株探米国株
英語
エドガーで原本を確認する
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

(Mark One)

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2024

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from_______to________

Commission File Number: 001-41764

 

 

BV FINANCIAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland

 

14-1920944

(State of Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

7114 North Point Road, Baltimore, MD, 21219

(Address of Principal Executive Offices) (Zip Code)

 

(410) 477-5000

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

BVFL

 

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-accelerated Filer

☒

Smaller Reporting Company

☒

Emerging growth company

☒

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 12, 2024, the registrant had 11,597,985 shares of common stock outstanding.

 

 

 

 

TABLE OF CONTENTS

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

 

Consolidated Balance Sheets

1

Consolidated Statements of Income

2

Consolidated Statements of Comprehensive Income

3

Consolidated Statements of Changes in Stockholders' Equity

4

Consolidated Statements of Cash Flows

6

Notes to Unaudited Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

Item 4.

Controls and Procedures

46

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

47

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

48

Signatures

49

 

 

BV FINANCIAL, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

 

September 30, 2024

 

 

December 31, 2023

 

(dollars in thousands, except per share amounts)

 

(unaudited)

 

 

(derived from audited financial statements)

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Cash

 

$

7,207

 

 

$

9,260

 

Interest-bearing deposits in other banks

 

 

86,858

 

 

 

64,482

 

Cash and cash equivalents

 

 

94,065

 

 

 

73,742

 

Equity investment

 

 

254

 

 

 

256

 

Securities available for sale

 

 

39,162

 

 

 

34,781

 

Securities held to maturity (fair value of $5,210 and $9,206, ACL of $4 and $6)

 

 

6,029

 

 

 

10,209

 

Total loans

 

 

693,231

 

 

 

704,802

 

Allowance for credit losses

 

 

(8,001

)

 

 

(8,554

)

Net loans

 

 

685,230

 

 

 

696,248

 

Foreclosed real estate

 

 

160

 

 

 

170

 

Premises and equipment, net

 

 

13,404

 

 

 

14,250

 

Federal Home Loan Bank of Atlanta stock, at cost

 

 

654

 

 

 

626

 

Investment in life insurance

 

 

19,947

 

 

 

19,657

 

Accrued interest receivable

 

 

2,922

 

 

 

3,279

 

Goodwill

 

 

14,420

 

 

 

14,420

 

Intangible assets, net

 

 

876

 

 

 

1,012

 

Deferred tax assets, net

 

 

8,442

 

 

 

8,969

 

Other assets

 

 

7,144

 

 

 

7,635

 

Total assets

 

$

892,709

 

 

$

885,254

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

139,302

 

 

$

142,030

 

Interest-bearing deposits

 

 

495,011

 

 

 

492,090

 

Total deposits

 

 

634,313

 

 

 

634,120

 

Subordinated debentures

 

 

34,845

 

 

 

37,251

 

Other liabilities

 

 

13,817

 

 

 

14,818

 

Total liabilities

 

 

682,975

 

 

 

686,189

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding; Common stock, $0.01 par value; 45,000,000 shares authorized at September 30, 2024 and December 31, 2023; 11,701,785 shares issued and outstanding as of September 30, 2024 and 11,375,803 issued and outstanding as of December 31, 2023

 

 

117

 

 

 

114

 

Paid-in capital

 

 

110,697

 

 

 

110,465

 

Retained earnings

 

 

107,543

 

 

 

97,772

 

Unearned common stock held by employee stock ownership plan

 

 

(7,202

)

 

 

(7,328

)

Accumulated other comprehensive loss

 

 

(1,421

)

 

 

(1,958

)

Total stockholders' equity

 

 

209,734

 

 

 

199,065

 

Total liabilities and stockholders' equity

 

$

892,709

 

 

$

885,254

 

 

See notes to consolidated financial statements. 1

BV FINANCIAL, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

 

(dollars in thousands, except per share amounts)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

Interest Income

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Loans, including fees

 

$

10,522

 

 

$

9,764

 

 

$

30,481

 

 

$

27,863

 

Investment securities available for sale

 

 

353

 

 

 

302

 

 

 

966

 

 

 

846

 

Investment securities held to maturity

 

 

83

 

 

 

89

 

 

 

266

 

 

 

275

 

Other interest income

 

 

1,192

 

 

 

1,560

 

 

 

3,058

 

 

 

2,958

 

Total interest income

 

 

12,150

 

 

 

11,715

 

 

 

34,771

 

 

 

31,942

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

2,381

 

 

 

1,764

 

 

 

6,610

 

 

 

3,694

 

Interest on FHLB borrowings

 

 

—

 

 

 

530

 

 

 

—

 

 

 

1,313

 

Interest on subordinated debentures

 

 

466

 

 

 

545

 

 

 

1,985

 

 

 

1,621

 

Total interest expense

 

 

2,847

 

 

 

2,839

 

 

 

8,595

 

 

 

6,628

 

Net interest income

 

 

9,303

 

 

 

8,876

 

 

 

26,176

 

 

 

25,314

 

Recovery for credit losses

 

 

(714

)

 

 

(333

)

 

 

(806

)

 

 

(480

)

Net interest income after provision for credit losses

 

 

10,017

 

 

 

9,209

 

 

 

26,982

 

 

 

25,794

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

Service fees on deposits

 

 

103

 

 

 

109

 

 

 

303

 

 

 

304

 

Fees from debit cards

 

 

175

 

 

 

183

 

 

 

529

 

 

 

543

 

Income from investment in life insurance

 

 

91

 

 

 

85

 

 

 

290

 

 

 

549

 

Gain on foreclosed real estate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

678

 

Gain on sale of fixed assets

 

 

—

 

 

 

188

 

 

 

—

 

 

 

188

 

Other income

 

 

327

 

 

 

317

 

 

 

747

 

 

 

798

 

Total noninterest income

 

 

696

 

 

 

882

 

 

 

1,869

 

 

 

3,060

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and related benefits

 

 

3,494

 

 

 

3,149

 

 

 

9,714

 

 

 

8,887

 

Occupancy

 

 

396

 

 

 

397

 

 

 

1,242

 

 

 

1,178

 

Data processing

 

 

366

 

 

 

345

 

 

 

1,117

 

 

 

1,034

 

Advertising

 

 

6

 

 

 

5

 

 

 

16

 

 

 

33

 

Professional fees

 

 

400

 

 

 

220

 

 

 

757

 

 

 

597

 

Equipment

 

 

97

 

 

 

105

 

 

 

301

 

 

 

319

 

Foreclosed real estate and holding costs

 

 

(3

)

 

 

13

 

 

 

13

 

 

 

173

 

Amortization of intangible assets

 

 

45

 

 

 

46

 

 

 

135

 

 

 

138

 

FDIC insurance premiums

 

 

82

 

 

 

120

 

 

 

246

 

 

 

237

 

Other

 

 

590

 

 

 

608

 

 

 

1,751

 

 

 

1,656

 

Total noninterest expense

 

 

5,473

 

 

 

5,008

 

 

 

15,292

 

 

 

14,252

 

Net income before tax

 

 

5,240

 

 

 

5,083

 

 

 

13,559

 

 

 

14,602

 

Income tax expense

 

 

1,442

 

 

 

1,399

 

 

 

3,788

 

 

 

3,904

 

Net income

 

$

3,798

 

 

$

3,684

 

 

$

9,771

 

 

$

10,698

 

Basic earnings per share

 

$

0.35

 

 

$

0.35

 

 

$

0.91

 

 

$

1.21

 

Diluted earnings per share

 

$

0.35

 

 

$

0.35

 

 

$

0.91

 

 

$

1.20

 

 

See notes to consolidated financial statements. 2

BV FINANCIAL, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net income

 

$

3,798

 

 

$

3,684

 

 

$

9,771

 

 

$

10,698

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities available for sale

 

 

573

 

 

 

(347

)

 

 

740

 

 

 

(252

)

Income tax relating to securities available for sale

 

 

(157

)

 

 

95

 

 

 

(203

)

 

 

69

 

Other comprehensive income (loss)

 

 

416

 

 

 

(252

)

 

 

537

 

 

 

(183

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

4,214

 

 

$

3,432

 

 

$

10,308

 

 

$

10,515

 

 

See notes to consolidated financial statements. 3

BV FINANCIAL, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited)

For the Three Months Ended September 30, 2024 and 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Common stock

 

 

Paid-in capital

 

 

Unearned common stock held by ESOP

 

 

Retained earnings

 

 

Accumulated other comprehensive loss

 

 

Total

 

 

 

 

Balance, June 30, 2024

 

$

114

 

 

$

110,694

 

 

$

(7,244

)

 

$

103,745

 

 

$

(1,837

)

 

$

205,472

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,798

 

 

 

—

 

 

 

3,798

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(net of tax of ($157))

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

416

 

 

 

416

 

Stock compensation

 

 

3

 

 

 

3

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6

 

ESOP shares committed to be released

 

 

—

 

 

 

—

 

 

 

42

 

 

 

—

 

 

 

—

 

 

 

42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2024

 

$

117

 

 

$

110,697

 

 

$

(7,202

)

 

$

107,543

 

 

$

(1,421

)

 

$

209,734

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Common stock

 

 

Paid-in capital

 

 

Unearned common stock held by ESOP

 

 

Retained earnings

 

 

Accumulated other comprehensive loss

 

 

Total

 

 

 

 

Balance, June 30, 2023

 

$

74

 

 

$

15,599

 

 

$

—

 

 

$

91,079

 

 

$

(2,272

)

 

$

104,480

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,684

 

 

 

—

 

 

 

3,684

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(net of tax of $95)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(252

)

 

 

(252

)

Stock compensation

 

 

—

 

 

 

63

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

63

 

Proceeds from issuance of common stock, net of offering costs

 

 

40

 

 

 

94,702

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

94,742

 

Purchase of unearned common stock held by ESOP plan

 

 

—

 

 

 

—

 

 

 

(7,839

)

 

 

—

 

 

 

—

 

 

 

(7,839

)

ESOP shares committed to be released

 

 

—

 

 

 

—

 

 

 

204

 

 

 

—

 

 

 

—

 

 

 

204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2023

 

$

114

 

 

$

110,364

 

 

$

(7,635

)

 

$

94,763

 

 

$

(2,524

)

 

$

195,082

 

 

 

 

 

 

 

See notes to consolidated financial statements. 4

BV FINANCIAL, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited)

For the Nine Months Ended September 30, 2024 and 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Common stock

 

 

Paid-in capital

 

 

Unearned common stock held by ESOP

 

 

Retained earnings

 

 

Accumulated other comprehensive loss

 

 

Total

 

 

 

 

Balance, December 31, 2023

 

$

114

 

 

$

110,465

 

 

$

(7,328

)

 

$

97,772

 

 

$

(1,958

)

 

$

199,065

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9,771

 

 

 

—

 

 

 

9,771

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(net of tax of ($203))

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

537

 

 

 

537

 

Stock compensation

 

 

3

 

 

 

232

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

235

 

ESOP shares committed to be released

 

 

—

 

 

 

—

 

 

 

126

 

 

 

—

 

 

 

—

 

 

 

126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2024

 

$

117

 

 

$

110,697

 

 

$

(7,202

)

 

$

107,543

 

 

$

(1,421

)

 

$

209,734

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Common stock

 

 

Paid-in capital

 

 

Unearned common stock held by ESOP

 

 

Retained earnings

 

 

Accumulated other comprehensive loss

 

 

Total

 

 

 

 

Balance, December 31, 2022

 

$

74

 

 

$

15,406

 

 

$

—

 

 

$

84,612

 

 

$

(2,341

)

 

$

97,751

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

10,698

 

 

 

—

 

 

 

10,698

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(net of tax of $69)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(183

)

 

 

(183

)

Stock compensation

 

 

—

 

 

 

256

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

256

 

Proceeds from issuance of common stock, net of offering costs

 

 

40

 

 

 

94,702

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

94,742

 

Purchase of unearned common stock held by ESOP plan

 

 

—

 

 

 

—

 

 

 

(7,839

)

 

 

—

 

 

 

—

 

 

 

(7,839

)

ESOP shares committed to be released

 

 

—

 

 

 

—

 

 

 

204

 

 

 

—

 

 

 

—

 

 

 

204

 

CECL ASU Transition

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(547

)

 

 

—

 

 

 

(547

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2023

 

$

114

 

 

$

110,364

 

 

$

(7,635

)

 

$

94,763

 

 

$

(2,524

)

 

$

195,082

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements. 5

BV FINANCIAL, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

Nine Months Ended September 30,

 

(dollars in thousands)

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

9,771

 

 

$

10,698

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

 

Net accretion of discounts and premiums

 

 

(22

)

 

 

(145

)

Recovery of credit losses

 

 

(806

)

 

 

(480

)

Gain on sale of foreclosed real estate

 

 

—

 

 

 

(678

)

Amortization of deferred loan fees/costs

 

 

545

 

 

 

(335

)

Amortization of intangible assets

 

 

135

 

 

 

138

 

Amortization of debt issuance costs

 

 

117

 

 

 

117

 

Write-off fair market value of subordinated debentures

 

 

566

 

 

 

—

 

Depreciation of premises and equipment

 

 

625

 

 

 

652

 

Gain on sale of assets

 

 

—

 

 

 

(188

)

Deferred tax expense

 

 

323

 

 

 

345

 

Increase in cash surrender value of life insurance

 

 

(290

)

 

 

(313

)

Stock-based compensation expense

 

 

235

 

 

 

256

 

ESOP compensation expense

 

 

126

 

 

 

204

 

Decrease in accrued interest and other assets

 

 

1,663

 

 

 

144

 

(Increase) decrease in other liabilities

 

 

(858

)

 

 

1,284

 

Net cash provided by operating activities

 

 

12,130

 

 

 

11,699

 

Cash flows from investing activities

 

 

 

 

 

 

Proceeds from maturities and principal payments of investment securities available for sale

 

 

8,440

 

 

 

3,929

 

Purchases of investment securities available for sale

 

 

(12,500

)

 

 

(6,918

)

Proceeds from maturities and principal payments of investment securities held to maturity

 

 

4,179

 

 

 

434

 

Net decrease (increase) in loans

 

 

11,830

 

 

 

(40,140

)

Purchase of premises and equipment

 

 

(594

)

 

 

(117

)

Proceeds from sale of premises and equipment

 

 

—

 

 

 

456

 

Proceeds from life insurance benefits

 

 

—

 

 

 

731

 

Purchase of participation foreclosed real estate

 

 

—

 

 

 

(57

)

Proceeds from sale of foreclosed real estate

 

 

—

 

 

 

2,167

 

Proceeds from sale of Federal Home Loan Bank of Atlanta stock

 

 

—

 

 

 

8

 

Purchase of Federal Home Loan Bank of Atlanta stock

 

 

(28

)

 

 

(1,438

)

Net cash provided by (used in) investing activities

 

 

11,327

 

 

 

(40,945

)

Cash flows provided by financing activities

 

 

 

 

 

 

(Decrease) increase in official checks

 

 

56

 

 

 

1,118

 

Net increase (decrease) in deposits

 

 

267

 

 

 

(37,861

)

Increase in advance payments by borrowers for taxes and insurance

 

 

(364

)

 

 

(607

)

Advances from the Federal Home Loan Bank of Atlanta

 

 

—

 

 

 

25,500

 

Purchase of unearned common stock held by employee stock ownership plan

 

 

—

 

 

 

(7,839

)

Repayment of subordinate debt

 

 

(3,093

)

 

 

—

 

Issuance of common stock funded by stock offering

 

 

—

 

 

 

97,990

 

Offering costs

 

 

—

 

 

 

(3,248

)

Net cash (used in) provided by financing activities

 

 

(3,134

)

 

 

75,053

 

Net increase in cash and cash equivalents

 

 

20,323

 

 

 

45,807

 

Cash and cash equivalents at beginning of period

 

 

73,742

 

 

 

68,652

 

Cash and cash equivalents at end of period

 

$

94,065

 

 

$

114,459

 

Supplementary cash flows information

 

 

 

 

 

 

Interest paid

 

$

7,729

 

 

$

7,434

 

Income taxes paid

 

$

4,190

 

 

$

3,855

 

Supplementary noncash transactions

 

 

 

 

 

 

Impact of ASC 326 adoption

 

$

—

 

 

$

547

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

Net change on available for sale securities

 

$

(366

)

 

$

—

 

Transfers from property plant and equipment to other assets

 

 

815

 

 

 

—

 

Deferred tax assets

 

 

204

 

 

 

—

 

Deferred principal on foreclosed real estate

 

 

10

 

 

 

—

 

Net change in adjusted other comprehensive income

 

 

537

 

 

 

—

 

 

See notes to consolidated financial statements. 6

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Note 1 – Summary Of Significant Accounting Policies

General

 

The unaudited consolidated financial statements and other financial information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes, of BV Financial, Inc. (the "Company") included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Business

BV Financial, Inc. (“BV Financial,” the “Company” or “we”) was organized as a federal corporation and savings and
loan holding company in January 2005 as part of the mutual holding company reorganization of Bay-Vanguard Federal
Savings Bank. In February 2019, the Company became a Maryland-chartered corporation and a bank holding
company.


Prior to consummation of its mutual to stock conversion in July 2023, BayVanguard, M.H.C., Inc. (the “MHC”) was
the Maryland-chartered mutual holding company of the Company. The MHC’s only business was the ownership of
at least a majority of the outstanding common stock of the Company. On January 19, 2023, the MHC adopted a Plan of
Conversion and Reorganization pursuant to which the MHC undertook a “second-step” conversion and
BayVanguard Bank (the “Bank”), the Company’s wholly owned subsidiary, reorganized from the two-tier mutual
holding company structure to the fully-public stock holding company structure (the “Conversion”). The Conversion
was consummated on July 31, 2023 on which date the MHC ceased to exist. As part of the Conversion, the Company
sold 9,798,980 shares of its common stock at a price of $10.00 per share. Each outstanding share of Company common
stock owned by the existing public stockholders of the Company were converted into new shares of Company common
stock based on an exchange ratio of 1.5309-to-1. The Company had 11,375,803 shares of Company common stock
outstanding as a result of the stock offering and Conversion.

 

The Company is a registered bank holding company subject to comprehensive regulation and examination by the
Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).

The Bank is headquartered in Baltimore, Maryland and is a full-service community-oriented financial institution dedicated to serving the financial service needs of consumers and businesses. The Bank is engaged primarily in the business of attracting deposits from the general public and using such funds to originate one-to-four-family real estate, construction, multi-family, commercial real estate, farm, marine loans, commercial and consumer loans.

The Bank's deposits are insured up to the applicable legal limits by the Federal Deposit Insurance Corporation's Deposit Insurance Fund. The Bank is a member of the Federal Home Loan Bank System.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Bank and the Bank's subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Basis of Financial Statement Presentation and Significant Estimates

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for credit losses, goodwill impairment, and the valuation of deferred tax assets.

 

7

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Significant Group Concentrations of Credit Risk

A significant portion of the Company's activities are with customers located within the Baltimore metropolitan area and on the Eastern Shore of Maryland. The Company does not have any significant concentrations in any one industry or with any one customer.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks, cash items in the process of clearing, and interest-bearing deposits with banks with original maturities of less than 90 days.

Securities

The Company classifies investment securities as held to maturity ("HTM") or available for sale ("AFS"). Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and are reported at amortized cost (including amortization of premiums or accretion of discounts). Net unrealized gains and losses for debt securities classified as available for sale are recognized as increases or decreases in other comprehensive income or loss, net of taxes, and excluded from the determination of net income.

Equity securities are reported at fair value with unrealized gains and losses included in net gains/losses in noninterest income.

Realized gains and losses on sales of securities are determined using the specific identification method and are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Premiums and discounts on callable debt securities are amortized through the earliest call date.

When the fair value of an AFS debt security has declined below its amortized cost basis, the Company is required to assess whether the decline is from a credit loss or other factors. For any security, either explicitly or implicitly guaranteed by the federal government, an analysis is performed on the individual security using the latest available information to determine if the decline in fair value is attributable to a credit loss. If such determination is made, the Company would record an allowance for credit loss for the debt instrument. As of September 30, 2024, we have recognized no credit losses on AFS securities.

For HTM debt securities, an allowance will be recognized when lifetime credit losses are expected, in an amount that
reflects the expected contractual credit losses, even when the risk of such loss is remote. Any security, either explicitly
or implicitly guaranteed by the U.S. Government is excluded from this analysis. This includes U.S. Treasury securities,
securities issued by agencies of the U.S. Government and mortgage-backed securities issued by Ginnie Mae, Fannie
Mae and Freddie Mac.

The allowance for credit losses ("ACL") for HTM securities is computed using bond global default rates tracked by
S&P with a loss given default of 45%. Accrued interest receivable on the HTM debt securities excluded from this
analysis totaled $26,000 at September 30, 2024.

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank System to hold stock of its district Federal
Home Loan Bank (the "FHLB") in an amount determined by both asset size and borrowings from the FHLB. Purchases
and sales of stock are made directly with the FHLB at par value.

The Bank held $654,000 and $626,000 of FHLB restricted stock at September 30, 2024 and December 31, 2023, respectively.

The restricted stock is carried at cost. Management evaluates whether this investment is impaired based on its assessment of the ultimate recoverability of the investment rather than by recognizing temporary declines in value.

8

BV FINANCIAL, INC. AND SUBSIDIARIES

 

The determination of whether a decline affects the ultimate recoverability of the investment is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Loans Receivable

Loans receivable are stated at unpaid principal balances, adjusted for premiums and discounts on loans purchased, the
undisbursed portion of loans in process, net deferred loan origination fees and costs, fair value adjustments on loans
acquired in a merger, and the allowance for credit losses. Interest income is accrued on the unpaid principal balance.
Loan origination fees and costs are deferred and recognized as an adjustment to the yield of the related loans. The
Company is amortizing these amounts over the contractual life of the loan using the interest method. For purchased
loans, the related premium or discount is recognized over the contractual life of the purchased loan and is included as
part of interest income. The accrual of interest is generally discontinued when the contractual payment of principal or
interest has become 90 days past due or management has serious doubts about further collectability of principal or
interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of
collection and is either guaranteed or well secured. When a loan is placed on non-accrual status, unpaid interest
credited to income is reversed. Interest received on non-accrual loans generally is either applied against principal or
reported as interest income, according to management's judgment as to the collectability of principal. Generally, loans
are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual
terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no
longer in doubt. Interest payments on impaired loans are recorded in the same manner as interest payments on
non-accrual loans.

Allowance for Credit Losses

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 the loan is uncollectible. Subsequent recoveries, if any, are credited to the ACL. Management believes the ACL is maintained in accordance with GAAP and is 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 loss history is updated through the most recent quarter-end prior to the reporting period. 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 problem 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 value of the forward looking adjustment.

9

BV FINANCIAL, INC. AND SUBSIDIARIES

 

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 (the "FDIC") 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 charge-offs.

The calculation of ACL excludes accrued interest receivable balances because these balances are reversed in a timely manner against previously recognized interest income when a loan is placed on non-accrual status.

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposure

The Company's off-balance sheet credit instruments primarily consist of unfunded commitments on existing loans. In the ordinary course of business, the Company has entered into commitments to extend credit. Such financial instruments are recorded on the balance sheet when they are funded.

The Company records a reserve for unfunded commitments on off-balance sheet credit exposures through a charge to the provision for credit loss expense. The reserve is estimated by loan segment at each measurement date under the ASC 326 model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in other liabilities on the Company's Consolidated Balance Sheets.

