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

LYNCHBURG, Va., April 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 ended March 31, 2017.

Net income for the three months ended March 31, 2017 was $760,000 or $0.17 per diluted share compared with $887,000 or $0.20 per diluted share for the three months ended March 31, 2016.

Robert R. Chapman III, President and CEO, stated: “Our financial performance in the first quarter continued to demonstrate the Company’s focus on steady, long-term growth of our balance sheet, which reflected meaningful year-over-year growth of loans, deposits and assets. An emphasis on growing commercial banking was evident.

“Year-over-year net income comparison reflected higher noninterest expense related to investments to expand our market reach, including building our banking teams in several markets. We are seeing positive results from our investment in growth, and anticipate that increased productivity and accelerating revenue will enhance profitability.”

Highlights

  • Interest income from earning assets increased 5.2% in the first quarter of 2017 compared with the first quarter of 2016.
  • Net interest income before the provision for loan losses for the three months ended March 31, 2017 was $4.84 million, up 3.2% from $4.69 million for the three months ended March 31, 2016.
  • Driven primarily by increased commercial lending, total loans, net of the allowance for loan losses, were a Company record $466.24 million at March 31, 2017, up from $464.35 million at December 31, 2016, and $433.70 million a year earlier.
  • Commercial loans (primarily C&I) increased 12% year-over-year, while owner occupied real estate, led by commercial real estate (CRE) portfolio growth, rose 13% at March 31, 2017 compared with March 31, 2016.
  • Total assets rose to $578.43 million at March 31, 2017, the highest in Company history.
  • Asset quality ratios reflected continuing loan portfolio strength, with a 0.67% ratio of nonperforming loans to total loans.
  • Total stockholders’ equity was $50.19 million, up from $49.42 million at December 31, 2016 and $49.46 million at March 31, 2016. Book value per share rose to $11.46 at March 31, 2017 from $11.29 at December 31, 2016.
  • Based on the results achieved in the first quarter, on April 18, 2017 the Company’s board of directors approved a $0.06 per share dividend payable to shareholders of record on June 9, 2017, to be paid on June 23, 2017.

Chapman noted: “Additional loans drove year-over-year net interest income growth, although both commercial and residential loan demand in the first quarter of 2017 was somewhat slower than anticipated. In particular, slower residential mortgage activity – perhaps partially related to the area’s current lean housing inventory – impacted originations and subsequent noninterest income from gains on mortgage sales to the secondary market. We entered the second quarter with good pipelines in commercial and residential lending, and feel confident about ongoing lending activity.”

First Quarter 2017 Operational Review

Total interest income was $5.51 million in the first quarter of 2017, growing 5.2% compared with total interest income of $5.24 million in the first quarter of 2016. Average rates earned on loans, including fees, was 4.46% in the first quarter of 2017, down slightly from 4.60% in the first quarter of 2016, and consistent with 4.48% in the fourth quarter of 2016. The average rate earned on total earning assets in the first quarter of 2017 was 4.16%, consistent with the fourth quarter of 2016 and down slightly from 4.35% in the first quarter of 2016.

“Considering the competitive lending market and continued pricing pressure in a low interest rate environment, we have been pleased with our ability to lend while maintaining relatively stable pricing and attracting quality loans,” commented J. Todd Scruggs, Executive Vice President and CFO. “We believe our ability to add value through excellent service and customized financial solutions remains a strong selling point for us.”

Total interest expense was $671,000 for the three months ended March 31, 2017, compared with $548,000 for the three months ended March 31, 2016. The increase partially reflected interest paid on capital notes issued in February 2017. Year-over-year growth in lower-interest bearing demand deposits and rate reductions in time deposits contributed to an average rate paid on interest bearing accounts of 0.62% in the first quarter of 2017. The Company’s net interest margin was 3.65% and net interest spread was 3.50%, consistent with the fourth quarter of 2016.

