Loan Portfolio and Credit Risk - As of December 31, 2023, 40.8% of the total loan portfolio, amounting to $287.2 million, consisted of loans secured by non-owner occupied commercial real estate[285]. - The company intends to continue increasing originations of commercial real estate loans, which involve credit risks that could adversely affect financial condition[283]. - The company faces risks related to local economic conditions, which could impact borrowers' ability to repay loans and the value of collateral securing loans[291]. - As of December 31, 2023, the allowance for credit losses was 1.21% of total loans and 81.5% of non-performing loans, indicating a potential need for future increases in the allowance due to credit deterioration[318]. - The company had outstanding commitments to extend credit of $49.4 million and $935,000 in letters of credit as of December 31, 2023[636]. Financial Performance and Capital - The company has accumulated other comprehensive losses of $1.95 million related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio as of December 31, 2023[290]. - The aggregate amount of uninsured deposits was $187.5 million as of December 31, 2023, compared to $172.1 million in 2022[296]. - Total deposits decreased by $50.5 million, or 7.4%, to $634.1 million at December 31, 2023, compared to $684.6 million at December 31, 2022[325]. - At December 31, 2023, the Bank had approximately $243.0 million in available liquidity, which is 1.9 times the uninsured and unsecured deposit balance of $129.0 million[326]. - Net cash provided by operating activities was $15.2 million for the year ended December 31, 2023, compared to $9.7 million for the year ended December 31, 2022[634]. - The company is categorized as well capitalized and exceeds all regulatory capital requirements as of December 31, 2023[635]. - The company has a common equity Tier 1 capital ratio requirement of 4.5%, with a capital conservation buffer resulting in a minimum ratio of 7.0%[302]. Business Strategy and Growth - The company’s business strategy includes growth in assets, deposits, and operations, which requires attracting customers from other financial institutions[306]. - The company continually evaluates merger and acquisition opportunities to expand market presence and improve profitability[343]. - The company established an investment real estate group in 2020, with $184.2 million, or 64.1%, of investor commercial real estate loans secured by collateral located outside of Maryland as of December 31, 2023[316]. Risk Management and Operational Challenges - The Enterprise Risk Management Committee oversees the company's overall risk framework and appetite, including strategic, credit, liquidity, and operational risks[311]. - The company has established policies to prevent or limit the impact of system failures and security breaches, although vulnerabilities remain[309]. - The company has faced significant operational risks due to reliance on technology, which may be subject to failures or security breaches[337]. Interest Rates Impact - Rising interest rates positively impacted income as short-term investments repriced immediately while deposit rates increased more slowly[325]. Regulatory Classification - The company is classified as an emerging growth company, allowing it to take advantage of exemptions from various reporting requirements[304].
BV Financial(BVFL) - 2023 Q4 - Annual Report