Definitive Notice & Proxy Statement

Sincerely,

/s/ Ammon G. Dunton, Jr.

/s/ Austin L. Roberts, III

Ammon G. Dunton, Jr.

Chairman of the Board

Austin L. Roberts, III

President and Chief Executive Officer

You are cordially invited to attend the Annual Meeting of Stockholders of Bay Banks of Virginia, Inc. on May 16, 2005, at 1:00 p.m., at Indian Creek Yacht & Country Club, Kilmarnock, Virginia. We would be pleased to have you as our guest for a buffet luncheon starting at 12:00 p.m. If you wish to attend, please indicate this on the enclosed luncheon reservation card that must be returned with your completed proxy. This will allow us to have an accurate count of those joining us for the luncheon.

The primary business of the meeting will be the election of two directors of the Company and the ratification of the appointment of the Company’s independent registered public accounting firm, as more fully explained in the accompanying proxy statement.

During the meeting, we also will report to you on the condition and performance of the Company and its subsidiaries, the Bank of Lancaster and Bay Trust Company. You will have an opportunity to question management on matters that affect the interests of all stockholders.

We hope you can join us for the luncheon and attend the Annual Meeting on May 16, 2005. Whether or not you plan to attend, please complete, sign and date the enclosed proxy and return it promptly in the enclosed envelope.

Thank you for your interest in the Company’s affairs. As always, we are most grateful for your continuing support of Bay Banks of Virginia.

The Annual Meeting of Stockholders of Bay Banks of Virginia, Inc. (the “Company”) will be held at Indian Creek Yacht & Country Club, Kilmarnock, Virginia, on May 16, 2005 at 1:00 p.m. for the following purposes:

Only stockholders of record at the close of business on March 28, 2005 will be entitled to notice of and to vote at the Annual Meeting and any adjournments thereof.

By Order of the Board of Directors

/s/ Hazel S. Farmer

Hazel S. Farmer

Corporate Secretary

The enclosed proxy is solicited by the Board of Directors of Bay Banks of Virginia, Inc. (the “Company”), the holding company for the Bank of Lancaster and Bay Trust Company (together, the “Subsidiaries”), for the Company’s Annual Meeting of Stockholders to be held on May 16, 2005, at the time and place and for the purposes set forth in the accompanying Notice of the Annual Meeting or any adjournment thereof. The approximate mailing date of this Proxy Statement and accompanying proxy is April 11, 2005.

Execution of a proxy will not affect a stockholder’s right to attend the Annual Meeting and to vote in person. Any stockholder who has executed and returned a proxy may revoke it by attending the Annual Meeting and requesting to vote in person. A stockholder may also revoke his proxy at any time before it is exercised by filing a written notice with the Company or by submitting a proxy bearing a later date. Proxies will extend to, and will be voted at, any adjourned session of the Annual Meeting.

Only stockholders of record at the close of business on March 28, 2005 are entitled to notice of and to vote at the Annual Meeting or any adjournments thereof. The number of shares of common stock of the Company outstanding and entitled to vote on March 28, 2005 was 2,359,883. The Company has no other class of stock outstanding. A 60% majority of the shares entitled to vote, represented in person or by proxy, will constitute a quorum for the transaction of business.

Each share of common stock entitles the record-holder thereof to one vote upon each matter to be voted upon at the Annual Meeting. Shares for which the holder has elected to abstain or to withhold the proxies’ authority to vote (including broker non-votes) on a matter will count toward a quorum, but will not be included in determining the number of votes cast with respect to such matter.

The cost of solicitation of proxies will be borne by the Company. Solicitation is being made by mail, and if necessary may be made in person, by telephone, or special letter by officers and regular employees of the Company, acting without compensation other than regular compensation.

The only beneficial owner of 5% or more of the outstanding common stock of the Company is the Bay Banks of Virginia Employee Stock Ownership Trust (the “Trust”), which owns 126,716 shares, or 5.4% of the Company’s common stock. The Trust was established pursuant to the Company’s Employee Stock Ownership Plan (“ESOP”). Two members of the Board of Directors of the Company and one director of Bank of Lancaster (the “Bank”) are trustees of the ESOP. As of March 28, 2005, all shares held in the Trust

had been allocated to the accounts of participating employees. Under the terms of the ESOP, the trustees must vote all allocated shares held in the ESOP in accordance with the instructions of the participating employees, and allocated shares for which employees do not give instructions will be voted in the same ratio on any matter as to those shares for which instructions are given.

