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Bank of the James Announces Third Quarter, Nine Months of 2018 Financial Results and Declaration of Dividend

BOTJ

Strong Year-Over-Year Earnings Growth, Loan and Deposit Expansion

LYNCHBURG, Va., Oct. 19, 2018 (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 nine months ended September 30, 2018.

Net income for the three months ended September 30, 2018 was $1.40 million or $0.32 per diluted share, up 38% compared with $1.02 million or $0.23 per diluted share for the three months ended September 30, 2017. For the nine months ended September 30, 2018, net income rose 49% to $3.83 million or $0.87 per diluted share, compared with $2.56 million or $0.59 per diluted share for the nine months ended September 30, 2017.

Robert R. Chapman III, President and CEO, commented: “We continued to have balanced contributions from commercial and retail lending and banking activities, generating meaningful year-over-year interest income and non-interest income growth. Deposit growth of $47 million year-over-year, specifically an increase core deposits, reflected an ongoing focus on building full banking relationships with clients. Importantly, deposit growth has provided attractively priced financing to fund lending, and contributed to interest expense management and net interest margin improvement.”

Highlights

  • Commercial real estate (CRE), construction and multi-family housing loans were major contributors to the 15% growth of interest income from earning assets in the third quarter of 2018 compared with the third quarter of 2017.
  • Net interest income before the provision for loan losses was $5.99 million in the third quarter of 2018, up 13% from the third quarter of 2017, led primarily by growth in commercial lending.
  • Total noninterest income, primarily reflecting increased fee income from treasury services, income from the Company’s insurance and investments business, and continued strong gains on sales of residential mortgage loans, was up 17% in the nine months of 2018 compared with the nine months of 2017.
  • Deposits increased to a record $607.45 million at September 30, 2018, led by core deposit growth (noninterest-bearing demand, NOW, savings and money market accounts).
  • Total assets were a Company record $668.44 million at September 30, 2018.
  • Total nonperforming loans declined 45% at September 30, 2018 from December 31, 2017, contributing to strong asset quality ratios, including an improvement of nonperforming loans to total loans of 0.44% at September 30, 2018 from 0.87% at December 31, 2017. All asset quality ratios remained strong, reflecting loan portfolio strength.
  • Measures of productivity trended positively, as Return on Average Assets (ROAA) was 0.84% for the quarter ended September 30, 2018, up from 0.66% for the quarter ended September 30, 2017 (and up from 0.79% for the quarter ended June 30, 2018). Return on Average Equity (ROAE) increased significantly to 10.13% for the quarter ended September 30, 2018 from 7.75% for the quarter ended September 30, 2017 (and up from 9.67% for the quarter ended June 30, 2018). The Company’s efficiency ratio improved year-over-year.
  • Total stockholders’ equity increased to $53.12 million at September 30, 2018 from $51.67 million December 31, 2017, and retained earnings rose to $15.31 million from $12.27 million at year-end 2017. Based on the results achieved in the third quarter of 2018, on October 16, 2018 the Company’s board of directors approved a $0.06 per share dividend payable to stockholders of record on November 30, 2018, to be paid on December 14, 2018.

Chapman continued: “As we have grown the Company’s loan portfolio, we believe that we have been very focused in maintaining sound asset and credit quality by applying thorough credit risk assessment and ongoing loan quality monitoring. This contributed to a 45% reduction in the dollar amount of nonperforming loans since the beginning of 2018, and improved asset quality ratios, including a meaningful reduction in the ratio of nonperforming loans to total loans since the beginning of the year. An expanded banking team, and continued traction in Roanoke, Charlottesville, Harrisonburg and most recently Appomattox and Blacksburg, while managing operating expenses and maintaining asset quality, have contributed to our long-term goals of improved returns on our asset base and generating accelerating, predictable earnings growth.”

