****

 

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

**------**

**FORM 10-Q**

**------**

**x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

 

**For the quarterly period ended June 30, 2007**

 

or

 

o Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

For the transition period from ____________ to _____________

 

Commission File Number: 0-50576

 

**CITIZENS BANCORP OF VIRGINIA, INC.**

(Exact name of registrant as specified in its charter)

 

| **Virginia**

(State or other jurisdiction of incorporation or organization)

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | **20-0469337**

(I.R.S. Employer Identification No.) |
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **126 South Main Street**

**Blackstone, VA**
(Address of principal executive offices)

**23824**

(Zip Code)

 

**(434) 292-7221**

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x

No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

 

 

Large accelerated filer  o

Accelerated filer  o

Non-accelerated filer  x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  o    No  x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  **2,440,750 shares of Common Stock as of August 10, 2007.**

 

**FORM 10-Q**

For the Period Ended June 30, 2007

 

**INDEX**

 

**Part I.**  

**Financial Information**

 

Page No.

 

 

Item 1.

Financial Statements

 

 

Consolidated Balance Sheets

3

 

 

Consolidated Statements of Income

4

 

 

Consolidated Statements of Changes in Stockholders’ Equity

5

 

 

Consolidated Statements of Cash Flows

6

 

 

Notes to Interim Consolidated Financial Statements

7

 

 

Item 2.

Management’s Discussion and Analysis of Financial

 

Condition and Results of Operations   

11

 

 

Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

19

 

 

Item 4.   

Controls and Procedures

19

 

 

**Part II.**  

**Other Information**

 

 

Item 1.

Legal Proceedings

20

 

 

Item 1A.

Risk Factors

20

 

 

Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

20

 

 

Item 3.

Defaults upon Senior Securities

20

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

21

 

 

Item 5.

Other Information

21

 

 

Item 6.

Exhibits

21

 

 

**Signatures**

22

 

 

**Part I.  Financial Information**

 

**Item 1.  Financial Statements**

 

**Consolidated Balance Sheets**

**(Dollars in thousands, except share data)**

 

 

 

**June 30,**

 

**December 31,**

 

 

**2007**

 

**2006**

**Assets**

 

**(Unaudited)**

 

 

 

 

 

 

 

Cash and due from banks

 

$               9,293 

 

$               8,318 

Interest-bearing deposits in banks

 

2,154 

 

653 

Federal funds sold

 

2,660 

 

4,114 

Securities available for sale, at fair market value

 

47,070 

 

51,078 

Restricted securities

 

631 

 

632 

Loans, net of allowance for loan losses of $1,940

 

 

 

 

and $1,935

 

207,701 

 

198,234 

Premises and equipment, net

 

7,960 

 

8,033 

Accrued interest receivable

 

1,803 

 

1,820 

Other assets

 

8,295 

 

8,033 

 

 

 

 

 

Total assets

 

$           287,567 

 

$           280,915 

 

 

 

 

 

**Liabilities and Stockholders' Equity**

 

 

 

 

 

 

 

 

 

**Liabilities**

 

 

 

 

Deposits:

 

 

 

 

Noninterest-bearing 

 

$             40,600 

 

$             38,085 

Interest-bearing

 

203,155 

 

201,258 

Total deposits

 

$           243,755 

 

$           239,343 

Short term borrowings

 

5,382 

 

4,368 

Accrued interest payable

 

1,655 

 

1,374 

Accrued expenses and other liabilities

 

1,128 

 

772 

Total liabilities

 

$           251,920 

 

$           245,857 

 

 

 

 

 

 

 

 

 

 

**Stockholders' Equity**

 

 

 

 

Preferred stock, $0.50 par value; authorized 1,000,000 shares;

 

 

 

none outstanding

 

$                    -   

 

$                    -   

Common stock, $0.50 par value; authorized 10,000,000 shares;

 

 

 

issued and outstanding, 2,440,750 

 

1,220 

 

1,220 

Additional paid-in capital

 

49 

 

49 

Retained earnings

 

35,588 

 

34,654 

Accumulated other comprehensive loss

 

(1,210)

 

(866)

Total stockholders' equity

 

$             35,647 

 

$             35,057 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$           287,567 

 

$           280,915 

 

 

 

 

 

See accompanying notes to interim financial statements.

 

 

 

3

 

**Consolidated Statements of Income (Unaudited)**

**(Dollars in thousands, except per share data)**

 

 

**Three Months Ended**

**June 30,**

 

**Six Months Ended**

**June 30**

 

**2007**

 

**2006**

 

**2007**

 

**2006**

Interest and Dividend Income

 

 

 

 

 

 

 

Loans, including fees

3,852 

 

3,575 

 

7,484 

 

6,927 

Investment securities:

 

 

 

 

 

 

 

Taxable

377 

 

345 

 

777 

 

695 

Tax-exempt

118 

 

117 

 

237 

 

235 

Dividends

7 

 

9 

 

16 

 

23 

Federal Funds sold

33 

 

38 

 

69 

 

44 

Other

51 

 

2 

 

56 

 

4 

**Total interest and dividend income**

**4,439**

 

**4,086**

 

**8,639**

 

**7,928**

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

Deposits

1,606 

 

1,272 

 

3,121 

 

2,447 

Short term borrowings

49 

 

42 

 

94 

 

94 

**Total interest expense**

**1,655**

 

**1,314**

 

**3,215**

 

**2,541**

 

 

 

 

 

 

 

 

**Net interest income**

**2,784**

 

**2,772**

 

**5,424**

 

**5,387**

 

 

 

 

 

 

 

 

Provision for loan losses

0 

 

19 

 

0 

 

34 

 

 

 

 

 

 

 

 

**Net interest income after provision**

 

 

 

 

 

 

 
**for loan losses**

**2,784**

 

**2,753**

 

**5,424**

 

**5,353**

 

 

 

 

 

 

 

 

Noninterest Income

 

 

 

 

 

 

 

Service charges on deposit accounts

316 

 

324 

 

600 

 

634 

Net gain on sales of loans

23 

 

31 

 

60 

 

45 

Net gain on sale of OREO

15 

 

77 

 

15 

 

77 

Income from bank owned life insurance

74 

 

66 

 

137 

 

127 

ATM fee income

102 

 

61 

 

192 

 

128 

Other 

82 

 

57 

 

148 

 

98 

**Total noninterest income**

**612**

 

**616**

 

**1,152**

 

**1,109**

 

 

 

 

 

 

 

 

Noninterest Expense

 

 

 

 

 

 

 

Salaries and employee benefits

1,256 

 

1,191 

 

2,472 

 

2,360 

Net occupancy expense 

142 

 

144 

 

269 

 

264 

Equipment expense

163 

 

190 

 

327 

 

372 

Other 

557 

 

602 

 

1,095 

 

1,140 

**Total noninterest expense**

**2,118**

 

**2,127**

 

**4,163**

 

**4,136**

 

 

 

 

 

 

 

 

**Income before income taxes**

**1,278**

 

**1,242**

 

**2,413**

 

**2,326**

 

 

 

 

 

 

 

 

Income taxes

373 

 

358 

 

698 

 

661 

 

 

 

 

 

 

 

 

**Net income**

**906**

 

**884**

 

**1,715**

 

**1,665**

**Earnings per share, basic & diluted**

**0.37**

 

**0.36**

 

**0.70**

 

**0.68**

 

  See accompanying Notes to Interim Consolidated Financial Statements. 

