-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F/vGpCa83e6AcYsiFP9y7rYlXXZT7lEuhYZhdfIdd3A1vwhTylllP2no1D1lR5Ft u9jWaZQnmEzyMeAfkgeKhw== 0000916641-99-000905.txt : 19991117 0000916641-99-000905.hdr.sgml : 19991117 ACCESSION NUMBER: 0000916641-99-000905 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAY BANKS OF VIRGINIA INC CENTRAL INDEX KEY: 0001034594 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 541838100 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-22955 FILM NUMBER: 99756404 BUSINESS ADDRESS: STREET 1: 100 S MAIN STREET CITY: KILMARNICK STATE: VA ZIP: 22482 BUSINESS PHONE: 8044351171 MAIL ADDRESS: STREET 1: 100 S MAIN STREET CITY: KILMARNOCK STATE: VA ZIP: 22482 10QSB 1 BAY BANKS OF VIRGINIA, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 BAY BANKS OF VIRGINIA, INC. (EXACT NAME OF SMALL BUSINESS ISSUER) VIRGINIA 54-1838100 (STATE OF INCORPORATION) (IRS EMP. ID NO.) 100 S. MAIN STREET, KILMARNOCK, VA 22482 (ADDRESS OF PRINCIPAL OFFICE) (804)435-1171 (ISSUER'S TELEPHONE NO.) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 X yes _____no State the number of shares outstanding of each of the issuer's classes of common equity, as of the Latest practicable date: 1,164,029 shares of common stock at September 30, 1999. Transitional Small Business Disclosure Format ____yes X no BAY BANKS OF VIRGINIA, INC. FORM 10-QSB For the interim period ending SEPTEMBER 30, 1999. INDEX PART I - FINANCIAL INFORMATION ITEM 1. INTERIM FINANCIAL STATEMENTS (UNAUDITED) 1-3 CONSOLIDATED BALANCE SHEETS SEPTEMBER 1999 AND DECEMBER 1998 1 CONSOLIDATED STATEMENT OF EARNINGS QUARTER ENDED SEPTEMBER 30, 1999 AND 1998 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 2 CONSOLIDATED STATEMENT OF CASH FLOWS YEAR TO DATE SEPTEMBER 1999 AND 1998 3 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 4-7 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 8 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 8 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8 ITEM 5. OTHER INFORMATION 8 ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K 8 SIGNATURES 9 BAY BANKS OF VIRGINIA, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER DECEMBER BALANCE SHEET CATEGORIES 1999 1998 ASSETS: CASH DUE FROM BANKS 3,886,782 5,268,229 U. S. TREASURY SECURITIES 1,515,000 4,566,875 U. S. GOVERNMENT SECURITIES 14,432,634 17,198,694 STATE AND MUNICIPAL SECURITIES 27,411,795 25,354,483 OTHER SECURITIES 17,655,720 11,831,332 FED FUNDS SOLD 120,000 12,007,706 TOTAL LOANS, NET UNEARNED 123,988,599 114,988,545 LESS: LOAN LOSS RESERVE (1,186,961) (1,011,935) NET LOANS 122,801,638 113,976,610 NET PREM., FURN., FIXT. 4,419,554 4,699,797 ACCRUED INTEREST RECEIVABLE 1,529,730 1,537,745 OTHER REAL ESTATE OWNED 646,830 1,179,556 OTHER ASSETS 4,538,423 2,582,685 TOTAL ASSETS 198,958,106 200,203,712 LIABILITIES DEMAND DEPOSITS 20,692,699 19,851,650 SAVINGS AND NOW 106,682,979 105,347,377 CERTIFICATES OF DEPOSIT 47,204,604 53,656,050 TOTAL DEPOSITS 176,976,082 178,855,077 FED FUNDS PURCHASED 3,150,000 - OTHER LIABILITIES 1,321,473 840,495 TOTAL LIABILITIES 178,295,711 179,695,572 SHAREHOLDERS EQUITY: COMMON STOCK AUTHORIZED-5,000,000 SHARES OUTSTANDING-1,164,029 AND 1,164,728 5,820,148 5,823,640 PAID IN CAPITAL 12,298,519 3,529,924 RETAINED EARNINGS 2,716,898 10,528,706 MKT.ADJ.-SEC.-UNREALIZED (929,214) 626,500 TOTAL SHAREHOLDERS EQUITY 19,906,351 20,508,140 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 198,958,106 200,203,712
BAY BANKS OF VIRGINIA, INC. CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
