LYNCHBURG, Va., July 19, 2019 (GLOBE NEWSWIRE) -- Bank of the James Financial Group, Inc. (the “Company”) (NASDAQ:BOTJ), the parent company of Bank of the James, a full-service commercial and retail bank serving Region 2000 (Greater Lynchburg MSA), and the Charlottesville, Harrisonburg, and Roanoke, Virginia markets, today announced unaudited results for the three months and six months ended June 30, 2019.

Net income for the three months ended June 30, 2019 was $1.38 million or $0.31 per diluted share, compared with $1.30 million or $0.30 per diluted share for the three months ended June 30, 2018. Net income for the six months ended June 30, 2019 was $2.61 million or $0.60 per diluted share, compared with $2.42 million or $0.55 per diluted share for the six months ended June 30, 2018.

Robert R. Chapman III, President and CEO, commented: “Steady growth in earnings, loans, assets and the Company’s book value reflects the outstanding work by our entire banking team. Our core Region 2000 market continues to generate strong results, and we have been very encouraged by the consistent commercial loan growth, mortgage originations and deposit expansion in our Charlottesville, Harrisonburg and Roanoke markets.

“In June, 2019, we opened our second full-service banking locations in Charlottesville and Roanoke – an expansion reflecting the positive reception and success in these markets. We are on-track to establish a new office in Rustburg, Virginia this year, and will soon expand our presence in Lexington, Virginia, extending our footprint in the Shenandoah Valley to serve Buena Vista, Lexington and the Rockbridge County community.

“As anticipated, our expansion resulted in increased operating expenses, including increased investment in personnel, equipment and facilities. It was particularly encouraging that even with higher operating costs, our Company reported higher year-over-year earnings that reflected increasing productivity of our established team and assets.”

Highlights

  • Loans receivable, net of the allowance for loan losses, were a Company-record $551.97 million at June 30, 2019, increasing by more than $21 million during the first six months of 2019 from $530.02 million at December 31, 2018.
  • Commercial lending growth was highlighted by expanded commercial real estate (CRE) lending throughout the Company’s served markets. Non-owner-occupied real estate loans were $185.72 million at June 30, 2019, up 8% compared with a year earlier. Total construction loans increased 17% year-over-year.
  • Total interest income in the second quarter of 2019 rose 10% compared with a year earlier, and increased 14% in the first half of 2019 compared with the first half of 2018, primarily as a result of loan growth.
  • Strong residential mortgage origination, which generates income from gains on loan sales to the secondary market, contributed significantly to increased total noninterest income, which was $1.66 million in the second quarter of 2019, up 15% from $1.44 million in the second quarter of 2018. Income from mortgage activity and fees from corporate treasury services contributed to total noninterest income of $2.88 million in the first half of 2019, up from $2.63 million in the first half of 2018.
  • Reflecting the Company’s emphasis on growing its deposit base, total deposits rose to $617.18 million at June 30, 2019, compared with $612.04 million at December 31, 2018 and $596.07 million at June 30, 2018. Core deposits (noninterest-bearing demand, NOW, savings and money market accounts) comprised approximately 70% of the Company’s total deposits.
  • Total assets rose to a Company-record $690.10 million at June 30, 2019, with strong asset quality.
  • New full-service offices opened in Charlottesville and Roanoke, the Company’s second full-service branches in both markets.
  • Total stockholders’ equity increased by more than $4 million to $59.25 million at June 30, 2019 from December 31, 2018. Tangible book value per share rose to $13.53, compared to $12.59 at December 31, 2018 and $12.00 at June 30, 2018.

Second Quarter, First Half of 2019 Operational Review

Total interest income was $7.39 million in the second quarter of 2019, up from $6.73 million a year earlier, reflecting loan growth and adjustable rate loans that repriced to reflect rising interest rates. Income from lending represented 92% of total interest income. Interest expense increased year-over-year, which reflected a larger deposit base and rate increases in demand and time deposits. Rates paid on total interest-bearing deposits in the second quarter of 2019 were 0.90% compared with 0.69% a year earlier.

