• Bank of the James Announces Second Quarter, First Half 2016 Financial Results and Declaration of Dividend

    Source: Nasdaq GlobeNewswire / 22 Jul 2016 12:00:23   Eastern Standard Time

    LYNCHBURG, Va., July 22, 2016 (GLOBE NEWSWIRE) -- Bank of the James Financial Group, Inc. (the “Company”) (NASDAQ:BOTJ), the parent company of Bank of the James, a full-service commercial and retail bank serving the greater Lynchburg area (Region 2000), and the Charlottesville, Harrisonburg, and Roanoke, Virginia markets, today announced unaudited results for the three months and six months ended June 30, 2016. Net income for the three months ended June 30, 2016 was $1.05 million or $0.24 per diluted share compared with $957,000 or $0.28 per diluted share for the three months ended June 30, 2015. Net income for the six months ended June 30, 2016 was $1.94 million or $0.44 per diluted share compared with $1.88 million or $0.56 per diluted share for the six months ended June 30, 2015. Diluted earnings per share in the second quarter and first half 2016 reflected a 30% increase in the number of weighted average shares outstanding compared with the second quarter and first half 2015, resulting primarily from the issuance of one million new shares of the company's common stock on December 3, 2015. Robert R. Chapman III, President and CEO, stated:  “Our second quarter and first half financial results reflected account growth and new business throughout our expanded franchise, strong production from an expanded banking team, and sound asset quality. We have been judiciously investing in people and operations to drive growth and support productivity, and feel the positive results are reflected in areas such as loan growth and expanded interest income. “The company recently received regulatory approval to begin full-service branch banking in our successful and growing Charlottesville market, and anticipate opening this new home base in Charlottesville for commercial and retail banking operations in October or early November. Our Shenandoah Valley business, based in Harrisonburg, recently celebrated its one-year anniversary and continues to grow. The company’s Roanoke business, with an expanded focus on commercial lending, is performing very well. “Our investment in people include banking leaders in several markets. In our home base of Region 2000, a 22-year banking veteran and Appomattox native, Thomas R. Cobb, recently joined the company as Vice President and Regional Manager. We’re excited to be expanding our presence in Appomattox. Successful community banking depends on a quality team of bankers and the relationships they establish and maintain. Our talented team is proving its value and helping drive growth.” Highlights Interest income from earning assets increased 6% in second quarter 2016 and 7% in first half 2016 from a year earlier, primarily due to commercial and construction loan growth.Net interest income was up 10% for the three months ended June 30, 2016 and 11% for the six months ended June 30, 2016 compared with the prior year’s periods, reflecting interest income growth, disciplined deposit pricing, and elimination of interest expense resulting from the retirement of outstanding debt in January 2016.Noninterest income increased 15% in first half 2016 compared with a year earlier, primarily reflecting consistent growth in gains on sales of purchase mortgage originations, service charges and income from treasury management and corporate credit card services, and gains on the sale of investment securities.Total deposits were a company record $493.54 million, with 7% growth in non-interest bearing deposits and 3% growth in core deposits (interest- and noninterest-bearing demand accounts) from December 31, 2015.Total loans, net of provision for loan losses, were a company record $452.04 million at June 30, 2016 as the company continued to build its portfolio of commercial loans. Loans held for sale at June 30, 2016 were more than double from December 31, 2015 as the company grew residential purchase mortgage originations.Measures of shareholder value included a 5% increase in total stockholders’ equity at June 30, 2016 from December 31, 2015, and a 41% increase from June 30, 2015 (primarily due to the issuance of new shares of common stock in December 2015) and an increase in book value per share to $11.55 compared with $11.01 at December 31, 2015 and $10.62 at June 30, 2015. The Company paid quarterly cash dividends, with a dividend yield of 1.92% based on a recent share price of $12.50.Based on the results achieved in the second quarter, on July 19, 2016 the Company’s board of directors approved a $0.06 per share dividend payable to shareholders of record on September 9, 2016, to be paid on September 23, 2016. Second Quarter 2016 Operational Review Net income of $1.05 million for the three months ended June 30, 2016 was a company record for second quarter earnings. Interest income of $5.29 million in second quarter 2016, up 6% from second quarter 2015, was also a company record. Net interest income in second quarter 2016 was $4.74 million, a 10% increase from $4.32 million in second quarter 2015. Interest expense declined 18% to $550,000 in second quarter 2016 from $667,000 in second quarter 2015. The interest expense reduction primarily reflected the elimination of interest paid on capital notes that were retired in January 2016 following the company’s common equity placement. While the company attracted more interest-bearing time deposits compared with last prior year, it maintained a stable 0.57% average rate paid on interest bearing accounts. J. Todd Scruggs, Executive Vice President and CFO, noted: “Several quarters ago, we noted there wasn’t much opportunity to decrease deposit-related interest expense in this continuing low interest rate environment, which has turned out to be a correct assessment.  Despite the low rate environment, we are pleased that the bank has been able to continue building its deposit base without the need to offer ‘loss leader’ pricing on interest-bearing accounts. We believe the emphasis on maintaining value-added banking relationships with clients has played an important role in supporting deposit growth.” The company's net interest margin was 3.80% and net interest spread was 3.67% for the three months ended June 30, 2016.  Our margins were relatively stable on a consecutive quarter basis with first quarter 2016, and consistent with the margin and spread in second quarter 2015. Average rates earned on loans, including fees, was 4.50% in second quarter 2016 compared with 4.60% in first quarter 2016 and 4.62% in second quarter 2015. The average rate earned on total earning assets in second quarter 2016 was 4.24%. Net interest income increased 10% to $4.74 million for the three months ended June 30, 2016 from $4.32 million for the three months ended June 30, 2015. Increased lending activity resulted in an increase in our provision for loan losses in the second quarter, which totaled $250,000, up from the prior year and slightly higher than in first quarter 2016. Noninterest income from fees, service charges and commissions, including gains from the sale of residential mortgages to the secondary market, and income from the bank's line of treasury management services for commercial customers, was $1.32 million in second quarter 2016 compared with $1.08 million in second quarter 2015. Gains from the company’s sale of securities contributed $163,000 to noninterest income in second quarter 2016. Noninterest expense for the three months ended June 30, 2016 was $4.25 million, an 8% increase compared with $3.94 million for the three months ended June 30, 2015, primarily reflecting costs related to the company's market expansion, including additional compensation and benefits expense, and investment in enhanced operating systems, web-based technology, security, and marketing to build the bank’s branding. First Half Operations Reflect Strong Start to 2016 Net income of $1.94 million for the six months ended June 30, 2016 reflected higher interest income, net interest income and noninterest income compared with first half 2015, with increased provisions for loan losses, noninterest expense and slightly higher income taxes. Interest income of $10.53 million in first half 2016 was up 7% compared with $9.82 million in first half 2015. Net interest income in first half 2016 was $9.43 million, up 11% compared with $8.52 million in