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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
or
[ ] 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 0-25031
VIRGINIA CAPITAL BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1913168
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
400 George Street, Fredericksburg, Virginia 22404
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(540) 899-5500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changes since last report)
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 9,289,280 shares of common
stock, par value $0.01 per share, were outstanding as of May 7, 2001.
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Virginia Capital Bancshares, Inc.
Form 10-Q
For the Quarter Ended March 31, 2001
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
March 31, 2001 and December 31, 2000 (unaudited)................... 3
Consolidated Statements of Income - For the Three
Months Ended March 31, 2001 and 2000 (unaudited)................... 4
Consolidated Statements of Changes in Stockholders' Equity -
For the Three Months Ended March 31, 2001 and 2000 (unaudited)..... 5
Consolidated Statements of Cash Flows - For the
Three Months Ended March 31, 2001 and 2000 (unaudited)............. 6
Notes to Unaudited Consolidated Financial Statements............... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 14
PART II: OTHER INFORMATION.............................................. 15
Item 1. Legal Proceedings.............................................. 15
Item 2. Changes in Securities and Use of Proceeds...................... 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
SIGNATURES.............................................................. 17
PART I. FINANCIAL INFORMATION
VIRGINIA CAPITAL BANCSHARES, INC.
Consolidated Balance Sheets (Unaudited)
(Dollars in Thousands)
March 31, December 31,
2001 2000
-------- --------
Assets
Cash and cash equivalents (includes interest-bearing
deposits of $23,178 in 2001; $8,842 in 2000) $ 24,713 $ 10,247
Investment securities
Held-to-maturity (fair value $516 in 2001; $575 in 2000) 508 565
Available-for-sale (cost $53,349 in 2001; $61,910 in 2000) 53,388 61,131
Federal Home Loan Bank stock, restricted, at cost 3,773 3,685
Loans receivable, net 448,030 444,800
Accrued interest receivable 3,229 3,429
Real estate acquired through foreclosure, net 498 627
Property and equipment, net 3,144 3,229
Other assets 4,421 4,962
---------------------------
Total assets $541,704 $532,675
===========================
Liabilities and Stockholders' Equity
Liabilities
Deposits $370,337 $367,345
Official bank checks 3,359 2,080
Advances from Federal Home Loan Bank 5,000 5,000
Advances from borrowers for taxes and insurance 2,575 945
Accrued expenses and other liabilities 3,141 1,811
---------------------------
Total liabilities 384,412 377,181
---------------------------
Stockholders' Equity
Preferred stock, 5,000,000 shares authorized, none issued - -
Common stock, $.01 par value, 75,000,000 shares authorized,
issued and outstanding 9,289,280 at March 31, 2001 and
9,289,280 at December 31, 2000 93 93
Additional paid-in capital 80,139 80,045
Common stock held by stock benefit plans (13,095) (13,488)
Retained earnings, substantially restricted 90,131 89,327
Accumulated other comprehensive income (loss) 24 (483)
---------------------------
Total stockholders' equity 157,292 155,494
---------------------------
Total liabilities and stockholders' equity $541,704 $532,675
===========================
See accompanying notes to consolidated financial statements.
3
VIRGINIA CAPITAL BANCSHARES, INC.
Consolidated Statements of Income (Unaudited)
(Dollars in Thousands)
Three Months Ended
March 31,
----------------------------
2001 2000
----------------------------
Interest income
Interest and fees on loans $8,862 $8,233
Interest on investment securities 1,089 1,389
----------------------------
Total interest income 9,951 9,622
----------------------------
Interest expense
Deposits 4,850 4,171
Advances and other borrowings 77 78
----------------------------
Total interest expense 4,927 4,249
----------------------------
Net interest income before provision for loan losses 5,024 5,373
Provision for loan losses 20 25
----------------------------
Net interest income after provision for loan losses 5,004 5,348
----------------------------
Noninterest income
Fees and service charges 93 81
Securities losses - (21)
Other 6 6
----------------------------
Total noninterest income 99 66
----------------------------
Noninterest expense
Compensation and benefits 1,109 1,030
Occupancy and equipment 177 215
Franchise tax 280 -
Other 849 826
----------------------------
Total noninterest expense 2,415 2,071
----------------------------
Income before income taxes 2,688 3,343
Income taxes 961 1,263
----------------------------
Net Income $1,727 $2,080
============================
Net income per share
Basic $ .21 $ .22
Diluted $ .20 $ .22
See accompanying notes to consolidated financial statements.
