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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 SEPTEMBER 30, 2002

|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

|Yes | x | No | o
|--- | - | -- | -
|    |   |    |  

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Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest practicable date: 2,302,325 shares of common stock on October 31, 2002.

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##### Table of Contents

FORM 10-Q

For the interim period ending September 30, 2002.

INDEX

|PART I  | FINANCIAL INFORMATION                                                                                                       
|------- | ----------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                             
|ITEM 1. | FINANCIAL STATEMENTS                                                                                                        
|        |                                                                                                                             
|        | CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001                                            
|        |                                                                                                                             
|        | CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED)        
|        |                                                                                                                             
|        | CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED)                     
|        |                                                                                                                             
|        | CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED)
|        |                                                                                                                             
|        | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                  
|        |                                                                                                                             
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION                                        
|        |                                                                                                                             
|        | FINANCIAL HIGHLIGHTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO SEPTEMBER 30, 2001 (UNAUDITED)                
|        |                                                                                                                             
|        | NET INTEREST INCOME ANALYSIS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO SEPTEMBER 30, 2001 (UNAUDITED)        
|        |                                                                                                                             
|        | INTEREST RATE SENSITIVITIY GAP ANALYSIS AS OF SEPTEMBER 30, 2002 (UNAUDITED)                                                
|        |                                                                                                                             
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                  
|        |                                                                                                                             
|        | RATE SHOCK ANALYSIS OF NET INTEREST INCOME ON SEPTEMBER 30, 2002 (UNAUDITED)                                                
|        |                                                                                                                             
|ITEM 4. | CONTROLS AND PROCEDURES                                                                                                     
|        |                                                                                                                             
|PART II | OTHER INFORMATION                                                                                                           
|        |                                                                                                                             
|ITEM 1. | LEGAL PROCEEDINGS                                                                                                           
|        |                                                                                                                             
|ITEM 2. | CHANGES IN SECURITIES                                                                                                       
|        |                                                                                                                             
|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES                                                                                             
|        |                                                                                                                             
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                         
|        |                                                                                                                             
|ITEM 5. | OTHER INFORMATION                                                                                                           
|        |                                                                                                                             
|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K                                                                                            

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PART I  
FINANCIAL INFORMATION

Item 1.     
Financial Statements

Bay Banks of Virginia, Inc.Consolidated Balance Sheets

|                                             |                                       | (Unaudited)Sep 30 2002 |             | Dec 31, 2001 |  
|-------------------------------------------- | ------------------------------------- | ---------------------- | ----------- | ------------ | -
|                                             |                                       |                        |             |              |  
|ASSETS                                       |                                       |                        |             |              |  
|Cash and due from banks                      |                                       | $                      | 11,300,119  |              | $
|Federal funds sold                           |                                       |                        | 19,492,297  |              |  
|Securities available for sale, at fair value |                                       |                        | 49,569,764  |              |  
|Gross Loans                                  |                                       |                        | 164,591,912 |              |  
|Allowance for loan losses                    |                                       |                        | (1,538,242  | )            |  
|Premises and equipment, net                  |                                       |                        | 7,501,355   |              |  
|Accrued interest receivable                  |                                       |                        | 1,466,202   |              |  
|Other real estate owned                      |                                       |                        | 602,743     |              |  
|Other assets                                 |                                       |                        | 2,479,117   |              |  
|Total assets                                 |                                       | $                      | 255,465,267 |              | $
|                                             |                                       |                        |             |              |  
|LIABILITIES                                  |                                       |                        |             |              |  
|Demand deposits                              |                                       | $                      | 29,998,627  |              | $
|Savings and NOW deposits                     |                                       |                        | 107,266,842 |              |  
|Other time deposits                          |                                       |                        | 89,392,944  |              |  
|Total deposits                               |                                       | $                      | 226,658,413 |              | $
|Securities sold for repurchase               |                                       | $                      | 3,135,308   |              | $
|Other liabilities                            |                                       |                        | 1,043,920   |              |  
|Total liabilities                            |                                       | $                      | 230,837,641 |              | $
|                                             |                                       |                        |             |              |  
|SHAREHOLDERS EQUITY                         |                                       |                        |             |              |  
|Common stock - $5 par value;                 |                                       |                        |             |              |  
|                                             | Authorized - 5,000,000 shares         |                        |             |              |  
|                                             | Outstanding  2,305,325 and 1,153,281 |                        | $           | 11,526,624   |  
|Additional paid-in capital                   |                                       |                        | 4,027,068   |              |  
|Retained earnings                            |                                       |                        | 7,178,853   |              |  
|Accumulated other comprehensive income       |                                       |                        | 1,895,081   |              |  
|Total shareholders equity                   |                                       | $                      | 24,627,626  |              | $
|Total liabilities and shareholders equity   |                                       | $                      | 255,465,267 |              | $

See notes to consolidated financial statements.