first half 2015, reflecting increased interest income and 15% lower interest expense, primarily reflecting interest expense management and the elimination of interest paid on capital notes subsequent to their retirement in January 2016. The company's net interest margin was 3.84% and net interest spread was 3.71% for the six months ended June 30, 2016 compared with 3.80% and 3.66%, respectively, in first half 2015. Average rates earned on loans, including fees, was 4.55% in first half 2016 and average rates earned on total earning assets was 4.29%. Noninterest income was $2.32 million in first half 2016, up 15% compared with $2.03 million in first half 2015. Increased gains from the sale of residential mortgages to the secondary market, other fee income, and gains on sale of securities were the primary drivers of increased noninterest income. Noninterest expense for the six months ended June 30, 2016 was $8.44 million compared with $7.62 million for the six months ended June 30, 2015, reflecting increased salaries and benefits, technology investments, marketing and operating expense increases. Balance Sheet Review Loans held for investment, net of the allowance for loan losses, were $452.04 million at June 30, 2016 compared with $430.45 million at December 31, 2015, and up from $412.43 million at June 30, 2015. Loans held for sale were $4.45 million at June 30, 2016 compared with $1.96 million at December 31, 2015 and $2.97 million at June 30, 2015, primarily reflecting a positive trend in residential mortgage originations and quarterly timing related to closing and selling selected loans (primarily longer-term fixed rate mortgages) to the secondary market. The bank added approximately $6.5 million in commercial loans (primarily C&I) during the second quarter. Commercial loan balances were at June 30, 2016 were $85.91 million, up 29% from $66.29 million at June 30, 2015. “We are very pleased with the continuing gains in commercial and industrial lending in all our markets,” said Michael A. Syrek, Executive Vice President and Senior Loan Officer. “We’ve generated balanced growth from a variety of manufacturing and service sectors. We feel our relationship managers have been very effective in building lending relationships that also incorporate deposits, cash flow and funds management, and investment services.” Bradford Harris, Senior Vice President and Market President - Roanoke, added: “Many of the business owners we meet within our market are responding positively to a bank willing and able to work with them to provide customized financial solutions that help them manage their finances and operations more efficiently. We are also seeing a number of business owners, many of them baby boomers, looking to the future and ownership transitions. A strong relationship with a bank that has the resources to provide financial guidance and advice is proving very important to them.” Total commercial and residential real estate loans at June 30, 2016 were $266.60 million compared with $256.82 million at June 30, 2015, with the modest growth primarily reflecting conservative additions to the bank’s commercial real estate portfolio. Total construction loans, led by 25% year-over-year growth in 1-4 family construction lending, were $23.58 million at June 30, 2016, up 10% from $21.49 million at June 30, 2015. An 8% year-over-year growth in consumer lines of credit was partially driven by the bank’s rewards program to generate home equity borrowing by higher net worth customers with sound credit profiles. Total deposits at June 30, 2016 were $493.54 million compared with $467.61 million at December 31, 2015. The bank continued to attract noninterest bearing deposits, which increased to $97.54 million at June 30, 2016 from $91.33 million at December 31, 2015. Demand and savings deposits increased to $332.98 million at June 30, 2016 compared with $324.19 million at December 31, 2015. Total assets were $545.73 million at June 30, 2016 compared with $527.14 million at December 31, 2015, with growth in deposits primarily funding growth in loans partially offset by a decrease in cash and cash equivalents and a slight decline in securities available for sale, at fair value. The company's asset quality