UNITED STATES
SECURITIES EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-26314
JAMES RIVER BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1740210
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 EAST WASHINGTON STREET, SUFFOLK, VIRGINIA 23434
Address of principal executive offices and zip code
(804) 539-0241
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 __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. At March 31, 1996, the issuer
had 2,448,855 outstanding shares of its $5.00 par value common stock.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Cash and due from depository institutions $ 11,370 $ 12,264
Interest-bearing bank balances 100 --
Federal funds sold and securities purchased under
resale agreements or similar arrangements 24,094 11,832
Investment securities available-for-sale 89,655 63,107
(amortized cost: $89,591 in 1996 and $62,036
in 1995)
Investment securities held-to-maturity (fair
value: $12,354 in 1996 and $23,071 in 1995) 12,443 22,867
Loans, net 214,509 206,516
Premises and equipment, net 6,524 5,439
Intangible assets 2,973 160
Other assets 5,257 4,095
-------- --------
Total Assets $366,925 $326,280
======== ========
LIABILITIES
Noninterest-bearing deposits $ 32,866 $ 32,851
Interest-bearing deposits 295,190 254,513
-------- --------
Total deposits 328,056 287,364
Accounts payable and other liabilities 2,182 2,031
-------- --------
Total liabilities 330,238 289,395
-------- --------
SHAREHOLDERS' EQUITY
Common stock, $5 par, 10,000,000 shares
authorized, 2,448,855 issued and oustanding in
in 1996 and 2,448,502 in 1995 12,245 12,244
Additional paid-in capital 1,827 1,820
Retained earnings 22,572 22,114
Net unrealized gain on securities
available-for-sale 43 707
-------- --------
Total Shareholders' Equity 36,687 36,885
-------- --------
Total Liabilities and Shareholders' Equity $366,925 $326,280
======== ========
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE>
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended
March 31, March 31,
1996 1995
INTEREST INCOME
Interest and fees on loans $ 4,821 $ 4,019
Interest and dividends on securities 1,301 1,477
Interest on temporary investments 153 131
Total Interest Income 6,275 5,627
INTEREST EXPENSE
Interest on deposits 3,117 2,755
Interest on short-term borrowings 0 8
Total Interest Expense 3,117 2,763
Net Interest Income 3,158 2,864
Provision for loan losses 127 41
Net Interest Income after provision
for loan losses 3,031 2,823
NONINTEREST INCOME
Service charges on deposit accounts 257 202
Non-deposit fees and commissions 26 30
Securities (losses), gains, net 5 (46)
Other income 62 57
Total Noninterest Income 350 243
NONINTEREST EXPENSE
Personnel expense 1,191 1,084
Occupancy and equipment expense 187 176
Federal deposit insurance expense 183 186
Other expense 1,166 581
Total NonInterest Expense 2,727 2,027
EARNINGS
Income before income taxes 654 1,039
Income tax expense 196 233
Net income $ 458 $ 806
PER COMMON SHARE
Net Income (loss):
Primary $ .19 $ .33
Cash dividends paid $ .00 $ .00
AVERAGE SHARES OUTSTANDING
Primary 2,448,630 2,428,878
The notes to financial statements are an integral part of these statements.
<PAGE>
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(dollars in thousands, except per share data)
For The Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Additional Unrealized
Common Paid-in Retained Gains
Stock Captial Earnings (Losses) Total
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995 $ 12,244 $ 4,926 $ 19,008 $ 707 $ 36,885
Reclassification, see Note 5 -- (3,106) 3,106 -- --
Balance December 31, 1995 restated 12,244 1,820 22,114 707 36,885
Net income -- -- 458 -- 458
Common stock issued in directors'
stock purchase plan 1 7 8
Net unrealized loss on
securities available-for-sale -- -- -- (664) (664)
------ ----- ------ ------ ------
Balance March 31, 1996 $ 12,245 $ 1,827 $ 22,572 $ 43 $ 36,687
====== ===== ====== ====== ======
</TABLE>
<PAGE>
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands, except per share data)
For the Three Months Ended March 31, 1996 And 1995
<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 458 $ 806
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 107 119
Amortization of bond (discounts) and premiums (26) 176
Provision for loan losses 127 41
Decrease (increase) in other assets (3,976) (346)
Increase (decrease) in other liabilities 157 (758)
----------- -----------
$ (3,153) $ 38
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities $ 1,215 $ 3,254
Proceeds from maturities of securities 5,203 557
Purchase of securities (23,180) (2,903)
Purchases of premises and equipment (1,192) (40)
Acquisition of other real estate -- (95)
Net increase in loans (8,120) (4,642)
----------- -----------
$ (26,074) $ (3,869)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in non-interest bearing deposits $ 15 $ (3,784)
Net increase in interest bearing deposits 17,207 13,981
Net increase (decrease) in certificates of deposit 23,470 (7,400)
Issuance of stock 8 13
Cash dividends paid -- (89)
Repayment of borrowed funds (1,500)
Purchase of fractional shares (5) --
----------- -----------
$ 40,695 $ 1,221
----------- -----------
Net increase (decrease) in cash and cash equivalents 11,468 (2,610)
CASH AND CASH EQUIVALENTS
Beginning 24,096 22,661
----------- -----------
Ending $ 35,564 $ 20,051
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid $ 1,824 $ 1,748
=========== ===========
Income taxes $ 440 $ 156
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Transfer of investments held-to-maturity
to available-for-sale $ 9,200,000 $ 996,666
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE>
PART 1 - FINANCIAL INFORMATION
JAMES RIVER BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore do not
include all of the disclosures and notes required by generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the three month periods ended March
31, 1996 and 1995 are not necessarily indicative of results that may be expected
for the entire year or any interim period. The interim financial statements
should be read in conjunction with the December 31, 1995 consolidated financial
statements of James River Bankshares, Inc. (James River).
