BOTJ
BANK OF THE JAMES FINANCIAL GROUP INC
8-K
  2017-Apr-21 at 01:35 pm Get Reserve Plan For Historical Filings Read Filing at SEC

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DOCUMENT: d377452d8k.htm

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

Current Report

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): April 18, 2017

 

 

BANK OF THE JAMES FINANCIAL GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Virginia   001-35402   20-0500300

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

828 Main Street, Lynchburg, VA   24504
(Address of principal executive offices)   (Zip Code)

(434) 846-2000

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

  Emerging growth company

 

  If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 


Item 2.02 - Results of Operations and Financial Condition

On Friday, April 21, 2017, Bank of the James Financial Group, Inc. (the “Company”) issued a press release announcing financial results for the quarter ended March 31, 2017 (the “Press Release”). A copy of the Press Release is attached hereto as Exhibit 99.1.

Item 8.01 - Other Events

On April 18, 2017, the Board of Directors of the Company declared a quarterly cash dividend of $0.06 per share of common stock. The dividend will be paid on or about June 23, 2017, to stockholders of record as of the close of business on June 9, 2017. A copy of the Press Release dated April 21, 2017 announcing the declaration of the dividend is attached hereto as Exhibit 99.1.

Item 9.01 - Financial Statements and Exhibits

 

  (a) Financial statements of businesses acquired – not applicable

 

  (b) Pro forma financial information – not applicable

 

  (c) Shell company transactions – not applicable

 

  (d) Exhibits

 

Exhibit
No.

  

Exhibit Description

99.1    Bank of the James Financial Group, Inc. Press Release dated April 21, 2017

 

2


SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: April 21, 2017

    BANK OF THE JAMES FINANCIAL GROUP, INC.
    By  

/s/ J. Todd Scruggs

      J. Todd Scruggs
      Secretary-Treasurer

 

3


EXHIBIT INDEX

 

Exhibit
No.

  

Exhibit Description

99.1    Bank of the James Financial Group, Inc. Press Release dated April 21, 2017

 

4

DOCUMENT: d377452dex991.htm

Exhibit 99.1

 

LOGO

Bank of the James Announces First Quarter 2017

Financial Results and Declaration of Dividend

Revenue Growth, Record Assets, Loans

LYNCHBURG, Va., April 21, 2017Bank of the James Financial Group, Inc. (the “Company”) (NASDAQ:BOTJ), the parent company of Bank of the James, a full-service commercial and retail bank serving the greater Lynchburg area (Region 2000), and the Charlottesville, Harrisonburg, and Roanoke, Virginia markets, today announced unaudited results for the three months ended March 31, 2017.

Net income for the three months ended March 31, 2017 was $760,000 or $0.17 per diluted share compared with $887,000 or $0.20 per diluted share for the three months ended March 31, 2016.

Robert R. Chapman III, President and CEO, stated: “Our financial performance in the first quarter continued to demonstrate the Company’s focus on steady, long-term growth of our balance sheet, which reflected meaningful year-over-year growth of loans, deposits and assets. An emphasis on growing commercial banking was evident.

“Year-over-year net income comparison reflected higher noninterest expense related to investments to expand our market reach, including building our banking teams in several markets. We are seeing positive results from our investment in growth, and anticipate that increased productivity and accelerating revenue will enhance profitability.”

Highlights

Interest income from earning assets increased 5.2% in the first quarter of 2017 compared with the first quarter of 2016.

Net interest income before the provision for loan losses for the three months ended March 31, 2017 was $4.84 million, up 3.2% from $4.69 million for the three months ended March 31, 2016.

Driven primarily by increased commercial lending, total loans, net of the allowance for loan losses, were a Company-record $466.24 million at March 31, 2017, up from $464.35 million at December 31, 2016, and $433.70 million a year earlier.

Commercial loans (primarily C&I) increased 12% year-over-year, while owner occupied real estate, led by commercial real estate (CRE) portfolio growth, rose 13% at March 31, 2017 compared with March 31, 2016.