 

4

 

**Consolidated Statements of Changes in Stockholders' Equity**

**For the Six Months Ended June 30, 2007 and 2006, (Unaudited)**

**(Dollars in thousands, except per share data)**

 

 

 

 

 

 

 

**Accumulated**

 

 

 

 

 

 

 

 

 

 

 

**Other**

 

 

 

 

 

 

 

 

 

 

 

**Compre-**

 

 

 

 

 

 

 

**Additional**

 

 

 

**hensive**

 

**Compre-**

 

 

 

**Common**

 

**Paid-In**

 

**Retained**

 

**Income**

 

**hensive**

 

 

 

**Stock**

 

**Capital**

 

**Earnings**

 

**(Loss)**

 

**Income**

 

**Total**

 

 

 

 

 

 

 

 

 

 

 

 

**Balance at December 31, 2005**

$    1,220 

 

$          49 

 

$   32,971 

 

$       (781)

 

 

 

$      33,459 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Net income

- - 

 

- - 

 

1,665 

 

- - 

 

$     1,665 

 

$        1,665 

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

Unrealized (losses) on securities available

 

 

 

 

 

 

 

 

 

 

for sale, net of deferred taxes

- - 

 

- - 

 

- - 

 

(435)

 

$     (435)

 

(435)

Total comprehensive income

- - 

 

- - 

 

- - 

 

- - 

 

$     1,230 

 

- - 

Cash dividends declared ($0.32 per share)

- - 

 

- - 

 

(781)

 

- - 

 

 

 

$         (781)

**Balance at June 30, 2006**

$     1,220 

 

$          49 

 

$   33,855 

 

$    (1,216)

 

 

 

$      33,908 

 

 

 

 

 

 

 

 

 

 

 

 

**Balance at December 31, 2006**

$     1,220 

 

$          49 

 

$   34,654 

 

$       (866)

 

 

 

$      35,057 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Net income

- - 

 

- - 

 

1,715 

 

- - 

 

$     1,715 

 

$        1,715 

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

Unrealized (losses) on securities available

 

 

 

 

 

 

 

 

 

 

for sale, net of deferred taxes

- 

 

- - 

 

- - 

 

(344)

 

(344)

 

(344)

Total comprehensive income

- - 

 

- - 

 

- - 

 

- - 

 

$     1,371 

 

- - 

Cash dividends declared ($0.32 per share)

- - 

 

- - 

 

(781)

 

- - 

 

 

 

(781)

**Balance at June 30, 2007**

$     1,220 

 

$          49 

 

$   35,588 

 

$    (1,210)

 

 

 

$      35,647 

 

See accompanying Notes to Interim Consolidated Financial Statements.

 

5

****

**Consolidated Statements of Cash Flows**

 

 

**(Dollars in thousands)**

**Six Months Ended**

 

**Six Months Ended**

**(Unaudited)**

**June 30**

 

**June 30**

 

**2007**

 

**2006**

**Cash Flows from Operating Activities**

 

 

 

Net income

$                  1,715

 

$                  1,665 

Adjustments to reconcile net income to net cash

 

 

 

provided by operating activities:

 

 

 

Depreciation

327

 

320

Provision for loan losses

- -

 

34

Net (gain) on sales of loans

(60)

 

(45)

Origination of loans held for sale

(4,829)

 

(2,621)

Proceeds from sales of loans

4,889

 

2,666

Net (gain) on sale of other real estate owned

(15)

 

(77)

Net amortization of securities

38 

 

45

Changes in assets and liabilities:

 

 

 

Decrease in accrued interest receivable

17

 

45

(Increase) in other assets

(170)

 

(124)

Increase in accrued interest payable

281

 

268

Increase (decrease) in accrued expenses and other liabilities 

478 

 

(101)

Net cash provided by operating activities

$                  2,671

 

$                  2,075

**Cash Flows from Investing Activities**

 

 

 

Activity in available for sale securities:

 

 

 

Maturities and prepayments

$                 4,919

 

$                   2,501 

Purchases

(1,471)

 

(4,340)

Redemption of restricted securities

1 

 

(111) 

Net (increase) in loans

(9,467)

 

(4,878)

Purchases of land, premises and equipment

(254)

 

(795)

Proceeds from sale of other real estate owned

100

 

277

Net cash used in investing activities

$                 (6,172)

 

$                 (7,346)

**Cash Flows from Financing Activities**

 

 

 

Net increase in deposits

$                   4,412

 

$                   4,915 

Net increase in short-term borrowings

1,014

 

1,544

Dividends paid

(903)

 

(781)

Net cash provided by financing activities

$                   4,523 

 

$                   5,678 

Net increase in cash and cash equivalents

$                   1,022

 

$                      407

**Cash and Cash Equivalents**

 

 

 

Beginning of period

$                 13,085 

 

$                   9,230 

End of period

$                 14,107 

 

$                   9,637 

**Supplemental Disclosures of Cash Flow Information**

 

 

 

Cash paid during the period for:

 

 

 

Interest

$                  2,934

 

$                   2,272 

Income taxes

$                     398  

 

$                      675

**Supplemental Disclosures of Noncash Investing**

 

 

 

**and Financing Activities**

 

 

 

Unrealized gains (losses) on securities available for sale

$                   (521)

 

$                      657 

 

See accompanying Notes to Interim Consolidated Financial Statements.

