BV Financial, Inc. EPS $0.35 Vs $0.33 YoY For The Quarter Ended September 30, 2023

Author: Benzinga Newsdesk | October 23, 2023 04:40pm

BV Financial, Inc. (NASDAQ:BVFL), (the "Company") the holding company for BayVanguard Bank (the "Bank"), reported net income of $3.7 million, or $0.35 per diluted share, for the quarter ended September 30, 2023 compared to net income of $2.6 million, or $0.33 per diluted share, for the quarter ended September 30, 2022. Net income for the nine-month period ended September 30, 2023 was $10.7 million or $1.20 per diluted share compared to net income of $7.8 million or $0.98 per diluted share for the nine-month period ended September 30, 2022.

Financial Highlights

On July 31, 2023, Bay-Vanguard, M.H.C., Inc. (the "MHC"), the former mutual holding company of the Company completed its conversion from the mutual holding company to the stock holding company form of organization (the "Conversion"), and the Company completed its related stock offering. As a result of the Conversion, the MHC ceased to exist. After the sale of 9,798,980 shares in the offering and the exchange of new shares of common stock to the Company's then existing shareholders, 11,375,803 shares of Company common stock are outstanding. The sale of new shares raised $98.0 million before offering expenses.
Return on average assets and return on average equity for the three months ended September 30, 2023 were 1.58% and 9.84%, respectively. Return on average assets and return on average equity for the nine months ended September 30, 2023 were 1.61% and 11.88%, respectively.
Nets loans increased $39.8 million, or 6.0%, compared to December 31, 2022.
Deposits decreased $38.1 million, or 5.6%, from $684.6 million at December 31, 2022 to $646.5 million at September 30, 2023.
Total equity increased by $97.1 million, or 99.3%, primarily due to the stock offering noted above.
Total loan delinquencies decreased by 71.6% to $3.0 million at September 30, 2023 or 0.43% of loans, from $10.6 million, or 1.59% of total loans, at December 31, 2022.
In the quarter ended September 30, 2023, the Company recorded a credit to the provision for credit losses of $333,000. The calculated required allowance for credit losses ("ACL") decreased by $10,000 and the Company experienced net recoveries for the quarter of $255,000. Additionally, the required ACL for unfunded commitments decreased by $68,000. In the nine-months ended September 30, 2023, the Company recorded a recovery of the provision for credit losses of $480,000. Net recoveries for the period of $421,000 exceeded the required increase in the ACL for loans. Additionally, the required ACL for unfunded commitments decreased by $163,000.

Financial Condition

Total Assets. Total assets were $931.4 million at September 30, 2023, an increase of $86.4 million, or 10.2%, from $845.0 million at December 31, 2022. The increase was due primarily to a $45.8 million increase in cash and cash equivalents , and a $39.8 million increase in net loans receivable to $698.9 million at September 30, 2023, partially offset by decreases of $1.4 million in repossessed assets and $417,000 in the cash value of life insurance.

Cash and Cash Equivalents. Cash and cash equivalents increased $45.8 million, or 67.7%, to $114.5 million at September 30, 2023 from $68.7 millionat December 31, 2022 primarily due to the stock offering and an increase in borrowings from the FHLB.

Net Loans Receivable. Netloans receivable increased$39.8 million, or 6.0%, to $698.9 million at September 30, 2023 from $659.1 million at December31, 2022. Increasesin commercial real estate and construction loans offset decreasesin owner and non-owner occupied one- to four-family loansand commercial loans. The increase in construction loans was due primarily to draws on existing lines of credit. The decreases in one- to four-family loans and commercial loans were due primarily to payoffs and paydowns exceeding originations during the nine-months ended September 30, 2023.

Securities. Securities available for sale ("AFS") increased $2.6 million, or 7.8%, to $35.6 million at September 30, 2023 from $33.0 millionat December 31, 2022. This increase was primarily due to an increase of $4.0 million in agency securities, partially offset by decreases in mortgage-backed and corporate securities due to paydowns and maturities and a $30,000 decrease in the market value of the AFS portfolio.

Total Liabilities. Total liabilities decreased $10.7 million or 1.43%, to $736.5 million at September 30, 2023 from $747.2 million at December 31, 2022.The decrease was primarily due to a decrease in total deposits of $38.1 million, partially offset by an increase in borrowings.

Deposits. Total deposits decreased $38.1 million, or 5.6%, to $646.5 million at September 30, 2023 from $684.6 million at December 31, 2022. Interest-bearing deposits decreased $14.1 million, or 2.7%, to $503.3 million at September 30, 2023 from $517.4 million at December31, 2022. Noninterest bearing deposits decreased $24.0 million, or 14.4%, to $143.2 millionat September 30, 2023 from $167.2 million at December 31, 2022.

