Bay Banks of Virginia, Inc. Reports Second Quarter and First Half 2018 Results

Bay Banks of Virginia, Inc. Reports Second Quarter and First Half 2018 Results

RICHMOND, Va., Aug. 1, 2018 /PRNewswire/ — Bay Banks of Virginia, Inc. (OTCQB: BAYK), holding company of Virginia Commonwealth Bank and VCB Financial Group, Inc., reported financial results for the second quarter and first half of 2018.

The company reported net income of $946 thousand, or $0.07 per diluted share, for the second quarter of 2018 compared to $1.1 million, or $0.09 per diluted share, for the first quarter of 2018, and $557 thousand, or $0.06 per diluted share, for the second quarter of 2017. For the first half of 2018, the company reported net income of $2.1 million, or $0.16 per diluted share, compared to $380 thousand, or $0.05 per diluted share, for the first half of 2017.  

Randal R. Greene, President and Chief Executive Officer, commented: “Earnings for the second quarter were less than adequate; however, as I reflect on the first half of 2018, there were many highlights. Net new loan growth in the first half was strong considering the run-off of nearly $40 million of purchased portfolio loans including those acquired in the Virginia BanCorp merger. Comparing results for the first half of 2018 to the first half of 2017, we are realizing positive leverage from our larger balance sheet and our asset quality metrics continue to improve. In the first half of 2018, we transitioned several key management positions and the bank is stronger for it.” 

Operating Results

Second Quarter 2018 compared to First Quarter 2018

  • Income before income taxes for the second quarter of 2018 was $1.1 million compared to $1.4 million for the first quarter of 2018.
  • Interest income for the three months ended June 30, 2018 was $10.5 million, on average interest-earning assets of $913.5 million, compared to $10.7 million for the three months ended March 31, 2018, on average interest-earning assets of $905.0 million. Interest income in the second quarter of 2018 included accretion of acquired loan discounts of $547 thousand, while interest income in the first quarter of 2018 included $503 thousand of accretion of acquired loan discounts. Interest income in the second quarter of 2018 included negative adjustments totaling $145 thousand for amounts reported in the prior quarter.
  • Interest expense was $2.3 million and $2.0 million for the second quarter of 2018 and the first quarter of 2018, respectively, and cost of funds was 1.08% and 0.95% for the consecutive quarter periods. Higher funding cost in the second quarter period was primarily due to higher costs of deposits.  
  • Net interest margin was 3.60% for the three months ended June 30, 2018 compared to 3.83% for the three months ended March 31, 2018. Net interest margin excluding accretion of acquired loan discounts and amortization of fair value marks on time deposits for the three months ended June 30, 2018 was 3.34%1 compared to 3.58%1 for the three months ended March 31, 2018. Lower net interest margin in the second quarter period was primarily due to the interest income adjustment noted above and higher funding costs in the second quarter of 2018.
  • Provision for loan losses was ($348) thousand for the second quarter of 2018, while provision for loan losses in the first quarter of 2018 was $320 thousand. The recovery of loan losses in the second quarter of 2018 is primarily due to the decline of reserve levels for a select portfolio of consumer loans as these loan balances continue to decline.
  • Noninterest income for both the three months ended June 30, 2018 and March 31, 2018 was $1.2 million. Noninterest income in the first quarter of 2018 included a gain of $352 thousand on the curtailment of the company’s post-retirement benefit plan effective March 1, 2018.
  • Noninterest expenses for the three months ended June 30, 2018 and March 31, 2018 were $8.6 million and $8.1 million, respectively. In the first quarter of 2018, merger-related expenses were $363 thousand and costs associated with the succession of the company’s CFO and in the completion of the company’s 2017 year-end reporting totaled $1.0 million, while costs related to these activities were approximately $200 thousand in the second quarter of 2018.