Net interest income after provision for loan losses was $6.04 million for the three months ended June 30, 2019, compared with $5.49 million for the same period a year earlier. Commercial lending growth and modest loan yield increases contributed to the net interest margin of 3.82% in the second quarter of 2019 compared with 3.74% in the second quarter of 2018.

For the six months of 2019, total interest income rose nearly 14% to $14.62 million at June 30, 2019 from $12.88 million at June 30, 2018. Total interest expense increased year-over-year, reflecting a larger deposit base and rate increases on interest-bearing deposits. For the six months of 2019, net interest income after the provision for loan losses was $11.96 million, up 11% from $10.80 million for the six months of 2018. The net interest margin was 3.87% for the six months ended June 30, 2019 compared with 3.69% for the six months ended June 30, 2018.

J. Todd Scruggs, Executive Vice President and CFO, commented: “We have generally been satisfied with the stability of the net interest margin and interest rate spread. Even with higher interest expense, net interest income has demonstrated solid year-over-year growth driven by income from lending and supported by sound loan quality that has led to consistently low provisions for loan losses.”

Noninterest income, including gains from the sale of residential mortgages to the secondary market, revenue contributions from BOTJ Investment Services, and income from the Bank’s line of treasury management services for commercial customers was $1.66 million in the second quarter of 2019 compared with $1.44 million in the second quarter of 2018. In the first half of 2019, noninterest income rose to $2.88 million compared with $2.63 million in the first half of 2018.

Noninterest expense for the three months and six months ended June 30, 2019 increased, primarily reflecting increased personnel expenses and higher occupancy and equipment costs related to previously noted market expansion.

In the second quarter of 2019, Return on Average Assets (ROAA) was 0.80% and Return on Average Equity (ROAE) was 9.47%. In the first half of 2019, ROAA was 0.77% and ROAE was 9.11%. For both periods, ROAA was up slightly from a year earlier, and ROAE was down slightly from a year earlier. The Company’s efficiency ratio was higher in both periods compared to a year earlier, primarily reflecting the addition of personnel and facilities and an increase in variable compensation related to increased production in the mortgage and investment divisions.

Balance Sheet Review: Steady Growth, Sound Quality

Total assets were $690.10 million at June 30, 2019. The primary driver of balance sheet growth continues to be deposits used to fund loans held for investment, net of the allowance for loan losses, which totaled $551.97 million at June 30, 2019. Loans held-for-sale were $4.44 million, primarily reflecting strong residential mortgage activity. Fair value of securities available-for-sale was $53.82 million compared with $52.73 million at December 31, 2018.

Commercial lending continued to lead the Company’s loan portfolio growth, with stable year-over-year commercial & industrial lending, 4.5% growth in real estate lending and a 17% increase in construction lending.

“The heart of successful commercial lending, particularly with small and midsize businesses, comes from building and maintaining relationships, providing expert advice, and offering customized financial solutions to every client,” explained Michael A. Syrek, Executive Vice President and Chief Loan Officer. “By building partnerships with clients, we are flexible and responsive to their needs.

“Commercial clients often have changing needs based on seasonality, project opportunity, and operating capital requirements. A focus on partnering with clients, communicating frequently, and offering a range of services and options enhances client retention and earns us referrals.”

The Company’s loan portfolio continued to provide balanced performance and year-over-year growth. Non-owner occupied commercial real estate (primarily commercial and investment property), was $185.72 million at June 30, 2019 compared with $171.67 million a year earlier. Owner-occupied commercial real estate was $156.43 million at June 30, 2019, up from $155.88 million at June 30, 2018. Total construction loans, led by non 1-4 family construction growth of 89%, was $25.16 million, up 17% from $21.44 million a year earlier. Consumer and home equity loans were similar to a year ago.

Total deposits at June 30, 2019 were $617.18 million, up from $612.04 million at December 31, 2018, led by expanded core deposits, which comprised 70% of total deposits. Interest-bearing demand deposits were $342.38 million at June 30, 2019 compared with $331.30 million at December 31, 2018. Noninterest bearing demand deposits were $88.90 million at June 30, 2019 compared with $91.36 million at December 31, 2018.

