Bank of Botetourt posts profitable second quarter financial results

Published: Jul. 28, 2022 at 7:30 AM CDT

BUCHANAN, Va., July 28, 2022 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT) announced today its unaudited financial results for the three and six months-end June 30, 2022. The Bank produced net income amounting to $1,763,000 or $0.91 per basic share in the second quarter. This amount compares to a net income of $1,582,000 or $0.83 per share, for the same period last year.  For the six months-ended the Bank produced net income amounting to $3,306,000 or $1.72 per basic share. This amount compares to a net income of $3,562,000 or $1.87 per share, for the same period last year.

At June 30, 2022, select financial information and key highlights include:

  • Return on average assets of 0.94%
  • Return on average equity of 11.26%
  • Book value of $29.86
  • Total deposit growth of 9.74%
  • Total asset growth of 8.09%
  • Total loan growth of 1.88%
  • Community Bank Leverage Ratio of 8.84%
  • Strong liquidity position
  • Net interest margin of 3.26% at June 30, 2022 compared to 3.03% 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 August 19, 2022 to shareholders of record August 12, 2022. President & CEO, G. Lyn Hayth, III stated, "We have had a strong 2022 so far spurred by steady loan and deposit growth. This momentum has helped our bank exceed budget expectations the first six months of the year."

Results of Operations

Net income for the three months ended June 30, 2022 was $1,763,000 compared to $1,582,000 for the same period last year, representing an increase of $181,000 or 11.4%.  Basic and diluted earnings per share increased $0.08 from $0.83 at June 30, 2021 to $0.91 at June 30, 2022.  The increase in net income is primarily due to $301,000 increase in investment income and $74,000 increase in interchange fees, offset by $225,000 provision for loan loss.

The provision for loan losses was $225,000 for the three months ended June 30, 2022 as compared to no provision for the three months ended June 30, 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 $233,000 at June 30, 2022 as compared to $18,000 at June 30, 2021.

At June 30, 2022 net loans increased 1.88%. Interest and fees on loans at June 30, 2022 decreased $316,000 over the same three month time period of 2021 primarily due to a $234,000 decrease in PPP loan servicing fees. Interest expense decreased by $258,000 from $691,000 at June 30, 2021 to $433,000 at June 30, 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 $442,000, or 52.6%, to $1,282,000 for the three months ended June 30, 2022 compared to $840,000 for same time period of 2021.  The increase is attributable primarily to $130,000 increase in service charges on deposit accounts, $68,000 increase in fees and commissions from wealth management division, and $74,000 in interchange fees related to customer debit cards.

Noninterest expense increased $455,000 from $3,792,000 at June 30, 2021 to $4,247,000 at June 30, 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 the recognized deferred costs of PPP lending during the quarter.

Income tax expense for the three months ended June 30, 2022 was $452,000 compared to $410,000 one year prior. The increase in tax expense is due to higher revenue for the quarter.

Financial Condition

At June 30, 2022 total assets amounted to $717,433,000, an increase of 8.1% above total assets at December 31, 2021 of $663,766,000, an increase of $53,667,000. Total net loans increased $7,997,000 or 1.9% from $425,902,000 at December 31, 2021 to $433,899,000 at June 30, 2022. Total deposits at December 31, 2021 amounted to $598,659,000, compared to $656,985,000 at June 30, 2022, an increase of 9.7% or $58,326,000. The increase in deposits is attributable to organic growth.

Stockholders' equity totaled $57,553,000 at June 30, 2022 compared to $59,137,000 at December 31, 2021. The $1,584,000 decrease during the period is due to an increase in accumulated other comprehensive loss offset by net income for 2022, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan.

Non-Performing Assets

Non-performing assets, which consist of nonaccrual loans and foreclosed properties decreased from $1,757,000 at December 31, 2021 to $1,499,000 at June 30, 2022.  The decrease is attributable to the sale of a foreclosed property during the quarter with a gain on sale of approximately $21,000 and the charge-off of a consumer nonaccrual loan and payments on existing nonaccrual loans. Following the sale, no foreclosed properties remain and therefore nonaccrual loans were $1,499,000 at June 30, 2022 compared to $1,730,000 at December 31, 2021.  There were no new additions to nonaccruals loans during the 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 $2,279,000 June 30, 2021 compared to $2,915,000 at December 31, 2020.  Loss exposure on impaired loans decreased from $204,000 at December 31, 2021 to $56,000 at June 30, 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 $50,000 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. At June 30, 2022, troubled debt restructurings ("TDRs") totaled $1.2 million 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 June 30, 2022 Bank of Botetourt reported its CBLR ratio at 8.84% which is below the required regulatory minimum ratio. This compares to a CBLR ratio of 9.14% at December 31, 2021.  The Bank is provided a two-quarter grace period, starting June 30, 2022 and ending December 31, 2022 to restore its ratio to 9%.  If the Bank fails to meet the community bank leverage ratio qualifying criteria after the grace period, the Bank will opt out of the CBLR with the filing of the December 31, 2022 call report.

