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VB

Village Bank & Trust Financial Corp. (VBFC)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered solid profitability: net income $2.11M and diluted EPS $1.41, versus Q2 2024 EPS $1.11 and a Q3 2023 loss per share of $(1.72) .
  • Net interest margin expanded to 3.95% (up 20 bps q/q and 49 bps y/y) on asset repricing and stabilizing funding costs; management expects NIM support from higher loan yields and disciplined deposit mix .
  • Commercial loans grew 2.01% q/q and 9.42% y/y; total deposits rose 2.75% q/q, driven by noninterest-bearing and low-cost relationship deposits; credit quality remained strong with NPLs/loans at 0.06% .
  • Strategic catalyst: definitive agreement to be acquired by TowneBank for $80.25 per share cash announced Sept 24, 2024; shareholder approval obtained Dec 19, 2024; closing targeted for early 2025 pending regulatory approvals .

What Went Well and What Went Wrong

What Went Well

  • NIM expansion to 3.95% on higher earning-asset yields and stabilizing funding costs; management expects continued improvement as lower-yielding assets amortize .
  • Commercial bank pre-tax earnings of $2.75M and segment net income of $2.21M; mortgage segment loss narrowed versus Q3 2023 on revenue initiatives and cost control .
  • Deposits up 2.75% q/q, with noninterest-bearing deposit mix rising to 38.20%; strong core relationship growth cited .

What Went Wrong

  • Mortgage banking segment posted a net loss of $105K amid weakness in the mortgage environment, though improved y/y .
  • Noninterest expense increased to $5.84M (up y/y) on staffing, software, and higher debit-card rewards redemptions .
  • Funding cost pressure persisted (interest-bearing liabilities cost up 81 bps y/y), offset by mix and noninterest-bearing deposits; time deposits still elevated y/y due to brokered CDs earlier in 2024 .

Financial Results

MetricQ3 2023Q4 2023Q1 2024Q2 2024Q3 2024
Interest Income ($USD Millions)$8.462 $9.130 $9.335 $9.869 $10.336
Interest Expense ($USD Millions)$2.348 $2.445 $2.939 $3.259 $3.265
Net Interest Income ($USD Millions)$6.114 $6.685 $6.396 $6.610 $7.071
Provision for Credit Losses ($USD Millions)$0.000 $0.050 $0.150 $0.000 $0.000
Noninterest Income ($USD Millions)$(3.669) $1.156 $1.604 $1.391 $1.387
Noninterest Expense ($USD Millions)$5.752 $5.697 $5.629 $5.939 $5.844
Pre-tax Income ($USD Millions)$(3.307) $2.094 $2.221 $2.062 $2.614
Net Income ($USD Millions)$(2.553) $1.692 $1.772 $1.653 $2.106
Diluted EPS ($USD)$(1.72) $1.14 $1.19 $1.11 $1.41
Net Interest Margin (%)3.46% 3.83% 3.72% 3.75% 3.95%
ROA (%)(1.36)% 0.91% 0.97% 0.88% 1.11%
ROE (%)(15.82)% 10.45% 10.50% 9.63% 11.62%

Segment breakdown (pre-tax, $USD Thousands):

Segment Pre-tax IncomeQ3 2023Q4 2023Q1 2024Q2 2024Q3 2024
Commercial Banking$(3,019) $2,410 $2,134 $2,255 $2,747
Mortgage Banking$(288) $(316) $87 $(193) $(133)
Total Pre-tax$(3,307) $2,094 $2,221 $2,062 $2,614

KPIs: Loans and Deposits

Loans Outstanding ($USD Thousands)Q3 2023Q4 2023Q1 2024Q2 2024Q3 2024
Total Commercial Loans$425,586 $424,288 $441,329 $456,522 $465,692
Consumer/Residential$117,014 $128,532 $129,631 $130,285 $130,664
Student$18,923 $17,923 $15,782 $14,156 $13,645
Total Loans$566,101 $575,008 $591,338 $605,408 $614,772
Deposits Outstanding ($USD Thousands)Q3 2023Q4 2023Q1 2024Q2 2024Q3 2024
Noninterest-bearing Demand$243,390 $247,624 $230,118 $236,063 $246,838
Interest Checking$81,779 $76,289 $78,739 $73,305 $69,763
Money Market$210,439 $195,249 $207,640 $217,147 $236,135
Savings$42,367 $39,633 $35,238 $33,892 $31,626
Time Deposits$48,799 $46,550 $68,534 $68,505 $61,838
Total Deposits$626,774 $605,345 $620,269 $628,912 $646,200

