POTOMAC BANCSHARES, INC. REPORTS 2023 SECOND QUARTER RESULTS

CHARLES TOWN, W.Va., Aug. 3, 2023 /PRNewswire/ -- Potomac Bancshares, Inc. (the "Company") (OTC: PTBS), the one bank holding company for Bank of Charles Town (BCT), for the quarter ended June 30, 2023, earned $1.783 million or $0.43 per share compared to $1.605 million or $0.39 per share for the quarter ended June 30, 2022, and $2.042 million in the first quarter of 2023 or $0.49 per share.

Net income was $3.825 million for the first six months of 2023 or $0.92 per share compared to $3.274 million or $0.79 per share for the same period in 2022, a 16.5% increase in per share earnings.

Alice P. Frazier, CEO and President commented, "I am particularly proud of the BCT team's continued efforts on building long-term relationships with our clients that is based upon delivering the needed products coupled with a high level of service.  In addition to solid loan and deposit growth, our wealth division continues to grow revenues."  Frazier added, "As a result of our consistent success in executing on our strategic goals, we were able to raise our dividend this quarter from $0.09 per share to $0.10 per share, an 11.1% increase."  

Frazier continued, "Our efforts for the remainder of the year will be focused on balancing the impact of the rising cost of deposits, liquidity, and overall deposit growth against slowing loan growth, all the while maintaining solid profitability."

Selected Highlights

• Total assets were $794.0 million as of Q2 2023 compared to $740.6 million as of Q2 2022, an increase of $53.4 million or 7.2%.
• Investment securities were $85.4 million as of Q2 2023 compared to $83.1 million as of Q2 2022. All investment securities are classified as available for sale (AFS).
• Loans were $645.1 million as of Q2 2023 compared to $572.2 million as of Q2 2022, an increase of $72.9 million or 12.7%, and up $22.6 million or 3.6% since Q4 2022.
• Total deposits grew to $706.7 million as of Q2 2023, up $43.8 million or 6.6% since Q2 2022, and were up $41.2 million since Q4 2022, or 6.2%.
• Deposits not covered by FDIC insurance, securities, and other pledged collateral were less than 10% of total deposits as of Q2 2023.
• Pre-tax pre-provision net income excluding Payment Protection Program Loan (PPP) fees and PPP interest income was $5.149 million for the first six months of 2023 compared to $3.873 million for the same period in 2022, a 32.9% increase.
• Net interest income was $12.8 million for the first six months of  2023 compared to $11.0 million in the first six months of 2022, a 16.2% increase.
• Tangible capital increased $4.755 million since Q2 2022.
• Return on Assets (ROA) for the first six months of 2023 was 1.00% compared to 0.92% in the same period in 2022.
• Return on Equity (ROE) for the first six months of 2023 was 12.45% compared to 11.07% in the first six months of 2022.

