Press Release

Bay Banks of Virginia, Inc. Reports First Quarter 2019 Results

Improved Performance

Company Release - 4/30/2019 4:30 PM ET

RICHMOND, Va., April 30, 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 first quarter ended March 31, 2019.

Bay Banks of Virginia Logo

The company reported net income of $1.5 million, or $0.11 per diluted share, for the first quarter of 2019 compared to $782 thousand, or $0.06 per diluted share, for the fourth quarter of 2018 and $1.1 million, or $0.09 per diluted share, for the first quarter of 2018. Net income for the fourth quarter of 2018 included $483 thousand ($382 thousand1 after income tax) of expenses incurred in connection with the company's previously announced early retirement program. Net income in the first quarter of 2018 included $363 thousand ($287 thousand1 after income tax) of merger-related expenses in connection with the company's merger with Virginia BanCorp, Inc. on April 1, 2017 (the "Merger"). Costs associated with the succession of the company's CFO and costs related to fees incurred relating to the completion of the company's 2017 year-end financial reporting in the first quarter of 2018 totaled approximately $1.0 million.

Randal R. Greene, President and Chief Executive Officer, commented: "I am pleased to report improved first quarter 2019 results, which reflect the strongest quarterly earnings reported since the Merger. Our results reflect an intentional slowing of loan growth as we exercise a disciplined approach of investing our liquidity in higher yielding loans. Growing deposits, particularly noninterest-bearing accounts, continues to be challenging in a fiercely competitive environment and our deposit costs continue to increase due to both this competition and the natural repricing of our maturing time deposits. In the first quarter of 2019, higher loan yields contributed to some stability in our net interest margin, when excluding accretion of loan discounts. Also, in the first quarter of 2019, we completed the closure of our Hopewell, Virginia branch, as planned."

Operating Results

First Quarter 2019 compared to Fourth Quarter 2018

  • Income before income taxes for the first quarter of 2019 was $1.8 million compared to $670 thousand for the fourth 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 March 31, 2019 was $12.3 million, on average interest-earning assets of $1.0 billion, compared to $11.7 million on average interest-earning assets of $989.3 million for the three months ended December 31, 2018. Interest income in the first quarter of 2019 included accretion of acquired loan discounts of $439 thousand, while interest income in the fourth quarter of 2018 included $352 thousand of accretion of acquired loan discounts. Yields on average interest-earning assets were 4.90% and 4.72% for the linked quarter periods.
  • Interest expense was $3.7 million and $3.3 million for the three months ended March 31, 2019 and December 31, 2018, respectively, and cost of funds was 1.54% and 1.40% for the linked quarter periods. Average interest-bearing liabilities were $853.6 million and $817.3 million for the first and fourth quarters of 2019 and 2018, respectively. Higher funding costs in the first quarter of 2019 was primarily due to competition for deposits in the company's markets, higher interest rates in general, and the repricing of maturing time deposits.
  • Net interest margin ("NIM") was 3.45% for the first quarter of 2019 compared to 3.41% for the fourth quarter of 2018. NIM excluding accretion of acquired loan discounts and amortization of fair value marks on acquired time deposits ("Core NIM") for the first quarter of 2019 was 3.26%1 compared to 3.25%1 for the fourth quarter of 2018.
  • Provision for loan losses was $314 thousand in the first quarter of 2019, while provision for loan losses in the fourth quarter of 2018 was $870 thousand. Provision for loan losses in both periods was primarily attributable to loan growth of $16.5 million and $48.0 million for the first quarter of 2019 and the fourth quarter of 2018, respectively.
  • Noninterest income for the three months ended March 31, 2019 and December 31, 2018 was $1.1 million and $1.0 million, respectively. Wealth management and secondary market sales and servicing income were higher in the fourth quarter of 2018 compared to the first quarter of 2019 by $78 thousand and $60 thousand, respectively, offset by a $138 thousand loss in the fourth quarter of 2018 on rabbi trust assets associated with the company's deferred compensation plan.
  • Noninterest expenses for the three months ended March 31, 2019 and December 31, 2018 were $7.6 million and $7.9 million, respectively. Noninterest expenses for the fourth quarter of 2018 included $483 thousand incurred to implement the company's early retirement program. Additionally, fourth quarter of 2018 noninterest expenses included the reversal of approximately $300 thousand of costs related to certain management incentives, as the basis for these were not met. The company's efficiency ratio for the three months ended March 31, 2019 was 78.1% compared to 83.7% (78.6%1 excluding expenses incurred to implement the early retirement program) for the three months ended December 31, 2018.
  • Income tax expense in the first quarter of 2019 was $337 thousand, reflective of an 18.4% effective income tax rate, while income tax expense for the fourth quarter of 2018 was 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.