4
VIRGINIA CAPITAL BANCSHARES, INC.
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(Dollars in Thousands)
Common Retained Accumulated
Additional Stock Earnings, Other Total
Preferred Common Paid-in Held by Substantially Comprehensive Stockholders'
Stock Stock Capital Benefit Plans Restricted Income (Loss) Equity
--------- --------- ---------- ------------- -------------- --------------- --------------
Balance, December 31, 2000 $ - $ 93 $80,045 $(13,488) $89,327 $ (483) $155,494
Comprehensive income:
Net income - - - - 1,727 - 1,727
Change in net unrealized
gain (loss) on securities
available-for-sale - - - - - 507 507
--------
Comprehensive income 2,234
Cash dividends declared ($0.11
per share) - - - - (923) - (923)
ESOP shares committed to
be released - - 94 114 - - 208
Amortization of restricted
stock awards - - - 279 - - 279
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Balance, March 31, 2001 $ - $ 93 $ 80,139 $(13,095) $90,131 $ 24 $157,292
=============================================================================================
Balance, December 31, 1999 $ - $108 $103,226 $(15,062) $86,206 $(1,384) $173,094
Comprehensive income:
Net income - - - - 2,080 - 2,080
Change in net unrealized
gain (loss) on securities
available-for-sale - - - - - (101) (101)
--------
Comprehensive income 1,979
Cash dividends declared ($0.21
per share) - - - - (2,011) - (2,011)
ESOP shares committed to
be released - - 53 114 - - 167
Amortization of restricted
stock awards - - - 279 - - 279
Stock repurchases - (5) (8,020) - - - (8,025)
---------------------------------------------------------------------------------------------
Balance, March 31, 2000 $ - $103 $ 95,259 $(14,669) $86,275 $(1,485) $165,483
=============================================================================================
See accompanying notes to consolidated financial statements
5
VIRGINIA CAPITAL BANCSHARES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
For the Three Months
Ended March, 31
------------------------
2001 2000
------------------------
Cash flows from operating activities:
Net income $ 1,727 $2,080
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 85 110
Provision for loan losses 20 25
Provision for loss on real estate owned 10 5
Net realized losses on investment securities - 21
ESOP shares committed to be released 208 167
Amortization of restricted stock awards 279 279
Premium/discount on investment securities 74 98
Deferred loan fees and costs, net 18 54
(Increase) decrease in accrued interest receivable 200 (37)
Decrease in other assets 180 1,113
Increase in advances by borrowers for taxes and insurance 1,630 1,583
Increase in other liabilities 1,330 1,000
----------------------------
Net cash provided by operating activities 5,761 6,498
----------------------------
Cash flows from investing activities:
Proceeds from sale of securities available-for-sale - 4,978
Proceeds from redemption of securities available-for-sale 8,500 500
Purchase of FHLB stock (88) (72)
Principal payments on mortgaged-backed securities held-to-maturity 68 64
Loan originations and principal payments, net (3,268) (9,468)
Purchases of property and equipment - (64)
Proceeds from sale of real estate acquired through foreclosure 145 177
----------------------------
Net cash provided by (used in) investing activities 5,357 (3,885)
----------------------------
Cash flows from financing activities:
Net decrease in savings and transaction accounts (272) (2,020)
Net increase in certificates of deposit 3,264 2,136
Net increase in official bank checks 1,279 351
Cash dividends paid (923) (2,011)
Stock repurchases - (8,025)
----------------------------
Net cash provided by (used in) financing activities 3,348 (9,569)
----------------------------
Net increase (decrease) in cash and cash equivalents 14,466 (6,956)
Cash and cash equivalents at beginning of period 10,247 18,555
----------------------------
Cash and cash equivalents at end of period $24,713 $11,599
============================
See accompanying notes to consolidated financial statements.
6
VIRGINIA CAPITAL BANCSHARES, INC.