Q2 2023 Compared to Q2 2022 

• Excluding PPP loans, loan growth of $75.2 million was driven by the commercial business line with growth of $59.3 million, the mortgage business line with growth of $12.6 million, and the home equity business line with growth of $4.5 million, offset by a decrease in consumer and other loans of $1.2 million.
• Non-owner-occupied office property loans were $45.0 million or 7.0% of the total loan portfolio as of Q2 2023. The majority of the office property loans are for main street, small offices.
• Securities portfolio duration as of Q2 2023 was 4.08 compared to 4.31 as of Q2 2022.
• Net unrealized losses in the AFS portfolio were $10.6 million as of Q2 2023 and $8.7 million as of Q2 2022.
• Total deposits increased $43.8 million or 6.6% since Q2 2022.The increase is attributable to an $11.5 million increase in non-interest bearing deposits (7.3% growth) and a $32.3 million increase in interest bearing deposits (6.4% growth).
• The Tier 1 leverage capital ratio for BCT was 10.04% as of Q2 2023 compared to 10.18% as of Q2 2022. The tangible equity / tangible assets ratio for the Company improved to 7.86% from 7.79% as of Q2 2022.
• Net interest margin was 3.28% for the quarter compared to 3.33% in Q2 2022.  Excluding PPP income, net interest margin was unchanged at 3.28% for Q2 2023 compared to 3.19% for Q2 2022.
• Net interest income increased $437 thousand for the quarter compared to Q2 2022, or 7.5%.  Excluding PPP income, net interest income increased $733 thousand for the quarter compared to Q2 2022, or 13.2%.
• The earning asset yield increased 80 basis points (bps) compared to Q2 2022 while interest bearing deposit costs increased by 119 bps compared to Q2 2022.
• The allowance for credit losses was 1.05% of total loans outstanding as of Q2 2023 and 1.01% as Q2 2022. 
• A provision for credit losses of $191 thousand was recorded in the current quarter compared to $242 thousand in Q2 2022.
• Non-performing assets as a percentage of total assets including Other Real Estate Owned (OREO) was 0.33% as of Q2 2023 compared to 0.01% as of Q2 2022. The increase is a result of one commercial relationship and currently management does not expect a loss. There was no OREO as of June 30, 2023 or June 30, 2022.
• Non-interest income for the quarter was $1.7 million, an increase of $173 thousand or 11.6% compared to Q2 2022 with increases primarily in Wealth and Investments and secondary market income.  See Table 3 for additional details. 
• Wealth and Investments continues to have a strong year in both adding new accounts and additional fee income related to settling estates.
• Secondary market income was up 73% due to a shift in strategy to sell more loans in the secondary market compared to 2022.
• Non-interest expense was $5.5 million for Q2 2023, an increase of $429 thousand or 8.5% over Q2 2022. See Table 3 for additional details.
• The increase was across numerous categories to support growth initiatives.

Linked Quarter Q2 2023 Compared to Q1 2023 

• Total assets increased slightly during the quarter to $794.0 million, an increase of $1.7 million.
• Loans increased $18.1 million in the quarter, or 2.9%, since Q1 2023. The increase was primarily in commercial loans.
• Securities portfolio duration was 4.08 as of Q2 2023 compared to 4.46 as of Q1 2023.
• Net unrealized losses in the AFS portfolio were $10.6 million as of Q2 2023 and $8.7 million as of Q1 2023.
• Deposits increased $1.9 million compared to Q1 2023.  Excluding brokered CDs, core deposit growth was $10.2 million or 1.5%.
• Non-interest bearing deposits increased $3.5 million, the result of continued commercial account growth.
• Brokered CDs were reduced by $8.2 million during the quarter to $6.1 million.
• Total FHLB borrowings as of both Q2 2023 and Q1 2023 were $6.0 million.
• The Tier 1 leverage capital ratio for BCT was 10.04% compared to 10.25% as of Q1 2023. For the Company, the tangible equity / tangible assets ratio was 7.86% compared to 7.88% as of Q1 2023.
• Net interest margin for the quarter was down 29 bps to 3.28% from 3.57% in Q1 2023.
• The cost of interest bearing deposits increased 54 bps to 1.55% during Q2 2023 compared to Q1 2023 while the yield on total earning assets increased 6 bps to 4.46%.
• Available Liquidity.
• Our Federal Reserve balance was $27.0 million as of Q2 2023 compared to $42.5 million as of Q1 2023.
• Available borrowing lines were $288 million as of Q2 2023 and $294 million as of Q1 2023.
• The allowance for credit losses was 1.05% of total loans outstanding as of Q2 2023 and Q1 2023.
• A provision for credit losses of $191 thousand was recorded in the quarter compared to $31 thousand in Q1 2023. The provision reflects growth in loans in Q2 2023 and an increase in the liability for unfunded commitments.
• Non-performing assets as a percentage of total assets including OREO were 0.33% as of Q2 2023 and -0- as of Q1 2023.
• Non-interest income increased $330 thousand for the quarter compared to Q1 2023, a 24.7% increase. All areas contributed to this increase as previously disclosed. See Table 3 for additional details.
• Non-interest expenses increased $281 thousand in the quarter compared to  Q1 2023, a 5.4% increase.
• The increase was primarily driven by salaries and benefits, advertising and public relations, computer services and communications, and ATM and check card expenses. These were offset by decreases in other professional services and other operating expenses. See Table 3 for additional details.