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

|                                                                                                   |  | Qtr ended Sep 30, 2002 |           | Qtr ended Sep 30, 2001 |   | Year to date Sep 30, 2002 |  | Year to date Sep 30, 2001 |           
|-------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | ---------------------- | - | ------------------------- |  | ------------------------- | ----------
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|INTEREST INCOME                                                                                    |  |                        |           |                        |   |                           |  |                           |           
|Loans receivable (incl fees)                                                                       |  | $                      | 2,966,896 |                        | $ | 3,245,989                 |  | $                         | 9,114,589 
|Securities                                                                                         |  |                        | 692,162   |                        |   | 663,627                   |  |                           | 2,039,928 
|Federal funds sold                                                                                 |  |                        | 49,060    |                        |   | 76,855                    |  |                           | 235,577   
|Total interest income                                                                              |  | $                      | 3,708,118 |                        | $ | 3,986,471                 |  | $                         | 11,390,094
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|INTEREST EXPENSE                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|Deposits                                                                                           |  | $                      | 1,313,819 |                        | $ | 1,727,831                 |  | $                         | 4,067,659 
|Securities sold to repurchase                                                                      |  |                        | 9,043     |                        |   | 20,042                    |  |                           | 23,599    
|Total interest expense                                                                             |  | $                      | 1,322,862 |                        | $ | 1,747,873                 |  | $                         | 4,091,258 
|Net Interest Income                                                                                |  | $                      | 2,385,256 |                        | $ | 2,238,598                 |  | $                         | 7,298,836 
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|Provision for loan losses                                                                          |  | $                      | 103,000   |                        | $ | 75,000                    |  | $                         | 314,000   
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|Net interest income after provision for loan losses                                                |  | $                      | 2,282,256 |                        | $ | 2,163,598                 |  | $                         | 6,984,836 
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|NONINTEREST INCOME                                                                                 |  |                        |           |                        |   |                           |  |                           |           
|Income from fiduciary activities                                                                   |  | $                      | 147,722   |                        | $ | 189,524                   |  | $                         | 481,708   
|Service charges & fees on deposit accounts                                                         |  |                        | 144,334   |                        |   | 106,260                   |  |                           | 396,690   
|Other miscellaneous fees                                                                           |  |                        | 190,794   |                        |   | 154,559                   |  |                           | 470,047   
|Net securities gains                                                                               |  |                        | 0         |                        |   | 1,847                     |  |                           | 2,800     
|Other income                                                                                       |  |                        | 67,723    |                        |   | 60,546                    |  |                           | 186,063   
|Total noninterest income                                                                           |  | $                      | 550,573   |                        | $ | 512,736                   |  | $                         | 1,537,308 
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|NONINTEREST EXPENSES                                                                               |  |                        |           |                        |   |                           |  |                           |           
|Salaries and employee benefits                                                                     |  | $                      | 1,145,392 |                        | $ | 1,034,403                 |  | $                         | 3,373,163 
|Occupancy expense                                                                                  |  |                        | 218,292   |                        |   | 230,382                   |  |                           | 630,256   
|Deposit insurance premium                                                                          |  |                        | 9,361     |                        |   | 11,999                    |  |                           | 27,995    
|Visa Expense                                                                                       |  |                        | 94,765    |                        |   | 81,419                    |  |                           | 234,557   
|Amortization of intangibles                                                                        |  |                        | 70,391    |                        |   | 73,517                    |  |                           | 216,208   
|Other expense                                                                                      |  |                        | 575,341   |                        |   | 465,564                   |  |                           | 1,694,090 
|Total noninterest expenses                                                                         |  | $                      | 2,113,542 |                        | $ | 1,897,284                 |  | $                         | 6,176,269 
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|Net Income before income taxes                                                                     |  | $                      | 719,287   |                        | $ | 779,050                   |  | $                         | 2,345,875 
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|Income tax expense                                                                                 |  | $                      | 214,668   |                        | $ | 223,000                   |  | $                         | 731,668   
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|Net Income                                                                                         |  | $                      | 504,619   |                        | $ | 556,050                   |  | $                         | 1,614,207 
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|Average basic shares outstanding (1)                                                               |  |                        | 2,301,241 |                        |   | 2,311,182                 |  |                           | 2,300,905 
|Earnings per share, basic                                                                          |  | $                      | 0.22      |                        | $ | 0.24                      |  | $                         | 0.70      
|Average diluted shares outstanding (1)                                                             |  |                        | 2,337,911 |                        |   | 2,352,226                 |  |                           | 2,337,575 
|Earnings per share, diluted                                                                        |  | $                      | 0.22      |                        | $ | 0.24                      |  | $                         | 0.69      
|                                                                                                   |  |                        |           |                        |   |                           |  |                           |           
|(1) Average basic and diluted shares outstanding are adjusted for a 2-for-1 stock split on 6/7/02. |  |                        |           |                        |   |                           |  |                           |           

See notes to consolidated financial statements.

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

|Nine months ended:                                                                |  | Sep 30, 2002 |             | Sep 30, 2001 |  
|--------------------------------------------------------------------------------- |  | ------------ | ----------- | ------------ | -
|                                                                                  |  |              |             |              |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |              |             |              |  
|                                                                                  |  |              |             |              |  
|Net Income                                                                        |  | $            | 1,614,207   |              | $
|                                                                                  |  |              |             |              |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |              |             |              |  
|Depreciation                                                                      |  |              | 383,188     |              |  
|Provision for Loan Losses                                                         |  |              | 314,000     |              |  
|Net (Gain) / Loss on Sale of Securities                                           |  |              | (2,800      | )            |  
|(Increase) / Decrease in Accrued Interest Receivable                              |  |              | 96,715      |              |  
|(Increase) / Decrease in Other Assets                                             |  |              | 350,826     |              |  
|Increase / (Decrease) in Other Liabilities                                        |  |              | 120,357     |              |  
|Net Cash Provided by Operating Activities                                         |  | $            | 2,876,493   |              | $
|                                                                                  |  |              |             |              |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |              |             |              |  
|Purchases of Available-for-Sale Securities                                        |  |              | (5,509,233  | )            |  
|Proceeds from sales of Available-for-Sale Securities                              |  |              | 3,768,400   |              |  
|Proceeds from maturities of Available-for-Sale Securities                         |  |              | 2,210,733   |              |  
|(Increase) / Decrease in Loans outstanding                                        |  |              | (13,115,114 | )            |  
|(Increase) / Decrease in Fed Funds Sold                                           |  |              | 5,743,183   |              |  
|Purchases of Premises and Equipment                                               |  |              | (941,049    | )            |  
|(Increase) / Decrease in Other Real Estate Owned                                  |  |              | 11,330      |              |  
|Net Cash (Used in) Investing Activities                                           |  | $            | (7,831,750  | )            | $
|                                                                                  |  |              |             |              |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |              |             |              |  
|Increase / (Decrease) in Demand, Savings, & NOW deposits                          |  |              | 9,035,668   |              |  
|Increase / (Decrease) in Time Deposits                                            |  |              | (1,570,820  | )            |  
|Proceeds from issuance of Common Stock                                            |  |              | 243,965     |              |  
|Repurchase of Common Stock                                                        |  |              | (404,721    | )            |  
|Dividends paid                                                                    |  |              | (828,247    | )            |  
|Other                                                                             |  |              | 312,197     |              |  
|Net Cash Provided by Financing Activities                                         |  | $            | 6,788,042   |              | $
|                                                                                  |  |              |             |              |  
|Net Increase / (Decrease) in Cash & Due from Banks                                |  | $            | 1,832,785   |              | $
|                                                                                  |  |              |             |              |  
|Cash & Due From Banks at Beginning of period                                      |  | $            | 9,467,334   |              | $
|Cash & Due From Banks at End of period                                            |  | $            | 11,300,119  |              | $

See Notes to Consolidated Financial Statements.

