Bank of Botetourt posts profitable third quarter financial results

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Bank of Botetourt (OTCPK: BORT) reported strong financial results for Q3 ended September 30, 2022, with net income of $2.3 million, up 27.1% from $1.8 million in Q3 2021, translating to earnings per share (EPS) of $1.19. Year-to-date net income reached $5.6 million, an increase over last year's $5.4 million. Key metrics include a return on assets of 1.06%, and total asset growth of 6.5% to $707 million. The bank also announced a dividend of $0.185 per share. Noninterest income rose 11.5%, while noninterest expenses increased mainly due to higher salaries.

Positive

• Net income increased 27.1% YoY to $2.3 million in Q3 2022.
• Total asset growth of 6.5% YoY, reaching $707 million.
• Return on average equity stood at 12.79%.
• Noninterest income rose 11.5% to $1.26 million in Q3 2022.

Negative

• Provision for loan losses rose to $495,000 from $195,000 YoY.
• Noninterest expenses increased by $421,000 due to higher salaries.

BUCHANAN, Va., Oct. 26, 2022 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT) announced today its unaudited financial results for the three and nine months-end September 30, 2022. The Bank produced net income amounting to $2,308,000 or $1.19 per basic share in the third quarter. This amount compares to a net income of $1,816,000 or $0.94 per share, for the same period last year.  For the nine months-ended the Bank produced net income amounting to $5,614,000 or $2.91 per basic share. This amount compares to a net income of $5,378,000 or $2.81 per share, for the same period last year. 

At September 30, 2022, select financial information and key highlights include:

• Return on average assets of 1.06%
• Return on average equity of 12.79%
• Book value of $30.02
• Total deposit growth of 7.83%
• Total asset growth of 6.51%
• Total loan growth of 6.11%
• Community Bank Leverage Ratio of 9.13%
• Strong liquidity position
• Net interest margin of 3.63% at September 30, 2022 compared to 3.02% one year prior.

As a result of the solid financial performance, the Board of Directors voted to pay the $0.185 per share quarterly dividend, or $0.74 per share annualized which is payable on November 18, 2022 to shareholders of record November 11, 2022. President & CEO, G. Lyn Hayth, III stated "We are gratified by the performance of our Bank. We have been able to successfully meet business objectives that we established for 2022, especially increasing shareholder value.  As we celebrate our 123rd year in community banking, it is rewarding to live out our mission of being Customer Driven and Community Committed."

Results of Operations

Net income for the three months ended September 30, 2022 was $2,308,000 compared to $1,816,000 for the same period last year, representing an increase of $492,000 or 27.1%.  Basic and diluted earnings per share increased $0.25 from $0.94 at September 30, 2021 to $1.19 at September 30, 2022.  The increase in net income is primarily due to $1,009,000 increase in investment income, $111,000 increase in loans and fees on loans, partially offset by a $300,000 increase in the provision for loan loss.

The provision for loan losses was $495,000 for the three months ended September 30, 2022 as compared to $195,000 provision for the three months ended September 30, 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 $353,000 at September 30, 2022 as compared to $8,000 at September 30, 2021.

At September 30, 2022 net loans increased 6.1%. Interest and fees on loans at September 30, 2022 increased $111,000 over the same three month time period of 2021 primarily due to increased loan growth, partially offset by a $407,000 decrease in PPP loan servicing fees. Interest expense decreased by $93,000 from $596,000 at September 30, 2021 to $503,000 at September 30, 2022.  The lower interest expense is a result of lower interest rates paid on the balances of interest-bearing deposits than for the same time period of 2021.

Noninterest income increased by $130,000, or 11.5%, to $1,264,000 for the three months ended September 30, 2022 compared to $1,134,000 for same time period of 2021.  The increase is attributable primarily to $62,000 increase in service charges on deposit accounts and $90,000 increase in fees and commissions from wealth management division.