Total assets rose to $578.43 million at March 31, 2017, the highest in Company history.

Asset quality ratios reflected continuing loan portfolio strength, with a 0.67% ratio of nonperforming loans to total loans.

Total stockholders’ equity was $50.19 million, up from $49.42 million at December 31, 2016 and $49.46 million at March 31, 2016. Book value per share rose to $11.46 at March 31, 2017 from $11.29 at December 31, 2016.

 

1


Based on the results achieved in the first quarter, on April 18, 2017 the Company’s board of directors approved a $0.06 per share dividend payable to shareholders of record on June 9, 2017, to be paid on June 23, 2017.

Chapman noted: “Additional loans drove year-over-year net interest income growth, although both commercial and residential loan demand in the first quarter of 2017 was somewhat slower than anticipated. In particular, slower residential mortgage activity – perhaps partially related to the area’s current lean housing inventory – impacted originations and subsequent noninterest income from gains on mortgage sales to the secondary market. We entered the second quarter with good pipelines in commercial and residential lending, and feel confident about ongoing lending activity.”

First Quarter 2017 Operational Review

Total interest income was $5.51 million in the first quarter of 2017, growing 5.2% compared with total interest income of $5.24 million in the first quarter of 2016. Average rates earned on loans, including fees, was 4.46% in the first quarter of 2017, down slightly from 4.60% in the first quarter of 2016, and consistent with 4.48% in the fourth quarter of 2016. The average rate earned on total earning assets in the first quarter of 2017 was 4.16%, consistent with the fourth quarter of 2016 and down slightly from 4.35% in the first quarter of 2016.

“Considering the competitive lending market and continued pricing pressure in a low interest rate environment, we have been pleased with our ability to lend while maintaining relatively stable pricing and attracting quality loans,” commented J. Todd Scruggs, Executive Vice President and CFO. “We believe our ability to add value through excellent service and customized financial solutions remains a strong selling point for us.”

Total interest expense was $671,000 for the three months ended March 31, 2017, compared with $548,000 for the three months ended March 31, 2016. The increase partially reflected interest paid on capital notes issued in February 2017. Year-over-year growth in lower-interest bearing demand deposits and rate reductions in time deposits contributed to an average rate paid on interest bearing accounts of 0.62% in the first quarter of 2017. The Company’s net interest margin was 3.65% and net interest spread was 3.50%, consistent with the fourth quarter of 2016.

Net interest income was $4.84 million for the three months ended March 31, 2017, a 3.2% increase from $4.69 million for the three months ended March 31, 2016. Net interest income after provision for loan losses was $4.74 million for the three months ended March 31, 2017 compared with $4.49 million for the three months ended March 31, 2016.

Noninterest income from fees, service charges and commissions, including gains from the sale of residential mortgages to the secondary market, and income from the bank’s line of treasury management services for commercial customers, was $881,000 in the first quarter of 2017 compared with $1.01 million in the first quarter of 2016. Fee income increased year-over-year, however, slower residential mortgage origination resulted in lower gains from the sale of loans in the first quarter of 2017 compared with a year earlier.

Noninterest expense for the three months ended March 31, 2017 was $4.52 million, an increase of 7.8% from the same period a year earlier. Higher expenses primarily reflected costs related to the Company’s market expansion, including increased employee compensation, an expanded commercial banking team, and additional staff and management in the bank’s served markets. Occupancy costs increased moderately year-over-year, primarily reflecting additional facilities. The Company increased marketing expenditures to build brand visibility throughout an expanded geographic market.

