Press Release

Bay Banks of Virginia, Inc. Reports Fourth Quarter and Full-Year 2018 Results

2018 Loan Growth Over 17%

Company Release - 2/6/2019 4:30 PM ET

RICHMOND, Va., Feb. 6, 2019 /PRNewswire/ -- Bay Banks of Virginia, Inc. (OTCQB: BAYK), holding company of Virginia Commonwealth Bank and VCB Financial Group, Inc., announced financial results for the quarter and year ended December 31, 2018.

Bay Banks of Virginia Logo

The company reported net income of $782 thousand, or $0.06 per diluted share, for the fourth quarter of 2018 compared to $1.0 million, or $0.08 per diluted share, for the third quarter of 2018, and to a net loss of $2.4 million, or ($0.18) per diluted share, for the fourth quarter of 2017. Net income for the fourth quarter of 2018 included $483 thousand ($382 thousand1 after income taxes) of expenses incurred in connection with the company's previously announced early retirement program. Net income in the fourth quarter of 2017 included $850 thousand ($561 thousand1 after income taxes) of merger-related expenses in connection with the company's merger with Virginia BanCorp, Inc. on April 1, 2017 (the "Merger").

For the year of 2018, the company reported net income of $3.9 million, or $0.31 per diluted share, compared to a net loss of $1.2 million, or ($0.14) per diluted share, for the year of 2017. Expenses incurred in connection with the Merger were $363 thousand and $2.0 million for the years ended December 31, 2018 and 2017, respectively.

Randal R. Greene, President and Chief Executive Officer, commented: "Since our merger with Virginia BanCorp, Inc. at the beginning of the second quarter of 2017, we have grown our balance sheet by 30%. Our larger balance sheet coupled with the cost savings initiatives announced during the third quarter of 2018 are beginning to result in improved profitability. Income before income taxes for the fourth quarter of 2018 when excluding the provision for loan losses and the costs incurred in implementing our early retirement program was just over $2.0 million. Our challenge continues to be growing deposits at acceptable rates to keep pace with the loan growth opportunities we have in our very strong markets."

Operating Results

Fourth Quarter 2018 compared to Third Quarter 2018

  • Income before income taxes for the fourth quarter of 2018 was $670 thousand compared to $1.2 million for the third quarter of 2018. Income before income taxes, excluding the costs incurred to implement the company's early retirement program, was $1.2 million1 for the fourth quarter of 2018.
  • Interest income for the three months ended December 31, 2018 was $11.7 million, on average interest-earning assets of $989.3 million, compared to $10.9 million for the three months ended September 30, 2018, on average interest-earning assets of $929.1 million. Interest income in the fourth quarter of 2018 included accretion of acquired loan discounts of $352 thousand, while interest income in the third quarter of 2018 included $357 thousand of accretion of acquired loan discounts. Yields on average interest-earning assets were 4.72% and 4.66% for the linked quarter periods.
  • Interest expense was $3.3 million and $2.6 million for the three months ended December 31, 2018 and September 30, 2018, respectively, and cost of funds was 1.40% and 1.19% for the linked quarter periods. Average interest-bearing liabilities were $817.3 million and $762.0 million for the fourth and third quarters of 2018, respectively. Higher funding cost in the fourth quarter period was primarily due to heightened competition for deposits in the company's markets and greater use of higher cost Federal Home Loan Bank of Atlanta ("FHLB") borrowings to fund loan growth, both affected by higher interest rates, in general.
  • Net interest margin ("NIM") was 3.41% for the fourth quarter of 2018 compared to 3.57% for the third quarter of 2018. Net interest margin excluding accretion of acquired loan discounts and amortization of fair value marks on time deposits ("Core NIM") for the fourth quarter of 2018 was 3.25%1 compared to 3.40%1 for the third quarter of 2018. The decline in Core NIM for the linked quarter periods was primarily attributable to higher cost of funds, partially offset by higher yields on interest-earning assets.
  • Provision for loan losses was $870 thousand in the fourth quarter of 2018, while provision for loan losses in the third quarter of 2018 was $509 thousand. Provision for loan losses in the fourth quarter of 2018 was primarily attributable to an increase of $48.0 million of gross loans in the quarter and higher reserves attributed to certain loan types as the company's loan portfolio mix shifts from residential and consumer loans to commercial loans.
  • Noninterest income for the three months ended December 31, 2018 and September 30, 2018 was $1.0 million and $944 thousand, respectively. Increased income from the company's wealth management business was partially offset by lower income from fiduciary activities from the company's trust management and administration services business.
  • Noninterest expenses for the three months ended December 31, 2018 and September 30, 2018 were $7.9 million and $7.5 million, respectively. Noninterest expenses for the fourth quarter of 2018 included $483 thousand incurred to implement the company's early retirement program. Efficiency ratio for the three months ended December 31, 2018 was 83.7% (78.6%1 excluding expenses incurred to implement the early retirement program) compared to 81.3% for the three months ended September 30, 2018.
  • Income taxes for the fourth quarter of 2018 were a benefit of $112 thousand. The income tax benefit was primarily attributable to higher than estimated tax deductions reported in the company's 2017 federal income tax return at the higher 2017 corporate tax rate and a lower effective income tax rate for the full year of 2018 than was recorded for the 2018 period through the third quarter of 2018.