The Company’s Board of Directors is divided into three classes (I, II and III). The term of office for the Class I directors will expire at the Annual Meeting and the nominees to serve as Class I directors are set forth below. Allen C. Marple and Austin L. Roberts, III, the President and Chief Executive Officer of the Company and the Bank, currently serve as directors of the Company. If elected, the nominees will serve until the Annual Meeting of Stockholders held in 2008.

The persons named in the proxy will vote for the election of the nominees named below unless authority is withheld. If for any reason any of the persons named as nominees should become unavailable to serve, an event that management does not anticipate, proxies will be voted for the remaining nominee and such other person or persons as the Board of Directors may designate.

The Board of Directors recommends the nominees, set forth below, for election. The Board of Directors recommends that stockholders vote FOR the nominees. The nominees receiving the greatest number of affirmative votes cast at the Annual Meeting will be elected.

A. Wayne Saunders retired from the Board on December 10, 2004. The Company and the remaining Board members express their sincere appreciation and gratitude to Mr. Saunders, who served as a director of the Company since 2000.

Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of the director’s duties, including the attendance at Board and committee meetings. During 2004, there were eight meetings of the Board of Directors. Each incumbent director attended at least 75% of the aggregate number of meetings of the Board of Directors and its committees. Directors are encouraged to attend stockholders meetings, and all directors attended the 2004 Annual Meeting of Stockholders.

There are no family relationships among any of the directors or among any directors and any officer. None of the directors serves as a director of any other publicly-held company.

The Board of Directors has, among others, a standing Compensation Committee and Audit Committee.

Compensation Committee. The Compensation Committee consists of Allen C. Marple and three non-voting members; Ammon G. Dunton, Jr., Austin L. Roberts, III and Robert C. Berry, Jr. In addition, certain directors of the Company’s subsidiaries have been appointed as voting members of the Compensation Committee. They are William A. Creager of the Trust Company Board, and David W. Cheek and Patricia N. Lawler of the Bank Board. The function of this committee is to recommend the compensation to be paid to the executive officers of the Company. It also administers the stock option plans for the benefit of such officers and directors eligible to participate in such plans. The Compensation Committee met two times during 2004.

Audit Committee. The Audit Committee consists of Weston F. Conley, Richard A. Farmar, III, and Allen C. Marple. In addition, certain directors of the Company’s subsidiaries have been appointed as

voting members of the Audit Committee. Currently serving in this capacity is Jane Williams of the Trust Company Board.

As required, at least three members of the Audit Committee meet the requirements for independence as set forth in the NASDAQ definition of “independent director,” and meet the definition of an independent director as set forth in the rules of the Securities and Exchange Commission (“SEC”). Specifically, Directors Conley, Farmar, Marple and Williams are each independent by definition. In addition, none have participated in the preparation of the financial statements of the Company or any Subsidiary of the Company at any time during the past three years.

The Audit Committee was chaired by A. Wayne Saunders until his retirement from the Board on December 10, 2004. Mr. Saunders brought a diversity of financial knowledge and expertise to the Audit Committee and in 2004 was duly voted upon and elected as the “audit committee financial expert” for the Audit Committee of Bay Banks of Virginia. Although the Company, with the retirement of Mr. Saunders, does not currently have an “audit committee financial expert” as set forth in the rules of the SEC, Ms. Williams and all three directors on the Audit Committee have extensive business backgrounds that the Board has determined are sufficient for the proper exercise of their duties on the committee.

The Audit Committee elected Allen C. Marple as its chair at the March 10, 2005 meeting, which was the Committee’s first meeting following Mr. Saunders retirement.

