BUCHANAN, Va., Oct. 29, 2020 /PRNewswire/ -- Bank of Botetourt (OTCPK: BORT) announced today its unaudited financial results for the quarter-ended September 30, 2020. The Bank produced net income amounting to $1,095,000 or $0.64 per basic share in the third quarter. This amount compares to a net income of $1,483,000 or $0.86 per share, for the same period last year. For the nine months-ended the Bank produced net income amounting to $3,305,000 or $1.92 per basic share. This amount compares to a net income of $3,741,000 or $2.18 per share, for the same period last year.
At September 30, 2020, select financial highlights include:
Return on average assets of 0.80%
Return on average equity of 8.53%
Book value of $30.75
$1.60 million year-to-date provision for loan losses
Third quarter loan extension, skip-a-payment, and modification requests slowed to 21 loans with balances of $1.0 million bringing the year-to-date total to 251 loans with balances of $57.1 million
Community Bank Leverage Ratio ("CBLR") of 9.25%
As a result of the solid financial performance, the Board of Directors voted to pay the $0.175 per share quarterly dividend, or $0.70 per share annualized which is payable on November 19, 2020 to shareholders of record November 12, 2020. President & CEO, G. Lyn Hayth, III stated "Our year-to-date performance has surpassed our own budget expectations. We remain cautiously optimistic during the health pandemic. Bank of Botetourt has navigated this unprecedented time with a sense of resilience and customer-focus."
Results of Operations
Net income for the three months ended September 30, 2020 was $1,095,000 compared to $1,483,000 for the same period last year, representing a decrease of $388,000 or 26.2%. Basic and diluted earnings per share decreased $0.22 from $0.86 at September 30, 2019 to $0.64 at September 30, 2020. The decrease in net income is primarily due to a $395,000 higher loan loss provision compared to the prior year.
The Bank has realized continued strong loan demand in 2020 as net loans increased 9.86%. Interest and fees on loans at September 30, 2020 increased $328,000 over the same three month time period of 2019. Interest expense remained unchanged at $1,168,000 for September 30, 2019 and 2020, respectively.
The provision for loan losses was $420,000 for the three months ended September 30, 2020 as compared to $25,000 for September 30, 2019. The higher provision is due to an increase in a recession probability predictor in the Bank's environmental factors portion of the allowance for loan loss reserve calculation. With the far-reaching economic impacts resulting from COVID-19, the likelihood of recession necessitated the need for a higher provision beyond the overall growth in the loan portfolio. In determining the estimated allowance the Bank considered national and local unemployment trends, market conditions, social distancing impacts on area non-essential businesses, and customer requests for payment deferrals. Net charge-offs were $575,000 at September 30, 2020 as compared to 243,000 at September 30, 2019.
Noninterest income decreased by $32,000, or 3.2%, to $960,000 for the three months ended September 30, 2020 compared to $992,000 for same time period of 2019. The decrease is attributable primarily to a decrease in fee income from services charges on deposit accounts and revenue from brokerage services.
Noninterest expense increased $350,000 or 10.4% from the three months ended September 30, 2019 to the three months ended September 30, 2020. The increase is primarily related to an increase in salaries, employee benefits, premises and fixed assets, and marketing related expenses.
Income tax expense for the three months ended September 30, 2020 was $221,000 compared to $339,000 one year prior. The decrease in tax expense is due to recognizing less revenue for the quarter.
Net income for the nine months ended September 30, 2020 was $3,305,000 compared to $3,741,000 for the same period last year, representing a decrease of $436,000 or 11.7%. Basic and diluted earnings per share decreased $0.26 from $2.18 at September 30, 2019 to $1.92 at September 30, 2020. The decrease in net income is primarily attributed to an increase in a higher provision for loan losses related to the uncertain economic conditions related to the COVID-19 health pandemic. Provision for loan losses totaled $1,610,000 at September 30, 2020 compared to $620,000 at September 30, 2019. The 160.0% increase is related to growth in the portfolio as well as accounting for the environmental factors related to the large span of industries negatively impacted by the social distancing guidance, unemployment claims, and the anticipated expiration of the temporary increase in unemployment compensation benefits under the Federal Pandemic Unemployment Compensation program.
At September 30, 2020 total assets amounted to $586,724,000, an increase of 19.1% above total assets at December 31, 2019 of $492,817,000, an increase of $93,907,000. Total net loans increased $41,536,000 or 9.9% from $421,417,000 at December 31, 2019 to $462,953,000 at September 30, 2020. Approximately $30,100,000 of the growth was related to PPP lending. Total deposits at December 31, 2019 amounted to $434,268,000, compared to $525,269,000 at September 30, 2020, an increase of 21.0% or $91,001,000. The majority of the increase in deposits was organic growth. In addition, a substantial majority of the PPP loan proceeds were deposited to accounts at the Bank.
Stockholders' equity totaled $53,014,000 at September 30, 2020 compared to $50,269,000 at December 31, 2019. The $2,745,000 increase during the period is net income for 2020, net proceeds from the issuance of common stock from the Dividend Reinvestment and Stock Purchase Plan, a reduction in accumulated other comprehensive loss and partially offset by dividends paid.
