Bay Banks of Virginia Earnings 2020-03-31

Balance Sheet	Income Statement	Cash Flow

10-Q 1 bayk-10q_20200331.htm 10-Q bayk-10q_20200331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE

QUARTERLY PERIOD ENDED MARCH 31, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 0-22955

BAY BANKS OF VIRGINIA, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Virginia

54-1838100

(STATE OR OTHER JURISDICTION OF

INCORPORATION OR ORGANIZATION)

(I.R.S. EMPLOYER

IDENTIFICATION NO.)

1801 BAYBERRY COURT, SUITE 101

RICHMOND, Virginia 23226

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(804) 325-3775

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

N/A

(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ yes ☐ no

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ yes ☐ no

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ yes ☒ no

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 13,332,874 shares of common stock on May 1, 2020.

FORM 10-Q

For the interim period ending March 31, 2020

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS		3

CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2020 (UNAUDITED) AND DECEMBER 31, 2019		3

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)		4

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)		5

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)		6

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)		7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)		8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		25

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		33

ITEM 4. CONTROLS AND PROCEDURES		33

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS		34

ITEM 1A. RISK FACTORS		34

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		34

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		35

ITEM 4. MINE SAFETY DISCLOSURES		35

ITEM 5. OTHER INFORMATION		35

ITEM 6. EXHIBITS		36

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED BALANCE SHEETS

	March 31, 2020			December 31, 2019 (1)
(Dollars in thousands, except share data)	(unaudited)
ASSETS
Cash and due from banks	$	9,976		$	6,096
Interest-earning deposits		44,711			34,358
Federal funds sold		1,319			1,359
Certificates of deposit		2,754			2,754
Available-for-sale securities, at fair value		94,618			99,454
Restricted securities		5,752			5,706
Loans receivable, net of allowance for loan losses of $10,172 and $7,562, respectively		960,023			916,628
Loans held for sale		747			1,231
Premises and equipment, net		19,462			20,141
Accrued interest receivable		3,139			3,035
Other real estate owned, net		1,679			1,916
Bank owned life insurance		19,870			19,752
Goodwill		10,374			10,374
Mortgage servicing rights		774			935
Core deposit intangible		1,369			1,518
Other assets		6,986			6,666
Total assets	$	1,183,553		$	1,131,923
LIABILITIES
Noninterest-bearing demand deposits	$	136,437		$	137,933
Savings and interest-bearing demand deposits		394,637			382,607
Time deposits		433,393			389,900
Total deposits		964,467			910,440
Securities sold under repurchase agreements		3,284			6,525
Federal Home Loan Bank advances		45,000			45,000
Subordinated notes, net of issuance costs		31,029			31,001
Other liabilities		12,371			12,772
Total liabilities		1,056,151			1,005,738
SHAREHOLDERS’ EQUITY
Common stock ($5 par value; authorized - 30,000,000 shares; outstanding - 13,346,789 and 13,261,801 shares, respectively) (2)		66,734			66,309
Additional paid-in capital		36,536			36,658
Unearned employee stock ownership plan shares		(1,463	)		(1,525	)
Retained earnings		24,646			24,660
Accumulated other comprehensive income, net		949			83
Total shareholders’ equity		127,402			126,185
Total liabilities and shareholders’ equity	$	1,183,553		$	1,131,923

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

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

See Notes to Consolidated Financial Statements.

