BAY BANKS OF VIRGINIA HOLDS ANNUAL MEETING

Ammon G. Dunton, Jr. was honored at the recent Bay Banks of Virginia Stockholders Meeting, holding company for Bank of Lancaster and Bay Trust Company, held at Indian Creek Yacht & Country Club, Kilmarnock. Dunton was recognized for his 31 years of devoted service as a Director of Bank of Lancaster, serving 22 of those years as Chairman of the Board. Dunton, one of the founding Directors of Bay Banks, retired from its Board in April of 2007. He was also a driving force in the establishment of trust services at the Company and served on the Board of Bay Trust Company from its establishment in 2000 until his retirement in 2005. Dunton received a framed Resolution recognizing his distinguished service and many valuable contributions to Bay Banks, Bank of Lancaster and Bay Trust Company. The Resolution was presented by (l to r) John B. “Jay” Wallin, President of Bay Trust Company; Austin L. Roberts, III, President & CEO of Bay Banks and Bank of Lancaster; Dunton; and Allen C. Marple, Chairman of Bay Banks of Virginia.

Bay Banks of Virginia, Inc. (OTC BB: BAYK), holding company for Bank of Lancaster and Bay Trust Company, held its annual Stockholders meeting and luncheon on Monday, May 19, 2008 at Indian Creek Yacht & Country Club, Kilmarnock, Virginia. Chairman Allen C. Marple welcomed over 220 Stockholders to the meeting, including Directors, members of the Company’s Advisory Boards, retirees and several members of the Company’s staff.

Mrs. Pam Varnier, Assistant Corporate Secretary for the Company, reported that by proxy and in person, 80 % of the Company stock was represented.

Austin L. Roberts, III and Robert J. Wittman were re-elected to the holding company’s Board of Directors, each to serve a three-year term.

On behalf of the Boards of Bay Banks, Bank of Lancaster, and Bay Trust Company, Chairman Marple read a Resolution honoring Ammon G. Dunton, Jr., who has served the family of companies for 31 years. Dunton was elected to the Bank’s Board of Directors in 1977 and during his 31-year tenure, he was elected Chairman of the Executive Committee, a position he held for 22 years; and he was elected Chairman of the Board, a position he held for 21 years. During his directorship, Dunton served on all of the Board’s Committees, also serving as Chair of the Trust, Investment and Loan Committees. With the inception of the Bank’s Community Reinvestment Advisory Boards, Dunton served as the initial Chairman of each. A Director Emeritus Board was formed in 1998, which Dunton has chaired since its creation.

Dunton was a driving force in the establishment of trust services at the Company and in 2000, when Bay Trust Company was formed, he was elected a Director and served until his retirement in 2005. In 1997, Dunton was one of the founding Directors of Bay Banks of Virginia and was elected Chairman, a position he held until his retirement from that Board in 2007.

Marple noted that during Dunton’s association with the Bank, it grew from one office with assets of $65 Million to seven offices with assets of $330 Million; and the Bank has been the market share leader in deposits throughout his tenure.

As outlined in the Resolution adopted by the three Boards, the Directors expressed to Dunton their gratitude for the “excellent service, counsel and leadership he has rendered to our family of companies for the past 31 years” and “the pleasure of their personal association with him during his tenure.” Presenting the framed Resolution on behalf of the Boards were Austin L. Roberts, III, President & CEO of Bay Banks and Bank of Lancaster, Bay Banks Chairman Marple, and John B. Wallin, President of Bay Trust Company.

John B. “Jay” Wallin reported on Bay Trust. Wallin first recognized two Trust Company family members who retired in 2007, Robert C. Berry, Jr. and Kathleen Pollard. Wallin noted that Berry had served as President and CEO of Bay Trust since 2001 and while he is no longer involved in the day-to-day operations, Wallin stated the Company feels fortunate to have his continued counsel on the Bay Trust Board of Directors. Kathleen Pollard, who served as the Trust Assistant, retired after 17 years and she, too, is greatly missed by both the staff and the customers.

Wallin reported that during 2007, assets under the care and custody of Bay Trust increased by more than $21 Million, a growth rate of better than 13%. Wallin advised that he feels the growth experienced at Bay Trust is due in large part to the personal, professional service provided by each member of the staff, a staff who puts a great deal of focus on the delivery of personal, high quality service to meet the unique, individual needs of its clients. In the past year alone, Wallin advised that along with the wide variety of trust services, the staff has helped clients with the purchase of a home, the development of commercial real estate, charitable giving and gift planning, the refinancing of a home, to name only a few. He invited and encouraged everyone to visit Bay Trust and take advantage of the professional and unique trust services available right here at home.

