BV Financial, Inc Announces Financial Results

Rhea-AI Summary

BV Financial, Inc announced its financial results for the quarter ended March 31, 2024, reporting a net income of $2.6 million or $0.24 per diluted share, compared to $3.1 million or $0.39 per diluted share in the same period last year. The decrease was primarily due to paying off $3.0 million in debt, resulting in a write-off of $566,000. Return on average assets and equity decreased, while loans and deposits saw slight increases. The company recorded a provision for credit losses and saw changes in its financial condition, liabilities, deposits, and stockholders' equity. Non-performing assets remained stable, and operating results showed a decline in net interest income and noninterest income, with an increase in noninterest expenses. Income tax expenses and effective tax rates also fluctuated.

Positive

• The company reported a net income of $2.6 million or $0.24 per diluted share for Q1 2024.
• Return on average assets and equity decreased compared to the same period last year.
• Loans increased by $3.9 million, while deposits increased by $5.4 million from the previous quarter.
• The company recorded a provision for credit losses of $18,000 in Q1 2024.
• Total assets, liabilities, and stockholders' equity showed changes during the quarter.
• Non-performing assets remained stable at $10.9 million.
• Net interest income and noninterest income saw declines, while noninterest expenses increased.
• Income tax expenses and effective tax rates fluctuated between Q1 2024 and Q1 2023.

Negative

• The decrease in net income was primarily due to paying off debt and a write-off of $566,000.
• Return on average assets and equity decreased compared to the same period last year.
• Noninterest income decreased primarily due to lower income on insurance policies.
• Noninterest expenses increased, driven by higher compensation and benefits expenses.
• Income tax expenses and effective tax rates fluctuated between Q1 2024 and Q1 2023.

Insights

Financial Analyst

The recent financial disclosure by BV Financial, Inc. indicates a decrease in net income for Q1 2024, attributed mainly to a sizeable write-off related to junior subordinated debt payoff. While such a write-off is a one-time expense, investors should note the underlying shift in interest expenses and the possible implications for future quarters. The return on average equity (ROAE) significantly dropped from 12.57% to 5.14% year-over-year, which could suggest a decreased efficiency in generating shareholder value. However, the increase in total assets driven by a rise in loans receivable and deposit growth provides a contrasting sign of solid operational footing.

Investors typically look at the net interest margin (NIM) as a key indicator of a bank's profitability. The compression of BV Financial's NIM from 4.34% to 3.91% reflects the interest rate environment's challenges, compounded by the increased cost of interest-bearing liabilities. The shift in deposit strategy, replacing retail certificates with lower-cost brokered deposits, demonstrates an adaptive measure to control interest expenses. This strategic agility can be both a strength and a risk, depending on execution and market dynamics.

Credit Analyst

An essential element for evaluating a financial institution's health is its asset quality. BV Financial's non-performing assets have remained relatively stable, which is reassuring. However, the coverage ratio has slightly dipped from 82.9% to 79.2%, which may be something to monitor over subsequent quarters. The provision for credit losses remains low, indicating management's confidence in asset quality but warrants attention as economic conditions fluctuate.

On the liability side, the pay-off of higher-rate subordinated debt is a proactive measure in managing cost of capital. Considering the current financial landscape, this could be advantageous in the long term, although it has led to a short-term increase in interest expense. An informed investor should balance these present costs with future benefits of reduced interest payments and potentially improved net interest margin.

BALTIMORE, MD / ACCESSWIRE / April 22, 2024 / BV Financial, Inc. (NASDAQ:BVFL), (the "Company") the holding company for BayVanguard Bank (the "Bank"), reported net income of $2.6 million or $0.24 per diluted share for the quarter ended March 31, 2024 compared to net income of $3.1 million or $0.39 per diluted share for the quarter ended March 31, 2023.

Financial Highlights

During the quarter ended March 31, 2024, the Company paid off $3.0 million in junior subordinated debt assumed via previous acquisition that had an interest rate in the most recent quarter of 8.49%. This resulted in the write-off (increase in interest expense) of the remaining purchase accounting fair market value adjustment of $566,000. This write-off was the primary contributor to the decrease in net income in the quarter ended March 31, 2024 when compared to the quarter ended March 31, 2023.

