
Obligations of States and Political Subdivisions $ 23,516 $ 23,242
U.S. Government Securities 4 4
----------------- -----------------
$ 23,520 $ 23,246
================= =================
Securities Available for Sale:
------------------------------
June 30, 2000
-------------
(unaudited)
U.S. Treasury Securities $ 9,027 $ 8,955
U.S. Government Securities 50,814 49,088
Obligations of States and Political Subdivisions 5,119 5,004
Corporate Bonds 8,557 8,188
Other Equity Securities 2,211 2,412
----------------- -----------------
$ 75,728 $ 73,647
================= =================
December 31, 1999
U.S. Treasury Securities $ 10,536 $ 10,487
U.S. Government Securities 57,332 55,770
Obligations of States and Political Subdivisions 4,640 4,528
Corporate Bonds 9,567 9,254
Other Equity Securities 2,094 2,451
----------------- -----------------
$ 84,170 $ 82,490
================= =================
</TABLE>
-9-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999
4. The Company's loan portfolio is composed of the following (000 omitted):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------- -----------------
(unaudited)
<S> <C>
Real estate loans:
Construction $ 22,672 $ 20,497
Secured by farmland 1,556 1,600
Secured by 1 - 4 family residential 119,685 104,589
Other real estate loans 75,044 86,489
Loans to farmers (except secured by real estate) 108 156
Commercial and industrial loans (except those
secured by real estate) 22,135 22,996
Loans to individuals for personal expenditures 41,453 34,355
All other loans 4,770 3,370
----------------- -----------------
287,423 274,052
Less:
Deferred loan fees (594) (605)
Allowance for loan losses (3,278) (3,080)
----------------- ------------------
$ 283.551 $ 270,367
================= =================
</TABLE>
5. Activity in the allowance for loan losses is as follows (000 omitted):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------- -----------------
(unaudited)
<S> <C>
Balance at January 1 $ 3,080 $ 2,538
Recoveries added to the allowance 30 82
Loan losses charged to the allowance (141) (376)
Provision recorded to expense 309 836
----------------- -----------------
Balance at end of period $ 3,278 $ 3,080
================= =================
</TABLE>
-10-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1998
6. Short-term Borrowings and Long Term Debt
Outstanding short-term borrowings consisted of (000's omitted):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------- -----------------
(unaudited)
<S> <C>
Federal Reserve borrowings $ 1,017 $ 908
Current portion of Federal Home Loan Bank advance 80 80
----------------- -----------------
$ 1,097 $ 988
================= =================
</TABLE>
Second Bank & Trust has an agreement with the Federal Reserve where it can
borrow funds deposited by its customers. This agreement calls for variable
interest and is payable on demand. U. S. Government securities and U. S.
Treasury notes are pledged as collateral. This agreement will usually be
limited to $1,000,000, but may reach higher levels before a draw is
requested.
Second Bank & Trust has the following advances outstanding at June 30, 2000
with the Federal Home Loan Bank of Atlanta:
Advance, due May 2010, interest quarterly at 6.69% $ 5,000,000
Advance, due May 2005, interest quarterly at 7.07% 4,000,000
Advance, due May 2003, interest quarterly at 6.58% 3,000,000
-----------------
$ 12,000,000
The advances are collateralized by a blanket lien on Second Bank & Trust's
first mortgage loans.
Caroline Savings Bank has an outstanding Federal Home Loan Bank advance of
$460,000 that requires quarterly principal payments totaling $80,000
annually and interest payable monthly at 6.60%. Substantially all of
Caroline Savings Bank's first mortgage loans are pledged, by blanket
floating lien, as collateral for all advances from the Federal Home Loan
Bank of Atlanta.
The average balance of short-term borrowings outstanding did not exceed 30
percent of stockholders' equity for the six months ended June 30, 2000 or
the year ended December 31, 1999.
7. Earnings and Dividends Paid Per Share:
The following table shows the weighted average number of shares used in
computing earnings per share and the effect on weighted average number of
shares of diluted potential common stock in 2000. Weighted average shares
for the three months ended June 30, 1999 and six months ended June 30, 1999
were 2,356,500 and 2,355,536, respectively.
