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 June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-26314
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JAMES RIVER BANKSHARES, INC.
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(Exact name of registrant as specified in its charter)
VIRGINIA 54-1740210
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(State of Incorporation) (I.R.S. Employer Identification No.)
1512 HOLLAND ROAD, SUFFOLK, VIRGINIA 23434
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(Address of principal executive officers) (Zip Code)
(757) 539-0267
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(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 June 30, 1998,
the issuer had 3,715,747 outstanding shares of its $5.00 par value common stock.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1998 1997
---- ----
(unaudited)
<S> <C>
ASSETS
Cash and due from banks $ 14,724 $ 14,086
Interest bearing deposits with banks 7,720 2,720
Federal funds sold 7,805 14,382
Securities available-for-sale, at fair value (amortized cost
of $75,869 on June 30, 1998 and $70,764 on
December 31, 1997) 76,554 71,952
Securities held-to-maturity, at amortized cost (fair value
of $10,402 on June 30, 1998 and $11,244 on December 31,
1997) 10,182 11,074
Loans, net of allowance for loan losses 268,780 259,687
Loans held for sale, net 2,930 789
Premises and equipment, net 8,435 7,480
Accrued interest receivable 3,066 2,939
Intangible assets, net 2,478 2,504
Other assets 2,501 2,463
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Total Assets $ 405,175 $ 390,076
=========== ==========
LIABILITIES
Non-interest bearing deposits 43,172 46,490
Interest bearing deposits 316,687 301,083
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Total deposits 359,859 347,573
Accrued interest payable 789 752
Short-term borrowings 700 -
Accounts payable and other liabilities 1,596 1,367
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Total Liabilities 362,944 349,692
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SHAREHOLDERS' EQUITY
Common stock, $5 par, 10,000,000 shares authorized,
3,715,747 issued and outstanding in 1998 and
3,672,557 in 1997 18,579 18,363
Additional paid-in capital 3,850 3,572
Retained earnings 19,345 17,663
Net unrealized gain on securities available-for-sale 457 786
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Total Shareholders' Equity 42,231 40,384
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Total Liabilities and Shareholders' Equity $ 405,175 $ 390,076
=========== ==========
</TABLE>
The accompanying notes 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 Six Months Ended
----------------------------------------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C>
INTEREST INCOME
Loans $ 6,177 $ 5,892 $ 12,194 $ 11,411
Investment securities:
Taxable 971 1,109 1,891 2,352
Exempt from federal income taxes 290 291 585 608
Federal funds sold and other 319 137 589 212
---- ---- ---- ---
Total Interest Income 7,757 7,429 15,259 14,583
------ ------ ------- ------
INTEREST EXPENSE
Deposits 3,660 3,526 7,238 6,993
Federal funds purchased 13 13 15 32
--- --- --- --
Total Interest Expense 3,673 3,539 7,253 7,025
------ ------ ------ -----
Net Interest Income 4,084 3,890 8,006 7,558
Provision for Loan Losses 84 116 227 216
--- ---- ---- ---
Net Interest Income after Provision for Loan Losses 4,000 3,774 7,779 7,342
------ ------ ------ -----
NON-INTEREST INCOME
Service charges on deposit accounts 335 238 630 528
Other fees and commissions 85 75 175 155
Net realized gains on disposition of securities - (1) 438 66
Other income 130 61 301 128
---- --- ---- ---
Total Non-Interest Income 550 373 1,544 877
---- ---- ------ ---
NON-INTEREST EXPENSE
Salaries and employee benefits 1,631 1,573 3,265 3,173
Occupancy 189 179 393 371
Equipment 218 224 447 450
Directors' Fees 88 94 176 178
Deposit insurance premiums 26 27 56 52
Other 833 801 1,628 1,532
---- ---- ------ -----
Total Non-Interest Expense 2,985 2,898 5,965 5,756
------ ------ ------ -----
Income Before Income Taxes 1,565 1,249 3,358 2,463
Provision for Income Taxes 474 341 937 679
---------- ---- ---- ---
Net Income $ 1,091 $ 908 $ 2,421 $ 1,784
========== ============= ========== =======
Net Income per Common Share
Basic $ 0.30 $ 0.25 $ 0.66 $ 0.48
========== ============= ========= =======
Diluted $ 0.29 $ 0.24 $ 0.64 $ 0.48