First Half 2018 compared to First Half 2017

  • Income before income taxes for the first half of 2018 was $2.5 million compared to $513 thousand for the first half of 2017. Results for the first half of 2017 include the operations of Virginia BanCorp, Inc. since the effective date of the merger, April 1, 2017. 
  • Interest income for the six months ended June 30, 2018 was $21.2 million, on average interest-earning assets of $909.0 million, compared to $13.7 million for the six months ended June 30, 2017, on average interest-earning assets of $621.5 million. Average interest-earning assets in the first half of 2017 included those acquired in the merger from the effective date of the merger. Interest income in the first half of 2018 included accretion of acquired loan discounts of $1.1 million, while interest income in the first half of 2017 included $451 thousand of accretion of acquired loan discounts.
  • Interest expense was $4.4 million and $2.4 million for the six months ended June 30, 2018 and 2017, respectively, and cost of funds was of 1.05% and 0.82% for the respective periods. Average interest-bearing liabilities were $716.7 million and $518.6 million for the first half of 2018 and 2017, respectively. Average interest-bearing liabilities in 2017 included those assumed in the merger from the effective date of the merger.
  • Net interest margin was 3.72% for the six months ended June 30, 2018 compared to 3.68% for the six months ended June 30, 2017. Net interest margin excluding accretion of acquired loan discounts and amortization of fair value marks on time deposits for the six months ended June 30, 2018 was 3.46%1 compared to 3.50%1 for the six months ended June 30, 2017.
  • Provision for loan losses was ($28) thousand for the first half of 2018, while provision for loan losses in the first half of 2017 was $758 thousand.
  • Noninterest income for the six months ended June 30, 2018 and 2017 was $2.3 million and $2.0 million, respectively.
  • Noninterest expenses for the six months ended June 30, 2018 and 2017 were $16.7 million and $12.0 million, respectively. As noted, noninterest expenses for the first half of 2017 include the operations of Virginia BanCorp from the effective date of the merger. Merger-related expenses were $363 thousand and $985 thousand for the six months ended June 30, 2018 and 2017, respectively. Expenses associated with the succession of the company’s CFO and fees incurred in the first half of 2018 in the completion of the company’s 2017 year-end reporting totaled approximately $1.2 million.

Second Quarter 2018 compared to Second Quarter 2017

  • Income before income taxes for the second quarter of 2018 was $1.1 million compared to $811 thousand for the second quarter of 2017.
  • Interest income for the three months ended June 30, 2018 was $10.5 million, on average interest-earning assets of $913.5 million, compared to $8.9 million for the three months ended June 30, 2017, on average interest-earning assets of $790.1 million. Interest income in the second quarter of 2018 included accretion of acquired loan discounts of $547 thousand, while interest income in the second quarter of 2017 included $451 thousand of accretion of acquired loan discounts.
  • Interest expense was $2.3 million and $1.4 million for the second quarter of 2018 and the second quarter of 2017, respectively, and the cost of funds was 1.08% and 0.76% for the quarter over quarter periods.    
  • Net interest margin was 3.60% for the three months ended June 30, 2018 compared to 3.80% for the three months ended June 30, 2017. Net interest margin excluding accretion of acquired loan discounts and amortization of fair value marks on time deposits for the three months ended June 30, 2018 was 3.34%1 compared to 3.51%1 for the three months ended June 30, 2017.
  • Provision for loan losses was ($348) thousand for the second quarter of 2018, while provision for loan losses in the second quarter of 2017 was $568 thousand.
  • Noninterest income for the three months ended June 30, 2018 and 2017 was $1.2 million and $1.1 million, respectively.
  • Noninterest expenses for the three months ended June 30, 2018 and 2017 were $8.6 million and $7.2 million, respectively. Merger-related expenses were $685 thousand in the second quarter of 2017, while no merger-related expenses were reported in the second quarter of 2018. Expenses associated with the completion of the company’s 2017 year-end reporting and succession of the company’s CFO totaled approximately $200 thousand in the second quarter of 2018.