Note 2. Mergers and Acquisitions
In the first quarter of 1996, James River Bankshares, Inc. ("James
River") and its subsidiaries consummated several significant transactions.
First, in two separate transactions that both closed February 29, 1996, James
River acquired Bank of Isle of Wight, a Virginia state chartered bank in
Smithfield, Virginia and First Colonial Bank, FSB, a federal savings bank in
Hopewell, Virginia. The acquisitions of these two financial institutions were
treated as a pooling of interest and the historical financial information
included in this Form 10-Q is presented on this basis. In the aggregate, these
two transactions more than doubled James River's total assets and net loans.
Secondly, James River Bank, (formally known as "The Bank of Waverly") a wholly
owned subsidiary of James River, consummated the acquisition of two branch
banking offices from First Union National Bank of Virginia on March 23, 1996,
one of which is located in the City of Franklin, Virginia and one of which is
located in Courtland, Virginia, in Southampton County. James River Bank assumed
aggregate deposit liabilities of approximately $34 million in connection with
the two branch acquisitions.
Note 3. Transfer of Held-to-Maturity Investments
In conjunction with the acquisition by James River, First Colonial
Bank, FSB, transferred most of its investment portfolio from the
held-to-maturity category to available-for-sale, in order to maintain James
River's existing interest rate risk position and credit risk policy. The
transfer consisted of the entire investment portfolio of U. S. Government agency
and corporation obligations (except mortgage-backed securities),
1
<PAGE>
having an amortized cost of $9.2 million. The effect of this reclassification
was to reduce the net unrealized gain on securities available-for-sale by
$99,000.
Note 4. Earnings and Dividends Per Share
Earnings per share for the three months ended March 31, 1996 and 1995
are determined by dividing income for the periods by 2,448,630 and 2,428,878,
respectively, the weighted average number of shares of common stock and common
stock equivalents outstanding. Stock options and warrants are regarded as common
stock equivalents and are therefore considered in earnings per share
calculations, if dilutive. Common stock equivalents are computed using the
treasury stock method. There is no material difference between primary and
fully-diluted earnings per share.
Note 5. Reclassification of Additional Paid-In Capital
Due to a miscalculation at December 31, 1995, an erroneous transfer of
$3,106,000 from Retained Earnings to Additional Paid- In Capital was made. The
reclassification in the Consolidated Statement of Stockholders' Equity at March
31, 1996, corrects this error.
2
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Financial Condition
Assets
Total assets of James River Bankshares, Inc. ("James River") at March
31, 1996 were $366.9 million as compared to $326.3 million at December 31, 1995,
an increase of $40.6 million or 12.4%. This increase was primarily attributable
to the receipt of $34.4 million related to the assumption of deposits in the
purchase of two branch offices by James River Bank (formerly "The Bank of
Waverly"). Although the purchase transaction did not include loans, consolidated
total loans for the first quarter grew $8.0 million, a 3.9% increase, to $217.5
million.
During the first quarter of 1996, the interest rate environment for
James River's investment portfolio experienced a significant rise in rates.
Accordingly, the values of the Company's investment securities
available-for-sale had a net decline of $664,000 or 1.0%.
Liabilities
Deposits grew $40.7 million during the first quarter, an increase of
14.2%, to $328.1 million. Aside from the $34.2 million in deposits purchased
from First Union National Bank, deposits for James River grew $6.6 million in
the first quarter, an increase of 2.3%.
