Bank of Botetourt Posts Record Quarterly Earnings

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Oct 23, 2019, 16:01 ET

BUCHANAN, Va., Oct. 23, 2019 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT) announced today its unaudited financial results for the three months ended September 30, 2019. The Bank reported net income of $1,483,000 or $0.86 per basic share in the third quarter, the highest quarterly income in the Bank's 120 year history. This amount compares to net income of $1,243,000 or $0.87 per share, for the same period last year. For the nine months ended September 30, 2019 the Bank reported net income of $3,741,000 or $2.18 per basic share. This amount compares to net income of $3,464,000 or $2.42 per share, for the same period last year.

At September 30, 2019, key performance ratios were as follows:

Return on average assets 1.08%
Return on average equity 10.42%
Book value $28.83

As a result of the solid financial performance, the Board of Directors voted to pay a $0.16 per share quarterly dividend, or $0.64 per share annualized, which is payable on November 15, 2019 to shareholders of record November 8, 2019.

President & CEO, G. Lyn Hayth, III stated, "We are thrilled to announce our historic performance in the third quarter. Loan demand and deposit growth have both remained steadfast while economic conditions remain favorable. This momentum has helped our bank exceed budget expectations the first nine months of the year."

Results of Operations

Net income for the three months ended September 30, 2019 was $1,483,000 compared to $1,243,000 for the same period last year, representing an increase of $240,000 or 19.3%. Basic and diluted earnings per share decreased $0.01 from $0.87 at September 30, 2018 to $0.86 at September 30, 2019 as a result of the capital stock raise in December 2018 resulting in the issuance of 275,000 additional shares of common stock.

The increase in net income for the three months ended September 30, 2019 is primarily attributable to lower than anticipated bad debt expense of $25,000. In addition, the Bank received its Small Bank Assessment Credits from the Federal Deposit Insurance Corporation. The Bank used $53,500 in credits for its third quarter FDIC insurance assessment, thereby reducing expenses by the same amount. The remaining assessment credit of $42,100 will be used to offset the fourth quarter FDIC insurance assessment and thereby reduce expenses. It is anticipated that all credits will be used by December 31, 2019 and expense reduction will not recur in 2020. Total interest income at September 30, 2019 increased $671,000 to $5,396,000 from $4,725,000 for the same three month time period of 2018. Interest expense increased $344,000 from $824,000 at September 30, 2018 to $1,168,000 at September 30, 2019. As a result, net interest income increased $327,000 from September 30, 2018 to September 30, 2019.

The provision for loan losses was $25,000 for the three months ended September 30, 2019 as compared to $85,000 for the three months ended September 30, 2018. The decrease in the provision is due to a reduction in the model's three year rolling average loan charge-off history.

Noninterest income increased by $56,000, or 6.0%, for the three months ended September 30, 2019 compared to the same time period of 2018. The increase is attributable primarily to service charges on deposit accounts, sales of brokerage products and annuities, and income from subsidiaries.

Noninterest expense increased $137,000 or 4.2% from the three months ended September 30, 2018 to the three months ended September 30, 2019. The increase is primarily related to an increase in salaries, employee benefits, premises and fixed assets, and debit card related expenses.

Income tax expense for the three months ended September 30, 2019 was $339,000 compared to $273,000 one year prior.

Financial Condition

At September 30, 2019 total assets amounted to $484,593,000, an increase of 11.2% above total assets of $435,765,000 at December 31, 2018, an increase of $48,828,000. Total net loans increased $30,207,000 or 7.9% from $380,404,000 at December 31, 2018 to $410,611,000 at September 30, 2019. Total deposits at December 31, 2018 amounted to $386,324,000, compared to $427,008,000 at September 30, 2019, an increase of 10.5% or $40,684,000.

At September 30, 2019 the Bank had $5,000,000 in borrowed funds in the form of a five year principal-reducing advance from the Federal Home Loan Bank. The Bank had no borrowings at September 30, 2018.

Stockholders' equity totaled $49,483,000 at September 30, 2019 compared to $46,265,000 at December 31, 2018. The $3,218,000 increase during the period is comprised of net income for 2019, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan, partially offset by accumulated other comprehensive loss and dividends paid.

Non-Performing Assets

Non-performing assets, which consist of nonaccrual loans and foreclosed properties, decreased from $5,052,000 at December 31, 2018 to $3,477,000 at September 30, 2019.

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 $1,500,000 at September 30, 2019 compared to $1,300,000 at December 31, 2018. One loan was added to impaired status during the quarter. Loss exposure on impaired loans at December 31, 2018 was $4,000 compared to $72,000 at September 30, 2019 after obtaining current appraisals on collateral securing impaired loans in the portfolio and estimating selling costs based on historical experience. An additional $95,000 remains reserved for an unimpaired loan with probable and estimable exposure.

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 September 30, 2019, troubled debt restructurings totaled $962,000 and were spread among various loan categories. No new TDRs have been identified in 2019.

