Press Release

Bay Banks of Virginia, Inc. Reports Fourth Quarter and Full Year 2019 Results

Company Release - 1/28/2020 4:30 PM ET

RICHMOND, Va., Jan. 28, 2020 /PRNewswire/ -- Bay Banks of Virginia, Inc. (OTCQB: BAYK), holding company of Virginia Commonwealth Bank and VCB Financial Group, Inc., announced financial results for the quarter and year ended December 31, 2019.

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

The company reported net income of $2.0 million, or $0.15 per diluted share, for the fourth quarter of 2019 compared to $1.8 million, or $0.14 per diluted share, for the third quarter of 2019 and $782 thousand, or $0.06 per diluted share, for the fourth quarter of 2018. Net income for the fourth quarter of 2018 included $483 thousand ($382 thousand1 after income taxes) of expenses incurred in connection with the company's previously announced early retirement program.

For the year of 2019, the company reported net income of $7.1 million, or $0.54 per diluted share, compared to $3.9 million, or $0.30 per diluted share, for the year of 2018. Net income in the year 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: "2019 was a year of great improvement with increasing profitability in each sequential quarter. We began the year with a focus on balance sheet management and low-cost deposit growth. Our overall loan portfolio shows minimal growth in 2019; however, net growth in our markets was nearly $79 million in 2019. Our portfolio of loans acquired in the Merger and subsequent purchases of consumer portfolios have declined from $290 million since the Merger to approximately $123 million at year-end 2019. We have sold more originated residential mortgages into the secondary market, grown noninterest-bearing deposits and continue to emphasize these accounts, and we've aggressively lowered deposit costs since the second quarter of 2019."

Operating Results

Fourth Quarter 2019 compared to Third Quarter 2019

  • Income before income taxes for the fourth quarter of 2019 was $2.5 million compared to $2.3 million for the third quarter of 2019.
  • Interest income for the three months ended December 31, 2019 was $13.0 million, on average interest-earning assets of $1.06 billion, compared to $12.8 million, on average interest-earning assets of $1.04 billion, for the three months ended September 30, 2019. Interest income in the fourth quarter of 2019 included accretion of acquired loan discounts of $929 thousand, while interest income in the third quarter of 2019 included $357 thousand of accretion of acquired loan discounts. Higher accretion in the fourth quarter of 2019 was primarily attributable to significant paydowns and payoffs of loans acquired in the Merger. Yields on average interest-earning assets were 4.87% for each of the sequential quarter periods, including the effect of accretion. Yields on average interest-earning assets in the fourth quarter of 2019 were positively affected by higher accretion of acquired loan discounts, which had a positive 21 basis point effect compared to yields in the third quarter of 2019. Negatively affecting yields on average interest-earning assets in the fourth quarter of 2019 were higher average balances of lower earning investment securities purchased in the quarter and lower yields on new loans originated in the latter part of the fourth quarter of 2019.
  • Interest expense was $3.9 million and $3.7 million for the three months ended December 31, 2019 and September 30, 2019, respectively, and cost of funds was 1.54% and 1.52% for the sequential quarter periods. Average interest-bearing liabilities were $860.4 million and $851.4 million for the fourth and third quarters of 2019, respectively. Interest expense on the company's $25 million of 5.625% subordinated notes issued on October 7, 2019 and maturing on October 15, 2029 (the "2029 Notes") contributed $354 thousand and 10 basis points to interest expense and cost of funds, respectively, in the fourth quarter of 2019. Cost of deposits was 1.34% for the fourth quarter of 2019, down six basis points from 1.40% for the third quarter of 2019.
  • Net interest margin ("NIM") was 3.43% for the fourth quarter of 2019 compared to 3.45% for the third quarter of 2019. Higher accretion in the fourth quarter of 2019 had a positive 21 basis point effect on NIM, which was offset by higher balances of lower earning investment securities, lower yields on interest-earning deposits and federal funds sold, and higher cost of funds. The 2029 Notes had a negative 10 basis point effect on NIM in the fourth quarter of 2019.
  • Provision for loan losses was $311 thousand in the fourth quarter of 2019 and was primarily attributable to net loan growth of approximately $17.2 million and net charge-offs from a select portfolio of purchased consumer loans. The majority of loans acquired in the Merger, which declined, carry no allowance for loan losses as they were recorded at fair value at the effective date of the Merger. Provision for loan losses of $495 thousand 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 net loan growth of $23.7 million.
  • Noninterest income for the three months ended December 31, 2019 and September 30, 2019 was $1.4 million and $1.2 million, respectively. Higher noninterest income in the fourth quarter of 2019 compared to the third quarter of 2019 was primarily due to wealth management income, which increased $69 thousand on a sequential quarter basis.
  • Noninterest expense for the three months ended December 31, 2019 and September 30, 2019 was $7.7 million and $7.4 million, respectively. Higher noninterest expense in the fourth quarter of 2019 was primarily due to higher salaries and employee benefits and higher Federal Deposit Insurance Corporation ("FDIC") assessments, partially offset by lower net losses from other real estate owned. Higher salaries and employee benefits for the fourth quarter of 2019 were primarily due to required contributions to the company's Employee Stock Ownership Plan (ESOP) and positive adjustments to the incentive accrual recorded in the third quarter of 2019. The company's FDIC assessment for the third quarter of 2019 included the benefit of a small bank assessment credit of $171 thousand compared to a $55 thousand benefit in the fourth quarter of 2019. The company's efficiency ratio for the fourth quarter of 2019 was 73.5% compared to 72.8% for the third quarter of 2019.
  • Income tax expense for the fourth quarter of 2019 was $469 thousand, reflective of a 19.0% effective income tax rate, while income tax expense for the third quarter of 2019 was $448 thousand, reflective of a 19.6% effective income tax rate.

