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Bank of the James Announces Second Quarter, First Half 2017 Financial Results and Declaration of Dividend

BOTJ

LYNCHBURG, Va., July 21, 2017 (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 the greater Lynchburg area (Region 2000), and the Charlottesville, Harrisonburg, and Roanoke, Virginia markets, today announced unaudited results for the three months and six months ended June 30, 2017.

Net income for the three months ended June 30, 2017 was $787,000 or $0.18 per diluted share compared with $1.05 million or $0.24 per diluted share for the three months ended June 30, 2016. For the six months ended June 30, 2017, net income was $1.55 million or $0.35 per diluted share compared with $1.94 million or $0.44 per diluted share for the six months ended June 30, 2016.

Robert R. Chapman III, President and CEO, commented: “As we passed the halfway mark of 2017, the Company’s financial results continued to reflect the positive impact of a strategy to drive steady growth throughout a larger served market. Our team is doing a tremendous job of retaining valued clients and earning new business. We are pleased with the positive reception Bank of the James has received in Charlottesville, Roanoke and Harrisonburg.

“We believe the positive impact of investments made in experienced, motivated people, technology and leading-edge products is already evident in financial results that reflect steady growth in areas such as lending, net interest income and deposits. The Company’s success in building commercial banking has been rewarding, continuing to exceed expectations. Throughout this period of investment and growth, we have been pleased to deliver increased value to stockholders, whose support has enabled us to invest in the future.”

Highlights

  • Interest income from earning assets of $5.85 million increased 10.5% in the second quarter of 2017 compared with the second quarter of 2016. Net interest income before provision for loan losses of $5.14 million in the second quarter of 2017 increased 8.4% compared with the second quarter of 2016.
  • In the first half of 2017, interest income from earning assets grew 7.9% compared with the first half of 2016, while net interest income increased 5.8% compared with a year earlier.
  • Led by increasing use of business-related electronic treasury management services, service charges, fees, and commissions increased to $898,000 in the first half of 2017 from $734,000 in the first half of 2016.
  • Strong commercial lending activity and new customer relationships, particularly in the Company’s Charlottesville, Harrisonburg and Roanoke, Virginia markets, led to a Company-record $483.25 million in total loans, net of the allowance for loan losses. Loans increased from $466.24 million at March 31, 2017 and $464.35 million at December 31, 2016, and were up 6.9% from loans, net at June 30, 2016.
  • Commercial and industrial loans (C&I) increased 14% year-over-year, while owner occupied real estate, led by commercial real estate (CRE) portfolio growth, rose 13% at June 30, 2017 compared with June 30, 2016.
  • Total assets rose to $595.64 million at June 30, 2017, the highest in Company history.
  • Asset quality ratios reflected continuing loan portfolio strength.
  • Total stockholders’ equity increased to $51.06 million, up from $49.42 million at December 31, 2016. Book value per share rose to $11.66 at June 30, 2017 from $11.29 at December 31, 2016.
  • Based on the results achieved in the second quarter, on July 18, 2017 the Company’s board of directors approved a $0.06 per share dividend payable to stockholders of record on September 8, 2017, to be paid on September 22, 2017.

Chapman noted: “A critical aspect of our growth strategy is for productivity and efficiency to continue to improve, which will translate to increased profitability and earnings growth. A critical part of our success is prudent, sustainable growth, with a clear focus on maintaining strong asset quality. We believe our results reflect this commitment to growth and quality.”

Second Quarter 2017 Operational Review

Total interest income was $5.85 million in the second quarter of 2017, growing 10.5% compared with total interest income of $5.29 million in the second quarter of 2016, and up more than $300,000 from the first quarter of 2017. The average rate earned on loans, including fees, was 4.57% in the second quarter of 2017, up from 4.50% in the second quarter of 2016, and slightly higher than the average rate in the first quarter of 2017. The average rate earned on total earning assets in the second quarter of 2017 was 4.26%, reflecting relative stability compared with the past several quarters.

Total interest expense was $711,000 for the three months ended June 30, 2017, compared with $550,000 for the three months ended June 30, 2016. The increase partially reflected interest paid on capital notes issued in February 2017. Addressing the prospect of rising rates on deposit accounts, the Company also has selectively grown certificates of deposit to lock in deposits at current rates.

