UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-26314
JAMES RIVER BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1740210
(State of Incorporation) (I.R.S. Employer Identification No.)
101 EAST WASHINGTON STREET, SUFFOLK, VIRGINIA 23434
(Address of principal executive officers)(Zip Code)
(804) 539-0241
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. At March 31, 1997,
the issuer had 2,458,413 outstanding shares of its $5.00 par value common stock.
<PAGE>
PART 1 - FINANCIAL INFORMATION
JAMES RIVER BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all of the disclosures and notes required by generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the three month periods ended March
31, 1997 and 1996 are not necessarily indicative of results that may be expected
for the entire year or any interim period. The interim financial statements
should be read in conjunction with the December 31, 1996 Annual Report to
Shareholders on Form 10-K, including the 1996 consolidated financial statements
of James River Bankshares, Inc. ("James River").
Note 2. Earnings and Dividends Per Share
Earnings per share for the three months ended March 31, 1997 and 1996
are determined by dividing income for the periods by 2,483,901 and 2,479,793,
respectively, the weighted average number of shares of common stock and common
stock equivalents outstanding. Stock options and warrants are regarded as common
stock equivalents and are, therefore, considered in earnings per share
calculations, if dilutive. Common stock equivalents are computed using the
treasury stock method. There is no material difference between primary and
fully-diluted earnings per share.
Cash dividends paid in the first quarter of 1997 amounted to $.13 per
share. For the same period of 1996, no dividends were declared or paid, but the
second quarter dividend included the normal $.13 quarterly dividend plus an
additional $.13 in dividends paid.
Note 3. Mergers and Acquisitions
During 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 merged with Bank of
Isle of Wight, a Virginia state chartered bank in Smithfield, Virginia ("Bank of
Isle of Wight") and First Colonial Bank, FSB, a federal savings bank in
<PAGE>
Hopewell, Virginia ("First Colonial"). The merger of these two financial
institutions was treated as a pooling of interest and the historical financial
information included in the Form 10-Q is presented on that basis. Accordingly,
the consolidated financial statements of James River give effect to this merger,
and the accounts of First Colonial and Bank of Isle of Wight have been combined
with James River for all periods presented. In the aggregate, these two
transactions more than doubled James River's total assets and net loans.
Second, James River Bank, a wholly-owned subsidiary of James River,
consummated the acquisition of three 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 the others of which are located in Courtland,
Southampton County, Virginia. The transaction was accounted for by the purchase
method of accounting. James River Bank assumed aggregate deposit liabilities of
approximately $34 million in connection with the three branch acquisitions. In
addition, equipment valued at $210,000 and land and buildings valued at $825,000
were purchased. In connection with the acquisition, intangible assets of
$2,816,914 were capitalized including goodwill, an inseparable component of core
deposit intangible, and other costs incurred directly related to the
acquisition. These costs are being amortized on an accelerated method over
fifteen years.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(unaudited)
<S> <C>
ASSETS
Cash and due from banks $ 14,533 $ 16,675
Interest bearing deposits with banks 1,496 444
Federal funds sold 833 3,327
Securities available-for-sale, at fair value (amortized cost
$88,566 on March 31, 1997 and $91,032 on
December 31, 1996) 87,886 91,269
Securities held-to-maturity, at amortized cost (fair value
$11,663 on March 31, 1997 and $12,243 on December 31,
1996) 11,939 12,217
Loans, net of allowance for loan losses 250,140 239,721
Loans held for sale, net 175 1,192
Premises and equipment, net 8,307 8,324
Accrued interest receivable 3,310 3,124
Intangible assets, net 2,729 2,750
Deferred income taxes 798 590
Other assets 2,252 1,975
-------------- --------------
Total Assets $ 384,398 $ 381,608
============== =============
LIABILITIES
Non-interest bearing deposits 36,308 42,799
Interest bearing deposits 304,878 299,533
-------------- ------------
Total deposits 341,186 342,332
Federal funds purchased 3,496 -
Accrued interest payable 718 612
Accounts payable and other liabilities 1,426 1,061
-------------- ------------
Total Liabilities 346,826 344,005
-------------- ------------
SHAREHOLDERS' EQUITY
Common stock, $5 par, 10,000,000 share authorized,
2,458,413 issued and outstanding in 1997 and 2,457,950
in 1996 12,292 12,290
Additional paid-in capital 3,528 3,521
Retained earnings 22,186 21,629
Net unrealized gain (loss) on securities available-for-sale (434) 163
-------------- ------------
Total Shareholders' Equity 37,572 37,603
-------------- ------------
Total Liabilities and Shareholders' Equity $ 384,398 $ 381,608
============== ============
</TABLE>
The accompanying notes to are an integral part of these financial statements.