Net charge-offs were $243,000 at September 30, 2019 as compared to $47,000 at September 30, 2018.

Capital Ratios

Bank of Botetourt continues to be a Well Capitalized institution and exceed the BASEL III capital requirements. As of September 30, 2019, Bank of Botetourt reported tier 1 leverage capital of 10.78% and total capital of 13.83%. Both common equity tier 1 and tier 1 capital ratios were 12.86%.

Strategic Initiatives

Subsequent to September 30, 2019, Bank of Botetourt introduced online account opening at its website and through its online banking platform.

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.

Bank of Botetourt Balance Sheets, unconsolidated September 30, 2019(unaudited) and December 31, 2018

	(unaudited)	(audited)
	September 30	December 31
	2019	2018
Assets

Cash and due from banks	$ 9,110,000	$ 7,386,000
Interest-bearing deposits with banks	22,309,000	5,784,000
Federal funds sold	492,000	486,000
Total cash and cash equivalents	31,911,000	13,656,000
Investment securities available for sale	14,394,000	16,061,000
Loans, net of allowance for loan losses of $3,770,000 at	410,611,000	380,404,000
September 30, 2019 and $3,393,000 at December 31, 2018
Loans held for sale	1,361,000	317,000
Premises and fixed assets, net	12,890,000	11,901,000
Other real estate owned	2,913,000	4,231,000
Investment in unconsolidated subsidiaries	1,843,000	1,670,000
Other assets	8,670,000	7,525,000
Total assets	484,593,000	435,765,000

Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits	$ 55,769,000	$ 43,620,000
Interest-bearing deposits	371,239,000	342,704,000
Total deposits	427,008,000	386,324,000

Other borrowings	5,000,000	-
Other liabilities	3,102,000	3,176,000
Total liabilities	435,110,000	389,500,000

Commitments and contingencies	-	-

Stockholders' Equity
Common stock, $1.50 par value; 2,500,000 shares
authorized; 1,719,161 and 1,713,664 issued and
outstanding at September 30, 2019 and at December 31, 2018
respectively	2,579,000	2,571,000
Additional paid-in capital	11,318,000	11,168,000
Retained earnings	36,294,000	33,315,000
Accumulated other comprehensive loss	(708,000)	(789,000)
Total stockholders' equity	49,483,000	46,265,000
Total liabilities and stockholders' equity	484,593,000	435,765,000

Bank of Botetourt Statements of Income For the Nine and Three Months Ended September 30, 2019 and 2018 (Unaudited)

	Nine Months Ended September 30		Three Months Ended September 30
	2019	2018	2019	2018
Interest income
Loans and fees on loans	$ 15,268,000	$ 13,134,000	$ 5,246,000	$ 4,566,000
Investment securities:
U.S. Treasury and Government Agencies	138,000	148,000	41,000	51,000
All other securities	130,000	138,000	45,000	45,000
Due from depository institutions	194,000	151,000	62,000	62,000
Federal Funds Sold	5,000	3,000	2,000	1,000
Total Interest income	15,735,000	13,574,000	5,396,000	4,725,000

Interest expense
Deposits	3,335,000	2,257,000	1,168,000	824,000
Federal funds purchased	-	2,000	-	-
Other borrowings	-	13,000	-	-
Total Interest expense	3,335,000	2,272,000	1,168,000	824,000
Net Interest Income	12,400,000	11,302,000	4,228,000	3,901,000

Provision for loan losses	620,000	140,000	25,000	85,000
Net Interest Income after provision for loan losses	11,780,000	11,162,000	4,203,000	3,816,000

Noninterest income
Service charges on deposit accounts	533,000	499,000	203,000	174,000
Securities brokerage and annuities	104,000	44,000	41,000	19,000
Other income, net of gains (losses)	1,996,000	1,812,000	748,000	743,000
Total noninterest income	2,633,000	2,355,000	992,000	936,000

Noninterest expense
Salaries and employee benefits	4,675,000	4,534,000	1,625,000	1,541,000
Premises and fixed assets expense	1,045,000	1,013,000	359,000	343,000
Other expense	4,022,000	3,809,000	1,389,000	1,352,000
Total noninterest expense	9,742,000	9,356,000	3,373,000	3,236,000
Income before income taxes	4,671,000	4,161,000	1,822,000	1,516,000

Income tax expense	930,000	697,000	339,000	273,000
Net income	$ 3,741,000	$ 3,464,000	$ 1,483,000	$ 1,243,000

Basic earnings per share	$ 2.18	$ 2.42	$ 0.86	$ 0.87
Diluted earnings per share	$ 2.18	$ 2.42	$ 0.86	$ 0.87
Dividends declared per share	$ 0.48	$ 0.45	$ 0.16	$ 0.15
Basic weighted average shares outstanding	1,716,337	1,433,817	1,718,222	1,435,229
Diluted weighted average shares outstanding	1,716,337	1,433,817	1,718,222	1,435,229