<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 September 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 November 13, 2000:
Common Stock, $2.50 par value 2,341,800
----------------------------- -------------------------
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 9-11
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-14
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>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ ------------
(unaudited)
<S> <C>
ASSETS
Cash and due from depository institutions (non-interest
bearing deposits) $ 12,661 $ 14,426
Interest bearing deposits 3,687 -
Federal funds sold 16,729 2,123
Securities (market value: 2000, $106,462; 1999, $105,736) 106,489 106,010
Loans held for sale 5,892 4,237
Loans receivable, net 289,439 270,367
Bank premises and equipment 11,003 10,989
Interest receivable 2,991 2,980
Other real estate owned 698 902
Other assets 3,838 3,545
-------- --------
Total Assets $453,427 $415,579
======== ========
LIABILITIES
Deposits:
Noninterest-bearing demand deposits $ 52,710 $ 44,293
Savings and interest-bearing demand deposits 129,779 133,690
Time deposits 202,033 183,354
-------- --------
Total deposits 384,522 361,337
Repurchase agreements - 396
Federal Home Loan Bank advances 14,320 2,400
Other short-term borrowings 1,080 988
Interest payable 1,807 1,316
Other liabilities 2,275 1,955
-------- --------
Total Liabilities 404,004 368,392
-------- --------
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 33,776 31,868
Accumulated other comprehensive income (766) (1,113)
-------- --------
Total Stockholders' Equity 49,423 47,187
-------- --------
Total Liabilities and Stockholders' Equity $453,427 $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
SEPTEMBER 30,
2000 1999
--------- ---------
(unaudited) (unaudited)
<S> <C>
Interest Income
Interest and fees on loans $6,669 $5,807
Interest on investment securities:
Taxable 29 38
Nontaxable 235 260
Interest and dividends on securities available for sale:
Taxable 1,230 1,223
Nontaxable 50 52
Dividends 29 39
Interest income on federal funds sold 281 143
------ ------
Total Interest Income 8,523 7,562
------ ------
Interest Expense
Interest on deposits 3,849 3,312
Interest on Federal Home Loan Bank advances 249 49
Interest on short-term borrowings 8 18
------ ------
Total Interest Expense 4,106 3,379
------ ------
Net Interest Income 4,417 4,183
Less: Provision for loan losses 167 173
------ ------
Net Interest Income after Provision for Loan Losses 4,250 4,010
Other Income
Service charges on deposit accounts 418 380
Commissions and fees from fiduciary activities 178 163
Investment fee income 56 15
Other operating income 92 56
Gains (losses) on securities available for sale - 3
Fees on mortgage loans sold 100 156
------ ------
Total Other Income 844 773
------ ------
Other Expense
Compensation and employee benefits 1,918 1,780
Net occupancy expense 481 439
Computer services 157 122
Professional fees 77 67
Other operating expenses 722 675
------ ------
Total Other Expense 3,355 3,083
------ ------
Income Before Income Tax Expense 1,739 1,700
Income tax expense 477 476
------ ------
Net Income $1,262 $1,224
====== ======
Earnings per Share, basic and assuming dilution $ .54 $ .52
====== ======
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>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
--------- -----------
(unaudited) (unaudited)
<S> <C>
Interest Income
Interest and fees on loans $19,275 $17,257
Interest on investment securities:
Taxable 100 107
Nontaxable 731 760
Interest and dividends on securities available for sale:
Taxable 3,507 3,506
Nontaxable 149 135
Dividends 100 106
Interest income on federal funds sold 408 350
------- -------
Total Interest Income 24,270 22,221
------- -------
Interest Expense
Interest on deposits 10,663 9,709
Interest on Federal Home Loan Bank advances 436 133
Interest on short-term borrowings 69 59
------- -------
Total Interest Expense 11,168 9,901
------- -------
Net Interest Income 13,102 12,320
Less: Provision for loan losses 476 548
------- -------
Net Interest Income after Provision for Loan Losses 12,626 11,772
Other Income
Service charges on deposit accounts 1,225 1,045
Commissions and fees from fiduciary activities 543 489
Investment fee income 136 98
Other operating income 251 259
Gains (losses) on securities available for sale 52 8
Fees on mortgage loans sold 285 601
------- -------
Total Other Income 2,492 2,500
------- -------
Other Expense
Compensation and employee benefits 5,626 5,245
Net occupancy expense 1,422 1,311
Computer services 561 346
