<PAGE>
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, 2000
[ ] 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.)
1514 HOLLAND ROAD, SUFFOLK, VIRGINIA 23434
-------------------------------------------------
(Address of principal executive offices)(Zip Code)
(757) 934-8100
----------------------------
(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 May 1, 2000, the issuer had
4,609,145 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, 2000 and 1999 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, 1999
Annual Report to Shareholders on Form 10-K, including the 1999 consolidated
financial statements of James River Bankshares, Inc. ("James River" or the
"Company").
Note 2. Mergers and Acquisitions
On August 15, 1999, James River completed its merger with State Bank of
Remington, Inc. ("State Bank"). Under the terms of the Merger Agreement, State
Bank became a wholly owned banking subsidiary of James River. The Merger
Agreement provided that shareholders of State Bank received 2.9 shares of James
River common stock for each outstanding share of State Bank common stock. State
Bank had approximately 291,000 shares of common stock outstanding, which
converted to 843,815 whole shares of James River's common stock. The merger was
accounted for as a pooling of interests. All historical information presented
in this Form 10-Q has been restated to reflect this transaction.
Note 3. Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and displaying
comprehensive income and its components. All of James River's other
comprehensive income relates to net unrealized gains (losses) on
available-for-sale securities.
Comprehensive income consists of the following for the three months ended
March 31:
2000 1999
---------- ----------
Income from Continuing Operations $1,437,000 $ 935,000
Loss from Discontinued Operations (180,000) (153,000)
Other comprehensive income (278,000) (266,000)
---------- ----------
Total comprehensive income $ 979,000 $ 516,000
========== ==========
<PAGE>
The components of other comprehensive income and related tax effects for
the three months ended March 31 are shown in the following table.
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Unrealized gain/(loss) on available-for-sale securities (421,000) (404,000)
Reclassification adjustment for gains realized in income - 6,000
---------- ----------
Net unrealized gain/(loss) (421,000) (410,000)
Tax effect (143,000) (144,000)
---------- ----------
Net of tax amount (278,000) (266,000)
========== ==========
</TABLE>
Note 4. Discontinued Operations
During the first quarter of 2000, the board of directors voted to suspend
operations of Mortgage Company of James River, Inc. ("MCJR"). MCJR was
established in the fourth quarter of 1998 and began operations in January 1999.
At March 31, 2000, MCJR had total assets of $680 thousand and total liabilities
of $179 thousand. The assets consisted primarily of cash and fixed assets.
During the three month periods ended March 31, 2000 and March 31, 1999, the
Company recognized losses of $180 thousand and $153 thousand, net of taxes,
respectively, from discontinued operations.
In February, 2000, the Company began implementing the plan of suspension. The
estimated charge for disposal booked during the first quarter of 2000 is as
follows:
Employee severance and benefits $ 158,000
Fixed asset write-downs 28,000
Provision for lease expense 26,000
Anticipated income from operations through disposal date (6,000)
---------
Total 206,000
Income tax benefit (78,000)
---------
Net after-tax charge for disposal $ 128,000
=========
The disposal costs are estimates and are subject to change. Changes in
estimates will be accounted for prospectively and included in income (loss) from
discontinued operations in the Company's consolidated financial statements
during the year ended December 31, 2000.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JAMES RIVER BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
---------------------- ------------
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 13,346 $ 15,121 $ 16,374
Interest bearing deposits with banks 4,583 12,477 1,290
Federal funds sold 700 4,775 2,160
Securities available-for-sale, at fair value (amortized cost
of $105,693 on March 31, 2000, $96,760 on March
31, 1999, and $105,210 on December 31, 1999) 102,054 97,455 101,992
Securities held-to-maturity, at amortized cost (fair value
of $13,083 on March 31, 2000, $15,540 on March
31, 1999, and $13,569 on December 31, 1999) 13,338 15,202 13,755
Loans, net of allowance for loan losses 329,949 313,104 328,511