Foreclosed Real Estate

Foreclosed real estate and repossessed assets are composed of property acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. If the fair value of the asset, net of estimated selling costs, is less than the related loan balance at the time of acquisition, a charge against the allowance for credit losses is recorded. After foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value less estimated costs to sell. Revenues and expenses from operations and changes in the valuation allowance are included in noninterest income and expenses.

Premises and Equipment

Land is stated at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed based on the straight-line method over the estimated useful lives of the respective assets. Expenditures for improvements are capitalized while costs for maintenance and repairs are expensed as incurred.

Leases

The Company determines if an arrangement is a lease at inception. All of the Company’s leases are currently classified as operating leases and are included in other assets and other liabilities on the Company’s Consolidated Balance Sheets. Periodic operating lease costs are recorded in occupancy expenses of premises on the Company's Consolidated Statements of Income.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease arrangements. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of the expected future lease payments over the remaining lease term. In determining the present value of future lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The operating ROU assets are adjusted for any lease payments made at or before the lease commencement date, initial direct costs, any lease incentives received and, for acquired leases, any favorable or unfavorable fair value adjustments. The present value of the lease liability may include the impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options provided in the lease terms. Lease expense is recognized on a straight-line basis over the expected lease term. Lease agreements that include lease and non-lease components, such as common area maintenance charges, are accounted for separately.

 

10

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Investment in Life Insurance

Investment in life insurance is reflected at the net cash surrender value to the Company.

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is evaluated for impairment at least annually and on an interim basis if an event or circumstance indicates it is likely an impairment has occurred. Any impairment of goodwill would be recorded against income in the period of impairment.

Intangible Assets

Intangible assets, consisting of core deposit intangibles, represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged on its own or in combination with a related contract, asset or liability. Core deposit intangibles are amortized on an accelerated basis over an estimated useful life. Core deposit intangibles are evaluated annually for impairment. Any impairment of intangible assets would be recorded against income in the period of impairment.

Deferred Income Taxes

Deferred income taxes are recognized for temporary differences between the financial reporting basis and income tax basis of assets and liabilities based on enacted tax rates expected to be in effect when such amounts are realized or settled. Deferred tax assets are recognized only to the extent that it is more likely than not that such amounts will be realized based on consideration of available evidence.

Statements of Cash Flows

Cash and cash equivalents in the statements of cash flows include cash, federal funds sold and interest-bearing deposits in other banks. Federal funds are generally purchased and sold for one-day periods.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Earnings Per Share

Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding for the appropriate period. Diluted earnings per share are computed by dividing net income by the weighted average shares outstanding as adjusted for the dilutive effect of stock options based on the treasury stock method. Unearned ESOP shares are removed from the weighted average number of shares in the calculations. As of September 30, 2024 and September 30, 2023, the Company had 934,564 and 36,350 shares, respectively, of unexercised stock options. As a result of the Conversion, the shares have been adjusted to reflect the 1.5309-to-1 exchange ratio. Options with an exercise price greater than the average market price of the common shares are excluded from the calculation as their effect would be anti-dilutive.

Information related to the calculation of earnings per share is presented in Note 12.

Stock-Based Compensation

The Company accounts for stock-based compensation under the fair value method of accounting. For stock options, the Company uses a Black-Scholes valuation model to measure stock-based compensation expense at the date of grant.

11

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Compensation expense related to stock-based awards is recognized over the period during which an individual is required to provide service in exchange for such award.

 

At the Company’s Annual Meeting of Stockholders held on September 5, 2024, the stockholders approved the 2024 Equity Incentive Plan. As a result, in September 2024, the Company granted 878,916 stock options and 343,562 shares of restricted stock.

Revenue Recognition

Management is required by accounting pronouncements governing the recognition of revenue to recognize revenue when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

The Company records revenue from contracts with customers in accordance with ASC 606, “Revenue from Contracts with Customers.” Under ASC 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation.

The Company’s primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of ASC 606. The Company evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income was not necessary. The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity.

Accounting Standards Updates

 

ASU 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures.” The amendments in ASU 2023-07 are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. This ASU requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), an amount for other segment items by reportable segment and a description of its composition, all annual disclosures required by FASB ASU Topic 280 in interim periods as well, and the title and position of the CODM and how the CODM uses the reported measures. Additionally, this ASU requires that at least one of the reported segment profit and loss measures should be the measure that is most consistent with the measurement principles used in an entity’s consolidated financial statements. Lastly, this ASU requires public business entities with a single reportable segment to provide all disclosures required by these amendments in this ASU and all existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively. The adoption of ASU 2023-07 is not expected to have a material impact on the Company's financial statements.

 

ASU 2023-09, “Income Taxes (Topic 740), Improvement to Income Tax Disclosures.” The amendments in ASU 2023-09 require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The adoption of ASU 2023-09 is not expected to have a material impact on the Company's financial statements.

12

BV FINANCIAL, INC. AND SUBSIDIARIES

 

In November 2024, the FASB issued 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The purpose of this amendment is to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales and research and development). The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact these changes may have on our consolidated financial statements.

 

Note 2 - Securities

Securities available for sale at September 30, 2024 and December 31, 2023 consisted of the following:

 

 

 

September 30, 2024

 

(dollars in thousands)

 

Amortized cost

 

 

Gross unrealized gains

 

 

Gross unrealized losses

 

 

Fair value

 

 

 

 

 

Available for sale

 

 

 

 

 

 

 

 

 

 

 

 

Agencies

 

$

544

 

 

$

—

 

 

$

—

 

 

$

544

 

Corporate securities

 

 

1,726

 

 

 

—

 

 

 

172

 

 

 

1,554

 

Mortgage-backed securities

 

 

26,624

 

 

 

15

 

 

 

1,843

 

 

 

24,796

 

Treasuries

 

 

12,228

 

 

 

40

 

 

 

—

 

 

 

12,268

 

Total

 

$

41,122

 

 

$

55

 

 

$

2,015

 

 

$

39,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

(dollars in thousands)

 

Amortized cost

 

 

Gross unrealized gains

 

 

Gross unrealized losses

 

 

Fair value

 

 

 

 

Available for sale

 

 

 

 

 

 

 

 

 

 

 

 

Agencies

 

$

4,728

 

 

$

—

 

 

$

5

 

 

$

4,723

 

Corporate securities

 

 

1,722

 

 

 

—

 

 

 

304

 

 

 

1,418

 

Mortgage-backed securities

 

 

31,032

 

 

 

5

 

 

 

2,397

 

 

 

28,640

 

Total

 

$

37,482

 

 

$

5

 

 

$

2,706

 

 

$

34,781

 

 

 

13

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Securities held to maturity at September 30, 2024 and December 31, 2023 consisted of the following:

 

 

 

September 30, 2024

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

(dollars in thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

 

 

 

Held to maturity

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities (1)

 

 

3,196

 

 

 

—

 

 

 

440

 

 

 

2,756

 

Mortgage-backed securities

 

 

2,833

 

 

 

3

 

 

 

382

 

 

 

2,454

 

Total

 

$

6,029

 

 

$

3

 

 

$

822

 

 

$

5,210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

(dollars in thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

 

 

 

Held to maturity

 

 

 

 

 

 

 

 

 

 

 

 

Agencies

 

$

4,003

 

 

$

—

 

 

$

22

 

 

$

3,981

 

Corporate securities (1)

 

 

3,194

 

 

 

—

 

 

 

570

 

 

 

2,624

 

Mortgage-backed securities

 

 

3,012

 

 

 

3

 

 

 

414

 

 

 

2,601

 

Total

 

$

10,209

 

 

$

3

 

 

$

1,006

 

 

$

9,206

 

 

(1) Amount is net of CECL credit reserve of $4,000 at September 30, 2024 and $6,000 at December 31, 2023.

The Company pledged securities with an amortized cost of $29.9 million and a fair value of $27.9 million at September 30, 2024 to secure deposits from municipalities. At December 31, 2023, the Company pledged securities with an amortized cost of $41.4 million and a fair value of $38.6 million to secure deposits from municipalities. The amortized cost and fair value of securities as of September 30, 2024 and December 31, 2023, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the securities may be called or prepaid with or without prepayment penalties.

 

 

 

September 30, 2024

 

 

 

Available for sale

 

 

Held to maturity

 

 

 

Amortized

 

 

Fair

 

 

Amortized

 

 

Fair

 

(dollars in thousands)

 

cost

 

 

value

 

 

cost

 

 

value

 

 

 

 

 

Maturing

 

 

 

 

 

 

 

 

 

 

 

 

Due under one year

 

$

27,539

 

 

$

27,461

 

 

$

171

 

 

$

170

 

Due after one year through five years

 

 

202

 

 

 

197

 

 

 

3,217

 

 

 

2,777

 

Due after five years through ten years

 

 

1,841

 

 

 

1,645

 

 

 

494

 

 

 

471

 

Due after ten years

 

 

11,540

 

 

 

9,859

 

 

 

2,147

 

 

 

1,792

 

Total

 

$

41,122

 

 

$

39,162

 

 

$

6,029

 

 

$

5,210

 

 

All mortgage-backed securities are guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae.

14

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Investment securities with unrealized losses for continuous periods of less than 12 months and 12 months or longer are as follows:

 

 

 

Less than 12 months

 

 

Over 12 months

 

 

Total

 

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

September 30, 2024

 

losses

 

 

value

 

 

losses

 

 

value

 

 

losses

 

 

value

 

(dollars in thousands)

 

 

 

Available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

—

 

 

$

—

 

 

$

172

 

 

$

1,554

 

 

 

172

 

 

 

1,554

 

Mortgage-backed securities

 

 

—

 

 

 

—

 

 

 

1,843

 

 

 

22,099

 

 

 

1,843

 

 

 

22,099

 

Total

 

$

—

 

 

$

—

 

 

$

2,015

 

 

$

23,653

 

 

$

2,015

 

 

$

23,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities (1)

 

$

—

 

 

$

—

 

 

$

440

 

 

$

2,756

 

 

 

440

 

 

 

2,756

 

Mortgage-backed securities

 

 

—

 

 

 

7

 

 

 

382

 

 

 

2,296

 

 

 

382

 

 

 

2,303

 

Total

 

$

—

 

 

$

7

 

 

$

822

 

 

$

5,052

 

 

$

822

 

 

$

5,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than 12 months

 

 

Over 12 months

 

 

Total

 

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

December 31, 2023

 

losses

 

 

value

 

 

losses

 

 

value

 

 

losses

 

 

value

 

(dollars in thousands)

 

 

 

Available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency securities

 

$

5

 

 

$

4,723

 

 

$

—

 

 

$

—

 

 

$

5

 

 

$

4,723

 

Corporate securities

 

 

83

 

 

 

667

 

 

 

221

 

 

 

751

 

 

 

304

 

 

 

1,418

 

Mortgage-backed securities

 

 

1

 

 

 

478

 

 

 

2,396

 

 

 

26,152

 

 

 

2,397

 

 

 

26,630

 

Total

 

$

89

 

 

$

5,868

 

 

$

2,617

 

 

$

26,903

 

 

$

2,706

 

 

$

32,771

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency securities

 

$

—

 

 

$

—

 

 

$

22

 

 

$

3,981

 

 

$

22

 

 

$

3,981

 

Corporate securities (1)

 

 

—

 

 

 

—

 

 

 

570

 

 

 

2,624

 

 

 

570

 

 

 

2,624

 

Mortgage-backed securities

 

 

—

 

 

 

14

 

 

 

414

 

 

 

2,482

 

 

 

414

 

 

 

2,496

 

Total

 

$

—

 

 

$

14

 

 

$

1,006

 

 

$

9,087

 

 

$

1,006

 

 

$

9,101

 

 

(1) Fair value amount is net of CECL credit reserve of $4,000 at September 30, 2024 and $6,000 at December 31, 2023.

 

As of September 30, 2024 and December 31, 2023, the Company determined that for its available-for-sale debt securities in an unrealized loss position, it did not intend to sell nor was it more likely than not that it would be required to sell any security and that the decline in fair value was not due to credit factors, but due to changes in interest rates and other factors. Accordingly, at September 30, 2024 and December 31, 2023, the Company did not record an allowance for credit losses for its available-for-sale debt securities.

15

BV FINANCIAL, INC. AND SUBSIDIARIES

 

We monitor the credit quality of HTM debt securities through both internal analysis performed on a quarterly basis and credit ratings when available. The following table reflects the credit ratings for the HTM debt securities at September 30, 2024.

 

(dollars in thousands)

 

AAA

 

 

A-

 

 

BBB/BBB+

 

 

BBB-

 

 

Not Rated

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

—

 

 

$

500

 

 

$

1,246

 

 

$

700

 

 

$

750

 

 

$

3,196

 

Mortgage-backed securities

 

 

2,833

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,833

 

 

$

2,833

 

 

$

500

 

 

$

1,246

 

 

$

700

 

 

$

750

 

 

$

6,029

 

 

 

The following table provides a breakdown of our HTM debt securities by year of origination at September 30, 2024.

 

(dollars in thousands)

 

Total

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

Corporate securities

 

$

3,196

 

 

$

—

 

 

$

—

 

 

$

750

 

 

$

2,446

 

 

$

—

 

 

$

—

 

Mortgage-backed securities

 

 

2,833

 

 

 

—

 

 

 

—

 

 

 

1,811

 

 

 

119

 

 

 

—

 

 

 

903

 

 

$

6,029

 

 

$

—

 

 

$

—

 

 

$

2,561

 

 

$

2,565

 

 

$

—

 

 

$

903

 

 

 

The following table is a roll forward of our allowance for credit losses on HTM debt securities at September 30, 2024 and 2023.

 

(dollars in thousands)

 

Three Months Ended September 30, 2024

 

 

Nine Months Ended September 30, 2024

 

 

Three Months Ended September 30, 2023

 

 

Nine Months Ended September 30, 2023

 

Beginning Balance

 

$

5

 

 

$

6

 

 

$

7

 

 

$

—

 

Impact of adopting ASC 326

 

 

—

 

 

 

—

 

 

 

—

 

 

 

10

 

(Recovery) for credit losses

 

 

(1

)

 

 

(2

)

 

 

—

 

 

 

(3

)

Ending Balance

 

$

4

 

 

$

4

 

 

$

7

 

 

$

7

 

 

16

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Note 3 – Loans Receivable

Portfolio loans, net of deferred costs and fees, are summarized by type as follows at September 30, 2024 and December 31, 2023:

 

 

Period Ended

 

 

September 30, 2024

 

 

December 31, 2023

 

(dollars in thousands)

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - owner occupied

 

$

122,998

 

 

 

17.74

%

 

$

130,026

 

 

 

18.45

%

One to four family - non owner occupied

 

 

99,574

 

 

 

14.36

%

 

 

108,090

 

 

 

15.34

%

Commercial owner occupied

 

 

86,737

 

 

 

12.51

%

 

 

102,512

 

 

 

14.54

%

Commercial investor

 

 

311,951

 

 

 

45.01

%

 

 

287,194

 

 

 

40.76

%

Construction and land

 

 

20,516

 

 

 

2.96

%

 

 

21,865

 

 

 

3.10

%

Farm loans

 

 

11,666

 

 

 

1.68

%

 

 

14,877

 

 

 

2.11

%

Total real estate loans

 

 

653,442

 

 

 

94.26

%

 

 

664,564

 

 

 

94.30

%

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

17,599

 

 

 

2.54

%

 

 

18,279

 

 

 

2.59

%

Guaranteed by U.S. Government

 

 

2,964

 

 

 

0.43

%

 

 

3,715

 

 

 

0.53

%

Commercial

 

 

19,226

 

 

 

2.77

%

 

 

18,244

 

 

 

2.58

%

Total consumer and commercial

 

 

39,789

 

 

 

5.74

%

 

 

40,238

 

 

 

5.70

%

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

 

693,231

 

 

 

100.0

%

 

 

704,802

 

 

 

100.0

%

Allowance for credit losses

 

 

(8,001

)

 

 

 

 

 

(8,554

)

 

 

 

Total loans, net of deferred costs and fees

 

$

685,230

 

 

 

 

 

$

696,248

 

 

 

 

 

Net deferred loan origination fees at September 30, 2024 and December 31, 2023 totaled $2.1 million and $1.8 million, respectively.

In the normal course of banking business, risks related to specific loan categories are as follows:

Real Estate Loans – Real estate loans are typically made to consumers and businesses and are secured by real estate. Credit risk arises from the borrower’s continuing financial stability, which can be adversely impacted by the economy as well as borrower-specific occurrences. Also impacting credit risk would be a shortfall in the value of the real estate in relation to the outstanding loan balance in the event of a default or subsequent liquidation of the collateral.

 

Residential lending repayment is generally dependent on economic and market conditions in the Company's lending area. Commercial real estate, commercial and construction loan repayments are generally dependent on the operations of the related properties or the financial condition of its borrower or guarantor. Accordingly, repayment of such loans can be more susceptible to adverse conditions in the real estate market and the regional economy.

Marine Loans – Marine loans are typically made to consumers and are secured by boats. Credit risk is similar to real estate loans above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan. Marine loans may entail greater risk than residential mortgage loans, as they are collateralized by assets that depreciate rapidly. Repossessed collateral for a defaulted loan may not provide an adequate source of repayment for the outstanding.

Other Consumer – Other consumer loans include installment loans and personal lines of credit which may be secured or unsecured. Credit risk is similar to real estate loans above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan, if any. Consumer loans may entail greater risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower.

17

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Guaranteed by the U.S. Government – Loans guaranteed by the U.S. Government present similar risks as reflected in the other categories mentioned herein. However, the primary differentiating factor is that an explicit guarantee is provided by the government, therefore substantially mitigating any risk of loss in the event of credit deterioration.

Commercial – Commercial loans are secured or unsecured loans used for business purposes. Loans are typically secured by accounts receivable, inventory, equipment and/or other assets of the business. Credit risk arises from the successful operation of the business, which may be affected by competition, rising interest rates, regulatory changes and adverse conditions in the local and regional economy.

Non-accrual loans as of September 30, 2024 and December 31, 2023 were as follows:

 

 

September 30, 2024

 

 

December 31, 2023

 

 

No

 

 

With an

 

 

 

 

 

No

 

 

With an

 

 

 

 

(dollars in thousands)

 

Allowance

 

 

Allowance

 

 

Total

 

 

Allowance

 

 

Allowance

 

 

Total

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - owner occupied

 

$

1,219

 

 

$

—

 

 

$

1,219

 

 

$

1,160

 

 

$

—

 

 

$

1,160

 

One to four family - non owner occupied

 

 

294

 

 

 

—

 

 

 

294

 

 

 

273

 

 

 

—

 

 

 

273

 

Commercial owner occupied

 

 

691

 

 

 

—

 

 

 

691

 

 

 

739

 

 

 

—

 

 

 

739

 

Commercial investor

 

 

1,151

 

 

 

—

 

 

 

1,151

 

 

 

8,057

 

 

 

—

 

 

 

8,057

 

Construction and land

 

 

224

 

 

 

—

 

 

 

224

 

 

 

321

 

 

 

—

 

 

 

321

 

Total real estate loans

 

 

3,579

 

 

 

—

 

 

 

3,579

 

 

 

10,550

 

 

 

—

 

 

 

10,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

11

 

 

 

—

 

 

 

11

 

 

 

4

 

 

 

—

 

 

 

4

 

Commercial

 

 

—

 

 

 

380

 

 

 

380

 

 

 

—

 

 

 

—

 

 

 

—

 

Total consumer and commercial loans

 

 

11

 

 

 

380

 

 

 

391

 

 

 

4

 

 

 

—

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total nonaccrual loans

 

$

3,590

 

 

$

380

 

 

$

3,970

 

 

$

10,554

 

 

$

—

 

 

$

10,554

 

 

There were eighteen loans, on non-accrual status, that had payment defaults in the past 12 months.

 

Loans can be current but classified as non-accrual due to customer operating results or payment history. All interest accrued but not collected from loans that are placed on non-accrual or charged-off is reversed against interest income. In accordance with the Company’s policy, such interest income is recognized on a cash basis or cost-recovery method, until qualifying for return to accrual status.

The Company considers a loan to be past due or delinquent when the terms of the contractual obligation are not met by the borrower. An analysis of days past due loans as of September 30, 2024 follows:

 

 

 

September 30, 2024

 

 

 

30 - 59

 

 

60 - 89

 

 

90+

 

 

 

 

 

 

 

 

 

 

 

Days

 

 

Days

 

 

Days

 

 

Total

 

 

Current

 

 

Total

 

(dollars in thousands)

 

Past Due

 

 

Past Due

 

 

Past Due

 

 

Past Due

 

 

Loans

 

 

Loans

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - owner occupied

 

$

387

 

 

$

1,123

 

 

$

548

 

 

$

2,058

 

 

$

120,940

 

 

$

122,998

 

One to four family - non owner occupied

 

 

61

 

 

 

—

 

 

 

245

 

 

 

306

 

 

 

99,268

 

 

 

99,574

 

Commercial owner occupied

 

 

270

 

 

 

676

 

 

 

172

 

 

 

1,118

 

 

 

85,619

 

 

 

86,737

 

Commercial investor

 

 

—

 

 

 

—

 

 

 

359

 

 

 

359

 

 

 

311,592

 

 

 

311,951

 

Construction and land

 

 

—

 

 

 

144

 

 

 

—

 

 

 

144

 

 

 

20,372

 

 

 

20,516

 

Farm loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11,666

 

 

 

11,666

 

Total real estate loans

 

 

718

 

 

 

1,943

 

 

 

1,324

 

 

 

3,985

 

 

 

649,457

 

 

 

653,442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

4

 

 

 

10

 

 

 

—

 

 

 

14

 

 

 

17,585

 

 

 

17,599

 

Guaranteed by U.S. Government

 

 

52

 

 

 

—

 

 

 

—

 

 

 

52

 

 

 

2,912

 

 

 

2,964

 

Commercial

 

 

—

 

 

 

—

 

 

 

380

 

 

 

380

 

 

 

18,846

 

 

 

19,226

 

Total consumer and commercial loans

 

 

56

 

 

 

10

 

 

 

380

 

 

 

446

 

 

 

39,343

 

 

 

39,789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

774

 

 

$

1,953

 

 

$

1,704

 

 

$

4,431

 

 

$

688,800

 

 

$

693,231

 

 

 

 

 

 

 

 

18

BV FINANCIAL, INC. AND SUBSIDIARIES

 

 

 

An analysis of days past due loans as of December 31, 2023 follows:

 

 

December 31, 2023

 

 

30 - 59

 

 

60 - 89

 

 

90+

 

 

 

 

 

 

 

 

 

 

 

Days

 

 

Days

 

 

Days

 

 

Total

 

 

Current

 

 

Total

 

(dollars in thousands)

 

Past Due

 

 

Past Due

 

 

Past Due

 

 

Past Due

 

 

Loans

 

 

Loans

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - owner occupied

 

$

2,043

 

 

$

645

 

 

$

619

 

 

$

3,307

 

 

$

126,719

 

 

$

130,026

 

One to four family - non owner occupied

 

 

322

 

 

 

—

 

 

 

219

 

 

 

541

 

 

 

107,549

 

 

 

108,090

 

Commercial owner occupied

 

 

901

 

 

 

—

 

 

 

468

 

 

 

1,369

 

 

 

101,143

 

 

 

102,512

 

Commercial investor

 

 

371

 

 

 

—

 

 

 

6,907

 

 

 

7,278

 

 

 

279,916

 

 

 

287,194

 

Construction and land

 

 

826

 

 

 

—

 

 

 

258

 

 

 

1,084

 

 

 

20,781

 

 

 

21,865

 

Farm loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

14,877

 

 

 

14,877

 

Total real estate loans

 

 

4,463

 

 

 

645

 

 

 

8,471

 

 

 

13,579

 

 

 

650,985

 

 

 

664,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

39

 

 

 

—

 

 

 

—

 

 

 

39

 

 

 

18,240

 

 

 

18,279

 

Guaranteed by U.S. Government

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,715

 

 

 

3,715

 

Commercial

 

 

—

 

 

 

401

 

 

 

—

 

 

 

401

 

 

 

17,843

 

 

 

18,244

 

Total consumer and commercial loans

 

 

39

 

 

 

401

 

 

 

—

 

 

 

440

 

 

 

39,798

 

 

 

40,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

4,502

 

 

$

1,046

 

 

$

8,471

 

 

$

14,019

 

 

$

690,783

 

 

$

704,802

 

 

Allowance for Credit Losses ("ACL")

The following tables detail activity in the ACL at and for the three and nine months ended September 30, 2024 and 2023. An allocation of the allowance to one category of loans does not prevent the Company from using that allowance to absorb losses in a different category.

