Bank of The James Reports Strong Year-Over-Year Earnings Growth in Fourth Quarter, Full-Year 2012 Financial Results

Bank of The James Reports Strong Year-Over-Year Earnings Growth in Fourth 
Quarter, Full-Year 2012 Financial Results 
LYNCHBURG, VA -- (Marketwire) -- 01/25/13 --  Bank of the James
Financial Group, Inc. (NASDAQ: BOTJ) 
Financial Highlights 


 
--  Net income in 2012 increased 255% to $2.13 million or $0.64 per fully
    diluted share, compared with net income in 2011 of $600,000 or $0.18
    per fully diluted share.
--  Net income in fourth quarter 2012 was $747,000 or $0.22 fully diluted
    per share, compared with a fourth quarter 2011 net loss of $(218,000)
    or $(0.07) per fully diluted share.
--  The allowance for loan and lease losses (ALLL) to non-accruing loans
    increased to 87.22% at December 31, 2012, compared with 54.09% at
    December 31, 2011.
--  The bank's continued focus on improving asset quality contributed to a
    sharp reduction of problem loans, with non-performing assets as a
    percent of total assets declining to 1.95% at December 31, 2012,
    compared with 3.20% at December 31, 2011, while the company's
    consolidated "Texas Ratio" ((NPAs + TDR):(Capital + ALLL)) improved to
    25.69% at December 31, 2012, compared with 44.46% at December 31,
    2011.
--  The company reduced interest expense 28% in 2012 compared with 2011,
    reflecting a reduction in borrowings, and net interest margin improved
    to 4.03% at December 31, 2012, compared with 3.89% at December 31,
    2011.
--  Total assets at year end 2012 were $441.38 million, compared with
    yearend 2011 total assets of $427.44 million.
--  Return on average assets (ROAA) increased to 0.50% in 2012, compared
    with 0.14% in 2011, while return on average equity (ROAE) rose to
    7.76% in 2012, compared with 2.25% in 2011.
--  Book value per share in fourth quarter 2012 reflected the company's
    focus on asset quality improvement in 2011 and first half 2012,
    increasing to $8.83 in fourth quarter 2012, compared with $8.02 in
    fourth quarter 2011.