Loans held for sale, net 74 4,083 345
Premises and equipment, net 10,401 11,495 10,995
Accrued interest receivable 3,604 3,518 3,434
Intangible assets, net 2,354 2,275 2,411
Other assets 7,138 4,783 6,097
--------- --------- ---------
Total Assets $ 487,541 $ 484,288 $ 487,364
========= ========= =========
LIABILITIES
Non-interest bearing deposits $ 62,158 $ 52,742 $ 63,713
Interest bearing deposits 355,176 375,703 354,307
--------- --------- ---------
Total deposits 417,334 428,445 418,020
Accrued interest payable 1,001 951 998
Federal funds purchased and other short-term borrowings 7,277 1,551 4,561
Long-term borrowings 8,000 - 11,000
Accounts payable and other liabilities 2,543 2,102 1,787
--------- --------- ---------
Total Liabilities 436,155 433,049 436,366
--------- --------- ---------
SHAREHOLDERS' EQUITY
Preferred stock, $5 par, 2,000,000 shares authorized,
none issued - - -
Common stock, $5 par, 10,000,000 shares authorized,
4,609,790 issued and outstanding at March 31, 2000,
4,585,388 at March 31, 1999, and 4,613,203 at
December 31, 1999 23,049 22,927 23,066
Additional paid-in capital 4,317 4,047 4,338
Retained earnings 26,422 23,806 25,718
Accumulated other comprehensive income (loss) (2,402) 459 (2,124)
--------- --------- ---------
Total Shareholders' Equity 51,386 51,239 50,998
--------- --------- ---------
Total Liabilities and Shareholders' Equity $ 487,541 $ 484,288 $ 487,364
========= ========= =========
</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
--------------------------
March 31, March 31,
-------- ---------
2000 1999
---- ----
<S> <C> <C>
INTEREST INCOME
Loans $ 7,385 $ 6,883
Investment securities:
Taxable 1,410 1,295
Exempt from federal income taxes 336 330
Federal funds sold and other 60 257
----------- -----------
Total Interest Income 9,191 8,765
----------- -----------
INTEREST EXPENSE
Deposits 3,528 3,994
Federal funds purchased and other borrowings 70 12
Long-term borrowings 122 -
----------- -----------
Total Interest Expense 3,720 4,006
----------- -----------
Net Interest Income 5,471 4,759
Provision for Loan Losses 95 154
----------- -----------
Net Interest Income after Provision for Loan Losses 5,376 4,605
----------- -----------
NON-INTEREST INCOME
Service charges on deposit accounts 555 475
Other fees and commissions 158 143
Net realized gains on disposition of securities - 6
Other income 45 5
----------- -----------
Total Non-Interest Income 758 629
----------- -----------
NON-INTEREST EXPENSE
Salaries and employee benefits 2,392 2,214
Occupancy 307 329
Equipment 333 300
Directors' fees 62 89
Deposit insurance premiums 22 29
Other 1,054 1,045
----------- -----------
Total Non-Interest Expense 4,170 4,006
----------- -----------
Income Before Income Taxes and Discontinued Operations 1,964 1,228
Provision for Income Taxes 527 293
----------- -----------
Income From Continuing Operations 1,437 935
Loss From Discontinued Operations (180) (153)
----------- -----------
Net Income $ 1,257 $ 782
=========== ===========
Net Income per Common Share
Basic from Continuing Operations $ 0.31 $ 0.20
Basic from Discontinued Operations (0.04) (0.03)
----------- -----------
Basic Earnings per Common Share $ 0.27 $ 0.17
=========== ===========
Diluted from Continuing Operations $ 0.31 $ 0.20
Diluted from Discontinued Operations (0.04) (0.03)
----------- -----------
Diluted Earnings per Common Share $ 0.27 $ 0.17
=========== ===========
Cash Dividends Paid per Common Share $ 0.12 $ 0.12
=========== ===========
Weighted Average Number of Shares Outstanding
Basic 4,613,007 4,568,943
=========== ===========
Diluted 4,618,510 4,603,187
=========== ===========
</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, 2000
<TABLE>
<CAPTION>
Accumulated
Shares of Additional Other
Common Common Paid-in Retained Comprehen-
Stock Stock Capital Earnings sive Income Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1999 4,613,203 $ 23,066 $ 4,338 $ 25,718 $ (2,124) $ 50,998
Comprehensive income:
Net income - - - 1,257 - 1,257
Other comprehensive income (loss) - - - - (278) (278)
-------------------------------------------------------------------------------
Total comprehensive income - - - 1,257 (278) 979
===============================================================================
Common stock issued 1,087 5 7 - - 12
Stock options exercised - - - - - -
Common stock repurchased (4,500) (22) (28) - - (50)
Cash dividends declared
($0.12 per share) - - - (553) - (553)
---------- ---------- ---------- ---------- ---------- ----------
