BANK OF BOTETOURT BUCHANAN, Va., April 30, 2020 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT) announced today its unaudited financial results for the quarter-ended March 31, 2020. The Bank produced net income amounting to $1,038,000 or $0.60 per basic share in the first quarter. This amount compares to a net income of $1,154,000 or $0.67 per share, for the same period last year.
At March 31, 2020, select financial highlights include:
- Return on average assets of 0.83%
- Return on average equity of 8.19%
- Book value of $29.69
As a result of the solid financial performance, the Board of Directors voted to pay the $0.175 per share quarterly dividend, or $0.70 per share annualized which is payable on May 19, 2020 to shareholders of record May 12, 2020. President & CEO, G. Lyn Hayth, III stated "Our first quarter performance is off to a gratifying start. We are cautiously optimistic amid the pandemic. Bank of Botetourt has been taking care of our customers since 1899 but we are placing an even higher emphasis on helping them navigate their financial needs during this unprecedented time of the COVID-19 pandemic."
Economy and Interest Rate Environment
On March 3, 2020, the FOMC lowered its federal funds rate by 50 basis points because the coronavirus posed evolving risks to economic activity. On March 15,2020 the FOMC decided to lower the target range another 100 basis points because the effects of the coronavirus will impact economic activity in the near term as well as pose risks to the overall economic outlook. The FOMC announced it expected to maintain this lowered target range until it is confident that the economy has weathered the events and is on track to achieve the dual mandate. As a result of the FOMC's actions, the Bank revised its 2020 budget assumptions for interest rates and thereby lowered its budgeted amount for interest income and interest expense, respectively. In addition, the Bank assessed other line item impacts to the budget including bad debt expense. The Bank determined a higher provision for loan losses is warranted in 2020 due to the uncertainty surrounding the COVID-19 pandemic as well as the large span of industries negatively impacted by the social distancing and stay at home orders.
Results of Operations
Net income for the three months ended March 31, 2020 was $1,038,000 compared to $1,154,000 for the same period last year, representing a decrease of $116,000 or 10.1%. Basic and diluted earnings per share decreased $0.07 from $0.67 at March 31, 2019 to $0.60 at March 31, 2020. The decrease in net income is primarily due to a $250,000 higher loan loss provision compared to the prior year.
The provision for loan losses was $445,000 for the three months ended March 31, 2020 as compared to $195,000 for March 31, 2019. The higher provision is due to an increase in a recession probability predictor in the Bank's environmental factors portion of the allowance for loan loss reserve calculation. With the far-reaching economic impacts resulting from COVID-19, the likelihood of recession necessitated the need for a higher provision beyond the overall growth in the loan portfolio. In determining the estimated allowance the Bank considered national and local unemployment trends, market conditions, social distancing impacts on area non-essential businesses, and customer requests for payment deferrals. Net charge-offs were $99,000 at March 31, 2020 as compared to 22,000 at March 31, 2019.
The Bank has realized continued strong loan demand in 2020 as net loans increased 2.6%. Interest and fees on loans at March 31, 2020 increased $489,000 over the same three month time period of 2019. Interest expense increased from $1,025,000 at March 31, 2019 to $1,274,000 at March 31, 2020. During the first three months of 2020, interest bearing deposits grew 2.9%. The higher interest expense is a result of both interest expense related to borrowings and an increase the balances of interest-bearing deposits.
Noninterest income increased by $350,000, or 52.0%, to $1,023,000 for the three months ended March 31, 2020 compared to $673,000 for same time period of 2019. The increase is attributable primarily to income from loans held-for-sale, income from title insurance subsidiaries, and fee income from services charges on deposit accounts.
Noninterest expense increased $488,000 from $3,054,000 at March 31, 2019 to $3,542,000 at March 31, 2020. 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, 2020 was $262,000 compared to $287,000 one year prior. The decrease in tax expense is due to slightly less revenue for the quarter.
