Press Release

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

Company Release - 7/30/2019 4:48 PM ET

RICHMOND, Va., July 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 three and six months ended June 30, 2019.

Bay Banks of Virginia Logo (PRNewsfoto/Bay Banks of Virginia, Inc.)

The company reported net income of $1.7 million, or $0.13 per diluted share, for the second quarter of 2019 compared to $1.5 million, or $0.11 per diluted share, for the first quarter of 2019 and $946 thousand, or $0.07 per diluted share, for the second quarter of 2018. For the first half of 2019, the company reported net income of $3.2 million, or $0.25 per diluted share, compared to $2.1 million, or $0.16 per diluted share, for the first half of 2018. Net income in the first half of 2018 included $363 thousand ($287 thousand1 after income tax) of merger-related expenses incurred in connection with the company's merger with Virginia BanCorp, Inc. on April 1, 2017 (the "Merger").

Randal R. Greene, President and Chief Executive Officer, commented: "I am again pleased to report improved quarterly results. As noted in our first quarter report, we have intentionally slowed loan growth preserving our liquidity for higher yielding opportunities.  In the second quarter, we experienced a higher than usual level of loan payoffs. However, loans to new relationships and advances under current lines were strong in the quarter and we are earning slightly higher yields on these loans. Deposit costs in our markets appear to be stabilizing, and as a result, we have taken actions to lower the cost of this funding source. We are experiencing some success in growing noninterest-bearing accounts, though this growth is not at the pace we would like. We are focused on growing these accounts."

Operating Results

Second Quarter 2019 compared to First Quarter 2019

  • Income before income taxes for the second quarter of 2019 was $2.1 million compared to $1.8 million for the first quarter of 2019.
  • Interest income for the three months ended June 30, 2019 was $12.3 million, on average interest-earning assets of $1.04 billion, compared to $12.3 million, on average interest-earning assets of $1.02 billion, for the three months ended March 31, 2019. Interest income in the second quarter of 2019 included accretion of acquired loan discounts of $197 thousand, while interest income in the first quarter of 2019 included $439 thousand of accretion of acquired loan discounts. Higher accretion in the first quarter of 2019 was primarily attributable to early payoffs of loans acquired in the Merger. Yields on average interest-earning assets were 4.77% and 4.90% for the linked quarter periods, including the effect of accretion. Of the decline in yield from the first quarter to the second quarter of 2019, 11 basis points were attributable to lower accretion of acquired loan discounts of $242 thousand.
  • Interest expense was $3.8 million and $3.7 million for the three months ended June 30, 2019 and March 31, 2019, respectively, and cost of funds was 1.58% and 1.54% for the linked quarter periods. Average interest-bearing liabilities were $857.4 million and $853.6 million for the second and first quarters of 2019, respectively.
  • Net interest margin ("NIM") was 3.29% for the second quarter of 2019 compared to 3.45% for the first quarter of 2019. Of the decline in NIM from the first quarter to the second quarter of 2019, 9 basis points were attributable to lower accretion of acquired loan discounts, while the remaining decline was primarily due to higher cost of funds.
  • Provision for loan losses was $62 thousand in the second quarter of 2019, while provision for loan losses in the first quarter of 2019 was $314 thousand. Provision for loan losses in the second quarter of 2019 was primarily attributable to adjustments to certain qualitative loan loss factors to adjust for the change in the composition of the company's loan portfolio. Provision for loan losses in the first quarter of 2019 was primarily attributable to gross loan growth of $16.5 million.
  • Noninterest income for the three months ended June 30, 2019 and March 31, 2019 was $1.3 million and $1.1 million, respectively. Greater noninterest income in the second quarter of 2019 compared to the first quarter of 2019 was primarily due to higher secondary market mortgage sales and servicing income, which increased $196 thousand, as the company sold a greater volume of originated loans and due to general seasonality in the mortgage banking business.
  • Noninterest expenses for the three months ended June 30, 2019 and March 31, 2019 were $7.6 million and $7.6 million, respectively. Noninterest expenses for the second quarter of 2019 included a net loss on the sale and valuation of other real estate owned of $72 thousand, while the first quarter of 2019 included a $6 thousand net gain on the sale and valuation of other real estate owned. The company's efficiency ratio for the second quarter of 2019 was 77.7% compared to 78.1% for the first quarter of 2019.
  • Income tax expense for the second quarter of 2019 was $395 thousand, reflective of an 18.6% effective income tax rate, while income tax expense for the first quarter of 2019 was $337 thousand, reflective of an 18.4% effective income tax rate.