<PAGE>
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
March 31, March 31,
1997 1996
---- ----
<S> <C>
INTEREST INCOME
Loans $ 5,519 $ 4,821
Investment securities:
Taxable 1,243 970
Exempt from federal income taxes 317 331
Federal funds sold and other 75 153
------------- -----------
Total Interest Income 7,154 6,275
------------- -----------
INTEREST EXPENSE
Deposits 3,467 3,117
Federal funds purchased 19 -
------------- -----------
Total Interest Expense 3,486 3,117
------------- -----------
Net Interest Income 3,668 3,158
Provision for loan losses 100 127
------------- -----------
Net Interest Income after provision for loan losses 3,568 3,031
------------- -----------
NON-INTEREST INCOME
Service charges on deposit accounts 289 257
Other fees and commissions 62 26
Net realized gains on disposition of securities 67 5
Other income 86 62
------------- -----------
Total Non-Interest Income 504 350
------------- -----------
NON-INTEREST EXPENSE
Salaries and employee benefits 1,600 1,191
Occupancy 192 187
Equipment 226 183
Merger - 530
Directors' Fees 84 82
Deposit insurance premiums 25 78
Other 731 476
------------- -----------
Total Non-Interest Expense 2,858 2,727
------------- -----------
Income before income taxes 1,214 654
Provision for income taxes 338 196
------------- -----------
Net Income $ 876 $ 458
============= ===========
Earnings Per Common and Common Equivalent Share $ 0.35 $ 0.19
============= ===========
Cash Dividends Paid per Common Share $ 0.13 $ -
============= ===========
Weighted Average Number of Shares Outstanding 2,483,901 2,479,793
============= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(Dollars in thousands)
For The Three Months Ended March 31, 1997
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) on
Shares of Additional Securities
Common Common Paid-in Retained Available-
Stock Stock Capital Earnings For-Sale Total
----- ----- ------- -------- -------- -----
<S> <C>
Balance - December 31, 1996 2,457,950 $ 12,290 $ 3,521 $ 21,629 $ 163 $ 37,603
Net Income - - - 876 - 876
Common stock issued 463 2 7 - - 9
Cash dividends declared ($0.13 per share) - - - (319) - (319)
Change in unrealized gain (loss) on
securities available-for-sale, net of taxes - - - - (597) (597)
----------- --------- --------- --------- -------- --------
Balance - March 31, 1997 2,458,413 $ 12,292 $ 3,528 $ 22,186 $ (434) $ 37,572
=========== ========= ========= ========= ======== ========
</TABLE>
The accompanying notes to are an integral part of these financial statements.
<PAGE>
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
March 31, March 31,
1997 1996
---- ----
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 876 $ 458
Adjustments to reconcile to net cash provided
by operating activities:
Provision for loan and other real estate losses 100 127
Depreciation and amortization 294 107
Amortization of bond (discounts) and premiums 12 (26)
Gain on disposition of securities (67) (5)
Changes in:
Loans held for sale 1,017 (44)
Interest receivable (186) 52
Other assets 200 (823)
Interest payable 106 297
Other liabilities 365 (140)
-------- --------
Net cash provided by operating activities 2,717 3
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from dispositions of securities - available-for-sale 175 1,215
Proceeds from maturities of securities - available-for-sale 2,512 3,984
Proceeds from maturities of securities - held-to-maturity 277 1,224
Purchase of securities - available-for-sale (165) (23,568)
Purchases of premises and equipment (185) (157)
Net increase in loans (10,955) (8,076)
Net cash and cash equivalents received in acquisition
of branches - 30,484
-------- --------
Net cash provided (used) by investing activities (8,341) 5,106
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in non-interest bearing deposits (6,491) (2,983)
Net increase in interest bearing deposits 5,345 9,339
Issuance of stock 9 8
Cash dividends paid (319) -
Purchase of fractional shares - (5)
Federal funds purchased 3,496 -
-------- --------
Net cash provided by financing activities 2,040 6,359
-------- --------
Net increase (decrease) in cash and cash equivalents $ (3,584) $ 11,468
CASH AND CASH EQUIVALENTS
Beginning 20,446 24,096
-------- --------
Ending $ 16,862 $ 35,564
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid $ 3,380 $ 1,824
======== ========
Income taxes $ - $ 440
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
Real estate acquired in settlement of loans $ 436 $ -
======== ========
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
This Form 10-Q contains forward looking statements that involve risks
and uncertainties. James River's actual results could differ materially from
those anticipated in these forward looking statements as a result of certain
factors. The following discussion should be read in conjunction with the
unaudited consolidated financial statements included in Item 1. of this Form
10-Q.
