UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-K/A
----------------------------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 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) (Zip Code)
Registrant's telephone number, including area code: (804) 539-0241
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$5.00 par value
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendment to this Form 10-K/A. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 31, 1996: Common Stock - $47,983,790.
The number of shares outstanding of the registrant's common
stock as of March 31, 1996: 2,448,855.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders ("Annual
Report") are incorporated by reference in Part II of this Form 10-K/A. Portions
of the definitive Proxy Statement (the "1996 Proxy Statement") to be used in
connection with the 1996 Annual Meeting of Shareholders are incorporated by
reference in Part III of this Form 10-K/A.
<PAGE>
PART I
Item 1. Business
General
James River Bankshares, Inc., ("James River" or "Company") is a Virginia
bank holding company that commenced operations June 1, 1995. James River was
capitalized pursuant to a share exchange ("Share Exchange") between Bank of
Suffolk, a Virginia state chartered bank ("BOS"), and James River Bank ("JRB"),
formerly The Bank of Waverly, also a Virginia state chartered bank. In the Share
Exchange, shareholders of BOS and JRB exchanged their shares of common stock of
BOS and JRB, respectively, for shares of James River Common Stock. BOS and JRB
became wholly owned subsidiaries of James River on May 31, 1995.
In the first quarter of 1996, 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 ("BIW")
and First Colonial Bank, FSB, a federal savings bank in Hopewell, Virginia
("FCB"). In the aggregate, these two transactions more than doubled James
River's total assets and net loans. JRB also 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 Southhampton County. JRB assumed aggregate
deposit liabilities of approximately $34 million in connection with the two
branch acquisitions. In addition, BOS recently agreed to purchase a branch bank
facility in Suffolk from Central Fidelity Bank and anticipates commencing
operations at this branch in June 1996, subject to final negotiation of a
definitive agreement.
As a result of the various transactions described above, James River now
has four operating bank subsidiaries with a total of 16 banking offices that
conduct operations from the Tidewater region of southeastern Virginia to the
tri-city areas of Hopewell, Petersburg and Colonial Heights in southcentral
Virginia.
Reported financial results in Items 1, 6 and 7 of this Form 10-K and the
Financial Statements included in the Annual Report are as of December 31, 1995,
and include only the results of operations of BOS and JRB on a restated
consolidated basis. For pro forma results as of December 31, 1995, that include
the operating results of BIW and FCB, see "Item 8. Financial Statements and
Supplementary Data."
Operations of James River's Banking Subsidiaries
General. BOS was organized and chartered under the laws of the
Commonwealth of Virginia on January 11, 1967, and commenced operations on June
27, 1967. BOS is a member of the Federal Reserve System. BOS's deposits are FDIC
insured, and BOS is subject to the supervision, examination and regulation of
the Federal Reserve and the Virginia Bureau of Financial Institutions ("BFI").
BOS provides a wide range of financial services principally to individuals and
to small and medium-sized businesses, including individual and commercial demand
and time deposit accounts, commercial and consumer loans, travelers' checks,
safe deposit facilities, sales of United States Savings Bonds, collection items
and official checks. While BOS is authorized to provide trust services, it has
elected not to provide such services presently. BOS operates five full service
banking offices and one loan production office in the City of Suffolk, Virginia.
JRB was organized and chartered under the laws of the Commonwealth of
Virginia on June 12, 1933, and commenced operations on that day. JRB is a member
of the Federal Reserve System. JRB's deposits are FDIC insured, and JRB is
subject to the supervision, examination, and regulation of the Federal Reserve
and the BFI. JRB provides a wide range of financial services similar to those
provided by BOS. JRB operates one full service banking office and one drive-up
facility in the town of Waverly, Virginia, and one full-service banking office
in Sussex, Virginia.
BIW was organized and chartered under the laws of the Commonwealth of
Virginia on August 10, 1971, and commenced operations on November 28, 1973. BIW
is a member of the Federal Reserve System. BIW's deposits are FDIC insured, and
BIW is subject to the supervision, examination, and regulation of the Federal
Reserve and the BFI. BIW provides a wide range of financial services similar to
those provided by BOS and JRB. BIW is authorized to provide trust services, but
does not currently do so. BIW operates one full service banking office in the
town of Smithfield, Virginia.
FCB is a stock corporation which was incorporated under the laws of the
Commonwealth of Virginia in 1972. FCB commenced operations in 1975 as First
Colonial Savings and Loan Association and converted from a state chartered
association to a federal savings bank in 1990. FCB is a member of the Federal
Home Loan Bank of Atlanta. FCB's deposits are insured by the Savings Association
Insurance Fund ("SAIF") which is a division of the FDIC. FCB is subject to the
supervision, examination, and regulation of the Office of Thrift Supervision
("OTS"). FCB provides a wide range of financial services similar to those
provided by BOS, JRB and BIW. FCB is not authorized to provide trust services.
FCB operates in the southside Virginia area from a main office located in
Hopewell, Virginia. Including the main office, FCB has five full service
branches located primarily in the tri-city area in Hopewell, Colonial Heights,
Chester, Dinwiddie, Petersburg and a mortgage division in Prince George,
Virginia.
Credit Policies. James River's banking subsidiaries employ extensive
written policies and procedures to enhance management of credit risk. The loan
portfolio of each subsidiary is managed under a specifically defined credit
process. This process includes formulation of portfolio management strategy,
guidelines for underwriting standards and risk assessment, procedures for
on-going identification and management of credit deterioration, and regular
portfolio reviews to estimate loss exposure and to ascertain compliance with
internal policies.
A major element of credit risk management is the diversification of
risk. The objective of each subsidiary is to maintain a diverse loan portfolio
to minimize the impact of any single event or set of circumstances.
Concentration parameters are based upon individual risk factors, policy
constraints, economic conditions, collateral, and products. James River's
subsidiaries generally do not make loans outside their market area unless the
borrower has an established relationship with the bank and conducts his
principal business operations within the bank's market area. Consequently, James
River's banking subsidiaries and their borrowers are directly affected by the
economic conditions prevailing in their respective market areas.
The following table sets forth the composition of the loan portfolio of
BOS and JRB on a restated consolidated basis (by percentage) for the five years
ended December 31, 1995.
Loan Portfolio by Percentage
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(dollars in thousands)
<S> <C>
Commercial........... 18.6% 15.9% 17.1% 18.9% 23.4%
Agricultural......... 1.2 1.1 1.6 1.2 2.8
Real 2.8 0.3 0.4 0.9 1.3
estate-construction..
Real estate-mortgage. 63.4 69.3 68.1 67.5 60.6
Installment.......... 14.0 13.4 12.8 11.5 11.9
Total Loans...... 100.0% 100.0% 100.0% 100.0% 100.0%
Total Loans.......... $92,055 $82,105 72,522 67,026 57,150
</TABLE>
James River's service area provides lending opportunities to small
businesses, farmers, and a wide range of consumers. Most of the small businesses
are either retail or agribusiness companies. The loan portfolio set forth above
for BOS and JRB is 63.4% collateralized by first and second deeds of trust on
residential and commercial real estate. This heavy collateralization by real
estate requires an ascertainment of property values in the service areas and
lending on the appropriate loan-to-value ratios.
Commercial. Commercial loans represented 27.9% of James River's total
loan portfolio on December 31, 1995. $9.3 million or 35.8% of these loans were
secured by first and second deeds of trust on commercial real estate. Commercial
loans are used to purchase commercial real estate, to purchase capital
equipment, to support letters of credit and to fund inventory purchases. To
support all of the commercial business credits, borrowers' financials are kept
current and are analyzed to determine repayment through cash flows and annual
earnings. Because most of these businesses are small, principal owners generally
are asked to personally guarantee the credit.
Agricultural. At December 31, 1995, agricultural loans totaled $1.1
million. These were all farm operating loans including loans secured by farm
equipment. Loans secured by farm equipment loans have annual payments and are
part of the loan portfolio for one to five years.
Real Estate Construction. $2.6 million or 2.8% of the loan portfolio at
December 31, 1995, was outstanding in construction loans. Most of these loans
were made to either homeowners who are having their own home built or to
contractors who were building a residence under contract. Loans totaling
$617,000 were for commercial development.
Real Estate Mortgage. At December 31, 1995, 82.6% of the real estate
mortgages were residential mortgages on one to four family units. These loans
were either open ended adjustable rate mortgages ("ARMs"), amortized monthly,
predominately on a 20 year amortized basis, or closed end balloon loans, monthly
amortized and based on 15 or 20 year amortization. Both the ARMs and the
balloons have one, three or five year adjustable rates. Loan to value ratios are
consistently 75%. In BOS, approximately 8.5% of its one to four family
residential loans are in low to moderate income housing. $1.7 million were real
estate loans to individuals used for farm purchases and multifamily residential
properties. These loans are generally handled by a loan specialist whose
expertise is in the area of real estate lending.
Consumer. On December 31, 1995, 14.0% of total loans were consumer and
installment loans. Consumer loans include home improvement loans, automobile
loans and personal unsecured loans. James River's banking subsidiaries, on
consumer collaterized loans, generally uses loan to value ratios of 75% and none
of James River's current bank subsidiaries are involved in indirect dealer
lending.
Loan Portfolio
The loan portfolio of James River's banking subsidiaries is comprised of
commercial loans, agricultural loans, real estate loans, and consumer loans. Net
loans consist of total loans minus the allowance for loan losses, unearned
discounts, and deferred loan fees. Net loans were $90.4 million at December 31,
1995, 12.3% more than net loans of $80.5 million at December 31, 1994. The
average balance of total loans as a percentage of average earning assets was
61.7%, 56.6%, 54.0% and 54.0% for 1995, 1994, 1993 and 1992, respectively. BOS
and JRB had no loans outstanding to foreign countries or for highly leveraged
transactions as of December 31, 1995, 1994, 1993 or 1992.
In the normal course of business, James River's banking subsidiaries
make various commitments and incur certain contingent liabilities which are
disclosed but not reflected in its financial statements. These commitments and
contingent liabilities include commitments to extend credit and standby letters
of credit. At December 31, 1995, commitments for standby letters of credit
totaled $517,000 and commitments to extend credit were $25.0 million. At
December 31, 1994, commitments for standby letters of credit totaled $434,000
and commitments to extend credit totaled $12.3 million. At December 31, 1993,
commitments for standby letters of credit totaled $237,000 and commitments to
extend credit totaled $13.5 million. At December 31, 1992, commitments for
standby letters of credit totaled $424,000 and commitments to extend credit
totaled $10.4 million.
Interest income on installment, commercial, and real estate mortgage
loans is computed on the principal balance outstanding. Most loans carry an
interest rate tied to the base rate of James River's banking subsidiaries, which
is generally the Wall Street Journal prime rate.
The following tables summarize the composition of the loan portfolio at
the dates indicated for BOS and JRB:
Loan Portfolio
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(Dollars in thousands)
<S> <C>
Commercial.......... $15,672 $13,001 $20,399 $20,418 $16,520
Agricultural........ 1,102 939 1,150 802 1,629
Real estate-
construction........ 2,605 2,576 312 602 718
Real estate-
mortgage............ 59,055 53,148 41,407 37,476 31,494
Installment......... 13,621 12,441 9,254 7,728 6,789
Total Loans....... 92,055 82,105 72,522 67,026 57,150
Less:
Allowance for loan
losses.......... 1,619 1,616 1,318 1,063 703
Unearned discount. 1 3 16 47 164
Deferred loan fees 12 (10) (16) (19) (1)
(Expense)...........
Net loans....... $90,423 $80,496 $71,204 $65,935 $56,284
</TABLE>
Asset Quality
James River's banking subsidiaries attempt to maintain the allowance for
loan losses at a sufficient level to provide for potential losses in the loan
portfolio. The provision for loan losses is determined periodically by senior
management and lending officers based upon consideration of several factors,
including changes in the character and size of the loan portfolio and related
loan loss experience, a review and examination of overall loan quality which
includes the assessment of problem loans, and an analysis of anticipated
economic conditions in the market area. In addition, bank regulatory agencies
that regularly review the loan portfolio as part of their examination process
and advice from James River's independent accountants are considered in
reviewing and assessing the adequacy of the allowance for loan losses. Set forth
below is information regarding the maturity of loans for BOS and JRB at December
31, 1995:
Maturity Schedule of Loans
<TABLE>
<CAPTION>
December 31, 1995
Over One
One Year through Over Five Total
or Less Five Years Years Loans
(Dollars in thousands)
<S> <C>
Commercial......................... $ 8,372 $ 5,785 $ 2,960 $17,117
Agricultural....................... 353 749 0 1,102
Real estate-construction........... 1,609 996 0 2,605
Real estate-mortgage............... 11,288 23,163 23,930 58,381
Installments....................... 3,289 9,211 337 12,837
Total............................ 24,911 39,904 27,227 92,042
Loans maturing after one year with
predetermined rates.............. 31,347
Loans maturing after one year with
variable rates................... 35,784
Total............................ $67,131
</TABLE>
An analysis of the allowance for loan losses, including charge off
activity is presented below for BOS and JRB for the periods indicated.
Allowance for Loan Losses
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(dollars in thousands)
<S> <C>
Average total loans....... $87,169 $78,484 $71,377 $63,965 $53,555
Balance, beginning
of period............... 1,616 1,318 1,063 703 501
Less charge offs:
Commercial.............. 71 1 11 119 22
Installment............. 69 42 65 36 52
Real estate............. 14 6 37 49 9
Total charge offs..... 154 49 113 204 83
Plus recoveries:
Commercial.............. 8 1 15 11 17
Installment............. 53 12 16 6 28
Real estate............. 0 34 19 0 0
Total recoveries...... 61 47 50 17 45
Net charge offs........... 93 2 63 187 38
Provision for loan losses. 96 300 318 547 240
Balance end of period..... $1,619 $1,616 $1,318 $1,063 $ 703
Allowance for loan losses
to period end total loans. 1.76% 1.96% 1.82% 1.59% 1.23%
Allowance for loan losses
to nonaccrual loans....... 467.92 473.90 499.24 205.61 130.19
Net charge offs (recoveries)
to average loans.......... 0.11 0.00 0.09 0.29 0.07
</TABLE>
A breakdown of the allowance for loan losses for BOS and JRB at the
periods indicated is provided in the following table; however, management of
James River does not believe that the allowance for loan losses can be
fragmented by category with any precision that would be useful to investors. The
breakdown of the allowance for loan losses is based primarily upon those factors
discussed above in computing the allowance for loan losses as a whole. Because
all of these factors are subject to change, the breakdown is not necessarily
indicative of the category of future loan losses.
Allocation of Allowance for Loan Losses in Dollars
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(dollars in thousands)
<S> <C>
Commercial........ $ 442 $ 736 $ 541 $ 484 $ 325
Agricultural...... 22 67 70 8 14
Real estate-
construction.... 47 1 4 7 4
Real estate-
mortgage........ 880 646 574 462 308
Installment....... 229 166 129 102 52
Total allowance
for loan losses. $1,619 $1,616 $1,318 $1,063 $ 703
</TABLE>
The following table sets forth the composition of the loan portfolio of
BOS and JRB on a consolidated basis (by percentage) for the five years ended
December 31, 1995:
Amount of Loans to Gross Loans by Percentages
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
<S> <C>
Commercial.......... 18.6% 15.9% 17.1% 18.9% 23.4%
Commercial -
real estate....... 9.3 11.0 12.4 16.2 19.6
Agricultural........ 1.2 1.1 1.6 1.2 2.8
Real estate -
construction...... 2.8 0.3 0.4 0.9 1.3
Real estate -
mortgage.......... 54.1 58.3 55.7 51.3 41.0
Installment......... 14.0 13.4 12.8 11.5 11.9
Total Loans..... 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
The following table details information concerning nonaccrual,
restructured and past due loans, as well as foreclosed assets for BOS and JRB,
for the dates indicated:
Non-performing Assets
<TABLE>
<CAPTION>
December 31,
1995 1994 1993 1992 1991
(dollars in thousands)
<S> <C>
Nonaccrual loans............. $ 453 $ 341 $ 264 $ 517 $ 540
Foreclosed assets............ 0 0 50 109 17
Total non-performing
assets................... $ 453 $ 341 $ 314 $ 626 $ 557
Loans past due 90 or
more days accruing
interest................... $ 683 $ 203 $ 618 $ 355 $ 375
Non-performing loans
to total loans, at
period end................. .49% .42% .36% .77% .94%
Non-performing loans
to period end loans
and foreclosed assets...... .49 .42 .36 .77 .94
</TABLE>
As of December 31, 1995, loans 30 days or more delinquent for BOS and
JRB totaled $2.5 million, which includes those non-performing loans above that
have possible credit problems and cause management to have concerns about the
borrowers' continuing ability to comply with existing repayment terms. Of these
potential problem loans, $1.5 million are secured by first security interests in
real estate.
Investments
The carrying value of the investment portfolio of BOS and JRB was $46.7
million at December 31, 1995 compared to $57.3 million at December 31, 1994. The
average balance of the investment portfolio decreased $10.3 million or 18.0% in
1995 compared to 1994. The average balance of securities decreased 13.2%, or
$7.6 million, in 1995 and increased 2.4%, or $1.4 million, in 1994.
Since 1992, the management of BOS and JRB has made small adjustments in
the mix of the investment portfolio by moving investments from U. S. Treasury
and federal agencies to tax-exempt state and political subdivisions. U.S.
Treasury and federal agency securities now account for 48.5% of the investments
compared to 48.9% in State and political subdivisions.
At December 31, 1995, 1994 and 1993, there was no obligation of any one
issuer in the investment portfolio, exclusive of obligations of the U.S.
Government or U.S. agencies and corporations, which in the aggregate exceeded
10% of stockholders' equity.
The market value of BOS's and JRB's investment portfolio was 99.6%,
98.3% and 99.5% of carrying value, respectively, at years ended December 31,
1995, 1994 and 1993.
The following table summarizes the carrying value of securities for BOS
and JRB for the dates indicated:
Securities Portfolio
<TABLE>
<CAPTION>
December 31,
1995 1994 1993
<S> <C>
U. S. Treasury and other
government agencies......... $22,497 $34,814 $35,747
State and political
subdivisions................ 22,698 20,661 18,432
Other securities(1)........... 875 1,500 2,305
Total Securities.......... $46,070 $56,975 $56,484
</TABLE>
(1) Excluding Federal Reserve Bank stock and bank stock.
The following table sets forth the maturity distribution and weighted
average yields of the investment portfolio for BOS and JRB at December 31, 1995.
The weighted average yields are calculated on the basis of book value of the
investments portfolio and on the interest income of investments adjusted for
amortization of premium and accretion of discount. All investments are
Available-for-Sale, with carrying values and market values equal. Yields on
tax-exempt investments have been computed on a tax equivalent basis assuming a
federal tax rate of 34%.
Maturities of Investments
<TABLE>
<CAPTION>
December 31, 1995
Weighted
Book value Market value average yield
(Dollars in thousands)
<S> <C>
U.S. Treasury securities
One year or less..................... $ 2,355 $ 2,376 6.57%
After one to five years.............. 5,933 6,134 6.28
After five to ten years.............. 1,395 1,496 6.48
After ten years ..................... 0 0 0.00
Total.............................. 9,683 10,006 6.38
Federal agency securities
One year or less..................... 2,352 2,367 7.42
After one to five years.............. 3,589 3,627 6.46
After five to ten years.............. 4,885 4,880 6.48
After ten years...................... 1,591 1,618 6.62
Total.............................. 12,417 12,492 6.62
State and political subdivisions
securities
One year or less..................... 775 777 7.49
After one to five years.............. 9,170 9,295 8.29
After five to ten years.............. 9,290 9,537 8.07
After ten years...................... 2,935 3,088 8.12
Total.............................. 22,170 22,697 8.15
Federal Reserve Bank Stock and
other Equity Stock
One year or less..................... 0 0 0.00
After one to five years.............. 0 0 0.00
After five to ten years.............. 0 0 0.00
After ten years...................... 657 657 6.00
Total.............................. 657 657 6.00
Other Securities
One year or less..................... 0 0 0.00
After one to five years.............. 849 875 6.74
After five to ten years.............. 0 0 0.00
After ten years...................... 0 0 0.00
Total.............................. 849 875 6.74
Total securities at period end....... $45,776 $46,727 7.17
</TABLE>
Deposits
James River's banking subsidiaries primarily use deposits to fund their
loans and investments portfolio. Since the end of 1992, as demonstrated below,
BOS and JRB continued to experience deposit growth, especially in money market
savings, regular savings and interest bearing deposits. Average balances in
total deposits increased from $108.8 million in 1992 to $122.1 million in 1993,
a growth of $13.4 million or 12.3%. For the comparable period ending December
31, 1994, average total deposits increased $3.8 million or 3.1%. For the period
ending December 31, 1995, average total deposits increased $936,000 or .75%.
This lower level of deposit growth is attributable primarily to management's
control of deposit costs.
James River's banking subsidiaries offer individuals and
small-to-medium-sized businesses a variety of deposit accounts. These accounts,
including checking, savings, money market, and certificates of deposit, are
obtained primarily from the communities which James River's banking subsidiaries
service. Management believes that this provides a stable core deposit base. The
following table details the average amount of, and the average rate paid on, the
following primary deposit categories for BOS and JRB for the periods indicated:
Average Deposits and Average Rates Paid
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
(Dollars in thousands)
<S> <C>
Interest-bearing deposits:
Checking................ $18,207 3.30% $20,404 2.92% $ 21,423 2.80%
Money market savings.... 14,641 3.90 16,756 3.36 14,572 3.45
Regular savings......... 20,853 3.64 23,292 3.40 22,169 3.53
Certificates of deposit:
$100,000 and over..... 6,875 4.38 4,409 3.65 5,309 3.94
Under $100,000........ 45,622 5.30 43,689 4.37 42,265 4.37
Total interest-bearing 106,198 4.43 108,550 3.70 105,738 3.73
deposits..................
