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Bank of Botetourt Posts Record Quarterly Earnings

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BUCHANAN, Va., Oct. 23, 2019 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT) announced today its unaudited financial results for the three months ended September 30, 2019. The Bank reported net income of $1,483,000 or $0.86 per basic share in the third quarter, the highest quarterly income in the Bank's 120 year history. This amount compares to net income of $1,243,000 or $0.87 per share, for the same period last year.  For the nine months ended September 30, 2019 the Bank reported net income of $3,741,000 or $2.18 per basic share. This amount compares to net income of $3,464,000 or $2.42 per share, for the same period last year.  

At September 30, 2019, key performance ratios were as follows:

  • Return on average assets 1.08%
  • Return on average equity 10.42%
  • Book value $28.83

As a result of the solid financial performance, the Board of Directors voted to pay a $0.16 per share quarterly dividend, or $0.64 per share annualized, which is payable on November 15, 2019 to shareholders of record November 8, 2019.

President & CEO, G. Lyn Hayth, III stated, "We are thrilled to announce our historic performance in the third quarter.  Loan demand and deposit growth have both remained steadfast while economic conditions remain favorable. This momentum has helped our bank exceed budget expectations the first nine months of the year."

Results of Operations

Net income for the three months ended September 30, 2019 was $1,483,000 compared to $1,243,000 for the same period last year, representing an increase of $240,000 or 19.3%.  Basic and diluted earnings per share decreased $0.01 from $0.87 at September 30, 2018 to $0.86 at September 30, 2019 as a result of the capital stock raise in December 2018 resulting in the issuance of 275,000 additional shares of common stock.  

The increase in net income for the three months ended September 30, 2019 is primarily attributable to lower than anticipated bad debt expense of $25,000.  In addition, the Bank received its Small Bank Assessment Credits from the Federal Deposit Insurance Corporation. The Bank used $53,500 in credits for its third quarter FDIC insurance assessment, thereby reducing expenses by the same amount.  The remaining assessment credit of $42,100 will be used to offset the fourth quarter FDIC insurance assessment and thereby reduce expenses.  It is anticipated that all credits will be used by December 31, 2019 and expense reduction will not recur in 2020.  Total interest income at September 30, 2019 increased $671,000 to $5,396,000 from $4,725,000 for the same three month time period of 2018. Interest expense increased $344,000 from $824,000 at September 30, 2018 to $1,168,000 at September 30, 2019.  As a result, net interest income increased $327,000 from September 30, 2018 to September 30, 2019.

The provision for loan losses was $25,000 for the three months ended September 30, 2019 as compared to $85,000 for the three months ended September 30, 2018. The decrease in the provision is due to a reduction in the model's three year rolling average loan charge-off history. 

Noninterest income increased by $56,000, or 6.0%, for the three months ended September 30, 2019 compared to the same time period of 2018.  The increase is attributable primarily to service charges on deposit accounts, sales of brokerage products and annuities, and income from subsidiaries.

Noninterest expense increased $137,000 or 4.2% from the three months ended September 30, 2018 to the three months ended September 30, 2019.  The increase is primarily related to an increase in salaries, employee benefits, premises and fixed assets, and debit card related expenses.

Income tax expense for the three months ended September 30, 2019 was $339,000 compared to $273,000 one year prior.

Financial Condition

At September 30, 2019 total assets amounted to $484,593,000, an increase of 11.2% above total assets of $435,765,000 at December 31, 2018, an increase of $48,828,000. Total net loans increased $30,207,000 or 7.9% from $380,404,000 at December 31, 2018 to $410,611,000 at September 30, 2019. Total deposits at December 31, 2018 amounted to $386,324,000, compared to $427,008,000 at September 30, 2019, an increase of 10.5% or $40,684,000.

At September 30, 2019 the Bank had $5,000,000 in borrowed funds in the form of a five year principal-reducing advance from the Federal Home Loan Bank.  The Bank had no borrowings at September 30, 2018.

Stockholders' equity totaled $49,483,000 at September 30, 2019 compared to $46,265,000 at December 31, 2018. The $3,218,000 increase during the period is comprised of net income for 2019, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan, partially offset by accumulated other comprehensive loss and dividends paid.

Non-Performing Assets

Non-performing assets, which consist of nonaccrual loans and foreclosed properties, decreased from $5,052,000 at December 31, 2018 to $3,477,000 at September 30, 2019.

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 $1,500,000 at September 30, 2019 compared to $1,300,000 at December 31, 2018. One loan was added to impaired status during the quarter.  Loss exposure on impaired loans at December 31, 2018 was $4,000 compared to $72,000 at September 30, 2019 after obtaining current appraisals on collateral securing impaired loans in the portfolio and estimating selling costs based on historical experience. An additional $95,000 remains reserved for an unimpaired loan with probable and estimable exposure.

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 September 30, 2019, troubled debt restructurings totaled $962,000 and were spread among various loan categories. No new TDRs have been identified in 2019.

Net charge-offs were $243,000 at September 30, 2019 as compared to $47,000 at September 30, 2018. 

Capital Ratios

Bank of Botetourt continues to be a Well Capitalized institution and exceed the BASEL III capital requirements.  As of September 30, 2019, Bank of Botetourt reported tier 1 leverage capital of 10.78% and total capital of 13.83%. Both common equity tier 1 and tier 1 capital ratios were 12.86%.

Strategic Initiatives

Subsequent to September 30, 2019, Bank of Botetourt introduced online account opening at its website and through its online banking platform.

About Bank of Botetourt

Bank of Botetourt was chartered in 1899 and operates twelve retail offices in Botetourt, Rockbridge, Roanoke, and Franklin counties and the City of Salem, 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
September 30, 2019(unaudited) and December 31, 2018












(unaudited)


(audited)



September 30


December 31



2019


2018

Assets










Cash and due from banks


$       9,110,000


$       7,386,000

Interest-bearing deposits with banks


22,309,000


5,784,000

Federal funds sold


492,000


486,000

                  Total cash and cash equivalents


31,911,000


13,656,000

Investment securities available for sale


14,394,000


16,061,000

Loans, net of allowance for loan losses of $3,770,000 at


410,611,000


380,404,000

     September 30, 2019 and $3,393,000 at December 31, 2018




Loans held for sale


1,361,000


317,000

Premises and fixed assets, net


12,890,000


11,901,000

Other real estate owned


2,913,000


4,231,000

Investment in unconsolidated subsidiaries


1,843,000


1,670,000

Other assets


8,670,000


7,525,000

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