BV Financial, Inc.

Previous wording

the imposition of tariffs or other domestic or international governmental policies;

Current wording

the imposition of tariffs or other domestic or international governmental policies and retaliatory responses;

Previous wording

The ACL is an estimate of the expected credit losses for loans held for investment and for off-balance sheet exposures. ASC 326, "Financial Instruments-Credit Losses," requires an immediate recognition of the credit loss expected to occur over the lifetime of a financial asset whether originated or purchased. Charge-offs are recorded to the ACL when management believes a loan is uncollectible. Subsequent recoveries, if any, are credited to the ACL. Management believes the ACL is maintained in accordance with GAAP and in compliance with appropriate regulatory guidelines. The ACL includes quantitative estimates of losses for collectively and individually evaluated loans. The quantitative estimate for collectively evaluated loans (other than investor commercial real estate loans) is determined using the average charge-off method that utilizes historical losses for all Maryland banks with assets less than $1 billion beginning in March 2000. The investor commercial real estate portfolio utilizes the national loss history for banks with assets less than $1 billion over the same time period. Investor CRE loans are made nationwide, therefore, management deems it appropriate to utilize national loss rates when evaluating this portfolio. Adjustments are made to the historical loss factors under each scenario for economic conditions, portfolio concentrations, collateral values, the level and trend of delinquent and non-accrual loans and internal changes in staffing, loan policies and monitoring of the portfolio. Loans are selected for individual evaluation primarily based on their payment status and whether the loan has been placed on non-accrual status. Loans on non-accrual status include all loans greater than 90 days delinquent and other loans with weaknesses sufficient for management to place these loans on non-accrual status. The ACL is measured on a collective basis when similar risk factors exist as determined by internal loan coding and assignment to a portfolio segment. The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the ACL on loans. The model's calculation also uses an adjustment for a 12-month forecast period utilizing the most recent 12-month economic forecast from the Federal Reserve Board for national gross domestic product ("GDP"). The model compares the average history of loss rates described above to the forecasted GDP to determine the neccessity and amount of any forward-looking adjustment. The establishment of the ACL is significantly affected by management's judgment and by economic and other uncertainties, and different amounts may be reported under different conditions or assumptions. The Federal Deposit Insurance Corporation and the Maryland Office of the Commissioner of Financial Regulation, as an integral part of their examination process, periodically review the ACL for reasonableness and, as a result of such reviews, we may be required to increase our ACL or recognize loan c…

Excerpt shortened here; the source contains the full paragraph.

Current wording

The ACL is an estimate of the expected credit losses for loans held for investment and for off-balance sheet exposures. ASC 326, "Financial Instruments-Credit Losses," requires an immediate recognition of the credit losses expected to occur over the lifetime of a financial asset whether originated or purchased. Charge-offs are recorded to the ACL when management believes a loan is uncollectible. Subsequent recoveries, if any, are credited to the ACL. Management believes the ACL is maintained in accordance with GAAP and in compliance with appropriate regulatory guidelines. The ACL includes quantitative estimates of losses for collectively and individually evaluated loans. The quantitative estimate for collectively evaluated loans (other than investor commercial real estate loans) is determined using the average charge-off method that utilizes historical losses for all Maryland banks with assets less than $1 billion beginning in March 2000. The investor commercial real estate portfolio utilizes the national loss history for banks with assets less than $1 billion over the same time period. Investor CRE loans are made nationwide, therefore, management deems it appropriate to utilize national loss rates when evaluating this portfolio. Adjustments are made to the historical loss factors under each scenario for economic conditions, portfolio concentrations, collateral values, the level and trend of delinquent and non-accrual loans and internal changes in staffing, loan policies and monitoring of the portfolio. Loans are selected for individual evaluation primarily based on their payment status and whether the loan has been placed on non-accrual status. Loans on non-accrual status include all loans greater than 90 days delinquent and other loans with weaknesses sufficient for management to place these loans on non-accrual status. The ACL is measured on a collective basis when similar risk factors exist as determined by internal loan coding and assignment to a portfolio segment. The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the ACL on loans. The model's calculation also uses an adjustment for a 12-month forecast period utilizing the most recent 12-month economic forecast from the Federal Reserve Board for national gross domestic product ("GDP"). The model compares the average history of loss rates described above to the forecasted GDP to determine the neccessity and amount of any forward-looking adjustment. The establishment of the ACL is significantly affected by management's judgment and by economic and other uncertainties, and different amounts may be reported under different conditions or assumptions. The Federal Deposit Insurance Corporation and the Maryland Office of the Commissioner of Financial Regulation, as an integral part of their examination process, periodically review the ACL for reasonableness and, as a result of such reviews, we may be required to increase our ACL or recognize loan…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

At March 31, 2025, we had a net deferred tax asset totaling $9.0 million. In accordance with ASC Topic 740 “Income Taxes,” we use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If currently available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting deferred tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are subjective and are reviewed on a regular basis as regulatory, economic or business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect income. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize its federal and state deferred tax asset.

Current wording

At June 30, 2025, we had a net deferred tax asset totaling $9.3 million. In accordance with ASC Topic 740 “Income Taxes,” we use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If currently available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting deferred tax assets and liabilities. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets are subjective and are reviewed on a regular basis as regulatory, economic or business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance that results in additional income tax expense in the period in which it is recognized would negatively affect income. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize its federal and state deferred tax asset.

Previous wording

Cash and Cash Equivalents. Cash and cash equivalents increased $320,000, or 0.5%, to $70.8 million at March 31, 2025 from $70.5 million at December 31, 2024.

Current wording

Cash and Cash Equivalents. Cash and cash equivalents decreased $14.2 million, or 20.1%, to $56.3 million at June 30, 2025 from $70.5 million at December 31, 2024. The decrease in cash was primarily a result of the pay-off of FHLB borrowings.

Previous wording

Our allowance for credit losses – loans increased $366,000 to $8.9 million at March 31, 2025 compared to $8.5 million at December 31, 2024. The ratio of our allowance for credit losses to total loans was 1.18% at March 31, 2025 compared to 1.15% at December 31, 2024, while the allowance for credit losses to non-performing loans was 183.87% at March 31, 2025 compared to 212.51% at December 31, 2024.

Current wording

Allowance for Credit Losses. The allowance for credit losses – loans increased $637,000 to $9.2 million at June 30, 2025 compared to $8.5 million at December 31, 2024. The ratio of our allowance for credit losses to total loans was 1.22% at June 30, 2025 compared to 1.15% at December 31, 2024, while the allowance for credit losses to non-performing loans was 208.6% at June 30, 2025 compared to 212.5% at December 31, 2024.

Previous wording

Liabilities. Total liabilities increased $7.6 million or 1.1%, to $723.9 million at March 31, 2025 from $716.3 million at December 31, 2024. The increase was primarily due to an increase in total deposits of $6.4 million, and an increase in escrow accounts and other accrued balances within other liabilities.

Current wording

Liabilities. Total liabilities decreased $6.0 million, or 0.8%, to $710.3 million at June 30, 2025 from $716.3 million at December 31, 2024. The decrease was due primarily to the decrease in borrowings, offset by an increase in deposits.

Previous wording

Comparison of Operating Results for the Three Months Ended March 31, 2025 and 2024

Current wording

Comparison of Operating Results for the Three and Six Months Ended June 30, 2025 and 2024

Previous wording

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 origination fees totaled $2.3 million and $2.2 million at March 31, 2025 and 2024, respectively.

Current wording

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 origination fees totaled $2.3 million and $2.0 million at June 30, 2025 and 2024, respectively.

Previous wording

Net Income. Net income was $2.1 million or $0.21 per diluted share, for the three months ended March 31, 2025 compared to $2.6 million, or $0.24 per diluted share, for the three months ended March 31, 2024.

Current wording

Net Income. Net income was $2.9, million or $0.29 per diluted share, for the three months ended June 30, 2025 compared to $3.4 million, or $0.32 per diluted share, for the three months ended June 30, 2024. Net income was $5.0 million, or $0.50 per diluted share, for the six months ended June 30, 2025 compared to $6.0, million or $0.52 per diluted share, for the six months ended June 30, 2024. The decreases were due to higher provisions for credit losses and compensation expenses, offset by higher net interest income.

Previous wording

Interest Income. Interest income increased $877,000, or 8.0%, to $11.9 million for the three months ended March 31, 2025 from $11.0 million for the three months ended March 31, 2024. The increase was due primarily to an increase in interest income on loans, partially offset by a decrease in other interest income on cash and cash equivalents. Interest income on loans increased $959,000 or 9.8%, to $10.7 million for the three months ended March 31, 2025 from $9.8 million for the three months ended March 31, 2024 due to increases in the portfolio and in the average yield on loans. The average balance of loans increased $31.3 million, or 4.4%, to $739.7 million for the three months ended March 31, 2025 from $708.4 million for the three months ended March 31, 2024. The weighted average yield on loans increased 35 basis points to 5.89% for the three months ended March 31, 2025 compared to 5.54% for the three months ended March 31, 2024, as variable rate loans reset to higher interest rates and the rates on new loans exceeded the rates on paid off loans due to the higher interest rate environment. Other interest income decreased related to interest income on cash and cash equivalents $81,000 to $743,000 for the three months ended March 31, 2025 from $824,000 for the three months ended March 31, 2024 due to a decrease in the yield of 76 basis points, offset by a $4.2 million increase in the average balance of cash and cash equivalents.

Current wording

Interest Income. Interest income increased $649,000, or 5.6%, to $12.3 million for the three months ended June 30, 2025 from $11.6 million for the three months ended June 30, 2024. The increase was due primarily to an increase in interest income on loans, partially offset by a decrease in other interest income on cash and cash equivalents. Interest income on loans increased $1.1 million, or 11.4%, to $11.3 million for the three months ended June 30, 2025 from $10.2 million for the three months ended June 30, 2024 due to increases in the average balance and average yield on loans. The average balance of loans increased $46.7 million, or 6.6%, to $752.2 million for the three months ended June 30, 2025 from $705.5 million for the three months ended June 30, 2024. The weighted average yield on loans increased 25 basis points to 6.04% for the three months ended June 30, 2025 compared to 5.79% for the three months ended June 30, 2024, as variable rate loans reset to higher interest rates and the rates on new loans exceeded the rates on paid off loans due to the higher interest rate environment. Interest income on cash and cash equivalents decreased $481,000 to $562,000 for the three months ended June 30, 2025 from $1.0 million for the three months ended June 30, 2024 primarily due to a decrease in average balance of $25.6 million.

Previous wording

Interest Expense. Interest expense increased $197,000 or 6.5% to $3.2 million for the three months ended March 31, 2025 from $3.0 million at March 31, 2024. Interest expense on deposits increased $615,000 for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, as rates paid increased and depositors moved money into higher-cost certificates of deposit and money market accounts, offset by a decrease in interest expense on borrowings of $418,000.

Current wording

Interest Expense. Interest expense increased $402,000 or 14.8% to $3.1 million for the three months ended June 30, 2025 from $2.7 million at June 30, 2024. Interest expense on deposits increased $380,000 for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Previous wording

Interest expense on FHLB advances for the three months ended March 31, 2025 was $171,000 compared to $0 for the three months ended March 31, 2024 due to $15.0 million in new borrowings in 2025.

Current wording

Interest expense on FHLB advances for the three months ended June 30, 2025 was $23,000 compared to no expenses for the three months ended June 30, 2024 due to borrowings outstanding at the beginning of the quarter that were fully paid off in April 2025.

Previous wording

The increase in interest expense on deposits was due to a 40 basis point increase in the average rate, as well as a $30.9 million increase in the average balance of interest-bearing deposits to $522.9 million at March 31, 2025 from $492.0 million for the three months ended March 31, 2024. The average rate on interest-bearing deposits was 2.02% for the three months ended March 31, 2025 compared to 1.62% for the three months ended March 31, 2024.

Current wording

The increase in interest expense on deposits was due to a 40 basis point increase in the average rate, as well as a $26.4 million increase in the average balance of interest-bearing deposits to $521.7 million for the six monthes ended June 30, 2025 from $495.3 million for the six months ended June 30, 2024. The average rate on interest-bearing deposits was 2.02% for the three months ended June 30, 2025 compared to 1.62% for the three months ended June 30, 2024 as rates paid increased and depositors moved money into higher-cost certificates of deposit and money market accounts.

Previous wording

Interest expense on subordinated debentures decreased $589,000, or 55.8%, to $466,000 for the three months ended March 31, 2025 compared to $1.1 million for the three months ended March 31, 2024. The decrease was due primarily to the pay-off in the first quarter of 2024 of $3.0 million in junior subordinated debt assumed in a prior acquisition and the concurrent write-off of the purchase accounting adjustment on that debt.

Current wording

Interest expense on subordinated debentures decreased $590,000, or 38.8%, to $931,000 for the six months ended June 30, 2025 compared to $1.5 million for the six months ended June 30, 2024. The decrease was due to the pay-off in the first quarter of 2024 of $3.0 million in junior subordinated debt assumed in a prior acquisition and the concurrent write-off of the purchase accounting adjustment on that debt.

Previous wording

Net Interest Income. Net interest income was $8.6 million for the three months ended March 31, 2025 compared to $8.0 million in the three months ended March 31, 2024. The net interest margin for the three months ended March 31, 2025 was 4.12% compared to 3.91% for the three months ended March 31, 2024. The net interest spread for the three months ended March 31, 2025 was 3.37% compared to 3.10% for the three months ended March 31, 2024.

Current wording

Net Interest Income. Net interest income was $9.2 million for the three months ended June 30, 2025 compared to $8.9 million for the three months ended June 30, 2024.The net interest margin for the three months ended June 30, 2025 was 4.36% compared to 4.33% for the three months ended June 30, 2024. The increase in net interest income was due to higher average balances of interest earning assets and higher yields on these assets offset by a higher average balance of deposits and higher rates paid on deposits.

Previous wording

We recorded a provision for credit losses of $297,000 for the three months ended March 31, 2025 compared to a provision for credit losses of $18,000 for the three months ended March 31, 2024. Our allowance for credit losses was $8.9 million at March 31, 2025 compared to $8.5 million at March 31, 2024. The ratio of our allowance for credit losses to total loans was 1.18% at March 31, 2025 compared to 1.20% at March 31, 2024, while the allowance for credit losses to non-performing loans was 183.9% at March 31, 2025 compared to 79.2% at March 31, 2024. The Company had net recoveries on previously charged off loans of $15,000 in the quarter ended March 31, 2025 as compared to net recoveries of $85,000 in the quarter ended March 31, 2024.

Current wording

Provision for Credit Losses. We recorded a provision for credit losses of $178,000 for the three months ended June 30, 2025 compared to a reversal of the provision for credit losses of ($111,000) for the three months ended June 30, 2024. We recorded a provision for credit losses of $475,000 for the six months ended June 30, 2025 compared to a reversal of the provision for credit losses of ($92,000) for the six months ended June 30, 2024. Our allowance for credit losses was $9.2 million at June 30, 2025 compared to $8.5 million at December 31, 2024. The ratio of our allowance for credit losses to total loans was 1.22% at June 30, 2025 compared to 1.15% at December 31, 2024, while the allowance for credit losses to non-performing loans was 208.6% at June 30, 2025 compared to 212.5% at December 31, 2024.

Previous wording

Non-interest Income. For the three months ended March 31, 2025, noninterest income totaled $530,000 compared to $578,000 in the quarter ended March 31, 2024.

Current wording

Non-interest Income. For the three months ended June 30, 2025, noninterest income totaled $714,000 compared to $596,000 for the quarter ended June 30, 2024. The increase was attributable to the collection of miscellaneous fees on loans and deposits.

Previous wording

Non-interest Expense. For the three months ended March 31, 2025, noninterest expense totaled $6.2 million compared to $4.9 million for the three months ended March 31, 2024. Compensation and benefits expenses increased $1.4 million, or 44.6%, due to increases in salaries and the $1.2 million cost of the equity awards granted after the stockholders approved the 2024 Equity Incentive Plan. Professional fees increased $119,000, or 106.3%, primarily due to a recovery in 2024 of previously expensed legal fees of $109,000 on the disposition of a problem loan. Other expenses decreased $271,000 or 43.2%.

Current wording

Non-interest Expense. For the three months ended June 30, 2025, noninterest expense totaled $5.8 million compared to $4.9 million for the three months ended June 30, 2024. Compensation and benefits increased $927,000 due to the $1.1 million cost of the equity awards granted under the 2024 Equity Incentive Plan approved by stockholders. All other expense categories combined decreased by $70,000 in the quarter ended June 30, 2025 when compared to the quarter ended June 30, 2024.

Previous wording

Income Tax Expense. For the three months ended March 31, 2025, income tax expense was $599,000 for an effective tax rate of 22.2%. In the quarter ended March 31, 2024, income tax expense was $1.0 million for an effective tax rate of 28.5%. The lower rate was due to an accrual adjustment made in the current quarter.

Current wording

Income Tax Expense. For the three months and six months ended June 30, 2025, income tax expense was $1.1 million for an effective tax rate of 27.3% and $1.7 million for an effective tax rate of 25.2%, respectively. For the three months and six months ended June 30, 2024, income tax expense was $1.3 million for an effective tax rate of 27.9% and $2.3 million for an effective tax rate of 28.2%, respectively. The lower effective tax rate in the six-month period ended June 30, 2025 was due to an accrual adjustment made in the first quarter.

Previous wording

Asset Quality. Non-performing assets at March 31, 2025 totaled $5.0 million consisting of $4.8 million in nonperforming loans and $158,000 in foreclosed real estate, compared to $4.2 million at December 31, 2024, consisting of $4.0 million in non-performing loans and $159,000 in foreclosed real estate. Non-performing owner occupied commercial real estate loans increased by $500,000 in the quarter. On April 1, 2025, $600,000 of the non-performing loans in this segment paid in full. Commercial non-performing loans increased by $660,000 in the quarter due to a $660,000 loan relationship being placed on non-accrual status. Subsequent to March 31, 2025, the Bank was able to secure these loans with previously unencumbered real estate. At March 31, 2025, the allowance for credit losses on loans was $8.9 million, which represented 1.18% of total loans and 183.9% of non-performing loans compared to $8.5 million at December 31, 2024, which represented 1.15% of total loans and 212.5% of non-performing loans.

Current wording

Asset Quality. Non-performing assets at June 30, 2025 totaled $4.5 million consisting of $4.4 million in nonperforming loans and $157,000 in foreclosed real estate, compared to $4.2 million at December 31, 2024, consisting of $4.0 million in non-performing loans and $159,000 in foreclosed real estate. Commercial non-performing loans increased by $650,000 in the six-month period due to a $660,000 loan relationship being placed on non-accrual status. These loans are secured with real estate and business assets. At June 30, 2025, the allowance for credit losses on loans was $9.2 million, which represented 1.22% of total loans and 208.6% of non-performing loans compared to $8.5 million at December 31, 2024, which represented 1.15% of total loans and 212.5% of non-performing loans.

Previous wording

Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities and proceeds from maturities of securities. We also have the ability to borrow from the FHLB of Atlanta. At March 31, 2025, we had a $165.6 million line of credit with the FHLB of Atlanta, $23.0 million of FHLB in unfunded letters of credit used to secure municipal deposits and $15.0 million in advances outstanding against the line of credit with the FHLB of Atlanta. The Company also has a $20.0 million short-term unsecured facility from a correspondent bank.

Current wording

Liquidity. Liquidity describes our ability to meet financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities and proceeds from maturities of securities. We also have the ability to borrow from the FHLB. At June 30, 2025, we had a $165.5 million line of credit with the FHLB, and $23.0 million of FHLB in unfunded letters of credit used to secure municipal deposits. The Company also has a $20.0 million short-term unsecured facility from a correspondent bank.

Previous wording

We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. However, if a substantial portion of these deposits is not retained, we may utilize FHLB advances, brokered deposits or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. At March 31, 2025, the Company had $50.0 million in brokered deposits compared to $10.0 million in brokered deposits at March 31, 2024. In addition, we had $57.0 million of municipal deposits at March 31, 2025, which represented 8.7% of total deposits. The Bank's uninsured deposits totaled $179.1 million, or 26.0% of total deposits, of which $50.1 million were secured using the market value of pledged collateral or letters of credit issued by FHLB, and an additional $31.1 million were deposits of the Company at the Bank.

Current wording

We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. However, if a substantial portion of these deposits is not retained, we may utilize FHLB advances, brokered deposits or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. At June 30, 2025, the Company had $50.3 million in brokered deposits compared to $10.0 million in brokered deposits at June 30, 2024. In addition, we had $59.1 million of municipal deposits at June 30, 2025, which represented 9.0% of total deposits. The Bank's uninsured deposits totaled $171.5 million, or 24.9% of total deposits, of which $53.2 million were secured using the market value of pledged collateral or letters of credit issued by FHLB, and an additional $28.8 million were deposits of the Company at the Bank.