SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The summary information presented below at each date or for each of the years presented is derived in part from the consolidated financial
statements of BV Financial. The information at and for the years ended December 31, 2022 and 2021 was derived from the audited consolidated financial statements of BV Financial included elsewhere in this proxy statement/prospectus. The
following information is only a summary and should be read in conjunction with the consolidated financial statements and related notes of BV Financial beginning on page F-1 of this proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(In thousands) |
|
Selected Financial Condition Data: |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
844,963 |
|
|
$ |
815,130 |
|
Cash and cash equivalents |
|
|
68,652 |
|
|
|
111,190 |
|
Securities
available-for-sale |
|
|
33,034 |
|
|
|
37,793 |
|
Securities
held-to-maturity |
|
|
10,461 |
|
|
|
4,059 |
|
Loans receivable, net |
|
|
659,131 |
|
|
|
584,438 |
|
Investment in life insurance |
|
|
19,983 |
|
|
|
25,966 |
|
Goodwill |
|
|
14,420 |
|
|
|
14,420 |
|
Deferred tax assets, net |
|
|
9,113 |
|
|
|
8,322 |
|
Deposits |
|
|
684,618 |
|
|
|
680,025 |
|
Borrowings |
|
|
49,039 |
|
|
|
36,828 |
|
Total stockholders equity |
|
|
97,751 |
|
|
|
83,446 |
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(In thousands, except per share data) |
|
Selected Operating Data: |
|
|
|
|
|
|
|
|
Interest income |
|
$ |
33,350 |
|
|
$ |
29,378 |
|
Interest expense |
|
|
3,430 |
|
|
|
3,733 |
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
29,920 |
|
|
|
25,645 |
|
Provision for loan losses |
|
|
1,038 |
|
|
|
575 |
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
28,882 |
|
|
|
25,070 |
|
Non-interest income |
|
|
5,665 |
|
|
|
2,371 |
|
Non-interest expense |
|
|
19,994 |
|
|
|
14,617 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
14,553 |
|
|
|
12,824 |
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
4,029 |
|
|
|
3,383 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
10,524 |
|
|
$ |
9,441 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
1.42 |
|
|
$ |
1.33 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
1.41 |
|
|
$ |
1.32 |
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
At or For the Years Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
Performance Ratios: |
|
|
|
|
|
|
|
|
Return on average assets |
|
|
1.23 |
% |
|
|
1.16 |
% |
Return on average equity |
|
|
11.40 |
% |
|
|
11.98 |
% |
Interest rate spread(1) |
|
|
3.75 |
% |
|
|
3.30 |
% |
Net interest margin(2) |
|
|
3.91 |
% |
|
|
3.54 |
% |
Non-interest expense to average assets |
|
|
2.37 |
% |
|
|
1.80 |
% |
Efficiency ratio(3) |
|
|
57.88 |
% |
|
|
53.27 |
% |
Average interest-earning assets to average interest-bearing liabilities |
|
|
135.37 |
% |
|
|
146.16 |
% |
Average equity to average assets |
|
|
10.82 |
% |
|
|
9.69 |
% |
Capital Ratios(4): |
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets |
|
|
17.34 |
% |
|
|
18.07 |
% |
Tier 1 capital to risk-weighted assets |
|
|
16.76 |
% |
|
|
17.57 |
% |
Common equity tier 1 capital to risk-weighted assets |
|
|
16.76 |
% |
|
|
17.57 |
% |
Tier 1 capital to average assets |
|
|
13.39 |
% |
|
|
11.79 |
% |
Asset Quality Ratios: |
|
|
|
|
|
|
|
|
Allowance for loan losses as a percentage of total loans |
|
|
0.57 |
% |
|
|
0.45 |
% |
Allowance for loan losses as a percentage of
non-performing loans |
|
|
64.80 |
% |
|
|
111.27 |
% |
Net (charge-offs) recoveries to average outstanding loans during the year |
|
|
(0.02 |
)% |
|
|
(0.04 |
)% |
Non-performing loans as a percentage of total
loans |
|
|
0.88 |
% |
|
|
0.41 |
% |
Non-performing loans as a percentage of total
assets |
|
|
0.70 |
% |
|
|
0.30 |
% |
Total non-performing assets as a percentage of total
assets |
|
|
0.93 |
% |
|
|
0.54 |
% |
Other: |
|
|
|
|
|
|
|
|
Number of offices |
|
|
15 |
|
|
|
16 |
|
Number of full-time equivalent employees |
|
|
107 |
|
|
|
102 |
|
(1) |
Represents the difference between the weighted average yield on interest-earning assets and the weighted
average cost of interest-bearing liabilities. |
(2) |
Represents net interest income as a percentage of average interest-earning assets. |
(3) |
Represents non-interest expenses divided by the sum of net interest
income and non-interest income. |
(4) |
BayVanguard Bank only. |
60
RECENT DEVELOPMENTS
The following tables set forth selected consolidated financial and other data of BV Financial, Inc. at the dates and for the periods
indicated. The financial information at March 31, 2023 and for the three months ended March 31, 2023 and 2022 is not audited but, in the opinion of management, includes all adjustments necessary for a fair presentation. All of these
adjustments are normal and recurring. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the entire year or any other period. The financial
information at December 31, 2022 is derived from, and should be read together with, the consolidated financial statements and related notes appearing elsewhere in this proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2023 |
|
|
At December 31, 2022 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
(In thousands) |
|
Selected Financial Condition Data: |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
857,525 |
|
|
$ |
844,963 |
|
Cash and cash equivalents |
|
|
64,608 |
|
|
|
68,652 |
|
Securities
available-for-sale |
|
|
36,103 |
|
|
|
33,034 |
|
Securities
held-to-maturity |
|
|
10,394 |
|
|
|
10,461 |
|
Loans receivable, net |
|
|
672,798 |
|
|
|
659,131 |
|
Investment in life insurance |
|
|
19,335 |
|
|
|
19,983 |
|
Goodwill |
|
|
14,420 |
|
|
|
14,420 |
|
Deferred tax assets, net |
|
|
9,219 |
|
|
|
9,113 |
|
Deposits |
|
|
666,989 |
|
|
|
684,618 |
|
Borrowings |
|
|
74,592 |
|
|
|
49,039 |
|
Total stockholders equity |
|
|
100,653 |
|
|
|
97,951 |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
(In thousands, except per share data) |
|
Selected Operating Data: |
|
|
|
|
|
|
|
|
Interest income |