Noninterest expense increased $421,000 from $3,850,000 at September 30, 2021 to $4,271,000 at September 30, 2022.  The increase is primarily related to an increase in salary and employee benefits expense for the quarter. The majority of the increase in salaries expense is related to the recognized deferred costs of PPP loans.

Income tax expense for the three months ended September 30, 2022 was $541,000 compared to $411,000 one year prior. The increase in tax expense is due to higher revenue for the quarter.

Financial Condition

At September 30, 2022 total assets amounted to $706,952,000, an increase of 6.5% above total assets at December 31, 2021 of $663,766,000, an increase of $43,186,000. Total net loans increased $26,006,000 or 6.1% from $425,902,000 at December 31, 2021 to $451,908,000 at September 30, 2022. Total deposits at December 31, 2021 amounted to $598,659,000, compared to $645,544,000 at September 30, 2022, an increase of 7.8% or $46,885,000. The increase in deposits is attributable to organic growth.

Stockholders' equity totaled $57,941,000 at September 30, 2022 compared to $59,137,000 at December 31, 2021. The $1,196,000 decrease during the period is due to an increase in accumulated other comprehensive loss offset by net income for 2022 and net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan.

Non-Performing Assets

Non-performing assets, which consist of nonaccrual loans and foreclosed properties decreased by $497,000 from $1,757,000 at December 31, 2021 to $1,260,000 at September 30, 2022.  The decrease is attributable to charge-off of a commercial real estate loan,  the removal of a residential construction loan from nonaccrual status back to accrual status, and the addition of one commercial loan and one revolving line of credit approximating $80,000.  No foreclosed properties remained at September 30, 2022. Nonaccrual loans were $1,260,000 at September 30, 2022 compared to $1,730,000 at December 31, 2021. 

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 $2,038,000 September 30, 2022 compared to $2,915,000 at December 31, 2021.  Loss exposure on impaired loans decreased from $204,000 at December 31, 2021 to $85,000 at September 30, 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 $79,000 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 September 30, 2022, troubled debt restructurings ("TDRs") totaled $1.2 million 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 September 30, 2022 Bank of Botetourt reported its CBLR ratio at 9.13% which meets the required regulatory minimum ratio.  This compares to a CBLR ratio of 9.14% on December 31, 2021. 

In September, the Board of Directors approved a Series A Preferred Stock Rights Offering commencing on October 4, 2022.  The opportunity offers rights to existing shareholders to purchase up to a maximum of 325,000 shares of its noncumulative, convertible, perpetual preferred stock at a price of $28.00 per share.  The subscription period expires November 4, 2022.  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 $44,200,000, with all receiving forgiveness from the SBA through September 30, 2022. As a result, no PPP loans remain on the balance sheet at the end of the third quarter. No deferred PPP loan servicing fees remain at September 30, 2022. The Bank recognized $460,000 in 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
Income Statement
For the nine months ended and three months ended September 30, 2022 and 2021 (Unaudited)
	Nine Months Ended September 30,				Three Months Ended September 30,
	2022		2021		2022		2021
Interest income
Loans and fees on loans	$      16,003,000		$      16,530,000		$        5,618,000		$        5,507,000
Investment securities:
U.S. Treasury and Government Agencies	537,000		99,000		226,000		56,000
Mortgage-backed securities	104,000		-		83,000		-
All other securities	548,000		266,000		195,000		118,000
Due from depository institutions	1,037,000		110,000		731,000		53,000
Federal Funds Sold	2,000		-		1,000		-
Total Interest income	18,231,000		17,005,000		6,854,000		5,734,000
Interest expense
Deposits	1,390,000		2,078,000		503,000		577,000
Other borrowings	-		55,000		-		19,000
Total Interest expense	1,390,000		2,133,000		503,000		596,000
Net Interest Income	16,841,000		14,872,000		6,351,000		5,138,000
Provision for loan losses	925,000		195,000		495,000		195,000
Net Interest Income after provision for loan losses	15,916,000		14,677,000		5,856,000		4,943,000
Noninterest income
Service charges on deposit accounts	679,000		487,000		249,000		187,000
Securities brokerage and annuities	205,000		116,000		51,000		30,000
Other income, net of gains	2,833,000		2,483,000		964,000		917,000
Total noninterest income	3,717,000		3,086,000		1,264,000		1,134,000
Noninterest expense
Salaries and employee benefits	5,758,000		5,021,000		1,927,000		1,829,000
Premises and fixed assets expense	1,321,000		1,145,000		451,000		369,000
Other expense	5,547,000		4,883,000		1,893,000		1,652,000
Total noninterest expense	12,626,000		11,049,000		4,271,000		3,850,000
Income before income taxes	7,007,000		6,714,000		2,849,000		2,227,000
Income tax expense	1,393,000		1,336,000		541,000		411,000
Net income	$        5,614,000		$        5,378,000		$        2,308,000		$        1,816,000
Basic earnings per share	$                   2.91		$                   2.81		$                   1.19		$                   0.94
Diluted earnings per share	$                   2.91		$                   2.81		$                   1.19		$                   0.94
Dividends declared per share	$                0.555		$                   0.54		$                0.185		$                   0.18
Basic weighted average shares outstanding	1,930,104		1,910,799		1,935,826		1,916,864
Diluted weighted average shares outstanding	1,930,104		1,910,799		1,935,826		1,916,864

