Bank of Botetourt Records Profitable 2022; Board Votes to Pay Preferred Dividend and Increase Common Dividend

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Feb 01, 2023, 09:00 ET

BUCHANAN, Va., Feb. 1, 2023 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT and BORTP) announced today its unaudited financial results for the three and twelve months-ended December 31, 2022. The Bank produced net income amounting to $2,191,000 or $1.13 per basic share in the fourth quarter. This amount compares to a net income of $1,501,000 or $0.77 per share, for the same period last year. For the twelve months-ended December 31, 2022 the Bank produced net income amounting to $7,805,000 or $4.04 per basic share. This amount compares to net income of $6,879,000 or $3.58 per share, for the same period last year.

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

Return on average assets of 1.10%
Return on average equity of 12.99%
Book value of $32.48
Total deposit growth of 7.8%
Total asset growth of 7.8%
Total loan growth of 13.2%
Community Bank Leverage Ratio of 10.32%
Strong liquidity position
Net interest margin of 3.67% at December 31, 2022 compared to 2.98% 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 February 9, 2023 to preferred shareholders of record February 2, 2023. The Board voted to increase the quarterly common dividend from $0.185 to $0.1925 per share, or $0.77 per share annualized which is payable on February 17, 2023 to common shareholders of record February 13, 2023. President & CEO, G. Lyn Hayth, III stated, "We are gratified by the exceptional financial performance of our Bank during 2022. We were able to successfully meet business objectives that we established for 2022, especially increasing shareholder value."

Results of Operations

Net income for the three months ended December 31, 2022 was $2,191,000 compared to $1,501,000 for the same period last year, representing an increase of $690,000 or 46.0%. Basic and diluted earnings per share increased $0.36 from $0.77 at December 31, 2021 to $1.13 at December 31, 2022. The increase in net income is primarily due to $1,234,000 increase in investment income, $834,000 increase in loans and fees on loans, partially offset by a $444,000 increase in deposit interest expense and a $355,000 increase in the provision for loan loss.

The provision for loan losses was $585,000 for the three months ended December 31, 2022 as compared to $230,000 for the three months ended December 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 $498,000 at December 31, 2022 as compared to $(11,000) at December 31, 2021, whereby recoveries exceeded charge-offs.

Interest and fees on loans at December 31, 2022 increased $834,000 over the same three month time period of 2021 primarily due to increased loan growth, partially offset by a $169,000 decrease in PPP loan servicing fees. Interest expense increased by $430,000 from $492,000 at December 31, 2021 to $922,000 at December 31, 2022. The higher interest expense is a result of higher interest rates paid on the balances of interest-bearing deposits over the same time period of 2021.

Noninterest income decreased by $149,000, or 9.76%, to $1,378,000 for the three months ended December 31, 2022 compared to $1,527,000 for same time period of 2021. The decrease is attributable primarily to $170,000 decrease in mortgage origination fees for the fourth quarter compared to the same time period of 2021, partially offset by a $84,000 increase in service charges on deposit accounts.

Noninterest expense increased $237,000 from $4,469,000 at December 31, 2021 to $4,706,000 at December 31, 2022. The increase is primarily due to an increase in equipment related expenses of $82,000, an increase in fees for outside services of $75,000, and an increase in ATM and debit card fees of $40,000.

Income tax expense for the three months ended December 31, 2022 was $511,000 compared to $301,000 one year prior. The increase in tax expense is due to higher revenue for the quarter.

Financial Condition

At December 31, 2022 total consolidated assets amounted to $713,718,000, an increase of 7.8% above total assets at December 31, 2021 of $662,230,000, an increase of $51,488,000. Total net loans increased $56,263,000 or 13.2% from $425,899,000 at December 31, 2021 to $482,162,000 at December 31, 2022. Total deposits at December 31, 2021 amounted to $597,122,000, compared to $643,923,000 at December 31, 2022, an increase of 7.8% or $46,801,000. The increase in deposits is attributable to organic growth.

Stockholders' equity totaled $66,393,000 at December 31, 2022 compared to $59,137,000 at December 31, 2021. The $7,256,000 increase during the period is primarily due net income for 2022, the successful results of a Series A Preferred Stock Rights Offering which resulted in net proceeds of $6,642,261, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan, and offset by the increase in accumulated other comprehensive loss.

Non-Performing Assets

Non-performing assets, which consist of nonaccrual loans and foreclosed properties decreased by $811,000 from $1,757,000 at December 31, 2021 to $946,000 at December 31, 2022. The decrease is attributable to the charge-off of two commercial real estate loans and the charge-off of one unsecured loan, offset by the addition of two residential loans, one residential revolving loan, one residential lot loan and one unsecured loan. No foreclosed properties remained at December 31, 2022. Nonaccrual loans were $946,000 at December 31, 2022 compared to $1,730,000 at December 31, 2021, a decrease of $784,000.

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 $1,616,000 December 31, 2022 compared to $2,915,000 at December 31, 2021. Loss exposure on impaired loans decreased from $204,000 at December 31, 2021 to $63,000 at December 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 $57,000 for the aforementioned additions to nonaccrual loans.

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 December 31, 2022, troubled debt restructurings ("TDRs") totaled $914,000 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 December 31, 2022 Bank of Botetourt reported its CBLR ratio at 10.32% which meets the required regulatory minimum ratio. This compares to a CBLR ratio of 9.14% on December 31, 2021.

In November 2022, Bank of Botetourt issued 243,659 shares of its noncumulative, convertible, perpetual preferred stock at a price of $28.00 per share and resulted in net proceeds of $6,642,261. The Bank intends to use the net proceeds for general corporate purposes which may include increasing its capital position, supporting future growth such as branching and infrastructure, and funding loan demand.

