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Section 1: 8-K (8-K)

bayk-8k_20201029.htm
false 0001034594 0001034594 2020-10-29 2020-10-29

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): October 29, 2020

 

BAY BANKS OF VIRGINIA, INC.

(Exact Name of Registrant as Specified in Charter)

 

 

Virginia

 

0-22955

 

54-1838100

(State or Other Jurisdiction

 

(Commission File Number)

 

(IRS Employer

of Incorporation)

 

 

 

Identification No.)

 

1801 Bayberry Court, Suite 101, Richmond, VA 23226

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (844) 404-9668

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 


Item 2.02 Results of Operations and Financial Condition.

On October 29, 2020, Bay Banks of Virginia, Inc. (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 2020.

A copy of the Company’s press release is attached and furnished herewith as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

 

Exhibit No.

 

Description

 

 

 

 

 

99.1

 

Press release, dated October 29, 2020, announcing the Company’s financial results for the three and nine months ended September 30, 2020.

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

BAY BANKS OF VIRGINIA, INC.

 

 

 

 

 

 

 

 

 

By:

  /s/ Judy C. Gavant

 

 

Judy C. Gavant

 

Executive Vice President and Chief Financial Officer

 

October 29, 2020

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

bayk-ex991_6.htm

Exhibit 99.1

Bay Banks of Virginia, Inc. Reports Third Quarter and Year-to-date 2020 Results

RICHMOND, VA, October 29, 2020 /PRNewswire/ -- Bay Banks of Virginia, Inc. (OTCQB: BAYK), holding company of Virginia Commonwealth Bank and VCB Financial Group, Inc., announced financial results for the three and nine months ended September 30, 2020.

On August 13, 2020, the company and Blue Ridge Bankshares, Inc. (NYSE American: BRBS)  (“Blue Ridge”) jointly announced the signing of a definitive merger agreement pursuant to which the companies will combine in an all-stock merger (the “Merger”) to create a leading Virginia-based community bank. Under the terms of the merger agreement, shareholders of the company will receive 0.50 shares of Blue Ridge common stock for each share of the company’s common stock they own. Upon completion of the Merger, the company’s shareholders will own approximately 54% and Blue Ridge shareholders will own approximately 46% of the combined company’s stock. The Merger is subject to customary closing conditions, including regulatory approvals and approval from the shareholders of both companies. The company anticipates the Merger will close in the first quarter of 2021.

The company reported net income of $1.5 million, or $0.11 per diluted share, for the third quarter of 2020 compared to a net loss of $8.1 million or $(0.62) per diluted share, for the second quarter of 2020 and net income of $1.8 million, or $0.14 per diluted share, for the third quarter of 2019. For the nine months ended September 30, 2020, the company reported a net loss of $6.6 million, or $(0.51) per diluted share, compared to net income of $5.1 million, or $0.39 per diluted share, for the nine months ended September 30, 2019. Net loss for the nine months ended September 30, 2020 included a $10.4 million ($9.8 million after tax1), or $0.751 per diluted share, charge for the impairment of goodwill reported in the second quarter of 2020.  For the three months ended September 30, 2020, results included approximately $1.5 million ($1.4 million after tax1), or $0.111 per diluted share, of expenses incurred in connection with the anticipated Merger.

In addition to the goodwill impairment charge and Merger-related expenses, net income (loss) for the three and nine months ended September 30, 2020 included loan loss provision expense of $869 thousand and $5.7 million, respectively. A significant portion of the provision for loan losses in 2020 relates to estimated reserve needs as a result of the COVID-19 pandemic. Excluding the $10.4 million goodwill impairment charge and $1.5 million of Merger-related expenses, pre-tax, pre-loan loss provision income for the third quarter of 2020 was $4.5 million1 compared to $4.1 million1 and $2.8 million1 for the second quarter of 2020 and third quarter of 2019, respectively.

The company has actively participated in the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act, closing nearly 700 loans totaling $56.8 million and receiving $2.4 million in processing fees. Of the processing fees received, $287 thousand and $532 thousand were recognized in interest income in the third-quarter and year-to-date periods ended September 30, 2020, while the remaining fees were deferred and will be recognized over the life of the loans, accelerated for pre-payments.

From the onset of the global pandemic, the company has proactively addressed the needs of its commercial and individual borrowers, modifying loans allowing for the short-term deferral of principal payments or of principal and interest payments. The following table presents the loan balances and number by loan type and the percentage these loans comprise within each loan type for modified loans as of September 30, 2020. Of the following loans, $39.5 million were to borrowers in the hotel/motel industry, $18.6 million to borrowers in the restaurant and restaurant-related industry, and $9.3 million to borrowers in the retail industry.