Third Quarter, Nine Months of 2018 Operational Review

Total interest income was $6.98 million in the third quarter of 2018, up 15% from $6.07 million a year earlier. The primary driver of interest income growth in the third quarter and nine months of 2018 was an increase in loans combined with an increase in interest rates. Although interest expense rose year-over-year with an increase in deposits and market driven rate increases, net interest income was up 13% to $5.99 million for the quarter ended September 30, 2018 compared with a year earlier. Net interest income in the nine months of 2018 increased 12% compared with a year earlier.

The Company’s provision for loan losses was 5% lower in the third quarter of 2018 compared with a year earlier, and 29% lower in the nine months of 2018 compared with a year earlier. The third quarter of 2018 loan loss provision was $190,000, down from $200,000 in the third quarter of 2017, and the loan loss provision in the nine months of 2018 was $527,000, compared with $745,000 in the first nine months of 2017.

Net interest income after provision for loan losses in the third quarter of 2018 was $5.80 million compared with $5.08 million in the third quarter of 2017. Net interest income after provision for loan losses in the nine months of 2018 was $16.60 million compared with $14.52 million a year earlier.

Commercial lending growth, increased rates, and relative stability in the interest rate spread contributed to a 3.80% net interest margin in the third quarter of 2018, up from 3.69% a year earlier. The net interest margin for the nine months of 2018 expanded to 3.73% from 3.68% in the nine months of 2017. Average rates on total earning assets for the quarter ended September 30, 2018 were 4.47%, compared to 4.20% a year earlier.

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 supported continued positive quarterly growth. Noninterest income rose modestly in the third quarter of 2018 compared with the third quarter of 2017, and was up more than 17% for the nine months of 2018 to $4.05 million from $3.45 million for nine months of 2017.

Ongoing strong residential mortgage origination activity supported a strong pipeline of loans held for sale, which generated gains on sale to the secondary market of $767,000 in the third quarter of 2018, compared with $694,000 in the third quarter of 2017. For the nine months of 2018, gains on the sales of loans held for sale were $2.26 million, compared with $1.66 million for the comparable period in 2017.

Chapman noted: “We have been extremely grateful for the tremendous accomplishments of our Bank of the James Mortgage team in all our served markets including our most recent establishment of a mortgage office in Blacksburg. The team’s professionalism and willingness to go the extra mile for customers, combined with a finely tuned and efficient approval and closing process, has time and again earned referrals from customers, real estate agents, and home builders.

“A focus on mortgage origination has allowed us to emphasize the service and capabilities that Bank of the James is known for, while managing the Company’s risk profile by placing closed mortgages in the secondary market. This has proven to be a very successful strategy.”

Income from service charges, fees and commissions, which included growing fee income from the Company’s suite of treasury services for businesses and income from BOTJ Investment Services, was $547,000 in the third quarter of 2018, relatively stable compared with the third quarter of 2017, and up significantly from $465,000 in the second quarter of 2018. Income of $1.48 million for the nine months of 2018 increased from $1.38 million for the nine months of 2017.

Noninterest expense for the three months ended September 30, 2018 was $5.47 million compared with $4.98 million a year earlier, primarily reflecting increased personnel expenses from a larger team of producing individuals, equipment expense, OREO expense, and to a lesser extent, professional expenses, and data processing expenses. In the nine months of 2018, noninterest expense was $15.87 million compared with $14.24 million in the nine months of 2017.

Balance Sheet Review: Growth, Asset Quality

Total assets rose to a Company record $668.44 million. The primary driver of asset growth continues to be loans held for investment, net of the allowance for loan losses, which totaled $524.10 million, up from $491.02 million at December 31, 2017. Loans held for sale were $2.53 million. Fair market value of securities available-for-sale was $52.33 million compared with $55.31 million at December 31, 2017.

The Company’s commercial loan portfolio realized  year-over-year growth in several categories. Non-owner occupied commercial real estate (primarily commercial and investment property), increased 30% to $71.10 million at September 30, 2018 from $54.73 million a year earlier. Owner-occupied commercial real estate of $102.32 million was up 3% from a year earlier, and mortgages on multi-family properties increased 24% at September 30, 2018 from a year earlier. Construction lending, primarily reflecting continued strong residential home construction activity, was up 20% from a year earlier. Agricultural and consumer loans experienced double-digit growth compared with a year earlier, and residential mortgages and home equity loans were relatively stable.

