ALLOWANCE FOR CREDIT LOSS - LOANS

BALTIMORE, MD / ACCESSWIRE / January 22, 2024 / BV Financial, Inc. (NASDAQ:BVFL), (the "Company") the holding company for BayVanguard Bank (the "Bank"), reported net income of $13.7 million or $1.47 per diluted share compared to net income of $10.5 million or $1.32 per diluted share for the year ended December 31, 2022. Net income for the quarter ended December 31, 2023 was $3.0 million, or $0.28 per diluted share compared to net income of $2.7 million, or $0.34 per diluted share, for the quarter ended December 31, 2022.

On July 31, 2023, the Company completed its conversion from the mutual holding company (M.H.C.) form of reorganization to the stock holding company form of organization (the "Conversion"). In connection with the Conversion, Bay-Vanguard M.H.C. (the "MHC") ceased to exist. Also, as part of the Conversion, the Company sold 9,798,980 shares of its common stock at a price of $10.00 per share, which resulted in net proceeds of $86.9 million. Each outstanding share of Company common stock owned by the public stockholders of the Company (stockholders other than the M.H.C.) were converted into new shares of Company common stock based on an exchange ratio of 1.5309-to-1. The Company had 11,375,803 shares of Company common stock outstanding as a result of the Conversion. Additionally, concurrently with the conversion, the Bank converted to a Maryland-chartered commercial bank.

Financial Highlights

Return on average assets and return on average equity for the year ended December 31, 2023 were 1.54% and 9.93%, respectively. Return on average assets and return on average equity for the three months ended December 31, 2023 were 1.34% and 6.11%, respectively.
Net loans increased $37.1 million, or 5.63% to $696.2 million at December 31, 2023 compared to $659.1 million at December 31, 2022.
Deposits decreased $50.5 million, or 7.38%, from $684.6 million at December 31, 2022 to $634.1 million at December 31,2023.
Total equity increased by $101.3 million, or 103.64%, primarily due to the stock offering noted above and net income for the year.
In the quarter ended December 31, 2023, the Company recorded a provision for credit losses of $435,000 consisting of $354,000 in the allowance for credit losses (ACL) - loans and $81,000 in the ACL -for unfunded commitments. In the year ended December 31, 2023, the Company recorded a recovery of the provision for credit losses of $45,000 as net recoveries of $467,000 exceeded the required increase in the ACL for loans.

Financial Condition

Total Assets. Total assets were $885.3 million at December 31, 2023, an increase of $40.3 million, or 4.8%, from $845.0 million at December 31, 2022. The increase was due primarily to a $37.1 million increasein net loans receivable to $696.2 million at December 31, 2023, a $5.1 million increase in cash and cash equivalents and a $1.7 million increase in available-for-sale securities, partially offset by a decrease of $1.8 million in foreclosed real estate.

Cash and Cash Equivalents. Cash and cash equivalents increased $5.1 million, or 7.4%, to $73.7 million at December 31, 2023 from $68.7 millionat December 31, 2022 primarily due to the stock offering.

Net Loans Receivable. Netloans receivable increased$37.1 million, or 5.6%, to $696.2 million at December 31, 2023 from $659.1 million at December31, 2022. Increasesin investor and owner occupied commercial real estate, construction loans and farm loans offset decreasesin owner and non-owner occupied one- to four-family loansand commercial loans.The decreases in one- to four-family loans and commercial loans were due primarily to payoffs and paydowns exceeding originations during the year ended December 31, 2023.

Securities. Securities available for sale ("AFS") increased $1.7 million, or 5.3%, to $34.8 million at December 31, 2023 from $33.0 millionat December 31, 2022. This increase was primarily due to an increase of $4.0 million in agency securities, a $500,000 increase in the market value of the AFS portfolio, partially offset by decreases in mortgage-backed and corporate securities due to paydowns and maturities.

Total Liabilities. Total liabilities decreased $61.0 million or 8.2%, to $686.2 million at December 31, 2023 from $747.2 million at December 31, 2022.The decrease was primarily due to a decrease in total deposits of $50.5 million, and a decrease in borrowings of $12 million slightly offset by an increase in other liabilities.

Deposits. Total deposits decreased $50.5 million, or 7.4%, to $634.1 million at December 31, 2023 from $684.6 million at December 31, 2022. Interest-bearing deposits decreased $25.3 million, or 4.9%, to $492.1 million at December 31, 2023 from $517.4 million at December31, 2022. Noninterest bearing deposits decreased $25.2 million, or 15.1%, to $142.0 millionat December 31, 2023 from $167.2 million at December 31, 2022. During the fourth quarter of 2023, the Company offered reasonable rates to retain $15.0 million in certificates of deposit held by a local government entity. These certificate accounts were moved to another financial institution. The Company had no brokered deposits as of December 31, 2023.

