Bank of Botetourt posts profitable first quarter financial results

BUCHANAN, Va., April 28, 2022 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT) announced today its unaudited financial results for the quarter-ended March 31, 2022. The Bank produced net income amounting to $1,543,000.  The net income equated to $0.80 per basic share in the first quarter. This amount compares to a net income of $1,980,000 or $1.04 per share, for the same period last year.

At March 31, 2022, select financial information and key highlights include:

• Return on average assets of 0.90%
• Return on average equity of 10.41%
• Book value of $30.91
• Total deposit growth of 6.07%
• Total asset growth of 5.54%
• Community Bank Leverage Ratio of 9.13%
• Strong liquidity position
• Net interest margin of 2.91% at March 31, 2022 compared to 2.99% one year prior.

As a result of the solid financial performance, the Board of Directors voted to pay the $0.185 per share quarterly dividend, or $0.74 per share annualized which is payable on May 19, 2022 to shareholders of record May 12, 2022. President & CEO, G. Lyn Hayth, III stated "Our first quarter financial results exceeded budget expectations. SBA forgiveness of PPP loans and the subsequent revenue recognition contributed to our successful financial results.  In addition, strong and consistent title insurance revenue generated by our subsidiaries has been a contributor to 2022 earnings."

Results of Operations

Net income for the three months ended March 31, 2022 was $1,543,000 compared to $1,980,000 for the same period last year, representing an decrease of $437,000 or 22.07%.  Basic and diluted earnings per share decreased $0.24 from $1.04 at March 31, 2021 to $0.80 at March 31, 2022.  The decrease in net income is primarily due to $322,000 less loan interest income, $205,000 more provision for loan losses, and a $437,000 increase in noninterest expense, primarily salaries, benefits, and fixed asset expenses.

The provision for loan losses was $205,000 for the three months ended March 31, 2022 as compared to no provision for the three months ended March 31, 2021. The increase in bad debt expense is due to an increase in the historical loss factor on loans and inflationary concerns in the economy. 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 $227,000 at March 31, 2022 as compared to $(23,000) at March 31, 2021.

At March 31, 2022 net loans decreased 2.20%. Interest and fees on loans at March 31, 2022 decreased $322,000 over the same three month time period of 2021. Interest expense decreased by $392,000 from $846,000 at March 31, 2021 to $454,000 at March 31, 2022.  The lower interest expense is a result of lower interest rates paid on the balances of interest-bearing deposits than for the same time period of 2021.

Noninterest income increased by $59,000, or 5.31%, to $1,171,000 for the three months ended March 31, 2022 compared to $1,112,000 for same time period of 2021.  The increase is attributable primarily to income from service charges on deposit accounts and income from title insurance subsidiaries, partially offset by a decrease of income on sale of mortgage loans.

Noninterest expense increased $701,000 from $3,407,000 at March 31, 2021 to $4,108,000 at March 31, 2022.  The increase is primarily related to an increase in salary and employee benefits expense for the quarter. The majority of the increase in salaries expense is related to more deferred costs in 2021 for PPP lending activity compared to 2022.

Income tax expense for the three months ended March 31, 2022 was $400,000 compared to $515,000 one year prior. The decrease in tax expense is due to lower revenue for the quarter.

Financial Condition

At March 31, 2022 total assets amounted to $700,538,000, an increase of 5.54% above total assets at December 31, 2021 of $663,766,000, an increase of $36,772,000. Total net loans decreased $9,352,000 or 2.20% from $425,902,000 at December 31, 2021 to $416,550,000 at March 31, 2022. Total deposits at December 31, 2021 amounted to $598,659,000, compared to $635,001,000 at March 31, 2022, an increase of 6.07% or $36,342,000. The increase in deposits is attributable to organic growth.

Stockholders' equity totaled $59,472,000 at March 31, 2022 compared to $59,137,000 at December 31, 2021. The $335,000 increase during the period is net income for 2022, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan, and partially offset by dividends paid and accumulated other comprehensive loss.

Non-Performing Assets

Non-performing assets, which consist of nonaccrual loans and foreclosed properties decreased from $1,757,000 at December 31, 2021 to $1,548,000 at March 31, 2022.  The decrease is attributable to the charge-off of a consumer non-accrual loan and payments on existing nonaccrual loans.  Nonaccrual loans were $1,521,000 at March 31, 2022 compared to $1,730,000 at December 31, 2021.  There were no new additions to nonaccrual loans during the first quarter.  The decrease in nonaccrual loans is attributable to the charge-off of the aforementioned consumer loan.

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 $2,304,000 at March 31, 2022 compared to $2,915,000 at December 31, 2021.  The decrease in impaired loans is attributable to one consumer loan being charged-off and one junior lien owner occupied impaired loan being paid off.  Loss exposure on impaired loans decreased from $204,000 at December 31, 2021 to $31,000 at March 31, 2022.  The decrease is attributable to the charge-off of one consumer loan with a specific reserve of $198,000, offset by the addition of a specific reserve of $25,000 for an existing nonaccrual commercial real estate owner occupied loan. 

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 ("TDRs"). At March 31, 2022, TDRs totaled $1,200,000 and were spread among various loan categories. No new TDRs have been identified in 2022.

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, 2022 Bank of Botetourt reported its CBLR ratio at 9.13% which meets the required regulatory minimum ratio. This compares to a CBLR ratio of 9.14% at December 31, 2021.

Paycheck Protection Program

Bank of Botetourt was a participant in the Paycheck Protection Program ("PPP") initiated by the U.S. Department of the Treasury. Both rounds of PPP lending totaled $44,200,000, with $40,100,000 receiving forgiveness from the SBA through March 31, 2022. As a result, $4,100,000 million of PPP loans remain on the balance sheet at the end of the first quarter. Deferred PPP loan servicing fees totaled $261,000 at March 31, 2022 while the Bank recognized $199,000 in revenue during 2022.

Strategic Initiative & Award

Bank of Botetourt's website, www.bankofbotetourt.com, launched a refreshed and a more modernized version with easy to use navigation on April 6, 2022.  On April 21, 2022, Bank of Botetourt was honored with the Chancellor's Award for Leadership in Philanthropy in Richmond, Virginia.  The Virginia Foundation for Community College Education annually honors individuals and organizations who through their leadership and dedication to philanthropy have improved the quality of life in their communities across the Commonwealth of Virginia.   

About Bank of Botetourt

Bank of Botetourt was chartered in 1899 and operates thirteen retail offices in Botetourt, Rockbridge, Roanoke, and Franklin counties, the City of Salem, and the Town of Vinton, 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