Full-Year 2018 compared to Full-Year 2017

  • Income before income taxes for the year of 2018 was $4.4 million compared to a loss before income taxes of $475 thousand for 2017. Results for the year of 2017 include the operations of Virginia BanCorp, Inc. since the effective date of the Merger, April 1, 2017.
  • Interest income for the year ended December 31, 2018 was $43.8 million, on average interest-earning assets of $934.5 million, compared to $33.7 million for the year ended December 31, 2017, on average interest-earning assets of $702.1 million. Average interest-earning assets for the year of 2017 included those acquired in the Merger from the effective date of the Merger. Interest income for the year of 2018 included accretion of acquired loan discounts of $1.8 million, while interest income for the year of 2017 included $1.9 million of accretion of acquired loan discounts. Yields on average interest-earning assets were 4.70% and 4.83% for the years ended December 31, 2018 and 2017, respectively. Yields on average interest-earning assets in 2017 were favorably affected by higher accretion, higher average balances of higher yielding consumer loans, and higher fee income, some of which was to align policies for recording certain fees as a result of the Merger.
  • Interest expense was $10.2 million and $6.0 million for the years ended December 31, 2018 and 2017, respectively, and cost of funds was 1.17% and 0.91% for the respective periods. Average interest-bearing liabilities were $768.8 million and $569.0 million for the years of 2018 and 2017, respectively. Average interest-bearing liabilities in 2017 included those assumed in the Merger from the effective date of the Merger. Higher funding cost in the 2018 period was primarily due to higher cost of deposits and greater use of higher cost FHLB borrowings to fund loan growth.
  • Net interest margin was 3.61% for the year ended December 31, 2018 compared to 3.98% for the year ended December 31, 2017. Core NIM for the years ended December 31, 2018 and 2017 was 3.40%1 and 3.66%1, respectively.
  • Provision for loan losses was $1.4 million for the year of 2018, while provision for loan losses for the year of 2017 was $4.9 million. Provision for loan losses in the 2018 period included the correction in the second quarter of 2018 of the overstatement recorded in the company's 2017 allowance for loan losses, as previously reported, while provision for loan losses in the 2017 period was primarily due to higher reserves for a certain portfolio of consumer loans.
  • Noninterest income for the years ended December 31, 2018 and 2017 was $4.3 million and $3.5 million, respectively. Noninterest income in the 2018 period included a $352 thousand gain on the discontinuance of the company's post-retirement benefit plan effective March 1, 2018, while noninterest income in the 2017 period included an additional $213 thousand of losses recorded on the disposition of assets.
  • Noninterest expenses for the years ended December 31, 2018 and 2017 were $32.1 million and $26.7 million, respectively. Merger-related expenses were $363 thousand and $2.0 million for the years ended December 31, 2018 and 2017, respectively. Expenses in 2018 associated with the succession of the company's CFO and fees incurred in the completion of the company's 2017 year-end reporting totaled approximately $1.2 million, all of which were recorded in the first six months of 2018. Efficiency ratio for the year ended December 31, 2018 was 84.8% compared to 85.7% for the year ended December 31, 2017.
  • Income tax expense for the year ended December 31, 2018 was $533 thousand, representing an effective rate of 12.1%. The effective rate was positively affected by higher than estimated income tax deductions reported in the company's 2017 federal income tax return at the higher 2017 rate, as noted above. Income tax expense for 2017 of $797 thousand reflected the effect of the revaluation of the company's net deferred tax asset upon the enactment of the Tax Cuts and Jobs Act of 2017 ("TCJA") at the end of 2017.