First Half 2019 compared to First Half 2018

  • Income before income taxes for the first half of 2019 was $3.9 million compared to $2.5 million for the first half of 2018.
  • Interest income for the six months ended June 30, 2019 was $24.7 million, on average interest-earning assets of $1.03 billion, compared to $21.2 million for the six months ended June 30, 2018, on average interest-earning assets of $909.0 million. Interest income in the first half of 2019 included accretion of acquired loan discounts of $636 thousand, while interest income in the first half of 2018 included $1.1 million of accretion of acquired loan discounts. Yields on average interest-earning assets were 4.83% and 4.68% for the first half of 2019 and 2018, respectively. The higher yield on average interest-earning assets in the 2019 period was primarily due to higher loan yields, partially offset by lower accretion of acquired loan discounts of $414 thousand, which had a negative 11 basis point effect.
  • Interest expense was $7.5 million and $4.4 million for the six months ended June 30, 2019 and 2018, respectively, and cost of funds was of 1.56% and 0.98% for the respective periods. Higher cost of funds in the first half of 2019 was primarily due to competition for deposits in the company's markets, the repricing of maturing time deposits, and higher interest rates in general. Average interest-bearing liabilities were $855.5 million and $747.7 million for the first half of 2019 and 2018, respectively.
  • NIM was 3.37% for the first half of 2019 compared to 3.75% for the first half of 2018. Lower NIM in the 2019 period was primarily due to higher cost of funds and lower accretion of acquired loan discounts, which had a negative 23 basis point effect, partially offset by higher loan yields.
  • Provision for loan losses was $376 thousand for the first half of 2019, primarily attributable to gross loan growth of $15.3 million. Provision for loan losses in the first half of 2018 was a recovery of $28 thousand, which included a $580 thousand benefit to correct for an overstatement in the company's allowance for loan losses as of December 31, 2017, as previously reported, and the decline in reserve levels for a select portfolio of purchased consumer loans.
  • Noninterest income for the six months ended June 30, 2019 and 2018 was $2.4 million and $2.3 million, respectively. The 2018 period included a gain of $352 thousand on the curtailment of the company's post-retirement benefit plan.
  • Noninterest expenses for the six months ended June 30, 2019 and 2018 were $15.2 million and $16.7 million, respectively. Merger-related expenses were $0 and $363 thousand for the six months ended June 30, 2019 and 2018, respectively. Expenses associated with the succession of the company's CFO and in the completion of the company's 2017 year-end reporting incurred in the first half of 2018 were approximately $1.2 million.
  • Income tax expense for the second half of 2019 was $732 thousand, reflective of an 18.6% effective income tax rate, while income tax expense for the second half of 2018 was $447 thousand, reflective of an 17.8% effective income tax rate.