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended
(Dollars in thousands, except per share data)	March 31, 2020			March 31, 2019
INTEREST INCOME
Loans, including fees	$	11,352		$	11,461
Securities:
Taxable		652			595
Tax-exempt		94			118
Federal funds sold		2			7
Interest-bearing deposit accounts		104			135
Certificates of deposit		14			20
Total interest income		12,218			12,336
INTEREST EXPENSE
Deposits		2,848			2,809
Securities sold under repurchase agreements		2			3
Subordinated notes		512			137
Federal Home Loan Bank advances		234			704
Total interest expense		3,596			3,653
Net interest income		8,622			8,683
Provision for loan losses		2,777			314
Net interest income after provision for loan losses		5,845			8,369
NONINTEREST INCOME
Trust management		193			214
Service charges and fees on deposit accounts		236			238
Wealth management		247			206
Interchange fees, net		98			101
Other service charges and fees		33			29
Secondary market sales and servicing		202			71
Increase in cash surrender value of bank owned life insurance		118			120
Net gains on sales and calls of available-for-sale securities		26			—
Net losses on disposition of other assets		(7	)		(1	)
Net (losses) gains on rabbi trust assets		(263	)		90
Referral fees		471			—
Other		37			22
Total noninterest income		1,391			1,090
NONINTEREST EXPENSE
Salaries and employee benefits		3,628			4,001
Occupancy		751			868
Data processing		537			588
Bank franchise tax		256			216
Telecommunications and other technology		358			207
FDIC assessments		148			216
Foreclosed property		7			43
Consulting		71			115
Advertising and marketing		67			67
Directors’ fees		192			164
Audit and accounting		140			204
Legal		191			83
Core deposit intangible amortization		149			180
Net other real estate owned gains		—			(6	)
Other		813			684
Total noninterest expense		7,308			7,630
(Loss) income before income taxes		(72	)		1,829
Income tax (benefit) expense		(58	)		337
Net (loss) income	$	(14	)	$	1,492
Basic and diluted earnings per share	$	—		$	0.11

See Notes to Consolidated Financial Statements.

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	For the Three Months Ended
(Dollars in thousands)	March 31, 2020			March 31, 2019
Net (loss) income	$	(14	)	$	1,492
Other comprehensive income:
Unrealized holding gain on available-for-sale securities arising during the period		1,070			1,020
Deferred income tax expense on unrealized gain on available-for-sale securities		(225	)		(214	)
Reclassification of net gains on sales and calls of available-for-sale securities recognized in net income		26			—
Deferred income tax expense on realized gain on available-for-sale securities		(5	)		—
Total other comprehensive income		866			806
Comprehensive income	$	852		$	2,298

See Notes to Consolidated Financial Statements.

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited)

										Unearned
										Employee Stock						Accumulated
	Shares of						Additional			Ownership						Other		Total
	Common			Common			Paid-in			Plan			Retained			Comprehensive		Shareholders’
(Dollars in thousands)	Stock			Stock			Capital			Shares			Earnings			Income, net		Equity
Three months ended March 31, 2020
Balance at beginning of period		13,261,801		$	66,309		$	36,658		$	(1,525	)	$	24,660		$	83	$	126,185
Net loss		—			—			—			—			(14	)		—		(14	)
Other comprehensive income, net		—			—			—			—			—			866		866
Stock options exercised, net		15,514			77			4			—			—			—		81
Director and executive stock grant		11,734			59			46			—			—			—		105
Restricted stock awards		61,020			305			(305	)		—			—			—		—
Shares repurchased pursuant to ESOP		(3,280	)		(16	)		(9	)		—			—			—		(25	)
ESOP collateral release		—			—			—			62			—			—		62
Share-based compensation expense		—			—			142			—			—			—		142
Balance at end of period		13,346,789		$	66,734		$	36,536		$	(1,463	)	$	24,646		$	949	$	127,402

								Unearned
								Employee Stock					Accumulated
	Shares of				Additional			Ownership					Other			Total
	Common		Common		Paid-in			Plan			Retained		Comprehensive			Shareholders’
(Dollars in thousands)	Stock		Stock		Capital			Shares			Earnings		Loss, net			Equity
Three months ended March 31, 2019
Balance at beginning of period		13,201,682	$	66,008	$	36,972		$	(1,734	)	$	17,557	$	(1,327	)	$	117,476
Net income		—		—		—			—			1,492		—			1,492
Other comprehensive income, net		—		—		—			—			—		806			806
Stock options exercised, net		5,173		26		(17	)		—			—		—			9
Director stock grant		762		4		2			—			—		—			6
Restricted stock awards		105,920		530		(530	)		—			—		—			—
ESOP collateral release		—		—		—			37			—		—			37
Share-based compensation expense		—		—		66			—			—		—			66
Cumulative effect adjustment of adoption of accounting principle		—		—		—			—			45		—			45
Balance at end of period		13,313,537	$	66,568	$	36,493		$	(1,697	)	$	19,094	$	(521	)	$	119,937

See Notes to Consolidated Financial Statements.

