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CST: 24/08/2019 11:06:35   

Bank of the James Announces Second Quarter, First Half 2019 Financial Results

36 Days ago

Commercial Loan Growth, Robust Mortgage Origination, Expanded Market Presence

LYNCHBURG, Va., July 19, 2019 (GLOBE NEWSWIRE) -- Bank of the James Financial Group, Inc. (the “Company”) (NASDAQ:BOTJ), the parent company of Bank of the James, a full-service commercial and retail bank serving Region 2000 (Greater Lynchburg MSA), and the Charlottesville, Harrisonburg, and Roanoke, Virginia markets, today announced unaudited results for the three months and six months ended June 30, 2019.

Net income for the three months ended June 30, 2019 was $1.38 million or $0.31 per diluted share, compared with $1.30 million or $0.30 per diluted share for the three months ended June 30, 2018. Net income for the six months ended June 30, 2019 was $2.61 million or $0.60 per diluted share, compared with $2.42 million or $0.55 per diluted share for the six months ended June 30, 2018.

Robert R. Chapman III, President and CEO, commented: “Steady growth in earnings, loans, assets and the Company’s book value reflects the outstanding work by our entire banking team. Our core Region 2000 market continues to generate strong results, and we have been very encouraged by the consistent commercial loan growth, mortgage originations and deposit expansion in our Charlottesville, Harrisonburg and Roanoke markets.

“In June, 2019, we opened our second full-service banking locations in Charlottesville and Roanoke – an expansion reflecting the positive reception and success in these markets. We are on-track to establish a new office in Rustburg, Virginia this year, and will soon expand our presence in Lexington, Virginia, extending our footprint in the Shenandoah Valley to serve Buena Vista, Lexington and the Rockbridge County community.

“As anticipated, our expansion resulted in increased operating expenses, including increased investment in personnel, equipment and facilities. It was particularly encouraging that even with higher operating costs, our Company reported higher year-over-year earnings that reflected increasing productivity of our established team and assets.”

Highlights

  • Loans receivable, net of the allowance for loan losses, were a Company-record $551.97 million at June 30, 2019, increasing by more than $21 million during the first six months of 2019 from $530.02 million at December 31, 2018.
  • Commercial lending growth was highlighted by expanded commercial real estate (CRE) lending throughout the Company’s served markets. Non-owner-occupied real estate loans were $185.72 million at June 30, 2019, up 8% compared with a year earlier. Total construction loans increased 17% year-over-year.
  • Total interest income in the second quarter of 2019 rose 10% compared with a year earlier, and increased 14% in the first half of 2019 compared with the first half of 2018, primarily as a result of loan growth.
  • Strong residential mortgage origination, which generates income from gains on loan sales to the secondary market, contributed significantly to increased total noninterest income, which was $1.66 million in the second quarter of 2019, up 15% from $1.44 million in the second quarter of 2018. Income from mortgage activity and fees from corporate treasury services contributed to total noninterest income of $2.88 million in the first half of 2019, up from $2.63 million in the first half of 2018.
  • Reflecting the Company’s emphasis on growing its deposit base, total deposits rose to $617.18 million at June 30, 2019, compared with $612.04 million at December 31, 2018 and $596.07 million at June 30, 2018. Core deposits (noninterest-bearing demand, NOW, savings and money market accounts) comprised approximately 70% of the Company’s total deposits.
  • Total assets rose to a Company-record $690.10 million at June 30, 2019, with strong asset quality.
  • New full-service offices opened in Charlottesville and Roanoke, the Company’s second full-service branches in both markets.
  • Total stockholders’ equity increased by more than $4 million to $59.25 million at June 30, 2019 from December 31, 2018. Tangible book value per share rose to $13.53, compared to $12.59 at December 31, 2018 and $12.00 at June 30, 2018.

Second Quarter, First Half of 2019 Operational Review

Total interest income was $7.39 million in the second quarter of 2019, up from $6.73 million a year earlier, reflecting loan growth and adjustable rate loans that repriced to reflect rising interest rates. Income from lending represented 92% of total interest income. Interest expense increased year-over-year, which reflected a larger deposit base and rate increases in demand and time deposits. Rates paid on total interest-bearing deposits in the second quarter of 2019 were 0.90% compared with 0.69% a year earlier.