 

6

 

**Notes to Interim Consolidated Financial Statements**

(Unaudited)

 

**Note 1.**

**General**

 

 

The Consolidated Balance Sheets at June 30, 2007 and December 31, 2006, the Consolidated Statements of Income for the three months and six months ended June 30, 2007 and 2006, and the Consolidated Changes in Stockholders’ Equity and Cash Flows for the six months ended June 30, 2007 and 2006, were prepared in accordance with instructions for Form 10-Q, and do not include all of the information and footnotes required by accounting principles  generally accepted in the United States of America (GAAP) for complete financial statements. However, in the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position at June 30, 2007 and the results of operations for the three months and the six monthsended June 30, 2007 and 2006.  The statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Citizens Bancorp of Virginia, Inc. Annual Report on Form 10-K for the year ended December 31, 2006. The results of operations for the three-month and six-month  periods ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year. 

 

 

Citizens Bancorp of Virginia, Inc. (Company) is a one-bank holding company formed on December 18, 2003.  The Company is the sole shareholder of its only subsidiary, Citizens Bank and Trust Company (Bank).  The Bank conducts and transacts the general business of a commercial bank as authorized by the banking laws of the Commonwealth of Virginia and the rules and regulations of the Federal Reserve System.   The Bank was incorporated in 1873 under the laws of Virginia.  Deposits are insured by the Federal Deposit Insurance Corporation.  As of June 30, 2007, the Bank employed 117 full and part-time employees, which resulted in 112 full-time equivalents.  The address of the principal offices for the Company and the main office of the Bank is 126 South Main Street, Blackstone, Virginia, and all banking offices are located within the Commonwealth ofVirginia.  

 

 

 

**Note 2.**

**Securities**

 

 

Securities available for sale are summarized below:

 

 

**June 30, 2007**

**(Dollars in thousands)**

 

 

**Gross**

 

**Gross**

 

 

 

**Amortized**

 

**Unrealized**

 

**Unrealized**

 

**Fair**

 

**Cost**

 

**Gains**

 

**(Losses)**

 

**Value**

U.S. government 

 

 

 

 

 

 

 

and federal agency 

$      18,432 

 

$           - - 

 

$        (620)

 

$       17,812 

State and municipal 

15,100 

 

25 

 

(387)

 

14,738 

Mortgage-backed 

11,328 

 

7 

 

(254)

 

11,081 

Corporate 

3,535 

 

- - 

 

(96)

 

3,439 

 

$      48,395 

 

$           32 

 

$     (1,357)

 

$       47,070 

 

 

7

 

 

 

**December 31, 2006**

 

 

 

**Gross**

 

**Gross**

 

 

**(Dollars in thousands)**

**Amortized**

 

**Unrealized**

 

**Unrealized**

 

**Fair**

 

**Cost**

 

**Gains**

 

**(Losses)**

 

**Value**

U.S. government 

 

 

 

 

 

 

 

and federal agency 

$     21,877 

 

$             - - 

 

$       (525)

 

$       21,352 

State and municipal 

15,353 

 

67 

 

(136)

 

15,284 

Mortgage-backed 

11,088 

 

22 

 

(125)

 

10,985 

Corporate 

3,565 

 

- - 

 

(108)

 

3,457 

 

$     51,883 

 

$             89 

 

$       (894)

 

$       51,078 

 

Information pertaining to securities with gross unrealized losses at June 30, 2007 and December 31, 2006, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is summarized as follows:

 

 

 

**Less than 12 Months**

 

**12 Months or More**

 

 

**Fair**

 

**Unrealized**

 

**Fair**

 

**Unrealized**

**June 30, 2007**

 

**Value**

 

**(Loss)**

 

**Value**

 

**(Loss)**

 

 

**(Dollars in thousands)**

U.S. government

 

 

 

 

 

 

 

 

and federal agency

 

$          3,362 

 

$             (62)

 

$       19,001 

 

$          (663)

State and municipal

 

5,947 

 

(129)

 

7,121 

 

(258)

Mortgage-backed

 

1,048 

 

(11)

 

4,004 

 

(138)

Corporate

 

- - 

 

- - 

 

3,439 

 

(96)

Total temporarily

 

 

 

 

 

 

 

 

impaired securities

 

$         10,357 

 

$           (202)

 

$       33,565 

 

$        (1,155)

 

 

**Less than 12 Months**

 

**12 Months or More**

 

 

**Fair**

 

**Unrealized**

 

**Fair**

 

**Unrealized**

**December 31, 2006**

 

**Value**

 

**(Loss)**

 

**Value**

 

**(Loss)**

 

 

**(Dollars in thousands)**

U.S. government

 

 

 

 

 

 

 

 

and federal agency

 

$          1,693 

 

$               (1)

 

$       18,908 

 

$          (524)

State and municipal

 

773 

 

- - 

 

6,818 

 

(136)

Mortgage-backed

 

4,189 

 

(14)

 

4,395 

 

(111)

Corporate

 

- - 

 

- - 

 

3,458 

 

(108)

Total temporarily

 

 

 

 

 

 

 

 

impaired securities

 

$          6,655 

 

$             (15)

 

$       33,579 

 

$          (879)

 

The unrealized losses in the investment portfolio as of June 30, 2007 are considered temporary and are a result of general market fluctuations that occur daily.  The unrealized losses are from 81 securities that are all of investment grade, backed by insurance, U.S. government agency guarantees, or the full faith and credit of local municipalities throughout the United States.  Market prices change daily and are affected by conditions beyond the control of the Company.  Investment decisions are made by the management group of the Company and reflect the overall liquidity and strategic asset/liability 

 

8

 

objectives of the Company.  Management analyzes the securities portfolio frequently and manages the portfolio to provide an overall positive impact to the Company’s income statement and balance sheet.  As management has the ability and intent to hold debt securities for the foreseeable future, no declines are deemed to be other than temporary.

