FVCBankcorp(FVCB) - 2024 Q1 - Quarterly Results

Press Release & Company Information Contact Information This section provides contact details for media and investor inquiries, including Chairman and CEO David W. Pijor and President Patricia A. Ferrick - Contact information for David W. Pijor, Esq., Chairman and Chief Executive Officer, and Patricia A. Ferrick, President, including phone and email, is provided for further information[2] Company Overview FVCBankcorp, Inc. is the holding company for FVCbank, a Virginia-chartered community bank with $2.18 billion in assets, serving the greater Baltimore and Washington, D.C. metropolitan areas with 8 full-service offices - FVCBankcorp, Inc. is the holding company for FVCbank, a $2.18 billion asset-sized Virginia-chartered community bank[40] - FVCbank serves commercial businesses, nonprofit organizations, professional service entities, their owners and employees in the greater Baltimore and Washington, D.C. metropolitan areas[40] - The bank operates 8 full-service offices across Arlington, Fairfax, Manassas, Reston and Springfield, Virginia, Washington, D.C., and Baltimore, and Bethesda, Maryland[40] First Quarter 2024 Financial Highlights Key Financial Metrics (GAAP & Non-GAAP) The Company reported a significant increase in GAAP net income and diluted EPS for Q1 2024 compared to Q1 2023, despite a nonrecurring tax provision related to BOLI surrender. Non-GAAP commercial bank operating earnings also increased quarter-over-quarter | Metric | Q1 2024 | Q1 2023 | | :----------------------- | :------ | :------ | | Net Income | $1.3 million | $621 thousand | | Diluted EPS | $0.07 | $0.03 | - Q1 2024 results include an additional provision for income taxes totaling $2.4 million related to the cumulative increases in BOLI policy cash values that were taxable upon the policies' surrender[5] | Metric | Q1 2024 | Q4 2023 | | :-------------------------------- | :---------- | :---------- | | Commercial Bank Operating Earnings | $3.7 million | $2.8 million | | Diluted Operating EPS | $0.20 | $0.15 | Strategic Balance Sheet Repositioning The Company surrendered $48.0 million of BOLI policies yielding 2.74% (3.34% tax-equivalent) to pay down high-cost funding and fund new loan growth. This resulted in a nonrecurring $2.4 million tax increase in Q1 2024, with the full impact on net interest income expected in Q2 2024 - During Q1 2024, the Company surrendered $48.0 million of its bank-owned life insurance (BOLI) policies, which yielded 2.74% (3.34% on a tax-equivalent basis)[6] - This transaction resulted in a nonrecurring increase of $2.4 million to the Company's tax provisioning related to the gain associated with the cash payout[6] - The Company used the proceeds to pay down high-cost funding and fund new loan growth, with the full impact on net interest income to be realized in Q2 2024[6] Capital Strength FVCbank remains 'well capitalized' with all regulatory capital components exceeding required thresholds. The total risk-based capital ratio improved to 14.23% at March 31, 2024, from 13.83% at December 31, 2023, and the tangible common equity to total assets ratio increased to 10.30% from 8.92% year-over-year - All of FVCbank's regulatory capital components and ratios were well in excess of thresholds required to be considered 'well capitalized'[6] | Metric | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :----------------------------------- | :--------------- | :---------------- | :--------------- | | Total Risk-Based Capital to RWA | 14.23% | 13.83% | 13.48% | | Tangible Common Equity to Total Assets | 10.30% | 10.12% | 8.92% | Credit Quality Overview The Company maintained strong credit quality with nonperforming loans decreasing by 33% year-over-year to $3.0 million (0.14% of total assets) at March 31, 2024, despite a quarter-over-quarter increase. Net recoveries of $30 thousand were recorded in Q1 2024 | Metric | March 31, 2024 | March 31, 2023 | Change YoY | | :--------------------------------- | :------------- | :------------- | :--------- | | Nonperforming Loans | $3.0 million | $4.5 million | -$1.5 million (-33%) | | Nonperforming Loans to Total Assets | 0.14% | 0.19% | -0.05 pp | - Compared to December 31, 2023, nonperforming loans increased $1.2 million at March 31, 2024[6] - The Company recorded net recoveries of $30 thousand during the first quarter of 2024, or 0.01% of average total loans[6] Management Commentary CEO's Remarks CEO David W. Pijor expressed satisfaction with improved net interest margin and decreased