Fourth Quarter 2018 compared to Fourth Quarter 2017

  • Income before income taxes for the fourth quarter of 2018 was $670 thousand compared to a loss of $2.0 million for the fourth quarter of 2017. Income before income taxes, excluding the costs incurred to implement the company's early retirement program ($483 thousand) was $1.2 million1 for the fourth quarter of 2018.
  • Interest income for the three months ended December 31, 2018 was $11.7 million, on average interest-earning assets of $989.3 million, compared to $10.5 million for the three months ended December 31, 2017, on average interest-earning assets of $900.6 million. Interest income in the fourth quarter of 2018 included accretion of acquired loan discounts of $352 thousand, while interest income in the fourth quarter of 2017 included $1.0 million of accretion of acquired loan discounts. Yields on average interest-earning assets were 4.72% and 4.69% for the three months ended December 31, 2018 and 2017, respectively.
  • Interest expense was $3.3 million and $1.9 million for the three months ended December 31, 2018 and 2017, respectively, and the cost of funds was 1.40% and 0.92% for the quarter-over-quarter periods. Higher funding cost in the 2018 period was primarily due to higher cost of deposits and greater use of FHLB borrowings, as noted above. Average interest-bearing liabilities were $817.2 million and $742.0 million for the fourth quarters of 2018 and 2017, respectively.
  • Net interest margin was 3.41% for the fourth quarter of 2018 compared to 3.82% for the fourth quarter of 2017. Core NIM for the fourth quarter of 2018 was 3.25%1 compared to 3.31%1 for the same quarter of 2017. The decline in Core NIM was primarily attributable to higher cost of funds.
  • Provision for loan losses was $870 thousand for the fourth quarter of 2018, while provision for loan losses in the fourth quarter of 2017 was $3.1 million. Provision for loan losses in the fourth quarter of 2018 was primarily attributable to an increase of $48.0 million of gross loans in the quarter and higher reserves attributed to certain loan types as the company's loan portfolio mix shifts from residential and consumer loans to commercial loans. Provision for loan losses in the 2017 period included higher reserves for a certain portfolio of consumer loans.
  • Noninterest income for the fourth quarters of 2018 and 2017 was $1.0 million and $562 thousand, respectively. Contributing to higher noninterest income in the 2018 period was higher income from the company's wealth management business and losses recorded on the disposition of assets in the 2017 period.
  • Noninterest expenses for the fourth quarters of 2018 and 2017 were $7.9 million and $8.0 million, respectively. Noninterest expenses in the fourth quarter of 2018 included $483 thousand of expenses incurred to implement the company's early retirement program, while merger-related expenses were $850 thousand in the fourth quarter of 2017. Higher noninterest expenses in the 2018 period compared to the 2017 period were primarily due to higher occupancy and data processing costs due to growth, partially offset by lower advertising and marketing and consulting costs incurred in the 2017 period. Efficiency ratio for the fourth quarter of 2018 was 83.7% (78.6%1 excluding expenses incurred to implement the early retirement program) compared to 88.2% for the same quarter of 2017 (78.7%1 excluding merger-related expenses).
  • Income taxes for the fourth quarter of 2018 were a benefit of $112 thousand. The benefit was primarily attributable to greater than estimated income tax deductions reported in the company's 2017 federal income tax return and the adjustment to the year-to-date 2018 effective rate recorded in the fourth quarter of 2018, noted above. Income tax expense for the fourth quarter of 2017 of $391 thousand reflected the effect of the revaluation of the company's net deferred tax asset upon the enactment of the TCJA at the end of 2017.

Balance Sheet

  • Loans, net of allowance for loan losses, were $894.2 million at December 31, 2018 compared to $758.7 million at December 31, 2017, a growth rate of over 17%. Excluding the pay-down of approximately $67 million in the year of 2018 of purchased portfolio loans, including those acquired in the Merger, gross loan growth was approximately 27% for 2018.
  • Total assets were $1.1 billion at December 31, 2018 compared to $970.6 million at December 31, 2017.
  • Deposits were $842.2 million at December 31, 2018 compared to $761.8 million at December 31, 2017. Noninterest-bearing accounts comprised 13.6% of total deposits at December 31, 2018, slightly up from 13.5% at December 31, 2017.
  • Shareholders' equity was $117.5 million and $114.6 million at December 31, 2018 and December 31, 2017, respectively. Tangible book value, calculated as shareholders' equity less goodwill and core deposit intangible assets, net of the associated deferred tax liability, divided by common shares outstanding, was $7.981 and $7.711 at December 31, 2018 and December 31, 2017, respectively. Capital ratios for Virginia Commonwealth Bank and Bay Banks of Virginia, Inc. were above regulatory minimum guidelines for well-capitalized banks and bank holding companies, respectively, as of December 31, 2018 and December 31, 2017.
  • Return on average assets for the years ended December 31, 2018 and 2017 was 0.39% and (0.17)%, respectively, while return on average equity for the same periods was 3.36% and (1.58)%, respectively. Return on average assets for the fourth quarter of 2018, annualized, was 0.30% (0.44%1 excluding expenses incurred implementing the early retirement program) compared to 0.41% for the third quarter of 2018.

Asset Quality

  • Nonperforming assets were $8.8 million, or 0.81% of total assets, as of December 31, 2018, compared to $7.9 million, or 0.77% of total assets, as of September 30, 2018, and $10.8 million, or 1.12% of total assets, as of December 31, 2017. Net charge-offs to average gross loans were 0.15% and 0.17% for the years ended December 31, 2018 and 2017, respectively.
  • The ratio of allowance for loan losses to total gross loans was 0.88%, 0.85%, and 1.00% at December 31, 2018, September 30, 2018, and December 31, 2017, respectively. The company's allowance for loan losses does not include discounts recorded on acquired loans. The ratio of allowance for loan losses plus remaining discounts on acquired loans to total gross loans (adding the remaining discounts on acquired loans) was 1.31%1, 1.35%1, and 1.76%1, as of the same three period ends, respectively.