Non-performing assets, which consist of nonaccrual loans and foreclosed properties increased from $3,200,000 at December 31, 2019 to $4,100,000 at September 30, 2020. The increase is attributable to an uptick in nonaccrual loans. Nonaccrual loans were $656,000 at December 31, 2019 compared to $1,826,000 at September 30, 2020. There was one new addition, a residential loan, to nonaccruals loans during the quarter.
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 $1,500,000 at December 31, 2019, compared to $2,600,000 at September 30, 2020. The increase is related to the addition of 13 impaired loans in various loan categories. Loss exposure on impaired loans at December 31, 2019 was $310,000 compared to $62,000 at September 30, 2020 after obtaining current appraisals on collateral securing a significant number of impaired loans in the portfolio and estimating selling costs based on historical experience.
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, 2020, troubled debt restructurings ("TDRs") totaled $1,256,000 and were spread among various loan categories. One new TDRs was identified during the third quarter, an owner occupied nonfarm nonresidential loan.
The federal banking agencies jointly issued a final rule, effective January 1, 2020, that provided for an optional, simplified measure of capital adequacy, the community bank leverage ratio framework, for qualifying community banking organizations, 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, Bank of Botetourt reported its CBLR ratio at 9.25% which exceeds the required regulatory minimum ratio. The CARES Act temporarily reduced the CBLR minimum ratio from 9.0% to 8.0% through December 31, 2020.
Paycheck Protection Program
Bank of Botetourt is participating in the Paycheck Protection Program ("PPP") initiated by the U.S. Department of the Treasury on April 3, 2020. As of September 30, 2020, the Bank has processed and received approval from the U.S. Small Business Administration on 488 applications for approximately $30.1 million. Bank of Botetourt funded these loans using its on-balance sheet liquidity. The Bank completed the requirements to borrow from the Payroll Protection Program Lending Facility ("PPPLF"), if needed, at the Federal Reserve Bank of Richmond. At September 30, 2020 the Bank does not anticipated borrowing any funds from the PPPL facility. The Bank will continue to monitor its liquidity position as the newly created facility is available until December 31, 2020. The Bank earned and received $1,232,000 from the SBA for generating the PPP loans. This revenue will be recognized over the life of the PPP loans. At September 30, 2020, the Bank recognized $232,000 of the PPP revenue. At September 30, 2020, no PPP loans had been submitted for forgiveness as the first payments are not due until the fourth quarter of 2020.
COVID-19 Customer & Employee Care
Bank of Botetourt continues to take numerous steps to assist our customers and employees during the pandemic. For loan customers impacted by COVID-19, the Bank has granted extensions, skip-a-payment, and modifications consistent with regulatory guidance for 251 loans with balances of $57.1 million. For depositing customers, the Bank is permitting unlimited withdrawals from savings accounts without additional fee or penalty as announced and permitted by banking regulators. All of our offices remain open, although our lobbies are under controlled access. When customers enter our branches, facemasks are required for all parties. Plexiglass shields and social distancing floor markers have been installed in our offices. We have had no layoffs as a result of COVID-19. Non-essential work travel is not permitted. While the majority of our employee have returned to the workplace, we continue to use online meeting platforms for social distancing.
FDIC Summary of Deposits
The FDIC Summary of Deposits report was released during the third quarter of 2020. Headquartered in Botetourt County, Bank of Botetourt continued to hold the largest market share of deposits in the County at 44.03%. When analyzing the collective geographies in which the Bank is located (Botetourt County, Franklin County, Roanoke Count, Rockbridge County, and City of Salem), the Bank held the fourth largest market share of deposits at 9.12%.
About Bank of Botetourt
Bank of Botetourt was chartered in 1899 and operates twelve retail offices in Botetourt, Rockbridge, Roanoke, and Franklin counties and the City of Salem, 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, 2020(unaudited) and December 31, 2019
Cash and due from banks
Interest-bearing deposits with banks
Federal funds sold
Total cash and cash equivalents
Investment securities available for sale
Loans, net of allowance for loan losses of $5,010,000 at
September 30, 2020 and $3,975,000 at December 31, 2019
Loans held for sale
Premises and fixed assets, net
Other real estate owned
Investment in unconsolidated subsidiaries
Liabilities and Stockholders' Equity
Commitments and contingencies
Common stock, $1.50 par value; 2,500,000 shares
authorized; 1,727,608 and 1,720,900 issued and
outstanding at September 30, 2020 and at December 31, 2019
Additional paid-in capital
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
Bank of Botetourt
For the Nine and Three Months ended September 30, 2020 and 2019 (Unaudited)
Nine Months Ended
Three Months Ended
Loans and fees on loans
U.S. Treasury and Government Agencies
All other securities
Due from depository institutions
Federal Funds Sold
Total Interest income
Total Interest expense
Net Interest Income
Provision for loan losses
Net Interest Income after provision for loan losses
Service charges on deposit accounts
Securities brokerage and annuities
Other income, net of gains
Total noninterest income
Salaries and employee benefits
Premises and fixed assets expense
Total noninterest expense
Income before income taxes
Income tax expense
Basic earnings per share
Diluted earnings per share
Dividends declared per share
Basic weighted average shares outstanding
Diluted weighted average shares outstanding
SOURCE Bank of Botetourt