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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549

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FORM 10-K

|ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|------------------------------------------------------------------------------
|                                                                              
|For the fiscal year ended December 31, 2002                                   
|                                                                              
|Commission file no:  0-22955                                                  
|                                                                              
|BAY BANKS OF VIRGINIA, INC.                                                   
|(Exact name of registrant as specified in its charter)                        
|                                                                              
|VIRGINIA                                                                      
|(State of Incorporation)                                                      
|                                                                              
|100 SOUTH MAIN STREET, KILMARNOCK, VIRGINIA 22482                             
|(Address of principal executive
offices)                        (Zip Code)    
|                                                                              
|Registrants telephone number: 804.435.1171                                    
|                                                                              
|Securities registered under Section 12(b) of the Exchange Act: None           
|                                                                              
|Securities registered under Section 12(g) of the Exchange Act:                
|                                                                              
|Common Stock ($5.00 Par Value)                                                
|(Title of Class)                                                              

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 an accelerated filer (as defined in Rule 12b-2 of the Act).

|YES o | NOx
|----- | ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

The aggregate market value of voting stock held by non-affiliates of the registrant based on the closing sale price of the registrants common stock on June 28,
2002, was $42,014,730.

The number of shares outstanding of the registrants common stock as of  March 28, 2003:
2,311,189

|DOCUMENTS INCORPORATED BY REFERENCE
|-----------------------------------

Portions of the registrants 2002 Annual Report to Shareholders are incorporated by reference into Part II of this Form 10-K.

Portions of the registrants definitive Proxy Statement for its Annual Meeting of Shareholders to be held on May 19, 2003 are incorporated by reference into Part
III of this Form 10-K.

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Form 10-K TABLE OF CONTENTS

|ITEM NUMBER |     | ITEM       |                                                                                                | PAGE NUMBER
|----------- | --- | ---------- | ---------------------------------------------------------------------------------------------- | -----------
|            |     |            |                                                                                                |            
|            |     | PART I     |                                                                                                |            
|            | 1.  |            | BUSINESS                                                                                       |            
|            |     |            |                                                                                                |            
|            |     |            | STATISTICAL INFORMATION                                                                        |            
|            |     |            |                                                                                                |            
|            | 2.  |            | PROPERTIES                                                                                     |            
|            |     |            |                                                                                                |            
|            | 3.  |            | LEGAL PROCEEDINGS                                                                              |            
|            |     |            |                                                                                                |            
|            | 4.  |            | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            |            
|            |     |            |                                                                                                |            
|            |     |            | PART II                                                                                        |            
|            |     |            |                                                                                                |            
|            | 5.  |            | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                          |            
|            |     |            |                                                                                                |            
|            | 6.  |            | SELECTED FINANCIAL DATA                                                                        |            
|            |     |            |                                                                                                |            
|            | 7.  |            | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          |            
|            |     |            |                                                                                                |            
|            | 7A. |            | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                     |            
|            |     |            |                                                                                                |            
|            | 8.  |            | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    |            
|            |     |            |                                                                                                |            
|            | 9.  |            | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE           |            
|            |     |            |                                                                                                |            
|            |     |            | PART III                                                                                       |            
|            |     |            |                                                                                                |            
|            | 10. |            | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                             |            
|            |     |            |                                                                                                |            
|            | 11. |            | EXECUTIVE COMPENSATION                                                                         |            
|            |     |            |                                                                                                |            
|            | 12. |            | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |            
|            |     |            |                                                                                                |            
|            | 13. |            | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 |            
|            |     |            |                                                                                                |            
|            | 14. |            | CONTROLS AND PROCEDURES                                                                        |            
|            |     |            |                                                                                                |            
|            |     |            | PART IV                                                                                        |            
|            |     |            |                                                                                                |            
|            | 15. |            | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                                |            
|            |     |            |                                                                                                |            
|            |     | SIGNATURES |                                                                                                | 19         

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This report contains certain forward-looking statements with respect to the financial condition, results of
operations, plans, objectives and business of Bay Banks of Virginia, Inc. and its subsidiaries.  These forward-looking statements involve certain risks and uncertainties.  Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others, the following:  (a) competitive pressure in the financial services industry increases significantly;  (b) changes in the interest rate environment that reduce
margins;  (c) general economic conditions, either nationally or regionally, are less favorable than expected, resulting in, among other things, a deterioration in credit quality;  (d) changes occur in the financial services regulatory
environment; and  (e) changes occur in the securities markets.

PART I

ITEM 1:  BUSINESS

Nature of Business.  Bay Banks of Virginia, Inc. (the Company) is a bank
holding company that conducts substantially all of its operations through its subsidiaries, Bank of Lancaster (the Bank), and Bay Trust Company (the Trust Company).  Bay Banks of Virginia, Inc. was incorporated under the
laws of the Commonwealth of Virginia on June 30, 1997, in connection with the holding company reorganization of the Bank of Lancaster.

The Bank is a state-chartered bank and a member of the
Federal Reserve System.  The Bank services individual and commercial customers, the majority of which are in the Northern Neck of Virginia, by providing a full range of banking and related financial services, including checking, savings, other
depository services, commercial and industrial loans, residential and commercial mortgages, home equity loans, and consumer installment loans.

The Bank has two offices located in Kilmarnock,
Virginia, one office in White Stone, Virginia, one office in Warsaw, Virginia, one office in Montross, Virginia, one office in Heathsville, Virginia, and one office in Callao, Virginia.  A substantial amount of the Banks deposits are
interest bearing, and the majority of the Banks loan portfolio is secured by real estate.  Deposits of the Bank are insured by the Bank Insurance Fund of the Federal Deposit Insurance Corporation (the FDIC).  The Bank
opened for business in 1930 and has partnered with the community to ensure responsible growth and development since that time.

In August of 1999, Bay Banks of Virginia formed Bay Trust
Company.  This subsidiary of the Company was created to purchase and manage the assets of the trust department of the Bank of Lancaster.  The sale and transfer of assets from the Bank to the Trust Company was completed as of the close of
business on December 31, 1999.  As of January 1, 2000, the Bank of Lancaster no longer owned or managed the trust function, and thereby no longer receives an income stream from the trust department.  Income generated by the Trust Company
is consolidated with the Banks income and the Companys income for the purposes of the Companys consolidated financial statements.  The Trust Company opened for business on January 1, 2000 in its permanent location on Main
Street in Kilmarnock, Virginia.

The Trust Company offers a broad range of trust and related fiduciary services.  Among these are testamentary trusts, revocable and irrevocable personal,
managed agency, and custodial trusts, as well as discount brokerage services.

The Companys marketplace is situated on the Northern Neck peninsula of Virginias western
shore.  The Northern Neck includes the counties of Lancaster, Northumberland, Middlesex, Richmond, and Westmoreland.  The Companys primary trading area is dominated by smaller, retired households with relatively high per
capita incomes.  Growth in households, employment, and retail sales is moderate but the local economic conditions are stable as growth has been positive for several years.  Health care, tourism, and related services are the major
employment sectors in the Northern Neck.

The Company had $263,060,149 in total assets and $231,516,181 in total deposits as of December 31, 2002.  Net earnings for the year ended
December 31, 2002, were $2,301,401.  Loan demand was steady as net loans increased to $168,442,156.

Lending Activities.  Through the Bank of Lancaster, the Company
provides a wide range of real estate, consumer, and commercial lending services to its customers in its market area.

Real Estate Lending.  The Banks real estate loan
portfolio is the largest segment of the loan portfolio.  Loans secured by real estate increased to $140,343,743 during 2002.  This balance is 82.6% of total loans outstanding.  The Bank offers fixed and adjustable rate loans on
one-to-four family residential properties.  These mortgages are underwritten and documented within the guidelines of the Regulations of the Board of Governors of the Federal Reserve System (the Federal Reserve).  The Bank
underwrites mainly adjustable rate mortgages as the marketplace allows.  Construction loans with a twelve-month term are also a major component of the Banks portfolio.  Underwritten at 80% loan to value, and to qualified builders and
individuals, these loans are disbursed as construction progresses and verified by Bank inspection.  The Bank also offers commercial loans that are secured by real estate.  These loans are typically written at 80% loan to value and are
either variable with the prime rate of interest, or adjustable in one, three, or five year terms.

The Company also offers secondary market loan origination.  Through the Bank, customers may
apply for a home mortgage that will be underwritten in accordance with the guidelines of the Federal Home Loan Mortgage

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Corporation.  These loans are then sold into the secondary market on a loan by loan basis.  The Bank earns origination fees through offering this service. 
Customers, upon approval, receive a fixed or adjustable rate of interest with amortization terms up to 30 years.  Since these loans are sold into the secondary market, the Company earns no future interest income, nor does it incur any interest
rate or re-pricing risk.