Net interest income after provision for loan losses was $6.04 million for the three months ended June 30, 2019, compared with $5.49 million for the same period a year earlier. Commercial lending growth and modest loan yield increases contributed to the net interest margin of 3.82% in the second quarter of 2019 compared with 3.74% in the second quarter of 2018.

For the six months of 2019, total interest income rose nearly 14% to $14.62 million at June 30, 2019 from $12.88 million at June 30, 2018. Total interest expense increased year-over-year, reflecting a larger deposit base and rate increases on interest-bearing deposits. For the six months of 2019, net interest income after the provision for loan losses was $11.96 million, up 11% from $10.80 million for the six months of 2018. The net interest margin was 3.87% for the six months ended June 30, 2019 compared with 3.69% for the six months ended June 30, 2018.

J. Todd Scruggs, Executive Vice President and CFO, commented: “We have generally been satisfied with the stability of the net interest margin and interest rate spread. Even with higher interest expense, net interest income has demonstrated solid year-over-year growth driven by income from lending and supported by sound loan quality that has led to consistently low provisions for loan losses.”

Noninterest income, including gains from the sale of residential mortgages to the secondary market, revenue contributions from BOTJ Investment Services, and income from the Bank’s line of treasury management services for commercial customers was $1.66 million in the second quarter of 2019 compared with $1.44 million in the second quarter of 2018. In the first half of 2019, noninterest income rose to $2.88 million compared with $2.63 million in the first half of 2018.

Noninterest expense for the three months and six months ended June 30, 2019 increased, primarily reflecting increased personnel expenses and higher occupancy and equipment costs related to previously noted market expansion.

In the second quarter of 2019, Return on Average Assets (ROAA) was 0.80% and Return on Average Equity (ROAE) was 9.47%. In the first half of 2019, ROAA was 0.77% and ROAE was 9.11%. For both periods, ROAA was up slightly from a year earlier, and ROAE was down slightly from a year earlier. The Company’s efficiency ratio was higher in both periods compared to a year earlier, primarily reflecting the addition of personnel and facilities and an increase in variable compensation related to increased production in the mortgage and investment divisions.

Balance Sheet Review: Steady Growth, Sound Quality

Total assets were $690.10 million at June 30, 2019. The primary driver of balance sheet growth continues to be deposits used to fund loans held for investment, net of the allowance for loan losses, which totaled $551.97 million at June 30, 2019. Loans held-for-sale were $4.44 million, primarily reflecting strong residential mortgage activity. Fair value of securities available-for-sale was $53.82 million compared with $52.73 million at December 31, 2018.

Commercial lending continued to lead the Company’s loan portfolio growth, with stable year-over-year commercial & industrial lending, 4.5% growth in real estate lending and a 17% increase in construction lending.

“The heart of successful commercial lending, particularly with small and midsize businesses, comes from building and maintaining relationships, providing expert advice, and offering customized financial solutions to every client,” explained Michael A. Syrek, Executive Vice President and Chief Loan Officer. “By building partnerships with clients, we are flexible and responsive to their needs.

“Commercial clients often have changing needs based on seasonality, project opportunity, and operating capital requirements. A focus on partnering with clients, communicating frequently, and offering a range of services and options enhances client retention and earns us referrals.”

The Company’s loan portfolio continued to provide balanced performance and year-over-year growth. Non-owner occupied commercial real estate (primarily commercial and investment property), was $185.72 million at June 30, 2019 compared with $171.67 million a year earlier. Owner-occupied commercial real estate was $156.43 million at June 30, 2019, up from $155.88 million at June 30, 2018. Total construction loans, led by non 1-4 family construction growth of 89%, was $25.16 million, up 17% from $21.44 million a year earlier. Consumer and home equity loans were similar to a year ago.

Total deposits at June 30, 2019 were $617.18 million, up from $612.04 million at December 31, 2018, led by expanded core deposits, which comprised 70% of total deposits. Interest-bearing demand deposits were $342.38 million at June 30, 2019 compared with $331.30 million at December 31, 2018. Noninterest bearing demand deposits were $88.90 million at June 30, 2019 compared with $91.36 million at December 31, 2018.