Full-Year 2019 compared to Full-Year 2018

  • Income before income taxes for the year of 2019 was $8.7 million compared to $4.4 million for the year of 2018.
  • Interest income for the year ended December 31, 2019 was $50.4 million, on average interest-earning assets of $1.04 billion, compared to $43.8 million for the year ended December 31, 2018, on average interest-earning assets of $934.5 million. Interest income for the year ended December 31, 2019 included accretion of acquired loan discounts of $1.9 million, while interest income for the year ended December 31, 2018 included $1.8 million of accretion of acquired loan discounts. Yields on average interest-earning assets were 4.85% and 4.70% for the year of 2019 and 2018, respectively. The higher yield on average interest-earning assets in the 2019 period was primarily due to higher loan yields and higher accretion of acquired loan discounts of $163 thousand, which had a positive 2 basis point effect.
  • Interest expense was $15.1 million and $10.2 million for the years ended December 31, 2019 and 2018, respectively, and cost of funds was of 1.55% and 1.17% for the respective periods. Higher cost of funds in the year ended December 31, 2019 was primarily due to higher rates paid on deposits generated in the latter part of 2018, the repricing of maturing time deposits in a higher rate environment, the issuance of the 2029 Notes during the fourth quarter of 2019, greater use and cost of Federal Home Loan Bank of Atlanta advances, and higher interest rates in general. Average interest-bearing liabilities were $855.7 million and $768.8 million for the years ended December 31, 2019 and 2018, respectively.
  • NIM was 3.40% for the year ended December 31, 2019 compared to 3.61% for the year ended December 31, 2018. Lower NIM in the 2019 period was primarily due to higher cost of funds, partially offset by higher loan yields and higher accretion of acquired loan discounts. Higher accretion of acquired loan discounts had a positive 2 basis point effect on NIM in the 2019 period compared to the 2018 period.
  • Provision for loan losses was $1.2 million for the year ended December 31, 2019, primarily attributable to net loan growth of approximately $78.6 million and net charge-offs from a select portfolio of purchased consumer loans. The majority of loans acquired in the Merger, which declined, carry no allowance for loan losses as they were recorded at fair value at the effective date of the Merger. Provision for loan losses for the year ended December 31, 2018 was $1.4 million, which was primarily attributable net loan growth of $135.5 million during 2018. The 2018 period also 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 years ended December 31, 2019 and 2018 was $5.0 million and $4.3 million, respectively. Noninterest income in the 2019 period reflects greater income from secondary market sales and servicing of $282 thousand, as the company sold a greater volume of mortgages originated in the 2019 period, while the 2018 period included a gain of $352 thousand on the curtailment of the company's post-retirement benefit plan effective March 1, 2018.
  • Noninterest expense for the years ended December 31, 2019 and 2018 was $30.4 million and $32.1 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 years ended December 31, 2019 and 2018, respectively, and the 2018 period included $483 thousand of expenses incurred in connection with the company's early retirement program noted above.
  • Income tax expense for the year ended December 31, 2019 was $1.6 million, reflective of an 18.9% effective income tax rate, while income tax expense for the year ended December 31, 2018 was $533 thousand, reflective of a 12.1% effective income tax rate. The 2018 effective income tax rate was positively affected by higher than estimated income tax deductions reported in the company's 2017 federal income tax return at the higher 2017 rate, as previously reported.