Consumer Lending.  Consumer loans totaled $9,995,591 as of December 31, 2002, which amount to 5.9% of the total loans outstanding.  In an effort to
offer a full range of services, the Banks consumer lending includes automobile and boat financing, home improvement loans, and unsecured personal loans.  These loans historically entail greater risk than loans secured by real estate, but
also offer a higher return.

Commercial Lending.  Commercial lending activities include small business loans, asset based loans, and other secured and unsecured loans and lines of
credit.  Commercial loan balances were $16,762,800 at year-end 2002 and 9.9% of total loans outstanding.  Commercial lending may entail greater risk than residential mortgage lending, and is therefore underwritten with strict risk
management standards.  Among the criteria for determining the borrowers ability to repay is a cash flow analysis of the business and business collateral.

Business
Development.  The Bank offers several services to commercial customers.  These services include Analysis Checking, Cash Management Deposit Accounts, Wire Services, Direct Deposit Payroll Service, and a full line of Commercial
Lending options.  The Bank also offers Small Business Administration Low Document Loan products.  This allows commercial customers to apply for favorable rate loans for the development of business opportunities, while providing
the Bank with a partial guarantee of the outstanding loan balance.

Bay Services Company, Inc.  The Bank has one wholly owned subsidiary, Bay Services Company, Inc., a Virginia
corporation organized in 1994 (Bay Services).  Bay Services owns an interest in a land title insurance agency, Bankers Title of Fredericksburg, which generally sells title insurance to mortgage loan customers, including customers of
the Bank and the other financial institutions that have an ownership interest in the agency.  Bay Services has also invested in an insurance and investment services agency, Bankers Investment Group.  This agency will provide the
Banks non-deposit products department with insurance and investment products for marketing within the Banks primary marketing area.

Competition.  The Banks
marketplace is highly competitive, and the Bank is subject to competition from a variety of commercial banks and financial service companies.  For deposits, the Bank competes with statewide banking institutions, local community banks, major
investment brokerage companies, insurance companies, and other issuers of money markets and mutual fund products.  For loans, the Bank competes with other commercial banks, savings and loans, credit unions, major investment brokerage companies,
and consumer finance companies.  As the marketplace continues to develop, the Bank expects competition to increase.

Supervision and Regulation.  Bank holding companies and
banks are regulated under both federal and state law.  The Company is subject to regulation by the Federal Reserve.  Under the Bank Holding Company Act of 1956, the Federal Reserve exercises supervisory responsibility for any non-bank
acquisition, merger or consolidation.  In addition, the Bank Holding Company Act limits the activities of a bank holding company and its subsidiaries to that of banking, managing or controlling banks, or any other activity that is closely
related to banking.  In addition, the Company is registered under the bank holding company laws of Virginia, and as such is subject to regulation and supervision by the State Corporation Commission Bureau of Financial Institutions.

The following description summarizes the significant state and Federal laws to which the Company and the Bank are subject.  To the extent statutory or regulatory provisions or proposals are setforth,
the description is qualified in its entirety by reference to the particular statutory or regulatory provisions or proposals.

The Bank is supervised and regularly examined by the Federal Reserve and
the Commonwealth of Virginias State Corporation Commission Bureau of Financial Institutions.  These on-site examinations verify compliance with regulations governing corporate practices, capitalization, and safety and soundness. 
Further, the Bank is subject to the requirements of the Community Reinvestment Act (the CRA).  The CRA requires financial institutions to meet the credit needs of the local community, including low to moderate-income needs. 
Compliance with the CRA is monitored through regular examination by the Federal Reserve.

Federal Reserve regulations permit bank holding companies to engage in non-banking activities closely
related to banking or to managing or controlling banks.  These activities include the making or servicing of loans, performing certain data processing services, and certain leasing and insurance agency activities.

The Company owns 100% of the stock of the Bank of Lancaster.  The Bank is prohibited by the Federal Reserve from holding or purchasing its own shares except in limited circumstances.  Further, the Bank is subject to
certain requirements as imposed by state banking statutes and regulations.  The Bank is limited by the Federal Reserve regarding what dividends it can pay the Company.  Any dividend in excess of the total of the Banks net profit for
that year plus retained earnings from the prior two years must be approved by the proper regulatory agencies.  Further, under the Federal Deposit Insurance Corporation Improvement Act of 1991 (the FDICIA), insured depository
institutions are prohibited from making capital distributions, if, after making such distributions, the institution would become undercapitalized as defined by regulation.  Based upon the Banks current financial position, it
is not anticipated that this statute will impact the continued operation of the Bank.

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As a bank holding company, Bay Banks of Virginia is required to file with the Federal Reserve an annual report and such additional information as it may require pursuant to
the Bank Holding Company Act.  The Federal Reserve may also conduct examinations of the Company and any or all of its subsidiaries.

Capital Requirements.  The Federal Reserve,
the Office of the Comptroller of the Currency (the OCC) and the FDIC have issued substantially similar risk-based and leverage capital guidelines applicable to banking organizations.  In addition, those regulatory agencies may from
time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth.  Under the risk-based capital requirements of these federal bank regulatory agencies,
the Company and the Bank are required to maintain a minimum ratio of total capital to risk-weighted assets of 8%.  At least half of the total capital is required to be Tier 1 capital, which consists principally of common and certain
qualifying preferred shareholders equity, less certain intangibles and other adjustments.  The remainder (Tier 2 capital) consists of a limited amount of subordinated and other qualifying debt (including certain hybrid capital
instruments) and a limited amount of the general loan loss allowance.  The Tier 1 and total capital to risk-weighted asset ratios of the Company as of December 31, 2002 were 11.5% and 12.5%, respectively, exceeding the minimum
requirements.

In addition, each of the federal regulatory agencies has established a minimum leverage capital ratio (Tier 1 capital to
average risk-weighted assets) (Tier 1 leverage ratio).  These guidelines provide for a minimum Tier 1 leverage ratio of 4% for banks and bank holding companies that meet certain specified criteria, including that they have the
highest regulatory examination rating and are not contemplating significant growth or expansion.  The Tier 1 leverage ratio of the Company as of December 31, 2002, was 7.9%, which is well above the minimum requirement.  The guidelines also
provide that banking organizations that are experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible
assets.

Deposit Insurance. Pursuant to FDICIA, the FDIC adopted a risk-based assessment system for insured depository institutions that takes into account the risks attributable to
different categories and concentrations of assets and liabilities.  The risk-based system assigns an institution to one of three capital categories:  (i) well-capitalized, (ii) adequately capitalized, or (iii) undercapitalized.  The
FDIC also assigns an institution to one of three supervisory subgroups within each capital group.  The supervisory subgroup to which an institution is assigned is based on an evaluation provided to the FDIC by the institutions primary
federal regulator and information which the FDIC determines to be relevant to the institutions financial condition and the risk posed to the deposit insurance funds (which may include, if applicable, information provided by the
institutions state supervisor).  An institutions insurance assessment rate is then determined based on the capital category and supervisory category to which it is assigned.

Under
the final risk-based assessment system there are nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates are applied.  Assessment rates for deposit insurance
currently range from zero basis points ($2,000 minimum) to 27 basis points.  The capital and supervisory subgroup to which an institution is assigned by the FDIC is confidential and may not be disclosed.  A banks rate of deposit
insurance assessments will depend upon the category and subcategory to which the bank is assigned by the FDIC.  Any increase in insurance assessments could have an adverse effect on the earnings of insured institutions, including the
Bank.

Safety and Soundness Standards.  The FDIC has adopted guidelines that establish standards for safety and soundness of banks.  They are designed to identify potential safety
and soundness problems and ensure that banks address those concerns before they pose a risk to the deposit insurance fund.  If the FDIC determines that an institution fails to meet any of these standards, the agency can require the institution
to prepare and submit a plan to come into compliance.  If the agency determines that the plan is unacceptable or is not implemented, the agency must, by order, require the institution to correct the deficiency.

The FDIC also has safety and soundness regulations and accompanying guidelines on asset quality and earnings standards.  The guidelines provide six standards for establishing and maintaining a system to identify problem
assets and prevent those assets from deteriorating.  The guidelines also provide standards for evaluating and monitoring earnings and for ensuring that earnings are sufficient to maintain adequate capital and reserves.  If an institution
fails to comply with a safety and soundness standard, the agency may require the institution to submit and implement an acceptable compliance plan, or face enforcement action.

The
Gramm-Leach-Bliley Act of 1999.  The Gramm-Leach-Bliley Act of 1999 (GLBA) was signed into law on November 12, 1999.  The main purpose of GLBA is to permit greater affiliations within the financial services industry,
primarily banking, securities and insurance.  The provisions of GLBA that are believed to be of most significance to the Company are discussed below.

