$15.89
$30.11
bear $15.89
base $25.93
bull $30.11
margin of safety $15.00
market price* $21.67
BV Financial is the holding company for BayVanguard Bank, a community bank with about $878 million of assets and $676 million of deposits at June 30, 2026. It operates from a main office and 12 branch offices in the Baltimore area (Baltimore City and Anne Arundel, Baltimore and Harford Counties) and on Maryland's Eastern Shore (Dorchester and Talbot Counties). It makes money the traditional way: it gathers local deposits and lends them out, mostly against real estate. Of its $755 million loan book at the end of 2025, $322 million (43%) was investor-owned commercial real estate, 34% was one-to-four family homes (owner-occupied and rental), 11% was owner-occupied commercial property, and the rest was construction and land, business, farm and marine loans. Much of the investor real estate book comes from a group the bank set up in 2020 that also lends on property outside Maryland. The bank converted fully to public ownership in July 2023, and it is unusually well capitalized: shareholders' equity of $183 million is about 21% of assets, and its Tier 1 capital was 16.4% of average assets at the end of 2025. It has used that surplus to repurchase stock ($17.7 million in 2024, $30.0 million in 2025 and $6.6 million in the first half of 2026), cutting shares outstanding from 10.65 million at the end of 2024 to 8.52 million at June 30, 2026. It also repaid $35 million of 4.875% subordinated notes in December 2025, ahead of their scheduled switch to a floating rate of three-month SOFR plus 4.72%. It has never paid a cash dividend. How we measured earnings. We start with cash generated by operations, strip out swings in working capital, and subtract stock-based pay (including shares allocated to the employee stock ownership plan) and the capital spending needed to keep the branches running. Because this is a lender, we also subtract loans actually written off, net of later recoveries. We do not subtract the accounting provision for future losses, which is an estimate rather than a cash loss; for the same reason we ignore the $2.2 million release of loan-loss reserves that inflated 2025 reported profit. In practice the bank has recovered more on old problem loans than it has written off in each of the last four years (net recoveries of $467,000 in 2023, $315,000 in 2024 and $83,000 in 2025), and non-performing loans fell from $4.0 million to $2.3 million during 2025. On this basis owner earnings were $1.45 per share in 2023, $1.20 in 2024 and $1.35 in 2025. We use the median of those three years, $1.35, as the starting level. We leave out 2022 because it came before the conversion, when the bank had about half its current capital. Stock pay is a real cost here: it reached $4.2 million in 2025 after the post-conversion equity plan began, but fell to $1.4 million in the first half of 2026 from $2.4 million a year earlier. Growth needs capital. A bank cannot grow its loans on deposits alone; it must keep equity in proportion to its assets. In every case we hold back, out of each year's earnings, enough equity to fund that case's loan growth at the bank's current ratio of about 21 cents of equity per dollar of assets, and count only the remainder as value to owners. With a return on equity of about 7% in 2025, this matters: at 3% loan growth, roughly 38 cents of each dollar earned is kept in the bank. We do not add the bank's surplus capital on top of the earnings stream, and because the bank's earnings continue in every case, we neither subtract its borrowings nor add its cash. Recent trend. Per-share owner earnings grew 12.5% in 2025, but only because of buybacks; in total they slipped 0.6%. For the first year of the base case we assume $1.50 per share, 11% above the starting level and below last year's per-share growth. The support is a fact already in the filings: average diluted shares fell from 9.46 million in 2025 to 8.25 million in the second quarter of 2026, a 13% reduction, while second-quarter net interest income still rose to $9.54 million from $9.16 million a year earlier despite the cash spent on buybacks and the note repayment. First-quarter 2026 results were weak because operating expenses jumped to $7.6 million; the filings available to us do not explain why. Second-quarter expenses fell back to $5.5 million and net income recovered to $3.5 million ($0.42 per diluted share), so we treat the first-quarter charge as a one-time item and do not build it into the run rate. Base case, about $25.90 per share. Owner earnings start at $1.50 per share and grow 3% a year for ten years, in line with the bank's recent record: loans grew 6.1% in 2023, 4.7% in 2024 and 2.3% in 2025, and deposits grew 2.7% in 2024 and 3.8% in 2025, on a net interest margin of 4.35% in 2025. After holding back growth capital, owners receive about $0.93 per share in year one, rising to about $1.21 in year ten. After year ten we assume earnings stay flat with no further growth, resting on the bank's established local deposit branch network; we credit that network with persistence, not expansion. Bear case, about $15.90 per share. This case combines risks the bank itself discloses. First, earnings are sensitive to falling rates: the bank's own model shows net interest income falling 8.7% if rates drop 2 percentage points. That takes about $0.28 per share off earnings, so owner earnings start at about $1.22 and do not grow for a decade (no growth means no capital is held back). Second, the $322 million investor commercial real estate book, much of it secured by property outside Maryland and, by the bank's own account, lacking a history through a downturn, goes through a credit cycle: we assume realized losses of 2% of that book, about $0.56 per share after tax, spread over years two to four. Third, after year ten, competition from larger banks, credit unions and online lenders wears down the franchise and earnings shrink 3% a year. With equity at 21% of assets, leverage adds little further risk. The shares are backed by about $19.70 of tangible book value per share; the bear value falls below that because the bank's return on equity is modest. Bull case, about $30.10 per share. Owner earnings start at $1.65 per share, close to the second-quarter 2026 run rate, and grow 5% a year for ten years, matching the loan growth the bank achieved in 2023 and 2024, then hold flat. Faster growth needs more retained capital, so owners receive about $0.70 per share in year one; this is why the bull case sits only modestly above the base case. At a return on equity near 7%, growth adds little value beyond the cost of the capital it consumes. We did not include any takeover premium. The three-year post-conversion restriction on acquiring the company ended in July 2026, but nothing in the filings points to a sale, so it is not a driver we can evidence. We also did not assume higher interest rates. Change from our earlier estimate. Our earlier base value of about $29.70 did not set aside the capital the bank must retain to grow its loan book, and it did not formally account for realized loan losses. Because the bank has had net recoveries rather than losses, the second change barely moves earnings, but holding back growth capital lowers the base value to about $25.90 and the bull value to about $30.10. The bear value rises slightly, to about $15.90, because it now starts from the higher per-share earnings produced by the smaller share count. What would make this wrong: real losses in the investor commercial real estate portfolio, a sharp fall in interest rates that squeezes the margin, stock pay returning to 2025 levels, first-quarter-style expense charges recurring, or buybacks at prices above what the shares are worth. The cause of the first-quarter 2026 expense increase could not be confirmed from the documents available. Margin-of-safety price. This is a small, geographically concentrated bank with heavy exposure to investor real estate and earnings that move with interest rates, offset by an unusually thick capital cushion. The margin-of-safety price sits about 42% below the base value, at $15.00, a little below the bear case and about 24% below tangible book value per share.