 

**Note  3.**

**Loans**

 

The loan portfolio was composed of the following:

 

 

**(Dollars in thousands)**

**June 30,   2007**

 

**December 31,  2006**

Real estate loans: 

 

 

 

Commercial 

$       49,318 

 

$       48,358 

Residential 1-4 family 

99,144 

 

95,601 

Construction 

19,937 

 

17,510 

Total real estate loans

$     168,399 

 

$     161,469 

Commercial loans

22,071 

 

20,324 

Consumer loans

19,171 

 

18,376 

Total loans 

$     209,641 

 

$     200,169 

Less:  allowance for loan losses 

1,940 

 

1,935 

Loans, net 

$     207,701 

 

$     198,234 

 

**Note 4.**

**Allowance for Loan Losses**

 

The following is a summary of transactions in the allowance for loan losses:

 

 

**Six Months Ended**

 

 

**Year Ended**

**(Dollars in thousands)**

**June  30,**

**2007**

 

**December 31,**

**2006**

Balance, beginning 

$         1,935 

 

$         1,954

(Recovery) of provision for loan losses 

--

 

(316)

Loans charged off 

(42)

 

(155)

Recoveries of loans previously charged off 

47

 

452 

Balance, ending 

$         1,940 

 

$         1,935 

 

The following is a summary of impaired loans:

 

                ****

**(Dollars in thousands)**

**June  30,**

**2007**

 

**December 31,**

**2006**

Impaired loans with a valuation allowance

$            1,356 

 

$             1,906 

Impaired loans without a valuation allowance

212  

 

- - 

Total impaired loans

$            1,568

 

$             1,906 

 

 

 

 

Valuation allowance related to impaired loans

$               301

 

$                348 

 

 

 

 

Average investment in impaired loans

$            1,600

 

$             2,200 

 

 

 

 

Interest income recognized

$                 44

 

$                  91 

 

9

 

Non-accrual loans excluded from the impairment disclosure above under Statement of Financial Accounting Standards No. 118, “Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures” (“SFAS No. 118”), totaled $534 thousand and $36 thousand at June 30, 2007 and December 31, 2006, respectively. Income on non-accrual and impaired loans under the original terms would have been approximately $92 thousand and $120 thousand for the six months ended June 30, 2007 and June 30, 2006, respectively.   The Company had $ 473 thousand in loans that were ninety days or more past due and still accruing at June 30, 2007.   There were no loans ninety days or more past due and still accruing at December 31, 2006.

 

**Note 5.**

**Earnings Per Share**

 

The weighted average number of shares used in computing earnings per share was 2,440,750 shares for the six months ended June 30, 2007 and June 30, 2006.  

 

**Note 6.**

**Defined Benefit Pension Plan**

 

The components of Net Periodic Benefit Cost for the six months ended June 30, 2007 and June 30, 2006 were as follows:

 

 

**Pension Benefits**

**(Dollars in thousands)**

 

**2007**

 

**2006**

 

 

 

 

 

Service cost

 

$       154

 

$      148 

Interest cost

 

112

 

102

Expected return on plan assets

 

(140)

 

(116)

Amortization of prior service cost

 

(48) 

 

(48)

Amortization of net actuarial loss

 

42

 

44

Net periodic benefit cost

 

$       120

 

$     130

 

 

 

 

 

The pension plan has a fiscal year ending September 30, providing the Company the flexibility as to the calendar year in which it makes pension plan contributions.  The Company made its required 2007 fiscal year contribution to the pension plan in December 2006 in the amount of $240,000.  The Company anticipates making the 2008 contribution by December 31, 2007.  The Company estimates this contribution to be approximately $250,000.  

 

**Note 7.**

**Recent Accounting Pronouncements**

 

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS 157).  SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  SFAS 157 does not require any new fair value measurements but may change current practice for some entities.  This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those years.  The Company does not expect the implementation of SFAS 157 to have a material impact on its consolidated financial statements.

 

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159).  This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of this Statement is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The fair value option established by this Statement 

 

10

 

permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may be applied instrument by instrument and is irrevocable. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007.  The Company is in the process of evaluating the impact SFAS 159 may have on its consolidated financial statements. 

 

 

**Item 2.**

**Management’s Discussion and Analysis of Financial Condition and Results of Operations**

 

The following discussion provides information about the major components of the results of operations and financial condition, liquidity, and capital resources of Citizens Bancorp of Virginia, Inc. (the Company).  This discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and Notes to the Interim Consolidated Financial Statements included in this quarterly report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

 

The Company’s primary revenue comes from retail banking in the form of interest income received on loans and investments.  This income is partially offset by the Company’s interest expense on deposits and borrowed funds, resulting in net interest income.  The Company’s earnings also come from noninterest income in the form of deposit fees, gains on the sale of loans and investments, ATM fees, Bank-owned Life Insurance, and other financial services.  The Company’s combined noninterest income and net interest income are offset by the Company’s noninterest expense which includes employee compensation and benefits, occupancy, equipment and other operating expenses.

 

**CRITICAL ACCOUNTING POLICIES**

 

**General**

 

The  financial  condition  and results of  operations  presented in the Consolidated Financial  Statements,  accompanying  Notes  to  Interim Consolidated Financial  Statements and  management's  discussion and analysis are, to a large degree,   dependent  upon  the  accounting  policies  of the Company. The selection and application of these accounting policies involve judgments, estimates, and uncertainties that are susceptible to change.

 

Presented below is a discussion of those accounting policies (Critical Accounting Policies) that management believes are the most important to the portrayal and understanding of the Company’s financial condition and results of operations.   The Critical Accounting Policies require management's most difficult, subjective and complex judgments about matters that are inherently uncertain.  In the event that different assumptions or conditions were to prevail,  and depending  upon the severity of such changes, materially different  financial  condition  or  results  of  operations  is  a reasonable  likelihood.  

 

**Allowance for Loan Losses**

 

The Company monitors and maintains an allowance for loan losses to absorb an estimate of probable losses inherent in the loan portfolio.  The Company maintains policies and procedures that address the systems of controls  over  the  following  areas  of  maintenance  of  the  allowance:  the systematic  methodology used to determine the appropriate level of the allowance to  provide  assurance that the systems are  maintained  in  accordance  with  accounting principles  generally  accepted in the United States of America;  the accounting policies for loan charge-offs and recoveries;  the assessment and measurement of impairment in the loan portfolio; the loan grading system; and the general economic environment.

 

11

 

The Company evaluates various loans individually for impairment as required by Statement of Financial   Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan, and SFAS No. 118, Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures*.*Loans evaluated individually for impairment include non-performing loans, such as loans on non-accrual, loans past due by 90 days or more, restructured loans and other loans selected by management.  The evaluations are based upon discounted expected cash flows or collateral valuations. If the evaluation shows that a loan is individually impaired, then a specific reserve is established for the amount of impairment. If a loan evaluated individually is not impaired, then the loan is assessed for impairment under SFAS No. 5, Accounting for Contingencies, with a group ofloans that have similar characteristics.

 

For loans without individual measures of impairment, the Company makes estimates of losses for groups of loans as required by SFAS No. 5.  Loans are grouped by similar characteristics, including the type of loan, the assigned loan grade and the general collateral type.  A loss rate reflecting the expected loss inherent in a group of loans is derived based upon estimates of default rates for a given loan grade, the predominant collateral type for the group and the terms of the loan.  The  resulting estimate of losses  for groups of loans are adjusted  for  relevant  environmental  factors  and  other  conditions  of  the portfolio of loans, including:  borrower and industry concentrations; levels and  trends in delinquencies,  charge-offs  and  recoveries;  changes in underwriting  standards and risk  selection;  level of  experience,  ability and depth of lending management; and national and local economic conditions.