 

Three Months Ended

 

September 30, 2024

 

(dollars in thousands)

 

Beginning Balance

 

 

Charge-offs

 

 

Recoveries

 

 

Provisions (Recovery)

 

 

Ending Balance

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - owner occupied

 

$

1,627

 

 

$

—

 

 

$

3

 

 

$

(401

)

 

$

1,229

 

One to four family - non owner occupied

 

 

1,002

 

 

 

—

 

 

 

128

 

 

 

(414

)

 

 

716

 

Commercial owner occupied

 

 

514

 

 

 

—

 

 

 

—

 

 

 

(18

)

 

 

496

 

Commercial investor

 

 

3,709

 

 

 

—

 

 

 

—

 

 

 

605

 

 

 

4,314

 

Construction and land

 

 

745

 

 

 

—

 

 

 

1

 

 

 

(332

)

 

 

414

 

Farm loans

 

 

257

 

 

 

—

 

 

 

—

 

 

 

(157

)

 

 

100

 

Total real estate loans

 

 

7,854

 

 

 

—

 

 

 

132

 

 

 

(717

)

 

 

7,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

434

 

 

 

—

 

 

 

—

 

 

 

(21

)

 

 

413

 

Commercial

 

 

259

 

 

 

—

 

 

 

—

 

 

 

60

 

 

 

319

 

Total consumer and commercial

 

 

693

 

 

 

—

 

 

 

—

 

 

 

39

 

 

 

732

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

8,547

 

 

$

—

 

 

$

132

 

 

$

(678

)

 

$

8,001

 

 

The following table summarized the ACL activity for the three months ended September 30, 2024.

 

(dollars in thousands)

 

 

 

Provision for (recovery of) credit losses - loans

 

$

(678

)

Provision for (recovery of) allowance for securities - HTM

 

 

—

 

Provision for (recovery of ) allowance for credit losses - unfunded commitments

 

 

(36

)

Provision for (recovery of) credit losses per the consolidated statements of income

 

$

(714

)

 

 

19

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Three Months Ended

 

September 30, 2023

 

(dollars in thousands)

 

Beginning Balance

 

 

Charge-offs

 

 

Recoveries

 

 

Provisions (recovery)

 

 

Ending Balance

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - owner occupied

 

$

1,342

 

 

$

(2

)

 

$

34

 

 

$

147

 

 

$

1,521

 

One to four family - non owner occupied

 

 

1,212

 

 

 

—

 

 

 

214

 

 

 

(292

)

 

 

1,134

 

Commercial owner occupied

 

 

459

 

 

 

—

 

 

 

—

 

 

 

(26

)

 

 

433

 

Commercial investor

 

 

3,784

 

 

 

—

 

 

 

—

 

 

 

41

 

 

 

3,825

 

Construction and land

 

 

480

 

 

 

—

 

 

 

1

 

 

 

(105

)

 

 

376

 

Farm loans

 

 

145

 

 

 

—

 

 

 

—

 

 

 

11

 

 

 

156

 

Total real estate loans

 

 

7,422

 

 

 

(2

)

 

 

249

 

 

 

(224

)

 

 

7,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

451

 

 

 

(4

)

 

 

12

 

 

 

(5

)

 

 

454

 

Commercial

 

 

290

 

 

 

—

 

 

 

—

 

 

 

(36

)

 

 

254

 

Total consumer and commercial

 

 

741

 

 

 

(4

)

 

 

12

 

 

 

(41

)

 

 

708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

8,163

 

 

$

(6

)

 

$

261

 

 

$

(265

)

 

$

8,153

 

 

The following table summarized the ACL activity for the three months ended September 30, 2023.

 

(dollars in thousands)

 

 

 

Provision for (recovery of) credit losses - loans

 

$

(265

)

Reduction in allowance for securities - HTM

 

 

(1

)

Reduction in allowance for credit losses - unfunded commitments

 

 

(67

)

Provision for credit losses per the consolidated statement of income

 

$

(333

)

 

Nine Months Ended

 

September 30, 2024

 

(dollars in thousands)

 

Beginning Balance

 

 

Charge-offs

 

 

Recoveries

 

 

Provisions (recovery)

 

 

Ending Balance

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - owner occupied

 

$

1,728

 

 

$

—

 

 

$

112

 

 

$

(611

)

 

$

1,229

 

One to four family - non owner occupied

 

 

1,030

 

 

 

(1

)

 

 

169

 

 

 

(482

)

 

 

716

 

Commercial owner occupied

 

 

563

 

 

 

—

 

 

 

3

 

 

 

(70

)

 

 

496

 

Commercial investor

 

 

3,725

 

 

 

—

 

 

 

—

 

 

 

589

 

 

 

4,314

 

Construction and land

 

 

772

 

 

 

—

 

 

 

3

 

 

 

(361

)

 

 

414

 

Farm loans

 

 

179

 

 

 

—

 

 

 

—

 

 

 

(79

)

 

 

100

 

Total real estate loans

 

 

7,997

 

 

 

(1

)

 

 

287

 

 

 

(1,014

)

 

 

7,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

403

 

 

 

(3

)

 

 

1

 

 

 

12

 

 

 

413

 

Commercial

 

 

154

 

 

 

—

 

 

 

—

 

 

 

165

 

 

 

319

 

Total consumer and commercial

 

 

557

 

 

 

(3

)

 

 

1

 

 

 

177

 

 

 

732

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

8,554

 

 

$

(4

)

 

$

288

 

 

$

(837

)

 

$

8,001

 

 

The following table summarized the ACL activity for the nine months ended September 30, 2024.

 

(dollars in thousands)

 

 

 

Provision for (recovery of) credit losses - loans

 

$

(837

)

Provision for (recovery of) allowance for securities - HTM

 

 

(2

)

Provision for (recovery of ) allowance for credit losses - unfunded commitments

 

 

33

 

Provision for (recovery of) credit losses per the consolidated statements of income

 

$

(806

)

 

 

20

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Nine Months Ended

 

September 30, 2023

 

(dollars in thousands)

 

Beginning Balance

 

 

Impact of ASC 326 Adoption

 

 

Charge-offs

 

 

Recoveries

 

 

Provisions (recovery)

 

 

Ending Balance

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - owner occupied

 

$

344

 

 

$

1,117

 

 

$

(2

)

 

$

60

 

 

$

2

 

 

$

1,521

 

One to four family - non owner occupied

 

 

562

 

 

 

356

 

 

 

—

 

 

 

247

 

 

 

(31

)

 

 

1,134

 

Commercial owner occupied

 

 

366

 

 

 

78

 

 

 

—

 

 

 

—

 

 

 

(11

)

 

 

433

 

Commercial investor

 

 

2,272

 

 

 

1,506

 

 

 

—

 

 

 

—

 

 

 

47

 

 

 

3,825

 

Construction and land

 

 

93

 

 

 

496

 

 

 

—

 

 

 

153

 

 

 

(366

)

 

 

376

 

Farm loans

 

 

17

 

 

 

135

 

 

 

—

 

 

 

—

 

 

 

4

 

 

 

156

 

Total real estate loans

 

 

3,654

 

 

 

3,688

 

 

 

(2

)

 

 

460

 

 

 

(355

)

 

 

7,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

68

 

 

 

336

 

 

 

(64

)

 

 

25

 

 

 

89

 

 

 

454

 

Commercial

 

 

91

 

 

 

208

 

 

 

—

 

 

 

2

 

 

 

(47

)

 

 

254

 

Total consumer and commercial

 

 

159

 

 

 

544

 

 

 

(64

)

 

 

27

 

 

 

42

 

 

 

708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

$

3,813

 

 

$

4,232

 

 

$

(66

)

 

$

487

 

 

$

(313

)

 

$

8,153

 

 

The following table summarized the ACL activity for the nine months ended September 30, 2023.

 

(dollars in thousands)

 

 

 

Provision for (recovery of) credit losses - loans

 

$

(313

)

Reduction in allowance for securities - HTM

 

 

(3

)

Reduction in allowance for credit losses - unfunded commitments

 

 

(164

)

Provision for credit losses per the consolidated statement of income

 

$

(480

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Term Loans by Origination Year

 

(dollars in thousands)

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

 

Balance at September 30, 2024

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Revolving

 

 

Total

 

One to four family - owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

4,231

 

 

$

3,580

 

 

$

7,766

 

 

$

12,985

 

 

$

9,643

 

 

$

72,243

 

 

$

11,810

 

 

$

122,258

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

340

 

 

 

—

 

 

 

368

 

 

 

32

 

 

 

740

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total One to four family - owner occupied

 

$

4,231

 

 

$

3,580

 

 

$

7,766

 

 

$

13,325

 

 

$

9,643

 

 

$

72,611

 

 

$

11,842

 

 

$

122,998

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - non owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

3,470

 

 

$

13,274

 

 

$

28,976

 

 

$

16,883

 

 

$

9,702

 

 

$

26,537

 

 

$

—

 

 

$

98,842

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

245

 

 

 

487

 

 

 

—

 

 

 

732

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total One to four family - non owner occupied

 

$

3,470

 

 

$

13,274

 

 

$

28,976

 

 

$

16,883

 

 

$

9,947

 

 

$

27,024

 

 

$

—

 

 

$

99,574

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1

 

 

$

—

 

 

$

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

4,129

 

 

$

20,508

 

 

$

10,807

 

 

$

9,676

 

 

$

5,391

 

 

$

33,748

 

 

$

—

 

 

$

84,259

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

920

 

 

 

1,558

 

 

 

—

 

 

 

2,478

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Commercial owner occupied

 

$

4,129

 

 

$

20,508

 

 

$

10,807

 

 

$

9,676

 

 

$

6,311

 

 

$

35,306

 

 

$

—

 

 

$

86,737

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial investor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

24,994

 

 

$

65,828

 

 

$

98,269

 

 

$

71,424

 

 

$

15,968

 

 

$

34,317

 

 

$

—

 

 

$

310,800

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,151

 

 

 

—

 

 

 

1,151

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Commercial investor

 

$

24,994

 

 

$

65,828

 

 

$

98,269

 

 

$

71,424

 

 

$

15,968

 

 

$

35,468

 

 

$

—

 

 

$

311,951

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

11,145

 

 

$

4,698

 

 

$

701

 

 

$

1,298

 

 

$

—

 

 

$

1,092

 

 

$

—

 

 

$

18,934

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,502

 

 

 

80

 

 

 

—

 

 

 

1,582

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Construction and land

 

$

11,145

 

 

$

4,698

 

 

$

701

 

 

$

1,298

 

 

$

1,502

 

 

$

1,172

 

 

$

—

 

 

$

20,516

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farm loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

327

 

 

$

—

 

 

$

4,099

 

 

$

1,796

 

 

$

256

 

 

$

5,188

 

 

$

—

 

 

$

11,666

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Farm loans

 

$

327

 

 

$

—

 

 

$

4,099

 

 

$

1,796

 

 

$

256

 

 

$

5,188

 

 

$

—

 

 

$

11,666

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

2,048

 

 

$

3,251

 

 

$

1,873

 

 

$

5,639

 

 

$

1,638

 

 

$

3,150

 

 

$

—

 

 

$

17,599

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Marine and other consumer loans

 

$

2,048

 

 

$

3,251

 

 

$

1,873

 

 

$

5,639

 

 

$

1,638

 

 

$

3,150

 

 

$

—

 

 

$

17,599

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

3

 

 

$

—

 

 

$

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guaranteed by U.S. Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

—

 

 

$

-

 

 

$

—

 

 

$

—

 

 

$

21

 

 

$

2,943

 

 

$

—

 

 

$

2,964

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Guaranteed by U.S. Government

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

21

 

 

$

2,943

 

 

$

—

 

 

$

2,964

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

4,061

 

 

$

386

 

 

$

2,813

 

 

$

7,223

 

 

$

437

 

 

$

3,249

 

 

$

—

 

 

$

18,169

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

380

 

 

 

—

 

 

 

—

 

 

 

677

 

 

 

—

 

 

 

1,057

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Commercial

 

$

4,061

 

 

$

386

 

 

$

3,193

 

 

$

7,223

 

 

$

437

 

 

$

3,926

 

 

$

—

 

 

$

19,226

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

(dollars in thousands)

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

 

Balance at September 30, 2024

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Revolving

 

 

Total

 

Total Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

54,405

 

 

$

111,525

 

 

$

155,304

 

 

$

126,924

 

 

$

43,056

 

 

$

182,467

 

 

$

11,810

 

 

$

685,491

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

380

 

 

 

340

 

 

 

2,667

 

 

 

4,321

 

 

 

32

 

 

 

7,740

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total loans

 

$

54,405

 

 

$

111,525

 

 

$

155,684

 

 

$

127,264

 

 

$

45,723

 

 

$

186,788

 

 

$

11,842

 

 

$

693,231

 

 

22

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Term Loans by Origination Year

(dollars in thousands)

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

 

Balance at December 31, 2023

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolving

 

 

Total

 

One to four family - owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

6,387

 

 

$

7,906

 

 

$

13,727

 

 

$

9,974

 

 

$

9,707

 

 

$

71,463

 

 

$

10,492

 

 

$

129,656

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

331

 

 

 

39

 

 

 

370

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total One to four family - owner occupied

 

$

6,387

 

 

$

7,906

 

 

$

13,727

 

 

$

9,974

 

 

$

9,707

 

 

$

71,794

 

 

$

10,531

 

 

$

130,026

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(2

)

 

$

—

 

 

$

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One to four family - non owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

13,810

 

 

$

30,603

 

 

$

20,582

 

 

$

10,742

 

 

$

7,611

 

 

$

22,795

 

 

$

—

 

 

$

106,143

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,947

 

 

 

—

 

 

 

1,947

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total One to four family - non owner occupied

 

$

13,810

 

 

$

30,603

 

 

$

20,582

 

 

$

10,742

 

 

$

7,611

 

 

$

24,742

 

 

$

—

 

 

$

108,090

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial owner occupied

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

20,967

 

 

$

16,071

 

 

$

16,642

 

 

$

5,998

 

 

$

5,071

 

 

$

31,536

 

 

$

—

 

 

$

96,285

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

943

 

 

 

1,502

 

 

 

3,782

 

 

 

—

 

 

 

6,227

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Commercial owner occupied

 

$

20,967

 

 

$

16,071

 

 

$

16,642

 

 

$

6,941

 

 

$

6,573

 

 

$

35,318

 

 

$

—

 

 

$

102,512

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(3

)

 

$

—

 

 

$

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial investor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

68,682

 

 

$

89,812

 

 

$

65,624

 

 

$

16,205

 

 

$

9,991

 

 

$

28,823

 

 

$

—

 

 

$

279,137

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,907

 

 

 

—

 

 

 

1,150

 

 

 

—

 

 

 

8,057

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Commercial investor

 

$

68,682

 

 

$

89,812

 

 

$

65,624

 

 

$

23,112

 

 

$

9,991

 

 

$

29,973

 

 

$

—

 

 

$

287,194

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

6,901

 

 

$

9,650

 

 

$

2,271

 

 

$

650

 

 

$

—

 

 

$

704

 

 

$

—

 

 

$

20,176

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,400

 

 

 

—

 

 

 

289

 

 

 

—

 

 

 

1,689

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Construction and land

 

$

6,901

 

 

$

9,650

 

 

$

2,271

 

 

$

2,050

 

 

$

—

 

 

$

993

 

 

$

—

 

 

$

21,865

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farm loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

—

 

 

$

4,141

 

 

$

2,281

 

 

$

261

 

 

$

2,641

 

 

$

5,553

 

 

$

—

 

 

$

14,877

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Farm loans

 

$

—

 

 

$

4,141

 

 

$

2,281

 

 

$

261

 

 

$

2,641

 

 

$

5,553

 

 

$

—

 

 

$

14,877

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine and other consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

3,542

 

 

$

2,187

 

 

$

6,417

 

 

$

1,788

 

 

$

396

 

 

$

3,945

 

 

$

—

 

 

$

18,275

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4

 

 

 

—

 

 

 

4

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Marine and other consumer loans

 

$

3,542

 

 

$

2,187

 

 

$

6,417

 

 

$

1,788

 

 

$

396

 

 

$

3,949

 

 

$

—

 

 

$

18,279

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(80

)

 

$

—

 

 

$

(80

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guaranteed by U.S. Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

—

 

 

$

-

 

 

$

—

 

 

$

26

 

 

$

417

 

 

$

3,272

 

 

$

—

 

 

$

3,715

 

Special Mention

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Guaranteed by U.S. Government

 

$

—

 

 

$

—

 

 

$

—

 

 

$

26

 

 

$

417

 

 

$

3,272

 

 

$

—

 

 

$

3,715

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

501

 

 

$

4,299

 

 

$

6,236

 

 

$

2,000

 

 

$

628

 

 

$

3,483

 

 

$

—

 

 

$

17,147

 

Special Mention

 

 

—

 

 

 

400

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

400

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

697

 

 

 

—

 

 

 

697

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total Commercial

 

$

501

 

 

$

4,699

 

 

$

6,236

 

 

$

2,000

 

 

$

628

 

 

$

4,180

 

 

$

—

 

 

$

18,244

 

Current Period Gross Write-off

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

(dollars in thousands)

 

Term Loans Amortized Cost Basis by Origination Year

 

 

 

 

 

 

 

Balance at December 31, 2023

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolving

 

 

Total

 

Total Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

120,790

 

 

$

164,669

 

 

$

133,780

 

 

$

47,644

 

 

$

36,462

 

 

$

171,574

 

 

$

10,492

 

 

$

685,411

 

Special Mention

 

 

—

 

 

 

400

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

400

 

Substandard

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9,250

 

 

 

1,502

 

 

 

8,200

 

 

 

39

 

 

 

18,991

 

Doubtful

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total loans

 

$

120,790

 

 

$

165,069

 

 

$

133,780

 

 

$

56,894

 

 

$

37,964

 

 

$

179,774

 

 

$

10,531

 

 

$

704,802

 

 

 

23

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss allowance is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.

 

When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses. General allowances represent loss allowances which have been established to cover probable accrued losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, such that additional general or specific loss allowances may be required.

 

In connection with the filing of our periodic reports with the FDIC and in accordance with our classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations.

 

Through our loan evaluation process, we have identified certain loans for which the primary source of loan repayment may no longer be a viable option. The Company is dependent on the liquidation of the collateral to provide funds for repayment of the loan. The following table shows the loans determined by management to be collateral dependent at September 30, 2024.

 

 

 

Loan Balance

 

 

Estimated Collateral Values

 

 

Loan Balance

 

 

Estimated Collateral Values

 

(dollars in thousands)

 

Real Estate

 

 

Real Estate

 

 

Business\Other Assets

 

 

Business\Other Assets

 

One to four family - owner occupied

 

$

1,219

 

 

$

5,356

 

 

$

—

 

 

$

—

 

One to four family - non-owner occupied

 

 

294

 

 

 

838

 

 

 

—

 

 

 

—

 

Commercial owner occupied real estate

 

 

691

 

 

 

1,565

 

 

 

—

 

 

 

—

 

Commercial investor real estate

 

 

1,151

 

 

 

2,125

 

 

 

—

 

 

 

—

 

Construction and land

 

 

224

 

 

 

987

 

 

 

—

 

 

 

—

 

Commercial

 

 

380

 

 

 

976

 

 

 

—

 

 

 

124

 

Marine and other consumer

 

 

11

 

 

 

—

 

 

 

—

 

 

 

18

 

Total

 

$

3,970

 

 

$

11,847

 

 

$

—

 

 

$

142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Borrowers experiencing financial difficulty ("BEFD") modifications included in the collateral dependent schedule above, as of September 30, 2024 were as follows:

 

(dollars in thousands)

 

Number of Loans

 

Amortized Cost

 

One to four family - owner occupied

 

7

 

$

856

 

One to four family - non owner occupied

 

1

 

 

128

 

Commercial owner occupied

 

1

 

 

418

 

Commercial investor real estate

 

1

 

 

792

 

 

 

 

 

 

Total BEFD modification loans

 

10

 

$

2,194

 

 

 

 

 

 

Modifications on non-accrual

 

3

 

$

1,410

 

 

 

 

 

 

 

There was one BEFD modification past due as of September 30, 2024.

 

The following table details the amortized cost basis for loans made to borrowers experiencing financial difficulty as of the period ended September 30, 2024.

 

 

 

Nine Months Ended September 30, 2024

 

(dollars in thousands)

 

Term Extensions

 

 

Payment Deferral and Term Extensions

 

 

Total

 

 

Percentage of Total Loans

 

One to four family - owner occupied

 

$

856

 

 

$

—

 

 

$

856

 

 

 

0.12

%

One to four family - non-owner occupied

 

 

128

 

 

 

—

 

 

 

128

 

 

 

0.02

%

Commercial owner occupied real estate

 

 

418

 

 

 

—

 

 

 

418

 

 

 

0.06

%

Commercial investor real estate

 

 

792

 

 

 

—

 

 

 

792

 

 

 

0.11

%

Total

 

$

2,194

 

 

$

—

 

 

$

2,194

 

 

 

0.32

%

 

Note 4 - Goodwill And Other Intangible Assets

Goodwill and other intangible assets are presented in the tables below.

 

(dollars in thousands)

 

As of September 30, 2024

 

 

As of December 31, 2023

 

 

 

 

 

 

 

 

Goodwill

 

$

14,420

 

 

$

14,420

 

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Carrying Amount

 

 

Accumulated Amortization

 

 

Net

 

 

Carrying Amount

 

 

Accumulated Amortization

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core deposit intangible

 

$

1,868

 

 

$

992

 

 

$

876

 

 

$

1,868

 

 

$

856

 

 

$

1,012

 

 

As of September 30, 2024 future estimated annual amortization expense is as follows:

 

Year ending

 

 

 

(dollars in thousands)

 

 

 

2024

 

$

45

 

2025

 

 

180

 

2026

 

 

180

 

2027

 

 

180

 

2028

 

 

180

 

Thereafter

 

 

111

 

Total Estimated Amortization Expense

 

$

876

 

 

Management performed its annual analysis of goodwill and core deposit intangibles during the fourth quarter of 2023 and concluded that there was no impairment at December 31, 2023. At September 30, 2024, management's analysis concluded that there were no changes in the Company's financial statements or operations subsequent to the annual analysis that would indicate that it was more likely than not that goodwill or core deposit intangible was impaired.