The Company continued to grow noninterest bearing demand accounts, primarily reflecting increased commercial banking business throughout the franchise. The average rate paid on interest bearing accounts was 0.63% in the second quarter of 2017, which was consistent with the previous several quarters. For the six months ended June 30, 2017, the Company’s net interest margin for was 3.70% and net interest spread was 3.55%

Net interest income increased to $5.14 million for the three months ended June 30, 2017 from $4.74 million for the three months ended June 30, 2016, primarily reflecting loan growth, and was up from $4.84 million for the three months ended March 31, 2017. Net interest income after provision for loan losses was $4.70 million for the three months ended June 30, 2017 compared with $4.49 million for the three months ended June 30, 2016.

Noninterest income, including gains from the sale of residential mortgages to the secondary market, and income from the bank's line of treasury management services for commercial customers was $1.25 million in the second quarter of 2017 compared with $1.32 million in the second quarter of 2016. Income from gains on sale of loans held for sale increased from the first quarter of 2017, and were down modestly from a year earlier when mortgage activity was particularly strong. Continued growth in fee-based treasury services for businesses was partially reflected within the 36% growth in service charges, fees, and commissions in the second quarter of 2017 compared with the second quarter of 2016.

Noninterest expense for the three months ended June 30, 2017 was $4.81 million compared with $4.25 million a year earlier, with the increase primarily reflecting the Company’s investment in an expanded banking team and market expansion.

J. Todd Scruggs, Executive Vice President and CFO, noted: “We anticipate personnel and facility-related expenses will level out in the coming quarters, as we have essentially completed our recent expansion strategy. We have already seen growth and accelerating productivity that we expect will be reflected in accelerating earnings going forward.”

First Half 2017 Operational Overview

Total interest income of $11.36 million in the first half of 2017 rose 8% compared to $10.53 million in the first half of 2016, led by a 6.7% growth in loan-generated interest income. Net interest income in the first half of 2017 increased to $9.98 million from $9.43 million in the first half of 2016, primarily reflecting increased total interest income, partially offset by increased total interest expense related to capital notes issued and growth in time deposits and related interest. Net interest income after provision for loan losses rose 5% to $9.43 million from $8.98 million. The provision for loan losses was $545,000 in the first six months of 2017 compared with $450,000 in the first six months of 2016, with the increase primarily reflecting appropriate reserving to match loan growth.

The Company's net interest margin was 3.70% in the six months of 2017 compared with 3.84% a year earlier, and net interest spread was 3.55% compared with 3.71% for the six months ended June 30, 2016. Average rates earned on loans, including fees, was 4.52% in the first half of 2017 and average rates earned on total earning assets was 4.21%.

Noninterest income was $2.14 million for the six months ended June 30, 2017, compared with $2.32 million for the six months ended June 30, 2016, primarily reflecting lower gains on sale of loans held for sale, partially offset by increases in service charges, fees and commission income. Management noted that tight residential housing inventories have contributed to a general slowing of purchase mortgage originations. Higher noninterest expense in the first half of 2017 compared with the previous year’s six-month period primarily reflected the investments in personnel and infrastructure the Company made during the past year.

Balance Sheet Reflects Consistent Growth

Total assets rose to $595.64 million at June 30, 2017 from $574.20 million at December 31, 2016, and were up 9% from $545.73 million a year ago.  The primary driver of asset growth has been loans held for investment, net of the allowance for loan losses, which totaled $483.25 million, up from $464.35 million at December 31, 2016. The loan portfolio grew 7% year-over-year, primarily reflecting consistent growth in commercial lending.

The Company’s commercial loan portfolio (primarily C&I) increased to $97.37 million at June 30, 2017, a 14% increase compared with commercial loans a year earlier. Owner occupied real estate loans, led by CRE lending, increased 13% to $145.12 million at June 30, 2017 from $128.89 million at June 30, 2016.

Non-owner occupied real estate (primarily commercial and investment property) increased 5% year-over year. Total construction loans increased 8%, led by new home construction. Consumer lines of credit (primarily home equity) increased slightly, and consumer loans declined modestly.