Asset quality remained strong, with a ratio of nonperforming loans to total loans of 0.63% at June 30, 2019, compared to 0.55% at December 31, 2018 and 0.60% at June 30, 2018. The allowance for loan losses to total loans was 0.85% at June 30, 2019, representing slight decreases from December 31, 2018 and June 30, 2018. During the quarter, the Company added modestly to its loan loss reserve, primarily to keep pace with loan growth. Based on continuing loan quality, the Company’s allowance for loan losses to nonperforming loans was 136% at June 30, 2019 compared to 156% at December 31, 2018.

Chapman noted: “We believe our longstanding trend of maintaining strong asset quality while consistently growing commercial loans and originating quality residential mortgage loans makes a strong statement about the credit policies and procedures in place. It also speaks to strong judgment of our people involved in determining creditworthiness, and their commitment to analyzing every borrower and situation. Strong loan quality has greatly contributed to quality earnings and maximizing shareholder value.”

As noted in the highlights, total stockholders’ equity and tangible book value per share increased at June 30, 2019. Retained earnings increased to $18.61 million at June 30, 2019 from $16.52 million at December 31, 2018. The Bank's regulatory capital ratios continued to exceed accepted regulatory standards for a well-capitalized institution.

About the Company

Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc. opened for business in July 1999 and is headquartered in Lynchburg, Virginia. The bank currently services customers in Virginia from offices located in Altavista, Amherst, Appomattox, Bedford, Blacksburg, Charlottesville, Forest, Harrisonburg, Lexington, Lynchburg, Madison Heights, and Roanoke. The bank offers full investment and insurance services through its BOTJ Investment Services division and BOTJ Insurance, Inc. subsidiary.  The bank provides mortgage loan origination through Bank of the James Mortgage, a division of Bank of the James. Bank of the James Financial Group, Inc. common stock is listed under the symbol “BOTJ” on the NASDAQ Stock Market, LLC.  Additional information on the Company is available at www.bankofthejames.bank.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "estimate," "expect," "intend," "anticipate," "plan" and similar expressions and variations thereof identify certain of such forward-looking statements which speak only as of the dates on which they were made. Bank of the James Financial Group, Inc. (the "Company") undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Such factors include, but are not limited to, competition, general economic conditions, potential changes in interest rates, and changes in the value of real estate securing loans made by Bank of the James (the "Bank"), a subsidiary of the Company. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Company's filings with the Securities and Exchange Commission and previously filed by the Bank (as predecessor of the Company) with the Federal Reserve Board.

CONTACT: J. Todd Scruggs, Executive Vice President and Chief Financial Officer (434) 846-2000.
tscruggs@bankofthejames.com

FINANCIAL STATEMENTS FOLLOW


Bank of the James Financial Group, Inc. and Subsidiaries
Dollar amounts in thousands, except per share data
unaudited

Selected Data: Three
months
ending
Jun 30,
2019
Three
months
ending
Jun 30,
2018
Change Year
to
date
Jun 30,
2019
Year
to
date
Jun 30,
2018
Change
Interest income $ 7,390 $ 6,725   9.89 % $ 14,624 $ 12,880   13.54 %
Interest expense   1,238   922   34.27 %   2,342   1,746   34.14 %
Net interest income   6,152   5,803   6.01 %   12,282   11,134   10.31 %
Provision for loan losses   116   315   -63.17 %   326   337   -3.26 %
Noninterest income   1,659   1,441   15.13 %   2,878   2,627   9.55 %
Noninterest expense   5,975   5,306   12.61 %   11,574   10,403   11.26 %
Income taxes   343   323   6.19 %   649   598   8.53 %
Net income   1,377   1,300   5.92 %   2,611   2,423   7.76 %
Weighted average shares outstanding - basic   4,378,436   4,378,436   -     4,378,436   4,378,436   -  
Weighted average shares outstanding - diluted   4,383,021   4,378,436   4,585     4,381,994   4,378,481   3,513  
Basic net income per share $ 0.31 $ 0.30 $ 0.01   $ 0.60 $ 0.55 $ 0.05  
Fully diluted net income per share $ 0.31 $ 0.30 $ 0.01   $ 0.60 $ 0.55 $ 0.05  