Non-performing Assets
Non-performing assets of James River comprise delinquent loans on which
income accrual has ceased or is being fully reserved, and property acquired
through foreclosure or repossession. Non performing assets totaled $810,000 on
March 31, 1996 as compared to $1.4 million on December 31, 1995. Those loans
past due 90 days or more and still accruing were $343,000 and $683,000 for the
same respective periods. Of these loans, loans secured by real estate totaled
$295,000 March 31, 1996 and $251,000 on December 31, 1995. Repossessed assets
make up only a small portion of non-performing assets, totaling $63,000, with a
$55,000 valuation allowance, on March 31, 1996, compared to $59,000, with a
$55,000 valuation allowance, on December 31, 1995.
Non-accrual loans totaled $639,000 on December 31, 1995, of which
$612,000 was secured by real estate with appraised values exceeding carrying
values. On March 31, 1996, non-accrual loans totaled $610,000 with $593,000
secured by real estate, again with appraised values exceeding the carrying value
of such loans.
3
<PAGE>
No additional provisions, other than ordinary provisions, are being
made to the allowance for loan losses.
The allowances for possible losses on loans are maintained by James
River at what management considers to be a realistic level consistent with the
level of loans, taking into consideration, the non-accrual and past due loans
detailed above.
James River's allowance for loan losses of $2.9 million was 1.35% of
total loans on March 31, 1996. On December 31, 1995, the allowance for loan
losses of $2.9 million was 1.37% of total loans. During this first quarter,
total loans increased $8.0 million or 3.9%.
The following details the allowance for loan losses for the first
quarter:
1996 1995
------ -----
Balance, January 1 $ 2,861 $ 2,811
Provision for loan losses 114 41
Net charges to the allowance (34) 6
------- -------
Balance, March 31, $ 2,941 $ 2,858
------- -------
RESULTS OF OPERATIONS
First Quarter of 1996 compared to First Quarter of 1995
Net Operating Results
For the quarter ended March 31, 1996, James River earned net income of
$458,000 as compared to $806,000 for the same period of 1995. The decrease was
mainly due to the charge of $530,000 to operating income for merger expenses
incurred by James River in connection with the acquisitions of First Colonial
Bank, FSB, and Bank of Isle of Wight.
Net Interest Income
Net interest income during the quarter ended March 31, 1996 increased
$294,000 to $3.2 million, up 10.3% from the $2.9 million for the quarter ended
March 31, 1995.
The increase in interest income was largely due to the $8.0 million
increase in loans for the first quarter of 1996 over the same period in 1995.
With rate changes and increased volume, interest and fee income on loans
increased 20.0% for the first quarter of 1996 to $4.8 million, $802,000 more
than the $4.0 million earned in same period of 1995. This increase was partially
offset by a $176,000 decrease in income on investment securities. Interest
income on overnight investment funds also increased $22,000 for the quarter over
the same period in 1995.
4
<PAGE>
Interest expense increased $354,000 to $3.1 million, a 12.8% increase
from the $2.8 million expense for the first quarter of 1995. Although interest
bearing deposits increased from $246.8 million at March 31, 1995 to $295.2
million at March 31, 1996, $34.2 million of this increase was not effective
until March 25, 1996, when James River Bank received deposits of $34.2 million
in connection with its acquisition of two branch offices from First Union,
therefore, James River did not have the full cost of these period ending
deposits for any significant period of time during 1996. The greater expense
incurred in the first quarter of 1996 is primarily due to the increase in
average total deposits of 6.7%, or 18.2 million, for the first three months of
1996 over the same period of 1995.
Non-Interest Income
Non-interest income during the quarter ended March 31, 1996 increased
by $107,000 as compared to the same period during 1995. Customer service fees on
deposit accounts increased $55,000, due largely to new accounts and increased
fees. An additional $51,000 change was made on the investments sold account. In
1995, the net losses by James River on the sale of investments was $46,000,
compared to the net gain of $5,000 in 1996.
Non-Interest Expense
Non-interest expenses during the first quarter of 1996 increased by
$700,000 compared to 1995, an increase of 34.5%, The major components of the
increase in 1995 were an increase in salaries and benefits of $107,000 and
$585,000 in other expenses. The increase in salaries is basically attributable
to the increase in officer staff of three of the subsidiaries and new personnel
associated with the two branches recently purchased by James River Bank.