TheCompany has been adjusting interestrates paid on deposits in an attempt to retain and grow thesebalances.

Federal Home Loan Bank Borrowings. The Company had$37.5 million in Federal Home Loan Bank borrowings at September 30, 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.

Stockholders' Equity. Stockholders' equity increased $97.3 million, or 99.6%, to $195.1 millionat September 30, 2023, primarily due to the capital raise noted above, $10.7 million in net income and a $547,000negative adjustment to retained earnings resulting from the adoption of ASC Topic 326 "Financial Instruments-Credit Losses" during the quarter ended March 31, 2023.

Asset Quality. Non-performing assets at September 30, 2023 totaled $4.4 million consisting of $3.8 million in nonperforming loans and $555,000 in other real estate owned, compared to $7.9 million at December 31, 2022, consisting of $5.9 million in non-performing loans and $2.0 million in other real estate owned. At September 30 2023, the allowance for credit losses on loans was $8.2 million, which represented 1.15% of total loans and 213.5% of non-performing loans compared to $3.8 million at December 31, 2022, which represented 0.57% of total loans and 64.8% of non-performing loans. In addition, at December 31, 2022, the Bank had credit marks of $3.8 million that were not included in the Bank's allowance for loan loss estimate which is in accordance with U.S. Generally Accepted Accounting Principles. The credit marks were established for specific loans acquired in previous mergers.

Comparison of Operating results for the Three and Nine Months Ended September 30, 2023 and 2022

Net Interest Income. Net interest income was $8.9 million for the three months ended September 30, 2023 compared to $7.8 million in the three months ended September 30, 2022. The net interest margin for the three months ended September 30, 2023 was 4.10% compared to 4.00% for the three months ended September 30, 2022. The 100 basis point increase in the yield on interest-earning assets and the higher level of average equity offset the 139 basis point increase in the cost of deposits and borrowed money. The increase in the yield on interest-earning assets was due to higher rates earned on cash balances and loans due to higher market interest rates. The increase in the cost of interest-bearing liabilities was due higher rates paid on deposits and a shift to higher cost certificates of deposits as well as an increased reliance on advances from the Federal Home Loan Bank of Atlanta.

Net interest income was $25.3 million for the nine months ended September 30, 2023, compared to $21.5 million in the nine months ended September 30, 2022.The net interest margin for the nine months ended September 30, 2023 was 4.21% compared to 3.73% for the nine months ended September 30, 2022. The 114 basis point increase in the yield on interest-earning assets offset the 95 basis point increase in the cost of deposits and borrowed money. The increase in the yield on interest-earning assets was due to higher rates earned on cash balances and loans due to higher market interest rates. The increase in the cost of interest-bearing liabilities was due to an increased reliance on advances from the Federal Home Loan Bank of Atlanta and higher rates paid on deposits and a shift to higher cost certificates of deposits.

Noninterest Income. For the three months ended September 30, 2023, noninterest income totaled $882,000 compared to $681,000 in the quarter ended September 30, 2022. In the quarter ended September 30, 2023, the Company recognized a gain of $188,000 on the sale of a closed branch office. For the quarter ended September 30, 2022, the Company recognized a gain of $45,000 on the sale of a former branch building.

For the nine months ended September 30, 2023, noninterest income totaled $3.1 million as compared to $3.3 million for the nine months ended September 30, 2022. In the nine-months ended September 30, 2023, the Company recognized a gain of $678,000 on the sale of foreclosed real estate and $225,000 in excess life insurance proceeds and a $188,000 gain on the sale of a closed branch office. In the nine months ended September 30, 2022, the Company recognized a $694,000 gain on bargain purchase from the acquisition of North Arundel Savings Bank and $620,000 in prepayment penalties on loans.

Noninterest Expense. For the three months ended September 30, 2023, noninterest expense totaled $5.0 million compared to $4.6 million for the three months ended September 30, 2022. Compensation and benefits expenses increased by 18.1% due to increases in staffing and salary levels. Occupancy, professional fees, FDIC insurance premiums and other expenses also increased. Expenses for holding foreclosed real estate decreased $325,000 as a result of a property sale.

For the nine months ended September 30, 2023, noninterest expense totaled $14.3 million as compared to $13.6 million for the nine months ended September 30, 2022. Increases in compensation and benefits, professional fees and FDIC insurance expense were partially offset by lower decreases in other categories.

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