Loan Type

Loan Count

 

Principal Balance (in thousands)

 

% of Loan Type

 

Mortgage loans on real estate:

 

 

 

 

 

 

 

 

 

Residential first mortgages

 

14

 

$

2,886

 

1%

 

Commercial mortgages (non-owner occupied)

 

23

 

 

47,102

 

17%

 

Construction, land and land development

 

13

 

 

22,879

 

17%

 

Commercial mortgages (owner occupied)

 

17

 

 

10,520

 

14%

 

Residential revolving and junior mortgages

 

1

 

 

257

 

1%

 

Commercial and industrial

 

87

 

 

17,575

 

9%

 

Consumer

 

2

 

 

8

 

0%

 

     Total

 

157

 

$

101,227

 

10%

 

Randal R. Greene, President and Chief Executive Officer, commented: “The global pandemic and resulting government mandates have caused tremendous hardships for families and businesses. Last quarter, I stated we’d begin in the last half of the year to gain some clarity into the lasting impact the COVID-19 virus may have on the financial health of our borrowers. Our borrowers have benefited from payment deferrals and, I’m pleased to report, many are back to paying status during the third quarter. Even though there is some improvement, some of our borrowers are still struggling with the extended economic downturn. Our branch lobbies are open at this time, though branch traffic is not at pre-pandemic levels; I believe the virus has accelerated the adoption of digital access. In spite of these difficult times, our employees have supported our customers, grown our loan portfolio and deposit franchise, and driven increased operating profitability. Excluding the effect of the unusual expense items, the company earned $4.5 million1 on a pre-tax, pre-loan loss provision basis, exceeding any levels earned in recent periods.”

Operating Results

Third Quarter 2020 compared to Second Quarter 2020

 

 

Income before income taxes for the third quarter of 2020 was $2.1 million compared to a loss before income taxes of $8.3 million for the second quarter of 2020. Income before income taxes for the third quarter of 2020 included $1.5 million of Merger-related expenses, while the loss before income taxes for the second quarter of 2020 included a $10.4 million goodwill impairment charge, as reported previously.

 

Interest income for the three months ended September 30, 2020 was $12.1 million, on average interest-earning assets of $1.19 billion, compared to $12.0 million, on average interest-earning assets of $1.16 billion, for the three months ended June 30, 2020. Interest income in the third and second quarters of 2020 included accretion of acquired loan discounts of $97 thousand and $93 thousand, respectively. Yields on average interest-earning assets were 4.03% and 4.17% for the third and second quarters of 2020, respectively. Yields on average interest-earning assets in the third quarter of 2020 were negatively affected by lower yields on loans originated or renewed at lower rates. PPP loans, which the company began originating early in the second quarter of 2020, had a negative 4 and 3 basis point effect on loan yields in the third and second quarters of 2020, respectively. Partially offsetting the decline in yield were higher average balances of gross loans in the third quarter of 2020 of $31.8 million.

 

Interest expense was $2.7 million and $3.0 million for the three months ended September 30, 2020 and June 30, 2020, respectively, and cost of funds was 0.96% and 1.12% for the sequential quarter periods. Average interest-bearing liabilities were $925.8 million and $914.8 million for the third and second quarters of 2020, respectively. Cost of deposits was 0.82% for the third quarter of 2020, down 15 basis points from 0.97% for the second quarter of 2020.

 

Net interest margin (“NIM”) was 3.14% for the third quarter of 2020 compared to 3.11% for the second quarter of 2020. The increase in NIM was primarily attributable to lower cost of funds, including higher average noninterest-bearing demand deposit balances, partially offset by lower yields on interest-earning assets.

 

Provision for loan losses was $869 thousand for the third quarter of 2020 compared to $2.0 million for the second quarter of 2020. The third quarter of 2020 provision expense was primarily attributable to specific reserves on loans to borrowers adversely effected by the COVID-19 pandemic. Of the second quarter of 2020 provision amount, approximately $1.4 million was attributable to qualitative loss factors to provide for losses estimated to have been incurred as of June 30, 2020, as a result of challenges certain borrowers are facing due to the pandemic.