Dividend Announcement
At our July Board meeting, Potomac Bancshares, Inc. Board of Directors declared a quarterly dividend of $0.10 per share, an 11.1% increase from the previous quarter's dividend. The dividend is for all shareholders of record on August 4, 2023, and will be paid on August 11, 2023.

About the Company

Founded in 1871, BCT-Bank of Charles Town, also known as The Community's Bank, is a wholly owned subsidiary of Potomac Bancshares, Inc. (OTC:PTBS). The Company conducts operations through its main office, an additional eight branch offices, and two loan production offices. BCT's offices are located in Jefferson and Berkeley Counties (WV), Loudoun and Stafford Counties (VA), and Washington County (MD). The Bank provides various banking products and services including free access to over 55,000 ATMs through the Allpoint^® network plus online and mobile banking for individuals, businesses, non-profits, and local municipalities. The Bank also offers commercial lines and term loans, residential and commercial construction, commercial real estate loans and agricultural loans. The Residential Lending division offers secondary market and portfolio mortgage loans, one-time close construction to perm loans, as well as home equity loans and lines of credit.  For over 65 years, BCT Wealth Advisors has provided financial management, investment, trust, and estate services to its clients.  In 2023, American Banker selected BCT as a "Top 200 Community Bank," an annual listing of the best performing banks in the United States with assets under $2 billion. BCT was voted "Best of the Best" winner in the 2022 Journal-News Readers' Choice Awards in three categories: Bank, Loan Services, and Financial Planning.

The Company's shares are quoted on the OTC Pink Sheet marketplace under the symbol "PTBS." For more information about Potomac Bancshares, Inc., and the Bank, please visit our website at www.mybct.bank.

Forward Looking Statements

Certain statements made in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about events or results or otherwise are not statements of historical facts, such as statements about the Company's growth strategy and deployment of capital. Although the Company believes that its expectations with respect to such forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from those expressed or implied by such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise, except as required by applicable law.

CONSOLIDATED FINANCIAL HIGHLIGHTS
POTOMAC BANCSHARES, INC.
Table 1
				Six Months Ended
(Unaudited - dollars in thousands, except per share data)
				June 30, 2023		June 30, 2022
Earnings Performance
	Interest  and dividend income			$16,580		$12,152
	Interest expense			3,781		1,141
	Net interest income			12,799		11,011
	Provision for credit losses			222		242
	Non-interest income			3,004		3,169
	Non-interest expense			10,653		9,736
		Income  Before Income Tax Expense		4,928		4,202
	Income tax expense			1,103		928
		Net Income		$3,825		$3,274
	Return  on average equity			12.45 %		11.07 %
	Return  on average assets			1.00 %		0.92 %
	Net interest margin			3.42 %		3.19 %
				June 30, 2023		June 30, 2022
Balance Sheet Highlights
	Total assets			$794,015		$740,629
	Investment securities			85,350		83,077
	Loans held for sale			2,086		-
	Loans, net of allowance for credit losses of $6,758 in 2023 and  $5,795 in 2022			638,381		566,423
	Deposits			706,660		662,892
	Long term FHLB borrowings			6,000		-
	Subordinated debt, net of issuance costs			9,868		9,812
	Shareholders' equity			$62,441		$57,686
				June 30, 2023		June 30, 2022
Shareholders' Value (per share)
	Earnings  per share, basic			$0.92		$0.79
	Earnings  per share, diluted			0.92		0.79
	Cash dividends declared (per share)			0.18		0.17
	Book value at period end (per share)			$15.07		$13.92
	End of period number of shares outstanding			4,144,561		4,144,561
				June 30, 2023		June 30, 2022
Safety and Soundness
	Tier 1 capital ratio (leverage ratio)*			10.04 %		10.18 %
	Tangible Equity/Tangible Assets			7.86 %		7.79 %
	Non-performing assets as a percentage of
		total assets including OREO		0.33 %		0.01 %
	Allowance for credit losses as a percentage of
		period end loans		1.05 %		1.01 %
	Ratio of net recoveries annualized during the period to
		average loans outstanding during the period		-0.010 %		-0.018 %