GLBA repealed sections 20 and 32 of the
Glass-Steagall Act, which separated commercial banking from investment banking, and substantially amends the Bank Holding Company Act which limited the ability of bank holding companies to engage in the securities and insurance businesses.  To
achieve this purpose, GLBA created a new type of company, the financial holding company.  A financial holding company may engage in or acquire companies that engage in a broad range of financial services, including

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| |  | securities activities such as underwriting, dealing, brokerage, investment and merchant banking; and
| | - | ----------------------------------------------------------------------------------------------------
| |   |                                                                                                     
| |  | insurance underwriting, sales and brokerage activities.                                             

A bank holding company may elect to become a
financial holding company only if all of its depository institution subsidiaries are well-capitalized, well-managed and have at least a satisfactory CRA rating.  For various reasons, the Company has not elected to be treated as a financial
holding company.

GLBA establishes a system of functional regulation under which the federal banking agencies regulate the banking activities of financial holding companies and banks
financial subsidiaries, the Securities and Exchange Commission regulate their securities activities and state insurance regulators will regulate their insurance activities.

GLBA and certain
regulations issued by federal banking agencies also provide protection against the transfer and use by financial institutions of consumers nonpublic personal information.  A financial institution must provide to its customers, at the
beginning of the customer relationship and annually thereafter, the institutions policies and procedures regarding the handling of customers nonpublic personal financial information.  The privacy provisions generally prohibit a
financial institution from providing a customers personal financial information to unaffiliated third parties unless the institution discloses to the customer that the information may be so provided and the customer is given the opportunity to
opt out of such disclosure.

Neither the provisions of GLBA nor the acts implementing regulations have had a material impact on the Companys or the Banks regulatory capital ratios
(as discussed above) or ability to continue to operate in a safe and sound manner.

Recent Legislation.

USA Patriot Act of 2001.   In October 2001, the USA Patriot Act of 2001 was enacted in response to the terrorist attacks in New York,
Pennsylvania and Washington, D.C. which occurred on September 11, 2001. The Patriot Act is intended to strengthen U.S. law enforcement and the intelligence communities abilities to work cohesively to combat terrorism on a variety of fronts.
The potential impact of the Patriot Act on financial institutions of all kinds is significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws and imposes various regulations, including
standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.

Sarbanes-Oxley Act of 2002.    On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the
SOA). The stated goals of the SOA are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and
reliability of corporate disclosures pursuant to the securities laws. The SOA is the most far-reaching U.S. securities legislation enacted since the 1930s.

The SOA generally applies
to all companies that file or are required to file periodic reports pursuant to the Securities Exchange Act of 1934 (the Exchange Act), including banks regulated by the FDIC. The SOA includes very specific additional disclosure
requirements and new corporate governance rules, requires the Securities and Exchange Commission (the SEC) and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules and mandates
further studies of specified issues by the SEC. The SOA represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as
the relationship between a board of directors and management and between a board of directors and its committees.

The SOA addresses,
among other matters:

| |  | audit committees;                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                          
| |  | certification of financial statements by the chief executive officer and the chief financial officer;                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                          
| |  | the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuers securities by directors and senior officers in the twelve month
period following initial publication of any financial statements that later require restatement;
| |   |                                                                                                                                                                                                                                                                          
| |  | expedited filing requirements for Forms 4s;                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                          
| |  | disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code;                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                          
| |  | the formation of a public accounting oversight board;                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                          
| |  | auditor independence; and                                                                                                                                                                                                                                                

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| |  | various increased criminal penalties for violations of securities laws.
| | - | -----------------------------------------------------------------------

The SOA contains provisions
that became effective upon enactment on July 30, 2002 and provisions that will become effective from within 30 days to one year from enactment. The SEC has been delegated the task of enacting rules to implement various provisions with respect to,
among other matters, disclosure in periodic filings pursuant to the Exchange Act.

Index of Statistical Tables:

|Table      |  | Description                                             
|---------- |  | --------------------------------------------------------
|           |  |                                                         
|Table I    |  | Average Balances, Income & Expense, Yields, and Rates   
|Table II   |  | Volume & Rate Analysis of Changes in Net Interest Income
|Table III  |  | Types of Investments                                    
|Table IV   |  | Investment Maturities & Average Yields                  
|Table V    |  | Types of Loans                                          
|Table VI   |  | Loan Maturity Schedule of Selected Loans                
|Table VII  |  | Risk Elements                                           
|Table VIII |  | Summary of Allowance for Loan Losses                    
|Table IX   |  | Allocation of the Allowance for Loan Losses             
|Table X    |  | Average Deposits & Rates                                
|Table XI   |  | Maturity Schedule of Time Deposits of $100,000 or more  
|Table XII  |  | Return on Equity & Assets                               
|Table XIII |  | Interest Rate Sensitivity Analysis                      

Table I Average Balances, Income and Expense,
Yields, and Rates

|                                              |                                    | 2002            |         | 2001             |  | 2000         |       
|--------------------------------------------- | ---------------------------------- | --------------- | ------- | ---------------- |  | ------------ | ------
|                                              |                                    |                 |         |                  |  |              |       
|(Fully taxable equivalent basis in Thousands) |                                    | Average Balance |         | Income/  Expense |  | Yield/  Rate |       
|                                              |                                    |                 |         |                  |  |              |       
|INTEREST EARNING ASSETS:                      |                                    |                 |         |                  |  |              |       
|Taxable Investments                           |                                    |                 | 34,404  |                  |  | 2,023        |       
|Tax-Exempt Investments (1)                    |                                    |                 | 14,714  |                  |  | 946          |       
|                                              | Total Investments                  |                 |         | 49,118           |  |              | 2,969 
|Gross Loans (2)                               |                                    |                 | 159,951 |                  |  | 11,150       |       
|Interest-bearing Deposits                     |                                    |                 | 200     |                  |  | 1            |       
|Fed Funds Sold                                |                                    |                 | 21,479  |                  |  | 345          |       
|                                              | TOTAL INTEREST EARNING ASSETS      |                 |         | 230,748          |  |              | 14,464
|INTEREST-BEARING LIABILITIES:                 |                                    |                 |         |                  |  |              |       
|Savings Deposits                              |                                    |                 | 59,506  |                  |  | 1,326        |       
|NOW Deposits                                  |                                    |                 | 33,069  |                  |  | 420          |       
|Time Deposits => $100,000                     |                                    |                 | 22,721  |                  |  | 890          |       
|Time Deposits < $100,000                      |                                    |                 | 67,730  |                  |  | 2,519        |       
|Money Market Deposit Accounts                 |                                    |                 | 12,739  |                  |  | 202          |       
|                                              | Total Deposits                     |                 |         | 195,765          |  |              | 5,357 
|Fed Funds Purchased                           |                                    |                 |        |                  |  |             |       
|Securities Sold to Repurchase                 |                                    |                 | 3,406   |                  |  | 34           |       
|Other Short Term Borrowings                   |                                    |                 |        |                  |  |             |       
|                                              | TOTAL INTEREST-BEARING LIABILITIES |                 |         | 199,171          |  |              | 5,391 
|Net Interest Income/Yield on Earning Assets   |                                    |                 |         |                  |  | 9,074        |       
|Net Interest Rate Spread                      |                                    |                 |         |                  |  |              |       
|                                              |                                    |                 |         |                  |  |              |       

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|Notes:                                                                     
|---------------------------------------------------------------------------
|(1) - Income and yield is tax-equivalent assuming a federal tax rate of 34%
|(2) - Includes Visa credit card program and non-accrual loans.             

