Bay Bancorp, Inc. Reports Record First Quarter 2017 Results

COLUMBIA, Md., April 27, 2017 (GLOBE NEWSWIRE) -- 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.

Forward-Looking Statements

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”.

                         
BAY BANCORP, INC. AND SUBSIDIARY                        
CONSOLIDATED BALANCE SHEETS                        
                         
    March 31,       March 31,    
    2017     December 31,   2016     December 31,
    (unaudited)   2016     (unaudited)   2015  
                         
ASSETS                        
Cash and due from banks   $ 5,981,700     $ 7,591,685     $ 6,074,891     $ 8,059,888  
Interest bearing deposits with banks and federal funds sold     36,822,635       32,435,771       8,682,578       26,353,334  
Total Cash and Cash Equivalents     42,804,335       40,027,456       14,757,469       34,413,222  
                         
Investment securities available for sale, at fair value     64,455,089       60,232,727       25,018,385       33,352,233  
Investment securities held to maturity, at amortized cost     1,137,200       1,158,238       1,553,671       1,573,165  
Restricted equity securities, at cost     2,322,295       1,823,195       1,870,395       2,969,595  
Loans held for sale     848,975       1,613,497       3,560,752       4,864,344  
                         
Loans, net of deferred fees and costs     495,236,254       487,103,713       396,854,139       393,240,567  
Less: Allowance for loan losses     (3,159,769 )     (2,823,153 )     (1,948,536 )     (1,773,009 )
Loans, net     492,076,485       484,280,560       394,905,603       391,467,558  
                         
Real estate acquired through foreclosure     564,678       1,224,939       1,501,896       1,459,732  
Premises and equipment, net     3,835,945       3,882,343       4,903,369       5,060,802  
Bank owned life insurance     15,844,759       15,729,302       5,641,561       5,611,352  
Core deposit intangible     2,794,844       3,030,309       2,431,376       2,624,184  
Deferred tax assets, net     2,890,703       2,984,718       2,793,504       2,723,557  
Accrued interest receivable     1,921,253       1,884,945       1,372,456       1,271,871  
Accrued taxes receivable     660,993       1,153,102       2,136,804       2,775,237  
Prepaid expenses     972,721       1,001,723       777,683       691,372  
Other assets     220,863       276,540       209,732       303,614  
Total Assets   $   633,351,138     $   620,303,594     $   463,434,656     $   491,161,838  
                         
LIABILITIES                         
Noninterest-bearing deposits   $ 112,411,694     $ 111,378,694     $ 98,085,001     $ 101,838,210  
Interest-bearing deposits     413,390,788       415,079,700       267,800,996       265,577,728  
Total Deposits     525,802,482       526,458,394       365,885,997       367,415,938  
                         
Short-term borrowings     34,000,000       20,000,000       26,275,000       52,300,000  
Defined benefit pension liability     964,334       994,156       1,361,177       829,237  
Accrued expenses and other liabilities     5,302,656       6,923,818       2,974,857       2,934,174  
Total Liabilities     566,069,472       554,376,368       396,497,031       423,479,349  
                         
STOCKHOLDERS’ EQUITY                        
Common stock - par value $1.00, authorized 20,000,000 shares, issued and outstanding 10,543,862, 10,456,098, 10,887,932 and 11,062,932 shares as of March 31, 2017, December 30, 2016, March 31, 2016 and December 31, 2015, respectively.     10,543,862       10,456,098       10,887,932       11,062,932  
Additional paid-in capital     41,187,024       40,814,285       42,730,014       43,378,927  
Retained earnings     15,383,778       14,426,969       12,853,469       12,667,070  
Accumulated other comprehensive income     167,002       30,383       466,210       573,560  
Total controlling interest     67,281,666       65,727,735       66,937,625       67,682,489  
Non-controlling interest     -       199,491       -       -  
Total Stockholders' Equity     67,281,666       65,927,226       66,937,625       67,682,489  
Total Liabilities and Stockholders' Equity   $   633,351,138     $   620,303,594     $   463,434,656     $   491,161,838  
                         

BAY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME 
(Unaudited)
             
    Three Months Ended March 31, 
      2017     2016
             
Interest income:            
Interest and fees on loans   $ 5,920,144   $ 4,844,320
Interest on loans held for sale     6,882     39,666
Interest and dividends on securities     350,885     211,384
Interest on deposits with banks and federal funds sold     77,675     19,045
Total Interest Income     6,355,586     5,114,415
             
Interest expense:            
Interest on deposits     455,850     309,177
Interest on short-term borrowings     60,204     63,795
Total Interest Expense     516,054     372,972
Net Interest Income     5,839,532     4,741,443
             
Provision for loan losses     440,521     298,000
Net interest income after provision for loan losses     5,399,011     4,443,443
             