 

Noninterest income for the three months ended September 30, 2020 and June 30, 2020 was $2.3 million and $2.2 million, respectively. Secondary market sales and servicing income increased $351 thousand in the third quarter of 2020 compared to the second quarter of 2020, driven by an increase in the demand for purchase money and refinance mortgages and a positive fair market value adjustment to the company’s mortgage servicing rights asset. In addition, wealth management fee income increased $122 thousand on a sequential quarter basis. Partially offsetting these increases was lower referral fee income of $410 thousand in the third quarter of 2020. As previously reported, the company earns referral fees for referring loan customers to a third-party financial institution to execute interest rate swaps.

 

Noninterest expense for the three months ended September 30, 2020 and June 30, 2020 was $8.6 million and $17.5 million, respectively. The third quarter of 2020 included $1.5 million of Merger-related expenses compared to none for the second quarter of 2020, while the second quarter of 2020 included a $10.4 million goodwill impairment charge, as previously reported. The company’s efficiency ratio was 74.1% and 156.7% for the third and second quarters of 2020, respectively. The


 

company’s efficiency ratio excluding Merger-related expenses and the goodwill impairment charge was 61.6%1 and 63.6%1 for the third and second quarters of 2020, respectively.

 

Income tax expense for the third quarter of 2020 was $655 thousand, reflective of a 30.5% effective income tax rate, while income tax benefit for the second quarter of 2020 was $217 thousand, reflective of a 2.6% effective income tax rate. The effective income tax rate in the third quarter of 2020 was higher than the statutory federal income tax rate of 21% primarily as a result of nondeductible Merger-related expenses. The income tax benefit in the second quarter of 2020 was a result of income tax expense before the goodwill impairment charge, offset by an income tax benefit (reversal of a deferred tax liability) of $590 thousand related to a portion of the goodwill.

 

Year-to-date 2020 compared to Year-to-date 2019

 

 

Loss before income taxes for the nine months ended September 30, 2020 was $6.3 million compared to income before income taxes of $6.2 million for the nine months ended September 30, 2019. The loss before income taxes for the nine months ended September 30, 2020 included a $10.4 million goodwill impairment charge recorded in the second quarter of 2020 and $1.5 million of Merger-related expenses recorded in the third quarter of 2020.

 

Interest income for the nine months ended September 30, 2020 was $36.3 million, on average interest-earning assets of $1.14 billion, compared to $37.5 million for the nine months ended September 30, 2019, on average interest-earning assets of $1.04 billion. Interest income in the first nine months of 2020 included accretion of acquired loan discounts of $381 thousand, while interest income in the first nine months of 2019 included $993 thousand of accretion of acquired loan discounts. Yields on average interest-earning assets were 4.24% and 4.85% for the nine months ended September 30, 2020 and 2019, respectively. The lower yield on average interest-earning assets in the 2020 period was primarily due to lower yields on loans originated during the period, the repricing of variable rate loans, the addition of lower yielding PPP loans, which had a negative 3 basis point effect on yield, and lower accretion of acquired loan discounts, which had a negative 8 basis point effect on yield. Partially offsetting these negative effects were higher average balances of gross loans in the 2020 period of $90.9 million.

 

Interest expense was $9.3 million and $11.2 million for the nine months ended September 30, 2020 and 2019, respectively, and cost of funds was 1.16% and 1.55% for the respective periods. Average balances of noninterest-bearing demand accounts increased $50.0 million for the 2020 period from the 2019 period. Average interest-bearing liabilities were $904.2 million and $854.1 million for the nine months ended September 30, 2020 and 2019, respectively.

 

NIM was 3.15% for the first nine months of 2020 compared to 3.39% for the same period of 2019. Lower NIM in the 2020 period was primarily due to lower yields on average interest-earning assets, primarily loans, and lower accretion of acquired loan discounts, partially offset by lower cost of funds.

 

Provision for loan losses was $5.7 million for the first nine months of 2020 compared to $871 thousand for the same period of 2019. Provision for loan losses in the 2020 period was primarily attributable to qualitative loss factors for increases in state unemployment rates, including Virginia, and for losses estimated to have been incurred as of September 30, 2020 due to the COVID-19 pandemic, gross loan growth, excluding PPP loans, of approximately $71.9 million, and higher specific reserves on impaired loans. The company recorded no provision for loan losses for PPP loans due to the U.S. government guarantee.

 

Noninterest income for the nine months ended September 30, 2020 and 2019 was $5.9 million and $3.6 million, respectively. The 2020 period included higher secondary market sales and servicing income of $1.4 million and $1.1 million of referral fee income, while the 2019 period included no income from such activities.