Noninterest-bearing....... 20,171 0.00 17,437 0.00 16,404 0.00
Total deposits............ $126,369 3.74% $125,987 3.19% $122,142 3.22%
</TABLE>
The following is a summary of the maturity distribution of certificates
of deposit in amounts of $100,000 or more for BOS and JRB as of December 31,
1995:
Maturities of CDs of $100,000 or More at December 31, 1995
Amount Percent
(Dollars in thousands)
Three months or less............... $3,172 51.3%
Over three months to twelve months. 1,869 30.3
Over twelve months................. 1,136 18.4
Total............................ $6,177 100.0%
Certificates of deposit in amounts of $100,000 or more at December 31,
1995, 1994, and 1993 were $6.2 million, $4.3 million, and $4.6 million,
respectively. The balance of $6.2 million at December 31, 1995, represented
11.4% of total certificates of deposit. The December 31, 1994 figure represents
8.4% of the total certificate of deposit balance of $49.8 million at that date.
The December 31, 1993 figure represents 10.0% of the total certificate of
deposit balance of $46.1 million at that date.
James River's banking subsidiaries do not accept brokered deposits, and
all large certificates of deposit are community based.
Short-Term Borrowings
James River's banking subsidiaries occasionally find it necessary to
purchase federal funds on a short-term basis due to fluctuations in loan and
deposit levels. James River's banking subsidiaries have several arrangements
where they may purchase funds. The only borrowings of James River's banking
subsidiaries involve the purchase and sale of federal funds. Set forth below are
short term borrowings for BOS and JRB at the periods indicated:
Short-Term Borrowings
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
(Dollars in thousands)
<S> <C>
Average daily amount of short-term borrowings
outstanding during the period.................... $ 673 $ 219 $ 0
Weighted average interest rate on average
daily short-term borrowings...................... 6.19% 4.11% 0.00%
Maximum outstanding short-term borrowings
outstanding at any month end..................... 3,816 1,437 0
Short-term borrowings outstanding at period end.... 0 0 0
</TABLE>
<PAGE>
The following tables illustrate average balances of total
interest-earning assets and total interest-bearing liabilities for JRB and BOS
for the period indicated, showing the average distribution of assets,
liabilities, stockholders' equity, and the related income, expense, and
corresponding weighted average yields and costs. The average balances used for
the purposes of these tables and other statistical disclosures were calculated
by using the yearly average balances.
Average Balances, Interest Income and Expenses, and Average Yields and Rates
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
Interest Interest Interest
Average income/ Average Average income/ Average Average income/ Average
balance expense yield/rate balance expense yield/rate balance expense yield/rate
<S> <C>
Assets:
Interest bearing assets:
Securities:
U. S. Treasury.......... $11,506 $ 769 6.68% $17,731 $ 1,032 5.82% $16,691 $1,041 6.24%
Federal agency.......... 16,617 1,163 7.00 19,263 1,247 6.47 19,626 1,288 6.56
State and political
subdivisions (1)...... 20,492 1,746 8.52 18,503 1,540 8.32 17,743 1,626 9.16
Collateralized mortgage
obligations............ 0 0 0.00 0 0 0 250 22 8.80
Federal reserve stock
(2)................... 428 15 3.50 174 10 5.75 143 8 5.59
Other equity securities. 1,036 75 7.24 1,954 107 5.48 1,874 98 5.23
Total Securities...... 50,079 3,768 7.52 57,625 3,936 6.83 56,327 4,083 7.25
Loans:
Commercial.............. 16,365 1,414 8.64 26,055 2,219 8.52 24,769 1,905 7.69
Real estate -
construction........... 2,031 187 9.21 273 25 9.16 457 39 8.53
Real estate - mortgage.. 58,161 5,127 8.82 44,054 3,689 8.37 39,286 3,500 8.91
Installment............. 12,262 1,229 10.02 8,102 835 10.31 6,865 855 12.45
Total Loans.......... 88,819 7,957 8.96 78,484 6,768 8.62 71,377 6,299 8.82
Interest bearing deposits
in other banks.......... 0 0 0.00 0 0 0.00 0 0 0
Federal funds sold........ 3,984 159 3.99 2,528 117 4.63 4,433 107 2.41
Total money market
investments........ 3,984 159 3.99 2,528 117 4.63 4,433 107 2.41
Total interest-earning
assets/total
interest income.... 142,882 $11,884 8.32% 138,637 $10,821 7.81% 132,137 $10,489 7.94%
Noninterest earning assets:
Cash and due from banks. 6,260 6,354 6,206
Other assets............ 1,308 3,191 2,274
Less: Allowance for
loan losses........... (1,650) (1,462) (1,215)
Fixed Assets............ 3,432 2,865 2,117
Total noninterest
earning assets... 9,350 10,948 9,382
Total Assets..........$152,232 $149,585 $141,519
Liabilities and
stockholders equity:
Interest bearing
liabilities:
Interest bearing deposits:
Checking................$ 18,207 $ 600 3.30% $20,404 $ 595 2.92% $ 21,423 $ 600 2.80%
Money market savings.... 14,641 571 3.90 16,756 563 3.36 14,572 503 3.45
Regular savings......... 20,853 758 3.63 23,292 791 3.40 22,169 783 3.53
Certificates of deposit:
$100,000 and over..... 6,261 301 4.81 4,409 161 3.57 5,309 209 3.94
Under $100,000........ 46,236 2,459 5.32 43,689 1,909 4.37 42,265 1,845 4.37
Total interest
bearing deposits.... 106,198 4,689 4.43 108,550 4,019 3.70 105,738 3,940 3.73
Federal funds purchased... 672 42 6.25 496 20 4.03 235 7 2.98
Total interest bearing
liabilities/
total interest expense.. 106,870 4,731 4.43 109,046 4,039 3.70 105,973 3,947 3.72
Non interest bearing
liabilities:
Demand deposits......... 20,171 17,437 16,404
Other liabilities....... 1,034 1,050 838
Total noninterest
liabilities........ 21,205 18,487 17,242
Total liabilities......... 128,075 127,533 123,215
Stockholders equity....... 24,157 22,052 18,304
Total Liabilities and
Stockholders' equity.....$152,232 $149,585 $141,519
Interest spread (3)....... 3.89 4.11 4.22
Net interest income/net
interest margin (4)..... $7,153 5.01% $6,782 4.89% $6,542 4.95%
</TABLE>
(1) Income and yields are reported on a tax-equivalent basis assuming a federal
tax rate of 34%.
(2) Includes Federal Reserve Bank stock, Virginia Bankers Bank stock and the
average of a $330,000 investment in common stock of a commercial bank
purchased in 1995.
(3) Interest spread is the average yield earned on earning assets, calculated on
a fully taxable equivalent basis, less the average rate incurred on
interest-bearing liabilities.
(4) Net interest margin is net interest income, calculated on a fully taxable
equivalent basis assuming a federal income tax rate of 34%, expressed as a
percentage of average earnings assets.
<PAGE>
The following table describes the impact on the interest income of BOS
and JRB resulting from changes in average balances and average rates for the
periods indicated. The change in interest due to both volume and rate has been
allocated to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
Rate and Volume Analysis
<TABLE>
<CAPTION>
Years Ended December 31,
1995 compared to 1994 1994 compared to 1993
Change Due To: Change Due To:
Increase Increase
(Decrease) Rate Volume (Decrease) Rate Volume
<S> <C>
Interest income:
Securities:
U. S. Treasury.......... $ (263) $ 99 $(362) $ (9) $ (68) $ 59
Federal agency.......... (84) 87 (171) (41) 62 (103)
State and political
subdivisions.......... 206 41 165 (86) 1 (87)
Collateralized mortgage
obligations........... 0 0 0 (22) (22) 0
Federal Reserve stock... 5 (10) 15 2 2 0
Other equity securities. (32) 18 (50) 9 34 (25)
Total Securities...... (168) 235 (403) (147) 9 (156)
Loans:
Commercial................ (805) 20 (825) 314 194 120
Real estate - construction 162 1 161 (14) (14) 0
Real estate - mortgage.... 1,438 257 1,181 189 222 (33)
Installment............... 394 47 347 (20) (19) (1)
Total Loans............. 1,189 325 864 469 383 86
Interest bearing deposits
in other banks............ 0 0 0 0 0 0
Federal funds sold.......... 42 (25) 67 10 17 (7)
Total money market 42 (25) 67 10 17 (7)
investments.............
Total interest income..... 1,063 535 528 332 409 (77)
Interest expense:
Interest bearing deposits:
Checking................ 5 69 (64) (5) 4 (9)
Money market savings.... 8 79 (71) 60 41 19
Regular savings......... (33) 50 (83) 8 34 (26)
Certificates of deposit:
$100,000 and over..... 140 74 66 (48) 4 (52)
Under $100,000........ 550 439 111 64 90 (26)
Total interest 670 711 (41) 79 173 (94)
bearing deposits....
Federal funds purchased..... 22 15 7 13 12 1
Total interest expense...... 692 726 (34) 92 185 (93)
Net interest income......... $ 371 $(191) $ 562 $ 240 $ 224 $ 16
</TABLE>
Interest Sensitivity
An important element of both earnings performance and liquidity is
management of the interest sensitivity gap. The interest sensitivity gap is the
difference between interest-sensitive assets and interest-sensitive liabilities
in a specific time interval. The gap can be managed by repricing assets or
liabilities, by selling investments held for sale, by replacing an asset or
liability at maturity, or by adjusting the interest rate during the life of an
asset or liability. Matching the amounts of assets and liabilities repricing in
the same time interval helps to hedge the interest rate risk and minimize the
impact on net interest income in periods of rising or falling interest rates.
James River's banking subsidiaries evaluate interest sensitivity risk
and then formulate guidelines regarding asset generation and pricing, funding
sources and pricing, and off-balance sheet commitments in order to decrease
sensitivity risk. These guidelines are based upon management's outlook regarding
future interest rate movements, the state of the regional and national economy,
and other financial and business risk factors.
On December 31, 1995, BOS and JRB had $50.0 million more in liabilities
than assets that repriced within three months or less and was, therefore, in a
liability-sensitive position. Positive gaps can affect earnings adversely in a
period of falling rates, while negative gaps can adversely impact earnings in a
period of rising rates. To reduce the impact of shifts in prevailing interest
rates, $25.1 million of the loan portfolio of BOS and JRB at December 31, 1995,
was based upon a floating rate with a repricing frequency of less than one year.
Moreover, as of December 31, 1995, BOS and JRB collectively held $40.3 million
in investments held as "Available for Sale" which could be sold quickly to meet
any special funding needs.
The following table illustrates the interest sensitivity gap position of
BOS and JRB as of December 31, 1995. This table presents a position that existed
at one particular day, that changes continually, and that is not necessarily
indicative of James River's position at any other time.
Interest Sensitivity Analysis
<TABLE>
<CAPTION>
December 31, 1995
Maturing Or Repricing In:
3 Months 4-12 1-5 Over
or Less Months Years 5 Years
(Dollars in thousands)
<S> <C>
Interest-sensitive assets:
Loans.............................. $13,346 $18,999 $32,484 $27,226
Securities......................... 2,003 4,064 19,384 21,276
Federal Funds sold................. 7,232 0 0 0
Total interest-sensitive assets.. $22,581 $23,063 $51,868 $48,502
Cumulative interest-sensitive
assets........................... $22,581 $45,644 $97,512 $146,014
Interest-sensitive liabilities:
NOW accounts....................... $21,518 $ 0 $ 0 $ 0
Regular savings.................... 19,217 0 0 0
Certificates of deposit............ 9,085 21,172 18,230 0
Money market savings............... 13,083 0 0 0
IRA and Keoghs..................... 4,858 1,087 366 0
Total interest-sensitive
liabilities.................... $67,761 $22,259 $18,596 $ 0
Cumulative interest-sensitive
liabilities...................... $67,761 $90,020 $108,616 $108,616
Period gap......................... $(45,180) $ 804 $33,272 $48,502
Cumulative gap..................... $(45,180) $(44,376) $(11,404) $37,398
Ratio of cumulative interest-
sensitive assets to interest-
sensitive liabilities............ 33.32% 50.70% 89.78% 134.43%
Ratio of cumulative gap to
total assets..................... (28.62) (28.12) (7.23) 23.69
</TABLE>
<PAGE>
Return on Equity and Assets
The following table summarizes ratios for BOS and JRB considered to be
significant indicators of James River's profitability and financial condition
during the periods indicated:
Return on Equity and Assets
Years ended December 31,
1995 1994 1993
Return on average assets..................... 1.29% 1.45% 1.53%
Return on average equity..................... 8.14 9.87 11.82
Dividend payout ratio (1)....................40.63 32.89 29.88
Average equity to average asset ratio........15.87 14.74 12.93
(1) Historically, BOS and JRB paid dividends annually in the fourth quarter
of each fiscal year. On December 1, 1995, James River paid a dividend of
$0.52 per share to holders of record on November 15, 1995.
Market Area and Competition
James River now has four operating bank subsidiaries with a total of 16
banking offices that conduct operations from the Tidewater region of
southeastern Virginia to the tri-city areas of Hopewell, Petersburg and Colonial
Heights in southcentral Virginia. All of James River's subsidiaries operate in
highly competitive environments, competing for deposits and loans with other
financial institutions, many of which possess greater financial resources than
those available to James River's subsidiaries. Certain of these institutions
have higher lending limits than James River's subsidiaries and may provide
various services for their customers which James River's subsidiaries do not
offer directly to their customers. In addition, there can be no assurance that
other financial institutions, with substantially greater resources than James
River's subsidiaries, will not establish operations in their respective service
areas.
Supervision and Regulation of James River's Banking Subsidiaries
James River's subsidiaries are subject to state and federal banking laws
and regulations which impose specific requirements or restrictions and provide
for general regulatory oversight with respect to virtually all aspects of their
operations. The following is a brief summary of certain statutes and regulations
affecting James River's banking subsidiaries. This summary is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referred to below, and it is not intended to be an exhaustive description of all
laws applicable to the business of James River's subsidiaries. Any change in
applicable laws or regulations may have a material effect on the business and
prospects of James River.
State Chartered Banks. BOS, JRB and BIW (the "Bank Subsidiaries") are
all state-chartered banks organized under Virginia law. They are also members of
the Federal Reserve System and, therefore, are supervised and examined by the
Federal Reserve, their primary federal regulator. The Federal Reserve and BFI
conduct regular examinations of the Bank Subsidiaries, reviewing the adequacy of
their allowance for loan losses, quality of loans and investments, propriety of
management practices, compliance with laws and regulations and other aspects of
their operations. In addition to these regular examinations, the Bank
Subsidiaries must furnish the Federal Reserve with quarterly reports containing
detailed financial statements and schedules. The Federal Deposit Insurance
Corporation ("FDIC"), which provides deposit insurance, also has authority to
examine and regulate the Bank Subsidiaries.
Federal and state banking laws and regulations govern all areas of the
operations of the Bank Subsidiaries, including maintenance of cash reserves,
loans, mortgages, maintenance of minimum capital, payment of dividends, and
establishment of branch offices. Federal and state bank regulatory agencies also
have the general authority to eliminate dividends paid by insured banks if such
payment is deemed to constitute an unsafe or unsound practice. The Federal
Reserve has authority to impose penalties, initiate civil administrative
actions, and take other steps to prevent the Bank Subsidiaries from engaging in
unsafe or unsound practices. In this regard, the Federal Reserve has adopted
capital adequacy requirements applicable to its member banks. See "Supervision
and Regulation of James River - Capital Requirements" below.
Federal Savings Banks. As a federally chartered savings bank, FCB is
subject to regulation, supervision and periodic examination by the Office of
Thrift Supervision ("OTS") and the FDIC. The regulations of these agencies
govern most aspects of FCB's business and operations. FCB's deposits are insured
by the SAIF administered by the FDIC to the maximum amount permitted by law,
which is currently $100,000 per depositor in most cases. See "Supervision and
Regulation of James River - Deposit Insurance" below.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") effected sweeping changes in the regulatory structure applicable to
federally insured savings institutions. FIRREA abolished the Federal Home Loan
Bank Board and the role of its Chairman as the chief regulator of the savings
and loan industry. The primary regulator for federal and state savings
institutions is now the OTS, an office in the United States Department of the
Treasury. The Director of the OTS is responsible for the examination and
supervision of all savings institutions.
The OTS has authority to issue regulations, conduct examinations and
supervise the operations of savings institutions. The OTS regulatory scheme is
comprehensive and governs, among other things, capital requirements, equity
investments, affordable housing, liquidity, securities issuances, the form of
savings instruments issued by savings institutions, certain aspects of a savings
association's lending activities, including appraisal requirements, maximum loan
amounts, private mortgage insurance coverage, lending authority and
nondiscriminatory lending practices. OTS regulations also restrict transactions
between savings institutions and affiliated parties which are deemed to be a
conflict of interest under the regulations. In addition, the OTS' consent is
required prior to any major corporate reorganization, including a merger.
Supervision and Regulation of James River
General. As a bank holding company, James River is subject to state and
federal banking and bank holding company laws and regulations which impose
specific requirements or restrictions and provide for general regulatory
oversight with respect to virtually all aspects of its operations. The following
is a brief summary of certain statutes and regulations affecting James River.
This summary is qualified in its entirety by reference to the particular
statutory and regulatory provisions referred to below, and is not intended to be
an exhaustive description of all laws applicable to James River's operations.
Any change in applicable laws or regulations may have a material effect on the
business and prospects of James River.
Bank Holding Companies. As a bank holding company registered under the
Bank Holding Company Act ("BHC Act"), James River is subject to regulation by
the Federal Reserve. The Federal Reserve has jurisdiction under the BHC Act to
approve any bank or nonbank acquisition, merger or consolidation proposed by a
bank holding company. The BHC Act generally limits the activities of a bank
holding company and its subsidiaries to that of banking, managing or controlling
banks, or any other activity which is so closely related to banking or to
managing or controlling banks as to be a proper incident thereto.
The BHC Act formerly prohibited the Federal Reserve from approving an
application from a bank holding company to acquire shares of a bank located
outside the state in which the operations of the holding company's banking
subsidiaries were principally conducted, unless such an acquisition was
specifically authorized by statute of the state in which the bank whose shares
were to be acquired was located. However, under recently enacted federal
legislation, the restriction on interstate acquisitions was abolished effective
September 29, 1995, and bank holding companies from any state may now acquire
banks and bank holding companies located in any other state. Banks also will be
able to branch across state lines effective June 1, 1997, provided certain
conditions are met, including that applicable state law must expressly permit
such interstate branching. Under Virginia law effective July 1, 1995, Virginia
banks can branch across state lines in those states with which Virginia has
reciprocal agreements.
There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by federal law
and regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance fund in the
event the depository institution becomes in danger of default or in default. For
example, under a policy of the Federal Reserve with respect to bank holding
company operations, a bank holding company is required to serve as a source of
financial strength to its subsidiary depository institutions and to commit
resources to support such institutions in circumstances where it might not do so
absent such policy. In addition, the "cross-guarantee" provisions of federal law
require insured depository institutions under common control to reimburse the
FDIC for any loss suffered or reasonably anticipated by either the Savings
Association Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF") as a
result of the default of a commonly controlled insured depository institution or
for any assistance provided by the FDIC to a commonly controlled insured
depository institution in danger of default. The FDIC may decline to enforce the
cross-guarantee provisions if it determines that a waiver is in the best
interest of the SAIF or the BIF or both. The FDIC's claim for damages is
superior to claims of shareholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institutions.
The Federal Deposit Insurance Act also provides that amounts received
from the liquidation or other dissolution of any insured depository institution
by any receiver must be distributed (after payment of secured claims) to pay the
deposit liabilities of the institution prior to payment of any other general or
unsecured senior liability, subordinated liability, general creditor or
shareholder. This provision would give depositors a preference over general and
subordinated creditors and shareholders in the event a receiver is appointed to
distribute the assets of any of James River's subsidiaries.
James River is registered under the bank holding company laws of
Virginia. Accordingly, James River and its subsidiaries are also subject to
regulation and supervision by the BFI.
Savings and Loan Holding Companies. Since James River's acquisition of
FCB, James River has been a savings and loan holding company under federal law
in addition to being a bank holding company. For a discussion of the supervision
and regulation of FCB as a federal savings bank, see "Supervision and Regulation
of James River's Banking Subsidiaries - Federal Savings Banks" above.
FIRREA amended the Home Owner's Loan Act to establish new provisions
governing savings and loan holding companies. A savings and loan holding company
is defined as any company which directly or indirectly controls a savings
institution or controls another company which is a savings and loan holding
company. Under FIRREA, "control" exists where a person (a) directly or
indirectly, or acting in concert with one or more other persons or through one
or more subsidiaries, owns, controls or holds the power to vote (or holds
proxies representing) more than 25% of the voting shares of a savings
institution, (b) controls in any manner the election of a majority of the
directors of the savings bank or (c) directly or indirectly exercises a
controlling influence over the management or policies of the savings bank. Once
control of a savings bank has been established, various provisions of FIRREA
govern the activities of savings and loan holding companies.
OTS regulations prohibit companies from acquiring control of a savings
institution without the prior written approval of the OTS. Persons acquiring
control of a savings institution must provide written notice to the OTS, which
the OTS may disapprove or allow to take effect after the expiration of a certain
waiting period. Certain types of acquisitions by companies or persons are exempt
from the OTS application or notice requirements.