Asset quality remained strong, with a ratio of nonperforming loans to total loans of 0.63% at June 30, 2019, compared to 0.55% at December 31, 2018 and 0.60% at June 30, 2018. The allowance for loan losses to total loans was 0.85% at June 30, 2019, representing slight decreases from December 31, 2018 and June 30, 2018. During the quarter, the Company added modestly to its loan loss reserve, primarily to keep pace with loan growth. Based on continuing loan quality, the Company’s allowance for loan losses to nonperforming loans was 136% at June 30, 2019 compared to 156% at December 31, 2018.

Chapman noted: “We believe our longstanding trend of maintaining strong asset quality while consistently growing commercial loans and originating quality residential mortgage loans makes a strong statement about the credit policies and procedures in place. It also speaks to strong judgment of our people involved in determining creditworthiness, and their commitment to analyzing every borrower and situation. Strong loan quality has greatly contributed to quality earnings and maximizing shareholder value.”

As noted in the highlights, total stockholders’ equity and tangible book value per share increased at June 30, 2019. Retained earnings increased to $18.61 million at June 30, 2019 from $16.52 million at December 31, 2018. The Bank's regulatory capital ratios continued to exceed accepted regulatory standards for a well-capitalized institution.

About the Company

Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc. opened for business in July 1999 and is headquartered in Lynchburg, Virginia. The bank currently services customers in Virginia from offices located in Altavista, Amherst, Appomattox, Bedford, Blacksburg, Charlottesville, Forest, Harrisonburg, Lexington, Lynchburg, Madison Heights, and Roanoke. The bank offers full investment and insurance services through its BOTJ Investment Services division and BOTJ Insurance, Inc. subsidiary.  The bank provides mortgage loan origination through Bank of the James Mortgage, a division of Bank of the James. Bank of the James Financial Group, Inc. common stock is listed under the symbol “BOTJ” on the NASDAQ Stock Market, LLC.  Additional information on the Company is available at www.bankofthejames.bank.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "estimate," "expect," "intend," "anticipate," "plan" and similar expressions and variations thereof identify certain of such forward-looking statements which speak only as of the dates on which they were made. Bank of the James Financial Group, Inc. (the "Company") undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Such factors include, but are not limited to, competition, general economic conditions, potential changes in interest rates, and changes in the value of real estate securing loans made by Bank of the James (the "Bank"), a subsidiary of the Company. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Company's filings with the Securities and Exchange Commission and previously filed by the Bank (as predecessor of the Company) with the Federal Reserve Board.

J. Todd Scruggs, Executive Vice President and Chief Financial Officer (434) 846-2000.
tscruggs@bankofthejames.com

FINANCIAL STATEMENTS FOLLOW


Bank of the James Financial Group, Inc. and Subsidiaries
Dollar amounts in thousands, except per share data
unaudited

Selected Data:Three
months
ending
Jun 30,
2019
Three
months
ending
Jun 30,
2018
ChangeYear
to
date
Jun 30,
2019
Year
to
date
Jun 30,
2018
Change
Interest income$7,390$6,725 9.89%$14,624$12,880 13.54%
Interest expense 1,238 922 34.27% 2,342 1,746 34.14%
Net interest income 6,152 5,803 6.01% 12,282 11,134 10.31%
Provision for loan losses 116 315 -63.17% 326 337 -3.26%
Noninterest income 1,659 1,441 15.13% 2,878 2,627 9.55%
Noninterest expense 5,975 5,306 12.61% 11,574 10,403 11.26%
Income taxes 343 323 6.19% 649 598 8.53%
Net income 1,377 1,300 5.92% 2,611 2,423 7.76%
Weighted average shares outstanding - basic 4,378,436 4,378,436 -  4,378,436 4,378,436 - 
Weighted average shares outstanding - diluted 4,383,021 4,378,436 4,585  4,381,994 4,378,481 3,513 
Basic net income per share$0.31$0.30$0.01 $0.60$0.55$0.05 
Fully diluted net income per share$0.31$0.30$0.01 $0.60$0.55$0.05 