 

Noninterest expense for the nine months ended September 30, 2020 and 2019 were $33.4 million and $22.7 million, respectively. Excluding the goodwill impairment charge of $10.4 million and Merger-related expenses of $1.5 million incurred in the 2020 period, noninterest expense decreased $1.1 million on a comparative period basis. Decreases in certain noninterest expenses in the 2020 period were primarily attributable to reduced headcount and occupancy costs, resulting from temporary and permanent branch closures, and overall general expense control.

 

Income tax expense for the first nine months of 2020 was $378 thousand, reflective of a 6.0% effective income tax rate, while income tax expense for the first nine months of 2019 was $1.2 million, reflective of an 18.9% effective income tax rate. Income tax expense for the first nine months of 2020 includes the result of income tax expense before the goodwill impairment charge, offset by the related deferred tax benefit, and the effect of nondeductible Merger-related expenses, as noted previously.

Third Quarter 2020 compared to Third Quarter 2019

 

 

Income before income taxes for the third quarter of 2020 was $2.1 million compared to income before income taxes of $2.3 million for the third quarter of 2019. Income before income taxes for the third quarter of 2020 includes $1.5 million of Merger-related expenses.

 

Interest income for the three months ended September 30, 2020 was $12.1 million, on average interest-earning assets of $1.19 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 third quarter of 2020 included accretion of acquired loan discounts of $97 thousand, while interest income in the third quarter of 2019 included $357 thousand of accretion of acquired loan discounts. Yields on average interest-earning assets were 4.03% and 4.87% for the third quarters of 2020 and 2019, respectively. Yields


 

on average interest-earning assets in the third quarter of 2020 were negatively affected by lower yields on loans originated, including PPP loans, in 2020, the repricing of variable rate loans, and lower accretion of acquired loan discounts, which had a negative 10 basis point effect.

 

Interest expense was $2.7 million and $3.7 million for the three months ended September 30, 2020 and 2019, respectively, and cost of funds was 0.96% and 1.52% for the respective periods. Average interest-bearing liabilities were $925.8 million and $851.4 million for the third quarters of 2020 and 2019, respectively. Cost of deposits was 0.82% for the third quarter of 2020, down 58 basis points from 1.40% for the third quarter of 2019.

 

NIM was 3.14% for the third quarter of 2020 compared to 3.45% for the third quarter of 2019. The decrease in NIM was primarily attributable to lower yields on loans, partially offset by lower cost of funds.

 

Provision for loan losses was $869 thousand in the third quarter of 2020 compared to $495 thousand in the third quarter of 2019.

 

Noninterest income for the three months ended September 30, 2020 and 2019 was $2.3 million and $1.2 million, respectively. Higher noninterest income in the 2020 period was primarily due to higher secondary market sales and servicing income of $789 thousand and higher wealth management fee income of $165 thousand.

 

Noninterest expense for the three months ended September 30, 2020 and 2019 was $8.6 million and $7.4 million, respectively. The company’s efficiency ratio was 74.1% and 72.8% for the third quarters of 2020 and 2019, respectively. The company’s efficiency ratio, excluding the $1.5 million of Merger-related expenses incurred in the 2020 period, was 61.6%1 and 72.8%1 for the third quarters of 2020 and 2019, respectively.

 

Income tax expense for the third quarter of 2020 was $655 thousand, reflective of a 30.5% effective income tax rate, due to the reasons noted previously. Income tax expense for the third quarter of 2019 was $448 thousand, reflective of an 19.6% effective income tax rate.

 

Balance Sheet

 

 

Total assets were $1.25 billion and $1.13 billion at September 30, 2020 and December 31, 2019, respectively.

 

Loans, net of allowance for loan losses, were $1.04 billion at September 30, 2020 compared to $916.6 million at December 31, 2019, a $125.1 million increase, including $56.8 million of PPP loans. Excluding PPP loans, net loan growth for the first nine months of 2020 was $68.3 million, an annualized rate of approximately 10%.

 

Deposits were $1.03 billion at September 30, 2020 compared to $910.4 million at December 31, 2019, a $117.2 million increase, including an increase of $52.9 million of noninterest-bearing demand account balances. Noninterest-bearing demand accounts comprised 18.6% of total deposits at September 30, 2020, an increase from 15.2% and 13.6% at December 31, 2019 and September 30, 2019, respectively.

