BAY BANKS OF VIRGINIA INC - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

o TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER..........0-22955

BAY BANKS OF VIRGINIA, INC.
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)

VIRGINIA		54-1838100
(STATE OF INCORPORATION)		(IRS EMP. ID NO.)

100 SOUTH MAIN STREET, KILMARNOCK, VA 22482
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)

(804)435-1171
(REGISTRANTS TELEPHONE NUMBER INCLUDING AREA CODE)

Indicate by checkmark 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

x Yes

o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

o 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:

2,311,189 shares of common stock on April 30, 2003.

FORM 10-Q

For the interim period ending March 31, 2003.

INDEX

PART I	FINANCIAL INFORMATION	3

ITEM 1.	FINANCIAL STATEMENTS	3

	CONSOLIDATED BALANCE SHEETS MARCH 31, 2003 (UNAUDITED) AND DECEMBER 31, 2002	3

	CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002 (UNAUDITED)	4

	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002 (UNAUDITED)	5

	CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002 (UNAUDITED)	6

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	8

	FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO MARCH 31, 2002 (UNAUDITED)	10

	NET INTEREST INCOME ANALYSIS FOR THE THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO MARCH 31, 2002 (UNAUDITED)	11

	INTEREST RATE SENSITIVITIY GAP ANALYSIS AS OF MARCH 31, 2003 (UNAUDITED)	12

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15

	RATE SHOCK ANALYSIS OF NET INTEREST INCOME ON MARCH 31, 2003 (UNAUDITED)

ITEM 4.	CONTROLS AND PROCEDURES	15

PART II	OTHER INFORMATION	15

ITEM 1.	LEGAL PROCEEDINGS	15

ITEM 2.	CHANGES IN SECURITIES	15

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	15

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	15

ITEM 5.	OTHER INFORMATION	15

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	15

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Bay Banks of Virginia, Inc.
Consolidated Balance Sheets

	Mar 31 2003		Dec 31 2002

	(Unaudited)
ASSETS
Cash and due from banks	$	13,950,944	$	9,875,840
Interest-bearing deposits		171,855		159,730
Federal funds sold		30,041,522		19,978,688
Securities available for sale, at fair value		46,679,597		50,151,265
Gross loans, net of allowance for loan losses of $1,735,510 and $1,696,914		167,625,004		168,442,156
Premises and equipment, net		8,093,563		7,968,469
Accrued interest receivable		1,367,152		1,453,952
Other real estate owned		495,431		580,167
Core deposit intangible		2,807,842		2,807,842
Other assets		1,390,926		1,642,040

Total assets	$	272,623,836	$	263,060,149

LIABILITIES
Demand deposits	$	30,024,963	$	25,731,769
Savings and NOW deposits		117,258,534		114,421,623
Other time deposits		94,201,062		91,362,789

Total deposits	$	241,484,559	$	231,516,181
Securities sold under repurchase agreements		3,874,987		4,481,764
Other liabilities		2,247,249		2,305,405

Total liabilities	$	247,606,795	$	238,303,350

SHAREHOLDERS’ EQUITY
Common stock - $5 par value;
Authorized - 5,000,000 shares;
Outstanding - 2,311,189 and 2,307,360 shares	$	11,555,944	$	11,536,800
Additional paid-in capital		4,141,469		4,080,693
Retained Earnings		7,599,651		7,514,790
Accumulated other comprehensive income		1,719,977		1,624,516

Total shareholders’ equity	$	25,017,041	$	24,756,799

Total liabilities and shareholders’ equity	$	272,623,836	$	263,060,149

See Notes to Consolidated Financial Statements.

Bay Banks of Virginia, Inc.
Consolidated Statements of Income
(Unaudited)

	Qtr ended Mar 31, 2003		Qtr ended Mar 31, 2002

INTEREST INCOME
Loans receivable (incl fees)	$	2,732,489	$	2,792,557
Securities:
Taxable		425,409		527,912
Tax-exempt		179,553		140,105
Federal funds sold		72,806		102,076

Total interest income	$	3,410,257	$	3,562,650

INTEREST EXPENSE
Deposits	$	1,258,978	$	1,414,676
Securities Sold to Repurchase		9,327		5,655

Total interest expense	$	1,268,305	$	1,420,331

Net Interest Income	$	2,141,952	$	2,142,319

Provision for loan losses	$	78,000	$	79,000

Net interest income after provision for loan losses	$	2,063,952	$	2,063,319

NONINTEREST INCOME
Income from fiduciary activities	$	138,468	$	175,581
Service charges & fees on deposit accounts		138,294		120,635
Other miscellaneous fees		147,996		125,205
Secondary market brokerage income		92,288		53,784
Net securities gains		20,857		1,600
Other income		71,789		29,972

Total noninterest income	$	609,692	$	506,777

NONINTEREST EXPENSES
Salaries and employee benefits	$	1,044,609	$	834,805
Occupancy expense		261,496		199,460
Bank franchise tax		52,488		57,000
Deposit Insurance Premium		9,288		18,634
Visa Expense		71,366		62,809
Amortization of Intangibles		6,196		15,306
Other expense		598,048		483,956

Total noninterest expenses	$	2,043,491	$	1,671,970

Net Income before income taxes	$	630,153	$	898,126

Income tax expense		191,232		256,000

Net Income	$	438,921	$	642,126

Average basic shares outstanding		2,305,385		2,300,742
Earnings per share, basic		0.19		0.28
Average diluted shares outstanding		2,316,288		2,335,228
Earnings per share, diluted		0.19		0.27

See Notes to Consolidated Financial Statements.

Bay Banks of Virginia, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

	Quarter ended Mar 31, 2002			Quarter ended Mar 31, 2003

CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	438,921		$	642,126
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		183,724			130,987
Net amortization and accretion of securities		5,587			10,516
Provision for Loan Losses		78,000			79,000
Net (Gain) / Loss on Sale of Securities		(20,857	)		(1,600	)
(Gain) / Loss on sale of other real estate owned		(34,911	)		0
Accrued income and other assets		337,914			53,390
Increase / (Decrease) in Other Liabilities		(107,332	)		35,857

Net Cash Provided by Operating Activities	$	881,046		$	950,276

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of Available-for-Sale Securities		3,797,835			752,493
Proceeds from sales of Available-for-Sale Securities		2,449,500			504,800
Purchases of Available-for-Sale Securities		(2,615,760	)		(2,187,348	)
(Increase) / Decrease in interest bearing deposits		(12,125	)		9,313
(Increase) / Decrease in Loans outstanding		739,152			(2,578,225	)
(Increase) / Decrease in Federal Funds Sold		(10,062,834	)		(126,884	)
Purchases of Premises and Equipment		(308,818	)		(230,776	)
(Increase) / Decrease in other real estate owned		119,647			(10,796	)

Net Cash (Used in) Investing Activities	$	(5,893,403	)	$	(3,867,423	)

CASH FLOWS FROM FINANCING ACTIVITIES
Increase / (Decrease) in Demand, Savings, & NOW deposits		7,130,105			1,745,405
Increase / (Decrease) in Time Deposits		2,838,273

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