========== ============= ========= =======
Cash Dividends Paid per Common Share $ 0.10 $ 0.09 $ 0.20 $ 0.18
========== ============= ========= =======
Weighted Average Number of Shares Outstanding
Basic 3,699,464 3,676,386 3,687,591 3,681,842
=========== ============= =========== ==========
Diluted 3,800,085 3,715,010 3,788,211 3,720,464
=========== ============= =========== ==========
</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 Six Months Ended June 30, 1998
<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, 1997 3,672,557 $ 18,363 $3,572 $17,663 $ 786 $ 40,384
Comprehensive income - - - 2,421 (329) 2,092
Common stock issued 694 4 12 - - 16
Stock options exercised 42,496
212 266 - - 478
Cash dividends declared
($0.20 per share) - - - (739) - (739)
----------- -------- --------------- -------- ------------ --------
Balance - June 30, 1998 3,715,747 $ 18,579 $3,850 $19,345 $ 457 $ 42,231
========== ======== =============== ======== ============ ========
</TABLE>
The accompanying notes 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>
Six Months Ended
------------------------------------
June 30, June 30,
1998 1997
---- ----
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$ 2,421 $ 1,784
Adjustments to reconcile to net cash provided by operating activities:
Provision for loan and other real estate losses 227 216
Depreciation and amortization 586 608
Amortization of bond (discounts) and premiums 9 25
Gain on disposition of securities (438) (66)
Gain on sale of loans (18) (33)
Gain on sale of fixed assets (84) -
Changes in:
Loans held for sale (2,123) 798
Interest receivable (127) 84
Other assets (50) 125
Interest payable 37 132
Other liabilities 229 312
---- ----
Net cash provided by operating activities 669 3,985
---- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from dispositions of securities - available-for-sale 745 8,925
Proceeds from maturities of securities - available-for-sale 15,028 5,547
Proceeds from maturities of securities - held-to-maturity 887 669
Purchase of securities - available-for-sale (20,445) (2,566)
Purchases of premises and equipment (1,412) (282)
Proceeds from sale of premises and equipment 138 -
Net increase in loans (9,290) (20,385)
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Net cash used by investing activities (14,349) (8,092)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in non-interest bearing deposits (3,318) (2,868)
Net increase in interest bearing deposits 15,604 5,172
Issuance of stock 494 20
Cash dividends paid (739) (661)
Cancellation of shares - (374)
Proceeds from short-term borrowings 700 -
---- -------
Net cash provided by financing activities 12,741 1,289
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Net decrease in cash and cash equivalents $ (939) $(2,818)
CASH AND CASH EQUIVALENTS
Beginning 31,188 20,446
------- ------
Ending $ 30,249 $ 17,628
================ ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid $ 7,216 $ 6,893
====== =====
Income taxes $ 934 $ 591
==== ===
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
Real estate acquired in settlement of loans $ 128 $ 436
==== ===
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PART 1 - FINANCIAL INFORMATION
JAMES RIVER BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all of the disclosures and notes required by generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the three month and six month
periods ended June 30, 1998 and 1997 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, 1997
Annual Report to Shareholders on Form 10-K, including the 1997 consolidated
financial statements of James River Bankshares, Inc. ("James River").
Note 2. Earnings and Dividends Per Share
On September 25, 1997, the Board of Directors declared a 3-for-2 stock
split effected in the form of a 50% stock dividend, which was distributed
November 7, 1997. Accordingly, the average number of shares outstanding and per
share amounts for earnings, dividends declared, and book value have been
restated for all periods presented to give effect to the split.
James River adopted Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share," on December 31, 1997. Accordingly, a dual
presentation of basic and diluted earnings per share is included in the
Consolidated Statements of Income. Earnings per share amounts for prior periods
have been restated to conform with the new presentation. The effect of the new
standard was not material.