Return on average assets and return on average equity for the quarter ended March 31, 2024 were 1.16% and 5.14%, respectively. Return on average assets and return on average equity for the three months ended March 31, 2023 were 1.46% and 12.57%, respectively.

Loans increased $3.9 million, or 0.56% to $708.7 million at March 31, 2024 compared to $704.8 million at December 31, 2023.

Deposits increased $5.4 million, or 0.85%, from $634.1 million at March 31, 2023 to $639.5 million at March 31, 2024.

In the quarter ended March 31, 2024, the Company recorded a provision for credit losses of $18,000 consisting of a $133,000 benefit to the provision for credit losses - loans, a $152,000 provision for credit losses for unfunded commitments and a $1,000 credit to the provision for credit losses for held-to-maturity securities. In the quarter ended December 31, 2023, the Company recorded a provision for credit losses of $435,000 consisting of $354,000 in the provision for credit losses - loans and $81,000 in the provision for credit losses for unfunded commitments.

Financial Condition

Total Assets. Total assets were $892.5 million at March 31, 2024, an increase of $7.2 million, or 0.82%, from $885.3 million at December 31, 2023. The increase was due primarily to a $5.1 million increase in cash and a $3.9 million increase in loans receivable funded by an increase in deposits and quarterly net income. The increase in deposits included the issuance of $10 million in brokered deposits during the period.

Cash and Cash Equivalents. Cash and cash equivalents increased $5.1 million, or 6.9%, to $78.8 million at March 31, 2024 from $73. 7million at December 31, 2023 primarily due to the increase in deposits.

Net Loans Receivable. Loans receivable increased $3.9 million, or 0.56%, to $708.7 million at March 31, 2024 from $704.8 million at December 31, 2023. Increases in commercial and industrial loans of $7.0 million and investor commercial real estate loans of $4.9 million offset decreases in owner and non-owner occupied one- to four-family loans and owner occupied commercial real estate loans.

Securities. Securities available for sale ("AFS") decreased $1.0 million, or 3.0%, to $33.8 million at March 31, 2024 from $34.8 million at December 31, 2023. The decrease was due to new purchases not fully replacing maturities and paydowns in the portfolio. Securities held-to-maturity were relatively unchanged at $10.2 million.

Total Liabilities. Total liabilities increased $4.6 million or 0.7%, to $690.8 million at March 31, 2024 from $686.2 million at December 31, 2023. The increase was primarily due to an increase in total deposits of $5.4 million, and an increase in escrow accounts and other accrued balances offsetting the pay-off of the junior subordinated debt.

Deposits. Total deposits increased $5.4 million, or 0.85%, to $639.5 million at March 31, 2024 from $634.1 million at December 31, 2023. Interest-bearing deposits increased $8.3 million, or 1.7%, to $500.4 million at March 31, 2024 from $492.1 million at December 31, 2023. Noninterest bearing deposits decreased $2.9 million, or 2.1%, to $139.1 million at March 31, 2024 from $142.0 million at December 31, 2023. During the first quarter of 2024, the Company replaced $10.0 million in retail certificates of deposits with $10 million of brokered deposits at a cost lower than that would have been required to retain the retail certificates.

Federal Home Loan Bank Borrowings. The Company had no Federal Home Loan Bank borrowings at March 31, 2024 or December31, 2023.

Stockholders' Equity. Stockholders' equity increased $2.7 million, or 1.3%, to $201.8 million at March 31, 2024, primarily due to net income.

Asset Quality. Non-performing assets at March 31, 2024 totaled $10.9 million consisting of $10.7 million in nonperforming loans and $170,000 in foreclosed real estate, compared to $10.7 million at December 31, 2023, consisting of $10.5 million in non-performing loans and $170,000 in foreclosed real estate. At March 31 2024, the allowance for credit losses on loans was $8.5 million, which represented 1.20% of total loans and 79.2% of non-performing loans compared to $8.6 million at December 31, 2023, which represented 1.21% of total loans and 82.9% of non-performing loans.