Second Quarter 2019 compared to Second Quarter 2018

  • Income before income taxes for the second quarter of 2019 was $2.1 million compared to $1.1 million for the second quarter of 2018.
  • Interest income for the three months ended June 30, 2019 was $12.3 million, on average interest-earning assets of $1.04 billion, compared to $10.5 million, on average interest-earning assets of $913.5 million, for the three months ended June 30, 2018. Interest income in the second quarter of 2019 included accretion of acquired loan discounts of $197 thousand, while interest income in the second quarter of 2018 included $547 thousand of accretion of acquired loan discounts and negative adjustments totaling $145 thousand for amounts incorrectly reported in the first quarter of 2018, as previously reported. Yields on average interest-earning assets were 4.77% and 4.61% for the second quarters of 2019 and 2018, respectively. Higher loan yields in the 2019 period were partially offset by lower accretion of acquired loan discounts.
  • Interest expense was $3.8 million and $2.3 million for the three months ended June 30, 2019 and 2018, respectively, and cost of funds was 1.58% and 1.08%, for the respective periods. Higher costs of funds 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 $857.4 million and $747.2 million for the second quarters of 2019 and 2018, respectively.
  • NIM was 3.29% for the second quarter of 2019 compared to 3.60% for the second quarter of 2018. The decline in NIM was primarily attributable to higher cost of funds and lower accretion of acquired loan discounts, partially offset by higher loan yields in the 2019 period.
  • Provision for loan losses was $62 thousand for the three months ended June 30, 2019, primarily attributable to adjustments to certain qualitative loan loss factors, as noted above. Provision for loan losses for the three months ended June 30, 2018 was a recovery of $348 thousand, primarily attributable to a $580 thousand benefit to correct for an overstatement in the company's allowance for loan losses as of December 31, 2017, as noted above.
  • Noninterest income for the three months ended June 30, 2019 and 2018 was $1.3 million and $1.2 million, respectively. The increase of $132 thousand was primarily attributable to higher service charges and fees on deposit accounts and a gain on rabbi trust assets of $40 thousand in the second quarter of 2019 compared to a loss of $25 thousand in the 2018 period.
  • Noninterest expenses for the three months ended June 30, 2019 and 2018 were $7.6 million and $8.6 million, respectively. Noninterest expenses associated with the succession of the company's CFO was approximately $200 thousand in the second quarter of 2018. Higher consulting and audit and accounting fees in the 2018 period were primarily related to projects, such as the implementation of an enterprise risk management platform and a Sarbanes-Oxley readiness assessment. The company's efficiency ratio for the second quarter of 2019 was 77.7% compared to 91.5% for the same quarter of 2018.
  • Income tax expense for the second quarter of 2019 and 2018 was $395 thousand and $197 thousand, respectively, reflective of an 18.6% and 17.2% effective income tax rate, respectively.

Balance Sheet

  • Total assets were $1.1 billion at June 30, 2019 and at December 31, 2018.
  • Loans, net of allowance for loan losses, were $909.9 million at June 30, 2019 compared to $894.2 million at December 31, 2018, an annualized growth rate of over 3%. Excluding the payoff of approximately $19.5 million in the first half of 2019 of purchased portfolio loans, including those acquired in the Merger, loan growth, annualized, was approximately 8% for the first half of 2019.
  • Deposits were $875.6 million at June 30, 2019 compared to $842.2 million at December 31, 2018. Noninterest-bearing demand accounts comprised 13.3% of total deposits at June 30, 2019, down slightly from 13.6% at December 31, 2018.
  • Shareholders' equity was $122.6 million and $117.5 million at June 30, 2019 and December 31, 2018, respectively, an increase of $5.1 million. The increase in shareholders' equity in the first half of 2019 was primarily attributable to net income of $3.2 million and $1.4 million of unrealized gains on the company's available-for-sale securities portfolio. 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 $8.311 and $7.981 at June 30, 2019 and December 31, 2018, respectively. Capital ratios for Virginia Commonwealth Bank were above regulatory minimum guidelines for well-capitalized banks as of June 30, 2019 and December 31, 2018.
  • Annualized return on average assets for the quarters ended June 30, 2019, March 31, 2019, and June 30, 2018 was 0.62%, 0.55%, and 0.38%, respectively, while annualized return on average equity for the same periods was 5.72%, 5.05%, and 3.28%, respectively.

Asset Quality

  • Nonperforming assets were $7.7 million, or 0.71% of total assets, as of June 30, 2019, compared to $8.8 million, or 0.81% of total assets, as of December 31, 2018, and $7.0 million, or 0.71% of total assets, as of June 30, 2018.
  • The ratio of allowance for loan losses to total gross loans was 0.82%, 0.88%, and 0.89% at June 30, 2019, December 31, 2018, and June 30, 2018, respectively. The company's allowance for loan losses does not include discounts recorded on loans acquired in the Merger, which were $3.3 million, $3.9 million, and $4.7 million as of June 30, 2019, December 31, 2018, and June 30, 2018, respectively.

Outlook

Greene concluded: "Our loan pipeline continues to be strong and we expect to selectively grow loans in the second half of the year.  We will continue our strategy of emphasizing residential loan originations that can be sold in the secondary market and adding residential loans to our portfolio that have favorable yields. Deposit costs are being strategically lowered, which we expect will provide support to our net interest margin in the coming quarters."