Cash dividends paid in the first quarter of 1998 amounted to $.10 per
share. In the second quarter of 1998, cash dividends paid amounted to $.10 per
share. For the first and second quarters ended June 30, 1997, cash dividends
paid amounted to $.09 per share per quarter.
Note 3. Comprehensive Income
On January 1, 1998, James River adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components. The adoption of SFAS No.
130 did not have a material impact on the Company. All of James River's other
comprehensive income relates to net unrealized gains (losses) on
available-for-sale securities.
<PAGE>
Comprehensive income consists of the following for the six months ended
June 30, 1998.
Net income $ 2,421,000
Other comprehensive income ($ 329,000)
--------------
Total comprehensive income $ 2,092,000
Amounts reclassified to net income from unrealized gains (losses) on
securities available-for-sale are shown in the following table.
<TABLE>
<CAPTION>
Tax
Before-Tax (Expense) Net-of-Tax
Amount or Benefit Amount
------ ---------- ------
<S> <C>
Unrealized gains (losses) on securities:
Unrealized holding losses arising
during the period $ (65,000) $ 22,000 $ (43,000)
Less: adjustment for gains
included in net income (438,000) 152,000 (286,000)
------------ ---------- -----------
Net unrealized losses $ (503,000) $ 174,000 $ (329,000)
</TABLE>
Note 4. Reclassifications
Certain amounts in the consolidated Statements of Income for 1997 have
been reclassified to conform with classifications used for 1998. These changes
in classification had no effect on net income or retained earnings.
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Information contained in this Form 10-Q may contain forward looking
statements with respect to James River Bankshares, Inc.'s ("James River" or the
"Company") financial condition and results of operations. These forward looking
statements may involve certain risks and uncertainties that may cause actual
results to differ materially from those contemplated by such forward looking
statements. Risks and uncertainties that may affect the financial condition and
results of operations of James River include, but are not limited to, general
economic and business conditions, interest rate fluctuations, competition from
banks and other financial service providers, new financial products and
services, risks inherent in making loans including repayment risks and changing
collateral values, changing trends in customer profiles, technological changes,
and changes in laws and regulations applicable to James River and its
subsidiaries. Although James River believes that its expectations with respect
to any forward looking statements are based upon reasonable assumptions within
the limits of its knowledge of its business and operations, there can be no
assurance that actual results will not differ materially from any future results
that may be expressed or implied by forward looking statements.
FINANCIAL CONDITION
Assets
Total assets of James River at June 30, 1998 were $405.2 million
compared to $390.1 million at December 31, 1997, an increase of $15.1 million or
3.9%. Net loans increased $11.2 million during the first six months of 1998.
Real estate loans increased $3.3 million to $159.7 million at June 30, 1998, and
loans held for sale increased $2.1 million for the same period. Investment
securities increased $3.7 million, from $83.0 million at December 31, 1997 to
$86.7 million at June 30, 1998. Federal funds sold decreased $6.6 million to
$7.8 million at June 30, 1998, while interest bearing deposits increased $15.6
million during the first six months of 1998. Total earning assets increased
$13.3 million, or 3.7%, during the same period.
Average total assets for the three months ended June 30, 1998 increased
$18.0 million to $403.6 million from $385.6 million for the three months ended
June 30, 1997. For the first half of 1998, average total assets increased 4.0%,
or $15.2 million, to $398.3 million from $383.1 million for the first half of
1997. Average investment securities decreased from $91.1 million for the quarter
ended June 30, 1997 to $83.5 million for the quarter ended June 30, 1998.
Average total loans increased $13.7 million during the same period. For the
first six months of 1998, average investment securities decreased $13.5 million
from $96.3 for the first six months of 1997, and average total loans increased
$16.4 million during the same period. Average interest bearing deposits and
Federal funds sold increased $10.9 million for the second quarter of 1998 and
$5.4 million over the same period of 1997. For the six months ended June 30,
1998, average interest bearing deposits and Federal funds sold increased $8.8
million and $7.0 million, respectively.
