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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 27, 2023
VILLAGE BANK AND TRUST FINANCIAL CORP.
(Exact Name of Registrant as Specified in Charter)
|
Virginia (State or Other Jurisdiction |
0-50765 |
16-1694602 |
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13319 Midlothian Turnpike |
23113 |
||
Registrant’s Telephone Number, Including Area Code: (804) 897-3900
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock, par value $4.00 per share |
VBFC |
Nasdaq Capital Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On January 27, 2023, Village Bank and Trust Financial Corp. issued a press release reporting its financial results for the period ended December 31, 2022. A copy of the press release is being furnished as an exhibit to this report and shall not be deemed “filed” for any purpose.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. |
Description |
|
|
99.1 |
|
104 |
Cover Page Interactive Data File – the cover page iXBRL tags are embedded within the Inline XBRL document. |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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VILLAGE BANK AND TRUST FINANCIAL CORP. |
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(Registrant) |
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Date: January 27, 2023 |
By: |
/s/ Donald M. Kaloski, Jr. |
|
Donald M. Kaloski, Jr. |
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Executive Vice President and CFO |
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3
Exhibit 99.1
News Release
For Immediate Release
VILLAGE BANK AND TRUST FINANCIAL CORP.
REPORTS EARNINGS FOR THE FOURTH QUARTER OF 2022
Midlothian, Virginia, January 27, 2023. Village Bank and Trust Financial Corp. (the “Company”) (Nasdaq symbol: VBFC), parent company of Village Bank (the “Bank”), today reported unaudited results for the fourth quarter of 2022. Net income for the fourth quarter of 2022 was $2,162,000, or $1.46 per fully diluted share, compared to net income for the fourth quarter of 2021 of $2,363,000, or $1.61 per fully diluted share. For the year ended December 31, 2022, net income was $8,305,000, or $5.62 per fully diluted share, compared to net income for the year ended December 31, 2021, of $12,453,000, or $8.48 per fully diluted share.
Jay Hendricks, President and CEO, commented, “We are pleased with our results for 2022. For the year, we produced a 13.54% consolidated return on average equity, with the Commercial Banking Segment producing a 14.31% return on average equity while also maintaining strong asset quality. Growth in the Commercial Banking Segment’s earnings allowed us to compensate for reduced contributions from the U.S. Small Business Administration’s Paycheck Protection Program income and our mortgage segment.”
“Core loans in our Commercial Banking Segment grew 8.97% annually but were flat for the quarter as we began to observe borrower reluctance given rising interest rates, inflation and economic uncertainty. Deposits contracted 3.30% annually and 7.40% during the quarter due to a combination of businesses and consumers spending down their pandemic savings and investment oriented cash seeking yield as rates increased.”
“Our Mortgage Banking Segment continues to be impacted by housing affordability and inventory issues that are compounded by rising rates. We continue to take prudent steps to offset the reduced mortgage banking segment earnings while we navigate the challenges of the current economic environment.”
“Our focus remains on core relationship growth, disciplined management of our net interest margin and asset mix, navigating the weak mortgage environment and remaining vigilant on credit quality. While higher rates are good for net interest income, they are placing increased pressure on deposit pricing. We are well positioned for the higher rate environment and will address the continued rise in rates through our disciplined approach to balance sheet management and prudent risk taking.”
1
Operating Results
The following table presents quarterly results for the indicated periods (in thousands):
GAAP Operating Results by Segment | |||||||||||||||
|
|
Q4 2022 |
|
Q3 2022 |
|
Q2 2022 |
|
Q1 2022 |
|
Q4 2021 |
|||||
Pre-tax earnings (loss) by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial banking |
|
$ |
3,070 |
|
$ |
2,688 |
|
$ |
2,677 |
|
$ |
2,459 |
|
$ |
2,433 |
Mortgage banking |
|
|
(388) |
|
|
(27) |
|
|
68 |
|
|
(252) |
|
|
559 |
Income before income tax expense (benefit) |
|
|
2,682 |
|
|
2,661 |
|
|
2,745 |
|
|
2,207 |
|
|
2,992 |
Commercial banking income tax expense |
|
|
602 |
|
|
514 |
|
|
540 |
|
|
460 |
|
|
512 |
Mortgage banking income tax expense (benefit) |
|
|
(82) |
|
|
(6) |
|
|
15 |
|
|
(53) |
|
|
117 |
Net income |
|
$ |
2,162 |
|
$ |
2,153 |
|
$ |
2,190 |
|
$ |
1,800 |
|
$ |
2,363 |
Three months ended December 31, 2022 vs. three months ended December 31, 2021.
