Bank of Botetourt posts strong first quarter financial results

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Apr 26, 2019, 07:27 ET

BUCHANAN, Va., April 26, 2019 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT) announced today its unaudited financial results for the quarter-ended March 31, 2019. The Bank produced net income amounting to $1,154,000 or $0.67 per basic share in the first quarter. This amount compares to a net income of $1,112,000 or $0.78 per share, for the same period last year.

Book value was $27.54 at March 31, 2019 as compared to $25.05 one year prior. As a result of the solid financial performance, the Board of Directors voted to pay the $0.16 per share quarterly dividend, or $0.64 per share annualized which is payable on May 17, 2019 to shareholders of record May 10, 2019.

President & CEO, G. Lyn Hayth, III stated "Our 2019 performance is off to a great start. Strong loan and deposit growth has helped the Bank surpass our first quarter budget expectations."

Results of Operations

Net income for the three months ended March 31, 2019 was $1,154,000 compared to $1,112,000 for the same period last year, representing an increase of $42,000 or 3.8%. Basic and diluted earnings per share decreased $0.11 from $0.78 at March 31, 2018 to $0.67 at March 31, 2019 as a result of the capital stock raise in December 2018 whereby 275,000 additional shares of common stock were issued. The increase in net income is primarily due to higher total interest income. The Bank has realized continued strong loan demand in 2019 as gross loans increased 2.9%. Interest and fees on loans at March 31, 2019 increased $721,000 over the same three month time period of 2018.

Interest expense increased from $680,000 at March 31, 2018 to $1,025,000 at March 31, 2019. During the first three months of 2019, interest bearing deposits grew 5.7%. The higher interest expense is a result of both an increase in rate and volume on interest-bearing deposits.

The provision for loan losses was $195,000 for the three months ended March 31, 2019 as compared to $55,000 for March 31, 2018. The increase in the provision is due to the overall growth in the loan portfolio. Net charge-offs were $22,000 at March 31, 2019 as compared to recoveries exceeding charge-offs by 23,000 at March 31, 2018.

Noninterest income decreased by $123,000, or 15.5%, to $673,000 for the three months ended March 31, 2019 compared to $796,000 for same time period of 2018. The decrease is attributable primarily to a one-time nonrecurring transaction in the first quarter of 2018 that did not repeat in 2019. The transaction was proceeds from an insurance claim related to a loan in our portfolio for $108,000. Services charges on deposit accounts decreased $7,000 when comparing March 31, 2019 to March 31, 2018.

Noninterest expense decreased $81,000 from $3,135,000 at March 31, 2018 to $3,054,000 at March 31, 2019. The decrease is primarily related to a decrease in salary and employee benefits partially offset by an increase in premise and fixed asset expense.

Income tax expense for the three months ended March 31, 2019 was $287,000 compared to $111,000 one year prior. There was a one-time nonrecurring tax adjustment of $116,000 occurring in the first quarter of 2018 which reduced the tax accrual and thereby lowered first quarter 2018 tax expense by the same amount. Adjusting for the non-recurring event, income tax expense increased slightly due to more revenue.

Financial Condition

At March 31, 2019 total assets amounted to $457,731,000, an increase of 5.0% above total assets at December 31, 2018 of $435,765,000, an increase of $21,966,000. Total net loans increased $11,135,000 or 2.9% from $380,404,000 at December 31, 2018 to $391,539,000 at March 31, 2019. Total deposits at December 31, 2018 amounted to $386,324,000, compared to $406,320,000 at March 31, 2019, an increase of 5.2% or $19,996,000. The increase in deposits organically funded the loan demand without reliance on borrowed funds.

Stockholders' equity totaled $47,241,000 at March 31, 2019 compared to $46,265,000 at December 31, 2018. The $976,000 increase during the period is 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 $5.1 million at December 31, 2018 to $4.6 million at March 31, 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 $1.3 million at December 31, 2018, compared to $1.7 million at March 31, 2019. The increase is related to the addition of one impaired loan in the 1-4 family owner occupied loan category. Loss exposure on impaired loans at both December 31, 2018 and March 31, 2019 were $4,000, respectively, 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, 2019, troubled debt restructurings totaled $1.2 million, and were spread among various loan categories. No new TDRs have been identified in 2019.