 

2


Balance Sheet Reflects Consistent Growth

Loans held for investment, net of the allowance for loan losses, were a Company record $466.24 million at March 31, 2017, compared with $464.35 million at December 31, 2016, and up 7.5% compared with $433.70 million at March 31, 2016. The Company’s commercial loan portfolio was $89.00 million at March 31, 2017, up $9.51 million from March 31, 2016. Owner occupied real estate loans, led by CRE, increased to $142.39 million in the first quarter of 2017, up $16.39 million from $126.01 million a year earlier. Non-owner occupied real estate (primarily commercial and investment property) increased to $144.68 million, up 7.2% from $135.00 million a year ago. Total construction loans were down 16.8%, while consumer lines of credit (primarily home equity) grew 4.9% year-over-year.

Total deposits at March 31, 2017 were $521.20 million compared with $523.11 million at December 31, 2016, and up from $473.45 million at March 31, 2016. The Bank continued to attract noninterest bearing deposits, which increased to $105.28 million at March 31, 2017 from $102.65 million at December 31, 2016. Core deposits (noninterest bearing, NOW, money market and savings deposits) of $356.19 million comprised approximately 68% of the Company’s total deposits.

“Continuing growth of core deposits has been a meaningful highlight for the Company, providing attractive funding for loans, and reflecting new banking relationships and growth in Harrisonburg, Charlottesville and Roanoke,” Chapman said. “An expanding presence in Appomattox should further support deposit growth and new banking relationships.”

Total assets were a record $578.43 million at March 31, 2017, up from $574.20 million at December 31, 2016 and $524.61 million at March 31, 2016. Asset growth primarily reflected increased retained loans and increased securities available-for-sale.

The Company’s asset quality remained sound, with a 0.67% ratio of nonperforming loans to total loans at March 31, 2017. The Company’s allowance for loan losses to total loans was 1.21%, and the Company’s allowance for loan losses as a percent of nonperforming loans was 182%.

Total nonperforming loans were $3.15 million at March 31, 2017, compared with $2.55 million at December 31, 2016. The increase primarily reflected one classified commercial loan being moved to nonperforming status during the first quarter of 2017. Total nonperforming assets were $5.90 million and other real estate owned was $2.75 million. The Bank’s regulatory capital ratios continued to exceed accepted regulatory standards for a well-capitalized institution.

The Company grew measures of shareholder value, including tangible book value per share and total stockholders’ equity. Total stockholders’ equity increased to $50.19 million at March 31, 2017, compared with $49.42 million at December 31, 2016 and $49.46 million at March 31, 2016. Retained earnings rose to $10.65 million at March 31, 2017 from $10.16 million at December 31, 2016.

About the Company

Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc., serves Lynchburg, Charlottesville, Harrisonburg, Roanoke, Appomattox and other markets in Virginia. The bank operates 12 full service locations, two limited service branches, two loan production offices, and an investment/insurance services division. Bank of the James Financial Group, Inc. common stock is listed under the symbol “BOTJ” on the NASDAQ Stock Market, LLC.

 

3


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, Inc. (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 the Company. 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.

FINANCIAL STATEMENTS FOLLOW

 

4


Bank of the James Financial Group, Inc. and Subsidiaries

(000’s) except ratios and percent data

unaudited

 

Selected Data:

   Three
months
ending
Mar 31,
2017
     Three
months
ending
Mar 31,
2016
     Change  

Interest income

   $ 5,509      $ 5,235        5.23

Interest expense

     671        548        22.45

Net interest income

     4,838        4,687        3.22

Provision for loan losses

     100        200        -50.00

Noninterest income

     881        1,008        -12.60

Noninterest expense

     4,517        4,190        7.80

Income taxes

     342        418        -18.18

Net income

     760        887        -14.32

Weighted average shares outstanding

     4,378,436        4,378,436        0.00

Basic net income per share

   $ 0.17      $ 0.20      $ (0.03

Fully diluted net income per share

   $ 0.17      $ 0.20      $ (0.03

 

Balance Sheet at

period end:

   Mar 31,
2017
     Dec 31,
2016
     Change     Mar 31,
2016
     Dec 31,
2015
     Change  