Financial Condition
At March 31, 2020 total assets amounted to $513,053,000, an increase of 4.1% above total assets at December 31, 2019 of $492,817,000, an increase of $20,236,000. Total net loans increased $10,876,000 or 2.6% from $421,417,000 at December 31, 2019 to $432,293,000 at March 31, 2020. Total deposits at December 31, 2019 amounted to $434,268,000, compared to $448,866,000 at March 31, 2020, an increase of 3.4% or $14,598,000. The majority of the increase in deposits was organic growth. The Bank also borrowed an additional $5,000,000 from the FHLB as added liquidity for potential customer loan demand during the pandemic.
Stockholders' equity totaled $51,125,000 at March 31, 2020 compared to $50,269,000 at December 31, 2019. The $856,000 increase during the period is net income for 2020, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan, a reduction in accumulated other comprehensive loss and partially offset by dividends paid.
Non-Performing Assets
Non-performing assets, which consist of nonaccrual loans and foreclosed properties increased from $3.2 million at December 31, 2019 to $3.5 million at March 31, 2020. The increase is attributable to an uptick in nonaccrual loans. Nonaccrual loans were $656,000 at December 31, 2019 compared to $969,000 at March 20, 2020. There were three new additions to nonaccruals loans during the quarter, one residential construction loans and two residential 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 $1.5 million at December 31, 2019, compared to $1.3 million at March 31, 2020. The decrease is related to the removal of one impaired loan in the residential loan category. Loss exposure on impaired loans at December 31, 2019 was $310,000 compared to $291,000 and March 31, 2020 after obtaining current appraisals on collateral securing a significant number of impaired loans in the portfolio and estimating selling costs based on historical experience.
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 March 31, 2020, troubled debt restructurings ("TDRs") totaled $1.1 million, and were spread among various loan categories. No new TDRs have been identified in 2020.
Capital Ratios
The federal banking agencies jointly issued a final rule, effective January 1, 2020, that provided for an optional, simplified measure of capital adequacy, the community bank leverage ratio framework, for qualifying community banking organizations, 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, Bank of Botetourt reported its CBLR ratio at 10.35% which exceeds the required regulatory minimum ratio. The CARES Act temporarily reduced the CBLR minimum ratio from 9.0% to 8.0% through December 31, 2020.
Paycheck Protection Program
Bank of Botetourt is participating in the Paycheck Protection Program ("PPP") initiated by the U.S. Department of the Treasury on April 3, 2020. As of April 29, 2020, the Bank has processed and received approval from the U.S. Small Business Administration on 328 applications for approximately $27.05 million. Bank of Botetourt initially has funded these loans using its on-balance sheet liquidity. The Bank is assessing its anticipated liquidity needs for the remainder of 2020 and will replenish a portion of liquidity used to fund the PPP loans by borrowing from the newly created Payroll Protection Program Lending Facility ("PPPLF") at the Federal Reserve Bank of Richmond.
COVID-19 Customer & Employee Care
Bank of Botetourt has taken numerous steps to assist our customers and employees during the pandemic. For loan customers impacted by COVID-19, the Bank has granted extensions and modifications consistent with regulatory guidance. For depositing customers, the Bank is permitting unlimited withdrawals from savings accounts without additional fee or penalty as announced and permitted by banking regulators. All of our offices remain open, although our lobbies are under controlled access. For our employees, we have enabled flexible work practices as approximately 30% to work remotely and thereby promote social distancing. We have had no layoffs as a result of COVID-19. We have discontinued non-essential travel are using online meeting platforms.