25

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Note 5 – Foreclosed Real Estate

Foreclosed real estate assets are presented net of the valuation allowance. The Company considers foreclosed real estate as classified assets for regulatory and financial reporting. Foreclosed real estate carrying amounts reflect management’s estimate of the realizable value of these properties incorporating current appraised values, local real estate market conditions and related selling costs. The Company had foreclosed real estate of $160,000 and $170,000 at September 30, 2024 and December 31, 2023, respectively.

During the nine months ended September 30, 2024 and September 30, 2023, the Company incurred foreclosed real estate expenses of $13,000 and $173,000, respectively.

The Company had $114,000 and $174,000 in loans secured by residential real estate for which formal foreclosure proceedings were in process as of September 30, 2024 and December 31, 2023, respectively.

The table below shows the foreclosed real estate roll forward balance as of September 30, 2024.

 

(dollars in thousands)

 

September 30, 2024

 

 

December 31, 2023

 

Beginning of period balance

 

$

170

 

 

$

1,987

 

Improvements and additions

 

 

—

 

 

 

57

 

Principal payments

 

 

(10

)

 

 

—

 

Proceeds from sale

 

 

—

 

 

 

(2,583

)

Gain on sale

 

 

—

 

 

 

709

 

End of period balance

 

$

160

 

 

$

170

 

 

Note 6 - Deposits

Deposits consisted of the following:

 

 

September 30, 2024

 

December 31, 2023

(dollars in thousands)

 

Balance

 

 

Percentage

 

Balance

 

 

Percentage

Noninterest-bearing checking accounts

 

$

139,302

 

 

21.96%

 

$

142,030

 

 

22.40%

Interest-bearing checking accounts

 

 

88,652

 

 

13.98%

 

 

83,656

 

 

13.19%

Money market accounts

 

 

113,071

 

 

17.83%

 

 

87,310

 

 

13.77%

Savings accounts

 

 

130,009

 

 

20.50%

 

 

147,608

 

 

23.28%

Certificates of deposit

 

 

163,279

 

 

25.73%

 

 

173,516

 

 

27.36%

Total deposits

 

$

634,313

 

 

100.00%

 

$

634,120

 

 

100.00%

 

At September 30, 2024, the Bank had two account relationships from local government entities that comprised 3.0% and 1.7% of total deposits, respectively. At September 30, 2024, the Company had $10.0 million of brokered certificates of deposits. The Company had no brokered deposits at December 31, 2023.

 

At September 30, 2024 and December 31, 2023, the Bank had $32.5 million and $32.1 million in certificates of deposits of $250,000 or more, respectively. Deposits in excess of $250,000 are not be insured by the FDIC.

 

 

 

 

 

 

 

 

 

 

26

BV FINANCIAL, INC. AND SUBSIDIARIES

 

At September 30, 2024 scheduled maturities of certificates of deposits are as follows:

 

(dollars in thousands)

 

September 30, 2024

 

Within one year

 

$

129,071

 

Year 2

 

 

18,373

 

Year 3

 

 

4,759

 

Year 4

 

 

8,098

 

Year 5

 

 

2,978

 

Thereafter

 

 

—

 

Total certificates of deposit

 

$

163,279

 

 

 

Note 7 - Borrowings And Subordinated Debt

A summary of the Company’s borrowings and subordinated debt at September 30, 2024 and December 31, 2023 are indicated as follows:

 

 

 

 

 

September 30, 2024

 

 

December 31, 2023

(dollars in thousands)

 

Maturity

 

Balance

 

 

Rate

 

 

Balance

 

 

Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

—

BV Financial Inc. Series 2020 Notes

 

2030

 

$

35,000

 

 

4.88%

 

 

$

35,000

 

 

4.88%

Easton Capital Trust I

 

2034

 

 

—

 

 

 

—

 

 

 

3,093

 

 

SOFR + 2.85%

Total Borrowings, gross

 

 

 

 

35,000

 

 

 

 

 

 

38,093

 

 

 

Less: Debt issuance costs

 

 

 

 

(155

)

 

 

 

 

 

(272

)

 

 

Less: net fair value adjustment

 

 

 

 

—

 

 

 

 

 

 

(570

)

 

 

Total Borrowings, net

 

 

 

$

34,845

 

 

 

 

 

$

37,251

 

 

 

 

 

Note 8 – Lease Commitments And Contingencies

Operating Leases

The Company determines if an arrangement is a lease at inception. All of the Company’s leases are currently classified
as operating leases and are included in other assets and other liabilities on the Company’s Consolidated Balance
Sheets. Periodic operating lease costs are recorded in occupancy expenses of premises on the Company's Consolidated
Statements of Income.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease
liabilities represent the Company’s obligation to make lease payments arising from the lease arrangements. Operating
lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of the
expected future lease payments over the remaining lease term. In determining the present value of future lease
payments, the Company uses its incremental borrowing rate based on the information available at the lease
commencement date. The operating ROU assets are adjusted for any lease payments made at or before the lease
commencement date, initial direct costs, any lease incentives received and, for acquired leases, any favorable or
unfavorable fair value adjustments. The present value of the lease liability may include the impact of options to extend
or terminate the lease when it is reasonably certain that the Company will exercise such options provided in the lease
terms. Lease expense is recognized on a straight-line basis over the expected lease term. Lease agreements that include
lease and non-lease components, such as common area maintenance charges, are accounted for separately.

 

27

BV FINANCIAL, INC. AND SUBSIDIARIES

 

The table below details the right of use asset (net of accumulated amortization), lease liability and other information related to the Company's operating leases:

 

 

Consolidated Balance

 

 

 

 

 

 

(dollars in thousands)

 

Sheet Classification

 

September 30, 2024

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

Operating lease right of use asset

 

Other assets

 

$

979

 

 

$

1,128

 

Operating lease liabilities

 

Other liabilities

 

$

1,018

 

 

$

1,162

 

 

 

 

 

 

 

 

 

 

Other information related to leases:

 

 

 

 

 

 

 

 

Weighted average remaining lease term of operating leases

 

 

 

5.0 years

 

 

5.5 years

 

Weighted average discount rate of operating leases

 

 

 

 

4.40

%

 

 

4.26

%

 

 

 

 

 

 

 

 

 

 

 

The table below details the Company's lease cost, which is included in occupancy expense in the Consolidated Statements of Income.

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

76

 

 

$

72

 

 

$

224

 

 

$

187

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for lease liability

 

$

58

 

 

$

52

 

 

$

172

 

 

$

140

 

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liability is as follows:

 

(dollars in thousands)

 

As of September 30, 2024

 

Lease payments due:

 

 

 

Within one year

 

$

244

 

After one but within two years

 

 

238

 

After two but within three years

 

 

154

 

After three but within four years

 

 

64

 

After four but within five years

 

 

64

 

After five years

 

 

245

 

Total undiscounted lease payments

 

 

1,009

 

Less: imputed interest

 

 

9

 

Present value of operating lease liabilities

 

$

1,018

 

 

Note 9 – Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Basel III Capital Rules became effective for the Bank on January 1, 2015 (subject to a phase-in period for certain provisions). Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1 capital, Tier 1 capital, and Total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to adjusted quarterly average assets (as defined).

28

BV FINANCIAL, INC. AND SUBSIDIARIES

 

In connection with the adoption of the Basel III Capital Rules, the Bank elected to opt-out of the requirement to include accumulated other comprehensive income in Common Equity Tier 1 capital. Common Equity Tier 1 capital for the Bank is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities and subject to transition provisions.

Insured depository institutions are required to meet the following in order to qualify as "well capitalized:" (1) a common equity Tier 1 risk-based capital ratio of 6.5%; (2) a Tier 1 risk-based capital ratio of 8%; (3) a total risk-based capital ratio of 10%; and (4) a Tier 1 leverage ratio of 5%.

The maintenance of a capital conservation buffer of 2.5% is also required. The Basel III Capital Rules also provide for a "countercyclical capital buffer" that is applicable to only certain covered institutions and does not have any current applicability to the Bank. The aforementioned capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets above the minimum but below the conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To be well

 

 

 

 

 

 

 

 

 

 

 

 

 

 

capitalized under

 

 

 

 

 

 

 

 

For capital

 

 

prompt corrective

 

 

Actual

 

 

adequacy purposes

 

 

action provisions

 

As of September, 2024

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

(dollars in thousands)

 

Tier 1 Leverage ratio

 

$

170,081

 

 

 

19.26

%

 

$

34,671

 

 

 

4.00

%

 

$

43,339

 

 

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 capital (to risk-weighted assets)

 

$

170,081

 

 

 

25.17

%

 

$

40,551

 

 

 

6.00

%

 

$

54,068

 

 

 

8.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1 Capital Ratio (to risk-weighted assets)

 

$

170,081

 

 

 

25.17

%

 

$

30,413

 

 

 

4.50

%

 

$

43,930

 

 

 

6.50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital ratio (to risk-weighted assets)

 

$

178,325

 

 

 

26.39

%

 

$

54,068

 

 

 

8.00

%

 

$

67,585

 

 

 

10.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To be well
capitalized under

 

 

 

 

 

 

 

 

For capital

 

 

prompt corrective

 

 

Actual

 

 

adequacy purposes

 

 

action provisions

 

As of December 31, 2023

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

(dollars in thousands)

 

Tier 1 Leverage ratio

 

$

162,125

 

 

 

18.50

%

 

$

35,055

 

 

 

4.00

%

 

$

43,819

 

 

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 capital (to risk-weighted assets)

 

$

162,125

 

 

 

24.00

%

 

$

40,523

 

 

 

6.00

%

 

$

54,031

 

 

 

8.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1 Capital Ratio (to risk-weighted assets)

 

$

162,125

 

 

 

24.00

%

 

$

30,393

 

 

 

4.50

%

 

$

43,900

 

 

 

6.50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital ratio (to risk-weighted assets)

 

$

170,571

 

 

 

25.26

%

 

$

54,031

 

 

 

8.00

%

 

$

67,539

 

 

 

10.00

%

 

Note 10 – Fair Value Measurements

The Company adopted ASC Topic 820, “Fair Value Measurements” and ASC Topic 825, “The Fair Value Option for Financial Assets and Financial Liabilities,” which provides a framework for measuring and disclosing fair value under U.S. GAAP. ASC Topic 820 requires disclosures about the fair value of assets and liabilities recognized in the consolidated balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, AFS investment securities) or on a nonrecurring basis (for example, individually evaluated loans).

ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. AFS securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis such as loans held for investment and certain other assets.

29

BV FINANCIAL, INC. AND SUBSIDIARIES

 

These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Under ASC Topic 820, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine the fair value. These hierarchy levels are:

Level 1 inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s quarterly valuation process. Intra-quarter transfers in and out of level 3 assets and liabilities recorded at fair value on a recurring basis are disclosed. There were no such transfers during the quarter ended September 30, 2024 or the year ended December 31, 2023.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Securities Available for Sale

AFS investment securities are recorded at fair value on a recurring basis. Standard inputs include quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include agency and mortgage-backed securities issued by government sponsored entities (“GSEs”), municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Equity Securities Carried at Fair Value Through Income

Equity securities carried at fair value through income are recorded at fair value on a recurring basis. Standard inputs include quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 equity securities include those traded on an active exchange, such as the New York Stock Exchange. Level 2 equity securities include mutual funds with asset-backed securities issued by GSEs as the underlying investment supporting the fund. Equity securities classified as Level 3 include mutual funds with asset-backed securities in less liquid markets.

Loans Receivable

The Company does not record loans at fair value on a recurring basis; however, from time to time, a loan is individually evaluated and an ACL is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan are segregated individually. Management estimates the fair value of individually evaluated loans using one of several methods, including the collateral value, market value of similar debt, or discounted cash flows. Individually evaluated loans not requiring an allowance are those for which the fair value of expected repayments or collateral exceed the recorded investment in such loans.

30

BV FINANCIAL, INC. AND SUBSIDIARIES

 

In accordance with FASB ASC 820, loans where an allowance is established based on the fair value of collateral (loans with impairment) require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price (e.g., contracted sales price), the Company records the loan as nonrecurring Level 2. When the fair value of the collateral dependent loan is derived from an appraisal, the Company records the loan as nonrecurring Level 3. Fair value is reassessed at least quarterly or more frequently when circumstances occur that indicate a change in the fair value. The fair values of collateral dependent loans that are not measured based on collateral values are measured using discounted cash flows and considered to be Level 3 inputs.

Foreclosed Real Estate

Foreclosed real estate is adjusted for fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed real estate is reported at the lower of carrying value or fair value. Fair value is based on independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price (e.g., contracted sales price), the Company records the foreclosed asset as nonrecurring Level 2 when the fair value is derived from an appraisal, the Company records the foreclosed asset at nonrecurring Level 3.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets as of September 30, 2024 and December 31, 2023 measured at fair value on a recurring basis.

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

Quoted prices

 

 

Significant

 

 

Significant

 

 

 

 

 

in active

 

 

other

 

 

other

 

 

 

 

 

markets for

 

 

observable

 

 

unobservable

 

As of September 30, 2024

 

Total

 

 

identical assets

 

 

inputs

 

 

inputs

 

 

(dollars in thousands)

 

Securities available for sale

 

 

 

 

 

 

 

 

 

 

 

 

Agencies

 

$

544

 

 

$

—

 

 

$

544

 

 

$

—

 

Corporate securities

 

 

1,554

 

 

 

—

 

 

 

1,554

 

 

 

—

 

Mortgage-backed securities

 

 

24,796

 

 

 

—

 

 

 

24,796

 

 

 

—

 

Treasuries

 

 

12,268

 

 

 

—

 

 

 

12,268

 

 

 

—

 

 

$

39,162

 

 

$

—

 

 

$

39,162

 

 

$

—

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

Quoted prices

 

 

Significant

 

 

Significant

 

 

 

 

 

in active

 

 

other

 

 

other

 

 

 

 

 

markets for

 

 

observable

 

 

unobservable

 

As of December 31, 2023

 

Total

 

 

identical assets

 

 

inputs

 

 

inputs

 

 

(dollars in thousands)

 

Securities available for sale

 

 

 

 

 

 

 

 

 

 

 

 

Agencies

 

$

4,723

 

 

$

—

 

 

$

4,723

 

 

$

—

 

Corporate securities

 

 

1,418

 

 

 

—

 

 

 

1,418

 

 

 

—

 

Mortgage-backed securities

 

 

28,640

 

 

 

—

 

 

 

28,640

 

 

 

—

 

 

$

34,781

 

 

$

—

 

 

$

34,781

 

 

$

—

 

 

 

31

BV FINANCIAL, INC. AND SUBSIDIARIES

 

The Company may be required to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a non-recurring basis as of September 30, 2024 and December 31, 2023 were included in the tables below.

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

Quoted prices

 

 

Significant

 

 

Significant

 

 

 

 

 

in active

 

 

other

 

 

other

 

 

 

 

 

markets for

 

 

observable

 

 

unobservable

 

As of September 30, 2024

 

Total

 

 

identical assets

 

 

inputs

 

 

inputs

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans

 

$

3,970

 

 

$

—

 

 

$

—

 

 

$

3,970

 

Foreclosed real estate and repossessed assets

 

 

160

 

 

 

—

 

 

 

—

 

 

 

160

 

 

$

4,130

 

 

$

—

 

 

$

—

 

 

$

4,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

Quoted prices

 

 

Significant

 

 

Significant

 

 

 

 

 

in active

 

 

other

 

 

other

 

 

 

 

 

markets for

 

 

observable

 

 

unobservable

 

As of December 31, 2023

 

Total

 

 

identical assets

 

 

inputs

 

 

inputs

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans

 

$

10,554

 

 

$

—

 

 

$

—

 

 

$

10,554

 

Foreclosed real estate and repossessed assets

 

 

170

 

 

 

—

 

 

 

—

 

 

 

170

 

 

$

10,724

 

 

$

—

 

 

$

—

 

 

$

10,724

 

 

Note 11 – Fair Value Of Financial Instruments

Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash. Certain items are specifically excluded from the financial instrument fair value disclosure requirements, including the Company’s common stock, foreclosed real estate, premises and equipment and other assets and liabilities.

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Therefore, any aggregate unrealized gains or losses should not be interpreted as a forecast of future earnings or cash flows. Furthermore, the fair values disclosed should not be interpreted as the aggregate current value of the Company.

32

BV FINANCIAL, INC. AND SUBSIDIARIES

 

The Company’s estimated fair values of financial instruments are presented in the following table.

 

 

 

 

September 30, 2024

 

 

December 31, 2023

 

 

Fair value

 

Carrying

 

 

Fair

 

 

Carrying

 

 

Fair

 

(dollars in thousands)

 

hierarchy

 

amount

 

 

value

 

 

amount

 

 

value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

Level 1

 

$

94,065

 

 

$

94,065

 

 

$

73,742

 

 

$

73,742

 

Equity investment

 

Level 2

 

 

254

 

 

 

254

 

 

 

256

 

 

 

256

 

Securities held to maturity

 

Level 2

 

 

6,029

 

 

 

5,210

 

 

 

10,209

 

 

 

9,206

 

Securities held to available for sale

 

Level 2

 

 

39,162

 

 

 

39,162

 

 

 

34,781

 

 

 

34,781

 

Federal Home Loan Bank of Atlanta stock

 

Level 2

 

 

654

 

 

 

654

 

 

 

626

 

 

 

626

 

Net loans

 

Level 3

 

 

685,230

 

 

 

683,230

 

 

 

696,248

 

 

 

686,879

 

Accrued interest receivable

 

Level 2

 

 

2,922

 

 

 

2,922

 

 

 

3,279

 

 

 

3,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

Level 3

 

$

634,313

 

 

$

633,490

 

 

$

634,120

 

 

$

631,720

 

Subordinated Debentures

 

Level 3

 

 

34,845

 

 

 

29,406

 

 

 

37,251

 

 

 

31,018

 

Accrued interest payable

 

Level 2

 

 

1,102

 

 

 

1,102

 

 

 

193

 

 

 

193

 

 

 

Note 12 – Earnings Per Share (“EPS”)

Basic earnings per common share represent income available to common shareholders, divided by the weighted average number of common shares outstanding during the period. As a result of the Conversion, previously outstanding shares held by public stockholders were adjusted to reflect the 1.5309-to-1 exchange ratio. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may have been issued by the Company related to outstanding unvested restricted stock awards were determined using the treasury stock method and included in the calculation of dilutive common stock equivalents.

As of three and nine months ended September 30, 2024, and 2023, there were no, unvested restricted stock awards which were excluded from the calculation as their effect would be anti-dilutive. Basic and diluted earnings per share have been computed based on weighted-average common and common equivalent shares outstanding as follows:

 

 

Three Months Ended September 30,

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

(dollars in thousands, except per share data)

 

Basic

 

 

Diluted

 

 

Basic

 

 

Diluted

 

 

Basic

 

 

Diluted

 

 

Basic

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

3,798

 

 

$

3,798

 

 

$

3,684

 

 

$

3,684

 

 

$

9,771

 

 

$

9,771

 

 

$

10,698

 

 

$

10,698

 

Weighted average common
   shares outstanding

 

 

10,752

 

 

 

10,752

 

 

 

10,600

 

 

 

10,600

 

 

 

10,686

 

 

 

10,686

 

 

 

8,858

 

 

 

8,858

 

Dilutive securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

—

 

 

 

30

 

 

 

—

 

 

 

30

 

 

 

—

 

 

 

33

 

 

 

—

 

 

 

40

 

Adjusted weighted average
   shares outstanding

 

 

10,752

 

 

 

10,782

 

 

 

10,600

 

 

 

10,630

 

 

 

10,686

 

 

 

10,719

 

 

 

8,858

 

 

 

8,898

 

Earnings -per share amount

 

$

0.35

 

 

$

0.35

 

 

$

0.35

 

 

$

0.35

 

 

$

0.91

 

 

$

0.91

 

 

$

1.21

 

 

$

1.20

 

 

33

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Note 13 – Income Taxes

The Company files a consolidated federal income tax return with its subsidiaries. Deferred tax assets and liabilities are determined using the liability (or balance sheet) method which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. If it is more likely than not that some portion or the entire deferred tax asset will not be realized, deferred tax assets will be reduced by a valuation allowance. It is the Company’s policy to recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(dollars in thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Current expense

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

860

 

 

$

1,004

 

 

$

2,375

 

 

$

2,434

 

State

 

 

371

 

 

 

456

 

 

 

1,090

 

 

 

1,125

 

Total current expense

 

 

1,231

 

 

 

1,460

 

 

 

3,465

 

 

 

3,559

 

Deferred expense

 

 

211

 

 

 

(61

)

 

 

323

 

 

 

345

 

Income tax expense

 

$

1,442

 

 

$

1,399

 

 

$

3,788

 

 

$

3,904

 

 

Note 14 – Subsequent Events

 

Not applicable.

 

 

 

 

34

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis is intended to enhance your understanding of our financial condition and results of operations. The financial information in this section is derived from the accompanying financial statements. You should read the financial information in this section in conjunction with the business and financial information contained in this Quarterly Report on Form 10-Q and in the Company’s 2023 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 22, 2024.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “intend,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

•
statements of our goals, intentions and expectations;
•
statements regarding our business plans, prospects, growth and operating strategies;
•
statements regarding the quality of our loan and investment portfolios; and
•
estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not undertake any obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

•
general economic conditions, either nationally or in our market areas, that are worse than expected, including as a result of unemployment levels and labor shortages, and any potential recession or slowed economic growth;
•
changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for credit losses;
•
changes in the economic assumptions and methodology used to calculate the allowance for credit losses;
•
our ability to access cost-effective funding;
•
changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio;
•
fluctuations in real estate values and both residential and commercial real estate market conditions;
•
our continued ability to originate loans outside of our market area;
•
our ability to implement and change our business strategies;
•
competition among depository and other financial institutions;
•
inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations or prepayments on loans we have made and make;
•
adverse changes in the securities markets; changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements and insurance premiums;

35

BV FINANCIAL, INC. AND SUBSIDIARIES

 

•
•
changes in the quality or composition of our loan or investment portfolios;
•
technological changes that may be more difficult or expensive than expected;
•
system failure or cyber-security breaches of our information technology infrastructure;
•
the failure to maintain current technologies and/or successfully implement future information technology enhancements;
•
the inability of third-party providers to perform as expected;
•
our ability to manage market risk, credit risk and operational risk in the current economic environment;
•
our ability to enter new markets successfully and capitalize on growth opportunities;
•
our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire, and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;
•
changes in consumer spending, borrowing and savings habits;
•
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
•
our ability to retain key employees;
•
our compensation expense associated with equity allocated or awarded to our employees; and
•
changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Except as required by law or regulation, we do not undertake, and we specifically disclaim any obligation to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies and Use of Critical Accounting Estimates

Our accounting policies are integral to understanding the results reported. We consider accounting policies that require management to exercise significant judgment or discretion or to make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies.