 

Shareholders’ equity was $121.4 million and $126.2 million at September 30, 2020 and December 31, 2019, respectively, a decrease of $4.8 million. The decrease in shareholders’ equity in the 2020 period was primarily attributable to a year-to-date net loss of $6.6 million, partially offset by net unrealized gains of approximately $1.1 million 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 $9.041 and $8.641 at September 30, 2020 and December 31, 2019, respectively.

 

The company made no purchases of its common stock outstanding in the first nine months of 2020, pursuant to a share repurchase program authorized by its board of directors in the fourth quarter of 2019.

 

Capital ratios for Virginia Commonwealth Bank were above regulatory minimum guidelines for well-capitalized banks as of September 30, 2020 and December 31, 2019.

 

Annualized return (loss) on average assets for the quarters ended September 30, 2020, June 30, 2020, and September 30, 2019 was 0.48%, (2.64)%, and 0.66%, respectively, while annualized return (loss) on average shareholders’ equity for the same periods was 4.95%, (25.40)%, and 5.97%, respectively. Excluding the $1.5 million of Merger-related expenses reported in the third quarter of 2020, annualized return on average assets and annualized return on average shareholders’ equity for the three months ended September 30, 2020 were 0.93%1 and 9.64%1, respectively. Excluding the goodwill impairment charge of $10.4 million incurred in the second quarter of 2020, annualized return on average assets and annualized return on average shareholders’ equity for the three months ended June 30, 2020 were 0.54%1 and 5.18%1, respectively.  

Asset Quality

 

 

Nonperforming assets were $18.3 million, or 1.46% of total assets, as of September 30, 2020, compared to $6.4 million, or 0.56% of total assets, as of December 31, 2019, and $9.4 million, or 0.84% of total assets, as of September 30, 2019. The increase in nonperforming assets from December 31, 2019 to September 30, 2020 was primarily attributable to $12.7 million of higher balances of nonaccrual loans to borrowers adversely affected by the COVID-19 pandemic.

 

The ratio of allowance for loan losses to total gross loans was 1.22%, 0.82%, and 0.80% at September 30, 2020, December 31, 2019, and September 30, 2019, respectively. Due to the full U.S. government guarantee on PPP loans, the company has recorded no allowance for loan losses for $56.8 million of PPP loans outstanding as of September 30, 2020. Excluding PPP loans from the denominator of the ratio of allowance for loan losses to total gross results in a ratio of 1.29%1 as of September 30, 2020. Further, the company’s allowance for loan losses does not include discounts recorded on loans acquired in the


 

company’s 2017 merger with Virginia BanCorp, Inc., which were $1.5 million, $1.9 million, and $2.9 million as of September 30, 2020, December 31, 2019, and September 30 2019, respectively.

Outlook

Greene concluded: “The recent up-tick in virus cases and the stalling of further government actions to support the economy could further impact our borrowers’ ability to satisfy their loans. These factors and the low interest rate environment expected for several years puts pressure on banks, such as ours. We believe the ensuing combination with Blue Ridge, positioning us with a larger balance sheet and a more diversified revenue base, should be to our advantage.”

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 18 banking offices, located throughout the greater Richmond region of Virginia, the Northern Neck region of Virginia, Middlesex County, and the Hampton Roads region of Virginia, 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: the effect of the COVID-19 pandemic, including its potential adverse effect on economic conditions, and the company’s employees, customers, loan losses, and financial performance; changes in interest rates and general economic conditions; the ability to close the Merger on the expected terms and schedule; difficulties, delays and unforeseen costs in completing the Merger and in integrating the company’s and Blue Ridge’s businesses; the ability to realize cost savings and other benefits of the Merger; business disruption during the pendency of or following the Merger; 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; and other factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and other reports filed with the Securities and Exchange Commission. 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 [email protected]

1 See discussion of non-GAAP financial measures at the end of the Supplemental Financial Data tables that follow.

  


BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

(unaudited)

 

 

 

 

 

(Dollars in thousands, except share data)

 

September 30, 2020

 

 

December 31, 2019 (1)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

9,324

 

 

$

6,096

 

Interest-earning deposits

 

 

50,069

 

 

 

34,358

 

Federal funds sold

 

 

152

 

 

 

1,359

 

Certificates of deposit

 

 

1,266

 

 

 

2,754

 

Available-for-sale securities, at fair value

 

 

87,853

 

 

 

99,454

 

Restricted securities

 

 

5,022

 

 

 

5,706

 

Loans receivable, net of allowance for loan losses of $12,899 and

   $7,562, respectively

 

 

1,041,711

 

 

 

916,628

 

Loans held for sale

 

 

2,687

 

 

 

1,231

 