 

The amount of estimated impairment for individually evaluated loans and groups of loans is added together for a total estimate of loan losses.  This estimate of losses is compared to the allowance for loan losses of the Company as of the evaluation date and, if the estimate of losses is greater than the allowance, an additional provision to the allowance would be made. If the estimate of losses is less than the allowance, the degree to which the allowance exceeds the estimate is evaluated to determine whether the allowance falls outside a range of estimates. If the estimate of losses is below the range of reasonable estimates, the allowance would be reduced by way of a credit to the provision for loan losses.  The Company recognizes the inherent imprecision in estimates of losses due to various  uncertainties and variability related to the  factors  used,  and  therefore  a  reasonable  range  around theestimate of losses is derived and used to ascertain whether the allowance is too high.  If  different assumptions or conditions  were  to  prevail  and  it is determined  that the  allowance  is not  adequate to absorb the new  estimate of probable losses, an additional  provision for loan losses would be made, which amount may be material to the Consolidated Financial Statements.

 

**FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**Balance Sheet**

 

Total assets for the Company increased to $287.6 million at June 30, 2007 compared to $280.9 million atDecember 31, 2006, representing an increase of $6.7 million or 2.3%. Total net loans at June 30, 2007were $207.7 million, an increase of $9.5 million from the December 31, 2006 amount of $198.2 million.Loan origination activity for the first six months of 2007 was strong with $43.9 million in new loans.Net loans as a percent of total assets were 72.2% at June 30, 2007, an increase of 1.6% from December31, 2006. Investment securities decreased to $47.1 million at June 30, 2007, or 16.7% of total assets,which is a decrease of $4.0 million from $51.1 million at December 31, 2006. The investment portfolio’scash flow will typically be used to fund loan demand if deposit account growth is insufficient to meetloan demand. The decline in the investment securities balances between December 31, 2006 and June 30,2007 was to fund the higher loan demand not being met by deposit account growth. Federal funds solddecreased $1.5 million from $4.1 million at December 31, 2006 to $2.6 million at June 30, 2007. 

 

**Allowance for Loan Losses**

 

The allowance for loan losses at June 30, 2007 was $1.940 million compared to $1.935 million at December 31, 2006.  The allowance for loan losses, as a percentage of total outstanding loans, decreased to 0.93% at June 30, 2007 from 0.97% at December 31, 2006.  During the six months ended June 30, 

 

12

 

2007, the Company charged off $42 thousand in loans, recovered $47 thousand from previous write-offs, and did not provide any additional provision to the allowance.  

 

Management believes the allowance for loan losses is adequate to cover credit losses inherent in the loan portfolio at June 30, 2007.  Loans classified as loss, doubtful, substandard or special mention are adequately reserved for and are not expected to have a material impact beyond what has been reserved.  For a more detailed discussion of Management’s analysis of the loan portfolio, please see the “Allowance for Loan Losses” discussion above.

 

Criticized loans are defined by management as loans that, after having undergone normal credit review, presently indicate, or have the potential for, significant weakness or high likeliness that the loans will not perform under the original terms of the loans.  Criticized loans may or may not be currently accruing interest and, while they are not classified as impaired loans, management has computed probable loss amounts should the loans not perform as originally agreed.  Criticized loan balances at June 30, 2007 and December 31, 2006 totaled $2.5 million and $2.2 million, respectively.  At June 30, 2007 and December 31, 2006, $211 thousand and $208 thousand, respectively, were included in the allowance for loan losses to cover for the possible losses on these loans. 

 

The Company had $1.0 million in non-accruing loans at June 30, 2007, or 0.48% of gross loans, compared to $1.7 million at December 31, 2006, or 0.87% of gross loans, a decrease of $0.7 million or 41.2%.

 

**Deposits**

 

Total deposits of $243.7 million at June 30, 2007 represented an increase of $4.4 million from $239.3 million at December 31, 2006.  Total certificates of deposit at June 30, 2007 were $133.9 million, up $1.2 million from $132.7 million at December 31, 2006.  Non-interest bearing deposits totaled $40.6 million at June 30, 2007, which is a 6.6% increase from $38.1 million at December 31, 2006.  Interest-bearing deposits accounted for 83.3% of total deposits at June 30, 2007 as compared to 84.1% of total deposits at December 31, 2006.  Bank management remained focused on growing low-cost deposit account balances during the first half of 2007; this strategy has assisted in managing the overall interest cost of deposit accounts.  

 

**Short Term Borrowings**

 

The Company utilizes one main source of short term borrowings, overnight repurchase agreements from commercial customers that utilize the Business Investment Sweeps product.  A secondary source of short term borrowings would be overnight advances from the Federal Home Loan Bank of Atlanta or from lines of credit established with its correspondent banks.  For additional details on borrowing sources, see the “Liquidity” section later in this report.  At June 30, 2007, the Company had total short term borrowings of $5.4 million that consisted entirely of customer repurchase agreements.  This is compared to $4.4 million in short term borrowings at December 31, 2006, which was also entirely from customer repurchase agreements.

 

**Stockholders’ Equity**

 

Stockholders’ equity was $35.6 million at June 30, 2007 compared to $35.1 million at December 31, 2006.  The book value per common share was $14.60 at June 30, 2007 compared to $14.36 at December 31, 2006.  On April 13, 2007, shareholders were paid a quarterly dividend of $0.16 per share.  On June 27, 2007, the Board of Directors approved a cash dividend of $0.16 per share, or $390 thousand, payable to shareholders on July 20, 2007.  Total average outstanding shares for the first two quarters of 2007 and the average outstanding for the year ended December 31, 2006 were 2,440,750 shares.

 

The change in Accumulated Other Comprehensive Loss at June 30, 2007 versus December 31, 2006 was a result of the change in net unrealized losses on available for sale securities.  At June 30, 2007, the 

 

13

 

Company reflected a net unrealized loss of $1.210 million or an increase of $344 thousand from $866 thousand at December 31, 2006.  

 

**Net Income**

 

For the six months ended June 30, 2007, the Company reported net income of $1.715 million as compared to $1.665 million for the same period in 2006, an increase of 3.0%.  Income per basic and diluted share was $0.70 for the six months ended June 30, 2007, as compared to $0.68 per basic and diluted share for the period ended June 30, 2006.