* The capital ratio presented is for Bank of Charles Town. When computing capital ratios, the net of unrealized holding gains (losses) on securities available for sale and the unfunded liability for pension and other post-retirement benefits, all computed net of tax, are added back to these shareholders' equity figures.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS
POTOMAC BANCSHARES, INC.
Quarterly Financial Data
TABLE 2
			Three Months Ended
(Unaudited - dollars in thousands, except per share data)
			6/30/2023		3/31/2023		12/31/2022		9/30/2022		6/30/2022
Earnings Performance
	Interest  and dividend income		$8,548		$8,032		$7,789		$7,123		$6,421
	Interest expense		2,272		1,509		987		663		582
	Net interest income		6,276		6,523		6,802		6,460		5,839
	Provision for credit losses		191		31		165		225		242
	Non-interest income		1,667		1,337		1,419		1,495		1,494
	Non-interest expense		5,467		5,186		5,553	**	5,045		5,038
		Income  Before Income Tax Expense	2,285		2,643		2,503		2,685		2,053
	Income tax expense		502		601		550		601		448
		Net Income	$1,783		$2,042		$1,953		$2,084		$1,605
	Return  on average equity		11.41 %		13.52 %		14.74 %		13.97 %		11.00 %
	Return  on average assets		0.91 %		1.09 %		1.13 %		1.10 %		0.89 %
	Net interest margin		3.28 %		3.57 %		3.63 %		3.49 %		3.33 %
			6/30/2023		3/31/2023		12/31/2022		9/30/2022		6/30/2022
Balance Sheet Highlights
	Total assets		$794,015		$792,332		$756,050		$772,546		$740,629
	Investment securities		85,350		88,605		88,743		96,779		83,077
	Loans held for sale		2,086		292		-		255		-
	Loans, net of allowance for credit losses		638,381		620,436		616,382		592,374		566,423
	Deposits		706,660		704,717		665,469		694,060		662,892
	Long term FHLB borrowings		6,000		6,000		-		-		-
	Short term overnight borrowings		-		-		11,720		-		-
	Subordinated debt, net of issuance costs		9,868		9,854		9,839		9,826		9,812
	Shareholders' equity		$62,441		$62,416		$60,460		$57,622		$57,686
			6/30/2023		3/31/2023		12/31/2022		9/30/2022		6/30/2022
Shareholders' Value (per share)
	Earnings  per share, basic		$0.43		$0.49		$0.47		$0.50		$0.39
	Earnings  per share, diluted		0.43		0.49		0.47		0.50		0.39
	Cash dividends declared (per share)		0.09		0.09		0.09		0.09		0.09
	Book value at period end (per share)		$15.07		$15.06		$14.59		$13.90		$13.92
	End of period number of shares outstanding		4,144,561		4,144,561		4,144,561		4,144,561		4,144,561
			6/30/2023		3/31/2023		12/31/2022		9/30/2022		6/30/2022
Safety and Soundness
	Tier 1 capital ratio (leverage ratio)*		10.04 %		10.25 %		10.08 %		9.98 %		10.18 %
	Tangible Equity/Tangible Assets		7.86 %		7.88 %		8.00 %		7.46 %		7.79 %
	Non-performing assets as a percentage of
		total assets including OREO	0.33 %		0.00 %		0.00 %		0.01 %		0.01 %
	Allowance for credit losses as a percentage of
		period end loans	1.05 %		1.05 %		1.00 %		1.01 %		1.01 %
	Ratio of net recoveries annualized during the period to
		average loans outstanding during the period	-0.011 %		-0.009 %		-0.008 %		-0.003 %		-0.033 %