Total deposits at June 30, 2017 were $532.86 million compared with $523.11 million at December 31, 2016, and up from $493.54 million at June 30, 2016. The Bank continued to attract noninterest bearing deposits, which increased to $111.68 million at June 30, 2017 from $102.65 million at December 31, 2016. Core deposits (noninterest bearing, NOW, money market and savings deposits) comprised approximately 68% of the Company’s total deposits.

As the Company has grown assets, quality ratios have remained sound. The 0.54% ratio of nonperforming loans to total loans at June 30, 2017 was unchanged from December 31, 2016. The Company's allowance for loan losses to total loans was 1.25%, and the Company maintained a strong allowance for loan losses as a percent of nonperforming loans. Total nonperforming assets were $5.42 million at June 30, 2017 compared with $4.92 million at December 31, 2016. The increase primarily reflected one classified commercial loan being moved to nonperforming status during the first quarter of 2017. The Bank's regulatory capital ratios continued to exceed accepted regulatory standards for a well-capitalized institution.

The Company grew measures of stockholder value, including tangible book value per share and total stockholders' equity. Total stockholders' equity increased to $51.06 million at June 30, 2017, compared with $49.42 million at December 31, 2016. Retained earnings rose to $11.18 million at June 30, 2017 from $10.16 million at December 31, 2016.

Chapman concluded: “We entered the second half of 2017 with good momentum, including robust loan pipelines and new business opportunities. We believe if we continue to execute on our strategy, the Company should deliver positive financial results and value for our stockholders.”

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 operates 13 banking offices and two limited services offices in Virginia serving Altavista, Amherst, Appomattox, Bedford, Charlottesville, Forest, Harrisonburg, 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.

FINANCIAL STATEMENTS FOLLOW

               
Bank of the James Financial Group, Inc. and Subsidiaries
(000's) except ratios and percent data
unaudited
               
Selected Data:   Three
months
ending
Jun 30,
2017
Three
months
ending
Jun 30,
2016
Change Year
to
date
Jun 30,
2017
Year
to
date
Jun 30,
2016
Change
Interest income   $   5,851   $   5,293     10.54 %   $   11,360   $   10,528     7.90 %
Interest expense     711     550     29.27 %     1,382     1,098     25.87 %
Net interest income     5,140     4,743     8.37 %     9,978     9,430     5.81 %
Provision for loan losses     445     250     78.00 %     545     450     21.11 %
Noninterest income     1,254     1,316     -4.71 %     2,135     2,324     -8.13 %
Noninterest expense     4,806     4,254     12.98 %     9,323     8,444     10.41 %
Income taxes     356     504     -29.37 %     698     922     -24.30 %
Net income     787     1,051     -25.12 %     1,547     1,938     -20.18 %
Weighted average shares outstanding - basic     4,378,436     4,378,436     0.00 %     4,378,436     4,378,436     0.00 %
Weighted average shares outstanding - diluted     4,378,519     4,378,436   N/M
      4,378,527     4,378,436   N/M  
Basic net income per share   $   0.18   $   0.24   $   (0.06 )   $   0.35   $    0.44   $   (0.09 )
Fully diluted net income per share   $   0.18   $   0.24   $   (0.06 )   $   0.35   $   0.44   $   (0.09 )


Balance Sheet at period end:   Jun 30,
2017
Dec 31,
2016
Change Jun 30,
2016
Dec 31,
2015
Change
Loans, net   $   483,248   $   464,353   4.07 %   $   452,044   $   430,445     5.02 %
Loans held for sale     2,514     3,833   -34.41 %     4,452     1,964     126.68 %
Total securities     52,603     44,075   19.35 %     37,118     38,515     -3.63 %
Total deposits     532,862     523,112   1.86 %     493,535     467,610     5.54 %
Stockholders' equity     51,058     49,421   3.31 %     50,553     48,196     4.89 %
Total assets     595,637     574,195   3.73 %     545,730     527,143     3.53 %
Shares outstanding     4,378,436     4,378,436   -       4,378,436     4,378,436     -  
Book value per share   $   11.66   $   11.29   0.37     $   11.55   $   11.01   $   0.54  


