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VB

Village Bank & Trust Financial Corp. (VBFC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 GAAP net income was $1.486M and diluted EPS was $0.99; excluding $932K pre-tax merger expenses, adjusted net income was $2.222M and adjusted diluted EPS was $1.48, with adjusted ROA 1.15% and adjusted ROE 11.94% .
  • Net interest margin expanded sequentially to 4.02% (from 3.95% in Q3 and 3.75% in Q2) as earning asset yields rose and funding cost increases slowed; asset quality remained strong with NPL/Loans at 0.06% .
  • Commercial Banking pre-tax earnings were $1.966M; Mortgage Banking posted a smaller net loss of $159K as revenue opportunities expanded and costs were controlled .
  • The TowneBank merger gained shareholder approval on Dec 19 and remains on track for an anticipated Q1 2025 close pending regulatory approvals; dividend of $0.18/share was maintained in Q4 .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin improved to 4.02% in Q4, supported by a 51 bps increase in earning asset yields and disciplined management of deposit mix and cost; management noted “Asset repricing and stabilizing funding cost are supporting net interest margin growth” .
  • Commercial loans and deposits grew in 2024, with loans (ex-student) up 8.71% and deposits up 2.33%; focus on core relationship growth and funding mix discipline continues .
  • Asset quality metrics remained favorable vs peers: NPL/Loans 0.06%, ACL/Loans 0.60%, and net charge-offs effectively zero in Q4, with coverage ratios well above peer averages .

What Went Wrong

  • Noninterest expense rose to $7.061M in Q4 (from $5.844M in Q3), driven by $932K merger costs, increased staffing, software, and higher debit-card reward redemptions; GAAP EPS compressed sequentially to $0.99 .
  • Money market and time deposit rates remained elevated (MMDA 3.20%, time deposits 3.52%), sustaining funding cost pressure even as velocity slowed; sequential total deposits fell 4.14% due to seasonal outflows .
  • Mortgage Banking remained a drag, with a net loss of $159K in Q4 despite improvement from Q4 2023; the segment continues to face a weak mortgage environment .

Financial Results

Quarterly Core Financials (Dollars in thousands unless noted)

MetricQ2 2024Q3 2024Q4 2024
Interest income$9,869 $10,336 $10,450
Interest expense$3,259 $3,265 $3,128
Net interest income (before provision)$6,610 $7,071 $7,322
Provision for credit losses$— $— $—
Noninterest income$1,391 $1,387 $1,504
Noninterest expense$5,939 $5,844 $7,061
Income before income tax$2,062 $2,614 $1,765
Income tax expense$409 $508 $279
Net income$1,653 $2,106 $1,486
EPS - Basic ($)$1.11 $1.41 $0.99
EPS - Diluted ($)$1.11 $1.41 $0.99

Margins and Returns

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net interest margin (%)3.83% 3.75% 3.95% 4.02%
ROA (%)0.91% 0.88% 1.11% 0.77%
ROE (%)10.45% 9.63% 11.62% 7.99%

YoY Snapshot (Q4 2024 vs Q4 2023)

MetricQ4 2023Q4 2024
Net income ($000)$1,692 $1,486
EPS - Diluted ($)$1.14 $0.99
Net interest margin (%)3.83% 4.02%

Segment Breakdown (Pre-tax, $000)

SegmentQ2 2024Q3 2024Q4 2024
Commercial Banking$2,255 $2,747 $1,966
Mortgage Banking$(193) $(133) $(201)
Total pre-tax$2,062 $2,614 $1,765

KPIs

KPIQ2 2024Q3 2024Q4 2024
Total loans ($000)$605,408 $614,772 $618,864
Total deposits ($000)$628,912 $646,200 $619,422
Noninterest-bearing deposits (%)37.54% 38.20% 38.83%
ACL/Loans (%)0.61% 0.60% 0.60%
NPL/Loans (%)0.07% 0.06% 0.06%
Net charge-offs to avg loans (%)(0.07%) (0.02%) 0.00%
CET1 ratio (Bank)13.44% 13.54% 13.82%
Tier 1 leverage (Bank)11.33% 11.57% 11.56%