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Bay Banks of Virginia, Inc.Consolidated Statement of Changes in Shareholders Equity (Unaudited)

|                                                                                           |                                                           | Common Stock |            | Additional Paid-in Capital |   | Retained Earnings |         | Accumulated Other Comprehensive Income/(Loss) |            | Total Shareholders Equity |  
|------------------------------------------------------------------------------------------ | --------------------------------------------------------- | ------------ | ---------- | -------------------------- | - | ----------------- | ------- | --------------------------------------------- | ---------- | ------------------------- | -
|                                                                                           |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|Balance on 1/1/2001                                                                        |                                                           | $            | 5,809,841  |                            | $ | 3,887,823         |         | $                                             | 11,848,640 |                           | $
|Comprehensive Income:                                                                      |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|Net Income                                                                                 |                                                           |              |            |                            |   |                   |         |                                               | 1,399,945  |                           |  
|Net changes in unrealized gain of available- for-sale securities, net of taxes of $619,607 |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|                                                                                           |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|Total Comprehensive Income                                                                 |                                                           |              |           |                            |   |                  |         | $                                             | 1,399,945  |                           | $
|Dividends paid ($0.36/share)                                                               |                                                           |              |            |                            |   |                   |         |                                               | (800,125   | )                         |  
|Stock repurchases                                                                          |                                                           |              | (86,760    | )                          |   | (183,982          | )       |                                               | (309,960   | )                         |  
|Sale of common stock:                                                                      |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|                                                                                           | Dividends Reinvested                                      |              |            | 33,444                     |   |                   | 192,578 |                                               |            |                          |  
|                                                                                           | Stock Options exercised                                   |              |            | 21,185                     |   |                   | 30,923  |                                               |            | (22,315                   | )
|                                                                                           |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|Balance on 9/30/01                                                                         |                                                           | $            | 5,777,710  |                            | $ | 3,927,342         |         | $                                             | 12,116,185 |                           | $
|                                                                                           |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|Balance on 1/1/2002                                                                        |                                                           | $            | 5,766,405  |                            | $ | 3,940,720         |         | $                                             | 12,363,054 |                           | $
|Comprehensive Income:                                                                      |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|Net Income                                                                                 |                                                           |              |            |                            |   |                   |         |                                               | 1,614,207  |                           |  
|Net changes in unrealized gain of available- for-sale securities, net of taxes of $694,666 |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|                                                                                           |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|Total Comprehensive Income                                                                 |                                                           |              |           |                            |   |                  |         | $                                             | 1,614,207  |                           | $
|Dividends paid ($0.36/share)                                                               |                                                           |              |            |                            |   |                   |         |                                               | (828,247   | )                         |  
|Stock repurchases                                                                          |                                                           |              | (74,645    | )                          |   | (128,900          | )       |                                               | (201,176   | )                         |  
|Sale of common stock:                                                                      |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|                                                                                           | Dividends Reinvested                                      |              |            | 59,562                     |   |                   | 184,403 |                                               |            |                          |  
|                                                                                           | 2-for-1 stock split in the form of a 100% stock dividende |              |            | 5,750,427                  |   |                   |         |                                               |            | (5,750,427                | )
|                                                                                           | Stock Options exercised                                   |              |            | 24,875                     |   |                   | 30,845  |                                               |            | (18,558                   | )
|                                                                                           |                                                           |              |            |                            |   |                   |         |                                               |            |                           |  
|Balance on 9/30/02                                                                         |                                                           | $            | 11,526,624 |                            | $ | 4,027,068         |         | $                                             | 7,178,853  |                           | $

See Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements (Unaudited)

|Note 1: | Bay Banks of Virginia, Inc. owns 100% of the Bank of Lancaster (the Bank) and 100% of Bay Trust Company of Virginia, Inc. (the Trust Company).  The
consolidated financial statements include the accounts of the Bank, the Trust Company, and Bay Banks of Virginia.                                                                                                                                                                                                                                                                                                                 
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | The accounting and reporting policies of the registrant conform to accounting principles generally accepted by the United States of America and to the general practices within the
banking industry.  This interim statement has not been audited.  However, in managements opinion, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial
statements have been included.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | These consolidated financial statements should be read in conjunction with the financial statements and notes to financial statements included in the registrants 2001 Annual
Report to Shareholders.                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Note 2: | Securities Available for Sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | The carrying amounts of debt and other securities and their approximate fair values at September 30, 2002, and December 31, 2001, follow:                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                               |  | Amortized Cost |            | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Fair Value |        
|------------------------------ |  | -------------- | ---------- | ---------------------- | - | ----------------------- |  | ---------- | -------
|                               |  |                |            |                        |   |                         |  |            |        
|September 30, 2002:            |  |                |            |                        |   |                         |  |            |        
|U.S. Government agencies       |  | $              | 3,196,279  |                        | $ | 130,518                 |  |            |       
|State and municipal securities |  |                | 24,310,696 |                        |   | 1,740,033               |  |            |       
|Other securities               |  |                | 19,191,456 |                        |   | 1,000,782               |  |            |       
|                               |  |                |            |                        |   |                         |  |            |        
|                               |  | $              | 46,698,431 |                        | $ | 2,871,333               |  |            |       
|                               |  |                |            |                        |   |                         |  |            |        
|December 31, 2001:             |  |                |            |                        |   |                         |  |            |        
|U.S. Government agencies       |  |                | 6,693,947  |                        |   | 152,679                 |  |            | 19,275 
|State and municipal securities |  |                | 20,978,986 |                        |   | 436,702                 |  |            | 38,745 
|Other securities               |  |                | 19,492,597 |                        |   | 369,727                 |  |            | 72,888 
|                               |  |                |            |                        |   |                         |  |            |        
|                               |  | $              | 47,165,530 |                        | $ | 959,108                 |  | $          | 130,908
|                               |  |                |            |                        |   |                         |  |            |        

|Note 3: | Loans                                                         
|------- | --------------------------------------------------------------
|        |                                                               
|        | The components of loans in the balance sheets were as follows:

|                                 |  | Sep 30, 2002 |             | Dec 31, 2001 |  
|-------------------------------- |  | ------------ | ----------- | ------------ | -
|                                 |  |              |             |              |  
|Real estate mortgage loans       |  | $            | 129,427,415 |              | $
|Commercial loans                 |  |              | 13,440,386  |              |  
|Installment and other loans      |  |              | 20,578,342  |              |  
|Net deferred loan costs and fees |  |              | 1,145,769   |              |  
|                                 |  |              |             |              |  
|                                 |  |              | 164,591,912 |              |  
|Allowance for loan losses        |  |              | (1,538,242  | )            |  
|                                 |  |              |             |              |  
|                                 |  | $            | 163,053,670 |              | $

Loans upon which the accrual of interest has been discontinued totaled $62
thousand as of September 30, 2002, and $163 thousand as of December 31, 2001.