|
$ |
9,688 |
|
|
$ |
7,413 |
|
Interest expense |
|
|
1,488 |
|
|
|
871 |
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
8,200 |
|
|
|
6,542 |
|
Provision for credit losses |
|
|
2 |
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for credit losses |
|
|
8,198 |
|
|
|
6,365 |
|
Non-interest income |
|
|
807 |
|
|
|
1,488 |
|
Non-interest expense |
|
|
4,700 |
|
|
|
4,358 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
4,305 |
|
|
|
3,495 |
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
1,190 |
|
|
|
1,078 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,115 |
|
|
$ |
2,417 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.42 |
|
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.42 |
|
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
At or For the Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Performance Ratios(1): |
|
|
|
|
|
|
|
|
Return on average assets |
|
|
1.46 |
% |
|
|
1.15 |
% |
Return on average equity |
|
|
12.54 |
% |
|
|
11.05 |
% |
Interest rate spread(2) |
|
|
4.06 |
% |
|
|
3.33 |
% |
Net interest margin(3) |
|
|
4.34 |
% |
|
|
3.49 |
% |
Non-interest expense to average assets |
|
|
2.21 |
% |
|
|
2.07 |
% |
Efficiency ratio(4) |
|
|
52.19 |
% |
|
|
55.49 |
% |
Average interest-earning assets to average interest-bearing liabilities |
|
|
134.59 |
% |
|
|
134.73 |
% |
Average equity to average assets |
|
|
11.51 |
% |
|
|
10.44 |
% |
Capital Ratios(5): |
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets |
|
|
18.11 |
% |
|
|
17.81 |
% |
Tier 1 capital to risk-weighted assets |
|
|
16.86 |
% |
|
|
17.30 |
% |
Common equity tier 1 capital to risk-weighted assets |
|
|
16.86 |
% |
|
|
17.30 |
% |
Tier 1 capital to average assets |
|
|
13.53 |
% |
|
|
12.05 |
% |
Asset Quality Ratios(6): |
|
|
|
|
|
|
|
|
Allowance for loan losses as a percentage of total loans |
|
|
1.19 |
% |
|
|
0.45 |
% |
Allowance for credit losses as a percentage of
non-performing loans |
|
|
176.47 |
% |
|
|
75.92 |
% |
Net (charge-offs) recoveries to average outstanding loans during the year |
|
|
0.01 |
% |
|
|
0.01 |
% |
Non-performing loans as a percentage of total
loans |
|
|
0.67 |
% |
|
|
0.59 |
% |
Non-performing loans as a percentage of total
assets |
|
|
0.53 |
% |
|
|
0.45 |
% |
Total non-performing assets as a percentage of total
assets |
|
|
0.77 |
% |
|
|
0.68 |
% |
Other: |
|
|
|
|
|
|
|
|
Number of offices |
|
|
15 |
|
|
|
17 |
|
Number of full-time equivalent employees |
|
|
117 |
|
|
|
109 |
|
(1) |
Performance ratios are annualized, where appropriate. |
(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) |
BayVanguard Bank only. |
(6) |
BV Financial adopted ASU 2016-13, Financial Instruments Credit
Losses (Topic 326), on January 1, 2023, resulting in some ratios not being comparable before and after adoption. |
62
Comparison of Financial Condition at March 31, 2023 (unaudited) and December 31, 2022
Total Assets. Total assets were $857.5 million at March 31, 2023, an increase of $12.5 million, or 1.5%,
from $845.0 million at December 31, 2022. The increase was due primarily to a $13.7 million increase in net loans receivable to $672.8 million at March 31, 2023, partially offset by decreases of $4.1 million in cash and
cash equivalents to $64.6 million at March 31, 2023 and $700,000 in investment in life insurance to $19.3 million at March 31, 2023.
Cash and Cash Equivalents. Cash and cash equivalents decreased $4.1 million, or 5.9%, to $64.6 million at
March 31, 2023 from $68.7 million at December 31, 2022 as funds were used to fund the increases in net loans receivable. We regularly review our liquidity position based on alternative uses of available funds as well as market
conditions.
Net Loans Receivable. Net loans receivable increased $13.7 million, or 2.1%, to $672.8 million
at March 31, 2023 from $659.1 million at December 31, 2022. Increases in commercial real estate and construction loans offset decreases in owner and non-owner occupied one- to four-family loans and commercial loans. We continue to see robust demand for non-office commercial real estate properties and the increase in construction loans was
due primarily to draws on existing lines of credit. The decreases in one- to four-family loans and commercial loans were due primarily to payoffs and paydowns exceeding originations during the quarter ended
March 31, 2023.
Securities. Securities increased $3.0 million, or 6.9%, to $46.5 million at
March 31, 2023 from $43.5 million at December 31, 2022. This increase was primarily due to an increase of $4.0 million in agency securities, partially offset by a $1.3 million decrease in available for sale mortgage-backed
securities to $32.7 million at March 31, 2023. Purchases exceeded paydowns and maturities of debt securities for the period.
Total Liabilities. Total liabilities increased $9.7 million, or 1.3%, from $747.2 million at December 31,
2022 to $756.9 million at March 31, 2023. The increase was primarily due to a $25.5 million increase in Federal Home Loan Bank borrowings, partially offset by a decrease in total deposits of $17.6 million.
Deposits. Total deposits decreased $17.6 million, or 2.6%, to $667.0 million at March 31, 2023
from $684.6 million at December 31, 2022. Interest-bearing deposits decreased $2.1 million, or 0.4%, to $515.3 million at March 31, 2023 from $517.4 million at December 31, 2022. Noninterest bearing deposits
decreased $15.5 million, or 9.27%, to $151.7 million at March 31, 2023 from $167.2 million at December 31, 2022.
Of the $17.6 million decrease in deposits that occurred in the quarter ended March 31, 2023, $14.5 million, or 79.5%, of the
decrease occurred in January as primarily commercial customers made routine annual post-year end distributions, moved cash to alternative investments and made certain large capital expenditures. BV Financial has been adjusting interest rates paid on
deposits to retain and grow these balances. The turmoil experienced in the banking system in early March 2023 has not led to a measurable increase in customer inquiries or withdrawals.
