Press Release

Bay Banks of Virginia, Inc. Reports Third Quarter and Year-to-date 2019 Results

Company Release - 10/29/2019 4:30 PM ET

RICHMOND, Va., Oct. 29, 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 nine months ended September 30, 2019.

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

The company reported net income of $1.8 million, or $0.14 per diluted share, for the third quarter of 2019 compared to $1.7 million, or $0.13 per diluted share, for the second quarter of 2019 and $1.0 million, or $0.08 per diluted share, for the third quarter of 2018. For the first nine months of 2019, the company reported net income of $5.1 million, or $0.39 per diluted share, compared to $3.1 million, or $0.24 per diluted share, for the first nine months of 2018. Net income in the first nine months 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. On a pre-tax, pre-loan loss provision basis, income increased $600 thousand1 when comparing the third quarter to the second quarter of 2019 and $1.1 million1 when comparing the third quarter of 2019 to the third quarter of 2018. In the third quarter of 2019, we continued to realize the benefit of stronger loan yields, though recent index rate declines are resulting in downward pressure on yields.

"As noted last quarter, deposit costs in our markets are stabilizing. We began to lower deposit costs late in the second quarter, and due to this and lower rates on alternative funding sources, I am pleased to report declining funding costs on a sequential quarter basis. In addition, we are experiencing some success in growing noninterest-bearing accounts, though this growth is occurring at a slower pace than we would like. We've had many wins, though it takes time for these accounts to fund."

Operating Results

Third Quarter 2019 compared to Second Quarter 2019

  • Income before income taxes for the third quarter of 2019 was $2.3 million compared to $2.1 million for the second quarter of 2019.
  • Interest income for the three months ended September 30, 2019 was $12.8 million, on average interest-earning assets of $1.04 billion, compared to $12.3 million, on average interest-earning assets of $1.04 billion, for the three months ended June 30, 2019. Interest income in the third quarter of 2019 included accretion of acquired loan discounts of $357 thousand, while interest income in the second quarter of 2019 included $197 thousand of accretion of acquired loan discounts. Higher accretion in the third quarter of 2019 was primarily attributable to early payoffs of loans acquired in the Merger. Yields on average interest-earning assets were 4.87% and 4.77% for the sequential quarter periods, including the effect of accretion. Of the increase in yield from the second quarter to the third quarter of 2019, 6 basis points were attributable to higher accretion of acquired loan discounts of $160 thousand.
  • Interest expense was $3.7 million and $3.8 million for the three months ended September 30, 2019 and June 30, 2019, respectively, and cost of funds was 1.52% and 1.58% for the sequential quarter periods. Average interest-bearing liabilities were $851.4 million and $857.4 million for the third and second quarters of 2019, respectively.
  • Net interest margin ("NIM") was 3.45% for the third quarter of 2019 compared to 3.29% for the second quarter of 2019. Of the increase in NIM from the second quarter to the third quarter of 2019, 6 basis points were attributable to higher accretion of acquired loan discounts in the third quarter of 2019.
  • Provision for loan losses was $495 thousand in the third quarter of 2019, while provision for loan losses in the second quarter of 2019 was $62 thousand. Higher provision for loan losses in the third quarter of 2019 was primarily attributable to net charge-offs from a select portfolio of purchased consumer loans, a specific reserve for a commercial and industrial loan, and gross loan growth of $14.4 million.
  • Noninterest income for the three months ended September 30, 2019 and June 30, 2019 was $1.2 million and $1.3 million, respectively. Lower noninterest income in the third quarter of 2019 compared to the second quarter of 2019 was primarily due to lower wealth management revenue, which decreased $77 thousand on a sequential quarter basis.
  • Noninterest expense for the three months ended September 30, 2019 and June 30, 2019 was $7.4 million and $7.6 million, respectively. Noninterest expense for the third quarter of 2019 included the benefit of a small bank assessment credit from the Federal Deposit Insurance Corporation ("FDIC") of $171 thousand and a decrease in salaries and employee benefits expense, partially offset by a net loss on the sale and valuation of other real estate owned of $375 thousand. The company's efficiency ratio for the third quarter of 2019 was 72.8% compared to 77.7% for the second quarter of 2019.
  • Income tax expense for the third quarter of 2019 was $448 thousand, reflective of a 19.6% effective income tax rate, while income tax expense for the second quarter of 2019 was $395 thousand, reflective of an 18.7% effective income tax rate.