The Commercial Banking Segment posted net income of $2,468,000 for Q4 2022 compared to $1,921,000 for Q4 2021.
The following are variances of note for the three months ended December 31, 2022 compared to the three months ended December 31, 2021:
| ● | Net interest margin (“NIM”) expanded by 47 basis points to 4.03% for Q4 2022 compared to 3.56% for Q4 2021. The expansion was driven by the following: |
| o | The yield on our earning assets increased by 54 basis points, 4.35% as of Q4 2022 compared to 3.81% as of Q4 2021. The increase in our yield on earning assets is a result of improvement in our earning asset mix as well as the impact of the rise in interest rates during 2022. |
| o | Total U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) income recorded by the Commercial Banking Segment was $4,700 for Q4 2022 compared to $1,069,000 for Q4 2021. |
| o | The cost of interest bearing liabilities increased by 11 basis points to 0.55% for Q4 2022 compared to 0.44% for Q4 2021. The increase in our cost of funds was driven by an increase in the rate paid on variable rate debt as a result of the rising rate environment and market pressures on rates on deposit products. While the rate paid on time deposits decreased 30 basis points to 0.54% for Q4 2022 compared to 0.84% for Q4 2021, the rate paid on money market deposit accounts increased 22 basis points to 0.44% for Q4 2022 compared to 0.22% for Q4 2021. |
| ● | The Commercial Banking Segment did not record a provision for loan loss for Q4 2022 or Q4 2021. The lack of a provision for loan loss, during Q4 2022, was driven by stable macroeconomic conditions and credit quality remaining strong. While current economic |
2
| challenges due to higher inflation and the speed at which interest rates are rising remain a risk to credit quality, we believe our current level of allowance for loan losses is sufficient. |
| ● | The Commercial Banking Segment posted noninterest income of $825,000 for Q4 2022 compared to $812,000 for Q4 2021. The increase in noninterest income was driven by an increase in interchange fee income as consumer and business spending remained elevated during the quarter. |
| ● | The Commercial Banking Segment posted noninterest expense of $4,699,000 for Q4 2022 compared to $4,610,000 for Q4 2021. The increase in noninterest expense was driven by increased staffing costs and the impact of rising inflation on our expense base. |
The Mortgage Banking Segment posted a net loss of $306,000 for Q4 2022 compared to net income of $442,000 for Q4 2021. Mortgage originations were $23,500,000 for Q4 2022, down 59.65% from $58,234,000 for Q4 2021. The drop in mortgage originations during Q4 2022 is the result of the sharp rise in mortgage rates during 2022 and the historically low inventory of homes for sale. As a result of the sharp drop in origination volume, the Mortgage Banking Segment has taken steps to right size its expense structure to minimize the impact to earnings.
Year ended December 31, 2022 vs. year ended December 31, 2021.
The Commercial Banking Segment posted net income of $8,778,000 for the year ended December 31, 2022, compared to $8,883,000 for the year ended December 31, 2021.