Daily averages:   Three
months
ending
Jun 30,
2017
Three
months
ending
Jun 30,
2016
Change Year
to
date
Jun 30,
2017
Year
to
date
Jun 30,
2016
Change
Loans, net   $   471,770   $   437,619   7.80 %   $   468,052   $   434,903   7.62 %
Loans held for sale     2,347     4,457   -47.34 %     1,871     3,580   -47.74 %
Total securities     54,130     41,040   31.90 %     52,532     40,669   29.17 %
Total deposits     530,487     483,453   9.73 %     524,100     476,486   9.99 %
Stockholders' equity     51,483     49,351   4.32 %     51,228     49,041   4.46 %
Interest earning assets     551,552     500,942   10.10 %     544,693     494,770   10.09 %
Interest bearing liabilities     424,884     385,670   10.17 %     420,597     382,104   10.07 %
Total assets     588,167     533,648   10.22 %     580,404     527,299   10.07 %


Financial Ratios:   Three
months
ending
Jun 30,
2017
Three
months
ending
Jun 30,
2016
Change Year
to
date
Jun 30,
2017
Year
to
date
Jun 30,
2016
Change
Return on average assets   0.54 %   0.79 %   (0.25 )   0.54 %   0.74 %   (0.20 )
Return on average equity   6.13 %   8.54 %   (2.41 )   6.09 %   7.93 %   (1.84 )
Net interest margin   3.74 %   3.80 %   -0.06 %   3.70 %   3.84 %   -0.14 %
Efficiency ratio   75.16 %   70.21 %   4.95     76.97 %   71.84 %   5.13  
Average equity to average assets   8.75 %   9.25 %   (0.50 )   8.83 %   9.30 %   (0.47 )


Allowance for loan losses:   Three
months
ending
Jun 30,
2017
Three
months
ending
Jun 30,
2016
Change Year
to
date
Jun 30,
2017
Year
to
date
Jun 30,
2016
Change
Beginning balance   $   5,716     $   4,750     20.34 %   $   5,716     $   4,683     22.06 %
Provision for losses     445       250     78.00 %     545       450     21.11 %
Charge-offs     (96 )     (127 )   -24.41 %     (226 )     (378 )   -40.21 %
Recoveries     67       14     378.57 %     97       132     -26.52 %
Ending balance     6,132       4,887     25.48 %     6,132       4,887     25.48 %


Nonperforming assets:   Jun 30,
2017
Dec 31,
2016
Change Jun 30,
2016
Dec 31,
2015
Change
Total nonperforming loans   $   2,649   $   2,550   3.88 %   $   2,540   $   3,406   -25.43 %
Other real estate owned     2,775     2,370   17.09 %     2,420     1,965   23.16 %
Total nonperforming assets     5,424     4,920   10.24 %     4,960     5,371   -7.65 %
Troubled debt restructurings - (performing portion)     448     455   -1.54 %     639     646   -1.08 %


Asset quality ratios:   Jun 30,
2017
Dec 31,
2016
Change Jun 30,
2016
Dec 31,
2015
Change
Nonperforming loans to total loans   0.54 %   0.54 %   (0.00 )   0.56 %   0.77 %   (0.21 )
Allowance for loan losses to total loans   1.25 %   1.22 %   0.03     1.07 %   1.08 %   (0.01 )
Allowance for loan losses to nonperforming loans   231.48 %   224.16 %   7.32     192.40 %   137.49 %   54.91  


             
Bank of the James Financial Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollar amounts in thousands, except per share amounts)
             
Assets   6/30/2017       12/31/2016
Cash and due from banks   $ 18,117         $ 16,938  
Federal funds sold     5,115           11,745  
Total cash and cash equivalents     23,232           28,683  
             