OTS regulations establish two categories of control definitions:
conclusive control and rebuttable control. Control is conclusively established
where an acquiror directly or indirectly, through one or more subsidiaries or
transactions or acting in concert with one or more persons or companies: (i)
acquires more than 25% of any class of voting stock of the institution; (ii)
acquires any combination of voting stock and irrevocable proxies representing
more than 25% of any class of voting stock of an institution; (iii) acquires any
combination of voting stock and irrevocable proxies representing more than 25%
of any class of voting stock of an institution; or (iv) controls in any manner
the election of a majority of the directors of the savings institution.
"Rebuttable control" describes circumstances with respect to stock
ownership that could enable an investor to direct the management or policies of
a savings bank. Under OTS regulations, a rebuttable control determination arises
upon the acquisition of any combination of voting stock and revocable or
irrevocable proxies, representing more than 25% of any class of voting stock of
a savings bank, which proxies would enable the acquiror to elect one-third or
more of the bank's board of directors, or otherwise exert a controlling
influence on the bank and its business.
Alternatively, a rebuttable control determination may arise either upon
an acquisition of more than 10% of any class of voting stock of a savings bank,
or upon an acquisition of more than 25% of any class of voting or non-voting
stock of a savings bank if certain other "control factors" are present. Such
"control factors" include that, as a result of the acquisition, the acquiror
would be one of the two largest holders of any class of voting stock of the
bank, that the acquiror would hold more than 25% of the bank's total
shareholders' equity, that the acquiror and/or his or her representative would
constitute more than one member of the bank's board of directors, or that the
acquiror would serve as the chairperson of the board of directors, as an
executive officer or in a similar policy-making position with the savings bank.
The regulations also specify the criteria with which the OTS evaluates
control applications. The OTS is empowered to disapprove an acquisition of
control upon a consideration of, among other things, the following factors: (i)
whether the acquisition would result in or tend to result in a monopoly or would
substantially lessen competition, (ii) whether the financial and managerial
resources and future prospects of the acquiror and savings bank involved would
be detrimental to the bank or the insurance risk of the SAIF or BIF, and (iii)
the convenience and needs of the community to be served. Detailed regulations
state factors to be considered when determining if an acquiror fails to satisfy
the financial and managerial resources and future prospects tests.
Capital Requirements. The Federal Reserve, the Office of the Comptroller
of the Currency and the FDIC have issued substantially similar risk-based and
leverage capital guidelines applicable to United States banking organizations.
In addition, those regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum levels because of its
financial condition or actual or anticipated growth. Under the risk-based
capital requirements of these federal bank regulatory agencies, James River and
its subsidiaries are required to maintain a minimum ratio of total capital to
risk-weighted assets of at least 8%. At least half of the total capital is
required to be "Tier 1 capital," which consists principally of common and
certain qualifying preferred shareholders' equity, less certain intangibles and
other adjustments. The remainder, "Tier 2 capital," consists of a limited amount
of subordinated and other qualifying debt (including certain hybrid capital
instruments) and a limited amount of the general loan loss allowance. The Tier 1
and total capital to risk-weighted asset ratios of James River as of December
31, 1995 were 26.6% and 28.3%, respectively, exceeding the minimums required.
In addition, each of the federal regulatory agencies has established a
minimum leverage capital ratio (Tier 1 capital to average tangible assets).
These guidelines provide for a minimum ratio of 3% for banks and bank holding
companies that meet certain specified criteria, including that they have the
highest regulatory examination rating and are not contemplating significant
growth or expansion. All other institutions are expected to maintain a leverage
ratio of at least 100 to 200 basis points above the minimum. The leverage ratio
of James River as of December 31, 1995, was 16.6%. The guidelines also provide
that banking organizations experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels, without significant reliance on intangible assets.
The following table sets forth in detail the various capital ratios of
BOS and JRB on a consolidated basis at the dates indicated:
Analysis of Capital
December 31,
1995 1994 1993
(Dollars in thousands)
Tier 1 Capital:
Common stock................ $ 7,669 $ 7,655 $ 6,624
Additional Paid Capital .... 2,248 2,222 27
Retained earnings........... 14,952 13,784 12,337
Gains (losses) on securities
available-for-sale........ 627 (789) 0
Less: Goodwill.............. (160) (176) (192)
Total Tier 1 capital...... $25,336 $22,696 $18,796
Tier 2 Capital:
Allowance for loan losses... $ 1,199 $ 1,114 $ 921
Allowable long-term debt.... 0 0 0
Total Tier 2 Capital...... $ 1,199 $ 1,114 $ 921
Risk-weighted assets.......... $95,958 $89,175 $73,718
Capital Ratios:
Tier 1 risk-based capital
ratio..................... 26.57% 25.45% 25.50%
Total risk-based capital
ratio..................... 28.26 27.26 27.29
Tier 1 capital to average
adjusted total assets..... 16.64 14.98 12.72
Deposit Insurance. The deposits of the Company's banking subsidiaries
are insured up to $100,000 per insured depositor (as defined by law and
regulation) by the FDIC through the SAIF and the BIF. The SAIF and the BIF are
administered and managed by the FDIC. As insurer, the FDIC is authorized to
conduct examinations of and to require reporting by SAIF and BIF-insured
institutions. FIRREA also authorizes the FDIC to prohibit any SAIF and
BIF-insured institution from engaging in any activity that the FDIC determines
by regulation or order to pose a serious threat to the SAIF and BIF. The FDIC
also has the authority to initiate enforcement actions against savings
institutions, after first giving the OTS an opportunity to take such action.
Through the SAIF, the FDIC insures deposits at savings institutions
such as FCB, and through the BIF, the FDIC insures deposits at other financial
institutions (principally commercial banks, state-chartered banks such as BOS,
JRB and BIW, and certain federally chartered savings banks). FCB's current
deposit insurance premium is $0.23 per $100 of deposits. Due to the adequacy of
the BIF's capitalization and the current regulatory capital levels of BOS, JRB
and BIW, these institutions currently pay only an annual minimum payment of
$2,000 on BIF-insured deposits.
The difference in premiums for BIF and SAIF deposits stems from the
relative levels of capitalization of the BIF and SAIF. BIF has now reached the
capitalization level required by law, and BIF premiums have been reduced
accordingly. SAIF has not reached the capitalization level required by law, and
there is little likelihood that SAIF will do so in the near term. As a result,
SAIF premiums would continue to exceed BIF premiums substantially for the
indefinite future.
To eliminate this disparity between BIF and SAIF premiums, both the
House of Representatives and the Senate have passed legislation to require
institutions with SAIF deposits to complete the capitalization of SAIF
immediately through a special assessment of approximately $0.85 per $100 of SAIF
deposits held on March 31, 1995. The legislation provided for this special
assessment to be due and payable on January 1, 1996.
House and Senate conferees have reconciled their respective bills'
differences, but the legislation is part of the overall budget dispute between
Congress and the administration. The Treasury Department concurs with the
proposed legislation on the BIF/SAIF issue. However, no assurance can be given
that this legislation will be enacted at all or in its present form.
From time to time, there are various proposals that involve increasing
the deposit insurance premiums paid by banks and/or savings institutions. The
Company is unable to predict whether or to what extent the rates that its
banking subsidiaries pay for federal deposit insurance may increase in future
periods as a result of such proposals. Such increases would adversely affect its
operations.
The FDIC may terminate the deposit insurance of any depository
institution, including the Company's banking subsidiaries, if it determines,
after a hearing, that the institution has engaged or is engaging in unsafe or
unsound practices, is in an unsafe or unsound condition to continue operations
or has violated any applicable law, regulation, order or any condition imposed
in writing by the FDIC. It also may suspend deposit insurance temporarily during
the hearing process for the permanent termination of insurance, if the
institution has no tangible capital. If deposit insurance is terminated, the
deposits at the institution at the time of termination, less subsequent
withdrawals, shall continue to be insured for a period from six months to two
years, as determined by the FDIC. Management is aware of no existing
circumstances that could result in termination of the deposit insurance of the
Company's banking subsidiaries.
On December 15, 1994, the Federal Reserve Board, the Office of Thrift
Supervision, the Office of the Controller of the Currency ("OCC"), and the FDIC
(collectively the "agencies") issued a final rule entitled, Risk-Based Capital
Standards; Concentration of Credit Risk and Risks of Nontraditional Activities.
The final rule amends the risk-based capital standards by explicitly identifying
concentrations of credit risk and certain risks arising from nontraditional
activities, as well as an institution's ability to manage these risks, as
important factors in assessing an institution's overall capital adequacy. While
no quantitative measure of such risk is included in the final rule, to the
extent appropriate, the agencies will issue examination guidelines on new
developments in nontraditional activities or concentrations of credit to ensure
that adequate account is taken of the risks of these activities. Moreover, the
agencies also believe that institutions identified through the examination
process as having significant exposure to concentration of credit risk or as not
adequately managing concentration risks should hold capital in excess of the
regulatory minimums. Therefore, due to the subjective nature of this final rule,
the Company is unable to determine what effect, if any, this rule may have on
regulatory capital requirements.
On August 2, 1995, the OCC, the Federal Reserve Board, and the FDIC
(collectively the "banking agencies") issued a final rule entitled, Risk-Based
Capital Standards; Interest Rate Risk. The final rule implements minimum capital
standards for interest rate risk exposures in a two-step process. The final rule
implements the first step of that process by revising the capital standards of
the banking agencies to explicitly include a bank's exposure to declines in the
economic value of its capital due to changes in interest rates as a factor that
the banking agencies will consider in evaluating a bank's capital adequacy. The
banking agencies intend to implement this rule on a case-by-case basis during
the examination process. The second step of the banking agencies' process will
be to issue a proposed rule that would establish an explicit minimum capital
charge for interest rate risk, based on the level of the bank's measured
interest rate risk exposure. Due to the subjective nature of the first phase of
this final rule, the Company is unable to determine what effect, if any, this
rule may have on its regulatory capital requirements.
On November 16, 1995, the Federal Reserve Board issued guidelines
entitled, Federal Reserve Guidelines for Rating Risk Management at State Member
Banks and Bank Holding Companies (the "Guidelines"). The Guidelines specify that
principles of sound management should apply to the entire spectrum of risks
facing a banking institution including, but not limited to, credit, market,
liquidity, operational, legal, and reputational risk and that, for state member
banks, a single numerical rating for risk management should be provided as part
of the examination process. The Guidelines also specify that examination reports
should make reference to the types and nature of corrective actions that need to
be taken by institutions to address noted risk management and internal control
deficiencies. Where appropriate, institutions should also be advised that the
Federal Reserve Board will initiate supervisory actions if the failure to
separate critical operational duties creates the potential for serious losses or
if material deficiencies or situations that threaten the safe and sound conduct
of their activities are not adequately addressed in a timely manner. Due to the
subjective nature of the risk-management evaluation, the Company is not able to
determine what effect, if any, this rule may have on the operation of the
Company.
Community Reinvestment Act. The federal supervisory agencies share
authority to implement regulations under the Community Reinvestment Act of 1979,
as amended ("CRA"). The general purpose of the CRA is to encourage lenders,
while operating safely and soundly, to meet the credit needs of their
communities. The CRA specifically directs regulators, when examining a lender,
to assess the lender's record of helping to meet the credit needs of its entire
community, including low and moderate-income neighborhoods. For example, the
regulators will evaluate and take into account a lender's record of meeting its
community credit needs when evaluating a lender's application for creation of a
new branch. BOS, JRB, BIW and FCB have always had a "Satisfactory" rating with
respect to their compliance with the CRA. James River itself has not been
examined or received a CRA rating.
As a result of a Presidential initiative, each of the federal banking
agencies, including the FDIC, issued a notice of proposed rulemaking in October
of 1994 to replace the current CRA assessment system with a new evaluation
system that would rate institutions based on their actual performance (rather
than efforts) in meeting community credit needs. The final rule retains, to a
significant extent, the principles and structures underlying the 1994 proposal
and will be phased in over 1996 and 1997. James River is currently studying the
new CRA regulations and determining whether the regulations would require
changes to the CRA action plans of its banking subsidiaries.
Governmental Monetary Policies and Economic Controls. James River and
its banking subsidiaries are affected by monetary policies of regulatory
authorities, including the Federal Reserve, which regulates the national money
supply in order to mitigate recessionary and inflationary pressures. Among the
techniques available to the Federal Reserve are engaging in open market
transactions in United States Government securities, changing the discount rate
on bank borrowings, and changing reserve requirements against bank deposits.
These techniques are used in varying combinations to influence the overall
growth of bank loans, investments and deposits. Their use may also affect
interest rates charged on loans or paid on deposits. The effect of governmental
policies on the earnings of James River cannot be predicted.
Employees
At December 31, 1995, JRB had the equivalent of 79 full time employees,
including employees of BOS and JRB. None of its employees is represented by any
collective bargaining unit. JRB considers relations with its employees to be
good.
Item 2. Properties
James River's headquarters is located at 101 East Washington Street,
Suffolk, Virginia, which is also the location of the main office of BOS. James
River does not have any interest in any properties other than those owned or
leased by its subsidiaries. James River's four banking subsidiaries collectively
own 15 of the 16 branch banking offices and lease the land for one office.
Item 3. Legal Proceedings
In the course of its operations, James River and its subsidiaries are
parties to various legal proceedings. James River does not believe that the
outcome of these law suits, individually or in the aggregate, will have a
material adverse affect on James River's business, financial position or results
of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to James River's shareholders for a vote
during the fourth quarter of the year ended December 31, 1995.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
James River was capitalized on June 1, 1995, pursuant to a share
exchange between BOS and JRB. See "Item 1. Business - General." James River
Common Stock began trading on NASDAQ/NMS on June 7, 1995. The following table
sets forth the high and low sales prices of James River Common Stock as reported
on NASDAQ/NMS for the periods listed. JRB Common Stock is thinly traded.
1995 Sales Prices
High Low
Second Quarter (June 7 through June 30, 1995) $19.75 $18.75
Third Quarter (July 1 through September 30, 1995) $23.50 $20.25
Fourth Quarter (October 1 through December 31, 1995) $24.25 $22.25
JRB commenced operations on June 1, 1995. On October 25, 1995, JRB
announced a dividend of $0.52 per share that was paid on December 1, 1995, to
holders of record on November 15, 1995. On a pro forma combined basis, based on
the dividend history of BOS and JRB, James River paid dividends of $0.50, $0.49,
and $0.48 per share during the years ended December 31, 1994, 1993 and 1992,
respectively. On March 31, 1996, James River had approximately 2,282
shareholders of record.
<PAGE>
Item 6. Selected Consolidated Financial Data
The information included under "Five Year Financial Summary" appearing
on page 11 of the Annual Report is incorporated herein by reference.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information included under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 7 through 10 of the
Annual Report is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
(a) The Financial Statements and the notes thereto which appear on pages
12 through 33 of the Annual Report are incorporated herein by reference.
(b) Supplementary Data
Unaudited quarterly financial information for James River is
contained in Note 16 on page 32 of the Financial Statements included in the
Annual Report.
Certain pro forma financial results are set forth below:
<PAGE>
Pro Forma Financial Information
The following unaudited pro forma condensed financial statements have
been prepared on a consolidated basis based upon the historical financial
statements of James River, FCB and BIW. The pro forma combined information gives
effect to the recently closed transactions with FCB and BIW accounted for as a
pooling of interests and the branch acquisitions by JRB from First Union
accounted for under the purchase method of accounting, and is based on the
issuance of 599,541 shares of James River Common Stock in the FCB transaction
and 315,400 shares of JRB Common Stock in the BIW transaction. The number of
shares of James River Common Stock issued in connection with the FCB transaction
and the BIW transaction was subject to certain minor adjustments. The pro forma
combined financial information and results of operations are not necessarily
indicative of the results which would actually have been attained if the FCB
transaction and BIW transaction had occurred in the past or which may be
attained in the future.
Pro Forma Combined Statement of Financial Condition
December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
James River Branch First Colonial Bank of Isle
Bankshares Acquisitions(a) Bank of Wight Adjustments Consolidated
(Dollars in thousands)
<S> <C>
Assets
Cash and due from banks............ $ 7,901 $ 30,485 $ 2,406 $ 1,957 $ 0 $42,749
Federal funds sold and securities
purchased under resale
agreements....................... 7,232 0 1,805 2,795 0 11,832
Investment Securities
Securities Held to Maturity...... 0 0 23,706 0 0 23,706
Securities Available-for-Sale,
at fair market value........... 46,727 0 4,637 10,904 0 62,268
Total investment securities........ 46,727 0 28,343 10,904 0 85,974
Loans held for sale................ 0 0 1,483 0 0 1,483
Loans.............................. 92,042 16 96,513 19,333 0 207,904
Less: Allowance for credit losses. (1,619) 0 (972) (267) 0 (2,858)
Net loans receivable............. 90,423 16 97,024 19,066 0 206,529
Premises and equipment............. 3,347 1,044 1,782 293 0 6,466
Accrued interest receivable........ 1,525 0 977 245 0 2,747
Other assets....................... 677 2,817 662 179 0 4,335
Deferred income taxes.............. 4 0 155 0 0 159
Total Assets..................... $157,836 $34,362 $133,154 $35,439 $ 0 $360,791
Liabilities
Deposits:
Demand deposits.................. $ 22,966 $ 3,343 $ 3,497 $ 6,407 $ 0 $ 36,213
Interest bearing demand deposits. 21,518 5,312 8,381 4,722 0 39,933
Money market savings............. 13,083 5,544 2,487 2,850 23,964
Savings deposits................. 19,217 22 19,873 4,087 0 43,199
Time deposits $100,000 and over.. 6,177 0 15,538 1,442 0 23,157
Other time deposits.............. 48,621 19,987 74,639 12,024 0 155,271
Total deposits................. 131,582 34,208 124,415 31,532 0 321,737
Accrued interest payable........... 383 152 36 0 0 571
Deferred income taxes.............. 0 0 0 27 0 27
Other liabilities.................. 375 2 569 625 500(b) 2,071
Total Liabilities................ 132,340 34,362 125,020 32,184 500 324,406
Stockholders' Equity
Capital Stock...................... 7,669 0 1,245 2,050 1,279(c) 12,243
Additional paid in capital......... 3,567 0 1,971 667 (1,279)(c) 4,926
Retained earnings.................. 13,633 0 4,890 486 (500)(b) 18,509
Net unrealized gain on securities
available-for-sale............... 627 0 28 52 0 707
Total Stockholders' Equity....... 25,496 0 8,134 3,255 (500) 36,385
Total Liabilities and
Stockholders' Equity......... $157,836 $34,362 $133,154 $35,439 $ 0 $360,791
</TABLE>
See Notes to Pro Forma Financial Information.
<PAGE>
James River Bankshares, Inc., First Colonial Bank, FSB and
Bank of Isle of Wight
Pro Forma Combined Statements of Income
Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
James River First Bank of Pro Forma
Bankshares, Inc. Colonial Isle Combined
Bank, FSB(d) of Wight
(Dollars in thousands, except per share data)
<S> <C>
Interest income:
Loans including fees............... $ 7,957 $ 6,908 $ 1,756 $16,621
Investment securities:
Taxable.......................... 2,117 1,899 409 4,425
Exempt from Federal Taxes........ 1,090 0 181 1,271
3,207 1,899 590 5,696
Deposits in banks.................. 0 171 0 171
Federal funds sold and securities
purchased under resale agreements 159 0 149 308
Total interest income.......... 11,323 8,978 2,495 22,796
Interest expense:
Deposits........................... 4,689 5,364 1,042 11,095
Federal funds and other borrowings. 42 0 0 42
Total Interest Expense........... 4,731 5,364 1,042 11,137
Net interest income.............. 6,592 3,614 1,453 11,659
Provision for credit losses.......... 96 209 36 341
Net interest income after provision
for credit losses................ 6,496 3,405 1,417 11,318
Other operating income:
Customer service fees.............. 471 231 152 854
Investment securities gains (losses) (52) (71) 3 (120)
Other income....................... 130 367 8 505
549 527 163 1,239
Other operating expenses:
Salaries........................... 1,802 1,273 458 3,533
Employee benefits.................. 393 349 119 861
Occupancy expense, net............. 325 191 39 555
Equipment expense.................. 386 109 69 564
Other expenses..................... 1,550 941 314 2,805
4,456 2,863 999 8,318
Income before income taxes........... 2,589 1,069 581 4,239
Income taxes......................... 623 366 156 1,145
Net income........................... $1,966 $ 703 $ 425 $3,094
Earnings per common share $ 1.28(e) $ 0.58(e) $ 5.40(e) $ 1.27(f)
Cash dividends per common share $ 0.52(e) $ 0.08(e) $ 1.81(e) $ 0.43(f)
Average common shares outstanding 1,531,429(e) 1,214,883(e) 78,605(e) 2,430,936(f)
Additional JRB shares issued 585,087(f) 314,420(f)
</TABLE>
See Notes to Pro Forma Financial Information.
There are no adjustments necessary to the historical results of operations as a
result of these transactions.