remained strong and stable, with a 0.56% ratio of nonperforming loans to total loans at June 30, 2016. Relatively consistent with prior quarters, the company's allowance for loan losses to total loans was 1.07%. The company's allowance for loan losses as a percent of nonperforming loans increased to 192.40% at June 30, 2016 compared with 137.49% at December 31, 2015. The company grew measures of shareholder value, including tangible book value per share and total stockholders' equity. Total stockholders' equity increased to $50.55 million at June 30, 2016, compared with $48.20 million at December 31, 2015, and up from $35.81 million compared with June 30, 2015. Retained earnings grew to $9.33 million at June 30, 2016 from $7.92 million at December 31, 2015. Return on average assets (ROAA) was 0.79% in second quarter 2016, consistent with the prior year’s second quarter. Return on average equity (ROAE) in second quarter 2016 was 8.54%, up from 7.30% in first quarter 2016, and down from 10.71% in second quarter 2015. The decline in year-over-year ROAE primarily reflected the sharp increase in outstanding shares resulting from the company's common equity issue in December 2015. The bank's regulatory capital ratios continued to exceed accepted regulatory standards for a well-capitalized institution. Conclusion and Outlook “The markets we serve continue to show general economic health, with education, technology development and specific areas in manufacturing making investments in growth and the future,” said Chapman. “As our market presidents have reported, our ability to win business from competing institutions, rather than booming economic growth has driven our results.” He explained the bank’s ability to attract customers from the largest banks, which dominate our area, is driven by superior service, customized financial solutions, experienced relationship managers and “big bank” electronic and Web-based capabilities. The exit of some community and smaller banks, mostly through acquisition, has also left a void that we as a community bank can fill, he added. “As we have expanded into a significantly larger geographical area, we have been pleased although not entirely surprised that, as when we entered the Charlottesville market several years ago, the Bank of the James brand and positive reputation is more widespread than expected. “The company’s first half financial performance was gratifying, thanks mostly to our team of talented bankers. We continue to make new hires throughout our franchise, primarily in commercial banking but selectively in retail and mortgage banking. We are finding opportunities to bring on board experienced bankers, many with extensive relationships with businesses, individuals, and their communities, who want to be part of our mission and share our vision. “With the current economic, housing and business outlook in our markets, we feel the remainder of 2016 should generate growth opportunities for the bank. A sharp focus on client retention and continuing commitment to the highest standards of risk management and credit quality should contribute to ongoing value for our shareholders.” About the Company Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc., serves Lynchburg, Charlottesville, Harrisonburg, Roanoke, and other markets in Virginia. The bank operates 10 full service locations, two limited service branches, two loan production offices, and an investment/insurance services division. Bank of the James Financial Group, Inc. common stock is listed under the symbol "BOTJ" on the NASDAQ Stock Market, LLC. Cautionary Statement Regarding Forward-Looking Statements This press release contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "estimate," "expect," "intend," "anticipate," "plan" and similar expressions and variations thereof identify certain of such forward-looking statements which speak only as of the dates on which they were made. Bank of the James Financial Group, Inc. (the "Company") undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Such factors include, but are not limited to, competition, general economic conditions, potential changes in interest rates, and changes in the value of real estate securing loans made by Bank of the James (the "Bank"), a subsidiary of the Company. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Company's filings with the Securities and Exchange Commission and previously filed by the Bank (as predecessor of the Company) with the Federal Reserve Board. Bank of the James Financial Group, Inc. and Subsidiaries(000's) except share data, ratios and percent dataunaudited Selected Data:ThreemonthsendingJun 30,2016ThreemonthsendingJun 30,2015ChangeYeartodateJun 30,2016YeartodateJun 30,2015ChangeInterest income$  5,293 $  4,991  6.05%$  10,528 $  9,817  7.24%Interest expense 550  667  -17.54% 1,098  1,297  -15.34%Net interest income 4,743  4,324  9.69% 9,430  8,520  10.68%Provision for loan losses 250  57  338.60% 450  157  186.62%Noninterest income 1,316  1,078  22.08% 2,324  2,025  14.77%Noninterest expense 4,254  3,935  8.11% 8,444  7,615  10.89%Income taxes 504  453  11.26% 922  889  3.71%Net income 1,051  957  9.82% 1,938  1,884  2.87%Weighted average common shares outstanding – basic and diluted 4,378,436  3,371,616  29.86% 4,378,436  3,371,616  29.86%Basic earnings per common share$  0.24 $  0.28 $  (0.04)$  0.44 $  0.56 $  (0.12)Fully diluted earnings per common share$  0.24 $  0.28 $  (0.04)$  0.44 $  0.56 $  (0.12) Balance Sheet atperiod end:Jun 30,2016Dec 31,2015ChangeJun 30,2015Dec 31,2014ChangeLoans, net$  452,044 $  430,445  5.02%$412,425 $394,573  4.52%Loans held for sale 4,452  1,964  126.68% 2,972  1,030  188.54%Total securities 37,118  38,515  -3.63% 31,972  26,923  18.75%Total deposits 493,535  467,610  5.54% 445,386  399,497  11.49%Stockholders' equity 50,553  48,196  4.89% 35,806  34,776  2.96%Total assets 545,730  527,143  3.53% 492,836  460,865  6.94%Shares outstanding 4,378,436  4,378,436  -  3,371,616  3,371,616  - Book value per share$  11.55 $  11.01  0.54 $  10.62 $  10.31 $  0.31  Daily averages:ThreemonthsendingJun 30,2016ThreemonthsendingJun 30,2015ChangeYeartodateJun 30,2016YeartodateJun 30,2015ChangeLoans, net$  437,619 $  406,994  7.52%$434,903 $402,134  8.15%Loans held for sale 4,457  2,199  102.68% 3,580  1,884  90.02%Total securities 41,040  30,728  33.56% 40,669  28,897  40.74%Total deposits 483,453  429,617  12.53% 476,486  420,294  13.37%Stockholders' equity 49,351  35,834  37.72% 49,041  35,481  38.22%Interest earning assets 500,942  457,569  9.48% 494,770  452,441  9.36%Interest bearing liabilities 385,670  368,441  4.68% 382,104  365,160  4.64%Total assets 533,648  487,074  9.56% 527,299  481,316  9.55% Financial Ratios:ThreemonthsendingJun 30,2016ThreemonthsendingJun 30,2015ChangeYeartodateJun 30,2016YeartodateJun 30,2015ChangeReturn on average assets 0.79% 0.79% -  0.74% 0.79% (0.05)Return on average equity 8.54% 10.71% (2.17) 7.93% 10.71% (2.78)Net interest margin 3.80% 3.76% 0.04  3.84% 3.80% 0.04 Efficiency ratio 70.21% 72.84% (2.63) 71.84% 72.21% (0.37)Average equity to average assets 9.25% 7.36% 1.89  9.30% 7.37% 1.93  Allowance for loan losses:ThreemonthsendingJun 30,2016ThreemonthsendingJun 30,2015ChangeYeartodateJun 30,2016YeartodateJun 30,2015ChangeBeginning balance$  4,750 $  4,746  0.08%$  4,683 $  4,790  -2.23%Provision for losses 250  57  338.60% 450  157  186.62%Charge-offs (127) (259) -50.97% (378) (460) -17.83%Recoveries 14  42  -66.67% 132  99  33.33%Ending balance 4,887  4,586  6.56% 4,887  4,586  6.56% Nonperforming assets:Jun 30,2016Dec 31,2015ChangeJun 30,2015Dec 31,2014ChangeTotal nonperforming loans$  2,540 $  3,406  -25.43%$  1,908 $  3,505  -45.56%Other real estate owned 2,420  1,965  23.16% 2,065  956  116.00%Total nonperforming assets 4,960  5,371  -7.65% 3,973  4,461  -10.94%Troubled debt restructurings - (performing portion) 639  646  -1.08% 847  376  125.27% Asset quality ratios:Jun 30,2016Dec 31,2015ChangeJun 30,2015Dec 31,2014ChangeNonperforming loans to total loans 0.56% 0.78% (0.22) 0.46% 0.87% (0.41)Allowance for loan losses to total loans 1.07% 1.08% (0.01) 1.10% 1.20% (0.10)Allowance for loan losses to nonperforming loans 192.40% 137.49% 54.91  240.36% 136.66% 103.69                     Bank of the James Financial Group, Inc. and SubsidiariesConsolidated Balance Sheets(dollar amounts in thousands, except per share amounts)  (unaudited)  Assets6/30/16 12/31/15    Cash and due from banks$  