Bank of the James Reports Year-Over-Year Earnings Growth, Asset Quality Improvement in Second Quarter and First Half 2012 Financial Results

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LYNCHBURG, VA--(Marketwire -07/26/12)- Bank of the James Financial Group, Inc. (BOTJ)

Financial Highlights

  • Net income in second quarter 2012 increased 52% to $486,000 or $0.15 per diluted share compared with $319,000 or $0.10 per diluted share in second quarter 2011.
  • First half 2012 net income increased to $846,000 or $0.25 per diluted share compared with $754,000 or $0.23 per diluted share in the first half 2011.
  • Total assets were $433.20 million at June 30, 2012 compared with $429.63 million at June 30, 2011.
  • In second quarter 2012, the provision for loan losses declined 53% to $425,000 compared with $906,000 in second quarter 2011, reflecting improving loan quality since the beginning of 2012.
  • The ratio of allowance for loan losses to nonperforming loans improved to 79.19% at June 30, 2012, compared with 61.42% at March 31, 2012 and 40.67% at June 30, 2011, reflecting a continued focus on asset quality and increased coverage for problem loans.
  • The company's nonperforming assets (NPAs) as a percent of total assets declined sharply to 2.18% at June 30, 2012, compared with 3.19% at December 31, 2011 and 3.84% at June 30, 2011.
  • Since June 30, 2011, the Bank's "Texas Ratio" ((NPAs + TDR):(Capital + ALL)) has declined by more than 50% to 24.5% at June 30, 2012 compared with 53.5% at June 30, 2011.
  • In first half 2012, interest expense declined 30% compared with the prior year's first half, reflecting strategic interest rate management which resulted in net interest margin improvement despite a flat interest-rate environment and significant pressure on margins.
  • Book value per share increased to $8.47 per share in second quarter 2012 compared with $8.02 in fourth quarter 2011 and $8.12 in second quarter 2011.

Bank of the James Financial Group, Inc. (BOTJ), the parent company of Bank of the James, a full-service commercial and retail bank, today announced unaudited results for the quarter and six months ended June 30, 2012.

"Our financial results and earnings growth reflect several key initiatives that have enabled us to operate more efficiently and remove problematic loans from our balance sheet, which has resulted in an increased bottom line," said Robert R. Chapman III, President and CEO. "Compared with a year ago, we have seen significant improvement in asset quality and a meaningful slowing of nonaccrual loans. We believe this is an encouraging sign. We successfully identified and reserved for many troubled loans and our current portfolio of loans is showing significant signs of improvement.

"Our year-over-year reduction of interest expense and our ability to grow our net interest margin to 3.95% in the first half of 2012 from a 3.84% average in the first half of 2011, despite the low-rate environment and considerable pressure on margins, enabled us to make the most of the interest income we generated. We have kept noninterest expense relatively stable year-over-year. Even as we managed costs, we never backed off investing in technology and services to remain highly competitive and provide a more diverse range of capabilities to our retail and commercial customers.

"We believe the greatest challenges with asset quality management are behind us. This should allow us to devote more time and attention to grow banking relationships and capture a greater share of lending opportunities in Region 2000. We have definitely seen an uptick in residential mortgage lending, including home purchase activity in addition to refinancing. Also, commercial lending inquiries have increased to levels that we have not seen in several years. We're excited that after several years of limited growth in our loan portfolio that we once again believe that the opportunity for growth is returning."

Financial Highlights and Overview

Net interest income before provision for loan losses was $3.84 million in second quarter 2012 compared with $3.81 million in second quarter 2011. In first half 2012, net interest income before provision for loan losses was $7.70 million compared with $7.51 million in first half 2011.

"By offering competitive rates and developing loyal customer relationships, we have been able to manage interest expense while maintaining a high level of customer retention," noted J. Todd Scruggs, CFO. "We strongly believe the goodwill we have developed in our community and our reputation for exceptional service, support and convenience has played a key role in generating customer loyalty."

Second quarter 2012 noninterest income, which includes fees from mortgage origination and gains on sales from securities, rose 11% to $843,000 compared with $758,000 in second quarter 2011. In first half 2012, noninterest income was $1.51 million, up 6% compared with $1.43 million in first half 2011.

Total loans, net of allowance for loan loss (ALL), were $319.2 million at June 30, 2012 compared with $312.2 million at March 31, 2012, $318.8 million at December 31, 2011 and $319.4 million at June 30, 2011. Scruggs noted this overall quarter-to-quarter stability in the portfolio was accomplished despite significant principal reductions in 2011 and resulted in large part from the Bank's ability to generate sufficient new loans.

Total deposits at June 30, 2012 were $384.59 million, compared with $376.55 million at June 30, 2011 and $374.23 million at December 31, 2011.