Notes to Consolidated Financial Statements
March 31, 2001
1. The consolidated financial statements include the accounts of Virginia
Capital Bancshares, Inc. (the "Company") and its wholly-owned subsidiary
Fredericksburg State Bank (the "Bank"). All material intercompany
transactions and accounts have been eliminated. In the opinion of
management, the accompanying unaudited consolidated financial statements
contain all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the financial position of the Company as of
March 31, 2001, and the results of its operations for each of the periods
presented. The results of operations for the interim periods presented are
not necessarily indicative of the results of operations that may be
expected for all of 2001.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, pursuant to the rules and
regulations of the Securities and Exchange Commission. These unaudited
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto included in the
Company's Annual Report to stockholders on Form 10-K for the year ended
December 31, 2000.
2. The following is a reconciliation of the denominators of the basic and
diluted earnings per share computations.
Basic Earnings Per Share: Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
-----------------------------------------
Net income $ 1,727 $ 2,080
Dividends on unvested restricted stock awards (32) (77)
-----------------------------------------
Net income - basic $ 1,695 $ 2,003
=========================================
Weighted average shares outstanding 9,289,280 10,560,690
Less: Unallocated/unearned shares held by
stock benefit plans (1,189,007) (1,307,625)
-----------------------------------------
Weighted average shares outstanding - basic 8,100,273 9,253,065
=========================================
Earnings per share - basic $ .21 $ .22
=========================================
7
Diluted Earnings Per Share: Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
-----------------------------------------
Net income $ 1,727 $ 2,080
Dividends on unvested restricted stock awards, net (19) (77)
-----------------------------------------
Net income - diluted $ 1,708 $ 2,003
=========================================
Weighted average shares outstanding-basic 8,100,273 9,253,065
Add effect of dilutive instruments:
Restricted stock awards 122,521 -
Stock options 125,229 -
=========================================
Weighted average shares outstanding-diluted 8,348,023 9,253,065
=========================================
Earnings per share - diluted $ .20 $ .22
=========================================
8
PART I: FINANCIAL INFORMATION
VIRGINIA CAPITAL BANCSHARES, INC.
MARCH 31, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking
statements which are based on certain assumptions and which describe future
plans, strategies and expectations of Virginia Capital Bancshares, Inc. (the
"Company"). These forward-looking statements are generally identified by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project," or
similar expressions. The Company's ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which
could have a material adverse effect on the operations of the Company and the
subsidiaries include, but are not limited to, changes in: interest rates,
general economic conditions, legislative/regulatory changes, monetary and fiscal
policies of the U.S. Government, including policies of the U.S. Treasury and the
Federal Reserve Board, the quality or composition of the loan or investment
portfolios, demand for loan products, deposit flows, competition, demand for
financial services in the Company's market area and accounting principles and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. The Company does not undertake -- and specifically disclaims any
obligation -- to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
General
The Company is the holding company for Fredericksburg State Bank ("the
Bank"). On January 19, 2001, Fredericksburg State Bank was converted from a
federally chartered savings bank (known as Fredericksburg Savings Bank) to a
Virginia state commercial bank. The Company is headquartered in Fredericksburg,
Virginia and its principal business currently consists of the operations of the
Bank. The Bank's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on its loan and
investment portfolios and its cost of funds, consisting of the interest paid on
deposits and borrowings. Results of operations are also affected by the Bank's
provision for loan losses and fees and other service charges. The Bank's
noninterest expense principally consists of compensation and employee benefits,
office occupancy and equipment expense, federal deposit insurance premiums, the
cost of foreclosed real estate operations, data processing, advertising and
business promotion and other expenses. Results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in interest rates, government policies and actions of
regulatory authorities. Future changes in applicable law, regulations or
government policies may materially impact the Bank.
On January 23, 2001, the Company and BB&T Corporation ("BB&T") entered into
an Agreement and Plan of Reorganization pursuant to which the Company will merge
with and into BB&T. The merger, which is subject to the approval of Virginia
Capital shareholders and banking
9
regulators, is expected to be completed in the second quarter of 2001. BB&T
received the approval of the Federal Reserve Board on April 5, 2001 and the
Virginia Bureau of Financial Institutions on March 27, 2001.
In connection with the Agreement and Plan of Reorganization, the Company
granted to BB&T a stock option pursuant to a Stock Option Agreement, dated as of
January 23, 2001, which, under certain defined circumstances, would enable BB&T
to purchase 1,848,560 shares of Virginia Capital common stock, subject to
adjustment, at a price of $15.00 per share.