Balance Sheet

  • Loans, net of allowance for loan losses, were $794.4 million at June 30, 2018 compared to $758.7 million at December 31, 2017, an annualized growth rate of over 9%. Excluding the pay-down of approximately $38 million in the first six months of 2018 of purchased portfolio loans, including those acquired in the Virginia BanCorp merger, gross loan growth on an annualized basis was approximately 19%. 
  • Total assets were $983.2 million at June 30, 2018 compared to $970.6 million at December 31, 2017.
  • Deposits were $775.1 million at June 30, 2018 compared to $761.8 million at December 31, 2017. Noninterest-bearing accounts comprised 14.1% of total deposits, an increase from 13.5% at December 31, 2017. 
  • Shareholders’ equity was $115.7 million and $114.6 million at June 30, 2018 and December 31, 2017, respectively. 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 $7.811 and $7.711 at June 30, 2018 and December 31, 2017, respectively. Capital ratios for Virginia Commonwealth Bank were above regulatory minimum guidelines for well-capitalized banks as of June 30, 2018 and December 31, 2017.
  • Return on average assets for the six months ended June 30, 2018 and 2017, annualized, was 0.43% and 0.12%, respectively, while return on average equity for the same periods, annualized, was 3.63% and 2.65%, respectively.

Asset Quality

  • Nonperforming assets were $6.9 million, or 0.71% of total assets, as of June 30, 2018, compared to $9.5 million, or 0.95% of total assets, as of March 31, 2018. Net charge-offs, annualized, to average loans was 0.16% and 0.09% for the six and three months ended June 30, 2018 and March 31, 2018, respectively.
  • The ratio of allowance for loan losses to total gross loans was 0.89% and 1.00% at June 30, 2018 and March 31, 2018, respectively. The company’s allowance for loan losses does not include discounts recorded on acquired loans. The ratio of allowance for loan losses plus remaining discounts on acquired loans to total gross loans (adding the remaining discounts on acquired loans) was 1.46%1 and 1.65%1 at June 30, 2018 and March 31, 2018, respectively.

Outlook

Greene concluded: “I continue to believe we are well-positioned to capture an under-served segment in our target markets. Our pipeline of opportunities in the greater Richmond area is strong, though we are pursuing cautiously due to the recent increase in deposit costs. Our branch and loan production office in Virginia Beach are open for business and we are actively pursuing both loan and deposit opportunities. As previously noted, we are addressing infrastructure needs to support and mitigate the risks that come with our larger organization. At the same time, we are keenly focused on deposit generation and expense management, two areas that are lagging. We’ve launched several initiatives to address both and I believe the results of these initiatives will deliver improving financial results.”

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 1930’s, Virginia Commonwealth Bank is headquartered in Richmond, Virginia. With 19 banking offices, including one production office, located throughout the greater Richmond area, the Northern Neck region, the Tri-Cities area of Petersburg, Hopewell and Colonial Heights, Middlesex County, Suffolk, and Virginia Beach, the bank serves businesses, professionals, and consumers with a wide variety of financial services, including retail and commercial banking, and mortgage banking. VCB Financial Group provides management services for personal and corporate trusts, including estate planning, estate settlement and trust administration, along with 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: the ability to successfully implement integration plans associated with the Virginia BanCorp merger (the “Merger”), which integration may be more difficult, time-consuming or costly than expected; the ability to achieve the cost savings and synergies contemplated by the Merger within the expected timeframe; disruptions to customer and employee relationships and business operations caused by the Merger; changes in interest rates and general economic conditions; the legislative/regularity 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; and tax and accounting rules, principles, polices 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 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 (Unaudited)

CONSOLIDATED BALANCE SHEETS

June 30, 2018

December 31, 2017 (1)

(Dollars in thousands, except share data)

(unaudited)