Net interest income was $4.84 million for the three months ended March 31, 2017, a 3.2% increase from $4.69 million for the three months ended March 31, 2016. Net interest income after provision for loan losses was $4.74 million for the three months ended March 31, 2017 compared with $4.49 million for the three months ended March 31, 2016.

Noninterest income from fees, service charges and commissions, 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 $881,000 in the first quarter of 2017 compared with $1.01 million in the first quarter of 2016. Fee income increased year-over-year, however, slower residential mortgage origination resulted in lower gains from the sale of loans in the first quarter of 2017 compared with a year earlier.

Noninterest expense for the three months ended March 31, 2017 was $4.52 million, an increase of 7.8% from the same period a year earlier. Higher expenses primarily reflected costs related to the Company’s market expansion, including increased employee compensation, an expanded commercial banking team, and additional staff and management in the bank’s served markets. Occupancy costs increased moderately year-over-year, primarily reflecting additional facilities. The Company increased marketing expenditures to build brand visibility throughout an expanded geographic market.

Balance Sheet Reflects Consistent Growth

Loans held for investment, net of the allowance for loan losses, were a Company record $466.24 million at March 31, 2017, compared with $464.35 million at December 31, 2016, and up 7.5% compared with $433.70 million at March 31, 2016. The Company’s commercial loan portfolio was $89.00 million at March 31, 2017, up $9.51 million from March 31, 2016. Owner occupied real estate loans, led by CRE, increased to $142.39 million in the first quarter of 2017, up $16.39 million from $126.01 million a year earlier. Non-owner occupied real estate (primarily commercial and investment property) increased to $144.68 million, up 7.2% from $135.00 million a year ago. Total construction loans were down 16.8%, while consumer lines of credit (primarily home equity) grew 4.9% year-over-year.

Total deposits at March 31, 2017 were $521.20 million compared with $523.11 million at December 31, 2016, and up from $473.45 million at March 31, 2016. The Bank continued to attract noninterest bearing deposits, which increased to $105.28 million at March 31, 2017 from $102.65 million at December 31, 2016. Core deposits (noninterest bearing, NOW, money market and savings deposits) of $356.19 million comprised approximately 68% of the Company’s total deposits.

“Continuing growth of core deposits has been a meaningful highlight for the Company, providing attractive funding for loans, and reflecting new banking relationships and growth in Harrisonburg, Charlottesville and Roanoke,” Chapman said. “An expanding presence in Appomattox should further support deposit growth and new banking relationships.”

Total assets were a record $578.43 million at March 31, 2017, up from $574.20 million at December 31, 2016 and $524.61 million at March 31, 2016. Asset growth primarily reflected increased retained loans and increased securities available-for-sale.

The Company’s asset quality remained sound, with a 0.67% ratio of nonperforming loans to total loans at March 31, 2017. The Company’s allowance for loan losses to total loans was 1.21%, and the Company’s allowance for loan losses as a percent of nonperforming loans was 182%.

Total nonperforming loans were $3.15 million at March 31, 2017, compared with $2.55 million at December 31, 2016. The increase primarily reflected one classified commercial loan being moved to nonperforming status during the first quarter of 2017. Total nonperforming assets were $5.90 million and other real estate owned was $2.75 million. The Bank’s regulatory capital ratios continued to exceed accepted regulatory standards for a well-capitalized institution.

The Company grew measures of shareholder value, including tangible book value per share and total stockholders’ equity. Total stockholders’ equity increased to $50.19 million at March 31, 2017, compared with $49.42 million at December 31, 2016 and $49.46 million at March 31, 2016. Retained earnings rose to $10.65 million at March 31, 2017 from $10.16 million at December 31, 2016.

About the Company

Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc., serves Lynchburg, Charlottesville, Harrisonburg, Roanoke, Appomattox and other markets in Virginia. The bank operates 13 full service locations, two limited service branches, two loan production offices, and an investment/insurance services division. Bank of the James Financial Group, Inc. common stock is listed under the symbol “BOTJ” on the NASDAQ Stock Market, LLC.

