Market Overview

FVCBankcorp, Inc. Announces Record Earnings for Second Quarter 2019

Share:

FVCBankcorp, Inc. (NASDAQ:FVCB) (the "Company") today reported second quarter 2019 net income of $4.1 million, or $0.28 diluted earnings per share, compared to $3.1 million, or $0.26 diluted earnings per share, for the quarterly period ended June 30, 2018. Weighted-average common shares outstanding for the diluted earnings per share calculations were 14.8 million and 12.1 million for the three months ended June 30, 2019 and 2018, respectively, reflecting the increase from shares issued in 2018 for the initial public offering and acquisition of Colombo Bank ("Colombo").

For the six month period ended June 30, 2019, net income was $8.0 million, or $0.54 per diluted earnings per share, compared to $6.1 million, or $0.50 diluted earnings per share, for the six month period ended June 30, 2018. Before merger-related expenses net of taxes, net income for the six months ended June 30, 2019 was $8.1 million, or $0.55 per diluted share and for the prior year net income for the six month period was $6.4 million, or $0.53 diluted earnings per share.

Return on average assets was 1.13% and return on average equity was 9.78% for the second quarter of 2019. For the comparable quarterly June 30, 2018 period, return on average assets was 1.13% and return on average equity was 12.00%. For the six months ended June 30, 2019 and 2018, return on average assets was 1.14% and 1.13%, respectively. Return on average equity for the six months ended June 30, 2019 and 2018 was 9.76% and 12.02%, respectively.

Selected Highlights

  • Record Earnings. Earnings increased $1.0 million, or 33%, to $4.1 million for the second quarter of 2019 as compared to the same 2018 period. Net interest margin increased to 3.59% for the quarter ended June 30, 2019 compared to 3.50% for the year ago quarter ended June 30, 2018, and decreased from 3.65% for the linked quarter ended March 31, 2019.
  • Strong Loan Growth. Total loans, net of deferred fees, totaled $1.23 billion at June 30, 2019, an increase of $55.4 million, or 19% annualized, from March 31, 2019. Year-over-year loan growth was $278.7 million, or 29% from June 30, 2018 to June 30, 2019. Excluding the $110 million of loans associated with the Colombo acquisition, organic growth was $168 million, or 18%.
  • Sound Asset Quality. Asset quality remains strong, with nonperforming loans and loans past due 90 days or more as a percentage of total assets of 0.67% at June 30, 2019. Nonperforming loans and loans past due 90 days or more totaled $10.0 million at June 30, 2019, of which $2.9 million were acquired loans from Colombo.
  • Strong Core Deposit Growth. Total deposits increased $56.7 million, to $1.27 billion at June 30, 2019, or 19% annualized, from March 31, 2019. Noninterest-bearing deposits increased $37.4 million, or 16% during 2019 and represent 21% of the total deposit base at June 30, 2019.
  • Improved Tangible Book Value. Tangible book value per share at June 30, 2019 was $11.70, a 25% increase from $9.38 at June 30, 2018.

"I continue to be pleased with how our Company performed during the second quarter of 2019. FVCbank has consistently reported record earnings which has been driven by strong loan and deposit growth, a direct result of our expanded regional presence and the strength of our business development teams," stated David W. Pijor, Chairman and CEO.

Balance Sheet

Total assets increased to $1.48 billion at June 30, 2019 compared to $1.14 billion at June 30, 2018, an increase of $345.2 million, or 30%. Loans receivable, net of deferred fees, totaled $1.23 billion at June 30, 2019, compared to $955.6 million at June 30, 2018, an increase of $278.7 million, or 29%. Excluding the $110 million of loans associated with the Colombo acquisition, organic growth was $168 million, or 18%. During the second quarter of 2019, average loans grew $70.0 million, or 25% annualized. During the quarter, loan originations totaled approximately $114 million, of which $77 million funded during the quarter.

Investment securities increased $17.4 million to $136.2 million at June 30, 2019, compared to $118.8 million at June 30, 2018.

Total deposits increased to $1.27 billion at June 30, 2019 compared to $1.01 billion at June 30, 2018, an increase of $260.5 million, or 26%. Core deposits, which represent total deposits less wholesale deposits, increased $255.5 million or 27% to $1.19 billion at June 30, 2019 compared to $931.6 million at June 30, 2018. Wholesale deposits totaled $82.2 million, or 6% of total deposits at June 30, 2019, a decrease of $33.2 million from March 31, 2019. Noninterest-bearing deposits increased $17.0 million to $270.7 million at June 30, 2019 from $253.7 million at March 31, 2019, and represented 21% of total deposits at June 30, 2019.

Income Statement

Net interest income totaled $12.4 million, an increase of $3.0 million, or 32%, for the quarter ended June 30, 2019, compared to the year ago quarter, and an increase of $607 thousand, or 5% compared to the first quarter of 2019. The Company's net interest margin increased 9 basis points to 3.59% for the quarter ended June 30, 2019 compared to 3.50% for the quarter ended June 30, 2018. On a linked quarter basis, net interest margin decreased 6 basis points from 3.65% for the three months ended March 31, 2019, primarily a result of a decrease in acquired loan accretion and an increase in the cost of interest-bearing deposits. For the six months ended June 30, 2019, net interest income was $24.1 million compared to $18.1 million for the year to date period ended June 30, 2018, an increase of $6.0 million, or 33%.