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Table II Volume & Rate Analysis of Changes in Net Interest Income

|                              |                                    | 2002 vs. 2001        |        | 2001 vs. 2000      | 
|----------------------------- | ---------------------------------- | -------------------- | ------ | ------------------ | 
|                              |                                    |                      |        |                    | 
|(Thousands)                   |                                    | Change due to Volume |        | Change due to Rate | 
|                              |                                    |                      |        |                    | 
|Investments:                  |                                    |                      |        |                    | 
|Taxable Investments           |                                    |                      | (200   | )                  | 
|Tax-Exempt Investments        |                                    |                      | 259    |                    | 
|                              |                                    |                      |        |                    | 
|                              | Total Investments                  |                      |        | 59                 | 
|Loans                         |                                    |                      | 735    |                    | 
|Interest-bearing Deposits     |                                    |                      | (43    | )                  | 
|Fed Funds Sold                |                                    |                      | 26     |                    | 
|                              |                                    |                      |        |                    | 
|                              | Total Interest Earning Assets      |                      |        | 777                | 
|Interest-bearing Deposits:    |                                    |                      |        |                    | 
|Savings Deposits              |                                    |                      | 58     |                    | 
|NOW Deposits                  |                                    |                      | 87     |                    | 
|CDs >= $100,000              |                                    |                      | 1,184  |                    | 
|CDs < $100,000               |                                    |                      | 544    |                    | 
|Money Market Deposit Accounts |                                    |                      | 12     |                    | 
|                              |                                    |                      |        |                    | 
|                              | Total Interest-bearing Deposits    |                      |        | 1,885              | 
|Fed Funds Purchased           |                                    |                      |       |                    | 
|Securities Sold to Repurchase |                                    |                      | 9      |                    | 
|Other Short Term Borrowings   |                                    |                      |       |                    | 
|                              |                                    |                      |        |                    | 
|                              | Total Interest-Bearing Liabilities |                      |        | 1,894              | 
|Change in Net Interest Income |                                    |                      | (1,117 | )                  | 
|                              |                                    |                      |        |                    | 



|Notes:                                                                                                                | 
|--------------------------------------------------------------------------------------------------------------------- | 
|Changes due to a combination of volume and rates are allocated proportionately to Due to Volume and Due to Rates. | 

Table III Types of Investments

|(Amortized Cost, thousands)     |  | 12/31/2002 |        | 12/31/2001 |   | 12/31/2000 | 
|------------------------------- |  | ---------- | ------ | ---------- | - | ---------- | 
|                                |  |            |        |            |   |            | 
|U.S. Treasury Securities        |  | $          | 0      |            | $ | 0          | 
|U.S. Government Agencies        |  | $          | 7,511  |            | $ | 6,694      | 
|State and Municipal Governments |  | $          | 25,712 |            | $ | 20,979     | 
|Other Securities                |  | $          | 14,466 |            | $ | 19,493     | 
|                                |  |            |        |            |   |            | 
|Total                           |  | $          | 47,690 |            | $ | 47,166     | 

Table IV Investment Maturities & Average Yieldsas
of 12/31/2002

|(Thousands)                                |                        | One Year or Less or No Maturity |   | One to Five Years |   | Five to Ten Years |        | Over Ten Years |   | Total  |  
|------------------------------------------ | ---------------------- | ------------------------------- | - | ----------------- | - | ----------------- | ------ | -------------- | - | ------ | -
|                                           |                        |                                 |   |                   |   |                   |        |                |   |        |  
|U.S. Treasury & Agency Securities          |                        |                                 |   |                   |   |                   |        |                |   |        |  
|                                           | Book Value             |                                 | $ | 1,648             |   | $                 | 4,864  |                | $ | 1,000  |  
|                                           | Market Value           |                                 | $ | 1,683             |   | $                 | 5,136  |                | $ | 1,050  |  
|                                           | Weighted average yield |                                 |   | 5.36              | % |                   | 5.77   | %              |   | 5.79   | %
|States & Political Subdivisions Securities |                        |                                 |   |                   |   |                   |        |                |   |        |  
|                                           | Book Value             |                                 | $ | 710               |   | $                 | 12,512 |                | $ | 12,040 |  
|                                           | Market Value           |                                 | $ | 716               |   | $                 | 13,295 |                | $ | 12,638 |  
|                                           | Weighted average yield |                                 |   | 5.45              | % |                   | 6.17   | %              |   | 6.16   | %
|Other Securities:                          |                        |                                 |   |                   |   |                   |        |                |   |        |  
|                                           | Book Value             |                                 | $ | 3,052             |   | $                 | 6,571  |                | $ | 4,515  |  
|                                           | Market Value           |                                 | $ | 3,079             |   | $                 | 7,027  |                | $ | 4,739  |  
|                                           | Weighted average yield |                                 |   | 6.07              | % |                   | 6.31   | %              |   | 6.00   | %
|Total Securities:                          |                        |                                 |   |                   |   |                   |        |                |   |        |  
|                                           | Book Value             |                                 | $ | 5,410             |   | $                 | 23,947 |                | $ | 17,555 |  
|                                           | Market Value           |                                 | $ | 5,478             |   | $                 | 25,458 |                | $ | 18,427 |  
|                                           | Weighted average yield |                                 |   | 5.77              | % |                   | 6.13   | %              |   | 6.09   | %
|                                           |                        |                                 |   |                   |   |                   |        |                |   |        |  

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|Notes:                                                                       
|-----------------------------------------------------------------------------
|Yields on tax-exempt securities have been computed on a tax-equivalent basis.
|Average yields on securities held for sale are based on amortized cost.      

Table V
Types of Loans

|(Thousands)                                   |  | 12/31/2002 |         | 12/31/2001 |   | 12/31/2000 |  | 12/31/1999 |         | 12/31/1998 |  
|--------------------------------------------- |  | ---------- | ------- | ---------- | - | ---------- |  | ---------- | ------- | ---------- | -
|                                              |  |            |         |            |   |            |  |            |         |            |  
|Commercial                                    |  | $          | 16,763  |            | $ | 11,399     |  | $          | 11,279  |            | $
|Real Estate - Construction                    |  | $          | 19,131  |            | $ | 13,914     |  | $          | 4,591   |            | $
|Real Estate - Mortgage                        |  | $          | 121,213 |            | $ | 115,029    |  | $          | 111,957 |            | $
|Installment and Other (includes Visa program) |  | $          | 11,795  |            | $ | 10,560     |  | $          | 20,590  |            | $
|                                              |  |            |         |            |   |            |  |            |         |            |  
|Total                                         |  | $          | 168,902 |            | $ | 150,903    |  | $          | 148,417 |            | $



|Notes:                                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|---------------------------------------- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Deferred loan costs & fees not included. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Allowance for loan losses not included.  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 

Table VI Loan Maturity Schedule of Selected Loansas of December 31,
2002

|                                              |        | One Year or Less |       | One to Five Years |   | Over Five Years |       
|--------------------------------------------- | ------ | ---------------- | ----- | ----------------- | - | --------------- | ------
|                                              |        |                  |       |                   |   |                 |       
|(Thousands)                                   |        | Fixed Rate       |       | Variable Rate     |   | Fixed Rate      |       
|                                              |        |                  |       |                   |   |                 |       
|Commercial                                    |        | $                | 1,387 |                   | $ | 12,879          |       
|Real Estate - Construction                    |        | $                | 2,356 |                   | $ | 2,387           |       
|Real Estate - Mortgage                        |        | $                | 2,501 |                   | $ | 44,880          |       
|Installment and Other (includes Visa program) |        | $                | 3,384 |                   | $ | 2,982           |       
|                                              |        |                  |       |                   |   |                 |       
|                                              | Totals |                  | $     | 9,628             |   | $               | 63,128
|                                              |        |                  |       |                   |   |                 |       



|Notes:                                                                       
|-----------------------------------------------------------------------------
|Loans with immediate re-pricing are shown in the One Year or Less category.
|Variable rate loans are categorized based on their next re-pricing date.     

Table
VII Risk Elements

|(Thousands)                                                                                                                             |                             | 12/31/2002 |     | 12/31/2001 |   | 12/31/2000 |     | 12/31/1999 |     | 12/31/1998 |  
|--------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ---------- | --- | ---------- | - | ---------- | --- | ---------- | --- | ---------- | -
|                                                                                                                                        |                             |            |     |            |   |            |     |            |     |            |  
|Non-accrual Loans                                                                                                                       |                             | $          | 268 |            | $ | 163        |     | $          | 25  |            | $
|Restructured Loans                                                                                                                      |                             | $          | 0   |            | $ | 0          |     | $          | 0   |            | $
|Foreclosed Properties                                                                                                                   |                             | $          | 580 |            | $ | 614        |     | $          | 805 |            | $
|                                                                                                                                        |                             |            |     |            |   |            |     |            |     |            |  
|                                                                                                                                        | Total Non-performing Assets |            | $   | 848        |   | $          | 777 |            | $   | 830        |  
|Loans past due 90+ days as to principal or interest payments & accruing interest                                                        |                             | $          | 673 |            | $ | 825        |     | $          | 758 |            | $
|For non-accrual & restructured loans, Gross interest income which would have been recorded under
original loan terms for the year ended |                             | $          | 10  |            | $ | 13         |     | $          | 2   |            | $
|For non-accrual & restructured loans, Gross interest income recorded for the year ended                                                 |                             | $          | 10  |            | $ | 13         |     | $          | 2   |            | $
|Potential problem loans as of year end not reported above:                                                                              |                             | $          | 170 |            | $ | 422        |     | $          | 123 |            | $
|                                                                                                                                        |                             |            |     |            |   |            |     |            |     |            |  

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|Notes:                                                                                                                                                                                                                                                                                                                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Loans receivable that management has the intent and ability to hold for the foreseeable future or until  maturity or payoff are reported at their outstanding unpaid
principal balances reduced by any charge-offs or specific valuation accounts and net of any unearned discount and fees and costs on originating loans.                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                             
|Loan origination fees and certain direct origination costs for real estate mortgage loans are capitalized and recognized as an adjustment of the yield of the related
loans.                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                             
|The accrual of interest on impaired loans is discontinued when, in managements opinion, the borrower may be unable to meet payments as they become due.  When
interest accrual is discontinued, all unpaid accrued interest is reversed.  Interest income is subsequently recognized only to the extent cash payments are received.                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                             
|The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries).  Managements periodic evaluation of the adequacy
of the allowance is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers ability to repay, the estimated value of any underlying collateral, and current economic
conditions.