Federal Home Loan Bank Borrowings. We had $37.5 million in Federal Home Loan Bank borrowings at March 31, 2023
compared to $12.0 million in Federal Home Loan Bank borrowings at December 31, 2022. The increase was used to fund loan growth and to maintain on balance sheet liquidity.
Stockholders Equity. Stockholders equity increased $2.9 million, or 3.0%, to $100.7 million at
March 31, 2023, primarily due to $3.1 million in net income, a $300,000 reduction in the other comprehensive loss and a $500,000 negative adjustment to retained earnings resulting from the adoption of ASU Topic 326 during the quarter ended
March 31, 2023.
63
Average Balances and Yields. The following table sets forth average
balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances
are daily average balances. Non-accrual loans are included in the computation of average balances only. The yields set forth below include the effect of deferred fees, discounts, and premiums that are
amortized or accreted to interest income or interest expense. Average balances exclude loans held for sale, if applicable. Net deferred loan fees totaled $1.7 million and $1.4 million at March 31, 2023 and 2022, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
Average Outstanding Balance |
|
|
Interest |
|
|
Average Yield/Rate(1) |
|
|
Average Outstanding Balance |
|
|
Interest |
|
|
Average Yield/Rate(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
(Unaudited) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
667,888 |
|
|
$ |
8,773 |
|
|
|
5.33 |
% |
|
$ |
615,651 |
|
|
$ |
7,202 |
|
|
|
4.75 |
% |
Securities
available-for-sale |
|
|
36,134 |
|
|
|
266 |
|
|
|
2.99 |
% |
|
|
38,987 |
|
|
|
136 |
|
|
|
1.41 |
% |
Securities
held-to-maturity |
|
|
11,915 |
|
|
|
93 |
|
|
|
3.18 |
% |
|
|
5,697 |
|
|
|
39 |
|
|
|
2.54 |
% |
Cash, cash equivalents and other interest-earning assets |
|
|
50,883 |
|
|
|
556 |
|
|
|
4.43 |
% |
|
|
100,905 |
|
|
|
36 |
|
|
|
0.14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
766,820 |
|
|
|
9,688 |
|
|
|
5.12 |
% |
|
|
761,240 |
|
|
|
7,413 |
|
|
|
3.95 |
% |
Noninterest-earning assets |
|
|
81,403 |
|
|
|
|
|
|
|
|
|
|
|
90,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
848,223 |
|
|
|
|
|
|
|
|
|
|
$ |
851,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand deposits |
|
$ |
91,842 |
|
|
|
18 |
|
|
|
0.08 |
% |
|
$ |
94,047 |
|
|
|
15 |
|
|
|
0.06 |
% |
Savings deposits |
|
|
164,818 |
|
|
|
40 |
|
|
|
0.10 |
% |
|
|
167,793 |
|
|
|
23 |
|
|
|
0.06 |
% |
Money market deposits |
|
|
99,583 |
|
|
|
97 |
|
|
|
0.39 |
% |
|
|
106,572 |
|
|
|
45 |
|
|
|
0.17 |
% |
Certificates of deposit |
|
|
152,264 |
|
|
|
510 |
|
|
|
1.36 |
% |
|
|
159,750 |
|
|
|
284 |
|
|
|
0.72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits |
|
|
508,507 |
|
|
|
665 |
|
|
|
0.53 |
% |
|
|
528,162 |
|
|
|
368 |
|
|
|
0.28 |
% |
Federal Home Loan Bank advances |
|
|
24,150 |
|
|
|
289 |
|
|
|
4.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
% |
Subordinated debentures |
|
|
37,069 |
|
|
|
534 |
|
|
|
5.84 |
% |
|
|
36,858 |
|
|
|
503 |
|
|
|
5.53 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings |
|
|
61,219 |
|
|
|
823 |
|
|
|
5.45 |
% |
|
|
36,858 |
|
|
|
503 |
|
|
|
5.53 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
569,725 |
|
|
|
1,488 |
|
|
|
1.06 |
% |
|
|
565,019 |
|
|
|
871 |
|
|
|
0.63 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits |
|
|
158,807 |
|
|
|
|
|
|
|
|
|
|
|
170,418 |
|
|
|
|
|
|
|
|
|
Other noninterest-bearing liabilities |
|
|
22,042 |
|
|
|
|
|
|
|
|
|
|
|
27,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
750,584 |
|
|
|
|
|
|
|
|
|
|
|
762,518 |
|
|
|
|
|
|
|
|
|
Equity |
|
|
97,649 |
|
|
|
|
|
|
|
|
|
|
|
88,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
848,223 |
|
|
|
|
|
|
|
|
|
|
$ |
851,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
8,200 |
|
|
|
|
|
|
|
|
|
|
$ |
6,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread(2) |
|
|
|
|
|
|
|
|
|
|
4.06 |
% |
|
|
|
|
|
|
|
|
|
|
3.32 |
% |
Net interest-earning assets(3) |
|
$ |
197,095 |
|
|
|
|
|
|
|
|
|
|
$ |
196,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin(4) |
|
|
|
|
|
|
|
|
|
|
4.34 |
% |
|
|
|
|
|
|
|
|
|
|
3.49 |
% |
Average interest-earning assets to interest-bearing liabilities |
|
|
134.59 |
% |
|
|
|
|
|
|
|
|
|
|
134.73 |
% |
|
|
|
|
|
|
|
|
(2) |
Net interest rate spread represents the difference between the weighted average yield on interest-earning
assets and the weighted average rate of interest-bearing liabilities. |
(3) |
Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
|
(4) |
Net interest margin represents net interest income divided by average total interest-earning assets.
|
64
Comparison of Operating Results for the Three Months Ended March 31, 2023 and 2022
General. Net income increased $698,000, or 28.9%, to $3.1 million for the three months ended March 31, 2023,
compared to $2.4 million for the three months ended March 31, 2022. The increase was due primarily to increases in net interest income and a reduction in the provision for credit losses and income tax expense, partially offset by a
decrease in non-interest income and an increase in non-interest expense.
