Bay Banks of Virginia Earnings 2019-09-30

BAYK 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
EFSI	108	834	741	0	0	9	14	90		6.4	1%
CCGN	106	2	11	2	2	-4	-4	106	87%	-26.4	-195%
FXA	106	102	0	2	0	1	1	-39	0%	-34.7	1%
BAYK	105	1,094	972	0	0	5	21	81		3.8	0%
EPSN	103	93	19	7	0	5	8	86	0%	11.2	6%
FXNC	103	778	706	4	0	9	17	80	0%	4.7	1%
UTGN	103	419	291	46	0	16	26	78	0%	3.0	4%
CLDB	101	691	620	0	0	7	14	77		5.7	1%
ZDPY	101	8	2	1	0	-0	0	102	0%	389.6	-2%
MOBQ	100	21	10	5	2	-30	-29	99	44%	-3.4	-148%

10-Q 1 bayk-10q_20190930.htm 10-Q bayk-10q_20190930.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 SEPTEMBER 30, 2019

☐	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: 13,334,506 shares of common stock on November 1, 2019.

FORM 10-Q

For the interim period ending September 30, 2019

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS		4

CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018		4

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)		5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)		6

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)		7

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)		9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)		10

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		29

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		39

ITEM 4. CONTROLS AND PROCEDURES		39

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS		40

ITEM 1A. RISK FACTORS		40

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		40

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		40

ITEM 4. MINE SAFETY DISCLOSURES		40

ITEM 5. OTHER INFORMATION		40

ITEM 6. EXHIBITS		41

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED BALANCE SHEETS

	(unaudited)
(Dollars in thousands, except share data)	September 30, 2019			December 31, 2018 (1)
ASSETS
Cash and due from banks	$	7,419		$	7,685
Interest-earning deposits		23,894			18,981
Federal funds sold		92			625
Certificates of deposit		3,498			3,746
Available-for-sale securities, at fair value		80,748			82,232
Restricted securities		6,684			7,600
Loans receivable, net of allowance for loan losses of $7,495 and $7,902, respectively		924,268			894,191
Loans held for sale		268			368
Premises and equipment, net		20,532			18,169
Accrued interest receivable		3,104			3,172
Other real estate owned, net		2,178			3,597
Bank owned life insurance		19,632			19,270
Goodwill		10,374			10,374
Mortgage servicing rights		910			977
Core deposit intangible		1,675			2,193
Deferred tax asset, net		740			1,510
Other assets		6,203			5,927
Total assets	$	1,112,219		$	1,080,617
LIABILITIES
Noninterest-bearing demand deposits	$	124,670		$	114,122
Savings and interest-bearing demand deposits		372,404			359,400
Time deposits		396,614			368,670
Total deposits		893,688			842,192
Securities sold under repurchase agreements		6,323			6,089
Federal Home Loan Bank advances		68,000			100,000
Subordinated notes, net of issuance costs		6,906			6,893
Other liabilities		12,445			7,967
Total liabilities		987,362			963,141
SHAREHOLDERS’ EQUITY
Common stock ($5 par value; authorized - 30,000,000 shares; outstanding - 13,334,302 and 13,201,682 shares, respectively) (2)		66,671			66,008
Additional paid-in capital		36,781			36,972
Unearned employee stock ownership plan shares		(1,593	)		(1,734	)
Retained earnings		22,658			17,557
Accumulated other comprehensive income (loss), net		340			(1,327	)
Total shareholders’ equity		124,857			117,476
Total liabilities and shareholders’ equity	$	1,112,219		$	1,080,617

(1)	Derived from audited December 31, 2018 Consolidated Financial Statements.

(2)	Preferred stock is authorized; however, none was outstanding as of September 30, 2019 and December 31, 2018.

See Notes to Consolidated Financial Statements.