Securities held-to-maturity (fair value of $3,284 in 2017 and $3,273 in 2016)     3,288           3,299  
Securities available-for-sale, at fair value     49,315           40,776  
Restricted stock, at cost     1,505           1,373  
Loans, net of allowance for loan losses of $6,132 in 2017 and $5,716 2016     483,248           464,353  
Loans held for sale     2,514           3,833  
Premises and equipment, net     11,191           10,771  
Software, net     225           176  
Interest receivable     1,298           1,378  
Cash value - bank owned life insurance     12,846           12,673  
Other real estate owned     2,775           2,370  
Income taxes receivable     1,291           1,214  
Deferred tax asset     2,057           2,374  
Other assets     852           922  
Total assets   $ 595,637         $ 574,195  
             
Liabilities and Stockholders' Equity            
Deposits            
Noninterest bearing demand     111,678           102,654  
NOW, money market and savings     249,594           255,429  
Time     171,590           165,029  
Total deposits     532,862           523,112  
             
Repurchase agreements     5,000           -  
Capital notes 4% due 1/24/2022     5,000           -  
Interest payable     78           88  
Other liabilities     1,639           1,574  
Total liabilities   $ 544,579         $ 524,774  
             
Stockholders' equity            
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding            
4,378,436 as of June 30, 2017 and December 31, 2016     9,370           9,370  
Additional paid-in-capital     31,495           31,495  
Accumulated other comprehensive (loss)     (985 )         (1,600 )
Retained earnings     11,178           10,156  
Total stockholders' equity   $ 51,058         $ 49,421  
             
Total liabilities and stockholders' equity   $ 595,637         $ 574,195  


             
Bank of the James Financial Group, Inc. and Subsidiaries
Consolidated Statements of Income (unaudited)
(dollar amounts in thousands, except per share amounts)
             
    For the Three Months       For the Six Months
    Ended June 30,       Ended June 30,
      2017     2016         2017     2016
Interest Income                    
Loans   $ 5,465   $ 5,007       $ 10,653   $ 9,985
Securities                    
US Government and agency obligations     121     125         234     264
Mortgage backed securities     77     68         143     120
Municipals     90     46         170     90
Dividends     28     27         35     33
Other (Corporates)     30     3         57     9
Interest bearing deposits     17     9         32     15
Federal Funds sold     23     8         36     12
Total interest income     5,851     5,293         11,360     10,528
                     
Interest Expense                    
Deposits                    
NOW, money market savings     175     139         344     275
Time Deposits     425     373         827     742
Federal Funds purchased     -     -         -     4
Brokered time deposits     61     38         124     69
Capital notes     50     -         87     8
Total interest expense     711     550         1,382     1,098
                     
Net interest income     5,140     4,743         9,978     9,430
                     
Provision for loan losses     445     250         545     450
                     
Net interest income after provision for loan losses     4,695     4,493         9,433     8,980
                     
Noninterest income                    
Gains on sale of loans held for sale     598     681         969     1,172
Service charges, fees and commissions     493     362         898     734
Increase in cash value of life insurance     87     65         173     130
Other     24     45         33     60
Gain on sales of available-for-sale securities     52     163         62     228
                     
Total noninterest income     1,254     1,316         2,135     2,324
                     
Noninterest expenses                    
Salaries and employee benefits     2,396     2,162         4,776     4,399
Occupancy     365     305         737     637
Equipment     438     314         786     633
Supplies     123     108         257     227
Professional, data processing, and other outside expense     697     701         1,377     1,363
Marketing     236     201         384     320
Credit expense     187     106         301     189
Other real estate expenses     24     4         36     5
FDIC insurance expense     88     91         191     183
Other     252     262         478     488
Total noninterest expenses     4,806     4,254         9,323     8,444
                     
Income before income taxes     1,143     1,555         2,245     2,860
                     
Income tax expense     356     504         698     922
                     
Net Income   $ 787   $ 1,051       $ 1,547   $ 1,938
                     
Weighted average shares outstanding - basic     4,378,436     4,378,436         4,378,436     4,378,436
                     
Weighted average shares outstanding - diluted     4,378,519     4,378,436         4,378,527     4,378,436
                     
Net Income per common share - basic   $ 0.18   $ 0.24       $ 0.35   $ 0.44
                     
Net Income per common share - diluted   $ 0.18   $ 0.24       $ 0.35   $ 0.44

 

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

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