FOR IMMEDIATE RELEASE — April 18, 2019
Fairfax, VA — FVCBankcorp, Inc. (NASDAQ:FVCB) (the “Company”) today reported first quarter 2019 net income of $3.9 million, or $0.27 diluted earnings per share, compared to $3.0 million, or $0.25 diluted earnings per share, for the quarterly period ended March 31, 2018. Weighted-average common shares outstanding for the diluted earnings per share calculations were 14.8 million and 12.1 million for the three months ended March 31, 2019 and 2018, respectively, reflecting the increase from shares issued in 2018 for the initial public offering and acquisition of Colombo Bank.
During the first quarter of 2019, the Company incurred merger and acquisition expense of $52 thousand, net of tax. Excluding merger-related expenses net of tax, earnings for the three months ended March 31, 2019 were $4.0 million, or $0.27 per diluted earnings per share. There were no merger and acquisition expenses recorded during the three months ended March 31, 2018.
The Company believes the reporting of non-GAAP earnings to exclude merger-related expenses are more reflective of the Company’s operating performance and future operating performance (“Operating Earnings”). On a GAAP basis, return on average assets was 1.16% and return on average equity was 9.74% for the first quarter of 2019. For the comparable March 31, 2018 period, return on average assets was 1.13% and return on average equity was 12.03%. On an Operating Earnings basis, return on average assets and return on average equity for the three months ended March 31, 2019 were 1.17% and 9.86%, respectively.
Selected Highlights
- Record Operating Earnings. Operating Earnings increased $981 thousand, or 33%, to $4.0 million for
the first quarter of 2019 as compared to the same 2018 period. Net interest margin increased to 3.65% for the quarter ended March 31, 2019 compared to 3.59% for the linked quarter ended December 31, 2018 and 3.39% for the year ago quarter ended March 31, 2018 - Strong Loan Growth. Total loans, net of deferred fees, totaled $1.18 billion at March 31, 2019, an increase of $42.2 million, or 15% annualized, from December 31, 2018. Year-over-year loan growth was $257.7 million, or 28% from March 31, 2018 to March 31, 2019
- Sound Asset Quality. Asset quality remains strong, with nonperforming loans and loans past due 90 days or more as a percentage of total assets was 0.27% at March 31, 2019. Nonperforming loans and loans past due 90 days or more totaled $3.8 million at March 31, 2019, of which $838 thousand were acquired loans
- Strong Core Deposit Growth. Total deposits increased $50.3 million, to $1.21 billion at March 31, 2019, or 17% annualized, from December 31, 2018. Noninterest-bearing deposits increased $20.4 million, or 9% during the first quarter of 2019 and represent 21% of the total deposit base at March 31, 2019
- Improved Efficiency Ratio. Efficiency ratio for the three months ended March 31, 2019 was 55.2%, an improvement from 57.5% for the year ago quarter
- Improved Tangible Book Value. Tangible book value per share at March 31, 2019 was $11.32, a 24% increase from $9.15 at March 31, 2018
“I am pleased with the growth our Company experienced during the first quarter, specifically within our loan portfolio. Over half of our net loan growth this quarter represents our efforts within our expanded Maryland and Washington D.C. markets, as we began leveraging our post-acquisition opportunities within these markets. We are excited about the strength of our loan pipeline as we head into the second quarter,” stated David W. Pijor, Chairman and CEO.
Balance Sheet
Total assets increased to $1.42 billion at March 31, 2019 compared to $1.35 billion at December 31, 2018, an increase of $68.2 million, or 5%. Loans receivable, net of deferred fees, totaled $1.18 billion at March 31, 2019, compared to $921.2 million at March 31, 2018, a year-over-year increase of $257.7 million, or 28%. During the first quarter of 2019, loans grew $42.2 million, or 15% on an annualized basis, and average loans grew $36.4 million, or 13% annualized. While the Company experienced strong loan growth during the first quarter of 2019, this loan growth predominantly occurred towards the end of the quarter, and as such, interest income only slightly offset the impact of increased loan loss reserves recorded for the quarter ended March 31, 2019.
During the quarter, loan originations totaled approximately $121 million, of which $77 million funded during the quarter. Construction loans and commercial loan originations represented the larger portion of originations during the quarter ended March 31, 2019 totaling $72 million, and consequently represented the majority of the loan commitments not funded during the quarter.
Investment securities increased $14.2 million to $139.5 million at March 31, 2019, compared to $125.3 million at December 31, 2018.
Total deposits increased to $1.21 billion at March 31, 2019 compared to $1.16 billion at December 31, 2018, an increase of $50.3 million, or 17% on an annualized basis. Core deposits, which represent total deposits less wholesale deposits, increased $19.2 million or 7% on an annualized basis, which reflects declines in certain deposit concentrations which were more than offset by growth in core deposit relationships. Wholesale deposits totaled $115.4 million, or 10% of total deposits at March 31, 2019, an increase of $31.0 million from December 31, 2018. Noninterest-bearing deposits increased $20.4 million to $253.7 million at March 31, 2019 from $233.3 million at December 31, 2018, and represented 21% of total deposits at March 31, 2019.
