Village Bank and Trust Financial (VBFC) - 2022 Q1 - Quarterly Report

Part I – Financial Information Financial Statements This section presents the unaudited consolidated financial statements for Village Bank and Trust Financial Corp. for Q1 2022, covering Balance Sheets, Income, Comprehensive Income, Equity, and Cash Flows Consolidated Balance Sheets Total assets increased to $764.4 million, liabilities to $702.9 million, and equity decreased to $61.5 million in Q1 2022 Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $764,417 | $748,401 | | Total cash and cash equivalents | $68,484 | $92,616 | | Investment securities available for sale | $139,866 | $94,699 | | Total loans, net | $515,361 | $522,601 | | Total Liabilities | $702,937 | $685,000 | | Total deposits | $683,673 | $664,048 | | Total Shareholders' Equity | $61,480 | $63,401 | Consolidated Statements of Income Net income for Q1 2022 decreased to $1.8 million from $3.9 million in Q1 2021, primarily due to a $2.6 million drop in mortgage banking income Q1 2022 vs Q1 2021 Income Statement (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Interest Income | $5,861 | $6,376 | | Provision for (recovery of) loan losses | ($400) | $0 | | Total Noninterest Income | $1,628 | $4,170 | | Mortgage banking income, net | $878 | $3,491 | | Total Noninterest Expense | $5,682 | $5,513 | | Net Income | $1,800 | $3,897 | | Earnings per share, diluted | $1.24 | $2.66 | Consolidated Statements of Comprehensive Income (Loss) The company experienced a total comprehensive loss of $1.8 million for Q1 2022, primarily due to a $3.6 million net change in unrealized holding losses on securities Comprehensive Income (Loss) Summary (in thousands) | Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Income | $1,800 | $3,897 | | Total other comprehensive loss | ($3,605) | ($440) | | Total comprehensive income (loss) | ($1,805) | $3,457 | Consolidated Statements of Shareholders' Equity Shareholders' equity decreased to $61.5 million at March 31, 2022, mainly due to a $3.6 million other comprehensive loss offsetting net income - Key changes in shareholders' equity for Q1 2022 include net income of $1.8 million, other comprehensive loss of $3.6 million, and cash dividends of $206,000[18] Consolidated Statements of Cash Flows Net cash used in operating activities was $1.3 million in Q1 2022, a significant shift from $20.8 million provided in Q1 2021, largely due to lower proceeds from mortgage loan sales Cash Flow Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($1,339) | $20,757 | | Net cash used in investing activities | ($42,212) | ($36,567) | | Net cash provided by financing activities | $19,419 | $7,281 | | Net decrease in cash and cash equivalents | ($24,132) | ($8,529) | Notes to Consolidated Financial Statements This section provides detailed disclosures supporting the financial statements, covering investment securities, loan portfolio, deposits, borrowings, fair value, segments, and regulatory capital - Investment securities available for sale increased to $139.9 million at March 31, 2022, from $94.7 million at year-end 2021. Gross unrealized losses increased significantly to $5.6 million from $1.3 million, attributed to rising interest rates[29] - Total loans decreased slightly to $518.6 million. PPP loans, included in commercial and industrial loans, decreased to $17.0 million from $32.6 million at year-end 2021[34][35] - The company has two reportable segments: Commercial Banking and Mortgage Banking. For Q1 2022, the Commercial Banking segment reported net income of $2.0 million, while the Mortgage Banking segment reported a net loss of $199,000[87][90] - As of March 31, 2022, the Bank exceeded all minimum capital ratios to be classified as well capitalized under regulatory standards, with a Total capital to risk-weighted assets ratio of 14.69%[95][99] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial performance, highlighting a decrease in net income to $1.8 million due to lower mortgage banking income and compressed net interest margin Results of Operations Q1 2022 net income was $1.8 million, down from $3.9 million in Q1 2021, primarily due to a $2.6 million drop in mortgage banking income and compressed net interest margin Key Performance Indicators - Q1 2022 vs Q1 2021 | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Income (in thousands) | $1,800 | $3,897 | | Diluted EPS | $1.24 | $2.66 | | Net Interest Margin (NIM) | 3.36% | 3.92% | | Mortgage Banking Income, net (in thousands) | $878 | $3,491 | | Provision for (recovery of) loan losses (in thousands) | ($400) | $0 | - The compression in Net Interest Margin (NIM) was driven by reduced SBA PPP fee income ($0.54 million in Q1 2022 vs. $1.89 million in Q1 2021) and an increase in lower-yielding liquid assets on the balance sheet[129] - The decrease in noninterest income was almost entirely due to a $2.6 million decline in mortgage banking income, resulting from decreased loan originations and sales amid rising mortgage rates and low housing inventory[139] Balance Sheet Analysis Total assets grew to $764.4 million, with stable loan portfolio composition, strong asset quality, and a 3.0% increase in total deposits since year-end 2021 - Approximately 78.9% of all loans are secured by real property, primarily in Virginia. The commercial and industrial loan portfolio represents 15.6% of all loans[146] Asset Quality Metrics | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Nonperforming assets | $1,307 | $1,359 | | Nonperforming assets to total assets | 0.17% | 0.18% | | Allowance for loan losses to Loans | 0.66% | 0.65% | - Total deposits increased by $19.6 million (3.0%) from Dec 31, 2021, with noninterest bearing demand accounts growing by $11.0 million and now representing 40.9% of total deposits[156][159] Capital Resources Shareholders' equity decreased to $61.5 million due to unrealized losses on securities, but the Bank remains well-capitalized with strong regulatory capital ratios - The $1.9 million decrease in shareholders' equity was primarily due to a $3.6 million increase in accumulated other comprehensive loss from unrealized holding losses on securities, which was partially offset by $1.8 million in net income[164] Bank Regulatory Capital Ratios | Ratio | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Leverage ratio | 10.13% | 9.86% | | Common equity tier 1 capital ratio | 14.07% | 14.01% | | Total capital to risk-weighted assets | 14.69% | 14.66% | Liquidity The company maintains a strong liquidity position with $208.4 million in liquid assets and access to additional funding sources like FHLB and federal funds lines - Liquid assets totaled $208.4 million, or 27.3% of total assets, at March 31, 2022[169] - The company has unused borrowing capacity of $23.4 million from the FHLB and maintains two federal funds lines of credit totaling $15 million[170][171] - Commitments to originate loans totaled $122.3 million as of March 31, 2022[173] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable for this reporting period - Not Applicable[180] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2022[181] - No changes in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[182] Part II – Other Information This section covers other information including legal proceedings, risk factors, and exhibits Legal Proceedings The company reports no material pending legal proceedings to which it is a party or to which its property is subject - There are no material pending legal proceedings involving the Company[185] Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for 2021 - No material changes to risk factors from the 2021 Form 10-K have been reported[186] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for this reporting period - Not applicable[187] Defaults Upon Senior Securities This item is not applicable for this reporting period - Not applicable[188] Mine Safety Disclosures The company reports no mine safety disclosures to be made - None[189] Other Information This item is not applicable for this reporting period - Not applicable[190] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO/CFO certifications and XBRL data files[192]