Table VIII Summary of Allowance for Loan Losses

|(Thousands)                                                                               |                                              | 12/31/02 |         | 12/31/01 |   | 12/31/00 |      | 12/31/99 |         | 12/31/98 |  
|----------------------------------------------------------------------------------------- | -------------------------------------------- | -------- | ------- | -------- | - | -------- | ---- | -------- | ------- | -------- | -
|                                                                                          |                                              |          |         |          |   |          |      |          |         |          |  
|Balance, beginning of period                                                              |                                              | $        | 1,493   |          | $ | 1,370    |      | $        | 1,198   |          | $
|Loans charged off:                                                                        |                                              |          |         |          |   |          |      |          |         |          |  
|                                                                                          | Commercial                                   |          | $       | (203     | ) | $        | (62  | )        | $       | (27      | )
|                                                                                          | Real estate - construction                   |          | $       | 0        |   | $        | 0    |          | $       | 0        |  
|                                                                                          | Real estate - mortgage                       |          | $       | (22      | ) | $        | (42  | )        | $       | (50      | )
|                                                                                          | Installment & Other (including Visa program) |          | $       | (64      | ) | $        | (117 | )        | $       | (17      | )
|                                                                                          |                                              |          |         |          |   |          |      |          |         |          |  
|Total loans charged off                                                                   |                                              | $        | (289    | )        | $ | (221     | )    | $        | (94     | )        | $
|Recoveries of loans previously charged off:                                               |                                              |          |         |          |   |          |      |          |         |          |  
|                                                                                          | Commercial                                   |          | $       | 4        |   | $        | 0    |          | $       | 0        |  
|                                                                                          | Real estate - construction                   |          | $       | 0        |   | $        | 0    |          | $       | 0        |  
|                                                                                          | Real estate - mortgage                       |          | $       | 1        |   | $        | 0    |          | $       | 7        |  
|                                                                                          | Installment & Other (including Visa program) |          | $       | 17       |   | $        | 19   |          | $       | 9        |  
|                                                                                          |                                              |          |         |          |   |          |      |          |         |          |  
|Total recoveries                                                                          |                                              | $        | 22      |          | $ | 19       |      | $        | 16      |          | $
|Net charge offs                                                                           |                                              | $        | (267    | )        | $ | (202     | )    | $        | (78     | )        | $
|Provision for loan losses                                                                 |                                              | $        | 471     |          | $ | 325      |      | $        | 250     |          | $
|Balance, end of period                                                                    |                                              | $        | 1,697   |          | $ | 1,493    |      | $        | 1,370   |          | $
|                                                                                          |                                              |          |         |          |   |          |      |          |         |          |  
|Average loans outstanding during the period                                               |                                              | $        | 159,951 |          | $ | 151,668  |      | $        | 142,489 |          | $
|Ratio of net charge-offs during the period to average loans outstanding during the period |                                              |          | 0.17    | %        |   | 0.13     | %    |          | 0.05    | %        |  
|                                                                                          |                                              |          |         |          |   |          |      |          |         |          |  



|See Note 1 to Financial Statements, Loans receivable paragraph, for a description of the factors which influenced managements determination of the provision charged to
operating expense.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Table IX Allocation of the Allowance for Loan Losses

|(Thousands)                                  |  | 12/31/2002 |       | 12/31/2001 |  | 12/31/2000 |   | 12/31/99 |       | 12/31/98 | 
|-------------------------------------------- |  | ---------- | ----- | ---------- |  | ---------- | - | -------- | ----- | -------- | 
|                                             |  |            |       |            |  |            |   |          |       |          | 
|                                             |  | Amount     |       | Percent    |  | Amount     |   | Percent  |       | Amount   | 
|                                             |  |            |       |            |  |            |   |          |       |          | 
|Commercial                                   |  | $          | 822   |            |  | 9.9        | % | $        | 237   |          | 
|Real estate - construction                   |  | $          | 73    |            |  | 11.2       | % | $        | 21    |          | 
|Real estate - mortgage                       |  | $          | 674   |            |  | 71.2       | % | $        | 1,032 |          | 
|Installment & Other (including Visa program) |  | $          | 128   |            |  | 7.7        | % | $        | 203   |          | 
|                                             |  |            |       |            |  |            |   |          |       |          | 
|Total                                        |  | $          | 1,697 |            |  | 100.0      | % | $        | 1,493 |          | 

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Table X Average Deposits & Rates

|                                     |                               | 2002             |         | 2001        |  | 2000             |     
|------------------------------------ | ----------------------------- | ---------------- | ------- | ----------- |  | ---------------- | ----
|                                     |                               |                  |         |             |  |                  |     
|(Thousands)                          |                               | Average  Balance |         | Yield/ Rate |  | Average  Balance |     
|                                     |                               |                  |         |             |  |                  |     
|Non-interest bearing Demand Deposits |                               | $                | 28,226  |             |  | 0.00             | %   
|Interest bearing Deposits:           |                               |                  |         |             |  |                  |     
|                                     | NOW Accounts                  |                  | $       | 33,069      |  |                  | 1.27
|                                     | Regular Savings               |                  | $       | 59,506      |  |                  | 2.23
|                                     | Money Market Deposit Accounts |                  | $       | 12,739      |  |                  | 1.59
|Time Deposits:                       |                               |                  |         |             |  |                  |     
|                                     | CDs $100,000 or more         |                  | $       | 22,721      |  |                  | 3.91
|                                     | CDs less than $100,000       |                  | $       | 67,730      |  |                  | 3.72
|                                     |                               |                  |         |             |  |                  |     
|Total Interest bearing Deposits      |                               | $                | 195,765 |             |  | 2.74             | %   
|Total Average Deposits               |                               | $                | 223,991 |             |  | 2.39             | %   
|                                     |                               |                  |         |             |  |                  |     

Table XI Maturity Schedule of Time Deposits of $100,000 or more

|(Thousands)      |        | 12/31/2002 |        | 12/31/2001 |   | 12/31/00 |       
|---------------- | ------ | ---------- | ------ | ---------- | - | -------- | ------
|                 |        |            |        |            |   |          |       
|3 months or less |        | $          | 1,316  |            | $ | 2,624    |       
|3-6 months       |        | $          | 2,602  |            | $ | 3,098    |       
|6-12 months      |        | $          | 2,858  |            | $ | 2,931    |       
|Over 12 months   |        | $          | 18,263 |            | $ | 14,778   |       
|                 |        |            |        |            |   |          |       
|                 | Totals |            | $      | 25,039     |   | $        | 23,431
|                 |        |            |        |            |   |          |       

Table XII Return on Equity & Assets

|(Thousands)                        |  | 2002 |         | 2001 |   | 2000    |  
|---------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                   |  |      |         |      |   |         |  
|Net Income                         |  | $    | 2,301   |      | $ | 2,009   |  
|Average Total Assets               |  | $    | 252,001 |      | $ | 228,412 |  
|Return on Assets                   |  |      | 0.9     | %    |   | 0.9     | %
|Average Equity                     |  | $    | 23,687  |      | $ | 22,215  |  
|Return on Equity                   |  |      | 9.7     | %    |   | 9.0     | %
|Dividends declared per share       |  | $    | 0.50    |      | $ | 0.47    |  
|Average Shares Outstanding         |  |      | 2,301   |      |   | 2,311   |  
|Average Diluted Shares Outstanding |  |      | 2,310   |      |   | 2,345   |  
|Net Income per Share               |  | $    | 1.00    |      | $ | 0.87    |  
|Net Income per Diluted Share       |  | $    | 0.99    |      | $ | 0.86    |  
|Dividend Payout Ratio              |  |      | 50.0    | %    |   | 53.6    | %
|Equity to Assets Ratio             |  |      | 9.4     | %    |   | 9.7     | %

