Bank of Botetourt posts profitable second quarter financial results

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Jul 27, 2023, 08:00 ET

BUCHANAN, Va., July 27, 2023 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT and BORTP) announced today its unaudited financial results for the three and six months-end June 30, 2023. The Bank produced net income amounting to $1,993,000 or $0.96 per basic share in the second quarter. This amount compares to a net income of $1,763,000 or $0.91 per share, for the same period last year. For the six months-ended the Bank produced net income amounting to $4,287,000 or $2.08 per basic share. This amount compares to a net income of $3,306,000 or $1.72 per share, for the same period last year.

At June 30, 2023, select financial information and key highlights include:

Return on average assets of 1.19%
Return on average equity of 12.53%
Book value of $36.09
Total deposit growth of 1.96%
Total asset growth of 4.38%
Total loan growth of 11.28%
Community Bank Leverage Ratio of 10.75%
Strong liquidity position
Net interest margin of 3.25% at June 30, 2023 compared to 3.26% one year prior.

As a result of the solid financial performance, the Board of Directors voted to pay the 7.00% preferred dividend, which calculates to $0.49 per share on August 9, 2023 to preferred shareholders of record August 2, 2023. Furthermore, the Board of Directors voted to pay the $0.1925 per share quarterly dividend, or $0.77 per share annualized which is payable on August 18, 2023 to common shareholders of record August 11, 2023. CEO & Vice-Chairman, G. Lyn Hayth, III stated "Our financial results for 2023 continue to meet budget expectations, despite the impact of significant increases in interest rates. Bank of Botetourt continues to sustain significant loan growth while conserving strong relationships with our current customers."

Results of Operations

Net income for the three months ended June 30, 2023 was $1,993,000 compared to $1,763,000 for the same period last year, representing an increase of $230,000 or 13.05%. Basic and diluted earnings per share increased $0.05 from $0.91 at June 30, 2022 to $0.96 at June 30, 2023. The increase in net income is primarily due to $1,790,000 more loan interest income, $583,000 more investment income, offset by $1,524,000 increase in interest expense and $171,000 provision for credit loss.

For the three months ended June 30, 2023, the Bank recorded a provision for credit loss expense of $396,000, which includes $43,000 related to provision for unfunded commitments, compared to $225,000 provision for loan loss for the three months ended June 30, 2022. The provision expense recorded during the quarter mainly reflected allocations necessitated by net loan growth and adjustments to historical loss factors to better represent expectations for future credit losses. The ratio of the allowance for credit losses to total loans and leases outstanding was 1.38% at the end of the quarter, down 3 basis points from the prior quarter and 5 basis point higher from the end of the same quarter of 2022. Net charge-offs were $104,000 at June 30, 2023 as compared to $233,000 at June 30, 2022.

At June 30, 2023 net loans increased 11.28%. Interest and fees on loans at June 30, 2023 increased $1,790,000 over the same three month time period of 2022. Interest expense increased by $1,524,000 from $433,000 at June 30, 2022 to $1,957,000 at June 30, 2023. The higher interest expense is a result of higher interest rates paid on the balances of interest-bearing deposits than for the same time period of 2022 and the addition of interest on borrowed funds.

Noninterest income increased by $97,000, or 7.57%, to $1,379,000 for the three months ended June 30, 2023 compared to $1,282,000 for same time period of 2022. 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 the sale of mortgage loans.

Noninterest expense increased $484,000 from $4,247,000 at June 30, 2022 to $4,731,000 at June 30, 2023. The increase is primarily related to increases in salary and employee benefits, debit card expense and premise and fixed asset expense.

Income tax expense for the three months ended June 30, 2023 was $513,000 compared to $452,000 one year prior. The increase in tax expense is due to higher revenue for the quarter.

Financial Condition

At June 30, 2023 total assets amounted to $746,836,000, an increase of 4.38% above total assets at December 31, 2022 of $715,514,000, an increase of $31,322,000. Total net loans increased $54,406,000 or 11.28% from $482,163,000 at December 31, 2022 to $536,569,000 at June 30, 2023. Total deposits at December 31, 2022 amounted to $645,720,000, compared to $658,362,000 at June 30, 2023, an increase of 1.96% or $12,642,000. The increase in deposits is attributable to organic growth coupled with the addition of $11,000,000 in brokered deposits.

Stockholders' equity totaled $70,163,000 at June 30, 2023 compared to $66,393,000 at December 31, 2022. The $3,770,000 increase during the period is net income for 2023, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan, the decrease in accumulated other comprehensive loss, and partially offset by dividends paid.

Non-Performing Assets

Bank of Botetourt has no foreclosed properties. Therefore, non-performing assets only consisted of nonaccrual loans at December 31, 2022 and June 30, 2023, respectively. Non-performing assets decreased from $946,000 at December 31, 2022 to $607,000 at June 30, 2023. The decrease is attributable to the sale of collateral on two non-accrual loans, one secured by raw land and one secured by a residential property. The sale of collateral resulted in the subsequent payoff of the total loan balance for one loan secured by raw land and the paydown of the 1-4 family residential loan followed by the subsequent charge-off of the remaining total loan balance. Furthermore, one residential real estate loan was charged off and one commercial loan was paid in full resulting in the total $339,000 decrease in non-performing assets. There were no new additions to nonaccrual loans during the second quarter. The decrease in nonaccrual loans is attributable to the charge-off payment activity of the aforementioned loans.