noninterest expense. He highlighted the positive future impact of the BOLI surrender, growth in core relationships through new loan originations ($42 million) and non-time deposits ($113 million), and commitment to client service and technology - Management is pleased with continued efforts to improve net interest margin and decrease noninterest expense, as demonstrated in Q1 2024 results[10] - The surrender of $48.0 million in BOLI is expected to further improve net interest income and margin going forward[10] - Core relationships are increasing through the origination of over $42 million in new loans and $113 million in new non-time deposit accounts[10] Detailed Financial Review Statement of Condition (Balance Sheet) Total assets slightly decreased quarter-over-quarter, while loans receivable and total deposits saw modest increases. The Company strategically reduced wholesale funding and increased shareholders' equity, maintaining a well-capitalized position Assets Total assets slightly decreased to $2.18 billion. Loans receivable increased by 1% to $1.85 billion, driven by new originations. Investment securities decreased by 3% due to principal repayments and market value decline | Metric | March 31, 2024 | December 31, 2023 | Change QoQ | | :-------------------- | :--------------- | :---------------- | :--------- | | Total Assets | $2.18 billion | $2.19 billion | -$7.9 million (-0.4%) | | Loans Receivable, net | $1.85 billion | $1.83 billion | +$24.2 million (+1%) | | Investment Securities | $167.1 million | $171.9 million | -$4.8 million (-3%) | - Loan originations totaled $41.5 million with a weighted average rate of 8.76% during the first quarter of 2024[12] - The decrease in investment securities was primarily a result of $2.8 million in principal repayments and a $2.0 million decrease in the market value of the portfolio[13] Liabilities and Equity Total deposits increased by 1% to $1.86 billion, with noninterest-bearing deposits at 21.2% of total deposits. Time deposits increased significantly as customers sought higher rates. Wholesale funding decreased by 4%, and shareholders' equity increased by 2% to $220.7 million, contributing to improved book and tangible book values per share | Metric | March 31, 2024 | December 31, 2023 | Change QoQ | | :-------------------- | :--------------- | :---------------- | :--------- | | Total Deposits | $1.86 billion | $1.85 billion | +$12.0 million (+1%) | | Noninterest-Bearing Deposits | $394.1 million | $396.7 million | -$2.6 million (-0.7%) | | Time Deposits | $344.4 million | $306.3 million | +$38.0 million (+12%) | | Wholesale Funding | $316.8 million | $330.2 million | -$13.4 million (-4%) | | Shareholders' Equity | $220.7 million | $217.1 million | +$3.5 million (+2%) | | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------------------ | :--------------- | :---------------- | | Book Value Per Share | $12.32 | $12.19 | | Tangible Book Value Per Share (non-GAAP) | $11.90 | $11.77 | - The Bank is well-capitalized at March 31, 2024, with total risk-based capital of 14.23%, common equity tier 1 risk-based capital of 13.18%, and tier 1 leverage ratio of 11.18%[19] Asset Quality The Company recorded no provision for credit losses in Q1 2024. While nonaccrual loans increased quarter-over-quarter due to one commercial & industrial loan, overall credit quality remains strong, with watchlist credits decreasing and a diversified commercial real estate portfolio managed with disciplined policies Credit Loss Provision and Allowance No provision for credit losses was recorded in Q1 2024, compared to $242 thousand in Q1 2023. The Allowance for Credit Losses (ACL) to total loans was 1.02%, slightly down from 1.03% QoQ, and ACL coverage to nonperforming loans decreased to 651% due to an increase in NPLs | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--------------------------------- | :------ | :------ | :------ | | Provision for Credit Losses | $0 | $0 | $242 thousand | | ACL to Total Loans, net of fees | 1.02% | 1.03% | 1.04% | | ACL Coverage to Nonperforming Loans | 651% | 1065% | 449% | Nonperforming Loans and Watchlist Credits Nonaccrual loans and loans 90 days or more past due increased to $3.0 million (0.14% of total assets) from $1.8 million (0.08%) QoQ, primarily due to one commercial & industrial loan. Watchlist credits decreased to $28.0 million | Metric | March 31, 2024 | December 31, 2023 | Change QoQ | | :----------------------------------- | :--------------- | :---------------- | :--------- | | Nonaccrual Loans & 90+ Days Past Due | $3.0 million | $1.8 million | +$1.2 million | | Nonaccrual Loans to Total Assets | 0.14% | 0.08% | +0.06 pp | | Watchlist Credits | $28.0 million | $28.8 million | -$800 thousand | - The increase in nonperforming loans for Q1 2024 is primarily a result of one commercial & industrial loan relationship that was placed on nonaccrual[21] Commercial Real Estate Portfolio Commercial real estate (CRE) loans totaled $1.09 billion (59% of total loans) and construction loans $155 million (8%). The portfolio is diversified by asset type and geography, with rigorous credit approval and monitoring practices | Loan Type | Amount | % of Total Loans | | :-------------------------- | :------------- | :--------------- | | Commercial Real Estate | $1.09 billion | 59% | | Construction Loans | $155 million | 8% | | Office Buildings | $121.3 million | 7% | | Retail Shopping Centers | $266.1 million | 14% | | Multi-family Housing | $178.2 million | 10% | - The commercial real estate portfolio, including construction loans, is diversified by asset type and geographic concentration[23] - The Company manages this portion of the portfolio with comprehensive policies to monitor, measure and mitigate its loan concentrations, including rigorous credit approval, monitoring and administrative practices[23] Minority Investment in Mortgage Banking Operation The Company reported a pre-tax loss of $226 thousand from its minority investment in Atlantic Coast Mortgage, LLC (ACM) in Q1 2024, a significant improvement from the $1.3 million loss in Q4 2023. ACM management is actively working to reduce expenses and increase revenues | Metric | Q1 2024 | Q4 2023 | | :-------------------------------- | :---------- | :---------- | | Pre-tax Loss from ACM Investment | $226 thousand | $1.3 million | - ACM management is continuing to evaluate opportunities to further reduce expenses and increase revenues[25] Income Statement Net income significantly increased year-over-year, but Q1 2024 was impacted by nonrecurring BOLI taxes. Net interest income saw a modest QoQ increase, driven by improved net interest margin, while noninterest income turned positive due to the absence of securities sale losses. Noninterest expenses decreased, primarily due to reduced salaries and benefits Net Interest Income and Margin Net interest income increased 1% QoQ to $12.8 million but decreased 9% YoY. Net interest margin improved 10 basis points QoQ to 2.47% but decreased 13 basis points YoY. Total interest income increased 6% YoY, with loan yields increasing to 5.50%. Total interest expense remained stable QoQ but increased significantly YoY due to higher funding costs | Metric | Q1 2024 | Q4 2023 | Q1 2023 | Change QoQ | Change YoY | | :---------------- | :------ | :------ | :------ | :--------- | :--------- | | Net Interest Income | $12.8M | $12.7M | $14.0M | +1% | -9% | | Net Interest Margin | 2.47% | 2.37% | 2.60% | +10 bps | -13 bps | - The decrease in net interest income compared to the year-ago quarter is primarily due to an increase in funding costs[28] - Loan yields increased 8 basis points to 5.50% QoQ and 39 basis points YoY[30] - Approximately $353 million, or 24%, of the Company's commercial loan portfolio is expected to reprice in the next 12 months[31] Noninterest Income Noninterest income totaled $395 thousand in Q1 2024, a significant improvement from losses in prior quarters due to the absence of investment securities sale losses. BOLI income decreased by 42.9% YoY due to policy surrender | Metric | Q1 2024 | Q4 2023 | Q1 2023 | Change QoQ | Change YoY | | :-------------------- | :------ | :------ | :------ | :--------- | :--------- | | Total Noninterest Income (Loss) | $395 thousand | -$9.9 million | -$4.6 million | +104% | +108.5% | - The positive noninterest income in Q1 2024 is largely due to the absence of losses from the sale of available-for-sale investment securities, which impacted Q1 2023 and Q4 2023[34] - Income from bank-owned life insurance decreased $142 thousand (42.9%) to $190 thousand YoY, a direct result of the surrendered BOLI[35] Noninterest Expense Total noninterest expense decreased 8% QoQ and 4% YoY to $8.6 million. This reduction was primarily driven by a $738 thousand decrease in salaries and benefits QoQ, resulting from reduced staffing and process improvements through technology. Occupancy expense also decreased, while internet banking and software expense increased due to enhanced customer software solutions | Metric | Q1 2024 | Q4 2023 | Q1 2023 | Change QoQ | Change