Allowance for Credit Losses

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 problem 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.

36

BV FINANCIAL, INC. AND SUBSIDIARIES

 

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 value of the 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 charge-offs. The calculation of ACL excludes accrued interest receivable balances because these balances are reversed in a timely manner against previously recognized interest income when a loan is placed on non-accrual.

Goodwill

 

The excess purchase price over the fair value of net assets from acquisitions, or goodwill, is evaluated for impairment at least annually and on an interim basis if an event or circumstance indicates it is likely impairment has occurred. Goodwill impairment is determined by comparing the fair value of a reporting unit to its carrying amount. In any given year, the Company may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If it is not more likely than not that the fair value of the reporting unit is in excess of the carrying value, or if the Company elects to bypass the qualitative assessment, a quantitative impairment test is performed. In performing a quantitative test for impairment, the fair value of net assets is estimated based on analyses of the Company’s market value, discounted cash flows, and peer values. The determination of goodwill impairment is sensitive to market-based economics and other key assumptions used in determining or allocating fair value. Variability in the market and changes in assumptions or subjective measurements used to estimate fair value are reasonably possible and may have a material impact on our consolidated financial statements or results of operations. Our annual goodwill impairment test is performed each year as of September 30. The Company performed its 2024 goodwill impairment qualitative assessment and determined its goodwill was not considered impaired.

 

Deferred Income Taxes

 

At September 30, 2024, we had a net deferred tax asset totaling $8.4 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 inherently subjective and are reviewed on a regular basis as regulatory 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.

 

37

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Comparison of Financial Condition at September 30, 2024 (unaudited) and December 31, 2023

 

Assets. Assets were $892.7 million at September 30, 2024, an increase of $7.4 million, or 0.8%, from $885.3 million at December 31, 2023. The increase was due primarily to a $20.3 million increase in cash and cash equivalents which was primarily offset by decreases of $11.6 million in loans and $2.0 million in other non-earning assets.

Cash and Cash Equivalents. Cash and cash equivalents increased $20.3 million, or 27.7%, to $93.8 million at September 30, 2024 from $73.5 million at December 31, 2023 primarily due to the decreases in loans and other non-interest earning assets.

Loans. Loans receivable decreased $11.6 million, or 1.6%, to $693.2 million at September 30, 2024 from $704.8 million at December 31, 2023. Decreases in one- to four-family real estate loans of $15.5 million and owner-occupied commercial real estate loans of $15.8 million were partially offset by increases in investor commercial real estate loans and commercial loans of $24.8 million.

Allowance for Credit Losses.

Our allowance for credit losses – loans decreased $553,000 to $8.0 million at September 30, 2024 compared to $8.6 million at December 31, 2023. The decrease in the ACL resulted from lower historical loss rates and lower life of loan calculations. The ratio of our allowance for credit losses to total loans was 1.15% at September 30, 2024 and September 30, 2023, while the allowance for credit losses to non-performing loans was 201.60% at September 30, 2024 compared to 81.05% at December 31, 2023.

Securities. Securities available for sale increased by $4.4 million, or 12.6%, to $39.2 million at September 30, 2024 from $34.8 million at December 31, 2023. The increase was due to purchases used primarily to secure local government deposits offset by paydowns in the mortgage-backed securities. The held-to-maturity portfolio decreased by $4.2 million or 40.9% due to maturities and paydowns not being replaced by purchases.

Liabilities. Liabilities decreased $3.2 million, or 0.5%, to $683.0 million at September 30, 2024 from $686.2 million at December 31, 2023. The decrease was due primarily to the decrease in borrowings as $3.0 million in junior subordinated debt was paid off in the first quarter of 2024.

Deposits. Total deposits increased $193,000, or 0.03% to $634.3 million at September 30, 2024 from $634.1 million at December 31, 2023. Interest-bearing deposits increased $2.9 million, or 0.6%, to $495.0 million at September 30, 2024 from $492.1 million at December 31, 2023. Noninterest bearing deposits decreased $2.7 million, or 1.9%, to $139.3 million at September 30, 2024 from $142.0 million at December 31, 2023.

Stockholders’ Equity. Stockholders’ equity increased $10.6 million, or 5.4%, to $209.7 million at September 30, 2024 from $199.1 million at December 31, 2023 primarily due to net income of $9.8 million.

 

 

 

 

38

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Comparison of Operating Results for the Three and Nine Months Ended September 30, 2024 and 2023

 

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 $2.1 million and $1.5 million at September 30, 2024 and 2023, respectively.

 

 

For the Three Months Ended September 30,

 

 

2024

 

2023

 

(dollars in thousands)

 

Average Outstanding Balance

 

 

Interest

 

 

Average Yield/Rate(1)

 

Average Outstanding Balance

 

 

Interest

 

 

Average Yield/Rate(1)

 

 

(Unaudited)

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

690,170

 

 

$

10,522

 

 

6.05%

 

$

702,320

 

 

$

9,763

 

 

 

5.52

%

Securities available-for-sale

 

 

36,201

 

 

 

353

 

 

3.87%

 

 

35,867

 

 

 

302

 

 

 

3.34

%

Securities held-to-maturity

 

 

9,937

 

 

 

83

 

 

3.31%

 

 

12,493

 

 

 

89

 

 

 

2.83

%

Cash, cash equivalents and other interest-earning assets

 

 

86,322

 

 

 

1,192

 

 

5.48%

 

 

115,553

 

 

 

1,559

 

 

 

5.35

%

Total interest-earning assets

 

 

822,630

 

 

 

12,150

 

 

5.86%

 

 

866,233

 

 

 

11,713

 

 

 

5.36

%

Noninterest-earning assets

 

 

68,767

 

 

 

 

 

 

 

 

65,878

 

 

 

 

 

 

 

Total assets

 

$

891,397

 

 

 

 

 

 

 

$

932,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

$

79,652

 

 

 

207

 

 

1.03%

 

$

82,096

 

 

 

219

 

 

 

1.06

%

Savings deposits

 

 

128,918

 

 

 

89

 

 

0.27%

 

 

155,521

 

 

 

49

 

 

 

0.13

%

Money market deposits

 

 

108,518

 

 

 

669

 

 

2.45%

 

 

85,981

 

 

 

254

 

 

 

1.17

%

Certificates of deposit

 

 

173,751

 

 

 

1,416

 

 

3.23%

 

 

189,117

 

 

 

1,240

 

 

 

2.60

%

Total interest-bearing deposits

 

 

490,839

 

 

 

2,381

 

 

1.92%

 

 

512,715

 

 

 

1,762

 

 

 

1.36

%

Federal Home Loan Bank advances

 

 

—

 

 

 

—

 

 

—

 

 

37,500

 

 

 

529

 

 

 

5.60

%

Subordinated debentures

 

 

34,827

 

 

 

466

 

 

5.30%

 

 

37,175

 

 

 

545

 

 

 

5.82

%

Total borrowings

 

 

34,827

 

 

 

466

 

 

5.30%

 

 

74,675

 

 

 

1,074

 

 

 

5.71

%

Total interest-bearing
liabilities

 

 

525,666

 

 

 

2,847

 

 

2.15%

 

 

587,390

 

 

 

2,836

 

 

 

1.92

%

Noninterest-bearing demand deposits

 

 

140,039

 

 

 

 

 

 

 

 

144,603

 

 

 

 

 

 

 

Other noninterest-bearing liabilities

 

 

18,101

 

 

 

 

 

 

 

 

50,437

 

 

 

 

 

 

 

Total liabilities

 

 

683,806

 

 

 

 

 

 

 

 

782,430

 

 

 

 

 

 

 

Equity

 

 

207,591

 

 

 

 

 

 

 

 

149,681

 

 

 

 

 

 

 

Total liabilities and equity

 

$

891,397

 

 

 

 

 

 

 

$

932,111

 

 

 

 

 

 

 

Net interest income

 

 

 

 

$

9,303

 

 

 

 

 

 

 

$

8,877

 

 

 

 

Net interest rate spread(2)

 

 

 

 

 

 

 

3.71%

 

 

 

 

 

 

 

 

3.44

%

Net interest-earning assets(3)

 

$

296,964

 

 

 

 

 

 

 

$

278,843

 

 

 

 

 

 

 

Net interest margin(4)

 

 

 

 

 

 

 

4.49%

 

 

 

 

 

 

 

 

4.07

%

Average interest-earning assets to interest-bearing liabilities

 

 

156.49

%

 

 

 

 

 

 

 

147.47

%

 

 

 

 

 

 

 

(1)
Annualized.
(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.

 

 

 

39

BV FINANCIAL, INC. AND SUBSIDIARIES

 

The following table sets forth the effects of changing rates and volumes on our net interest income for the three months ended September 30, 2024 and 2023. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by current rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately based on the changes due to rate and volume.

 

 

 

For the Three Months Ended September 30, 2024

 

 

 

Interest Income Increase (Decrease) Due to

 

 

 

(In thousands)

 

 

 

Volume

 

 

Rate

 

 

Total

 

Interest income:

 

 

 

 

 

 

 

 

 

   Loans receivable

 

$

(185

)

 

$

944

 

 

$

759

 

 

 

 

 

 

 

 

 

 

 

   Investment securities AFS

 

 

3

 

 

 

48

 

 

 

51

 

   Investment securities HTM

 

 

(21

)

 

 

15

 

 

 

(6

)

   Total Investment securities

 

 

(18

)

 

 

63

 

 

 

45

 

 

 

 

 

 

 

 

 

 

 

   Short-term investments and other

 

 

 

 

 

 

 

 

 

     interest-earning assets

 

 

(404

)

 

 

37

 

 

 

(367

)

       Total interest-earning assets

 

$

(607

)

 

$

1,044

 

 

$

437

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

   Deposits

 

$

(106

)

 

$

725

 

 

$

619

 

 

 

 

 

 

 

 

 

 

 

   FHLB Borrowings

 

 

—

 

 

 

(529

)

 

 

(529

)

   Subordinated Debentures

 

 

(31

)

 

 

(48

)

 

 

(79

)

   Total Borrowings

 

 

(31

)

 

 

(577

)

 

 

(608

)

       Total interest-bearing liabilities

 

 

(137

)

 

 

148

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

Change in net interest income

 

$

(470

)

 

$

896

 

 

$

426

 

 

 

 

 

 

40

BV FINANCIAL, INC. AND SUBSIDIARIES

 

 

For the Nine Months Ended September 30,

 

 

2024

 

2023

 

(dollars in thousands)

 

Average Outstanding Balance

 

 

Interest

 

 

Average Yield/Rate(1)

 

Average Outstanding Balance

 

 

Interest

 

 

Average Yield/Rate(1)

 

 

(Unaudited)

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

701,310

 

 

$

30,481

 

 

5.79%

 

$

688,654

 

 

$

27,864

 

 

 

5.39

%

Securities available-for-sale

 

 

34,569

 

 

 

966

 

 

3.72%

 

 

35,746

 

 

 

846

 

 

 

3.15

%

Securities held-to-maturity

 

 

10,507

 

 

 

266

 

 

3.37%

 

 

12,276

 

 

 

275

 

 

 

2.98

%

Cash, cash equivalents and other interest-earning assets

 

 

74,720

 

 

 

3,058

 

 

5.46%

 

 

76,308

 

 

 

2,957

 

 

 

5.17

%

Total interest-earning assets

 

 

821,106

 

 

 

34,771

 

 

5.64%

 

 

812,984

 

 

 

31,942

 

 

 

5.23

%

Noninterest-earning assets

 

 

68,985

 

 

 

 

 

 

 

 

73,244

 

 

 

 

 

 

 

Total assets

 

$

890,091

 

 

 

 

 

 

 

$

886,228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

$

83,683

 

 

 

681

 

 

1.08%

 

$

87,159

 

 

 

380

 

 

 

0.58

%

Savings deposits

 

 

138,474

 

 

 

250

 

 

0.24%

 

 

163,312

 

 

 

141

 

 

 

0.12

%

Money market deposits

 

 

96,724

 

 

 

1,496

 

 

2.06%

 

 

92,457

 

 

 

491

 

 

 

0.71

%

Certificates of deposit

 

 

174,896

 

 

 

4,183

 

 

3.19%

 

 

172,950

 

 

 

2,682

 

 

 

2.07

%

Total interest-bearing deposits

 

 

493,777

 

 

 

6,610

 

 

1.78%

 

 

515,878

 

 

 

3,694

 

 

 

0.95

%

Federal Home Loan Bank advances

 

 

—

 

 

 

—

 

 

—

 

 

33,098

 

 

 

1,312

 

 

 

5.28

%

Subordinated debentures

 

 

35,139

 

 

 

1,985

 

 

7.53%

 

 

37,122

 

 

 

1,622

 

 

 

5.82

%

Total borrowings

 

 

35,139

 

 

 

1,985

 

 

7.53%

 

 

70,220

 

 

 

2,934

 

 

 

5.57

%

Total interest-bearing
liabilities

 

 

528,916

 

 

 

8,595

 

 

2.16%

 

 

586,098

 

 

 

6,628

 

 

 

1.51

%

Noninterest-bearing demand deposits

 

 

139,642

 

 

 

 

 

 

 

 

154,521

 

 

 

 

 

 

 

Other noninterest-bearing liabilities

 

 

17,676

 

 

 

 

 

 

 

 

25,536

 

 

 

 

 

 

 

Total liabilities

 

 

686,234

 

 

 

 

 

 

 

 

766,155

 

 

 

 

 

 

 

Equity

 

 

203,857

 

 

 

 

 

 

 

 

120,073

 

 

 

 

 

 

 

Total liabilities and equity

 

$

890,091

 

 

 

 

 

 

 

$

886,228

 

 

 

 

 

 

 

Net interest income

 

 

 

 

$

26,176

 

 

 

 

 

 

 

$

25,314

 

 

 

 

Net interest rate spread(2)

 

 

 

 

 

 

 

3.48%

 

 

 

 

 

 

 

 

3.72

%

Net interest-earning assets(3)

 

$

292,190

 

 

 

 

 

 

 

$

226,886

 

 

 

 

 

 

 

Net interest margin(4)

 

 

 

 

 

 

 

4.25%

 

 

 

 

 

 

 

 

4.15

%

Average interest-earning assets to interest-bearing liabilities

 

 

155.24

%

 

 

 

 

 

 

 

138.71

%

 

 

 

 

 

 

 

(1)
Annualized.
(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.

 

41

BV FINANCIAL, INC. AND SUBSIDIARIES

 

The following table sets forth the effects of changing rates and volumes on our net interest income for the nine months ended September 30, 2024 and 2023. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by current rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately based on the changes due to rate and volume.

 

 

 

For the Nine Months Ended September 30, 2024

 

 

 

Interest Income Increase (Decrease) Due to

 

 

 

(In thousands)

 

 

 

Volume

 

 

Rate

 

 

Total

 

Interest income:

 

 

 

 

 

 

 

 

 

   Loans receivable

 

$

550

 

 

$

2,067

 

 

$

2,617

 

 

 

 

 

 

 

 

 

 

 

   Investment securities AFS

 

 

(33

)

 

 

153

 

 

 

120

 

   Investment securities HTM

 

 

(45

)

 

 

36

 

 

 

(9

)

   Total Investment securities

 

 

(78

)

 

 

189

 

 

 

111

 

 

 

 

 

 

 

 

 

 

 

   Short-term investments and other

 

 

 

 

 

 

 

 

 

     interest-earning assets

 

 

(65

)

 

 

166

 

 

 

101

 

       Total interest-earning assets

 

$

407

 

 

$

2,422

 

 

$

2,829

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

   Deposits

 

$

(296

)

 

$

3,212

 

 

$

2,916

 

 

 

 

 

 

 

 

 

 

 

   FHLB Borrowings

 

 

(447

)

 

 

(865

)

 

 

(1,312

)

   Subordinated Debentures

 

 

(112

)

 

 

475

 

 

 

363

 

   Total Borrowings

 

 

(559

)

 

 

(390

)

 

 

(949

)

       Total interest-bearing liabilities

 

 

(855

)

 

 

2,822

 

 

 

1,967

 

 

 

 

 

 

 

 

 

 

 

Change in net interest income

 

$

1,262

 

 

$

(400

)

 

$

862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Net Income. Net income was $3.8 million or $0.35 per diluted share for the three months ended September 30, 2024 compared to $3.7 million or $0.35 per diluted share for the three months ended September 30, 2023. In the quarter ended September 30, 2024, the Company recorded a recovery for credit losses of $714,000 as a result of the improvement in the asset quality of the Company’s loan portfolio. In the quarter ended September 30, 2023, the Company recognized a recovery for credit loss of $333,000. Net income was $9.8 million or $0.91 per diluted share for the nine months ended September 30, 2024 compared to $10.7 million or $1.20 per diluted share for the nine months ended September 30, 2023. The difference between the nine months ended September 30, 2024 when compared to the same period in 2023 is that in the nine months ended September 30, 2023, the Company recognized a gain on the sale of foreclosed real estate of $678,000, a gain on the sale of fixed assets of $188,000 and received $225,000 in life insurance death benefits. These items did not recur in 2024.

 

Interest Income. Interest income increased $435,000, or 3.7%, to $12.1 million for the three months ended September 30, 2024 from $11.7 million for the three months ended September 30, 2023. 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 $759,000 or 7.8%, to $10.5 million for the three months ended September 30, 2024 from $9.8 million for the three months ended September 30, 2023 due to increases in the average yield on loans. The average balance of loans decreased $12.1 million, or 1.7%, to $690.2 million for the three months ended September 30, 2024 from $702.3 million for the three months ended September 30, 2023. The weighted average yield on loans increased 53 basis points to 6.05% for the three months ended September 30, 2024 compared to 5.52% for the three months ended September 30, 2023, 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, cash equivalents and other interest-earning assets $370,000 to $1.2 million for the three months ended September 30, 2024 from $1.6 million for the three months ended September 30, 2023 due to a decrease in the average balance of cash, cash equivalents and other interest-earning assets.

Interest income increased $2.8 million, or 8.9%, to $34.8 million for the nine months ended September 30, 2024 from $31.9 million for the nine months ended September 30, 2023. The increase was due primarily to increases in interest income on loans, and, to a lesser extent, other interest income on cash, cash equivalents and other interest-earning assets. Interest income on loans increased $2.6 million, or 9.4%, to $30.5 million for the nine months ended September 30, 2024 from $27.9 million for the nine months ended September 30, 2023 due to increases in the average balance of loans and the average yield on loans. The average balance of loans increased $12.6 million, or 1.8%, to $701.3 million for the nine months ended September 30, 2024 from $688.7 million for the nine months ended September 30, 2023. The weighted average yield on loans increased 40 basis points to 5.79% for the nine months ended September 30, 2024 compared to 5.39% for the nine months ended September 30, 2023, 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 on cash, cash equivalents and other interest-earning assets increased $100,000 to $3.1 million for the nine months ended September 30, 2024 from $3.0 million for the nine months ended September 30, 2023 due to a 29 basis point increase in the average yield, offset by a slight decrease in the average balance of cash, cash equivalents and other interest-earning assets.

Interest Expense. Interest expense remained unchanged at $2.8 million for the three months ended September 30, 2024 and 2023. Interest expense on deposits increased $619,000 for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, as rates paid increased and depositors moved money into higher-cost certificates of deposit, offset by a decrease in interest expense on borrowed money of $608,000 as there were no advances outstanding from the FHLB in the quarter ended September 30, 2024.

The increase in interest expense on deposits was due to a 56 basis point increase in the average rate, offset by a $21.9 million decrease in the average balance of interest-bearing deposits to $490.8 million at September 30, 2024 from $512.7 million for the three months ended September 30, 2023. The average rate on interest-bearing deposits was 1.92% for the three months ended September 30, 2024 compared to 1.36% for the three months ended September 30, 2023.

We had no interest expense on FHLB advances for the three months ended September 30, 2024 compared to $530,000 for the three months ended September 30, 2023 as all advances were paid off.

Interest expense on subordinated debentures decreased $79,000, or 14.7%, to $466,000 for the three months ended September 30, 2024 compared to $545,000 for the three months ended September 30, 2023. 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.

43

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Interest expense increased $2.0 million, or 29.7%, to $8.6 million for the nine months ended September 30, 2024 compared to $6.6 million for the nine months ended September 30, 2023 primarily due to a $2.9 million increase in interest expense on deposits as rates paid increased and depositors moved money into higher-cost certificate of deposit accounts, and an increase of $364,000 in interest expense on subordinated debt, offset by a $1.3 million decrease in interest expense on borrowed money as there were no advances outstanding from the FHLB during the nine months ended September 30, 2024.

The increase in interest expense on deposits was due to a 83 basis point increase in the average rate, offset by a $22.1 million decrease in the average balance of interest-bearing deposits to $493.8 million at September 30, 2024 from $515.9 million for the nine months ended September 30, 2023. The average rate on interest-bearing deposits was 1.78% for the nine months ended September 30, 2024 compared to 0.95% for the nine months ended September 30, 2023.

We had no interest expense on FHLB advances for the nine months ended September 30, 2024 compared to $1.3 million for the nine months ended September 30, 2023 as all advances were paid off.

Interest expense on subordinated debentures increased $363,000, or 22.4%, to $2.0 million for the nine months ended September 30, 2024 compared to $1.6 million for the nine months ended September 30, 2023. The average rate on subordinated debentures increased 171 basis points to 7.53% for the nine months ended September 30, 2024 compared to 5.82% for the nine months ended September 30, 2023. The increase was due primarily to the write-off (increase in interest expense) of the remaining purchase accounting fair market value adjustment of $566,000 upon the pay-off in the first quarter of 2024 of $3.0 million in junior subordinated debt assumed in a prior acquisition.

Net Interest Income. Net interest income was $9.3 million for the three months ended September 30, 2024 compared to $8.9 million in the three months ended September 30, 2023. The net interest margin for the three months ended September 30, 2024 was 4.49% compared to 4.07% for the three months ended September 30, 2023. The increase in net interest income was due to higher yields on interest-earning assets, and lower balances of interest-bearing liabilities offsetting higher rates paid on deposits.

 

Net interest income was $26.2 million for the nine months ended September 30, 2024, compared to $25.3 million in the nine months ended September 30, 2023. The net interest margin for the nine months ended September 30, 2024 was 4.25% compared to 4.15% for the nine months ended September 30, 2023. The increase in net interest income was due to higher yields on interest earning assets, and lower balances of interest-bearing liabilities offsetting higher rates paid on deposits.

Provision for Credit Losses.

We recorded a recovery for credit losses of $714,000 for the three months ended September 30, 2024 compared to a recovery for credit losses of $333,000 for the three months ended September 30, 2023. We recorded a recovery of credit losses of $806,000 for the nine months ended September 30, 2024 compared to a recovery of credit losses of $480,000 for the nine months ended September 30, 2023. Our allowance for credit losses was $8.0 million at September 30, 2024 compared to $8.2 million at September 30, 2023. The ratio of our allowance for credit losses to total loans was 1.15% at September 30, 2024 compared to 1.15% at September 30, 2023, while the allowance for credit losses to non-performing loans was 201.6% at September 30, 2024 compared to 213.5% at September 30, 2023. The Company had net recoveries on previously charged off loans of $132,000 in the quarter ended September 30, 2024 as compared to net recoveries of $255,000 in the quarter ended September 30, 2023 and net recoveries of $284,000 in the nine months ended September 30, 2024 as compared to net recoveries of $421,000 in the nine months ended September 30, 2023.

