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BALTIMORE, MD / ACCESSWIRE / April 27, 2023 / BV Financial, Inc. (OTC PINK:BVFL), the holding company for BayVanguard Bank, today reported net income of $3.1 million, or $0.42 per diluted share, for the three months ended March 31, 2023 compared to net income of $2.4 million or $0.33 per diluted share, for the three months ended March 31, 2022. Return on average assets and equity were 1.46% and 12.57% in the quarter ended March 31,2023 compared to 1.15% and 11.05% in the quarter ended March 31, 2022. The net interest margin for the current quarter of 4.34% represented an increase of 85 basis points from the 3.49% in the quarter ended March 31, 2022.
Balance Sheet Review
Total assets were $857.5 million at March 31, 2023, an increase of $12.5 million, or 1.5%, from $845.0 million at December 31, 2022. The increase was due primarily to a $13.7 million increase in net loans receivable to $672.8 million at March 31, 2023, partially offset by decreases of $4.0 million in cash and cash equivalents to $64.6 million at March 31, 2023 and $700,000 in investment in life insurance to $19.3 million at March 31, 2023.
Cash and cash equivalents decreased $4.0 million, or 5.9%, to $64.6 million at March 31, 2023 from $68.7 million at December 31, 2022 as funds were used to fund the increases in net loans receivable. We regularly review our liquidity position based on alternative uses of available funds as well as market conditions.
Net loans receivable increased $13.7 million, or 2.1%, to $672.8 million at March 31, 2023 from $659.1 million at December 31, 2022. Increases in commercial real estate and construction loans offset by decreases in owner and non-owner occupied 1-4 loans and commercial loans.
Securities increased $3.0 million, or 6.9%, to $46.5 million at March 31, 2023 from $43.5 million at December 31, 2022. This increase was primarily due to an increase of $4.0 million in agency securities, partially offset by a $1.3 million decrease in available for sale mortgage-backed securities to $32.7 million at March 31, 2023.
Total liabilities increased $9.7 million, or 1.3%, to $756.9 million at March 31, 2023 from $747.2 million at December 31, 2022. The increase was primarily due to a $25.5 million increase in Federal Home Loan Bank borrowings, partially offset by a decrease in total deposits of $17.6 million.
Total deposits decreased $17.6 million, or 2.6%, to $667.0 million at March 31, 2023 from $684.6 million at December 31, 2022. Interest-bearing deposits decreased $2.1 million, or 0.4%, to $515.3 million at March 31, 2023 from $517.4 million at December 31, 2022. Noninterest bearing deposits decreased $15.5 million, or 9.3% to $151.7 million at March 31, 2023 from $167.2 million at December 31, 2022
Of the $17.6 million decrease in deposits that occurred in the quarter ended March 31, 2023, $14.0 million, or 79.5%, of the decrease occurred in January as primarily commercial customers made routine annual post-year end distributions, moved cash to alternative investments and made certain large capital expenditures. BV Financial has been adjusting interest rates paid on deposits to retain and grow these balances. The turmoil experienced in the banking system in early March 2023 has not led to a measurable increase in customer inquiries or withdrawals.
We had $37.5 million in Federal Home Loan Bank borrowings at March 31, 2023 compared to $12.0 million in Federal Home Loan Bank borrowings at December 31, 2022. The increase was used to fund loan growth and to maintain on balance sheet liquidity.
BayVanguard Bank's Tier 1 leverage capital ratio was 13.53% at March 31, 2022 compared to 12.05% at December 31, 2022. This ratio and the Bank's other capital measurements continue to exceed all regulatory standards for "well-capitalized" financial institutions.
Income Statement Review
Interest income increased $2.3 million, or 30.7%, to $9.7 million for the three months ended March 31, 2023 from $7.4 million for the three months ended March 31, 2022. The increase was due primarily to increases in interest income on loans, which is our primary source of interest income, and interest income on cash, cash equivalents and other interest-earning assets. Interest income on loans increased $1.6 million, or 21.8%, to $8.8 million for the three months ended March 31, 2023 from $7.2 million for the three months ended March 31, 2022 due to increases in the average balance of loans and the average yield. The average balance of loans increased $52.2 million, or 8.5%, to $667.9 million for the three months ended March 31, 2023 from $615.7 million for the three months ended March 31, 2022. The weighted average yield on loans increased 58 basis points to 5.33% for the three months ended March 31, 2023 compared to 4.75% for the three months ended March 31, 2022, as variable rate loans reset to higher interest rates and the rates on new loans exceeded the rates on paid off loans. Interest income on cash, cash equivalents and other interest-earning assets increased $520,000, to $556,000 for the three months ended March 31, 2023 from $36,000 for the three months ended March 31, 2022 due to a 429 basis point increase in the average yield on cash, cash equivalents and other interest-earning assets, partially offset by an $50.1 million decrease in the average balance as cash on hand was used to fund loan growth.