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended						For the Nine Months Ended
(Dollars in thousands, except per share data)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
INTEREST INCOME
Loans, including fees	$	11,930		$	10,124		$	34,849		$	29,853
Securities:
Taxable		553			498			1,725			1,392
Tax-exempt		113			119			327			356
Federal funds sold		6			3			31			14
Interest-earning deposit accounts		145			106			432			399
Certificates of deposit		18			18			57			54
Total interest income		12,765			10,868			37,421			32,068
INTEREST EXPENSE
Deposits		3,123			2,027			9,019			5,427
Securities sold under repurchase agreements		4			3			11			10
Subordinated notes and other borrowings		142			128			417			384
Federal Home Loan Bank advances		465			441			1,784			1,140
Total interest expense		3,734			2,599			11,231			6,961
Net interest income		9,031			8,269			26,190			25,107
Provision for loan losses		495			509			871			481
Net interest income after provision for loan losses		8,536			7,760			25,319			24,626
NONINTEREST INCOME
Income from fiduciary activities		201			151			621			596
Service charges and fees on deposit accounts		243			251			727			538
Wealth management		185			144			654			558
Interchange fees, net		108			105			330			221
Other service charges and fees		32			30			88			91
Secondary market sales and servicing		293			152			632			528
Increase in cash surrender value of bank owned life insurance		122			123			362			374
Net gains (losses) on sale of available-for-sale securities		1			—			(1	)		—
Net gains (losses) on disposition of other assets		—			51			(2	)		(18	)
Gain (loss) on rabbi trust assets		—			5			130			(11	)
Gain on curtailment of post-retirement benefit plan		—			—			—			352
Other		15			(16	)		44			101
Total noninterest income		1,200			996			3,585			3,330
NONINTEREST EXPENSE
Salaries and employee benefits		3,666			4,022			11,532			12,407
Occupancy		805			924			2,510			2,536
Data processing		541			546			1,738			1,852
Bank franchise tax		209			178			655			531
Telecommunications and other technology		258			195			727			603
FDIC assessments		(7	)		151			371			521
Foreclosed property		48			45			110			110
Consulting		156			214			418			937
Advertising and marketing		124			126			300			347
Directors’ fees		148			146			525			382
Audit and accounting		193			236			586			839
Legal		20			123			130			380
Merger-related		—			—			—			363
Core deposit intangible amortization		164			196			517			610
Net other real estate owned losses (gains)		375			(112	)		441			(169	)
Other		747			542			2,108			1,966
Total noninterest expense		7,447			7,532			22,668			24,215
Income before income taxes		2,289			1,224			6,236			3,741
Income tax expense		448			198			1,180			645
Net income	$	1,841		$	1,026		$	5,056		$	3,096
Basic and diluted earnings per share	$	0.14		$	0.08		$	0.39		$	0.24

See Notes to Consolidated Financial Statements.

BAY BANKS OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	For the Three Months Ended						For the Nine Months Ended
(Dollars in thousands)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Net income	$	1,841		$	1,026		$	5,056		$	3,096
Other comprehensive income (loss):
Unrealized holding gains (losses) on available-for-sale securities arising during the period		296			(477	)		2,109			(1,944	)
Deferred income tax (expense) benefit		(62	)		100			(443	)		408
Reclassification of net (gains) losses on sale of available-for-sale securities recognized in net income		(1	)		—			1			—
Total other comprehensive income (loss)		233			(377	)		1,667			(1,536	)
Comprehensive income	$	2,074		$	649		$	6,723		$	1,560

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 (Loss), net			Equity
Balances at December 31, 2018		13,201,682	$	66,008	$	36,972		$	(1,734	)	$	17,557	$	(1,327	)	$	117,476
Net income		—		—		—			—			5,056		—			5,056
Other comprehensive income		—		—		—			—			—		1,667			1,667
Stock options exercised, net		5,173		26		(17	)		—			—		—			9
Director stock grant		18,396		92		56			—			—		—			148
Restricted stock awards		109,051		545		(545	)		—			—		—			—
ESOP collateral release		—		—		—			141			—		—			141
Share-based compensation expense		—		—		315			—			—		—			315
Cumulative effect adjustment of adoption of accounting principle		—		—		—			—			45		—			45
Balances at September 30, 2019		13,334,302	$	66,671	$	36,781		$	(1,593	)	$	22,658	$	340		$	124,857

							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
Balances at December 31, 2017		13,203,605	$	66,018	$	37,142	$	(1,129	)	$	13,679	$	(1,156	)	$	114,554
Net income		—		—		—		—			3,096		—			3,096
Other comprehensive loss		—		—		—		—			—		(1,536	)		(1,536	)
Stock options exercised, net		22,491		112		19		—			—		—			131
Director stock grant		12,620		64		62		—			—		—			126
ESOP collateral release		—		—		—		123			—		—			123
Share-based compensation expense		—		—		53		—			—		—			53
Balances at September 30, 2018		13,238,716	$	66,194	$	37,276	$	(1,006	)	$	16,775	$	(2,692	)	$	116,547

Unearned

Employee

Stock

Accumulated

Shares of

Additional

Ownership

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	13	$105

10-Q	2019-11-07	Quarter: 2019-09-30
10-Q	2019-08-08	Quarter: 2019-06-30
10-Q	2019-05-08	Quarter: 2019-03-31
10-K	2019-03-08	Annual: 2018-12-31
10-Q	2018-11-09	Quarter: 2018-09-30
10-Q	2018-08-14	Quarter: 2018-06-30
10-Q	2018-05-11	Quarter: 2018-03-31
10-K	2018-04-09	Annual: 2017-12-31
10-Q	2017-11-09	Quarter: 2017-09-30
10-Q	2017-08-09	Quarter: 2017-06-30
10-Q	2017-05-15	Quarter: 2017-03-31
10-K	2017-03-22	Annual: 2016-12-31
10-Q	2016-11-14	Quarter: 2016-09-30
10-Q	2016-08-10	Quarter: 2016-06-30
10-Q	2016-05-13	Quarter: 2016-03-31
10-K	2016-03-28	Annual: 2015-12-31
10-Q	2015-11-12	Quarter: 2015-09-30
10-Q	2015-08-07	Quarter: 2015-06-30
10-Q	2015-05-08	Quarter: 2015-03-31
10-K	2015-03-25	Annual: 2014-12-31
10-Q	2014-11-13	Quarter: 2014-09-30
10-Q	2014-08-11	Quarter: 2014-06-30
10-Q	2014-05-13	Quarter: 2014-03-31
10-K	2014-03-28	Annual: 2013-12-31
10-Q	2013-11-12	Quarter: 2013-09-30
10-Q	2013-08-14	Quarter: 2013-06-30
10-Q	2013-05-14	Quarter: 2013-03-31
10-K	2013-03-28	Annual: 2012-12-31
10-Q	2012-11-13	Quarter: 2012-09-30
10-Q	2012-08-14	Quarter: 2012-06-30
10-Q	2012-05-14	Quarter: 2012-03-31
10-K	2012-03-28	Annual: 2011-12-31
10-Q	2011-11-10	Quarter: 2011-09-30
10-Q	2011-08-12	Quarter: 2011-06-30
10-Q	2011-05-12	Quarter: 2011-03-31
10-K	2011-03-22	Annual: 2010-12-31
10-Q	2010-11-05	Quarter: 2010-09-30
10-Q	2010-08-06	Quarter: 2010-06-30
10-Q	2010-05-06	Quarter: 2010-03-31
10-K	2010-03-30	Annual: 2009-12-31

8-K	2020-01-28	Earnings, Exhibits
8-K	2020-01-28	Other Events, Exhibits
8-K	2019-11-13	Other Events, Exhibits
8-K	2019-11-12	Other Events, Exhibits
8-K	2019-10-29	Earnings, Exhibits
8-K	2019-10-18	Other Events, Exhibits
8-K	2019-10-09	Officers
8-K	2019-10-07	Enter Agreement, Off-BS Arrangement, Regulation FD, Other Events, Exhibits
8-K	2019-09-05	Other Events, Exhibits
8-K	2019-07-30	Earnings, Exhibits
8-K	2019-05-20	Shareholder Vote
8-K	2019-05-13	Other Events, Exhibits
8-K	2019-04-30	Earnings, Exhibits
8-K	2019-04-08	Officers
8-K	2019-02-06	Earnings, Exhibits
8-K	2019-01-29	Other Events, Exhibits
8-K	2018-12-03	Other Events, Exhibits
8-K	2018-11-06	Other Events, Exhibits
8-K	2018-10-30	Earnings, Exhibits
8-K	2018-10-29	Other Events, Exhibits
8-K	2018-09-25	Officers, Amend Bylaw, Exhibits
8-K	2018-09-04	Other Events, Exhibits
8-K	2018-08-01	Earnings, Exhibits
8-K	2018-07-06	Other Events, Exhibits
8-K	2018-06-11	Shareholder Vote
8-K	2018-05-09	Earnings, Exhibits
8-K	2018-03-28	Other Events, Exhibits
8-K	2018-03-27	Earnings, Exhibits
8-K	2018-03-22	Other Events, Exhibits
8-K	2018-03-12	Officers, Amend Bylaw, Exhibits
8-K	2018-03-02	Other Events, Exhibits
8-K	2018-02-08	Other Events, Exhibits
8-K	2018-01-31	Other Events, Exhibits

EX-31.1	bayk-ex311_8.htm
EX-31.2	bayk-ex312_6.htm
EX-32.1	bayk-ex321_7.htm