Bank of Botetourt exceeds budget expectations, posts profitable third quarter financial results

Oct 31 2024 12:30 BST

BUCHANAN, Va. , Oct. 31, 2024 /PRNewswire/ -- Buchanan-based Bank of Botetourt (OTCPK: BORT and BORTP) announced today its unaudited financial results for the three and nine months-ended September 30, 2024. The Bank produced net income amounting to $1,967,000 or $0.94 per basic share in the third quarter. This amount compares to net income of $2,085,000 or $1.01 per share, for the same period last year. For the nine months-ended the Bank produced net income amounting to $5,988,000 or $2.88 per basic share. This amount compares to a net income of $6,372,000 or $3.09 per share, for the same period last year.

At September 30, 2024, select financial information and key highlights include:

Return on average assets of 0.99%
Return on average equity of 10.28%
Book value of $38.21
Total deposit growth of 2.49%
Total asset growth of 3.41%
Total loan growth of 9.65%
Community Bank Leverage Ratio of 10.53%

The Board of Directors voted to pay the 7.00% preferred dividend, which calculates to $0.49 per share on November 8, 2024 to preferred shareholders of record November 1, 2024. Furthermore, the Board of Directors voted to pay the $0.20 per share quarterly dividend, or $0.80 per share annualized, which is payable on November 18, 2024 to common shareholders of record November 11, 2024. CEO & Vice-Chairman, G. Lyn Hayth, III stated "As we celebrate our 125^th anniversary, we remain deeply committed to delivering exceptional shareholder value by consistently producing strong financial results. Surpassing our budget is a testament to the hard work and dedication of our entire team. Together, we honor our legacy while looking forward to even greater success in the future."

Results of Operations

Net income for the three months ended September 30, 2024 was $1,967,000 compared to $2,085,000 for the same period last year, representing an decrease of $118,000 or 5.66%. Basic and diluted earnings per share decreased $0.07 from $1.01 at September 30, 2023 to $0.94 at September 30, 2024. The decrease in net income is primarily due to $1,334,000 more interest expense on deposits and other borrowings, $428,000 more provision for credit losses, $332,000 less investment income, offset by $2,116,000 more interest and fees on loans.

For the three months ended September 30, 2024, the Bank recorded a provision for credit loss expense of $411,000 and a reserve for unfunded commitments of $11,000, which is included in other expenses. This compares to $(17,000) for the same period last year, representing an increase of $428,000. The provision recorded during the quarter mainly reflected allocations necessitated by net loan growth and adjustments to historical loss factors to better represent expectations for future credit losses. The ratio of the allowance for credit losses to total loans and leases outstanding was 1.19% at the end of the quarter, up 1 basis point from the prior quarter and down 11 basis points from one year prior.

At September 30, 2024 net loans increased 9.65%. Interest and fees on loans at September 30, 2024 increased $2,116,000 over the same three month time period of 2023. Interest expense increased by $1,334,000 from $2,687,000 at September 30, 2023 to $4,021,000 at September 30, 2024. The higher interest expense is a result of higher interest rates paid on the balances of interest-bearing deposits than for the same time period of 2023 and the increase of interest on borrowed funds.

Noninterest income increased by $140,000, or 11.56%, to $1,351,000 for the three months ended September 30, 2024 compared to $1,211,000 for same time period of 2023. The increase is attributed to an increase in service charges on deposit accounts, income from title insurance subsidiaries, partially offset by a decrease in gain on sale of mortgage loans.

Noninterest expense increased $308,000 from $4,735,000 at September 30, 2023 to $5,043,000 at September 30, 2024. The increase is primarily related to increases in salary and employee benefits, debit card expense, and core processing expenses.

Income tax expense for the three months ended September 30, 2024 was $453,000 compared to $481,000 one year prior. The decrease in tax expense is due to less revenue for the quarter.

Financial Condition

At September 30, 2024 total assets amounted to $817,971,000, an increase of 3.41% above total assets at December 31, 2023 of $791,015,000, an increase of $26,956,000. Total net loans increased $57,257,000 or 9.65% from $593,256,000 at December 31, 2023 to $650,513,000 at September 30, 2024. Total deposits at December 31, 2023 amounted to $691,584,000, compared to $708,771,000 at September 30, 2024, an increase of 2.49% or $17,187,000.