Balance - March 31, 2000 4,609,790 $ 23,049 $ 4,317 $ 26,422 $ (2,402) $ 51,386
========== ========== ========== ========== ========== ==========
</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, 1999
<TABLE>
<CAPTION>
Accumulated
Shares of Additional Other
Common Common Paid-in Retained Comprehen-
Stock Stock Capital Earnings sive Income Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1998 4,565,326 $ 22,827 $ 4,096 $ 23,531 $ 725 $ 51,179
Comprehensive income:
Net income - - - 782 - 782
Other comprehensive income - - - - (266) (266)
--------------------------------------------------------------------------------
Total comprehensive income - - - 782 (266) 516
================================================================================
Common stock issued 564 3 7 - - 10
Stock options exercised 48,376 242 253 - - 495
Common stock surrendered and
repurchased (28,878) (145) (309) - - (454)
Cash dividends declared
($0.12 per share) - - - (507) - (507)
---------- ---------- ---------- ---------- ---------- ----------
Balance - March 31, 1999 4,585,388 $ 22,927 $ 4,047 $ 23,806 $ 459 $ 51,239
========== ========== ========== ========== ========== ==========
</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>
Three Months Ended
----------------------
March 31, March 31,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations $ 1,437 $ 935
Net loss from discontinued operations (180) (153)
Adjustments to reconcile to net cash provided
by operating activities:
Provision for loan and other real estate losses 95 154
Depreciation and amortization 335 346
Amortization of bond (discounts) and premiums 3 6
Gain on disposition of securities - (6)
Loss on disposition of fixed assets 63 -
Changes in:
Loans held for sale 271 (484)
Interest receivable (170) (145)
Other assets (567) 176
Interest payable 3 (31)
Other liabilities 756 (488)
-------- --------
Net cash provided by operating activities 2,046 310
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposition of available-for-sale securities 2,126 6,567
Purchase of available-for-sale securities (2,609) (9,728)
Redemption of held-to-maturity securities 414 887
Purchases of property and equipment (278) (301)
Proceeds from disposition of property and equipment 521 -
Net increase in loans (1,854) (4,878)
-------- --------
Net cash used in investing activities (1,680) (7,453)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in non-interest bearing deposits (1,555) (3,151)
Net increase (decrease) in interest bearing deposits 869 (1,835)
Issuance of common stock 12 505
Common stock repurchased and surrendered (50) (454)
Cash dividends paid (553) (507)
Proceeds from short-term borrowings 2,716 809
Proceeds from long-term borrowings (3,000) -
-------- --------
Net cash used in financing activities (1,561) (4,633)
-------- --------
Net decrease in cash and cash equivalents $ (1,195) $(11,776)
CASH AND CASH EQUIVALENTS
Beginning 19,824 44,149
-------- --------
Ending $ 18,629 $ 32,373
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid $ 3,717 $ 4,037
======== ========
Income taxes $ 143 $ -
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
Real estate acquired in settlement of loans $ 321 $ 28
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<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, including the anticipated effect
of rising interest rates on net interest income. 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 March 31, 2000 were $487.5 million compared
to $487.4 million at December 31, 1999, an increase of $177 thousand. Net loans
increased $1.2 million during the first three months of 2000. Real estate loans
increased $8 thousand to $182.8 million at March 31, 2000, and business loans
increased $699 thousand while loans held for sale decreased $271 thousand for
the same period. Investment securities decreased $355 thousand, from $115.7
million at December 31, 1999 to $115.4 million at March 31, 2000. Federal funds
sold decreased $1.5 million to $700 thousand at March 31, 2000, while interest
bearing deposits increased $3.3 million during the first three months of 2000.
Short-term investments, including Federal Funds sold, were reduced and invested
in higher yielding investment securities and loans during the period. Total
earning assets increased $2.7 million, or 0.6%, during the same period.
At March 31, 2000, James River's total assets were $487.5 million, 0.7%, or
$3.3 million, more than on the comparable date in 1999. Net loans were $330.0
million at March 31, 2000, an increase of $12.8 million over March 31, 1999.