Interest Income. Interest income increased $2.3 million, or 30.7%, to $9.7 million for the three months ended
March 31, 2023 from $7.4 million for the three months ended March 31, 2022. The increase was due primarily to increases in interest income on loans, which is our primary source of interest income, and interest income on cash, cash
equivalents and other interest-earning assets. Interest income on loans increased $1.6 million, or 22.2%, to $8.8 million for the three months ended March 31, 2023 from $7.2 million for the three months ended March 31, 2022
due to increases in the average balance of loans and the average yield. The average balance of loans increased $52.2 million, or 8.5%, to $667.9 million for the three months ended March 31, 2023 from $615.7 million for the three
months ended March 31, 2022. The weighted average yield on loans increased 58 basis points to 5.33% for the three months ended March 31, 2023 compared to 4.75% for the three months ended March 31, 2022, as variable rate loans reset to
higher interest rates and the rates on new loans exceeded the rates on paid off loans. Interest income on cash, cash equivalents and other interest-earning assets increased $520,000, to $556,000 for the three months ended March 31, 2023 from
$39,000 for the three months ended March 31, 2022 due to a 429 basis point increase in the average yield on cash, cash equivalents and other interest-earning assets, partially offset by a $50.1 million decrease in the average balance as
excess funds were used to fund loan growth.
Interest Expense. Interest expense increased $617,000, or 70.8%, to
$1.5 million for the three months ended March 31, 2023 compared to $871,000 for the three months ended March 31, 2022, due primarily to a $298,000 increase on interest paid on deposits, and a $288,000 increase on interest paid on
advances from the Federal Home Loan Bank.
The increase in interest expense on deposits was due to a 25 basis point increase in the
average rate, offset by a $19.7 million decrease in the average balance of interest-bearing deposits to $508.5 million at March 31, 2023 from $528.2 million for the three months ended March 31, 2022. The average rate on
interest-bearing deposits was 0.53% for the three months ended March 31, 2023 compared to 0.28% for the three months ended March 31, 2022.
Interest expense on Federal Home Loan Bank advances increased to $288,000 for the three months ended March 31, 2023 due to an average
balance of $24.2 million for the three months ended March 31, 2023. The average rate on Federal Home Loan Bank advances was 4.85% for the three months ended March 31, 2023. In recent periods, we have relied more heavily on Federal
Home Loan Bank advances to supplement deposits to fund loan growth and maintain liquidity. See Risk FactorsRisks Related to Our FundingOur inability to generate core deposits may cause us to rely more heavily on wholesale funding
strategies for funding and liquidity needs, which could have an adverse effect on our net interest margin and profitability.
Interest expense on subordinated debentures increased $31,000, or 6.0%, to $534,000 for the three months ended March 31, 2023 compared to
$503,000 for the three months ended March 31, 2022. The average rate on subordinated debentures increased 31 basis points to 5.84% for the three months ended March 31, 2023 compared to 5.53% for the three months ended March 31, 2022,
due to increases in market interest rates.
Net Interest Income. Net interest income increased $1.7 million, or
26.1%, to $8.2 million for the three months ended March 31, 2023 from $6.5 million for the three months ended March 31, 2022, as a result of a $2.3 million increase in interest income, offset by a $617,000 increase in
interest expense. Our interest rate spread increased 74 basis points to 4.06% for the three months ended March 31, 2023, compared to 3.32% for the three months ended March 31, 2022, while our net interest margin increased 85 basis points
to 4.34% for the three months ended March 31, 2023 compared to 3.48% for the three months ended March 31. 2022.
Provision
for Credit Losses. BV Financial adopted ASU 326 on January 1, 2023. Under this new current expected loss model, provisions for credit losses are charged to operations to establish an allowance for credit losses at a level to
cover expected losses over the expected life of a loan or securities portfolio. Under the previous
65
incurred loss model, provisions for loan losses were charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our
loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements. Prior to adoption of this standard, BV Financial segregated the loan portfolios acquired via mergers and evaluated them against a
credit allowance established at acquisition. As part of the adoption of the new accounting standard, $3.8 million in remaining acquisition credit marks were transferred to the allowance for credit losses for loans. An additional $750,000 in
allowances for credit losses were established, $450,000 for the allowance for credit losses for loans, $289,000 as a reserve for off balance sheet commitments and $11,000 for
held-to-maturity securities as of the adoption date. In evaluating the level of the allowance for credit losses, management analyzes several qualitative loan portfolio
risk factors including, but not limited to, managements ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and
non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could
affect potential credit losses.
We recorded provisions for credit losses of $2,000 and $177,000 for the three months ended March 31,
2023 and 2022, respectively. Our allowance for credit losses was $8.1 million at March 31, 2023 compared to $2.9 million at March 31, 2022. The ratio of our allowance for credit losses to total loans was 1.19% at March 31,
2023 compared to 0.45% at March 31, 2022, while the allowance for credit losses to non-performing loans was 176.47% at March 31, 2023 compared to 75.9% at March 31, 2022. BV Financial had net
recoveries on previously charged off loans of $37,000 and $44,000 in the quarters ended March 31, 2023 and 2022, respectively.
Non-interest Income. Non-interest income
decreased $681,000 to $807,000 for the three months ended March 31, 2023 from $1.5 million for the three months ended March 31, 2022. The decrease was due primarily to a $548,000 decrease in other income resulting from a decrease in
loan-related fees and bargain purchase gain recognized on the acquisition of North Arundel Savings Bank in 2022.
Non-interest Expense. Non-interest expense increased $342,000, or 7.8%, to $4.7 million for the three months ended March 31, 2023 from $4.4 million
for the three months ended March 31, 2022. The increase was due primarily to a $500,000 increase in compensation and related benefits to $2.9 million at March 31, 2023 due to general increases in salary and incentive compensation,
additional staffing as we built up the infrastructure to support growth, partially offset by a decrease of $216,000 in other non-interest expenses related to data processing conversion expenses incurred in
2022.
Income Tax Expense. We recognized income tax expense of $1.2 million and $1.1 million for the three
months ended March 31, 2023 and 2022, respectively, resulting in effective rates of 27.7% and 30.9%. Income tax expense increased as a result of the increase in our net income before taxes.
Recent Industry Events
On March 8,
2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations. On March 10, 2023, Silicon Valley Bank, Santa Clara, California, was closed by the California Department of
Financial Protection and Innovation and on March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services. In each case, the FDIC was named receiver. Additionally, on May 1, 2023,
First Republic Bank, San Francisco, California, was closed by the FDIC and sold to JP Morgan Chase & Co. These events led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository
institutions.