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm. Accordingly, the independent registered public accounting firm reports directly to the Audit Committee of the Company. It is the responsibility of the Audit Committee to select the Company’s independent registered public accounting firm, to approve the scope of the independent registered public accounting firms audits and to review the reports of examination by the regulatory agencies, the independent registered public accounting firm and the internal auditor. The Committee regularly reports to the Board of Directors of the Company. The Audit Committee met five times during 2004.

The Company’s Board of Directors does not have a standing nominating committee. The Board of Directors does not believe that it is necessary to have a nominating committee because it has determined that the functions of a nominating committee can be adequately performed by its independent members and that stockholders are best served by having such directors participate in the selection of board nominees.

In accordance with the Company’s By-Laws, nominations for the election of directors shall be made by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as director(s) at a meeting only if written notice of such stockholder’s intent to make such nomination or nominations has been given, either by personal delivery or by U.S. mail, postage prepaid, to the Secretary of the Company not later than (i) with respect to an election to be held at an annual meeting of stockholders, 120 days prior to the date of the anniversary of the immediately preceding Annual Meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to stockholders. Each notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person

or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as director of the Company if so elected. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. The above procedures are in addition to the procedures regarding inclusion of stockholder proposals in proxy materials set forth in “Stockholder Proposals” in this Proxy Statement.

Qualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing board composition. However, minimum qualifications include high level leadership experience in business activities, breadth of knowledge about issues affecting the Company and time available for meetings and consultation on Company matters. The independent directors seek a diverse group of candidates who possess the background, skills and expertise to make a significant contribution to the Board, to the Company, and its stockholders. The independent directors, along with the other board members as appropriate, evaluate potential nominees, whether proposed by stockholders or otherwise, by reviewing their qualifications, reviewing results of personal and reference interviews and reviewing other relevant information. Candidates whose evaluations are favorable are then chosen by a majority of the independent directors to be recommended for selection by the full Board. The full Board then selects and recommends candidates for nomination as directors for stockholders to consider and vote upon at an annual meeting.

Non-employee directors of the Company receive an annual retainer of $3,500 and $350 for each meeting of the Company’s Board of Directors. Directors who are employees of the Company, the Bank or Trust Company are not compensated for attendance at Board or Committee meetings. The Chairman of the Board, Mr. Ammon G. Dunton, Jr., is a Company and Bank employee. As an employee, he received $45,000 in compensation in 2004, but received no annual retainer, board or committee attendance fees from the Company or the Subsidiaries.

In accordance with the 1998 Non-Employee Directors Stock Option Plan, each of the four non-employee directors of the Company and the Subsidiaries were granted in May 2004 stock options for 500 shares of the Company’s common stock at its then fair market value. This plan, which reserves a total of 50,000 shares of common stock of the Company, provides that each non-employee director of the Company and the Subsidiaries is eligible to receive a stock option grant for 500 shares in May of each year during the term of the plan.

The following table sets forth, as of March 28, 2005, certain information with respect to the beneficial ownership of Company common stock held by each director and nominee and by the directors and all executive officers as a group.

No officer receives compensation from the Company. All compensation is paid through the Subsidiaries.

The following table presents compensation information on the President and Chief Executive Officer of the Company and the Bank. No other executive officer of the Company or the Bank earned over $100,000 in salary and bonus in 2004.

The Company’s stock option plan provides for the granting of incentive stock options to executive officers and key employees of the Company and the Subsidiaries. No stock options were granted to Mr. Roberts during 2004.

The following table shows certain information with respect to the number and value of unexercised options at year-end held by Mr. Roberts. No stock options were granted to Mr. Roberts during 2004.

Pension Plan. The Company has a non-contributory defined benefit pension plan (the “Pension Plan”) which covers substantially all salaried employees who have reached the age of twenty-one and who have completed one year of service. The normal retirement age is 65, but participants may elect early retirement at 55 after 10 years of service at reduced levels of benefits and disability retirement after 10 years of service at full levels of benefits. Vesting is 100% after 5 years of service.

The following table provides information concerning estimated annual benefits that are payable to covered employees at normal retirement age under the terms of the Pension Plan, based on the compensation and years of service classifications specified below. The Pension Plan benefits shown in the table are computed on the basis of a straight life annuity beginning at age 65.