Non-interest Income. For the three months ended September 30, 2024, noninterest income totaled $696,000 compared to $882,000 for the quarter ended September 30, 2023. For the quarter ended September 30, 2023, the Company recognized a gain of $188,000 on the sale of a former branch building.

 

For the nine months ended September 30, 2024, noninterest income totaled $1.9 million as compared to $3.1 million for the nine months ended September 30, 2023. In the nine months ended September 30, 2023, the Company recognized a gain of $678,000 on the sale of foreclosed real estate, a gain of $188,000 on the sale of a former branch building and $225,000 in life insurance death benefits.

 

Non-interest Expense. For the three months ended September 30, 2024, noninterest expense totaled $5.5 million compared to $5.0 million in the three months ended September 30, 2023. Compensation and benefits increased $344,000, or 10.9%, due to increases in salary and benefits. Professional fees increased by $180,000, or 81.9%, primarily due to legal and accounting costs related to the Company becoming a public company, and data processing expense increased by $21,000 or 6.2%.

44

BV FINANCIAL, INC. AND SUBSIDIARIES

 

These increases were partially offset by decreases in all other categories of expenses.

 

For the nine months ended September 30, 2024, noninterest expense totaled $15.3 million as compared to $14.3 million in the nine months ended September 30, 2023. Compensation and benefits increased $827,000, or 9.3%, due to increases in staffing and salaries and benefits. Professional fees increased $160,000, or 26.8%, primarily due to legal and accounting costs related to the Company becoming a public company. Expenses also increased in the occupancy, data processing and other expense categories while decreases occurred in foreclosed real estate costs, equipment and advertising expenses.

Income Tax Expense. We recognized income tax expense of $1.4 million for each of the three months ended September 30, 2024 and 2023, resulting in effective rates of 27.5% and 27.5%, respectively. In the nine months ended September 30, 2024 and 2023, we recognized income tax expense of $3.8 million and $3.9 million, respectively, resulting in effective tax rates of 27.9% and 26.7%, respectively.

Asset Quality. Non-performing assets at September 30, 2024 totaled $4.1 million consisting of $3.9 million in nonperforming loans and $160,000 in other real estate owned, compared to $10.7 million at December 31, 2023, consisting of $10.6 million in non-performing loans and $170,000 in other real estate owned. During the quarter, our largest loan on non-accrual, a $3.8 million investor commercial real estate loan paid off. At September 30, 2024, the allowance for credit losses on loans was $8.0 million, which represented 1.15% of total loans and 201.6% of non-performing loans compared to $8.6 million at December 31, 2023, which represented 1.21% of total loans and 81.1% of non-performing loans.

Liquidity and Capital Resources

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 September 30, 2024, we had $151.6 million available under a line of credit with the FHLB of Atlanta, and had $23.0 million of FHLB in unfunded letters of credit used to secure municipal deposits outstanding against the line of credit with the FHLB of Atlanta. This resulted in additional borrowing availability from the FHLB of $128.6 million, none of which was outstanding at September 30, 2024. The Company also has a short-term unsecured facility from a correspondent bank in the amount of $20.0 million.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period. We are committed to maintaining a strong liquidity position.

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 September 30, 2024, the Company had $10.0 million in brokered deposits and no brokered deposits at September 30, 2023. In addition, we had $57.7 million of municipal deposits at September 30, 2024, which represented 9.1% of total deposits. The Bank's uninsured deposits totaled $204.6 million, or 30.1% of total deposits, of which $51.6 million were secured using the market value of pledged collateral or letters of credit issued by FHLB, and an additional $45.4 million were deposits of the Company at the Bank.

Capital Resources. At September 30, 2024, the Bank exceeded all of its regulatory capital requirements and was categorized as well capitalized. Management is not aware of any conditions or events since the most recent notification that would change our category.

 

45

BV FINANCIAL, INC. AND SUBSIDIARIES

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable, as the Company is a smaller reporting company.

Item 4. Controls and Procedures

 

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Co-Chief Executive Officers and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2024. Based on that evaluation, the Company’s management, including the Co-Chief Executive Officers and the Chief Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

 

During the quarter ended September 30, 2024, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

46

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Part II – Other Information

The Company is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed under the heading "Risk Factors" contained in the Annual Report on Form 10-K for the year ended December 31, 2023. The Company's evaluation of the risk factors applicable to it has not changed materially from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On July 30, 2024, the Company announced that it had adopted a stock repurchase program for up to 10% of the Company’s outstanding shares of common stock (approximately 1,138,772 shares). The program does not have a scheduled expiration date and the Company's Board has the right to suspend or discontinue the program at any time.

 

The following table provides information on repurchases by the Company of its common stock under the Company’s Board approved program during the quarter ended September 30, 2024.

Period

 

Total Number of Shares Purchased

 

 

Average Price Paid Per Share

 

 

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

 

 

Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs

 

July 1 - 31, 2024

 

 

—

 

 

$

—

 

 

 

—

 

 

 

1,138,772

 

August 1 - 31, 2024

 

 

10,000

 

 

 

13.92

 

 

 

10,000

 

 

 

1,128,772

 

September 1 - 30, 2024

 

 

19,500

 

 

 

15.41

 

 

 

19,500

 

 

 

1,109,272

 

  Total

 

 

29,500

 

 

$

14.90

 

 

 

29,500

 

 

 

 

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended September 30, 2024, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

47

BV FINANCIAL, INC. AND SUBSIDIARIES

 

Item 6. Exhibits

 

3.1

 

Amended and Restated Articles of Incorporation of BV Financial, Inc. (1)

 

 

 

3.2

 

Amended and Restated Bylaws of BV Financial Bancorp, Inc. (2)

 

10.1

 

BV Financial, Inc. 2024 Equity Incentive Plan (3)

 

31.1

 

31.2

 

 

Certification of Co- Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Certification of Co- Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

31.3

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32

 

Certification of Co-Chief Executive Officers and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101

 

The following materials for the quarter ended September 30, 2024, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements

 

 

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)

 

(1)
Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 8-A (Commission File No. 001-41764), filed on July 31, 2023.
(2)
Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-270496), filed on March 13, 2023.
(3)
Incorporated by reference to Appendix A to the Proxy Statement for the Annual Meeting of Stockholders (Commission File No. 001-41764), filed on August 1, 2024.

 

48

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

BV FINANCIAL, INC.

 

 

 

 

 

 

Date: November 13, 2024

 

/s/ Timothy L. Prindle

 

 

 

 

 

Timothy L. Prindle

Co-President and Chief Executive Officer

Date: November 13, 2024

 

/s/ David M. Flair

 

 

David M. Flair

 

 

Co-President and Chief Executive Officer

 

 

 

 

 

 

Date: November 13, 2024

 

/s/ Michael J. Dee

 

 

Michael J. Dee

 

 

Executive Vice President and Chief Financial Officer

 

49

EX-10.1 2 bvfl-ex10_1.htm EX-10.1 EX-10.1

Exhibit 10.1

 

BV FINANCIAL, INC.

2024 EQUITY INCENTIVE PLAN

ARTICLE 1 - GENERAL

Section 1.1 Purpose, Effective Date and Term. The purpose of this BV Financial Inc. 2024 Equity Incentive Plan (the “Plan”) is to promote the long-term financial success of BV Financial, Inc. (the “Company”), and its Subsidiaries, including BayVanguard Bank (the “Bank”) by providing a means to attract, retain and reward individuals who contribute to that success and to further align their interests with those of the Company’s stockholders through the ownership of shares of Company Stock. The “Effective Date” of the Plan shall be the date on which the Plan satisfies the applicable stockholder approval requirements. The Plan will remain in effect as long as any Awards remain outstanding; provided, however, that no Awards may be granted under the Plan after the day immediately prior to the ten-year anniversary of the Effective Date. Upon stockholder approval of this Plan, no further awards shall be granted under the BV Financial, Inc. 2017 Stock Option Plan (the “2017 Stock Option Plan”) or the BV Financial, Inc. 2021 Equity Incentive Plan (the “2021 Equity Incentive Plan”), and the 2017 Stock Option Plan and the 2021 Equity Incentive Plan shall remain in existence solely for the purpose of administering outstanding grants thereunder.

Section 1.2 Administration. The Plan shall be administered by the Compensation Committee of the Board of Directors (the “Committee”), in accordance with Section 5.1.

Section 1.3 Participation. Each individual who is granted or holds an Award in accordance with the terms of the Plan will be a Participant in the Plan (a “Participant”). The grant of Awards shall be limited to Employees and Directors of, and service providers to, the Company or any Subsidiary.

Section 1.4 Definitions. Capitalized terms used in the Plan are defined in Article 8 and elsewhere in the Plan.

 

ARTICLE 2 - AWARDS

Section 2.1 General. Any Award under the Plan may be granted singularly, or in combination with another Award (or Awards). Each Award under the Plan shall be subject to the terms and conditions of the Plan and any additional terms, conditions, limitations and restrictions provided by the Committee with respect to the Award and as evidenced in an Award Agreement. Every Award under the Plan shall require a written Award Agreement. Subject to the provisions of Section 2.2(d), an Award may be granted as an alternative to or replacement of an existing award under the Plan or any other plan of the Company or any Subsidiary (provided, however, that no reload Awards shall be granted hereunder) or as the form of payment for grants or rights earned or due under any other compensation plan or arrangement of the Company or its Subsidiaries, including without limitation the plan of any entity acquired by the Company or any Subsidiary. The types of Awards that may be granted under the Plan include:

(a) Stock Options. A Stock Option means a grant under Section 2.2 that represents the right to purchase shares of Stock at an Exercise Price established by the Committee. Any Stock Option may be either an Incentive Stock Option (an “ISO”) that is intended to satisfy the requirements applicable to an “incentive stock option” described in Code Section 422(b), or a Non-Qualified Stock Option (a “Non-Qualified Option”) that is not intended to be an ISO, provided, however, that no ISOs may be granted: (i) after the ten-year anniversary of the Effective Date or the date the Plan is approved by the Board of Directors, whichever is earlier, or (ii) to a non-Employee. Unless otherwise specifically provided by its terms, any Stock Option granted under the Plan to an Employee shall be an ISO to the maximum extent permitted. Any ISO granted under this Plan that does not qualify as an ISO for any reason (whether at the time of grant or as the result of a subsequent event) shall be deemed to be a Non-Qualified Option. In addition, any ISO granted under this Plan may be unilaterally modified by the Committee to disqualify the Stock Option from ISO treatment such that it shall become a Non-Qualified Option; provided however, that any modification will be ineffective if it causes the Award to be subject to Code Section 409A (unless, as modified, the Award complies with Code Section 409A).

A-1

 

 

(b) Restricted Stock Awards. A Restricted Stock Award means a grant of shares of Stock under Section 2.3 for no consideration or for such minimum consideration as may be required by applicable law, subject to a time-based vesting schedule or the satisfaction of market conditions or performance conditions.

(c) Restricted Stock Units. A Restricted Stock Unit means a grant under Section 2.4 denominated in shares of Stock that is similar to a Restricted Stock Award except no shares of Stock are actually awarded on the date of grant of a Restricted Stock Unit. A Restricted Stock Unit is subject to a time-based vesting schedule or the satisfaction of market conditions or performance conditions and shall be settled in shares of Stock, cash, or a combination thereof.

(d) Performance Awards. A Performance Award means an Award granted under Sections 2.2, 2.3 or 2.4 that vests upon the achievement of one or more specified performance measures, as further set forth in Section 8.1 under “Performance Award.”

Section 2.2 Stock Options.

(a) Grant of Stock Options. Each Stock Option shall be evidenced by an Award Agreement that specifies: (i) the number of Stock Options covered by the Award; (ii) the date of grant of the Stock Option and the Exercise Price; (iii) the vesting period or conditions to exercisability or vesting; and (iv) such other terms and conditions not inconsistent with the Plan, including the effect of termination of a Participant’s employment or Service with the Company as the Committee may, in its discretion, prescribe. Stock Options may be granted as Performance Awards.

(b) Terms and Conditions. A Stock Option shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee. In no event, however, shall a Stock Option expire later than ten (10) years after the date of its grant (or five (5) years with respect to an ISO granted to an Employee who is a 10% Stockholder). The “Exercise Price” of each Stock Option shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant (or, if greater, the par value of a share of Stock); provided, however, that the Exercise Price of an ISO shall not be less than 110% of Fair Market Value of a share of Stock on the date of grant if granted to a 10% Stockholder; further, provided, that the Exercise Price may be higher or lower in the case of Stock Options granted or exchanged in replacement of existing Awards held by an employee or director of or service provider to an acquired entity. The payment of the Exercise Price shall be by cash or, subject to limitations imposed by applicable law, by such other means as the Committee may from time to time permit, including: (i) by tendering, either actually or constructively by attestation, shares of Stock valued at Fair Market Value as of the date of exercise; (ii) by irrevocably authorizing a third party, acceptable to the Committee, to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Stock Option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise; (iii) by net settlement of the Stock Option, using a portion of the shares of Stock obtained on exercise in payment of the Exercise Price (and if applicable, tax withholding); (iv) by personal, certified or cashier’s check; (v) by other property deemed acceptable by the Committee; or (vi) by any combination thereof. The total number of shares of Stock that may be acquired upon the exercise of a Stock Option shall be rounded down to the nearest whole share, with cash-in-lieu paid by the Company, at its discretion, for the value of any fractional share.

(c) Prohibition of Cash Buy-Outs of Underwater Stock Options. Under no circumstances will any Stock Option with an Exercise Price as of an applicable date that is greater than the Fair Market Value of a share of Stock as of the same date that was granted under the Plan be bought back by the Company without stockholder approval.

(d) Prohibition Against Repricing. Except for adjustments pursuant to Section 3.4, and reductions of the Exercise Price approved by the Company’s stockholders, neither the Committee nor the Board of Directors shall have the right or authority to (i) make any adjustment or amendment that reduces or would have the effect of reducing the Exercise Price of a Stock Option previously granted under the Plan, (ii) cancel a Stock Option when the Exercise Price per share exceeds the Fair Market Value of one share of Stock in exchange for cash or another Award (other than in connection with a Change in Control), or (iii) take any other action with respect to a Stock Option that would be treated as a repricing under the rules and regulations of the principal U.S. Exchange on which the shares of Stock are listed.

A-2

 

(e) Prohibition on Paying Dividends. No dividends shall be paid on Stock Options and no Dividend Equivalent Rights may be granted with respect to Stock Options.

Section 2.3. Restricted Stock Awards.

(a) Grant of Restricted Stock. Each Restricted Stock Award shall be evidenced by an Award Agreement, that specifies: (i) the number of shares of Stock covered by the Restricted Stock Award; (ii) the date of grant of the Restricted Stock Award; (iii) the vesting period or conditions to vesting; and (iv) such other terms and conditions not inconsistent with the Plan, including the effect of termination of Participant’s employment or Service with the Company as the Committee may, in its discretion, prescribe. Restricted Stock Awards may be granted as Performance Awards. All Restricted Stock Awards shall be in the form of issued and outstanding shares of Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine, including electronically and/or solely on the books and records maintained by the transfer agent. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock (including that the Restricted Stock may not be sold, encumbered, hypothecated or otherwise transferred except in accordance with the terms of the Plan and Award Agreement) and/or that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.

(b) Terms and Conditions. Each Restricted Stock Award shall be subject to the following terms and conditions:

(i) Dividends. No cash dividends shall be paid with respect to any Restricted Stock Awards unless and until the Participant vests in the underlying share(s) of Restricted Stock. Upon the vesting of a Restricted Stock Award, any dividends declared but not paid during the vesting period shall be paid within thirty (30) days following the vesting date. Any stock dividends declared on shares of Stock subject to a Restricted Stock Award shall be subject to the same restrictions and shall vest at the same time as the shares of Restricted Stock from which said dividends were derived. All unvested dividends shall be forfeited by the Participants to the extent his or her underlying Restricted Stock Awards are forfeited.

(ii) Voting Rights. Unless the Committee determines otherwise with respect to any Restricted Stock Award and specifies such determination in the relevant Award Agreement, a Participant shall have voting rights related to unvested, non-forfeited Restricted Stock Awards and the voting rights may be exercised by the Participant in his or her discretion.

(iii) Tender Offers and Merger Elections. Each Participant to whom a Restricted Stock Award is granted shall have the right to respond, or to direct the response, with respect to the related shares of Restricted Stock, to any tender offer, exchange offer, cash/stock merger consideration election or other offer made to, or elections made by, the holders of shares of Stock. Such a direction for any shares of Restricted Stock shall be given by proxy or ballot (if the Participant is the beneficial owner of the shares of Restricted Stock for voting purposes) or by completing and filing, with the inspector of elections, the trustee or such other person who shall be independent of the Company as the Committee shall designate in its direction (if the Participant is not a beneficial owner), a written direction in the form and manner prescribed by the Committee. If no direction is given, then the shares of Restricted Stock shall not be tendered.

Section 2.4 Restricted Stock Units.

(a) Grant of Restricted Stock Unit Awards. Each Restricted Stock Unit shall be evidenced by an Award Agreement that specifies: (i) the number of Restricted Stock Units covered by the Award; (ii) the date of grant of the Restricted Stock Units; (iii) the Restriction Period; and (iv) such other terms and conditions not inconsistent with the Plan, including the effect of termination of a Participant’s employment or Services with the Company as the Committee may, in its discretion, prescribe.

A-3

 

(b) Terms and Conditions. Each Restricted Stock Unit Award shall be subject to the following terms and conditions:

(i) A Restricted Stock Unit Award shall be similar to a Restricted Stock Award except that no shares of Stock are actually awarded to the recipient on the date of grant. The Committee shall impose such conditions and/or restrictions on any Restricted Stock Unit Award granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Restricted Stock Unit, time-based restrictions and vesting following the attainment of performance measures, restrictions under applicable laws or under the requirements of any Exchange or market upon which shares of Stock may be listed, or holding requirements or sale restrictions placed by the Company upon vesting of the Restricted Stock Units. The Committee may make grants of Restricted Stock Units upon such terms and conditions as it may determine, which may include, but is not limited to, deferring receipt of the underlying shares of Stock provided the deferral complies with Section 409A of the Code and applicable provisions of the Plan.

(ii) Restricted Stock Units may be granted as Performance Awards.

(iii) Subject to the provisions of the Plan and the applicable Award Agreement, during the period, if any, set by the Committee, commencing with the date of grant of a Restricted Stock Unit for which a Participant’s continued Service is required (the “Restriction Period”), and until the later of (A) the expiration of the Restriction Period and (B) the date the applicable performance measures (if any) are satisfied, the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber Restricted Stock Units.

(iv) A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.

(v) No dividends shall be paid on Restricted Stock Units. In the sole discretion of the Committee, exercised at the time of grant, Dividend Equivalent Rights may be assigned to Restricted Stock Units. A Dividend Equivalent Right, if any, shall be paid at the same time as the shares of Stock or cash subject to the Restricted Stock Unit are distributed to the Participant and is otherwise subject to the same rights and restrictions as the underlying Restricted Stock Unit.

Section 2.5 Vesting of Awards. The Committee shall specify the vesting schedule or conditions of each Award. At least ninety-five percent (95%) of all Awards under the Plan shall be subject to a vesting requirement of at least one year of Service following the grant of the Award and evidenced in the Award Agreement, subject to acceleration of vesting, to the extent authorized by the Committee or set forth in the Award Agreement, upon the Participant’s death, Disability or an Involuntary Termination in connection with a Change in Control as set forth in Article IV.

Section 2.6 Deferred Compensation. Subject to approval by the Committee before an election is made, an Award of Restricted Stock Units may be deferred pursuant to a valid deferral election made by a Participant. If a deferral election is made by a Participant, the Award Agreement shall specify the terms of the deferral and shall constitute the deferral plan pursuant to the requirements of Code Section 409A. If any Award would be considered “deferred compensation” as defined under Code Section 409A (“Deferred Compensation”), the Committee reserves the absolute right (including the right to delegate such right) to unilaterally amend the Plan or the Award Agreement, without the consent of the Participant, to maintain exemption from, or to comply with, Code Section 409A. Any amendment by the Committee to the Plan or an Award Agreement pursuant to this Section 2.6 shall maintain, to the extent practicable, the original intent of the applicable provision without violating Code Section 409A. A Participant’s acceptance of any Award under the Plan constitutes acknowledgement and consent to such rights of the Committee, without further consideration or action. Any discretionary authority retained by the Committee pursuant to the terms of this Plan or pursuant to an Award Agreement shall not be applicable to an Award which is determined to constitute Deferred Compensation, if such discretionary authority would contravene Code Section 409A. Unless otherwise provided in a valid election form intended to comply with Code Section 409A, all Awards that are considered Deferred Compensation hereunder shall settle and be paid in no event later than 2½ months following the end of the calendar year with respect to which the Award’s substantial risk of forfeiture lapsed.

A-4

 

Section 2.7. Effect of Termination of Service on Awards. The Committee shall establish the effect of a Termination of Service on the continuation of rights and benefits available under an Award and, in so doing, may make distinctions based upon, among other things, the reason(s) for the Termination of Service and type of Award. Unless otherwise specified by the Committee and set forth in an Award Agreement or as set forth in any employment or severance agreement entered into by and between the Company and/or a Subsidiary and the Participant, the following provisions shall apply to each Award granted under this Plan:

(a) Upon the Participant’s Termination of Service for any reason other than due to Disability, death or Cause, Stock Options shall be exercisable only as to those shares that were immediately exercisable by the Participant at the date of termination, and may be exercised for the remaining unexpired term of the Stock Option following termination, provided, however, in order to obtain ISO treatment for Stock Options, the Stock Option must be exercised within three (3) months of the Termination of Service, and any Restricted Stock or Restricted Stock Units that have not vested as of the date of Termination of Service shall expire and be forfeited.

(b) In the event of a Termination of Service for Cause, all Stock Options granted to a Participant that have not been exercised (whether or not vested), and all Restricted Stock Awards and Restricted Stock Units that have not vested, shall expire and be forfeited.

(c) Upon Termination of Service on account of Disability or death, all Stock Options shall be fully exercisable, whether or not then exercisable, and all Restricted Stock Awards and Restricted Stock Units shall immediately vest as to all shares subject to an outstanding Award at the date of Termination of Service. Upon Termination of Service for reasons of death or Disability, any Awards that vest based on the achievement of performance targets shall vest based on achievement at target (or if actual achievement of the performance measures is greater than the target level, at the actual achievement level) as of the date of Disability or death. Stock Options may be exercised for the remaining unexpired term of the Stock Option following Termination of Service due to death or Disability, , provided, however, in order to obtain ISO treatment for Stock Options exercised by heirs or devisees of an optionee, the optionee’s death must have occurred while employed or within three (3) months after Termination of Service.

(d) Notwithstanding anything herein to the contrary, no Stock Option shall be exercisable beyond the last day of the original term of the Stock Option.

(e) Notwithstanding the provisions of this Section 2.7, the effect of a Change in Control on the vesting/exercisability of Stock Options, Restricted Stock Awards, Restricted Stock Units and Performance Awards is as set forth in Article 4.