Notably, the liquidation of Silvergate Bank and the failures of Silicon Valley Bank and Signature Bank were not generally
related to the credit quality of their assets, but to poor liquidity management, mismatched funding of long-term assets with short-term funds, and unique business models. The financial distress these banks experienced appears to have been caused in
large part by high exposure to certain industries, including cryptocurrency and venture capital and start-up companies operating in the technology space, which have experienced significant volatility and
fluctuations in cash flows over the past several years. These banks also had high levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a
66
source of funding than insured deposits. Silicon Valley Bank in particular appears to have experienced a severe lack of liquidity, forcing it to sell long-term investment securities at
significant losses. Ultimately, it was unable to meet its financial commitments and satisfy the cash requirements of its customers.
We
believe that our risk profile differs from these banks. BayVanguard Bank is a community bank with an operating history dating to 1873. Our customers consist primarily of homeowners and various small businesses and professionals in our market area,
which includes the Baltimore market (Baltimore City, Anne Arundel, Baltimore and Harford Counties, Maryland) and Dorchester and Talbot Counties, Maryland on the Eastern Shore of Maryland. See Business of BayVanguard BankMarket
Area. We are not exposed to cryptocurrency loans, deposits or services, nor are we involved in the venture capital or start-up industry. As of March 31, 2023, our average depositor account balance
was approximately $23,000, and the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) totaled $167.1 million, or 25.0% of total deposits, of which
$77.6 million are deposits of local government entities that are secured with pledged securities or letters of credit issued by the Federal Home Loan Bank.
As of March 31, 2023, as a result of the rising interest rate environment, we had a net unrealized loss of $2.1 million on our available-for-sale investment securities portfolio. Our available-for-sale investment
securities totaled $36.1 million, or 4.2% of total assets, at March 31, 2023. The held-to-maturity portfolio totaled $10.4 million with a fair value of
$9.6 million at March 31, 2023. See Business of BayVanguard BankInvestment Activities and Note 3 to our consolidated financial statements.
As discussed above, we experienced a decrease in deposits of $17.6 million, or 2.6%, to $667.0 million at March 31, 2023 from
$684.6 million at December 31, 2022. This decrease was primarily due to routine annual post-year end distributions, movement of cash to alternative investments and certain large capital expenditures by our commercial customers. For
additional information on our funding sources and related risks, see Business of BayVanguard BankSources of Funds and Risk FactorsRisks Related to Our FundingOur inability to generate core deposits may cause us to
rely more heavily on wholesale funding strategies for funding and liquidity needs, which could have an adverse effect on our net interest margin and profitability.
For additional information on our interest rate risk, asset/liability, liquidity and capital resources management practices, see
Managements Discussion and Analysis of Financial Condition and Results of OperationsManagement of Market Risk and Liquidity and Capital Resources. We regularly review our interest rate risk and liquidity
position based on alternative uses of available funds as well as market conditions. No changes in our liquidity or interest rate risk practices have been made as a result of the events in the banking industry in March 2023 and management believes
that current interest rate risk, asset/liability, liquidity and capital resources management practices are appropriate for our institution.
67
CAPITALIZATION
The following table presents the historical consolidated capitalization of BV Financial at December 31, 2022 and the pro forma
consolidated capitalization of BV Financial after giving effect to the conversion and offering based upon the assumptions set forth in the Pro Forma Data section.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BV Financial Historical at December 31, 2022 |
|
|
BV Financial Pro Forma at December 31, 2022 Based upon the Sale in the Offering at $10.00 per share of: |
|
|
|
9,775,000 Shares |
|
|
11,500,000 Shares |
|
|
13,225,000 Shares |
|
|
15,208,750 Shares(1) |
|
|
|
(Dollars in thousands) |
|
Deposits(2) |
|
$ |
684,618 |
|
|
$ |
684,618 |
|
|
$ |
684,618 |
|
|
$ |
684,618 |
|
|
$ |
684,618 |
|
Borrowed funds |
|
|
49,039 |
|
|
|
49,039 |
|
|
|
49,039 |
|
|
|
49,039 |
|
|
|
49,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits and borrowed funds |
|
$ |
733,657 |
|
|
$ |
733,657 |
|
|
$ |
733,657 |
|
|
$ |
733,657 |
|
|
$ |
733,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 1,000,000 shares authorized (post-conversion)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 45,000,000 shares authorized (post-conversion); shares to be issued
as reflected(3)(4) |
|
|
74 |
|
|
|
113 |
|
|
|
133 |
|
|
|
153 |
|
|
|
176 |
|
Additional paid-in capital(3) |
|
|
15,406 |
|
|
|
110,759 |
|
|
|
127,839 |
|
|
|
144,918 |
|
|
|
164,560 |
|
Retained earnings(5) |
|
|
84,612 |
|
|
|
84,612 |
|
|
|
84,612 |
|
|
|
84,612 |
|
|
|
84,612 |
|
Accumulated other comprehensive loss |
|
|
(2,341 |
) |
|
|
(2,341 |
) |
|
|
(2,341 |
) |
|
|
(2,341 |
) |
|
|
(2,341 |
) |
Common stock to be acquired by stock-based benefit plans(6) |
|
|
|
|
|
|
(3,910 |
) |
|
|
(4,600 |
) |
|
|
(5,290 |
) |
|
|
(6,084 |
) |
Common stock held by employee stock ownership
plan(7) |
|
|
|
|
|
|
(7,820 |
) |
|
|
(9,200 |
) |
|
|
(10,580 |
) |
|
|
(12,167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
$ |
97,751 |
|
|
$ |
181,413 |
|
|
$ |
196,443 |
|
|
$ |
211,472 |
|
|
$ |
228,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares offered for sale |
|
|
|
|
|
|
9,775,000 |
|
|
|
11,500,000 |
|
|
|
13,225,000 |
|
|
|
15,208,750 |
|
Exchange shares issued |
|
|
|
|
|
|
1,554,273 |
|
|
|
1,828,557 |
|
|
|
2,102,840 |
|
|
|
2,418,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares outstanding |
|
|
7,418,575 |
|
|
|
11,329,273 |
|
|
|
13,328,557 |
|
|
|
15,327,840 |
|
|
|
17,627,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity as a percentage of total assets |
|
|
11.57 |
% |
|
|
19.54 |
% |
|
|
20.82 |
% |
|
|
22.06 |
% |
|
|
23.44 |
% |
Tangible equity as a percentage of tangible assets |
|
|
9.90 |
% |
|
|
18.16 |
% |
|
|
19.48 |
% |
|
|
20.77 |
% |
|
|
22.19 |
% |
(1) |
As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in
the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering. |
(2) |
Does not reflect withdrawals from deposit accounts to purchase shares of common stock in the conversion and
offering. These withdrawals would reduce pro forma deposits and assets by the amount of the withdrawals. |
(3) |
BV Financial currently has 45,000,000 authorized shares of common stock, $0.01 par value per share, and