QUARTER END QUARTER END YTD YTD SEPTEMBER 1999 SEPTEMBER 1998 SEPTEMBER 1999 SEPTEMBER 1998 INTEREST INCOME INTEREST AND FEES ON LOANS 2548304 2401627 7457919 7092119 INTEREST ON US TREASURY SECURITIES 34314 90531 130526 308217 INTEREST ON US GOVERNMENT SECURITIES 279130 221614 717740 660549 INTEREST ON MUNICIPAL SECURITIES 360584 326569 1054595 924542 INTEREST ON OTHER SECURITIES 229950 168046 810273 457364 INTEREST ON FED FUNDS SOLD 28779 208029 190747 631519 TOTAL INTEREST INCOME 3481061 3416416 10361994 10074310 INTEREST EXPENSE INTEREST ON INT. BEARING TRANSACTION 268890 263303 797238 750361 INTEREST ON SAVINGS DEPOSITS 741035 796642 2154679 2352906 INTEREST ON CERTIFICATES 574700 745552 1842333 2223654 INTEREST ON FED FUNDS PURCHASED 418 0 418 0 OTHER SHORT TERM BORROWINGS 32308 4578 32308 6325 TOTAL INTEREST EXPENSE 1617351 1810075 4826976 5333246 NET INTEREST INCOME 1863710 1606341 5535018 4741064 PROVISION FOR LOAN LOSSES 75000 58367 275000 148367 NET INTEREST INCOME AFTER PROV. 1788710 1547974 5260018 4592697 NON-INTEREST INCOME VISA INCOME 84236 97168 206331 204636 DEPOSIT FEES 86925 86728 262362 234579 TRUST DEPARTMENT FEES 129423 122334 388269 365338 OTHER FEES 67419 99576 264838 281864 SECURITIES GAINS AND LOSSES 186 35769 186 101274 TOTAL NON-INTEREST INCOME 368189 441574 1122254 1187690 NON-INTEREST EXPENSE SALARIES AND BENEFITS 745835 690742 2189833 2004780 OCCUPANCY 59794 67368 213427 197798 FURNITURE AND EQUIPMENT 129632 115108 434032 455869 OTHER OPERATING 468115 460443 1421440 1446185 TOTAL NON-INTEREST EXPENSE 1403376 1333661 4258732 4104632 INCOME BEFORE TAXES 753523 655885 2123540 1675756 INCOME TAXES 155251 116952 568649 267808 NET INCOME 598272 538935 1554891 1407948 EARNINGS PER SHARE .51 0.46 1.34 1.21
BANKS OF VIRGINIA, INC. CONDENSED STATEMENT OF CASHFLOWS (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES
SEPTEMBER 1999 SEPTEMBER 1998 NET INCOME 1554891 1407948 ADJUSTMENTS TO RECONCILE NET INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES: DEPRECIATION 328477 455869 PROVISION FOR LOAN LOSS 225000 148367 NET (GAIN) LOSS ON SALE OF SECURITIES (181) (101274) DECREASE IN ACCRUED INTEREST RECEIVABLE 8015 (440942) (DECREASE) IN ACCRUED INTEREST PAYABLE (57861) 39731 DECREASE IN OTHER ASSETS (1955738) (2193843) (DECREASE) IN OTHER LIABILITIES 157978 (173942) ------------------------------------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 332397 (859086) CASH FLOWS FROM INVESTING ACTIVITIES PURCHASES OF AFS SECURITIES (3172318) (25605577) PROCEEDS FROM SALES OF AFS SECURITIES 509300 5520545 PROCEEDS FROM MATURITIES OF AFS SECURITIES 5337395 7980475 NET (INCREASE) IN LOANS OUTSTANDING (9000054) (7642627) NET (INCREASE) DECREASE IN FED FUNDS SOLD 8737000 (2872137) PURCHASE OF PREMISES AND EQUIPMENT (20760) (1742850) DECREASE IN OTHER REAL ESTATE OWNED 532736 218874 ------------------------------------------ NET CASH USED IN INVESTING ACTIVITIES 2851483 (24143297) CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE(DECREASE) IN DEMAND, SAVINGS, AND NOW 2176651 15942267 NET INCREASE(DECREASE) IN TIME DEPOSITS (6451446) 8970755 PROCEEDS FROM ISSUANCE OF COMMON STOCK (3492) 50382 DIVIDENDS PAID (647070) (512782) ------------------------------------------ NET CASH PROVIDED BY FINANCING ACTIVITIES (4925327) 24450622 NET INCREASE (DECREASE) IN CASH (1741447) (550761)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (UNAUDITED) The following discussion is intended to assist in understanding and evaluating the results of operations and the financial condition of Bay Banks of Virginia, Incorporated, a single bank holding company. This discussion should be read in conjunction with the attached Balance Sheet, Statement of Income and Statement of Cash Flows. EARNINGS SUMMATION For the nine months ended September 1999 net income was $1.55 million as compared to $1.41 million for the comparable period in 1998, for an increase of 9.93%. Earnings per share through the third quarter were $1.34 as compared to $1.21 in 1998, which represents an increase of 10.74%. Return on Average Equity was 8.23% for 1999 and 8.05% for 1998. Return on Average Assets was 1.07% and .97% consecutively. Net Interest Income through the third quarter of 1999 was $5.52 million and for the same period in 1998 the total was $4.74 million. This is an increase 16.46% over 1998. The Net Interest Margin on a fully tax equivalent basis for the year to date 1999 was 5.74%, up from 5.17% for the comparable period in 1998. Average interest earning assets totaled $188.92 million. As a result, interest-earning assets exceeded interest- bearing liabilities by $28.17 million, or 14.91%. Earning assets as a percentage of total average assets at quarter end 1999 were 93.24%, and for 1998 were 94.05%. PROVISION/ALLOWANCE FOR LOAN