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|Note 4: | Earnings per share                                                                                                                                                                                                                                                                      
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                         
|        | The following shows the weighted average number of shares used in computing earnings per share and the effect on weighted average number of shares of diluted potential
common stock, as adjusted for a 2-for-1 stock split in the form of a 100% stock dividend issued on June 7, 2002.
|        |                                                                                                                                                                                                                                                                                         

|                               |               | Sep 30, 2002 |           | Sep 30, 2001     |  
|------------------------------ | ------------- | ------------ | --------- | ---------------- | -
|                               |               |              |           |                  |  
|                               |               | Shares       |           | Per share Amount |  
|                               |               |              |           |                  |  
|Basic earnings per share       |               |              | 2,300,905 |                  | $
|Effect of dilutive securities: |               |              |           |                  |  
|                               | Stock options |              |           | 36,670           |  
|Diluted earnings per share     |               |              | 2,337,575 |                  | $
|                               |               |              |           |                  |  

ITEM 2. 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion is intended to assist in understanding the results of operations and
the financial condition of Bay Banks of Virginia, Inc. (the Company) a two bank holding company.  This discussion should be read in conjunction with the above consolidated financial statements and the notes thereto.

CRITICAL ACCOUNTING POLICIES

GENERAL.  The Companys financial statements are prepared in accordance with accounting principles generally accepted in
the United States (GAAP).  The financial information contained within our statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already
occurred.  A variety of factors could affect the ultimate value that is obtained either when earning income,recognizing an expense, recovering an asset or relieving a liability.  We use historical loss factors as one factor in determining
the inherent loss that may be present in our loan portfolio.  Actual losses could differ significantly from the historical factors that we use.  In addition, GAAP itself may change from one previously acceptable method to another
method.  Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.

ALLOWANCE FOR LOAN LOSSES.  The allowance for
loan losses is an estimate of the losses that may be sustained in our loan portfolio.  The allowance is based on two basic principles of accounting:  (1) Statement of Financial Accounting Standards (SFAS) No. 5 Accounting
for Contingencies,  which requires that losses be accrued when they are probable of occurring and estimable and (2) SFAS No. 114, Accounting by Creditors for Impairment of a Loan, which requires that losses be accrued based on
the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.  The use of these values is inherently subjective and our actual losses could be
greater or less than the estimates.

The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries).  Managements periodic evaluation of
the adequacy of the allowance is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers ability to repay, the estimated value of any underlying collateral, and current
economic conditions.

RECENT ACCOUNTING PRONOUNCEMENTS.In April 2002, the Financial Accounting Standards Board (FASB) issued Statement No. 145, Recission of FASB No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.  FASBStatement No. 145 rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt,and an amendment of that statement, FASB
Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.  FASBStatement No. 145 also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers.This Statement amends FASB
Statement No. 13, Accounting for Leases,to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to
sale-

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leaseback transactions.  FASB Statement No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe
their applicability under changed conditions.  The provisions of FASB Statement No. 145 related to the rescission of FASB Statement No. 4 shall be applied in fiscal years beginning after May 15, 2002.  The provisions of this Statement
related to Statement 13 are effective for transactions occurring after May 15, 2002, with early application encouraged.  This statement is not expected to have a material effect on the Companys financial statements.

In June 2002, the Financial Accounting Standards Board issued Statement 146, Accounting for Costs Associated with Exit or Disposal Activities. 
This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).  The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan.  The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31 2002, with early application encouraged.  This statement is not expected to have a
material effect on the Companys financial statements.

The Financial Accounting Standards Board also issued Statement  No. 147,
Acquisitions of Certain Financial Institutions, an Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9in October 2002.  FASB Statement No. 72, Accounting for Certain Acquisitions of Banking or Thrift
Institutions,and FASB Interpretation No. 9, Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a Similar Institution Is Acquired in a Business Combination Accounted for by the Purchase Method,provided
interpretive guidance on the application of the purchase method to acquisitions of financial institutions.  Except for transactions between two or more mutual enterprises, this Statement removes acquisitions of financial institutions from the
scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with FASB Statements No. 141, Business Combinations,and No. 142, Goodwill and Other Intangible Assets.Thus, the
requirement in paragraph 5 of Statement 72 to recognize (and subsequently amortize) any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset
no longer applies to acquisitions with the scope of this Statement.  In addition, this Statement amends FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,to include in its scope long-term
customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship assets and credit cardholder intangible assets.  Consequently, those intangible assets are subject to the same undiscounted cash flow
recoverability test and impairment loss recognition and measurement provisions that Statement 144 requires for other long-lived assets that are held and used.

Paragraph 5 of this Statement, which relates to the application of the purchase method of accounting, is effective for acquisitions for which the date of acquisition
is on or after October 1, 2002.  The provisions in paragraph 6 related to accounting for the impairment or disposal of certain long-term customer-relationship intangible assets are effective on October 1, 2002.  Transition provisions for
previously recognized unidentifiable intangible assets in paragraphs 8-14 are effective on October 1, 2002, with earlier application permitted.

This Statement clarifies that a branch acquisition that meets the definition of a business should be accounted for as a business combination, otherwise the
transaction should be accounted for as an acquisition of net assets that does not result in the recognition of goodwill.

The transition provisions state that if the transaction that gave rise to the
unidentifiable intangible asset was a business combination, the carrying amount of that asset shall be reclassified to goodwill as of the later of the date of acquisition or the date Statement 142 was first applied (fiscal years beginning after
December 15, 2001).  Any previously issued interim statements that reflect amortization of the unidentifiable intangible asset subsequent to the Statement 142 application date shall be restated to remove that amortization expense.  The
carrying amounts of any recognized intangible assets that meet the recognition criteria of Statement 141 that have been included in the amount reported as an unidentifiable intangible asset and for which separate accounting records have been
maintained shall be reclassified and accounted for as assets apart from the unidentifiable intangible asset and shall not be reclassified to goodwill.  This statement is not expected to have a material effect on the Companys financial
statements.

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Bay Banks of Virginia, Inc.Financial Highlights (Unaudited)