ASSETS

   Cash and due from banks

$                                 8,319

$                                 9,396

   Interest-bearing deposits

28,263

41,971

   Certificates of deposit

3,224

3,224

   Federal funds sold

1,944

6,961

   Available-for-sale securities, at fair value

74,322

77,153

   Restricted securities

6,190

5,787

   Loans receivable, net of allowance for loan losses

     of $7,113 and $7,770, respectively

794,443

758,726

   Loans held for sale

669

1,651

   Premises and equipment, net

18,079

17,463

   Accrued interest receivable

2,954

3,194

   Other real estate owned, net

3,501

4,284

   Bank owned life insurance

19,024

18,773

   Goodwill

10,374

10,374

   Mortgage servicing rights

977

999

   Core deposit intangible

2,576

2,991

   Other assets

8,357

7,609

Total assets

$                             983,216

$                             970,556

LIABILITIES

   Noninterest-bearing deposits

$                             108,943

$                             103,037

   Savings and interest-bearing demand deposits

296,206

299,820

   Time deposits

369,917

358,989

     Total deposits

775,066

761,846

   Securities sold under repurchase agreements

7,008

9,498

   Federal Home Loan Bank advances

70,000

70,000

   Subordinated notes, net of issuance costs

6,885

6,877

   Other liabilities

8,533

7,781

     Total liabilities

867,492

856,002

SHAREHOLDERS’ EQUITY 

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

     outstanding – 13,226,096 and 13,203,605 shares, respectively) (2)

66,130

66,018

   Additional paid-in capital

37,207

37,142

   Unearned employee stock ownership plan shares

(1,047)

(1,129)

   Retained earnings

15,749

13,679

   Accumulated other comprehensive loss, net

(2,315)

(1,156)

     Total shareholders’ equity

115,724

114,554

Total liabilities and shareholders’ equity

$                             983,216

$                             970,556

(1) Derived from audited December 31, 2017 Consolidated Financial Statements.

(2) Preferred stock is authorized; however, none was outstanding as of June 30, 2018 and December 31, 2017.

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

For the three months ended

(Dollars in thousands, except per share data)

June 30, 2018

March 31, 2018

June 30, 2017

INTEREST INCOME

Loans, including fees

$                     9,745

$                     9,984

$                     8,326

Securities:

  Taxable

497

397

348

  Tax-exempt

117

120

114

Federal funds sold

51

74

33

Interest-bearing deposit accounts

80

98

53

Certificates of deposit

18

19

18

   Total interest income

10,508

10,692

8,892

INTEREST EXPENSE

Deposits

1,796

1,604

1,077

Securities sold under repurchase agreements

4

3

4

Subordinated notes

128

128

119

Federal Home Loan Bank advances

386

313

248

   Total interest expense

2,314

2,048

1,448

Net interest income

8,194

8,644

7,444

Provision for (recovery of) loan losses

(348)

320

568

    Net interest income after provision for loan losses

8,542

8,324

6,876

NON-INTEREST INCOME

Income from fiduciary activities

198

247

229

Service charges and fees on deposit accounts

152

135

246

Non-deposit product income

283

132

115

Interchange fees, net

124

(8)

129

Other service charges and fees

30

30

45

Secondary market lending income

244

133

86

Increase in cash surrender value of bank owned life insurance

124

127

133

Net gains on available-for-sale securities

7

Net losses on disposition of other assets

(69)

Gain on curtailment of post-retirement benefit plan

352

Other income

9

91

91

   Total non-interest income

1,164

1,170

1,081

NON-INTEREST EXPENSE

Salaries and employee benefits

4,273

4,106

3,321

Occupancy

882

795

693

Data processing

837

548

394

Bank franchise tax

178

176

142

Telecommunications

131

106

76

FDIC assessments

187

183

111

Foreclosed property

53

12

59

Consulting

345

383

97

Advertising and marketing

153

68

54

Directors’ fees

69

168

209

Audit and accounting fees

240

363

217

Legal

119

133

13

Merger related

363

685

Intangible amortization

203

211

234

Net other real estate owned (gains) losses

84

(141)