First Quarter 2019 compared to First Quarter 2018

  • Income before income taxes for the first quarter of 2019 was $1.8 million compared to $1.4 million for the first quarter of 2018.
  • Interest income for the three months ended March 31, 2019 was $12.3 million, on average interest-earning assets of $1.0 billion, compared to $10.7 million on average interest-earning assets of $905.0 million for the three months ended March 31, 2018. Interest income in the first quarter of 2019 included accretion of acquired loan discounts of $439 thousand, while interest income in the first quarter of 2018 included $503 thousand of accretion of acquired loan discounts and approximately $330 thousand of additional fee income and other adjustments, a portion of which was reversed in the second quarter of 2018. Yields on average interest-earning assets were 4.90% and 4.74% for the first quarters of 2019 and 2018, respectively.
  • Interest expense was $3.7 million and $2.0 million for the three months ended March 31, 2019 and 2018, respectively, and the cost of funds was 1.54% and 0.95% for the quarter-over-quarter periods. Higher funding costs in the 2019 period was primarily due to higher cost of deposits, as noted above, and greater use of FHLB borrowings. Average interest-bearing liabilities were $853.6 million and $747.8 million for the first quarters of 2019 and 2018, respectively.
  • NIM was 3.45% for the first quarter of 2019 compared to 3.83% for the first quarter of 2018. Core NIM for the first quarter of 2019 was 3.26%1 compared to 3.58%1 for the same quarter of 2018. The decline in Core NIM was primarily attributable to higher cost of funds (59 basis points), partially offset by higher yields on interest-earning assets (16 basis points). The effect of the interest income adjustments, noted above, on NIM in the first quarter of 2018 was approximately 14 basis points.
  • Provision for loan losses was $314 thousand for the first quarter of 2019, while provision for loan losses in the first quarter of 2018 was $320 thousand.
  • Noninterest income for the first quarters of 2019 and 2018 was $1.1 million and $1.2 million, respectively. Contributing to higher noninterest income in the 2018 period was a gain on the curtailment of the company's post-retirement benefit plan of $352 thousand. Partially offsetting this gain in the first quarter of 2018 was higher service charges and fees on deposit accounts and interchange fee income, net, in the first quarter of 2019 of $103 thousand and $109 thousand, respectively.
  • Noninterest expenses for the first quarters of 2019 and 2018 were $7.6 million and $8.1 million, respectively. Noninterest expenses in the first quarter of 2018 included $363 thousand of merger-related expenses, while there were no merger-related expenses in the first quarter of 2019. Costs associated with the succession of the company's CFO and costs related to fees incurred in the first quarter of 2018 in the completion of the company's 2017 year-end financial reporting totaled approximately $1.0 million. First quarter of 2019 noninterest expenses compared to the same period of 2018, excluding these items, were higher due to the company's expansion into the Virginia Beach market, expansion of VCB Financial Group in the Richmond, Virginia market, and costs for general infrastructure to support the company's growing operations. Additionally, the first quarter of 2018 included a net gain on the sale of other real estate owned of $141 thousand compared to a $6 thousand gain in the first quarter of 2019. The company's efficiency ratio for the first quarter of 2019 was 78.1% compared to 82.7% for the same quarter of 2018 (79.0%1 excluding merger-related expenses).
  • Income tax expense in the first quarter of 2019 and 2018 was $337 thousand and $250 thousand, respectively, reflective of an 18.4% and 18.2% effective income tax rate, respectively.