<PAGE>
James River Bankshares, Inc., First Colonial Bank, FSB and
Bank of Isle of Wight
Pro Forma Combined Statements of Income
Year Ended December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
James River First Colonial Bank of Isle Pro Forma
Bankshares, Inc. Bank, FSB(d) of Wight Combined
(Dollars in thousands, except per share data)
<S> <C>
Interest income:
Loans including fees................. $ 6,763 $ 5,789 $ 1,591 $14,143
Investment securities:
Taxable............................ 2,494 2,152 345 4,991
Exempt from Federal Taxes.......... 1,027 0 176 1,203
3,521 2,152 521 6,194
Deposits in banks.................... 0 75 0 75
Federal funds sold and securities
purchased under resale agreements.. 117 0 76 193
Total interest income............ 10,401 8,016 2,188 20,605
Interest expense:
Deposits............................. 4,020 4,730 879 9,629
Federal funds and other borrowings... 20 64 1 85
Total Interest Expense............. 4,040 4,794 880 9,714
Net interest income................ 6,361 3,222 1,308 10,891
Provision for credit losses............ 299 287 6 592
Net interest income after provision
for credit losses.................. 6,062 2,935 1,302 10,299
Other operating income:
Customer service fees................ 589 154 153 896
Investment securities and loan gains
(losses)........................... (22) 203 (29) 152
Other income......................... 51 260 6 317
618 617 130 1,365
Other operating expenses:
Salaries............................. 1,708 1,100 490 3,298
Employee benefits.................... 439 247 31 717
Occupancy expense, net............... 220 192 36 448
Equipment expense.................... 329 104 69 502
Other expenses....................... 1,196 1,001 376 2,573
3,892 2,644 1,002 7,538
Income before income taxes............. 2,788 908 430 4,126
Income taxes........................... 612 349 106 1,067
Net income (g)......................... $2,176 $ 559 $ 324 $ 3,059
Earnings per common share (g) $ 1.49(e) $ 0.46(e) $ 4.14(e) $ 1.30(f)
Cash dividends per common share $ 0.50(e) $ 0.05(e) $ 1.00(e) $ 0.38(f)
Average common shares outstanding 1,461,522 1,214,765 78,250 2,359,552(f)
Additional JRB shares issued 585,030(f) 313,000(f)
</TABLE>
See Notes to Pro Forma Financial Information.
There are no adjustments necessary to the historical results of operations as a
result of these transactions.
<PAGE>
James River Bankshares, Inc., First Colonial Bank, FSB and
Bank of Isle of Wight
Pro Forma Combined Statements of Income
Year Ended December 31, 1993
(Unaudited)
<TABLE>
<CAPTION>
James River First Colonial Bank of Pro Forma
Bankshares, Inc. Bank, FSB(d) Isle Combined
of Wight
(Dollars in thousands, except per share data)
<S> <C>
Interest income:
Loans including fees............... $ 6,286 $ 6,139 $ 1,516 $13,941
Investment securities:
Taxable.......................... 2,586 2,377 401 5,364
Exempt from Federal Taxes........ 987 0 130 1,117
3,573 2,377 531 6,481
Deposits in banks.................. 0 127 0 127
Federal funds sold and securities
purchased under resale agreements 109 0 34 143
Total interest income.......... 9,968 8,643 2,081 20,692
Interest expense:
Deposits........................... 3,940 5,091 878 9,909
Federal funds and other borrowings. 8 238 2 248
Total Interest Expense........... 3,948 5,329 880 10,157
Net interest income.............. 6,020 3,314 1,201 10,535
Provision for credit losses.......... 318 230 45 593
Net interest income after provision
for credit losses................ 5,702 3,084 1,156 9,942
Other operating income:
Customer service fees.............. 506 239 159 904
Investment securities gains (losses) 139 542 19 700
Other income....................... 67 415 2 484
712 1,196 180 2,088
Other operating expenses:
Salaries........................... 1,575 1,128 456 3,159
Employee benefits.................. 424 176 31 631
Occupancy expense, net............. 204 305 34 543
Equipment expense.................. 287 3 57 347
Other expenses..................... 1,132 1,043 347 2,522
3,622 2,655 925 7,202
Income before income taxes........... 2,792 1,625 411 4,828
Income taxes......................... 629 629 121 1,379
Net income........................... $2,163 $ 996 $ 290 $3,449
Earnings per common share $ 1.64(e) $ 0.84(e) $ 4.08(e) $ 1.59(f)
Cash dividends per common share $ 0.50(e) $ 0.00(e) $ 0.75(e) $ 0.32(f)
Average common shares outstanding 1,319,626 1,184,149 71,100 2,174,312(f)
Additional JRB shares issued 570,286(f) 284,400(f)
</TABLE>
See Notes to Pro Forma Financial Information.
There are no adjustments necessary to the historical results of operations as a
result of these transactions.
<PAGE>
Notes to Pro Forma Financial Information (Unaudited)
(a) The pro forma information for the Branch Acquisitions is presented for
informational purposes only as of December 31, 1995, as the Branch
Acquisitions are not considered the acquisition of a business.
(b) The pro forma information presented includes the total estimated costs
associated with the pooling of interests transactions of $500,000, as if
the transaction was consummated on December 31, 1995.
(c) Information was appropriately adjusted to (i) reflect the issuance of an
additional 914,941 shares of JRB Common Stock and (ii) the elimination
of approximately $1,279,000 of additional paid-in capital to reflect the
issuance of JRB Common Stock with a $5 par value.
(d) Includes information for the years ended June 30, 1995, 1994 and 1993,
which is FCB's fiscal year-end. In JRB's consolidated financial
statements for the year ended December 31, 1996, the statement of
stockholders' equity for 1995 will contain the following adjustments to
conform FCB's fiscal year-end to JRB's:
FCB's six months ended December 31, 1995:
Net income $412,000
Appreciation of available-
for-sale securities 27,000
Issuance of common stock 24,000
Dividends (99,000)
$364,000
(e) Per share data for JRB, FCB and BIW has been computed based on
historical net income (before the cumulative effect of accounting
changes and before reflecting the dilution of common stock equivalents),
using their respective weighted average shares outstanding. If common
stock equivalents are considered, FCB's fully diluted earnings per share
would have been $.55 for the year ended December 31, 1995. If the
cumulative effect of accounting changes are considered, FCB's primary
and fully diluted earnings per share would have been $.83 for the year
ended December 31, 1994.
(f) It is assumed that the exchange of shares will be accounted for on a
pooling of interests accounting basis and, accordingly, the related pro
forma per share and average common shares outstanding have been
calculated using the exchange ratio whereby JRB will issue .4816 and 4
of its shares for FCB and BIW, respectively. Primary and fully diluted
earnings per share do not materially differ.
(g) FCB's net income and earnings per common share, for the year ended June
30, 1994, does not include the cumulative effect of accounting changes
for computing income taxes and for debt and equity securities of
$276,863 and $166,286, respectively.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Frank Edward Sheffer & Co. has declined to stand for re-election as the
Company's principal accountant and Goodman & Company has been engaged in that
capacity, all as described in a Current Report on Form 8-K filed by the Company
pursuant to the Securities Exchange Act of 1934 on April 1, 1996 and in the 1996
Proxy Statement.
<PAGE>
PART III
The information required by Part III, Items 10, 11, 12 and 13 has been
incorporated herein by reference to the Company's 1996 Proxy Statement as set
forth below in accordance with Instruction G(3) of Form 10-K.
Item 10. Directors and Executive Officers of the Registrant.
Information relating to directors and executive officers of the Company
and compliance with Section 16(a) of the Securities Exchange Act of 1934
("Exchange Act") is set forth in the sections entitled "Election of Directors"
and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in
the Company's 1996 Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation.
Information regarding compensation of officers and directors of the
Company is set forth in the sections entitled "Election of Directors" and
"Executive Compensation" in the Company's 1996 Proxy Statement and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information regarding ownership of certain of the Company's securities
is set forth in the section entitled "Security Ownership of Management and
Certain Beneficial Owners" in the Company's 1996 Proxy Statement and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information regarding certain relationships and related transactions
with the Company is set forth in the section entitled "Certain Relationships and
Related Transactions" in the Company's 1996 Proxy Statement and is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. The following consolidated financial statements of James
River at December 31, 1995 and 1994 and for the three
years ending December 31, 1995, 1994 and 1993, and the
auditor's report thereon, are incorporated herein by
reference to the pages indicated in the Annual Report:
Consolidated Financial Statements Page
Consolidated Statements of Financial Condition 12
Consolidated Statements of Income 13
Consolidated Statements of Stockholders' Equity 14
Consolidated Statements of Cash Flows 15
Notes to Consolidated Financial Statements 16
Independent Auditor's Report 33
The report dated January 18, 1995, of Erny & Mason, P.C., independent
accountants for JRB prior to the Share Exchange, is attached hereto as Exhibit
99.1
2. Financial Statements Schedules - None.
3. The exhibits listed on the accompanying Exhibit Index are
filed or incorporated by reference as part of this Form
10-K/A and such Exhibit Index is incorporated herein by
reference.
(b) Reports on Form 8-K: None.
(c) The exhibits listed on the accompanying Exhibit Index are filed
or incorporated by reference as part of this Form 10-K/A and such
Exhibit Index is incorporated herein by reference.
(d) Financial Statements excluded from Annual Report pursuant to
Rule 14a-3(b): Not applicable.
<PAGE>
Signatures
In accordance with Section 13 of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, in the City of
Suffolk, State of Virginia, on Aug. 12 , 1996.
JAMES RIVER BANKSHARES, INC.
By: /s/ Harold U. Blythe
Harold U. Blythe, President
and Chief Executive Officer
In accordance with the Exchange Act, this Report has been signed by the
following persons in the capacities and on the dates stated.
Signature Title Date
* Chairman of The Board Aug. 12, 1996
Elmon T. Gray and Director
* Vice Chairman of the Board Aug. 12, 1996
G. P. Jackson and Director
/s/ Harold U. Blythe President and Chief Executive Aug. 12, 1996
Harold U. Blythe Officer, Director
* Senior Vice President and Chief Aug. 12, 1996
Glenn T. McCall Financial Officer, Director
* Director Aug. 12, 1996
James E. Butler, Jr.
* Director Aug. 12, 1996
Bruce B. Gray
* Director Aug. 12, 1996
E.V. Stephenson, Jr.
* Director Aug. 12, 1996
Robert E. Spencer, Jr.
* Director Aug. 12, 1996
John A. Ramsey, Jr.
* Director Aug. 12, 1996
James C. Stewart
* Director Aug. 12, 1996
Ben P. Kanak
* Harold U. Blythe by signing his name hereto, does sign this document on behalf
of the persons indicated above for whom he is attorney-in-fact pursuant to a
power of attorney duly executed by such person and filed with the Securities and
Exchange Commission.
By: /s/ Harold U. Blythe
Harold U. Blythe, President
and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page
No. Description Number
<S> <C>
*2.1 Agreement and Plan of Reorganization dated November 21, 1994 *
(Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Commission File No. 33-88322, previously
filed with the Commission on January 6, 1995).
*2.2 First Colonial Bank Agreement and Plan of Merger dated June 30, *
1995, as amended (Incorporated by reference to the Registrant's
Registration Statement on Form S-4, Commission File No. 33-99254,
previously filed with the Commission on November 13, 1995).
*2.3 Bank of Isle of Wight Agreement and Plan of Merger dated June 30, *
1995 (Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Commission File No. 33-99254, previously
filed with the Commission on November 13, 1995).
*3.1 Articles of Incorporation of James River Bankshares, Inc. *
(Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Commission File No. 33-88322, previously
filed with the Commission on January 6, 1995).
**3.2 Amended and Restated Bylaws of James River Bankshares, Inc.
*4 Form of Common Stock certificate of James River Bankshares, Inc. *
(Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Commission File No. 33-88322, previously
filed with the Commission on January 6, 1995).
*10.1 Agreement between The Bank of Waverly and First Union National
Bank, * dated November 13, 1995 regarding branch acquisitions
(Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Commission File No. 33-99254, previously
filed with the Commission on December 22, 1995).
*10.2 Employment Agreement between James River Bankshares, Inc. and Harold *
U. Blythe dated July 18, 1995 (Incorporated by reference to
Amendment No. 1 to the Registrant's Registration Statement on Form
S-4, Commission File No. 33-99254, previously filed with the
Commission on December 22, 1995).
*10.3 Employment Agreement between James River Bankshares, Inc. and Glenn *
T. McCall dated July 18, 1995 (Incorporated by reference to
Amendment No. 1 to the Registrant's Registration Statement on Form
S-4, Commission File No. 33-99254, previously filed with the
Commission on December 22, 1995).
*10.4 Employment Agreement between First Colonial Bank and James C. *
Stewart dated February 29, 1996. (Incorporated by reference to the
Registrant's Form 10-K, Commission File No. 0-26314, previously
filed with the Commission on April 15, 1996).
*10.5 Employment Agreement between Bank of Isle of Wight and Robert E. *
Spencer, Jr. dated February 29, 1996. (Incorporated by reference to
the Registrant's Form 10-K, Commission File No. 0-26314, previously
filed with the Commission on April 15, 1996).
**13 Annual Report to security holders.
*21 List of Subsidiaries. (Incorporated by reference to the
Registrant's Form 10-K, Commission File No. 0-26314, previously
filed with the Commission on April 15, 1996).
**23.1 Consent of Frank Edward Sheffer & Co.
**23.2 Consent of Erny & Mason, P.C.
**99.1 Report of Erny & Mason, P.C.
</TABLE>
* (Not filed herewith. In accordance with Rule 12b-32 of the General Rules and
Regulations under the Securities Exchange Act of 1934, the exhibit is
incorporated by reference.)
** Filed herewith.
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
JAMES RIVER BANKSHARES, INC.
(the "Corporation")
Article I
Meetings of the Shareholders
Section 1.1. Annual Meetings. The annual meeting of the Shareholders for the
election of a class of directors and for the transaction of such other business
as may properly come before the annual meeting shall be held at such time on
such business day as shall be designated in a writing given to the Secretary by
the Chairman of the Board of Directors or the President or designated in a
resolution of the Board of Directors.
Section 1.2. Special Meetings. Special meetings of the Shareholders for any
purpose or purposes may be called at any time by any three members of the Board
of Directors on their motion or on the motion of the Chairman of the Board of
Directors, or the President, and upon such call, the Board of Directors shall
fix the date of such special meeting.
Section 1.3. Place of Meetings. The annual meeting and any special meeting of
the Shareholders shall be held at such place, within or without the Commonwealth
of Virginia, as shall be designated in a writing given to the Secretary by the
Chairman of the Board of Directors or the President, or designated in a
resolution of any three members of the Board of Directors calling for such
meeting.
Section 1.4. Notice of Shareholder Meeting.
(a) Required notice. Written notice stating the date, time and place of
any annual or special shareholder meeting shall be given not less than 10 nor
more than 60 days before the date of the meeting, except that notice of a
shareholders' meeting to act on (i) an amendment of the articles of
incorporation, (ii) a plan of merger or share exchange, (iii) a proposed sale,
lease, exchange or other disposition of all, or substantially all, of the
Corporation's property otherwise than in the usual and regular course of
business, or (iv) the dissolution of the Corporation, shall be given not less
than 25 nor more than 60 days before the meeting date, either personally or by
facsimile or by mail or private carrier, by or at the direction of the Chairman
of the Board, the President, the Board of Directors, or other person(s) calling
the meeting, to each Shareholder of record entitled to vote at such meeting and
to any other shareholder entitled by the Act or the articles of incorporation to
receive notice of the meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, addressed to
the Shareholder at his address as it appears on the stock transfer books of the
Corporation at the close of business on the record date established by
resolution of the Board of Directors for such meeting pursuant to Section 1.5 of
these Bylaws.
Section 1.5. Fixing the Record Date. For the purpose of determining the
Shareholders entitled to notice of or to vote at any meeting of the Shareholders
or any adjournment thereof, or entitled to receive payment of any dividend, or
in order to make a determination of the Shareholders for any other proper
purpose, the Board of Directors by resolution shall fix in advance a date as the
record date for any such determination of the Shareholders, such date in any
case to be not more than seventy (70) calendar days prior to the date on which
the particular action, requiring such determination of the Shareholders, is to
be taken. If no record date is fixed for the determination of the Shareholders
entitled to notice of or to vote at a meeting of Shareholders, or the
Shareholders entitled to receive payment of a dividend, the close of business on
the day before the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
the Shareholders of record. When a determination of the Shareholders entitled to
vote at a meeting of the Shareholders has been made as provided herein, such
determination shall apply to any adjournment of such meeting. Any determination
of the Shareholders of record to be made for any purpose on a certain date shall
be made as of the close of business on such date.
Section 1.6. Shareholder Lists. At least ten (10) calendar days before each
meeting of the Shareholders, the officer or agent having charge of the share
transfer books of the Corporation shall prepare a complete list of the
Shareholders entitled to vote at such meeting, with the address and number of
shares held by each, which list shall be arranged by voting group, if any, and
within each voting group by class or series, if any, of shares. Such Shareholder
list shall be kept on file at the principal office of the Corporation or the
office of the registrar and transfer agent of the Corporation for a period of
ten (10) calendar days prior to such meeting, and shall be subject to inspection
at any time during usual business hours by any person who (i) has been a
Shareholder of record for at least six (6) months immediately preceding his
demand or is the holder of record of at least five percent (5%) of all of the
outstanding shares, (ii) makes a demand in good faith and for a proper purpose,
(iii) describes with reasonable particularity his purpose and the Shareholder
list he desires to inspect and (iv) the Shareholder list is directly connected
with his purpose. Such list shall also be produced and kept open at the time and
place of such meeting of the Shareholders and shall be subject to inspection by
any Shareholder during the whole time of such meeting for the purposes of such
meeting.
Section 1.7 Shareholder Quorum and Voting Requirements.
(a) Quorum. Except as otherwise required by law, a majority of the
shares entitled to vote represented in person or by proxy, shall constitute a
quorum of such group of Shareholders at a meeting of the Shareholders. If less
than a quorum be so represented at a meeting of the Shareholders, then a
majority of the shares so represented may adjourn the meeting from time to time
without further notice but may take no other action. At such adjourned meeting
at which a quorum is present in person or represented by proxy, any business may
be transacted which might have been transacted at the meeting originally called.
Once a share is represented for any purpose at a meeting of the Shareholders, it
shall be deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is, or shall be,
set for that adjourned meeting.
Section 1.8. Proxies. At each meeting of the Shareholders, a Shareholder
entitled to vote may vote in person or by proxy executed in writing by such
Shareholder or his attorney-in-fact. An appointment of a proxy is effective when
received by the Secretary or other officer or agent authorized to tabulate votes
before or at the time of the meeting. No proxy shall be valid after eleven (11)
months from its date, unless otherwise expressly provided in the proxy.
Section 1.9. Voting of Shares. If a quorum is present at a meeting of the
Shareholders, action on a matter other than election of directors shall be
approved if the votes cast within the voting group favoring the action exceed
the votes cast within the voting group opposing the action unless a vote of a
greater number is required by the Corporation's Articles of Incorporation or
law. If a quorum is present at a meeting of the Shareholders, directors shall be
elected by a plurality of the votes cast by the shares entitled to vote in such
election.
The attendance at any meeting of the Shareholders by a Shareholder who may
theretofore have given a proxy shall not have the effect of revoking the proxy
unless such Shareholder shall in writing so notify the Secretary prior to the
voting of the proxy. The holders of shares of common stock of the Corporation
entitled to vote for the election of directors and for all other purposes shall
have one vote for each share of common stock of the Corporation which they hold.
Voting on all matters shall be by voice vote or by a show of hands unless the
holders of fifteen percent (15%) of the shares represented at a meeting shall,
prior to the voting on any particular matter, demand a ballot vote on that
particular matter.
Section 1.10. Presiding Officers. Meetings of the Shareholders shall be presided
over by the Chairman of the Board of Directors unless he is absent or requests
the President to preside, in which event the President shall preside. If neither
the Chairman of the Board of Directors nor the President is present, a chairman
chosen at the meeting shall preside. The Secretary or, in his absence, a person
selected at the meeting, shall act as the secretary of the meeting.
Section 1.11. Action by Shareholders Without a Meeting. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting (and without action by the board of directors) if one or more written
consents, describing the action so taken, shall be signed by all of the
shareholders entitled to vote on the action and delivered to the secretary of
the Corporation for inclusion in the minutes or filing with the corporate
records. Any action taken by unanimous written consent shall be effective
according to its terms when all consents are in possession of the Corporation. A
shareholder may withdraw consent only by delivering a written notice of
withdrawal to the Corporation prior to the time that all consents are in the
possession of the Corporation. Action taken by unanimous written consent is
effective as of the date specified therein provided the consent states the date
of execution by each shareholder. If the Act requires that notice of proposed
action be given to non-voting shareholders and the action is to be taken by
unanimous consent of the voting shareholders, the Corporation shall give the
non-voting shareholders written notice of the proposed action at least 10 days
before the action is taken, which notice shall contain or be accompanied by the
same material that would have been required to be sent to non-voting
shareholders in a notice of meeting at which the proposed action would have been
submitted to the shareholders for action. A consent signed under this section
has the effect of a meeting vote and may be described as such in any document.
ARTICLE II
Board of Directors
Section 2.1. General Powers. The Board of Directors shall have responsibility
for the management of the property, affairs and business of the Corporation,
subject to any requirement of actions by the Shareholders made in the Articles
of Incorporation of the Corporation or by law. In carrying out its
responsibility, the Board of Directors shall elect such officers and appoint, or
cause to be appointed, such other agents and shall delegate, or cause to be
delegated, to them such authority and duties in the management of the
Corporation as is provided in these Bylaws or as may be determined, from time to
time, by resolution of the Board of Directors not inconsistent with these
Bylaws.
Section 2.2. Number of Directors. The number of directors shall be between seven
(7) and seventeen (17). The actual number of directors may be increased or
decreased from time to time within this range by the Board of Directors by
resolution of the Board. Only the shareholders may increase or decrease the
range in the number of directors. No decrease in number shall have the effect of
shortening the term of any incumbent director.
Section 2.3. Resignations. Any director may resign at any time by giving written
notice to the Board of Directors, its Chairman, the President or the Secretary.
Any resignation shall become effective when the notice is delivered, unless the
notice specifies a later effective date. The acceptance of such resignation
shall not be necessary to make it effective, unless otherwise specified therein,
in which event the resignation shall take effect upon its acceptance by the
Board of Directors, unless the notice specifies a later effective date.