The company's balance sheet reflected reduction in nonperforming assets and improved asset quality. The Bank's focus on liquidating collateral related to troubled loans as promptly as possible along with decreasing foreclosure volume, contributed to the decrease in other owned real estate (OREO) at June 30, 2012 of $2.26 million compared with $4.28 million at June 30, 2011. This is a significant decrease from the historical high OREO balance of $5.22 million at September 30, 2011.

As previously noted, the Bank's "Texas Ratio" has declined steadily and sharply since June 30, 2011, with the improvement exceeding the company's goal for first half 2012. As a ratio to both loans and assets, total nonperforming assets declined significantly. NPAs to total loans were 2.91% at June 30, 2012 compared with 5.09% at June 30, 2011. Chapman explained that while many nonperforming loans were removed from the portfolio in 2011, the ratio of NPAs to total loans and total assets has dropped in each of the first two quarters of 2012.

"We are pleased with the positive monthly trends in loan quality this year," said Chapman. "These improvements in asset quality have strengthened our capital position and have given us greater freedom to concentrate on growing loans and assets."

At June 30, 2012, the bank's tier 1 leverage ratio was 8.04%, tier 1 risk-based capital ratio was 10.73%, and total risk-based capital was 11.98%, all ratios exceeding regulatory standards for a well-capitalized institution.

About the Company

Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc., serves the greater Lynchburg, Virginia MSA, often referred to as Region 2000, which was ranked by Forbes magazine among the top 50 places in the United States for business and careers. The Bank operates nine full service locations and one limited service location as well as a mortgage origination office in Forest, Virginia and an investment services division in downtown Lynchburg. The company celebrates its 13th anniversary this year. As of January 25, 2012, Bank of the James Financial Group, Inc. common stock is listed on the NASDAQ Stock Market, LLC under the symbol "BOTJ."

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 (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 Bank of the James Financial Group, Inc. 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 ratios and percent data
Unaudited

Three Three Year Year
months months to to
ending ending date date
Jun 30, Jun 30, Jun 30, Jun 30,
Selected Data: 2012 2011 Change 2012 2011 Change
---------- ---------- ------- ---------- ---------- -------
Interest
income $ 4,645 $ 4,896 -5.13% $ 9,331 $ 9,838 -5.15%
---------- ---------- ------- ---------- ---------- -------
Interest
expense 809 1,090 -25.78% 1,629 2,325 -29.94%
---------- ---------- ------- ---------- ---------- -------
Net interest
income 3,836 3,806 0.79% 7,702 7,513 2.52%
---------- ---------- ------- ---------- ---------- -------
Provision for
loan losses 425 906 -53.09% 1,175 1,485 -20.88%
---------- ---------- ------- ---------- ---------- -------
Noninterest
income 843 758 11.21% 1,514 1,430 5.87%
---------- ---------- ------- ---------- ---------- -------
Noninterest
expense 3,559 3,204 11.08% 6,843 6,374 7.36%
---------- ---------- ------- ---------- ---------- -------
Income taxes 209 135 54.81% 352 330 6.67%
---------- ---------- ------- ---------- ---------- -------
Net income 486 319 52.35% 846 754 12.20%
---------- ---------- ------- ---------- ---------- -------
Weighted
average
shares
Outstanding 3,342,415 3,323,743 0.56% 3,342,415 3,323,743 0.56%
---------- ---------- ------- ---------- ---------- -------
Basic net
income per
share $ 0.15 $ 0.10 $ 0.05 $ 0.25 $ 0.23 $ 0.02
---------- ---------- ------- ---------- ---------- -------
Fully diluted
net income
per share $ 0.15 $ 0.10 $ 0.05 $ 0.25 $ 0.23 $ 0.02
---------- ---------- ------- ---------- ---------- -------



 
Balance Sheet
at Jun 30, Dec 31, Jun 30, Dec 31,
period end: 2012 2011 Change 2011 2010 Change
---------- ---------- ------ ---------- ---------- -------
Loans, net $ 319,216 $ 318,754 0.14% $ 319,386 $ 320,715 -0.41%
---------- ---------- ------ ---------- ---------- -------
Loans held for
sale 1,164 434 168.20% 215 - N/A
---------- ---------- ------ ---------- ---------- -------
Total
securities 58,761 56,471 4.06% 58,367 52,883 10.37%
---------- ---------- ------ ---------- ---------- -------
Total deposits 384,589 374,234 2.77% 376,551 368,390 2.22%
---------- ---------- ------ ---------- ---------- -------
Stockholders'
equity 28,299 26,805 5.57% 26,973 25,495 5.80%
---------- ---------- ------ ---------- ---------- -------
Total assets 433,204 427,436 1.35% 429,625 418,928 2.55%
---------- ---------- ------ ---------- ---------- -------
Shares
outstanding 3,342,415 3,342,415 - 3,323,743 3,323,743 -
---------- ---------- ------ ---------- ---------- -------
Book value per
share $ 8.47 $ 8.02 0.45 $ 8.12 $ 7.67 $ 0.44
---------- ---------- ------ ---------- ---------- -------



