Market Overview

FVCBankcorp, Inc. Announces Record Earnings for Third Quarter 2019

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FVCBankcorp, Inc. (NASDAQ:FVCB) (the "Company") today reported third quarter 2019 net income of $4.1 million, or $0.28 diluted earnings per share, compared to $3.4 million, or $0.27 diluted earnings per share, for the quarterly period ended September 30, 2018. Weighted-average common shares outstanding for the diluted earnings per share calculations were 14.9 million and 12.5 million for the three months ended September 30, 2019 and 2018, respectively, reflecting the increase from shares issued in 2018 for the initial public offering, completed in September 2018, and acquisition of Colombo Bank ("Colombo"), completed in October 2018.

For the nine month period ended September 30, 2019, net income was $12.1 million, or $0.82 per diluted earnings per share, compared to $9.5 million, or $0.78 diluted earnings per share, for the nine month period ended September 30, 2018. Before merger-related expenses net of taxes, net income for the nine months ended September 30, 2019 was $12.2 million, or $0.82 per diluted share and for the prior year net income for the nine month period was $10.0 million, or $0.82 diluted earnings per share.

Return on average assets was 1.10% and return on average equity was 9.46% for the third quarter of 2019. For the comparable quarterly September 30, 2018 period, return on average assets was 1.18% and return on average equity was 12.23%. For the nine months ended September 30, 2019 and 2018, return on average assets was 1.13% and 1.15%, respectively. Return on average equity for the nine months ended September 30, 2019 and 2018 was 9.65% and 12.09%, respectively.

Selected Highlights

  • Continued Loan Growth. Total loans, net of deferred fees, totaled $1.24 billion at September 30, 2019, an increase of $9.0 million from June 30, 2019. Year-over-year loan growth was $265.1 million, or 27% from September 30, 2018 to September 30, 2019. Excluding $104 million of loans associated with the Colombo acquisition, organic growth was $161 million, or 16%.
  • Strong Core Deposit Growth. Total deposits increased $48.3 million, to $1.32 billion at September 30, 2019, or 15% annualized, from June 30, 2019. Noninterest-bearing deposits increased $61.5 million, or 26% during 2019 and represent 22% of the total deposit base at September 30, 2019.
  • Record Earnings. Earnings increased $708 thousand, or 21%, to $4.1 million for the third quarter of 2019 as compared to the same 2018 period. Net interest income increased $2.2 million, or 22%, to $12.1 million for the three months ended September 30, 2019 compared to the same period of 2018. Net interest margin decreased to 3.41% for the quarter ended September 30, 2019. See below under "Income Statement" for additional information on changes to the Company's net interest margin.
  • Improved Tangible Book Value. Tangible book value per share at September 30, 2019 was $12.03, an 11% increase from $10.81 at September 30, 2018.

"Growth in core relationships continues to be a driver of our quarterly earnings. Loan growth was less than prior quarters as we purposefully were more selective of originations in our construction and commercial real estate portfolios. However, our loan pipeline continues to be strong as we focus our efforts to growing our commercial & industrial portfolio," stated David W. Pijor, Chairman and CEO.

Balance Sheet

Total assets increased to $1.57 billion at September 30, 2019 compared to $1.18 billion at September 30, 2018, an increase of $389.8 million, or 33%. Loans receivable, net of deferred fees, totaled $1.24 billion at September 30, 2019, compared to $978.3 million at September 30, 2018, an increase of $265.1 million, or 27%. Excluding the $104 million of loans associated with the Colombo acquisition, organic growth was $161 million, or 16%. During the third quarter of 2019, average loans grew $33.4 million, or 11% annualized. During the quarter, loan originations totaled approximately $79.2 million, of which $37.3 million funded during the quarter, reflecting slower loan growth.

Investment securities increased $23.4 million to $136.5 million at September 30, 2019, compared to $113.1 million at September 30, 2018.

Total deposits increased to $1.32 billion at September 30, 2019 compared to $994.0 million at September 30, 2018, an increase of $323.7 million, or 33%. Core deposits, which represent total deposits less wholesale deposits, increased $301.3 million or 32% to $1.24 billion at September 30, 2019 compared to $943.4 million at September 30, 2018. Wholesale deposits totaled $73.0 million, or 6% of total deposits at September 30, 2019, a decrease of $9.2 million from June 30, 2019. Noninterest-bearing deposits increased $24.1 million to $294.8 million at September 30, 2019 from $270.7 million at June 30, 2019, and represented 22% of total deposits at September 30, 2019.