Balance Sheet

  • Loans, net of allowance for loan losses, were $910.8 million at March 31, 2019 compared to $894.2 million at December 31, 2018, an annualized growth rate of over 7%. Excluding the pay-down of approximately $16.4 million in the first quarter of 2019 of purchased portfolio loans, including those acquired in the Merger, loan growth, annualized, was approximately 14.5% for the first quarter ended March 31, 2019.
  • Total assets were $1.1 billion at March 31, 2019 and at December 31, 2018.
  • Deposits were $856.7 million at March 31, 2019 compared to $842.2 million at December 31, 2018. Noninterest-bearing accounts comprised 13.1% of total deposits at March 31, 2019, down slightly from 13.6% at December 31, 2018.
  • Shareholders' equity was $119.9 million and $117.5 million at March 31, 2019 and December 31, 2018, respectively, an increase of $2.5 million. The increase in shareholders' equity in the first quarter of 2019 was primarily attributable to net income of $1.5 million and $806 thousand of unrealized gains on the company's available-for-sale securities portfolio due to declining long-term interest rates. 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 $8.111 and $7.981 at March 31, 2019 and December 31, 2018, respectively. Capital ratios for Virginia Commonwealth Bank were above regulatory minimum guidelines for well-capitalized banks as of March 31, 2019 and December 31, 2018.
  • Annualized return on average assets for the quarters ended March 31, 2019, December 31, 2018, and March 31, 2018 was 0.55%, 0.30%, and 0.46%, respectively, while annualized return on average equity for the same periods was 5.05%, 2.69%, and 3.92%, respectively. Annualized operating return on average assets, which excludes expenses incurred implementing the early retirement program and merger-related expenses, for the quarters ended March 31, 2019, December 31, 2018, and March 31, 2018 was 0.55%1, 0.44%1, and 0.57%1, respectively.

Asset Quality

  • Nonperforming assets were $9.1 million, or 0.82% of total assets, as of March 31, 2019, compared to $8.8 million, or 0.81% of total assets, as of December 31, 2018, and $9.5 million, or 0.95% of total assets, as of March 31, 2018.
  • The ratio of allowance for loan losses to total gross loans was 0.86%, 0.88%, and 1.00% at March 31, 2019, December 31, 2018, and March 31, 2018, 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 1.23%1, 1.31%1, and 1.65%1, as of the same three period ends, respectively.

Outlook

Greene concluded: "As noted, we expect to slow 2019 loan growth when compared to 2018 to preserve liquidity for higher yielding loans. In particular, we will place a greater emphasis on residential loan originations that can be sold in the secondary market. Secondary market sales are an important source of fee income and allow us to avoid higher incremental funding costs. We've also restructured our residential lending group to align with this shift. We are addressing deposit growth on a number of fronts; we have dedicated deposit managers and have in place 2019 incentive plans for our lenders that are heavily weighted on noninterest-bearing account generation.

"Additionally, we continue to evaluate the transaction activity in our branches. To align staffing with the needs of our customers, we recently moved to staffing certain of our branches with part-time personnel. We believe this model will allow us to operate more efficiently, while continuing to provide our customers with the quality service they expect. The changes in our retail staffing and residential lending group should result in annualized savings of approximately $400,000, which we expect to begin to realize in the second quarter of 2019."