 
Three Three Year Year
months months to to
ending ending date date
Jun 30, Jun 30, Jun 30, Jun 30,
Daily averages: 2012 2011 Change 2012 2011 Change
-------- -------- ------ -------- -------- ------
Loans, net $314,687 $320,135 -1.70% $315,470 $320,384 -1.53%
-------- -------- ------ -------- -------- ------
Loans held for sale 878 202 334.65% 825 102 708.82%
-------- -------- ------ -------- -------- ------
Total securities 59,741 56,951 4.90% 60,379 56,422 7.01%
-------- -------- ------ -------- -------- ------
Total deposits 384,795 377,053 2.05% 380,115 374,875 1.40%
-------- -------- ------ -------- -------- ------
Stockholders' equity 27,166 26,590 2.17% 26,997 26,377 2.35%
-------- -------- ------ -------- -------- ------
Interest earning assets 393,649 396,939 -0.83% 373,420 394,636 -5.38%
-------- -------- ------ -------- -------- ------
Interest bearing
liabilities 346,095 353,011 -1.96% 345,162 351,430 -1.78%
-------- -------- ------ -------- -------- ------
Total assets 432,247 429,314 0.68% 429,177 426,526 0.62%
-------- -------- ------ -------- -------- ------



 
Three Three Year Year
months months to to
ending ending date date
Jun 30, Jun 30, Jun 30, Jun 30,
Financial Ratios: 2012 2011 Change 2012 2011 Change
------- -------- ------ ------- ------- ------
Return on average assets 0.45% 0.30% 0.15 0.40% 0.36% 0.04
------- -------- ------ ------- ------- ------
Return on average equity 7.18% 4.81% 2.37 6.28% 5.76% 0.52
------- -------- ------ ------- ------- ------
Net interest margin 3.91% 3.85% 0.06 3.95% 3.84% 0.11
------- -------- ------ ------- ------- ------
Efficiency ratio 76.06% 70.20% 5.86 74.25% 71.27% 2.98
------- -------- ------ ------- ------- ------
Average equity to average
assets 6.28% 6.19% 0.09 6.29% 6.18% 0.11
------- -------- ------ ------- ------- ------



 
Three Three Year Year
months months to to
ending ending date date
Allowance for loan Jun 30, Jun 30, Jun 30, Jun 30,
losses: 2012 2011 Change 2012 2011 Change
-------- -------- ------ -------- -------- ------
Beginning balance $ 6,006 $ 5,318 12.94% $ 5,612 $ 5,467 2.65%
-------- -------- ------ -------- -------- ------
Provision for losses 425 906 -53.09% 1,175 1,485 -20.88%
-------- -------- ------ -------- -------- ------
Charge-offs (847) (1,266) -33.10% (1,231) (2,005) -38.60%
-------- -------- ------ -------- -------- ------
Recoveries 109 12 808.33% 137 23 495.65%
-------- -------- ------ -------- -------- ------
Ending balance 5,693 4,970 14.55% 5,693 4,970 14.55%
-------- -------- ------ -------- -------- ------



 
Jun 30, Dec 31, Jun 30, Dec 31,
Nonperforming assets: 2012 2011 Change 2011 2010 Change
-------- -------- ------ -------- -------- ------
Total nonperforming
loans $ 7,189 $ 10,376 -30.72% $ 12,222 $ 8,366 46.09%
-------- -------- ------ -------- -------- ------
Other real estate owned 2,263 3,253 -30.43% 4,281 3,440 24.45%
-------- -------- ------ -------- -------- ------
Total nonperforming
assets 9,452 13,629 -30.65% 16,503 11,806 39.78%
-------- -------- ------ -------- -------- ------
Troubled debt
restructurings -
(performing portion) 187 783 -76.12% 4,217 4,987 -15.44%
-------- -------- ------ -------- -------- ------



 
Jun 30, Dec 31, Jun 30, Dec 31,
Asset quality ratios: 2012 2011 Change 2011 2010 Change
------- ------- ------ ------- ------- ------
Nonperforming loans to
total loans 2.21% 3.20% (0.99) 3.77% 2.56% 1.20
------- ------- ------ ------- ------- ------
Allowance for loan
losses to total loans 1.75% 1.73% 0.02 1.53% 1.68% (0.14)
------- ------- ------ ------- ------- ------
Allowance for loan
losses to nonperforming
loans 79.19% 54.09% 25.10 40.66% 65.35% (24.68)
------- ------- ------ ------- ------- ------

Contact:

J. Todd Scruggs
Executive Vice President and CFO
(434) 846-2000
tscruggs@bankofthejames.com

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