Comparison of Financial Condition at March 31, 2001 and December 31, 2000
The Company's assets totalled $541.7 million at March 31, 2001, an increase
of $9.0 million, or 1.7% from total assets of $532.7 million at December 31,
2000. Dividends of $.11 per share were paid totalling $923,000 during the first
three months of 2001. Stockholders' equity increased to $157.3 million, or
29.04% of total assets, compared to $155.5 million, or 29.2% of total assets, at
December 31, 2000. Deposits increased $3.0 million from $367.3 million at
December 31, 2000 to $370.3 million at March 31, 2001.
Loans. Net loans receivable increased $3.2 million to $448.0 million at
March 31, 2001 from $444.8 million at December 31, 2000. One-to-four family
mortgage loans increased $139,000 to $378.7 million at March 31, 2001 from
$378.6 million at December 31, 2000. Construction loans increased $2.5 million
to $21.7 million at March 31, 2001 from $19.2 million at December 31, 2000.
Allowance for Loan Losses. The allowance for loan losses remained
constant at $5.7 million at March 31, 2001 and December 31, 2000. The unchanged
allowance during this period reflects the stability in non-performing assets and
net charged off loans, as well as management's belief that there is economic
stability in the Bank's market area. The adequacy of the allowance for loan
losses is evaluated monthly by management based upon a review of significant
loans, with particular emphasis on non-performing and delinquent loans that
management believes warrant special attention. At March 31, 2001, the allowance
for loan losses provided coverage of 490.43% of total nonperforming loans of
$1.2 million compared to 483.46% of total nonperforming loans of $1.2 million at
December 31, 2000. The ratio of allowance for loan losses to net loans
receivable was 1.25% at March 31, 2001 and 1.26% at December 31, 2000.
Investment Securities. Investment securities classified as available-for-
sale totalled $53.4 million at March 31, 2001, a net decrease of $7.7 million
from $61.1 million at December 31, 2000. The decrease in investment securities
classified as available-for-sale is primarily a result of maturities. The
following tables set forth certain information regarding the amortized cost and
fair value of the Company's available-for-sale securities at March 31, 2001.
10
Amortized Estimated
Cost Fair Value
--------------------------------
U.S. Treasury and agency obligations $16,647 $16,809
Corporate Securities 29,320 29,584
State and local municipal bonds 3,380 3,409
Mutual fund 1,502 1,463
Dual index consolidated bonds 2,500 2,123
--------------------------------
$53,349 $53,388
================================
Maturities of available-for-sale securities at March 31, 2001 are as follows:
Amortized Estimated
Cost Fair Value
--------------------------------
Mutual fund $ 1,502 $ 1,463
Due in one year or less 19,517 19,630
Due after one year through five years 32,330 32,295
--------------------------------
$53,349 $53,388
================================
Deposits. Total deposits increased $3.0 million from $367.3 million at
December 31, 2000 to $370.3 million at March 31, 2001. Transaction accounts
increased $1.7 million from $23.8 million at December 31, 2000 to $25.5 million
at March 31, 2001. Savings accounts decreased $2.0 million from $61.7 million
at December 31, 2000 to $59.7 million at March 31, 2001. Certificates of
deposit increased $3.3 million from $281.8 million at December 31, 2000 to
$285.1 million at March 31, 2001.
Comparison of Operating Results for the Three Months Ended March 31, 2001
and 2000
General. Net income for the three months ended March 31, 2001 decreased
$353,000 to $1.7 million compared to net income of $2.1 million for the three
months ended March 31, 2000. The decrease in net income during the three-month
period ended March 31, 2001 resulted primarily from a $349,000 decrease in net
interest income and a $344,000 increase in non-interest expenses partially
offset by a decrease in income taxes of $302,000. The decrease in income taxes
resulted from reduced taxable income and the Bank's conversion from a federally
chartered savings bank to a Virginia state commercial bank. As a Virginia state
commercial bank, the Bank is not subject to Virginia income taxes.
Interest Income. Interest income for the three months ended March 31,
2001 increased $329,000 to $10.0 million, from $9.6 million for the comparable
period in 2000. Interest on mortgage loans, the largest component of interest
income, increased $561,000 from $8.0 million for the three months ended
March 31, 2000 to $8.6 million for the three months ended March 31, 2001. The
increase in interest on mortgage loans was the result of an increase in the
average balance of mortgage loans to $438.6 million compared to $422.0 million
in the prior year's first quarter, and, an increase of 22 basis points in the
yield on the average balance of mortgage loans from 7.58% to 7.80%. The increase
in interest on mortgage loans was offset by a decrease in interest on overnight
and short-term deposits and investment securities of $300,000. The $300,000
decrease was primarily the result of a decrease in the average balance of
overnight and short-term deposits and
11
investment securities from $96.3 million for the three month period ended
March 31, 2000 to $76.7 million for the three month period ended March 31, 2001.