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 $48.16 million with all receiving forgiveness from the SBA through December 31, 2022. As a result, no PPP loans and no deferred loan servicing fees remain on the balance sheet at December 31, 2022. The Bank recognized $460,000 in PPP revenue during 2022.

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 Consolidated Balance Sheets December 31, 2022 (unaudited) and December 31, 2021 (audited)

	(unaudited)	(audited)
	December 31	December 31
	2022	2021
Assets

Cash and due from banks	$ 8,987,000	$ 6,988,000
Interest-bearing deposits with banks	91,418,000	135,690,000
Federal funds sold	523,000	445,000
Total cash and cash equivalents	100,928,000	143,123,000
Time deposits with banks	250,000	250,000
Investment debt and equity securities held-to-maturity	9,950,000	8,950,000
Investment securities available for sale	92,552,000	57,529,000
Restricted equity securities	412,000	561,000
Loans held for sale	177,000	409,000
Loans, net of allowance for loan losses of $6,686,000 at	482,162,000	425,899,000
December 31, 2021 and $5,674,000 at December 31, 2020
Property and equipment, net	14,063,000	14,369,000
Bank owned life insurance	4,313,000	4,401,000
Accrued income	1,828,000	1,372,000
Foreclosed assets	-	27,000
Other assets	7,083,000	5,340,000
Total assets	713,718,000	662,230,000

Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits	$ 169,162,000	$ 84,086,000
Interest-bearing deposits	474,761,000	513,036,000
Total deposits	643,923,000	597,122,000

Other Borrowings	-	3,000,000
Accrued interest payable	324,000	197,000
Other liabilities	3,078,000	2,774,000
Total liabilities	647,325,000	603,093,000

Commitments and contingencies	-	-

Stockholders' Equity
Preferred stock, $1.00 par value; 325,000 shares authorized
non-cumulative perpetual; 243,659 and 0 issued and
outstanding at December 31, 2022 and 2021, respectively	244,000	-
Common stock, $1.50 par value; 2,500,000 shares
authorized; 1,940,879 and 1,921,995 issued and
outstanding at December 31, 2022 and at December 31, 2021,
respectively	2,911,000	2,883,000
Additional paid-in capital	23,655,000	16,779,000
Retained earnings	47,681,000	41,304,000
Accumulated other comprehensive loss	(8,098,000)	(1,829,000)
Total stockholders' equity	66,393,000	59,137,000
Total liabilities and stockholders' equity	713,718,000	662,230,000

Bank of Botetourt Income Statement For the twelve months ended and three months ended December 31, 2022 and 2021 (Unaudited)

	Twelve Months Ended December 31,		Three Months Ended December 31,
	Twelve Months Ended December 31,		Three Months Ended December 31,
	2022	2021	2022	2021
Interest income
Loans and fees on loans	$ 22,031,000	$ 21,724,000	$ 6,028,000	$ 5,194,000
Federal Funds Sold	5,000	-	3,000	-
Investment securities:
Taxable	1,549,000	560,000	456,000	212,000
Exempt from federal income tax	124,000	-	42,000	-
Dividend income	19,000	23,000	5,000	5,000
Deposits with banks	2,039,000	164,000	1,003,000	55,000
Total Interest income	25,767,000	22,471,000	7,537,000	5,466,000

Interest expense
Deposits	2,292,000	2,556,000	922,000	478,000
Other borrowings	20,000	69,000	-	14,000
Total Interest expense	2,312,000	2,625,000	922,000	492,000
Net Interest Income	23,455,000	19,846,000	6,615,000	4,974,000

Provision for loan losses	1,510,000	425,000	585,000	230,000
Net Interest Income after provision for loan losses	21,945,000	19,421,000	6,030,000	4,744,000

Noninterest income
Service charges on deposit accounts	987,000	713,000	288,000	204,000
ATM and debit card	1,711,000	1,605,000	442,000	418,000
Other service charges and fees	682,000	494,000	182,000	126,000
Mortgage origination fees	392,000	1,148,000	47,000	217,000
Other income	1,339,000	1,354,000	419,000	562,000
Total noninterest income	5,111,000	5,314,000	1,378,000	1,527,000

Noninterest expense
Salaries and employee benefits	8,032,000	7,276,000	2,274,000	2,255,000
Occupancy	983,000	867,000	193,000	196,000
Equipment	883,000	817,000	305,000	223,000
Foreclosed assets, net	(66,000)	702,000	6,000	39,000
Outside services	2,070,000	1,838,000	570,000	495,000
FDIC insurance premiums and assessment	341,000	332,000	95,000	98,000
ATM and debit card	1,108,000	957,000	316,000	276,000
Franchise tax	496,000	437,000	130,000	112,000
Telephone and communication	292,000	263,000	75,000	70,000
Other professional fees	210,000	235,000	52,000	68,000
Marketing	772,000	618,000	197,000	172,000
Other operating expenses	2,140,000	1,826,000	493,000	465,000
Total noninterest expense	17,261,000	16,168,000	4,706,000	4,469,000
Income before income taxes	9,795,000	8,567,000	2,702,000	1,802,000

Income tax expense	1,990,000	1,688,000	511,000	301,000
Net income	$ 7,805,000	$ 6,879,000	$ 2,191,000	$ 1,501,000

Basic earnings per share	$ 4.04	$ 3.58	$ 1.13	$ 0.77
Diluted earnings per share	$ 4.04	$ 3.58	$ 1.13	$ 0.77
Dividends declared per share	$ 0.74	$ 0.72	$ 0.185	$ 0.180
Basic weighted average shares outstanding	1,932,448	1,921,203	1,939,403	1,952,076
Diluted weighted average shares outstanding	1,932,448	1,921,203	1,939,403	1,952,076