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Three Months Ended
(Dollars in thousands)	March 31, 2020			March 31, 2019
Cash Flows From Operating Activities
Net (loss) income	$	(14	)	$	1,492
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		375			446
Net premium amortization on available-for-sale securities		130			118
Amortization of subordinated notes issuance costs		28			4
Amortization of core deposit intangible		149			180
Accretion of fair value adjustment on acquired time deposits		(24	)		(34	)
Accretion of fair value adjustments (discounts) on acquired loans		(189	)		(439	)
Provision for loan losses		2,777			314
Share-based compensation expense		142			66
Increase in other real estate owned valuation allowance		10			16
Gain on sale of other real estate owned		(10	)		(22	)
Net loss on the disposition of fixed and other assets		7			1
Decrease in value of mortgage servicing rights		161			54
Increase in cash surrender value of bank owned life insurance		(118	)		(120	)
Net gains on sales and calls of available-for-sale securities		(26	)		—
Originations of loans held for sale (HFS)		(23,327	)		(2,344	)
Proceeds from HFS loan sales		24,068			2,773
Gain on HFS sold loans		(257	)		(61	)
Decrease (increase) in other assets and accrued interest receivable		103			(4,099	)
(Decrease) increase in other liabilities		(444	)		5,116
Net cash provided by operating activities		3,541			3,461
Cash Flows From Investing Activities
Proceeds from maturities, calls, and principal paydowns of available-for-sale securities		7,846			1,098
Purchases of available-for-sale securities		(2,018	)		—
Purchases of restricted securities, net		(46	)		(204	)
Decrease in federal funds sold		40			443
Net increase in loans		(46,113	)		(16,583	)
Proceeds from sale of other real estate owned		367			22
Net (purchases) disposals of premises and equipment		(230	)		27
Net cash used in investing activities		(40,154	)		(15,197	)
Cash Flows From Financing Activities

Price	7.85	EPS	0
Shares	13	P/E	21
MCap	105	P/FCF	11
Net Debt	-31	EBIT	17
TEV	73	TEV/EBIT	4
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-03-31	Filed 2020-05-11
10-K	2019-12-31	Filed 2020-03-06
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10-Q	2019-06-30	Filed 2019-08-08
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10-Q	2016-09-30	Filed 2016-11-14
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10-K	2015-12-31	Filed 2016-03-28
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10-K	2014-12-31	Filed 2015-03-25
10-Q	2014-09-30	Filed 2014-11-13
10-Q	2014-06-30	Filed 2014-08-11
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10-K	2013-12-31	Filed 2014-03-28
10-Q	2013-09-30	Filed 2013-11-12
10-Q	2013-06-30	Filed 2013-08-14
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10-K	2012-12-31	Filed 2013-03-28
10-Q	2012-09-30	Filed 2012-11-13
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10-K	2010-12-31	Filed 2011-03-22
10-Q	2010-09-30	Filed 2010-11-05
10-Q	2010-06-30	Filed 2010-08-06
10-Q	2010-03-31	Filed 2010-05-06
10-K	2009-12-31	Filed 2010-03-30

8-K	2020-06-15
8-K	2020-06-15
8-K	2020-05-07
8-K	2020-01-28
8-K	2020-01-28
8-K	2020-01-02
8-K	2019-11-13
8-K	2019-11-12
8-K	2019-10-29
8-K	2019-10-18
8-K	2019-10-09
8-K	2019-10-07
8-K	2019-09-05
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8-K	2019-05-20
8-K	2019-05-13
8-K	2019-04-30
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8-K	2019-02-06
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8-K	2018-03-12
8-K	2018-03-02
8-K	2018-02-08
8-K	2018-01-31

EX-31.1	bayk-ex311_6.htm
EX-31.2	bayk-ex312_7.htm
EX-32.1	bayk-ex321_8.htm

BAYK 10Q Quarterly Report

Bay Banks of Virginia Earnings 2020-03-31