Total deposits at September 30, 2018 rose to $607.45 million from $567.49 million at December 31, 2017. Much of the deposit growth reflected increased noninterest bearing demand accounts, which grew to $89.84 million at September 30, 2018 from $74.10 million at December 31, 2017, and core interest bearing accounts (NOW, money market and savings), which increased to $329.87 million from $307.99 million during the same period. Core deposits comprised approximately 70% of total deposits.

Asset quality remained strong, with a ratio of nonperforming loans to total loans of 0.44% at September 30, 2018, compared with 0.87% at December 31, 2017. As previously noted, nonperforming loans declined 45% from December 31, 2017 levels, while total nonperforming assets, inclusive of Other Real Estate Owned (OREO), declined 31% from year-end 2017 to $4.81 million. The Company’s allowance for loan losses was $4.56 million, with a ratio of 0.86% of allowance for loan losses to total loans and a 194% loss allowance to nonperforming loans.

The Company grew measures of stockholder value. Total stockholders’ equity was $53.12 million at September 30, 2018, up from $51.67 million at December 31, 2017. Retained earnings increased to $15.31 million, up from $12.27 million at December 31, 2017. Tangible book value per share increased to $12.13 at September 30, 2018 from $11.80 at December 31, 2017. 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 operates 13 banking offices, three limited services offices, and two loan production 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.

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
Sep 30,
2018
Three
months
ending
Sep 30,
2017
Change Year
to
date
Sep 30,
2018
Year
to
date
Sep 30,
2017
Change
Interest income $ 6,980 $ 6,070   14.99 % $ 19,860 $ 17,430   13.94 %
Interest expense   990   786   25.95 %   2,736   2,168   26.20 %
Net interest income   5,990   5,284   13.36 %   17,124   15,262   12.20 %
Provision for loan losses   190   200   -5.00 %   527   745   -29.26 %
Noninterest income   1,420   1,389   2.23 %   4,047   3,454   17.17 %
Noninterest expense   5,465   4,984   9.65 %   15,868   14,237   11.46 %
Income taxes   351   474   -25.95 %   949   1,172   -19.03 %
Net income   1,404   1,015   38.33 %   3,827   2,562   49.38 %
Weighted average shares outstanding - basic   4,378,436   4,378,436   -     4,378,436   4,378,436   -  
Weighted average shares outstanding - diluted   4,378,436   4,378,519   (83 )   4,378,466   4,378,524   (88 )
Basic net income per share $ 0.32 $ 0.23 $ 0.09   $ 0.87 $ 0.59 $ 0.28  
Fully diluted net income per share $ 0.32 $ 0.23 $ 0.09   $ 0.87 $ 0.59 $ 0.28  
                             


Balance Sheet at
period end:
Sep 30,
2018
Dec 31,
2017
Change Sep 30,
2017
Dec 31,
2016
Change
Loans, net $ 524,104 $ 491,022 6.74 % $ 493,764 $ 464,353   6.33 %
Loans held for sale   2,529   2,626 -3.69 %   1,502   3,833   -60.81 %
Total securities   56,036   61,025 -8.18 %   52,946   44,075   20.13 %
Total deposits   607,447   567,493 7.04 %   560,515   523,112   7.15 %
Stockholders' equity   53,117   51,665 2.81 %   51,792   49,421   4.80 %
Total assets   668,438   626,341 6.72 %   619,336   574,195   7.86 %
Shares outstanding   4,378,436   4,378,436 -     4,378,436   4,378,436   -  
Book value per share $ 12.13 $ 11.80 $ 0.33   $ 11.83 $ 11.29 $ 0.54  
                           