  
Bank of the James Financial Group, Inc. (NASDAQ: BOTJ), the parent
company of Bank of the James, a full-service commercial and retail
bank serving the greater Lynchburg MSA, today announced unaudited
results for the quarter and year ended December 31, 2012. 
Robert R. Chapman III, President and CEO, commented: "Our 2012
earnings demonstrated the positive impact of the bank's initiative to
improve asset quality while maintaining capital levels and growing
our asset base. A dramatic measurement of our progress was ROAA and
ROAE in fourth quarter 2012, where ROAA was 0.69% and ROAE was 10.51%
while those ratios were both in negative territory in fourth quarter
2011. We believe the sharp improvement in the bank's Texas Ratio is
also a good indicator of the bank's greatly improved financial
condition. 
"We are seeing overall stability in our loan portfolio, with fewer
non-accruing loans, and a much lower percentage of non-accrual loans
to total loans. Throughout the year, loans more than 29 days past due
were close to or below 1% of total loans. We have reduced other real
estate owned (OREO) and continue to aggressively pursue opportunities
to sell these assets. The real estate market has brightened
considerably, which we anticipate will support continuing reduction
of OREO. 
"In 2013, with the bulk of our work to improve our balance sheet and
asset quality behind us, we can focus the majority of our attention
on the business of growing Bank of the James. We have strategic
locations throughout Lynchburg and Region 2000, and opportunities to
grow market share. In the past year, we added to and strengthened our
commercial lending team. We have grown our commercial loan portfolio
and expanded banking relationships with customers to include more
deposits and treasury management. In addition, we hope to expand into
retirement planning services, including 401(k) plans. 
"We're very enthusiastic about the coming year, with the bank
positioned to move forward and economic conditions looking somewhat
brighter than during the past few years." 
Financial Highlights and Overview 
For the year ended December 31, 2012, net interest income after
provision for loan losses was $13.45 million, compared with net
income after provision for loan losses of $10.52 million for the year
ended December 31, 2011. Interest income was $18.75 million in 2012
compared with $19.52 million in 2011, partially reflecting a slight
reduction in the yield on our earning assets. The bank lowered
interest expense by 28% to $3.02 million, compared with $4.19 million
in 2011. During the year, the bank reduced Federal Home Loan Bank
(FHLB) borrowings and reduced its interest expense accordingly. The
bank also grew its base of lower-cost core deposits, including
non-interest bearing demand deposit accounts generated by commercial
customers. These factors contributed to an improvement in net
interest margin to 4.03% in 2012, compared with 3.89% in 2011. 
A sharp decline in the bank's provision for loan losses was a primary
contributor to year-over-year earnings growth, with a loss provision
of $2.29 million for the year ended December 31, 2012, down 52%
compared with $4.81 million for the year ended December 31, 2011. 
In the fourth quarter 2012, net interest income after provision for
loan losses was $3.50 million compared with net interest income after
loan loss provision of $1.92 million in fourth quarter 2011. Interest
income was $4.66 million compared with $4.85 million in fourth
quarter 2011, while the bank reduced interest expense in fourth
quarter 2012 by 26% to $651,000, compared with $877,000 in fourth
quarter 2011. The company's provision for loan losses was $513,000 in
fourth quarter 2012, compared with $2.05 million in fourth quarter
2011. Its net interest margin was 4.10% which, as in the full year
results, primarily reflected reduced FHLB borrowings, interest rate
management and increased non-interest bearing core deposits. 
"We continue to offer competitive deposit and loan rates, but a key
to retaining customers and maintaining margins in this exceptionally
low interest rate environment is by offering outstanding community
banking service and support," said J. Todd Scruggs, CFO. "This has
also been true in our commercial banking business, where we have
added loan customers who have moved deposits to the bank. We offer
more modest account-related fees than many competitors and aren't
loading up fees for customers who maintain lower balances. This has
an impact on non-interest income, but it helps us win and retain core
deposits and broader customer relationships." 
Non-interest income, which includes fees from mortgage origination,
gain on sale of securities, fees on services such as brokerage and
insurance services, for the year ended December 31, 2012 was $3.62
million, compared with $3.68 million for the year ended December 31,
2011. Non-interest expense in 2012 was $14.39 million compared with
$13.69 million in 2011, the increase partially reflecting growth in
the commercial lending team and employee bonuses granted in lieu of
salary increases. 
Non-interest income in fourth quarter 2012 was $1.05 million and was
also $1.05 million in fourth quarter 2011. Non-interest expense was
$3.52 million in fourth quarter 2012, compared with $3.37 million in
fourth quarter 2011. 
The bank's efficiency ratio was 73.08% in 2012 and 69.53% in fourth
quarter 2012. Chapman explained the company's efficiency was impacted
by costs related to problem assets, managing and selling bank-owned
assets, and write-downs. Other real estate owned (OREO) declined to
$2.11 million at December 31, 2012, compared with $3.25 million at
December 31, 2011. 
"With fewer problem assets, and as we continue to sell OREO
properties, we anticipate lowering our efficiency ratio in 2013. We
have also made improvements and technological upgrades to drive more
efficient operations, which should have a positive impact on
operational costs." 
Total loans, net of allowance for loan loss and including loans held
for sale, were $320.83 million at December 31, 2012 compared with
$319.19 million at December 31, 2011, reflecting modest growth offset
by removing non-performing loans from the portfolio in 2012. Chapman
said mortgage lending was particularly strong in the last several
months of 2012 and that its mortgage division had record earnings in
2012. "The regional real estate market is picking up, and the low
interest rate environment continues to drive residential mortgage
refinancing," Chapman explained. "We also experienced growth in
commercial lending, which will contribute to anticipated loan