Premises and equipment, net

 

 

17,859

 

 

 

20,141

 

Accrued interest receivable

 

 

4,664

 

 

 

3,035

 

Other real estate owned, net

 

 

1,113

 

 

 

1,916

 

Bank owned life insurance

 

 

20,103

 

 

 

19,752

 

Goodwill

 

 

 

 

 

10,374

 

Mortgage servicing rights

 

 

845

 

 

 

935

 

Core deposit intangible

 

 

1,094

 

 

 

1,518

 

Other assets

 

 

7,820

 

 

 

6,666

 

Total assets

 

$

1,251,582

 

 

$

1,131,923

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

190,843

 

 

$

137,933

 

Savings and interest-bearing demand deposits

 

 

424,001

 

 

 

382,607

 

Time deposits

 

 

412,837

 

 

 

389,900

 

Total deposits

 

 

1,027,681

 

 

 

910,440

 

 

 

 

 

 

 

 

 

 

Securities sold under repurchase agreements

 

 

1,117

 

 

 

6,525

 

Federal Home Loan Bank advances

 

 

25,000

 

 

 

45,000

 

Federal Reserve Bank advances

 

 

32,637

 

 

 

 

Subordinated notes, net of unamortized issuance costs

 

 

31,083

 

 

 

31,001

 

Other liabilities

 

 

12,635

 

 

 

12,772

 

Total liabilities

 

 

1,130,153

 

 

 

1,005,738

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

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

   outstanding - 13,342,104 and 13,261,801 shares, respectively) (2)

 

 

66,711

 

 

 

66,309

 

Additional paid-in capital

 

 

36,816

 

 

 

36,658

 

Unearned employee stock ownership plan shares

 

 

(1,326

)

 

 

(1,525

)

Retained earnings

 

 

18,012

 

 

 

24,660

 

Accumulated other comprehensive income, net

 

 

1,216

 

 

 

83

 

Total shareholders' equity

 

 

121,429

 

 

 

126,185

 

Total liabilities and shareholders' equity

 

$

1,251,582

 

 

$

1,131,923

 

 

(1) Derived from audited December 31, 2019 Consolidated Financial Statements.

(2) Preferred stock is authorized; however, none was outstanding as of September 30, 2020 and December 31, 2019.

 

 

 

 

 

 

 

 

 

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 


 

 

For the Three Months Ended

 

(Dollars in thousands, except per share data)

 

September 30, 2020

 

 

June 30, 2020

 

 

September 30, 2019

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

11,371

 

 

$

11,290

 

 

$

11,930

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

596

 

 

 

573

 

 

 

553

 

Tax-exempt

 

 

88

 

 

 

89

 

 

 

113

 

Federal funds sold

 

 

 

 

 

 

 

 

6

 

Interest-earning deposit accounts

 

 

6

 

 

 

8

 

 

 

145

 

Certificates of deposit

 

 

9

 

 

 

14

 

 

 

18

 

Total interest income

 

 

12,070

 

 

 

11,974

 

 

 

12,765

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,104

 

 

 

2,411

 

 

 

3,123

 

Securities sold under repurchase agreements

 

 

 

 

 

1

 

 

 

4

 

Subordinated notes and other borrowings

 

 

510

 

 

 

510

 

 

 

142

 

Federal Home Loan Bank advances

 

 

50

 

 

 

90

 

 

 

465

 

Federal Reserve Bank advances

 

 

29

 

 

 

20

 

 

 

 

Total interest expense

 

 

2,693

 

 

 

3,032

 

 

 

3,734

 

Net interest income

 

 

9,377

 

 

 

8,942

 

 

 

9,031

 

Provision for loan losses

 

 

869

 

 

 

2,027

 

 

 

495

 

Net interest income after provision for loan losses

 

 

8,508

 

 

 

6,915

 

 

 

8,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

Trust management

 

 

220

 

 

 

203

 

 

 

201

 

Service charges and fees on deposit accounts

 

 

155

 

 

 

137

 

 

 

243

 

Wealth management

 

 

350

 

 

 

228

 

 

 

185

 

Interchange fees, net

 

 

149

 

 

 

130

 

 

 

108

 

Other service charges and fees

 

 

33

 

 

 

28

 

 

 

32

 

Secondary market sales and servicing

 

 

1,082

 

 

 

731

 

 

 

293

 

Increase in cash surrender value of bank owned life insurance

 

 

117

 

 

 

116

 

 

 

122

 

Net gains on sales and calls of available-for-sale securities

 