The remuneration covered by the Pension Plan is an employee’s “final average earnings” which, under the terms of the Pension Plan is defined to be the average of the highest five consecutive calendar years of base salary (reported as “Salary” in the Summary Compensation Table above) earned by the employee during the ten calendar years prior to his or her date of retirement, termination, disability or death. A participant’s monthly retirement benefit (if they have twenty-five years of credited service at their normal retirement date) is 25% of their final average salary, plus an additional 18.75% if it is in excess of the participant’s Social Security covered salary. The Social Security covered salary is the average of the participant’s working lifetime prior to the year the participant attains his or her Social Security retirement age. Cash benefits under the Pension Plan generally commence on retirement, death or other termination of employment and are payable in various forms at the election of the participant.

Based on current salary levels and assuming retirement at the normal retirement age of 65, it is estimated that the annual retirement benefit for Mr. Roberts will be $55,560. The final average salary, and the respective years of service as of October 1, 2004 for Mr. Roberts were $164,483 and 14 years, respectively.

401(k) Plan. The Subsidiaries have a contributory 401(k) plan. All salaried employees are eligible to participate after having worked six months consecutively and there is no age requirement. Participants may elect to defer between 1% and 15% of their base compensation, which will be contributed to the plan, providing the amount deferred does not exceed the dollar maximum election

deferral for each year. The Subsidiaries’ match is 100% up to a 2% deferral; the subsidiaries will provide a 25% match on employee contributions between 2% and 4% of salary. Under the plan, an employee is vested in a Subsidiary’s contribution by 20% after two years and 20% each year thereafter for the next four years of service. If an employee leaves prior to the two-year period, he or she forfeits any accrued match contribution.

Distributions to participants are made at death, retirement or other termination of employment in a lump sum payment. The plan permits certain in-service withdrawals. Normal retirement age is considered 65; early retirement is considered at 55 with 10 years of vested service; disability retirement has no age requirements but a service requirement of 10 years of vested service.

Stock Option Plans. The Company currently has in effect one stock option plan for employees, the 2003 plan. The 1985 and 1994 stock plans have expired, but certain options deemed earned are still exercisable as outlined below. The 2003 plan provides for the earning of incentive stock options by key employees of the Company upon successful completion of agreed upon goals. The Compensation Committee of the Company makes allocations under the plan and fixes the terms and conditions of each allocation pursuant to a separate agreement entered into with each eligible key employee. The price of shares of stock to be issued upon the exercise of options deemed earned is 100% of the fair market value on the date of the award. The option is not exercisable after the expiration of ten years from the date such option is granted. An option is not transferable by a person to whom it is granted other than by will or the laws of descent and distribution.

Under the 2003 plan, 25,000 of the plan’s 175,000 shares have been granted. Of those 25,000 shares granted, the number of shared considered earned has not been determined. Under the 1985 and 1994 plans, option grants for 6,340 and 127,781 shares, respectively, are still available for exercise.

Employee Stock Ownership Plan (ESOP). The ESOP is a non-contributory plan supported by annual contributions made at the discretion of the Company’s Board of Directors. The ESOP is a stock bonus plan qualified under Section 401(a) of the Internal Revenue Code and an employee ownership plan under Section 4975(E)(7) of the Internal Revenue Code. Trustees and an administrative committee as appointed by the Chairman of Company’s Board of Directors for the exclusive benefit of participants administer the ESOP. The ESOP is eligible to each Bank and Trust Company employee over the age of twenty-one and credited with at least 1,000 hours of service for the plan year.

This report is submitted by the Board of Directors of the Company, which is responsible for establishing and administering the Company’s compensation policies and its incentive stock option plan through its Compensation Committee.

The Company’s compensation policy for executive management is designed to achieve the following objectives: (a) to enhance business results of the Company and increase stockholder value by aligning closely the financial interests of its officers with those of its stockholders; (b) to reward executive management consistent with the Company’s annual performance goals; (c) to recognize individual initiative, leadership and achievement; and (d) to provide competitive compensation that will attract and retain qualified corporate officers and key employees.