(3)

Other

809

646

844

   Total non-interest expense

8,563

8,120

7,146

Income before income taxes

1,143

1,374

811

Income tax expense 

197

250

254

   Net income

$                        946

$                     1,124

$                        557

Basic and diluted earnings per share

$                       0.07

$                       0.09

$                       0.06

BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited) – Continued

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

For the six months ended

(Dollars in thousands, except per share data)

June 30, 2018

June 30, 2017

INTEREST INCOME

Loans, including fees

$                   19,729

$                   12,714

Securities:

  Taxable

894

617

  Tax-exempt

237

228

Federal funds sold

126

34

Interest-bearing deposit accounts

178

60

Certificates of deposit

36

37

   Total interest income

21,200

13,690

INTEREST EXPENSE

Deposits

3,400

1,707

Federal funds purchased

10

Securities sold under repurchase agreements

7

7

Subordinated notes

256

236

Federal Home Loan Bank advances

699

402

   Total interest expense

4,362

2,362

Net interest income

16,838

11,328

Provision for (recovery of) loan losses

(28)

758

    Net interest income after provision for loan losses

16,866

10,570

NON-INTEREST INCOME

Income from fiduciary activities

445

474

Service charges and fees on deposit accounts

287

458

Non-deposit product income

414

195

Interchange fees, net

116

204

Other service charges and fees

61

77

Secondary market lending income

376

201

Increase in cash surrender value of bank owned life insurance

251

208

Net gains on available-for-sale securities

2

Net losses on disposition of other assets

(69)

Gain on curtailment of post-retirement benefit plan

352

Other income

101

152

   Total non-interest income

2,334

1,971

NON-INTEREST EXPENSE

Salaries and employee benefits

8,379

6,145

Occupancy

1,677

1,132

Data processing

1,385

598

Bank franchise tax

353

218

Telecommunications

237

104

FDIC assessments

370

196

Foreclosed property

65

69

Consulting

729

151

Advertising and marketing

221

127

Directors’ fees

236

331

Audit and accounting fees

603

245

Legal

249

95

Merger related

363

985

Intangible amortization

414

234

Net other real estate owned (gains) losses

(57)

93

Other

1,459

1,305

   Total non-interest expense

16,683

12,028

Income before income taxes

2,517

513

Income tax expense 

447

133

   Net income

$                     2,070

$                        380

Basic and diluted earnings per share

$                       0.16

$                       0.05

Bay Banks of Virginia, Inc.

Supplemental Financial Data (Unaudited) – Continued

As of and for the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30, 

(Dollars in thousands, except per share amounts)

2018

2018

2017

2017

2017

Select Consolidated Balance Sheet Data

Total assets

$         983,216

$         994,676

$          970,556

$           959,936

$      867,392

Cash, interest-bearing deposits and federal funds sold

38,526

63,696

58,328

75,223

41,011

Available-for-sale securities, at fair value

74,322

75,434

77,153

71,893

54,448

Loans:

    Mortgage loans on real estate

644,202

624,424

609,637

594,761

522,458

    Commercial and industrial

124,563

129,225

114,093

99,637

85,939

    Consumer loans

32,767

37,011

42,566

48,640

41,229

Loans receivable

801,532

790,660

766,296

743,038

649,626

Unamortized net deferred loan costs

24

228

200

1,590

316

Allowance for loan losses (ALL)

(7,113)

(7,923)

(7,770)

(4,920)

(4,241)

Net loans

794,443

782,965

758,726

739,708

645,701

Loans held for sale

669

414

1,651

162

55,620

Other real estate owned, net

3,501

2,593

4,284

5,159

5,360

Total liabilities

$         867,492

$         879,757

$          856,002

$           842,148

$      782,914

Deposits:

    Noninterest-bearing demand deposits

108,943

124,572

103,037

99,531

97,299

    Savings and interest-bearing deposits

296,206

299,216

299,820

297,150

282,056

    Time deposits

369,917

373,163

358,989

338,732

309,619

Total deposits

775,066

796,951

761,846

735,413

688,974

Securities sold under repurchase agreements

7,008

6,551

9,498

17,091

10,786

Federal Home Loan Bank advances

70,000

60,000

70,000

75,000

70,000

Subordinated notes, net of issuance costs

6,885

6,881

6,877

6,873

6,868

Shareholders’ equity

115,724

114,919

114,554

117,788

84,478

Condensed Consolidated Statements of Operations

Interest income

$           10,508

$           10,692

$            10,514

$               9,496

$          8,892

Interest expense

2,314

2,048

1,945

1,694

1,448

Net interest income

8,194

8,644

8,569

7,802

7,444

Provision for (recovery of) loan losses

(348)

320

3,101

1,075

568

Non-interest income

1,164

1,170

733

1,070

1,081

Non-interest expense

8,563

8,120

8,204

6,782

7,146

Income (loss) before taxes

1,143

1,374

(2,003)

1,015

811

Income tax expense

197

250

391

273

254

Net income (loss)

$                946

$             1,124

$            (2,394)

$                  742

$             557

Bay Banks of Virginia, Inc.

Supplemental Financial Data (Unaudited) – Continued

As of and for the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30, 

(Dollars in thousands, except per share amounts)

2018

2018

2017

2017

2017

Per Share Data

Basic earnings (loss) per share

$               0.07

$               0.09

$              (0.18)

$                 0.07

$            0.06

Diluted earnings (loss) per share

0.07

0.09

(0.18)

0.07

0.06

Dividends per share

0.04

0.04

0.04

Book value per share

8.75

8.69

8.68

8.93

8.99

Tangible book value per share (1)

7.81

7.74

7.71

7.98

7.64

Shares outstanding at end of period

13,226,096

13,223,096

13,203,605

13,193,983

9,399,138

Weighted average shares outstanding, basic

13,059,604

13,038,593

13,036,057

10,488,227

9,374,157

Weighted average shares outstanding, diluted

13,126,419

13,106,214

13,108,400

10,557,623

9,445,338

Performance Ratios (tax-equivalent basis):

Yield on average interest-earning assets

4.61%

4.74%

4.69%

4.40%

4.46%

Cost of funds

1.08%

0.95%

0.92%

0.83%

0.76%

Cost of deposits

0.93%

0.83%

0.81%

0.72%

0.64%

Net interest spread

3.37%

3.64%

3.64%

3.43%

3.66%

Net interest margin (NIM)

3.60%

3.83%

3.82%

3.62%

3.80%

NIM, excluding acquisition accounting adjustments (1)

3.34%

3.58%

3.31%

3.39%

3.51%

Average interest-earnings assets to total average assets

92.37%

92.10%

93.30%

94.99%

92.83%

Return on average assets (annualized)

0.38%

0.46%

-0.99%

0.32%

0.26%

Return on average equity (annualized)

3.28%

3.92%

-8.24%

3.10%

2.65%

Merger related expense

$                     –

$                363

$                 850

$                  141

$             685

Average assets

988,946

982,616

965,246

913,664

851,071

Average interest-earning assets

913,486

904,991

900,617

867,853

790,072

Average interest-bearing liabilities

747,227

747,813

742,043

715,878

667,735

Average shareholders’ equity

115,321

114,736

116,171

95,650

84,170

Shareholders’ equity to total assets ratio

11.77%

11.55%

11.80%

12.27%

9.74%

Asset Quality Data and Ratios:

Nonaccrual loans

$             3,474

$             6,892

$              6,496

$               4,799

$          5,362

Loans past due 90 days or more and still accruing (excludes

purchased credit-impaired loans)

48

Other real estate owned, net

3,501

2,593

4,284

5,159

5,360

Total non-performing assets

6,975

9,485

10,828

9,958

10,722

Net charge-offs (recoveries)

462

167

948

397

320

Net charge-offs to average loans (annualized)

0.23%

0.09%

0.50%

0.22%

0.20%

Total non-performing assets to total assets

0.71%

0.95%

1.11%

1.04%

1.24%

Gross loans to total assets

81.52%

79.49%

78.95%

77.40%

74.89%

ALL to gross loans

0.89%

1.00%

1.01%

0.66%

0.65%

ALL plus acquisition accounting adjustments (discounts) on

acquired loans to gross loans (1)

1.46%

1.65%

1.76%

1.38%

1.53%

(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 Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30, 

(Dollars in thousands, except per share amounts)

2018

2018

2017

2017

2017

Reconciliation of Non-GAAP Financial Measures (1)

NIM, excluding acquisition accounting adjustments

Interest income

$        10,508

$        10,692

$           10,514

$              9,496

$        8,892

Add: tax-equivalent yield adjustment for tax-exempt securities (a)

31

32

21

60

59

Less: accretion of discounts on acquired loans

547

503

1,047

409

451

Interest income, adjusted

9,992

10,221

9,488

9,147

8,500

Average interest-earning assets

$      913,486

$      904,991

$         900,617

$          867,853

$    790,073

Yield on interest-earning assets, excluding accretion of discounts on

acquired loans (annualized)

4.38%

4.52%

4.21%

4.22%

4.30%

Interest expense

$          2,314

$          2,048

$             1,944

$              1,694

$        1,448

Add: amortization of premium on acquired time deposits

42

68

88

103

117

Interest expense, adjusted

2,356

2,116

2,032

1,797

1,565

Net interest income, excluding acquisition accounting adjustments

7,637

8,105

7,456

7,350

6,935

Average interest-bearing liabilities

$      747,227

$      747,813

$         742,043

$          715,878

$    667,735

Cost of interest-bearing liabilities, excluding amortization of premium on acquired time deposits (annualized)

1.26%

1.13%

1.10%

1.00%

0.94%

NIM, excluding acquisition accounting adjustments

3.34%

3.58%

3.31%

3.39%

3.51%

ALL plus discounts on acquired loans to gross loans

Allowance for loan losses

$          7,113

$          7,923

$             7,770

$              4,920

$        4,241

Add: discounts on acquired loans

4,655

5,212

5,792

5,375

5,812

ALL plus discounts on acquired loans

11,768

13,135

13,562

10,295

10,053

Gross loans + discounts on acquired loans

$      806,211

$      796,100

$         771,459

$          745,083

$    656,288

ALL plus discounts on acquired loans to gross loans

1.46%

1.65%

1.76%

1.38%

1.53%

Tangible book value per share

Total shareholders’ equity

$      115,724

$      114,919

$         114,554

$          117,788

$      84,478

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

12,409

12,570

12,737

12,492

12,642

Tangible shareholders’ equity

$      103,316

$      102,350

$         101,818

$          105,297

$      71,837

Shares outstanding at end of period

13,226,096

13,223,096

13,203,605

13,193,983

9,399,138

Tangible book value per share

$            7.81

$            7.74

$               7.71

$                7.98

$          7.64

(a) Assumes a federal income tax rate of 21% for the 2018 periods and for the three months-ended December 31, 2017 and a 34% federal income tax 

rate for the other 2017 periods ended presented.

(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. NIM, excluding acquisition accounting adjustments, ALL plus discounts on acquired loans to gross loans, and tangible book value per share are supplemental financial measures that are not required nor presented in accordance with GAAP.  Management believes ALL plus discounts on acquired loans as a percentage of gross loans and tangible book value per share are meaningful because they are measures management uses to assess asset quality and capital levels, respectively.  Management believes that NIM, excluding acquisition accounting adjustments, is meaningful because management uses it 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.

SOURCE Bay Banks of Virginia, Inc.

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