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
(000’s) except ratios and percent data
unaudited

Selected Data: Three
months
ending
Mar 31,
2017
Three
months
ending
Mar 31,
2016
Change
Interest income $ 5,509 $ 5,235   5.23 %
Interest expense   671   548   22.45 %
Net interest income   4,838   4,687   3.22 %
Provision for loan losses   100   200   -50.00 %
Noninterest income   881   1,008   -12.60 %
Noninterest expense   4,517   4,190   7.80 %
Income taxes   342   418   -18.18 %
Net income   760   887   -14.32 %
Weighted average shares outstanding     4,378,436   4,378,436   0.00 %
Basic net income per share $ 0.17 $ 0.20 $ (0.03 )
Fully diluted net income per share   $ 0.17   $ 0.20   $ (0.03 )

Balance Sheet at
period end:
Mar 31,
2017
Dec 31,
2016
Change Mar 31,
2016
Dec 31,
2015
Change
Loans, net $ 466,244 $ 464,353 0.41 %   $ 433,701   $ 430,445   0.76 %
Loans held for sale   1,633   3,833   -57.40 %   3,706   1,964   88.70 %
Total securities   51,513   44,075 16.88 %   40,280   38,515   4.58 %
Total deposits   521,199   523,112 -0.37 %   473,451   467,610   1.25 %
Stockholders’ equity   50,191   49,421 1.56 %   49,456   48,196   2.61 %
Total assets   578,433   574,195 0.74 %   524,611   527,143   -0.48 %
Shares outstanding   4,378,436   4,378,436     4,378,436   4,378,436    
Book value per share     $ 11.46   $ 11.29 0.17   $ 11.30 $ 11.01   $ 0.29  

Daily averages: Three
months
ending
Mar 31,
2017
Three
months
ending
Mar 31,
2016
Change
Loans, net   $ 464,293   $ 432,188 7.43 %
Loans held for sale   1,390   2,302   -39.62 %
Total securities   50,916   40,182 26.71 %
Total deposits   520,881   455,650 14.32 %
Stockholders’ equity   50,970   48,731 4.59 %
Interest earning assets   537,758   488,598 10.06 %
Interest bearing liabilities     416,261   378,539 9.97 %
Total assets   576,567   519,396 11.01 %

Financial Ratios: Three
months
ending
Mar 31,
2017
Three
months
ending
Mar 31,
2016
Change
Return on average assets 0.53 % 0.68 % (0.15 )
Return on average equity 6.05 % 7.30 % (1.25 )
Net interest margin 3.65 % 3.89 %   (0.24 )
Efficiency ratio   78.98 %   73.57 % 5.41  
Average equity to average assets   8.84 % 9.38 % (0.54 )

Allowance for loan losses:   Three
months
ending
Mar 31,
2017
Three
months
ending
Mar 31,
2016
Change
Beginning balance   $ 5,716     $ 4,683   22.06 %
Provision for losses   100     200   -50.00 %
Charge-offs   (130 )   (251 )   -48.21 %
Recoveries   30     118   -74.58 %
Ending balance   5,716     4,750   20.34 %

Nonperforming assets: Mar 31,
2017
 Dec 31, 
2016
Change Mar 31,
2016
Dec 31,
2015
Change
Total nonperforming loans   $ 3,147   $ 2,550   23.41 %   $ 2,587   $ 3,406   -24.05 %
Other real estate owned   2,750   2,370 16.03 %   2,355   1,965 19.85 %
Total nonperforming assets   5,897   4,920 19.86 %   4,942   5,371 -7.99 %
Troubled debt restructurings – (performing portion)     452   455 -0.66 %   642   646 -0.62 %