Balance Sheet at
period end:
Jun 30,
2019
Dec 31,
2018
ChangeJun 30,
2018
Dec 31,
2017
Change
Loans, net$551,974$530,016 4.14%$523,730$491,022 6.66%
Loans held for sale 4,443 1,670 166.05% 5,815 2,626 121.44%
Total securities 57,512 56,427 1.92% 57,394 61,025 -5.95%
Total deposits 617,184 612,043 0.84% 596,068 567,493 5.04%
Stockholders' equity 59,249 55,143 7.45% 52,524 51,665 1.66%
Total assets 690,095 674,897 2.25% 655,866 626,341 4.71%
Shares outstanding 4,378,436 4,378,436 -  4,378,436 4,378,436 - 
Book value per share$13.53$12.59$0.94 $12.00$11.80$0.20 


Daily averages:Three
months
ending
Jun 30,
2019
Three
months
ending
Jun 30,
2018
ChangeYear
to
date
Jun 30,
2019
Year
to
date
Jun 30,
2018
Change
Loans, net$542,162$518,972 4.47%$537,763$505,794 6.32%
Loans held for sale 3,948 3,706 6.53% 2,981 3,076 -3.09%
Total securities 58,214 60,959 -4.50% 58,624 61,811 -5.16%
Total deposits 622,390 597,379 4.19% 618,240 584,104 5.84%
Stockholders' equity 58,295 53,913 8.13% 57,809 53,383 8.29%
Interest earning assets 645,406 622,956 3.60% 640,362 608,485 5.24%
Interest bearing liabilities 535,364 504,581 6.10% 530,953 476,569 11.41%
Total assets 690,637 660,578 4.55% 684,419 645,290 6.06%



Financial Ratios:Three
months
ending
Jun 30,
2019
Three
months
ending
Jun 30,
2018
ChangeYear
to
date
Jun 30,
2019
Year
to
date
Jun 30,
2018
Change
Return on average assets0.80%0.79% 0.01 0.77%0.76% 0.01 
Return on average equity9.47%9.67% (0.20)9.11%9.15% (0.04)
Net interest margin3.82%3.74% 0.08 3.87%3.69% 0.18 
Efficiency ratio76.49%73.25% 3.24 76.35%75.60% 0.75 
Average equity to average assets8.44%8.16% 0.28 8.45%8.27% 0.18 


Allowance for loan losses:Three
months
ending
Jun 30,
2019
Three
months
ending
Jun 30,
2018
ChangeYear
to
date
Jun 30,
2019
Year
to
date
Jun 30,
2018
Change
Beginning balance$4,673 $4,671  0.04%$4,581 $4,752  -3.60%
Provision for losses 116  315  -63.17% 326  337  -3.26%
Charge-offs (86) (315) -72.70% (219) (555) -60.54%
Recoveries 21  17  23.53% 36  154  -76.62%
Ending balance 4,724  4,688  0.77% 4,724  4,688  0.77%


Nonperforming assets:Jun 30,
2019
Dec 31,
2018
ChangeJun 30,
2018
Dec 31,
2017
Change
Total nonperforming loans$3,485 $2,939  18.58%$3,195 $4,308 -25.84%
Other real estate owned 2,413  2,431  -0.74% 2,585  2,650 -2.45%
Total nonperforming assets 5,898  5,370  9.83% 5,780  6,958 -16.93%
Troubled debt restructurings - (performing portion) 418  424  -1.42% 432  440 -1.82%


Asset quality ratios:Jun 30,
2019
Dec 31,
2018
ChangeJun 30,
2018
Dec 31,
2017
Change
Nonperforming loans to total loans 0.63% 0.55% 0.08  0.60%0.87% (0.27)
Allowance for loan losses to total loans 0.85% 0.86% (0.01) 0.89%0.96% (0.07)
Allowance for loan losses to nonperforming loans 135.55% 155.87% (20.32) 146.73%110.31% 36.42 


Bank of the James Financial Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollar amounts in thousands, except per share amounts)

    
    
Assets(unaudited)
6/30/2019
 12/31/2018
 
    
Cash and due from banks$24,543  $26,725 
Federal funds sold 7,587   23,600 
Total cash and cash equivalents 32,130   50,325 
    