Daily averages: Three
months
ending
Sep 30,
2018
Three
months
ending
Sep 30,
2017
Change Year
to
date
Sep 30,
2018
Year
to
date
Sep 30,
2017
Change
Loans, net $ 522,944   $ 487,051   7.37 % $ 511,573   $ 474,455   7.82 %
Loans held for sale   3,134     3,169   -1.10 %   3,096     2,309   34.08 %
Total securities   60,281     54,791   10.02 %   61,302     53,293   15.03 %
Total deposits   602,549     551,629   9.23 %   590,319     535,203   10.30 %
Stockholders' equity   54,967     51,984   5.74 %   53,917     51,482   4.73 %
Interest earning assets   625,693     574,214   8.97 %   614,290     554,642   10.75 %
Interest bearing liabilities   519,235     436,510   18.95 %   490,947     425,959   15.26 %
Total assets   663,685     612,447   8.37 %   651,489     592,974   9.87 %
                                 


Financial Ratios: Three
months
ending
Sep 30,
2018
Three
months
ending
Sep 30,
2017
Change Year
to
date
Sep 30,
2018
Year
to
date
Sep 30,
2017
Change
Return on average assets   0.84 %   0.66 % 0.18     0.79 %   0.58 % 0.21  
Return on average equity   10.13 %   7.75 % 2.38     9.49 %   6.65 % 2.84  
Net interest margin   3.80 %   3.69 % 0.11     3.73 %   3.68 % 0.05  
Efficiency ratio   73.75 %   74.69 % (0.94 )   74.95 %   76.07 % (1.12 )
Average equity to average assets   8.28 %   8.49 % (0.21 )   8.28 %   8.68 % (0.41 )
                                 

 

Allowance for loan losses: Three
months
ending
Sep 30,
2018
Three
months
ending
Sep 30,
2017
Change Year
to
date
Sep 30,
2018
Year
to
date
Sep 30,
2017
Change
Beginning balance $   4,688   $   6,132   -23.55 % $   4,752   $   5,716   -16.86 %
Provision for losses   190     200   -5.00 %   527     745   -29.26 %
Charge-offs   (324 )   (325 ) -0.31 %   (879 )   (551 ) 59.53 %
Recoveries   7     13   -46.15 %   161     110   46.36 %
Ending balance   4,561     6,020   -24.24 %   4,561     6,020   -24.24 %
                                 


Nonperforming assets: Sep 30,
2018
Dec 31,
2017
Change Sep 30,
2017
Dec 31,
2016
Change
Total nonperforming loans $ 2,350 $ 4,308 -45.45 % $ 2,334 $ 2,550 -8.47 %
Other real estate owned   2,455   2,650 -7.36 %   2,639   2,370 11.35 %
Total nonperforming assets   4,805   6,958 -30.94 %   4,973   4,920 1.08 %
Troubled debt restructurings - (performing portion)   428   440 -2.73 %   444   455 -2.42 %
                         


Asset quality ratios: Sep 30,
2018
Dec 31,
2017
Change Sep 30,
2017
Dec 31,
2016
Change
Nonperforming loans to total loans 0.44 % 0.87 % (0.43 ) 0.47 % 0.54 % (0.07 )
Allowance for loan losses to total loans 0.86 % 0.96 % (0.10 ) 1.20 % 1.22 % (0.02 )
Allowance for loan losses to nonperforming loans 194.09 % 110.31 % 83.78   257.93 % 224.16 % 33.77  
                         


 
Bank of the James Financial Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollar amounts in thousands, except per share amounts)
       
Assets (unaudited)
       
  9/30/2018
  12/31/2017
       
Cash and due from banks $ 25,849     $ 20,267  
Federal funds sold   24,615       16,751  
Total cash and cash equivalents   50,464       37,018  
       