Nine Months Ended September 30, 2019 compared to Nine Months Ended September 30, 2018

  • Income before income taxes for the nine months ended September 30, 2019 was $6.2 million compared to $3.7 million for the first nine months of 2018.
  • Interest income for the nine months ended September 30, 2019 was $37.4 million, on average interest-earning assets of $1.04 billion, compared to $32.1 million for the nine months ended September 30, 2018, on average interest-earning assets of $916.2 million. Interest income in the nine months ended September 30, 2019 included accretion of acquired loan discounts of $993 thousand, while interest income in the nine months ended September 30, 2018 included $1.4 million of accretion of acquired loan discounts. Yields on average interest-earning assets were 4.85% and 4.69% for the first nine months 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 $407 thousand, which had a negative 5 basis point effect.
  • Interest expense was $11.2 million and $7.0 million for the nine months ended September 30, 2019 and 2018, respectively, and cost of funds was of 1.55% and 1.08% for the respective periods. Higher cost of funds in the nine months ended September 30, 2019 was primarily due to competition for deposits in the company's markets, the repricing of maturing time deposits, greater use and cost of Federal Home Loan Bank of Atlanta advances, and higher interest rates in general. Average interest-bearing liabilities were $854.1 million and $752.5 million for the nine months ended September 30, 2019 and 2018, respectively.
  • NIM was 3.39% for the nine months ended September 30, 2019 compared to 3.67% for the nine months ended September 30, 2018. Lower NIM in the 2019 period was primarily due to higher cost of funds and lower accretion of acquired loan discounts, partially offset by higher loan yields. Lower accretion of acquired loan discounts had a negative 6 basis point effect on NIM in the 2019 period compared to the 2018 period.
  • Provision for loan losses was $871 thousand for the nine months ended September 30, 2019, primarily attributable to net charge-offs and additions to the specific reserve in the third quarter of 2019, noted previously, and gross loan growth of $29.7 million. Provision for loan losses in the nine months ended September 30, 2018 was $481 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.
  • Noninterest income for the nine months ended September 30, 2019 and 2018 was $3.6 million and $3.3 million, respectively. The 2018 period included a gain of $352 thousand on the curtailment of the company's post-retirement benefit plan.
  • Noninterest expense for the nine months ended September 30, 2019 and 2018 was $22.7 million and $24.2 million, 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. Merger-related expenses were $0 and $363 thousand for the nine months ended September 30, 2019 and 2018, respectively.
  • Income tax expense for the nine months ended September 30, 2019 was $1.2 million, reflective of an 18.9% effective income tax rate, while income tax expense for the nine months ended September 30, 2018 was $645 thousand, reflective of a 17.2% effective income tax rate.

Third Quarter 2019 compared to Third Quarter 2018

  • Income before income taxes for the third quarter of 2019 was $2.3 million compared to $1.2 million for the third quarter of 2018.
  • Interest income for the three months ended September 30, 2019 was $12.8 million, on average interest-earning assets of $1.04 billion, compared to $10.9 million, on average interest-earning assets of $929.1 million, for the three months ended September 30, 2018. Interest income in the third quarter of 2019 and 2018 included accretion of acquired loan discounts of $357 thousand. Yields on average interest-earning assets were 4.87% and 4.66% for the third quarters of 2019 and 2018, respectively. The increase in yield on average interest-earning assets was primarily attributable to higher loan yields in the 2019 period.  
  • Interest expense was $3.7 million and $2.6 million for the three months ended September 30, 2019 and 2018, respectively, and cost of funds was 1.52% and 1.19%, for the respective periods. Higher costs of funds in the 2019 period was primarily due to higher cost of deposits of 1.40% in the 2019 period compared to 1.02% in the 2018 period due to the reasons noted above. Average interest-bearing liabilities were $851.4 million and $762.0 million for the third quarters of 2019 and 2018, respectively.
  • NIM was 3.45% for the third quarter of 2019 compared to 3.57% for the third quarter of 2018. The decline in NIM was primarily attributable to higher cost of deposits, partially offset by higher loan yields in the 2019 period.
  • Provision for loan losses was $495 thousand for the three months ended September 30, 2019, primarily attributable to net charge-offs from a select portfolio of purchased consumer loans, a specific reserve for a commercial and industrial loan, and gross loan growth of $14.4 million in the third quarter of 2019. Provision for loan losses for the three months ended September 30, 2018 was $509 thousand, primarily attributable to gross loan growth of $52.7 million.
  • Noninterest income for the three months ended September 30, 2019 and 2018 was $1.2 million and $996 thousand, respectively. The increase of $204 thousand quarter over quarter was primarily attributable to higher secondary market sales and servicing income, as the company sold a greater volume of mortgages originated in the 2019 period.
  • Noninterest expense for the three months ended September 30, 2019 and 2018 was $7.4 million and $7.5 million, respectively. In the third quarter of 2019, the company received a small bank assessment credit of $171 thousand from the FDIC, as noted previously. Higher consulting, legal, and audit and accounting fees in the 2018 period were primarily related to projects, such as the implementation of an enterprise risk management platform, legal services related to the company's employment benefit plans, and a Sarbanes-Oxley readiness assessment. Additionally, in the third quarter of 2019, the company reported a $375 thousand net loss on the sale and valuation of other real estate owned, while a net gain of $112 thousand was reported in the 2018 period. The company's efficiency ratio for the third quarter of 2019 was 72.8% compared to 81.3% for the same quarter of 2018.
  • Income tax expense for the third quarter of 2019 and 2018 was $448 thousand and $198 thousand, respectively, reflective of a 19.6% and 16.2% effective income tax rate, respectively.

