Bay Bancorp, Inc. Announces First Quarter 2016 Results
COLUMBIA, Md., April 28, 2016 (GLOBE NEWSWIRE) -- Bay Bancorp, Inc. ("Bay") (NASDAQ: BYBK), the savings and loan holding company for Bay Bank, FSB ("Bank"), announced today net income of $0.19 million or $0.02 per basic and diluted common share for the quarter ended March 31, 2016, compared to net income of $0.34 million or $0.03 per basic and diluted common share for the quarter ended March 31, 2015. The pre-tax results for 2016 include $0.06 million of merger-related expenses related to the previously announced pending Hopkins Federal Savings Bank ("Hopkins Bank") merger (the "Hopkins Merger").
Commenting on the announcement, Joseph J. Thomas, President and CEO said, "We continued to invest in our franchise by hiring Todd Warren as Baltimore Market President and we achieved growth of new loans in the Bank's originated portfolio at an 18.6% annualized pace in the first quarter of 2016. However, our earnings were negatively impacted by a decline in net interest margin for the quarter ended March 31, 2016 to 4.20% from 4.73% for the same period of 2015 due to a decrease in net discount accretion recognized into income from acquired loans. Our ongoing efficiency efforts continue in 2016 and for the three months ended March 31, 2016, noninterest expense was $5.3 million compared to $5.7 million for the same period of 2015. The contributors to the decrease were broad based and would be even more substantial after considering the Hopkins Merger related expenses incurred in the first quarter 2016. Core, pre-provision income, excluding accelerated accretion on acquired loans, provision for loan loss, intangible asset amortization and merger related expenses, was $0.84 million for the three months ended March 31, 2016 compared to $0.80 million for the same period of 2015. We expect the approval and completion of the Hopkins Merger during the 2nd quarter of 2016 and are excited about the new client opportunities, additional scale, and enhanced earnings performance we will gain in the combination with Hopkins Bank."
Highlights from the First Three Months of 2016
Bay focused on deposit costs and liquidity management over the quarter as Bay prepared for the Hopkins Merger balance sheet. Partially related to the focus, deposits declined by $1.5 million for the three months ended March 31, 2016, when compared to December 31, 2015. Bay's capital position remains very strong with the capacity for both the Hopkins Merger and for future growth. Total regulatory capital to risk weighted assets was 16.6% as of March 31, 2016. The Bank has a proven record of success in acquisitions and acquired problem asset resolutions and, at March 31, 2016, had $9.0 million in remaining net purchase discounts on the acquired loan portfolios.
Specific highlights are listed below:
- Total assets were $463 million at March 31, 2016 compared to $491 million at December 31, 2015 and decreased by $24 million from $487 million at March 31, 2015.
- Total loans were $397 million at March 31, 2016, an increase of 0.9% from $393 million at December 31, 2015 and an increase of 1.4% from $392 million at March 31, 2015.
- Total deposits were $366 million at March 31, 2016, a decrease of 0.4% from $367 million at December 31, 2015 and a decrease of 9.5% from $404 million at March 31, 2015. Noninterest bearing deposits at March 31, 2016 were $98 million, a decrease of 3.7% from $101 million at December 31, 2015.
- Net interest income for the three months ended March 31, 2016 totaled $4.7 million compared to $5.3 million for the same period of 2015. Interest income associated with discount accretion on purchased loans, deferred costs and deferred fees will vary due to the timing and nature of loan principal payments and nonperforming loan resolutions. The decrease in net discount accretion income was the primary driver of year-over-year results, declining $0.6 million as Bay transitions interest income reliance to the core balance sheet and ongoing net earnings growth.
- Net interest margin for the three months ended March 31, 2016 was 4.20%, compared to 4.73% for the same period of 2015. The margin for the first quarter of 2016 reflects the variable pace of net discount accretion recognized within interest income and the impact of fair value amortization on the interest expense of acquired deposits. For the quarter ended March 31, 2016, the earning asset portfolio yield was influenced by a $0.60 million decline in net discount accretion of purchased loan discounts recognized in interest income. The net interest margin declined 0.53% during the quarter compared to a year earlier, nearly all related to loan and deposit accretion fluctuations.