Fourth Quarter 2019 compared to Fourth Quarter 2018

  • Income before income taxes for the fourth quarter of 2019 was $2.5 million compared to $670 thousand for the fourth quarter of 2018. Income before income taxes, excluding the costs incurred in connection with the company's early retirement program ($483 thousand), was $1.2 million1 for the fourth quarter of 2018.
  • Interest income for the three months ended December 31, 2019 was $13.0 million, on average interest-earning assets of $1.06 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 fourth quarters of 2019 and 2018 included accretion of acquired loan discounts of $929 thousand and $352 thousand, respectively. Yields on average interest-earning assets were 4.87% and 4.72% for the fourth quarters of 2019 and 2018, respectively. The increase in yield on average interest-earning assets was primarily attributable to higher accretion of loan discounts, which had a positive 22 basis point effect compared to the fourth quarter of 2018.  
  • Interest expense was $3.9 million and $3.3 million for the three months ended December 31, 2019 and 2018, respectively, and cost of funds was 1.54% and 1.40%, for the respective periods. Higher costs of funds in the 2019 period was primarily due to higher cost of deposits of 1.34% in the 2019 period compared to 1.22% in the 2018 period, due to the reasons noted above. Average interest-bearing liabilities were $860.4 million and $817.2 million for the fourth quarters of 2019 and 2018, respectively.
  • NIM was 3.43% for the fourth quarter of 2019 compared to 3.41% for the fourth quarter of 2018. The increase in NIM was primarily attributable to higher accretion of loan discounts, partially offset by higher cost of funds.
  • Provision for loan losses was $311 thousand in the fourth quarter of 2019 and was primarily attributable to net loan growth of approximately $17.2 million and net charge-offs from a select portfolio of purchased consumer loans. The majority of loans acquired in the Merger, which declined, carry no allowance for loan losses as they were recorded at fair value at the effective date of the Merger. Provision for loan losses in the fourth quarter of 2018 was primarily attributable to an increase of $47.2 million of net loans in the quarter and higher reserves attributed to certain loan types, as the company's loan portfolio mix continues to shift from residential and consumer loans to commercial loans.
  • Noninterest income for the three months ended December 31, 2019 and 2018 was $1.4 million and $1.0 million, respectively. The increase quarter-over-quarter was primarily attributable to a gain on rabbi trust assets of $62 thousand in the 2019 period compared to a loss of $179 thousand in the 2018 period and higher secondary market sales and servicing income of $178 thousand.
  • Noninterest expense for the three months ended December 31, 2019 and 2018 was $7.7 million and $7.9 million, respectively. The fourth quarter of 2018 included $483 thousand of expenses incurred in connection with the company's early retirement program. The company's efficiency ratio for the fourth quarter of 2019 was 73.5% compared to 83.7% (78.6%1 excluding early retirement program expenses) for the same quarter of 2018.
  • Income tax expense for the fourth quarter of 2019 was $469 thousand, reflective of a 19.0% effective income tax rate. Income tax expense for the fourth quarter of 2018 was a benefit of $112 thousand, primarily attributable to higher than estimated tax deductions reported in the company's 2017 federal income tax return and lower effective income tax rate for the full year of 2018, as previously reported.