Balance Sheet

  • Total assets were $1.11 billion and $1.08 billion at September 30, 2019 and December 31, 2018, respectively.
  • Loans, net of allowance for loan losses, were $924.3 million at September 30, 2019 compared to $894.2 million at December 31, 2018, an annualized growth rate of over 4%. Excluding the payoff of approximately $31.8 million in the first nine months of 2019 of purchased portfolio loans, including those acquired in the Merger, loan growth, annualized, was approximately 9% for the first nine months of 2019.
  • Deposits were $893.7 million at September 30, 2019 compared to $842.2 million at December 31, 2018. Noninterest-bearing demand accounts comprised 14.0% of total deposits at September 30, 2019, up 40 basis points from 13.6% at December 31, 2018.
  • Shareholders' equity was $124.9 million and $117.5 million at September 30, 2019 and December 31, 2018, respectively, an increase of $7.4 million. The increase in shareholders' equity in the first nine months of 2019 was primarily attributable to net income of $5.1 million and $1.7 million of net 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 $8.491 and $7.981 at September 30, 2019 and December 31, 2018, respectively. Capital ratios for Virginia Commonwealth Bank were above regulatory minimum guidelines for well-capitalized banks as of September 30, 2019 and December 31, 2018.
  • Annualized return on average assets for the quarters ended September 30, 2019, June 30, 2019, and September 30, 2018 was 0.66%, 0.62%, and 0.41%, respectively, while annualized return on average equity for the same periods was 5.97%, 5.72%, and 3.55%, respectively.  

Asset Quality

  • Nonperforming assets were $9.4 million, or 0.84% of total assets, as of September 30, 2019, compared to $7.7 million, or 0.71% of total assets, as of June 30, 2019, and $8.8 million, or 0.81% of total assets, as of December 31, 2018. The increase in nonperforming assets as of September 30, 2019 was primarily attributable to a commercial and industrial loan participation to a professional service firm being classified as substandard and placed on nonaccrual during the third quarter of 2019. During the third quarter of 2019, the borrower announced its plan to liquidate and subsequently filed for Chapter 7 bankruptcy. The outstanding balance of the loan as of September 30, 2019 was $2.7 million. As of June 30, 2019, the outstanding balance of the loan was $5.9 million and was classified as special mention. This increase in nonperforming assets in the third quarter of 2019 was partially offset by a $990 thousand reduction of other real estate owned, net, as the company continues to reduce its foreclosed properties portfolio.
  • The ratio of allowance for loan losses to total gross loans was 0.80%, 0.82%, and 0.88% at September 30, 2019, June 30, 2019, and December 31, 2018, respectively. The company's allowance for loan losses does not include discounts recorded on loans acquired in the Merger, which were $2.9 million, $3.3 million, and $3.9 million as of September 30, 2019, June 30, 2019, and December 31, 2018, respectively.

Outlook

Greene concluded: "Our loan pipeline continues to be strong; however, the lower rate environment is resulting in some competitors offering terms with which we will not compete. Additionally, we anticipate accelerated pay-offs in this down-rate environment. We will continue our strategy of funding the highest yielding loans and emphasizing residential loan originations that can be sold in the secondary market. We will continue to walk-down deposit costs, which I expect will provide some support to our net interest margin.