Federal Home Loan Bank Borrowings. The Company had no Federal Home Loan Bank borrowings at December 31, 2023 compared to $12.0 million in Federal Home Loan Bank borrowings at December 31, 2022. In the quarter ended December 31, 2023, the Company paid off all of the $37.5 million in borrowings that were outstanding as of September 30, 2023.

Stockholders' Equity. Stockholders' equity increased $101.3 million, or 103.6%, to $199.1 millionat December 31, 2023, primarily due to the capital raise noted above and net income.

Asset Quality. Non-performing assets at December 31, 2023 totaled $10.7 million consisting of $10.5 million in nonperforming loans and $170,000 in foreclosed real estate, compared to $7.9 million at December 31, 2022, consisting of $5.9 million in non-performing loans and $2.0 million in foreclosed real estate. At December 31 2023, the allowance for credit losses on loans was $8.6 million, which represented 1.21% of total loans and 82.9% of non-performing loans compared to $3.8 million at December 31, 2022, which represented 0.57% of total loans and 64.8% of non-performing loans. In addition, at December 31, 2022, the Bank had credit marks of $3.8 million that were not included in the Bank's allowance for loan loss estimate which is in accordance with U.S. Generally Accepted Accounting Principles. The credit marks were established for specific loans acquired in previous mergers.

Comparison of Operating Results for the Three and Twelve Months Ended December 31, 2023 and 2022

Net Interest Income. Net interest income was $8.9 million for the three months ended December 31, 2023 compared to $8.5 million in the three months ended December 31, 2022. The net interest margin for the three months ended December 31, 2023 was 4.30% compared to 4.45% for the three months ended December 31, 2022. The 61 basis point increase in the yield on interest-earning assets, a higher volume of interest earning assets and the higher level of average equity offset the 125 basis point increase in the cost of deposits and borrowed money. The increase in the yield on interest-earning assets was due to higher rates earned on cash balances and loans due to higher market interest rates. The increase in the cost of interest-bearing liabilities was due to higher rates paid on deposits and a shift to higher cost certificates of deposits.

Net interest income was $34.2 million for the year ended December 31, 2023, compared to $29.9 million in the year ended December 31, 2022.The net interest margin for the year ended December 31, 2023 was 4.23% compared to 3.91% for the year ended December 31, 2022. The 101 basis point increase in the yield on interest-earning assets and the higher level of average equity offset the 101- basis point increase in the cost of deposits and borrowed money. The increase in the yield on interest-earning assets was due to higher rates earned on cash balances and loans due to higher market interest rates. The increase in the cost of interest-bearing liabilities was due to an increased reliance on advances from the Federal Home Loan Bank of Atlanta, higher rates paid on deposits and a shift to higher cost certificates of deposits.

Noninterest Income. For the three months ended December 31, 2023, noninterest income totaled $698,000 compared to $2.3 million in the quarter ended December 31, 2022. In the quarter ended December 31, 2023, the Company recognized a gain of $31,000 on the sale of a foreclosed real estate property. For the quarter ended December 31, 2022, the Company recognized a gain on bargain purchase related to the North Arundel Savings Bank merger of $646,000 and $1.1 million in excess insurance proceeds.

For the year ended December 31, 2023, noninterest income totaled $3.7 million as compared to $5.7 million for the year ended December 31, 2022. In the year ended December 31, 2023, the Company recognized a gain of $709,000 on the sale of foreclosed real estate and $225,000 in excess life insurance proceeds and a $188,000 gain on the sale of a closed branch office. In the year ended December 31, 2022, the Company recognized a $1.3 million gain on bargain purchase from the acquisition of North Arundel Savings Bank and $1.4 million in excess insurance proceeds.

Noninterest Expense. For the three months ended December 31, 2023, noninterest expense totaled $5.1 million compared to $6.3 million for the three months ended December 31, 2022. Compensation and benefits expenses increased by 27.2% due to increases in staffing and salary levels. Professional fees and FDIC insurance premiums also increased. Expenses for holding foreclosed real estate expenses decreased $555,000 as a result of property sales. The quarter ended December 31, 2022 included $1.8 million in merger expenses.