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Table XIII Interest Rate Sensitivity Analysisas of 12/31/2002

|(Thousands)                        |  | Within 3 months |         | 3-12 Months |  | 1-5 Years |   | Over 5 Years |         | Total | 
|---------------------------------- |  | --------------- | ------- | ----------- |  | --------- | - | ------------ | ------- | ----- | 
|                                   |  |                 |         |             |  |           |   |              |         |       | 
|Interest-Bearing Due From Banks    |  |                 | 160     |             |  | 0         |   |              | 0       |       | 
|Fed Funds Sold                     |  |                 | 19,979  |             |  | 0         |   |              | 0       |       | 
|Investments (Market Value)         |  |                 | 3,631   |             |  | 1,847     |   |              | 25,458  |       | 
|Loans                              |  |                 | 39,334  |             |  | 27,408    |   |              | 79,159  |       | 
|                                   |  |                 |         |             |  |           |   |              |         |       | 
|Total Earning Assets               |  |                 | 63,104  |             |  | 29,255    |   |              | 104,617 |       | 
|NOW Accounts                       |  |                 | 40,177  |             |  | 0         |   |              | 0       |       | 
|MMDAs                             |  |                 | 14,748  |             |  | 0         |   |              | 0       |       | 
|Savings                            |  |                 | 59,753  |             |  | 0         |   |              | 0       |       | 
|CDs < $100,000                    |  |                 | 8,797   |             |  | 18,056    |   |              | 40,157  |       | 
|CDs >= $100,000                   |  |                 | 1,316   |             |  | 5,461     |   |              | 17,555  |       | 
|Total Interest Bearing Deposits    |  |                 | 124,791 |             |  | 23,517    |   |              | 57,712  |       | 
|Fed Funds Purchased                |  |                 | 0       |             |  | 0         |   |              | 0       |       | 
|Securities Sold to Repurchase      |  |                 | 4,482   |             |  | 0         |   |              | 0       |       | 
|                                   |  |                 |         |             |  |           |   |              |         |       | 
|Total Interest Bearing Liabilities |  |                 | 129,273 |             |  | 23,517    |   |              | 57,712  |       | 
|Rate Sensitive Gap                 |  |                 | (66,169 | )           |  | 5,738     |   |              | 46,905  |       | 
|Cumulative Gap                     |  |                 | (66,169 | )           |  | (60,431   | ) |              | (13,526 | )     | 

ITEM 2: PROPERTIES

The Company owns no property however its subsidiaries, the Bank of Lancaster and Bay Trust Company, own the following
properties free of any encumbrances:

|Main Office           |  | Northside Branch        |  | White Stone Branch   
|--------------------- |  | ----------------------- |  | ---------------------
|The Bank of Lancaster |  | Lancaster Square Center |  | Route 3              
|100 South Main Street |  | Kilmarnock, Virginia    |  | White Stone, Virginia
|Kilmarnock, Virginia  |  |                         |  |                      
|                      |  |                         |  |                      
|Operations Center     |  | Montross Branch         |  | Warsaw Branch        
|West Church Street    |  | Route 3, Kings Highway  |  | West Richmond Road   
|Kilmarnock, Virginia  |  | Montross, Virginia      |  | Warsaw, Virginia     
|                      |  |                         |  |                      
|Heathsville Branch    |  | Callao Branch           |  | Bay Trust Company    
|Route 360             |  | Route 360 and 202       |  | 1 North Main Street  
|Heathsville, Virginia |  | Callao, Virginia        |  | Kilmarnock, Virginia 

Through the normal course of business, the Bank maintains an inventory of
foreclosed properties known as other real estate owned, or OREO.  This inventory is held at the lower of carrying amount or fair value. The Bank expects no losses on these properties.  Balances in OREO as of December 31, 2002 were
$580,167.  Further information regarding OREO can be found in Notes 1 of the 2002 Annual Report to Shareholders and is hereby incorporated by reference.

Further information regarding property
of the Company is incorporated herein by reference to Note 6 of the Companys 2002 Annual Report to Shareholders, portions of which are included in Exhibit 13.0 of this report.

ITEM 3: LEGAL PROCEEDINGS

The Company is currently not involved in any material legal proceeding other than the ordinary & routine
litigation incidental to its business.

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

There were no matters submitted to a vote of security holders during the
quarter ended December 31, 2002.

PART II

ITEM 5: MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information. There is currently no established
public trading market in our common stock.  Our common

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##### Table of Contents

stock trades from time to time on the OTC Bulletin Board under the symbol BAYK and transactions generally involve a small number of shares.  The following
table summarizes the high and low sales prices and dividends paid for the two years ended December 31, 2002.

Common Equity Market Data*

|Sales Price |  | Sales Price |      
|----------- |  | ----------- | -----
|            |  |             |      
|2002        |  | High        |      
|            |  |             |      
|Qtr1        |  | $           | 17.25
|Qtr2        |  |             | 18.25
|Qtr3        |  |             | 18.25
|Qtr4        |  |             | 16.50

*Adjusted for 2 for 1 stock split on June 7, 2002.

At December 31, 2002, there were 2,307,360 shares of common stock outstanding held by 755 stockholders of record.

A discussion of certain restrictions and limitations on the
ability of the Bank to pay dividends to the Company and the ability of the Company to pay dividends on its common stock, is set forth in Part I, Business, of this Form 10-K under the heading Supervision and Regulation.

For further information regarding the Companys common equity, refer to Notes 1, 12, 13 and 14 of the Annual Report to Shareholders, portions of which are incorporated as Exhibit 13.0 of this
report.

Equity Compensation Plan Information.  The following table summarizes information, as of December 31, 2002, relating to the Companys stock incentive plans, pursuant to
which grants of options to acquire shares of common stock may be granted from time to time.

|                                                       |  | Year Ended December 31, 2002                                                                 |          
|------------------------------------------------------ |  | -------------------------------------------------------------------------------------------- | ---------
|                                                       |  |                                                                                              |          
|                                                       |  | Number of Shares to be Issued Upon Exercise of Outstanding  Options, Warrants and  Rights(1) |          
|                                                       |  |                                                                                              |          
|Equity compensation plans approved by shareholders     |  |                                                                                              | 164,872(1
|Equity compensation plans not approved by shareholders |  |                                                                                              |         
|Total                                                  |  |                                                                                              | 164,872  

---

(1) Consists
of options granted pursuant to the Companys stock incentive plans.