Section 2.4. Vacancies. Any vacancy occurring on the Board of Directors,
including a vacancy resulting from an increase in number of directors, may be
filled by the affirmative vote of a majority of the directors then in office
even though the number of directors then in office, may be less than the minimum
number of directors stated in the Articles of Incorporation and/or less than a
quorum of the Board of Directors.
Section 2.5. Annual Meetings. An annual meeting of the Board of Directors shall
be held immediately after the annual meeting of the Shareholders or, if not then
held, within a reasonable time thereafter upon the call of the Chairman of the
Board of Directors, the President or any three (3) directors.
Section 2.6. Regular Meetings. The Board of Directors may provide, by
resolution, for the holding of regular meetings in addition to the annual
meetings of the Board Directors.
Section 2.7. Special Meetings. Special meetings of the Board of Directors
shall be held upon the call of the Chairman of the Board of Directors, the
President or any three (3) directors.
Section 2.8. Place of Meetings. All meetings of the Board of Directors shall be
held at the principal office of the Corporation or at such other place, within
or without the Commonwealth of Virginia, as designated by the person or persons
calling the meeting and specified in the notice thereof, and at such time as the
Board of Directors may provide by resolution or as may be designated in a duly
executed notice or waiver of notice of such meeting.
Section 2.9. Notice of Meetings. Annual and regular meetings of the Board of
Directors may be held without notice. The person or persons calling a special
meeting of the Board of Directors shall, at least forty-eight (48) hours before
the meeting, give notice thereof by any usual means of communication. Notices of
special meetings shall specify the purpose or purposes for which the meeting is
called.
Section 2.10. Quorum. Directors constituting five-sevenths (5/7) of the total
number of directors then in office immediately before a meeting begins shall
constitute a quorum for the transaction of business at such meeting of the Board
of Directors. When the size of the Board of Directors is greater than seven (7),
a majority of the number of directors then in office immediately before a
meeting begins shall constitute a quorum for the transaction of business at such
meeting of the Board of Directors.
Section 2.11. Manner of Acting. Except as may be otherwise provided in these
Bylaws or by law, the act of directors constituting five-sevenths (5/7) of the
total number of directors then in office shall be the act of the Board of
Directors. When the size of the Board of Directors is greater than seven (7),
except as otherwise provided by law, the act of a majority of the directors
present at the meeting at which a quorum is present shall be the act of the
Board of Directors.
Section 2.12. Actions Taken by Written Consent of the Directors. Any action
required or permitted to be taken by the board of directors at a meeting may be
taken without a meeting if (i) all the directors take the action, (ii) each one
signs either before or after the action taken a written consent describing the
action taken, and (iii) the consents are filed with the records of the
corporation. Action taken by unanimous written consent is effective when the
last director signs the consent, unless the consent specifies a different
effective date, in which event the action taken is effective as of the date
specified therein provided the consent states the date of execution by each
director. A signed consent has the effect of a meeting vote and may be described
as such in any document.
Section 2.13. Participation in Meetings Through Use of Communication Devices.
Any or all directors may participate in a regular or special meeting of the
Board of Directors by, or conduct the meeting through, the use of any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by such means
shall be deemed to be present in person at the meeting. A written record shall
be made of any action taken at a meeting conducted by such means of
communication.
Section 2.14. Age Policy for Directors. Any person who was not elected as a
director at the 1996 annual meeting of shareholders shall not be eligible for
election or re-election to the Board of Directors if such person would be
seventy (70) years of age or older at the time of election or re-election. Any
person elected as a director at the 1996 annual meeting of shareholders shall
not be subject to the foregoing as long as such person continues to serve on the
Board of Directors and, therefore, shall be eligible for re-election to the
Board of Directors without regard to any age limitation.
ARTICLE III
Committees
Section 3.1. The Board of Directors, by resolution adopted by a majority of the
number of Directors fixed by these Bylaws, may elect an Executive Committee
which shall consist of not less than two Directors, including the President.
When the Board of Directors is not in session, the Executive Committee shall
have all power vested in the Board of Directors by law, by the Articles of
Incorporation, or by these Bylaws, provided that the Executive Committee shall
not have power to approve an amendment to the Articles of Incorporation or a
plan of merger or consolidation, a plan of exchange under which the Corporation
would be acquired, the sale, lease or exchange, or the mortgage or pledge for a
consideration other than money, of all, or substantially all, the property and
assets of the Corporation otherwise than in the usual and regular course of its
business, the voluntary dissolution of the Corporation, or revocation of
voluntary dissolution proceedings, or to take any action prohibited by express
resolution of the Board of Directors. The Executive Committee shall report at
the next regular or special meeting of the Board of Directors all action which
the Executive Committee may have taken on behalf of the Board since the last
regular or special meeting of the Board of Directors.
Section 3.2. Audit Committee. The Board of Directors, by resolution adopted by a
majority of the directors then in office, shall designate an Audit Committee to
consist of at least two (2) directors designated in such resolution. The
majority of the Board of Directors then in office shall have the power at any
time, or from time to time, to change the membership of, and fill vacancies in,
the Audit Committee. The Audit Committee shall recommend to the Board of
Directors the engagement or discharge of independent auditors, review with the
independent auditors the plan and results of the audit engagement, approve
services performed for the Corporation by the independent auditors, review the
degree of independence of the auditors, consider the range of audit and
non-audit fees, review the results of the Corporation's internal audit reports
and perform such other tasks as may be specified in a resolution of the Board of
Directors.
Section 3.3. Other Committees. The Board of Directors, by resolution adopted by
a majority of the directors then in office, may designate such other committees
with such authority as may be properly delegated to such committees and as may
be specified in such resolution. The number of members of each committee shall
be not less than two (2).
Section 3.4. Rules of Committee Procedure. All members of committees shall be
members of the Board of Directors and shall serve on the committees at the
pleasure of the Board of Directors. The Board of Directors, by resolution
adopted by a majority of the directors then in office (excluding the director
upon whose removal the Board of Directors is voting), may remove a director from
one or more committees.
Each committee shall have a chairman who may be designated by the Board of
Directors or, if not so designated, who shall be selected from its membership by
the members of the committee. Each committee shall have a secretary who shall be
elected by the members of the committee and who may or may not be a member of
the committee or a director. Except as provided in these Bylaws, the provisions
of these Bylaws governing the procedures, meetings, action without meetings,
notice and waiver of notice and quorum and voting requirements of the Board of
Directors shall apply to committees and their members. To the extent not
inconsistent with these Bylaws, each committee shall make its own rules of
procedure.
ARTICLE IV
Officers
Section 4.1. Officers. The officers of the Corporation shall be a Chairman of
the Board of Directors, a President, one or more Vice Presidents, a Secretary,
one or more Assistant Secretaries, a Treasurer, one or more Assistant
Treasurers, and other officers as may be determined and elected, from time to
time, by the Board of Directors. The same person may hold any two offices,
except the offices of President and Secretary.
Section 4.2. Chairman of the Board of Directors. The Chairman of the Board of
Directors shall be a director and shall have the power and responsibility for
carrying out the policies of the Board of Directors. The Chairman of the Board
of Directors shall possess such other powers and perform such other duties as
may be incident to the office of Chairman of the Board of Directors or
prescribed by resolution of the Board of Directors.
Section 4.3. President. The President shall be subject to the direction of the
Board of Directors, shall have general supervision over the business and affairs
of the Corporation, and shall be the chief executive officer of the Corporation.
The President shall possess such other powers and perform such other duties as
may be incident to the office of President or prescribed by resolution of the
Board of Directors or delegated to him by the Chairman of the Board of
Directors.
Section 4.4. Vice Presidents. Each of the Vice Presidents shall possess such
powers and perform such duties as may be incident to the office of Vice
President or prescribed by resolution of the Board of Directors or delegated to
him by the Chairman of the Board of Directors or the President.
Section 4.5. Secretary. The Secretary shall be ex officio secretary of the Board
of Directors and of all other committees unless the Board of Directors or such
committee shall designate some other person to act as its secretary. The
Secretary shall keep the minutes of all meetings of the Shareholders, the Board
of Directors and all committees of the Board of Directors if he is acting as
secretary of the meeting and shall prepare and give, or cause to be prepared and
given all notices of the Corporation. The Secretary shall have charge of the
corporate seal, the stock certificate books, stock transfer books and such
books, records and papers as the Board of Directors by resolution may direct.
The Secretary shall also possess such other powers and perform such other duties
as may be incident to the office of Secretary or prescribed by resolution of the
Board of Directors or delegated to him by the Chairman of the Board of
Directors, the President, or any Vice President. The Assistant Secretaries, if
any, shall possess such powers and perform such duties as may be incident to the
office of Assistant Secretary or prescribed by resolution of the Board of
Directors or delegated to him by the Chairman of the Board of Directors, the
President, any Vice President or the Secretary.
Section 4.6. Treasurer. The Treasurer shall possess such powers and perform such
duties as may be incident to the office of Treasurer or prescribed by resolution
of the Board of Directors or delegated to him by the Chairman of the Board of
Directors, the President, or any Vice President. The Assistant Treasurer, if
any, shall possess such powers and perform such duties as may be incident to the
office of Assistant Treasurer or prescribed by resolution of the Board of
Directors or delegated to him by the Chairman of the Board of Directors, the
President, any Vice President or the Treasurer.
Section 4.7. Other Officers. The other officers, if any, shall be elected by
resolution of the Board of Directors, and shall possess such powers and perform
such duties as may be prescribed by resolution of the Board of Directors or
delegated to them by the Chairman of the Board of Directors, the President, any
Vice President or such other officer whom they may be assisting.
ARTICLE V
Certificates of Stock
Section 5.1. Certificates for Shares. Certificates evidencing shares of stock of
the Corporation shall be in such form as shall be determined by resolution of
the Board of Directors. Such certificates shall be signed by the Chairman of the
Board of Directors or the President or any Vice President and by the Secretary
or any Assistant Secretary or the Treasurer or any Assistant Treasurer, or by
any other officer authorized by resolution of the Board of Directors, and may
(but need not) have affixed thereto the seal of the Corporation or a facsimile
thereof. The signatures of the officers upon a certificate may be facsimiles if
the certificate is countersigned by a transfer agent, or registered by a
registrar, other than the Corporation or an employee of the Corporation. All
certificates for shares of stock shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares of stock
represented thereby are issued, with the number of shares and the date of issue,
shall be entered on the stock transfer books of the Corporation.
Section 5.2. Transfer of Shares. Transfer of shares of the Corporation shall be
made only on the stock transfer books of the Corporation by the holder of record
thereof or by his duly authorized representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary, transfer agent or
registrar. All certificates surrendered to the Corporation or its transfer agent
for transfer shall be promptly canceled, and no new certificate shall be issued
until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in the case of a lost, destroyed or
mutilated certificate, a new certificate may be issued therefor upon such terms
and indemnity to the Corporation as the Board of Directors may prescribe. The
person in whose name shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.
ARTICLE VI
Miscellaneous
Section 6.1. Waiver of Notice. Unless otherwise provided by law, whenever any
notice is required to be given to any Shareholder, director or member of any
committee under the provision of these Bylaws or by law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. A Shareholder, director or member of a committee of the Corporation
who attends a meeting shall be deemed to have had timely and proper notice of
the meeting, unless he attends for the express purpose of objecting to the
transaction of any business at such meeting because the meeting is not lawfully
called or convened.
Section 6.2. Fiscal Year. The fiscal year of the Corporation shall begin
on January 1 and shall end on December 31 in each year.
Section 6.3. Voting Shares of Other Corporations. The Chairman of the Board or
the President, in conjunction with two other members of the Executive Committee,
are authorized to vote, represent and exercise on behalf of the Corporation all
rights incident to any and all shares of any other corporation owned by the
Corporation in person or by any person authorized by them, or any of them, to do
so. Notwithstanding the foregoing, the Board of Directors, in its discretion,
may designate by resolution any additional or other person to vote or represent
said shares of other corporations.
Section 6.4. Seal. The seal of the Corporation shall be in such form as is
approved by the Board of Directors by resolution, and said seal, or a facsimile
thereof, may be imprinted or affixed by any process or in any manner reproduced.
The Secretary, any Assistant Secretary and any other officers authorized by the
Board of Directors by resolution shall be empowered to use and attest the
corporate seal on all documents.
Section 6.5. Registered Office. The registered office of the Corporation shall
be 101 East Washington Street, in the City of Suffolk, Virginia, or at such
other place within the Commonwealth of Virginia as the Board of Directors shall,
from time to time, determine by resolution.
Section 6.6. Other Offices. The Corporation shall have such office or offices at
such place or places as the Board of Directors may from time to time determine
by resolution or as the business of the Corporation may require.
Section 6.7. Compensation of Directors, Members of Committees of the Board of
Directors and Officers. The compensation of the directors, members of committees
of the Board of Directors and officers of the Corporation shall be fixed in such
manner and on such basis as the Board of Directors shall, from time to time,
determine by resolution.
Section 6.8. Amendments to Bylaws. Except as otherwise provided by law, these
Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the
Board of Directors by resolution, but Bylaws made by the Board of Directors may
be repealed or changed, and new Bylaws made, by the Shareholders, and the
Shareholders may prescribe that any Bylaw made by them shall not be altered,
amended or repealed by the Board of Directors.
EXHIBIT 13
[LOGO]
James River Bankshares
ANNUAL REPORT
1995
<PAGE>
TABLE OF CONTENTS
Mission Statement 2
Financial Highlights 3
Letter to Our Stockholders 4
Year End Review 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Five Year Financial Summary 11
Consolidated Statements 12
Notes to Consolidated Financial Statements 16
Independent Auditor's Report 33
Board of Directors 34
Officers and Directors:
Bank of Suffolk and James River Bank 35
General Information 36
<PAGE>
MISSION STATEMENT
James River Bankshares, Inc. is an alliance of community based
financial institutions and related subsidiaries whose sole purpose is to provide
its customers and service areas with the best in competitive banking and bank
related services. This is done in a cost effective manner to allow all service
area citizens the opportunity to have needed banking services at a fair price.
The delivery for these services is done in the following manner:
o Quick, efficient, responsiveness to requests--decisions within 24 to 48
hours.
o Concerned, friendly, and fair personal service, while striving
always to personally recognize our customers and serve them as we would
like to be served.
o Commitment to inform our customers and provide them with new,
constantly changing services to meet their needs at a fair price.
James River Bankshares, Inc., in turn, will make a fair profit which will
provide a reasonable return to stockholders.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Percent
1995 1994 Change
- ----------------------------------------------------------------------------------------------------
<S> <C>
Earnings Net Interest Income $ 6,592 $ 6,361 3.63
Net Income 1,966 2,176 (9.61)
Per Share Net Income $ 1.28 $ 1.49 (14.09)
Dividends 0.52 0.50 .04
Book Value 16.62 14.94 11.25
At Year Loans, Net of
End Unearned Income 92,042 $ 82,112 12.09
Securities 46,727 57,288 (18.43)
Total Earning Assets 146,001 145,547 .31
Total Assets 157,836 157,619 .14
Total Deposits 131,582 133,254 1.26
Stockholders' Equity 25,496 22,872 11.47
Ratios Return on
Average Assets 1.29% 1.45% (11.03)
Return on Average Equity 8.14 9.87 (17.53)
Allowance for Loan Losses
to Net Loans 1.76 1.96 (10.20)
Leverage Capital Ratio 16.64 14.98 11.08
</TABLE>
[GRAPH] [GRAPH] [GRAPH]
NET INCOME TOTAL ASSETS STOCKHOLDERS' EQUITY
(thousands) (millions) (millions)
1991 1,513 1991 114.2 1991 16.2
1992 1,827 1992 139.7 1992 17.4
1993 2,163 1993 147.9 1993 19.0
1994 2,176 1994 157.6 1994 22.9
1995 1,966 1995 157.8 1995 25.5
<PAGE>
TO OUR STOCKHOLDERS:
James River Bankshares is off to a profitable, solid beginning, and we
are delighted to share with you this first annual report.
James River Bankshares commenced operations effective June 1, 1995. It is a
multi-bank holding company formed by Bank of Suffolk and James River Bank,
formerly known as The Bank of Waverly. The holding company now owns not only
Bank of Suffolk and James River Bank, but also, First Colonial Bank, FSB, and
Bank of Isle of Wight, the latter two banks joining effective March 1, l996.
1995 was a very exciting year for your company and one in which management
believes a very firm foundation has been established for the future.
Consolidated assets at year end were $157.8 million, with deposits of $131.6
million and earning assets of $146.0 million. Net income for the year was $1.966
million, down 9.6% compared to consolidated earnings of the two banks at year
end 1994 of $2.176 million. Special organizational expenses of $227,000 were
incurred in 1995 which caused a decrease by this amount in net income for the
year. Due to the acquisitions of First Colonial Bank, FSB and Bank of Isle of
Wight, additional organizational expenses will be incurred in the 1996 year.
In spite of the slightly down year in net earnings, the holding company
performed very well. Return on average assets was 1.29% and return on average
equity was 8.14% in 1995. Earnings per share were $1.28 and an annual cash
dividend of $.52 per share was paid on December 1, 1995.
Your holding company moved promptly to better leverage the capital ratio of
the holding company by acquiring two excellent banking subsidiaries, First
Colonial Bank, FSB, and Bank of Isle of Wight. Both banks are well established
in markets with outstanding growth and profit potential. When these mergers
became effective, the combined assets of all subsidiaries were approximately
$320 million.
Your Board of Directors and management have aggressively begun
consolidation of support services for the subsidiary banks in order to recognize
economies of scale throughout the company. Electronic data processing and bank
insurance consolidation are already underway. Management task forces are being
put in place to develop recommendations for additional cost savings without
compromising customer services.
<PAGE>
James River Bankshares, through its community bank subsidiaries, offers its
communities and customers the same personal service and responsiveness as
always, but consolidated within the holding company it can also provide a higher
level of services with greater variety and more expertise. This will allow us to
compete more effectively with the large banking systems.
Competition within the traditional banking arena is increasing
dramatically, and services offered by non-banking financial institutions have
now severely blurred competitive advantages and disadvantages. James River
Bankshares is preparing for this competition and will effectively and
successfully deliver banking services to our market and customers.
A special word of thanks should go to the Board of Directors, management,
and employees, all who have shouldered increased loads in this process,
providing the planning and direction needed to transform the individual banks
into James River Bankshares and at the same time seeing that our customers are
properly served as only your community bankers can do.
Your continued patience through this organizational period, your business,
and your support are greatly appreciated and will enable James River Bankshares
to reap and share equitable rewards.
Sincerely,
/s/ ELMON T. GRAY /s/ HAROLD U. BLYTHE
Elmon T. Gray Harold U. Blythe
Chairman President & CEO
<PAGE>
JAMES RIVER BANKSHARES
1995 Year End Review
With l995 being the year of the formation of James River Bankshares, there were
a number of events worthy of noting:
JUNE 1, 1995 - James River Bankshares became effective, merging Bank of Suffolk
and James River Bank, formerly The Bank of Waverly, into common ownership under
a multi-bank holding company.
JUNE 1, 1995 - The holding company's stock began trading on the NASDAQ National
Market System under the symbol "JRBK".
JUNE 30, 1995 - The holding company signed merger agreements with First Colonial
Bank, FSB, and Bank of Isle of Wight. The two mergers would increase assets to
approximately $314 million on this date and extend the franchise from Suffolk to
the tri-city areas of Petersburg, Hopewell, and Colonial Heights, Virginia,
along the southern border of the James River. Each bank would sit two members on
the James River Bankshares Board of Directors. The mergers were anticipated to
be effective in the first quarter of l996.
AUGUST 10, 1995 - The Board of Directors authorized the consolidation of
electronic data processing services through the establishment of a separate
non-bank subsidiary, James River Support, Inc., and construction of a new
operations center to be located in Waverly, Virginia for all processing in order
to develop an economy of scale in this expense area. All subsidiary banks will
use this center. The first bank is expected to be converted to this computer
center in September, l996.
SEPTEMBER 14, 1995 - The Board of Directors authorized the consolidation of all
insurance policies and programs for the subsidiary banks into one program. This
consolidation was expected to be complete by June, l996.
October 17, 1995 - The Board of Directors authorized the termination of the
subsidiary banks' retirement plans and the adoption of a single plan which would
be a discretionary defined contribution plan with a 40l(k) provision. The plan
will be in place for the l996 year.
The Board also declared an annual cash dividend of 52 cents per share to
stockholders of record November l5, l995, payable on December 1, 1995.
November 20, 1995 - The holding company announced the signing of an agreement by
James River Bank, formerly The Bank of Waverly, to purchase fixed assets and
deposits of the Courtland and Franklin branches of First Union National Bank of
Virginia. These deposits totaled $36.4 million. Consummation of the purchase was
expected to be the first quarter of l996.
December 14, 1995 - The Board of Directors through a bidding process accepted
the bid of Goodman & Company, L.L.P., to provide external auditing services and
tax services for the three year period 1996-1998. This effectively consolidated
all external accounting services among the subsidiary banks, subject annually to
stockholder approval.
<PAGE>
JAMES RIVER BANKSHARES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion is intended to assist readers in understanding and
evaluating the financial condition and results of operations of James River
Bankshares, Inc. (James River or the Company) and its subsidiaries as of
December 31, 1995. The Company was formed on June 1, 1995 and was capitalized
pursuant to a share exchange between Bank of Suffolk (BOS) and James River Bank
(JRB) formerly The Bank of Waverly. The transaction was accounted for as a
pooling-of-interest and all financial information has been restated accordingly.
The following discussion is based upon the historical combined financial
statements of BOS and JRB. This discussion and analysis should be read in
conjunction with James River's Consolidated Financial Statements and related
Notes.