1,000,000 authorized shares of preferred stock, par value $0.01 per share. On a pro forma basis, common stock and additional paid-in capital have been revised to reflect the number of shares of BV Financial
common stock to be outstanding. |
(4) |
No effect has been given to the issuance of additional shares of BV Financial common stock pursuant to the
exercise of options under one or more stock-based benefit plans. If the plans are implemented within the first year after the closing of the offering, an amount up to 10% of the shares of BV Financial common stock sold in the offering will be
reserved for issuance upon the exercise of options under the plans. No effect has been given to the exercise of options currently outstanding. See Management. |
(5) |
The retained earnings of BayVanguard Bank will be substantially restricted after the conversion. See
Proposal 1Approval of the Plan of Conversion and ReorganizationLiquidation Rights and Supervision and RegulationBanking RegulationCapital Requirements. |
(6) |
Assumes a number of shares of common stock equal to 4% of the shares of common stock to be sold in the offering
will be purchased for grant by one or more stock-based benefit plans. The funds to be used by such plans to purchase the shares will be provided by BV Financial. The dollar amount of common stock to be purchased is based on the $10.00 per share
purchase price in the offering and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the purchase price in the offering. BV Financial will accrue compensation
expense to reflect the vesting of shares pursuant to such stock-based benefit plans and will credit capital in an amount equal to the charge to operations. |
(7) |
Assumes that 8% of the shares sold in the offering will be acquired by the employee stock ownership plan
financed by a loan from BV Financial. The loan will be repaid principally from BayVanguard Banks contributions to the employee stock ownership plan. Since BV Financial will finance the employee stock ownership plan debt, this debt will be
eliminated through consolidation and no liability will be reflected on BV Financials consolidated financial statements. Accordingly, the shares of common stock acquired by the employee stock ownership plan are shown in this table as a
reduction of total stockholders equity. Implementation of such plans will require stockholder approval. |
74
PRO FORMA DATA
The following tables summarize historical data of BV Financial and pro forma data of BV Financial at and for the year ended December 31,
2022. This information is based on assumptions set forth below and in the tables, and should not be used as a basis for projections of market value of the shares of common stock following the conversion and offering.
The net proceeds are based upon the following assumptions:
|
(1) |
all of the shares of common stock will be sold in the subscription and community offerings;
|
|
(2) |
our employee stock ownership plan will purchase 8% of the shares of common stock sold in the offering with a
loan from BV Financial. The loan will be repaid in substantially equal payments of principal and interest (at the prime rate of interest, as may be adjusted annually) over 20 years. Interest income that we earn on the loan will offset the interest
paid by BayVanguard Bank. The effect on earnings for the employee stock ownership plan is the cost of amortizing the loan over 20 years, net of historical expense for the period; |
|
(3) |
we will pay Performance Trust a fee of 0.95% with respect to shares sold in the subscription and community
offering. No fee will be paid with respect to shares of common stock purchased by our qualified and non-qualified employee stock benefit plans, or stock purchased by our officers, directors and employees, and
their immediate families, and no fee will be paid with respect to exchange shares; and |
|
(4) |
total expenses of the offering, other than the fees and commissions to be paid to Performance Trust and other
broker-dealers, will be $1.4 million. |
In addition, the expenses of the offering may vary from those estimated, and
the fees paid to Performance Trust will vary from the amounts estimated if the amount of shares of BV Financial common stock sold varies from the amounts assumed above or if any shares are sold in the syndicated community offering.
We calculated pro forma consolidated net income as if the estimated net proceeds we received had been invested at the beginning of the period
at an assumed interest rate of 3.99% (2.91% on an after-tax basis). This represents the yield on the five-year U.S. Treasury Note at December 31, 2022, which, in light of current market interest rates, we
consider to more accurately reflect the pro forma reinvestment rate than the arithmetic average of the weighted average yield earned on our interest-earning assets and the weighted average rate paid on our deposits, which is the reinvestment rate
federal regulations require that we assume in presenting pro forma data.
We further believe that the reinvestment rate is factually
supportable because:
|
|
|
the yield on the U.S. Treasury Note can be determined and/or estimated from third-party sources; and
|
|
|
|
we believe that U.S. Treasury securities are not subject to credit losses due to a U.S. Government guarantee of
payment of principal and interest. |
We calculated historical and pro forma per share amounts by dividing historical and
pro forma amounts of consolidated net income and stockholders equity by the indicated number of shares of common stock. For pro forma earnings per share calculations, we adjusted these figures to give effect to the shares of common stock
purchased by the employee stock ownership plan. We computed per share amounts as if the shares of common stock were outstanding at the beginning of the period, but we did not adjust per share historical or pro forma stockholders equity to
reflect the earnings on the estimated net proceeds.
The pro forma data gives effect to the implementation of one or more stock-based
benefit plans. We have assumed that stock-based benefit plans will reserve for restricted stock awards a number of shares of common stock
75
equal to 4% of the shares of common stock sold in the stock offering at the same price for which they were sold in the stock offering. We have assumed that awards of common stock granted under
such plans vest over a five-year period.
We also have assumed that options will be granted under stock-based benefit plans to acquire
shares of common stock equal to 10% of the shares of common stock sold in the stock offering. We have assumed that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the
stock options had a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $5.02 for each option.
We may grant options and award shares of common stock under one or more stock-based benefit plans in excess of 10% and 4%, respectively, of
the shares of common stock sold in the stock offering and that vest sooner than over a five-year period if the stock-based benefit plans are adopted more than 12 months following the completion of the stock offering.