The following are variances of note for the year ended December 31, 2022 compared to the year ended December 31, 2021:
| ● | NIM compressed by nine basis points to 3.67% for the year ended December 31, 2022 compared to 3.76% for the year ended December 31, 2021. The compression was driven by the following: |
| o | The Commercial Banking Segment recorded PPP fee income, net of deferred costs, of $977,000 for the year ended December 31, 2022 compared to $4,993,000 for the year ended December 31, 2021, through interest income as a result of normal amortization and the receipt of funds from PPP loans forgiven by the SBA. In addition, the Commercial Banking Segment recorded interest income associated with PPP loans of $81,000 for the year ended December 31, 2022 compared to $1,040,000 for the year ended December 31, 2021. Total income associated with PPP loans was $1,058,000 for the year ended December 31, 2022 compared to $6,033,000 for the year ended December 31, 2021. |
| o | The yield on our earnings assets decreased by 16 basis points, 3.92% for the year ended December 31, 2022 compared to 4.08% for the year ended December 31, 2021. The decrease in our yield on earning assets for the year ended December 31, 2022, was a result of the shift in our earning asset mix which was driven by an increase in our liquid assets (i.e. interest bearing due from other institutions and investment securities) due |
3
| to the reduction in the PPP loan balances because of loan forgiveness, which was partially offset by growth in the core loan portfolio. The rise in interest rates during the year ended December 31, 2022 helped to offset the impact of the increased liquid assets. |
| o | The cost of interest bearing liabilities dropped by ten basis points to 0.44% for the year ended December 31, 2022 compared to 0.54% for the year ended December 31, 2021, because of the shift in our deposit mix from higher cost time deposits to lower cost relationship deposits. While we saw a reduction in our cost of interest bearing liabilities during the year, during the latter half of 2022 we started to experience a greater pressure on deposit pricing as a result of the rising rate environment and market pressures. |
| ● | The Commercial Banking Segment recorded a recovery of provision for loan loss expense of $300,000 and $500,000 for the year ended December 31, 2022 and December 31, 2021, respectively. The recovery of provision for loan loss expense, during the year ended December 31, 2022 and December 31, 2021, resulted from reductions in the qualitative factors driven by improving economic factors, improved credit metrics, and reductions in loan deferrals. While current economic challenges due to higher inflation and the speed at which interest rates are rising remain a risk to credit quality, we believe our current level of allowance for loan losses is sufficient. |
| ● | The Commercial Banking Segment posted noninterest income of $3,335,000 for the year ended December 31, 2022 compared to $3,001,000 for the year ended December 31, 2021. The increase in noninterest income was driven by an increase in fee income as consumer and business spending picked up during the year ended December 31, 2022, and the recognition of $79,000 in gains on the sale of SBA loan guarantee strips during the year ended December 31, 2022, compared to no gains during the year ended December 31, 2021. |
| ● | The Commercial Banking Segment posted noninterest expense of $18,209,000 for the year ended December 31, 2022 compared to $17,256,000 for the year ended December 31, 2021. The increase in noninterest expense was primarily driven by the deferral of $580,300 in salary and benefits costs during the year ended December 31, 2021 associated with the volume of PPP loan originations during that period. |
The Mortgage Banking Segment posted a net loss of $473,000 for the year ended December 31, 2022 compared to net income of $3,570,000 for the year ended December 31, 2021. Mortgage originations were $162,436,000 for the year ended December 31, 2022, down 45.60% from $298,605,000 for the year ended December 31, 2021. The drop in mortgage originations during the year ended December 31, 2022, is the result of the sharp rise in mortgage rates and the historically low inventory of homes for sale. As a result of the sharp drop in origination volume, the Mortgage Banking Segment has taken steps to right size its expense structure to minimize the impact to earnings.
4
Pre-Tax Pre-Provision Earnings by Segment
The following table presents the pre-tax, pre-provision (“PTPP”) earnings by segment for the indicated periods (in thousands):
Pre-Tax Earnings by Segment | ||||||||||||||||||||||
|
|
|
YE 2022 |
|
YE 2021 |
|
Q4 2022 |
|
Q3 2022 |
|
Q2 2022 |
|
Q1 2022 |
|
Q4 2021 |
|||||||
Pre-Tax Earnings by Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial banking - PTPP (ex. PPP)(1) |
|
|
$ |
9,535 |
|
|
4,822 |
|
$ |
3,065 |
|
$ |
2,762 |
|
$ |
2,189 |
|
$ |
1,519 |
|
$ |
1,364 |
Commercial banking - PPP Income |
|
|
|
1,059 |
|
|
6,033 |
|
|
5 |
|
|
26 |
|
|
488 |
|
|
540 |
|
|
1,069 |
Commercial banking income before provision for (recovery of) loan losses and income tax expense |
|
|
|
10,594 |
|
|
10,855 |
|
|
3,070 |
|
|
2,788 |
|
|
2,677 |
|
|
2,059 |
|
|
2,433 |
Mortgage banking income (loss) before income tax expense (benefit) |
|
|
|
(599) |
|
|
4,518 |
|
|
(388) |
|
|
(27) |
|
|
68 |
|
|
(252) |
|
|
559 |
Income before provision for (recovery of) loan losses and income tax expense |
|
|
|
9,995 |
|
|
15,373 |
|
|
2,682 |
|
|
2,761 |
|
|
2,745 |
|
|
1,807 |
|
|
2,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (recovery of) loan losses |
|
|
|
(300) |
|
|
(500) |
|
|
— |
|
|
100 |
|
|
— |
|
|
(400) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP income before income tax expense |
|
|
$ |
10,295 |
|
$ |
15,873 |
|
$ |
2,682 |
|
$ |
2,661 |
|
$ |
2,745 |
|
$ |
2,207 |
|
$ |
2,992 |
| (1) | Non-GAAP financial measure. |
The Commercial Banking Segment recorded PTPP earnings of $3,070,000 for Q4 2022 compared to $2,433,000 for Q4 2021. For the year ended December 31, 2022, PTPP earnings were $10,594,000, compared to $10,855,000 for the year ended December 31, 2021.
