BV Financial, Inc. Announces Financial Results

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