<PAGE>
Liabilities
Total liabilities at June 30, 1998 were $362.9 million compared to
$349.7 million at December 31, 1997, a 3.8%, or $13.2 million, increase.
Deposits of James River at June 30, 1998 were $359.9 million compared to $347.6
million at December 31, 1997, an increase of 3.5% or $12.3 million. During the
first six months of 1998, non-interest bearing deposits decreased $3.3 million
to $43.2 million, while interest bearing checking increased $7.4 million to
$44.8 million. Money market savings accounts also increased $5.1 million from
$22.2 million at December 31, 1997. During the first six months of 1998, James
River borrowed $700,000 to help fund a new administrative office building.
Average total liabilities for the quarter ended June 30, 1998 were
$361.8 million compared to $347.7 million for the quarter ended June 30, 1997,
an increase of $14.1 million. Average interest bearing deposits increased $10.9
million for the same period, while average non-interest bearing deposits
increased $2.0 million. Average Federal funds purchased decreased $656,000 for
the quarter ended June 30, 1998. For the six months ended June 30, 1998, average
total liabilities increased $11.7 million from $345.2 million for the six months
ended June 30, 1997. For the same period, average interest bearing deposits and
average non-interest bearing deposits increased $8.8 million and $2.2 million,
respectively. Average Federal funds purchased decreased $971,000 for the same
period.
Non-performing Assets
Non-performing assets of James River consist of non-accrual loans and
property acquired through foreclosure or repossession. Non-performing assets
totaled $810,000 on June 30, 1998, compared to $1.5 million on December 31,
1997. On June 30, 1998, non-accrual loans totaled $540,000, of which $346,000
was secured by real estate. Non-accrual loans totaled $897,000 on December 31,
1997, of which $647,000 was secured by real estate. Foreclosed real estate
accounted for $270,000 of non-performing assets at June 30, 1998 compared to
$573,000 at December 31, 1997. Management does not anticipate any material loss
relating to non-performing assets.
Loans past due 90 days or more and still accruing were $655,000 and
$431,000 on June 30, 1998 and December 31, 1997, respectively. Of these loans,
loans secured by real estate totaled $426,000 on June 30, 1998 and $233,000 on
December 31, 1997.
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 $1.8 million and $2.0 million at
June 30, 1998, and December 31, 1997, respectively. The portion of the allowance
for loan losses allocated to the impaired loan balance was $370,000 and $423,000
at June 30, 1998, and December 31, 1997, respectively.
The allowance for loan losses is 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. No additional provisions, other than ordinary provisions, are
being made to the allowance for loan losses.
<PAGE>
James River's allowance for loan losses of $3.6 million was 1.32% of
total loans on June 30, 1998. On December 31, 1997, the allowance for loan
losses of $3.5 million was 1.31% of total loans.
RESULTS OF OPERATIONS
Net Operating Results
For the quarter ended June 30, 1998, James River's net income was
$1,091,000 compared to $908,000 for the same period of 1997, a 20.2% increase.
Diluted earnings per share in the second quarter increased 20.8% to $.29 in 1998
from $.24 in 1997. The increases in net income and earnings per share were
attributable to a 5.0% increase in net interest income and a 47.5% increase in
non-interest income. Return on average assets and return on average equity were
1.08% and 10.45%, respectively, in the second quarter of 1998 compared to .94%
and 9.58% in the comparable period in 1997.
For the six months ended June 30, 1998, James River's net income was
$2,421,000 compared to $1,784,000 for the same period of 1997, a 35.7% increase.
Diluted earnings per share in the first half of 1998 increased 33.3% to $.64
from $.48 in the comparable 1997 period. The increases in net income and
earnings per share were attributable to a 5.9% increase in net interest income
and a 76.1% increase in non-interest income. Return on average assets and return
on average equity for the first half of 1998 were 1.22% and 11.70%,
respectively, compared to .93% and 9.42% in the comparable period in 1997.