Balance Sheet

  • Total assets were $1.13 billion and $1.08 billion at December 31, 2019 and 2018, respectively.
  • Loans, net of allowance for loan losses, were $916.6 million at December 31, 2019 compared to $894.2 million at December 31, 2018, a growth rate of approximately 2%. Excluding the payoff and amortization of approximately $56.5 million in the year of 2019 of purchased portfolio loans, including those acquired in the Merger, loan growth was approximately $78.6 million, or nearly 9%, for the year of 2019.
  • Deposits were $910.4 million at December 31, 2019 compared to $842.2 million at December 31, 2018. Noninterest-bearing demand accounts comprised 15.2% of total deposits at December 31, 2019, up from 13.6% at December 31, 2018.
  • Shareholders' equity was $126.2 million and $117.5 million at December 31, 2019 and 2018, respectively, an increase of $8.7 million. The increase in shareholders' equity in the year of 2019 was primarily attributable to net income of $7.1 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 $8.641 and $7.981 at December 31, 2019 and 2018, respectively. Pursuant to the company's previously announced share repurchase program and shares purchased by operation of the ESOP, the company purchased 72,705 common shares at a weighted average price per share of $7.98 in the fourth quarter of 2019. Capital ratios for Virginia Commonwealth Bank were above regulatory minimum guidelines for well-capitalized banks as of December 31, 2019 and 2018.
  • Annualized return on average assets for the quarters ended December 31, 2019, September 30, 2019, and December 31, 2018 was 0.71%, 0.66%, and 0.30%, respectively, while annualized return on average shareholders' equity for the same periods was 6.39%, 5.97%, and 2.69%, respectively.  

Asset Quality

  • Nonperforming assets were $6.4 million, or 0.56% of total assets, as of December 31, 2019, compared to $9.4 million, or 0.84% of total assets, as of September 30, 2019, and $8.8 million, or 0.81% of total assets, as of December 31, 2018. The decrease in nonperforming assets as of December 31, 2019 was primarily attributable to an approximately $2.2 million balance decline of a commercial and industrial loan participation to a professional service firm, which announced plans to liquidate and subsequently filed for Chapter 7 bankruptcy in the third quarter of 2019, as previously reported. The loan balance as of December 31, 2019 was approximately $450 thousand compared to $2.7 million as of September 30, 2019. During the 2019 year, the company reduced its other real estate owned, net from $3.6 million at December 31, 2018 to $1.9 million at December 31, 2019.
  • The ratio of allowance for loan losses to total gross loans was 0.82%, 0.80%, and 0.88% at December 31, 2019, September 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 $1.9 million, $2.9 million, and $3.9 million as of December 31, 2019, September 30, 2019, and December 31, 2018, respectively.

Outlook

Greene concluded: "As I look to 2020, we have set a goal to reach greater profitability and have charted the course to achieve this. We have a strong customer base on which to build and the management team who can deliver. I often receive unsolicited customer feedback stating that our employees have gone above and beyond to be responsive to our customers' banking needs, expeditiously, and with a personal touch. It is our competitive advantage. We have the team, the customers, the capital, the support of our board of directors, and operate in the best Virginia markets."

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)


December 31, 2019



December 31, 2018 (1)