Excluding income from PPP loans, the Commercial Banking Segment’s Q4 2022 PTPP earnings grew $1,701,000, or 124.72%, from Q4 2021 and the year ended December 31, 2022 PTPP earnings grew $4,713,000, or 97.74%, from the year ended December 31, 2021. The growth in the Commercial Banking Segment’s PTPP earnings was the result of growth in the core loan portfolio and the investment portfolio and the reduction in our cost of interest bearing liabilities.
The Company believes that reporting PTPP earnings, excluding income from PPP loans, provides a useful illustration of the Company’s core operating performance over the reported periods. PTPP earnings, excluding PPP loans, is determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP measures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
5
Financial Highlights
Highlights for the fourth quarter and year ended December 31, 2022 and December 31, 2021 are as follows:
|
|
Three Months Ended |
Year Ended |
|
|||||
Metric |
|
December 31, 2022 |
December 31, 2021 |
December 31, 2022 |
December 31, 2021 |
||||
Consolidated |
|
|
|
|
|
|
|
|
|
Return on average equity(1) |
|
14.45 |
% |
14.78 |
% |
13.54 |
% |
21.02 |
% |
Return on average assets(1) |
|
1.17 |
% |
1.26 |
% |
1.11 |
% |
1.73 |
% |
Commercial Banking Segment |
|
|
|
|
|
|
|
|
|
Return on average equity(1) |
|
16.50 |
% |
12.02 |
% |
14.31 |
% |
14.99 |
% |
Return on average assets(1) |
|
1.34 |
% |
1.02 |
% |
1.18 |
% |
1.23 |
% |
Net interest income to average assets |
|
3.76 |
% |
3.32 |
% |
3.41 |
% |
3.48 |
% |
Provision for (recovery of) loan losses to average assets |
|
— |
% |
— |
% |
(0.04) |
% |
(0.07) |
% |
Noninterest income to average assets |
|
0.45 |
% |
0.43 |
% |
0.45 |
% |
0.42 |
% |
Noninterest expense to average assets |
|
2.55 |
% |
2.46 |
% |
2.44 |
% |
2.39 |
% |
Mortgage Banking Segment |
|
|
|
|
|
|
|
|
|
Return on average equity(1) |
|
(2.05) |
% |
2.77 |
% |
(0.77) |
% |
6.02 |
% |
Return on average assets(1) |
|
(0.17) |
% |
0.24 |
% |
(0.06) |
% |
0.49 |
% |
Net income before tax to average assets |
|
(0.21) |
% |
0.30 |
% |
(0.08) |
% |
0.63 |
% |
| (1) | Annualized. |
Loans and Asset Quality
The following table provides the composition of our gross loan portfolio at the dates indicated (in thousands):
Loans Outstanding | |||||||||||||||
Loan Type |
|
Q4 2022 |
|
Q3 2022 |
|
Q2 2022 |
|
Q1 2022 |
|
Q4 2021 |
|||||
C&I + Owner occupied commercial real estate |
|
$ |
209,721 |
|
$ |
212,960 |
|
$ |
208,546 |
|
$ |
187,897 |
|
$ |
180,928 |
PPP Loans |
|
|
270 |
|
|
710 |
|
|
1,069 |
|
|
17,023 |
|
|
32,601 |
Nonowner occupied commercial real estate |
|
|
164,974 |
|
|
167,854 |
|
|
169,773 |
|
|
146,530 |
|
|
142,429 |
Acquisition, development and construction |
|
|
45,127 |
|
|
40,546 |
|
|
37,028 |
|
|
42,691 |
|
|
49,149 |
Total commercial loans |
|
|
420,092 |
|
|
422,070 |
|
|
416,416 |
|
|
394,141 |
|
|
405,107 |
Consumer/Residential |
|
|
93,680 |
|
|
92,525 |
|
|
83,969 |
|
|
96,411 |
|
|
92,372 |
Student |
|
|
20,617 |
|
|
22,010 |
|
|
23,413 |
|
|
24,693 |
|
|
25,975 |
Other |
|
|
4,038 |
|
|
4,078 |
|
|
3,758 |
|
|
3,397 |
|
|
3,003 |
Total loans |
|
$ |
538,427 |
|
$ |
540,683 |
|
$ |
527,556 |
|
$ |
518,642 |
|
$ |
526,457 |
Core loans, which are total loans, excluding PPP loans, decreased by $1,816,000, or 0.34%, from Q3 2022, and increased by $44,301,000, or 8.97%, from Q4 2021. The reduction in core loans during Q4 2022 was the result of borrowers pulling back on borrowing due to the increase in inflation, interest rates rising, and general concern around economic uncertainty. Core loan growth during 2022 was the product of our success in converting non-customer PPP borrowers into new core relationships and overall organic growth.