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 19 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/regulatory 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, Executive Vice President and 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




March 31, 2019



December 31, 2018 (1)


(Dollars in thousands, except share data)


(unaudited)






ASSETS









Cash and due from banks


$

7,404



$

7,685


Interest-earning deposits



23,091




18,891


Certificates of deposit



3,746




3,746


Federal funds sold



182




625


Available-for-sale securities, at fair value



82,030




82,232


Restricted securities



7,804




7,600


Loans receivable, net of allowance for loan losses of $7,858 and
   $7,902, respectively



910,762




894,191


Loans held for sale






368


Premises and equipment, net



21,822




18,169


Accrued interest receivable



3,274




3,172


Other real estate owned, net



3,718




3,597


Bank owned life insurance



19,390




19,270


Goodwill



10,374




10,374


Mortgage servicing rights



923




977


Core deposit intangible



2,013




2,193


Deferred tax asset, net



1,295




1,510


Other assets



6,012




5,927


Total assets


$

1,103,840



$

1,080,617











LIABILITIES









Noninterest-bearing demand deposits


$

112,315



$

114,122


Savings and interest-bearing demand deposits



371,587




359,400


Time deposits



372,751




368,670


Total deposits



856,653




842,192











Securities sold under repurchase agreements



7,220




6,089


Federal Home Loan Bank advances



100,000




100,000


Subordinated notes, net of unamortized issuance costs



6,897




6,893


Other liabilities



13,133




7,967


Total liabilities



983,903




963,141











SHAREHOLDERS' EQUITY









Common stock ($5 par value; authorized - 30,000,000 shares;
   outstanding - 13,313,537 and 13,201,682 shares, respectively) (2)



66,568




66,008


Additional paid-in capital



36,493




36,972


Unearned employee stock ownership plan shares



(1,697)




(1,734)


Retained earnings



19,094




17,557


Accumulated other comprehensive loss, net



(521)




(1,327)


Total shareholders' equity



119,937




117,476


Total liabilities and shareholders' equity


$

1,103,840



$

1,080,617



(1) Derived from audited December 31, 2018 Consolidated Financial Statements.

(2) Preferred stock is authorized; however, none was outstanding as of March 31, 2019 and December 31, 2018.

 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued

CONSOLIDATED STATEMENTS OF OPERATIONS




For the Three Months Ended


(Dollars in thousands, except per share data)


March 31, 2019



December 31, 2018



March 31, 2018


INTEREST INCOME













Loans, including fees


$

11,461



$

10,899



$

9,984


Securities:













Taxable



595




569




397


Tax-exempt



118




119




120


Federal funds sold



56




62




74


Interest-bearing deposit accounts



86




69




98


Certificates of deposit



20




17




19


Total interest income



12,336




11,735




10,692















INTEREST EXPENSE













Deposits



2,809




2,565




1,604


Securities sold under repurchase agreements



3




3




3


Subordinated notes and other borrowings



137




128




128


Federal Home Loan Bank advances



704




568




313


Total interest expense



3,653




3,264




2,048


Net interest income



8,683




8,471




8,644


Provision for loan losses



314




870




320


Net interest income after provision for loan losses



8,369




7,601




8,324















NONINTEREST INCOME













Income from fiduciary activities



214




114




247


Service charges and fees on deposit accounts



238




261




135


Wealth management



206




284




132


Interchange fees, net



101




118




(8)


Other service charges and fees



29




25




30


Secondary market sales and servicing



71




131




133


Increase in cash surrender value of bank owned life insurance



120




123




127


Net (loss) gain on disposition of other assets



(1)




11




(69)


Gain (loss) on rabbi trust assets



90




(138)




(52)


Gain on curtailment of post-retirement benefit plan









352


Other



22




75




143


Total noninterest income



1,090




1,004




1,170















NONINTEREST EXPENSE













Salaries and employee benefits



4,001




3,826




4,106


Occupancy



868




1,015




785


Data processing



588




581




472


Bank franchise tax



216




195




176


Telecommunications and other technology



207




212




195


FDIC assessments



216




198




183


Foreclosed property



43




66




12


Consulting



115




133




382


Advertising and marketing



67




92




68


Directors' fees



164




179




168


Audit and accounting



204




290




363


Legal



83




120




133


Merger-related









363


Core deposit intangible amortization



180




188




211


Net other real estate owned (gains) losses



(6)