"I continue to believe we are operating in two of Virginia's strongest markets and that these markets will perform well during most market conditions. Our recent $25 million subordinated notes offering provides us with adequate capital to continue our growth strategy, funding to possibly call our existing subordinated notes, and the ability to weather any unforeseen negative market conditions. Finally, our board of directors recently approved a share repurchase program, which we will utilize as market opportunities arise."

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 loan production office, located throughout the greater Richmond region, the Northern Neck region, Middlesex County, and the Hampton Roads region, 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)


September 30, 2019



December 31, 2018 (1)


ASSETS









Cash and due from banks


$

7,419



$

7,685


Interest-earning deposits



23,894




18,981


Federal funds sold



92




625


Certificates of deposit



3,498




3,746


Available-for-sale securities, at fair value



80,748




82,232


Restricted securities



6,684




7,600


Loans receivable, net of allowance for loan losses of $7,495 and

   $7,902, respectively



924,268




894,191


Loans held for sale



268




368


Premises and equipment, net



20,532




18,169


Accrued interest receivable



3,104




3,172


Other real estate owned, net



2,178




3,597


Bank owned life insurance



19,632




19,270


Goodwill



10,374




10,374


Mortgage servicing rights



910




977


Core deposit intangible



1,675




2,193


Deferred tax asset, net



740




1,510


Other assets



6,203




5,927


Total assets


$

1,112,219



$

1,080,617











LIABILITIES









Noninterest-bearing demand deposits


$

124,670



$

114,122


Savings and interest-bearing demand deposits



372,404




359,400


Time deposits



396,614




368,670


Total deposits



893,688




842,192











Securities sold under repurchase agreements



6,323




6,089


Federal Home Loan Bank advances



68,000




100,000


Subordinated notes, net of unamortized issuance costs



6,906




6,893


Other liabilities



12,445




7,967


Total liabilities



987,362




963,141











SHAREHOLDERS' EQUITY









Common stock ($5 par value; authorized - 30,000,000 shares;

   outstanding - 13,334,302 and 13,201,682 shares, respectively) (2)



66,671




66,008


Additional paid-in capital



36,781




36,972


Unearned employee stock ownership plan shares



(1,593)




(1,734)


Retained earnings



22,658




17,557


Accumulated other comprehensive income (loss), net



340




(1,327)


Total shareholders' equity



124,857




117,476


Total liabilities and shareholders' equity


$

1,112,219



$

1,080,617


 

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

(2) Preferred stock is authorized; however, none was outstanding as of September 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)


September 30, 2019



June 30, 2019



September 30, 2018


INTEREST INCOME













Loans, including fees


$

11,930



$

11,458



$

10,124


Securities:













Taxable



553




577




498


Tax-exempt



113




97




119


Federal funds sold



6




18




3


Interest-earning deposit accounts



145




152




106


Certificates of deposit



18




19




18


Total interest income



12,765




12,321




10,868















INTEREST EXPENSE













Deposits



3,123




3,088




2,027


Securities sold under repurchase agreements



4




4




3


Subordinated notes and other borrowings



142




138




128


Federal Home Loan Bank advances



465




614




441


Total interest expense



3,734




3,844




2,599


Net interest income



9,031




8,477




8,269


Provision for loan losses



495




62




509


Net interest income after provision for loan losses



8,536




8,415




7,760















NONINTEREST INCOME













Income from fiduciary activities



201




206




151


Service charges and fees on deposit accounts



243




246




251


Wealth management



185




262




144


Interchange fees, net



108




121




105


Other service charges and fees



32




27




30


Secondary market sales and servicing



293




267




152


Increase in cash surrender value of bank owned life insurance



122




121




123


Net gains (losses) on sale of available-for-sale securities



1




(2)





Net (losses) gains on disposition of other assets






(1)




51


Gain on rabbi trust assets






40




5


Other



15




8




(16)


Total noninterest income



1,200




1,295




996















NONINTEREST EXPENSE













Salaries and employee benefits



3,666




3,892




4,022


Occupancy



805




837




948


Data processing



541




609




546


Bank franchise tax



209




230




178


Telecommunications and other technology



258




262




171


FDIC assessments



(7)