Noninterest income:            
Payment sponsorship fees     656,192     551,009
Mortgage banking fees and gains     182,944     158,547
Service charges on deposit accounts     62,633     70,614
Bargain purchase gain (adjustment)     873     -
Gain on securities sold     5,521     272,963
Other income     418,200     137,944
Total Noninterest Income     1,326,363     1,191,077
             
Noninterest expenses:            
Salary and employee benefits     2,857,245     2,889,456
Occupancy and equipment expenses     757,645     871,195
Legal, accounting and other professional fees     232,956     310,561
Data processing and item processing services     327,794     281,992
FDIC insurance costs     65,014     77,479
Advertising and marketing related expenses     24,320     32,528
Foreclosed property expenses and OREO sales, net     16,859     74,479
Loan collection costs     34,666     20,800
Core deposit intangible amortization     235,465     192,808
Merger and acquisition related expenses     149,543     -
Other expenses     480,054     578,699
Total Noninterest Expenses     5,181,561     5,329,997
Income before income taxes     1,543,813     304,523
Income tax expense     587,005     118,124
Net income   $ 956,808   $ 186,399
             
Basic net income per common share   $ 0.09   $ 0.02
             
Diluted net income per common share   $ 0.09   $ 0.02
             

BAY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Twelve Months Ended December 31, 2016 and 2015
(Unaudited)
                           
                           
                  Accumulated        
          Additional       Other   Non-     
      Common   Paid-in   Retained   Comprehensive   controlling    
      Stock   Capital   Earnings   Income (loss)   Interest   Total
                           
Balance December 31, 2015   $ 11,062,932   $ 43,378,927   $ 12,667,070 $ 573,560   $ -   $ 67,682,489  
                           
Net income     -     -     186,399   -     -     186,399  
Other comprehensive income     -     -     -   (107,350 )   -     (107,350 )
Stock-based compensation     -     35,587     -   -     -     35,587  
Repurchase of common stock     (175,000 )   (684,500 )   -   -     -     (859,500 )
Balance March 31, 2016   $ 10,887,932   $ 42,730,014   $ 12,853,469 $ 466,210   $ -   $ 66,937,625  
                           
                           
                  Accumulated        
          Additional       Other   Non-     
      Common   Paid-in   Retained   Comprehensive   controlling    
      Stock   Capital   Earnings   Income (loss)   Interest   Total
                           
Balance December 31, 2016   $ 10,456,098   $ 40,814,285   $ 14,426,969 $ 30,383   $ 199,491   $ 65,927,226  
                           
Net income     -     -     956,808   -     -     956,808  
Sale of iReverse     -     -     1   -     (199,491 )   (199,490 )
Other comprehensive income     -     -     -   136,619     -     136,619  
Stock-based compensation     -     62,564     -   -     -     62,564  
Issuance of common stock under stock option plan     87,764     310,175     -   -     -     397,939  
Balance March 31, 2017   $ 10,543,862   $ 41,187,024   $ 15,383,778 $ 167,002   $ -   $ 67,281,666  
                           

BAY BANK, FSB
CAPITAL RATIOS
                                     
                  To Be Well  
                  Capitalized Under  
            To Be Considered     Prompt Corrective  
      Actual       Adequately Capitalized     Action Provisions  
    Amount   Ratio   Amount   Ratio   Amount   Ratio
As of March 31, 2017:                                    
(unaudited)                                    
                                     
Total Risk-Based Capital Ratio   $ 67,183   12.90 %   $ 41,674   8.00 %   $ 52,093   10.00 %
                                     
Tier I Risk-Based Capital Ratio   $ 64,023   12.29 %   $ 31,256   6.00 %   $ 41,674   8.00 %
                                     
Common Equity Tier I Capital Ratio   $ 64,023   12.29 %   $ 23,442   4.50 %   $ 33,860   6.50 %
                                     
Leverage Ratio   $ 64,023   10.34 %   $ 24,770   4.00 %   $ 30,963   5.00 %
                                     
As of December 31, 2016:                                    
                                     
                                     
Total Risk-Based Capital Ratio   $ 65,883   12.87 %   $ 40,959   8.00 %   $ 51,199   10.00 %
                                     
Tier I Risk-Based Capital Ratio   $ 63,057   12.32 %   $ 30,719   6.00 %   $ 40,959   8.00 %
                                     
Common Equity Tier I Capital Ratio   $ 63,057   12.32 %   $ 23,039   4.50 %   $ 33,279   6.50 %
                                     
Leverage Ratio   $ 63,057   10.45 %   $ 24,133   4.00 %   $ 30,166   5.00 %
                                     
As of March 31, 2016:                                    
(unaudited)                                    
Total Risk-Based Capital Ratio   $ 67,204   16.68 %   $ 32,231   8.00 %   $ 40,289   10.00 %
                                     
Tier I Risk-Based Capital Ratio   $ 65,255   16.20 %   $ 24,174   6.00 %   $ 32,231   8.00 %
                                     