 

 

 

 

3

 

 

 

1

 

Net gains on disposition of other assets

 

 

12

 

 

 

1

 

 

 

 

Net gains on rabbi trust assets

 

 

74

 

 

 

114

 

 

 

 

Referral fees

 

 

86

 

 

 

496

 

 

 

 

Other

 

 

8

 

 

 

7

 

 

 

15

 

Total noninterest income

 

 

2,286

 

 

 

2,194

 

 

 

1,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,801

 

 

 

3,839

 

 

 

3,666

 

Occupancy

 

 

700

 

 

 

705

 

 

 

805

 

Data processing

 

 

491

 

 

 

498

 

 

 

541

 

Bank franchise tax

 

 

256

 

 

 

257

 

 

 

209

 

Telecommunications and other technology

 

 

396

 

 

 

371

 

 

 

258

 

FDIC assessments

 

 

262

 

 

 

147

 

 

 

(7

)

Foreclosed property

 

 

22

 

 

 

28

 

 

 

48

 

Consulting

 

 

54

 

 

 

70

 

 

 

156

 

Advertising and marketing

 

 

47

 

 

 

26

 

 

 

124

 

Directors' fees

 

 

187

 

 

 

188

 

 

 

148

 

Audit and accounting

 

 

92

 

 

 

170

 

 

 

193

 

Legal

 

 

(210

)

 

 

154

 

 

 

20

 

Core deposit intangible amortization

 

 

134

 

 

 

142

 

 

 

164

 

Net other real estate owned losses

 

 

176

 

 

 

81

 

 

 

375

 

Goodwill impairment

 

 

 

 

 

10,374

 

 

 

 

Merger-related

 

 

1,456

 

 

 

 

 

 

 

Other

 

 

782

 

 

 

403

 

 

 

747

 

Total noninterest expense

 

 

8,646

 

 

 

17,453

 

 

 

7,447

 



Income (loss) before income taxes

 

 

2,148

 

 

 

(8,344

)

 

 

2,289

 

Income tax expense (benefit)

 

 

655

 

 

 

(217

)

 

 

448

 

Net income (loss)

 

$

1,493

 

 

$

(8,127

)

 

$

1,841

 

Basic and diluted earnings (loss) per share

 

$

0.11

 

 

$

(0.62

)

 

$

0.14

 


BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

For the Nine Months Ended

 

(Dollars in thousands, except per share data)

 

September 30, 2020

 

 

September 30, 2019

 

INTEREST INCOME

 

 

 

 

 

 

 

 

Loans, including fees

 

$

34,013

 

 

$

34,849

 

Securities:

 

 

 

 

 

 

 

 

Taxable

 

 

1,821

 

 

 

1,725

 

Tax-exempt

 

 

270

 

 

 

327

 

Federal funds sold

 

 

2

 

 

 

31

 

Interest-earning deposit accounts

 

 

119

 

 

 

432

 

Certificates of deposit

 

 

37

 

 

 

57

 

Total interest income

 

 

36,262

 

 

 

37,421

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

Deposits

 

 

7,364

 

 

 

9,019

 

Securities sold under repurchase agreements

 

 

3

 

 

 

11

 

Subordinated notes and other borrowings

 

 

1,531

 

 

 

417

 

Federal Home Loan Bank advances

 

 

374

 

 

 

1,784

 

Federal Reserve Bank advances

 

 

49

 

 

 

 

Total interest expense

 

 

9,321

 

 

 

11,231

 

Net interest income

 

 

26,941

 

 

 

26,190

 

Provision for loan losses

 

 

5,673

 

 

 

871

 

Net interest income after provision for loan losses

 

 

21,268

 

 

 

25,319

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

Trust management

 

 

615

 

 

 

621

 

Service charges and fees on deposit accounts

 

 

529

 

 

 

727

 

Wealth management

 

 

824

 

 

 

654

 

Interchange fees, net

 

 

378

 

 

 

330

 

Other service charges and fees

 

 

94

 

 

 

88

 

Secondary market sales and servicing

 

 

2,015

 

 

 

632

 

Increase in cash surrender value of bank owned life insurance

 

 

351

 

 

 

362

 

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

 

 

29

 

 

 

(1

)

Net gains (losses) on disposition of other assets

 

 

5

 

 

 

(2

)

Net (losses) gains on rabbi trust assets

 

 

(76

)

 

 

130

 

Referral fees

 

 

1,052

 

 

 

 

Other

 

 

54

 

 

 

44

 