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 $43,470,000 receiving forgiveness from the SBA through June 30, 2022. As a result, $730,000 thousand of PPP loans remain on the balance sheet at the end of the second quarter. Deferred PPP loan servicing fees totaled $92,000 at June 30, 2022 while the Bank recognized $368,000 in revenue during 2022.

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.









Bank of Botetourt
Income Statement
For the six months ended and three months ended June 30, 2022 and 2021 (Unaudited)






Six Months Ended
June 30,


Three Months Ended
June 30,




2022


2021


2022


2021

Interest income








     Loans and fees on loans

$      10,385,000


$      11,023,000


$        5,179,000


$        5,495,000

     Investment securities:








          U.S. Treasury and Government Agencies

311,000


43,000


196,000


32,000

          Mortgage-backed securities

21,000


-


21,000


-

          All other securities

353,000


148,000


194,000


78,000

     Due from depository institutions

306,000


57,000


247,000


30,000

     Federal Funds Sold

1,000


-


1,000


-

                    Total Interest income

11,377,000


11,271,000


5,838,000


5,635,000









Interest expense








     Deposits

887,000


1,501,000


433,000


655,000

     Other borrowings

-


36,000


-


36,000

                    Total Interest expense

887,000


1,537,000


433,000


691,000

                    Net Interest Income

10,490,000


9,734,000


5,405,000


4,944,000









Provision for loan losses

430,000


-


225,000


-

                    Net Interest Income after provision for loan losses

10,060,000


9,734,000


5,180,000


4,944,000









Noninterest income








     Service charges on deposit accounts

430,000


300,000


233,000


149,000

     Securities brokerage and annuities

154,000


86,000


79,000


63,000

     Other income, net of gains

1,869,000


1,566,000


970,000


628,000

                    Total noninterest income

2,453,000


1,952,000


1,282,000


840,000









Noninterest expense








     Salaries and employee benefits

3,831,000


3,192,000


1,913,000


1,695,000

     Premises and fixed assets expense

870,000


776,000


441,000


398,000

     Other expense

3,654,000


3,231,000


1,893,000


1,699,000

                    Total noninterest expense

8,355,000


7,199,000


4,247,000


3,792,000

                    Income before income taxes

4,158,000


4,487,000


2,215,000


1,992,000









Income tax expense

852,000


925,000


452,000


410,000

                    Net income

$        3,306,000


$        3,562,000


$        1,763,000


$        1,582,000









Basic earnings per share

$                   1.72


$                   1.87


$                   0.91


$                   0.83

Diluted earnings per share

$                   1.72


$                   1.87


$                   0.91


$                   0.83

Dividends declared per share

$                   0.37


$                   0.36


$                0.185


$                   0.18

Basic weighted average shares outstanding

1,927,195


1,907,717


1,930,282


1,910,543

Diluted weighted average shares outstanding

1,927,195


1,907,717


1,930,282


1,910,543









Bank of Botetourt
Balance Sheets, unconsolidated
June 30, 2022(unaudited) and December 31, 2021




(unaudited)


(audited)



June 30,


December 31,



2022


2021

Assets










Cash and Due from banks


$       8,540,000


$        6,984,000

Interest-bearing deposits with banks


143,734,000


135,944,000

Federal funds sold


138,000


445,000

                  Total cash and cash equivalents


152,412,000


143,373,000

Investment securities available for sale


91,625,000


57,529,000

Investment securities held to maturity 


9,950,000


8,950,000

Loans, net of allowance for loan losses of $5,872,000 at


433,899,000


425,902,000

     June 30, 2022 and $5,674,000 at December 31, 2021





Loans held for sale


153,000


409,000

Premises and fixed assets, net


14,095,000


14,369,000

Other real estate owned


-


27,000

Investment in unconsolidated subsidiaries


2,685,000


2,418,000

Other assets


12,614,000


10,789,000

                  Total assets


$  717,433,000


$   663,766,000






Liabilities and Stockholders' Equity





Liabilities  





Noninterest-bearing deposits


$  174,876,000


$      85,623,000

Interest-bearing deposits


482,109,000


513,036,000

                  Total deposits


656,985,000


598,659,000






Other borrowings


-


3,000,000

Other liabilities


2,895,000


2,970,000

                  Total liabilities


659,880,000


604,629,000











Stockholders' Equity





Common stock, $1.50 par value; 2,500,000 shares





     authorized; 1,933,875 and 1,921,995 issued and 





     outstanding at June 30, 2022 and at December 31, 2021





     respectively


2,901,000


2,883,000

Additional paid-in capital


17,078,000


16,779,000

Retained earnings


43,898,000


41,304,000

Accumulated other comprehensive loss


(6,324,000)


(1,829,000)

                  Total stockholders' equity


57,553,000


59,137,000

                  Total liabilities and stockholders' equity


$  717,433,000


$   663,766,000






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SOURCE Bank of Botetourt

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