Professional fees 263 285
Other operating expenses 2,180 2,100
------- -------
Total Other Expense 10,052 9,287
------- -------
Income Before Income Tax Expense 5,066 4,985
Income tax expense 1,391 1,393
------- -------
Net Income $ 3,675 $ 3,592
======= =======
Earnings per Share, basic and assuming dilution $ 1.56 $ 1.52
======= =======
Dividends per Share $ .75 $ .65
======= =======
</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 NINE MONTHS ENDED SEPTEMBER 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 - - - 3,592 3,592 3,592
Other Comprehensive Income,
net of tax:
Unrealized losses on securities
available for sale during the
period, net of tax
of ($717,000) - - - - (1,371) -
Add reclassification
adjustment, net of tax
of ($3,000) - - - - (5) -
--------
Other comprehensive income - - (1,376) (1,376) (1,376)
--------
Comprehensive income - - - - $ 2,215
======== =======
Cash dividends - - - (1,534) (1,534)
5% stock dividend 73 311 - (384) - -
Stock options exercised 5 12 - - - 17
Cash paid in lieu of fractional
shares - - - (6) - (6)
Issuance of common stock
under dividend
reinvestment plan 12 134 - - - 146
------ ------- ------- ------- -------- -------
Balance, September 30, 1999 $5,892 $10,541 $ (537) $31,348 $- $47,244
====== ======= ======= ======= ======== =======
Balance, January 1, 2000 $5,891 $10,541 $(1,113) $31,868 $ - $47,187
Net income - - - 3,675 3,675 3,675
Other Comprehensive Income,
net of tax:
Unrealized gains on securities
available for sale during the
period, net of tax
of $182,000 - - - - 381 -
Less reclassification
adjustment, net of tax
of ($18,000) - - - - (34) -
--------
Other comprehensive income - - 347 347 347
--------
Comprehensive income - - - - $ 4,022
========
Cash dividends - - - (1,767) (1,767)
Cash paid in lieu of fractional
shares - (19) - - - (19)
------ ------- ------- ------- -------- -------
Balance, September 30, 2000 $5,891 $10,522 $ (766) $33,776 $ - $49,423
====== ======= ======= ======= ======== =======
</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>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
-------- --------
(unaudited) (unaudited)
<S> <C>
OPERATING ACTIVITIES
Net income $ 3,675 $ 3,592
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 476 548
Deferred tax expense (benefit) (71) (76)
Depreciation and amortization 776 725
Pension (income) expense - -
(Gain) loss on sale of securities available for sale (52) (5)
Loss on sale of other real estate 29 18
Amortization (accretion) of premiums and
discounts on securities 68 40
Fees on mortgage loans sold (285) (601)
Proceeds from sale of mortgage loans 17,551 39,563
Purchase of loans for sale (17,266) (38,962)
Changes in assets and liabilities:
(Increase) in interest receivable (12) (80)
(Increase) Decrease in other assets (526) 48
Increase in interest payable 491 94
Increase (decrease) in other liabilities 320 1,967
-------- --------
Net cash provided by operating activities 5,174 6,871
-------- --------
INVESTING ACTIVITIES
Proceeds from sale of securities available for sale 3,306 4,225
Proceeds from maturities of investment securities 2,693 620
Proceeds from maturities and principal payments
of securities available for sale 8,687 17,690
Purchase of investment securities (709) (2,397)
Purchase of securities available for sale (13,821) (24,766)
Purchase of premises and equipment (798) (956)
Additions to other real estate (86) (669)
Proceeds from sale of other real estate 242 733
Net (increase) in loans (21,182) (15,064)
-------- --------
Net cash used in investing activities (21,660) (20,584)
-------- --------
</TABLE>
-7-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 OMITTED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
------- -------
(unaudited) (unaudited)
<S> <C>
FINANCING ACTIVITIES
Net increase in demand, money market and
savings deposits 4,506 8,861
Net increase in time deposits 18,678 8,440
Net (decrease) increase in repurchase agreements (396) (1,305)
Proceeds from Federal Home Loan Bank advances 12,000 1,000
Principal payments of Federal Home Loan Bank advances (80) (60)
Repayment from issuance of note payable - (50)
Net increase in short-term borrowings 92 (67)
Common stock issued - 155
Stock options exercised - 8
Fractional shares paid (19) (6)
Cash dividends paid on common stock (1,767) (1,534)
------- -------
Net cash provided by financing activities 33,014 15,442
------- -------
Increase in cash and cash equivalents 16,528 1,729
CASH AND CASH EQUIVALENTS
Beginning of the period 16,549 17,741
------- -------
End of the period $33,077 $19,470