As discussed under How We Intend to Use the Proceeds from the Offering, we intend to contribute 50% of the net proceeds from the
stock offering to BayVanguard Bank, and we will retain the remainder of the net proceeds from the stock offering. We will use a portion of the proceeds we retain to fund a loan to the employee stock ownership plan. We will retain the rest of the
proceeds for future use.
The pro forma data does not give effect to:
|
|
|
withdrawals from deposit accounts to purchase shares of common stock in the stock offering;
|
|
|
|
our results of operations after the stock offering; or |
|
|
|
changes in the market price of the shares of common stock after the stock offering. |
The following pro forma data may not be representative of the financial effects of the offering at the date on which the offering actually
occurs, and should not be taken as indicative of future results of operations. Pro forma consolidated stockholders equity represents the difference between the stated amounts of our assets and liabilities. The pro forma stockholders
equity is not intended to represent the fair market value of the shares of common stock and may be different than the amounts that would be available for distribution to stockholders if we liquidated. Moreover, pro forma stockholders equity
per share does not give effect to the liquidation accounts to be established in the conversion or, in the unlikely event of a liquidation of BayVanguard Bank, to the tax effect of the recapture of the bad debt reserve. See Proposal
1Approval of the Plan of Conversion and ReorganizationLiquidation Rights.
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the Year Ended December 31, 2022 Based upon the Sale at $10.00 Per Share of: |
|
|
|
9,775,000 Shares |
|
|
11,500,000 Shares |
|
|
13,225,000 Shares |
|
|
15,208,750 Shares(1) |
|
|
|
(Dollars in thousands, except per share amounts) |
|
Gross proceeds of offering |
|
$ |
97,750 |
|
|
$ |
115,000 |
|
|
$ |
132,250 |
|
|
$ |
152,088 |
|
Market value of shares issued in the exchange |
|
|
15,543 |
|
|
|
18,286 |
|
|
|
21,028 |
|
|
|
24,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma market capitalization |
|
$ |
113,293 |
|
|
$ |
133,286 |
|
|
$ |
153,278 |
|
|
$ |
176,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds of offering |
|
$ |
97,750 |
|
|
$ |
115,000 |
|
|
$ |
132,250 |
|
|
$ |
152,088 |
|
Expenses |
|
|
2,358 |
|
|
|
2,508 |
|
|
|
2,659 |
|
|
|
2,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net proceeds |
|
|
95,392 |
|
|
|
112,492 |
|
|
|
129,591 |
|
|
|
149,255 |
|
Common stock purchased by employee stock ownership plan |
|
|
(7,820 |
) |
|
|
(9,200 |
) |
|
|
(10,580 |
) |
|
|
(12,167 |
) |
Common stock purchased by stock-based benefit plans |
|
|
(3,910 |
) |
|
|
(4,600 |
) |
|
|
(5,290 |
) |
|
|
(6,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net proceeds, as adjusted |
|
$ |
83,662 |
|
|
$ |
98,692 |
|
|
$ |
113,721 |
|
|
$ |
131,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
10,524 |
|
|
$ |
10,524 |
|
|
$ |
10,524 |
|
|
$ |
10,524 |
|
Income on adjusted net proceeds |
|
|
2,437 |
|
|
|
2,875 |
|
|
|
3,312 |
|
|
|
3,816 |
|
Employee stock ownership plan(2) |
|
|
(285 |
) |
|
|
(336 |
) |
|
|
(386 |
) |
|
|
(444 |
) |
Stock awards(3) |
|
|
(571 |
) |
|
|
(672 |
) |
|
|
(772 |
) |
|
|
(888 |
) |
Stock options(4) |
|
|
(915 |
) |
|
|
(1,077 |
) |
|
|
(1,238 |
) |
|
|
(1,424 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income |
|
$ |
11,190 |
|
|
$ |
11,314 |
|
|
$ |
11,440 |
|
|
$ |
11,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share(5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
1.00 |
|
|
$ |
0.85 |
|
|
$ |
0.74 |
|
|
$ |
0.64 |
|
Income on adjusted net proceeds |
|
|
0.23 |
|
|
|
0.23 |
|
|
|
0.23 |
|
|
|
0.23 |
|
Employee stock ownership plan(2) |
|
|
(0.03 |
) |
|
|
(0.03 |
) |
|
|
(0.03 |
) |
|
|
(0.03 |
) |
Stock awards(3) |
|
|
(0.05 |
) |
|
|
(0.05 |
) |
|
|
(0.05 |
) |
|
|
(0.05 |
) |
Stock options(4) |
|
|
(0.09 |
) |
|
|
(0.09 |
) |
|
|
(0.09 |
) |
|
|
(0.09 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma earnings per share(5) |
|
$ |
1.06 |
|
|
$ |
0.91 |
|
|
$ |
0.80 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price to pro forma net earnings per share |
|
|
9.43 |
x |
|
|
10.99 |
x |
|
|
12.50 |
x |
|
|
14.29 |
x |
Number of shares used in earnings per share calculations |
|
|
10,586,373 |
|
|
|
12,454,557 |
|
|
|
14,322,740 |
|
|
|
16,471,151 |
|
At December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
97,751 |
|
|
$ |
97,751 |
|
|
$ |
97,751 |
|
|
$ |
97,751 |
|
Estimated net proceeds |
|
|
95,392 |
|
|
|
112,492 |
|
|
|
129,591 |
|
|
|
149,255 |
|
Common stock acquired by employee stock ownership plan(2) |
|
|
(7,820 |
) |
|
|
(9,200 |
) |
|
|
(10,580 |
) |
|
|
(12,167 |
) |
Common stock acquired by stock-based benefit
plans(3) |
|
|
(3,910 |
) |
|
|
(4,600 |
) |
|
|
(5,290 |
) |
|
|
(6,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma stockholders
equity(6) |
|
|
181,413 |
|
|
|
196,443 |
|
|
|
211,472 |
|
|
|
228,755 |
|
Intangible assets |
|
|
(15,615 |
) |
|
|
(15,615 |
) |
|
|
(15,615 |
) |
|
|
(15,615 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma tangible stockholders
equity(6) |
|
$ |
165,798 |
|
|
$ |
180,828 |
|
|
$ |
195,857 |
|
|
$ |
213,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity per
share(7): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
$ |
8.63 |
|
|
$ |
7.34 |
|
|
$ |
6.39 |
|
|
$ |
5.55 |
|
Estimated net proceeds |
|
|
8.42 |
|
|
|
8.44 |
|
|
|
8.45 |
|
|
|
8.47 |
|
Common stock acquired by employee stock ownership plan(2) |
|
|
(0.69 |
) |
|
|
(0.69 |
) |
|
|
(0.69 |
) |
|
|
(0.69 |
) |
Common stock acquired by stock-based benefit
plans(3) |
|
|
(0.35 |
) |
|
|
(0.35 |
) |
|
|
(0.35 |
) |
|
|
(0.35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma stockholders equity per
share(6)(7) |
|
|
16.01 |
|
|
|
14.74 |
|
|
|
13.80 |
|
|
|
12.98 |
|
Intangible assets |
|
|
(1.38 |
) |
|
|
(1.17 |
) |
|
|
(1.02 |
) |
|
|
(0.89 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma tangible stockholders equity per share(6)(7) |
|
$ |
14.63 |
|
|
$ |
13.57 |
|
|
$ |
12.78 |
|
|
$ |
12.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price as percentage of pro forma stockholders equity per share |
|
|
62.46 |
% |
|
|
67.84 |
% |
|
|
72.46 |
% |
|
|
77.04 |
% |
Offering price as percentage of pro forma tangible stockholders equity per share |
|
|
68.35 |
% |
|
|
73.69 |
% |
|
|
78.25 |
% |
|
|
82.71 |