Outlook

Greene concluded: "I am optimistic moving into 2019, in spite of mixed economic headwinds. Our team is aligned. We have a three-year plan guiding us to our goals, but we are nimble and will adjust as our markets and economic conditions require. Deposit growth could slow attainment of our goals and we are sharply focused on growing them, primarily noninterest-bearing deposits.

As I reflect on 2018, I am pleased with the accomplishments of our team. This has been a building year, building of both infrastructure and talent. I believe we now have both to take our over $1 billion company to the next level. I express my thanks to our employees for what they have accomplished in 2018, to our board for their advice and counsel, to our shareholders for their continuing support, and to our customers who trust us to meet many of their financial needs every day."

About Bay Banks of Virginia, Inc.

Bay Banks of Virginia, Inc. is the bank holding company for Virginia Commonwealth Bank and VCB Financial Group, Inc. Founded in the 1930s, Virginia Commonwealth Bank is headquartered in Richmond, Virginia. With 20 banking offices, including one production office, located throughout the greater Richmond area, the Northern Neck region, Middlesex County, the Tri-Cities area of Petersburg, Hopewell and Colonial Heights, Suffolk, and Virginia Beach, the bank serves businesses, professionals, and consumers with a wide variety of financial services, including retail and commercial banking, and mortgage banking. VCB Financial Group provides management services for personal and corporate trusts, including estate planning, estate settlement and trust administration, and investment and wealth management services.

Caution About Forward-Looking Statements

This press release contains statements concerning the company's expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements may constitute "forward-looking statements" as defined by federal securities laws. These statements may address issues that involve estimates and assumptions made by management, risks and uncertainties, and actual results could differ materially from historical results or those anticipated by such statements. Factors that could have a material adverse effect on the operations and future prospects of the company include, but are not limited to: changes in interest rates and general economic conditions; the legislative/regularity climate; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and Federal Reserve Board; the quality or composition of the loan or investment portfolios; demand for loan products; deposit flows; competition; demand for financial services in the company's market area; acquisitions and dispositions; implementation of new technologies and the ability to develop and maintain secure and reliable electronic systems; and tax and accounting rules, principles, policies and guidelines. These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and readers are cautioned not to place undue reliance on such statements, which speak only as of the date they are made. Except to the extent required by applicable law or regulation, the company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

For further information, contact Randal R. Greene, President and Chief Executive Officer, at 844-404-9668 or Judy C. Gavant, Chief Financial Officer, at 804-518-2606 or inquiries@baybanks.com.

1 See discussion of non-GAAP financial measures at the end of the Supplemental Financial Data tables that follow.

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data

CONSOLIDATED BALANCE SHEETS




December 31, 2018



December 31, 2017


(Dollars in thousands, except share data)


(unaudited)






ASSETS









Cash and due from banks


$

7,685



$

9,396


Interest-bearing deposits



19,751




41,971


Certificates of deposit



2,976




3,224


Federal funds sold



625




6,961


Available-for-sale securities, at fair value



82,232




77,153


Restricted securities



7,600




5,787


Loans receivable, net of allowance for loan losses of $7,902 and 
   $7,770, respectively



894,191




758,726


Loans held for sale



368




1,651


Premises and equipment, net



18,169




17,463


Accrued interest receivable



3,172




3,194


Other real estate owned, net



3,597




4,284


Bank owned life insurance



19,270




18,773


Goodwill



10,374




10,374


Mortgage servicing rights



977




999


Core deposit intangible



2,193




2,991


Deferred tax asset, net



1,510




2,342


Other assets



5,927




5,267


Total assets


$

1,080,617



$

970,556











LIABILITIES









Noninterest-bearing deposits


$

114,122



$

103,037


Savings and interest-bearing demand deposits



359,400




299,820


Time deposits



368,670




358,989


Total deposits



842,192




761,846











Securities sold under repurchase agreements



6,089




9,498


Federal Home Loan Bank advances



100,000




70,000


Subordinated notes, net of unamortized issuance costs



6,893




6,877


Other liabilities



7,967




7,781


Total liabilities



963,141




856,002











SHAREHOLDERS' EQUITY









Common stock ($5 par value; authorized - 30,000,000 shares;
  
outstanding - 13,201,682 and 13,203,605 shares, respectively) (1)



66,008




66,018


Additional paid-in capital



36,972




37,142


Unearned employee stock ownership plan shares



(1,734)




(1,129)


Retained earnings



17,557




13,679


Accumulated other comprehensive loss, net



(1,327)




(1,156)


Total shareholders' equity



117,476




114,554


Total liabilities and shareholders' equity


$

1,080,617



$

970,556



(1) Preferred stock is authorized; however, none was outstanding as of December 31, 2018 and December 31, 2017.