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











(unaudited)






(Dollars in thousands, except share data)


June 30, 2019



December 31, 2018 (1)


ASSETS









Cash and due from banks


$

8,139



$

7,685


Interest-earning deposits



15,869




18,891


Federal funds sold



596




625


Certificates of deposit



3,498




3,746


Available-for-sale securities, at fair value



81,169




82,232


Restricted securities



6,769




7,600


Loans receivable, net of allowance for loan losses of $7,479 and
     $7,902, respectively



909,913




894,191


Loans held for sale



593




368


Premises and equipment, net



21,001




18,169


Accrued interest receivable



3,191




3,172


Other real estate owned, net



3,168




3,597


Bank owned life insurance



19,511




19,270


Goodwill



10,374




10,374


Mortgage servicing rights



916




977


Core deposit intangible



1,840




2,193


Deferred tax asset, net



1,128




1,510


Other assets



6,585




5,927


Total assets


$

1,094,260



$

1,080,617











LIABILITIES









Noninterest-bearing demand deposits


$

116,229



$

114,122


Savings and interest-bearing demand deposits



374,175




359,400


Time deposits



385,218




368,670


Total deposits



875,622




842,192











Securities sold under repurchase agreements



6,983




6,089


Federal Home Loan Bank advances



70,000




100,000


Subordinated notes, net of unamortized issuance costs



6,902




6,893


Other liabilities



12,136




7,967


Total liabilities



971,643




963,141











SHAREHOLDERS' EQUITY









Common stock ($5 par value; authorized - 30,000,000 shares;
     
outstanding - 13,332,484 and 13,201,682 shares, respectively) (2)



66,662




66,008


Additional paid-in capital



36,699




36,972


Unearned employee stock ownership plan shares



(1,668)




(1,734)


Retained earnings



20,817




17,557


Accumulated other comprehensive income (loss), net



107




(1,327)


Total shareholders' equity



122,617




117,476


Total liabilities and shareholders' equity


$

1,094,260



$

1,080,617




(1)

Derived from audited December 31, 2018 Consolidated Financial Statements.

(2)

Preferred stock is authorized; however, none was outstanding as of June 30, 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)


June 30, 2019



March 31, 2019



June 30, 2018


INTEREST INCOME













Loans, including fees


$

11,458



$

11,461



$

9,745


Securities:













Taxable



577




595




497


Tax-exempt



97




118




117


Federal funds sold



18




7




5


Interest-earning deposit accounts



152




135




127


Certificates of deposit



19




20




17


Total interest income



12,321




12,336




10,508















INTEREST EXPENSE













Deposits



3,088




2,809




1,796


Securities sold under repurchase agreements



4




3




4


Subordinated notes and other borrowings



138




137




128


Federal Home Loan Bank advances



614




704




386


Total interest expense



3,844




3,653




2,314


Net interest income



8,477




8,683




8,194


Provision for (recovery of) loan losses



62




314




(348)


Net interest income after provision for loan losses



8,415




8,369




8,542















NONINTEREST INCOME













Income from fiduciary activities



206




214




198


Service charges and fees on deposit accounts



246




238




152


Wealth management



262




206




282


Interchange fees, net



121




101




124


Other service charges and fees



27




29




30


Secondary market sales and servicing



267




71




243


Increase in cash surrender value of bank owned life insurance



121




120




124


Net losses on sale of available-for-sale securities



(2)








Net losses on disposition of other assets



(1)




(1)





Gain (loss) on rabbi trust assets



40




90




(25)


Other



8




22




35


Total noninterest income



1,295




1,090




1,163















NONINTEREST EXPENSE













Salaries and employee benefits



3,892




4,001




4,273


Occupancy



837




868




874


Data processing



609




588




834


Bank franchise tax



230




216




177


Telecommunications and other technology



262




207




166


FDIC assessments



162




216




187


Foreclosed property



19




43




53


Consulting



147




115




341


Advertising and marketing



109




67




153


Directors' fees



213




164




68


Audit and accounting



189




204




240


Legal



27




83




119


Core deposit intangible amortization



173




180




203


Net other real estate owned losses (gains)



72




(6)