|Nine months ended (Thousands)                                                                       |                                              | 9/30/02 |           | 9/30/01 |   | Change    |     
|--------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------- | --------- | ------- | - | --------- | ----
|                                                                                                    |                                              |         |           |         |   |           |     
|FINANCIAL CONDITION                                                                                 |                                              |         |           |         |   |           |     
|Average Assets                                                                                      |                                              | $       | 249,488   |         | $ | 222,252   |     
|Average Interest-earning Assets                                                                     |                                              | $       | 226,896   |         | $ | 205,364   |     
|Average Earning Assets to Total Average Assets                                                      |                                              |         | 90.9      | %       |   | 92.4      | %   
|Period-end Interest-bearing Liabilities                                                             |                                              | $       | 199,795   |         | $ | 185,267   |     
|Average Interest-bearing Liabilities                                                                |                                              | $       | 201,959   |         | $ | 177,024   |     
|Average Equity, including FAS 115 adjustment                                                        |                                              | $       | 23,622    |         | $ | 22,047    |     
|Tier 1 Capital                                                                                      |                                              | $       | 20,099    |         | $ | 18,718    |     
|Net Risk-weighted Assets                                                                            |                                              | $       | 168,260   |         | $ | 154,290   |     
|Tier 2 Capital                                                                                      |                                              | $       | 1,538     |         | $ | 1,573     |     
|                                                                                                    |                                              |         |           |         |   |           |     
|RESULTS OF OPERATIONS                                                                               |                                              |         |           |         |   |           |     
|Net Interest Income before Provision                                                                |                                              | $       | 7,299     |         | $ | 6,189     |     
|Net Income                                                                                          |                                              | $       | 1,614     |         | $ | 1,400     |     
|Annualized Yield on Average Interest-earning Assets                                                 |                                              |         | 6.80      | %       |   | 7.84      | %   
|Annualized Cost of Average Interest-bearing Liabilities                                             |                                              |         | 2.70      | %       |   | 4.31      | %   
|Annualized Net Yield on Average Interest-earning Assets                                             |                                              |         | 4.40      | %       |   | 4.13      | %   
|Annualized Net Interest Rate Spread                                                                 |                                              |         | 4.10      | %       |   | 3.54      | %   
|                                                                                                    |                                              |         |           |         |   |           |     
|RATIOS                                                                                              |                                              |         |           |         |   |           |     
|Total Capital to Risk-weighted Assets (10% min)                                                     |                                              |         | 12.9      | %       |   | 13.2      | %   
|Tier 1 Capital to Risk-weighted Assets (6% min)                                                     |                                              |         | 11.9      | %       |   | 12.1      | %   
|Leverage Ratio (5% min)                                                                             |                                              |         | 8.1       | %       |   | 8.5       | %   
|Annualized Return on Average Assets (ROA)                                                           |                                              |         | 0.9       | %       |   | 0.8       | %   
|Annualized Return on Average Equity (ROE)                                                           |                                              |         | 9.1       | %       |   | 8.5       | %   
|Period-end basic shares outstanding*                                                                |                                              |         | 2,305,325 |         |   | 2,311,084 |     
|Average basic shares outstanding*                                                                   |                                              |         | 2,300,905 |         |   | 2,319,782 |     
|Average diluted shares outstanding*                                                                 |                                              |         | 2,337,575 |         |   | 2,360,826 |     
|                                                                                                    |                                              |         |           |         |   |           |     
|PER SHARE DATA                                                                                      |                                              |         |           |         |   |           |     
|Diluted earnings per average share (EPS) (nine months)*                                             |                                              | $       | 0.69      |         | $ | 0.59      |     
|Cash Dividends per average share (nine months)*                                                     |                                              | $       | 0.36      |         | $ | 0.34      |     
|Book Value per share*                                                                               |                                              |         |           |         |   |           |     
|                                                                                                    | before Accumulated Comprehensive Income/Loss |         | $         | 9.86    |   | $         | 9.44
|                                                                                                    | after Accumulated Comprehensive Income/Loss  |         | $         | 10.68   |   | $         | 9.85
|Book Value per average share*                                                                       |                                              |         |           |         |   |           |     
|                                                                                                    | before Accumulated Comprehensive Income/Loss |         | $         | 9.88    |   | $         | 9.41
|                                                                                                    | after Accumulated Comprehensive Income/Loss  |         | $         | 10.70   |   | $         | 9.81
|                                                                                                    |                                              |         |           |         |   |           |     
|* - Shares outstanding and Per Share data is adjusted for a 2-for-1 split which occurred on 6/7/02. |                                              |         |           |         |   |           |     

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EARNINGS SUMMATION

For the nine months ended September 30, 2002, net
income was $1.6 million as compared to $1.4 million for the comparable period in 2001, an increase of 15.3%.  Diluted earnings per average share for the first nine months of 2002 were $0.69 as compared to $0.59 for the first nine months of
2001.  Annualized return on average equity was 9.1% for the first nine months of 2002 as compared to 8.5% for the first nine months of 2001, an increase of 7.2%.  Annualized return on average assets was 0.9% for the first nine months of
2002, compared to 0.8% for the first nine months of 2001, an increase of 7.8%.  Net interest income for the first nine months of 2002 was $7.3 million as compared to $6.2 million for the first nine months of 2001, an increase of 17.9%. 
Average interest-earning assets totaled $226.9 million for the first nine months of 2002 as compared to $205.3 million for the first nine months of 2001, an increase of 10.5%.  Average interest-bearing liabilities totaled $202.0 million for the
first nine months of 2002 as compared to $177.0 million for the first nine months of 2001, an increase of 14.1%.  The annualized yield on average interest-earning assets for the first nine months of 2002 was 6.80% as compared to 7.84% for the
first nine months of 2001, a decrease of 13.3%.  The annualized yield (cost) on interest-bearing liabilities for the first nine months of 2002 was 2.70% as compared to 4.31% for the first nine months of 2001, a decrease of 37.4%.  Average
interest-earning assets as a percent of total average assets was 90.9% for the first nine months of 2002 as compared to 92.4% for the comparable period of 2001, a decrease of 1.6%.  Average total assets for the first nine months of 2002 were
$249.5 million as compared to $222.3 million for the first nine months of 2001, growth of 12.3%.

Bay Banks of Virginia, Inc.Net Interest Income Analysis(Unaudited)