Income Statement

Net interest income totaled $12.1 million, an increase of $2.2 million, or 22%, for the quarter ended September 30, 2019, compared to the year ago quarter, and decreased slightly by $279 thousand, or 2% compared to the second quarter of 2019, a result of increased deposit costs. The Company's net interest margin decreased 13 basis points to 3.41% for the quarter ended September 30, 2019 compared to 3.54% for the quarter ended September 30, 2018. On a linked quarter basis, net interest margin decreased 18 basis points from 3.59% for the three months ended June 30, 2019. During the third quarter of 2019, in addition to the repricing of the loan portfolio as a result of two 25 basis point rate cuts, several acquired loans with premium loan marks paid off during the quarter, which decreased loan interest income by $310 thousand as compared to the prior quarter, decreasing net interest margin by 9 basis points. Acquired loan accretion included in loan interest income was $43 thousand and $353 thousand for the three months ended September 30, 2019 and June 30, 2019, respectively. The average yield for the loan portfolio for the third quarter of 2019 was 5.13% compared to 4.99% for the year ago quarter, and 5.24% for the quarter ended June 30, 2019.

The cost of deposits, which includes noninterest-bearing deposits, increased 6 basis points to 1.42% for the third quarter of 2019 as compared to 1.36% for the second quarter of 2019, and 1.03% for the third quarter of 2018, reflecting the increased rate environment from a year ago. The Company had several large customer transactions that occurred at the end of the second quarter, prior to the Federal Reserve rate cuts, which impacted the yields on interest checking and time deposits for the third quarter of 2019.

For the nine months ended September 30, 2019, net interest income was $36.2 million compared to $28.0 million for the year to date period ended September 30, 2018, an increase of $8.2 million, or 29%.

Noninterest income totaled $680 thousand and $748 thousand for the quarters ended September 30, 2019 and 2018, respectively. Fee income from loans was $101 thousand, a decrease of $310 thousand for the quarter ended September 30, 2019 compared to 2018, primarily a result of a decrease in loan swap fee income. Service charges on deposit accounts and other fee income totaled $378 thousand for the third quarter of 2019, an increase of 67% or $151 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 September 30, 2019 was $2.0 million, compared to $1.5 million for the 2018 year to date period, an increase of $461 thousand, or 31%, which was primarily driven by loan swap fee income and service charges on deposit accounts.

Noninterest expense totaled $7.4 million for the quarter ended September 30, 2019, compared to $5.9 million for the same three-month period of 2018. Approximately $812 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 $51 thousand for the three months ended September 30, 2019. Salary and compensation related expenses increased $858 thousand, or 25%, for the quarter ended September 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 $291 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 September 30, 2019 compared to the same three-month period of 2018 is primarily growth related. On a linked quarter basis, noninterest expense increased $87 thousand from the three months ended June 30, 2019. For the nine months ended September 30, 2019 and 2018, noninterest expense was $21.5 million and $17.0 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 September 30, 2019 was 57.7%, an increase from 56.0% from the year ago quarter. The efficiency ratios for the nine months ended September 30, 2019 and 2018, excluding merger-related expenses and gain on securities were 56.1% and 55.5%, respectively.

Asset Quality

The Company recorded provision for loan losses of $235 thousand for the three months ended September 30, 2019, compared to $351 thousand for the year ago quarter. Year to date provision expense for 2019 was $1.3 million compared to $990 thousand for the 2018 year to date period. Nonperforming loans and loans ninety days or more past due at September 30, 2019 totaled $10.4 million, or 0.67% of total assets, of which $1.2 million related to acquired loans. This compares to $10.0 million in nonperforming loans and loans ninety days or more past due at June 30, 2019, or 0.67% of total assets. All of the Company's nonperforming loans are secured and have specific reserves totaling $392 thousand, representing the expected losses associated with those loans. Included in nonperforming loans is one loan totaling $3.9 million which is collateralized by property that is under a purchase and sales agreement that the Company expects will close during the fourth quarter of 2019, and for which the Company expects to receive full repayment. There were no troubled debt restructurings ("TDR") at September 30, 2019. Nonperforming assets (including other real estate owned, or OREO) to total assets was 0.91% at September 30, 2019 compared to 0.93% for June 30, 2019. The property that is recorded as OREO is also under a purchase and sales agreement which is expected to close during 2020. No loss is expected on the sale of OREO.

The allowance for loan losses to total loans was 0.81% for each of the periods ended September 30, 2019 and December 31, 2018. The allowance for loan losses on the Company's originated loan portfolio, excluding the credit mark on acquired loans, was 0.89% of loans outstanding at September 30, 2019. Net charge-offs of $163 thousand were recorded during the third quarter of 2019 which were primarily 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 $1.57 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 September 30,

 

For the Nine Months Ended September 30,

 

For the Three Months Ended

2019

 

2018

 

2019

 

2018

 

6/30/2019

 

12/31/2018

Selected Balances
Total assets

$

1,565,196

 

$

1,175,437

 

$

1,484,600

 

$

1,351,576

 

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