Balance Sheet at
period end:
Jun 30,
2019
Dec 31,
2018
Change Jun 30,
2018
Dec 31,
2017
Change
Loans, net $ 551,974 $ 530,016   4.14 % $ 523,730 $ 491,022   6.66 %
Loans held for sale   4,443   1,670   166.05 %   5,815   2,626   121.44 %
Total securities   57,512   56,427   1.92 %   57,394   61,025   -5.95 %
Total deposits   617,184   612,043   0.84 %   596,068   567,493   5.04 %
Stockholders' equity   59,249   55,143   7.45 %   52,524   51,665   1.66 %
Total assets   690,095   674,897   2.25 %   655,866   626,341   4.71 %
Shares outstanding   4,378,436   4,378,436   -     4,378,436   4,378,436   -  
Book value per share $ 13.53 $ 12.59 $ 0.94   $ 12.00 $ 11.80 $ 0.20  


Daily averages: Three
months
ending
Jun 30,
2019
Three
months
ending
Jun 30,
2018
Change Year
to
date
Jun 30,
2019
Year
to
date
Jun 30,
2018
Change
Loans, net $ 542,162 $ 518,972   4.47 % $ 537,763 $ 505,794   6.32 %
Loans held for sale   3,948   3,706   6.53 %   2,981   3,076   -3.09 %
Total securities   58,214   60,959   -4.50 %   58,624   61,811   -5.16 %
Total deposits   622,390   597,379   4.19 %   618,240   584,104   5.84 %
Stockholders' equity   58,295   53,913   8.13 %   57,809   53,383   8.29 %
Interest earning assets   645,406   622,956   3.60 %   640,362   608,485   5.24 %
Interest bearing liabilities   535,364   504,581   6.10 %   530,953   476,569   11.41 %
Total assets   690,637   660,578   4.55 %   684,419   645,290   6.06 %



Financial Ratios: Three
months
ending
Jun 30,
2019
Three
months
ending
Jun 30,
2018
Change Year
to
date
Jun 30,
2019
Year
to
date
Jun 30,
2018
Change
Return on average assets 0.80 % 0.79 %   0.01   0.77 % 0.76 %   0.01  
Return on average equity 9.47 % 9.67 %   (0.20 ) 9.11 % 9.15 %   (0.04 )
Net interest margin 3.82 % 3.74 %   0.08   3.87 % 3.69 %   0.18  
Efficiency ratio 76.49 % 73.25 %   3.24   76.35 % 75.60 %   0.75  
Average equity to average assets 8.44 % 8.16 %   0.28   8.45 % 8.27 %   0.18  


Allowance for loan losses: Three
months
ending
Jun 30,
2019
Three
months
ending
Jun 30,
2018
Change Year
to
date
Jun 30,
2019
Year
to
date
Jun 30,
2018
Change
Beginning balance $ 4,673   $ 4,671     0.04 % $ 4,581   $ 4,752     -3.60 %
Provision for losses   116     315     -63.17 %   326     337     -3.26 %
Charge-offs   (86 )   (315 )   -72.70 %   (219 )   (555 )   -60.54 %
Recoveries   21     17     23.53 %   36     154     -76.62 %
Ending balance   4,724     4,688     0.77 %   4,724     4,688     0.77 %


Nonperforming assets: Jun 30,
2019
Dec 31,
2018
Change Jun 30,
2018
Dec 31,
2017
Change
Total nonperforming loans $ 3,485   $ 2,939     18.58 % $ 3,195   $ 4,308   -25.84 %
Other real estate owned   2,413     2,431     -0.74 %   2,585     2,650   -2.45 %
Total nonperforming assets   5,898     5,370     9.83 %   5,780     6,958   -16.93 %
Troubled debt restructurings - (performing portion)   418     424     -1.42 %   432     440   -1.82 %


Asset quality ratios: Jun 30,
2019
Dec 31,
2018
Change Jun 30,
2018
Dec 31,
2017
Change
Nonperforming loans to total loans   0.63 %   0.55 %   0.08     0.60 % 0.87 %   (0.27 )
Allowance for loan losses to total loans   0.85 %   0.86 %   (0.01 )   0.89 % 0.96 %   (0.07 )
Allowance for loan losses to nonperforming loans   135.55 %   155.87 %   (20.32 )   146.73 % 110.31 %   36.42  


Bank of the James Financial Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollar amounts in thousands, except per share amounts)

       
       
Assets (unaudited)
6/30/2019
  12/31/2018
 
       
Cash and due from banks $ 24,543     $ 26,725  
Federal funds sold   7,587       23,600  
Total cash and cash equivalents   32,130       50,325  
       