PPP loans decreased by $440,000, or 61.97%, from Q3 2022 and decreased by $32,331,000, or 99.17%, from Q4 2021.
6
Asset quality
The Bank’s asset quality metrics continue to compare favorably to our peers as follows:
Asset Quality Metrics | ||||||||||||
|
|
Village |
|
Peer Group |
||||||||
Metric |
|
Q4 2022 |
|
Q3 2022 |
|
Q2 2022 |
|
Q1 2022 |
|
Q4 2021 |
|
Q3 2022(1) |
Allowance for Loan and Lease Losses/Nonperforming Loans |
|
515.16% |
|
342.57% |
|
280.87% |
|
260.49% |
|
251.94% |
|
229.50% |
Net Charge-offs (recoveries) to Average Loans(2) |
|
(0.00%) |
|
0.11% |
|
(0.01%) |
|
(0.29%) |
|
0.01% |
|
0.04% |
Nonperforming Loans/Loans (excluding Guaranteed Loans) |
|
0.13% |
|
0.20% |
|
0.26% |
|
0.29% |
|
0.30% |
|
0.58% |
Nonperforming Assets/Bank Total Assets (3) |
|
0.09% |
|
0.13% |
|
0.16% |
|
0.17% |
|
0.18% |
|
0.29% |
(1) Source - S&P Global data for VA Banks <$1 Billion in assets as of September 30, 2022. |
|
|
|
|
||||||||
(2) Annualized. |
|
|
|
|
||||||||
(3) Nonperforming assets excluding performing troubled debt restructurings. |
|
|
|
|
||||||||
Deposits
The following table provides the composition of our deposits at the dates indicated (in thousands):
Deposits Outstanding | |||||||||||||||
Deposit Type |
|
Q4 2022 |
|
Q3 2022 |
|
Q2 2022 |
|
Q1 2022 |
|
Q4 2021 |
|||||
Noninterest-bearing demand |
|
$ |
255,236 |
|
$ |
279,268 |
|
$ |
278,260 |
|
$ |
279,756 |
|
$ |
268,804 |
Interest checking |
|
|
90,252 |
|
|
86,894 |
|
|
88,630 |
|
|
92,534 |
|
|
89,599 |
Money market |
|
|
179,036 |
|
|
193,643 |
|
|
198,157 |
|
|
196,718 |
|
|
187,942 |
Savings |
|
|
55,695 |
|
|
57,498 |
|
|
54,702 |
|
|
55,489 |
|
|
54,106 |
Time deposits |
|
|
44,524 |
|
|
50,516 |
|
|
54,892 |
|
|
59,176 |
|
|
63,597 |
Total deposits |
|
$ |
624,743 |
|
$ |
667,819 |
|
$ |
674,641 |
|
$ |
683,673 |
|
$ |
664,048 |
Total deposits decreased by $43,076,000, or 6.45%, from Q3 2022, and decreased by $39,305,000, or 5.92%, from Q4 2021. Variances of note are as follows:
| ● | Noninterest bearing demand account balances decreased $24,032,000 from Q3 2022 and decreased $13,568,000 from Q4 2021, and represented 40.85% of total deposits compared to 41.82% as of Q3 2022 and 40.48% as of Q4 2021. The decrease in deposits was driven by a combination of consumers and businesses drawing down balances due to increased pressure from high inflation, making year-end tax payments, as well as investing in higher yielding products. |
| ● | Low cost relationship deposits (i.e. interest checking, money market, and savings) balances decreased $13,052,000, or 3.86%, from Q3 2022 and decreased $6,664,000, or 2.01%, from Q4 2021. The decrease in deposits was primarily driven by the same combination of factors as the noninterest bearing demand accounts. |
| ● | Time deposits decreased by $5,992,000, or 11.86%, from Q3 2022 and $19,073,000, or 29.99%, from Q4 2021. The decrease in time deposits was primarily driven by an effort to reduce reliance on high cost time deposits and the migration of customers from time deposits to money market demand accounts. |