% |
Number of shares outstanding for pro forma book value per share calculations |
|
|
11,329,273 |
|
|
|
13,328,557 |
|
|
|
15,327,840 |
|
|
|
17,627,016 |
|
(1) |
As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in
the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering. |
(footnotes continue on following page)
77
(continued from previous page)
(2) |
Assumes that 8% of the shares of common stock sold in the offering will be purchased by the employee stock
ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from BV Financial, and the outstanding loan with respect to existing shares of BV Financial
held by the employee stock ownership plan will be refinanced and consolidated with the new loan. BayVanguard Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and
interest payments on the debt. BayVanguard Banks total annual payments on the employee stock ownership plan debt are based upon 20 equal annual installments of principal and interest. Financial Accounting Standards Board Accounting Standards
Codification (ASC) 718-40, CompensationStock CompensationEmployee Stock Ownership Plans (ASC 718-40) requires that an
employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments
based on the number of loan repayment installments assumed to be paid by BayVanguard Bank, the fair value of the common stock remains equal to the subscription price and the employee stock ownership plan expense reflects an effective combined
federal and state tax rate of 27.0%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The
pro forma net income further assumes that 39,100, 46,000, 52,900 and 60,835 shares were committed to be released during the year ended December 31, 2022 at the minimum, midpoint, maximum, and adjusted maximum of the offering range,
respectively, and in accordance with ASC 718-40, only the employee stock ownership plan shares committed to be released during the period were considered outstanding for net income per share calculations.
|
(3) |
Assumes that one or more stock-based benefit plans reserve an aggregate number of shares of common stock equal
to 4% of the shares to be sold in the offering. Stockholder approval of the plans and purchases by the plans may not occur earlier than six months after the completion of the conversion. The shares may be acquired directly from BV Financial or
through open market purchases. Shares in the stock-based benefit plans are assumed to vest over a period of five years. The funds to be used to purchase the shares will be provided by BV Financial. The tables assume that (i) the stock-based
benefit plan acquires the shares through open market purchases at $10.00 per share, (ii) 20% of the amount contributed to the plan is amortized as an expense during the year ended December 31, 2022, and (iii) the plan expense reflects an
effective combined federal and state tax rate of 27.0%. Assuming stockholder approval of the stock-based benefit plans and that shares of common stock (equal to 4% of the shares sold in the offering) are awarded through the use of authorized but
unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 3.34%. |
(4) |
Assumes that options are granted under one or more stock-based benefit plans to acquire an aggregate number of
shares of common stock equal to 10% of the shares to be sold in the offering. Stockholder approval of the plans may not occur earlier than six months after the completion of the conversion. In calculating the pro forma effect of the stock-based
benefit plans, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were both $10.00 per share, the estimated grant-date fair value determined using the Black-Scholes option
pricing model was $5.02 for each option and that the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period using an effective combined federal and state tax rate of
27.0% and that 25.0% of the option expense is taxable. The actual expense will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used and the option pricing model
ultimately adopted. Under the above assumptions, the adoption of the stock-based benefit plans will result in no additional shares under the treasury stock method for calculating earnings per share. There can be no assurance that the exercise price
of the stock options will be equal to the $10.00 price per share. If a portion of the shares used to satisfy the exercise of options comes from authorized but unissued shares, our net income per share and stockholders equity per share would
decrease. The issuance of authorized but unissued shares of common stock pursuant to the exercise of options under such plan would dilute stockholders ownership and voting interests by approximately 7.94%. |
(5) |
Per share figures include publicly held shares of BV Financial common stock that will be issued in exchange for
new shares of BV Financial common stock in the conversion. See Proposal 1Approval of the Plan of Conversion and ReorganizationShare Exchange Ratio for Current Stockholders. Net income per share computations are determined by
taking the number of shares assumed to be sold in the offering and the number of new shares assumed to be issued in exchange for publicly held shares and, in accordance with ASC 718-40, subtracting the
employee stock ownership plan shares that have not been committed for release during the period. See footnote 2, above. The number of shares of common stock actually sold and exchange shares may be more or less than the assumed amounts.
|
(6) |
The retained earnings of BayVanguard Bank will be substantially restricted after the conversion. See Our
Dividend Policy, Proposal 1Approval of the Plan of Conversion and ReorganizationLiquidation Rights and Supervision and RegulationBanking RegulationCapital Requirements. |
(7) |
Per share figures include publicly held shares of BV Financial common stock that will be issued in exchange for
new shares of BV Financial common stock in the conversion. Stockholders equity per share calculations are based upon the sum of (i) the number of shares assumed to be sold in the offering and (ii) shares to be issued in exchange for
publicly held shares at the minimum, midpoint and maximum of the offering range, respectively. The exchange shares reflect an exchange ratio of 1.5271, 1.7966, 2.0661 and 2.3761 at the minimum, midpoint, maximum, and adjusted maximum of the offering
range, respectively. The number of shares actually sold and the corresponding number of exchange shares may be more or less than the assumed amounts. |
78