84


Other



651




684




790


Total noninterest expense



7,592




7,630




8,562


Income before income taxes



2,118




1,829




1,143


Income tax expense



395




337




197


Net income


$

1,723



$

1,492



$

946


Basic and diluted earnings per share


$

0.13



$

0.11



$

0.07


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued

CONSOLIDATED STATEMENTS OF OPERATIONS







For the Six Months Ended


(Dollars in thousands, except per share data)


June 30, 2019



June 30, 2018


INTEREST INCOME









Loans, including fees


$

22,919



$

19,729


Securities:









Taxable



1,172




894


Tax-exempt



214




237


Federal funds sold



25




11


Interest-earning deposit accounts



287




293


Certificates of deposit



39




36


Total interest income



24,656




21,200











INTEREST EXPENSE









Deposits



5,896




3,400


Securities sold under repurchase agreements



7




7


Subordinated notes



275




256


Federal Home Loan Bank advances



1,319




699


Total interest expense



7,497




4,362


Net interest income



17,159




16,838


Provision for (recovery of) loan losses



376




(28)


Net interest income after provision for loan losses



16,783




16,866











NONINTEREST INCOME









Income from fiduciary activities



420




445


Service charges and fees on deposit accounts



484




287


Wealth management



469




414


Interchange fees, net



222




116


Other service charges and fees



56




61


Secondary market sales and servicing



339




376


Increase in cash surrender value of bank owned life insurance



240




251


Net losses on sale of available-for-sale securities



(2)





Net losses on disposition of other assets



(1)




(69)


Gain on rabbi trust assets



130




27


Gain on curtailment of post-retirement benefit plan






352


Other



28




74


Total noninterest income



2,385




2,334











NONINTEREST EXPENSE









Salaries and employee benefits



7,893




8,379


Occupancy



1,705




1,659


Data processing



1,197




1,306


Bank franchise tax



446




353


Telecommunications and other technology



469




362


FDIC assessments



378




370


Foreclosed property



62




65


Consulting



262




723


Advertising and marketing



176




221


Directors' fees



377




236


Audit and accounting



393




603


Legal



110




249


Merger-related






363


Core deposit intangible amortization



353




414


Net other real estate owned losses (gains)



66




(57)


Other



1,335




1,437


Total noninterest expense



15,222




16,683


Income before income taxes



3,946




2,517


Income tax expense



732




447


Net income


$

3,214



$

2,070


Basic and diluted earnings per share


$

0.25



$

0.16


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued























As of and for the Six




As of and for the Three Months Ended



Months Ended




June 30,



March 31,



December 31,



September 30,



June 30,



June 30,



June 30,


(Dollars in thousands, except per share amounts)


2019



2019



2018



2018



2018



2019



2018


Select Consolidated Balance Sheet Data





























Total assets


$

1,094,260



$

1,103,840



$

1,080,617



$

1,027,440



$

983,216










Cash, interest-earning deposits and federal funds sold



27,506




30,677




28,061




22,713




38,526










Available-for-sale securities, at fair value



81,169




82,030




82,232




81,215




74,322










Loans:





























Mortgage loans on real estate



713,247




725,494




713,997




682,321




644,202










Commercial and industrial



187,531




173,360




164,608




144,118




124,563










Consumer



16,889




20,095




23,740




27,920




32,767










Loans receivable



917,667




918,949




902,345




854,359




801,532










Unamortized net deferred loan (fees) costs



(275)




(329)




(252)




(79)




24










Allowance for loan losses (ALL)



(7,479)




(7,858)




(7,902)




(7,287)




(7,113)










Net loans



909,913




910,762




894,191




846,993




794,443










Loans held for sale



593







368







669










Other real estate owned, net



3,168




3,718




3,597




3,663




3,501







































Total liabilities


$

971,643



$

983,903



$

963,141



$

910,893



$

867,492










Deposits:





