|(Fully taxable equivalent basis)                        |                                    | Nine months ended 9/30/2002 |         | Nine months ended 9/30/2001 |  
|------------------------------------------------------- | ---------------------------------- | --------------------------- | ------- | --------------------------- | -
|                                                        |                                    |                             |         |                             |  
|(Thousands)                                             |                                    | Average Balance             |         | Income/ Expense             |  
|                                                        |                                    |                             |         |                             |  
|INTEREST EARNING ASSETS:                                |                                    |                             |         |                             |  
|Debt Securities (Book Value):                           |                                    |                             |         |                             |  
|                                                        | Taxable Securities                 |                             | $       | 32,823                      |  
|                                                        | Tax-Exempt Securities (1)          |                             |         | 13,868                      |  
|                                                        |                                    |                             |         |                             |  
|Total Debt Securities                                   |                                    | $                           | 46,691  |                             | $
|Gross Loans (2)                                         |                                    | $                           | 157,821 |                             | $
|Interest-bearing Deposits                               |                                    |                             | 199     |                             |  
|Fed Funds Sold                                          |                                    |                             | 22,184  |                             |  
|                                                        |                                    |                             |         |                             |  
|                                                        | TOTAL INTEREST EARNING ASSETS      |                             | $       | 226,896                     |  
|                                                        |                                    |                             |         |                             |  
|INTEREST-BEARING LIABILITIES:                           |                                    |                             |         |                             |  
|Deposits:                                               |                                    |                             |         |                             |  
|                                                        | Savings Deposits                   |                             | $       | 59,544                      |  
|                                                        | NOW Deposits                       |                             |         | 31,713                      |  
|                                                        | Time Deposits => $100,000          |                             |         | 22,760                      |  
|                                                        | Time Deposits < $100,000           |                             |         | 72,084                      |  
|                                                        | Money Market Deposit Accounts      |                             |         | 12,673                      |  
|                                                        |                                    |                             |         |                             |  
|Total Interest Bearing Deposits                         |                                    | $                           | 198,774 |                             | $
|Securities Sold to Repurchase                           |                                    | $                           | 3,185   |                             | $
|Other Short Term Borrowings                             |                                    |                             |        |                             |  
|                                                        |                                    |                             |         |                             |  
|                                                        | TOTAL INTEREST-BEARING LIABILITIES |                             | $       | 201,959                     |  
|                                                        |                                    |                             |         |                             |  
|Net Interest Income/Yield on Earning Assets             |                                    |                             |         |                             | $
|Net Interest Rate Spread                                |                                    |                             |         |                             |  
|                                                        |                                    |                             |         |                             |  
|Notes:                                                  |                                    |                             |         |                             |  
|(1) -Yield and income assumes a federal tax rate of 34% |                                    |                             |         |                             |  
|                                                        |                                    |                             |         |                             |  

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|(2)-Includes Visa Program & nonaccrual loans. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|--------------------------------------------- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 

This Net Interest Income Analysis table
shows net interest margin increasing to 4.40% from 4.10% for the first nine months of 2002 compared to the first nine months of 2001.  Reductions of interest rates by the Federal Reserve Bank throughout 2001 contributed to these improved
margins.  In addition, improved asset/liability structure contributed to the higher margins.

Through the nine months ended September
30, 2002, average interest-earning assets were comprised mainly of the loan portfolio with $157.8 million and the investment portfolio with $46.7 million.  For the nine month period ended September 30, 2002, compared to the same period in 2001,
on a fully tax equivalent basis, tax-exempt investment yields declined to 6.61% from 7.25%, and taxable investment yields increased to 6.08% from 6.01%.  Total investment yield declined slightly to 6.24% from 6.28%.  In the first nine
months of 2002, gross loans on average volumes yielded 7.70% as compared to 8.46% for the same period in 2001.

Yields on average
interest-bearing deposits comparing the first nine months of 2002 to the same period in 2001, were as follows.  Savings yields were down to 2.27% compared to 4.03%, NOW accounts were down to 1.29% compared to 2.35%, money market demand accounts
were down to 1.61% compared to 2.83%, certificates of deposit greater than $100 thousand were down to 3.90% compared to 5.71%, and certificates of deposit less than $100 thousand were down to 3.57% compared to 5.52%.  The resulting total yield
on deposits through September 30, 2002, was down to 2.73% compared to 4.32% for the nine months ended September 30, 2001.

Bay Banks of Virginia, Inc.Interest Rate Sensitivity Gap Analysis (Unaudited)

|as of 9/30/2002(Thousands)      |                                    | Within 3 months |         | 3-12 Months |   | 1-5 Years |        | Over 5 Years |        | Total   |  
|------------------------------- | ---------------------------------- | --------------- | ------- | ----------- | - | --------- | ------ | ------------ | ------ | ------- | -
|                                |                                    |                 |         |             |   |           |        |              |        |         |  
|INTEREST EARNING ASSETS:        |                                    |                 |         |             |   |           |        |              |        |         |  
|Interest-Bearing Due From Banks |                                    | $               | 155     |             |   |          |        |              |       |         |  
|Fed Funds Sold                  |                                    |                 | 19,492  |             |   |          |        |              |       |         |  
|Debt Securities (Market Value)  |                                    |                 | 301     |             |   | 4,119     |        |              | 22,223 |         |  
|Loans                           |                                    |                 | 33,376  |             |   | 33,120    |        |              | 77,784 |         |  
|                                |                                    |                 |         |             |   |           |        |              |        |         |  
|                                | TOTAL EARNING ASSETS               |                 | $       | 53,324      |   | $         | 37,239 |              | $      | 100,007 |  
|                                |                                    |                 |         |             |   |           |        |              |        |         |  
|INTEREST-BEARING LIABILITIES:   |                                    |                 |         |             |   |           |        |              |        |         |  
|NOW Accounts                    |                                    | $               | 35,170  |             |   |          |        |              |       |         |  
|MMDAs & Savings                |                                    |                 | 36,290  |             |   | 36,012    |        |              |       |         |  
|Time Deposits                   |                                    |                 | 12,144  |             |   | 21,275    |        |              | 55,891 |         |  
|                                |                                    |                 |         |             |   |           |        |              |        |         |  
|                                | Total Interest-bearing Deposits    |                 | $       | 83,604      |   | $         | 57,287 |              | $      | 55,891  |  
|Fed Funds Purchased             |                                    |                 |        |             |   |          |        |              |       |         |  
|Securities Sold to Repurchase   |                                    |                 | 3,135   |             |   |          |        |              |       |         |  
|Other Short Term Borrowings     |                                    |                 |        |             |   |          |        |              |       |         |  
|                                |                                    |                 |         |             |   |           |        |              |        |         |  
|                                | TOTAL INTEREST-BEARING LIABILITIES |                 | $       | 86,739      |   | $         | 57,287 |              | $      | 55,891  |  
|                                |                                    |                 |         |             |   |           |        |              |        |         |  
|Rate Sensitive Gap              |                                    | $               | (33,415 | )           | $ | (20,048   | )      | $            | 44,116 |         | $
|Cumulative Gap                  |                                    | $               | (33,415 | )           | $ | (53,463   | )      | $            | (9,347 | )       | $
|Cumulative RSA/RSL              |                                    |                 | 0.61    |             |   | 0.63      |        |              | 0.95   |         |  
|                                |                                    |                 |         |             |   |           |        |              |        |         |  

Rate reductions throughout 2001 contributed to favorably impact net interest spreads as deposits repriced
downward.  Also, the ratio of rate sensitive assets (RSA) to rate sensitive liabilities (RSL) has improved to the  more neutral position shown above.  This improvement is partly the result of increased volume in the Banks
five-year certificates of deposit.  As of September 30, 2002, the Bank had interest-earning assets that mature within 3 months totaling $53.3 million, in 3-12 months totaling $37.2 million, in 1-5 years totaling $100 million, and over 5 years
totaling $42 million.  In comparison, interest-bearing liabilities maturing within 3 months totaled $86.7 million, in 3-12 months totaled $57.3 million, in 1-5 years totaled $55.9 million, and $83 thousand over 5 years.  Management is
continually reviewing loan and deposit products to modify or develop offerings that are less subject to interest rate risk.