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-8-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 2000 and December
31, 1999, and the results of operations and cash flows for the nine months
ended September 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 nine-month period ended September 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):
Amortized Fair
Cost Value
------------------ -------
Securities Held to Maturity:
---------------------------
September 30, 2000
------------------
(unaudited)
Obligations of States and Political Subdivisions $21,523 $21,496
U.S. Government Securities 3 3
------- -------
$21,526 $21,499
======= =======
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:
------------------------------
September 30, 2000
------------------
(unaudited)
U.S. Treasury Securities $ 8,022 $ 7,993
U.S. Government Securities 59,068 57,953
Obligations of States and Political Subdivisions 5,612 5,569
Corporate Bonds 10,977 10,724
Other Equity Securities 2,432 2,724
------- -------
$86,111 $84,963
======= =======
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 2,095 2,451
------- -------
$84,170 $82,490
======= =======
-9-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
4. The Company's loan portfolio is composed of the following (000 omitted):
September 30, December 31,
2000 1999
----------- ----------
(unaudited)
Real estate loans:
Construction $ 25,343 $ 20,497
Secured by farmland 1,538 1,600
Secured by 1 - 4 family residential 121,145 104,589
Other real estate loans 77,805 86,489
Loans to farmers (except secured by real estate) 163 156
Commercial and industrial loans (except those
secured by real estate) 21,429 22,996
Loans to individuals for personal expenditures 42,168 34,355
All other loans 3,787 3,370
-------- --------
293,378 274,052
Less:
Deferred loan fees (584) (605)
Allowance for loan losses (3,355) (3,080)
-------- --------
$289,439 $270,367
======== ========
5. Activity in the allowance for loan losses is as follows (000 omitted):
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
Balance at January 1 $3,080 $2,538
Recoveries added to the allowance 51 82
Loan losses charged to the allowance (250) (376)
Provision recorded to expense 476 836
------ ------
Balance at end of period $3,355 $3,080
====== ======
-10-
<PAGE>
VIRGINIA COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
6. Short-term Borrowings and Long Term Debt
Outstanding short-term borrowings consisted of (000's omitted):
September 30, December 31,
2000 1999
---- -----
(unaudited)
Federal Reserve borrowings $1,000 $908
Current portion of Federal Home Loan Bank advance 80 80
------ ----
$1,080 $988
====== ====
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. The Treasury will usually require
that this amount be limited to $1,000,000, but will occasionally allow
higher amounts before requesting a drawdown.
Second Bank & Trust has the following advances outstanding at September 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
$320,000 that requires quarterly principal payments totaling $80,000
annually and interest payable monthly at 6.60%. [Caroline also has
outstanding an advance for $2,000,000 maturing October 18, 2001 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 nine months ended September 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 September 30, 2000 and nine months ended
September 30, 2000 were 2,356,500 and 2,356,500, respectively.
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, 2000 Nine Months Ended Sept. 30, 2000
---------------------------------- --------------------------------
Shares Per Share Amount Shares Per Share Amount
---------------------------------- --------------------------------
<S> <C>
Basic earnings per share 2,356,500 $.54 2,356,500 $1.56
Effective of dilutive securities
Stock Options (828) - 1,584 -
--------- ---- --------- -----
Diluted earnings per share 2,355,672 $.54 2,358,084 $1.56
</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 September 30, 2000 amounted to $1.26 million or $.54 per share,
compared to $1.22 million or $.52 per share for the quarter ended September 30,
1999. Earnings for the nine month period ended September 30, 2000 amounted to
$3.68 million or $1.56 per share, an increase of 2.3% over the $3.59 million or
$1.52 per share for the comparable period in 1999. The Company's annualized
return on average equity for the nine-month period ended September 30, 2000 was
10.11%, compared to 10.21% in 1999. The Company's annualized return on average
assets for the nine months ended September 30, 2000 was 1.14%, compared to 1.18%
for the comparative period in 1999.