ASSETS









Cash and due from banks


$

6,096



$

7,685


Interest-earning deposits



34,358




18,981


Federal funds sold



1,359




625


Certificates of deposit



2,754




3,746


Available-for-sale securities, at fair value



99,454




82,232


Restricted securities



5,706




7,600


Loans receivable, net of allowance for loan losses of $7,562 and
 
$7,902, respectively



916,628




894,191


Loans held for sale



1,231




368


Premises and equipment, net



20,141




18,169


Accrued interest receivable



3,035




3,172


Other real estate owned, net



1,916




3,597


Bank owned life insurance



19,752




19,270


Goodwill



10,374




10,374


Mortgage servicing rights



935




977


Core deposit intangible



1,518




2,193


Other assets



6,666




7,437


Total assets


$

1,131,923



$

1,080,617











LIABILITIES









Noninterest-bearing demand deposits


$

137,933



$

114,122


Savings and interest-bearing demand deposits



382,607




359,400


Time deposits



389,900




368,670


Total deposits



910,440




842,192











Securities sold under repurchase agreements



6,525




6,089


Federal Home Loan Bank advances



45,000




100,000


Subordinated notes, net of unamortized issuance costs



31,001




6,893


Other liabilities



12,772




7,967


Total liabilities



1,005,738




963,141











SHAREHOLDERS' EQUITY









Common stock ($5 par value; authorized - 30,000,000 shares;
 
outstanding - 13,261,801 and 13,201,682 shares, respectively) (2)



66,309




66,008


Additional paid-in capital



36,658




36,972


Unearned employee stock ownership plan shares



(1,525)




(1,734)


Retained earnings



24,660




17,557


Accumulated other comprehensive income (loss), net



83




(1,327)


Total shareholders' equity



126,185




117,476


Total liabilities and shareholders' equity


$

1,131,923



$

1,080,617


 

(1)

Derived from audited December 31, 2018 Consolidated Financial Statements.

(2)

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


December 31, 2019



September 30, 2019



December 31, 2018


INTEREST INCOME













Loans, including fees


$

12,149



$

11,930



$

10,899


Securities:













Taxable



573




553




569


Tax-exempt



98




113




119


Federal funds sold



12




6




3


Interest-earning deposit accounts



149




145




128


Certificates of deposit



16




18




17


Total interest income



12,997




12,765




11,735















INTEREST EXPENSE













Deposits



3,056




3,123




2,565


Securities sold under repurchase agreements



3




4




3


Subordinated notes and other borrowings



494




142




128


Federal Home Loan Bank advances



301




465




568


Total interest expense



3,854




3,734




3,264


Net interest income



9,143




9,031




8,471


Provision for loan losses



311




495




870


Net interest income after provision for loan losses



8,832




8,536




7,601















NONINTEREST INCOME













Trust management



209




201




114


Service charges and fees on deposit accounts



250




243




261


Wealth management



254




185




284


Interchange fees, net



108




108




118


Other service charges and fees



27




32




25


Secondary market sales and servicing



309




293




131


Increase in cash surrender value of bank owned life insurance



119




122




123


Net losses on sale of available-for-sale securities






1





Net (losses) gains on disposition of other assets



(1)







11


Gain (loss) on rabbi trust assets



62







(179)


Other



36




15




75


Total noninterest income



1,373




1,200




963















NONINTEREST EXPENSE













Salaries and employee benefits



4,065




3,666




3,785


Occupancy



809




805




993


Data processing



530




541




583


Bank franchise tax



209




209




195


Telecommunications and other technology



313




258




226


FDIC assessments



112




(7)




198


Foreclosed property



35




48




66


Consulting



108




156




133


Advertising and marketing



84




124




92


Directors' fees



153




148




179


Audit and accounting



236




193




290


Legal



69




20




120


Core deposit intangible amortization



157




164




188


Net other real estate owned losses



19




375




62


Other



835




747




784


Total noninterest expense



7,734




7,447




7,894


Income before income taxes



2,471




2,289




670


Income tax expense (benefit)



469




448




(112)


Net income


$

2,002



$

1,841



$

782


Basic and diluted earnings per share


$

0.15



$

0.14



$

0.06


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued

CONSOLIDATED STATEMENTS OF OPERATIONS




For the Year Ended


(Dollars in thousands, except per share data)


December 31, 2019



December 31, 2018


INTEREST INCOME









Loans, including fees


$

46,998



$

40,752


Securities:









Taxable



2,298




1,961


Tax-exempt



425




475


Federal funds sold



43




17


Interest-earning deposit accounts



581




528


Certificates of deposit



73




70


Total interest income



50,418




43,803











INTEREST EXPENSE









Deposits



12,075




7,992


Securities sold under repurchase agreements



14




13


Subordinated notes and other borrowings



911




513


Federal Home Loan Bank advances



2,085




1,707


Total interest expense



15,085




10,225


Net interest income



35,333




33,578


Provision for loan losses



1,182




1,351


Net interest income after provision for loan losses



34,151




32,227











NONINTEREST INCOME









Trust management



830




710


Service charges and fees on deposit accounts



977




768


Wealth management



908




842


Interchange fees, net



438




339


Other service charges and fees



115




116


Secondary market sales and servicing



941




659


Increase in cash surrender value of bank owned life insurance



481




497


Net losses on sale of available-for-sale securities



(1)





Net losses on disposition of other assets



(3)




(7)


Gain (losses) on rabbi trust assets



192




(138)


Gain on curtailment of post-retirement benefit plan






352


Other



80




165


Total noninterest income



4,958




4,303











NONINTEREST EXPENSE









Salaries and employee benefits



15,597




16,233


Occupancy



3,319




3,528


Data processing



2,268




2,436


Bank franchise tax



864




726


Telecommunications and other technology



1,040




831


FDIC assessments



483




719


Foreclosed property



145




175


Consulting



526




1,068


Advertising and marketing



384




439


Directors' fees



678




561


Audit and accounting



822




1,129


Legal



199




500


Merger-related






363


Core deposit intangible amortization



674




798


Net other real estate owned losses (gains)



460




(107)


Other



2,943




2,720


Total noninterest expense



30,402




32,119


Income before income taxes



8,707




4,411


Income tax expense



1,649




533


Net income


$

7,058



$

3,878


Basic and diluted earnings per share


$

0.54



$

0.30


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued







As of and for the




As of and for the Three Months Ended



Year Ended




December 31,



September 30,



June 30,



March 31,



December 31,



December 31,



December 31,


(Dollars in thousands, except per share amounts)


2019



2019



2019



2019



2018



2019



2018


Select Consolidated Balance Sheet Data





























Total assets


$

1,131,923



$

1,112,219



$

1,094,260



$

1,103,840



$

1,080,617










Cash, interest-earning deposits and federal funds sold



41,813




31,405




24,604




30,677




27,291










Available-for-sale securities, at fair value



99,454




80,748




81,169




82,030




82,232










Loans:





























Mortgage loans on real estate



730,788




731,280




713,247




725,494




713,997










Commercial and industrial



181,730




186,281




187,531




173,360




164,608










Consumer



11,985




14,471




16,889




20,095




23,740










Loans receivable



924,503




932,032




917,667




918,949




902,345










Unamortized net deferred loan fees



(313)




(269)




(275)




(329)




(252)










Allowance for loan losses (ALL)



(7,562)




(7,495)




(7,479)




(7,858)




(7,902)










Net loans



916,628




924,268




909,913




910,762




894,191










Loans held for sale



1,231




268




593







368










Other real estate owned, net



1,916




2,178




3,168




3,718




3,597







































Total liabilities


$

1,005,738



$

987,362



$

971,643



$

983,903



$

963,141










Deposits:





























Noninterest-bearing demand deposits



137,933




124,670




116,229




112,315




114,122










Savings and interest-bearing demand deposits



382,607




372,404




374,175




371,587




359,400










Time deposits



389,900




396,614




385,218




372,751




368,670










Total deposits



910,440




893,688




875,622




856,653




842,192










Securities sold under repurchase agreements



6,525




6,323




6,983




7,220




6,089










Federal Home Loan Bank advances



45,000




68,000




70,000




100,000




100,000










Subordinated notes, net of unamortized issuance costs



31,001




6,906




6,902




6,897




6,893







































Shareholders' equity



126,185




124,857




122,617




119,937




117,476







































Condensed Consolidated Statements of Operations



Interest income


$

12,997



$

12,765



$

12,321



$

12,336



$

11,735



$

50,418



$

43,803


Interest expense



3,854




3,734




3,844




3,653




3,264




15,085




10,225


Net interest income



9,143




9,031




8,477




8,683




8,471




35,333




33,578


Provision for loan losses



311




495




62




314




870




1,182




1,351


Noninterest income



1,373




1,200




1,295




1,090




963




4,958




4,303


Noninterest expense



7,734




7,447




7,592




7,630




7,894




30,402




32,119


Income before income taxes



2,471




2,289




2,118




1,829




670




8,707




4,411


Income tax expense (benefit)