The compensation program for executive management consists of up to four elements: (1) base salary, which is set on an annual basis; (2) a cash incentive based on the achievement of performance goals established by the Compensation Committee; (3) incentive stock options; and (4) participation in the Company’s ESOP program.

The Board of Directors determines general salary and benefit policies and procedures. The Board uses market studies and published compensation data to review competitive rates of pay, to establish salary ranges, and to arrive at base salary levels. The Board approves base salaries at levels competitive with amounts paid to executives with comparable qualifications, experience and responsibilities after comparing salary information of similar sized banks as provided by the Virginia Bankers Association’s Salary Survey of Virginia Banks and other compensation surveys. In addition, the Board considers the recent performance of the Company and assesses the executive’s past performance and its expectation as to future contributions in leading the Company.

Compensation for senior officers other than the Chairman and the President and Chief Executive Officer is recommended to the Compensation Committee by the President and Chief Executive Officer. The Compensation Committee reviews these recommendations and has the authority to revise the proposed compensation proposals. Once approved by the Compensation Committee, the senior officer’s compensation is referred to the Board of Directors for review, discussion, revision if requested, and approval.

The Board uses a subjective approach to the determination of compensation based on the factors noted above. Except concerning incentive stock options, the Board does not rely on formulas or weights of specific factors. Neither the profitability of the Company nor the market value of its stock is directly utilized in computing an officer’s base compensation. The Company’s executive compensation program has substantially relied on base salary as its primary component.

Incentive stock option grants are earned only if the Compensation Committee determines that the objectives set forth in the option plan document are achieved by a specified date. The objective of these options is to create a link between officer compensation and Company performance. In determining the appropriate level of stock-based allotments, the Committee considers the officer’s contribution toward the Company’s performance. To encourage growth in stockholder value, incentive stock options are granted to all officers who are in a position and have a responsibility to make a substantial contribution to the long-term success of the Company. The Board believes this focuses attention on managing the Company from the perspective of an owner with an equity stake in the business.

The compensation paid for 2004 to the Chief Executive Officer of the Company and the Bank, Austin L. Roberts, III, reflects the considered judgment of the Board embracing the policy and process described previously. The Board reviews and fixes the base salary of the Chief Executive Officer based on similar competitive compensation data to other community banks’ senior executives and the Board’s

assessment of his past performance and its expectation as to his future contribution in leading the Company. The Compensation Committee also establishes the criteria that would give rise to a cash incentive payment.

Compensation Committee

Bay Banks of Virginia

Allen C. Marple, Chairman

David W. Cheek

William A. Creager

Patricia N. Lawler

Robert C. Berry, Jr. Non-Voting Member

Ammon G. Dunton, Jr. Non-Voting Member

Austin L. Roberts, III Non-Voting Member

During 2004 and up to the present time, there were transactions between the Bank and certain members of the Company’s Board of Directors, or their associates, all consisting of extensions of credit by the Bank in the ordinary course of business. Each transaction was made on substantially the same terms, including interest rates, collateral and repayment terms, as those prevailing at the time for comparable transactions with the general public. In the opinion of management, none of the transactions involve more than the normal risk of collect ability or present other unfavorable features, other than as set forth in “Interest of Directors and Officers in Certain Transactions” on page 16.

The only members of the Board who served as an officer or employee of the Company or any of its affiliates during 2004 are: Ammon G. Dunton, Jr., Chairman of the Board of the Company and the Bank; Austin L. Roberts, III, President and Chief Executive Officer of the Company and the Bank; and Robert C. Berry, Jr., Vice President of the Company and President and Chief Executive Officer of the Trust Company.

The graph and table below compares the cumulative total stockholder return on the Company’s common stock with the cumulative total return on the NASDAQ Stock Market Index the S&P 500 and the Carson Medlin Independent Bank Index for the five year period ended December 31, 2004, assuming that an investment of $100 was made on December 31, 1999 and dividends were reinvested. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of the Company’s common stock.