 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued

CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited)


For the Three Months Ended


(Dollars in thousands, except per share data)


December 31, 2018



September 30, 2018



December 31, 2017


INTEREST INCOME













Loans, including fees


$

10,899



$

10,126



$

9,742


Securities:













Taxable



569




498




453


Tax-exempt



119




119




79


Federal funds sold



62




46




87


Interest-bearing deposit accounts



69




64




134


Certificates of deposit



17




17




19


Total interest income



11,735




10,870




10,514















INTEREST EXPENSE













Deposits



2,565




2,027




1,515


Securities sold under repurchase agreements



3




3




3


Subordinated notes



128




128




128


Federal Home Loan Bank advances



568




441




299


Total interest expense



3,264




2,599




1,945


Net interest income



8,471




8,271




8,569


Provision for loan losses



870




509




3,101


Net interest income after provision for loan losses



7,601




7,762




5,468















NON-INTEREST INCOME













Income from fiduciary activities



114




151




213


Service charges and fees on deposit accounts



261




250




204


Wealth management



284




144




70


Interchange fees, net



118




106




(84)


Other service charges and fees



25




31




70


Secondary market sales and servicing



131




150




112


Increase in cash surrender value of bank owned life insurance



123




123




132


Net gain (loss) on disposition of other assets



11




51




(210)


(Loss) gain on rabbi trust assets



(138)







29


Other



75




(12)




26


Total non-interest income



1,004




994




562















NON-INTEREST EXPENSE













Salaries and employee benefits



3,826




4,022




3,571


Occupancy



1,043




962




792


Data processing



589




556




361


Bank franchise tax



195




178




174


Telecommunications



143




132




93


FDIC assessments



198




151




265


Foreclosed property



66




45




33


Consulting



142




228




456


Advertising and marketing



92




126




437


Directors' fees



179




146




129


Audit and accounting



290




236




380


Legal



120




123




25


Merger-related









850


Core deposit intangible amortization



188




196




218


Net other real estate owned losses (gains)



62




(112)




120


Other



802




543




129


Total non-interest expense



7,935




7,532




8,033


Income (loss) before income taxes



670




1,224




(2,003)


Income tax (benefit) expense



(112)




198




391


Net income (loss)


$

782



$

1,026



$

(2,394)


Basic and diluted earnings (loss) per share


$

0.06



$

0.08



$

(0.16)


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data – Continued

CONSOLIDATED STATEMENTS OF OPERATIONS




For the Year Ended




December 31, 2018



December 31, 2017


(Dollars in thousands, except per share data)


(unaudited)






INTEREST INCOME









Loans, including fees


$

40,752



$

31,330


Securities:









Taxable



1,961




1,399


Tax-exempt



475




423


Federal funds sold



234




164


Interest-bearing deposit accounts



311




310


Certificates of deposit



70




74


Total interest income



43,803




33,700











INTEREST EXPENSE









Deposits



7,992




4,513


Federal funds purchased






11


Securities sold under repurchase agreements



13




15


Subordinated notes



513




482


Federal Home Loan Bank advances



1,707




980


Total interest expense



10,225




6,001


Net interest income



33,578




27,699


Provision for loan losses



1,351




4,934


Net interest income after provision for loan losses



32,227




22,765











NON-INTEREST INCOME









Income from fiduciary activities



710




904


Service charges and fees on deposit accounts



768




900


Wealth management



842




370


Interchange fees, net



339




230


Other service charges and fees



116




145


Secondary market sales and servicing



659




469


Increase in cash surrender value of bank owned life insurance



497




473


Net gains on sale of available-for-sale securities






2


Net losses on disposition of other assets



(7)




(220)


Gain on curtailment of post-retirement benefit plan



352





(Loss) gain on rabbi trust assets



(138)




180


Other



165




54


Total non-interest income



4,303




3,507











NON-INTEREST EXPENSE









Salaries and employee benefits



16,233




13,403


Occupancy



3,682




2,735


Data processing



2,531




1,258


Bank franchise tax



726




533


Telecommunications



512




308


FDIC assessments



719




580


Foreclosed property



175




147


Consulting



1,098




665


Advertising and marketing



439




664


Directors' fees



561




444


Audit and accounting



1,129




746


Legal



500




128


Merger-related



363




1,976


Core deposit intangible amortization



798




679


Net other real estate owned (gains) losses



(107)




221


Other



2,760




2,260


Total non-interest expense



32,119




26,747


Income (loss) before income taxes



4,411




(475)


Income tax expense



533




797


Net income (loss)


$

3,878



$

(1,272)


Basic and diluted earnings (loss) per share


$

0.31



$

(0.14)