Comparison of Operating Results for the Three Ended March 31, 2024 and 2023

Net Interest Income. Net interest income was $8.0 million for the three months ended March 31, 2024 compared to $8.2 million in the three months ended March 31, 2023. The net interest margin for the three months ended March 31, 2024 was 3.91% compared to 4.34% for the three months ended March 31, 2023. The 125 basis point increase in the cost of interest-bearing liabilities offset the higher average balances and rates earned on loans and short-term investments. Included in interest expense is the above-mentioned write-off of the $566,000 remaining fair market value adjustment on the pay-off the $3.0 million junior subordinated debt. Additionally, the cost of interest-bearing deposits increased by 109 basis points to 1.62% in the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023.

Noninterest Income. For the three months ended March 31, 2024, noninterest income totaled $578,000 compared to $807,000 in the quarter ended March 31, 2023. The decrease is almost entirely due to lower income on insurance policies. In the quarter ended March 31, 2023, the Company received a $235,000 death benefit on the policies.

Noninterest Expense. For the three months ended March 31, 2024, noninterest expense totaled $4.9 million compared to $4.7 million for the three months ended March 31, 2023. Compensation and benefits expenses increased by 8.7% due to increases in staffing and salary levels. Other expenses increased $116,000 or 22.7% primarily due to higher fraud losses. Professional fees decreased by $88,000 or 44.0% due to the recovery of previously expensed legal fees of $109,000 on the disposition of a problem loan. Foreclosed real estate expenses decreased by $122,000 or 96.1% due to the sale of large foreclosed real estate properties in 2023.

Income taxes. For the three months ended March 31, 2024, income tax expense was $1.0 million for an effective tax rate of 28.5%. In the quarter ended March 31, 2023, income tax expense was $1.2 million for an effective tax rate of 27.65%. The lower tax rate in the quarter ended March 31, 2023 was due to a higher level of income from life insurance in that quarter.

Forward-Looking Statements

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, increased competitive pressures, the effects of inflation, potential recessionary conditions, general economic conditions or conditions within the securities markets, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the FRB, changes in the quality, size and composition of our loan and securities portfolios, changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio, changes in demand for our products and services, accounting and tax changes, 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, a potential government shutdown, a failure in or breach of our operational or security systems or infrastructure, including cyberattacks that could adversely affect the Company's financial condition and results of operations and the business in which the Company and the Bank are engaged and the failure to maintain current technologies, the failure to retain or attract employees.

BV Financial, Inc.

BV Financial, Inc. is the parent company of BayVanguard Bank. BayVanguard Bank is headquartered in Baltimore, Maryland with thirteen branches in the Baltimore metropolitan area and the eastern shore of Maryland. The Bank is a full-service community-oriented financial institution dedicated to serving the financial service needs of consumers and businesses.

Contact:

Michael J. Dee
Chief Financial Officer
(410) 477- 5000

		At or For the Three Months
		Ended March 31,
		2024				2023
Performance Ratios(1):
Return on average assets			1.16	%			1.46	%
Return on average equity			5.14	%			12.57	%
Interest rate spread(2)			3.10	%			4.06	%
Net interest margin(3)			3.91	%			4.34	%
Non-interest expense to average assets			2.23	%			2.21	%
Efficiency ratio(4)			52.75	%			52.19	%
Average interest-earning assets to average interest-bearing liabilities			154.58	%			134.59	%
Average equity to average assets			22.61	%			11.65	%
Credit Quality Ratios:
Allowance for credit losses as a percentage of total loans			1.20	%			1.19	%
Allowance for credit losses as a percentage of non-performing loans			79.16	%			176.47	%
Net charge-offs (recoveries) to average outstanding loans during the year			-0.01	%			0.01	%
Non-performing loans as a percentage of total loans			1.52	%			0.67	%
Non-performing loans as a percentage of total assets			1.20	%			0.53	%
Total non-performing assets as a percentage of total assets			1.22	%			0.77	%
Other:
Number of offices			13				15
Number of full-time equivalent employees			112				117
(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.