LOSSES Increases in the Provision for Loan Losses were $275,000 through the nine months ended September 1999. The total Allowance for Loan Losses as of September 31 was $1,186,961. The Loan Loss Provision as a percentage of Average Total Loans through the third quarter of 1999 was .97%. As of September 30, 1999, loans on Non-Accrual status totaled $38,961. Loans on Non-Accrual status as of September 31, 1998 were $96,442. Loan's still accruing interest but delinquent 90 days were $540,923 at quarter end 1999 as compared to $400,192 for quarter end 1998. The Allowance for Loan Losses is analyzed for adequacy on a quarterly basis to determine the necessary provision. A loan by loan review is conducted on all loan classes and inherent losses on these individual loans are determined. This valuation is then compared to historical data in an effort to determine the prevailing trends. A third component of the process is the analysis of a tabular presentation of loss allocation percentages by loan type. Through this process the Holding Company assesses the appropriate provision for the coming quarter. As of September 30, 1999, management deemed the loan loss reserve reasonable for the loss risk identified in the loan portfolio. NON INTEREST INCOME Other Income through the third quarter of 1999 totaled $1.12 million as compared to $1.19 million for 1998. Other Income for the Company is composed of Visa Merchant Fees, Deposit Fees, Trust Department Income, Miscellaneous Income, and Gains on the Sale of Securities. Of these categories, the Visa program, Deposit Fees and the Trust Department contribute the majority. Through the nine months ended September 30, 1999 Visa Fees were $206,331, Deposit Fees were $262,362, and Trust Income was $388,269. NON INTEREST EXPENSE Non Interest Expense totaled $4.26 million through the third quarter of 1999 as compared to $4.10 million for comparable period in 1998. Non Interest Expenses include Salaries and Benefits, Occupancy Expense, Furniture and Equipment Expense and Other Operating Expense. Of these categories, Salaries and Benefits are the major expense. Through the nine months ended September 30, 1999, Salary and Benefit Expense was $2.19 million, Occupancy was $213,427, Furniture and Equipment was $434,032 and Other Operating was $1,421,440. FINANCIAL CONDITION Total Assets at third quarter end of 1999 were $198.96 million as compared to $200.20 million at December 30, 1998. This represents a nominal decrease of .62% during the nine-month period. Total Loans through the third quarter were $123.99 million as compared to $111.86 million for the comparable period in 1998. Total Loans at year end 1998 were $114.99 million, resulting in an increase of 7.83% through the nine months ended September 30, 1999. Management continues to focus on new products and services that will further stimulate lending activity in our market area. Through the nine months of 1999, charged off loans totaled $112,935. For the comparable period in 1998 total loans charged off were $43,731. As of September 30, 1999, the Holding Company held $61.02 million in investment securities. This compares with December 1998 balances of $58.95 million. This represents an increase of 3.50% of the total portfolio during the nine months ended September 30, 1999. As of September 30, 1999, total deposits were $176.98 million as compared to $177.90 million at quarter end 1998 and $178.85 at year end 1998. This represents a net decrease of $1.87 million or 1.05% for the nine months ended September 30, 1999. For the period of September 30, 1999 to 1998, Non Interest-bearing Demand Deposits increased to $20.69 million, and Interest-bearing Transaction Accounts and Savings increased to $106.68 million. Certificates of deposit decreased to $47.21 million. The Bank of Lancaster maintained $647 thousand on Other Real Estate Owned as of September 30, 1999. For the comparable period in 1998 the balance was $1.16 million. The Bank of Lancaster is aggressively marketing all properties on OREO, and further, management expects no loss on any of these properties. LIQUIDITY AND CAPITAL RESOURCES Bay Banks of Virginia maintains adequate short-term assets to meet liquidity needs that are anticipated by management. Federal Funds Sold or Purchased, Other Borrowings and investments that mature in one year or less provide the major sources of funding for liquidity needs. At September 30, 1999 Federal Funds Purchased totaled $3.15 million. Total available Federal Funds Purchased lines of credit are $14.8 million. The company is developing products and alternative funding sources to fund loan growth and thereby remove itself from the Federal Funds Purchased market. Securities maturing in one year or less totaled $4.36 million. The liquidity ratio as of September 30, 1999 was 34.98% as compared to 39.34% for the prior period. Bay Banks of Virginia determines this ratio by dividing net liabilities into the sum of cash and due from, un-pledged investment securities and Federal Funds Sold. Management, through historical analysis, has deemed 15% an adequate liquidity ratio. As excess funds are diverted from Federal Funds to loans and investments, this ratio will decline to levels more consistent with prior periods. Total shareholder equity at September 30, 1999 was $19.91 million as compared to $18.97 million for the same period 1998. This represents an increase of 4.96% over September 1998. Shareholder equity at year-end 1998 was $20.51 million. Shareholder equity was impacted by unrealized losses on securities in the amount of $929,214 at quarter end 1999, while unrealized gains at year-end were $626,500. The Holding Company is required to maintain minimum amounts of Capital to Total Risk Weighted Assets, as defined by FFIEC guidelines. As of quarter end 1999, the Company maintained Tier 1 Capital of $18.89 million, Tier 2 Capital of $1.19 million and Total Risk Based Capital of $20.07 million. Net Risk Weighted Assets totaled $128.03 million. As of September 30, 1999, the Holding Company maintained 14.76% and 15.68% Tier 1 and Total Capital Ratios. The respective minimums are 5.50% and 6.00%. The Holding Company's Leverage Ratio at September 30, 1999 was 9.56% with a regulatory minimum of 3.00%. Book Value per share of common stock for the 1999 interim period was $17.10 and for 1998 the book value per share was $17.78. Cash dividends paid through September 30, 1999 were $396,627. Total number of shares outstanding at September 30, 1999 was 1,164,029. Year 2000 Issues The Year 2000 issue is a significant business issue that relates to the fact that many computer programs use a two-digit code to recognize and store the years' date. These programs were written to assume that the century is 1900; subsequently, some programs will not recognize the date change that occurs with the new millennium. The Company recognizes Year 2000 planning and compliance as a major business and operations issue. The Board of Directors is informed on an ongoing basis of all steps taken to insure a smooth transition into the year 2000. Further, management has developed a plan and timeline to evaluate the risks and exposures that the Company faces on a technological and operational level. This plan is a five-part approach, which includes making all necessary parties aware of the situation, assessing all impacts, renovation of operating systems, validation of all changes for effectiveness, and implementation of the necessary policies and procedures to ensure compliance. A Year 2000 team composed of senior management and key operational officers has been in place for over one year. Among the tasks accomplished to date are the identification and cataloging of all software, hardware, maintenance contracts and third-party vendors. Each identified party has been contacted and a dialogue established to ensure the necessary compliance with regulatory time constraints. Testing of all hardware and software were completed by June 30, 1999. Additionally, operating and capital budgets incorporate anticipated expenditures necessary to ensure compliance. The Company expects to be in conformity with the FFEIC Y2K Statement and be fully compliant prior to December 31, 1999. The company estimates the cost of Y2K to be $262 thousand for the year ended December 31, 1998. As this process develops, costs of