20,918  $  15,952 Federal funds sold 3,515   12,703 Total cash and cash equivalents 24,433   28,655     Securities held-to-maturity (fair value of $3,424 in 2016 and $2,649 in 2015) 3,309   2,519 Securities available-for-sale, at fair value 33,809   35,996 Restricted stock, at cost 1,373   1,313 Loans, net of allowance for loan losses of $4,887 in 2016 and $4,683 in 2015 452,044   430,445 Loans held for sale 4,452   1,964 Premises and equipment, net 9,692   9,751 Software, net 174   256 Interest receivable 1,209   1,248 Cash value - bank owned life insurance 9,911   9,781 Other real estate owned 2,420   1,965 Income taxes receivable 1,125   1,096 Deferred tax asset, net 911   1,399 Other assets 868   755 Total assets$  545,730  $  527,143     Liabilities and Stockholders' Equity   Deposits   Noninterest bearing demand 97,544   91,325 NOW, money market and savings 235,437   232,864 Time 160,554   143,421 Total deposits 493,535   467,610     Capital notes -   10,000 Interest payable 87   61 Other liabilities 1,555   1,276 Total liabilities$  495,177  $  478,947     Commitments and contingencies       Stockholders' equity   Preferred stock; authorized 1,000,000 shares; none issued and outstanding as of June 30, 2016 and December 31, 2015 -   - Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 4,378,436 as of June 30, 2016 and December 31, 2015 9,370   9,370 Additional paid-in-capital 31,495   31,495 Accumulated other comprehensive income (loss) 355   (589)Retained earnings 9,333   7,920 Total stockholders' equity$  50,553  $  48,196     Total liabilities and stockholders' equity$  545,730  $  527,143          Bank of the James Financial Group, Inc. and SubsidiariesConsolidated Statements of Income(dollar amounts in thousands, except per share amounts)  For the Three MonthsEnded June 30, For the Six MonthsEnded June 30,Interest Income 2016   2015   2016   2015 Loans$  5,007  $  4,758  $  9,985  $  9,386 Securities       US Government and agency obligations 125   143   264   283 Mortgage backed securities 68   18   120   28 Municipals – taxable 35   22   69   47 Municipals – tax exempt 11   11   21   21 Dividends 27   29   33   34 Other (Corporates) 3   2   9   3 Interest bearing deposits 9   4   15   6 Federal Funds sold 8   4   12   9 Total interest income 5,293   4,991   10,528   9,817         Interest Expense       Deposits       NOW, money market savings 139   123   275   245 Time Deposits 373   362   742   671 Brokered time deposits 38   29   69   52 Federal Funds purchased -   -   4   1 FHLB borrowings -   3   -   28 Capital notes 6% due 4/1/2017 -   150   8   300 Total interest expense 550   667   1,098   1,297         Net interest income 4,743   4,324   9,430   8,520         Provision for loan losses 250   57   450   157         Net interest income after provision for loan losses 4,493   4,267   8,980   8,363         Noninterest income       Gain on sales of loans held for sale, net 681   613   1,172   1,136 Service charges, fees and commissions 362   348   734   666 Increase in cash value of life insurance 65   68   130   136 Other 45   45   60   54 Gain on sale of available-for-sale securities, net 163   4   228   33         Total noninterest income 1,316   1,078   2,324   2,025         Noninterest expenses       Salaries and employee benefits 2,162   2,128   4,399   4,211 Occupancy 305   312   637   601 Equipment 314   304   633   603 Supplies 108   108   227   204 Professional, data processing, and other outside expense 701   560   1,363   1,046 Marketing 201   148   320   224 Credit expense 106   63   189   136 Other real estate expenses 4   32   5   37 FDIC insurance expense 91   79   183   153 Other 262   201   488   400 Total other operating expenses 4,254   3,935   8,444   7,615         Earnings before income taxes 1,555   1,410   2,860   2,773         Earnings tax expense 504   453   922   889         Net Income$  1,051  $  957  $  1,938  $  1,884         Weighted average shares outstanding – basic and diluted 4,378,436   3,371,616   4,378,436   3,371,616 Earnings per common share – basic and diluted$  0.24  $  0.28  $  0.44  $  0.56    CONTACT:  J. Todd Scruggs Executive Vice President and Chief Financial Officer (434) 846-2000 tscruggs@bankofthejames.com []