Asset quality

Asset Quality MetricQ3 2023Q4 2023Q1 2024Q2 2024Q3 2024
ACL on Loans / Total Loans0.59% 0.59% 0.60% 0.61% 0.60%
NPLs / Loans (excl. guaranteed)0.06% 0.06% 0.05% 0.07% 0.06%
Net Charge-offs (recoveries) to Avg Loans (Annualized)(0.11)% 0.00% (0.01)% (0.07)% (0.02)%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin trajectoryRemainder of 2024No formal numeric guidance“Asset repricing and stabilizing funding cost are supporting net interest margin growth… Increasing loan yields and disciplined management… will support our net interest margin for the remainder of the year.” Maintained qualitative positive outlook
Deposits funding mixH2 2024No formal numeric guidanceFocus on “core relationship growth” and “disciplined management of our funding mix and costs” Maintained qualitative focus
Credit provisioningQ3 2024No formal numeric guidanceNo provision in Q3; allowance viewed “sufficient” given current conditions Maintained conservative stance
Mortgage segment2024No formal numeric guidanceNavigating “weakness in the mortgage environment” with expanded revenue and cost controls Maintained cautious outlook
Strategic/M&A1H 2025Announced Sept 24, 2024Pending regulatory approvals; anticipated closing early 2025 New (transaction progress update)

Earnings Call Themes & Trends

Note: No Q3 2024 earnings call transcript was found; themes reflect management’s press release commentary versus prior quarter press releases.

TopicQ1 2024 (Previous Mentions)Q2 2024 (Previous Mentions)Q3 2024 (Current Period)Trend
Net interest margin and asset repricingNIM compressed 7 bps y/y to 3.72%; higher earning-asset yields offset funding costs NIM expanded to 3.75% on higher yields; funding cost increases slowing NIM expanded to 3.95%; continued support from asset repricing and mix Improving
Funding costs and deposit mixFunding cost up significantly; strong ~37% noninterest-bearing base Cost of funds up but velocity slowing; ~37% noninterest-bearing Cost of funds up y/y, but overall increase moderated by 38.20% noninterest-bearing mix Moderating pressure
Mortgage banking environmentWeak environment; small Q1 profit aided by valuation adjustment Segment loss; improving margins and expense control Segment net loss narrowed; continued weakness but ongoing initiatives Gradual improvement
Loan growthCore loans +2.84% q/q; CRE growth Commercial +3.44% q/q; consumer/residential up Commercial +2.01% q/q; total loans +1.55% q/q Steady growth
Credit qualityStrong; NPLs/loans 0.05% Strong; NPLs/loans 0.07% Strong; NPLs/loans 0.06%; recoveries in Q3 Stable/strong
Strategic actionsBrokered CDs added to supplement deposits Continued brokered CDs; costs monitored Maturity of $5M brokered CDs not replaced; TowneBank acquisition announced Transition toward merger

Management Commentary

  • “Asset repricing and stabilizing funding cost are supporting net interest margin growth and helping to offset weakness in the mortgage environment.” — Jay Hendricks, President & CEO .
  • “Increasing loan yields and disciplined management of our deposit mix and cost will support our net interest margin for the remainder of the year. Our focus remains on core relationship growth… and remaining vigilant on credit quality.” — Jay Hendricks .
  • On Q2: “Asset repricing and stabilizing funding cost are supporting net interest margin and helping to offset continued weakness in the mortgage environment.” — Jay Hendricks .
  • On Q1: “Higher funding cost squeezed our net interest income… We continue to see positive benefits from the repositioning in our investment portfolio in the third quarter last year.” — Jay Hendricks .
  • Strategic: “We are excited about our proposed combination with TowneBank… actively working… to efficiently complete the Merger.” — Jay Hendricks .
  • TowneBank transaction terms: $80.25 cash per VBFC share; combined company assets $17.8B based on 6/30/24 financials .

Q&A Highlights

  • No Q3 2024 earnings call transcript was available; no Q&A themes to report [Search result showed 0 earnings-call-transcript for VBFC in Oct–Nov 2024].

Estimates Context

  • Wall Street consensus (S&P Global Capital IQ) for Q3 2024 EPS and revenue was unavailable for VBFC due to missing CIQ mapping in the system. As a result, comparison vs consensus could not be performed.
  • Implication: Absent formal consensus, investors should benchmark results against recent run-rate (NIM trajectory, loan and deposit growth, and noninterest expense trends) .

Key Takeaways for Investors

  • Earnings quality improved: EPS $1.41 with NIM 3.95% and strong ROA/ROE, supported by rising asset yields and deposit mix discipline .
  • Balance sheet momentum: commercial loans +2.01% q/q; total deposits +2.75% q/q, with noninterest-bearing mix at 38.20%, lowering overall funding costs .
  • Credit remains a strength: NPLs/loans at 0.06% and net recoveries in Q3; ACL/loans at 0.60%—well above NPLs, indicating robust reserve coverage .
  • Mortgage remains a headwind but is improving: segment loss narrowed via revenue expansion, cost control, and margin improvement on loans sold .
  • Brokered CDs roll-off is gradually reducing higher-cost time deposits, aided by core deposit growth—constructive for NIM into year-end .
  • M&A catalyst: TowneBank’s $80.25 per share all-cash acquisition provides valuation support and near-term price anchor; closing targeted for early 2025 pending approvals .
  • Near-term: shares likely trade on merger spread and regulatory milestones; medium-term fundamentals remain solid with NIM tailwinds and strong credit, but mortgage softness and funding costs warrant monitoring .