<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 June 30, 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 August 1, 2000, the
issuer had 4,599,719 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>
(unaudited)
June 30, December 31,
--------------------------------- --------------
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 13,246 $ 13,608 $ 16,374
Interest bearing deposits with banks 3,324 2,465 1,290
Federal funds sold 1,150 8,181 2,160
Securities available-for-sale, at fair value (amortized cost
of $103,978 on June 30, 2000, $112,059 on June
30, 1999, and $105,210 on December 31, 1999) 100,394 110,585 101,992
Securities held-to-maturity, at amortized cost (fair value
of $12,711 on June 30, 2000, $14,732 on June
30, 1999, and $13,569 on December 31, 1999) 12,952 14,689 13,755
Loans, net of allowance for loan losses 340,243 324,583 328,511
Loans held for sale, net - 694 345
Premises and equipment, net 10,377 11,350 10,995
Accrued interest receivable 3,554 3,528 3,434
Intangible assets, net 2,301 2,216 2,411
Other assets 6,961 5,651 6,097
-------- -------- --------
Total Assets $494,502 $497,550 $487,364
======== ======== ========
LIABILITIES
Non-interest bearing deposits $ 62,572 $ 57,464 $ 63,713
Interest bearing deposits 345,310 379,078 354,307
-------- -------- --------
Total deposits 407,882 436,542 418,020
Accrued interest payable 1,061 977 998
Federal funds purchased and other short-term borrowings 22,465 2,845 4,561
Long-term borrowings 8,000 5,000 11,000
Accounts payable and other liabilities 2,903 1,895 1,787
-------- -------- --------
Total Liabilities 442,311 447,259 436,366
-------- -------- --------
SHAREHOLDERS' EQUITY
Preferred stock, $5 par, 2,000,000 shares authorized,
none issued - - -
Common stock, $5 par, 10,000,000 shares authorized,
4,604,480 issued and outstanding at June 30, 2000,
4,586,413 at June 30, 1999, and 4,613,203 at
December 31, 1999 23,022 22,932 23,066
Additional paid-in capital 4,283 4,058 4,338
Retained earnings 27,244 24,275 25,718
Accumulated other comprehensive income (loss) (2,358) (974) (2,124)
-------- -------- --------
Total Shareholders' Equity 52,191 50,291 50,998
-------- -------- --------
Total Liabilities and Shareholders' Equity $494,502 $497,550 $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 Six Months Ended
----------------------------------- ----------------------------
June 30, June 30, June 30, June 30,
-------- ------- -------- ---------
2000 1999 2000 1999
----- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 7,626 $ 7,009 $ 15,011 $ 13,892
Investment securities:
Taxable 1,395 1,399 2,805 2,694
Exempt from federal income taxes 340 328 676 658
Federal funds sold and other 54 249 114 506
---------- ---------- ---------- ----------
Total Interest Income 9,415 8,985 18,606 17,750
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 3,534 3,912 7,062 7,906
Federal funds purchased and other borrowings 212 8 282 20
Long-term borrowings 106 50 228 50
---------- ---------- ---------- ----------
Total Interest Expense 3,852 3,970 7,572 7,976
---------- ---------- ---------- ----------
Net Interest Income 5,563 5,015 11,034 9,774
Provision for Loan Losses 193 182 288 336
---------- ---------- ---------- ----------
Net Interest Income after Provision for Loan Losses 5,370 4,833 10,746 9,438
---------- ---------- ---------- ----------
NON-INTEREST INCOME
Service charges on deposit accounts 607 452 1,162 927
Other fees and commissions 171 195 329 338
Net realized gains on disposition of securities 2 - 2 6
Other income 113 74 158 79
---------- ---------- ---------- ----------
Total Non-Interest Income 893 721 1,651 1,350
---------- ---------- ---------- ----------
NON-INTEREST EXPENSE
Salaries and employee benefits 2,319 2,236 4,711 4,450
Occupancy 303 296 610 625
Equipment 336 303 669 603
Directors' fees 73 84 135 173
Deposit insurance premiums 21 31 43 60
Other 1,153 1,097 2,207 2,142
---------- ---------- ---------- ----------
Total Non-Interest Expense 4,205 4,047 8,375 8,053
---------- ---------- ---------- ----------
Income Before Income Taxes and Discontinued Operations 2,058 1,507 4,022 2,735
Provision for Income Taxes 579 419 1,106 712
---------- ---------- ---------- ----------
Income From Continuing Operations 1,479 1,088 2,916 2,023
Loss From Discontinued Operations (12) (112) (192) (265)
---------- ---------- ---------- ----------
Net Income $ 1,467 $ 976 $ 2,724 $ 1,758
========== ========== ========== ==========
Net Income per Common Share
Basic from Continuing Operations $0.32 $ 0.24 $ 0.63 $ 0.44
Basic from Discontinued Operations - (0.03) (0.04) (0.06)
---------- ---------- ---------- ----------
Basic Earnings per Common Share $0.32 $ 0.21 $ 0.59 $ 0.38
========== ========== ========== ==========
Diluted from Continuing Operations $0.32 $ 0.24 $ 0.63 $ 0.44
Diluted from Discontinued Operations - (0.03) (0.04) (0.06)
---------- ---------- ---------- ----------
Diluted Earnings per Common Share $0.32 $ 0.21 $ 0.59 $ 0.38