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 $1,268,000 at June 30, 2023 compared to $1,616,000 at December 31, 2022. The decrease in impaired loans is attributable to one real estate loan being paid off from the sale of collateral, another real estate loan being paid in full and one raw land loan being written off. Loss exposure on impaired loans decreased from $63,000 at December 31, 2022 to $56,000 at June 30, 2023. The decrease is attributable to the charge-off of one consumer loan with a specific reserve of $5,000 and the decrease in exposure on a consumer loan and residential loan as a result of payments made during 2023.

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, 2023 Bank of Botetourt reported its CBLR ratio at 10.75% which meets the required regulatory minimum ratio. This compares to a CBLR ratio of 10.32% at December 31, 2021.

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.

Bank of Botetourt
Income Statement
For the six months ended and three months ended June 30, 2023 and 2022 (Unaudited)

	Six Months Ended June 30,		Three Months Ended June 30,
	Six Months Ended June 30,		Three Months Ended June 30,
	2023	2022	2023	2022
Interest income
Loans and fees on loans	$ 13,483,000	$ 10,385,000	$ 6,969,000	$ 5,179,000
Securities:
U.S. Treasury and Government Agencies	439,000	311,000	217,000	196,000
Mortgage-backed securities	160,000	21,000	79,000	21,000
All other securities	428,000	353,000	200,000	194,000
Due from depository institutions	1,540,000	306,000	741,000	247,000
Federal funds sold	9,000	1,000	5,000	1,000
Total Interest income	16,059,000	11,377,000	8,211,000	5,838,000

Interest expense
Deposits	3,350,000	887,000	1,914,000	433,000
Other borrowings	43,000	-	43,000	-
Total Interest expense	3,393,000	887,000	1,957,000	433,000
Net Interest Income	12,666,000	10,490,000	6,254,000	5,405,000

Provision for credit losses	668,000	430,000	396,000	225,000
Net Interest Income after credit loss expense	11,998,000	10,060,000	5,858,000	5,180,000

Noninterest income
Service charges on deposit accounts	525,000	430,000	271,000	233,000
Securities brokerage and annuities	124,000	154,000	67,000	79,000
Other income, net of gains	2,066,000	1,869,000	1,041,000	970,000
Total noninterest income	2,715,000	2,453,000	1,379,000	1,282,000

Noninterest expense
Salaries and employee benefits	4,150,000	3,831,000	2,101,000	1,913,000
Premises and fixed assets expense	929,000	870,000	446,000	441,000
Other expense	4,250,000	3,654,000	2,184,000	1,893,000
Total noninterest expense	9,329,000	8,355,000	4,731,000	4,247,000
Income before income taxes	5,384,000	4,158,000	2,506,000	2,215,000

Income tax expense	1,097,000	852,000	513,000	452,000
Net income	4,287,000	3,306,000	1,993,000	1,763,000
Preferred stock dividends	238,000	-	119,000	-
Net income available to common shareholders	$ 4,049,000	$ 3,306,000	$ 1,874,000	$ 1,763,000

Basic earnings per share	$ 2.08	$ 1.72	$ 0.96	$ 0.91
Diluted earnings per share	$ 2.08	$ 1.72	$ 0.96	$ 0.91
Dividends declared per share	$ 0.385	$ 0.370	$ 0.1925	$ 0.185
Basic weighted average shares outstanding	1,944,073	1,927,195	1,945,467	1,930,282
Diluted weighted average shares outstanding	1,944,073	1,927,195	1,945,467	1,930,282

Bank of Botetourt
Balance Sheets, unconsolidated
June 30, 2023 (unaudited) and December 31, 2022

	(unaudited)	(audited)
	June 30,	December 31,
	2023	2022
Assets

Cash and due from banks	$ 9,995,000	$ 8,996,000
Interest-bearing deposits with banks	68,697,000	91,659,000
Federal funds sold	565,000	523,000
Total cash and cash equivalents	79,257,000	101,178,000
Debt securities held-to-maturity, net of allowance
for credit losses of $18,000 at June 30, 2023 and $0
at December 31, 2022	9,932,000	9,950,000
Debt securities available for sale	89,197,000	92,552,000
Loans, net of allowance for credit losses of $7,518,000 at
June 30, 2023 and $6,686,000 at December 31, 2022	536,569,000	482,163,000
Loans held for sale	478,000	177,000
Premises and fixed assets, net	14,486,000	14,063,000
Other real estate owned	-	-
Investment in unconsolidated subsidiaries	2,976,000	2,777,000
Other assets	13,941,000	12,654,000
Total assets	$ 746,836,000	$ 715,514,000

Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits	$ 166,381,000	$ 170,958,000
Interest-bearing deposits	491,981,000	474,762,000
Total deposits	658,362,000	645,720,000

Other borrowings	14,000,000	-
Other liabilities	4,311,000	3,401,000
Total liabilities	676,673,000	649,121,000

Commitments and contingencies	-	-

Stockholders' Equity
Preferred stock, $1.00 par value; 500,000 shares
authorized non-cumulative perpetual; 243,659 issued and
outstanding at June 30, 2023 and at December 31, 2022
respectively	244,000	244,000
Common stock, $1.50 par value; 2,500,000 shares
authorized; 1,946,773 and 1,940,879 issued and
outstanding at June 30, 2023 and at December 31, 2022,
respectively	2,920,000	2,912,000
Additional paid-in capital	23,813,000	23,654,000
Retained earnings	50,481,000	47,681,000
Accumulated other comprehensive loss	(7,295,000)	(8,098,000)
Total stockholders' equity	70,163,000	66,393,000
Total liabilities and stockholders' equity	$ 746,836,000	$ 715,514,000