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 | ||||
(unaudited) | (audited) | |||
March 31, | December 31, | |||
2020 | 2019 | |||
Assets | ||||
Cash and Due from banks | $ 6,932,000 | $ 6,914,000 | ||
Interest-bearing deposits with banks | 27,159,000 | 19,795,000 | ||
Federal funds sold | 137,000 | 302,000 | ||
Total cash and cash equivalents | 34,228,000 | 27,011,000 | ||
Investment securities available for sale | 18,339,000 | 17,793,000 | ||
Loans, net of allowance for loan losses of $4,321,000 at | 432,293,000 | 421,417,000 | ||
March 31, 2019 and $3,975,000 at December 31, 2019 | ||||
Loans held for sale | 1,336,000 | - | ||
Premises and fixed assets, net | 13,480,000 | 13,419,000 | ||
Other real estate owned | 2,574,000 | 2,536,000 | ||
Investment in unconsolidated subsidiaries | 2,009,000 | 1,856,000 | ||
Other assets | 8,794,000 | 8,785,000 | ||
Total assets | $ 513,053,000 | $ 492,817,000 | ||
Liabilities and Stockholders' Equity | ||||
Liabilities | ||||
Noninterest-bearing deposits | $ 48,717,000 | $ 45,246,000 | ||
Interest-bearing deposits | 400,149,000 | 389,022,000 | ||
Total deposits | 448,866,000 | 434,268,000 | ||
Other Borrowings | 10,000,000 | 5,000,000 | ||
Other liabilities | 3,062,000 | 3,280,000 | ||
Total liabilities | 461,928,000 | 442,548,000 | ||
Commitments and contingencies | - | - | ||
Stockholders' Equity | ||||
Common stock, $1.50 par value; 2,500,000 shares | ||||
authorized; 1,722,569 and 1,720,900 issued and | ||||
outstanding at March 31, 2020 and at December 31, 2019 | ||||
respectively | 2,584,000 | 2,581,000 | ||
Additional paid-in capital | 11,412,000 | 11,365,000 | ||
Retained earnings | 37,994,000 | 37,257,000 | ||
Accumulated other comprehensive loss | (865,000) | (934,000) | ||
Total stockholders' equity | 51,125,000 | 50,269,000 | ||
Total liabilities and stockholders' equity | $ 513,053,000 | $ 492,817,000 | ||
Bank of Botetourt | |||
Three Months Ended | |||
2020 | 2019 | ||
Interest income | |||
Loans and fees on loans | $ 5,380,000 | $ 4,891,000 | |
Investment securities: | |||
U.S. Treasury and Government Agencies | 55,000 | 47,000 | |
All other securities | 58,000 | 43,000 | |
Due from depository institutions | 44,000 | 59,000 | |
Federal Funds Sold | 1,000 | 2,000 | |
Total Interest income | 5,538,000 | 5,042,000 | |
Interest expense | |||
Deposits | 1,247,000 | 1,025,000 | |
Federal funds purchased | - | - | |
Other borrowings | 27,000 | - | |
Total Interest expense | 1,274,000 | 1,025,000 | |
Net Interest Income | 4,264,000 | 4,017,000 | |
Provision for loan losses | 445,000 | 195,000 | |
Net Interest Income after provision for loan losses | 3,819,000 | 3,822,000 | |
Noninterest income | |||
Service charges on deposit accounts | 195,000 | 154,000 | |
Securities brokerage and annuities | 33,000 | 24,000 | |
Other income, net of gains | 795,000 | 495,000 | |
Total noninterest income | 1,023,000 | 673,000 | |
Noninterest expense | |||
Salaries and employee benefits | 1,721,000 | 1,519,000 | |
Premises and fixed assets expense | 367,000 | 342,000 | |
Other expense | 1,454,000 | 1,193,000 | |
Total noninterest expense | 3,542,000 | 3,054,000 | |
Income before income taxes | 1,300,000 | 1,441,000 | |
Income tax expense | 262,000 | 287,000 | |
Net income | $ 1,038,000 | $ 1,154,000 | |
Basic earnings per share | $ 0.60 | $ 0.67 | |
Diluted earnings per share | $ 0.60 | $ 0.67 | |
Dividends declared per share | $ 0.175 | $ 0.16 | |
Basic weighted average shares outstanding | 1,721,652 | 1,714,416 | |
Diluted weighted average shares outstanding | 1,721,652 | 1,714,416 | |
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SOURCE Bank of Botetourt