 

The Company had an annualized return on average assets of 1.22% and an annualized return on average equity of 9.67% for the six months ended June 30, 2007, as compared to an annualized return on average assets and average equity of 1.21% and 9.85%, respectively, for the same period in 2006.

 

For the three months ended June 30, 2007, the Company reported net income of $906 thousand as compared to $884 thousand for the same period in 2006, an increase of 2.49%.   Income per basic and diluted share was $0.37 for the three months ended June 30, 2007, as compared to $0.36 per basic and diluted for the period in 2006.

 

The increase in net income for the three months ended June 30, 2007 as compared to the same period for 2006 is attributable to several factors, including an increase of $12 thousand or 0.4% in net interest income before provision for loan losses, a decrease of $19 thousand in loan loss provision, and a decrease of $9 thousand or 0.4% in total non-interest expense.  

 

Continued higher short term interest rates, competition for deposits, and the ability to continue growing non-interest bearing demand deposits will continue to put pressure on the cost of funds during the next several months as it did during the first half of 2007.

 

For the first six months of 2007, the asset quality of the loan portfolio remained high, and based upon the review of the allowance for loan losses, management did not have to provide any additional provision to the allowance.  For the same six months of 2006, a total of $34 thousand was provided to the allowance.  Based upon the current asset quality of the loan portfolio, management anticipates loan quality to remain high during 2007; additional provision for loan losses might be necessary as a result of the overall growth of the loan portfolio, rather than a deterioration of asset quality.

 

Noninterest income for the first six months of 2007 was $1.152 million or $43 thousand greater than the same period in 2006.  The results, excluding non-recurring items such as gains on Other Real Estate Owned sales, give a better indication of the core improvement in non-interest income over the previous year.  Exclusive of the $15 thousand in OREO gains for the first six months of 2007, and the $77 thousand in OREO gains for the same period of 2006, non-interest income would have been $1.137 million, or $105 thousand greater than the $1.032 million for the first six months of 2006, or a 10.2% increase.  

 

**Net Interest Income**

 

Net interest income is the Company’s primary source of earnings and represents the difference between interest and fees earned on loans, investments and other earning assets and the interest expense paid on deposits and other interest bearing liabilities.  The cost of funds represents interest expense on deposits and other borrowings.  Non-interest bearing deposits and capital are other components representing funding sources.  Changes in the volume and mix of earning assets and funding sources, along with the changes in yields earned and rates paid, determine changes in net interest income.

 

For the six months ended June 30, 2007, net interest income was $5.424 million, which was $37 thousand greater than $5.387 million for the same period in 2006.  The average loan balances for the six months 

 

14

 

ended June 30, 2007 were .66% lower or $1.4 million less than the six months ended June 30, 2006.  The loan yield increased 59 basis points to 7.38% for the six months ended June 30, 2007 from 6.79% for the comparable period in 2006.  The average investment securities balance for the first six months of 2007 was $48.9 million or $2.3 million greater than the average of $46.6 million for the same period in 2006.  The tax-equivalent yield on investment securities for the period in 2007 was 4.68% as compared to 4.58% for 2006, or an increase of 10 basis points from the year-earlier period.  The yield on earning assets for the six months ended June 30, 2007 was 6.84%, an increase of 46 basis points from the yield of 6.38% reported in the comparable period of 2006.  The increase in the earning assets yield for the year-to-date in 2007 as compared to the same period in 2006 is primarily the result of highershort-term rates.  The net interest margin includes the effect of non-interest bearing sources in its calculation and net interest income is expressed as a percentage of average earning assets.  The net interest margin decreased by 4 basis points to 4.33% for the six months ended June 30, 2007 as compared to 4.37% for the same period in 2006.  

 

A significant component of the Company’s increase in the net interest income has been the ability to manage interest bearing deposit rates and to attract and retain low cost core deposits, especially non-interest bearing demand deposit accounts. Interest bearing deposit accounts and short-term borrowings were also affected by higher short term interest rate increases with the time deposit accounts increasing 81 basis points and short-term borrowings increasing 12 basis points over the comparable period in 2006.  Average time deposit balances for the first six months of 2007 increased to $134.1 million as compared to $129.4 million for the prior year period, while short-term borrowings decreased $171 thousand from an average of $5.2 million during the first six months of 2006 to an average of $5.0 million for the first six months of 2007.  Meanwhile, lower costing money market and savings accountsaveraged $69.7 million for the first six months of 2007 as compared to $71.0 million during the same period in 2006.  Overall, interest bearing liabilities averaged $208.8 million for the first six months of 2007, an increase of $3.2 million when compared to $205.6 million for the same period in 2006.  The average balance for non-interest bearing deposit accounts for the first six months of 2007 was $36.1 million or $391 thousand greater than the average balance of $35.7 million for the comparable period in 2006.

 

The table on the following page labeled “Average Balances, Interest Yields and Rates, and Net Interest Margin” presents the average balances and rates of the various categories of the Company’s assets and liabilities.  Included in the table is a measurement of interest rate spread and margin.  Interest rate spread is the difference (expressed as a percentage) between the interest rate earned on earning assets less the interest expense on the interest bearing liabilities.  While net interest spread provides a quick comparison of earnings rates versus the cost of funds, management believes that the interest margin provides a better measurement of performance.  

 

15

 

**Average Balances, Interest Yields and Rates, and Net Interest Margin**

 

**Six Months Ended June 30,**

 

**2007**

 

**2006**

 

**Average**

 

 

 

**Average**

 

**Average**

 

 

 

**Average**

**(Dollars in Thousands)**

**Balance**

 

**Interest**

 

**Yield/Rate**

 

**Balance**

 

**Interest**

 

**Yield/Rate**

 

 

 

 

 

 

 

 

 

 

 

 

**ASSETS:**

 

 

 

 

 

 

 

 

 

 

 

Interest earning assets:

 

 

 

 

 

 

 

 

 

 

 

Interest bearing deposits with other banks and

 

 

 

 

 

 

 

 

 

 

 

other short-term investments

$      2,146 

 

$         56 

 

5.22%

 

$         175 

 

$           4 

 

4.61%

Loans **(1)**

204,404

 

7,484

 

7.38%

 

205,771

 

6,927

 

6.79%

Investment securities available for sale  **(2)**

48,965

 

1,152

 

4.68%

 

46,611

 

1,074

 

4.58%

Federal funds sold

2,651

 

69

 

