FVCBankcorp in Fairfax, Va., reported lower earnings that reflected balance sheet repositioning and a loss tied to its investment in a mortgage lender.
The $2.4 billion-asset company said in a press release that its first-quarter net income fell by 91% from a year earlier, to $621,000.
FVCBankcorp had an after-tax loss of $3.6 million tied to its decision in late February to sell $40.3 million of mortgage-backed securities. The securities represented about 12% of the company’s overall portfolio.
Proceeds from the sale were used to repay $20 million of borrowings from the Federal Home Loan Bank of Atlanta.
The company also fixed $150 million of wholesale funding by executing pay-fixed/receive-floating interest rate swaps. They have a weighted average rate of 3.5%, a five-year maturity and are designated against FHLB advances and brokered CDs.
The repositioning and the reduction of wholesale funding costs collectively added 10 basis points to the company’s net interest margin.
“We executed the securities sales to improve our margin by selling low-yielding securities to reduce higher-cost borrowings and deploy proceeds into higher-yielding loans,” David Pijor, the company’s chairman and CEO, said in the release.
“In January, we executed interest rate swaps to add lower-rate fixed funding to enhance liquidity and protect against rising interest rates,” Pijor added. “As an added precaution following the announcement of the bank failures, we increased wholesale funding to provide additional liquidity and increased borrowing capacity, while continuing to grow core deposits.”
Separately, the lower earnings included a $625,000 loss associated with its membership interest in Atlantic Coast Mortgage. That investment brought in $707,000 a year earlier.
The company said Atlantic Coast implemented new expense reductions in the first quarter, including cuts to corporate support staff, that lowered its fixed expenses by 22% compared to a year earlier.
Atlantic Coast’s business activity and volume have increased due to a 27% year-over-year increase in mortgage originators. New funded volume in the first quarter rose 13% from a quarter earlier, prequalification applications increased by 79% and new applications and rate locks rose by 51%.