Section 2.8. Holding Period for Vested Awards. As a condition of receipt of an Award, the Award Agreement may require a Participant to agree to hold a vested Award or shares of Stock received upon exercise of a Stock Option for a period of time specified in the Award Agreement (“Holding Period”). In connection with the foregoing, a Participant may be required to retain direct ownership of such shares until the earlier of (i) the expiration of the Holding Period following the date of vesting or (ii) such person’s termination of Service with the Company and any Subsidiary. The foregoing limitation, if applicable, shall not apply to the extent that an Award vests due to death, Disability or an Involuntary Termination at or following a Change in Control, or to the extent that (x) a Participant directs the Company to withhold or the Company elects to withhold shares of Stock with respect to the vesting or exercise, or, in lieu thereof, to retain, or to sell without notice, a sufficient number of shares of Stock to cover the amount required to be withheld or (y) a Participant exercises a Stock Option by a net settlement, and in the case of (x) and (y) herein, only to the extent of the shares are withheld for tax purposes or for purposes of the net settlement.

ARTICLE 3 - Shares Subject to Plan

Section 3.1 Available Shares. The shares of Stock with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued, currently held or, to the extent permitted by applicable law, subsequently acquired by the Company, including shares purchased in the open market or in private transactions.

Section 3.2 Share Limitations.

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(a) Share Reserve. Subject to the following provisions of this Section 3.2, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries under the Plan shall be equal to 1,371,857 shares of Stock. The maximum number of shares of Stock that may be delivered pursuant to the exercise of Stock Options (all of which may be granted as ISOs) is 979,898 shares of Stock, which represents 10.0% of the number of shares sold in connection with the second-step mutual-to-stock conversion of Bay-Vanguard, M.H.C. and the related stock issuance of the Company (the “Conversion”). The maximum number of shares of Stock that may be issued as Restricted Stock Awards and Restricted Stock Units is 391,959 shares of Stock, which represents 4.0% of the number of shares sold in connection with the Conversion. The aggregate number of shares available for grant under this Plan and the number of shares of Stock subject to outstanding awards shall be subject to adjustment as provided in Section 3.4.

(b) Computation of Shares Available. For purposes of this Section 3.2 and in connection with the granting of a Stock Option, Restricted Stock or Restricted Stock Unit, the number of shares of Stock available for the grant of Awards shall be reduced by the number of shares previously granted, subject to the following. To the extent any shares of Stock covered by an Award (including Restricted Stock Awards and Restricted Stock Units) under the Plan are not delivered to a Participant or beneficiary for any reason, including because the Award is forfeited or canceled or because a Stock Option is not exercised, then the shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan. To the extent that: (i) a Stock Option is exercised by using an actual or constructive exchange of shares of Stock to pay the Exercise Price; (ii) shares of Stock are withheld to satisfy tax withholding upon exercise or vesting of an Award granted hereunder; or (iii) shares are withheld to satisfy the Exercise Price of Stock Options in a net settlement of Stock Options, then the number of shares of Stock available shall be reduced by the gross number of Stock Options exercised or Stock vested prior to the return of shares to satisfy tax withholding, rather than by the net number of shares of Stock issued.

Section 3.3 Limitations on Grants to Employees and Directors.

 

(a)
Award Limitations. No individual Employee shall receive Awards representing more than twenty-five percent (25%) of the Stock available for issuance under the Plan. Non-Employee Directors (i.e., directors who are not also Employees of the Company or any Subsidiary) shall not receive, individually, Awards representing more than five percent (5%) of the Stock available for issuance under the Plan, and in the aggregate, shall not receive more than thirty percent (30%) of the Stock available for issuance as Awards under the Plan.

 

(b) Initial Grant to Non-Employee Directors. Each non-Employee Director of the Board of Directors of the Company who is in the Service of the Company on the Effective Date (i.e., the date of the 2024 Company annual stockholder meeting at which stockholders approve the Plan (“2024 Annual Meeting”) shall automatically be granted an Award of Stock Options and Restricted Stock as follows:

(i) Stock Options – Non-Employee Directors. Each non-Employee Director of the Board of Directors of the Company who is in the Service of the Company immediately following the 2024 Annual Meeting, shall receive, on the day immediately following the Effective Date, a grant of 36,746 Stock Options. These grants will vest at the rate of 25% per year, subject to acceleration in the event of death, Disability or an Involuntary Termination at or following a Change in Control.

(ii) Restricted Stock Awards – Non-Employee Directors. Each non-Employee Director of the Board of Directors of the Company who is in the Service of the Company immediately following the 2024 Annual Meeting shall receive, on the day immediately following the Effective Date, a grant of 14,698 shares of Restricted Stock. These grants will vest at the rate of 25% per year, subject to acceleration in the event of death, Disability or an Involuntary Termination at or following a Change in Control.

 

(c) Awards Subject to Adjustment. The aggregate number of shares available for grant under this Plan and the number of shares subject to outstanding Awards, including the limit on the number of Awards available for grant under this Plan described in this Section 3.3, shall be subject to adjustment as provided in Section 3.4.

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Section 3.4 Corporate Transactions.

(a) General. If the shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares for which grants of Stock Options, Restricted Stock and Restricted Stock Unit Awards may be made under the Plan shall be adjusted proportionately and accordingly by the Committee, so that the proportionate interest of the grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding Stock Options shall not change the aggregate purchase price payable with respect to shares that are subject to the unexercised portion of the Stock Option outstanding but shall include a corresponding proportionate adjustment in the purchase price per share. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Stock Options, Restricted Stock Awards and Restricted Stock Units (including, without limitation, cancellation of Stock Options, Restricted Stock Awards and Restricted Stock Units in exchange for the in-the-money value, if any, of the vested portion thereof, or substitution or exchange of Stock Options, Restricted Stock Awards and Restricted Stock Units using stock of a successor or other entity) in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence) affecting the Company or any parent or Subsidiary or the financial statements of the Company or any parent or Subsidiary, or in response to changes in applicable laws, regulations, or accounting principles.

(b) Merger in which Company is Not Surviving Entity. In the event of any merger, consolidation, or other business reorganization (including, but not limited to, a Change in Control) in which the Company is not the surviving entity, unless otherwise set forth in the agreement relating to the consummation of such merger, consolidation or other business reorganization, any Stock Options granted under the Plan which are outstanding immediately prior to such merger, consolidation or other business combination shall be converted into Stock Options to purchase voting common equity securities of the business entity which survives such merger, consolidation or other business reorganization having substantially the same terms and conditions as the outstanding Stock Options under this Plan and reflecting the same economic benefit (as measured by the difference between the aggregate Exercise Price and the value exchanged for outstanding shares of Stock in such merger, consolidation or other business reorganization), all as determined by the Committee prior to the consummation of such merger. The Committee may, at any time prior to the consummation of such merger, consolidation or other business reorganization, direct that all, but not less than all, outstanding Stock Options be canceled as of the effective date of such merger, consolidation or other business reorganization in exchange for a cash (or acquiror stock) payment per share of Stock equal to the excess (if any) of the value exchanged for an outstanding share of Stock in such merger, consolidation or other business reorganization over the Exercise Price of the Stock Option being canceled; provided, further, that in the event the Exercise Price of outstanding Stock Options exceed the value to be exchanged for an outstanding share of Stock (an “Underwater Stock Option”) in such merger, consolidation or other business reorganization, the Committee may, in its discretion, cancel and terminate such Underwater Stock Options without the consent of the holder of the Stock Option and without any payment to such holder.

Section 3.5 Delivery of Shares. Delivery of shares of Stock or other amounts under the Plan shall be subject to the following:

(a) Compliance with Applicable Laws. Notwithstanding any other provision of the Plan, the Company shall have no obligation to deliver any shares of Stock or make any other distribution of benefits under the Plan unless such delivery or distribution complies with all applicable laws (including, the requirements of the Securities Act), and the applicable requirements of any Exchange or similar entity.

(b) Certificates. To the extent that the Plan provides for the issuance of shares of Stock, the issuance may be made on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any Exchange.

ARTICLE 4 - CHANGE IN CONTROL

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Section 4.1 Consequence of a Change in Control. Subject to the provisions of Section 3.4 (relating to the adjustment of shares and cancellation of Stock Options in exchange for a cash or stock payment of the in-the-money value) and except as otherwise provided in the Plan and unless the Committee determines otherwise:

(a) Upon an Involuntary Termination at or following a Change in Control, all Stock Options then held by the Participant shall become fully earned and exercisable (subject to the expiration provisions otherwise applicable to the Stock Option). All Stock Options may be exercised for a period of one year following an Involuntary Termination at or following a Change in Control, provided, however, that no Stock Option shall be eligible for treatment as an ISO in the event such Stock Option is exercised more than three (3) months following a termination of employment.

(b) Upon an Involuntary Termination at or following a Change in Control, all Awards of Restricted Stock Awards and Restricted Stock Units, shall be fully earned and vested immediately.

(c) Upon an Involuntary Termination at or following a Change in Control, all Performance Awards shall vest at the greater of the target level of performance or actual annualized performance measured as of the most recent completed fiscal quarter.

(d) Notwithstanding anything in the Plan to the contrary, in the event of a Change in Control in which the Company is not the surviving entity, any Awards granted under the Plan which are outstanding immediately prior to such Change in Control shall become fully vested in the event the successor entity does not assume the Awards granted under the Plan and Performance Awards shall vest at the rate specified in Section 4.1(c) of the Plan.

Section 4.2 Definition of Change in Control. For purposes of the Plan, unless otherwise provided in an Award Agreement, a “Change in Control” shall be deemed to have occurred upon the earliest to occur of the following:

(a) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (a “Person”), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty five percent (25%) or more of the combined voting power of the Company’s then outstanding Voting Securities, provided that, notwithstanding the foregoing and for all purposes of this Plan: (a) the term “Person” shall not include (1) the Company or any of its Subsidiaries, (2) an employee benefit plan of the Company or any of its Subsidiaries (including the Plan), and any trustee or other fiduciary holding securities under any such plan, or (3) a corporation or other entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Stock of the Company; (b) no Person shall be deemed the beneficial owner of any securities acquired by such Person in an Excluded Transaction; and (c) no Director or officer of the Company or any direct or indirect Subsidiary of the Company (or any affiliate of any such Director or officer) shall, by reason of any or all of such Directors or officers acting in their capacities as such, be deemed to beneficially own any securities beneficially owned by any other such Director or officer (or any affiliate thereof); or

(b) the Incumbent Directors cease, for any reason, to constitute a majority of the Whole Board; or

(c) a plan of reorganization, merger, consolidation or similar transaction involving the Company and one or more other corporations or entities is consummated, other than a plan of reorganization, merger, consolidation or similar transaction that is an Excluded Transaction, or the stockholders of the Company approve a plan of complete liquidation of the Company, or a sale, liquidation or other disposition of all or substantially all of the assets of the Company or any bank Subsidiary of the Company is consummated; or

(d) a tender offer is made for 25% or more of the outstanding Voting Securities of the Company and the stockholders owning beneficially or of record 25% or more of the outstanding Voting Securities of the Company have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror and the tender offer is consummated.

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Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired beneficial ownership of more than the permitted amount of the then outstanding common stock or Voting Securities as a result of the acquisition of Stock or Voting Securities by the Company, which by reducing the number of shares of Stock or Voting Securities then outstanding, increases the proportional number of shares beneficially owned by the Subject Person; provided, however, that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Stock or Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the beneficial owner of any additional Stock or Voting Securities which increases the percentage of the then outstanding Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. In the event that an Award constitutes Deferred Compensation, and the settlement of, or distribution of benefits under, such Award is to be triggered solely by a Change in Control, then with respect to such Award a Change in Control shall be defined as required under Code Section 409A, as in effect at the time of such transaction.

 

ARTICLE 5 - COMMITTEE

Section 5.1 Administration. The Plan shall be administered by the members of the Compensation Committee of the Company who are Independent Board Members. If the Committee consists of fewer than two Independent Board Members, then the Board of Directors shall appoint to the Committee such additional Independent Board Members as shall be necessary to provide for a Committee consisting of at least two Independent Board Members. Any members of the Committee who do not qualify as Independent Board Members shall abstain from participating in any discussion or decision to make or administer Awards that are made to Participants who at the time of consideration for such Award are persons subject to the short-swing profit rules of Section 16 of the Exchange Act. The Board of Directors (or if necessary to maintain compliance with the applicable listing standards, those members of the Board of Directors who are “independent directors” under the corporate governance statutes or rules of any Exchange on which the Company lists, or has listed or seeks to list its securities) may, in their discretion, take any action and exercise any power, privilege or discretion conferred on the Committee under the Plan with the same force and effect under the Plan as if done or exercised by the Committee.

Section 5.2 Powers of Committee. The Committee’s administration of the Plan shall be subject to the following:

(a) The Committee will have the authority and discretion to select from among the Company’s and its Subsidiaries’ Employees, Directors and service providers those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, features, (including automatic exercise in accordance with Section 7.18) performance criteria, restrictions (including without limitation, provisions relating to non-competition, non-solicitation and confidentiality), and other provisions of such Awards, to cancel or suspend Awards (subject to the restrictions imposed by Article 6) and to reduce, eliminate or accelerate any restrictions applicable to an Award at any time after the grant of the Award, or to extend the time period to exercise a Stock Option, provided that such extension is consistent with Code Section 409A. Notwithstanding the foregoing, the Committee will not have the authority or discretion to accelerate the vesting requirements applicable to an Award to avoid the one-year minimum vesting requirement pursuant to Section 2.5 except in the event of a Change in Control as provided under Section 4.1 of the Plan and in the event of termination due to death or Disability.

(b) The Committee will have the authority and discretion to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.

(c) The Committee will have the authority to define terms not otherwise defined herein.

(d) In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the certificate of incorporation and bylaws of the Company and applicable state corporate law.

(e) The Committee will have the authority to: (i) suspend a Participant’s right to exercise a Stock Option during a blackout period (or similar restricted period) or to exercise in a particular manner (i.e., such as a “cashless exercise” or “broker-assisted exercise”) to the extent that the Committee deems it necessary or in the best

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interests of the Company in order to comply with the securities laws and regulations issued by the SEC; and (ii) to extend the period to exercise a Stock Option by a period of time equal to the blackout period, provided that the extension does not violate Section 409A of the Code, the Incentive Stock Option requirements or applicable laws and regulations.

Section 5.3 Delegation by Committee. Except to the extent prohibited by applicable law, the applicable rules of an Exchange upon which the Company lists its shares or the Plan, or as necessary to comply with the exemptive provisions of Rule 16b-3 promulgated under the Exchange Act, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it, including (a) delegating to a committee of one or more members of the Board of Directors who are not “Independent Board Members,” the authority to grant Awards under the Plan to eligible persons who are not then subject to Section 16 of the Exchange Act; or (b) delegating to a committee of one or more members of the Board of Directors who would be eligible to serve on the Compensation Committee of the Company pursuant to the listing requirements imposed by any national securities Exchange on which the Company lists, has listed or seeks to list its securities, the authority to grant awards under the Plan. The acts of such delegates shall be treated hereunder as acts of the Committee and such delegates shall report regularly to the Committee regarding the delegated duties and responsibilities and any Awards so granted. Any such allocation or delegation may be revoked by the Committee at any time.

Section 5.4 Information to be Furnished to Committee. As may be permitted by applicable law, the Company and its Subsidiaries shall furnish the Committee with data and information it determines may be required for it to discharge its duties. The records of the Company and its Subsidiaries as to a Participant’s employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined by the Committee to be manifestly incorrect. Subject to applicable law, Participants and other persons entitled to benefits under the Plan must furnish the Committee any evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.

Section 5.5 Committee Action. The Committee shall hold meetings, and may make administrative rules and regulations, as it may deem proper. A majority of the members of the Committee shall constitute a quorum, and the action of a majority of the members of the Committee present at a meeting at which a quorum is present, as well as actions taken pursuant to the unanimous written consent of all of the members of the Committee without holding a meeting, shall be deemed to be actions of the Committee. Subject to Section 5.1, all actions of the Committee, including interpretations of provisions of the Plan, shall be final and conclusive and shall be binding upon the Company, Participants and all other interested parties. Any person dealing with the Committee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by a member of the Committee or by a representative of the Committee authorized to sign the same in its behalf.

ARTICLE 6 - AMENDMENT AND TERMINATION

Section 6.1 General. The Board of Directors may, as permitted by law, at any time, amend or terminate the Plan, and the Board of Directors or the Committee may, at any time, amend any Award Agreement, provided that no amendment or termination (except as provided in Section 2.6, Section 3.4 and Section 6.2) may cause the Award to violate Code Section 409A, may cause the repricing of a Stock Option, or, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely impair the rights of any Participant or beneficiary under any Award granted under the Plan before the date the amendment is adopted by the Board of Directors or made by the Committee; provided, however, that, no amendment may (a) materially increase the benefits accruing to Participants under the Plan; (b) materially increase the aggregate number of securities that may be issued under the Plan, other than pursuant to Section 3.4, or (c) materially modify the requirements for participation in the Plan, unless the amendment under (a), (b) or (c) above is approved by the Company’s stockholders.

Section 6.2 Amendment to Conform to Law and Accounting Changes. Notwithstanding any provision in this Plan or any Award Agreement to the contrary, the Committee may amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of (i) conforming the Plan or the Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A), or (ii) avoiding an accounting treatment resulting from an accounting pronouncement or interpretation thereof issued by the SEC or Financial Accounting Standards Board subsequent to the adoption of the Plan or the making of the Award affected thereby, which in the sole discretion of the Committee, may materially and adversely affect the financial condition or results of operations of the Company.

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By accepting an Award under this Plan, each Participant agrees and consents to any amendment made pursuant to this Section 6.2 to any Award granted under the Plan without further consideration or action.

ARTICLE 7 - GENERAL TERMS

Section 7.1 No Implied Rights.

(a) No Rights to Specific Assets. Neither a Participant nor any other person shall by reason of participation in the Plan acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right, evidenced by an Award Agreement, to the shares of Stock or amounts, if any, payable or distributable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.

(b) No Contractual Right to Employment or Future Awards. The Plan does not constitute a contract of employment, and selection as a Participant will not give any participating Employee the right to be retained in the employ of the Company or any Subsidiary or any right or claim to any benefit under the Plan, unless the right or claim has specifically accrued under the terms of the Plan. No individual shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to receive a future Award under the Plan.

(c) No Rights as a Stockholder. Except as otherwise provided in the Plan or in an Award Agreement, no Award shall confer upon the holder thereof any rights as a stockholder of the Company before the date on which the individual fulfills all conditions for receipt of such rights.

Section 7.2 Transferability. Except as otherwise so provided by the Committee, Stock Options under the Plan are not transferable except: (i) as designated by the Participant by will or by the laws of descent and distribution; (ii) to a trust established by the Participant, if under Code Section 671 and applicable state law, the Participant is considered the sole beneficial owner of the Stock Option while held in trust, or (iii) between spouses incident to a divorce or pursuant to a domestic relations order, provided, however, in the case of a transfer within the meaning of this Section 7.2(iii), the Stock Option shall not qualify as an ISO as of the day of the transfer. The Committee shall have the discretion to permit the transfer of vested Stock Options (other than ISOs) under the Plan; provided, however, that such transfers shall be limited to Immediate Family Members of Participants, trusts and partnerships established for the primary benefit of Immediate Family Members or to charitable organizations, and; provided, further, that the transfers are not made for consideration to the Participant.

Awards of Restricted Stock shall not be transferable, except in the event of death, before the time that the Awards vest in the Participant. A Restricted Stock Unit Award is not transferable, except in the event of death, before the time that the Restricted Stock Unit Award vests in the Participant and property in which the Restricted Stock Unit is denominated is distributed to the Participant or the Participant’s beneficiary.

A beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

Section 7.3 Designation of Beneficiaries. A Participant may file with the Company a written designation of a beneficiary or beneficiaries under this Plan and may from time to time revoke or amend the designation. Any designation of beneficiary under this Plan shall be controlling over any other disposition, testamentary or otherwise (unless such disposition is pursuant to a domestic relations order); provided, however, that if the Committee is in doubt as to the entitlement of the beneficiary to any Award, the Committee may determine to recognize only the legal representative of the Participant in which case the Company, the Committee and the members thereof shall not be under any further liability to anyone.

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Section 7.4 Non-Exclusivity. Neither the adoption of this Plan by the Board of Directors nor the submission of the Plan to the stockholders of the Company for approval (and any subsequent approval by the stockholders of the Company) shall be construed as creating any limitations on the power of the Board of Directors or the Committee to adopt other incentive arrangements as may be deemed desirable, including, without limitation, the granting of Restricted Stock Awards, Restricted Stock Units and/or Stock Options otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

Section 7.5 Award Agreement. Each Award granted under the Plan shall be evidenced by an Award Agreement. A copy of the Award Agreement, in any medium chosen by the Committee, shall be provided (or made available electronically) to the Participant, and the Committee may, but need not require, that the Participant sign a copy of the Award Agreement. In the absence of a specific provision in the Award Agreement, the terms of the Plan shall control. In the event of a conflict between the terms of an Award Agreement and the Plan, the terms of the Plan will control.

Section 7.6 Form and Time of Elections; Notification Under Code Section 83(b). Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be filed with the Company at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require. Notwithstanding anything herein to the contrary, the Committee may, on the date of grant or at a later date, as applicable, prohibit an individual from making an election under Code Section 83(b). If the Committee has not prohibited an individual from making this election, an individual who makes this election shall notify the Committee of the election within ten (10) days of filing notice of the election with the Internal Revenue Service or as otherwise required by the Committee. This requirement is in addition to any filing and notification required under the regulations issued under the authority of Code Section 83(b).

Section 7.7 Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other written information upon which the person is acting considers pertinent and reliable, and signed, made or presented by the proper party or parties.

Section 7.8 Tax Withholding.

(a) Payment by Participant. Each Participant shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the Participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any taxes from any payment of any kind otherwise due to the Participant. The Company's obligation to deliver evidence of book entry (or stock certificates) to any Participant is subject to and conditioned on tax withholding obligations being satisfied by the Participant.

(b) Payment in Stock. The Committee may require or permit the Company's tax withholding obligation to be satisfied, in whole or in part, by the Company withholding from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser amount as is necessary to avoid liability accounting treatment. For purposes of share withholding, the Fair Market Value of withheld shares shall be determined in the same manner as the value of Stock includible in income of the Participants.

Section 7.9 Action by Company or Subsidiary. Any action required or permitted to be taken by the Company or any Subsidiary shall be by resolution or unanimous written consent of its board of directors, or by action of one or more members of the board of directors (including a committee of the board of directors) who are duly authorized to act for the board of directors, or (except to the extent prohibited by applicable law or applicable rules of the Exchange on which the Company lists its securities) by a duly authorized officer of the Company or Subsidiary.

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Section 7.10 Successors. All obligations of the Company under this Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business, stock, and/or assets of the Company.

Section 7.11 Indemnification. Except as provided in the last sentence of this Section 7.11, to the fullest extent permitted by law and the Company’s governing documents, each person who is or shall have been a member of the Committee, or of the Board of Directors, or an officer or Employee of the Company or a Subsidiary to whom authority was delegated in accordance with Section 5.3, shall be indemnified and held harmless by the Company (i) against and from any loss (including amounts paid in settlement), cost, liability or expense (including reasonable attorneys’ fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan; and (ii) against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute or regulation. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s charter or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. The foregoing right to indemnification shall include the right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition, provided, however, that, if required by applicable law, an advancement of expenses shall be made only upon delivery to the Company of an undertaking by or on behalf of such persons to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such person is not entitled to be indemnified for such expenses. Notwithstanding anything to the contrary in this Plan, the foregoing right to indemnification shall not apply to any compensation that an Employee is required to repay the Company pursuant to the terms of a Company clawback policy.