Total noninterest income

 

 

5,870

 

 

 

3,585

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

11,267

 

 

 

11,532

 

Occupancy

 

 

2,156

 

 

 

2,510

 

Data processing

 

 

1,526

 

 

 

1,738

 

Bank franchise tax

 

 

770

 

 

 

655

 

Telecommunications and other technology

 

 

1,176

 

 

 

727

 

FDIC assessments

 

 

557

 

 

 

371

 

Foreclosed property

 

 

58

 

 

 

110

 

Consulting

 

 

195

 

 

 

418

 

Advertising and marketing

 

 

140

 

 

 

300

 

Directors' fees

 

 

568

 

 

 

525

 

Audit and accounting

 

 

402

 

 

 

586

 

Legal

 

 

135

 

 

 

130

 

Core deposit intangible amortization

 

 

425

 

 

 

517

 

Net other real estate owned losses

 

 

256

 

 

 

441

 

Goodwill impairment

 

 

10,374

 

 

 

 

Merger-related

 

 

1,456

 

 

 

 

Other

 

 

1,947

 

 

 

2,108

 

Total noninterest expense

 

 

33,408

 

 

 

22,668

 



(Loss) income before income taxes

 

 

(6,270

)

 

 

6,236

 

Income tax expense

 

 

378

 

 

 

1,180

 

Net (loss) income

 

$

(6,648

)

 

$

5,056

 

Basic and diluted (loss) earnings per share

 

$

(0.51

)

 

$

0.39

 


BAY BANKS OF VIRGINIA, INC.

Supplemental Financial Data (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the

 

 

 

As of and for the Three Months Ended

 

 

Year Ended

 

 

 

September 30,

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

December 31,

 

(Dollars in thousands, except per share amounts)

 

2020

 

 

2020

 

 

2020

 

 

2019

 

 

2019

 

 

2019

 

Select Consolidated Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,251,582

 

 

$

1,238,226

 

 

$

1,183,553

 

 

$

1,131,923

 

 

$

1,112,219

 

 

 

 

 

Cash, interest-earning deposits and federal funds sold

 

 

59,545

 

 

 

39,912

 

 

 

56,006

 

 

 

41,813

 

 

 

31,405

 

 

 

 

 

Available-for-sale securities, at fair value

 

 

87,853

 

 

 

92,560

 

 

 

94,618

 

 

 

99,454

 

 

 

80,748

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans on real estate

 

 

806,283

 

 

 

798,109

 

 

 

762,404

 

 

 

730,788

 

 

 

731,280

 

 

 

 

 

Commercial and industrial

 

 

187,219

 

 

 

193,740

 

 

 

198,278

 

 

 

181,730

 

 

 

186,281

 

 

 

 

 

Paycheck Protection Program

 

 

56,788

 

 

 

55,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer

 

 

6,443

 

 

 

7,855

 

 

 

9,846

 

 

 

11,985

 

 

 

14,471

 

 

 

 

 

Loans receivable

 

 

1,056,733

 

 

 

1,055,200

 

 

 

970,528

 

 

 

924,503

 

 

 

932,032

 

 

 

 

 

Unamortized net deferred loan fees

 

 

(2,123

)

 

 

(2,345

)

 

 

(333

)

 

 

(313

)

 

 

(269

)

 

 

 

 

Allowance for loan losses (ALL)

 

 

(12,899

)

 

 

(12,007

)

 

 

(10,172

)

 

 

(7,562

)

 

 

(7,495

)

 

 

 

 

Net loans

 

 

1,041,711

 

 

 

1,040,848

 

 

 

960,023

 

 

 

916,628

 

 

 

924,268

 

 

 

 

 

Loans held for sale

 

 

2,687

 

 

 

2,521

 

 

 

747

 

 

 

1,231

 

 

 

268

 

 

 

 

 

Other real estate owned, net

 

 

1,113

 

 

 

1,903

 

 

 

1,679

 

 

 

1,916

 

 

 

2,178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

$

1,130,153

 

 

$

1,118,536

 

 

$

1,056,151

 

 

$

1,005,738

 

 

$

987,362

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

 

190,843

 

 

 

185,201

 

 

 

136,437

 

 

 

137,933

 

 

 

124,670

 

 

 

 

 

Savings and interest-bearing demand deposits

 

 

424,001

 

 

 

413,025

 

 

 

394,637

 

 

 

382,607

 

 

 

372,404

 

 

 

 

 

Time deposits

 

 

412,837

 

 

 

408,672