The return on average assets for the three months ended March 31, 2016 was 0.16%, as compared to 0.43% and 0.29% for the three months ended December 31, and March 31, 2015, respectively. The return on average equity for the three months ended March 31, 2016 was 1.11% compared to 3.10% and 2.08% for the three months ended December 31, and March 31, 2015, respectively.
- Nonperforming assets decreased to $9.7 million at March 31, 2016, from $10.3 million at December 31, 2015 and from $15.6 million at March 31, 2015. The decrease resulted from the Bank's consistent resolution of acquired nonperforming loans from previous acquisitions.
- The provision for loan losses for the three months ended March 31, 2016 was $298,000, compared to $275,000 for the same period of 2015. The increase for the 2016 period was primarily the result of an increase in loan originations and adjustments in certain qualitative factors. As a result, the allowance for loan losses increased to $1.95 million at March 31, 2016, representing 0.49% of total loans, compared to $1.77 million, or 0.45% of total loans, at December 31, 2015. Management expects both the allowance for loan losses and the related provision for loan losses to increase in the future periods due to the reduction in the accretion of the discount on the acquired loan portfolios and an increase in new loan originations.
Stock Repurchase Program
During 2015, Bay purchased 170,492 shares of its common stock, at an average price of $5.03 per share, pursuant to the stock purchase program that the Board of Directors approved on July 30, 2015. The program authorized Bay to purchase up to 250,000 shares of its common stock over a 12-month period in open market and/or through privately negotiated transactions, at Bay's discretion. During the first quarter of 2016, Bay purchased 79,508 shares of its common stock pursuant to the stock purchase program at an average price of $4.91 per share. Also during the first quarter of 2016, the Board of Directors authorized an additional stock purchase program, authorizing Bay to purchase an additional 250,000 shares of its common stock over a 12-month period in open market and/or through privately negotiated transactions, at Bay's discretion. As of March 31, 2016, Bay has repurchased 95,492 shares under this authorization at an average price of $4.95 per share. The Board may modify, suspend or discontinue the program at any time.
Balance Sheet Review
Total assets were $463.4 million at March 31, 2016, a decrease of $27.7 million, or 5.6%, when compared to December 31, 2015. Cash and interest bearing deposits decreased by $19.7 million or 57.1%, when compared to December 31, 2015 as the bank reduced wholesale short-term borrowings, while investment securities available for sale decreased by $8.3 million or 25.0%, over the same period. Loans held for sale decreased by $1.3, million or 26.8%, during the quarter ended March 31, 2016 and were offset by a $3.6 million, or 0.9%, increase in loans held for investment.
Total deposits were $365.9 million at March 31, 2016, a decrease of $1.5 million, or 0.4%, when compared to December 31, 2015. The decrease was primarily the result of a $3.8 million, or 3.7%, decrease in non-interest bearing accounts. The decrease in assets resulted in a $26.0 million decrease in short-term borrowings over the quarter.
Stockholders' equity decreased to $66.9 million at March 31, 2016 from $67.7 million at December 31, 2015 and increased from $65.7 million at March 31, 2015. The decrease since December 31, 2015 related to the ongoing stock repurchase program and a $0.1 million decrease in Accumulated Other Comprehensive Income offset by corporate earnings. The book value of Bay's common stock improved to $6.15 per share at March 31, 2016, compared to $6.12 per share at December 31, 2015.
Nonperforming assets, which consist of nonaccrual loans, troubled debt restructurings, accruing loans past due 90 days or more, and real estate acquired through foreclosure, decreased to $9.7 million at March 31, 2016 from $10.3 million at December 31, 2015. The decrease related primarily to decreases in nonaccrual loans and troubled debt restructurings. Nonperforming assets represented 2.1% of total assets at March 31, 2016, which, due to lower reported assets, was unchanged from December 31, 2015.
At March 31, 2016, the Bank remained above all "well-capitalized" regulatory requirement levels. The Bank's tier 1 risk-based capital ratio was 16.20% at March 31, 2016 as compared to 16.14% at December 31, 2015 and 16.22% at March 31, 2015. Liquidity remained strong due to managed cash and cash equivalents, borrowing lines with the FHLB of Atlanta, the Federal Reserve and correspondent banks, and the size and composition of the investment portfolio.
