FVCBankcorp(US:FVCB)2021-05-12 16:00Part I — Financial Information Financial Statements FVCBankcorp, Inc. reported net income of $5.6 million for Q1 2021, driven by reduced interest expense and asset growth to $1.88 billion Consolidated Balance Sheet Highlights | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Assets | $1,884,517 | $1,821,481 | +3.5% | | Loans, net | $1,432,491 | $1,451,125 | -1.3% | | Securities available-for-sale | $135,104 | $126,151 | +7.1% | | Total Deposits | $1,594,639 | $1,532,493 | +4.1% | | Noninterest-bearing Deposits | $501,812 | $399,062 | +25.8% | | Total Stockholders' Equity | $194,929 | $189,500 | +2.9% | Consolidated Income Statement Highlights | Metric | Three Months Ended Mar 31, 2021 (in thousands) | Three Months Ended Mar 31, 2020 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $14,043 | $12,211 | +15.0% | | Provision for loan losses | $0 | $1,066 | -100.0% | | Noninterest Income | $791 | $693 | +14.1% | | Noninterest Expenses | $7,882 | $7,209 | +9.3% | | Net Income | $5,569 | $3,733 | +49.2% | | Diluted EPS | $0.38 | $0.26 | +46.2% | Note 1: Organization and Accounting Policies (including COVID-19 Impact) This note outlines the company's organization, accounting policies, and COVID-19 response, highlighting PPP participation and reduced loan deferrals - The company executed a payment deferral program for commercial clients affected by the pandemic. While initially modifying 277 loans totaling $360.2 million (24.4% of the portfolio) in 2020, remaining deferred loans decreased to just $10.0 million (0.69% of the portfolio) by March 31, 202143 - The company actively participated in the Small Business Administration's (SBA) Paycheck Protection Program (PPP). As of March 31, 2021, PPP loans totaled $166.6 million. These loans are fully guaranteed by the U.S. government44 - The company will adopt the new credit loss standard (CECL) for fiscal years beginning after December 15, 2022. It is currently in the initial phases of evaluating allowance methodologies with a third-party vendor46 Note 3: Loans and Allowance for Loan Losses This note details the company's $1.45 billion loan portfolio composition and $14.4 million allowance for loan losses, including risk ratings and nonperforming loans Loan Portfolio Composition | Loan Type | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Commercial real estate | $783,783 | $790,025 | | Commercial and industrial | $276,621 | $275,334 | | Commercial construction | $219,187 | $222,319 | | Consumer real estate | $159,217 | $167,872 | | Consumer nonresidential | $13,594 | $15,835 | | Total Loans | $1,452,402 | $1,471,385 | Allowance for Loan Losses Activity | Metric | Three Months Ended Mar 31, 2021 (in thousands) | | :--- | :--- | | Beginning Balance | $14,958 | | Provision | $0 | | Charge-offs | ($631) | | Recoveries | $94 | | Ending Balance | $14,421 | - Total nonaccrual loans were $4.9 million in the originated portfolio and $2.2 million in the acquired portfolio as of March 31, 2021100101 Note 10: Subordinated Notes The company has two outstanding subordinated notes, including a $20 million issuance in October 2020 at 4.875% and a $25 million note callable in June 2021 - In October 2020, the company issued $20 million in subordinated notes due 2030 with an initial fixed rate of 4.875%. Proceeds may be used for general corporate purposes, including the potential repayment of a portion of the $25 million debt callable in June 2021147 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management analyzes Q1 2021 financial performance, highlighting improved net income, deposit growth, PPP loan origination, and strong asset quality and capital levels - Net income for Q1 2021 was $5.6 million, up from $3.7 million in Q1 2020. The increase was driven by a $1.8 million rise in net interest income and a $1.1 million decrease in the provision for loan losses212 - Net interest margin decreased to 3.22% from 3.37% in the prior-year quarter, primarily due to lower yields on interest-earning assets in the decreased rate environment, though this was partially offset by a significant reduction in the cost of interest-bearing liabilities222223 - Total assets increased by 3.5% to $1.88 billion since year-end 2020, while total deposits grew 4.1% to $1.59 billion, highlighted by a 25.8% increase in noninterest-bearing deposits236275 COVID-19 Pandemic Discussion This section details the company's COVID-19 response, including ongoing PPP loan origination, significantly reduced loan deferrals, and operational adjustments - The company continues to originate PPP loans under the 2021 program, adding 393 applications for approximately $62.5 million in Q1 2021. Total PPP loans outstanding were $166.6 million at March 31, 2021187210 - Loan payment deferrals have substantially decreased. As of March 31, 2021, only three loans totaling $10.0 million (0.69% of the portfolio) remained on deferral, down from a peak of $360.2 million in 2020188209 COVID-Impacted Loan Portfolio by Asset Class (at March 31, 2021) | Asset Class | Amount (in thousands) | | :--- | :--- | | Commercial real estate - retail | $190,308 | | Commercial real estate - mixed use | $81,890 | | Specialty use-hotel/lodging/motel | $60,972 | | Commercial real estate - office | $106,957 | | Total Loan Categories COVID Impacted | $729,389 | Asset Quality Asset quality improved in Q1 2021, with total nonperforming assets decreasing to $8.9 million or 0.47% of total assets, driven by payoffs and sales Nonperforming Assets | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Nonperforming loans (NPLs) | $5,023 | $5,621 | | Other real estate owned (OREO) | $3,866 | $3,866 | | Total Nonperforming Assets (NPAs) | $8,889 | $9,487 | | NPAs / Total Assets | 0.47% | 0.52% | - Special mention loans decreased significantly to $4.0 million from $12.1 million at year-end 2020, primarily due to two loans totaling $7.6 million being paid off245 - Substandard loans decreased by $1.8 million to $18.8 million, mainly due to the sale or payoff of several loans during the quarter246 Capital Resources The company maintains a strong capital position with shareholders' equity at $194.9 million, exceeding CBLR requirements, and approved a new share repurchase program - The Bank's Community Bank Leverage Ratio (CBLR) was 11.65% at March 31, 2021, significantly exceeding the 8.5% minimum requirement for 2021290294298 - Tangible book value per share (a non-GAAP measure) increased to $13.69 at March 31, 2021, from $13.41 at December 31, 2020294301 - On January 21, 2021, the company approved a new share repurchase program for up to 1,080,860 shares, or approximately 8% of outstanding common stock196 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, managed through ALCO, with the balance sheet being asset-sensitive and stress tests within policy limits Interest Rate Risk to Net Interest Income (1-Year Horizon) | Change in Interest Rates (bps) | % Change in Net Interest Income (Mar 31, 2021) | | :--- | :--- | | +400 | +10.68% | | +200 | +5.06% | | +100 | +2.32% | | -100 | -2.01% | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021326 Part II — Other Information Legal Proceedings The company is not a party to any material legal proceedings and is unaware of any threatened material legal proceedings - As of the reporting date, the company is not involved in any material legal proceedings330 Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020, were reported - No material changes to risk factors were reported for the quarter ended March 31, 2021331 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase common stock in Q1 2021 but authorized a new share repurchase program for up to 1,080,860 shares - No shares were repurchased during the first quarter of 2021333 - A share repurchase program was extended and increased on January 21, 2021, authorizing the repurchase of up to 1,080,860 shares of common stock335