62




(141)


Other



684




778




644


Total noninterest expense



7,630




7,935




8,120


Income before income taxes



1,829




670




1,374


Income tax expense (benefit)



337




(112)




250


Net income


$

1,492



$

782



$

1,124


Basic and diluted earnings per share


$

0.11



$

0.06



$

0.09


 

 

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



March 31,



December 31,



September 30,



June 30,



March 31,



December 31,

(Dollars in thousands, except per share amounts)


2019



2018



2018



2018



2018



2018

Select Consolidated Balance Sheet Data
























Total assets


$

1,103,840



$

1,080,617



$

1,027,440



$

983,216



$

994,676





Cash, interest-bearing deposits and federal
funds sold



30,677




28,061




22,713




38,526




63,696





Available-for-sale securities, at fair value



82,030




82,232




81,215




74,322




75,434





Loans:
























Mortgage loans on real estate



725,494




713,997




682,321




644,202




624,424





Commercial and industrial



173,360




164,608




144,118




124,563




129,225





Consumer



20,095




23,740




27,920




32,767




37,011





Loans receivable



918,949




902,345




854,359




801,532




790,660





Unamortized net deferred loan (fees) costs



(329)




(252)




(79)




24




228





Allowance for loan losses (ALL)



(7,858)




(7,902)




(7,287)




(7,113)




(7,923)





Net loans



910,762




894,191




846,993




794,443




782,965





Loans held for sale






368







669




414





Other real estate owned, net



3,718




3,597




3,663




3,501




2,593





























Total liabilities


$

983,903



$

963,141



$

910,893



$

867,492



$

879,757





Deposits:
























Noninterest-bearing demand deposits



112,315




114,122




108,602




108,943




124,572





Savings and interest-bearing demand
deposits



371,587




359,400




330,690




296,206




299,216





Time deposits



372,751




368,670




369,836




369,917




373,163





Total deposits



856,653




842,192




809,128




775,066




796,951





Securities sold under repurchase agreements



7,220




6,089




6,083




7,008




6,551





Federal Home Loan Bank advances



100,000




100,000




80,000




70,000




60,000





Subordinated notes, net of unamortized
issuance costs



6,897




6,893




6,889




6,885




6,881





























Shareholders' equity



119,937




117,476




116,547




115,724




114,919





























Condensed Consolidated Statements of
Operations
























Interest income


$

12,336



$

11,735



$

10,870



$

10,508



$

10,692



$

43,803

Interest expense



3,653




3,264




2,599




2,314




2,048




10,225

Net interest income



8,683




8,471




8,271




8,194




8,644




33,578

Provision for (recovery of) loan losses



314




870




509




(348)




320




1,351

Noninterest income



1,090




1,004




994




1,164




1,170




4,303

Noninterest expense



7,630




7,935




7,532




8,563




8,120




32,119

Income before income taxes



1,829




670




1,224




1,143




1,374




4,411

Income tax expense (benefit)



337




(112)




198




197




250




533

Net income


$

1,492



$

782



$

1,026



$

946



$

1,124



$

3,878

 

 

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




March 31,



December 31,



September 30,



June 30,



March 31,



December 31,


(Dollars in thousands, except per share amounts)


2019



2018



2018



2018



2018



2018


Basic earnings per share


$

0.11



$

0.06



$

0.08



$

0.07



$

0.09



$

0.30


Diluted earnings per share



0.11




0.06




0.08




0.07




0.09




0.30


Book value per share



9.01




8.90




8.80




8.75




8.69






Tangible book value per share (1)



8.11




7.98




7.88




7.81




7.74






Shares outstanding at end of period



13,313,537




13,201,682




13,238,716




13,226,096




13,223,096




13,201,682


Weighted average shares outstanding, basic



12,972,850




13,050,791




13,080,372




13,059,604




13,038,593




13,057,537


Weighted average shares outstanding, diluted



13,008,817




13,099,707




13,142,549




13,126,419




13,106,214




13,122,136



























Performance Measures (tax-equivalent basis):

