Income Statement
Net interest income totaled $11.8 million, an increase of $3.0 million, or 34%, for the quarter ended March 31, 2019, compared to the year ago quarter, and a decrease of $53 thousand compared to the fourth quarter of 2018. The Company’s net interest margin increased 26 basis points to 3.65% for the quarter ended March 31, 2019 compared to 3.39% for the quarter ended March 31, 2018. On a linked quarter basis, net interest margin increased 6 basis points from 3.59% for the three months ended December 31, 2018, a result of increases in yields on earning assets and loan mark accretion.
Cost of deposits for the first quarter of 2019 was 1.30%, compared to 0.93% for the first quarter of 2018, a 40% year-over-year increase, reflecting the Company’s continued management of its funding costs driven by the increased rate environment. Loan yields for the first quarter of 2019 were 5.23% compared to 4.73% for the year ago quarter. Included in net interest income for the first quarter of 2019 is $245 thousand in loan mark accretion associated with the Company’s acquired loan portfolio, which has contributed to the increase in margin. For the fourth quarter of 2018, the loan mark accretion was $169 thousand.
Noninterest income totaled $738 thousand and $385 thousand for the quarters ended March 31, 2019 and 2018, respectively. Fee income from loans was $347 thousand, an increase of $289 thousand for the quarter ended March 31, 2019 compared to 2018, primarily a result of an increase in loan income from interest rate swaps. Service charges on deposit accounts and other fee income totaled $286 thousand for the first quarter of 2019, an increase of 32% or $217 thousand from the year ago quarter. This increase in fee income resulted from the increase in core deposit relationships, both organic and acquired, year over year.
Noninterest expense totaled $6.9 million for the quarter ended March 31, 2019, compared to $5.3 million for the same three-month period of 2018. Approximately $825 thousand of the increase in noninterest expense from the year ago quarter is attributable to expenses associated with Colombo’s former operations, in addition to merger- related expenses of $67 thousand for the three months ended March 31, 2019. Salary and compensation related expenses increased $753 thousand, or 24%, for the quarter ended March 31, 2019, compared to the same three- month period of 2018, resulting from the increase in staffing from the acquisition and increases in back-office support staff. Occupancy and equipment expense increased $256 thousand year-over-year primarily as a result of the branch locations acquired from Colombo. Increases in data processing and network administration, franchise taxes and other operating expenses for the quarter ended March 31, 2019 compared to the same three- month period of 2018 is primarily growth related. On a linked quarter basis, noninterest expense excluding non- recurring merger-related expenses increased $86 thousand from the three months ended December 31, 2018. The efficiency ratio for the quarter ended March 31, 2019 was 55.2%, or 54.7% excluding merger-related expenses, a decrease from 57.5% from the year ago quarter.
Asset Quality
Asset quality remains strong as nonperforming loans and loans ninety days or more past due totaled $3.8 million, or 0.27% of total assets, of which $838 thousand related to acquired loans. Performing troubled debt restructurings (“TDR”) increased to $4.1 million at March 31, 2019, compared to $203 thousand at December 31, 2018, primarily as a result of one loan which was restructured during the quarter because of a specific borrower issue for which a specific reserve was not required. Nonperforming assets (including TDRs and other real estate owned) to total assets was 0.83% at March 31, 2019, 0.57% for December 31, 2018 and 0.60% for March 31, 2018. The allowance for loan losses to total loans was 0.81% for each of the periods ended March 31, 2019 and December 31, 2018. The allowance for loan losses on the Company’s originated portfolio was 0.92% of loan outstanding at March 31, 2019. Charge-offs of $162 thousand were recorded during the first quarter of 2019 and were related to the Company’s purchased consumer installment loan portfolio.
About FVCBankcorp Inc.
FVCBankcorp, Inc. is the holding company for FVCbank, a wholly-owned subsidiary of FVCB which commenced operations in November 2007. FVCbank is a $1.42 billion Virginia-chartered community bank serving the banking needs of commercial businesses, nonprofit organizations, professional service entities, their owners and employees located in the greater Baltimore and Washington D.C., metropolitan areas. Locally owned and managed, FVCbank is based in Fairfax, Virginia, and has 11 full-service offices in Arlington, Ashburn, Fairfax, Manassas, Reston and Springfield, Virginia, Washington D.C., and Baltimore, Bethesda, Rockville and Silver Spring, Maryland.
For more information on the Company’s selected financial information, please visit the Investor Relations page of FVCBankcorp Inc.’s website, www.fvcbank.com.
Caution about Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited, statements of goals, intentions, and expectations as to future trends, plans, events or results of the Company’s operations and policies and regarding general economic conditions. In some cases, forward-looking statements can be identified by use of words such as “may,” “will,” “anticipates,” “believes,” “expects,” “plans,” “estimates,” “potential,” “continue,” “should,” and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company’s market, interest rates and interest rate policy, competitive factors, and other conditions which by their nature, are not susceptible to accurate forecast and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results in the future may differ materially from those indicated herein. These forward-looking statements are based on current beliefs that involve significant risks, uncertainties, and assumptions. Factors that could cause the Company’s actual results to differ materially from those indicated in these forward-looking statements, include, but are not limited to, the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and in other periodic and current reports filed with the Securities and Exchange Commission. Because of these uncertainties and the assumptions on which the forward-looking statements are based, actual operations and results in the future may differ materially from those indicated herein. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company’s past results are not necessarily indicative of future performance.