Securities held-to-maturity (fair value of $3,774 in 2019 and $3,515 in 2018)   3,694       3,700  
Securities available-for-sale, at fair value   53,818       52,727  
Restricted stock, at cost   1,506       1,462  
Loans, net of allowance for loan losses of $4,724 in 2019 and $4,581 in 2018   551,974       530,016  
Loans held for sale   4,443       1,670  
Premises and equipment, net   15,664       13,233  
Software, net   212       193  
Interest receivable   1,761       1,742  
Cash value - bank owned life insurance   13,526       13,359  
Other real estate owned   2,413       2,431  
Income taxes receivable   454       1,102  
Deferred tax asset, net   1,232       1,755  
Other assets   7,268       1,182  
  Total assets $ 690,095     $ 674,897  
       
       
Liabilities and Stockholders' Equity      
Deposits      
Noninterest bearing demand   88,897       91,356  
NOW, money market and savings   342,384       331,298  
Time   185,903       189,389  
Total deposits   617,184       612,043  
       
Capital notes   5,000       5,000  
Interest payable   159       127  
Other liabilities   8,503       2,584  
  Total liabilities $ 630,846     $ 619,754  
       
Stockholders' equity      
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 4,378,436
as of June 30, 2019 and December 31, 2018
  9,370       9,370  
Additional paid-in-capital   31,548       31,495  
Accumulated other comprehensive loss   (275 )     (2,243 )
Retained earnings   18,606       16,521  
Total stockholders' equity $ 59,249     $ 55,143  
       
Total liabilities and stockholders' equity $ 690,095     $ 674,897  
       
       
       

Bank of the James Financial Group, Inc. and Subsidiaries
Consolidated Statements of Income
(dollar amounts in thousands, except per share amounts)
(unaudited)

                 
                 
  For the Three Months
Ended June 30,
  For the Six Months
Ended June 30,
 
Interest Income    
  2019     2018     2019     2018  
Loans $6,816   $6,195   $13,470   $11,869  
Securities                
US Government and agency obligations   184     186     369     384  
Mortgage backed securities   56     66     117     134  
Municipals   81     83     162     165  
Dividends   33     23     51     31  
Other (Corporates)   24     24     47     47  
Interest bearing deposits   74     56     165     91  
Federal Funds sold   122     92     243     159  
  Total interest income   7,390     6,725     14,624     12,880  
                 
Interest Expense                
Deposits                
NOW, money market savings   362     231     668     423  
Time Deposits   750     543     1,418     1,044  
Brokered time deposits   76     82     156     162  
FHLB borrowings   -     16     -     17  
Capital notes   50     50     100     100  
  Total interest expense   1,238     922     2,342     1,746  
                 
  Net interest income   6,152     5,803     12,282     11,134  
                 
Provision for loan losses   116     315     326     337  
                 
  Net interest income after provision for loan losses   6,036     5,488     11,956     10,797  
                 
                 
Noninterest income                
Gains on sale of loans held for sale   1,075     873     1,766     1,493  
Service charges, fees and commissions   461     465     900     929  
Increase in cash value of life insurance   84     85     167     169  
Other   39     18     45     36  
  Total noninterest income   1,659     1,441     2,878     2,627  
                 
Noninterest expenses                
Salaries and employee benefits   3,153     2,832     6,081     5,545  
Occupancy   417     360     838     755  
Equipment   536     398     994     777  
Supplies   142     140     304     289  
Professional, data processing, and other outside expense   859     837     1,674     1,652  
Marketing   276     187     421     327  
Credit expense   156     112     283     237  
Other real estate expenses   1     86     140     126  
FDIC insurance expense   94     99     188     200  
Other   341     255     651     495  
  Total noninterest expenses   5,975     5,306     11,574     10,403  
                 
  Income before income taxes   1,720     1,623     3,260     3,021  
                 
  Income tax expense   343     323     649     598  
                 
  Net Income $1,377   $1,300   $2,611   $ 2,423  
                 
Weighted average shares outstanding - basic   4,378,436     4,378,436     4,378,436     4,378,436  
                 
Weighted average shares outstanding - diluted   4,383,021     4,378,436     4,381,994     4,378,481  
                 
Net income per common share - basic $0.31   $0.30   $0.60   $ 0.55  
                 
Net income per common share - diluted $0.31   $0.30   $0.60   $ 0.55  
                 

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