========== ========== ========== ==========
Cash Dividends Paid per Common Share $0.14 $ 0.12 $ 0.26 $ 0.24
========== ========== ========== ==========
Weighted Average Number of Shares Outstanding
Basic 4,608,408 4,585,898 4,610,707 4,577,421
========== ========== ========== ==========
Diluted 4,614,397 4,614,491 4,616,697 4,606,014
========== ========== ========== ==========
</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, 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 -- -- -- 2,724 -- 2,724
Other comprehensive income (loss) -- -- -- -- (234) (234)
--------------------------------------------------------------------------------------------------------------------------
Total comprehensive income -- -- -- 2,724 (234) 2,490
--------------------------------------------------------------------------------------------------------------------------
Common stock issued 2,277 11 15 -- -- 26
Common stock repurchased (11,000) (55) (70) -- -- (125)
Cash dividends declared
($0.26 per share) -- -- -- (1,198) -- (1,198)
---------- -------- ---------- ---------- ---------- ----------
Balance - June 30, 2000 4,604,480 $ 23,022 $ 4,283 $ 27,244 $ (2,358) $ 52,191
========== ======== ========== ========== ========== ==========
</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, 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 -- -- -- 1,758 -- 1,758
Other comprehensive income -- -- -- -- (1,699) (1,699)
--------------------------------------------------------------------------------------------------------------------------
Total comprehensive income -- -- -- 1,758 (1,699) 59
--------------------------------------------------------------------------------------------------------------------------
Common stock issued 1,161 6 14 -- -- 20
Stock options exercised 48,804 244 257 -- -- 501
Common stock surrendered and
repurchased (28,878) (145) (309) -- -- (454)
Cash dividends declared
($0.24 per share) -- -- -- (1,014) -- (1,014)
---------- --------- ---------- ---------- ---------- ----------
Balance - June 30, 1999 4,586,413 $ 22,932 $ 4,058 $ 24,275 $ (974) $ 50,291
========== ========= ========== ========== ========== ==========
</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,
-------- --------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations $ 2,916 $ 2,023
Net loss from discontinued operations (192) (265)
Adjustments to reconcile to net cash provided
by operating activities:
Provision for loan and other real estate losses 288 336
Depreciation and amortization 734 702
Amortization of bond (discounts) and premiums 6 21
Gain on disposition of securities (2) (6)
Gain on disposition of fixed assets (7) (7)
Changes in:
Loans held for sale 345 2,905
Interest receivable (120) (155)
Other assets (506) 56
Interest payable 63 (5)
Other liabilities 1,116 (261)
----------- ----------
Net cash provided by operating activities 4,641 5,344
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposition of available-for-sale securities 4,954 14,070
Purchase of available-for-sale securities (3,721) (32,540)
Redemption of held-to-maturity securities 798 2,013
Purchase of held-to-maturity securities - (617)
Purchases of property and equipment (590) (437)
Proceeds from disposition of property and equipment 634 29
Net increase in loans (12,289) (16,555)
----------- ----------
Net cash used in investing activities (10,214) (34,037)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in non-interest bearing deposits (1,141) 1,101
Net increase (decrease) in interest bearing deposits (8,997) 1,541
Issuance of common stock 26 521
Common stock repurchased and surrendered (125) (454)
Cash dividends paid (1,198) (1,014)
Proceeds from short-term borrowings 17,904 2,103
Proceeds from (repayments of) long-term borrowings (3,000) 5,000
----------- ----------
Net cash provided by financing activities 3,469 8,798
----------- ----------
Net decrease in cash and cash equivalents $ (2,104) $ (19,895)
CASH AND CASH EQUIVALENTS
Beginning 19,824 44,149
----------- ----------
Ending $ 17,720 $ 24,254
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid $ 7,509 $ 7,981
=========== ==========
Income taxes $ 1,124 $ 986
=========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
Real estate acquired in settlement of loans $ 378 $ 128
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
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 six month periods ended June
30, 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 receive 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 six months ended
June 30:
2000 1999
----------- -----------
Income from Continuing Operations $ 2,916,000 $ 2,023,000
Loss from Discontinued Operations ( 192,000) ( 265,000)
Other comprehensive income ( 234,000) (1,699,000)
----------- -----------
Total comprehensive income (loss) $ 2,490,000 $ 59,000
=========== ===========
<PAGE>
The components of other comprehensive income and related tax effects for
the six months ended June 30 are shown in the following table.