Interest Expense. Interest expense was $4.9 million for the three months
ended March 31, 2001, an increase of $678,000 from $4.2 million for the three
months ended March 31, 2000. This increase is primarily attributable to a
$10.9 million increase in average deposits from $356.3 million for the first
quarter of 2000 to $367.2 million for the first quarter of 2001, and, an
increase of 60 basis points in the rates paid on these deposits from 4.68%
to 5.28%.
Provision for Loan Losses. The provision for loan losses for the three
months ended March 31, 2001 was $20,000, a decrease of $5,000 from $25,000 for
the three months ended March 31, 2000. Net charge-offs decreased from $19,000
for the three months ended March 31, 2000 to $2,000 for the three months ended
March 31, 2001. The static quality of the loan portfolio and constant level of
non-accruals mitigated the need for additional provisions for loan losses.
A summary of activity in the allowance for loan losses follows:
Three Months Ended
March 31,
------------------------
2001 2000
------------------------
Balance at beginning of period $5,671 $5,689
Provision for loan losses 20 25
Loans charged off:
Mortgage loans - 5
Consumer loans 2 14
------------------------
Total charge-offs 2 19
Recoveries - -
------------------------
Balance at end of period $5,689 $5,695
========================
Noninterest Expense. Total noninterest expense increased $344,000 to
$2.4 million for the three months ended March 31, 2001, compared to $2.1 million
for the three months ended March 31, 2000. The increase in noninterest expense
is primarily due to $280,000 of Virginia state franchise tax expense incurred in
the first quarter of 2001. The franchise tax expense resulted from the Bank's
conversion from a federally chartered savings bank to a Virginia state
commercial bank. As a federally chartered savings bank, the Bank incurred no
Virginia state franchise tax expense for 2000. Other noninterest expense of
$849,000 includes $230,000 of nonrecurring expenses related to the pending
merger with BB&T. The Company's efficiency ratio increased to 47.14% for the
three months ended March 31, 2001 compared to 38.07% for the three months ended
March 31, 2000, primarily as a result of the franchise tax expense and
nonrecurring merger-related expenses.
12
Other key performance ratios are as follows:
At or For the Three Months
Ended March 31,
----------------------------
2001 2000
----------------------------
Return on average assets 1.29% 1.54%
Return on average equity 4.42% 4.91%
Net interest margin 3.80% 4.06%
Total noninterest expense to average assets 1.80% 1.54%
Efficiency ratio 47.14% 38.07%
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, principal and interest
payments on loans, mortgage-backed and investment securities and FHLB advances.
While maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. At March 31, 2001, the
Bank's liquidity ratio was 10.72%. The Bank manages its liquidity position and
demands for funding primarily by investing excess funds in short-term
investments and utilizing FHLB advances in periods when the Bank's demands for
liquidity exceed funding from deposit inflows.
The Company's most liquid assets are cash and cash equivalents and
securities available-for-sale. The levels of these assets are dependent on the
Bank's operating, financing, lending and investing activities during any given
period. At March 31, 2001, the Company's cash and cash equivalents and
securities available-for-sale totalled $78.1 million, or 14.42% of the Company's
total assets.
The Company, through the Bank, has other sources of liquidity if a need for
additional funds arises. At March 31, 2001, the Bank had $5.0 million in
advances outstanding from the FHLB and, had an additional overall borrowing
capacity from the FHLB of $50.5 million. Depending on market conditions, the
pricing of deposit products and FHLB advances, the Bank may utilize FHLB
borrowings to fund asset growth.
At March 31, 2001, the Bank had commitments to fund loans and unused
outstanding lines of credit, unused standby letters of credit and undisbursed
proceeds of construction mortgages totaling $38.0 million. The Bank anticipates
that it will have sufficient funds available to meet its current loan
origination commitments. Certificate accounts, including IRA and Keogh
accounts, which are scheduled to mature in less than one year from March 31,
2001, totalled $200.8 million. Based upon experience, management believes the
majority of maturing certificates of deposit will remain with the Bank. In
addition, management of the Bank believes that it can adjust the rates offered
on certificates of deposit to retain deposits in changing interest rate
environments. In the event that a significant portion of these deposits are not
retained by the Bank, the Bank would be
13
able to utilize FHLB advances to fund deposit withdrawals, which would result in
an increase in interest expense to the extent that the average rate paid on such
advances exceeds the average rate paid on deposits of similar duration.