Review of Financial Results
Net income for the three months ended March 31, 2016 was $0.19 million compared to net income of $0.34 million for the same period of 2015. Individual categories reflect variability between years.
Net interest income decreased by $0.6 million for the quarter ended March 31, 2016 when compared to the same period of 2015. The decrease was the result of a $0.6 million decrease in net discount accretion recognized into income when compared to the same period of 2015. Excluding the net discount accretion impact, Bay was able to offset decreases in earning asset yield, with a reduction in deposit costs due to pricing discipline and a favorable change in deposit mix and effective utilization of short-term wholesale funding alternatives. The net interest margin for the quarter ended March 31, 2016 decreased to 4.20% from 4.73% for the same period of 2015. As of March 31, 2016, the remaining net loan discounts on the Bank's acquired loan portfolio totaled $9.0 million.
Noninterest income for the three months ended March 31, 2016 was $1.2 million compared to $1.2 million for the same period of 2015. A $0.24 million net decrease in mortgage banking fees and gains were offset by a $0.2 million increase in gains on security sales and redemptions during the quarter ended March 31, 2016. Expectations are for increased mortgage banking fees and gains to expand throughout 2016.
Noninterest expense reduction continues as a key focus for 2016 net income improvement. For the three months ended March 31, 2016, noninterest expense was $5.3 million compared to $5.7 million for the same period of 2015. The contributors to the decrease when compared to the quarter ended March 31, 2015 were broad based and led by decreases of $0.12 million in occupancy and equipment expenses, $0.06 million in loan collection costs, $0.06 million in data processing and item processing services and a $0.06 million in core deposit intangible amortization. The decrease is more substantial after consideration that 2016 contains $0.06 million in Hopkins Merger related expenses.
Bay Bancorp, Inc. Information
Bay Bancorp, Inc. is a financial holding company and a savings and loan holding company headquartered in Columbia, Maryland. Through Bay Bank, FSB, its federal savings bank subsidiary, Bay Bancorp, Inc. serves the community with a network of 11 branches strategically located throughout the Baltimore Metropolitan Statistical Area, particularly Baltimore City and the Maryland counties of Baltimore Washington corridor. The Bank serves small and medium size businesses, professionals and other valued customers by offering a broad suite of financial products and services, including on-line and mobile banking, commercial banking, cash management, mortgage lending and retail banking. The Bank funds a variety of loan types including commercial and residential real estate loans, commercial term loans and lines of credit, consumer loans and letters of credit. Additional information is available at www.baybankmd.com.
The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions. Although these statements reflect management's good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Bay Bancorp, Inc. with the Securities and Exchange Commission entitled "Risk Factors", as well as the cautionary statements contained in the other reports and documents that Bay Bancorp, Inc. files with or furnishes the SEC.
|BAY BANCORP, INC. AND SUBSIDIARY|
|CONSOLIDATED BALANCE SHEETS|
|March 31,||March 31,|
|2016||December 31,||2015||December 31,|
|Cash and due from banks||$||6,074,891||$||8,059,888||$||6,335,049||$||7,062,943|
|Interest bearing deposits with banks and federal funds sold||8,682,578||26,353,334||17,250,151||9,829,231|