[GRAPH]
RETURN ON
AVERAGE ASSETS (%)
1991 1.42
1992 1.44
1993 1.53
1994 1.45
1995 1.29
EARNINGS PERFORMANCE
James River sustained strong earnings in 1995, having net income of
$1,966,000. Even though this represents a 9.6% decrease from 1994 earnings of
$2,176,000, several significant factors must be considered when comparing
earnings performance. The decrease was primarily attributable to $227,000 in
organizational expenses incurred during the organization of the Company. The
earnings for 1994 represent a slight increase over 1993's $2,163,000.
Net income per share equaled $1.28 for 1995 as compared to $1.49 for 1994
and $1.64 for 1993. Return on average equity was 8.14%, 9.87%, and 11.82% for
1995, 1994, and 1993, respectively. Cash dividends paid were $0.52, $0.50, and
$0.49 and represent 40.6%, 33.6%, and 29.9% of earnings for each of the
respective years.
The return on average assets was 1.29% for 1995 in comparison to 1.45% and
1.53% for 1994 and 1993.
[GRAPH]
RETURN ON
AVERAGE EQUITY (%)
1991 9.66
1992 10.86
1993 11.82
1994 9.87
1995 8.14
NET INTEREST INCOME
During 1995, management was successful in increasing the loan portfolio by
$9,931,000 or 12%. This generated additional interest income by $278,000 net of
decreased interest on investments. Interest on investments decreased due to the
transfer of funds from the investment portfolio via sales/maturities to meet
this loan demand. James River increased net interest income by $231,000 or 3.6%
in 1995. The cost of funds increased by 73 basis points to 4.43%, while the
yield on average earning assets increased 61 basis points to 8.49%. As a result,
net interest spread decreased to 4.06% from 4.18% in 1994. The dollar increase
in interest earning assets over interest paying liabilities was the primary
reason for 1995's increase in net interest income.
Net interest income was $6,361,000 in 1994, 5.7% greater than the
$6,019,000 reported in 1993. This increase was primarily attributable to an
increase in total interest earning assets, which, on average, increased
$6,500,000, or 4.9% to $138,637,000 from $132,137,000 in 1993. The average
balance of securities increased $1,298,000, or 2.3%, to $57,625,000 while the
average balance of higher yielding loans gained 10.0% to $78,484,000. Although
interest rates were rising in 1994, they were on average, lower than in 1993 and
the average yield on interest earning assets declined 13 basis points from 7.94%
in 1993 to 7.81% in 1994.
[GRAPH]
EARNINGS PER SHARE
1991 1.15
1992 1.39
1993 1.64
1994 1.49
1995 1.28
OTHER INCOME
Total other income of $549,000 represents a $68,000, or 11.1% decrease from
1994. The decrease was primarily attributed to a decrease in customer service
fees. Also, securities losses increased as the result of selling securities to
meet the demand of higher yielding loans.
<PAGE>
For the year ended December 31, 1994, noninterest income was $618,000,
decreasing 13.2% from $712,000 in 1993. Gains on investments decreased by
$161,000 from income of $139,000 in 1993 to a loss of $22,000 in 1994. The loss
in 1994 was also generated by the need to fund loan demand. The gains in 1993
were primarily due to bonds being called at premiums by their issuers because of
a lower interest rate environment. Service charge income increased 16.2% from
1993 to 1994.
[GRAPH]
NET INTEREST MARGIN (%)
1991 4.89
1992 4.96
1993 4.95
1994 4.89
1995 5.01
OTHER EXPENSE
Other expense increased $564,000, or 14.5% in 1995. The greater portion, or
38.5% of this increase was due to organizational expenses incurred in connection
with the formation of the Company. Occupancy and equipment expenses also
increased $162,000 primarily due to additional depreciation expense on new
office renovations and new equipment.
Noninterest expenses increased $270,000, or 7.5% in 1994 to $3.9 million
from $3.6 million in 1993. Salaries and employee benefit cost increased 8.4%, or
$127,000, in 1994 over 1993. Equipment and occupancy expenses increased 11.8%,
to $549,000 in 1994 over 1993's $491,000. The increase in other operating
expenses was $64,000, or 5.7%, in 1994 over 1993.
INCOME TAXES
Income tax expense for 1995 was $623,000, or 1.9% more than the $612,000
for 1994. Even though income before taxes decreased, the increase in tax was due
to the decrease in the amount of tax-exempt interest on municipal bond
investments in proportion to all other income. Income tax expense in 1994, was
2.7% less than 1993. This decrease can be traced to a 4.1% increase in
tax-exempt income and a 0.2% decrease in operating income before taxes for 1994.
These amounts correspond to an effective tax rate of 24.1%, 21.94, and 22.53%,
respectively, for the three years ended December 31, 1995, 1994, and 1993.
[GRAPH]
NET LOAN GROWTH
(millions)
1991 56.3
1992 65.9
1993 71.2
1994 80.5
1995 90.4
BALANCE SHEET ANALYSIS
James River's total assets grew $217,000 to $157,836,000 from the year end
1994 balance of $157,619,000 which in turn grew by $9,741,000 from 1993.
LOANS
Total loans, net of unearned income, at year-end totalled $92,042,000 or
12.1% over 1994. The largest increase was in real estate mortgage lending which
rose $12,684,000 while commercial lending decreased $8,118,000, or 34.5%. The
ratio of loans-to-deposits at year-end 1995 was 70.0%, compared to 61.6% at year
end 1994.
Total loans also increased by $9,590,000 in 1994 from a balance of
$72,522,000 in 1993.
[GRAPH]
LOAN TO
DEPOSIT RATIO (%)
1991 62.59
1992 56.94
1993 56.01
1994 59.26
1995 69.91
INVESTMENTS
In 1995, the size of the investment securities portfolio declined by 18.4%,
or $10,560,000 to fund the increased loan demand. At year-end 1995, the
portfolio totaled $46,727,000 and 89.1% of all securities were rated "A" or
better, or were issued by the U.S. Government or its agencies. The portfolio had
an average taxable equivalent yield of 7.17% at year-end.
<PAGE>
Investments in 1994 and 1993 remained at relative equal levels with the
balance at year-end 1994 of $57,288,000.
DEPOSITS
Total deposits decreased $1,672,000, or 1.3% to $131,582,000 at year-end
1995. Average deposits were $126,280,000 and $125,987,000 in 1995 and 1994,
respectively. This relative equal level of deposit balances resulted from
management's control of deposit costs.
Total deposits at year-end 1993 were $127,690,000.
[GRAPH]
NON-PERFORMING
LOANS/TOTAL LOANS (%)
1991 .98
1992 .93
1993 .43
1994 .42
1995 .49
STOCKHOLDERS' EQUITY
Common stockholders' equity at year-end 1995 was $25,496,000 compared to
$22,872,000 at year-end 1994. Since 1993, Statement of Financial Accounting
Standards (SFAS) 115 requires a monthly adjustment to capital, for financial
reporting purposes, equal to the net increase or decrease in the market value of
the available-for-sale investment portfolio. As of year-end 1995, this
adjustment increased capital by $ 627,000. At year-end, the leverage capital
ratio was 16.64%, an increase from 1994's ratio of 14.98%. Generally, leverage
capital is the ratio of total stockholders' equity -- exclusive of unrealized
gains/losses on investments -- to average assets.
Stockholders' equity increased by $3,883,000 from the 1992 balance of
$18,989,000.
For 1995, 1994, and 1993 cash dividends were $797,000, $773,000, and
$644,000, respectively.
[GRAPH]
RESERVES AS %
OF LOANS
1991 1.23
1992 1.59
1993 1.82
1994 1.96
1995 1.76
ASSET QUALITY
LOAN MONITORING
James River strives to continually maintain asset quality. Management
places great emphasis on monitoring the loan portfolio's repayment performance.
Aggressive efforts are made in collecting problem loans. Non-performing loans
were 0.49% of total loans at year-end 1995 as compared to 0.42% at year-end 1994
and 0.43% for year-end 1993.
ALLOWANCE FOR LOAN LOSSES
Net loans charged off in 1995 were $92,000 as compared to $2,000 in 1994.
To maintain an adequate reserve balance, a provision of $96,000 was made in
1995. In 1994 the reserve was increased by $300,000 over 1993. At year-end 1995
the allowance for loan losses was 1.76% of total loans. The allowance at the end
of 1994 was 1.96%. At year-end 1993 the allowance for loan losses was
$1,318,000.
LIQUIDITY AND CAPITAL REQUIREMENTS
At year-end federal funds and investments maturing within one year amounted
to $12,001,000 or 9.12% of deposits. In addition, 42.75% of investment
securities mature in the 1-5 year range. 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.
[GRAPH]
NET CHARGE-OFFS
TO AVERAGE LOANS (%)
1991 .14
1992 .31
1993 .13
1994 .02
1995 .11
The Company has no long-term debt. The Company has entered into agreements
to purchase banking software and computer equipment for installation in 1996
<PAGE>
with an aggregate cost of approximately $1,300,000. In addition, the Company
intends to build a centralized EDP support center building which will house the
computer equipment and operations. The estimated cost of the building, furniture
and fixtures, exclusive of computer equipment, is expected to cost approximately
$775,000.
In addition, the Company, through James River Bank, acquired two branch
banking offices on March 23, 1996, one in the City of Franklin, Virginia and one
in Courtland, Southampton County, Virginia. The Company acquired the land,
buildings, equipment, furniture and fixtures and assumed the deposits of the two
branches. The fixed assets were purchased for $1,035,000. In addition, the
Company paid a premium for the branches' deposits of $2,817,000 based on
combined deposits of $34,360,000.
At December 31, 1995, the Company's equity to asset ratio was 16.15%.
[GRAPH]
SECURITIES GROWTH
(millions)
1991 43.3
1992 54.9
1993 56.7
1994 57.3
1995 46.7
INFLATION
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or with the same magnitude as the
prices of goods and services, since such prices are affected by inflation, to a
larger extent than interest rates.
[GRAPH]
DEPOSIT GROWTH
(millions)
1991 96.3
1992 121.4
1993 127.7
1994 133.3
1995 131.6
BUSINESS COMBINATION
On March 1, 1996, the Company acquired First Colonial Bank, FSB ("FCB") and
Bank of Isle of Wight ("BIW") in two separate subsidiary mergers. A total of
914,941 shares of James River Common Stock were issued to former shareholders of
FCB and BIW in the transactions. At March 1, 1996, FCB had total assets of
approximately $135,653,000 and shareholders' equity of approximately $8,298,000.
At March 1, 1996, BIW had total assets of approximately $33,444,000 and
shareholders' equity of approximately $3,275,000.
Both transactions were accounted for as a pooling-of-interest. See Note 14
to the Financial Statements "Subsequent Event."
ACCOUNTING RULE CHANGES
In May 1995, the Financial Accounting Standards Board issued Statement No.
122, Accounting for Mortgage Servicing Rights (SFAS No. 122). SFAS No. 122
requires that the cost of loans (including origination costs) be allocated
between the cost of the mortgage servicing rights and the loan based on relative
fair values, when loans are to be sold or securitized. The cost of mortgage
servicing rights would be recorded as an asset and amortized over the estimated
servicing period, with periodic evaluations and, if necessary, write downs for
impairment. The Statement must be implemented prospectively for fiscal years
beginning after December 15, 1995. FCB does maintain a servicing portfolio of
residential-mortgage loans. However, SFAS 122 is not expected to have a material
effect on the Company's financial statements. Additional accounting rule changes
are set forth in the notes to the Company's Financial Statements.
<PAGE>
JAMES RIVER BANKSHARES
Five Year Financial Summary
<TABLE>
<CAPTION>
Years ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
INCOME STATEMENT DATA:
Interest income $ 11,323 $ 10,401 $ 9,967 $ 9,662 $ 9,092
Interest expense 4,731 4,040 3,948 4,317 4,741
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income 6,592 6,361 6,019 5,345 4,351
Provision for loan losses 96 299 317 547 240
Net interest income after provision
for loan losses 6,496 6,062 5,702 4,798 4,111
Noninterest income 549 618 712 655 532
Noninterest expense 4,456 3,892 3,622 3,168 2,783
Income before income taxes 2,589 2,788 2,792 2,285 1,860
Income taxes - current 651 692 709 567 415
Income taxes - deferred (28) (80) (80) (109) (68)
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 1,966 $ 2,176 $ 2,163 $ 1,827 $ 1,513
PER SHARE DATA:
Net income $ 1.28 $ 1.49 $ 1.64 $ 1.39 $ 1.15
Cash dividends 0.52 0.50 0.49 0.48 0.39
Book value at period end 16.62 14.94 14.36 13.23 12.35
Tangible book value at period end 17.18 14.82 14.22 13.07 12.35
BALANCE SHEET DATA:
Total assets $ 157,836 $ 157,619 $ 147,878 $ 139,738 $ 114,166
Loans, net 90,423 80,496 71,204 65,935 56,284
Securities 46,727 57,288 56,689 54,892 43,277
Deposits 131,582 133,254 127,690 121,411 96,347
Stockholders' equity 25,496 22,872 18,988 17,412 16,172
Average shares outstanding 1,531,429 1,461,522 1,319,626 1,316,490 1,310,100
PERFORMANCE RATIOS:
Return on average assets 1.29% 1.45% 1.53% 1.44% 1.42%
Return on average equity 8.14 9.87 11.82 10.86 9.66
Net interest margin 5.01 4.89 4.95 4.96 4.89
Efficiency 61.94 55.58 54.93 53.93 57.37
ASSET QUALITY RATIOS:
Allowance for loan losses to period
end loans 1.76% 1.96% 1.82% 1.59% 1.23%
Allowance for loan losses to
nonaccrual loans 467.92 473.90 499.24 205.61 130.19
Non-performing assets to period end
loans and foreclosed properties 0.49 0.42 0.43 0.93 0.98
Net charge-offs to average loans 0.11 0.02 0.13 0.31 0.14
CAPITAL AND LIQUIDITY RATIOS:
Leverage 16.64% 14.98% 12.72% 12.95% 14.17%
Risk based:
Tier I capital 26.57 25.45 25.50 26.17 25.37
Total capital 28.26 27.26 27.29 27.70 26.47
Average loans to average deposits 69.91 59.26 56.01 56.94 62.59
</TABLE>
<PAGE>
JAMES RIVER BANKSHARES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
December 31, 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Cash and due from banks $ 7,901,380 $ 7,102,699
Federal funds sold 7,232,000 6,148,000
Investment securities available-for-sale 46,727,090 20,394,994
Investment securities held-to-maturity -- 36,892,918
Loans, net 90,422,853 80,496,048
Premises and equipment, net 3,415,091 3,605,311
Accrued interest receivable 1,525,379 1,507,102
Other assets 607,789 576,923
Deferred income taxes 4,368 895,325
- -------------------------------------------------------------------------------------------------------
Total Assets $ 157,835,950 $ 157,619,320
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 131,582,284 $ 133,254,444
Accrued interest payable 383,024 297,025
Other liabilities 374,265 1,195,795
- -------------------------------------------------------------------------------------------------------
Total Liabilities 132,339,573 134,747,264
- -------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Stockholders' equity:
Common stock, $5.00 par value per share (10,000,000
shares authorized; 1,533,752 and 1,531,040 shares
issued and outstanding at December 31, 1995 and
1994, respectively) 7,668,760 7,655,200
Additional paid-in-capital 3,566,875 3,540,733
Retained earnings 13,632,905 12,465,261
Net unrealized gain (loss) on securities available-for-sale 627,837 (789,138)
- -------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 25,496,377 22,872,056
- -------------------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $ 157,835,950 $ 157,619,320
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
JAMES RIVER BANKSHARES
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Interest income:
Interest and fees on loans $ 7,957,138 $ 6,762,527 $ 6,285,773
Interest on investment securities:
Taxable 2,117,187 2,493,636 2,585,582
Exempt from Federal income taxes 1,089,682 1,027,143 986,912
Interest on Federal funds sold 159,180 117,198 109,228
- --------------------------------------------------------------------------------------------------------------
Total interest income 11,323,187 10,400,504 9,967,495
- --------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 4,689,091 4,018,957 3,940,661
Interest on Federal funds purchased 41,673 20,538 7,391
- --------------------------------------------------------------------------------------------------------------
Total interest expense 4,730,764 4,039,495 3,948,052
- --------------------------------------------------------------------------------------------------------------
Net interest income 6,592,423 6,361,009 6,019,443
Provision for loan losses 96,152 299,447 317,653
- --------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 6,496,271 6,061,562 5,701,790
- --------------------------------------------------------------------------------------------------------------
Other operating income:
Customer service fees 470,882 588,487 505,745
Investment securities gains (losses) (51,677) (21,975) 139,450
Other income 129,953 50,989 66,520
- --------------------------------------------------------------------------------------------------------------
Total other operating income 549,158 617,501 711,715
- --------------------------------------------------------------------------------------------------------------
Other operating expenses:
Salaries 1,727,362 1,637,909 1,510,425
Employee benefits 380,406 427,332 413,596
Occupancy expense, net 325,288 220,063 203,934
Equipment expense 385,907 329,121 286,625
Other expenses 1,636,810 1,277,251 1,207,285
- --------------------------------------------------------------------------------------------------------------
Total operating expenses 4,455,773 3,891,676 3,621,865
- --------------------------------------------------------------------------------------------------------------
Income before income taxes 2,589,656 2,787,387 2,791,640
Income taxes 623,212 611,588 628,822
- --------------------------------------------------------------------------------------------------------------
Net income $ 1,966,444 $ 2,175,799 $ 2,162,818
- -------------------------------------------------------------------------------------------------------------
Earnings per share $ 1.28 $ 1.49 $ 1.64
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
JAMES RIVER BANKSHARES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Unrealized
gain(loss) on
Additional securities
Common Paid-In Retained available-
Stock Capital Earnings for-sale Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance, December 31, 1992 $ 6,593,950 $ 1,318,790 $ 9,499,521 $ -- $ 17,412,261
Net income -- -- 2,162,818 -- 2,162,818
Stock options exercised 30,000 27,600 -- -- 57,600
(6,000 shares)
Cash dividends declared -- -- (644,151) -- (644,151)
($0.49 per share)
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 6,623,950 1,346,390 11,018,188 -- 18,988,528
Implementation of change in
accounting for securities net of
deferred income taxes of $91,771 -- -- -- 178,144 178,144
Net income -- -- 2,175,799 -- 2,175,799
Net proceeds from 200,000 shares of
common stock from public offering 1,000,000 2,158,718 -- -- 3,158,718
Stock options exercised (6,250 shares) 31,250 35,625 -- -- 66,875
Cash dividends declared ($0.50 per share) -- -- (773,020) -- (773,020)
Other -- -- 44,294 -- 44,294
Change in unrealized gain (loss) on
securities available-for-sale, net of
deferred income taxes of $498,297 -- -- -- (967,282) (967,282)
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 7,655,200 3,540,733 12,465,261 (789,138) 22,872,056
Net income -- -- 1,966,444 -- 1,966,444
Stock option exercised
(2,799 shares) 11,500 17,365 -- -- 28,865
Stock issued pursuant to directors'
stock purchase plan (499 shares) 2,495 8,777 -- -- 11,272
Cash dividends declared
($0.52 per share) -- -- (797,633) -- (797,633)
Cash paid in lieu of fractional shares
related to merger with Bank of Suffolk
and The Bank of Waverly (435) -- (1,167) -- (1,602)
Transfer-securities held-to-maturity to
available-for-sale, net of deferred
income tax of $217,329 -- -- -- 421,874 421,874
Change in unrealized gain (loss) on
securities available-for-sale, net of
deferred income taxes of $512,627 -- -- -- 995,101 995,101
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $ 7,668,760 $ 3,566,875 $ 13,632,905 $ 627,837 $ 25,496,377
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
JAMES RIVER BANKSHARES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operating Activities:
Net income $ 1,966,444 $ 2,175,799 $ 2,162,818
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 3,971 325,000 274,000
Depreciation and amortization 330,523 242,270 197,111
(Increase) decrease in interest receivable (18,277) (14,450) (44,630)
Increase (decrease) in interest payable 85,999 9,903 (63,627)
(Increase) decrease in other assets (30,866) (297,388) (34,466)
Increase (decrease) in other liabilities (821,530) 327,051 183,808
Deferred taxes 890,957 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,407,221 2,768,185 2,675,014
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Proceeds from sale of investment securities
available-for-sale 27,388,548 8,562,447 --
Purchase of investments available-for-sale (17,399,715) (10,956,092) --
Redemption - investment securities
held-to-maturity 1,988,964 8,195,335 21,179,631
Purchase of investments held-to-maturity -- (7,452,122) (22,923,177)
Net increase in loans (9,930,776) (9,617,656) (5,542,128)
Purchase of fixed assets (140,303) (1,509,022) (567,674)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 1,906,718 (12,777,110) (7,853,348)
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Cash dividends paid (797,633) (773,020) (644,151)
Net increase (decrease) in demand deposits (253,088) 4,159,740 3,200,626
Net increase (decrease) in
interest bearing deposits 4,468,134 (878,685) 4,667,637
Net increase (decrease) in certificates of deposits (5,887,206) 2,283,418 (1,589,041)
Issuance of stock 40,137 3,225,593 57,600
Purchase of fractional shares (1,602) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (2,431,258) 8,017,046 5,692,671
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,882,681 (1,991,879) 514,337
Cash and cash equivalents, beginning of year 13,250,699 15,242,578 14,728,241
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 15,133,380 $ 13,250,699 $ 15,242,578
- ---------------------------------------------------------------------------------------------------------------------------
Cash paid during the year for:
Interest $ 4,644,765 $ 4,029,593 $ 4,023,174
- ---------------------------------------------------------------------------------------------------------------------------
Income taxes $ 377,708 $ 907,402 $ 707,172
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of non-cash activities:
Transfer of investments held-to-maturity
to available-for-sale $ 34,903,954 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
JAMES RIVER BANKSHARES
Notes to Consolidated Financial Statements
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
James River Bankshares, Inc. ("the Company") is a Virginia bank holding
company that commenced operation June 1, 1995. The Company was capitalized
pursuant to a share exchange between Bank of Suffolk, a Virginia state chartered
bank and The Bank of Waverly, a Virginia state chartered bank. In the share
exchange, shareholders of the Bank of Suffolk and The Bank of Waverly exchanged
their shares of common stock for 1,531,040 shares of James River Bankshares,
Inc. common stock. Bank of Suffolk and The Bank of Waverly are now wholly owned
subsidiaries of James River Bankshares, Inc. and the holding company conducts
all of its banking operations through these two subsidiaries.