162




151


Foreclosed property



48




19




45


Consulting



156




147




214


Advertising and marketing



124




109




126


Directors' fees



148




213




146


Audit and accounting



193




189




236


Legal



20




27




123


Core deposit intangible amortization



164




173




196


Net other real estate owned losses (gains)



375




72




(112)


Other



747




651




542


Total noninterest expense



7,447




7,592




7,532


Income before income taxes



2,289




2,118




1,224


Income tax expense



448




395




198


Net income


$

1,841



$

1,723



$

1,026


Basic and diluted earnings per share


$

0.14



$

0.13



$

0.08


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued

CONSOLIDATED STATEMENTS OF OPERATIONS







For the Nine Months Ended


(Dollars in thousands, except per share data)


September 30, 2019



September 30, 2018


INTEREST INCOME









Loans, including fees


$

34,849



$

29,853


Securities:









Taxable



1,725




1,392


Tax-exempt



327




356


Federal funds sold



31




14


Interest-earning deposit accounts



432




399


Certificates of deposit



57




54


Total interest income



37,421




32,068











INTEREST EXPENSE









Deposits



9,019




5,427


Securities sold under repurchase agreements



11




10


Subordinated notes and other borrowings



417




384


Federal Home Loan Bank advances



1,784




1,140


Total interest expense



11,231




6,961


Net interest income



26,190




25,107


Provision for loan losses



871




481


Net interest income after provision for loan losses



25,319




24,626











NONINTEREST INCOME









Income from fiduciary activities



621




596


Service charges and fees on deposit accounts



727




538


Wealth management



654




558


Interchange fees, net



330




221


Other service charges and fees



88




91


Secondary market sales and servicing



632




528


Increase in cash surrender value of bank owned life insurance



362




374


Net losses on sale of available-for-sale securities



(1)





Net losses on disposition of other assets



(2)




(18)


Gain (losses) on rabbi trust assets



130




(11)


Gain on curtailment of post-retirement benefit plan






352


Other



44




101


Total noninterest income



3,585




3,330











NONINTEREST EXPENSE









Salaries and employee benefits



11,532




12,407


Occupancy



2,510




2,607


Data processing



1,738




1,852


Bank franchise tax



655




531


Telecommunications and other technology



727




532


FDIC assessments



371




521


Foreclosed property



110




110


Consulting



418




937


Advertising and marketing



300




347


Directors' fees



525




382


Audit and accounting



586




839


Legal



130




380


Merger-related






363


Core deposit intangible amortization



517




610


Net other real estate owned losses (gains)



441




(169)


Other



2,108




1,966


Total noninterest expense



22,668




24,215


Income before income taxes



6,236




3,741


Income tax expense



1,180




645


Net income


$

5,056



$

3,096


Basic and diluted earnings per share


$

0.39



$

0.24


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued
























As of and for the Nine




As of and for the Three Months Ended



Months Ended




September 30,



June 30,



March 31,



December 31,



September 30,



September 30,



September 30,


(Dollars in thousands, except per share amounts)


2019



2019



2019



2018



2018



2019



2018


Select Consolidated Balance Sheet Data





























Total assets


$

1,112,219



$

1,094,260



$

1,103,840



$

1,080,617



$

1,027,440










Cash, interest-earning deposits and federal funds sold



34,811




27,506




30,677




27,291




22,713










Available-for-sale securities, at fair value



80,748




81,169




82,030




82,232




81,215










Loans:





























Mortgage loans on real estate



731,280




713,247




725,494




713,997




682,321










Commercial and industrial



186,281




187,531




173,360




164,608




144,118










Consumer



14,471




16,889




20,095




23,740




27,920










Loans receivable



932,032




917,667




918,949




902,345




854,359










Unamortized net deferred loan fees



(269)




(275)




(329)




(252)




(79)










Allowance for loan losses (ALL)



(7,495)




(7,479)




(7,858)




(7,902)




(7,287)










Net loans



924,268




909,913




910,762




894,191




846,993










Loans held for sale



268




593







368













Other real estate owned, net



2,178




3,168




3,718




3,597




3,663







































Total liabilities


$

987,362



$

971,643



$

983,903



$

963,141



$

910,893










Deposits:





