BV FINANCIAL, INC.
Consolidated Balance Sheets

		March 31, 2024				December 31, 2023
(dollars in thousands, except share amounts)		(unaudited)
Assets
Cash		$	8,520			$	9,260
Interest-bearing deposits in other banks			70,317				64,482
Cash and cash equivalents			78,837				73,742
Equity Investment			246				256
Securities available for sale			33,752				34,781
Securities held to maturity (fair value of $9,154 and $9,206, ACL of $6 and $5)			10,153				10,209
Loans held for maturity			708,736				704,802
Allowance for Credit Losses			(8,506	)			(8,554	)
Net Loans			700,230				696,248
Foreclosed real estate			170				170
Premises and equipment, net			14,473				14,250
Federal Home Loan Bank of Atlanta stock, at cost			654				626
Investment in life insurance			19,744				19,657
Accrued interest receivable			3,147				3,279
Goodwill			14,420				14,420
Intangible assets, net			967				1,012
Deferred tax assets, net			8,699				8,969
Other assets			7,053				7,635
Total assets		$	892,545			$	885,254
Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits		$	139,107			$	142,030
Interest-bearing deposits			500,381				492,090
Total deposits			639,488				634,120
FHLB borrowings			-				-
Subordinated Debentures			34,767				37,251
Other liabilities			16,538				14,818
Total liabilities			690,793				686,189
Stockholders' equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding			-				-
Common stock, $0.01 par value; 45,000,000 shares authorized in 2024 and 14,000,000 authorized in 2023; 11,375,803 shares issued and 11,375,803 shares outstanding as of March 31, 2024; 11,375,803 shares issued and 11,375,803 shares outstanding as of December 31, 2023			114				114
Paid-in capital			110,534				110,465
Unearned common stock held by employee stock ownership plan			(7,286	)			(7,328	)
Retained earnings			100,346				97,772
Accumulated other comprehensive loss			(1,956	)			(1,958	)
Total stockholders' equity			201,752				199,065
Total liabilities and stockholders' equity		$	892,545			$	885,254

BV FINANCIAL, INC.
Consolidated Statements of Income

(dollars in thousands, except per share amounts)		Three Months Ended March 31,
Interest Income		2024				2023
Loans, including fees		$	9,782			$	8,773
Investment securities available for sale			306				266
Investment securities held to maturity			92				93
Other interest income			824				556
Total interest income			11,004				9,688
Interest Expense
Interest on deposits			1,986				665
Interest on FHLB borrowings			-				289
Interest on Subordinated debentures			1,055				534
Total interest expense			3,041				1,488
Net interest income			7,963				8,200
Provision for (recovery of) credit losses			18				2
Net interest income after provision for (recovery of) credit losses			7,945				8,198
Noninterest Income
Service fees on deposits			103				94
Fees from debit cards			171				173
Income from investment in life insurance			87				318
Other income			217				222
Total noninterest income			578				807
Noninterest Expense
Compensation and related benefits			3,129				2,879
Occupancy			438				416
Data processing			377				349
Advertising			5				13
Professional fees			112				200
Equipment			102				105
Foreclosed real estate and repossessed assets holding costs			5				127
Amortization of intangible assets			45				46
FDIC insurance premiums			83				54
Other expense			627				511
Total noninterest expense			4,923				4,700
Net income before tax			3,600				4,305
Income tax expense			1,026				1,190
Net income		$	2,574			$	3,115
Basic earnings per share		$	0.24			$	0.39
Diluted earnings per share		$	0.24			$	0.39

BV FINANCIAL, INC.
Average Balance Sheet for the Quarters ended March 31
(Dollars in thousands)