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued




As of and for the Three Months Ended



As of and for the Year Ended




December 31,



September 30,



June 30,



March 31,



December 31,



December 31,



December 31,


(Dollars in thousands, except per share amounts)


2018



2018



2018



2018



2017



2018



2017


Select Consolidated Balance Sheet Data





























Total assets


$

1,080,617



$

1,027,440



$

983,216



$

994,676



$

970,556










Cash, interest-bearing deposits and federal
funds sold



28,061




22,713




38,526




63,696




58,328










Available-for-sale securities, at fair value



82,232




81,215




74,322




75,434




77,153










Loans:





























Mortgage loans on real estate



713,997




682,321




644,202




624,424




609,637










Commercial and industrial



164,608




144,118




124,563




129,225




114,093










Consumer



23,740




27,920




32,767




37,011




42,566










Loans receivable



902,345




854,359




801,532




790,660




766,296










Unamortized net deferred loan (fees) costs



(252)




(79)




24




228




200










Allowance for loan losses (ALL)



(7,902)




(7,287)




(7,113)




(7,923)




(7,770)










Net loans



894,191




846,993




794,443




782,965




758,726










Loans held for sale



368







669




414




1,651










Other real estate owned, net



3,597




3,663




3,501




2,593




4,284







































Total liabilities


$

963,141



$

910,893



$

867,492



$

879,757



$

856,002










Deposits:





























Noninterest-bearing demand deposits



114,122




108,602




108,943




124,572




103,037










Savings and interest-bearing deposits



359,400




330,690




296,206




299,216




299,820










Time deposits



368,670




369,836




369,917




373,163




358,989










Total deposits



842,192




809,128




775,066




796,951




761,846










Securities sold under repurchase agreements



6,089




6,083




7,008




6,551




9,498










Federal Home Loan Bank advances



100,000




80,000




70,000




60,000




70,000










Subordinated notes, net of unamortized
issuance costs



6,893




6,889




6,885




6,881




6,877







































Shareholders' equity



117,476




116,547




115,724




114,919




114,554







































Condensed Consolidated Statements of
Operations





























Interest income


$

11,735



$

10,870



$

10,508



$

10,692



$

10,514



$

43,803



$

33,700


Interest expense



3,264




2,599




2,314




2,048




1,945




10,225




6,001


Net interest income



8,471




8,271




8,194




8,644




8,569




33,578




27,699


Provision for (recovery of) loan losses



870




509




(348)




320




3,101




1,351




4,934


Non-interest income



1,004




994




1,164




1,170




562




4,303




3,507


Non-interest expense



7,935




7,532




8,563




8,120




8,033




32,119




26,747


Income (loss) before taxes



670




1,224




1,143




1,374




(2,003)




4,411




(475)


Income tax (benefit) expense



(112)




198




197




250




391




533




797


Net income (loss)


$

782



$

1,026



$

946



$

1,124



$

(2,394)



$

3,878



$

(1,272)


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued




As of and for the Three Months Ended



As of and for the Year Ended




December 31,



September 30,



June 30,



March 31,



December 31,



December 31,



December 31,


(Dollars in thousands, except per share amounts)


2018



2018



2018



2018



2017



2018



2017































Basic earnings (loss) per share


$

0.06



$

0.08



$

0.07



$

0.09



$

(0.18)



$

0.31



$

(0.14)


Diluted earnings (loss) per share



0.06




0.08




0.07




0.09




(0.18)




0.31




(0.14)


Dividends per share















0.04







0.12


Book value per share



8.90




8.80




8.75




8.69




8.68










Tangible book value per share (1)



7.98




7.88




7.81




7.74




7.71










Shares outstanding at end of period



13,201,682




13,238,716




13,226,096




13,223,096




13,203,605




13,201,682




13,203,605


Weighted average shares outstanding, basic



13,050,791




13,080,372




13,059,604




13,038,593




13,036,057




12,609,849




9,399,223


Weighted average shares outstanding, diluted



13,099,707




13,142,549




13,126,419




13,106,214




13,108,400




12,674,448




9,399,223































Performance Ratios (tax-equivalent basis):





























Yield on average interest-earning assets



4.72

%



4.66

%



4.61

%



4.74

%



4.69

%



4.70

%



4.83

%

Cost of funds



1.40

%



1.19

%



1.08

%



0.95

%



0.92

%



1.17

%



0.91

%

Cost of deposits



1.22

%



1.03

%



0.93

%



0.83

%



0.81

%



1.01

%



0.77

%

Net interest spread



3.14

%



3.30

%



3.37

%



3.64

%



3.64

%



3.37

%



3.78

%

Net interest margin (NIM)



3.41

%



3.57

%



3.60

%



3.83

%



3.82

%



3.61

%



3.98

%

NIM, excluding acquisition accounting
adjustments (1)



3.25

%



3.40

%



3.34

%



3.58

%



3.31

%



3.40

%



3.66

%

Average interest-earnings assets to total average
assets



93.76

%



93.45

%



92.37

%



92.10

%



93.30

%



93.46

%



91.96

%

Return on average assets (quarter-to-date
annualized)



0.30

%



0.41

%



0.38

%



0.46

%



(0.99)

%



0.39

%



(0.17)

%

Operating return on average assets (quarter-to-date
annualized) (1)



0.44

%



0.41

%



0.38

%



0.57

%



(0.76)

%



0.45

%



0.00

%

Return on average equity (quarter-to-date
annualized)



2.69

%



3.55

%



3.28

%



3.92

%



(8.24)

%



3.36

%



(1.58)

%

Merger-related expense


$



$



$



$

363



$

850



$

363



$

1,976


Efficiency ratio



83.7

%



81.3

%



91.5

%



82.7

%



88.2

%



84.8

%



85.7

%

Operating efficiency ratio (1)



78.6

%



81.3

%



91.5

%



79.0

%



78.7

%



82.6

%



79.4

%

Average assets



1,055,144




994,209




988,946




982,616




965,246




999,895




763,443


Average interest-earning assets



989,327




929,111




913,486




904,991




900,617




934,528




702,068


Average interest-bearing liabilities



817,225




761,986




747,227




747,813




742,043




768,826




568,998


Average shareholders' equity



116,291




115,454




115,321




114,736




116,171




115,468




80,503


Shareholders' equity to total assets ratio



10.87

%



11.34

%



11.77

%



11.55

%



11.80

%









Tangible shareholders' equity to tangible total
assets (1)



9.86

%



10.27

%



10.64

%



10.42

%



10.63

%






































Asset Quality Data and Ratios:





























Nonaccrual loans


$

5,206



$

4,204



$

3,474



$

6,892



$

6,496










Loans past due 90 days or more and still accruing
(excludes purchased credit-impaired loans)















48










Other real estate owned, net



3,597




3,663




3,501




2,593




4,284










Total non-performing assets



8,803




7,867




6,975




9,485




10,828










Net charge-offs (recoveries)



255




335




462




167




948




1,219




1,027


Net charge-offs to average loans (quarter-to-date
annualized)



0.12

%



0.17

%



0.23

%



0.09

%



0.50

%



0.15

%



0.17

%

Total non-performing assets to total assets



0.81

%



0.77

%



0.71

%



0.95

%



1.11

%









Gross loans to total assets



83.48

%



83.15

%



81.52

%



79.49

%



78.95

%









ALL to gross loans



0.88

%



0.85

%



0.89

%



1.00

%



1.01

%









ALL plus acquisition accounting adjustments
(discounts) on acquired loans to gross loans (1)



1.31

%



1.35

%



1.46

%



1.65

%



1.76

%










(1) Non-GAAP financial measure.  See GAAP to Non-GAAP financial measure reconciliation at the end of the Supplemental Financial Data tables that follow.

 

 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued




As of and for the Three Months Ended



As of and for the Year Ended




December 31,



September 30,



June 30,



March 31,



December 31,



December 31,



December 31,


(Dollars in thousands, except per share amounts)


2018



2018



2018



2018



2017



2018



2017


Reconciliation of Non-GAAP Financial Measures (1)





























NIM, excluding acquisition accounting adjustments





























Interest income, including fees


$

11,735



$

10,870



$

10,508



$

10,692



$

10,514



$

43,803



$

33,700


Add: tax-equivalent yield adjustment for tax-
exempt securities (c)



32




30




31




32




21




125




217


Less: accretion of discounts on acquired loans



352




357




547




503




1,047




1,759




1,907


Interest income, adjusted



11,415




10,543




9,992




10,221




9,488




42,169




32,010


Average interest-earning assets


$

989,327



$

929,111



$

913,486



$

904,991



$

900,617



$

934,528



$

702,068


Yield on interest-earning assets, excluding accretion of
discounts on acquired loans (quarter-to-date annualized)



4.58

%



4.54

%



4.38

%



4.52

%



4.21

%



4.51

%



4.56

%

Interest expense


$

3,264



$

2,599



$

2,314



$

2,048



$

1,945



$

10,225



$

6,001


Add: amortization of premium on acquired time
deposits



37




40




42




68




88




187




308


Interest expense, adjusted



3,301




2,639




2,356




2,116




2,033




10,412




6,309


Net interest income, excluding acquisition accounting
adjustments



8,114




7,904




7,637




8,105




7,455




31,757




25,701


Average interest-bearing liabilities


$

817,225



$

761,986



$

747,227



$

747,813



$

742,043



$

768,826



$

568,998


Cost of interest-bearing liabilities, excluding amortization
of premium on acquired time deposits (quarter-to-date
annualized)