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000 Six Months Ended June 30, 2000
-------------------------------- ------------------------------
Shares Per Share Amount Shares Per
-----------------------------------------------------------------------
<S> <C>
Share Amount
Basic earnings per share 2,356,500 $ .51 2,356,500 $ 1.02
Effective of dilutive securities
Stock Options (145) - 2,197 -
--------- -------- ---------- -------
-
Diluted earnings per share 2,356,355 $ .51 2,358,697 $ 1.02
</TABLE>
-11-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion provides information about the major components of the
results of operations, financial condition, liquidity and capital resources of
Virginia Commonwealth Financial Corporation (the Company). This discussion and
analysis should be read in conjunction with the Consolidated Financial
Statements and supplemental financial data.
In addition to historical information, statements contained in this report that
are not historical facts may be construed as forward-looking statements. The
forward-looking statements are subject to certain risks and uncertainties, which
could cause actual results to differ materially from historical results, or
those anticipated. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date thereof.
Overview
Virginia Commonwealth Financial Corporation's consolidated net income for the
quarter ended June 30, 2000 amounted to $1.19 million or $.51 per share,
compared to $1.20 million or $.51 per share for the quarter ended June 30, 1999.
Earnings for the six month period ended June 30, 2000 amounted to $2.41 million
or $1.02 per share, an increase of 1.9% over the $2.37 million or $1.01 per
share for the comparable period in 1999. The Company's annualized return on
average equity for the six month period ended June 30, 2000 was 10.17%, compared
to 10.13% in 1999. The Company's annualized return on average assets for the six
months ended June 30, 2000 was 1.14%, compared to 1.18% for the comparative
period in 1999.
Excluding $52 thousand in after-tax charges associated with acquisitions and
systems conversions completed during the second quarter, earnings for the three
month period were $1.24 million or $.53 per diluted share. VCFC's second quarter
2000 recurring earnings produced an annualized return on average assets of 1.17%
and an annualized return on average equity of 10.46%, compared to prior year
ratios of 1.17% and 10.10%, respectively.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income increased $231 thousand or 5.6% to $4.37 million for the
three months ended June 30, 2000. For the six months ended June 30, 2000, net
interest income increased $550 thousand or 6.8% to $8.69 million. This
improvement for the quarter and six month period can be attributed to an
increase in average earning assets and a stable net interest margin. Average
earning assets increased $25.0 million to $328.6 million at June 30, 2000, an
increase of 8.2% over $303.6 million at June 30, 1999. The increase in average
earning assets can be attributed to an increase in average loans receivable of
$25.6 million or 9.8%. This increase in average assets was funded in part by
wholesale funding of $12 million originated with the Federal Home Loan Bank of
Atlanta during the quarter. The net interest margin for the six months ended
June 30, 2000 was 4.62%, slightly improved from 4.61% for the comparable period
in 1999.
-12-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Noninterest Income
Noninterest income increased $33 thousand to $892 thousand for the three months
ended June 30, 2000, an improvement of 3.8% over $859 thousand for the
comparative period in 1999. For the six months ended June 30, 2000, noninterest
income decreased $78 thousand or 4.5% to $1.6 million. Decreased fees from
mortgage banking operations accounted for much of the decrease. This decrease
can be attributed to a significant increase in overall mortgage rates during the
first half of 2000. For the six months ended June 30, 2000, gross mortgage
origination's amounted to $11.7 million, a decrease of $18.1 million from the
$29.9 million originated for the comparable period in 1999.
Noninterest Expense
Operating expenses increased $273 thousand, or 8.6% to $3.5 million for the
three months ended June 30, 2000, compared to $3.2 million for the same period
in 1999. Operating expenses for the six months ended June 30, 2000 amounted to
$6.7 million, an increase of $494 thousand or 8.0% over the comparable period in
1999. Included in this increase are nonrecurring expenses of $118 thousand for
the three month period and $169 for the six month period associated with system
conversions and merger costs incurred in connection with acquisitions.
Incremental compensation costs of $142 thousand for the three month period and
$243 thousand for the six month period are associated with management additions
and staff hiring.