469




448




395




337




(112)




1,649




533


Net income


$

2,002



$

1,841



$

1,723



$

1,492



$

782



$

7,058



$

3,878


 

 

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued
























As of and for the




As of and for the Three Months Ended



Year Ended




December 31,



September 30,



June 30,



March 31,



December 31,



December 31,



December 31,


(Dollars in thousands, except per share amounts)


2019



2019



2019



2019



2018



2019



2018


Basic earnings per share


$

0.15



$

0.14



$

0.13



$

0.11



$

0.06



$

0.54



$

0.30


Diluted earnings per share



0.15




0.14




0.13




0.11




0.06




0.54




0.30


Book value per share



9.51




9.36




9.20




9.01




8.90










Tangible book value per share (1)



8.64




8.49




8.31




8.11




7.98










Shares outstanding at end of period



13,261,801




13,334,302




13,332,484




13,313,537




13,201,682










Weighted average shares outstanding, basic



13,071,708




13,077,600




13,059,824




13,001,182




13,050,791




13,053,080




13,057,537


Weighted average shares outstanding, diluted



13,145,522




13,132,459




13,104,943




13,037,149




13,099,707




13,111,853




13,122,136































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





























Yield on average interest-earning assets



4.87

%



4.87

%



4.77

%



4.90

%



4.72

%



4.85

%



4.70

%

Accretion of discounts on acquired loans


$

929



$

357



$

197



$

439



$

352



$

1,922



$

1,759


Cost of funds



1.54

%



1.52

%



1.58

%



1.54

%



1.40

%



1.55

%



1.17

%

Cost of deposits



1.34

%



1.40

%



1.42

%



1.34

%



1.22

%



1.37

%



1.01

%

Net interest spread



3.09

%



3.13

%



2.97

%



3.16

%



3.14

%



3.09

%



3.37

%

Net interest margin (NIM)



3.43

%



3.45

%



3.29

%



3.45

%



3.41

%



3.40

%



3.61

%

Average interest-earnings assets to total average assets



94.2

%



94.0

%



93.9

%



94.1

%



93.8

%



94.0

%



93.5

%

Return on average assets (annualized)



0.71

%



0.66

%



0.62

%



0.55

%



0.30

%



0.64

%



0.39

%

Operating return on average assets (annualized) (1)



0.71

%



0.66

%



0.62

%



0.55

%



0.44

%



0.64

%



0.45

%

Return on average equity (annualized)



6.39

%



5.97

%



5.72

%



5.05

%



2.69

%



5.79

%



3.36

%

Merger-related expense


$



$



$



$



$



$



$

363


Efficiency ratio



73.5

%



72.8

%



77.7

%



78.1

%



83.7

%



75.5

%



84.8

%

Operating efficiency ratio (1)



73.5

%



72.8

%



77.7

%



78.1

%



78.6

%



75.5

%



82.6

%

Average assets


$

1,126,663




1,109,986




1,105,411




1,088,180




1,055,144




1,107,670




999,895


Average interest-earning assets



1,061,227




1,043,243




1,037,527




1,024,058




989,327




1,041,622




934,528


Average interest-bearing liabilities



860,421




851,392




857,355




853,611




817,225




855,703




768,826


Average shareholders' equity



125,285




123,399




120,559




118,099




116,291




121,859




115,468


Shareholders' equity to total assets ratio



11.1

%



11.2

%



11.2

%



10.9

%



10.9

%









Tangible shareholders' equity to tangible total assets (1)



10.2

%



10.3

%



10.2

%



9.9

%



9.9

%






































Asset Quality Data and Ratios:





























Nonaccrual loans


$

4,476



$

7,194



$

4,577



$

5,384



$

5,206










Other real estate owned, net



1,916




2,178




3,168




3,718




3,597










Total nonperforming assets



6,392




9,372




7,745




9,102




8,803










Net charge-offs



245




478




441




358




255




1,522




1,219


Net charge-offs to average loans (annualized)