7
Capital
Shareholders’ equity at December 31, 2022 was $61,111,000 compared to $63,401,000 at December 31, 2021, which resulted in a tangible common equity ratio of 8.45% and 8.47%, as of December 31, 2022 and December 31, 2021, respectively. The $2,290,000 decrease in shareholders’ equity during the year ended December 31, 2022 was primarily due to the $10,145,000 increase in accumulated other comprehensive loss. The loss was primarily associated with the unrealized holding losses arising in the available for sale investment securities portfolio during the period, which were the result of the movement in interest rates during the year ended December 31, 2022. The increase in the unrealized holding losses was partially offset by net income of $8,305,000 during the year ended December 31, 2022.
The Bank continues to maintain a strong, well-capitalized position. The following table presents the regulatory capital ratios for the Bank at the dates indicated:
Bank Regulatory Capital Ratios | |||||||||||||||
Ratios |
|
Q4 2022 |
|
Q3 2022 |
|
Q2 2022 |
|
Q1 2022 |
|
Q4 2021 |
|||||
Common equity tier 1 |
|
|
14.22% |
|
|
13.90% |
|
|
13.91% |
|
|
14.07% |
|
|
14.01% |
Tier 1 |
|
|
14.22% |
|
|
13.90% |
|
|
13.91% |
|
|
14.07% |
|
|
14.01% |
Total capital |
|
|
14.81% |
|
|
14.48% |
|
|
14.52% |
|
|
14.69% |
|
|
14.66% |
Tier 1 leverage |
|
|
10.95% |
|
|
10.53% |
|
|
10.22% |
|
|
10.13% |
|
|
9.86% |
8
About Village Bank and Trust Financial Corp.
Village Bank and Trust Financial Corp. was organized under the laws of the Commonwealth of Virginia as a bank holding company whose activities consist of investment in its wholly-owned subsidiary, Village Bank. Village Bank is a full-service Virginia-chartered community bank headquartered in Midlothian, Virginia with deposits insured by the Federal Deposit Insurance Corporation (“FDIC”). The Bank has nine branch offices. Village Bank and its wholly-owned subsidiary, Village Bank Mortgage Corporation, offer a complete range of financial products and services, including commercial loans, consumer credit, mortgage lending, checking and savings accounts, certificates of deposit, and 24-hour banking.
Forward-Looking Statements
In addition to historical information, this press release may contain forward-looking statements. For this purpose, any statement, that is not a statement of historical fact may be deemed to be a forward-looking statement. These forward-looking statements may include statements regarding profitability, liquidity, allowance for loan losses, interest rate sensitivity, market risk, growth strategy and financial and other goals. Forward-looking statements often use words such as “believes,” “expects,” “plans,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends” or other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, and actual results could differ materially from historical results or those anticipated by such statements.