The Audit Committee of Bay Banks of Virginia oversees the Company’s financial reporting process on behalf of the Board of Directors of the Company. The Audit Committee is elected by the Board of Directors of the Company. All voting members are independent of management. In addition, the Audit Committee operates under a written charter adopted by the Board of Directors. While management has the primary responsibility for the quality and integrity of the Company’s financial statements and reporting processes, the Audit Committee provides assistance to management in fulfilling this responsibility. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements for the Annual Report with management and the independent registered public accounting firm, and discussed the quality and acceptability of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosure in the financial statements.

In addition, the committee obtained from the independent registered public accounting firm a formal written statement discussing any disclosed relationship or service which may impact the objectivity and independence of the independent registered public accounting firm, as required by Independence Standards Board Standard No. 1 “Independence Discussions with Audit Committees.” The committee also discussed with the independent registered public accounting firm all communications required by generally accepted auditing standards, including Statement on Auditing Standards No. 61, “Communication with Audit Committees.”

The Audit Committee also monitored the internal audit functions of the Company including the independence and authority of its reporting obligation, the proposed audit plan for the coming year, and the adequacy of management response to internal audit findings and recommendations.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2004 for filing with the Securities and Exchange Commission. The Company’s Audit Committee has also recommended the selection of the Company’s independent registered public accounting firm.

Audit Committee

Bay Banks of Virginia

Allen C. Marple, Chair

Weston F. Conley

Richard A. Farmar, III

Jane M. Williams

Yount, Hyde and Barbour, P.C. (“YHB”) audited the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, reviewed the Company’s quarterly reports on Form 10-Q.

The following table presents aggregate fees paid or to be paid by the Company and the Bank for professional services rendered by YHB. Audit fees include audit and review services, consents, and review of documents filed with the SEC. Audit related fees include agreed-upon procedures engagements for STAR Compliance Review, SysTrust Audit of Information Technology and consultation concerning financial accounting and reporting standards. Tax fees include preparation of federal and state tax returns and consultation concerning tax compliance issues.

The Audit Committee pre-approves all audit, audit related, and tax services on an annual basis, and in addition, authorizes individual engagements that exceed pre-established thresholds. Any additional engagement that falls below the pre-established thresholds must be reported by management at the Audit Committee meeting immediately following the initiation of such an engagement.

The Audit Committee has appointed Yount, Hyde and Barbour, P.C. as the Company’s independent registered public accounting firm for 2005, subject to ratification of the stockholders. The services that YHB will perform will consist primarily of the examination and audit of the institution’s financial statements, tax reporting assistance, and other audit and accounting matters. Representatives of YHB are expected to be present at the Annual Meeting and will be given an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

The Board of Directors recommends that you vote FOR the ratification of the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2005. Proxies solicited by the Board will be voted in favor thereof unless a stockholder has indicated otherwise on the proxy.

Some of the Company’s directors, executive officers, and members of their immediate families, and corporations, partnerships and other entities, of which such persons are officers, directors, partners, trustees, executors or beneficiaries, are customers of the Bank. All loans and loan commitments to them were originated in the ordinary course of business, upon substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and, other than as set forth below, do not involve more than normal risk of collectibility or present other unfavorable features. It is the policy of the Bank to provide loans to officers who are not executive

officers and to employees at more favorable rates than those prevailing at the time for comparable transactions with other persons. These loans do not involve more than the normal risk of collectibility or present other unfavorable features.

On February 21, 2005, Winn-Dixie Stores, Inc. and certain of its domestic subsidiaries (collectively, “Winn-Dixie”), filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York seeking reorganization relief under the provisions of Chapter 11 of Title 11 of the United States Code. The Company understands that part of the Winn-Dixie plan of reorganization contemplates voiding a number of shopping center leases. Lancaster Community Investors LC, a Virginia limited liability company (the “LLC”), the managers/members of which include Mr. Thomas A. Gosse, a director of the Company and each of the Subsidiaries and Ms. Patricia N. Lawler, a director of the Bank, and members Mr. Weston F. Conley, Jr., a director of the Company and of the Bank and Mr. Fletcher L. Brown, III, a director of the Bank, currently leases to Winn-Dixie a store location at Chesapeake Commons Shopping Center in Kilmarnock, Virginia. The shopping center property is wholly owned by the LLC. The Bank currently has a loan outstanding to the LLC in the principal amount of approximately $1.2 million. After Winn-Dixie’s bankruptcy filing, the LLC has had short-term cash difficulties and the loan has been placed on the Bank’s Watch List and has been restructured in accordance with a workout arrangement whereby the LLC will make interest-only payments on the loan for the next 12 months. Such arrangement is standard for problem loans of this type. The loan is secured by the shopping center real estate. In addition, Mr. Gosse and Ms. Lawler, along with certain other managers/members of the LLC, have each personally guaranteed the loan, and each such guarantee is limited to $100,000. At this time, the Bank expects that it will incur no loss of the principal amount outstanding due to the value of the real estate that secures the loan and the personal guarantees.