Richard C. Abbott, Senior Vice President, next addressed the Stockholders and his opening remarks were about the exciting opportunities before the Company. “Today, to me, is a most exciting time. Emerging technological improvements are fascinating; processes that once took hours to complete now take minutes. The Internet has revolutionized banking and presents immense opportunities for us to deliver incredibly fast responses to our customers and to deliver services in many new and exciting venues as well as to radically change and improve our branch retail delivery experience.”

Abbott noted that a few years ago banking experts deemed branch banking a dinosaur doomed to extinction because of the Internet and the new online services and ways to bank from your living room. “While this technology is available to all of our customers,” Abbott stated, “we have seen no decline in branch customer activity. We feel this is due in part to the inherent need we all have to see and to trust the people who will be the custodians of our assets. We want to look into the eyes of the person that we are entrusting with our financial present and future. This is what our branch network strives to accomplish every day.”

Abbott also reported with great pleasure the opening of the Bank’s third location in Northumberland County. The Burgess Office will open the first of June, partnering to serve the residents of Northumberland County with its two present locations in Callao and Heathsville.

In closing, Abbott stated, “I am personally confident that the future of our Company is bright, hopeful and prosperous. It has to be, for we are the only financial services company fully dedicated to the prosperity of the businesses and residents of the Northern Neck.”

President & CEO Austin Roberts opened his remarks by thanking the Stockholders for their attendance and continued support and also thanking the staff of Indian Creek Yacht and Country Club for once again hosting the event and doing such an excellent job. Roberts stated that Bay Banks has a proud 78-year history and he paid tribute to the retirees in attendance. He reported, “our institution would not be what it is today without the people that came before us. Each gave something of themselves, and their legacy and our enduring values based on our mission provide a clear map to guide our actions. These values, unlike strategies, never change. Simply put, our mission is to make the world we are a part of a better place in which to live.”

Roberts reported that in 2007, our organization continued to be focused on these values as the company experienced a year of growth, challenges, opportunities and change. The year began with the planning of branch opportunities, with the opening of the new Burgess Office being realized in only a few weeks and plans to open an office in Colonial Beach on the horizon. Roberts reported on the enhancing of the Company’s technology, including a service where business customers can make deposits without leaving their
office. “We also strive,” Roberts stated, “to provide fundamental insights to help our customers achieve their economic goals and solve their financial problems. Our financial planning service, Investment Advantage, and the business programs we provide with cutting-edge technology, cash management techniques, and credit card services, are all examples of ways we establish value for our customer relationships.” All of these things have resulted in Assets Under Management reaching record levels with growth of nearly 9%. At year-end 2007, assets owned by the Bank exceeded the $326 Million milestone, resulting in a 6.2% growth rate. Net Income reached $1.8 Million. “Over the past year, we have felt that if we continued our growth strategy, we would see positive long-term effects,” stated Roberts. “I am pleased to report that for the first quarter of 2008, our net income of $486,000 exceeds the results of the first quarter of 2007 by 28% and assets our Company owns are $330 Million – we are on our way to a good year.”

Roberts also reported that during 2007, loans grew at nearly a 6% rate, and this does not include the loans made and placed with other investors. This growth was combined with strong credit quality. For the year ended December 31, 2007, the Company’s net charge-offs to total loans were a very small 9 hundredths of one percent, below other banks in the local market. On the deposit side, Bank of Lancaster is the bank of preference for 28% of the deposit dollars in the Northern Neck marketplace, making Bank of Lancaster the deposit market share leader in its market.

Roberts further reported that the 2007 dividend increase was 3.1%, exceeding inflation and represented the 36th consecutive year of dividend increases. Stockholders are now receiving a current dividend yield of 5.55%.

In closing, Roberts recognized Judy Sydnor, the Bay Banks 2007 Employee of the Year. Roberts stated, “the key to the financial successes we have had has always been our satisfied customers. And the key to satisfied customers is outstanding members of our staff, for it is they who have molded our customer partnerships over so many years. Judy sets the example we each strive to obtain. Our value system positively affects the communities we are proud to serve because our family members live throughout the Northern Neck. Building value through values only strengthens the long-term customer partnership on which we are proud and dependent. They in turn make it possible for us to recruit and retain the best people in our industry, to support the communities in which we work and live, and in turn reward those who have entrusted us with their investments. “

Chairman Marple again thanked everyone for their attendance and the meeting was adjourned.