Yield on average interest-earning assets



4.90

%



4.72

%



4.66

%



4.61

%



4.74

%



4.70

%

Cost of funds



1.54

%



1.40

%



1.19

%



1.08

%



0.95

%



1.17

%

Cost of deposits



1.34

%



1.22

%



1.03

%



0.93

%



0.83

%



1.01

%

Net interest spread



3.15

%



3.14

%



3.30

%



3.37

%



3.64

%



3.37

%

Net interest margin (NIM)



3.45

%



3.41

%



3.57

%



3.60

%



3.83

%



3.61

%

NIM, excluding acquisition accounting adjustments
NIM) (1)



3.26

%



3.25

%



3.40

%



3.34

%



3.58

%



3.40

%

Average interest-earnings assets to total average assets



94.1

%



93.8

%



93.5

%



92.4

%



92.1

%



93.5

%

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



0.55

%



0.30

%



0.41

%



0.38

%



0.46

%



0.39

%

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



0.55

%



0.44

%



0.41

%



0.38

%



0.57

%



0.45

%

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



5.05

%



2.69

%



3.55

%



3.28

%



3.92

%



3.36

%

Merger-related expense


$



$



$



$



$

363



$

363


Efficiency ratio



78.1

%



83.7

%



81.3

%



91.5

%



82.7

%



84.8

%

Operating efficiency ratio (1)



78.1

%



78.6

%



81.3

%



91.5

%



79.0

%



82.6

%

Average assets


$

1,088,180




1,055,144




994,209




988,946




982,616




999,895


Average interest-earning assets



1,024,058




989,327




929,111




913,486




904,991




934,528


Average interest-bearing liabilities



853,611




817,225




761,986




747,227




747,813




768,826


Average shareholders' equity



118,099




116,291




115,454




115,321




114,736




115,468


Shareholders' equity to total assets ratio



10.9

%



10.9

%



11.3

%



11.8

%



11.6

%





Tangible shareholders' equity to tangible total assets
(1)



9.9

%



9.9

%



10.3

%



10.6

%



10.4

%






























Asset Quality Data and Ratios:

























Nonaccrual loans


$

5,384



$

5,206



$

4,204



$

3,474



$

6,892






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




















Other real estate owned, net



3,718




3,597




3,663




3,501




2,593






Total nonperforming assets



9,102




8,803




7,867




6,975




9,485






Net charge-offs (recoveries)



358




255




335




462




167




1,219


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



0.16

%



0.12

%



0.17

%



0.23

%



0.09

%



0.15

%

Total non-performing assets to total assets



0.82

%



0.81

%



0.77

%



0.71

%



0.95

%





Gross loans to total assets



83.2

%



83.5

%



83.2

%



81.5

%



79.5

%





ALL to gross loans



0.86

%



0.88

%



0.85

%



0.89

%



1.00

%





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



1.23

%



1.31

%



1.35

%



1.46

%



1.65

%






(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




March 31,



December 31,



September 30,



June 30,



March 31,



December 31,


(Dollars in thousands, except per share amounts)


2019



2018



2018



2018



2018



2018


Reconciliation of Non-GAAP Financial Measures (1)

























NIM, excluding acquisition accounting adjustments (Core
NIM)

























Interest income, including fees


$

12,336



$

11,735



$

10,870



$

10,508



$

10,692



$

43,803


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



31




32




30




31




32




125


Less: accretion of discounts on acquired loans



439




352




357




547




503




1,759


Interest income, adjusted



11,928




11,415




10,543




9,992




10,221




42,169


Average interest-earning assets


$

1,024,058



$

989,327



$

929,111



$

913,486



$

904,991



$

934,528


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



4.72

%



4.58

%



4.54

%



4.38

%



4.52

%



4.51

%

Interest expense


$

3,653



$

3,264



$

2,599



$

2,314



$

2,048



$

10,225


Add: amortization of premium on acquired time deposits



34




37




40




42




68




187


Interest expense, adjusted



3,687




3,301




2,639




2,356




2,116




10,412


Net interest income, excluding acquisition accounting
adjustments



8,241




8,114




7,904




7,637




8,105




31,757


Average interest-bearing liabilities


$

853,611



$

817,225



$

761,986



$

747,227



$

747,813



$

768,826


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



1.75

%



1.60

%



1.39

%



1.26

%



1.13

%



1.35

%

NIM, excluding acquisition accounting adjustments (Core NIM)