1.60

%



1.39

%



1.26

%



1.13

%



1.10

%



1.35

%



1.11

%

NIM, excluding acquisition accounting adjustments



3.25

%



3.40

%



3.34

%



3.58

%



3.31

%



3.40

%



3.66

%






























ALL plus discounts on acquired loans to gross loans





























Allowance for loan losses


$

7,902



$

7,287



$

7,113



$

7,923



$

7,770










Add: discounts on acquired loans



3,922




4,280




4,655




5,212




5,792










ALL plus discounts on acquired loans



11,824




11,567




11,768




13,135




13,562










Gross loans + discounts on acquired loans


$

906,015



$

858,560



$

806,211



$

796,100



$

771,459










ALL plus discounts on acquired loans to gross loans



1.31

%



1.35

%



1.46

%



1.65

%



1.76

%






































Tangible book value per share





























Total shareholders' equity


$

117,476



$

116,547



$

115,724



$

114,919



$

114,554










Less: intangible assets, net of deferred tax liability on
core deposit intangible (a)(b)



12,106




12,255




12,409




12,570




12,737










Tangible shareholders' equity


$

105,370



$

104,292



$

103,316



$

102,350



$

101,818










Shares outstanding at end of period



13,201,682




13,238,716




13,226,096




13,223,096




13,203,605










Tangible book value per share


$

7.98



$

7.88



$

7.81



$

7.74



$

7.71







































Tangible shareholders' equity to tangible assets





























Total assets


$

1,080,617



$

1,027,440



$

983,216



$

994,676



$

970,556










Less: intangible assets, net of deferred tax liability on
core deposit intangible (a)(b)



12,106




12,255




12,409




12,570




12,737










Tangible assets


$

1,068,511



$

1,015,185



$

970,807



$

982,106



$

957,819










Tangible shareholders' equity


$

105,370



$

104,292



$

103,316



$

102,350



$

101,818










Tangible shareholders' equity to tangible assets



9.86

%



10.27

%



10.64

%



10.42

%



10.63

%






































Select noninterest expenses, after-tax basis (ATB)





























Merger-related expenses


$



$



$



$

363



$

850



$

363



$

1,976


Merger-related expenses (ATB) (c)












287




561




287




1,304































Early retirement program expenses


$

483



$



$



$



$



$

483



$


Early retirement program expenses (ATB) (c)



382
















382


































Operating return on average assets





























Net income (loss)


$

782



$

1,026



$

946



$

1,124



$

(2,394)



$

3,878



$

(1,272)


Add: Early retirement program expenses (ATB)



382
















382





Add: Merger-related expenses (ATB)












287




561




287




1,304


Operating net income (loss)


$

1,164



$

1,026



$

946



$

1,411



$

(1,833)



$

4,546



$

32


Average assets


$

1,055,144



$

994,209



$

988,946



$

982,616



$

965,246



$

999,895



$

763,443


Operating return on average assets



0.44

%



0.41

%



0.38

%



0.57

%



-0.76

%



0.45

%



0.00

%






























Operating efficiency ratio





























Total noninterest expense


$

7,935



$

7,532



$

8,563



$

8,120



$

8,033



$

32,119



$

26,747


Less: Early retirement program expenses



483
















483





Less:  Merger-related expenses












363




850




363




1,976


Operating noninterest expense



7,452




7,532




8,563




7,757




7,183




31,273




24,771


Net interest income



8,471




8,271




8,194




8,644




8,569




33,578




27,699


Non-interest income



1,004




994




1,164




1,170




562




4,303




3,507


Operating efficiency ratio



78.6

%



81.3

%



91.5

%



79.0

%



78.7

%



82.6

%



79.4

%



(a) Excludes mortgage servicing rights.

(b) Assumes a federal income tax rate of 21% for the 2018 periods and for the three months-ended December 31, 2017.

(c) Assumes a federal income tax rate of 21% for the 2018 periods and 35% for the 2017 periods.




(1) Set forth above are calculations of each of the non-GAAP (generally accepted accounting principles) financial measures included in the Supplemental Financial Data tables. NIM, excluding acquisition accounting adjustments, ALL plus discounts on acquired loans to gross loans, tangible book value per share, tangible shareholders' equity to tangible total assets ratio, select noninterest expenses after-tax basis, operating return on average assets, and operating efficiency ratio are supplemental financial measures that are not required nor presented in accordance with GAAP.  Management believes ALL plus discounts on acquired loans as a percentage of gross loans, tangible book value per share, and tangible shareholders' equity to tangible total assets ratios are meaningful because they are measures management uses to assess asset quality and capital levels, respectively.  Management believes that NIM, excluding acquisition accounting adjustments, select noninterest expenses after-tax basis, operating return on average assets, and operating efficiency ratios are meaningful because management uses them to assess the financial performance of the company. Calculations of these non-GAAP financial measures may not be comparable to the calculation of similarly titled measures reported by other companies.

 

 

 

 

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