 

Bank of Botetourt
Balance Sheets, unconsolidated
September 30, 2022(unaudited) and December 31, 2021
		(unaudited)		(audited)
		September 30,		December 31,
		2022		2021
Assets
Cash and Due from banks		$       8,443,000		$       6,984,000
Interest-bearing deposits with banks		112,671,000		135,944,000
Federal funds sold		291,000		445,000
Total cash and cash equivalents		121,405,000		143,373,000
Investment securities available for sale		93,922,000		57,529,000
Investment securities held to maturity		9,950,000		8,950,000
Loans, net of allowance for loan losses of $6,246,000 at		451,908,000		425,902,000
September 30, 2022 and $5,674,000 at December 31, 2021
Loans held for sale		382,000		409,000
Premises and fixed assets, net		14,103,000		14,369,000
Other real estate owned		-		27,000
Investment in unconsolidated subsidiaries		2,740,000		2,418,000
Other assets		12,542,000		10,789,000
Total assets		$   706,952,000		$  663,766,000
Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits		$   183,491,000		$    85,623,000
Interest-bearing deposits		462,053,000		513,036,000
Total deposits		645,544,000		598,659,000
Other borrowings		-		3,000,000
Other liabilities		3,467,000		2,970,000
Total liabilities		649,011,000		604,629,000
Commitments and contingencies		-		-
Stockholders' Equity
Common stock, $1.50 par value; 2,500,000 shares
authorized; 1,938,050 and 1,921,995 issued and
outstanding at September 30, 2022 and at December 31, 2021
respectively		2,907,000		2,883,000
Additional paid-in capital		17,184,000		16,779,000
Retained earnings		45,849,000		41,304,000
Accumulated other comprehensive loss		(7,999,000)		(1,829,000)
Total stockholders' equity		57,941,000		59,137,000
Total liabilities and stockholders' equity		$   706,952,000		$  663,766,000

 

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SOURCE Bank of Botetourt

FAQ

What were Bank of Botetourt's earnings for Q3 2022?

Bank of Botetourt reported net income of $2.3 million in Q3 2022, or $1.19 per share.

How did Bank of Botetourt's revenue change in the third quarter?

The revenue increased, primarily driven by a $1 million rise in investment income.

What is the dividend payout for Bank of Botetourt in November 2022?

Bank of Botetourt declared a quarterly dividend of $0.185 per share, payable on November 18, 2022.

What growth did Bank of Botetourt see in its total deposits?

Total deposits grew by 7.8% YoY, reaching $645.5 million by September 30, 2022.

What is the stock symbol for Bank of Botetourt?

The stock symbol for Bank of Botetourt is BORT.