CONSOLIDATION
The consolidated financial statements of James River Bankshares include the
accounts of the holding company and its wholly owned bank subsidiaries.
Significant intercompany transactions and amounts have been eliminated.
The consolidation has been prepared using the pooling of interest method.
All information included in the financial statements has been combined as if the
merger had occurred at the earliest date presented.
CASH AND CASH EQUIVALENTS
For the purpose of presentation in the Statements of Cash Flows, cash and
cash equivalents are defined as those amounts included in the balance sheet
captions Cash and Due from Banks and Federal funds sold.
INVESTMENT SECURITIES
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
115 "Accounting for Certain Investments in Debt and Equity Securities" effective
January 1, 1994. SFAS 115 requires the classification of investment securities
into three categories: Held-to-Maturity, Available-for-Sale and Trading.
Investment securities classified as Held-to-Maturity are reported at cost,
adjusted for amortization of premium and accretion of discount. Investment
securities classified as Available-for-Sale are reported at fair value with the
change in unrealized gains and losses net of tax included in shareholders'
equity. The Company has had no Trading securities. The effect of adopting the
statement for 1994 was to recognize an unrealized gain, net of tax, of $178,144
as an increase in shareholders' equity.
The adjustment of premium or discount is amortized or accrued by the
interest method. Realized gains or losses or writedowns in carrying value of
securities are computed on the specific identification method.
Prior to the adoption of SFAS No. 115, securities were classified as
held-to-maturity. Held-to-maturity securities were carried at amortized cost.
Dividend and interest income, including amortization of premiums and
accretion of discounts, for both available-for-sale and held-to-maturity
securities are included in interest income.
Realized gains and losses for both securities portfolios are recorded in
net securities gains and are computed using the specific identification method.
LOANS
Loans are stated at the principal amount outstanding, net of deferred loan
fees, discounts, and reserve for loan losses.
Loan origination fees and certain direct origination costs are capitalized
and amortized as an adjustment to interest income over the life of the related
loans.
Loans, including impaired loans, are generally classified as nonaccrual if
they are past due as to maturity or payment of principal or interest for a
period of more than 90 days, unless such loans are well secured and in the
process of collection. If a loan or a portion of a loan is classified as
doubtful or is partially charged off, the loan is classified as nonaccrual.
Loans that are on a current payment status or past due less than 90 days may
also be classified as nonaccrual if repayment in full of principal and/or
interest is in doubt. Loans may be returned to accrual status when all principal
and interest amounts contractually due (including arrearages) are reasonably
assured of repayment.
When a loan is classified as nonaccrual, all interest receivable on that
particular loan is charged back to income at that time. When the future
collectibility of the recorded loan balance is expected, interest income may be
recognized on a cash basis. On charged off loans, cash receipts in excess of the
amount charged to the allowance for loan losses is recognized as income on the
cash basis.
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS 114") and SFAS No. 118 "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures" ("SFAS
118"). SFAS 114, as amended by SFAS 118 requires that an impaired loan be
measured based upon the present value of expected future cash flows discounted
at the effective interest rate, or the fair value of the collateral if the loan
is collateral dependent. A loan is considered impaired when it is probable that
a creditor will be unable to collect all interest and principal payments as
scheduled in the loan agreement. The basic policy of the Company is to charge
off loans when the loss can be readily determined. All impaired loans are
included in nonaccrual loans. Interest income is recognized on the cash basis
for impaired loans.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level considered adequate
by management to provide for potential loan losses. The reserve is increased by
provisions charged to operating expenses and reduced by net charge-offs. For the
period ended December 31, 1995, 1994 and 1993, the provision for losses on loans
amounted to a net charge-off of $92,181, $2,082 and $86,322 respectively. The
allowance is an amount that management believes will be adequate to absorb
losses inherent in existing loans, commitments to extend credit, based on
evaluations of the collectibility and prior loss experience of loans,
commitments to extend credit. The evaluations take into consideration such
factors as changes in the nature and volume of the portfolio, overall portfolio
quality, loan concentrations, specific problem loans, commitments, and current
and anticipated economic conditions (both local and worldwide) that may affect
the borrower's ability to pay. For additional information see Note 3.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line and declining
balance methods over the estimated useful lives of the assets. Estimated lives
range from 10 years to 40 years for buildings and from 3 years to 10 years for
equipment, furniture and fixtures. Leasehold improvements are being depreciated
over the lives of the respective leases.
Gains and losses upon disposition of assets are included in operations.
INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Income tax expense
is the tax payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of shares
outstanding during the year. The weighted average number of shares utilized in
calculating earnings per share was 1,531,429 in 1995, 1,461,522 in 1994 and
1,319,626 in 1993.
NOTE 2: INVESTMENT SECURITIES
During the third quarter of 1995, the Company reassessed its management
philosophy regarding investment securities. Management determined that, due to
proposed acquisitions, the Company would need to have funds available to meet
liquidity needs and future loan demand. Accordingly, all investments
held-to-maturity by Bank of Suffolk were reclassified as available-for-sale. All
securities held-to-maturity were transferred to available-for-sale as of
September 30, 1995. The transfers are shown separately on the statement of
changes in stockholders equity as follows:
Fair market value at date of transfer $30,090,897
Amortized cost 29,451,694
- -------------------------------------------------------------
Unrealized gain 639,203
Related income tax (217,329)
- -------------------------------------------------------------
Net increase to stockholders' equity $ 421,874
- -------------------------------------------------------------
During the first quarter of 1995 The Bank of Waverly did sell three
held-to-maturity securities as follows:
Gross Selling
Price Cost Gain
- ------------------------------------------------------------------------------
Agencies (2) $ 763,031 $ 751,270 $ 11,761
Municipals (1) 258,750 245,396 13,354
- ------------------------------------------------------------------------------
$ 1,021,781 $ 996,666 $ 25,115
- ------------------------------------------------------------------------------
Management determined that with the demand for agricultural loans in March,
1995, it was necessary for The Bank of Waverly to fund such loans through the
sale of investment securities. One particular available-for-sale security was
sold at a loss of $27,862. To offset this loss and increase available funding,
two U. S. Government Agency held-to-maturity securities and one municipal
held-to-maturity security were sold at a combined profit of $25,115. As a result
of the above action, all investments at The Bank of Waverly in the
held-to-maturity classification were reclassified to available-for-sale.
Securities available-for-sale consist of the following:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1995 Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
US government and federal
agencies $ 22,099,749 $ 427,460 $ 29,416 $ 22,497,793
State and local governments 22,170,310 561,416 34,214 22,697,512
Other securities 849,161 26,833 809 875,185
Equity 656,600 -- -- 656,600
- --------------------------------------------------------------------------------------------------------------------------
Totals $ 45,775,820 $ 1,015,709 $ 64,439 $ 46,727,090
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1994 Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
US government and federal
agencies $ 16,288,801 $ 514 $ 974,488 $ 15,314,827
State and local governments 4,909,909 7,427 227,819 4,689,517
Other securities 251,947 -- 1,297 250,650
Equity 140,000 -- -- 140,000
- --------------------------------------------------------------------------------------------------------------------------
Totals $ 21,590,657 $ 7,941 $ 1,203,604 $ 20,394,994
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following is a summary of maturities of securities available-for-sale as
of December 31, 1995:
<TABLE>
<CAPTION>
Securities available-for-sale
- --------------------------------------------------------------------------------------------------------------------------
Amortized Fair
Amounts maturing in: Cost Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
One year or less $ 5,482,003 $ 5,520,438
After one year through five years 19,541,305 19,930,205
After five years through ten years 15,569,812 15,912,880
After ten years 4,526,100 4,706,967
Equity 656,600 656,600
- --------------------------------------------------------------------------------------------------------------------------
Totals $ 45,775,820 $ 46,727,090
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
There were no securities in the held-to-maturity category at December 31,
1995.
Securities held-to-maturity consist of the following:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1994 Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
US government and
federal agencies $ 19,498,731 $ 21,014 $ 643,409 $ 18,876,336
State and local governments 15,971,872 177,423 544,102 15,605,193
Other securities 1,248,965 5,769 20,124 1,234,610
Equity 173,350 -- -- 173,350
- --------------------------------------------------------------------------------------------------------------------------
Totals $ 36,892,918 $ 204,206 $ 1,207,635 $ 35,889,489
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Gross realized gains and losses on securities-available-for-sale for 1995
and 1994 were as follows:
1995 1994
- ---------------------------------------------------------------
Gross realized gains $ 157,140 $ 14,994
Gross realized losses (212,791) (40,312)
- ---------------------------------------------------------------
Net realized loss $ (55,651) $ (25,318)
- ---------------------------------------------------------------
Gross realized gains and losses on redemption of securities
held-to-maturity are as follows:
1995 1994 1993
- --------------------------------------------------------------------------------
Gross realized gains $ 5,301 $ 5,182 $ 150,742
Gross realized losses (1,327) (1,839) (11,292)
- --------------------------------------------------------------------------------
Net realized gain $ 3,974 $ 3,343 $ 139,450
- --------------------------------------------------------------------------------
Investment securities with a carrying value of approximately $6,693,046
at December 31, 1995 were pledged to secure public deposits.
NOTE 3: LOANS RECEIVABLE
Loans receivable are summarized below:
December 31 1995 1994
- --------------------------------------------------------------------------
Commercial $ 15,672,258 $ 13,000,930
Agricultural 1,102,066 939,242
Real estate construction 2,604,934 2,576,084
Real estate mortgage 59,054,298 53,148,333
Installment 13,621,091 12,440,880
- --------------------------------------------------------------------------
Total loans $ 92,054,647 $ 82,105,469
Less:
Allowance for loan losses (1,619,429) (1,615,508)
Unearned discount (704) (3,844)
Deferred loan (fees) expenses (11,611) 9,931
- --------------------------------------------------------------------------
Net loans $ 90,422,853 $ 80,496,048
- --------------------------------------------------------------------------
The allowance for loan losses is summarized below:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------
<S> <C>
Balance--beginning of year $ 1,615,508 $ 1,318,143 $ 1,063,186
Provision charged to operations 96,152 299,447 341,279
Charge offs (136,090) (51,212) (130,902)
Recoveries 43,909 49,130 44,580
- ---------------------------------------------------------------------------------------------
Balance--end of year $ 1,619,479 $ 1,615,508 $ 1,318,143
- ---------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995, the Company had $344,000 in impaired loans, of which
$268,000 was collateralized by real estate with appraised values exceeding the
carrying values of the loans. Impaired loans making up $22,000 of this total
have since been charged to the allowance for loan losses as were the loans
considered to be smaller homogeneous loans, amounting to $48,000. The basic
policy of the Company is to charge off loans when the loss can be readily
determined. All impaired loans are included in nonaccrual loans, therefore,
there is no impact on the comparability of the credit risk tables.
NOTE 4: RELATED PARTIES
The Company has had and expects to have in the future, lending transactions
in the ordinary course of its business with directors, officers, principal
stockholders, and their associates, on substantially the same terms, including
interest rates and collateral on loans, as those prevailing at the same time for
comparable transactions with others. Such extensions of credit do not involve
more than the normal risk of collectibility or present other unfavorable
features. The aggregate amount of loans to such individuals as of December 31,
1995, 1994 and 1993 was $6,286,000, $6,575,622 and $6,293,709, respectively.
NOTE 5: BANK PREMISES AND EQUIPMENT
Major classifications of bank premises and equipment are summarized as
follows:
December 31, 1995 1994
- -----------------------------------------------------------------
Land $ 566,288 $ 566,288
Buildings 2,676,247 2,699,210
Furniture and equipment 2,375,856 2,270,152
Construction in process 36,771 3,600
- -----------------------------------------------------------------
5,655,162 5,539,250
Accumulated depreciation
and amortization (2,240,071) (1,933,939)
- -----------------------------------------------------------------
$ 3,415,091 $ 3,605,311
- -----------------------------------------------------------------
Depreciation expense $ 330,523 $ 242,270
- -----------------------------------------------------------------
See also Note 7 for office lease commitments.
NOTE 6: DEPOSITS
Deposits are summarized below:
<TABLE>
<CAPTION>
December 31, 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C>
Deposits:
Demand deposits $ 22,965,761 $ 23,218,849
Interest bearing demand deposits 21,518,344 11,218,386
Money market deposits 13,083,025 15,277,923
Savings deposits 19,216,915 22,853,841
Time deposits $100,000 and over 6,177,000 4,266,086
Other time deposits 48,621,239 56,419,359
- ----------------------------------------------------------------------------------------------
Total Deposits $ 131,582,284 $ 133,254,444
- ----------------------------------------------------------------------------------------------
</TABLE>
NOTE 7: COMMITMENTS, CONTINGENT LIABILITIES
AND LEGAL PROCEEDINGS
In the normal course of business there are outstanding various commitments
and contingent liabilities, such as guaranties, commitments to extend credit,
etc., which are not reflected in the accompanying financial statements. The
Company does not anticipate losses as a result of these transactions.
Summaries of certain of these commitments and contingent liabilities at
December 31, 1995, 1994 and 1993 follow:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C>
Commitments to extend credit $ 22,635,513 $ 13,491,346 $ 13,462,957
Standby letters of credit 517,232 433,932 236,700
</TABLE>
All the Company's loans, commitments, and commercial and standby letters of
credit have been granted to customers in the Company's market area. All such
customers are depositors of the Company. Commercial and standby letters of
credit were granted primarily to commercial borrowers. The Company, as a matter
of policy, does not extend credit to any single borrower or group of related
borrowers in excess of $3,500,000.
Fees from issuing standby letters of credit generally are recognized in
income for the year received. Losses, if any, are charged to the allowance for
loan losses. These standby letters of credit have an average risk profile
comparable to investment grade obligations. Outstanding credits do not extend
beyond one year.
The Company has entered into agreements to purchase banking software and
computer equipment for installation in 1996 with an aggregate cost of
approximately $1,300,000. In addition, the Company intends to build a
centralized EDP support center building, which will house the computer equipment
and operations. The estimated cost of the building, furniture and fixtures,
exclusive of computer equipment, is expected to cost approximately $775,000.
Standby letters of credit have been issued in support of the following
obligations:
1995 Approximate 1994 Approximate
- -------------------------------------------------------------------------------
Remaining Remaining
Average Average
Maturities Maturities
Percentage Months Percentage (Months)
- -------------------------------------------------------------------------------
Private debt 100 10 100 10
The Company is leasing a branch office under a noncancelable operating
lease having an expiration in 2004 with two additional five year and one two and
one-half year renewal options. Rent expense for 1995 was $36,000.
Future minimum rentals are as follows:
1996 $ 30,000.00
1997 30,000.00
1998 30,000.00
1999 30,000.00
Thereafter 180,000.00
There are no material legal proceedings other than ordinary routine
litigation incidental to the business.
NOTE 8: STOCKHOLDERS' EQUITY
During 1994, 200,000 additional shares were sold in a rights and public
offering at an average issue price of $17.00. This offering raised $3,158,718,
net of offering costs of $241,282.
The Company has a stock option plan for certain employees, in which 50,000
shares are reserved for issuance under the plan over a five-year period. For
1995, 1994 and 1993, 2,500, 6,300 and 6,200 shares were made available of which
2,300, 6,250, and 6,000 were issued at prices of $12.55, $10.70 and $9.60,
respectively. Total expired shares under the option plan for 1995 and 1994
amounted to 50 shares and 200 shares respectively.
Federal regulations restrict the payment of dividends in any calendar year
to net profits of that year, as defined, combined with retained net profits for
the two preceding years.
Federal regulatory agencies have adopted various capital standards for
financial institutions, including risk-based capital standards. The primary
objectives of comparing capital positions of financial institutions are to take
into account the different risks among financial institutions' assets and
off-balance-sheet-items.
Risk based capital standards have been supplemented with requirements for a
minimum leverage ratio. The leverage ratio is the Company's Tier I Capital
divided by the amount of the Company's total average assets as reported on the
balance sheet. In addition, the regulatory agencies consider the published
capital levels as minimum levels and may require a financial institution to
maintain capital at higher levels.
<PAGE>
A comparison of the Company's capital as of December 31, 1995 and 1994 with
the minimum requirements is presented below.
Actual Minimum
1995 1994 Requirements
- ------------------------------------------------------------------------------
Tier I Risk-based Capital 26.57% 25.45% 4.00%
Total Risk-based Capital 28.26% 27.26% 8.00%
Leverage Ratio 16.64% 14.98% 4.00%
NOTE 9: INCOME TAXES
The December 31, 1995, 1994 and 1993 provision for income taxes applicable
to net income as reflected in the financial statements consists of the
following:
December 31 1995 1994 1993
- -------------------------------------------------------------------------------
Provision applicable to income
per financial statements $623,212 $611,588 $628,822
Deferred tax provision 28,196 80,931 79,886
- -------------------------------------------------------------------------------
Total provision for taxes--current $651,408 $692,519 $708,708
- -------------------------------------------------------------------------------
The accumulated net deferred income taxes included in other assets in the
Statements of Condition are recapped below:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------
<S> <C>
Total net deferred income taxes--as adjusted $ 895,325 $407,868 $ 327,982
Deduction: Current year benefit 28,196 80,931 79,886
FASB-115--Provision (919,153) 406,526 --
- ---------------------------------------------------------------------------------------------
Total net deferred income taxes $ 4,368 $895,325 $ 407,868
- ---------------------------------------------------------------------------------------------
</TABLE>
The components of the deferred income tax asset included in other assets
are as follows:
1995 1994 1993
- --------------------------------------------------------------------------------
Deferred tax liability:
Federal $(616,158) $(87,454) $(60,154)
Deferred tax asset:
Federal 620,526 982,779 468,022
- --------------------------------------------------------------------------------
Net deferred tax asset $ 4,368 $895,325 $407,868
- --------------------------------------------------------------------------------
The tax effects of each type of income and expense item that gave rise to
deferred taxes are:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net unrealized appreciation on securities available for sale $(512,627) $ 406,526 $ --
Depreciation (103,531) (87,454) (60,154)
Pension 31,066 31,066 16,956
Allowance for credit losses 556,079 523,387 430,971
Other 33,381 21,800 20,095
- ---------------------------------------------------------------------------------------------------------------------------
Net deferred tax asset $ 4,368 $ 895,325 $ 407,868
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Had the Company been required to pay income taxes at the statutory Federal
income tax rate, the provision for income taxes would have been $880,483 in
1995, $947,712 in 1994 and $949,158 in 1993, computed by applying the Federal
income tax rate of 34% to income before taxes in 1995, 1994 and 1993. The
following is a reconciliation of the difference between the statutory Federal
income tax rate and the effective rate derived by dividing the provision for
income taxes shown in the Statements of Income by income before income taxes.
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C>
Statutory Federal income tax rate 34.00% 34.00% 34.00%
Tax-exempt municipal loan and municipal bond income (9.94%) (12.06%) (11.47%)
- --------------------------------------------------------------------------------------------
Effective income tax rate 24.06% 21.94% 22.53%
- --------------------------------------------------------------------------------------------
Net provision for taxes 24.06% 21.94% 22.53%
- --------------------------------------------------------------------------------------------
</TABLE>
NOTE 10: PENSION PLAN
The Company had a defined benefit pension plan, which was terminated on
December 31, 1995. The total pension cost for 1995, 1994 and 1993 was $16,076,
$66,068 and 56,020, respectively. The Company had elected to have the plan pay
administrative costs.
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7 1/2% and 6%, respectively, for 1995, 1994
and 1993. The weighted-average expected long-term rate of return on assets was
9% for 1995, 1994 and 1993.
The following table sets forth the plan's funded status and amounts
recognized in the Bank's Statements of Condition at December 31, 1995, 1994 and
1993 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $320,721, $410,655 and $356,135, respectively $ 328,840 $ 416,831 $ 358,097
- ---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation for service
rendered to date $ (652,131) $ (653,167) $ (612,070)
Plan assets at fair value, primarily listed stock and U. S. bonds 363,254 510,734 540,394
- ---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets $ (288,877) $ (142,433) $ (17,676)
Unrecognized net gain from past experience different
from that assumed and effects of changes in assumptions (37,684) (54,054) (61,385)
Prior service cost net yet recognized in the net periodic
pension cost 67,406 72,221 77,036
Unrecognized net obligation at December 31, 1990 being
recognized over 20 years 39,522 (41,110) (44,536)
- ---------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost included in other assets $ (219,633) $ (165,376) $ (100,561)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net pension costs for 1995, 1994 and 1993 included the following components
(in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Service cost--benefits earned during the period $ 85,752 $ 71,542 $ 66,143
Interest cost on projected benefit obligation 48,802 48,880 45,798
Actual return on plan assets (32,564) (45,837) (48,506)
Net amortization and deferral 1,389 1,389 1,380
- ---------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 103,379 $ 75,974 $ 64,815
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company also had a defined contribution pension plan, which was
terminated on December 31, 1995. The Company had contributed 9% of eligible
salaries on a monthly basis as well as paid the expenses of the plan. The plan
costs totaled $65,069 in 1995, $62,873 in 1994 and $65,825 in 1993, and is
included in employee benefits in the statement of income.