Net Interest Income
Net interest income during the quarter ended June 30, 1998 increased
$194,000 to $4.1 million, up 5.0% from the $3.9 million for the quarter ended
June 30, 1997. The increase in net interest income was due largely to an
increase in loans of $12.1 million from June 30, 1997 to June 30, 1998. With
increased volume, interest and fee income on loans increased 4.8% for the second
quarter of 1998 to $6.2 million, $285,000 more than the $5.9 million earned in
the same period of 1997. During the second quarter of 1998, income on investment
securities decreased $140,000, or 10.0%, to $1.3 million, compared to the second
quarter of 1997. Interest expense on deposits increased 3.8% in the second
quarter from $3.5 million in 1997 to $3.7 million for the same period in 1998.
The net interest margin in the second quarter of 1998 was 4.48% compared to
4.51% in the second quarter of 1997.
Net interest income during the six months ended June 30, 1998 increased
$448,000 to $8.0 million, up 5.9% from the $7.6 million for the six months ended
June 30, 1997. Interest and fee income on loans increased 6.8% for the first
half of 1998 to $12.2 million, $784,000 more than the $11.4 million earned in
the same period of 1997. During the first six months of 1998, income on
investment securities decreased $485,000, or 16.4%, to $2.5 million, compared to
the first six months of 1997. Interest expense on deposits increased 3.5% in the
first half from $7.0 million in 1997 to $7.2 million for the same period in
1998. The net interest margin in the first half of 1998 was 4.46% compared to
4.43% in the first half of 1997.
<PAGE>
Provision for Loan Losses
The provision for loan losses during the quarter ended June 30, 1998
was $84,000, down $32,000, or 27.6%, from the respective period in 1997. This
decrease was due primarily to a recovery at a subsidiary bank.
The provision for loan losses during the six months ended June 30, 1998
was $227,000, up $11,000, or 5.1%, from the respective period in 1997. This
increase was due primarily to an increase in total loans for the first half of
1998 of $11.4 million, or 4.3%, to $275.3 million compared to $263.9 million
during the first half of 1997.
Non-Interest Income
For the three months ending June 30, 1998, non-interest income was
$550,000, up $177,000, or 47.5%, compared to the respective period in 1997. The
increase was predominately attributable to gains recognized from the sale of
real estate in the 1998 quarter of $84,000.
For the six months ending June 30, 1998, non-interest income was $1.5
million, up $667,000, or 76.1%, compared to the respective period in 1997. The
increase was predominately attributable to gains recognized from the sale of
equity securities of $439,000 and income recorded from mortgage servicing rights
of $128,000 in the first quarter of 1998. In addition, in the second quarter of
1998 income recorded from gains on the sale of real estate contributed $84,000
to the increase in non-interest income.
Non-Interest Expense
Non-interest expense during the second quarter of 1998 increased
$87,000, or 3.0%, to $3.0 million compared with the 1997 quarter. The increase
was primarily attributable to a 3.7% increase in personnel expenses, and a 3.9%
increase in other expenses.
Non-interest expense during the first six months of 1998 increased
$209,000, or 3.6%, to $6.0 million compared with the first six months of 1997.
The increase was primarily attributable to a 2.9% increase in personnel
expenses, and a 6.3% increase in other expenses, due principally to higher
professional fees.
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.
<PAGE>
At June 30, 1998, James River had $48.7 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 $86.7 million in investment securities. Of
this amount, only $10.2 million is classified as held-to-maturity and is not
readily available for sale. Of the $76.5 million classified as
available-for-sale, $8.8 million matures in less than one year, and an
additional $40.5 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 8.8% of total deposits composed of
certificates of deposit of $100,000 and over.
Capital Resources
Total shareholders' equity amounted to $42.2 million at June 30, 1998
compared to $40.4 million at December 31, 1997. James River's leverage ratio was
9.94%, with a tier 1 risk-based capital ratio of 16.21% and a total risk-based
capital ratio of 17.46%.
RECENT ACCOUNTING CHANGES
Financial Accounting Standards Board (FASB) Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", was issued in
June 1998. This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative information embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This Statement is effective for all fiscal quarters
or fiscal years beginning after June 15, 1999. Although management is currently
studying this Statement, James River does not expect this Statement to
materially affect its financial condition of results of operations.