For the year ended December 31, 2023 noninterest expense totaled $19.4 million compared to $20.0 million in the year ended December 31, 2022. Compensation and benefits increased by 21.0% due to increases staffing and salary levels. Professional fees and FDIC insurance premiums also increased year over year. Decreases in merger expenses of $2.5 million and foreclosed real estate holding costs of $779,000 contributed to the net decline in operating expenses.

Forward-Looking Statements

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, increased competitive pressures, the effects of inflation, potential recessionary conditions, general economic conditions or conditions within the securities markets, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the FRB, changes in the quality, size and composition of our loan and securities portfolios, changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio, changes in demand for our products and services, accounting and tax changes, 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, a potential government shutdown, a failure in or breach of our operational or security systems or infrastructure, including cyberattacks that could adversely affect the Company's financial condition and results of operations and the business in which the Company and the Bank are engaged and the failure to maintain current technologies, the failure to retain or attract employees.

BV Financial, Inc.

BV Financial, Inc. is the parent company of BayVanguard Bank. BayVanguard Bank is headquartered in Baltimore, Maryland with fourteen branches in the Baltimore metropolitan area and the eastern shore of Maryland. The Bank is a full-service community-oriented financial institution dedicated to serving the financial service needs of consumers and businesses.

BV Financial Inc.

	At or For the Year						At or For the Three Months
	Ended December 31,						Ended December 31,
	2023			2022			2023			2022
Performance Ratios⁽¹⁾:
Return on average assets		1.54	%		1.24	%		1.34	%		1.29	%
Return on average equity		9.93	%		11.49	%		6.11	%		11.46	%
Interest rate spread⁽²⁾		3.74	%		3.75	%		3.64	%		4.28	%
Net interest margin⁽³⁾		4.23	%		3.91	%		4.30	%		4.45	%
Non-interest expense to average assets		2.19	%		2.35	%		2.29	%		3.00	%
Efficiency ratio⁽⁴⁾		51.03	%		57.88	%		56.19	%		61.47	%
Average interest-earning assets to average interest-bearing liabilities		142.89	%		135.36	%		153.30	%		135.16	%
Average equity to average assets		15.55	%		10.78	%		21.87	%		11.28	%
Credit Quality Ratios:⁽⁶⁾
Allowance for credit losses as a percentage of total loans		1.21	%		0.57	%		1.21	%		0.57	%
Allowance for credit losses as a percentage of non-performing loans		82.94	%		64.80	%		82.94	%		64.80	%
Net charge-offs (recoveries) to average outstanding loans during the year		-0.07	%		0.00	%		0.00	%		0.00	%
Non-performing loans as a percentage of total loans		1.46	%		0.88	%		1.46	%		0.88	%
Non-performing loans as a percentage of total assets		1.17	%		0.70	%		1.17	%		0.70	%
Total non-performing assets as a percentage of total assets		1.19	%		0.93	%		1.19	%		0.93	%

Other:
Number of offices		14			15			14			15
Number of full-time equivalent employees		107			110			107			110

(1) Performance ratios are annualized.

(2) Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3) Represents net interest income as a percentage of average interest-earning assets.

(4) Represents non-interest expenses divided by the sum of net interest income and non-interest income.

(5) The Company adopted ASC 326 on January 1, 2023. Some ratios are not comparable pre and post adoption of this accounting standard.

BV Financial, Inc.
Consolidated Balance Sheets

	December 31, 2023			December 31, 2022
(dollars in thousands, except share amounts)	(unaudited)			derived from audited financial statements

Assets
Cash	$	9,260		$	12,704
Interest-bearing deposits in other banks		64,482			55,948
Cash and cash equivalents		73,742			68,652
Equity Investment		256			221
Securities available for sale		34,781			33,034
Securities held to maturity (fair value of $9,212 and $9,660, ACL of $6 and $0)		10,209			10,461
Loans held for maturity		704,802			662,944
Allowance for Credit Losses		(8,554	)		(3,813	)
Net Loans		696,248			659,131
Foreclosed real estate		170			1,987
Premises and equipment, net		14,250			15,176
Federal Home Loan Bank of Atlanta stock, at cost		626			977
Investment in life insurance		19,657			19,983
Accrued interest receivable		3,279			2,952
Goodwill		14,420			14,420
Intangible assets, net		1,012			1,195
Deferred tax assets, net		8,969			9,113
Other assets		7,635			7,661
Total assets	$	885,254		$	844,963
Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits	$	142,030		$	167,202
Interest-bearing deposits		492,090			517,416
Total deposits		634,120			684,618