<TABLE>
<CAPTION>
2000 1999
---------- -----------
<S> <C> <C>
Unrealized gain/(loss) on available-for-sale securities $ (365,000) $(2,567,000)
Reclassification adjustment for gains realized in income 2,000 6,000
---------- -----------
Net unrealized gain/(loss) $ (367,000) (2,573,000)
Tax effect (133,000) ( 874,000)
---------- -----------
Net of tax amount $ (234,000) $(1,699,000)
========== ===========
</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 June 30, 2000, MCJR had total assets of $574 thousand and total liabilities
of $86 thousand. The assets consisted primarily of cash. During the six month
periods ended June 30, 2000 and June 30, 1999, the Company recognized losses of
$192 thousand and $265 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>
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 June 30, 2000 were $494.5 million compared
to $487.4 million at December 31, 1999, an increase of $7.1 million. Net loans
increased $11.4 million during the first six months of 2000. Real estate loans
decreased $9.9 million to $172.9 million at June 30, 2000, while business loans
increased $22.4 million and loans held for sale decreased $345 thousand for the
same period. Investment securities decreased $2.4 million, from $115.7 million
at December 31, 1999 to $113.3 million at June 30, 2000. Federal funds sold
decreased $1.0 million to $1.2 million at June 30, 2000, while interest bearing
deposits increased $2.0 million during the first six 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 $10.2 million, or 2.3%, during the same period.
At June 30, 2000, James River's total assets were $494.5 million, $3.1
million, or 0.6%, less than the comparable date in 1999. Net loans were $340.2
million at June 30, 2000, an increase of $14.9 million over June 30, 1999. Real
estate loans decreased 4.6% or $8.4 million and business loans increased 24.8%
or $22.0 million, while loans held for sale decreased $694 thousand for the same
period. Investment securities were $113.3 million at June 30, 2000, down $12.0
million from June 30, 1999. Interest bearing deposits increased $800 thousand
and federal funds sold decreased $7.0 million, respectively at June 30, 2000
over June 30, 1999.
Average total assets for the six months ended June 30, 2000 decreased $3.5
million to $485.6 million from $489.1 million for the six months ended June 30,
1999. Average investment securities increased 0.2% from $114.7 million for the
six months ended June 30, 1999 to $114.9 million for the same period in 2000.
Average total loans increased $14.7 million to $337.0 million during the same
period. Average interest bearing deposits decreased 74.7% to $2.3 million while
Federal funds sold decreased 92.1% to $921 thousand in the first half of 2000
over the same period of 1999.
<PAGE>
Average total assets decreased 1.1% to $487.4 million for the quarter ended
June 30, 2000 from $493.0 million for the same period in 1999. Average
investment securities decreased to $114.3 million for the quarter ended June 30,
2000 from $117.7 million for the quarter ended June 30, 1999. Average total
loans increased 4.4% to $340.4 million during the same period. Average interest
bearing deposits decreased $6.4 million and Federal funds sold decreased $11.1
million in the second quarter of 2000 over the same period of 1999,
respectively.
Liabilities
-----------
Total liabilities at June 30, 2000 were $442.3 million compared to $436.4
million at December 31, 1999, a $5.9 million decrease. Deposits at June 30, 2000
were $407.9 million compared to $418.0 million at December 31, 1999, a decrease
of 2.4% or $10.1 million. During the first six months of 2000, non-interest
bearing deposits decreased $1.1 million to $62.6 million, while interest bearing
deposits decreased $9.0 million to $345.3 million. Short-term borrowings
increased $17.9 million to $22.5 million at June 30, 2000 compared to December
31, 1999, while long term-borrowings decreased $3.0 million to $8.0 million for
the same period.