Interest expense increased $0.6 million, or 70.8%, to $1.5 million for the three months ended March 31, 2023 compared to $0.9 million for the three months ended March 31, 2022, due primarily to a $0.3 million increase on interest paid on deposits, and a $0.3 million increase on interest paid on advances from the Federal Home Loan Bank. The increase in interest expense on deposits was due to a 25 basis point increase in the average rate, offset by a $19.7 million decrease in the average balance of interest-bearing deposits to $508.5 million at March 31, 2023 from $528.2 million for the three months ended March 31, 2022. The average rate on interest-bearing deposits was 0.53% for the three months ended March 31, 2023 compared to 0.28% for the three months ended March 31, 2022.
Non-interest income decreased by $681,000 in the quarter ended March 31, 2023 as compared to the quarter ended March 31, 2022. In the quarter ended March 31, 2022, the Company recognized $200,000 in excess insurance proceeds as a result of the death of a former executive of an acquired institution. Non-interest income in the quarter ended March 31, 2022 included $600,000 in other income upon the pay-off of a customer's loan relationship, $300,000 in a gain on bargain purchase related to the merger with North Arundel Savings Bank.
Non-interest expense increased $342,000, or 7.8%, to $4.7 million for the three months ended March 31, 2023 from $4.4 million for the three months ended March 31, 2022. The increase was due primarily to a $500,000 increase in compensation and related benefits to $2.9 million at March 31, 2023 due to general increases in salary and incentive compensation, additional staffing as we built up the infrastructure to support growth, partially offset by a decrease of $216,000 in other non-interest expenses related to data processing conversion expenses incurred in 2022.
Credit Quality Review
Non-performing assets decreased to $6.6 million, or 0.77% of total assets, at March 31, 2023 compared to $7.9 million, or 0.93% of total assets, at December 31, 2022 as a previously nonaccrual commercial real estate loan paid in full. At March 31, 2023, allowance for credit loss on loans was $8.1 million, which represented 1.19% of total loans and 176.5% of non-performing loans. BV Financial adopted ASU 326 on January 1, 2023. Under this new current expected loss model, provisions for credit losses are charged to operations to establish an allowance for credit losses at a level to cover expected losses over the expected life of a loan or securities portfolio. Under the previous "incurred loss" model, provisions for loan losses were charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements. Prior to adoption of this standard, BV Financial segregated the loan portfolios acquired via mergers and evaluated them against a credit allowance established at acquisition. As part of the adoption of the new accounting standard, $3.8 million in remaining acquisition credit marks were transferred to the allowance for credit losses for loans. An additional $750,000 in allowances for credit losses were established, $450,000 for the allowance for credit losses for loans, $289,000 as a reserve for off balance sheet commitments and $11,000 for held-to-maturity securities as of the adoption date.
This press release may contain certain forward-looking statements that are based on management's current expectations regarding economic, legislative and regulatory issues that may impact the Company's earnings in future periods. Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, real estate values and competition, changes in accounting principles, policies or guidelines, changes in legislation or regulation and other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services.
BV Financial, Inc. is the parent company of BayVanguard Bank. BayVanguard Bank is headquartered in Baltimore, Maryland with fourteen other branches in the Baltimore metropolitan area and the Eastern Shore of Maryland.
Contact: Michael J. Dee Chief Financial Officer (410) 477-5000
BV FINANCIAL,INC.