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##### Table of Contents

ITEM 6. SELECTED FINANCIAL DATA

Selected Financial Data

|Years Ended December 31,                      |                | 2002        |           | 2001   |   | 2000      |        | 1999 |           | 1998   |  
|--------------------------------------------- | -------------- | ----------- | --------- | ------ | - | --------- | ------ | ---- | --------- | ------ | -
|                                              |                |             |           |        |   |           |        |      |           |        |  
|                                              |                | (Thousands) |           |        |   |           |        |      |           |        |  
|FINANCIAL CONDITION                           |                |             |           |        |   |           |        |      |           |        |  
|Total Assets                                  |                | $           | 263,060   |        | $ | 245,594   |        | $    | 225,332   |        | $
|Total Loans, net of allowance                 |                |             | 168,442   |        |   | 150,253   |        |      | 147,678   |        |  
|Total Deposits                                |                |             | 231,516   |        |   | 219,194   |        |      | 200,178   |        |  
|Stockholders Equity                          |                |             |           |        |   |           |        |      |           |        |  
|                                              | before FAS 115 |             |           | 23,132 |   |           | 22,070 |      |           | 21,546 |  
|                                              | after FAS 115  |             |           | 24,757 |   |           | 22,617 |      |           | 21,287 |  
|Average Assets                                |                |             | 252,001   |        |   | 228,412   |        |      | 212,916   |        |  
|Average Loans, net of allowance               |                |             | 166,313   |        |   | 150,193   |        |      | 140,596   |        |  
|Average Deposits                              |                |             | 229,379   |        |   | 202,223   |        |      | 183,791   |        |  
|Average Equity, after FAS 115                 |                |             | 23,687    |        |   | 22,215    |        |      | 20,115    |        |  
|RESULTS OF OPERATIONS                         |                |             |           |        |   |           |        |      |           |        |  
|Interest Income                               |                |             | 14,144    |        | $ | 15,442    |        | $    | 15,010    |        | $
|Interest Expense                              |                |             | 5,391     |        |   | 7,321     |        |      | 8,303     |        |  
|Net Interest Income                           |                |             | 8,753     |        |   | 8,121     |        |      | 6,707     |        |  
|Provision for Loan Losses                     |                |             | 471       |        |   | 325       |        |      | 250       |        |  
|Net Interest Income after Provision           |                |             | 8,282     |        |   | 7,796     |        |      | 6,457     |        |  
|Gain/(Loss) on Sales of Investments           |                |             | 3         |        |   | 22        |        |      | 54        |        |  
|Non-interest Income net of Securities Gains   |                |             | 2,088     |        |   | 2,063     |        |      | 1,696     |        |  
|Non-interest Expense                          |                |             | 7,203     |        |   | 7,042     |        |      | 6,020     |        |  
|Income before Taxes                           |                |             | 3,170     |        |   | 2,839     |        |      | 2,187     |        |  
|Income Taxes                                  |                |             | 869       |        |   | 830       |        |      | 574       |        |  
|Net Income                                    |                |             | 2,301     |        |   | 2,009     |        |      | 1,613     |        |  
|RATIOS                                        |                |             |           |        |   |           |        |      |           |        |  
|Total Capital to Risk Weighted Assets         |                |             | 12.5      | %      |   | 13.3      | %      |      | 13.6      | %      |  
|Tier 1 Capital to Risk Weighted Assets        |                |             | 11.5      | %      |   | 12.3      | %      |      | 12.7      | %      |  
|Leverage Ratio                                |                |             | 7.9       | %      |   | 8.1       | %      |      | 8.3       | %      |  
|Return on Average Assets                      |                |             | 0.9       | %      |   | 0.9       | %      |      | 0.8       | %      |  
|Return on Average Equity                      |                |             | 9.7       | %      |   | 9.0       | %      |      | 8.0       | %      |  
|Loan Loss Reserve to Loans                    |                |             | 1.0       | %      |   | 1.0       | %      |      | 0.9       | %      |  
|Dividends paid as a percent of Net Income     |                |             | 50.0      | %      |   | 53.6      | %      |      | 61.8      | %      |  
|Average Equity as a percent of Average Assets |                |             | 9.4       | %      |   | 9.7       | %      |      | 9.4       | %      |  
|Average shares outstanding                    |                |             | 2,301,364 |        |   | 2,310,522 |        |      | 2,318,698 |        |  
|Average Diluted shares outstanding            |                |             | 2,309,959 |        |   | 2,344,806 |        |      | 2,362,404 |        |  
|PER SHARE DATA                                |                |             |           |        |   |           |        |      |           |        |  
|Basic Earnings per share (EPS)                |                | $           | 1.00      |        | $ | 0.87      |        | $    | 0.70      |        | $
|Diluted Earnings per share (EPS)              |                |             | 0.99      |        |   | 0.86      |        |      | 0.69      |        |  
|Cash Dividends per share                      |                |             | 0.50      |        |   | 0.47      |        |      | 0.43      |        |  
|Book Value per share                          |                |             |           |        |   |           |        |      |           |        |  
|                                              | before FAS 115 |             |           | 10.03  |   |           | 9.57   |      |           | 9.27   |  
|                                              | after FAS 115  |             |           | 10.73  |   |           | 9.81   |      |           | 9.16   |  
|GROWTH RATES                                  |                |             |           |        |   |           |        |      |           |        |  
|Year end Assets                               |                |             | 7.1       | %      |   | 9.0       | %      |      | 12.8      | %      |  
|Year end Loans                                |                |             | 12.1      | %      |   | 1.7       | %      |      | 13.2      | %      |  
|Year end Deposits                             |                |             | 5.6       | %      |   | 9.5       | %      |      | 12.6      | %      |  
|Year end Equity                               |                |             |           |        |   |           |        |      |           |        |  
|                                              | before FAS 115 |             |           | 4.8    | % |           | 2.4    | %    |           | 1.9    | %
|                                              | after FAS 115  |             |           | 9.5    | % |           | 6.2    | %    |           | 8.0    | %
|Average Assets                                |                |             | 10.3      | %      |   | 7.3       | %      |      | 7.2       | %      |  
|Average Loans, net of allowance               |                |             | 10.7      | %      |   | 6.8       | %      |      | 18.3      | %      |  
|Average Deposits                              |                |             | 13.4      | %      |   | 10.0      | %      |      | 4.4       | %      |  
|Average Equity                                |                |             | 6.6       | %      |   | 10.4      | %      |      | 0.5       | %      |  
|Net Income                                    |                |             | 14.5      | %      |   | 24.6      | %      |      | -25.9     | %      |  
|Cash Dividends declared                       |                |             | 7.4       | %      |   | 8.3       | %      |      | 10.2      | %      |  
|Book Value                                    |                |             |           |        |   |           |        |      |           |        |  
|                                              | before FAS 115 |             |           | 4.8    | % |           | 3.2    | %    |           | 2.2    | %
|                                              | after FAS 115  |             |           | 9.4    | % |           | 7.0    | %    |           | 8.3    | %
|                                              |                |             |           |        |   |           |        |      |           |        |  



|Note:  All per-share data is adjusted to reflect a 2-for-1 split on June 7, 2002.
|---------------------------------------------------------------------------------

15



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##### Table of Contents

ITEM 7:  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Managements
Discussion and Analysis of Financial Condition and Results of Operations are incorporated herein by reference to the 2002 Annual Report to Shareholders, portions of which are included as Exhibit 13.0 of this report.

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Rate Shock Analysis of Net Interest
Income

|                             |  | 2002                           |       
|---------------------------- |  | ------------------------------ | ------
|                             |  | Interest Rate Scenario (000s) |       
|                             |  |                                |       
|                             |  | -200 bp                        |       
|                             |  |                                |       
|Net Interest Income          |  | $                              | 10,017
|Net Interest Income Change $ |  | $                              | 220   
|Net Interest Income Change%  |  |                                | 2.25  

Rate shock is a
method for stress testing the Banks future net interest margin under several rate change levels.  These levels span a 200 basis point (2.00%) decrease and a 200 basis point increase in the current prime rate of interest.  In order to
simulate activity, maturing balances are replaced with new balances at the new rate level and re-pricing balances are adjusted to the new rate shock level.  The interest is recalculated for each level along with the new average yield.  Net
interest income is then calculated and a risk profile is developed.  The results of these calculations are summarized in the table above.

As shown, the Company estimates that a reduction in the current prime rate of 200 basis points would result in a $220 thousand increase in net interest income over
twelve months.  Similarly, an increase in the current prime rate of 200 basis points would result in an estimated $271 thousand additional net interest income.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements of the Company are incorporated herein by reference to the
2002 Annual Report to Shareholders, portions of which are included as Exhibit 13.0 of this report.

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March 26, 2002, the
Companys Board of Directors voted to engage the accounting firm of Yount, Hyde & Barbour, P.C. as the independent public accountant to audit the Companys financial statements for the fiscal year ending December 31, 2002, to replace
the firm of Eggleston Smith, P.C., the independent public accountant engaged to audit the Companys financial statements as of December 31, 2001 and 2000, and for each of the years in the two year period ended December 31, 2001. 
Consistent with the Companys policies, the Company conducted a bidding process to select the independent public accountant to audit the Companys fiscal year ending December 31, 2002. The Companys Audit Committee received bids from
several independent public accounting firms including Eggleston Smith, P.C. After reviewing the proposals, the Companys Audit Committee selected Yount, Hyde & Barbour, P.C., which the Companys Board of Directors approved.

In connection with the audit of the two fiscal years ending December 31, 2001 and the subsequent interim period preceding the engagement of Yount, Hyde & Barbour, P.C., there were no disagreements with
Eggleston Smith, P.C. on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement.  Eggleston Smith, P.C. did not resign or decline to stand for reelection. Upon selection of Yount, Hyde & Barbour, P.C., the Company dismissed Eggleston Smith, P.C.
with respect to the audit of the Companys consolidated financial statements for periods beginning with the fiscal year ending December 31, 2002 and thereafter. Eggleston Smith P.C.s report on the consolidated financial statements as of
December 31, 2001 and 2000, and for each of the years in the two year period ended December 31, 2001, contained no adverse opinion or disclaimer of opinion and was not qualified as to uncertainty, audit scope or accounting principles.

The Company requested that Eggleston Smith, P.C. furnish it with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements.  Eggleston Smith, P.C.
complied and the Company maintains the letter on file.

16



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##### Table of Contents

PART III

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

All required information on the executive officers and directors of
the Company is detailed in the Companys 2003 definitive proxy statement for the annual meeting of shareholders (Definitive Proxy Statement), which is expected to be filed with the Securities and Exchange Commission within the
required time period, and is incorporated herein by reference.

ITEM 11:  EXECUTIVE COMPENSATION

Information on executive compensation is provided in the Definitive Proxy Statement and is
incorporated herein by reference.

ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information on security
ownership of certain beneficial owners and management is provided in the Definitive Proxy Statement, and is incorporated herein by reference.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information on certain relationships and related transactions are
detailed in the Definitive Proxy Statement and incorporated herein by reference.