Common Equity Tier I Capital Ratio   $ 65,255   16.20 %   $ 18,130   4.50 %   $ 26,188   6.50 %
                                     
Leverage Ratio   $ 65,255   13.74 %   $ 19,004   4.00 %   $ 23,755   5.00 %
                                     
As of December 31, 2015:                                    
                                     
Total Risk-Based Capital Ratio   $ 67,238   16.58 %   $ 32,443   8.00 %   $ 40,553   10.00 %
                                     
Tier I Risk-Based Capital Ratio   $ 65,465   16.14 %   $ 24,332   6.00 %   $ 32,443   8.00 %
                                     
Common Equity Tier I Capital Ratio   $ 65,465   16.14 %   $ 18,249   4.50 %   $ 26,360   6.50 %
                                     
Leverage Ratio   $ 65,465   13.75 %   $ 19,041   4.00 %   $ 23,801   5.00 %
                                     

BAY BANCORP, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA
                             
                             
  Three Months Ended   Year Ended
  March 31,   March 31,   December 31,   December 31,   December 31,
  2017     2016     2016     2016     2015  
  (unaudited)   (unaudited)   (unaudited)        
Financial Data:                            
Assets $ 633,351,138     $ 463,434,656     $ 620,303,594     $ 620,303,594     $ 491,161,838  
Investment securities   65,592,289       26,572,056       61,390,965       61,390,965       34,925,398  
Loans (net of deferred fees and costs)   495,236,254       396,854,139       487,103,713       487,103,713       393,240,567  
Allowance for loan losses   (3,159,769 )     (1,948,536 )     (2,823,153 )     (2,823,153 )     (1,773,009 )
Deposits   525,802,482       365,885,997       526,458,394       526,458,394       367,415,938  
Borrowings   34,000,000       26,275,000       20,000,000       20,000,000       52,300,000  
Equity attributable to non-controlling interest               199,491       199,491       -  
Equity attributable to common shareholders   67,281,664       66,937,625       65,727,735       65,727,735       67,682,489  
                             
Net income - Bay Bancorp   956,808       186,399       750,170       1,759,899       1,930,765  
Net income - Non-controlling interest   -       -       61,279       199,491       -  
                             
Average Balances: (unaudited)                            
Assets   617,613,946       476,747,246       603,746,545       536,333,860       481,145,938  
Investment securities   62,069,734       29,466,610       53,358,950       40,537,934       36,649,655  
Loans (net of deferred fees and costs)   490,288,543       395,839,666       483,690,335       436,793,412       389,684,221  
Borrowings   23,779,661       44,265,934       1,975,000       26,493,284       23,188,219  
Deposits   520,795,226       361,610,047       529,537,517       443,144,111       388,245,405  
Stockholders' equity   66,063,753       67,564,670       64,084,518       66,146,705       65,747,418  
                             
Performance Ratios:                            
Annualized return on average assets   0.63 %     0.16 %     0.53 %     0.37 %     0.40 %
Annualized return on average equity   5.87 %     1.11 %     5.04 %     2.96 %     2.94 %
Yield on average interest-earning assets   4.41 %     4.53 %     4.41 %     4.50 %     5.10 %
Rate on average interest-bearing liabilities   0.48 %     0.48 %     0.48 %     0.50 %     0.58 %
Net interest spread   3.93 %     4.05 %     3.93 %     4.00 %     4.51 %
Net interest margin   4.05 %     4.20 %     4.05 %     4.14 %     4.70 %
                             
Book value per share $ 6.38     $ 6.15     $ 6.29     $ 6.29     $ 6.13  
Basic net income per share   0.09       0.02       0.07       0.16       0.17  
Diluted net income per share   0.09       0.02       0.07       0.16       0.17  
                             
                             
    March 31,   March 31,   December 31,          
    2017   2016   2016              
Asset Quality Ratios:                            
Allowance for loan losses to loans   0.64 %     0.49 %     0.58 %            
Nonperforming loans to avg. loans   3.17 %     2.07 %     3.02 %            
Nonperforming assets to total assets   2.54 %     2.10 %     2.55 %            
Net charge-offs annualized to avg. loans   0.08 %     0.03 %     0.00 %            
                             
Capital Ratios (Bay Bank, FSB):                             
Total risk-based capital ratio   12.90 %     16.68 %     12.87 %            
Common equity tier 1 capital ratio   12.29 %     16.20 %     12.32 %            
Tier 1 risk-based capital ratio   12.29 %     16.20 %     12.32 %            
Leverage ratio   10.34 %     13.74 %     10.45 %            
                             

For investor inquiries contact: Joseph J. Thomas, President and CEO 410-536-7336 jthomas@baybankmd.com 7151 Columbia Gateway Drive, Suite A Columbia, MD 21046 For further information contact: Larry D. Pickett, Chief Financial Officer lpickett@baybankmd.com 410-312-5415

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