Loans, net

   $ 466,244      $ 464,353        0.41   $ 433,701      $ 430,445        0.76

Loans held for sale

     1,633        3,833        -57.40     3,706        1,964        88.70

Total securities

     51,513        44,075        16.88     40,280        38,515        4.58

Total deposits

     521,199        523,112        -0.37     473,451        467,610        1.25

Stockholders’ equity

     50,191        49,421        1.56     49,456        48,196        2.61

Total assets

     578,433        574,195        0.74     524,611        527,143        -0.48

Shares outstanding

     4,378,436        4,378,436        —         4,378,436        4,378,436        —    

Book value per share

   $ 11.46      $ 11.29        0.17     $ 11.30      $ 11.01      $ 0.29  

 

5


Daily averages:

   Three months
ending Mar 31,
2017
     Three months
ending Mar 31,
2016
     Change  

Loans, net

   $ 464,293      $ 432,188        7.43

Loans held for sale

     1,390        2,302        -39.62

Total securities

     50,916        40,182        26.71

Total deposits

     520,881        455,650        14.32

Stockholders’ equity

     50,970        48,731        4.59

Interest earning assets

     537,758        488,598        10.06

Interest bearing liabilities

     416,261        378,539        9.97

Total assets

     576,567        519,396        11.01

 

Financial Ratios:

   Three months
ending Mar 31,
2017
    Three months
ending Mar 31,
2016
    Change  

Return on average assets

     0.53     0.68     (0.15

Return on average equity

     6.05     7.30     (1.25

Net interest margin

     3.65     3.89     -0.24  

Efficiency ratio

     78.98     73.57     5.41  

Average equity to average assets

     8.84     9.38     (0.54

 

Allowance for loan losses:

   Three months
ending Mar 31,
2017
     Three months
ending Mar 31,
2016
     Change  

Beginning balance

   $ 5,716      $ 4,683        22.06

Provision for losses

     100        200        -50.00

Charge-offs

     (130      (251      -48.21

Recoveries

     30        118        -74.58

Ending balance

     5,716        4,750        20.34

 

6


Nonperforming assets:

   Mar 31,
2017
     Dec 31,
2016
     Change     Mar 31,
2016
     Dec 31,
2015
     Change  

Total nonperforming loans

   $ 3,147      $ 2,550        23.41   $ 2,587      $ 3,406        -24.05

Other real estate owned

     2,750        2,370        16.03     2,355        1,965        19.85

Total nonperforming assets

     5,897        4,920        19.86     4,942        5,371        -7.99

Troubled debt restructurings - (performing portion)

     452        455        -0.66     642        646        -0.62

 

Asset quality ratios:

   Mar 31,
2017
    Dec 31,
2016
    Change     Mar 31,
2016
    Dec 31,
2015
    Change  

Nonperforming loans to total loans

     0.67     0.54     0.13       0.59     0.78     (0.19

Allowance for loan losses to total loans

     1.21     1.22     (0.01     1.08     1.08     0.00  

Allowance for loan losses to nonperforming loans

     181.63     224.16     (42.53     183.61     137.49     46.12  

 

7


Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollar amounts in thousands, except per share amounts)

 

     (unaudited)
3/31/2017
    12/31/2016  

Assets

    

Cash and due from banks

   $ 19,751     $ 16,938  

Federal funds sold

     5,508       11,745  
  

 

 

   

 

 

 

Total cash and cash equivalents

     25,259       28,683  
  

 

 

   

 

 

 

Securities held-to-maturity (fair value of $3,272 in 2017 and $3,273 in 2016)

     3,293       3,299  

Securities available-for-sale, at fair value

     48,220       40,776  

Restricted stock, at cost

     1,415       1,373  

Loans, net of allowance for loan losses of $5,716 in 2017 and 2016

     466,244       464,353  

Loans held for sale

     1,633       3,833  

Premises and equipment, net

     11,034       10,771  

Software, net

     209       176  

Interest receivable

     1,365       1,378  

Cash value - bank owned life insurance

     12,759       12,673  

Other real estate owned

     2,750       2,370  

Income taxes receivable

     872       1,214  

Deferred tax asset

     2,234       2,374  

Other assets

     1,146       922  
  

 

