Bank of Botetourt posts most profitable quarter in its history

BUCHANAN, Va., April 30, 2021 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT) announced today its unaudited financial results for the quarter-ended March 31, 2021. The Bank produced net income amounting to $1,980,000, the most profitable quarter in its history.  The net income equated to $1.14 per basic share in the first quarter. This amount compares to a net income of $1,038,000 or $0.60 per share, for the same period last year.

At March 31, 2021, select financial highlights include:

• Return on average assets of 1.29%
• Return on average equity of 14.49%
• Book value of $32.05
• Total deposit growth of 7.6%
• Total asset growth of 7.2%
• Community Bank Leverage Ratio of 9.20%
• Strong liquidity position
• Net interest margin of 2.99% at March 31, 2021 compared to 3.43% one year prior.
• Outstanding Paycheck Protection Program ("PPP") loans of $26.2 million reported at December 31, 2020 decreased to $18.0 million at March 31, 2021 after receiving SBA forgiveness on $8.2 million. The Bank recognized $343,000 in revenue from the forgiven loans.
• In 2021, the Bank participated in the next round of the SBA's PPP Program. During the first quarter, the Bank generated $15.9 million new PPP loans. The bank recognized $24,000 in revenue related to this tranche of PPP lending.
• At quarter-end, PPP loan balances, from both rounds, totaled $31.5 million with $869,000 in deferred revenue.

As a result of the strong financial performance, the Board of Directors voted to pay the $0.18 per share quarterly dividend, or $0.72 per share annualized, payable on May 19, 2021 to shareholders of record May 12, 2021. President & CEO, G. Lyn Hayth, III stated "Our first quarter performance is historic and gratifying.  PPP loan forgiveness and subsequent revenue recognition contributed to our successful first quarter.  Our employees continue to work diligently in helping our customers during this phase of the pandemic. In addition, mortgage lending was a positive contributor to our earnings.  We are cautiously optimistic for favorable economic trends along with the hope that the coronavirus cases continue to subside."

Management Discussion & Analysis

Results of Operations

Net income for the three months ended March 31, 2021 was $1,980,000 compared to $1,038,000 for the same period last year, representing an increase of $942,000 or 90.8%.  Basic and diluted earnings per share increased $0.54 from $0.60 at March 31, 2020 to $1.14 at March 31, 2021.  The increase in net income is primarily due to $367,000 in PPP loan revenue recognized, $423,000 in secondary market mortgage income, and a one-time non-recurring special commission of $93,800 for insurance sales by the Bank's subsidiary.

Net income was augmented because there of no provision for loan losses required by the quarterly calculation for the three months ended March 31, 2021 as compared to $445,000 for March 31, 2020. The decrease in the provision is due to a reduction in exposure on impaired loans, overall improved economic trends, and partially offset by the historic loss factor in the allowance for loan loss reserve calculation. The distribution of the COVID-19 vaccine, improved unemployment metrics, and favorable GDP trends offset the provisional needs of the first quarter growth in the loan portfolio.  In determining the estimated allowance, the Bank considered national and local unemployment trends, market conditions, and customer requests for payment deferrals. Net charge-offs were $(23,000) at March 31, 2021 as recoveries of $37,000 exceeded $14,000 in charged-off loans.  This compares to net charge offs of $99,000 at March 31, 2020.

Loan growth remained virtually unchanged as net loans increased 0.2%. Interest and fees on loans at March 31, 2021 increased $148,000 over the same three month time period of 2020. Interest expense decreased by $428,000 from $1,274,000 at March 31, 2020 to $846,000 at March 31, 2021.  The lower interest expense is a result of interest paid on a borrowings with a smaller principal balance and lower interest rates paid on the balances of interest-bearing deposits than for the same time period of 2020.

Noninterest income increased by $89,000, or 8.7%, to $1,112,000 for the three months ended March 31, 2021 compared to $1,023,000 for same time period of 2020.  The increase is attributable primarily to income from loans held-for-sale, income from title insurance subsidiaries, including a one-time non-recurring special commission.

Noninterest expense decreased $135,000 from $3,542,000 at March 31, 2020 to $3,407,000 at March 31, 2021.  The decrease is primarily related to a decrease in salary and employee benefits expense for the quarter.

Income tax expense for the three months ended March 31, 2021 was $515,000 compared to $262,000 one year prior. The increase in tax expense is due to higher revenue for the quarter.

Financial Condition

At March 31, 2021 total assets amounted to $641,084,000, an increase of 7.2% above total assets at December 31, 2020 of $597,794,000, or $43,290,000. Total net loans increased $901,000 or 0.2% from $454,680,000 at December 31, 2020 to $455,581,000 at March 31, 2021. Total deposits at December 31, 2020 amounted to $536,805,000, compared to $577,737,000 at March 31, 2021, an increase of 7.6% or $40,932,000. The increase in deposits was attributable to organic growth and fiscal stimulus payments.

