Exhibit 99.1

 

Bay Bancorp, Inc. Announces Third Quarter 2014 Results

 

Lutherville Maryland—Bay Bancorp, Inc. (“Bay”) (NASDAQ: BYBK), the savings and loan holding company for Bay Bank, FSB (“Bank”), announced today net income of $1.79 million or $0.18 per diluted share for nine months ended September 30, 2014, compared to net income of $2.32 million or $0.29 per diluted share for the first nine months of 2013.  For the quarter, Bay reported a net loss of $0.94 million or $0.09 per diluted share, compared to net income of $2.64 million or $0.26 per diluted share for the 2nd quarter of 2014 and net income of $0.92 million or $0.11 per diluted share for the third quarter of 2013.  The nine months ended September 30, 2014 include a  $511,000 bargain purchase gain compared to a $2.86 million bargain purchase gain for the first nine months of 2013.

 

“After completing strategic steps in the second quarter of 2014 to reduce core operating expenses and cost of funds, in this quarter the Bank absorbed $1.1 million of previously announced, one-time stock-based compensation expense, and $0.6 million in extraordinary expenses related to the Slavie acquisition and subsequent integration” said Kevin B. Cashen, President and Chief Executive Officer. “The acquisition of Slavie Federal Savings Bank from the FDIC supports the plan to add earning assets at a discount, increase scale and improve profitability going forward.”

 

Highlights from the First Nine Months of 2014

 

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Recent Events

 

On May 30, 2014, the Bank entered into an agreement with Federal Deposit Insurance Corporation (“FDIC”) to acquire certain assets and assumed substantially all deposits and certain other liabilities of Slavie (the “Slavie Acquisition”), which was closed on that date by the Office of the Comptroller of the Currency (“OCC”).  In the Slavie Acquisition, the Bank acquired assets with a fair value of $117.1 million, including $82.9 million in loans, while assuming liabilities of $110.8 million. The Bank did not acquire any of Slavie’s other real estate owned.

 

An independent valuation specialist was engaged during the third quarter of 2014 to prepare a fair valuation analysis for the Slavie loan portfolio, core deposit intangible asset, and time deposit portfolio.  The valuation resulted in a summary before-tax bargain purchase gain of $511,000 compared to an initial pre-tax bargain purchase gain of $697,000 estimate recorded at June 30, 2014.  The adjusted valuation was properly recorded as a second quarter 2014 adjustment, resulting in an $113,000 decrease in second quarter after-tax income.  Summary valuation as of May 30, 2014 includes an overall loan fair value mark-to-market discount to book value of $7.83 million, a core deposit intangible of $0.48 million and a certificate premium of $0.13 million

 

Bay anticipates a normal level of additional expenses in the fourth quarter of 2014 related to the Slavie system conversion and other acquisition related costs.

 

On July 29, 2014, the Board of Directors of Bay granted 212,000 shares of Bay’s common stock to certain directors and officers and granted options to purchase 77,000 shares of Bay’s common stock to certain officers and a consultant.  The equity awards were granted to certain directors and officers and a consultant to recognize their efforts in building the Bank since being founded in 2010 by the Financial Services Partners Fund I, LLC (“FSPF”).  H Bancorp, LLC was formed on June 30, 2014 as the successor entity and Bay’s new top-tier holding company.  The liquidation of FSPF was a condition imposed by the Board of Governors of the Federal Reserve System as part of its approval of the Merger.  Bay realized an expense of $1.1 million in the third quarter of 2014 as a result of these equity awards, which will offset a portion of the one-time gains recorded in the second quarter of 2014.  Further details can be found in Bay’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2014.

 

Over the weekend of October 10, 2014, the Bank completed the core system integration of the Slavie/FISERV platform to the Bay Bank/FIS platform.  The Finance/General Ledger consolidation was also completed within this integration.  Several Slavie employees filled open positions within the Bank and have relocated to their new locations.

 

The former headquarters branch for Slavie was closed on October 10, 2014.  All deposits were transferred to the Bank’s Hickory branch location.  We anticipate no additional costs related to the facility.

 

Balance Sheet Review

 

Total assets were $480 million at September 30, 2014, an increase of $60.4 million, or 14%, when compared to December 31, 2013.  The increase was due to net increases in loans of $73.4 million, or 23%.  The Bank acquired net loans of $82.9 million in the Slavie Acquisition, which was offset by a net loan decline of $9.9 million, a $6.5 million decrease in mortgage loans held for sale and a $10.6 million increase in stockholders’ equity.  Excluding $7.0 million of net amortization from the acquired Slavie portfolio, the Bank achieved increased commercial and residential lending volume. Third quarter new loan originations and draws exceeded loan principal repayments by $6.0 million, a 6.1% annualized pace of net loan growth.

 

Total deposits were $399 million at September 30, 2014, an increase of $38 million, or 10%, when compared to December 31, 2013.  The increase was primarily driven by $110.8 million in deposits assumed in the Slavie Acquisition, offset by the $24.0 million decrease from the exit of the IRA product line, a net $9.5 million decrease resulting from the three closed Bank branch locations, and deposits acquired in the Slavie Acquisition declining by $43.1 million as part of the Bank’s strategy to reposition the deposit composition.  The Bank experienced organic net deposit growth of $3 million over the first nine months of 2014. 

 

Stockholders’ equity was $65.2 million at September 30, 2014, an increase of $10.7 million, or 19%, when compared to December 31, 2013.  The increase resulted from the $7.0 million received in the Capital Transaction, $1.4 million of stock based compensation and the retention of corporate earnings.