 

   

 

 

 

Total assets

   $ 578,433     $ 574,195  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Deposits

    

Noninterest bearing demand

     105,276       102,654  

NOW, money market and savings

     250,911       255,429  

Time

     165,012       165,029  
  

 

 

   

 

 

 

Total deposits

     521,199       523,112  

Capital notes

     5,000       —    

Interest payable

     77       88  

Other liabilities

     1,966       1,574  
  

 

 

   

 

 

 

Total liabilities

   $ 528,242     $ 524,774  
  

 

 

   

 

 

 

Stockholders’ equity

    

Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 4,378,436 as of March 31, 2017 and December 31, 2016

     9,370       9,370  

Additional paid-in-capital

     31,495       31,495  

Accumulated other comprehensive (loss)

     (1,327     (1,600

Retained earnings

     10,653       10,156  
  

 

 

   

 

 

 

Total stockholders’ equity

   $ 50,191     $ 49,421  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 578,433     $ 574,195  
  

 

 

   

 

 

 

 

8


Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Income

(dollar amounts in thousands, except per share amounts)

 

     For the Three Months
Ended March 31,
 
     2017      2016  

Interest Income

     

Loans

   $ 5,188      $ 4,978  

Securities

     

US Government and agency obligations

     113        139  

Mortgage backed securities

     66        52  

Municipals

     80        44  

Dividends

     7        6  

Other (Corporates)

     27        6  

Interest bearing deposits

     15        6  

Federal Funds sold

     13        4  
  

 

 

    

 

 

 

Total interest income

     5,509        5,235  
  

 

 

    

 

 

 

Interest Expense

     

Deposits

     

NOW, money market savings

     169        136  

Time Deposits

     402        369  

Federal Funds purchased

     —          4  

Brokered time deposits

     63        31  

Capital notes 6% due 4/1/2017

     —          8  

Capital notes 4% due 1/24/2022

     37        —    
  

 

 

    

 

 

 

Total interest expense

     671        548  
  

 

 

    

 

 

 

Net interest income

     4,838        4,687  

Provision for loan losses

     100        200  
  

 

 

    

 

 

 

Net interest income after provision for loan losses

     4,738        4,487  
  

 

 

    

 

 

 

Noninterest income

     

Gains on sale of loans held for sale

     371        491  

Service charges, fees and commissions

     405        372  

Increase in cash value of life insurance

     86        65  

Other

     9        15  

Gain on sales of available-for-sale securities

     10        65  
  

 

 

    

 

 

 

Total noninterest income

     881        1,008  

Noninterest expenses

     

Salaries and employee benefits

     2,380        2,237  

Occupancy

     372        332  

Equipment

     348        319  

Supplies

     134        119  

 

9


Professional, data processing, and other outside expense

     680        662  

Marketing

     148        119  

Credit expense

     114        83  

Other real estate expenses

     12        1  

FDIC insurance expense

     103        92  

Other

     226        226  
  

 

 

    

 

 

 

Total noninterest expenses

     4,517        4,190  
  

 

 

    

 

 

 

Income before income taxes

     1,102        1,305  

Income tax expense

     342        418  
  

 

 

    

 

 

 

Net Income

   $ 760      $ 887  
  

 

 

    

 

 

 

Weighted average shares outstanding - basic

     4,378,436        4,378,436  
  

 

 

    

 

 

 

Weighted average shares outstanding - diluted

     4,378,535        4,378,436  
  

 

 

    

 

 

 

Income per common share - basic

   $ 0.17      $ 0.20  
  

 

 

    

 

 

 

Income per common share - diluted

   $ 0.17      $ 0.20  
  

 

 

    

 

 

 

 

10

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