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

RICHMOND, Va., Jan. 28, 2020 /PRNewswire/ -- Bay Banks of Virginia, Inc. 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.

 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/bay-banks-of-virginia-inc-reports-fourth-quarter-and-full-year-2019-results-300994814.html

SOURCE Bay Banks of Virginia, Inc.

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