3.26

%



3.25

%



3.40

%



3.34

%



3.58

%



3.40

%


























ALL plus discounts on acquired loans to gross loans

























Allowance for loan losses


$

7,858



$

7,902



$

7,287



$

7,113



$

7,923






Add: discounts on acquired loans



3,464




3,922




4,280




4,655




5,212






ALL plus discounts on acquired loans



11,322




11,824




11,567




11,768




13,135






Gross loans + discounts on acquired loans


$

922,084



$

906,015



$

858,560



$

806,211



$

796,100






ALL plus discounts on acquired loans to gross loans



1.23

%



1.31

%



1.35

%



1.46

%



1.65

%






























Tangible book value per share

























Total shareholders' equity


$

119,937



$

117,476



$

116,547



$

115,724



$

114,919






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



11,964




12,106




12,255




12,409




12,570






Tangible shareholders' equity


$

107,973



$

105,370



$

104,292



$

103,316



$

102,350






Shares outstanding at end of period



13,313,537




13,201,682




13,238,716




13,226,096




13,223,096






Tangible book value per share


$

8.11



$

7.98



$

7.88



$

7.81



$

7.74































Tangible shareholders' equity to tangible assets

























Total assets


$

1,103,840



$

1,080,617



$

1,027,440



$

983,216



$

994,676






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



11,964




12,106




12,255




12,409




12,570






Tangible assets


$

1,091,876



$

1,068,511



$

1,015,185



$

970,807



$

982,106






Tangible shareholders' equity


$

107,973



$

105,370



$

104,292



$

103,316



$

102,350






Tangible shareholders' equity to tangible assets



9.9

%



9.9

%



10.3

%



10.6

%



10.4

%






























Select noninterest expenses, after-tax basis (ATB)

























Merger-related expenses


$



$



$



$



$

363



$

363


Merger-related expenses, ATB (b)















287




287



























Early retirement program expenses


$



$

483



$



$



$



$

483


Early retirement program expenses, ATB (b)






382













382



























Operating return on average assets

























Net income (loss)


$

1,492



$

782



$

1,026



$

946



$

1,124



$

3,878


Add: Early retirement program expenses, ATB






382













382


Add: Merger-related expenses, ATB















287




287


Operating net income


$

1,492



$

1,164



$

1,026



$

946



$

1,411



$

4,546


Average assets


$

1,088,180



$

1,055,144



$

994,209



$

988,946



$

982,616



$

999,895


Operating return on average assets



0.55

%



0.44

%



0.41

%



0.38

%



0.57

%



0.45

%


























Operating efficiency ratio

























Total noninterest expense


$

7,630



$

7,935



$

7,532



$

8,563



$

8,120



$

32,119


Less: Early retirement program expenses






483













483


Less: Merger-related expenses















363




363


Operating noninterest expense



7,630




7,452




7,532




8,563




7,757




31,273


Net interest income



8,683




8,471




8,271




8,194




8,644




33,578


Noninterest income



1,090




1,004




994




1,164




1,170




4,303


Operating efficiency ratio



78.1

%



78.6

%



81.3

%



91.5

%



79.0

%



82.6

%


(a) Excludes mortgage servicing rights.

(b) Assumes a federal income tax rate of 21%.



















































(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 on an 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 to 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, of the Company.  Management believes that NIM, excluding acquisition accounting adjustments, select noninterest expenses on an 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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SOURCE Bay Banks of Virginia, Inc.

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