At or For the Three Months
Ended March 31,
2023
2022
Performance Ratios(1):
Return on average assets
1.46
%
1.15
%
Return on average equity
12.57
%
11.05
%
Return on Average tangible Equity
14.87
%
13.43
%
Interest rate spread(2)
4.06
%
3.33
%
Net interest margin(3)
4.34
%
3.49
%
Non-interest expense to average assets
2.21
%
2.05
%
Efficiency ratio(4)
52.19
%
55.49
%
Average interest-earning assets to average interest-bearing liabilities
134.59
%
134.73
%
Average equity to average assets
11.65
%
10.44
%
Capital Ratios(5):
Total capital to risk-weighted assets
18.11
%
17.81
%
Tier 1 capital to risk-weighted assets
16.86
%
17.30
%
Common equity tier 1 capital to risk-weighted assets
16.86
%
17.30
%
Tier 1 capital to average assets
13.53
%
12.05
%
Tangible equity to tangible assets BV Financial consolidated
Credit Quality Ratios:(6)
Allowance for loan losses as a percentage of total loans
1.19
%
0.45
%
Allowance for loan losses as a percentage of non-performing loans
176.47
%
75.92
%
Net (charge-offs) recoveries to average outstanding loans during the year
0.01
%
0.01
%
Non-performing loans as a percentage of total loans
0.67
%
0.59
%
Non-performing loans as a percentage of total assets
0.53
%
0.45
%
Total non-performing assets as a percentage of total assets
0.77
%
0.68
%
Other:
Number of offices
15
17
Number of full-time equivalent employees
117
109
(1) Performance ratios are annualized.
(2) Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3) Represents net interest income as a percentage of average interest-earning assets.
(4) Represents non-interest expenses divided by the sum of net interest income and non-interest income.
(5) BayVanguard Bank only, unless otherwise noted
(6) The Company adopted ASU 326 on January 1, 2023. Some ratios are not comparable pre and post adoption.
BV Financial & Subsidiaries
Consolidated Statement of Condition
(in thousands)
Unaudited
3/31/2023
12/31/2022
ASSETS
Cash
8,238
12,704
Interest bearing deposits in other banks
56,370
55,948
64,608
68,652
Equity securities at fair value
211
221
Investment AFS
36,103
33,034
Investment HTM
10,394
10,461
Loans
680,893
662,944
Allowance for Credit Losses
(8,095)
(3,813)
Net Loans Receivable
672,798
659,131
Foreclosed Real Estate
2,044
1,987
Premises and Equipment, net
15,007
15,176
FHLB of Atlanta Stock
2,052
977
Investment in life insurance
19,335
19,983
Accrued Interest Receivable
2,767
2,952
Goodwill
14,420
14,420
Intangible Assets, net
1,148
1,195
Deferred tax asset, net
9,219
9,113
Other Assets
7,419
7,661
Total Assets
$
857,525
$
844,963
LIABILITIES
Non interest bearing deposits
151,667
167,202
Interest bearing deposits
515,322
517,416
Total Deposits
666,989
684,618
FHLB borrowings
37,500
12,000
Subordinated debentures
37,092
37,039
Other Liabilities
15,291
13,555
Total Liabilities
756,872
747,212
EQUITY
Common Stock at par
74
74
Paid-in capital
15,472
15,406
Retained Earnings
87,180
84,612
Accumulated other comprehensive loss
(2,073)
(2,341)
Total stockholders' equity
100,653
97,751
Total liabilites and stockholders' equity
$
857,525
$
844,963
Total common shares outstanding
7,424,595
7,418,575
QTRLY Consolidated Statement of Income
(in thousands)
3/31/2023
3/31/2022
INTEREST INCOME
Loans, including fees
$8,773
$7,202
Investment Securities - AFS
266
136
Investment Securities - HTM
93
36
Othere Interest Income
556
39
Total Interest Income
9,688
7,413
Interest on Deposits
665
367
Interest on FHLB & Other Borrowings
289
1
Interest on Subordinated Debentures
534
503
Total Interest Expense
1,488
871
Net Interest Income Before Provision For Loss
8,200
6,542
Provision for Loan Losses
2
177
Net Interest Income
8,198
6,365
Debit Card Income
173
182
Service Fees On Deposits
94
113
Income from Life Insurance
318
93
Gain on Bargain Purchase
-
330
Other Income
222
770
Total Other Income
807
1,488
Compensation
2,879
2,402
Occupancy
416
464
Data Processing
349
365
Advertising
13
5
Professional fees
200
175
Equipment
105
112
Foreclosed Real Estate Holding Costs
127
10
Amortization of intangible assets
46
45
FDIC insurance premiums
54
53
Other
511
727
Total Non-Interest Expense
4,700
4,358
Net Income Before Tax
4,305
3,495
Provision for Income Tax
1,190
1,078
Net Income
$3,115
$2,417
Basic Earnings per share
$0.42
$0.33
Diluted earnings per share
$0.42
$0.33
CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS
