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FVCBankcorp, Inc. Announces Record Earnings; Successful Integration of Colombo Bank

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FVCBankcorp, Inc. (NASDAQ:FVCB) (the "Company") today reported fourth
quarter 2018 net income of $1.4 million, or $0.10 diluted earnings per
share, compared to $1.0 million, or $0.08 diluted earnings per share,
for the quarterly period ended December 31, 2017. For the year ended
December 31, 2018, net income was $10.9 million, or $0.85 per diluted
share, compared to $7.7 million, or $0.67 per diluted share, for 2017.

On October 12, 2018, the Company completed its acquisition of Colombo
Bank ("Colombo"), and incurred merger-related expenses of $2.7 million
and $3.3 million, respectively, for the three and twelve months ended
December 31, 2018, respectively. In addition, the Company sold $10.9
million in securities available-for-sale at a loss of $462 thousand and
a book yield of approximately 1.50%, and reinvested those proceeds into
higher yielding securities at approximately 3.20%. Excluding
merger-related expenses and loss on sales of securities
available-for-sale, net of tax, earnings for the three and twelve months
ended December 31, 2018 were $3.9 million and $13.9 million,
respectively. Excluding the effect of $2.0 million in write-downs of
deferred tax assets due to enactment of the Tax Cut and Jobs Act
("TCJA") and $704 thousand in gain on foreclosure of other real estate
owned ("OREO"), net of tax, during the fourth quarter of 2017, earnings
for the three and twelve months ended December 31, 2017 were $2.3
million and $9.0 million, respectively.

Diluted earnings per share excluding the above adjustments for the three
and twelve months ended December 31, 2018 was $0.26 and $1.08,
respectively, compared with $0.19 and $0.78, respectively, for the three
and twelve months ended December 31, 2017. The Company believes the
reporting of non-GAAP earnings to exclude merger-related expenses,
losses on sales of securities, gain on foreclosure of OREO, and the tax
impacts from the TCJA, are more reflective of the Company's operating
performance and future performance ("Operating Earnings"). On a GAAP
basis, return on average assets was 0.42% and return on average equity
was 3.65% for the fourth quarter of 2018. For the comparable December
31, 2017 period, return on average assets was 0.40% and return on
average equity was 4.06%. On an Operating Earnings basis, return on
average assets and return on average equity for the three months ended
December 31, 2018 was 1.16% and 10.07%, respectively. On an Operating
Earnings basis, return on average assets and return on average equity
for the year ended December 31, 2018 was 1.20% and 11.87%, respectively.

Selected Highlights

  • Strategic Bank Acquisition. On October 12, 2018, the Company
    completed its acquisition of Colombo and completed the systems
    conversions process. Quarterly income and expenses include the former
    Colombo operations since the October 12, 2018 combination.
  • Record Operating Earnings. Operating Earnings increased $1.6
    million, or 69%, to $3.9 million for the fourth quarter of 2018 as
    compared to the same 2017 period. For the year ended December 31,
    2018, Operating Earnings increased $4.9 million, or 54%, compared to
    2017.
  • Improved Tangible Book Value. Tangible book value per share at
    December 31, 2018 was $10.93, a 21% increase from $9.03 at December
    31, 2017.
  • Continued Loan Growth. Total loans, net of deferred fees,
    totaled $1.14 billion at December 31, 2018, an increase of $248.1
    million, or 28%, from December 31, 2017. Excluding loans acquired from
    Colombo Bank, net loans increased $115.8, or 13%. Excluding acquired
    loans, average loan growth year-to-date 2018 was $134.8 million, or
    17% of average loans receivable for 2018, enhancing the Company's loan
    yield by 30 basis points for the year.
  • Sound Asset Quality. Asset quality remains strong with
    nonperforming loans and loans past due 90 days or more as a percentage
    of total assets being 0.28% at December 31, 2018, compared to 0.07% at
    December 31, 2017. Nonperforming loans and loans past due 90 days or
    more totaled $3.9 million at December 31, 2018, of which $870,000 were
    related to the acquisition.
  • Strong Core Deposit Growth. Total deposits increased $234.3
    million, or 25%, from December 31, 2017 to December 31, 2018. Total
    deposits, excluding acquired deposits and wholesale deposits,
    increased $127.1 million year-over-year, or 16%.
  • Improved Efficiency Ratio. Efficiency ratio for the three
    months ended December 31, 2018 was 75.7%, and excluding merger-related
    expenses and losses on securities, the efficiency ratio improved to
    54.3% for the quarter and 55.1% for 2018 year.

"Fourth quarter 2018 was another milestone for our Company as we closed
our acquisition of Colombo Bank and completed the systems integration
within a five month period of time. As our physical footprint has
expanded into Maryland and the District of Colombia, we are attracting
new clients and expanding existing relationships, introducing them to
our products and technology, which augments the customer experience.
Additionally, during the fourth quarter following our over-subscribed
IPO, we were added to the Russell 2000® Index, which will enhance our
trading liquidity and investor visibility. We are thrilled with the
opportunities we see for our Company as we enter 2019," stated David W.
Pijor, Chairman and CEO.

Acquisition of Colombo Bank

On October 12, 2018, the Company completed its previously announced
acquisition of Colombo. In connection with the transaction, 763,051
shares of the Company's common stock were issued to Colombo's
shareholders, along with $18.3 million in cash. The Company added $199.5
million of total assets to its balance sheet, including $142.6 million
of loans, net of negative $3.0 million of fair value adjustments, and
$138.3 million of deposits, including a negative $327 thousand fair
value adjustment to the CD portfolio. Additionally, the Company recorded
$6.9 million of goodwill and $2.0 million of core deposit intangibles.
During the year, the Company incurred legal and accounting costs,
contract termination expenses, system conversion and integration
expenses, plus employee retention and severance payments related to the
acquisition. As of December 31, 2018, all merger-related expenses have
been recognized and the Company has implemented cost savings in excess
of the 35% anticipated for the merger.

Balance Sheet

Total assets increased to $1.35 billion compared to $1.05 billion as of
December 31, 2018 and 2017, respectively, an increase of $298.7 million,
or 28%. Loans receivable, net of deferred fees, totaled $1.14 billion as
of December 31, 2018, compared to $888.7 million as of December 31,
2017, a year-over-year increase of $248.1 million, or 28%. Excluding the
loans acquired from Colombo, loans grew $115.8 million, or 13%
year-over-year, and average loans grew $134.8 million, or 17%. Excluding
the loans acquired from Colombo, loans increased $25.7 for the quarter,
or 12% on an annualized basis, and average loans grew $26.2 million, or
11% on an annualized basis. Mr. Pijor added, "We consider average loan
growth a better measure of the loan portfolio growth, as it directly
correlates with interest income growth. This becomes increasingly
important as the bank's portfolio reflects higher levels of C&I lending,
including government contract lending, in which balances outstanding can
fluctuate at period ends."

During the quarter, loan originations totaled approximately $95 million,
of which $36 million funded during the quarter. Construction loans and
C&I loan closings represented a larger portion of originations during
the quarter ended December 31, 2018; consequently a large amount of loan
commitments were not funded by year end. Further, during the quarter,
the Company experienced large payoffs outside of the expected loan
repayments and curtailments, totaling an additional $22 million, which
resulted in lower than expected net loan growth for the quarter.

Investment securities increased $7.6 million to $125.3 million at
December 31, 2018, compared to $117.7 million at December 31, 2017.
During the fourth quarter of 2018, the Company sold $24.4 million in
investment securities, including $13.5 million that were acquired from
Colombo, repositioning its securities portfolio to replace lower
yielding securities with market rate securities to improve future
incremental income.

Total deposits increased to $1.16 billion as of December 31, 2018
compared to $928.2 million as of December 31, 2017, an increase of
$234.3 million, or 25%. Total deposits, excluding acquired deposits and
wholesale deposits, increased $127.1 million year-over-year, or 16%.
Core deposits, which represent total deposits less wholesale deposits,
increased $265.4 million or 33% year-over-year. Wholesale deposits
totaled $84.4 million, or 7% of total deposits at December 31, 2018, a
decrease of $31.1 million from December 31, 2017. Noninterest-bearing
deposits increased 33% to $233.3 million at December 31, 2018, or 20% of
total deposits, compared to $175.4 million at December 31, 2017.
Excluding deposits recorded at acquisition, noninterest bearing deposits
increased 18% year-over-year, or $38.8 million.

The Company has expanded its core deposit growth through the acquisition
of Colombo and five additional branches in Maryland and the District of
Columbia. The Company continues its relationship-driven business
strategy through enhanced cash management products and a team based
approach to building and maintaining customer relationships.

Income Statement

Net interest income totaled $11.8 million, an increase of $3.4 million,
or 40%, for the quarter ended December 31, 2018, compared to the year
ago quarter. The Company's net interest margin was 3.59% and 3.43% for
the quarters ended December 31, 2018 and 2017, respectively. On a linked
quarter basis, net interest income increased $1.9 million, or 20%, and
the margin increased 5 basis points from 3.54% for the three months
ended September 30, 2018, a result of increases in yields on earning
assets and strong growth in core deposit mix offset by an increase in
the cost of funds. The contribution of the assets and liabilities from
Colombo added approximately $1.3 million to net interest income and
0.02% to the margin for the fourth quarter.

Cost of deposits for the fourth quarter of 2018 was 1.16%, compared to
0.87% for the fourth quarter of 2017, a 33% year-over-year increase,
reflecting the Company's continued management of its funding costs in a
year where the Federal Reserve hiked its benchmark short-term interest
rate a total of 100 basis points. Loan yields for the fourth quarter of
2018 were 5.22% compared to 4.63% for the year ago quarter.

Noninterest income totaled $166 thousand and $1.5 million for the
quarters ended December 31, 2018 and 2017, respectively. Noninterest
income excluding loss on sales of securities and gain on other real
estate owned was $628 thousand and $397 thousand for the respective
quarters, an increase of 58%. Fee income from fees on loans, service
charges on deposits, and other fee income was $519 thousand, an increase
of 106% for the quarter ended December 31, 2018 compared to 2017.
Included in loan income are fees from interest rate swaps totaling $229
thousand for the fourth quarter of 2018. In addition, the Colombo
transaction added approximately $31 thousand to non-interest income for
the fourth quarter of 2018. Losses on sales of securities
available-for-sale totaled $462,000 during the fourth quarter of 2018 as
a result of the aforementioned reinvestment strategy. During the fourth
quarter of 2017, the Company recorded $1.1 million related to a gain on
other real estate owned.

Noninterest expense totaled $9.4 million for the quarter ended December
31, 2018, compared to $4.9 million for the same three-month period of
2017. Approximately $800 thousand of the increase in noninterest expense
from the year ago quarter is attributable to expenses associated with
Colombo's former operations, in addition to merger-related expenses of
$2.7 million for the three months ended December 31, 2018. During the
year, the Company strategically hired business development officers and
back office staff to support the Company's growth plans, and retained
several employees from Colombo, including lending and branch personnel.
As a result, salary and compensation related expenses increased $1.1
million, or 40%, for the quarter ended December 31, 2018, compared to
the same three-month period of 2017. Occupancy and equipment expense
increased $195 thousand year-over-year primarily as a result of the
branch locations acquired from Colombo. Professional fees increased
slightly year-over-year as a result of implementation costs related to
regulatory compliance over the Company's internal control environment.
Increases in data processing and network administration, franchise taxes
and other operating expenses for the quarter ended December 31, 2018
compared to the same three-month period of 2017 is primarily growth
related. On a linked quarter basis, noninterest expense excluding
non-recurring merger-related expenses and the noninterest expenses
associated with the addition of Colombo, increased 5% from the three
months ended September 30, 2018. The efficiency ratio for the quarter
ended December 31, 2018 was 75.7%, or 54.3% excluding merger-related
expenses and securities losses, a decrease from 55.9% from the year ago
quarter.

Asset Quality

Asset quality remains strong as nonperforming loans and loans ninety
days or more past due totaled $3.9 million, or 0.28% of total assets, of
which $870 thousand related to acquired loans. Performing troubled debt
restructurings ("TDR") decreased to $203,000 at December 31, 2018,
compared to $1.7 million at December 31, 2017. Nonperforming assets
(including TDRs and other real estate owned) to total assets was 0.61%
and 0.58% at December 31, 2018 and 2017, respectively. The allowance for
loan losses to total loans was 0.81% at December 31, 2018, a decrease
from 0.88% at September 30, 2018. This ratio decrease was primarily the
result of the addition of $142.6 million of acquired loans. The
allowance for loan losses on the Company's legacy portfolio was 0.92% of
loan outstanding at December 31, 2018. The increase in the legacy
allowance was primarily attributable to modest charge-offs and specific
reserves added to the allowance during the quarter.

About FVCBankcorp Inc.

FVCBankcorp, Inc. is the holding company for FVCbank, a wholly-owned
subsidiary of FVCB which commenced operations in November 2007. FVCbank
is a $1.35 billion Virginia-chartered community bank serving the banking
needs of commercial businesses, nonprofit organizations, professional
service entities, their owners and employees located in the greater
Baltimore, Washington D.C., metropolitan areas. Locally owned and
managed, FVCbank is based in Fairfax, Virginia, and has 11 full-service
offices in Arlington, Ashburn, Fairfax, Manassas, Reston and
Springfield, Virginia, Washington D.C., and Baltimore, Bethesda,
Rockville and Silver Spring, Maryland.

For more information on the Company's 2018 selected financial
information, please visit the Investor Relations page of FVCBankcorp
Inc.'s website, www.fvcbank.com.

Caution about Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements include, but are not limited, statements of goals,
intentions, and expectations as to future trends, plans, events or
results of the Company's operations and policies and regarding general
economic conditions. In some cases, forward-looking statements can be
identified by use of words such as "may," "will," "anticipates,"
"believes," "expects," "plans," "estimates," "potential," "continue,"
"should," and similar words or phrases. These statements are based upon
current and anticipated economic conditions, nationally and in the
Company's market, interest rates and interest rate policy, competitive
factors, and other conditions which by their nature, are not susceptible
to accurate forecast and are subject to significant uncertainty. Because
of these uncertainties and the assumptions on which this discussion and
the forward-looking statements are based, actual future operations and
results in the future may differ materially from those indicated herein.

These forward-looking statements are based on current beliefs that
involve significant risks, uncertainties, and assumptions. Factors that
could cause the Company's actual results to differ materially from those
indicated in these forward-looking statements, include, but are not
limited to, the risk factors previously disclosed in the "Risk Factors"
section included in the Company's prospectus filed with the Securities
and Exchange Commission on September 17, 2018 pursuant to Rule 424(b)(4)
under the Securities Act of 1933. Because of these uncertainties and the
assumptions on which the forward-looking statements are based, actual
operations and results in the future may differ materially from those
indicated herein. Readers are cautioned against placing undue reliance
on any such forward-looking statements.
The Company's past
results are not necessarily indicative of future performance.

FVCBankcorp, Inc.
Selected Financial Data
(Dollars in thousands, except share data and per share data)
       
 
For the Three Months Ended December 31, For the Years Ended December 31,
(Unaudited) (Unaudited)
2018 2017 2018 2017
Selected Balances
Total assets $ 1,351,961 $ 1,053,224
Total investment securities 130,597 121,150
Total loans, net of deferred fees 1,136,743
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