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LIQUIDITY

The Company maintains adequate short-term assets to meet
the Companys liquidity needs as anticipated by management.  Federal funds sold and investments that mature in one year or less provide the major sources of funding for liquidity needs.  On September 30, 2002, federal funds sold
totaled $19.5 million and securities maturing in one year or less totaled $4.4 million, for a total pool of $23.9 million.  The liquidity ratio as of September 30, 2002 was 31.5% as compared to 34.7% as of December 31, 2001.  The Company
determines this ratio by dividing the sum of cash and cash equivalents, unpledged investment securities and Federal Funds Sold, by net liabilities.  Management, through historical analysis, has deemed 15% an adequate liquidity ratio.

CAPITAL RESOURCES

From December 31, 2001, to September 30, 2002, total
shareholders equity has grown by 8.9%.  It is impacted by net unrealized gains on securities in the amount of $1.9 million as of September 30, 2002.  There were net unrealized gains on December 31, 2001 of $547 thousand. 
Unrealized gains or losses, net of taxes, are recognized as accumulated comprehensive income or loss on the balance sheet and statement of changes in shareholders equity.  Shareholders equity before unrealized gains or losses was
$22.7 million on September 30, 2002, and $22.1 million on December 31, 2001.  This represents an increase of $662 thousand or 3.0% during the nine-month period.

The Company paid a 2-for-1 stock split in the form of a 100% stock dividend on June 7, 2002.  All share information has been adjusted to reflect the split for
all periods presented.

Book value per share on September 30, 2002, compared to September 30, 2001, grew to $10.68 from $9.85, an increase
of 8.4%.  Book value per share before accumulated comprehensive income on September 30, 2002, compared to September 30, 2001, grew to $9.86 from $9.44, an increase of 4.5%.  Cash dividends paid for the nine months ended September 30, 2002,
were $828 thousand, or $0.36 per average share, compared to $800 thousand, or $0.34 per average share, for the comparable period ended September 30, 2001, an increase of 4.3%.  Average shares outstanding for the nine months ended September 30,
2002, were 2,300,905 compared to 2,319,782 for the comparable period ended September 30, 2001.  The Company began a share repurchase program in August of 1999 and has continued the program into 2002.  On May 20, 2002, the Board of
Directors approved the repurchase of an additional 50,000 shares of common stock.  This increases the authorized number of shares in the repurchase plan to 115,000 shares.

The Company is subject to minimum regulatory capital ratios as defined by Federal Financial Institutions Examination Council guidelines.  As of September 30,
2002 the Company maintained Tier 1 capital of $20.1 million, net risk weighted assets of $168.2 million, and Tier 2 capital of $1.5 million.  On September 30, 2002, the Tier 1 capital to risk weighted assets ratio was 11.9%, the total capital
ratio was 12.9%, and the tier 1 leverage ratio was 8.1%.  These ratios continue to be well in excess of regulatory minimums.

FINANCIAL CONDITION

As of September 30, 2002, total assets have increased 4.0% since December 31, 2001, from $245.6 million to $255.5 million.  Cash and cash equivalents totaled
$11.3 million on September 30, 2002, compared to $9.5 million at year-end 2001.

During the nine months ended September 30, 2002, gross
loans increased by 8.5%, from $151.7 million to $164.6 million.  During the same nine-month period, real estate mortgage loans increased 12.1% to $129.4 million, commercial loans decreased 0.2% to $13.4 million, and installment and other loans
decreased by 6.3% to $20.6 million.

For the nine months ended September 30, 2002, the Company charged off loans totaling $288
thousand.  For the comparable period in 2001, total loans charged off were $68 thousand.  The Company maintained $603 thousand of other real estate owned (OREO) as of September 30, 2002.  As of year-end 2001, the balance
was $614 thousand.  The Company actively markets all OREO properties, and expects no loss on any of these properties.  All properties maintained as other real estate owned are carried at the lesser of book or market value.

Increases in the provision for loan losses amounted to $314 thousand through the first nine months, and the allowance for loan losses as of September
30, 2002, was $1.5 million.  The allowance for loan losses, as a percentage of average total loans through the first nine months of 2002 was 1.0%.

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As of September 30, 2002, $62 thousand of loans were on on non-accrual status.  There were $113 thousand of loans
on non-accrual status as of September 30, 2001.  Loans still accruing interest but delinquent for 90 days or more were $657 thousand on September 30, 2002, as compared to $638 thousand on September 30, 2001.

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 of 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 Company assesses the appropriate provision for the coming quarter.  As of September 30, 2002, management deemed the loan loss reserve reasonable for the
loss risk identified in the loan portfolio.

As of September 30, 2002, securities available for sale totaled $49.6 million at market
value.  This compares with December 2001 market value of $48.0 million.  This represents an increase of 3.3% during the nine months ended September 30, 2002.  The investment portfolio represents 19.4% of total assets and 21.2% of
earning assets.  The Companys investment portfolio is classified as available-for-sale, and therefore management has elected to mark the entire investment portfolio to market.  The resulting accumulated adjustment to book value as of
September 30, 2002 was an unrealized gain of $2.9 million.  The corresponding accumulated adjustment to shareholders equity was $1.9 million.  These gains or losses are booked monthly as an adjustment to book value based upon market
conditions, and are not realized as an adjustment to earnings until the securities are actually sold.  Management does not anticipate the realization of net losses on investments during 2002.

As of September 30, 2002, total deposits were $226.7 million.  Compared to $219.2 at year-end 2001, balances have increased 3.4%.  Comparing types of
deposit balances on September 30, 2002, to year-end 2001 results in the following, non-interest-bearing demand deposits increased by 14.9% to $30.0 million, savings and NOW accounts increased by 5.0% to $107.3 million, and other time deposits
decreased by 1.7% to $89.4 million.

RESULTS OF OPERATIONS

NON-INTEREST INCOME

Non-interest income for the first nine months of 2002 totaled $1.5 million compared to $1.6 million for the same period in 2001.  This is a decrease of
2.0%.  Non-interest income includes income from fiduciary activities, service charges on deposit accounts, other miscellaneous fees, gains on the sale of securities, and other income.  Of these categories, fiduciary activities contributed
the majority at $482 thousand.  Service charges on deposit accounts contributed $397 thousand.  Other miscellaneous fees contributed $470 thousand.  Other income contributed the balance with 186 thousand. For the first nine months of
2001, these totals were $619 thousand, $328 thousand, and $410 thousand, and 190 thousand, respectively.