|Total Cash and Cash Equivalents||14,757,469||34,413,222||23,585,200||16,892,174|
|Investment securities available for sale, at fair value||25,018,385||33,352,233||32,890,719||35,349,889|
|Investment securities held to maturity, at amortized cost||1,553,671||1,573,165||1,296,793||1,315,718|
|Restricted equity securities, at cost||1,870,395||2,969,595||1,291,095||1,862,995|
|Loans held for sale||3,560,752||4,864,344||12,494,787||7,233,306|
|Loans, net of deferred fees and costs||396,854,139||393,240,567||391,537,271||393,051,192|
|Less: Allowance for loan losses||(1,948,536||)||(1,773,009||)||(1,353,849||)||(1,294,976||)|
|Real estate acquired through foreclosure||1,501,896||1,459,732||1,501,135||1,480,472|
|Premises and equipment, net||4,903,369||5,060,802||5,398,901||5,553,957|
|Bank owned life insurance||5,641,561||5,611,352||5,516,549||5,485,377|
|Core deposit intangible||2,431,376||2,624,184||3,223,737||3,478,282|
|Deferred tax assets, net||2,793,504||2,723,557||4,117,563||3,214,100|
|Accrued interest receivable||1,372,456||1,271,871||1,300,297||1,306,111|
|Accrued taxes receivable||2,136,804||2,775,237||2,819,468||3,122,885|
|Defined benefit pension asset||-||-||-||680,668|
|Defined benefit pension liability||1,361,177||829,237||1,731,102||-|
|Accrued expenses and other liabilities||2,974,857||2,934,174||3,194,319||3,319,567|
|Common stock - par value $1.00, authorized 20,000,000 shares, issued and outstanding 10,887,932, 11,062,932, 11,014,517 and 11,014,517 shares as of March 31, 2016, December 31, 2015, March 31, 2015 and December 31, 2014, respectively.||10,887,932||11,062,932||11,014,517||11,014,517|
|Additional paid-in capital||42,730,014||43,378,927||43,274,558||43,228,950|
|Accumulated other comprehensive income||466,210||573,560||282,007||1,663,514|
|Total Stockholders' Equity||66,937,625||67,682,489||65,650,640||66,643,286|
|Total Liabilities and Stockholders' Equity||$||463,434,656||$||491,161,838||$||487,030,660||$||479,942,985|
|BAY BANCORP, INC. AND SUBSIDIARY|
|CONSOLIDATED STATEMENTS OF INCOME|
|Three Months Ended March 31,|
|Interest and fees on loans||$||4,844,320||$||5,507,767|
|Interest on loans held for sale||39,666||61,511|
|Interest and dividends on securities||211,384||257,436|
|Interest on deposits with banks and federal funds sold||19,045||10,612|
|Total Interest Income||5,114,415||5,837,326|
|Interest on deposits||309,177||484,401|
|Interest on short-term borrowings||63,795||13,776|
|Total Interest Expense||372,972||498,177|
|Net Interest Income||4,741,443||5,339,149|
|Provision for loan losses||298,000||275,109|
|Net interest income after provision for loan losses||4,443,443||5,064,040|
|Electronic banking fees||551,009||576,190|
|Mortgage banking fees and gains||158,547||393,642|
|Service charges on deposit accounts||70,614||79,017|
|Gain on securities sold||272,963||77,490|
|Total Noninterest Income||1,191,077||1,237,848|
|Salary and employee benefits||2,889,456||2,919,119|
|Occupancy and equipment expenses||871,195||995,233|
|Legal, accounting and other professional fees||310,561||368,028|
|Data processing and item processing services||281,992||342,673|
|FDIC insurance costs||77,479||106,311|
|Advertising and marketing related expenses||32,528||28,749|
|Foreclosed property expenses and OREO sales, net||74,479||60,991|
|Loan collection costs||20,800||87,510|
|Core deposit intangible amortization||192,808||254,545|
|Total Noninterest Expenses||5,329,997||5,700,512|
|Income before income taxes||304,523||601,376|
|Income tax expense||118,124||258,123|
|Basic net income per common share||$||0.02||$||0.03|
|Diluted net income per common share||$||0.02||$||0.03|
|BAY BANCORP, INC. AND SUBSIDIARY|