* The capital ratio presented is for Bank of Charles Town. When computing capital ratios, the net of unrealized holding gains (losses) on securities available for sale and the unfunded liability for pension and other post-retirement benefits, all computed net of tax, are added back to these shareholders' equity figures.
** Includes $367k loss on sale of securities.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS
POTOMAC BANCSHARES, INC.
Noninterest Income & Noninterest Expense
Three Months Ended
TABLE 3
(Unaudited - dollars in thousands)
			6/30/2023		3/31/2023		12/31/2022		9/30/2022		6/30/2022
Noninterest Income:
	Wealth and Investments		$425		$390		$344		$370		$379
	Service charges on deposit accounts		266		230		268		267		253
	Secondary market income		232		82		92		180		134
	Interchange fees		523		484		511		504		517
	Other operating income		221		151		204		174		211
		Total Noninterest Income	$1,667		$1,337		$1,419		$1,495		$1,494
Noninterest Expenses:
	Salaries and employee benefits		$3,061		$2,863		$2,823		$2,921		$2,815
	Net occupancy expense of premises		254		259		260		246		251
	Furniture and equipment expenses		369		334		342		324		356
	Advertising and public relations		133		66		76		84		75
	Computer services and communications		454		409		457		401		390
	Other professional services		258		289		312		217		269
	ATM and check card expenses		275		227		222		225		214
	Loss on sale of AFS securities		-		-		367		-		-
	Other operating expenses		663		739		694		627		668
		Total Noninterest Expenses	$5,467		$5,186		$5,553		$5,045		$5,038

 

CONSOLIDATED FINANCIAL HIGHLIGHTS
POTOMAC BANCSHARES, INC.
AVERAGE BALANCE SHEET, INTEREST AND RATES
TABLE 4
	Three Months Ended				Three Months Ended				Three Months Ended
(Unaudited - dollars in thousands)	6/30/2023				3/31/2023				6/30/2022
ASSETS:	Average Balance	Interest Income/ Expense	Average Yields/Rate (annualized)		Average Balance	Interest Income/ Expense	Average Yields/Rate (annualized)		Average Balance	Interest Income/ Expense	Average Yields/Rate (annualized)
Interest Earning Assets:
Loans:
Loans held for sale	$             3,824	$          42	4.41 %		$              559	$           9	6.53 %		$              565	$                  5	3.55 %
Portfolio loans (1)	634,716	7,561	4.78 %		625,192	7,316	4.75 %		557,592	5,936	4.27 %
Available for sale securities (2)	96,567	542	2.25 %		97,790	551	2.29 %		92,425	373	1.62 %
Federal Reserve	31,099	361	4.66 %		14,055	125	3.61 %		50,166	95	0.76 %
Other interest earning assets	2,237	42	7.53 %		2,696	31	4.66 %		2,627	12	1.83 %
Total Interest Earning Assets	768,443	$     8,548	4.46 %		740,292	$    8,032	4.40 %		703,375	$           6,421	3.66 %
Other Assets	17,987				17,836				19,752
Total Assets	$         786,430				$       758,128				$        723,127
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing Deposits	$         533,088	$     2,056	1.55 %		$       506,352	$    1,266	1.01 %		$        487,073	$              433	0.36 %
Federal Funds and repurchase agreements	4,468	8	0.72 %		3,842	7	0.74 %		10,644	11	0.41 %
Subordinated debt	9,859	139	5.65 %		9,845	139	5.73 %		9,804	138	5.65 %
FHLB advances	6,000	69	4.61 %		8,858	97	4.44 %		-	-	0.00 %
Total Interest-Bearing Liabilities	553,415	$     2,272	1.65 %		528,897	$    1,509	1.16 %		507,521	$              582	0.46 %
Non-interest-bearing deposits and other liabilities	170,339				167,982				157,082
Total Liabilities	723,754				696,879				664,603
Stockholders' Equity	62,676				61,249				58,524
Total Liabilities and Stockholders' Equity	$         786,430				$       758,128				$        723,127
Interest Rate Spread			2.81 %				3.24 %				3.20 %
Net Interest Income		$     6,276				$    6,523				$           5,839
Net Interest Margin			3.28 %				3.57 %				3.33 %

(1) Total loan interest income includes amortization of deferred loan fees, net of deferred loan costs.
(2) Average balances exclude unrealized gains/losses.

 

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SOURCE Potomac Bancshares, Inc.