On December 31, 1995, the Company adopted a defined contribution plan with
401(K) features which covers substantially all employees who have completed six
months of service. Employees may contribute up to 15% of their salaries and the
Company matches 25% of the first 2% and 10% of the next 6% of employee
contributions. Additional contributions can be made by the Company at the
discretion of the Board of Directors. No contributions to the plan, by the
Company, have been made in 1995.
The Company has adopted deferred compensation agreements for certain
officers which provide payments upon retirement or death. The estimated
actuarial value of the benefits is being charged to operations. The Company is
beneficiary of life insurance policies to offset the required future payments.
These non-qualified plans are funded and included in other liabilities.
NOTE 11: OTHER EXPENSES
The following expense categories are required to be disclosed because their
amounts exceed one percent of total income.
<TABLE>
<CAPTION>
December 31 1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C>
Deposit insurance premiums $ 149,073 $ 280,035 $ 261,550
Directors' fees 161,700 103,000 102,600
Office supplies 120,349 145,442 126,370
Organizational expenses 227,280 -- --
Virginia franchise tax 196,092 137,571 123,642
- -----------------------------------------------------------------------------------------
$ 854,494 $ 666,048 $ 614,162
- -----------------------------------------------------------------------------------------
</TABLE>
NOTE 12: CONDENSED FINANCIAL STATEMENTS--
PARENT COMPANY ONLY
The Parent Company's condensed balance sheets as of December 31, 1995 and
1994 and the related condensed statements of income and cash flows for the three
year period ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
ASSETS 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Cash and due from Banks $ 195,153 $ --
Securities--Available for Sale 330,000 --
Investments in wholly owned subsidiaries arising from investments
in equity in undistributed net income of subsidiaries:
Bank of Suffolk 12,463,880 11,492,730
The Bank of Waverly 12,218,742 11,379,326
Other assets 288,602 --
- -----------------------------------------------------------------------------------------------------------
Total Assets $ 25,496,377 $ 22,872,056
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Liabilities $ -- $ --
Stockholders Equity 25,496,377 22,872,056
- -----------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 25,496,377 $ 22,872,056
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
CONDENSED STATEMENTS OF INCOME 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Interest Income $ -- $ -- $ --
Interest Expense -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Interest Income $ -- $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------
Non-Interest Income--
Dividends from Subsidiaries--
Bank of Suffolk $ 995,850 $ -- $ --
The Bank of Waverly $ 655,640 $ -- $ --
Non-Interest Expense $ 121,569 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes and Equity
in Undistributed Net Income of Subsidiary $ 1,529,921 $ -- $ --
Income Tax Benefit 41,333 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Income before Equity in Undistributed Net
Income of Subsidiaries $ 1,571,254 $ -- $ --
Equity in Net Income of Subsidiaries 395,190 2,175,799 2,162,818
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $ 1,966,444 $ 2,175,799 $ 2,162,818
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CONDENSED CASH FLOWS 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operating Activities:
Net Income (Loss) $ 1,966,444 $ 2,175,799 $ 2,162,818
Adjustment:
Equity in Undistributed Net Income of Subsidiaries (395,190) (2,175,999) (2,162,818)
Increase--Other Assets (260,342) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Provided from Operations $ 1,310,912 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Expenditure for fixed assets $ (28,260) $ -- $ --
Purchase of available for sale securities (330,000) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net (Used) Provided by Investing Activities $ (358,260) $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Cash Dividends $ (797,633) $ -- $ --
Common Stock transactions 40,134 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Used in Financing Activities $ (757,499) $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Due from Banks $ 195,153 $ -- $ --
Cash and Due from Banks Beginning -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Cash and Due from Banks Ending $ 195,153 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The effective date of the merger was June 1, 1995. Prior to the merger each
respective Bank reported earnings as follows, which are incorporated into the
total earnings of the consolidated group as of December 31, 1995.
Bank of The Bank of
Suffolk Waverly
- --------------------------------------------------------------------------------
Interest Income $ 2,911,764 $ 1,720,668
Interest Expense 1,326,279 622,573
- --------------------------------------------------------------------------------
Net Interest Earnings 1,585,485 1,098,095
Non Interest Income 81,361 88,353
Non Interest Expense 1,092,992 730,208
- --------------------------------------------------------------------------------
Net Income before Taxes 57,384 456,240
Provision for Taxes 90,380 99,467
- --------------------------------------------------------------------------------
Net Income $ 483,474 $ 356,773
- --------------------------------------------------------------------------------
JAMES RIVER BANK SHARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1994 and 1993 the separate entities'
historical results of operation were as follows:
<TABLE>
<CAPTION>
Bank of The Bank of
Suffolk Waverly Combined
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Year ended December 31, 1994:
Net Interest Income $ 3,791,776 $ 2,569,233 $ 6,361,009
Net Income $ 1,334,850 $ 840,949 $ 2,175,799
Year ended December 31, 1993:
Net Interest Income $ 3,343,567 $ 2,675,876 $ 6,019,443
Net Income $ 1,179,056 $ 983,762 $ 2,162,818
</TABLE>
NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, "Disclosures about Fair Value of Financial Instruments," requires
the disclosure of fair value information about financial instruments, whether or
not recognized in the balance sheet, for which it is practicable to estimate
that value. Quoted market prices, when available, are used as the measure of
fair value. In cases where quoted market prices are not available, fair values
are based on present value estimates or other valuation techniques. These
derived fair values are significantly affected by assumptions used, principally
the timing of future cash flows and the discount rate. Because assumptions are
inherently subjective in nature, the estimated fair values cannot be
substantiated by comparison to independent market quotes and, in many cases, the
estimated fair values would not necessarily be realized in an immediate sale or
settlement of the instrument. The disclosure requirements of SFAS 107 exclude
certain financial instruments and all nonfinancial instruments. Accordingly, the
aggregate fair value amounts presented to not represent management's estimation
of the underlying value of the Company.
The following are the estimated fair values of the Company's financial
instruments followed by a general description of the methods and assumptions
used to estimate such fair values.
<TABLE>
<CAPTION>
Carrying Fair
Value Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS -
Cash and due from banks $ 7,901,380 $ 7,901,380
Federal Funds Sold 7,232,000 7,232,000
Investment Securities 46,727,090 46,727,090
Loans 92,042,332 92,984,212
Interest Receivable 1,525,379 1,525,379
- ---------------------------------------------------------------------------------------------------------------------------
$ 155,428,181 $ 156,370,061
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES -
Non-interest bearing deposits $ 22,965,761 $ 22,965,761
Interest bearing deposits 108,616,523 108,648,617
Interest payable 383,024 383,024
- ---------------------------------------------------------------------------------------------------------------------------
$ 131,965,308 $ 131,997,402
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used by the Company in
estimating the fair value for its financial instruments as required by FASB 107:
CASH AND DUE FROM BANKS: The carrying amount approximates fair value.
FEDERAL FUNDS SOLD: For federal funds sold, the carrying amount approximates
fair value.
INVESTMENTS SECURITIES: Fair values for securities are based on published market
prices, if available. For unquoted securities, the fair value is estimated by
the Company on the basis of financial and other information.
LOANS: For loans with short-term and variable rate characteristics, the total
receivables outstanding approximate fair value. This amount excludes any value
related to account relationships. The fair value of other types of loans is
estimated by discounting future cash flows using the contractual rates in effect
for such loans at the reporting date and adjusting for credit risk and operating
costs.
INTEREST RECEIVABLE AND INTEREST PAYABLE: The carrying amount approximates fair
value.
NON-INTEREST BEARING DEPOSITS: The fair value of these instruments is the amount
payable on demand at the reporting date.
INTEREST BEARING DEPOSITS: The fair value of demand deposits, savings accounts
and money market deposits with no defined maturity is the amount payable on
demand at the reporting date. The fair value of certificates of deposit is
estimated by discounting the future cash flows using rates currently offered for
deposits of similarly remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY AND COMMERCIAL LETTERS OF CREDIT: It is
not practical to separately estimate the fair values for off-balance-sheet
credit commitments, outstanding letters of credit, and guarantees written, due
to the excessive costs involved.
NOTE 14: SUBSEQUENT EVENTS
The Company entered into a tentative agreement, dated June 30, 1995, to
acquire, through a stock for stock merger, the operations of First Colonial
Bank, FSB, a federal savings bank and the Bank of Isle of Wight, a Virginia
banking corporation. Under the terms of the tentative agreement, 597,735 shares
of common stock of the Company would be exchanged with the shareholders of First
Colonial Bank and 314,600 shares of common stock of the Company would be
exchanged with the shareholders of the Bank of Isle of Wight. At June 30, 1995,
the assets of each respective bank are as follows:
<TABLE>
<CAPTION>
In Millions
Total
Assets Deposits Equity
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
First Colonial Bank $ 126.8 $ 118.2 $ 7.8
Bank of Isle of Wight 34.4 30.7 3.0
</TABLE>
The proposed mergers were subject to approval by the proper regulatory
authorities and stockholders of all three entities. Such approvals were received
and the mergers were effective March 1, 1996.
Had the merger occurred at December 31, 1995, the effect of the merger on
the Company would have been an increase in total assets of approximately $126.8
million from First Colonial Bank and approximately $35.4 million from Bank of
Isle of Wight. These amounts are based on available audited financial data at
June 30, 1995 and December 31, 1995, being their respective year ends. Revenue
would have increased approximately $12.1 million and net income would have
increased approximately $1.1 million for 1995 as a result of combining the
operating income of the newest subsidiaries. Earnings per share would be
approximately $1.27 per share computed by dividing the anticipated income by the
weighted average shares outstanding.
The Bank of Waverly entered into an agreement to acquire two branch banking
offices from First Union National Bank of Virginia, one in the City of Franklin,
Virginia, and the other is in Courtland, Virginia, in Southampton County. Under
the terms of the acquisition, The Bank of Waverly would acquire the land,
buildings, equipment, furniture and fixtures and assume the deposits of the two
branches. The Bank of Waverly would also pay a premium in connection with the
acquisitions of approximately 7.8%. Total deposits to be acquired amount to
$36,360,000 and fixed assets amount to $1,035,000. Approval from the proper
Federal and State authorities was received subsequent to December 31, 1995.
Management anticipates the effects on net income will be a breakeven until the
proceeds can be converted into loans. The funds are planned to be invested in
available for sale securities until needed.
NOTE 15: ACCOUNTING RULE CHANGES
In December 1992, the Financial Accounting Standards Board (FASB) issued
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," which
requires that all entities disclose the fair value of financial instruments,
both assets and liabilities recognized and not recognized in the statement of
financial position. The Bank was required to implement FAS No. 107 in 1995.
FASB has issued SFAS No. 121, SFAS No. 122 and SFAS No. 123 which have not
been adopted by the Company as of December 31, 1995. SFAS No. 121, SFAS No. 122
and SFAS No. 123 are effective for fiscal years beginning after December 15,
1995. Accordingly, they will be adopted by the Company effective January 1,
1996.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of," establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and to long-lived assets and certain
identifiable intangibles to be disposed of. This statement addresses when
impairment losses should be recognized, how impairment losses should be measured
and the reporting and disclosure requirements when long-lived assets have been
determined to be impaired.
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes and
encourages all entities to adopt new financial accounting and reporting
standards for stock-based employee compensation plans. However, it also allows
an entity to continue to measure compensation costs for those plans using the
intrinsic value based method of accounting prescribed by Accounting Principal
Board (APB) 25, "Accounting for Stock Issued to Employees". Entities electing to
remain with the accounting in APB 25 must make pro forma disclosures of net
income and earnings per share as if the fair value based method of accounting
defined in SFAS 123 had been applied. The affected plans include all
arrangements by which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of the employer's stock. This statement also applies
to transactions in which an entity issues its equity instruments to acquire
goods or services from nonemployees, requiring that such transactions be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
The accounting requirements of this Statement are effective for transactions
entered into in fiscal years that begin after December 15, 1995.
NOTE 16: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1995
- ---------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------
(Dollars in thousand, except per share data)
<S> <C>
Interest income $ 2,769 $ 2,830 $ 2,861 $ 2,853
Net interest 1,619 1,635 1,668 1,670
Net income 530 305 552 579
Earnings per share $ 0.35 $ 0.20 $ 0.36 $ 0.37
<CAPTION>
1994
- ---------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------
(Dollars in thousand, except per share data)
<S> <C>
Interest income $ 2,538 $ 2,575 $ 2,624 $ 2,664
Net interest 1,540 1,592 1,619 1,610
Net income 558 577 574 467
Earnings per share $ 0.42 $ 0.39 $ 0.37 $ 0.31
</TABLE>
JAMES RIVER BANKSHARES
Independent Auditor's Report
To the Board of Directors and Stockholders
James River Bankshares,Inc.
We have audited the consolidated statements of financial condition of James
River Bankshares, Inc. and subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of income and stockholders' equity and cash
flows for each of the years for the three years ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of The Bank of Waverly, a
wholly-owned subsidiary, which statements reflect total assets and revenues
constituting 41 percent and 45 percent, respectively, of the related
consolidated totals for the years ended 1994 and 1993. Those statements for the
periods indicated were audited by other auditors whose report dated January 18,
1995, expressing an unqualified opinion, has been furnished to us, and our
opinion, insofar as it relates to the amounts included for The Bank of Waverly,
is based solely on the report of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the report of the other auditors provides a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of James River Bankshares, Inc. as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the years for the three year period ended December 31, 1995 all in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993, the
Company adopted the provisions of Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," and in 1994, the Company adopted the provisions of Financial Accounting
Standards Board's Statement of Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities.
FRANK EDWARD SHEFFER & CO.
/s/ FRANK EDWARD SHEFFER & CO.
Certified Public Accountants
March 12, 1996
JAMES RIVER BANKSHARES
BOARD OF DIRECTORS
[PHOTO]
EXECUTIVE OFFICERS
Harold U. Blythe
President & Chief Executive Officer
Glenn T. McCall
Chief Financial Officer & Senior Vice President
DIRECTORS
Harold U. Blythe -- President & CEO, James River Bankshares, Inc.
James E. Butler, Jr. -- President, Butler Paper Company, Inc.
Bruce B. Gray -- Vice President, Gray Land & Timber Co.
Elmon T. Gray, Chairman -- Retired; Former President,
Gray Lumber Company
G. P. Jackson, Vice Chairman -- President, G.P. Jackson, Inc.
(Real Estate Rentals & Contractor)
Glenn T. McCall -- Sr. President & CFO, James River Bankshares, Inc.
E. V. Stephenson, Jr., Corporate Secretary -- Retired; Former
General Insurance Underwriter, Nurney -- Stephenson Corp.
ADDRESS
101 E. Washington Street
Suffolk, VA 23434
PHONE
(804) 539-024l
OFFICERS AND DIRECTORS:
BANK OF SUFFOLK AND JAMES RIVER BANK
DIRECTORS: BANK OF SUFFOLK
Harold U. Blythe
R. H. Braford
James E. Butler, Jr.
Larry L. Felton
G. P. Jackson, Chairman of the Board
Douglas C. Naismith
E. V. Stephenson, Jr., Corporate Secretary
OFFICERS: BANK OF SUFFOLK
Harold U. Blythe
President & Chief Executive Officer
Benjamin I. Wainwright, Jr.
Cashier & Chief Operations Officer
Robert H. Johnson
Vice President
Susan H. Simpkins
Vice President
James R. A. Stanley, Jr.
Vice President
Peter C. Jackson
Assistant Vice President & Plaza
Branch Manager
Jeffrey H. Noblin
Assistant Vice President & Oak
Ridge Branch Manager
Gleason C. Snow
Assistant Vice President
Construction Lending & Loan
Production Office Manager
C. Thomas Harry
Assistant Vice President
Julie T. Stephenson
Assistant Cashier & Manager
Bookkeeping & Proof Department
Mark U. McGahee
Assistant Cashier & Whaleyville
Branch Manager
Dorothy B. Demiel
Assistant Cashier & East End
Branch Manager
Patricia A. McClenny
Assistant Cashier & Training Officer
ADDRESS:
101 E. Washington Street
Suffolk, VA 23434
PHONE:
(804) 539-024l
DIRECTORS: JAMES RIVER BANK
C. Taylor Everett
Bruce B. Gray, Chairman of the Board
Elmon T. Gray
Garland Gray, II
Horace R. Gray, III
Dr. Clarence W. Griffin
Wayne M. Harrell
Horace R. Higgins, Jr.
Glenn T. McCall
Bruce C. Spencer
John W. Terry
Hinton W. Neblett, Honorary Director
OFFICERS: JAMES RIVER BANK
Bruce B. Gray
Chairman of the Board
Glenn T. McCall
President
Kathy O. Peebles
Executive Vice President & Cashier
& Operations Officer
O. Leroy Stables, Jr.
Senior Vice President & Senior
Loan Officer
Ida Louise S. West
Vice President & Manager
Proof and Transit Department
F. Edward Pearson, II
Vice President & Loan Officer
Doris M. Ellis
Assistant Vice President & Head Teller
Donna D. Clarke
Loan Officer
Nagha W. Dunn
Assistant Cashier & Sussex
Branch Manager
Ruth (Cindy) A. Price
Corporate Secretary
Hinton W. Neblett
President Emeritus
ADDRESS:
209 W. Main Street
Waverly, VA 23890
PHONE:
(804) 834-2222
GENERAL INFORMATION
ANNUAL MEETING
The annual meeting of shareholders will be held at 2:00 p.m. on Thursday, May
23, 1996, at the Holiday Inn Suffolk, 2864 Pruden Boulevard, Suffolk, Virginia.
EXECUTIVE OFFICE
101 E. Washington Street
P.O. Box 410
Suffolk, Virginia 23439-0410
REQUEST FOR INFORMATION
Earleen B. Sylvia, Administrative Assistant
(804) 539-0241
FORM 10-K
A form 10-K Report filed with the Securities and Exchange Commission is
available to stockholders without charge upon written request.
STOCK TRANSFER AGENT
First Union National Bank of North Carolina
230 South Tryon Street, 11th Floor
Charlotte, North Carolina 28288-1154
MARKET PRICE FOR COMMON STOCK
James River was capitalized on June 1, 1995, pursuant to a share exchange
between Bank of Suffolk and James River Bank, formerly The Bank of Waverly.
James River Bankshares Inc.'s Common Stock began trading on NASDAQ/NMS on June
7, 1995. The following table sets forth the high and low sales prices of the
Common Stock as reported on NASDAQ/NMS for the periods listed. The Common Stock
is thinly traded.
<TABLE>
<CAPTION>
1995 Sales Prices
- --------------------------------------------------------------------------------------
High Low
<S> <C>
Second Quarter (June 7 through June 30, 1995) $19.75 $18.75
Third Quarter (July 1 through September 30, 1995) $23.50 $20.25
Fourth Quarter (October 1 through December 31, 1995) $24.25 $22.25
</TABLE>
James River Bankshares, Inc. commenced operations on June 1, 1995. On October
25, 1995, the Company announced a dividend of $0.52 per share that was paid on
December 1, 1995, to holders of record on November 15, 1995. On a pro forma
combined basis, based on the dividend history of Bank of Suffolk and James River
Bank, the Company paid dividends of $0.50, $0.49, and $0.48 per share during the
years ended December 31, 1994, 1993 and 1992, respectively. On March 31, 1996,
James River had 960 shareholders of record.
STOCK LISTING
The common stock of James River Bankshares, Inc. is traded on the
over-the-counter (OTC) Market and is quoted on the National Association of
Securities Dealers Automated Quotations (NASDAQ) National Market System under
the symbol JRBK.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
James River Bankshares, Inc.:
We consent to incorporation by reference in the Registration Statements on Form
S-8 of James River Bankshares, Inc. of our report dated March 12, 1996, relating
to the consolidated balance sheets of James River Bankshares, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity, and cash flows and related
schedules for each of the years in the three-year period ended December 31,
1995, which report appears in the December 31, 1995 Annual Report on Form 10-K/A
of James River Bankshares, Inc.
/s/ FRANK EDWARD SHEFFER & CO.
Suffolk, Virginia
August 9, 1996
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
James River Bankshares, Inc.:
We consent to incorporation by reference in the Registration Statements on Form
S-8 of James River Bankshares, Inc. of our report dated January 18, 1995,
relating to the balance sheets of The Bank of Waverly as of December 31, 1994
and 1993, and the related statements of income, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1994,
which report appears in the Registration Statement on Form S-4 of James River
Bankshares, Inc., SEC File No. 33-88322.
/s/ ERNY & MASON, P.C.
Petersburg, Virginia
August 7, 1996
EXHIBIT 99.1
Independent Auditor's Report
The Board of Directors and
Stockholders
The Bank of Waverly
Waverly, Virginia
We have audited the accompanying balance sheets of The Bank of Waverly
as of December 31, 1994 and 1993, and the related statements of income, changes
in stockholders' equity, and cash flows for the years ended December 31, 1994,
1993 and 1992. These financial statements are the responsibility of the bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The Bank of Waverly
as of December 31, 1994 and 1993, and the results of its operations and its cash
flows for the years ended December 31, 1994, 1993 and 1992, in conformity with
generally accepted accounting principles.
As discussed in note 1 to the financial statements, in 1993, the bank
adopted the provisions of Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," and as
discussed in note 2 to the financial statements, in 1994, the bank adopted the
provisions of Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."
/s/ ERNY AND MASON P.C.
January 18, 1995