FHLB borrowings		-			12,000
Subordinated Debentures		37,251			37,039
Other liabilities		14,818			13,555
Total liabilities		686,189			747,212
Stockholders' equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding		-			-
Common stock, $0.01 par value; 45,000,000 shares authorized in 2023 and 14,000,000 authorized in 2022; 11,375,803 shares issued and 11,375,803 shares outstanding as of December 31, 2023; 7,418,575 shares issued and 7,418,575 shares outstanding as of December 31, 2022		114			74
Paid-in capital		110,465			15,406
Unearned common stock held by employee stock ownership plan		(7,328	)		-
Retained earnings		97,772			84,612
Accumulated other comprehensive loss		(1,958	)		(2,341	)
Total stockholders' equity		199,065			97,751
Total liabilities and stockholders' equity	$	885,254		$	844,963

BV FINANCIAL, INC.
Consolidated Statements of Income

(dollars in thousands, except per share amounts)	Three Months Ended December 31,					Years Ended December 31,
Interest Income	2023		2022			2023			2022
Loans, including fees	$	9,878	$	8,547		$	37,742		$	31,259
Investment securities available for sale		311		211			1,156			610
Investment securities held to maturity		92		102			367			245
Other interest income		1,196		509			4,154			1,236
Total interest income		11,477		9,369			43,419			33,350
Interest Expense
Interest on deposits		1,920		369			5,614			1,357
Interest on FHLB borrowings		99		11			1,411			11
Interest on Subordinated debentures		543		532			2,165			2,062
Total interest expense		2,562		912			9,190			3,430
Net interest income		8,915		8,457			34,229			29,920
Provision for (recovery of) credit losses		435		451			(45	)		1,038
Net interest income after provision for (recovery of) credit losses		8,480		8,006			34,274			28,882
Noninterest Income
Service fees on deposits		109		116			413			460
Fees from debit cards		181		188			724			755
Income from investment in life insurance		92		1,182			641			1,492
Gain on sale of loans		-		-			-			1
Gain(loss) on sale of repossessed assets		31		(33	)		709			246
Gain on sale of fixed assets		-		-			188			-
Other income		285		862			1,082			2,711
Total noninterest income		698		2,315			3,757			5,665
Noninterest Expense
Compensation and related benefits		3,371		2,649			12,257			10,130
Occupancy		426		440			1,604			1,661
Data processing		339		349			1,373			1,419
Advertising		11		6			43			23
Professional fees		290		155			886			607
Equipment		106		24			425			436
Foreclosed real estate and repossessed assets holding costs		13		568			186			965
Amortization of intangible assets		45		46			183			183
FDIC insurance premiums		98		55			336			219
Other expense		458		2,052			2,116			4,351
Total noninterest expense		5,157		6,344			19,409			19,994
Net income before tax		4,021		3,977			18,622			14,553
Income tax expense		1,012		1,247			4,915			4,029
Net income	$	3,009	$	2,730		$	13,707		$	10,524
Basic earnings per share	$	0.28	$	0.34		$	1.47		$	1.32
Diluted earnings per share	$	0.28	$	0.34		$	1.47		$	1.32

BV FINANCIAL, INC.
Average Balance Sheet for the Quarters ended December 31
(Dollars in thousands)

	For the Three Months Ended December 31,
	2023								2022
(dollars in thousands)	Average Outstanding Balance			Interest		Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Unaudited)
Interest-earning assets:
Loans	$	693,217		$	9,878		5.65	%	$	653,469		$	8,547		5.19	%
Securities available-for-sale		35,194			311		3.51	%		33,905			211		2.47	%
Securities held-to-maturity		11,193			92		3.26	%		11,165			102		3.64	%
Cash, cash equivalents and other interest-earning assets		82,482			1,196		5.65	%		54,959			509		3.69	%
Total interest-earning assets		822,086			11,477		5.54	%		753,498			9,369		4.93	%
Noninterest-earning assets		78,694								91,296
Total assets	$	900,780							$	844,794