The law firm of Dunton, Simmons & Dunton serves as legal counsel to the Company, the Bank and the Trust Company. Mr. Ammon G. Dunton, Jr. is a senior member of the firm.

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, directors and executive officers of the Company are required to file reports with the Securities and Exchange Commission indicating their holdings of and transactions in Company common stock. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, insiders of the Company complied with all filing requirements during 2004.

Management knows of no other business to be brought before the Annual Meeting. Should any other business properly be presented for action at the meeting, the shares represented by the enclosed proxy shall be voted by the persons named therein in accordance with their best judgment and in the best interests of the Company.

The Company’s By-Laws provide that, in addition to any other applicable requirements, for business (including stockholder nominations of Director candidates) to be properly brought before an annual meeting by a stockholder, the stockholder must give timely notice in writing to the Secretary of the Company no later than 120 days before the date of the anniversary of the immediately preceding annual meeting. As to each matter, the notice must comply with certain informational requirements set forth in the

By-Laws. These requirements are separate and apart from and in addition to the Securities and Exchange Commission’s requirements that a stockholder must meet to have a proposal included in the Company’s proxy materials. To be considered for inclusion in the Company’s proxy materials relating to the 2006 Annual Meeting of Stockholders pursuant to applicable Securities and Exchange Commission rules, the Secretary of the Company must receive stockholder proposals no later than December 15, 2005. Stockholder proposals should be addressed to Corporate Secretary, Hazel S. Farmer, Bay Banks of Virginia, Inc., 100 S. Main Street, P.O. Box 1869, Kilmarnock, Virginia 22482.

Bay Banks of Virginia has a process whereby shareholders can contact the Company’s directorship. Corporate shareholder contact information is available on the Company website at www.baybanks.com.

A copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, excluding exhibits, as filed with the Securities and Exchange Commission can be obtained without charge by writing to Austin L. Roberts, III, President and CEO, Bay Banks of Virginia, Inc., 100 South Main Street, P. O. Box 1869, Kilmarnock, Virginia 22482. This information may also be accessed, without charge, by visiting either the Company’s website at www.baybanks.com or the Securities and Exchange Commission’s Electronic Data Gathering and Retrieval Service (“EDGAR”) website at www.sec.gov.

The undersigned, revoking all prior proxies, hereby appoints Weston F. Conley, Jr. and Austin L. Roberts, III, or either of them, as proxies with full power of substitution to represent the undersigned and vote, as designated below, all the shares of common stock of Bay Banks of Virginia, Inc. held of record by the undersigned on March 28, 2005, at the Annual Meeting of Stockholders to be held on May 16, 2005, at 1:00 p.m. at the Indian Creek Yacht & Country Club, Kilmarnock, Virginia, or any adjournment thereof, on each of the following matters:

INSTRUCTIONS: To withhold authority to vote for an individual nominee(s), print the name of the nominee(s) in the space provided below.

This proxy, when properly executed, will be voted in the manner directed by the undersigned stockholder. If no direction is made, this proxy will be voted “FOR” each proposal. All joint owners MUST sign.

Please sign exactly as your name appears below. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.

Please mark, sign, date and return this Proxy promptly in the enclosed envelope.