Section 7.12 No Fractional Shares. Unless otherwise permitted by the Committee, no fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award Agreement. The Committee shall determine whether cash or other property shall be issued or paid in lieu of fractional shares or whether the fractional shares or any rights thereto shall be forfeited or otherwise eliminated by rounding down.

Section 7.13 Governing Law. The Plan, all awards granted hereunder, and all actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Maryland, without reference to principles of conflict of laws, except as superseded by applicable federal law. The federal and state courts located in Baltimore County, Maryland shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of the Plan. By accepting any Award, each Participant, and any other person claiming any rights under the Plan, agrees to submit himself or herself, and any legal action brought with respect to the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.

Section 7.14 Benefits Under Other Plans. Except as otherwise provided by the Committee or as set forth in a Qualified Retirement Plan, non-qualified plan or other benefit plan, Awards to a Participant (including the grant and the receipt of benefits) under the Plan shall be disregarded for purposes of determining the Participant’s benefits under, or contributions to, any Qualified Retirement Plan, non-qualified plan and any other benefit plans maintained by the Participant’s employer. The term “Qualified Retirement Plan” means any plan of the Company or a Subsidiary that is intended to be qualified under Code Section 401(a).

Section 7.15 Validity. If any provision of this Plan is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been included in the Plan.

Section 7.16 Notice. Unless otherwise provided in an Award Agreement, all written notices and all other written communications to the Company provided for in the Plan or an Award Agreement shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), or sent by facsimile, email or prepaid overnight courier to the Company at its principal executive office.

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Notices, demands, claims and other communications shall be deemed given: (i) in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery; (ii) in the case of certified or registered U.S. mail, five (5) days after deposit in the U.S. mail; or (iii) in the case of facsimile or email, the date upon which the transmitting party received confirmation of receipt; provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received, provided they are actually received.

If a communication is not received, it shall only be deemed received upon the showing of an original of the applicable receipt, registration or confirmation from the applicable delivery service. Communications that are to be delivered by U.S. mail or by overnight service to the Company shall be directed to the attention of the Company’s Chief Operating Officer and to the Corporate Secretary, unless otherwise provided in the Participant’s Award Agreement.

Section 7.17 Forfeiture Events. The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. These events include, but are not limited to, termination of employment for Cause, termination of the Participant’s provision of Services to the Company or any Subsidiary, violation of material Company or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct of the Participant that is detrimental to the business or reputation of the Company or any Subsidiary.

Section 7.18 Automatic Exercise. In the sole discretion of the Committee exercised in accordance with Section 5.2(a), any Stock Options that are exercisable but unexercised as of the day immediately before the expiration date of the Stock Option may be automatically exercised in accordance with procedures established for this purpose by the Committee, but only if the Exercise Price is less than the Fair Market Value of a share of Stock on such date and the automatic exercise will result in the issuance of at least one (1) whole share of Stock to the Participant after payment of the Exercise Price and any applicable tax withholding requirements. Payment of the exercise price and any applicable tax withholding requirements shall be made by a net settlement of the Stock Option whereby the number of shares of Stock to be issued upon exercise are reduced by a number of shares having a Fair Market Value on the date of exercise equal to the Exercise Price and any applicable tax withholding.

Section 7.19 Regulatory Requirements. The grant and settlement of Awards under this Plan shall be conditioned upon and subject to compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated thereunder.

Section 7.20. Awards Subject to Company Clawback Policies and Restrictions.

(a)
Clawback Policies. Awards granted hereunder are subject to any clawback policy that may be adopted by the Company from time to time, including the Company’s current clawback policy and pursuant to the provisions of Section 954 of the Dodd-Frank Act, implementing regulations thereunder, or otherwise.

 

(b)
Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to the Company’s insider trading policies and procedures, as in effect from time to time.

 

(c)
Hedging/Pledging Policy Restrictions. Awards under the Plan shall be subject to the Company’s policies relating to hedging and pledging as such may be in effect from time to time.

A-14

 

ARTICLE 8 - DEFINED TERMS; CONSTRUCTION

Section 8.1 In addition to the other definitions contained herein, unless otherwise specifically provided in an Award Agreement, the following definitions shall apply:

“10% Stockholder” means an individual who, at the time of grant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company.

“Award” means any Stock Option, Restricted Stock Award or Restricted Stock Unit or any other right or interest relating to Stock or cash, granted to a Participant under the Plan.

“Award Agreement” means the document (in whatever medium prescribed by the Committee and whether or not a signature is required or provided by a Participant) that evidences the terms and conditions of an Award. A copy of the Award Agreement will be provided (or made available electronically) to each Participant.

“Board of Directors” means the Board of Directors of the Company.

“Cause.” If the Participant is subject to a written employment agreement (or other similar written agreement) with the Company or a Subsidiary that provides a definition of termination for “cause,” then, for purposes of this Plan, the term “Cause” shall have the meaning set forth in such agreement. In the absence of such a definition, “Cause” means termination because of (i) Participant’s conviction (including conviction on a nolo contendere plea) of a felony or of any lesser criminal offense involving moral turpitude, fraud or dishonesty; (ii) the willful commission by Participant of a criminal or other act that, in the reasonable judgment of the Board of Directors will likely cause substantial economic damage to the Company or the Bank or substantial injury to the business reputation of the Company or Bank; (iii) the commission by Participant of an act of fraud in the performance of his duties on behalf of the Company or Bank; (iv) Participant’s material violation of the Bank’s code of ethics; (v) the continuing willful failure of Participant to perform his employment duties to the Company or Bank after thirty (30) days’ written notice thereof (specifying the particulars thereof in reasonable detail) and a reasonable opportunity to be heard and cure such failure are given to Participant by the Board of Directors; (vi) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company or a Subsidiary to cooperate, or the deliberate destruction of or deliberate failure to preserve documents or other materials that the Participant should reasonably know to be relevant to such investigation, after being instructed by the Company or a Subsidiary to preserve such documents, or the willful inducement of others to fail to cooperate or to fail to produce documents or other materials; or (vii) an order of a federal or state regulatory agency or a court of competent jurisdiction requiring the termination of Participant’s employment by the Company or the Bank.

“Change in Control” has the meaning ascribed to it in Section 4.2.

“Code” means the Internal Revenue Code of 1986, as amended, and any rules, regulations and guidance promulgated thereunder, as modified from time to time.

“Director” means a member of the Board of Directors or of a board of directors of a Subsidiary.

“Disability.” If the Participant is subject to a written employment agreement (or other similar written agreement) with the Company or a Subsidiary that provides a definition of “Disability” or “Disabled,” then, for purposes of this Plan, the terms “Disability” or “Disabled” shall have meaning set forth in such agreement. In the absence of such a definition, “Disability” shall be defined in accordance with the Bank’s long-term disability plan. To the extent that an Award hereunder is subject to Code Section 409A, “Disability” or “Disabled” shall mean that a Participant: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering Employees. Except to the extent prohibited under Code Section 409A, if applicable, the Committee shall have discretion to determine if a Disability has been incurred.

A-15

 

“Dividend Equivalent Right” means the right, associated with a Restricted Stock Unit, to receive a payment, in cash or shares of Stock, as applicable, equal to the amount of dividends paid on a share of Stock, as specified in the Award Agreement.

“Employee” means any person employed by the Company or a Subsidiary, including Directors who are employed by the Company or a Subsidiary.

“Exchange” means any national securities exchange on which the Stock may from time to time be listed or traded.

“Exchange Act” means the Securities Exchange Act of 1934, as amended and the rules, regulations and guidance promulgated thereunder, as modified from time to time.

“Excluded Transaction” means a plan of reorganization, merger, consolidation or similar transaction that would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving corporation or any parent thereof) at least 50% of the combined voting power of the Voting Securities of the entity surviving the plan of reorganization, merger, consolidation or similar transaction (or the parent of such surviving entity) immediately after such plan of reorganization, merger, consolidation or similar transaction.

“Exercise Price” means the price established with respect to a Stock Option pursuant to Section 2.2.

“Fair Market Value” on any date, means (i) if the Stock is listed on an Exchange, national market system or automated quotation system, the closing sales price on that Exchange or over such system on that date or, in the absence of reported sales on that date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the Stock is not listed on an Exchange, national market system or automated quotation system, “Fair Market Value” shall mean a price determined by the Committee in good faith on the basis of objective criteria consistent with the requirements of Code Section 422 and applicable provisions of Code Section 409A.

“Good Reason.” A termination of employment by an Participant shall be deemed a termination of employment for “Good Reason” as a result of the Participant’s resignation from the employ of the Company or any Subsidiary upon the occurrence of any of the following events:

(i) a material reduction in Participant’s base salary or base compensation;

(ii) a material diminution in Participant’s authority, duties or responsibilities without the written consent of Participant;

(iii) a change in the geographic location at which Participant must perform his duties that is more than thirty (30) miles from the location of Participant’s principal workplace on the date immediately prior to a Change in Control.

Notwithstanding the foregoing, in the event a Participant is a party to an Award Agreement, employment or change in control agreement that provides a definition for “Good Reason” or a substantially similar term, then the occurrence of any event set forth in such definition. In the event an Award is subject to Code Section 409A, the term “Good Reason” shall be defined in accordance with Code Section 409A.

Further, the Participant must give written notice to the Company or the Subsidiary for whom the Participant is employed of the Good Reason condition within 60 days of becoming aware (or should have become aware) of the applicable facts and circumstances, the Company or Subsidiary, as applicable, shall have 30 days to cure the Good Reason condition, and the Participant must terminate employment within 30 days after expiration of the opportunity to cure. Any distribution of an Award subject to Code Section 409A shall be subject to the distribution timing rules of Code Section 409A, including any delay in the distribution of such Award, which rules shall be set forth in the Award Agreement.

“Holding Period” has the meaning ascribed to it in Section 2.8.

A-16

 

“Immediate Family Member” means with respect to any Participant: (i) any of the Participant’s children, stepchildren, grandchildren, parents, stepparents, grandparents, spouses, former spouses, siblings, nieces, nephews, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law or sisters-in-law, including relationships created by adoption; (ii) any natural person sharing the Participant’s household (other than as a tenant or employee, directly or indirectly, of the Participant); (iii) a trust in which any combination of the Participant and persons described in section (i) and (ii) above own more than fifty percent (50%) of the beneficial interests; (iv) a foundation in which any combination of the Participant and persons described in sections (i) and (ii) above control management of the assets; or (v) any other corporation, partnership, limited liability company or other entity in which any combination of the Participant and persons described in sections (i) and (ii) above control more than fifty percent (50%) of the voting interests.

“Incumbent Directors” means:

(1) the individuals who, on the date hereof, constitute the Board; and

(2) any new Director whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended: (a) by the vote of at least two-thirds (2/3) of the Whole Board, with at least two-thirds of the Incumbent Directors then in office voting in favor of such approval or recommendation; or (b) by a Nominating Committee of the Board whose members were appointed by the vote of at least two-thirds (2/3) of the Whole Board, with at least two-thirds of the Incumbent Directors then in office voting in favor of such appointments.

 

“Independent Board Member” means a member of the Board of Directors who: (a) is not a current Employee of the Company or a Subsidiary, (b) does not receive remuneration from the Company or a Subsidiary, either directly or indirectly, for services rendered as a consultant or in any capacity other than as a Director, except in an amount for which disclosure would not be required pursuant to Item 404 of SEC Regulation S-K in accordance with the proxy solicitation rules of the SEC, as amended or any successor provision thereto, and (c) does not possess an interest in any other transaction, and is not engaged in a business relationship, for which disclosure would be required pursuant to Item 404(a) of SEC Regulation S-K under the proxy solicitation rules of the SEC, as amended or any successor provision thereto. The term Independent Board Member shall be interpreted in such manner as shall be necessary to conform to the requirements of a “Non-Employee Directors” under Rule 16b-3 promulgated under the Exchange Act and the corporate governance standards imposed on compensation committees under the listing requirements imposed by any Exchange on which the Company lists or seeks to list its securities.

“Involuntary Termination” means the Termination of Service of a Participant by the Company or Subsidiary, other than a termination for Cause, or termination of employment by an Employee for Good Reason.

“Incentive Stock Option” or “ISO” has the meaning ascribed to it in Section 2.1(a).

“Non-Qualified Option” means the right to purchase shares of Stock that is either (i) designated as a Non-Qualified Option, (ii) granted to a Participant who is not an Employee, or (iii) granted to an Employee and either is not designated by the Committee to be an ISO or does not satisfy the requirements of Code Section 422.

“Performance Award” means an Award that vests in whole or in part upon the achievement of one or more specified performance measures, as determined by the Committee. Regardless of whether an Award is subject to the attainment of one or more performance measures, the Committee may also condition the vesting thereof upon the continued Service of the Participant. The conditions for grant or vesting and the other provisions of a Performance Award (including without limitation any applicable performance measures) need not be the same with respect to each recipient. A Performance Award shall vest, or as to Restricted Stock Units be settled, after the Committee has determined that the performance goals have been satisfied.

Performance measures can include, but are not limited to: book value or tangible book value per share; basic earnings per share (e.g., earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization; or earnings per share); basic cash earnings per share; diluted earnings per share; return on equity; net income or net income before taxes; net interest income; non-interest income; non-interest expense to average assets ratio; cash general and administrative expense to average assets ratio; efficiency ratio; cash efficiency ratio; financial return ratios; adjusted earnings, capital; increase in revenue; total stockholder return; net operating income, operating income; net interest margin or net interest rate spread; stock price; assets, growth in assets, loans or deposits, asset quality level, charge offs, loan reserves, non-performing assets, loans, deposits, growth of loans, loan production volume, non-performing loans, deposits or assets; regulatory compliance or safety and soundness; achievement of balance sheet or income statement objectives and strategic business objectives, or any combination of these or other measures.

A-17

 

Performance measures may be based on the performance of the Company as a whole or on any one or more Subsidiaries or business units of the Company or a Subsidiary and may be measured relative to a peer group, an index or a business plan and may be considered as absolute measures or changes in measures. The terms of an Award may provide that partial achievement of performance measures may result in partial payment or vesting of the Award or that the achievement of the performance measures may be measured over more than one period or fiscal year. In establishing any performance measures, the Committee may provide for the exclusion of the effects of certain items, including but not limited to: (i) extraordinary, unusual, infrequently occurring and/or nonrecurring events or items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) dividends declared on the Company’s stock; (iv) changes in tax or accounting principles, regulations or laws; or (v) expenses incurred in connection with a merger, branch acquisition or similar transaction. Subject to the preceding sentence, if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or its Subsidiaries conducts its business or other events or circumstances render current performance measures to be unsuitable, the Committee may modify such performance measures, in whole or in part, as the Committee deems appropriate. Notwithstanding anything to the contrary herein, performance measures relating to any Award hereunder will be modified, to the extent applicable, to reflect a change in the outstanding shares of Stock of the Company by reason of any stock dividend or stock split, or a corporate transaction, such as a merger of the Company into another corporation, any separation of a corporation or any partial or complete liquidation by the Company or a Subsidiary. If a Participant is promoted, demoted or transferred to a different business unit during a performance period, the Committee may determine that the selected performance measures or applicable performance period are no longer appropriate, in which case, the Committee, in its sole discretion, may: (i) adjust, change or eliminate the performance measures or change the applicable performance period; or (ii) cause to be made a cash payment to the Participant in an amount determined by the Committee.

“Restricted Stock” or “Restricted Stock Award” has the meaning ascribed to it in Section 2.1(b).

“Restricted Stock Unit” has the meaning ascribed to it in Section 2.1(c).

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended and the rules, regulations and guidance promulgated thereunder and modified from time to time.

“Service” means service as an Employee, non-employee Director, or service provider of the Company or a Subsidiary, as the case may be, and includes service as a director emeritus or advisory director. Service shall not be deemed interrupted in the case of (i) any approved leave of absence for military service or sickness, or for any other purpose approved by the Company or a Subsidiary, if the Employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, (ii) transfers among the Company, any Subsidiary, or any successor entities, in any capacity of Employee or Director, or (iii) any change in status as long as the individual remains in the service of the Company or a Subsidiary in any capacity as an Employee or Director (except as otherwise provided in the Award Agreement).

“Stock” means the common stock of the Company, $0.01 par value per share.

“Stock Option” has the meaning ascribed to it in Section 2.1(a).

“Subsidiary” means any corporation, affiliate, bank or other entity which would be a subsidiary corporation with respect to the Company as defined in Code Section 424(f) and, other than with respect to an ISO, also means any partnership or joint venture in which the Company and/or any other Subsidiary owns more than fifty percent (50%) of the capital or profits interests.

A-18

 

“Termination of Service” means the first day occurring on or after a grant date on which the Participant ceases to be an Employee or Director of (including a director emeritus or advisory director), or service provider to, the Company or any Subsidiary, regardless of the reason for such cessation, subject to the following:

(1) The Participant’s cessation of Service as an Employee or service provider shall not be deemed to occur by reason of the transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries.

(2) The Participant’s cessation as an Employee or service provider shall not be deemed to occur by reason of the Participant’s being on a bona fide leave of absence from the Company or a Subsidiary approved by the Company or Subsidiary otherwise receiving the Participant’s Services provided the leave of absence does not exceed six (6) months, or if longer, so long as the Employee retains a right to reemployment with the Company or Subsidiary under an applicable statute or by contract. For these purposes, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Employee will return to perform Services for the Company or Subsidiary. If the period of leave exceeds six (6) months and the Employee does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the six (6) month period. For purposes of this sub-section, to the extent applicable, an Employee’s leave of absence shall be interpreted by the Committee in a manner consistent with Treasury Regulation Section 1.409A-1(h)(1).

(3) If, as a result of a sale or other transaction, the Subsidiary for whom Participant is employed (or to whom the Participant is providing services) ceases to be a Subsidiary, and the Participant is not, following the transaction, an Employee of or service provider to the Company or an entity that is then a Subsidiary, then the occurrence of the transaction shall be treated as the Participant’s Termination of Service caused by the Participant being discharged by the entity by which the Participant is employed or to which the Participant is providing Services.

(4) Except to the extent Code Section 409A may be applicable to an Award, and subject to the foregoing paragraphs of this sub-section, the Committee shall have discretion to determine if a Termination of Service has occurred and the date on which it occurred. If any Award under the Plan constitutes Deferred Compensation (as defined in Section 2.6), the term Termination of Service shall be interpreted by the Committee in a manner consistent with the definition of “Separation from Service” as defined under Code Section 409A and under Treasury Regulation Section 1.409A-1(h)(ii). For purposes of this Plan, a “Separation from Service” shall have occurred if the employer and Participant reasonably anticipate that no further Services will be performed by the Participant after the date of the Termination of Service (whether as an employee or as an independent contractor) or the level of further Services performed will be less than fifty percent (50%) of the average level of bona fide Services in the thirty-six (36) months immediately preceding the Termination of Service. If a Participant is a “Specified Employee,” as defined in Code Section 409A and any payment to be made hereunder shall be determined to be subject to Code Section 409A, then if required by Code Section 409A, the payment or a portion of the payment (to the minimum extent possible) shall be delayed and shall be paid on the first day of the seventh month following Participant’s Separation from Service.

(5) With respect to a Participant who is a Director, cessation as a Director will not be deemed to have occurred if the Participant continues as a director emeritus or advisory director. With respect to a Participant who is both an Employee and a Director, termination of employment as an Employee shall not constitute a Termination of Service for purposes of the Plan so long as the Participant continues to provide Service as a Director or director emeritus or advisory director.

“Voting Securities” means any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

“Whole Board” means the total number of Directors that the Company would have if there were no vacancies on the Board of Directors at the time the relevant action or matter is presented to the Board of Directors for approval.

 

Section 8.2 In this Plan, unless otherwise stated or the context otherwise requires, the following uses apply:

A-19

 

(a) Actions permitted under this Plan may be taken at any time and from time to time in the actor’s reasonable discretion;

(b) References to a statute shall refer to the statute and any successor statute, and to all regulations promulgated under or implementing the statute or its successor, as in effect at the relevant time;

(c) In computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from and including,” and the words “to,” “until” and “ending on” (and the like) mean “to, but excluding”;

(d) References to a governmental or quasi-governmental agency, authority or instrumentality shall also refer to a regulatory body that succeeds to the functions of the agency, authority or instrumentality;

(e) Indications of time of day mean Maryland time;

(f) The word “including” means “including, but not limited to”;

(g) All references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Plan unless otherwise specified;

(h) All words used in this Plan will be construed to be of such gender or number as the circumstances and context require;

(i) The captions and headings of articles, sections, schedules and exhibits appearing in or attached to this Plan have been inserted solely for convenience of reference and shall not be considered a part of this Plan nor shall any of them affect the meaning or interpretation of this Plan or any of its provisions;

(j) Any reference to a document or set of documents in this Plan, and the rights and obligations of the parties under any such documents, shall mean such document or documents as amended from time to time, and any and all modifications, extensions, renewals, substitutions or replacements thereof; and

(k) All accounting terms not specifically defined herein shall be construed in accordance with GAAP.

A-20
EX-31.1 3 bvfl-ex31_1.htm EX-31.1 EX-31.1

Exhibit 31.1

 

Certification of Co-Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, David M. Flair, certify that:

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q of BV Financial, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known to me by others within the entity, particularly during the period in which this report is being prepared;

 

 

b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:

November 13, 2024

/s/ David M. Flair

David M. Flair

Co-President and Chief Executive Officer

 

 

 
EX-31.2 4 bvfl-ex31_2.htm EX-31.2 EX-31.2

Exhibit 31.2

 

Certification of Co-Chief Executive Officer Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Timothy L. Prindle, certify that:

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q of BV Financial, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known to me by others within the entity, particularly during the period in which this report is being prepared;

 

 

b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:

November 13, 2024

/s/ Timothy L. Prindle

Timothy L. Prindle

Co-President and Chief Executive Officer

 

 

 
EX-31.3 5 bvfl-ex31_3.htm EX-31.3 EX-31.3

Exhibit 31.3

 

Certification of Chief Financial Officer Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Michael J. Dee, certify that:

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q of BV Financial, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known to me by others within the entity, particularly during the period in which this report is being prepared;

 

 

b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:

November 13, 2024

/s/ Michael J. Dee

Michael J. Dee

Executive Vice President and Chief Financial Officer

 

 
EX-32 6 bvfl-ex32.htm EX-32 EX-32

Exhibit 32

 

Certification of Co-Chief Executive Officers and Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

David M. Flair, Co-President and Chief Executive Officer of BV Financial, Inc. (the “Company”), Timothy L. Prindle, Co-President and Chief Executive Officer of the Company, and Michael J. Dee, Executive Vice President and Chief Financial Officer of the Company, each certify in their capacity as an officer of the Company that they have reviewed the Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (the “Report”) and that, to the best of their knowledge:

1.
The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:

November 13, 2024

/s/ David M. Flair

David M. Flair

Co-President and Chief Executive Officer

 

Date:

November 13, 2024

/s/ Timothy L. Prindle

Timothy L. Prindle

Co-President and Chief Executive Officer

 

Date:

November 13, 2024

/s/ Michael J. Dee

Michael J. Dee

Executive Vice President and Chief Financial Officer

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.