At June 30, 2000, total liabilities were $5.0 million less than total
liabilities at June 30, 1999. Deposits at June 30, 2000 were $28.6 million less
than the $436.5 million at June 30, 1999. Non-interest bearing deposits
increased $5.1 million while interest bearing deposits decreased $33.7 million
for the same period. At June 30, 2000, short-term borrowings were $22.5 million,
$19.7 million more than the $2.8 million at June 30, 1999. Long-term borrowings
also increased $3.0 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 six months ended June 30, 2000 decreased
.8% to $434.1 million compared to $437.7 million for the same period in 1999.
Average interest bearing deposits decreased 6.4% to $351.4 million for the same
period, while average non-interest bearing deposits increased 11.4% to $60.8
million. Average Federal funds purchased and other short-term borrowings
increased $8.6 million for the same period.
Average total liabilities for the quarter ended June 30, 2000 were $435.5
million compared to $441.7 million for the quarter ended June 30, 1999, a
decrease of $6.2 million. Average interest bearing deposits decreased $29.6
million for the same period, while average non-interest bearing deposits
increased $7.5 million. Average Federal funds purchased and other short-term
borrowings increased $9.1 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 $2.3 million on June 30, 2000, compared to $2.2 million on December 31,
1999. On June 30, 2000, non-accrual loans totaled $582 thousand, of which $325
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 $1.7 million of non-performing assets at June 30, 2000
compared to $1.8 million at December 31, 1999.
Loans past due 90 days or more and still accruing were $464 thousand and
$877 thousand on June 30, 2000 and December 31, 1999, respectively. Of these
loans, loans secured by real estate totaled $384 thousand on June 30, 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,"
<PAGE>
as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-
Income Recognition and Disclosures," was $3.4 million and $2.8 million at June
30, 2000, and December 31, 1999, respectively. The portion of the allowance for
loan losses allocated to the impaired loan balance was $662 thousand and $560
thousand at June 30, 2000, and December 31, 1999, 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.
James River's allowance for loan losses of $5.0 million was 1.43% of total
loans on June 30, 2000 compared with $4.5 million, or 1.36% of total loans, on
June 30, 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 generally
accepted accounting principles. 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 June 30, 2000, James River's
---------------------
net income from continuing operations was $1.5 million compared to $1.1 million
for the same period of 1999, a 36.6% increase. Diluted earnings per share from
continuing operations in the second quarter increased 33.3% to $.32 in 2000 from
$.24 in 1999. The annualized return on average assets and return on average
equity for continuing operations were 1.21% and 11.40%, respectively, in the
second quarter of 2000 compared to 0.88% and 8.48% in the comparable period in
1999. The increase in net income was attributable to increases in net interest
income and non-interest income.
For the six months ended June 30, 2000, net income from continuing
operations was $2.9 million compared to $2.0 million for the same period of
1999, a 44.1% increase. Diluted earnings per share from continuing operations
increased 43.2% to $.63 in the first six months of 2000 from $.44 in 1999. In
the first half of 2000, the annualized return on average assets and return on
average equity for continuing operations were 1.20% and 11.32%, respectively,
compared to 0.83% and 7.88% in the comparable period in 1999. The increase in
net income was attributable to increases in net interest income and non-interest
income and a decrease in the provision for loan losses.
Discontinued Operations - Losses from discontinued operations for the three
-----------------------
months ended June 30, 2000 and 1999 were $12 thousand and $112 thousand, net of
income taxes, respectively.
Losses from discontinued operations for the six months ended June 30, 2000
and 1999 were $192 thousand and $265 thousand, net of income taxes,
respectively.
Net Interest Income
-------------------
Net interest income during the quarter ended June 30, 2000 increased $548
thousand to $5.6 million, up 10.9% from the $5.0 million for the quarter ended
June 30, 1999. Interest income on loans
<PAGE>
was $7.6 million, up 8.8% from the $7.0 million for the quarter ended June 30,
1999. During the second quarter of 2000, income on investment securities
increased $8 thousand, or .5%, to $1.7 million, compared to the first quarter of
1999. Interest expense on deposits decreased 9.5% in the second quarter from
$3.9 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 5.04% from 4.48% in
same period in 1999.
Net interest income during the six months ended June 30, 2000 increased
$1.2 million to $11.0 million, up 12.9% from $9.8 million in the same period of
1999. Interest and fee income on loans increased 7.9% to $15.0 million in the
first half of 2000, an increase of $1.1 million over the comparable period in
1999. During the first half of 2000, income on investment securities increased
$129 thousand or 3.9% to $3.5 million compared to the first half of 1999.