Cost of deposits, which include noninterest-bearing deposits, for the second quarter of 2019 was 1.36%, compared to 0.95% for the second quarter of 2018, reflecting the increased rate environment from a year ago. The Company has also been successful in adding several new customer relationships at current market rates which have contributed to the increase in deposit costs year-over-year. The average yield for the loan portfolio for the second quarter of 2019 was 5.24% compared to 4.86% for the year ago quarter, and 5.23% for the quarter ended March 31, 2019. Included in net interest income for the second quarter of 2019 is $222 thousand in acquired loan accretion associated with the Company's acquired loan portfolio, which has contributed to the increase in margin. Acquired loan accretion was $245 thousand for the first quarter of 2019.

Noninterest income totaled $539 thousand and $363 thousand for the quarters ended June 30, 2019 and 2018, respectively. Fee income from loans was $53 thousand, an increase of $49 thousand for the quarter ended June 30, 2019 compared to 2018, primarily a result of an increase in commercial loan fee income. Compared to the quarter ended March 31, 2019, fees on loans decreased $294 thousand, all of which was a result of a decrease in loan swap fee income during the quarter ended June 30, 2019. Service charges on deposit accounts and other fee income totaled $376 thousand for the second quarter of 2019, an increase of 50% or $125 thousand from the year ago quarter. This increase in deposit fee income resulted from the increase in core deposit relationships, both organic and acquired, year over year. Noninterest income for the year to date period ended June 30, 2019 was $1.3 million, compared to $748 thousand for the 2018 year to date period, an increase of $529 thousand, or 71%, which was primarily driven by loan swap fee income and service charges on deposit accounts.

Noninterest expense totaled $7.3 million for the quarter ended June 30, 2019, compared to $5.8 million for the same three-month period of 2018. Approximately $893 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 $16 thousand for the three months ended June 30, 2019. Salary and compensation related expenses increased $921 thousand, or 28%, for the quarter ended June 30, 2019, compared to the same three-month period of 2018, resulting from the increase in staffing from the acquisition and increases in back-office support staff. Occupancy and equipment expense increased $293 thousand year-over-year primarily as a result of the branch locations acquired from Colombo. Increases in data processing and network administration, franchise taxes and other operating expenses for the quarter ended June 30, 2019 compared to the same three-month period of 2018 is primarily growth related. On a linked quarter basis, noninterest expense increased $372 thousand from the three months ended March 31, 2019, primarily a result of salary increases related to the Company's annual performance review process and an increase in the variable component to employee compensation. For the six months ended June 30, 2019 and 2018, noninterest expense was $14.2 million and $11.1 million, respectively, the increase of which relates directly to the addition of Colombo to the Company's expense structure.

The efficiency ratio for the quarter ended June 30, 2019 was 56.4%, a decrease from 59.9% from the year ago quarter. The efficiency ratios for the six months ended June 30, 2019 and 2018, excluding merger-related expenses were 55.5% and 56.6%, respectively.

Asset Quality

The Company recorded provision for loan losses of $505 thousand for the three months ended June 30, 2019, compared to $281 thousand for the year ago quarter. Year to date provision expense for 2019 was $1.0 million compared to $639 thousand for the 2018 year to date period. Asset quality remains strong as nonperforming loans and loans ninety days or more past due totaled $10.2 million, or 0.68% of total assets, of which $2.7 million related to acquired loans. All of the Company's nonperforming loans are secured with three loans having specific reserves totaling $325 thousand. There were no performing troubled debt restructurings ("TDR") at June 30, 2019, compared to $4.1 million at March 31, 2019, which is now included as part of the nonperforming loan portfolio and represents the decline in the allowance to nonperforming loans ratio. Nonperforming assets (including TDRs and other real estate owned) to total assets was 0.93% at June 30, 2019 compared to 0.83% for March 31, 2019. The allowance for loan losses to total loans was 0.81% for each of the periods ended June 30, 2019 and December 31, 2018. The allowance for loan losses on the Company's originated portfolio was 0.89% of loans outstanding at June 30, 2019 versus 0.92% at December 31, 2018, a result of acquired loans maturing and moving to the originated portfolio at renewal. One charge-off of $20 thousand was recorded during the second quarter of 2019 which was related to the Company's purchased consumer installment loan portfolio.

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 $1.48 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 and 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 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 and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and in other periodic and current reports filed with the Securities and Exchange Commission. 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)
(Unaudited)
 

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended

2019

2018

2019

2018

3/31/2019

12/31/2018

Selected Balances
Total assets

$

1,484,600

$

1,139,449

$

1,419,763

$

1,351,576

Total investment securities

 

141,611

 

122,644

 

144,865

 

130,597

Total loans, net of deferred fees

 

1,234,372

 

955,641

 

1,178,941

 

1,136,743

Allowance for loan losses

 

(9,996)

 

(8,298)

 

(9,512)

 

(9,159)

Total deposits

 

View Comments and Join the Discussion!