The American Institute of Certified Public Accountants issued Statement
of Position (SOP) 98-5, "Reporting on the Costs of Start-up Activities", in
April 1998. The SOP requires such costs to be expensed as incurred instead of
being capitalized and amortized. It applies to start-up activities and costs of
organization of both development stage and established operating entities, and
it changes existing practice for some industries. The SOP broadly defines
start-up activities as those one-time activities that relate to the opening of a
new facility, introduction of a new product or service, doing business in a new
territory, initiating a new process in an existing facility, doing business with
a new class of customer or beneficiary, or commencing some new operation. The
SOP is effective for financial statements for fiscal years beginning after
December 15, 1998. This SOP is not expected to materially affect James River's
financial condition or results of operations.
<PAGE>
YEAR 2000 PROJECT
State of Readiness
James River and its subsidiaries have undertaken a variety of measures
to ensure that hardware, software, and other date-sensitive equipment will be
century date compliant. James River has performed an inventory of all equipment,
developed a preliminary impact assessment, and has obtained certifications from
its vendors for specific product confirmation. Currently, the Company is in the
testing phase, with the emphasis placed on "mission critical" systems. James
River has received year 2000 certification from the vendor for the mainframe
hardware and software, and will continue testing in the August/September 1998
timeframe. All other applications are moving to the testing phase, with the goal
of December 1998 for completion of all testing within the organization.
James River is also dependent on numerous outside systems for
processing, such as: check collections, Automated Clearing House, electronic
funds transfer, wire transfer, automated teller machines, and credit card
processing. The majority of these outside systems are handled through the
Federal Reserve Bank of Richmond. Testing of these applications has been
scheduled in the third quarter 1998.
The Costs to Address Year 2000 Issues
At this stage, James River has incurred no material costs related to
year 2000. All research indicates that the costs for meeting the year 2000
requirements should be relatively insignificant, primarily because James River's
computer and network systems were established in 1996 and were year 2000
compliant at the time of installation. Additional costs related to testing and
software updates are expected to be less than $50,000.
The Risks of Year 2000 Issues
The primary risk to the Company regarding year 2000 issues is that the
ability to process transactions would be lost due to a mainframe hardware or
software failure. To mitigate this risk, James River has begun the testing
phase. With completion of testing scheduled for year-end 1998, James River would
have 1999 to consider options and to remedy any problems.
The Contingency Plan
James River is in the process of formalizing its contingency plan
should the mainframe hardware and software system not be able to process year
2000 transactions. James River has considered manual processing of transactions
and is focusing its efforts on the documentation and supplies needed should that
be necessary. Purchasing another system does not appear to be a viable option
because of cost considerations and because of requisite testing. James River
currently is investigating other contingency options.
Item 3. Quantitative and Qualitative Disclosures about Market Risk - None
<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
James River held its 1998 Annual Meeting of Shareholders on April 30, 1998.
At the Annual Meeting, the following matters were acted upon by
shareholders.
1. Election of directors. The following persons were elected as directors
of James River to serve a one year term, with the votes For and Withheld as
indicated below.
DIRECTOR FOR WITHHELD
Harold U. Blythe 2,500,697 1,158
James E. Butler, Jr. 2,500,622 1,233
Bruce B. Gray 2,500,697 1,158
Elmon T Gray 2,500,622 1,233
G. P. Jackson 2,500,622 1,233
H. R. Higgins, Jr. 2,500,697 1,158
Ben P. Kanak 2,500,697 1,158
John A. Ramsey, Jr. 2,500,697 1,158
Robert E. Spencer, Jr. 2,500,697 1,158
James C. Stewart 2,500,312 1,543
<PAGE>
2. Ratification of Goodman & Company, L.L.P. as independent auditors for
1998.
FOR AGAINST ABSTAIN
2,491,229 8,300 2,326
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: August 12, 1998 /s/ Donald W. Fulton, Jr.
--------------- -------------------------
Donald W. Fulton, Jr., Sr. Vice President
and Chief Financial Officer
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