Why do these fundamentals make FVCBankcorp, Inc. (NASDAQ: FVCB) attractive?

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<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "FVCBankcorp, Inc. (NASDAQ: FVCB) Profitability and risk are largely affected by the underlying economic growth of the region where it operates in the United States, since it is a small-cap stock market share. a market capitalization of 250 million US dollars. A bank's cash flow is directly influenced by economic growth as it is the main determinant of the level of deposits and demand for loans from which it benefits. The post-CFA recovery led to a new series of reforms, Basel III, created to improve regulation, supervision and risk management in the financial services sector. These reforms target banking regulations and aim to strengthen the ability of financial institutions to absorb shocks resulting from economic tensions that could expose banks such as FVCBankcorp to vulnerabilities. Its financial situation may weaken in the event of adverse macro-events such as political instability. This is why it is essential to understand how well the bank manages its risks. Strong leverage and liquidity management could put the bank in a protected position against macro headwinds. We can evaluate FVCBankcorp's risk-taking behavior by analyzing three parameters of leverage and liquidity that I will explain to you later. "Data-reactid =" 27 "> FVCBankcorp, Inc. (NASDAQ: FVCB) Profitability and risk are largely affected by the underlying economic growth of the region where it operates in the United States, since it is a small-cap stock market share. a market capitalization of 250 million US dollars. A bank's cash flow is directly influenced by economic growth as it is the main determinant of the level of deposits and demand for loans from which it benefits. The post-CFA recovery led to a new series of reforms, Basel III, created to improve regulation, supervision and risk management in the financial services sector. These reforms target banking regulations and aim to strengthen the ability of financial institutions to absorb shocks resulting from economic tensions that could expose banks such as FVCBankcorp to vulnerabilities. Its financial situation may weaken in the event of adverse macro-events such as political instability. This is why it is essential to understand how well the bank manages its risks. Strong leverage and liquidity management could put the bank in a protected position against macro headwinds. We can evaluate FVCBankcorp's risk-taking behavior by analyzing three leverage and liquidity indicators that I will explain earlier.

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NasdaqCM: Historic Debt of the BCVA 11th January 19

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Why is the leverage effect of CVGF important?

A low level of indebtedness exposes a bank to less risk and improves its ability to repay its debtors. Leverage can be thought of as the amount of a bank's assets relative to the funds of its shareholders. Although banks are required to have a certain level of safety margin to meet their capital requirements, FVCBankcorp's debt level of 8.47x is very safe and well below the maximum credit limit. 20x. This means that the bank is very much in debt and is well placed to repay its debtors in the event of adverse events because it has a sufficient level of equity. high compared to the debt contracted to stay in business. If the bank were to increase its level of debt to meet its capital needs, it would have plenty of leeway to do so.

How should we measure the liquidity of BCVF?

Deliver transparent money

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As I mentioned above, loans are relatively illiquid. It is helpful to understand how this non-liquid asset is the total assets of FVCBankcorp. In general, they should account for less than 70% of total assets, but its current level of 82% means that the bank has obviously lent 12.5% ​​above the reasonable upper limit. This means that his business figure depends on these specific assets, which means that the bank is also more likely to be exposed to default than its competitors with fewer loans.

The story continues

Does FVCB have a liquidity gap?

Banks take advantage of their clients' loans and lend interest on this principle. These loans tend to be fixed term, which means that they can not be realized easily. However, customer deposits are liabilities that must be repaid on demand and promptly. The disparity between the immediacy of the deposits and the illiquidity of the loans puts the financial situation of the bank to a severe test if an adverse event requires the bank to repay its depositors. Compared to the industry's conservative level of industry loan, set at 90%, the ratio of FVCBankcorp, greater than 98%, is higher, which places the bank in a relatively dangerous territory with respect to the negative imbalance cash. Essentially, for $ 1 of deposits at the bank, the bank lends more than $ 0.9, which is risky.

Next steps:

We discussed operational risks for BCVF in this article. But as an equity investment, you need to understand other fundamentals. There are three essential factors to consider:

  1. Future prospects: What are well-informed industry analysts predicting for the future growth of BCVA? Watch our analyst consensus free research report for the prospects of FVCB.
  2. Evaluation: What is FVCB worth today? Has the potential for future growth already been factored into the price? the infographics intrinsic value in our free research report allows to visualize if FVCB is currently badly evaluated by the market.
  3. Other performing stocks: Are there other stocks offering better prospects with proven track records? Explore our free list of these large stocks here.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "To help readers understand the past volatility of the financial market in the short term, our goal is to provide you with a long-term research analysis based solely on fundamental data. Note that our analysis does not take into account the latest price sensitive business announcements.

The author is an independent contributor and, at the time of publication, was not positioned in the mentioned actions. For errors requiring correction, please contact the publisher at the address editorial-team@simplywallst.com.

"data-reactid =" 69 "> To help readers understand the short-term volatility of the financial market, we aim to provide you with a long-term research analysis based only on fundamental data. account of the latest price sensitive business announcements.

The author is an independent contributor and, at the time of publication, was not positioned in the mentioned actions. For errors requiring correction, please contact the publisher at the address editorial-team@simplywallst.com.