Real estate loans increased 2.7% or $4.8 million and business loans increased
8.3% or $6.8 million, while loans held for sale decreased 98.2% to $74 thousand
for the same period. Investment securities were $115.4 million at March 31,
2000, up $2.7 million from March 31, 1999. Interest bearing deposits and
federal funds sold decreased $7.9 million and $4.1 million, respectively at
March 31, 2000 over March 31, 1999.
<PAGE>
Average total assets for the three months ended March 31, 2000 decreased
$923 thousand to $484.7 million from $485.7 million for the three months ended
March 31, 1999. Average investment securities increased 3.4% from $111.7 million
for the three months ended March 31, 1999 to $115.6 million for the same period
in 2000. Average total loans increased $15.2 million to $334.2 million during
the same period. Average interest bearing deposits decreased 73.5% to $2.6
million while Federal funds sold decreased 90.0% to $1.2 million in the first
three months of 2000 over the same period of 1999.
Liabilities
- -----------
Total liabilities at March 31, 2000 were $436.2 million compared to $436.4
million at December 31, 1999, a $211 thousand decrease. Deposits at March 31,
2000 were $417.3 million compared to $418.0 million at December 31, 1999, a
decrease of 0.2% or $686 thousand. During the first three months of 2000, non-
interest bearing deposits decreased $1.6 million to $62.2 million, while
interest bearing deposits increased $869 thousand to $355.2 million. Long term-
borrowings decreased $3.0 million to $8.0 million at March 31, 2000 compared to
December 31, 1999.
At March 31, 2000, total liabilities were $3.1 million more than total
liabilities at March 31, 1999. Deposits at March 31, 2000 were $11.1 million
less than the $428.4 million at March 31, 1999. Non-interest bearing deposits
increased $9.4 million while interest bearing deposits decreased $20.5 million
for the same period. Long-term borrowings increased $8.0 million over the
comparable period in 1999. The debt was incurred by the Company's subsidiary
banks through the Federal Home Loan Bank.
Average total liabilities for the quarter ended March 31, 2000 were $433.4
million compared to $434.2 million for the quarter ended March 31, 1999, a
decrease of $803 thousand. Average interest bearing deposits decreased $19.4
million for the same period, while average non-interest bearing deposits
increased $5.3 million. Average Federal funds purchased and other short-term
borrowings increased $4.3 million 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 $2.6 million on March 31, 2000, compared to $2.2 million on December 31,
1999. On March 31, 2000, non-accrual loans totaled $510 thousand, of which $365
thousand was secured by real estate. Non-accrual loans totaled $447 thousand on
December 31, 1999, of which $280 thousand was secured by real estate.
Foreclosed real estate accounted for $2.1 million of non-performing assets at
March 31, 2000 compared to $1.8 million at December 31, 1999.
Loans past due 90 days or more and still accruing were $769 thousand and
$877 thousand on March 31, 2000 and December 31, 1999, respectively. Of these
loans, loans secured by real estate totaled $355 thousand on March 31, 2000 and
$775 thousand on December 31, 1999.
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 $3.2 million and $2.8 million at March
31, 2000, and December 31, 1999, respectively. The portion of the allowance for
loan losses allocated to the impaired loan balance was $702 thousand and $560
thousand at March 31, 2000, and December 31, 1999, respectively.
<PAGE>
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.
James River's allowance for loan losses of $4.9 million was 1.45% of total
loans on March 31, 2000 compared with $4.4 million or 1.37% of total loans on
March 31, 1999. On December 31, 1999, the allowance for loan losses of $4.8
million was 1.44% of total loans.
RESULTS OF OPERATIONS
- ---------------------
Net Operating Results
- ---------------------
As a result of the Company's decision to suspend operations of Mortgage
Company of James River, Inc., ("MCJR"), results of operations are presented on
the basis of continuing and discontinued operations in accordance with
accounting rules. Historical presentation of continuing operations reflects the
Company's results of operations as if the disposition of MCJR had occurred for
all periods presented. Discontinued operations represents MCJR's operating
losses for the periods presented. Going forward, income or loss from
discontinued operations will consist of changes to estimates of income and
expense previously recorded as net losses from discontinued operations and will
be accounted for prospectively.