Securities held-to-maturity (fair value of $3,394 in 2018 and $5,619 in 2017)   3,703       5,713  
Securities available-for-sale, at fair value   52,333       55,312  
Restricted stock, at cost   1,462       1,505  
Loans, net of allowance for loan losses of $4,561 in 2018 and $4,752 in 2017   524,104       491,022  
Loans held for sale   2,529       2,626  
Premises and equipment, net   11,862       11,890  
Software, net   218       165  
Interest receivable   1,876       1,713  
Cash value - bank owned life insurance   13,274       13,018  
Other real estate owned   2,455       2,650  
Income taxes receivable   1,315       1,366  
Deferred tax asset   1,840       1,418  
Other assets   1,003       925  
Total assets $ 668,438     $ 626,341  
       
       
Liabilities and Stockholders' Equity      
       
Deposits      
Noninterest bearing demand   89,844       74,102  
NOW, money market and savings   329,870       307,987  
Time   187,733       185,404  
Total deposits   607,447       567,493  
       
Capital notes   5,000       5,000  
Interest payable   131       111  
Other liabilities   2,743       2,072  
Total liabilities $ 615,321     $ 574,676  
       
Stockholders' equity      
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 4,378,436 as of September 30, 2018 and December 31, 2017   9,370       9,370  
Additional paid-in-capital   31,495       31,495  
Accumulated other comprehensive loss   (3,057 )     (1,469 )
Retained earnings   15,309       12,269  
Total stockholders' equity $ 53,117     $ 51,665  
Total liabilities and stockholders' equity $ 668,438     $ 626,341  


 
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
  For the Nine Months
  Ended September 30,   Ended September 30,
Interest Income 2018   2017   2018   2017
Loans $ 6,460   $ 5,683   $ 18,329   $ 16,336
Securities              
US Government and agency obligations   187     131     571     365
Mortgage backed securities   62     71     196     214
Municipals   83     88     248     258
Dividends   9     7     40     42
Other (Corporates)   23     24     70     81
Interest bearing deposits   60     21     151     53
Federal Funds sold   96     45     255     81
Total interest income   6,980     6,070     19,860     17,430
               
               
Interest Expense              
Deposits              
NOW, money market savings   261     186     684     530
Time Deposits   597     460     1,641     1,287
FHLB borrowings   -     -     17     -
Reverse repurchase agreements   -     13     -     13
Brokered time deposits   82     77     244     201
Capital notes   50     50     150     137
Total interest expense   990     786     2,736     2,168
               
Net interest income   5,990     5,284     17,124     15,262
               
Provision for loan losses   190     200     527     745
               
Net interest income after provision for loan losses   5,800     5,084     16,597     14,517
               
               
Noninterest income              
Gains on sale of loans held for sale   767     694     2,260     1,663
Service charges, fees and commissions   547     549     1,476     1,377
Increase in cash value of life insurance   86     86     256     259
Other   20     9     55     42
Gain on sales of available-for-sale securities   -     51     -     113
               
Total noninterest income   1,420     1,389     4,047     3,454
               


Noninterest expenses              
Salaries and employee benefits   2,853     2,538     8,398     7,314
Occupancy   388     390     1,143     1,127
Equipment   414     360     1,191     1,146
Supplies   124     133     413     390
Professional, data processing, and other outside expense   761     735     2,413     2,112
Marketing   165     212     492     596
Credit expense   241     225     478     456
Other real estate expenses   110     42     236     78
FDIC insurance expense   99     94     299     285
Other   310     255     805     733
Total noninterest expenses   5,465     4,984     15,868     14,237
               
Income before income taxes   1,755     1,489     4,776     3,734
               
Income tax expense   351     474     949     1,172
               
Net Income $ 1,404   $ 1,015   $ 3,827   $ 2,562
               
Weighted average shares outstanding - basic   4,378,436     4,378,436     4,378,436     4,378,436
               
Weighted average shares outstanding - diluted   4,378,436     4,378,519     4,378,466     4,378,524
               
Net income per common share - basic $ 0.32   $ 0.23   $ 0.87   $ 0.59
               
Net income per common share - diluted $ 0.32   $ 0.23   $ 0.87   $ 0.59
                       

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