ITEM 14: CONTROLS AND PROCEDURES

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

PART IV

ITEM 15:  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

| | (a)1. | Financial Statements included in Exhibit 13.0, 2002 Annual Report to Shareholders:   
| | ----- | -------------------------------------------------------------------------------------
| |       | Consolidated Balance Sheets - December 31, 2002 and 2001                             
| |       | Consolidated Statements of Income - Years ended December 31, 2002, 2001, and 2000    
| |       | Consolidated Statements of Changes in Shareholders Equity                           
| |       | - Years ended December 31, 2002, 2001, and 2000                                      
| |       | Consolidated Statements of Cash Flows - Years ended December 31, 2002, 2001, and 2000
| |       | Parent Only Balance Sheets  December 31, 2002 and 2001                              
| |       | Parent Only Statements of Income  Years ended December 31, 2002, 2001, and 2000     
| |       | Parent Only Statements of Cash Flows  Years ended December 31, 2002, 2001, and 2000 
| |       |                                                                                      
| | (a)2. | Financial Statement Schedules:                                                       
| |       |                                                                                      
| |       | Schedule                                                                             
| |       |                                                                                      
| |       | Table I - Average Balances, Income & Expense, Yields, and Rates                      
| |       | Table II - Volume & Rate Analysis of Changes in Net Interest Income                  
| |       | Table III  Types of Investments                                                     
| |       | Table IV - Investment Maturities & Average Yields                                    
| |       | Table V - Types of Loans                                                             
| |       | Table VI - Loan Maturity Schedule of Selected Loans                                  
| |       | Table VII - Risk Elements                                                            
| |       | Table VIII - Summary of Allowance for Loan Losses                                    
| |       | Table IX  Allocation of the Allowance for Loan Losses                               
| |       | Table X - Average Deposits & Rates                                                   
| |       | Table XI - Maturity Schedule of Time Deposits of $100,000 or more                    
| |       | Table XII - Return on Equity & Assets                                                
| |       | Table XIII - Interest Rate Sensitivity Analysis                                      
| |       | Common Equity Market Data                                                            
| |       | Equity Compensation Plan Information                                                 
| |       | Selected Financial Data                                                              
| |       | Rate Shock Analysis of Net Interest Income                                           
| |       |                                                                                      
| | (a)3. | Exhibits:                                                                            

17



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##### Table of Contents

| | No.  |  | Description                                                                                                                                                       
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |  |                                                                                                                                                                   
| | 3.1  |  | Articles of Incorporation, as amended, of Bay Banks of Virginia, Inc. (filed herewith).                                                                           
| |      |  |                                                                                                                                                                   
| | 3.2  |  | Bylaws, as amended, of Bay Banks of Virginia, Inc. (filed herewith).                                                                                              
| |      |  |                                                                                                                                                                   
| | 10.1 |  | 1994 Incentive Stock Option Plan (Incorporated by reference to the previously filed Form S-4EF, Commission File number 333-22579 dated February 28, 1997).        
| |      |  |                                                                                                                                                                   
| | 10.2 |  | 1998 Non-Employee Directors Stock Option Plan (incorporated by reference to the previously filed Annual Report on Form 10-K for the year ended December 31, 1999).
| |      |  |                                                                                                                                                                   
| | 11.0 |  | Statement re: Computation of per share earnings.  (Incorporated herein by reference to Note 1 of the 2002 Annual Report to Shareholders).                         
| |      |  |                                                                                                                                                                   
| | 13.0 |  | Portions of the 2002 Annual Report to Shareholders for the year ended December 31, 2002 (filed herewith).                                                         
| |      |  |                                                                                                                                                                   
| | 21.0 |  | Subsidiaries of the Company (shown herein).                                                                                                                       
| |      |  |                                                                                                                                                                   
| | 23.1 |  | Consent of Yount, Hyde & Barbour, P.C. (filed herewith)                                                                                                           
| |      |  |                                                                                                                                                                   
| | 23.2 |  | Consent of Eggleston Smith, P.C. (filed herewith).                                                                                                                
| |      |  |                                                                                                                                                                   
| | 99.1 |  | Independent Accountants Report by Eggleston Smith, P.C. relating to Years ended December 31, 2001 and 2000. (filed herewith)                                     



b)  Reports on Form 8-K:

One
report on form 8-K was filed with the Securities and ExchangeCommission on December 4, 2002 announcing the fourth quarterly dividend.

SIGNATURES

In accordance with the requirements of Section 13 (or 15d) of the Exchange Act, of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 27th day of March 2003.

| | BAY BANKS OF VIRGINIA, INC.           | 
| | ------------------------------------- | 
| |                                       | 
| | /s/ AUSTIN L. ROBERTS, III            | 
| |                                       | 
| | Austin L. Roberts, III,               | 
| | President and Chief Executive Officer | 

In accordance with the requirements of the
Exchange Act, this report has been signed below by the following persons on behalf of the registrant, in the capacities indicated on the 27th day of March 2003.

| | /s/ AMMON G. DUNTON, JR.                          | 
| | ------------------------------------------------- | 
| |                                                   | 
| | Ammon G. Dunton, Jr. Chairman, Board of Directors | 
| |                                                   | 
| | /s/ AUSTIN L. ROBERTS, III                        | 
| |                                                   | 
| | Austin L. Roberts, III President and CEO          | 
| |                                                   | 
| | /s/ WESTON F. CONLEY, JR.                         | 
| |                                                   | 
| | Weston F. Conley, Jr. Director                    | 
| |                                                   | 
| | /s/ WILLIAM A. CREAGER                            | 
| |                                                   | 
| | William A. Creager Director                       | 

18



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##### Table of Contents

| | /s/ THOMAS A. GOSSE                                          | 
| | ------------------------------------------------------------ | 
| |                                                              | 
| | Thomas A. Gosse Director                                     | 
| |                                                              | 
| | /s/ RICHARD C. ABBOTT                                        | 
| |                                                              | 
| | Richard C. Abbott Treasurer and Principal Accounting Officer | 

19



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|BAY BANKS OF VIRGINIA, INC. |                                       | 
|--------------------------- | ------------------------------------- | 
|                            |                                       | 
|By:                         | /s/ AUSTIN L. ROBERTS, III            | 
|                            |                                       | 
|                            | Austin L. Roberts, III                | 
|                            | President and Chief Executive Officer | 
|                            |                                       | 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities indicated on March 28, 2003.

|Signature                  |  | Title                                
|-------------------------- |  | -------------------------------------
|                           |  |                                      
|                           |  |                                      
|/s/ WILLIAM A. CREAGER     |  | Director                             
|                           |  |                                      
|William A. Creager         |  |                                      
|                           |  |                                      
|/s/ WESTON F. CONLEY, JR.  |  | Director                             
|                           |  |                                      
|Weston F. Conley, Jr.      |  |                                      
|                           |  |                                      
|/s/ AMMON G. DUNTON, JR.   |  | Chairman of the Board of Directors   
|                           |  |                                      
|Ammon G. Dunton, Jr.       |  |                                      
|                           |  |                                      
|/s/ THOMAS A. GOSSE        |  | Director                             
|                           |  |                                      
|Thomas A. Gosse            |  |                                      
|                           |  |                                      
|/s/ AUSTIN L. ROBERTS, III |  | President and Chief Executive officer
|                           |  | and Directorv                        
|Austin L. Roberts, III     |  |                                      
|                           |  |                                      
|/s/ A. WAYNE SAUNDERS      |  | Director                             
|                           |  |                                      
|A. Wayne Saunders          |  |                                      
|                           |  |                                      
|/s/ RICHARD C. ABBOTT      |  | Chief Financial Officer and          
|                           |  | Principal Accounting Officer         
|Richard C. Abbott          |  |                                      



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##### Table of Contents

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In
connection with the Annual Report on Form 10-K for the year ended December 31, 2002 of Bay Banks of Virginia, Inc., (the Company), as filed with the Securities and Exchange Commission on the date hereof (the Report), the
undersigned Chief Executive Officer and Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002 that based on their knowledge and belief: (1) the
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company as of and for the periods covered in the Report.

|/s/ AUSTIN L. ROBERTS, III                      | 
|----------------------------------------------- | 
|                                                | 
|Austin L. Roberts, III, Chief Executive Officer | 
|                                               
|/s/ RICHARD C. ABBOTT                           | 
|                                                | 
|Richard C. Abbott, Chief Financial Officer      | 

March 28, 2003

CERTIFICATIONS

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

1. I have reviewed this Annual Report on Form
10-K of Bay Banks of Virginia;

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

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

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

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

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

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

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



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##### Table of Contents

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

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

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

Date:
March 28, 2003

| | /s/ AUSTIN L. ROBERTS, III           
| | -------------------------------------
| |                                      
| | Austin L. Roberts, III               
| | President and Chief Executive Officer



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##### Table of Contents

CERTIFICATIONS

I, Richard C. Abbott, certify that:

1.
I have reviewed this Annual Report on Form 10-K of Bay Banks of Virginia;

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

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

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

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

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

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

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

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

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

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

Date: March 28, 2003

| | /s/RICHARD C. ABBOTT                                    
| | --------------------------------------------------------
| |                                                         
| | Richard C. Abbott                                       
| | Chief Financial Officer and Principal Accounting Officer