Management continues to explore
methods of increasing its non-interest income.  Continued expansion of fiduciary services, diversification of business lines, and expansion of fee based services provided to bank customers are among the areas under regular review.

NON-INTEREST EXPENSE

Non-interest expenses totaled $6.2 million during the first nine
months of 2002 as compared to $5.6 million for the same period in 2001, an increase of 11.1%.  Non-interest expenses include salaries and benefits, occupancy expense, and other operating expense.  Of these categories, salaries and benefits
are the major expense.  Through the nine months ended September 30, 2002, salary and benefit expense was $3.4 million, occupancy expense was $630 thousand, and other operating expense was $1.7 million.  For the same period in 2001, the
totals were $3.0 million, $711 thousand, and $1.4 million, respectively.

FORWARD LOOKING STATEMENT

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 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

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interest rates, demand for loans in the Banks market area, and competition.  Any of these factors could cause actual results to differ materially from historical
earnings and those presently anticipated or projected.

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Rate Shock Analysis of Net Interest Incomeas of September 30, 2002 (Unaudited) (in thousands)

|Rate Change:                 |  | -100 bp |        | 0 bp |   | +200 bp |  
|---------------------------- |  | ------- | ------ | ---- | - | ------- | -
|                             |  |         |        |      |   |         |  
|Year 1                       |  |         |        |      |   |         |  
|Net Interest Income          |  | $       | 9,090  |      | $ | 9,252   |  
|Net Interest Income Change   |  | $       | (162   | )    | $ | 0       |  
|Net Interest Income % Change |  |         | -1.75  | %    |   | 0.00    | %
|                             |  |         |        |      |   |         |  
|Year 2                       |  |         |        |      |   |         |  
|Net Interest Income          |  | $       | 8,510  |      | $ | 9,219   |  
|Net Interest Income Change   |  | $       | (709   | )    | $ | 0       |  
|Net Interest Income % Change |  |         | -7.69  | %    |   | 0.00    | %
|                             |  |         |        |      |   |         |  
|Two Year Summary:            |  |         |        |      |   |         |  
|Net Interest Income          |  | $       | 17,600 |      | $ | 18,471  |  
|Net Interest Income Change   |  | $       | (871   | )    | $ | 0       |  
|Net Interest Income % Change |  |         | -4.72  | %    |   | 0.00    | %

Rate shock is a method for
stress testing the Banks future net interest margin under several rate change levels.  These levels span a 100 basis point (1.00%) decrease and a 200 basis point increase in the current prime rate of interest.  In order to simulate
activity, maturing balances are replaced with new balances at the new rate level and repricing balances are adjusted to the new rate shock level.  The interest is recalculated for each level along with the new average yield.  Net interest
income is then calculated and a risk profile is developed.  The results of these calculations are summarized in the table above.

As
shown, the Company estimates that a reduction in the current prime rate of 100 basis points would result in a $162 thousand decrease in net interest income over twelve months.  Similarly, an increase in the current prime rate of 200 basis
points would result in an estimated $302 thousand additional net interest income. Over a 24-month period, the Company estimates that a 100 basis point reduction in the current prime rate would result in an $871 thousand decrease in net interest
income while a 200 basis point increase would result in a $1.7 million increase in net interest income.

ITEM 4. 
CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the Company has carried out an
evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as Amended.  Based upon that evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys periodic Securities & Exchange
Commission filings.  There have been no significant changes in the Companys internal controls or in other factors that could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

PART II.

ITEM 1.
LEGAL PROCEEDINGS

None to report.

ITEM 2.
CHANGES IN SECURITIES

None to report.

ITEM 3.
DEFAULT UPON SENIOR SECURITIES

None to report.

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

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None to report.

ITEM 5.
OTHER INFORMATION

None to report.

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

(a) Exhibit Index:

| | 3.0  | Articles of Incorporation and Bylaws of Bay Banks of Virginia, Inc. (Incorporated by reference to Appendix I to Exhibit A of previously filed Form 424B3, Commission File number
333-2259 dated March 23, 1997.)
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                 
| | 10.1 | Incentive Stock option plan (Incorporated by reference to the previously filed Form S-4EF, Commission File number 333-22579 dated February 28, 1997.)                                                           
| |      |                                                                                                                                                                                                                 
| | 10.2 | 1998 Non-Employee Directors Stock Option Plan (incorporated by reference to the previously filed Annual Report on Form 10-K for the year ended December 31, 1999.)                                              
| |      |                                                                                                                                                                                                                 
| | 11.0 | Statement re: Computation of per share earnings.  (Incorporated by reference to Note 1 of the 2001 Annual Report to Shareholders.)                                                                              
| |      |                                                                                                                                                                                                                 
| | 99.1 | Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                          

(b) Reports on Form 8-K:

None to report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|           | BAY BANKS OF VIRGINIA, INC.                                                                | 
|---------- | ------------------------------------------------------------------------------------------ | 
|           |                                                                                            | 
|           | (Registrant)                                                                               | 
|           |                                                                                            | 
|           |                                                                                            | 
|11/14/2002 | /s/ AUSTIN L. ROBERTS, III                                                                 | 
|           |                                                                                            | 
|           | Austin L. Roberts, III President and Chief Executive Officer (principal executive officer) | 
|           |                                                                                            | 
|           |                                                                                            | 
|11/14/2002 | /s/ RICHARD C. ABBOTT                                                                      | 
|           |                                                                                            | 
|           | Richard C. Abbott Treasurer (principal financial officer)                                  | 

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CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERSection 302 Certification

I, Austin L. Roberts, III,
certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Bay Banks of Virginia, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a)     designed such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)     evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and

(c)     presented in this quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrants
other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):

(a)     all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and

(b)     any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls; and

6.     The registrants
other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

|/s/ AUSTIN L. ROBERTS, III                                   |  | Dated:  November 14, 2002
|------------------------------------------------------------ |  | -------------------------
|                                                             |  |                          
|Austin L. Roberts, III President and Chief Executive Officer |  |                          

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CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERSection 302 Certification

I, Richard C. Abbott,
certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Bay Banks of Virginia, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a)     designed such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)     evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and

(c)     presented in this quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrants
other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):

(a)     all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and

(b)     any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls; and

6.     The registrants
other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

|/s/ RICHARD C. ABBOTT       |  | Dated:  November 14, 2002
|--------------------------- |  | -------------------------
|                            |  |                          
|Richard C. Abbott Treasurer |  |                          

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