Stockholders' equity totaled $55,496,000 at March 31, 2021 compared to $53,816,000 at December 31, 2020. The $1,680,000 increase during the period is net income for the period, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan, and partially offset by an increase in accumulated other comprehensive loss and dividends paid.

Non-Performing Assets

Non-performing assets, which consist of nonaccrual loans and foreclosed properties decreased from $3.2 million at December 31, 2020 to $2.7 million at March 31, 2021.  The decrease is attributable to the sale of multiple foreclosed properties during the quarter with loss on sales of less than $1,000  The Bank wrote down remaining ORE properties by $272,000 during the quarter.. Nonaccrual loans were $1,273,000 at March 20, 2021 compared to $1,286,000 at December 31, 2020.  There were no new additions to nonaccruals loans during the quarter. 

A loan is considered impaired if it is probable that the Bank will be unable to collect all amounts due under the contractual terms of the loan agreement. Impaired loans amounted to $2.3 million March 31, 2021 and December 31, 2020, respectively.  Loss exposure on impaired loans decreased from $98,000 at December 31, 2020 to $78,000 at March 31, 2021 after obtaining current appraisals on collateral securing a significant number of impaired loans in the portfolio and estimating selling costs based on historical experience.

The Bank historically makes a conscious effort to attempt work-out loan scenarios with past due customers.  In some cases, loan restructuring is appropriate.  Bank management has procedures and processes in place to identify, monitor, and report troubled debt restructurings. At March 31, 2021, troubled debt restructurings ("TDRs") totaled $1.2 million and were spread among various loan categories. No new TDRs have been identified in 2021.

Capital Ratios

Bank of Botetourt qualified for and adopted the optional, simplified measure of capital adequacy, the community bank leverage ratio framework, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. A qualifying community banking organization is defined as having less than $10 billion in total consolidated assets, a leverage ratio greater than 9%, off-balance sheet exposures of 25% or less of total consolidated assets, and trading assets and liabilities of 5% or less of total consolidated assets. It also cannot be an advanced approaches institution. Bank of Botetourt qualified to opt-in to the Community Bank Leverage Ratio ("CBLR").  As of March 31, 2021 Bank of Botetourt reported its CBLR ratio at 9.20% which exceeds the required regulatory minimum ratio. The CARES Act temporarily reduced the CBLR minimum ratio from 9.0% to 8.5% through December 31, 2021.

Paycheck Protection Program

Bank of Botetourt is a participant in the Paycheck Protection Program ("PPP") initiated by the U.S. Department of the Treasury.  The $26.2 million in PPP loans at December 31, 2020 decreased to $18.0 million, comprised of 259 loans, at March 31, 2021 after receiving SBA forgiveness on $8.2 million. The deferred PPP loan servicing fees balance of $744,000 at December 31, 2020 decreased to $401,000 at March 31, 2021 as the Bank recognized $343,000 in revenue from the forgiven loans.

In 2021, the Bank participated in the next round of the SBA's PPP Program.  During the first quarter, the Bank generated 226 new PPP loans for $15.9 million with deferred revenue of $468,000, which will be recognized over the life of the loan. The bank recognized $24,000 in revenue related to this tranche of PPP lending in the first quarter.

At March 31, 2021, PPP loan balances, from both rounds, totaled $31.5 million with $869,000 in deferred revenue.

The Bank completed the updated requirements to borrow from the Payroll Protection Program Lending Facility ("PPPLF"), if needed, at the Federal Reserve Bank of Richmond. As of March 31, 2021 the Bank had not borrowed any funds from the PPPL facility

COVID-19 Customer & Employee Care

Bank of Botetourt is prepared to assist our customers and employees during the current phase of the pandemic.  For loan customers impacted by COVID-19, the Bank has granted extensions, skip-a-payment, and modifications consistent with regulatory guidance.  During the first quarter, additional requests for assistance slowed to only 2 requests. As of April 5, 2021 all of our offices are open will full access and all employees who worked from home during the pandemic returned to the office environment. Facemasks are required for all parties consistent with the Governor's Executive Order 72.  Plexiglass shields and floor markers assist in complying with social distancing. The Bank had no layoffs as a result of COVID-19.  All Bank employees are now eligible for the  COVID-19 vaccine.  The Bank has encouraged employees to be vaccinated and is monitoring its bank-wide vaccination rate.

About Bank of Botetourt

Bank of Botetourt was chartered in 1899 and operates twelve retail offices in Botetourt, Rockbridge, Roanoke, and Franklin counties and the City of Salem, all in Virginia.  Bank of Botetourt also operates a mortgage division, Virginia Mountain Mortgage and a financial services division, Botetourt Wealth Management.

SOURCE Bank of Botetourt