Asset quality ratios: Mar 31,
2017
Dec 31,
2016
Change Mar 31,
2016
Dec 31,
2015
  Change
Nonperforming loans to total loans 0.67 % 0.54 % 0.13   0.59 % 0.78 % (0.19 )
Allowance for loan losses to total loans 1.21 % 1.22 % (0.01 ) 1.08 % 1.08 % 0.00  
Allowance for loan losses to nonperforming loans     181.63 %   224.16 %   (42.53 )   183.61 %   137.49 % 46.12  
                         

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

Assets

(unaudited)
3/31/2017
      12/31/2016
     
Cash and due from banks $ 19,751         $ 16,938  
Federal funds sold   5,508           11,745  
Total cash and cash equivalents   25,259           28,683  
           
Securities held-to-maturity (fair value of $3,272 in 2017 and $3,273 in 2016)   3,293           3,299  
Securities available-for-sale, at fair value   48,220           40,776  
Restricted stock, at cost   1,415           1,373  
Loans, net of allowance for loan losses of $5,716 in 2017 and 2016   466,244           464,353  
Loans held for sale   1,633           3,833  
Premises and equipment, net   11,034           10,771  
Software, net   209           176  
Interest receivable   1,365           1,378  
Cash value – bank owned life insurance   12,759           12,673  
Other real estate owned   2,750           2,370  
Income taxes receivable   872           1,214  
Deferred tax asset   2,234           2,374  
Other assets   1,146           922  
Total assets $ 578,433         $ 574,195  
           
Liabilities and Stockholders’ Equity          
Deposits          
Noninterest bearing demand   105,276           102,654  
NOW, money market and savings   250,911           255,429  
Time   165,012           165,029  
Total deposits   521,199           523,112  
           
Capital notes   5,000            
Interest payable   77           88  
Other liabilities   1,966           1,574  
Total liabilities $ 528,242         $ 524,774  
           
Stockholders’ equity          
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding          
  4,378,436 as of March 31, 2017 and December 31, 2016   9,370           9,370  
Additional paid-in-capital   31,495           31,495  
Accumulated other comprehensive (loss)   (1,327 )         (1,600 )
Retained earnings   10,653           10,156  
Total stockholders’ equity $ 50,191         $ 49,421  
           
Total liabilities and stockholders’ equity $ 578,433         $ 574,195  
                   

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

  For the Three Months
Ended March 31,
 
Interest Income   2017     2016
Loans $ 5,188   $ 4,978
Securities      
US Government and agency obligations   113     139
Mortgage backed securities   66     52
Municipals   80     44
Dividends   7     6
Other (Corporates)   27     6
Interest bearing deposits   15     6
Federal Funds sold   13     4
Total interest income   5,509     5,235
       
Interest Expense      
Deposits      
NOW, money market savings   169     136
Time Deposits   402     369
Federal Funds purchased       4
Brokered time deposits   63     31
Capital notes 6% due 4/1/2017       8
Capital notes 4% due 1/24/2022   37    
Total interest expense   671     548
       
Net interest income   4,838     4,687
       
Provision for loan losses   100     200
       
Net interest income after provision for loan losses   4,738     4,487
       
Noninterest income      
Gains on sale of loans held for sale   371     491
Service charges, fees and commissions   405     372
Increase in cash value of life insurance   86     65
Other   9     15
Gain on sales of available-for-sale securities   10     65
       
Total noninterest income   881     1,008
       
Noninterest expenses      
Salaries and employee benefits   2,380     2,237
Occupancy   372     332
Equipment   348     319
Supplies   134     119
Professional, data processing, and other outside expense   680     662
Marketing   148     119
Credit expense   114     83
Other real estate expenses   12     1
FDIC insurance expense   103     92
Other   226     226
Total noninterest expenses   4,517     4,190
       
Income before income taxes   1,102     1,305
       
Income tax expense   342     418
       
Net Income $ 760   $ 887
       
Weighted average shares outstanding – basic   4,378,436     4,378,436
       
Weighted average shares outstanding – diluted   4,378,535     4,378,436
       
Income per common share – basic $ 0.17   $ 0.20
       
Income per common share – diluted $ 0.17   $ 0.20