Noninterest-bearing demand deposits



124,670




116,229




112,315




114,122




108,602










Savings and interest-bearing demand deposits



372,404




374,175




371,587




359,400




330,690










Time deposits



396,614




385,218




372,751




368,670




369,836










Total deposits



893,688




875,622




856,653




842,192




809,128










Securities sold under repurchase agreements



6,323




6,983




7,220




6,089




6,083










Federal Home Loan Bank advances



68,000




70,000




100,000




100,000




80,000










Subordinated notes, net of unamortized issuance costs



6,906




6,902




6,897




6,893




6,889







































Shareholders' equity



124,857




122,617




119,937




117,476




116,547







































Condensed Consolidated Statements of Operations


Interest income


$

12,765



$

12,321



$

12,336



$

11,735



$

10,870



$

37,421



$

32,068


Interest expense



3,734




3,844




3,653




3,264




2,599




11,231




6,961


Net interest income



9,031




8,477




8,683




8,471




8,271




26,190




25,107


Provision for loan losses



495




62




314




870




509




871




481


Noninterest income



1,200




1,295




1,090




1,004




994




3,585




3,330


Noninterest expense



7,447




7,592




7,630




7,935




7,532




22,668




24,215


Income before income taxes



2,289




2,118




1,829




670




1,224




6,236




3,741


Income tax expense (benefit)



448




395




337




(112)




198




1,180




645


Net income


$

1,841



$

1,723



$

1,492



$

782



$

1,026



$

5,056



$

3,096


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued
























As of and for the Nine




As of and for the Three Months Ended



Months Ended




September 30,



June 30



March 31,



December 31,



September 30,



September 30,



September 30,


(Dollars in thousands, except per share amounts)


2019



2019



2019



2018



2018



2019



2018


Basic earnings per share


$

0.14



$

0.13



$

0.11



$

0.06



$

0.08



$

0.39



$

0.24


Diluted earnings per share



0.14




0.13




0.11




0.06




0.08




0.39




0.24


Book value per share



9.36




9.20




9.01




8.90




8.80










Tangible book value per share (1)



8.49




8.31




8.11




7.98




7.88










Shares outstanding at end of period



13,334,302




13,332,484




13,313,537




13,201,682




13,238,716




13,334,302




13,238,716


Weighted average shares outstanding, basic



13,077,600




13,059,824




13,001,182




13,050,791




13,080,372




13,046,694




13,059,845


Weighted average shares outstanding, diluted



13,132,459




13,104,943




13,037,149




13,099,707




13,142,549




13,092,367




13,128,715































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





























Yield on average interest-earning assets



4.87

%



4.77

%



4.90

%



4.72

%



4.66

%



4.85

%



4.69

%

Accretion of discounts on acquired loans


$

357



$

197



$

439



$

352



$

357



$

993



$

1,408


Cost of funds



1.52

%



1.58

%



1.54

%



1.40

%



1.19

%



1.55

%



1.08

%

Cost of deposits



1.40

%



1.42

%



1.34

%



1.22

%



1.03

%



1.39

%



0.94

%

Net interest spread



3.13

%



2.97

%



3.16

%



3.14

%



3.30

%



3.09

%



3.46

%

Net interest margin (NIM)



3.45

%



3.29

%



3.45

%



3.41

%



3.57

%



3.39

%



3.67

%

Average interest-earnings assets to total average assets



94.0

%



93.9

%



94.1

%



93.8

%



93.5

%



94.0

%



93.4

%

Return on average assets (annualized)



0.66

%



0.62

%



0.55

%



0.30

%



0.41

%



0.61

%



0.42

%

Operating return on average assets (annualized) (1)



0.66

%



0.62

%



0.55

%



0.44

%



0.41

%



0.61

%



0.46

%

Return on average equity (annualized)



5.97

%



5.72

%



5.05

%



2.69

%



3.55

%



5.58

%



3.61

%

Merger-related expense


$



$



$



$



$



$



$

363


Efficiency ratio



72.8

%



77.7

%



78.1

%



83.7

%



81.3

%



76.1

%



85.2

%

Operating efficiency ratio (1)



72.8

%



77.7

%



78.1

%



78.6

%



81.3

%



76.1

%



83.9

%

Average assets


$

1,109,986




1,105,411




1,088,180




1,055,144




994,209




1,101,323




980,886


Average interest-earning assets



1,043,243




1,037,527




1,024,058




989,327




929,111




1,035,015




916,168


Average interest-bearing liabilities



851,392




857,355




853,611




817,225




761,986




854,123




752,518


Average shareholders' equity



123,399




120,559




118,099




116,291




115,454




120,705




114,478


Shareholders' equity to total assets ratio



11.2

%



11.2

%



10.9

%



10.9

%



11.3

%









Tangible shareholders' equity to tangible total assets (1)



