BUCHANAN, Va., April 27, 2023 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT and BORTP) announced today its unaudited financial results for the quarter-ended March 31, 2023. The Bank produced net income amounting to $2,294,000. The net income equated to $1.12 per basic share in the first quarter. This amount compares to net income of $1,543,000 or $0.80 per share, for the same period last year.
At March 31, 2023, select financial information and key highlights include:
- Return on average assets of 1.28%
- Return on average equity of 13.60%
- Book value of $35.30
- Total deposit growth of (0.83%)
- Total asset growth of (0.10%)
- Total loan growth of 5.31%
- Community Bank Leverage Ratio of 10.60%
- Net interest margin of 3.49% at March 31, 2023 compared to 2.91% 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 May 9, 2023 to preferred shareholders of record May 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 May 19, 2023 to common shareholders of record May 12, 2023. CEO & Vice-Chairman, G. Lyn Hayth, III stated "Our first quarter financial results exceeded budget expectations. Strong loan growth has helped the Bank surpass our first quarter budget expectations."
Results of Operations
Net income for the three months ended March 31, 2023 was $2,294,000 compared to $1,543,000 for the same period last year, representing an increase of $751,000 or 48.67%. Basic and diluted earnings per share increased $0.32 from $0.80 at March 31, 2022 to $1.12 at March 31, 2023. The increase in net income is primarily due to $1,503,000 more loan interest income, $1,001,000 more investment income, offset by a $982,000 increase in interest expense.
Bank of Botetourt adopted FASB's Topic 326, Financial Instruments - Credit Losses ("CECL") effective January 1, 2023. The impact of Day 1 adoption, as required by the standard, was a one-time reduction to retained earnings, net of deferred income taxes, of $581,000. The Allowance for Credit Losses ("ACL"), formerly referred to as the Allowance for Loan Losses, increased on the effective date by $261,000 and the reserve for unfunded commitments, included in other liabilities on the balance sheet, increased by $374,000, as a result of the adoption of CECL. Subsequent to adoption, the Bank recorded adjustments to its ACL and reserve for unfunded commitments through the provision for loan losses in the statements of income. For the three months ended March 31, 2023, the Bank recorded a provision for credit loss expense of $272,000 compared to $205,000 provision for loan loss for the three months ended March 31, 2022. Net charge-offs were $36,000 at March 31, 2023 as compared to $227,000 at March 31, 2022.
At March 31, 2023 net loans increased 5.31%. Interest and fees on loans at March 31, 2023 increased $1,308,000 over the same three month time period of 2022. Interest expense increased by $982,000 from $454,000 at March 31, 2022 to $1,436,000 at March 31, 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.
Noninterest income increased by $165,000, or 14.09%, to $1,336,000 for the three months ended March 31, 2023 compared to $1,171,000 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 $490,000 from $4,108,000 at March 31, 2022 to $4,598,000 at March 31, 2023. The increase is primarily related to increases in salary and employee benefits, debit card expense, franchise tax expense, and premise and fixed asset expense.
Income tax expense for the three months ended March 31, 2023 was $584,000 compared to $400,000 one year prior. The increase in tax expense is due to higher revenue for the quarter.
Financial Condition
At March 31, 2023 total assets amounted to $714,770,000, a decrease of 0.10% above total assets at December 31, 2022 of $715,514,000, a decrease of $744,000. Total net loans increased $25,586,000 or 5.31% from $482,163,000 at December 31, 2022 to $507,749,000 at March 31, 2023. Total deposits at December 31, 2022 amounted to $645,720,000, compared to $640,369,000 at March 31, 2023, a decrease of 0.83% or $5,531,000. The decrease in deposits is attributable to normal deposit activities.
Stockholders' equity totaled $68,579,000 at March 31, 2023 compared to $66,393,000 at December 31, 2022. The $2,186,000 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, and offset by the decrease in accumulated other comprehensive loss and 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 March 31, 2023, respectively. Non-performing assets decreased from $946,000 at December 31, 2022 to $690,000 at March 31, 2023. The decrease is attributable to the sale of collateral on a non-accrual loan secured by raw land and the subsequent payoff of the total loan balance. Furthermore, one residential real estate loan was charged off and one commercial loan was paid in full resulting in the total $256,000 decrease in non-performing assets. There were no new additions to nonaccrual loans during the first quarter. The decrease in nonaccrual loans is attributable to the charge-off and 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 $1,355,000 at March 31, 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 increased from $63,000 at December 31, 2022 to $84,000 at March 31, 2023. The increase is attributable to the charge-off of one consumer loan with a specific reserve of $5,000, offset by the addition of a specific reserve of $26,000 for an existing nonaccrual real estate 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 ("TDRs"). At March 31, 2023, TDRs totaled $896,000 and were spread among various loan categories. No new TDRs have been identified in 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 March 31, 2023 Bank of Botetourt reported its CBLR ratio at 10.60% which meets the required regulatory minimum ratio. This compares to a CBLR ratio of 10.32% at December 31, 2021.
