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
(Registrants 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 |
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 |
Exhibit Description | |
99.1 | Bank of the James Financial Group, Inc. Press Release dated April 21, 2017 |
4
Exhibit 99.1
Bank of the James Announces First Quarter 2017
Financial Results and Declaration of Dividend
Revenue Growth, Record Assets, Loans
LYNCHBURG, Va., April 21, 2017 Bank 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 Companys 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 Companys 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 areas 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 Companys 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 banks 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 Companys market expansion, including increased employee compensation, an expanded commercial banking team, and additional staff and management in the banks 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 Companys 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 Companys 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 Companys asset quality remained sound, with a 0.67% ratio of nonperforming loans to total loans at March 31, 2017. The Companys allowance for loan losses to total loans was 1.21%, and the Companys 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 Banks 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 Companys 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
(000s) 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