There are many factors that could have a material adverse effect on the operations and future prospects of the Company including, but not limited to:
| ● | the impacts of the ongoing COVID-19 pandemic; |
| ● | changes in assumptions underlying the establishment of allowances for loan losses, and other estimates; |
| ● | the risks of changes in interest rates on levels, composition and costs of deposits, loan demand, and the values and liquidity of loan collateral, securities, and interest sensitive assets and liabilities; |
| ● | the effects of future economic, business and market conditions; |
| ● | our inability to maintain our regulatory capital position; |
| ● | the Company’s computer systems and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions despite security measures implemented by the Company; |
| ● | changes in market conditions, specifically declines in the residential and commercial real estate market, volatility and disruption of the capital and credit markets, and soundness of other financial institutions we do business with; |
| ● | risks inherent in making loans such as repayment risks and fluctuating collateral values; |
| ● | changes in operations of Village Bank Mortgage Corporation as a result of the activity in the residential real estate market; |
| ● | legislative and regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and other changes in banking, securities, and tax laws and |
9
| regulations and their application by our regulators, and changes in scope and cost of FDIC insurance and other coverages; |
| ● | exposure to repurchase loans sold to investors for which borrowers failed to provide full and accurate information on or related to their loan application or for which appraisals have not been acceptable or when the loan was not underwritten in accordance with the loan program specified by the loan investor; |
| ● | governmental monetary and fiscal policies; |
| ● | geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, negatively impacting business and economic conditions in the U.S. and abroad; |
| ● | changes in accounting policies, rules and practices; |
| ● | reliance on our management team, including our ability to attract and retain key personnel; |
| ● | competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources; |
| ● | demand, development and acceptance of new products and services; |
| ● | problems with technology utilized by us; |
| ● | changing trends in customer profiles and behavior; and |
| ● | other factors described from time to time in our reports filed with the Securities and Exchange Commission (“SEC”). |
Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company’s reports (such as our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available on the SEC’s Web site at www.sec.gov.
For further information contact Donald M. Kaloski, Jr., Executive Vice President and CFO at 804-897-3900 or dkaloski@villagebank.com.
10
Financial Highlights | |||||||||||||||
(Dollars in thousands, except per share amounts) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|||||
|
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2021 |
|||||
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
* |
|||||
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
723,270 |
|
$ |
742,703 |
|
$ |
752,597 |
|
$ |
764,417 |
|
$ |
748,401 |
Investment securities |
|
|
133,853 |
|
|
134,503 |
|
|
131,623 |
|
|
139,866 |
|
|
93,699 |
Loans held for sale |
|
|
2,268 |
|
|
5,076 |
|
|
7,963 |
|
|
7,507 |
|
|
5,141 |
Loans, net |
|
|
539,015 |
|
|
541,275 |
|
|
528,130 |
|
|
518,764 |
|
|
526,024 |
Allowance for loan losses |
|
|
(3,370) |
|
|
(3,370) |
|
|
(3,423) |
|
|
(3,403) |
|
|
(3,423) |
Deposits |
|
|
624,743 |
|
|
667,819 |
|
|
674,641 |
|
|
683,673 |
|
|
664,048 |
Borrowings |
|
|
34,456 |
|
|
14,448 |
|
|
14,440 |
|
|
14,432 |
|
|
14,424 |
Shareholders' equity |
|
|
61,111 |
|
|
58,372 |
|
|
60,053 |
|
|
61,480 |
|
|
63,401 |
Book value per share |
|
$ |
41.21 |
|
$ |
39.55 |
|
$ |
40.68 |
|
$ |
41.64 |
|
$ |
43.03 |
