BV Financial, Inc.

BV Financial, Inc. operates as a bank holding company through its wholly owned subsidiary, BayVanguard Bank, a Maryland-chartered commercial bank originally chartered in 1873 ¹. The company is a full-service community-oriented financial institution dedicated to serving consumers and businesses, conducting operations from its main office and 12 branch offices located in the Baltimore metropolitan area and Dorchester and Talbot Counties, Maryland ². The economy in its primary market area has benefited from being varied and diverse, with a broad economic base ³. The company faces competition within its market area from large money center and regional banks, community banks, credit unions, mortgage banking firms, non-banking financial institutions, consumer finance companies, financial technology or fintech companies, and with respect to deposits, from money market funds, brokerage firms, mutual funds and insurance companies ⁴.

The company's competitive positioning is built on its community-oriented retail banking strategy, emphasizing personalized customer service, long-standing relationships with customers, and a favorable image in the community ⁵. Management highlights a focus on maintaining strong asset quality through conservative underwriting guidelines, sound loan administration, and enhanced loan monitoring of higher risk portfolio segments ⁶. The company's non-performing assets totaled $2.3 million, or 0.25% of total assets, at December 31, 2025 ⁷, and its total non-performing loans to total loans ratio was 0.30% at December 31, 2025 ⁸.

The core business model generates revenue primarily from interest on loans and, to a lesser extent, interest on investment securities ⁹. The company takes deposits from the general public and invests those deposits, together with funds generated from operations, in commercial real estate loans, one- to four-family real estate loans, and to a lesser extent, commercial loans, construction and land loans, marine loans, farm loans and certain consumer loans ¹⁰. Primary sources of funds are deposits and principal and interest payments on loans and securities ¹¹.

The company's principal lending activity is the origination of commercial real estate loans, one- to four-family real estate loans, and to a lesser extent, commercial loans, construction and land loans, marine loans, farm loans and certain consumer loans ¹². The lending function focuses on three areas: consumer, community, and investment real estate ¹³. At December 31, 2025, commercial real estate loans totaled $401.4 million, representing 53.2% of the total loan portfolio ¹⁴, of which $79.7 million were owner occupied commercial real estate loans and $321.7 million were commercial investor real estate loans ¹⁵. One- to four-family residential real estate loans totaled $258.5 million, representing 34.2% of the total loan portfolio ¹⁶, of which $94.5 million were secured by non-owner occupied properties ¹⁷. Commercial loans totaled $34.3 million, representing 4.5% of the total loan portfolio ¹⁸. Construction and land loans totaled $36.4 million, representing 4.8% of the total loan portfolio ¹⁹. Marine loans totaled $13.4 million, or 1.8% of total loans ²⁰. Farm loans totaled $7.2 million, or 1.0% of total loans ²¹. Other consumer loans totaled $1.5 million, or 0.2% of the total loan portfolio ²². Loans guaranteed by the U.S. Government totaled $2.2 million ²³.

Significant operational developments during the period include the redemption of $35.0 million in Fixed-to-Floating Rate Subordinated Notes Due 2030 in December 2025 ²⁴. The company also repurchased 1,823,997 shares of common stock at an average cost of $16.23 during the year ²⁵. In February 2024, BV Financial redeemed all of the outstanding junior subordinated debt issued by Easton Bank & Trust that it had acquired as part of its acquisition of Delmarva Bancshares, Inc. ²⁶. The company originated $52.8 million of commercial real estate and $32.9 million of residential mortgages loans during the year ended December 31, 2025 ²⁷.

For the year ended December 31, 2025, net income increased $1.8 million, or 15.1%, to $13.5 million, compared to $11.7 million for the year ended December 31, 2024 ²⁸. The increase was due primarily to an increase of $3.0 million in interest income and an increase in the recovery of provision for credit losses of $2.2 million, offset by a $1.3 million increase in interest expense, a $1.7 million increase in non-interest expense, and a $700,000 increase in income tax expense ²⁹. Total assets were $912.2 million at December 31, 2025, an increase of $392,000, or 0.04%, from $911.8 million at December 31, 2024 ³⁰. Stockholders' equity decreased $11.7 million or 6.0%, to $183.8 million at December 31, 2025, primarily due to $30.0 million in stock repurchases, offset by $13.5 million of net income and $4.2 million in other adjustments, primarily equity compensation ³¹.