10.3

%



10.2

%



9.9

%



9.9

%



10.3

%






































Asset Quality Data and Ratios:





























Nonaccrual loans


$

7,194



$

4,577



$

5,384



$

5,206



$

4,204










Other real estate owned, net



2,178




3,168




3,718




3,597




3,663










Total nonperforming assets



9,372




7,745




9,102




8,803




7,867










Net charge-offs



478




441




358




255




335




1,277




964


Net charge-offs to average loans (annualized)



0.21

%



0.19

%



0.16

%



0.12

%



0.17

%



0.19

%



0.16

%

Total nonperforming assets to total assets



0.84

%



0.71

%



0.82

%



0.81

%



0.77

%









Gross loans to total assets



83.8

%



83.8

%



83.2

%



83.5

%



83.2

%









ALL to gross loans



0.80

%



0.82

%



0.86

%



0.88

%



0.85

%









Discounts on acquired loans


$

2,886



$

3,265



$

3,464



$

3,922



$

4,280










 

(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 Nine




As of and for the Three Months Ended



Months Ended




September 30,



June 30,



March 31,



December 31,



September 30,



September 30,



September 30,


(Dollars in thousands, except per share amounts)


2019



2019



2019



2018



2018



2019



2018


Reconciliation of Non-GAAP Financial Measures (1)





























Tangible book value per share





























Total shareholders' equity


$

124,857



$

122,617



$

119,937



$

117,476



$

116,547










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



11,697




11,828




11,964




12,106




12,255










Tangible shareholders' equity


$

113,160



$

110,789



$

107,973



$

105,370



$

104,292










Shares outstanding at end of period



13,334,302




13,332,484




13,313,537




13,201,682




13,238,716










Tangible book value per share


$

8.49



$

8.31



$

8.11



$

7.98



$

7.88







































Tangible shareholders' equity to tangible total assets





























Total assets


$

1,112,219



$

1,094,260



$

1,103,840



$

1,080,617



$

1,027,440










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



11,697




11,828




11,964




12,106




12,255










Tangible total assets


$

1,100,522



$

1,082,432



$

1,091,876



$

1,068,511



$

1,015,185










Tangible shareholders' equity


$

113,160



$

110,789



$

107,973



$

105,370



$

104,292










Tangible shareholders' equity to tangible total assets



10.3

%



10.2

%



9.9

%



9.9

%



10.3

%






































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


$

1,841



$

1,723



$

1,492



$

782



$

1,026



$

5,056



$

3,096


Add: Early retirement program expenses, ATB












382











Add: Merger-related expenses, ATB





















287


Operating net income


$

1,841



$

1,723



$

1,492



$

1,164



$

1,026



$

5,056



$

3,383


Average assets


$

1,109,986



$

1,105,411



$

1,088,180



$

1,055,144



$

994,209



$

1,101,323



$

980,886


Operating return on average assets



0.66

%



0.62

%



0.55

%



0.44

%



0.41

%



0.61

%



0.46

%






























Operating efficiency ratio





























Total noninterest expense


$

7,447



$

7,592



$

7,630



$

7,935



$

7,532



$

22,668



$

24,215


Less: Early retirement program expenses












483











Less: Merger-related expenses





















363


Operating noninterest expense



7,447




7,592




7,630




7,147




7,935




22,668




23,852


Net interest income



9,031




8,477




8,683




8,471




8,271




26,190




25,107


Noninterest income



1,200




1,295




1,090




1,004




994




3,585




3,330


Operating efficiency ratio



72.8

%



77.7

%



78.1

%



78.6

%



81.3

%



76.1

%



83.9

%






























Pre-tax, pre-loan loss provision income





























Net income


$

1,841



$

1,723



$

1,492



$

782



$

1,026



$

5,056



$

3,096


Add: Income tax expense (benefit)



448




395




337




(112)




198




1,180




645


Add: Provision for loan losses



495




62




314




870




509




871




481


Pre-tax, pre-loan loss provision income


$

2,784



$

2,180



$

2,143



$

1,540



$

1,733



$

7,107



$

4,222


 

(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, operating efficiency ratio, and pre-tax, pre-loan loss provision income 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, operating efficiency ratios, and pre-tax, pre-loan loss provision income 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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