Stockholders' equity totaled $81,358,000 at September 30, 2024 compared to $74,778,000 at December 31, 2023. The $6,580,000 increase during the period is net income for 2024, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan, a decrease in accumulated other comprehensive loss, partially offset by dividends paid.

Asset Quality

Bank of Botetourt's asset quality remained strong for the third quarter 2024. Provision for credit losses for the third quarter of 2024 was $411,000 compared with $36,000 in the previous quarter and $(17,000) in the same quarter of 2023.

The Bank had no foreclosed properties at December 31, 2023 and September 30, 2024, respectively. Therefore, non-performing assets only consisted of nonaccrual loans. Non-performing assets increased from $121,000 at December 31, 2023 to $247,000 at September 30, 2024. The increase is attributable to the addition of four commercial and industrial loans, offset by the removal of one residential lot, three commercial and industrial loans, and one auto loan. The commercial and industrial additions are collateralized by commercial vehicles along with a UCC blanket lien on inventory, equipment and accounts. The sale of collateral for one residential lot loan and one commercial and industrial loan resulted in the subsequent paydown of the loan with the auto loan balance being charged-off. During the third quarter, two commercial and industrial loans totaling $143,000 were charged-off. There were no new additions to nonaccrual loans during the third quarter. The increase in nonaccrual loans is attributed to the new additions and the charge-off and payment activity of the aforementioned loans.

Net charge-offs during the third quarter of 2024 were $117,000 or 7 basis points annualized on total average loans outstanding. Net charge-offs for the third quarter of 2024 were comprised of charge-offs of $171,000 partially offset by recoveries of $54,000. Compared to the prior quarter, net charge-offs decreased $30,000 or 2 basis points annualized on total average loans outstanding. Compared to December 31, 2023, net charge-offs decreased $124,000 or 8 basis point annualized on total average loans outstanding.

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, 2024, Bank of Botetourt reported its CBLR ratio at 10.53% which meets the required regulatory minimum ratio. This compares to a CBLR ratio of 10.36% at December 31, 2023.

Milestone

On October 1, 2024, Bank of Botetourt, one of Virginia's six oldest banks, commemorated its 125th anniversary at The Hotel Roanoke and Conference Center in Roanoke, Virginia. This milestone celebrated a rich history of service, innovation, and commitment to the communities it serves. Established in 1899 as Bank of Buchanan, the institution has grown to become the largest community bank headquartered in the Roanoke Metropolitan Service. During the celebration, it was announced that Bank of Botetourt was named the #1 bank in Virginia in 2024 by Forbes. Bank of Botetourt was Forbes' top selection in Virginia in its America's Best-In-State Banks 2024. The independent survey of 26,000 U.S. consumers rated financial institutions on Trust, Terms and Conditions, Branch Services, Digital Services, Customer Service, and Financial Advice.

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 Balance Sheets, unconsolidated September 30, 2024 (unaudited) and December 31, 2023

	(unaudited)	(audited)
	September 30,	December 31,
	2024	2023
Assets

Cash and due from banks	$ 15,224,000	$ 10,410,000
Interest-bearing deposits with banks	25,851,000	58,800,000
Federal funds sold	678,000	524,000
Total cash and cash equivalents	41,753,000	69,734,000
Debt securities held to maturity, net of allowance
for credit losses of $18,000 at September 30, 2024 and
at December 31, 2023, respectively	9,982,000	9,932,000
Debt securities available for sale	77,767,000	85,663,000
Loans, net of allowance for credit losses of $7,821,000 at
September 30, 2024 and $7,542,000 at December 31, 2023	650,513,000	593,256,000
Loans held for sale	649,000	-
Premises and fixed assets, net	15,166,000	14,652,000
Other real estate owned		-
Investment in unconsolidated subsidiaries	3,183,000	3,000,000
Other assets	18,958,000	14,778,000
Total assets	$ 817,971,000	$ 791,015,000

Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits	$ 166,878,000	$ 161,464,000
Interest-bearing deposits	541,893,000	530,120,000
Total deposits	708,771,000	691,584,000

Other borrowings	19,000,000	19,000,000
Other liabilities	8,842,000	5,653,000
Total liabilities	736,613,000	716,237,000

Commitments and contingencies	-	-

Stockholders' Equity
Preferred stock, $1.00 par value; 1,000,000 shares
authorized; 243,659 issued and outstanding
at September 30, 2024 and at December 31, 2023, respectively	244,000	244,000
Common stock, $1.50 par value; 5,000,000 shares
authorized; 1,958,794 and 1,951,372 issued and
outstanding at September 30, 2024 and at December 31, 2023,
respectively	2,938,000	2,927,000
Additional paid-in capital	24,138,000	23,937,000
Retained earnings	57,834,000	53,377,000
Accumulated other comprehensive loss	(3,796,000)	(5,707,000)
Total stockholders' equity	81,358,000	74,778,000
Total liabilities and stockholders' equity	$ 817,971,000	$ 791,015,000

Bank of Botetourt Income Statement For the nine months ended and three months ended September 30, 2024 and 2023 (Unaudited)

	Nine Months Ended September 30,		Three Months Ended September 30,
	Nine Months Ended September 30,		Three Months Ended September 30,
	2024	2023	2024	2023
Interest income
Loans and fees on loans	$ 27,369,000	$ 20,980,000	$ 9,613,000	$ 7,497,000
Securities:
U.S.Treasury and Government Agencies	582,000	653,000	188,000	214,000
Mortgage-backed securities	195,000	235,000	62,000	75,000
All other securities	650,000	628,000	216,000	200,000
Due from depository institutions	1,779,000	2,309,000	458,000	769,000
Federal funds sold	16,000	14,000	7,000	5,000
Total Interest income	30,591,000	24,819,000	10,544,000	8,760,000

Interest expense
Deposits	10,809,000	5,845,000	3,769,000	2,495,000
Other borrowings	743,000	235,000	252,000	192,000
Total Interest expense	11,552,000	6,080,000	4,021,000	2,687,000
Net Interest Income	19,039,000	18,739,000	6,523,000	6,073,000

Provision for credit losses	513,000	651,000	411,000	(17,000)
Net Interest Income after credit loss expense	18,526,000	18,088,000	6,112,000	6,090,000

Noninterest income
Service charges on deposit accounts	963,000	790,000	351,000	265,000
Securities brokerage and annuities	297,000	176,000	111,000	52,000
Other income, net of gains	2,607,000	2,960,000	889,000	894,000
Total noninterest income	3,867,000	3,926,000	1,351,000	1,211,000

Noninterest expense
Salaries and employee benefits	6,590,000	6,299,000	2,213,000	2,149,000
Premises and fixed assets expense	1,469,000	1,365,000	499,000	436,000
Other expense	6,854,000	6,400,000	2,331,000	2,150,000
Total noninterest expense	14,913,000	14,064,000	5,043,000	4,735,000
Income before income taxes	7,480,000	7,950,000	2,420,000	2,566,000

Income tax expense	1,492,000	1,578,000	453,000	481,000
Net income	5,988,000	6,372,000	1,967,000	2,085,000
Preferred stock dividends	358,000	358,000	119,000	120,000
Net income available to common shareholders	$ 5,630,000	$ 6,014,000	$ 1,848,000	$ 1,965,000

Basic earnings per share	$ 2.88	$ 3.09	$ 0.94	$ 1.01
Diluted earnings per share	$ 2.88	$ 3.09	$ 0.94	$ 1.01
Dividends declared per share	$ 0.60	$ 0.578	$ 0.20	$ 0.1925
Basic weighted average shares outstanding	1,955,299	1,945,359	1,957,708	1,947,887
Diluted weighted average shares outstanding	1,955,299	1,945,359	1,957,708	1,947,887

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Bank of Botetourt exceeds budget expectations, posts profitable third quarter financial results