implementation are estimated to be $75 thousand for 1999 and 2000. Management has developed and tested a five-part plan to prepare for potential Year 2000 malfunctions. System testing has been performed in accordance with Federal Reserve Bank regulations and FFIEC guidelines. Management anticipates little or no disruption in the delivery of services. However, there can be no guarantee that no disruptions will occur as a result of Year 2000. Presently management does not expect that any problems currently anticipated will have a materially adverse impact on its business. Forward-Looking Statements In addition to the historical information contained herein, this discussion contains forward-looking statements that involve risks and uncertainties. Economic circumstances, the operations of the Bank, and the Holding Company's actual results could differ significantly from those discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences are discussed herein, but also include changes in economic conditions in the Company's (or Bank's) market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market, and competition. Any of these factors could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Part I Item 1. Financial Information Bank of Lancaster Notes to Consolidated Financial Statements Bay Banks of Virginia, Inc. owns 100% of the Bank of Lancaster. The consolidated financial statements include the accounts of the Bank of Lancaster and Bay Banks of Virginia, Incorporated. The accounting and reporting policies of the registrant conform to generally accepted accounting principals and to the general practices within the banking industry. This interim statement has not been audited, however, in management's opinion, it reflects a fair and accurate presentation of the consolidated financial statements. These financial statements should be read in conjunction with the financial statements and notes to financial statements included in the registrants 1997 Annual Report to Shareholders. PART 2. ITEM 1. LEGAL PROCEEDINGS None to report. ITEM 2. CHANGES IN SECURITIES See ITEM 4. ITEM 3. DEFAULT UPON SENIOR SECURITIES None to report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None to report. ITEM 5. OTHER INFORMATION None to report. ITEM 13: EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K. Exhibit Index ( 2) Plan of reorganization. N/A ( 3) (i)(ii)Articles of Incorporation and Bylaws. N/A ( 4) (i)Rights of Holders. N/A (10) (ii)(A)Material Contracts. N/A (11) Statement: Computation of Earnings per Share N/A (15) Letter: Unaudited financial information N/A (18) Letter: Change in accounting principals N/A (19) Report furnished to security holders N/A Published report regarding matters submitted to a vote of security holders N/A (23) Consent of council N/A (24) Power of Attorney N/A (27) Financial Data Schedule Attached (99) Additional Exhibits N/A (b) The Company filed an 8K on August 25, 1999. This filing announced the implementation of a share repurchase program as of August 24, 1999. The filing referenced Item 5: Other Events and read as follows: On August 24, 1999, the Registrant announced that its Board of Directors approved on August 19, 1999, a share repurchase program for its common stock. The Board authorized the registrant to repurchase up to 15,000 shares of common stock from time to time based on, among other things, market price and share availability. SIGNATURES BAY BANKS OF VIRGINIA 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. Bay Banks of Virginia --------------------- (Registrant) 11/15/1999 /s/ Austin L. Roberts, III ------------------------- President and Chief Executive Officer 11/15/1999 /s/ Paul T. Sciacchitano ---------------------- Treasurer EX-27 2 EXHIBIT 27
9 US 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1 3886782 153887583 120000 0 61015149 61944363 61015149 123988599 (1186961) 198958106 176976082 3150000 1321473 0 0 0 5820148 15015417 198958106 7457919 2713328 190747 10361994 4794668 32308 5535013 275000 181 4258732 2123540 2123540 0 0 1554891 1.34 1.34 5.74 38961 540923 0 0 1011935 112935 12962 1186961 1186961 0 0
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