 

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 $20.67 million at September 30, 2014 from $18.32 million at June 30, 2014 and $9.60 million at December 31, 2013.  This increase was due primarily to the migration of acquired PCI loan balances to nonaccrual status during the third quarter.  Nonperforming assets represented 4.31% of total assets at September 30, 2014 compared to 3.79% at June 30, 2014 and 2.29% at December 31, 2013.  The ratio of net charge-offs (annualized) to average total loans was 0.19% for the third quarter of 2014 and 0.49% for the third quarter of 2013.

 

At September 30, 2014, the Bank remained above all “well-capitalized” regulatory requirement levels.  The Bank’s tier 1 risk-based capital ratio was 15.84% at September 30, 2014 as compared to 15.70% at June 30, 2014 and 14.42% at December 31, 2013.   

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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 and nine month periods ended September 30, 2014 was a  ($0.94 million loss) and $1.79 million, respectively, compared to net income of $0.92 million and $2.32 million, respectively, for the same periods of 2013.  With variations in net income primarily the result of the bargain purchase gains from the Merger and the Slavie acquisition, changes were less comparable between periods. 

 

Net interest income increased by $4.0 million for the nine months ended September 30, 2014 when compared to the nine months ended September 30, 2013.  The increase was supported by a $90 million growth in average interest-earning assets added by the Merger and the Slavie Acquisition, a 14 basis point reduction in the average cost of interest bearing liabilities, and a 5 basis point increase in the average rates earned on interest-earning assets.  The net interest margin for the third quarter of 2014 decreased to 4.80% from 5.56% for the second quarter of 2014 and 5.44% for the third quarter of 2013.  While the average rates on interest earning assets increased, interest income recognition volatility was impacted by favorable loan resolutions and accretion of net discounts on loans of $0.9 million and $4.0 million during the three- and nine-month periods of 2014, respectively, compared to $1.2 million and $3.2 million, respectively, during the same periods of 2013. As of September 30, 2014, the remaining net loan discounts on the Bank’s loan portfolio, including pre-Merger bank loans and loans acquired in the Merger and the Slavie Acquisition totaled $16.60 million.

 

Noninterest income for the three months ended September 30, 2014 was $1.13 million compared to $1.76 million for the same period in 2013.  This decrease was primarily the result of $0.27 million decrease in mortgage banking fees and gains along with a $0.20 million decline in brokerage commissions. Expectations are for increased income in both areas in upcoming quarters.

 

Noninterest income for the nine months ended September 30, 2014 was $6.63 million compared to $6.77 million for the same period in 2013.  This variance was the result of the 2014 remaining interest rate mark-to-market adjustment on IRA deposits of $2.16 million and a $0.51 million bargain purchase gain compared to the $2.86 million bargain purchase gain associated with the Merger that was recognized during the first nine months of 2013.  Electronic banking fees increased by $0.63 million during the first nine months of 2014, as the Merger added this business unit to the Bank.  Brokerage commissions declined by$.32 million for the first nine months of 2014 as the Bank temporarily exited this business line late in 2013.  Mortgage banking fees for the first nine months ended September 30, 2014 declined by $0.79 million when compared to the same period of 2013, while deposit service charges increased by $0.09 million.

 

Noninterest expense for the three months ended September 30, 2014 was $7.97 million compared to $6.26 million for the prior quarter and $6.72 million for the third quarter of 2013.  The primary contributors to the increase when compared to the third quarter of 2013 were increases in Merger-related expenses of $0.39 million and one-time other expenses $0.98 million.  This overall increase was also impacted by the Slavie Acquisition, which added an additional $0.20 million in salaries and benefits and $0.10 million in other noninterest expenses in September 2014.

 

Noninterest expense for the nine months ended September 30, 2014 was $20.57 million compared to $16.16 million for the same period in 2013, an increase of $4.41 million.  The increase relates to the inclusion during the first nine months of 2014 of a full nine-months of ongoing expenses related to the Merger and $0.76 million of expenses from the Slavie Acquisition.  Categories impacted by this full nine-months of expenses were increases in salaries and employee benefits of $2.12 million, occupancy, furniture and equipment expenses of $1.10 million, foreclosed property expenses of $0.23 million, legal, accounting and other professional fees of $0.13 million and core deposit intangible amortization of $0.22 million.  This was offset by a $1.12 million decline in Merger-related expenses.   We anticipate a normal level of expenses in the fourth quarter of 2014 related to core expenses and acquisition related costs.

 

 

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Bay Bancorp, Inc. Information

 

Bay Bancorp, Inc. is a financial holding company and a savings and loan holding company headquartered in Lutherville, Maryland. Through Bay Bank, FSB, its federal savings bank subsidiary, Bay Bancorp, Inc. serves the community with a network of 10 branches strategically located throughout the Baltimore Metropolitan Statistical Area, particularly Baltimore City and the Maryland counties of Baltimore, Anne Arundel, Howard, Carroll, and Harford. The Bank serves local consumers, 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. The Bank’s subsidiary, Bay Financial Services, Inc., provides investment advisory and brokerage services. 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 the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. 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 Bancorp, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.

 

 

For investor inquiries contact: 

 

Joseph J. Thomas, Executive Chairman,

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

410-427-3726

 

 

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Bay Bancorp, Inc.

Consolidated Balance Sheets

 

 

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Bay Bancorp, Inc.

Consolidated Statements of Income (Loss)

(Unaudited)

 

 

 

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Bay Bancorp, Inc.

Consolidated Statements of Stockholders' Equity

For the Nine Months Ended September 30, 2014 and 2013

(Unaudited)

 

 

 

 

 

 

 

 

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Bay Bank, FSB

Capital Ratios

(Unaudited)

(in thousands)

 

 

 

 

 

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Bay Bancorp, Inc.

Selected Financial Data

(Unaudited)

 

 

 

 

 

 

 

 

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