Organizational expenses of $530,000 associated with James River's acquisitions
of First Colonial Bank, FSB, and Bank of Isle of Wight accounted for more than
90.6% of the increase in other expenses.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and interest sensitivity
At March 31, 1996, James River subsidiaries had $47.7 million in
undisbursed loan commitments and expects to have sufficient funds available to
meet its current loan origination commitments. Funding is expected to be in the
normal course of business primarily through loan repayments, prepayments, and
deposit growth. As additional funding, James River holds $102.1 million in
investment securities. Of this amount, $12.3 million is classified as
held-to-maturity with $206,000 maturing in less than one year. Of the $89.8
million in available-for-sale, $13.8 million matures in less than one year with
an additional $37.8 million maturing between 1 and 5 years.
Almost the entire deposit base is made up of core deposits
5
<PAGE>
with only 5.5% of total deposits composed of certificates of deposit of $100,000
and over.
CAPITAL RESOURCES
Total shareholders' equity amounted to $36.7 million at March 31, 1996.
James River's leverage ratio was 10.20%, with tier 1 risk-based capital ratio at
11.40% and a total risk-based capital ratio of 12.40%.
In the exchange of the common stock of First Colonial Bank, FSB, and
Bank of Isle of Wight for James River Bankshares, Inc. common stock, James River
purchased any fractional shares created. As a result, common stock shares
outstanding were reduced by 191 shares in the first quarter of 1996.
6
<PAGE>
PART II - OTHER INFORMATION
Item 1 . Legal Proceedings
None of James River or its subsidiaries are involved in any
pending legal proceedings other than nonmaterial legal
proceedings occurring in the ordinary course of business.
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Securities Holders -
On February 26, 1996, a Special Meeting of the Shareholders of
James River was held. At the Special Meeting, shareholders of
James River (i) voted upon a proposal to issue up to 599,541
shares of James River common stock to shareholders of First
Colonial Bank, FSB pursuant to the terms of an Agreement and
Plan of Merger dated as of June 30, 1995, as amended, between
James River and First Colonial Bank and (ii) voted upon a
proposal to issue up to 315,400 shares of James River common
stock to the shareholders of Bank of Isle of Wight pursuant to
the terms of an Agreement and Plan of Merger dated as of June
30, 1995 between James River and Bank of Isle of Wight. See
"Part I - Financial Information - Note 2." On the matter
regarding the issuance of shares of James River common stock
to shareholders of First Colonial Bank, there were 1,169,655
votes for, 12,170 votes against and 2,474 abstentions. On the
matter regarding the issuance of shares of James River common
stock to shareholders of Bank of Isle of Wight there were
1,180,490 votes for, 1,335 votes against and 2,474
abstentions. There were no broker non-votes on either
proposal.
Item 5. Other Information
Bank of Suffolk, a subsidiary of James River, recently agreed
to purchase a branch bank office in Suffolk from Central
Fidelity Bank. Also, First Colonial Bank, FSB, a subsidiary of
James River, has assumed a lease from NationsBank, N. A., for
a branch bank office in Hopewell. Both transactions are
subject to all necessary regulatory approval.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) Form 8-K
James River filed a Form 8-K dated March 23, 1996 under Item
4, regarding the (i) decision of Frank Edward Sheffer & Co. to
decline to stand for reelection as James River's independent
public accountants after serving in that capacity for the year
ended December 31, 1995 and (ii) the appointment of Goodman &
Company, L.L.P., to serve as James River's independent
certified public accountants for the fiscal year ending
December 31, 1996.
<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.
JAMES RIVER BANKSHARES, INC.
Date: May 13, 1996 /s/ Glenn T. McCall
------------ -------------------
Glenn T. McCall, Sr. Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 11,370
<INT-BEARING-DEPOSITS> 295,190
<FED-FUNDS-SOLD> 24,094
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 89,655
<INVESTMENTS-CARRYING> 12,443
<INVESTMENTS-MARKET> 12,354
<LOANS> 217,450
<ALLOWANCE> 2,941
<TOTAL-ASSETS> 366,925
<DEPOSITS> 328,056
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,182
<LONG-TERM> 0
0
0
<COMMON> 12,245
<OTHER-SE> 24,442
<TOTAL-LIABILITIES-AND-EQUITY> 366,925
<INTEREST-LOAN> 4,821
<INTEREST-INVEST> 1,301
<INTEREST-OTHER> 153
<INTEREST-TOTAL> 6,275
<INTEREST-DEPOSIT> 3,117
<INTEREST-EXPENSE> 3,117
<INTEREST-INCOME-NET> 3,158
<LOAN-LOSSES> 127
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 2,727
<INCOME-PRETAX> 654
<INCOME-PRE-EXTRAORDINARY> 458
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 458
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
<YIELD-ACTUAL> 8.21
<LOANS-NON> 610
<LOANS-PAST> 343
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,861
<CHARGE-OFFS> 81
<RECOVERIES> 47
<ALLOWANCE-CLOSE> 2,941
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,941
</TABLE>