5.15%

 

1,891

 

44

 

4.63%

Total interest earning assets

$  258,166 

 

$    8,761 

 

6.84%

 

$  254,448 

 

$    8,049 

 

6.38%

 

 

 

 

 

 

 

 

 

 

 

 

Total average non-earning assets

26,630

 

 

 

 

 

24,666

 

 

 

 

Less: allowance for credit losses

1,932

 

 

 

 

 

1,980

 

 

 

 

Net average non-earning assets

24,698

 

 

 

 

 

22,686

 

 

 

 

TOTAL AVERAGE ASSETS

$  282,864 

 

 

 

 

 

$  277,134 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**LIABILITIES AND STOCKHOLDERS'**

 

 

 

 

 

 

 

 

 

 

 

**EQUITY:**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Interest bearing demand

$    36,430 

 

$         29 

 

0.16%

 

$    37,232 

 

$         29 

 

0.16%

Savings

33,255

 

$       154 

 

0.93%

 

33,785

 

102

 

0.61%

Time deposits

134,104

 

2,938

 

4.42%

 

129,419

 

2,316

 

3.61%

Other short-term borrowings

4,999

 

94

 

3.79%

 

5,170

 

94

 

3.67%

Total interest bearing liabilities

$  208,788 

 

$    3,215 

 

3.11%

 

$  205,606 

 

$    2,541 

 

2.49%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Noininterest bearing demand

36,114

 

 

 

 

 

35,723

 

 

 

 

Other liabilities

2,215

 

 

 

 

 

1,696

 

 

 

 

Total noninterest bearing liabilities

38,329

 

 

 

 

 

37,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

35,747

 

 

 

 

 

34,109

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' 

 

 

 

 

 

 

 

 

 

 

EQUITY

$  282,864 

 

 

 

 

 

$  277,134 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

$    5,546 

 

 

 

 

 

$    5,508 

 

 

Net interest spread

 

 

 

 

3.74%

 

 

 

 

 

3.89%

Net interest margin

 

 

 

 

4.33%

 

 

 

 

 

4.37%

 

 

 

 

 

 

 

 

 

 

 

 

**(1)** Includes Loans Held for Sale and average daily balance of non-accrual loans.

 

 

**(2)** Income and yield are reported on a tax equivalent basis assuming a federal tax rate of 34%.

 

 

 

 

16

 

**Noninterest Income**

 

Noninterest income includes deposit fees, gains on the sales of investments, OREO and Loans Held for Sale, and ATM fees.   Noninterest income increased 3.87% to $1.152 million for the six months ended June 30, 2007 compared to $1.109 million for the same period in 2006.  Below is a representation of the changes to the significant components: 

  

**(Dollars in Thousands)**

**Six  months ended**

**Noninterest Income**

**June 30,**

**2007**

**June 30,**

**2006**

**% Change**

**Service charges on deposit accounts**

**$            600**

**$           634**

**(5.3)%**

**Net gain on sales of loans**

**60**

**45**

**33.3%**

**Net gain on sale of OREO**

**15**

**77**

**(80.5)%**

**Income from bank owned life insurance**

**137**

**127**

**7.9%**

**ATM fee income**

**192**

**128**

**50.0%**

**Other income**

**148**

**98**

**51.0%**

**Total noninterest income**

**$         1,152**

**$        1,109**

**3.9%**

 

 

**•**

Service charges on deposit accounts decreased 5.3% or $34 thousand primarily as the result of lower overdraft fees, due in part to daily maximum limits being placed for the automatic overdraft program, and in part to consumers moving from fee-generating products to fee-free checking products.   

 

 

**•**

Net gain on sales of loans increased 33.3% or $15 thousand as a result of a greater number of fixed-rate residential loans sold into the secondary market.  This program is in its second year of operation and the Bank is producing revenue on loans that it typically would not want to retain on its balance sheet due to the interest-rate risk that these loans can pose for the Bank.

 

 

**•**

Net gain on sale of OREO decreased 80.5% or $62 thousand as a result of the number of properties available for sale, and the value of those properties realized in the sale.

 

 

**•**

ATM fee income increased 50.0% or $64 thousand as a result of adding additional ATM machines and increased customer usage.

 

 

**•**

Other income increased 51.0% or $50 thousand primarily due to commissions earned on non-deposit investment services and title company dividends.

 

**Noninterest Expense**

 

Noninterest expense includes employee-related costs, occupancy and equipment expense and other overhead costs.  Noninterest expense for the six months ended June 30, 2007 increased $27 thousand to $4.163 million as compared to $4.136 million for the comparable period in 2006, or an increase of 0.65%.  Management has been working, over the last 2 years, to establish stricter controls over noninterest expenses, and these efforts are being realized by the moderate increases in non-interest expenses over the previous year.  The following table outlines the changes in significant components:

 

                

**(Dollars in Thousands)**

**Six months ended**

**Noninterest Expense**

**June 30, 2007**

**June 30, 2006**

**% Change**

**Salaries and employee benefits**

**$       2,472**

**$       2,360**

**4.7%**

**Net occupancy expense**

**269**

**264**

**1.9%**

**Equipment expense**

**327**

**372**

**(12.1)%**

**Other operating expense**

**1,095**

**1,140**

**(3.9)%**

**Total noninterest expense**

**$       4,163**

**$       4,136**

**0.6%**

 

 

17

 

 

**•**

Salaries and employee benefits increased $112 thousand as a result of additional staffing for branch expansion, cost of living increases and employer-match costs for the 401-K Plan and the employee incentive program.

 

 

**•**

Net occupancy expense increased $5 thousand primarily as a result of depreciation expense related to the South Hill banking office, increases in building repairs and maintenance and real estate taxes. 

 

 

**•**

Equipment expense decreased $45 thousand primarily as a result of lower depreciation expenses, due to equipment becoming fully depreciated, and lower costs in 2007 due to the reduction in rented postage equipment.

 

**Liquidity**

 

Liquidity represents an institution’s ability to meet present and future obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management.   Liquidity is also defined as the Company’s ability to meet the borrowing and deposit withdrawal requirements of the customers of the company in addition to meeting current and planned expenditures. The Company maintains its liquidity position through cash on hand, correspondent bank balances and investment in federal funds sold, by maintaining its investment portfolio in available for sale status and through the availability of borrowing lines at the Federal Home Loan Bank of Atlanta, the Federal Reserve Bank of Richmond and at its correspondent banks.  Federal funds lines of credit are maintained with four correspondent banks.   As of June 30, 2007, the Company has the following lines ofcredit available.