Excluding $57 thousand in after-tax charges associated with acquisitions and
systems conversions completed during the third quarter, earnings for the three
month period were $1.32 million or $.56 per diluted share. For the nine months
ended September 30, 2000 VCFC's recurring earnings was $3.87 million, or $1.64
per diluted share, excluding net of tax nonrecurring costs totaling $194
thousand, compared to $3.62 million or $1.54 per share in 1999. VCFC's third
quarter 2000 recurring earnings produced an annualized return on average assets
of 1.18% and an annualized return on average equity of 10.83%, compared to prior
year ratios of 1.20% and 10.40%, respectively.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income increased $234 thousand or 5.6% to $4.42 million for the
three months ended September 30, 2000. For the nine months ended September 30,
2000, net interest income increased $782 thousand or 6.3% to $13.10 million.
This improvement for the quarter and nine-month period can be attributed to an
increase in average earning assets and a relatively stable net interest margin.
Average earning assets increased $26.6 million to $405.1 million at September
30, 2000, an increase of 7.0% over $378.5 million at September 30, 1999. The net
interest margin for the nine months ended September 30, 2000 was 4.52%, compared
to 4.54% 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 $71 thousand to $844 thousand for the three months
ended September 30, 2000, an improvement of 9.2% over $773 thousand for the
comparative period in 1999. For the nine months ended September 30, 2000,
noninterest income decreased $8 thousand or .3% to $2.5 million. The improvement
noted in the third quarter was due to higher fees on brokerage operations. For
the year, increases in fees on brokerage and trust services were offset by
decreases in fees from mortgage banking operations.
Noninterest Expense
Operating expenses increased $272 thousand, or 8.8% to $3.4 million for the
three months ended September 30, 2000, compared to $3.1 million for the same
period in 1999. Operating expenses for the nine months ended September 30, 2000
amounted to $10.1 million, an increase of $765 thousand or 8.2% over the
comparable period in 1999. Included in this increase are nonrecurring expenses
of $128 thousand for the three-month period and $246 thousand for the nine-month
period associated with system conversions and merger costs incurred in
connection with acquisitions. Incremental compensation costs of $138 thousand
for the three-month period and $381 thousand for the nine-month period are
associated with management additions and normal staff hiring.
FINANCIAL CONDITION
Summary
At September 30, 2000, the Company has total assets of $453.4 million, an
increase of $37.8 million or 9.1% from $415.6 million at December 31, 1999.
Deposit growth of $23.0 million and FHLB advances of $12 million were used to
fund loan growth of $19.3 million and short-term securities growth of $18.2
million for the nine months ended September 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 $106.5 million at September 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 $1.2 million or .16% of loans receivable at September 30,
2000, compared to $1.6 million at December 31, 1999. The Company recorded a
provision for loan losses of $167 thousand for the three month period ended
September 30, 2000, compared to a provision of $173 thousand for the three month
period ended September 30, 1999. Provision for loan losses for the nine-month
period ended September 30, 2000 amounted to $476 thousand, compared to $548
thousand for 1999. The allowance for loan losses at September 30, 2000 amounted
to $3.4 million compared to $3.1 million at December 31, 1999. The allowance for
loan losses represents 715% of nonperforming loans and 1.12% of gross loans
receivable at September 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 September 30, 2000 of $49.4 million increased $2.2 million or
approximately 4.7% from $47.2 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 16.7% at September 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.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits are not applicable.
(b) The Corporation filed a Form 8-K on October 10, 2000 announcing
the Board's authorization of a stock repurchase of up to 225,000
shares in the open market. No shares had been repurchased as of
September 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
----------------
O.R. Barham, Jr.
President
November 13, 2000
--------------------------------
Jeffrey W. Farrar, CPA
Executive Vice President - Chief Financial Officer
November 13, 2000
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