YoY | | :-------------------- | :------ | :------ | :------ | :--------- | :--------- | | Total Noninterest Expense | $8.6 million | $9.4 million | $9.0 million | -8% | -4% | - Salaries and benefits expense decreased $738 thousand QoQ and $484 thousand YoY, primarily due to reduced staffing (FTE decreased from 118 to 111 QoQ) and process improvement through technology[37] - Internet banking and software expense increased $133 thousand YoY due to the implementation of enhanced customer software solutions[38] Income Taxes The Company recorded an income tax provision of $3.2 million in Q1 2024, compared to a benefit of $486 thousand in Q1 2023. This provision includes an additional $2.4 million related to the surrender of BOLI policies | Metric | Q1 2024 | Q1 2023 | | :---------------------- | :---------- | :---------- | | Income Tax Expense (Benefit) | $3.2 million | -$486 thousand | - The provision for income taxes for Q1 2024 includes an additional $2.4 million associated with the Company's surrendering of its BOLI policies[39] Financial Tables Selected Financial Data This section provides a comprehensive overview of selected financial balances, results of operations, per share data, key ratios, capital ratios, and asset quality metrics for the current and prior periods, including GAAP to non-GAAP reconciliations - Contains tables for Selected Balances, Summary Results of Operations, Per Share Data, Selected Ratios, Reconciliation of Net Income (GAAP) to Commercial Bank Operating Earnings (Non-GAAP), Capital Ratios - Bank, Asset Quality, Selected Average Balances, and Other Data[46][47] Summary Consolidated Statements of Condition This table presents a detailed consolidated balance sheet, showing assets, liabilities, and shareholders' equity at March 31, 2024, December 31, 2023, and March 31, 2023, along with quarter-over-quarter and year-over-year percentage changes - Provides a detailed breakdown of assets (Cash, Investment securities, Loans by type, BOLI, etc.), liabilities (Deposits by type, Borrowed funds, etc.), and Shareholders' Equity with comparative data and percentage changes[49] Summary Consolidated Statements of Income (Loss) This table provides a detailed consolidated income statement, outlining net interest income, provision for credit losses, noninterest income (loss), noninterest expense, income taxes, and net income (loss) for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, including GAAP to non-GAAP reconciliations - Presents a detailed income statement including Net Interest Income, Provision for Credit Losses, various Noninterest Income and Expense categories, Income Tax Expense (Benefit), and Net Income (Loss)[51] - Includes reconciliations of Net Income (GAAP) to Commercial Bank Operating Earnings (Non-GAAP) and Pre-Tax Pre-Provision Income (Non-GAAP)[51] Average Statements of Condition and Yields on Earning Assets and Interest-Bearing Liabilities This table presents average balances, interest income/expense, and average yields for interest-earning assets and interest-bearing liabilities for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, providing insights into the Company's net interest margin calculation - Details average balances, interest income/expense, and average yields for various interest-earning assets (Loans by type, Investment securities, Interest-bearing deposits) and interest-bearing liabilities (Deposits by type, Borrowed funds)[52] - Includes the calculation of Net Interest Margin based on average balances[52] Cautionary Note About Forward-Looking Statements Forward-Looking Statements Disclaimer This section serves as a standard disclaimer, warning that the press release contains forward-looking statements subject to known and unknown risks and uncertainties. It lists various factors that could cause actual results to differ materially from projections, including economic conditions, interest rate environment, liquidity, credit losses, market conditions, regulatory changes, and competitive pressures - The press release may contain forward-looking statements that represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of beliefs concerning future events[42] - Actual results, performance or achievements could differ materially from those contemplated due to a number of known and unknown risks and uncertainties[42] - Key factors include general business and economic conditions, the impact of the interest rate environment, changes in liquidity requirements, credit losses, market conditions, and regulatory changes[42][43]