Name (Age)	Company Director Since	Principal Occupation During Past Five Years
Class I (Nominees):

Allen C. Marple (68)	2005	Retired (1998) President of Spectrum Investments, Inc., Toronto, Canada

Austin L. Roberts, III (58)	1997	President and Chief Executive Officer of the Company and the Bank

Other Directors Not Standing For Election At This Time:

Class II (Directors Serving Until the 2006 Annual Meeting):

Weston F. Conley, Jr. (70)	1997	Managing Partner of Conley Properties, L.L.C., Morattico, VA; Former Chairman of RCV Seafood Corporation (seafood processor and wholesaler)

Thomas A. Gosse (58)	1997	President and Chief Executive Officer of Northern Neck Insurance Company, Irvington, VA


Name (Age)	Company Director Since	Principal Occupation During Past Five Years
Class III (Directors Serving Until the 2007 Meeting):

Robert C. Berry, Jr. (60)	2004	President and Chief Executive Officer of Bay Trust Company since February 2001; Vice President of the Company since February 2005; Previously Vice President and Manager of the Huntington trust office of City National Bank, West Virginia, and head of investments for the City National Bank Trust Department.

Ammon G. Dunton, Jr. (69)	1997	Chairman of the Board of the Company and the Bank; Attorney, Senior Partner of Dunton, Simmons & Dunton, White Stone, VA

Richard A. Farmar, III (47)	2004	President of B.H. Baird Insurance Agency, Warsaw, VA


Name	Amount and Nature of Beneficial Ownership (1)		Percent of Class
Robert C. Berry, Jr.	5,314	(2)(3)	*
Weston F. Conley, Jr.	65,369	(2)(4)	2.8	%
Ammon G. Dunton, Jr.	90,354	(2)(5)	3.8	%
Richard A. Farmar, III	8,318	(2)(6)	*
Thomas A. Gosse	7,100	(2)(7)	*
Allen C. Marple	1,539	(9)	*
Austin L. Roberts, III	40,351	(2)(8)	1.7	%
All directors and executive officers as a group	228,050	(2)(10)	9.6	%


						Long-Term Compensation Awards
		Annual Compensation (1)				Securities Underlying Options (2)		All Other Compensation (3)
Name and Principal Position	Year	Salary		Bonus		Securities Underlying Options (2)		All Other Compensation (3)
Austin L. Roberts, III President and CEO	2004 2003 2002	$	175,000 175,000 160,000	$	-0- -0- -0-	$	-0- -0- 7,000	$	6,263 6,493 8,386


	Number of Shares Acquired on Exercise	Value Realized (1)		Number of Shares Underlying Unexercised Options at December 31, 2004			Value of Unexercised In- the-Money Options at December 31, 2004 (2)
Name	Number of Shares Acquired on Exercise	Value Realized (1)		Exercisable		Unexercisable	Exercisable		Unexercisable
Austin L. Roberts, III	-0-	$	-0-	$	26,714	-0-	$	75,089	-0-


5 YEAR AVERAGE SALARY		YEARS OF SERVICE
5 YEAR AVERAGE SALARY		15		20		25		30		35
$	25,000	$	3,750	$	5,000	$	6,250	$	6,250	$	6,250
	50,000		7,890		10,520		13,150		13,150		13,150
	75,000		14,265		19,020		23,775		23,775		23,775
	100,000		20,640		27,520		34,400		34,400		34,400
	125,000		27,015		36,020		45,025		45,025		45,025
	150,000		33,390		44,520		55,650		55,650		55,650
	175,000		39,765		53,020		66,275		66,275		66,275
	200,000		46,140		61,520		76,900		76,900		76,900
	205,000		47,415		63,220		79,025		79,025		79,025
	and above


	1999		2000		2001		2002		2003		2004
BAY BANKS OF VIRGINIA, INC.	$	100	$	96	$	94	$	88	$	95	$	92
S&P 500 INDEX		100		91		80		62		80		89
NASDAQ INDEX		100		60		48		33		49		54
INDEPENDENT BANK INDEX		100		94		114		141		190		221


	Fiscal 2004		Percent		Fiscal 2003		Percent
Audit Fees	$	41,700	57	%	$	40,000	64	%
Audit-related Fees		28,750	39			19,500	31
Tax Fees		3,200	4			3,100	5

Total Fees	$	73,650	100	%	$	62,600	100	%