Securities held-to-maturity (fair value of $3,774 in 2019 and $3,515 in 2018) 3,694   3,700 
Securities available-for-sale, at fair value 53,818   52,727 
Restricted stock, at cost 1,506   1,462 
Loans, net of allowance for loan losses of $4,724 in 2019 and $4,581 in 2018 551,974   530,016 
Loans held for sale 4,443   1,670 
Premises and equipment, net 15,664   13,233 
Software, net 212   193 
Interest receivable 1,761   1,742 
Cash value - bank owned life insurance 13,526   13,359 
Other real estate owned 2,413   2,431 
Income taxes receivable 454   1,102 
Deferred tax asset, net 1,232   1,755 
Other assets 7,268   1,182 
  Total assets$690,095  $674,897 
    
    
Liabilities and Stockholders' Equity   
Deposits   
Noninterest bearing demand 88,897   91,356 
NOW, money market and savings 342,384   331,298 
Time 185,903   189,389 
Total deposits 617,184   612,043 
    
Capital notes 5,000   5,000 
Interest payable 159   127 
Other liabilities 8,503   2,584 
  Total liabilities$630,846  $619,754 
    
Stockholders' equity   
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 4,378,436
as of June 30, 2019 and December 31, 2018
 9,370   9,370 
Additional paid-in-capital 31,548   31,495 
Accumulated other comprehensive loss (275)  (2,243)
Retained earnings 18,606   16,521 
Total stockholders' equity$59,249  $55,143 
    
Total liabilities and stockholders' equity$690,095  $674,897 
    
    
    

Bank of the James Financial Group, Inc. and Subsidiaries
Consolidated Statements of Income
(dollar amounts in thousands, except per share amounts)
(unaudited)

         
         
 For the Three Months
Ended June 30,
 For the Six Months
Ended June 30,
 
Interest Income  
 2019  2018  2019  2018 
Loans$6,816 $6,195 $13,470 $11,869 
Securities        
US Government and agency obligations 184  186  369  384 
Mortgage backed securities 56  66  117  134 
Municipals 81  83  162  165 
Dividends 33  23  51  31 
Other (Corporates) 24  24  47  47 
Interest bearing deposits 74  56  165  91 
Federal Funds sold 122  92  243  159 
  Total interest income 7,390  6,725  14,624  12,880 
         
Interest Expense        
Deposits        
NOW, money market savings 362  231  668  423 
Time Deposits 750  543  1,418  1,044 
Brokered time deposits 76  82  156  162 
FHLB borrowings -  16  -  17 
Capital notes 50  50  100  100 
  Total interest expense 1,238  922  2,342  1,746 
         
  Net interest income 6,152  5,803  12,282  11,134 
         
Provision for loan losses 116  315  326  337 
         
  Net interest income after provision for loan losses 6,036  5,488  11,956  10,797 
         
         
Noninterest income        
Gains on sale of loans held for sale 1,075  873  1,766  1,493 
Service charges, fees and commissions 461  465  900  929 
Increase in cash value of life insurance 84  85  167  169 
Other 39  18  45  36 
  Total noninterest income 1,659  1,441  2,878  2,627 
         
Noninterest expenses        
Salaries and employee benefits 3,153  2,832  6,081  5,545 
Occupancy 417  360  838  755 
Equipment 536  398  994  777 
Supplies 142  140  304  289 
Professional, data processing, and other outside expense 859  837  1,674  1,652 
Marketing 276  187  421  327 
Credit expense 156  112  283  237 
Other real estate expenses 1  86  140  126 
FDIC insurance expense 94  99  188  200 
Other 341  255  651  495 
  Total noninterest expenses 5,975  5,306  11,574  10,403 
         
  Income before income taxes 1,720  1,623  3,260  3,021 
         
  Income tax expense 343  323  649  598 
         
  Net Income$1,377 $1,300 $2,611 $2,423 
         
Weighted average shares outstanding - basic 4,378,436  4,378,436  4,378,436  4,378,436 
         
Weighted average shares outstanding - diluted 4,383,021  4,378,436  4,381,994  4,378,481 
         
Net income per common share - basic$0.31 $0.30 $0.60 $0.55 
         
Net income per common share - diluted$0.31 $0.30 $0.60 $0.55