The Company, as a bank holding company, and the Bank, are subject to
regulatory requirements with respect to risk-based capital adequacy. Risk-based
capital ratios measure capital as a percentage of a combination of risk-weighted
balance sheet and off-balance sheet risk. The risk-weighted values of both
balance sheet and off-balance sheet items are determined in accordance with risk
factors specified by Federal regulatory pronouncements.
Tier 1 capital (total shareholders' equity excluding unrealized gains or
losses on debt securities available for sale, net of tax effect, plus certain
mandatorily redeemable capital securities, less nonqualifying intangible assets)
is required to be at least 4% of risk-weighted assets, and total capital (Tier 1
capital, plus a qualifying portion of the allowance for loan and lease losses
and qualifying subordinated debt) must be at least 8% of risk-weighted assets,
with at least one half of the minimum consisting of Tier 1 capital.
In addition to the risk-based capital measures described above, regulators
have also established minimum leverage capital requirements for banking
organizations. This is calculated by dividing period-end Tier 1 capital by
average tangible assets for the most recent quarter. The minimum required Tier
1 leverage ratio ranges from 3% for holding companies with the highest
supervisory rating and at least 4% for all others.
The Company's capital adequacy ratios for the quarter ending March 31, 2001
follow:
Risk-based capital ratios:
Tier 1 capital 29.36%
Total capital 46.89%
Tier 1 leverage ratio 48.14%
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
----------------------------------------------------------
There have been no material changes in information regarding quantitative
and qualitative disclosures about market risk from the information presented as
of December 31, 2000 in the Company's Annual Report on Form 10-K.
14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
-----------------
Neither the Company nor the Bank are involved in any pending legal
proceedings other than routine legal proceedings occurring in the ordinary
course of business, which in the aggregate involve amounts which are believed by
management to be immaterial to the financial condition and results of the
operation of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
-----------------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
-------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION.
-----------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .
---------------------------------
(a) Exhibits
2.1 Agreement and Plan of Reorganization between Virginia Capital Bancshares,
Inc. and BB&T Corporation (1)
3.1 Amended and Restated Articles of Incorporation of Virginia Capital
Bancshares, Inc. (2)
3.2 Amended and Restated Bylaws of Virginia Capital Bancshares, Inc. (2)
4.1 Draft Stock Certificate of Virginia Capital Bancshares, Inc. (3)
10.10 Stock Option Agreement between Virginia Capital Bancshares, Inc. and BB&T
Corporation (1)
____________________
(1) Incorporated herein by reference into this document from the Form 8-K filed
January 26, 2001.
(2) Incorporated herein by reference into this document from Exhibits to the
Company's 10-Q filed on November 15, 1999.
(3) Incorporated herein by reference into this document from the Exhibits to
Form S-1, Registration Statement and amendments thereto, initially filed on
September 11, 1998, Registration No. 33-63309.
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(b) Reports on Form 8-K
On January 26, 2001, the Company filed a Form 8-K reporting that the
Company and BB&T Corporation ("BB&T") entered into an Agreement and Plan of
Reorganization ("Agreement"), dated January 23, 2001, pursuant to which the
Company will merge with and into BB&T. The Agreement was filed as Exhibit 2.1
to the Form 8-K. In connection with the Agreement, the Company granted to BB&T
a stock option pursuant to a Stock Option Agreement. A copy of the Stock Option
Agreement was filed as Exhibit 10.1 to the Form 8-K.
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SIGNATURE
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 hereunto duly authorized.
VIRGINIA CAPITAL BANCSHARES, INC.
Dated: May 14, 2001 By: /s/ Samuel C. Harding, Jr.
-----------------------------------
Samuel C. Harding, Jr.
President
(principal executive officer)
Dated: May 14, 2001 By: /s/ Peggy J. Newman
-----------------------------------
Peggy J. Newman
Executive Vice President, Treasurer
and Secretary
(principal financial and accounting officer)
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