Strategic Initiatives
On April 10, 2023, Bank of Botetourt announced it had made application with its state and federal regulators to establish a full-service branch in the Town of Rocky Mount, Virginia. The new office will be located at 875 Tanyard Road. Services will include a 24/7 accessible ATM with deposit capabilities, a drive-thru, and night deposit. The Bank's mortgage company, Virginia Mountain Mortgage will also be available from this location. Bank of Botetourt also announced a partnership with Goodwill Industries of the Valleys to provide banking services for the new Melrose Plaza. Various products and services designed to fit individual needs for customers will be available. The Bank also plans to provide access to financial literacy and coaching services to help improve financial wellness.
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
Balance Sheets, unconsolidated
March 31, 2023 (unaudited) and December 31, 2022
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| (unaudited)
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| (audited)
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| March 31,
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| December 31,
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| 2023
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| 2022
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Assets
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Cash and Due from banks
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| $ 11,323,000
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| $ 8,996,000
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Interest-bearing deposits with banks
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| 64,712,000
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| 91,659,000
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Federal funds sold
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| 373,000
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| 523,000
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Total cash and cash equivalents
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| 76,408,000
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| 101,178,000
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Debt securities held-to-maturity, net of allowance
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| 9,932,000
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| 9,950,000
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for credit losses of $18,000 at March 31, 2023 and $0
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at December 31, 2022.
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Debt securities available for sale
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| 90,228,000
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| 92,552,000
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Loans, net of allowance for credit losses of $7,234,000 at
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| 507,749,000
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| 482,163,000
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March 31, 2023 and $6,686,000 at December 31, 2022
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Loans held for sale
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| 165,000
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| 177,000
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Premises and fixed assets, net
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| 14,566,000
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| 14,063,000
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Other real estate owned
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| -
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| -
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Investment in unconsolidated subsidiaries
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| 2,938,000
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| 2,777,000
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Other assets
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| 12,784,000
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| 12,654,000
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Total assets
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| 714,770,000
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| 715,514,000
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Liabilities and Stockholders' Equity
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Liabilities
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Noninterest-bearing deposits
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| $ 167,823,000
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| $ 170,958,000
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Interest-bearing deposits
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| 472,546,000
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| 474,762,000
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Total deposits
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| 640,369,000
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| 645,720,000
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Other liabilities
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| 5,822,000
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| 3,401,000
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Total liabilities
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| 646,191,000
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| 649,121,000
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Commitments and contingencies
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| -
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| -
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Stockholders' Equity
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Preferred stock, $1.00 par value; 500,000 shares
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authorized non-cumulative perpetual; 243,659 issued and
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outstanding at March 31, 2023 and at December 31, 2022
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respectively
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| 244,000
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| 244,000
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Common stock, $1.50 par value; 2,500,000 shares
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authorized; 1,944,297 and 1,940,879 issued and
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outstanding at March 31, 2023 and at December 31, 2022
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respectively
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| 2,916,000
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| 2,912,000
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Additional paid-in capital
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| 23,745,000
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| 23,654,000
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Retained earnings
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| 48,902,000
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| 47,681,000
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Accumulated other comprehensive loss
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| (7,228,000)
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| (8,098,000)
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Total stockholders' equity
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| 68,579,000
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| 66,393,000
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Total liabilities and stockholders' equity
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| 714,770,000
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| 715,514,000
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Bank of Botetourt
Income Statement
For the three months ended March 31, 2023 and 2022 (Unaudited)
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| Three Months Ended
March 31
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| 2023
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| 2022
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Interest income
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Loans and fees on loans
| $ 6,514,000
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| $ 5,206,000
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Securities:
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U.S. Treasury and Government Agencies
| 222,000
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| 115,000
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Mortgage-backed securities
| 81,000
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| -
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All other securities
| 228,000
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| 159,000
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Due from depository institutions
| 799,000
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| 59,000
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Federal Funds Sold
| 4,000
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| -
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Total interest income
| 7,848,000
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| 5,539,000
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Interest expense
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Deposits
| 1,436,000
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| 454,000
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Total interest expense
| 1,436,000
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| 454,000
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Net interest Income
| 6,412,000
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| 5,085,000
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Provision for credit losses
| 272,000
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| 205,000
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Net interest income after credit loss expense
| 6,140,000
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| 4,880,000
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Noninterest income
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Service charges on deposit accounts
| 254,000
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| 197,000
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Securities brokerage and annuities
| 57,000
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| 75,000
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Other income, net of gains
| 1,025,000
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| 899,000
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Total noninterest income
| 1,336,000
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| 1,171,000
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Noninterest expense
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Salaries and employee benefits
| 2,049,000
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| 1,918,000
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Premises and fixed assets expense
| 483,000
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| 429,000
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Other expense
| 2,066,000
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| 1,761,000
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Total noninterest expense
| 4,598,000
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| 4,108,000
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Income before income taxes
| 2,878,000
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| 1,943,000
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Income tax expense
| 584,000
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| 400,000
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Net income
| 2,294,000
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| 1,543,000
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Preferred stock dividends
| 119,000
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| -
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Net income available to common shareholders
| $ 2,175,000
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| $ 1,543,000
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Basic earnings per share
| $ 1.12
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| $ 0.80
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Diluted earnings per share
| $ 1.12
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| $ 0.80
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Dividends declared per share
| $ 0.1925
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| $ 0.185
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Basic weighted average shares outstanding
| 1,942,664
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| 1,924,074
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Diluted weighted average shares outstanding
| 1,942,664
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| 1,924,074
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SOURCE Bank of Botetourt