Noninterest-bearing demand deposits



116,229




112,315




114,122




108,602




108,943










Savings and interest-bearing demand deposits



374,175




371,587




359,400




330,690




296,206










Time deposits



385,218




372,751




368,670




369,836




369,917










Total deposits



875,622




856,653




842,192




809,128




775,066










Securities sold under repurchase agreements



6,983




7,220




6,089




6,083




7,008










Federal Home Loan Bank advances



70,000




100,000




100,000




80,000




70,000










Subordinated notes, net of unamortized issuance costs



6,902




6,897




6,893




6,889




6,885







































Shareholders' equity



122,617




119,937




117,476




116,547




115,724







































Condensed Consolidated Statements of Operations


Interest income


$

12,321



$

12,336



$

11,735



$

10,870



$

10,508



$

24,656



$

21,200


Interest expense



3,844




3,653




3,264




2,599




2,314




7,497




4,362


Net interest income



8,477




8,683




8,471




8,271




8,194




17,159




16,838


Provision for (recovery of) loan losses



62




314




870




509




(348)




376




(28)


Noninterest income



1,295




1,090




1,004




994




1,163




2,385




2,334


Noninterest expense



7,592




7,630




7,935




7,532




8,562




15,222




16,683


Income before income taxes



2,118




1,829




670




1,224




1,143




3,946




2,517


Income tax expense (benefit)



395




337




(112)




198




197




732




447


Net income


$

1,723



$

1,492



$

782



$

1,026



$

946



$

3,214



$

2,070


 

 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued















































As of and for the Six




As of and for the Three Months Ended



Months Ended




June 30



March 31,



December 31,



September 30,



June 30,



June 30



June 30,


(Dollars in thousands, except per share amounts)


2019



2019



2018



2018



2018



2019



2018


Basic earnings per share


$

0.13



$

0.11



$

0.06



$

0.08



$

0.07



$

0.25



$

0.16


Diluted earnings per share



0.13




0.11




0.06




0.08




0.07




0.25




0.16


Book value per share



9.20




9.01




8.90




8.80




8.75










Tangible book value per share (1)



8.31




8.11




7.98




7.88




7.81










Shares outstanding at end of period



13,332,484




13,313,537




13,201,682




13,238,716




13,226,096




13,332,484




13,226,096


Weighted average shares outstanding, basic



13,059,824




13,001,182




13,050,791




13,080,372




13,059,604




13,030,528




13,049,142


Weighted average shares outstanding, diluted



13,104,943




13,037,149




13,099,707




13,142,549




13,126,419




13,070,804




13,121,647































Performance Measures and Other Metrics (tax-equivalent basis):





























Yield on average interest-earning assets



4.77

%



4.90

%



4.72

%



4.66

%



4.61

%



4.83

%



4.68

%

Accretion of discounts on acquired loans


$

197



$

439



$

352



$

357



$

547



$

636



$

1,050


Cost of funds



1.58

%



1.54

%



1.40

%



1.19

%



1.08

%



1.56

%



0.98

%

Cost of deposits



1.42

%



1.34

%



1.22

%



1.03

%



0.93

%



1.38

%



0.89

%

Net interest spread



2.97

%



3.16

%



3.14

%



3.30

%



3.37

%



3.06

%



3.45

%

Net interest margin (NIM)



3.29

%



3.45

%



3.41

%



3.57

%



3.60

%



3.37

%



3.75

%

Average interest-earnings assets to total average assets



93.9

%



94.1

%



93.8

%



93.5

%



92.4

%



94.0

%



93.4

%

Return on average assets (annualized)



0.62

%



0.55

%



0.30

%



0.41

%



0.38

%



0.59

%



0.43

%

Operating return on average assets (annualized) (1)



0.62

%



0.55

%



0.44

%



0.41

%



0.38

%



0.59

%



0.48

%

Return on average equity (annualized)



5.72

%



5.05

%



2.69

%



3.55

%



3.28

%



5.39

%



3.63

%

Merger-related expense


$



$



$



$



$



$



$

363


Efficiency ratio



77.7

%



78.1

%



83.7

%



81.3

%



91.5

%



77.9

%



87.0

%

Operating efficiency ratio (1)



77.7

%



78.1

%



78.6

%



81.3

%



91.5

%



77.9

%



85.1

%

Average assets


$

1,105,411




1,088,180




1,055,144




994,209




988,946




1,096,908




973,543


Average interest-earning assets



1,037,527




1,024,058




989,327




929,111




913,486




1,030,829




909,018


Average interest-bearing liabilities



857,355




853,611




817,225




761,986




747,227




855,493




747,704


Average shareholders' equity



120,559




118,099




116,291




115,454




115,321




119,336




113,981


Shareholders' equity to total assets ratio



11.2

%



10.9

%



10.9

%



11.3

%



11.8

%









Tangible shareholders' equity to tangible total assets (1)