		For the Three Months Ended March 31,
		2024									2023
(dollars in thousands)		Average Outstanding Balance			Interest			Average Yield/Rate			Average Outstanding Balance			Interest			Average Yield/Rate
		(Unaudited)
Interest-earning assets:
Loans		$	708,367		$	9,782			5.54	%	$	667,888		$	8,773			5.33	%
Securities available-for-sale			34,045			306			3.61	%		36,134			266			2.99	%
Securities held-to-maturity			10,815			92			3.41	%		11,915			93			3.18	%
Cash, cash equivalents and other interest-earning assets			62,681			824			5.28	%		50,883			556			4.43	%
Total interest-earning assets			815,908			11,004			5.41	%		766,820			9,688			5.12	%
Noninterest-earning assets			67,460									81,403
Total assets		$	883,368								$	848,223
Interest-bearing liabilities:
Interest-bearing demand deposits		$	84,550			236			1.12	%	$	91,842			18			0.08	%
Savings deposits			146,629			65			0.18	%		164,817			40			0.10	%
Money market deposits			87,738			352			1.61	%		99,583			97			0.39	%
Certificates of deposit			173,093			1,333			3.09	%		152,264			510			1.36	%
Total interest-bearing deposits			492,010			1,986			1.62	%		508,506			665			0.53	%
Federal Home Loan Bank advances			-			-			-			24,150			289			4.85	%
Subordinated debentures			35,805			1,055			11.82	%		37,069			534			5.84	%
Total borrowings			35,805			1,055			11.82	%		61,219			823			5.45	%
Total interest-bearing liabilities			527,815			3,041			2.31	%		569,725			1,488			1.06	%
Noninterest-bearing demand deposits			139,691									158,807
Other noninterest-bearing liabilities			16,142									22,042
Total liabilities			683,648									750,574
Equity			199,720									97,649
Total liabilities and equity		$	883,368								$	848,223
Net interest income					$	7,963								$	8,200
Net interest rate spread									3.10	%								4.06	%
Net interest-earning assets		$	288,093								$	197,095
Net interest margin									3.91	%								4.34	%
Average interest-earning assets to interest-bearing liabilities			154.58	%								135.16	%

ALLOWANCE FOR CREDIT LOSS - LOANS
(Dollars in thousands)

		QTR
		3/31/2024
Beginning Balance		$	8,554
Provision for credit loss -loans			(133	)
Net Charge-offs (recoveries):
Owner Occupied 1-4			(52	)
Non-Owner Occupied 1-4			(29	)
Investor Commercial Real Estate			-
OO Commercial Real Estate			(2	)
Construction & Land			(1	)
Farm Loans			-
Marine & Consumer			(1	)
Guaranteed by the US Gov't			-
Commercial			-
Net charge-offs (recoveries)			(85	)
Ending Balance- ACL for Loans		$	8,506
Balance Reserve for unfunded loan commitments			360
Balance Reserve for HTM Securities			5
Total ACL		$	8,871
Provision expense for Unfunded Commitments			152
Provision expense for HTM Securities			(1	)
Total other provision expense		$	151
Total provision for (recovery of )credit losses		$	18

SOURCE: BV Financial, Inc.

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FAQ

What was BV Financial's net income for the quarter ended March 31, 2024?

BV Financial reported a net income of $2.6 million for the quarter ended March 31, 2024.

How did BV Financial's return on average assets and equity compare between the quarters ended March 31, 2024, and 2023?

Return on average assets and equity decreased in Q1 2024 compared to Q1 2023.

What were the changes in BV Financial's loans and deposits from December 31, 2023, to March 31, 2024?

Loans increased by $3.9 million, while deposits increased by $5.4 million from December 31, 2023, to March 31, 2024.

How did BV Financial's non-performing assets compare between March 31, 2024, and December 31, 2023?

Non-performing assets remained stable at $10.9 million from December 31, 2023, to March 31, 2024.

What factors contributed to the decline in BV Financial's noninterest income for the quarter ended March 31, 2024?

Noninterest income decreased primarily due to lower income on insurance policies.

What was the reason behind the increase in BV Financial's noninterest expenses for the quarter ended March 31, 2024?

Noninterest expenses increased, driven by higher compensation and benefits expenses.

How did BV Financial's income tax expenses and effective tax rates differ between the quarters ended March 31, 2024, and 2023?

Income tax expenses and effective tax rates fluctuated between Q1 2024 and Q1 2023.