Columbia, Maryland (April 27, 2017)—Bay Bancorp, Inc. (“Bay”) (NASDAQ: BYBK), the savings and loan holding company for Bay Bank, FSB (“Bank”), announced today net income of $0.96 million, or $0.09 per basic and diluted common share for the quarter ended March 31, 2017 compared to net income of $0.19 million or $0.02 per basic and diluted common share for the quarter ended March 31, 2016. The Bank now has total assets of over $633 million and 11 branches in the Baltimore-Washington region, and is the fifth largest community bank headquartered in the Baltimore region based upon deposit market share.
Commenting on the announcement, Joseph J. Thomas, President and CEO, said, “We are pleased with our company’s performance in the first quarter of 2017, the best quarterly earnings results in our history. We are demonstrating organic loan growth, attractive low cost core deposit funding and improved operational efficiencies and cost savings from prior acquisitions. Our income before taxes of $1.54 million represents a $1.24 million increase over the $0.30 million recorded for the first quarter in 2016 and $0.57 million increase over the $0.97 million recorded for the quarter ended December 31, 2016. As a result, our return on average assets for the three-month period ended March 31, 2017 was 0.63% as compared to 0.53% and 0.16% for the three-month periods ended December 31, 2016 and March 31, 2016, respectively, and return on average equity for the three-month period ended March 31, 2017 was 5.87%, as compared to 5.04% and 1.11% for the three-month periods ended December 31, 2016 and March 31, 2016, respectively.”
Highlights from the First Three-months of 2017
The Bank continued organic net growth in the first quarter of 2017. Net loan growth was favorable and targeted core deposit growth was strong. Planned declines in certificate of deposit balances following the successful closing of Bay’s merger with Hopkins Bancorp, Inc. and the related merger of Hopkins Federal Savings Bank into the Bank (collectively, the “Hopkins Merger”) led to an attractive 0.38% cost of funds for the first quarter of 2017. Bay has strong liquidity and capital positions along with capacity for future growth, with total regulatory capital to risk weighted assets of approximately 12.90% at March 31, 2017. The Bank has a record of success in acquisitions and acquired problem asset resolutions and had $7.6 million in remaining net purchase discounts on acquired loan portfolios at March 31, 2017.
Specific highlights are listed below:
• With the completion of the Hopkins Merger and consistent organic growth, total assets were $633 million at March 31, 2017 compared to $463 million at March 31, 2016 and $620 million at December 31, 2016.
• Total loans were $495 million at March 31, 2017, an increase of 25% from $397 million at March 31, 2016, and an increase of 2% from $487 million at December 31, 2016.
• Total deposits were $526 million at March 31, 2017, an increase of 44% from $366 million at March 31, 2016, and no change from $526 million at December 31, 2016. Non-interest bearing deposits were $112 million at March 31, 2017, an increase of 14% from $98 million at March 31, 2016 and an increase of 1% from $111 million at December 31, 2016.
• Net interest income for the three-month period ended March 31, 2017 totaled $5.8 million, compared to $4.7 million for the same period of 2016. Interest income associated with discount accretion on purchased loans, deferred costs and deferred fees will vary due to the timing and nature of loan principal payments. Earning asset leverage was the primary driver in year-over-year results, as average earning loans and investments increased to $552 million for the three months ended March 31, 2017, compared to $425 million for the same period of 2016.
• Net interest margin for the three-month period ended March 31, 2017 was 4.05%, compared to 4.20% for the same period of 2016. The margin for each period reflects the variable pace of discount accretion recognition within interest income, the impact of fair value amortization on the interest expense of acquired deposits, and the higher level of investments, including interest bearing federal funds acquired in the Hopkins Merger.
• Nonperforming assets increased to $16.1 million at March 31, 2017 from $15.8 million at December 31, 2016, and from $9.7 million at March 31, 2016. The first quarter of 2017 increases resulted primarily from the Hopkins Merger, offset by continued resolution of acquired nonperforming loans. Loans acquired in the Hopkins Merger include appropriate fair value adjustments.
• The provision for loan losses for the three-month period ended March 31, 2017 was $0.4 million, compared to $0.3 million for the same period of 2016. The increases for the 2017 period were primarily the result of increases in loan originations and the continued transition from an acquired loan portfolio to an originated portfolio. As a result, the allowance for loan losses was $3.16 million at March 31, 2017, representing 0.64% of loans, compared to $1.95 million, or 0.49% of loans, at March 31, 2016 and $2.82 million, or 0.58% of total loans, at December 31, 2016. The allowance for loan losses at March 31, 2017 represents 1.00% of the Bay originated portfolio, with the remaining discount on acquired loans mitigating the need for additional loan loss reserves on these portfolios. Management expects both the allowance for loan losses and the related provision for loan losses to increase in the future due to the gradual accretion of the discount on the acquired loan portfolios and an increase in new loan originations.
Balance Sheet Review
Total assets were $633 million at March 31, 2017, increases of $13 million, or 2%, and $170 million, or 37%, when compared to December 31, 2016 and March 31, 2016, respectively. Investment securities increased by $39 million, or 144%, when compared to March 31, 2016, while loans held for investment increased by $98 million, or 25%, over the same period.
Total deposits were $526 million at March 31, 2017, with no significant change compared to the $526 million at December 31, 2016. Activity included a managed decline in certificates of deposits, seasonal deposit fluctuations and no significant change in non-interest bearing deposits. Short-term borrowings from the Federal Home Loan Bank increased to $34 million compared to $20 million at December 31, 2016.
Stockholders’ equity increased to $67.3 million at March 31, 2017, from $65.9 million at December 31, 2016, and $66.9 million at March 31, 2016. These increases related primarily to corporate earnings, with the increase over the first quarter being offset by the $2.4 million decline related to the purchase of 568,436 shares of Bay’s common stock. The combined activity improved the book value of Bay’s common stock to $6.38 per share at March 31, 2017, compared to $6.29 per share at December 31, 2016 and $6.15 per share at March 31, 2016.
In the third quarter of 2016, the Board of Directors authorized an additional stock purchase program, authorizing Bay to purchase an additional 250,000 shares of its common stock over a 12-month period in open market and/or through privately negotiated transactions, at Bay’s discretion. During the third quarter of 2016, Bay purchased 150,000 shares at an average price of $5.10 per share along with a purchase of 418,436 shares through a privately negotiated transaction at an average price of $5.18 per share. Bay Bancorp has not elected to repurchase additional shares since that time. As of March 31, 2017, Bay has 250,000 shares remaining under the third quarter 2016 purchase authorization. The Board may modify, suspend or discontinue the program at any time.
Nonperforming assets, which consist of nonaccrual loans, troubled debt restructurings, accruing loans past due 90 days or more, and real estate acquired through foreclosure, increased to $16.1 million at March 31, 2017 from $15.8 million at December 31, 2016 and from $9.7 million at March 31, 2016. The changes were driven by loans acquired in the Hopkins Merger offset by decreases in purchased credit impaired loans. Nonperforming assets represented 2.53% of total assets at March 31, 2017, compared to 2.55% at December 31, 2016 and 2.10% at March 31, 2016.
At March 31, 2017, the Bank remained above all “well-capitalized” regulatory requirement levels. The Bank’s tier 1 risk-based capital ratio was approximately 12.29% at March 31, 2017 as compared to 12.31% at December 31, 2016 and 16.20% at March 31, 2016. Liquidity remained strong due to managed cash and cash equivalents, borrowing lines with the FHLB of Atlanta, the Federal Reserve and correspondent banks, and the size and composition of the investment portfolio.
Review of Financial Results
Net income for the three-months period ended March 31, 2017 was $0.96 million, compared to net income of $.81 million and $0.19 million for the three month periods ended December 31, 2016 and March 31, 2016, respectively.
Net interest income for the three months ended March 31, 2017 totaled $5.8 million compared to $4.7 million for the same period of 2016. Interest income resulting from interest-earning asset growth from expansion of the Bay originated loan portfolio, selective investment purchases and the Hopkins Merger was partially offset by a decrease in discount accretion on purchased loans, deferred costs and deferred fees. As of March 31, 2017, the remaining net loan discounts on the Bank’s loan portfolio totaled $7.6 million.
Noninterest income for the three months ended March 31, 2017 was $1.3 million, increasing by $0.1 million when compared to the $1.2 million for the three months ended March 31, 2016. Changes for the first quarter of 2017 were primary related to a $0.1 million increase in electronic banking fees.
Noninterest expense reduction continues to be a key focus for 2017 net income improvement. For the three-month periods ended March 31, 2017, noninterest expense was $5.2 million, compared to $5.3 million for the same period of 2016. The primary contributors to the decrease when compared to the first quarter of 2016 were a $0.2 million decrease in occupancy and foreclosed property costs, offset by a $0.1 million increase in merger related expenses.
Bay Bancorp, Inc. Information
Bay is a financial holding company and a savings and loan holding company headquartered in Columbia, Maryland. Through the Bank, Bay serves the community with a network of 11 branches strategically located throughout the Baltimore Metropolitan Statistical Area, particularly Baltimore City and the Maryland counties of Baltimore Washington corridor. The Bank serves small and medium size businesses, professionals and other valued customers by offering a broad suite of financial products and services, including on-line and mobile banking, commercial banking, cash management, mortgage lending and retail banking. The Bank funds a variety of loan types including commercial and residential real estate loans, commercial term loans and lines of credit, consumer loans and letters of credit. Additional information is available at www.baybankmd.com.
The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on Bay. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of Bay. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Bay with the Securities and Exchange Commission entitled “Risk Factors”.
For investor inquiries contact:
Joseph J. Thomas, President and CEO
7151 Columbia Gateway Drive,
Columbia, MD 21046
For further information contact:
Larry D. Pickett, Chief Financial Officer