10.2

%



9.9

%



9.9

%



10.3

%



10.6

%






































Asset Quality Data and Ratios:





























Nonaccrual loans


$

4,577



$

5,384



$

5,206



$

4,204



$

3,474










Other real estate owned, net



3,168




3,718




3,597




3,663




3,501










Total nonperforming assets



7,745




9,102




8,803




7,867




6,975










Net charge-offs



441




358




255




335




462




799




629


Net charge-offs to average loans (annualized)



0.19

%



0.16

%



0.12

%



0.17

%



0.23

%



0.18

%



0.16

%

Total nonperforming assets to total assets



0.71

%



0.82

%



0.81

%



0.77

%



0.71

%









Gross loans to total assets



83.8

%



83.2

%



83.5

%



83.2

%



81.5

%









ALL to gross loans



0.82

%



0.86

%



0.88

%



0.85

%



0.89

%









Discounts on acquired loans


$

3,265



$

3,464



$

3,922



$

4,280



$

4,655












(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 Six




As of and for the Three Months Ended



Months Ended




June 30,



March 31,



December 31,



September 30,



June 30,



June 30,



June 30,


(Dollars in thousands, except per share amounts)


2019



2019



2018



2018



2018



2019



2018


Reconciliation of Non-GAAP Financial Measures (1)





























Tangible book value per share





























Total shareholders' equity


$

122,617



$

119,937



$

117,476



$

116,547



$

115,724










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



11,828




11,964




12,106




12,255




12,409










Tangible shareholders' equity


$

110,789



$

107,973



$

105,370



$

104,292



$

103,316










Shares outstanding at end of period



13,332,484




13,313,537




13,201,682




13,238,716




13,226,096










Tangible book value per share


$

8.31



$

8.11



$

7.98



$

7.88



$

7.81







































Tangible shareholders' equity to tangible assets





























Total assets


$

1,094,260



$

1,103,840



$

1,080,617



$

1,027,440



$

983,216










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



11,828




11,964




12,106




12,255




12,409










Tangible assets


$

1,082,432



$

1,091,876



$

1,068,511



$

1,015,185



$

970,807










Tangible shareholders' equity


$

110,789



$

107,973



$

105,370



$

104,292



$

103,316










Tangible shareholders' equity to tangible assets



10.2

%



9.9

%



9.9

%



10.3

%



10.6

%






































Select noninterest expenses, after-tax basis (ATB)





























Merger-related expenses


$



$



$



$



$



$



$

363


Merger-related expenses, ATB (b)














$



$




287































Early retirement program expenses


$



$



$

483



$



$



$



$


Early retirement program expenses, ATB (b)









382











































Operating return on average assets





























Net income


$

1,723



$

1,492



$

782



$

1,026



$

946



$

3,214



$

2,070


Add: Early retirement program expenses, ATB









382














Add: Merger-related expenses, ATB





















287


Operating net income


$

1,723



$

1,492



$

1,164



$

1,026



$

946



$

3,214



$

2,357


Average assets


$

1,105,411



$

1,088,180



$

1,055,144



$

994,209



$

988,946



$

1,096,908



$

973,543


Operating return on average assets



0.62

%



0.55

%



0.44

%



0.41

%



0.38

%



0.59

%



0.48

%






























Operating efficiency ratio





























Total noninterest expense


$

7,592



$

7,630



$

7,935



$

7,532



$

8,563



$

15,222



$

16,683


Less: Early retirement program expenses









483














Less: Merger-related expenses





















363


Operating noninterest expense



7,592




7,630




7,147




7,935




7,532




15,222




16,320


Net interest income



8,477




8,683




8,471




8,271




8,194




17,159




16,838


Noninterest income



1,295




1,090




1,004




994




1,164




2,385




2,334


Operating efficiency ratio



77.7

%



78.1

%



78.6

%



81.3

%



91.5

%



77.9

%



85.1

%



(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. 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 tangible book value per share and tangible shareholders' equity to tangible total assets ratios are meaningful because they are measures management uses to assess capital levels.  Management believes that 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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