Continuing Operations - For the quarter ended March 31, 2000, James River's
---------------------
net income from continuing operations was $1.4 million compared to $935 thousand
for the same period of 1999, a 53.7% increase. Diluted earnings per share from
continuing operations in the first quarter increased 55.0% to $.31 in 2000 from
$.20 in 1999. The annualized return on average assets and return on average
equity for continuing operations were 1.19% and 11.20%, respectively, in the
first quarter of 2000 compared to 0.77% and 7.27% in the comparable period in
1999. The increase in net income is attributable to increases in net interest
income and non-interest income and decreases in the provision for loan losses.
Discontinued Operations - Losses from discontinued operations for the three
-----------------------
months ended March 31, 2000 and 1999 were $180 thousand and $153 thousand, net
of income taxes, respectively.
<PAGE>
Net Interest Income
- -------------------
Net interest income during the quarter ended March 31, 2000 increased $712
thousand to $5.5 million, up 15.0% from the $4.8 million for the quarter ended
March 31, 1999. During the first quarter of 2000, income on investment
securities increased $121 thousand, or 7.5%, to $1.7 million, compared to the
first quarter of 1999. Interest expense on deposits decreased 11.7% in the
first quarter from $4.0 million in 1999 to $3.5 million for the same period in
2000. The net interest margin increased in the first quarter of 2000 to 4.99%
from 4.37% in same period in 1999.
Provision for Loan Losses
- -------------------------
The provision for loan losses during the quarter ended March 31, 2000 was
$95 thousand, down $59 thousand, or 38.1%, from the respective period in 1999.
The reduction in the loan loss provision in the first quarter of 2000 was
attributable partially to loan loss recoveries during the period.
Non-Interest Income
- -------------------
For the three months ending March 31, 2000, non-interest income was $758
thousand, up $129 thousand, or 20.5%, compared to the respective period in 1999.
This increase was partially attributable to a 17.8% increase in service charges
on deposit accounts.
Non-Interest Expense
- --------------------
Non-interest expense during the first quarter of 2000 increased $164
thousand, or 4.1%, to $4.2 million compared with $4.0 million in the comparable
1999 quarter. This increase is attributable primarily to an 8.0% increase in
salaries and employee benefits which was offset partially by a 30.4% decrease in
directors 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.
At March 31, 2000, James River had $61.1 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
<PAGE>
business primarily through loan repayments, prepayments, and deposit growth. As
additional funding, James River holds $115.4 million in investment securities.
Of this amount, only $13.3 million is classified as held-to-maturity and is not
readily available for sale. $9.0 million of the investment securities portfolio
will mature in less than one year, with an additional $47.8 million maturing
between 1 and 5 years.
James River has $8.0 million in long-term debt. Almost the entire deposit
base is made up of core deposits, with only 8.5% of total deposits composed of
certificates of deposit of $100,000 and over.
Capital Resources
- -----------------
Total shareholders' equity amounted to $51.4 million at March 31, 2000
compared to $51.0 million at December 31, 1999. Reference is made to the
Consolidated Statements of Changes in Shareholders' Equity, included elsewhere
in this 10-Q. In August of 1999, James River implemented a stock repurchase
plan authorizing the total buyback of 50,000 shares. As of March 31, 2000,
James River had repurchased 40,500 shares at a cost of $519 thousand. James
River's leverage ratio was 10.62%, with a tier 1 risk-based capital ratio of
15.87% and a total risk-based capital ratio of 17.12%. Each of these ratios is
above the level required to be classified for regulatory purposes as "well
capitalized".
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, 2000. James River does not expect this
Statement to materially affect its financial condition or results of operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
James River's primary market risk is exposure to interest rate risk.
Fluctuations in interest rates will impact both the level of interest income and
interest expense and the market value of James River's interest-earning assets
and interest-bearing liabilities. There were no material changes in James
River's market risk management strategy during the first quarter of 2000. James
River is monitoring its interest rate risk in view of increases in both short
and long-term interest rates. Based on current assessments and the level of
changes in interest rates, the effects are not expected to be material.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending legal proceedings to which James River or its
subsidiaries are involved in 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 - Filed March 1, 2000
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 10, 2000 /s/ Donald W. Fulton, Jr.
------------- --------------------------------------------------
Donald W. Fulton, Jr., Sr. Vice President
and Chief Financial Officer
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