FINANCIAL CONDITION
Assets
Total assets of James River at March 31, 1997 were $384.4 million
compared to $381.6 million at December 31, 1996, an increase of $2.8 million or
0.7%. With an increase in net loans of $10.4 million during the first quarter of
1997, securities investments decreased $3.7 million and federal funds sold
decreased from $3.3 million at December 31, 1996 to $833,000 at March 31, 1997.
Liabilities
Deposits of James River at March 31, 1997 were $341.2 million compared
to $342.3 million at December 31, 1996, a decrease of 0.3% or $1.1 million.
Federal funds purchased at March 31, 1997 were $3.5 million, due to the decrease
in deposits and the increase in loans during the first quarter of 1997.
Non-performing Assets
Non-performing assets of James River comprise delinquent loans on which
the accrual of income has ceased, or is being fully reserved, and property
acquired through foreclosure or repossession. Non-performing assets totaled $1.1
million on March 31, 1997, compared to $462,000 on December 31, 1996. On March
31, 1997, non-accrual loans totaled $129,000, with $51,000 secured by real
estate. Non-accrual loans totaled $291,000 on December 31, 1996, of which
$203,000 was secured by real estate. Foreclosed real estate accounted for
$956,000 of non-performing assets as of March 31, 1997 compared to $171,000 as
of December 31, 1996. Little or no loss is anticipated relating to
non-performing assets.
Loans past due 90 days or more and still accruing were $1.2 million and
$857,000 for March 31, 1997 and December 31, 1996, respectively. Of these loans,
loans secured by real estate totaled $297,000 on March 31, 1997 and $675,000 on
December 31, 1996.
<PAGE>
The recorded investment in impaired loans requiring an allowance for
loan losses as determined in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan,"
as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures," was $3.1 million and $3.1 million at
March 31, 1997, and December 31, 1996, respectively. The portion of the
allowance for loan losses allocated to to the impaired loan balance was $523,000
and $558,000 at March 31, 1997, and December 31, 1996, respectively.
No additional provisions, other than ordinary provisions, are being
made to the allowance for loan losses.
The allowances for possible losses on loans are maintained by James
River at what management considers to be a realistic level consistent with the
level and type of loans, and taking into consideration the non-accrual and past
due loans detailed above.
James River's allowance for loan losses of $3.3 million was 1.29% of
total loans on March 31, 1997. On December 31, 1996, the allowance for loan
losses of $3.2 million was 1.30% of total loans. During this first quarter of
1997, total loans increased $9.5 million or 3.9%.
<PAGE>
RESULTS OF OPERATIONS
Net Operating Results
For the quarter ended March 31, 1997, James River earned net income of
$876,000, or $0.35 per share, compared to $458,000, or $0.19 per share, for the
same period of 1996, a 91.4% increase. The increase was primarily due to the
non-deductible merger expenses in the first quarter of 1996 of $530,000, which
were incurred in connection with James River's acquisition of Bank of Isle of
Wight and First Colonial Bank. Return on average assets and return on average
equity were .92% and 9.26%, respectively, in the first quarter of 1997 compared
to .56% and 5.10% in the comparable period in 1996.
Net Interest Income
Net interest income during the quarter ended March 31, 1997 increased
$510,000 to $3.7 million, up 16.2% from the $3.2 million for the quarter ended
March 31, 1996.
The increase in net interest income was largely due to an increase in
loans of $36.1 million from March 31, 1996 to March 31, 1997. With rate changes
and increased volume, interest and fee income on loans increased 14.5% for the
first quarter of 1997 to $5.5 million, $698,000 more than the $4.8 million
earned in the same period of 1996. Income on investment securities increased
$259,000 to $1.6 million during the first quarter of 1997. In comparison to the
first quarter of 1996, income on investment securities was up 19.9% from $1.3
million. Interest expense on deposits increased for the first quarter from $3.1
million in 1996 to $3.5 million for the same period in 1997, an 11.8% increase
in the cost of deposits. This was primarily due to a $9.5 million increase in
time deposits.