The company intends to continue to pursue opportunistic acquisitions and partnerships, focusing on franchises that enhance its funding profile, product capabilities or geographic density or footprint, while maintaining an acceptable risk profile ³². Management believes in the need to make significant technological investments and the importance of scale in banking ³³. The company also intends to continue to focus on the origination of commercial real estate loans while remaining a residential mortgage lender in its market area, maintaining a balance between the commercial real estate and residential mortgage portfolios ³⁴.

A key growth vector is increasing core deposits with an emphasis on non-interest-bearing deposits, as deposits are the primary source of funds for lending and investment ³⁵. Core deposits, defined as all deposits except for time deposits, were 69.8% of total deposits at December 31, 2025 ³⁶, and non-interest-bearing demand deposits were 20.5% of total deposits at December 31, 2025 ³⁷. The company continues to focus on expanding core deposits by leveraging its business development officers and commercial lending and retail relationships ³⁸.

The company's margin and cost outlook is influenced by its strategy to manage credit risk to maintain a low level of non-performing assets, following conservative underwriting guidelines with sound loan administration ³⁹. This includes enhanced loan monitoring of higher risk portfolio segments, higher risk individual loans and larger relationships within the portfolio, and frequent loan grade review ⁴⁰.

The company's operational outlook includes a focus on technology, as it has been required, and may be required in the future, to expend additional resources to employ the latest technologies ⁴¹. The company relies on third-party vendor solutions to support its operations, and has implemented a Third-Party Risk Management program, which includes a detailed onboarding process and periodic reviews of vendors with access to sensitive Company data ⁴².

The company's capital allocation strategy includes pursuing acquisitions that offer opportunities for solid financial returns ⁴³. During the year, the company repurchased 1,823,997 shares of common stock at an average cost of $16.23 ⁴⁴. To date, the company has not paid any cash dividends to its stockholders ⁴⁵.

The company faces headwinds from strong competition within its market area, which may limit its growth and profitability ⁴⁶. The company competes with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, fintech companies, and unregulated or less regulated non-banking entities, many of which are substantially larger and have substantially greater resources ⁴⁷. Additionally, changes in trade policies, including the imposition of tariffs, could negatively impact economic conditions in the markets served, potentially leading to higher costs for customers, reduced export demand, and supply chain disruptions ⁴⁸.

The company's emphasis on commercial real estate lending, which totaled $401.4 million or 53.2% of the loan portfolio at December 31, 2025 ⁴⁹, involves credit risks that could adversely affect financial condition and results of operations, as repayment depends on successful management and operation of properties and can be affected by adverse conditions in the real estate market or economy ⁵⁰. The geographic concentration of the loan portfolio in the Baltimore metropolitan area and Eastern Shore of Maryland makes the company vulnerable to a downturn in the local economy and real estate markets ⁵¹. Changes in interest rates could reduce profits and asset values, as the company's interest-bearing liabilities generally have shorter contractual maturities than its interest-earning assets, creating earnings volatility ⁵². At December 31, 2025, the company had accumulated other comprehensive losses of $1.1 million related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio ⁵³. The company's allowance for credit losses was 0.85% of total loans and 284.72% of non-performing loans at December 31, 2025 ⁵⁴, and if not sufficient to cover actual credit losses, earnings could decrease ⁵⁵. The company's inability to generate core deposits may cause it to rely more heavily on wholesale funding strategies, which could have an adverse effect on net interest margin and profitability ⁵⁶; at December 31, 2025, the company had $35.0 million of outstanding advances from the FHLB and $50.3 million in brokered deposits ⁵⁷.

Management's message emphasizes a community-oriented retail banking strategy focused on continuing and enhancing its core business ⁵⁸. Key strategic priorities include pursuing opportunistic acquisitions and partnerships to enhance funding profile, product capabilities, or geographic footprint ⁵⁹; growing the loan portfolio with an emphasis on commercial real estate and residential mortgage lending while maintaining a balance between the two ⁶⁰; managing credit risk to maintain a low level of non-performing assets through conservative underwriting and enhanced loan monitoring ⁶¹; and increasing core deposits with an emphasis on non-interest-bearing deposits ⁶². Management also highlights the importance of making significant technological investments and achieving scale in banking ⁶³.