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY|
|For the Three Months Ended March 31, 2016 and 2015|
|Balance December 31, 2014||$||11,014,517||$||43,228,950||$||10,736,305||$||1,663,514||$||66,643,286|
|Other comprehensive income||-||-||(1,381,507||)||(1,381,507||)|
|Balance March 31, 2015||$||11,014,517||$||43,274,558||$||11,079,558||$||282,007||$||65,650,640|
|Balance December 31, 2015||$||11,062,932||$||43,378,927||$||12,667,070||$||573,560||$||67,682,489|
|Other comprehensive income||-||(107,350||)||(107,350||)|
|Repurchase of common stock||(175,000||)||(684,500||)||-||-||(859,500||)|
|Balance March, 2016||$||10,887,932||$||42,730,014||$||12,853,469||$||466,210||$||66,937,625|
|BAY BANK, FSB|
|To Be Well|
|To Be Considered||Prompt Corrective|
|Actual||Adequately Capitalized||Action Provisions|
|As of March 31, 2016:|
|Total Risk-Based Capital Ratio||$||67,204||16.68||%||$||32,231||8.00||%||$||40,289||10.00||%|
|Tier I Risk-Based Capital Ratio||$||65,255||16.20||%||$||24,174||6.00||%||$||32,231||8.00||%|
|Common Equity Tier I Capital Ratio||$||65,255||16.20||%||$||18,130||4.50||%||$||26,188||6.50||%|
|As of December 31, 2015:|
|Total Risk-Based Capital Ratio||$||67,238||16.58||%||$||32,443||8.00||%||$||40,553||10.00||%|
|Tier I Risk-Based Capital Ratio||$||65,465||16.14||%||$||24,332||6.00||%||$||32,443||8.00||%|
|Common Equity Tier I Capital Ratio||$||65,465||16.14||%||$||18,249||4.50||%||$||26,360||6.50||%|
|As of March 31, 2015:|
|Total Risk-Based Capital Ratio||$||64,172||16.57||%||$||30,990||8.00||%||$||38,738||10.00||%|
|Tier I Risk-Based Capital Ratio||$||62,818||16.22||%||$||23,243||6.00||%||$||30,990||8.00||%|
|Common Equity Tier I Capital Ratio||$||62,818||16.22||%||$||17,432||4.50||%||$||25,180||6.50||%|
|As of December 31, 2014:|
|Total Risk-Based Capital Ratio||$||62,743||16.66||%||$||30,132||8.00||%||$||37,665||10.00||%|
|Tier I Risk-Based Capital Ratio||$||61,448||16.31||%||$||15,066||4.00||%||$||22,599||6.00||%|
|BAY BANCORP, INC. AND SUBSIDIARY|
|SELECTED FINANCIAL DATA|
|Three Months Ended||Twelve Months Ended|
|March 31,||March 31,||December 31,||December 31,||December 31,|
|Loans (net of deferred fees and costs)||396,854,139||391,537,271||393,240,567||393,240,567||393,051,192|
|Allowance for loan losses||(1,948,536||)||(1,353,849||)||(1,773,009||)||(1,773,009||)||(1,294,976||)|
|Average Balances: (unaudited)|
|Loans (net of deferred fees and costs)||395,839,666||392,780,699||391,709,601||389,684,221||364,511,290|
|Annualized return on average assets||0.16||%||0.29||%||0.43||%||0.40||%||0.66||%|
|Annualized return on average equity||1.11||%||2.08||%||3.10||%||2.94||%||4.93||%|
|Yield on average interest-earning assets||4.53||%||5.17||%||4.85||%||5.10||%||5.60||%|
|Rate on average interest-bearing liabilities||0.48||%||0.64||%||0.52||%||0.58||%||0.42||%|
|Net interest spread||4.05||%||4.53||%||4.33||%||4.51||%||5.18||%|
|Net interest margin||4.20||%||4.73||%||4.49||%||4.70||%||5.31||%|
|Book value per share||$||6.15||$||5.96||$||6.12||$||6.12||$||6.05|
|Basic net income per share||0.02||0.03||0.05||0.17||0.29|
|Diluted net income per share||0.02||0.03||0.05||0.17||0.29|
|March 31,||March 31,||December 31,|
|Asset Quality Ratios:|
|Allowance for loan losses to loans||0.49||%||0.35||%||0.45||%|
|Nonperforming loans to total loans||2.07||%||3.59||%||2.26||%|
|Nonperforming assets to total assets||2.10||%||3.21||%||2.10||%|
|Net charge-offs annualized to avg. loans||0.03||%||0.06||%||0.03||%|
|Capital Ratios (Bay Bank, FSB):|
|Total risk-based capital ratio||16.68||%||16.57||%||16.58||%|
|Common equity tier 1 capital ratio||16.20||%||16.22||%||16.14||%|
|Tier 1 risk-based capital ratio||16.20||%||16.22||%||16.14||%|