Capital Ratios

Bank of Botetourt continues to be a Well Capitalized institution and exceed the BASEL III capital requirements. As of March 31, Bank of Botetourt reported tier 1 leverage capital of 10.81% and total capital of 14.12%. Both common equity tier 1 and tier 1 capital ratios were 13.14%.

Strategic Initiatives

Bank of Botetourt's construction to expand and relocate its limited service office at 3214 Electric Road, Roanoke, VA to a standalone full-service office located at 3232 Electric Rd, Roanoke, VA is nearing completion. The Bank previously received regulatory approval and the new Cave Spring office will be 2,660 square feet and include an ATM with deposit capabilities and will continue housing the Bank's mortgage company, Virginia Mountain Mortgage. The grand opening celebration is scheduled for June 7, 2019.

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
March 31, 2019 (unaudited) and December 31, 2018 (audited)


	(unaudited)		(audited)
	March 31,		December 31,
	2019		2018

Assets

Cash and due from banks	$	8,599,000	$	7,386,000
Interest-bearing deposits with banks	15,746,000		5,784,000
Federal funds sold	156,000		486,000
Total cash and cash equivalents	24,501,000		13,656,000
Investment securities available for sale	15,872,000		16,061,000
Loans, net of allowance for loan losses of $3,567,000 at
March 31, 2019 and $3,393,000 at December 31, 2018	391,539,000		380,404,000
Loans held for sale	-		317,000
Premises and fixed assets, net	12,401,000		11,901,000
Other real estate owned	3,773,000		4,231,000
Investments in unconsolidated subsidiaries	1,784,000		1,670,000
Other assets	7,861,000		7,525,000
Total assets	$	457,731,000	$	435,765,000

Liabilities and Stockholders' Equity
*Liabilities*
Noninterest-bearing deposits	$	44,240,000	$	43,620,000
Interest-bearing deposits	362,080,000		342,704,000
Total deposits	406,320,000		386,324,000

Other liabilities	4,170,000		3,176,000
Total liabilities	410,490,000		389,500,000

Commitments and contingencies	-		-

*Stockholders' equity*
Common stock, $1.50 par value; 2,500,000 shares authorized; 1,433,238 and 1,431,764 issued and outstanding at March 31, 2018 and at December 31, 2017, respectively	2,573,000		2,571,000
Additional paid-in capital	11,216,000		11,168,000
Retained earnings	34,257,000		33,315,000
Accumulated other comprehensive loss	(805,000)		(789,000)
Total stockholders' equity	47,241,000		46,265,000
Total liabilities and stockholders' equity	$	457,731,000	$	435,765,000

Bank of Botetourt
Income Statement
*For the three months ended March 31, 2019 and 2018 (unaudited)*


	Three Months Ended March 31,
	2019		2018
*Interest income*
Loans and fees on loans	$	4,891,000	$	4,170,000
Investment securities:
U.S. Treasury and Government Agencies	47,000		49,000
All other securities	43,000		46,000
Due from depository institutions	59,000		31,000
Federal Funds Sold	2,000		1,000
Total interest income	5,042,000		4,297,000


*Interest expense*
Deposits	1,025,000		665,000
Federal funds purchased	-		2,000
Other borrowings	-		13,000
Total interest expense	1,025,000		680,000
Net interest income	4,017,000		3,617,000

*Provision for loan losses*	195,000		55,000
Net interest income after provision for loan losses	3,822,000		3,617,000

*Noninterest income*
Service charges on deposit accounts	154,000		161,000
Securities brokerage and annuities	24,000		12,000
Other income, net of gains (losses)	495,000		623,000
Total noninterest income	673,000		796,000

*Noninterest expense*
Salaries and employee benefits	1,519,000		1,583,000
Premises and fixed assets expense	342,000		311,000
Other expense	1,193,000		1,241,000
Total noninterest expense	3,054,000		3,135,000
Income before income taxes	1,441,000		1,223,000

*Income tax expense*	287,000		111,000
Net income	$	1,154,000	$	1,112,000

*Basic earnings per share*	$	0.67	$	0.78
*Diluted earnings per share*	$	0.67	$	0.78
*Dividends declared per share*	$	0.16	$	0.15
*Basic weighted average shares outstanding*	1,714,416		1,432,354
*Diluted weighted average shares outstanding*	1,714,416		1,432,354