Non-GAAP Adjustments

MetricQ4 2024 GAAPAdj. (ex-merger)
Net income ($000)$1,486 $2,222
EPS - Diluted ($)$0.99 $1.48
ROA (annualized, %)0.77% 1.15%
ROE (annualized, %)7.99% 11.94%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Merger closing timelineQ1 2025Anticipated Q1 2025 Anticipated Q1 2025 pending regulatory approvals Maintained
Quarterly cash dividendQ4 2024$0.18 declared in Q3 (paid Sep 13, 2024) $0.18 declared Nov 19, 2024 (paid Dec 6, 2024) Maintained
NIM outlook / earning asset yieldsFY 2024Expect continued improvement in earning asset yields with slowing funding cost pressures “Asset repricing and stabilizing funding cost are supporting net interest margin growth” Strengthening tone

Earnings Call Themes & Trends

Note: No Q4 2024 earnings call transcript was available; themes reflect quarterly releases.

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Net interest marginNIM expanded to 3.75% (Q2) and 3.95% (Q3) as earning asset yields rose and funding cost increases slowed NIM expanded to 4.02%; yield on earning assets +51 bps YoY; cost of interest-bearing liabilities +51 bps YoY Improving
Funding costs / deposit mixElevated MMDA and time deposit rates; brokered time deposits added in Q1 and partially matured in Q3 $10M brokered time deposits matured in Q4 and were not replaced; low-cost relationship deposits decreased seasonally; noninterest-bearing remained ~39% Pressure moderating; seasonal mix
Mortgage segmentLosses narrowing; efforts to expand revenue, control expenses, improve margins Smaller net loss ($159K) vs Q4 2023 as initiatives took hold Improving but still weak
Credit qualityStrong metrics; NPL/Loans ~0.06–0.07%; net recoveries in Q2–Q3 NPL/Loans 0.06%; net charge-offs ~0%; ACL/Loans 0.60% Stable/strong
Merger with TowneBankAgreement announced (Sep 24); expected close 1H25; EPS accretion expected by TowneBank Shareholders approved Dec 19; anticipated close Q1 2025 pending regulatory approvals Progressing toward close

Management Commentary

  • “We are pleased with the Company’s performance during 2024. 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 supported our net interest margin growth during the year. Our focus remains on core relationship growth, disciplined management of our funding mix and costs, and working with the TowneBank team to efficiently complete the Merger.” — Jay Hendricks .
  • “As of today, we anticipate closing to occur during the first quarter pending regulatory approval, and we look forward to our future partnership with TowneBank.” — Jay Hendricks .

Q&A Highlights

  • No Q4 2024 earnings call transcript available. At the Dec 19 special shareholder meeting, management reiterated anticipated Q1 2025 merger closing and took no questions (none were submitted) .

Estimates Context

  • Wall Street consensus (S&P Global) for VBFC was unavailable in our environment; no comparison to estimates provided.

Key Takeaways for Investors

  • Core profitability stronger than GAAP headline: adjusted EPS of $1.48 (vs $0.99 GAAP) highlights underlying momentum excluding merger costs; NIM trajectory is positive with 4.02% in Q4 .
  • Sequential earnings softness was driven by merger-related expenses and seasonal deposit outflows; underlying core banking pre-tax remains healthy ($1.966M in Q4) .
  • Asset quality is a differentiator with minimal NPLs and net charge-offs, supporting capital strength (CET1 13.82%, Tier 1 leverage 11.56%) .
  • Funding costs remain a watch item, but brokered time deposits are rolling off without replacement due to core deposit growth, which should aid cost of funds over time .
  • Mortgage segment losses are narrowing; sustained improvement depends on rate environment and continued margin optimization .
  • Merger with TowneBank is the near-term catalyst; shareholder approval secured and regulatory approvals pending for anticipated Q1 2025 close, with TowneBank targeting accretion post-close .
  • Dividend continuity ($0.18/share in Q4) underscores capital discipline; expect dividend policy to be reevaluated post-merger within TowneBank’s framework .