0.11

%



0.21

%



0.19

%



0.16

%



0.12

%



0.17

%



0.15

%

Total nonperforming assets to total assets



0.56

%



0.84

%



0.71

%



0.82

%



0.81

%









Gross loans to total assets



81.6

%



83.8

%



83.8

%



83.2

%



83.5

%









ALL to gross loans



0.82

%



0.80

%



0.82

%



0.86

%



0.88

%









Discounts on acquired loans


$

1,935



$

2,886



$

3,265



$

3,464



$

3,922










 

(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




As of and for the Three Months Ended



Year Ended




December 31,



September 30,



June 30,



March 31,



December 31,



December 31,



December 31,


(Dollars in thousands, except per share amounts)


2019



2019



2019



2019



2018



2019



2018


Reconciliation of Non-GAAP Financial Measures (1)





























Tangible book value per share





























Total shareholders' equity


$

126,185



$

124,857



$

122,617



$

119,937



$

117,476










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



11,573




11,697




11,828




11,964




12,106










Tangible shareholders' equity


$

114,612



$

113,160



$

110,789



$

107,973



$

105,370










Shares outstanding at end of period



13,261,801




13,334,302




13,332,484




13,313,537




13,201,682










Tangible book value per share


$

8.64



$

8.49



$

8.31



$

8.11



$

7.98







































Tangible shareholders' equity to tangible total assets





























Total assets


$

1,131,923



$

1,112,219



$

1,094,260



$

1,103,840



$

1,080,617










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



11,573




11,697




11,828




11,964




12,106










Tangible total assets


$

1,120,350



$

1,100,522



$

1,082,432



$

1,091,876



$

1,068,511










Tangible shareholders' equity


$

114,612



$

113,160



$

110,789



$

107,973



$

105,370










Tangible shareholders' equity to tangible total assets



10.2

%



10.3

%



10.2

%



9.9

%



9.9

%






































Select noninterest expenses, after-tax basis (ATB)





























Merger-related expenses


$



$



$



$



$



$



$

363


Merger-related expenses, ATB (b)














$



$




287































Early retirement program expenses


$



$



$



$



$

483



$



$

483


Early retirement program expenses, ATB (b)















382







382































Operating return on average assets





























Net income


$

2,002



$

1,841



$

1,723



$

1,492



$

782



$

7,058



$

3,878


Add: Early retirement program expenses, ATB















382







382


Add: Merger-related expenses, ATB





















287


Operating net income


$

2,002



$

1,841



$

1,723



$

1,492



$

1,164



$

7,058



$

4,546


Average assets


$

1,126,663



$

1,109,986



$

1,105,411



$

1,088,180



$

1,055,144



$

1,107,670



$

999,895


Operating return on average assets



0.71

%



0.66

%



0.62

%



0.55

%



0.44

%



0.64

%



0.45

%






























Operating efficiency ratio





























Total noninterest expense


$

7,734



$

7,447



$

7,592



$

7,630



$

7,935



$

30,402



$

32,119


Less: Early retirement program expenses















483







483


Less: Merger-related expenses





















363


Operating noninterest expense



7,734




7,447




7,592




7,630




7,147




30,402




31,273


Net interest income



9,143




9,031




8,477




8,683




8,471




35,333




33,578


Noninterest income



1,373




1,200




1,295




1,090




1,004




4,958




4,303


Operating efficiency ratio



73.5

%



72.8

%



77.7

%



78.1

%



78.6

%



75.5

%



82.6

%






























Pre-tax, pre-loan loss provision income





























Net income


$

2,002



$

1,841



$

1,723



$

1,492



$

782



$

7,058



$

3,878


Add: Income tax expense (benefit)



469




448




395




337




(112)




1,649




533


Add: Provision for loan losses



311




495




62




314




870




1,182




1,351


Pre-tax, pre-loan loss provision income


$

2,782



$

2,784



$

2,180



$

2,143



$

1,540



$

9,889



$

5,762


 

(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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