 

Federal Home Loan Bank of Atlanta

 

$64,200,000

Community Bankers Bank

 

11,400,000

SunTrust

 

8,000,000

Federal Reserve Bank of Richmond

 

3,300,000

Total Off-Balance Sheet Borrowing Lines

 

$86,900,000

 

The Company had $5.4 million in outstanding borrowings at June 30, 2007, which represented a $1.0 million or 23.2% increase from $4.4 million at December 31, 2006.    At June 30, 2007, outstanding borrowings were entirely from balances outstanding in the Investment Sweeps Account product, which is an overnight repurchase agreement product, not insured by FDIC, but guaranteed by the Bank with US Government and Federal Agency securities.  This product is offered to commercial customers only.

 

The Company monitors its liquidity position on a regular basis and continuously adjusts its assets to maintain adequate liquidity levels.  The Company has established satisfactory liquidity targets, monitors its liquidity position daily, and reports its liquidity ratios to the Board of Directors on a monthly basis. The Company considers its sources of liquidity to be sufficient to meet its estimated needs.

 

**Capital Resources**

 

Stockholders’ equity at June 30, 2007 and December 31, 2006 was $35.6 million and $35.0 million, respectively.  Total number of common shares outstanding at each of June 30, 2007 and December 31, 2006 was 2,440,750.

 

At June 30, 2007, the Company’s Tier 1 and total risk-based capital ratios were 19.1% and 20.1%, respectively, compared to 19.1% and 20.2% at December 31, 2006.  The Company’s leverage ratio was 12.9% at June 30, 2007 compared to 12.6% at December 31, 2006.  The Bank’s capital structure places it well above the regulatory guidelines, which affords the Company the opportunity to take advantage of business opportunities while ensuring that it has the resources to protect against risk inherent in its business.

 

18

 

**FORWARD LOOKING STATEMENTS**

 

Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, (the “Exchange Act”) as amended.  These forward-looking statements are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import.  Such forward-looking statements involve known and unknown risks including, but not limited to, the following factors:

 

 

**•**

successfully manage the Company’s growth and implement its growth strategies;

 

**•**

continue to attract low cost core deposits to fund asset growth;

 

**•**

maintain cost controls and asset qualities as the Company opens or acquires new branches;

 

**•**

rely on the Company’s management team, including its ability to attract and retain key personnel;

 

**•**

successfully manage interest rate risk;

 

**•**

respond to or anticipate changes in general economic and business conditions in the Company’s market area;

 

**•**

manage changes in interest rates and interest rate policies;

 

**•**

manage and monitor risks inherent in making loans such as repayment risks and fluctuating collateral values;

 

**•**

compete with other banks and financial institutions and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources;

 

**•**

respond to demand, development and acceptance of new products and services;

 

**•**

maintain capital levels adequate to support the Company’s growth;

 

**•**

handle problems with technology utilized by the Company;

 

**•**

plan for changing trends in customer profiles and behavior; and

 

**•**

monitor and manage changes in banking and other laws and regulations applicable to the Company.

 

Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

 

 

**Item 3.**

**Quantitative and Qualitative Disclosures about Market Risk**

 

In order to more closely measure interest sensitivity, the Company uses earnings simulation models on a quarterly basis.  These models utilize the Company’s financial data and various management assumptions as to growth and earnings to forecast a base level of net interest income and earnings over a one-year period.  This base level of earnings is then shocked assuming a sudden increase or decrease in interest rates.  

 

There have been no changes that would significantly alter the disclosure previously reported as of December 31, 2006.  For more information, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.  

 

**Item 4.**

**Controls and Procedures**

 

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

19

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this quarterly report.  Based on that evaluation, the Company has concluded that these controls and procedures are effective. In addition, there was no change in the Company’s internal control over financial reporting that occurred during the three months ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. 

 

 

20

 

**Part II.  Other Information**

 

**Item 1.  Legal Proceedings**

 

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company, including its subsidiaries, is a party or of which the property of the Company is subject.

 

**Item 1A.  Risk Factors**

 

There are no material changes to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

 

**Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds**

 

The Company did not repurchase any of its equity securities during the three months ended June 30, 2007.

 

**Item 3.  Defaults upon Senior Securities**

 

None.

 

**Item 4.  Submission of Matters to a Vote of Security Holders**

 

The Annual Meeting of Shareholders was held May 16, 2007 at the Main Office of the Company, 126 South Main Street, Blackstone, Virginia.  The Company had 2,440,750 shares outstanding and eligible to vote at the Annual Meeting.  The following Directors were elected by the shareholders at the Annual Meeting:

 

        

 

**Nominees**

**Votes Received by**

**Each Nominee**

**Votes Withheld for Each Nominee**

 

 

 

Irving J. Arnold

1,819,540

16,463

Frank P. Beale

1,749,117

86,886

Joseph D. Borgerding

1,817,355

18,648

William D. Coleburn

1,713,475

122,528

Roy C. Jenkins, Jr.

1,802,176

33,827

Joseph F. Morrissette

1,811,990

24,013

E. Walter Newman, Jr.

1,735,145

100,858

Jo Anne S. Webb

1,813,651

22,352

Samuel H. West

1,792,401

43,602

Jerome A. Wilson, III

1,818,340

17,663

 

In addition, the shareholders ratified the selection of Yount, Hyde & Barbour, P.C. as independent public accountants for the Company for the fiscal year 2007, as follows:

 

 

FOR  

1,820,676

AGAINST  5,088

ABSTAIN  10,239

 

**Item 5.  Other Information**

 

 None.

 

**Item 6.  Exhibits**

 

 See Exhibit Index.

 

21

 

**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.

 

 

**CITIZENS BANCORP OF VIRGINIA, INC.**

 

(Registrant)

 

 

Date:  

August 14, 2007

/s/  Joseph D. Borgerding

Joseph D. Borgerding

President and Chief Executive Officer

 

Date:  

August 14, 2007

/s/ Ronald E. Baron

Ronald E. Baron

Senior Vice President and Chief Financial Officer

 

 

22

 

**EXHIBIT INDEX**

 

Exhibit Number

 

 

31.1

Rule 13a-14(a) Certification of Principal Executive Officer 

 

 

31.2

Rule 13a-14(a) Certification of Principal Financial Officer

 

 

32.1

Statement of Principal Executive Officer Pursuant to 18 U.S.C. ss.1350

 

 

32.2

Statement of Principal Financial Officer Pursuant to 18 U.S.C. ss.1350

 

 

 

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