Non-Interest Income
Non-interest income during the quarter ended March 31, 1997 increased by
$154,000, or 44.1%, compared to the same period during 1996. This increase was
attributable to a $61,000 increase in gains on the sale of investments and a
$69,000 increase in service charge and fee income at March 31, 1997 compared to
the respective period in 1996.
Non-Interest Expense
Non-interest expenses during the first quarter of 1997 increased by
$131,000 compared to 1996, an increase of 4.8%. While James River incurred a
<PAGE>
one-time $530,000 non-deductible merger expense in the first quarter of 1996,
personnel expense for the first quarter of 1997 increased $409,000, primarily
due to the staffing of five additional branch banking offices and a new
electronic data processing center. In addition, expenses of premises and fixed
assets increased $48,000 due to the addition of new offices and equipment.
Amortization of the premiums paid in the 1996 acquisition of three branches
amounted to $65,000 for the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and interest sensitivity
Liquidity represents an institution's ability to meet present and
future financial obligations through either the sale or maturity of existing
assets or the acquisition of additional funds through liability management.
Liquid assets include cash, interest bearing deposits with banks, federal funds
sold, investments, and loans maturing within one year. As a result of James
River's management of liquid assets and the ability to generate liquidity
through liability funding, management believes that James River maintains
overall liquidity sufficient to satisfy its depositors' requirements and meet
its customers' credit needs.
At March 31, 1997, James River had $29.5 million in undisbursed loan
commitments and expects to have sufficient funds available to meet current loan
origination commitments. Funding is expected to be in the normal course of
business primarily through loan repayments, prepayments, and deposit growth. As
additional funding, James River holds $99.8 million in investment securities. Of
this amount, only $11.9 million is classified as held-to-maturity and is not
readily available for sale. Of the $87.9 million in available-for-sale, $5.3
million matures in less than one year, and an additional $48.5 million matures
between 1 and 5 years.
James River has no long-term debt. Almost the entire deposit base is
made up of core deposits with only 8.4% of total deposits composed of
certificates of deposit of $100,000 and over.
CAPITAL RESOURCES
Total shareholders' equity amounted to $37.6 million at March 31, 1997.
James River's leverage ratio was 9.29%, with tier 1 risk-based capital ratio of
13.77% and a total risk-based capital ratio of 15.00%.
<PAGE>
PART II - OTHER INFORMATION
Item 1 . Legal Proceedings
None of James River or its subsidiaries is involved in any pending legal
proceedings other than nonmaterial legal proceedings occurring in the
ordinary course of business.
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Securities Holders - None
Item 5. Other Information - None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - Financial Data Schedule, Exhibit 27
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JAMES RIVER BANKSHARES, INC.
Date: May 13, 1997 /s/ GLENN T. MCCALL
------------ -----------------------------------
Glenn T. McCall, Sr. Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,533
<INT-BEARING-DEPOSITS> 1,496
<FED-FUNDS-SOLD> 833
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 87,886
<INVESTMENTS-CARRYING> 11,939
<INVESTMENTS-MARKET> 11,663
<LOANS> 253,576
<ALLOWANCE> 3,261
<TOTAL-ASSETS> 384,398
<DEPOSITS> 341,186
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,640
<LONG-TERM> 0
0
0
<COMMON> 12,292
<OTHER-SE> 25,280
<TOTAL-LIABILITIES-AND-EQUITY> 384,398
<INTEREST-LOAN> 5,519
<INTEREST-INVEST> 1,560
<INTEREST-OTHER> 75
<INTEREST-TOTAL> 7,154
<INTEREST-DEPOSIT> 3,467
<INTEREST-EXPENSE> 3,486
<INTEREST-INCOME-NET> 3,668
<LOAN-LOSSES> 100
<SECURITIES-GAINS> 67
<EXPENSE-OTHER> 2,858
<INCOME-PRETAX> 1,214
<INCOME-PRE-EXTRAORDINARY> 1,214
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 876
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
<YIELD-ACTUAL> 9.26
<LOANS-NON> 129
<LOANS-PAST> 1,207
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,176
<CHARGE-OFFS> 67
<RECOVERIES> 52
<ALLOWANCE-CLOSE> 3,261
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,261
</TABLE>