Interest-bearing liabilities:
Interest-bearing demand deposits	$	83,014			234		1.12	%	$	98,441			19		0.08	%
Savings deposits		143,666			61		0.17	%		168,729			26		0.06	%
Money market deposits		88,671			312		1.40	%		108,293			80		0.29	%
Certificates of deposit		176,738			1,313		2.95	%		143,837			244		0.67	%
Total interest-bearing deposits		492,089			1,920		1.55	%		519,300			369		0.28	%
Federal Home Loan Bank advances		6,929			99		5.61	%		1,174			11		3.72	%
Subordinated debentures		37,228			543		5.81	%		37,017			532		5.71	%
Total borrowings		44,157			642		5.78	%		38,191			543		5.64	%
Total interest-bearing liabilities		536,246			2,562		1.90	%		557,491			912		0.65	%
Noninterest-bearing demand deposits		144,330								167,302
Other noninterest-bearing liabilities		23,207								24,750
Total liabilities		703,783								749,543
Equity		196,997								95,251
Total liabilities and equity	$	900,780							$	844,794
Net interest income				$	8,915							$	8,457
Net interest rate spread							3.64	%							4.28	%
Net interest-earning assets	$	285,840							$	196,007
Net interest margin							4.30	%							4.45	%
Average interest-earning assets to interest-bearing liabilities		153.30	%							135.16	%

BV FINANCIAL, INC.
Average Balance Sheet for the Year ended December, 31
(Dollars in thousands)

	2023								2022
(dollars in thousands)	Average Outstanding Balance			Interest		Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Unaudited)
Interest-earning assets:
Loans	$	683,657		$	37,742		5.52	%	$	634,152		$	31,259		4.93	%
Securities available-for-sale		35,607			1,156		3.25	%		36,551			610		1.67	%
Securities held-to-maturity		12,003			367		3.06	%		8,220			245		2.98	%
Cash, cash equivalents and other interest-earning assets		77,865			4,154		5.34	%		85,859			1,236		1.44	%
Total interest-earning assets		809,132			43,419		5.37	%		764,782			33,350		4.36	%
Noninterest-earning assets		78,100								87,128
Total assets	$	887,232							$	851,910

Interest-bearing liabilities:
Interest-bearing demand deposits	$	86,114			614		0.71	%	$	95,261			65		0.07	%
Savings deposits		154,629			202		0.13	%		169,678			97		0.06	%
Money market deposits		91,573			803		0.88	%		108,492			231		0.21	%
Certificates of deposit		170,299			3,995		2.35	%		154,346			964		0.63	%
Total interest-bearing deposits		502,615			5,614		1.12	%		527,777			1,357		0.26	%
Federal Home Loan Bank advances		26,503			1,411		5.32	%		296			11		3.79	%
Subordinated debentures		37,149			2,165		5.83	%		36,938			2,062		5.58	%
Total borrowings		63,652			3,576		5.62	%		37,234			2,073		5.57	%
Total interest-bearing liabilities		566,267			9,190		1.62	%		565,011			3,430		0.61	%
Noninterest-bearing demand deposits		149,630								169,722
Other noninterest-bearing liabilities		33,363								24,870
Total liabilities		749,260								759,603
Equity		137,972								92,307
Total liabilities and equity	$	887,232							$	851,910
Net interest income				$	34,229							$	29,920
Net interest rate spread							3.74	%							3.75	%
Net interest-earning assets	$	242,865							$	199,772
Net interest margin							4.23	%							3.91	%
Average interest-earning assets to interest-bearing liabilities		142.89	%							135.37	%

ALLOWANCE FOR CREDIT LOSS - LOANS
(Dollars in thousands)

	QTR			YTD
	12/31/2023			12/31/2023

Beginning Balance	$	8,153		$	3,813

Provision for credit loss -loans		354			42
CECL Transition - Gross up of PCD loans		-			3,778
CECL Transition - Cumulative effect adjustment related to adoption		-			454

Net Charge-offs (recoveries):
Owner Occupied 1-4		(4	)		(62	)
Non-Owner Occupied 1-4		(60	)		(305	)
Investor Commercial Real Estate		-			-
OO Commercial Real Estate		3			3
Construction & Land		(1	)		(154	)
Farm Loans		-			-
Marine & Consumer		15			54
Guaranteed by the US Gov't		-			-
Commercial		-			(3	)
Net charge-offs (recoveries)		(47	)		(467	)

Ending Balance- ACL for Loans	$	8,554		$	8,554

Balance Reserve for unfunded loan commitments		207			207
Balance Reserve for HTM Securities		6			6
Total ACL	$	8,767		$	8,767

Provision expense for Unfunded Commitments		81			(82	)
Provision expense for HTM Securities		-			(5	)
Total other provision expense	$	81		$	(87	)
Total provision for (recovery of )credit losses	$	435		$	(45	)

Contact:

Michael J. Dee
Chief Financial Officer
(410) 477-5000

SOURCE: BV Financial, Inc.

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BV Financial, Inc. Announces Financial Results