FINANCIAL CONDITION
Summary
At June 30, 2000, the Company has total assets of $444.9 million, an increase of
$29.3 million or 7.1% from $415.6 million at December 31, 1999. Deposit growth
of $17.0 million and FHLB advances of $12 million were used to fund loan growth
of $13.4 million, increasing net loans receivable to $287.4 million at June 30,
2000. Short term investments include interest bearing deposits with the Federal
Home Loan Bank of Atlanta and federal funds sold. The securities portfolio of
$96.1 million at June 30, 2000 consists of U.S. Treasuries, U.S. Government
agencies and corporations, obligations of state and political subdivisions, and
corporate bonds.
Asset Quality
Nonperforming assets, consisting of non-accrual loans and other real estate
owned, amounted to $1.4 million or .3% of assets at June 30, 2000, compared to
$1.3 million or .4% of assets at December 31, 1999. The Company recorded a
provision for loan losses of $155 thousand for the three month period ended June
30, 2000, compared to a provision of $184 thousand for the three month period
ended June 30, 1999. Provision for loan losses for the six month period ended
June 30, 2000 amounted to $309 thousand, compared to $375 thousand for 1999. The
allowance for loan losses at June 30, 2000 amounted to $3.278 million compared
to $3.080 million at December 31, 1999. The allowance for loan losses represents
239% of nonperforming assets and 1.14% of gross loans receivable at June 30,
2000. Management feels that the allowance is adequate to absorb any losses on
existing loans receivable.
-13-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
The Company's capital base provides the resource and ability to support the
assets of the Company and provide capital for future expansion. Stockholders'
equity as of June 30, 2000 of $48.1 million increased $941 thousand or
approximately 2% from $47.1 million at December 31, 1999. The Company's Tier I
capital consists primarily of common stockholder's equity. Risk weighted assets
are determined by assigning various risk levels to each asset type. The
Company's Tier 1 risk based capital ratio was 17.7% at June 30, 2000, compared
to 17.4% at December 31, 1999, placing the Company in a well capitalized
position as defined by regulators.
Liquidity is identified as the ability to generate or acquire sufficient amounts
of cash when needed and at reasonable cost to accommodate withdrawals, payments
of debt, and increased loan demand. These events may occur daily or at other
short-term intervals in the normal operation of the business. Experience helps
management predict time cycles in the amount of cash required. In assessing
liquidity, management gives consideration to relevant factors including
stability of deposits, quality of assets, economy of market served,
concentrations of business and industry, competition, and the Company's overall
financial condition. The Company's primary sources of liquidity are cash, due
from banks, fed funds sold and securities in our available for sale portfolio.
In addition, the Bank has substantial lines of credit from its correspondent
banks and access to the Federal Reserve discount window and Federal Home Loan
Bank to support liquidity. The Company has no brokered deposits. In the judgment
of management, the Company maintains the ability to generate sufficient amounts
of cash to cover normal requirements and any additional needs which may arise.
Effects of Inflation
The effect of changing prices on financial institutions is typically different
from other industries as the Company's assets and liabilities are monetary in
nature. Interest rates and thus the Company's asset liability management is
impacted by changes in inflation, but there is not a direct correlation between
the two measures. Management monitors the impact of inflation on the financial
markets.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes to the quantitative and qualitative
market risk disclosures in the Company's Form 10K for the year ended December
31, 1999.
-14-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material legal proceedings to which the
Registrant or any of its subsidiaries, directors, or officers
is a party or by which they, or any of them, are threatened.
Any legal proceeding presently pending or threatened against
Virginia Commonwealth Financial Corporation and its
subsidiaries are either not material in respect to the amount
in controversy or fully covered by insurance.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
The annual meeting of Virginia Commonwealth Financial Corporation was
held on May 10, 2000. The following directors were elected for
respective terms.
FOR AGAINST
--- -------
E. Page Butler (2002) 1,722,602 21,499
W. R. Southworth (2001) 1,722,602 21,499
O. R. Barham, Jr. (2003) 1,732,028 12,073
Marshall D. Gayheart, Jr. (2003) 1,732,028 12,073
H. Wayne Parrish (2003) 1,724,958 19,143
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits are not applicable.
(b) No form 8-K was filed during the three month period ended
June 30, 2000.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION
/s/ O.R. Barham, Jr.
-------------------------
O.R. Barham, Jr.
President
August 12, 2000
/s/ Jeffrey W. Farrar
--------------------------
Jeffrey W. Farrar, CPA
Executive Vice President
- Chief Financial Officer
August 12, 2000
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