Interest expense on deposits decreased 10.6% from $7.9 million in the first six
months of 1999 to $7.1 million in 2000. For the six months ended June 30, 2000,
interest expense on Federal funds purchased and other short-term borrowings
increased $255 thousand and interest expense on long-term borrowings increased
$178 thousand over the comparable period in 1999, respectively. The net interest
margin was 5.02% in the first half of 2000 compared to 4.43% in the first half
of 1999.
Provision for Loan Losses
-------------------------
The provision for loan losses during the quarter ended June 30, 2000 was
$193 thousand, up $11 thousand, or 6.0%, from the respective period in 1999.
The provision for loan losses during the first six months of 2000 was $288
thousand, down $48 thousand or 14.3% from the respective period in 1999. The
reduction in the loan loss provision in the first half of 2000 was attributable
partially to loan loss recoveries during the period.
Non-Interest Income
-------------------
For the three months ended June 30, 2000, non-interest income was $893
thousand, up $172 thousand, or 23.9%, compared to the respective period in 1999.
This increase was attributable primarily to a $155 thousand increase in service
charges on deposit accounts.
For the six months ended June 30, 2000, non-interest income was $1.7
million, up 22.3% compared to the same period of 1999. The increase was
partially attributable to a 25.4% increase in service charges on deposit
accounts.
Non-Interest Expense
--------------------
Non-interest expense during the second quarter of 2000 increased $158
thousand, or 3.9%, to $4.2 million compared with $4.0 million in the comparable
1999 quarter. This increase was attributable primarily to a 3.7% increase in
salaries and employee benefits and a 5.1% increase in other operating expense.
Non-interest expense during the first six months of 2000 increased $322
thousand, or 4.0%, to $8.4 million compared with the same period of 1999. The
increase was attributable primarily to a $261 thousand increase in salaries and
employees benefits.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
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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 June 30, 2000, James River had $55.3 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 $113.3 million in investment securities.
Of this amount, only $13.0 million is classified as held-to-maturity and is not
readily available for sale. $9.5 million of the investment securities portfolio
will mature in less than one year, with an additional $47.9 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 9.0% of total deposits composed of
certificates of deposit of $100,000 and over.
Capital Resources
-----------------
Total shareholders' equity amounted to $52.2 million at June 30, 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 a buyback of up to 50,000 shares. In April of 2000, James River
authorized a stock repurchase plan authorizing the purchase of up to an
additional 250,000 shares. As of June 30, 2000, James River had repurchased
47,000 shares at a cost of $661 thousand. At June 30, 2000, James River's
leverage ratio was 10.77%, with a tier 1 risk-based capital ratio of 15.73% and
a total risk-based capital ratio of 16.98%. 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.
BRANCH ACQUISITION
------------------
James River Bank, a subsidiary of the Company, entered into a Purchase and
Assumption Agreement with One Valley Bank/Central Virginia and BB&T Corporation
under which James River Bank will purchase certain assets and assume certain
liabilities of a branch office located in Emporia, Virginia. The assets
<PAGE>
include approximately $6 million in loans and approximately $16 million in
deposit liabilities. The transaction, which will be treated as a purchase for
accounting purposes, is expected to close on August 11, 2000, and is not
expected to be material to the Company.
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 six months ended June 30,
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 parties 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
James River held it 2000 Annual Meeting of Shareholders on April 27,
2000. 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.
FOR WITHHELD
Harold U. Blythe 3,542,811 95,838
James E. Butler, Jr. 3,546,481 92,168
James W. Craun 3,546,481 92,168
Bruce B. Gray 3,546,481 92,168
Elmon T. Gray 3,546,481 92,168
Horace R. Higgins, Jr. 3,543,954 94,695
G. P. Jackson 3,542,811 95,838
Ben P. Kanak 3,546,481 92,168
John A. Ramsey, Jr. 3,544,999 93,650
Robert E. Spencer, Jr. 3,542,811 95,838
2. Ratification of Yount, Hyde & Barbour P.C. as independent auditors for
2000.
FOR AGAINST ABSTAIN
3,616,368 8,817 13,464
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 May 9, 2000, related to the
discontinuance of the operations of Mortgage Company of James River,
Inc.
<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 11, 2000 /s/ Donald W. Fulton, Jr.
---------------- -------------------------------------------
Donald W. Fulton, Jr., Sr. Vice President
and Chief Financial Officer