Total shares outstanding |
|
|
1,482,790 |
|
|
1,476,017 |
|
|
1,476,165 |
|
|
1,476,392 |
|
|
1,473,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of deferred fees and costs |
|
|
0.63% |
|
|
0.62% |
|
|
0.65% |
|
|
0.66% |
|
|
0.65% |
Loans, net of deferred fees and costs (excluding PPP loans) |
|
|
0.63% |
|
|
0.62% |
|
|
0.65% |
|
|
0.68% |
|
|
0.69% |
Nonperforming loans |
|
|
515.16% |
|
|
342.57% |
|
|
280.87% |
|
|
260.49% |
|
|
251.94% |
Net charge-offs (recoveries) to average loans(1) |
|
|
(0.00%) |
|
|
0.11% |
|
|
(0.01%) |
|
|
(0.29%) |
|
|
0.01% |
Nonperforming assets to total assets |
|
|
0.09% |
|
|
0.13% |
|
|
0.16% |
|
|
0.17% |
|
|
0.18% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Capital Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 |
|
|
14.22% |
|
|
13.90% |
|
|
13.91% |
|
|
14.07% |
|
|
14.01% |
Tier 1 |
|
|
14.22% |
|
|
13.90% |
|
|
13.91% |
|
|
14.07% |
|
|
14.01% |
Total capital |
|
|
14.81% |
|
|
14.48% |
|
|
14.52% |
|
|
14.69% |
|
|
14.66% |
Tier 1 leverage |
|
|
10.95% |
|
|
10.53% |
|
|
10.22% |
|
|
10.13% |
|
|
9.86% |
|
|
Three Months Ended |
|||||||||||||
|
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|||||
|
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2021 |
|||||
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|||||
Selected Operating Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
7,533 |
|
$ |
6,955 |
|
$ |
6,731 |
|
$ |
6,268 |
|
$ |
6,743 |
Interest expense |
|
|
544 |
|
|
420 |
|
|
410 |
|
|
407 |
|
|
445 |
Net interest income before |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
provision for (recovery of) loan losses |
|
|
6,989 |
|
|
6,535 |
|
|
6,321 |
|
|
5,861 |
|
|
6,298 |
Provision for (recovery of) loan losses |
|
|
— |
|
|
100 |
|
|
— |
|
|
(400) |
|
|
— |
Noninterest income |
|
|
1,286 |
|
|
1,750 |
|
|
1,938 |
|
|
1,628 |
|
|
2,462 |
Noninterest expense |
|
|
5,593 |
|
|
5,524 |
|
|
5,514 |
|
|
5,682 |
|
|
5,768 |
Income before income tax expense |
|
|
2,682 |
|
|
2,661 |
|
|
2,745 |
|
|
2,207 |
|
|
2,992 |
Income tax expense |
|
|
520 |
|
|
508 |
|
|
555 |
|
|
407 |
|
|
629 |
Net income |
|
$ |
2,162 |
|
$ |
2,153 |
|
$ |
2,190 |
|
$ |
1,800 |
|
$ |
2,363 |
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.46 |
|
$ |
1.46 |
|
$ |
1.48 |
|
$ |
1.22 |
|
$ |
1.61 |
Diluted |
|
$ |
1.46 |
|
$ |
1.46 |
|
$ |
1.48 |
|
$ |
1.22 |
|
$ |
1.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets(1) |
|
|
1.17% |
|
|
1.14% |
|
|
1.16% |
|
|
0.97% |
|
|
1.26% |
Return on average equity(1) |
|
|
14.45% |
|
|
13.90% |
|
|
14.40% |
|
|
11.48% |
|
|
14.78% |
Net interest margin(1) |
|
|
4.03% |
|
|
3.70% |
|
|
3.57% |
|
|
3.36% |
|
|
3.56% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Derived from audited consolidated financial statements. |
|
|
|
|
|
|
|||||||||
(1) Annualized. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
Financial Highlights | ||||||
(Dollars in thousands, except per share amounts) | ||||||
|
|
|
|
|
|
|
|
|
Year Ended |
||||
|
|
December 31, |
|
December 31, |
||
|
|
2022 |
|
2021 |
||
|
|
(Unaudited) |
|
* |
||
Selected Operating Data |
|
|
|
|
|
|
Interest income |
|
$ |
27,487 |
|
$ |
27,667 |
Interest expense |
|
|
1,781 |
|
|
2,172 |
Net interest income before |
|
|
|
|
|
|
provision for (recovery of) loan losses |
|
|
25,706 |
|
|
25,495 |
Provision for (recovery of) loan losses |
|
|
(300) |
|
|
(500) |
Noninterest income |
|
|
6,602 |
|
|
12,343 |
Noninterest expense |
|
|
22,313 |
|
|
22,465 |
Income before income tax expense |
|
|
10,295 |
|
|
15,873 |
Income tax expense |
|
|
1,990 |
|
|
3,420 |
Net income |
|
$ |
8,305 |
|
$ |
12,453 |
Earnings per share |
|
|
|
|
|
|
Basic |
|
$ |
5.62 |
|
$ |
8.48 |
Diluted |
|
$ |
5.62 |
|
$ |
8.48 |
|
|
|
|
|
|
|
Performance Ratios |
|
|
|
|
|
|
Return on average assets |
|
|
1.11% |
|
|
1.73% |
Return on average equity |
|
|
13.54% |
|
|
21.02% |
Net interest margin |
|
|
3.67% |
|
|
3.76% |
|
|
|
|
|
|
|
* Derived from audited consolidated financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
12