portfolio growth in 2013." 
Total deposits at December 31, 2012 increased 6.6% to $399.02
million, compared with $374.23 million at December 31, 2011,
primarily reflecting strong deposit retention and more than 800 new
demand deposit accounts opened during the year. 
The ratio of non-performing loans to total loans declined to 1.95% at
December 31, 2012, compared with 3.20% at December 31, 2011. The
company's allowance for loan losses to total loans was 1.70% at
December 31, 2012, compared with 1.73% at December 31, 2011. Coverage
for losses increased significantly, with an allowance for loan losses
to non-performing loans of 87.22% at December 31, 2012, compared with
54.09% at December 31, 2011. Loan charge-offs in 2012 decreased 45%
to $2.60 million, compared with $4.72 million in 2011. OREO at
December 31, 2012 was $2.11 million compared with $3.25 million at
December 31, 2011. 
Total assets increased to $441.38 million at December 31, 2012,
compared with $427.44 million at December 31, 2011. The bank remained
well capitalized by accepted regulatory standards with a tier 1
leverage ratio of 8.41%, tier 1 risk-based capital ratio of 11.16%,
and total risk-based capital of 12.42%.  
Chapman concluded: "We greatly appreciate our shareholders' support
and confidence during a few challenging years, and we are delighted
to have demonstrated increased shareholder value and greater capital
strength in 2012. We also thank our employees for their diligent work
to serve our customers and help increase the bank's productivity, for
the sacrifices they made to help us manage expenses, and for their
active and generous participation in charitable and civic activities
that have played a major role in building good will and visibility
for Bank of the James in the community." 
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 will celebrate its 14th anniversary this year.
Bank of the James Financial Group, Inc. common stock is listed under
the symbol "BOTJ" on the NASDAQ Stock Market, LLC. 
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             
Selected      Dec 31,    Dec 31,               Dec 31,    Dec 31,           
 Data:         2012       2011      Change      2012       2011     Change  
            ---------- ----------  --------  ---------- ---------- -------- 
Interest                                                                    
 income     $    4,659 $    4,845     -3.84% $   18,753 $   19,519    -3.92%
Interest                                                                    
 expense           651        877    -25.77%      3,016      4,192   -28.05%
Net                                                                         
 interest                                                                   
 income          4,008      3,968      1.01%     15,737     15,327     2.68%
Provision                                                                   
 for loan                                                                   
 losses            513      2,050    -74.98%      2,289      4,807   -52.38%
Noninterest                                                                 
 income          1,052      1,050      0.19%      3,618      3,680    -1.68%
Noninterest                                                                 
 expense         3,518      3,366      4.52%     14,144     13,446     5.19%
Amortization 
 of tax                                                                   
 credit                                                                     
 investment        247        247      0.00%        247        247     0.00%
Income                                                                      
 taxes              35       (427)  -108.20%        543        (93) -683.87%
Net income         747       (218)  -442.66%      2,132        600   255.33%
Weighted                                                                    
 average                                                                    
 shares                                                                     
 outstanding 3,345,573  3,328,394      0.52%  3,343,210  3,324,915     0.55%
Basic net                                                                   
 income per                                                                 
 share      $     0.22 $    (0.07) $   0.29  $     0.64 $     0.18 $   0.46 
Fully                                                                       
 diluted                                                                    
 net income                                                                 
 per share  $     0.22 $    (0.07) $   0.29  $     0.64 $     0.18 $   0.46 
                                                                            

 
Balance Sheet                                                               
 at period       Dec 31,    Dec 31,             Dec 31,    Dec 31,          
 e
nd:             2012       2011     Change     2011       2010     Change 
               ---------- ---------- -------  ---------- ---------- ------- 
Loans, net     $  319,922 $   18,754    0.37% $  318,754 $  320,715   -0.61%
Loans held for                                                              
 sale                 904        434  108.29%        434          -     N/A 
Total                                                                       
 securities        53,369     56,471   -5.49%     56,471     52,883    6.78%
Total deposits    399,015    374,234    6.62%    374,234    368,390    1.59%
Stockholders'                                                               
 equity            29,613     26,805   10.48%     26,805     25,495    5.14%
Total assets      441,381    427,436    3.26%    427,436    418,928    2.03%
Shares                                                                      
 outstanding    3,352,725  3,342,415  10,310   3,342,415  3,323,743  18,672 
Book value per                                                              
 share         $     8.83 $     8.02 $  0.81  $     8.02 $     7.67 $  0.35 
                                                                            
                                                                            
                                                                            
                     Three     Three              Year      Year            
                    months    months               to        to             
                    ending    ending              date      date            
                    Dec 31,   Dec 31,            Dec 31,   Dec 31,          
Daily averages:      2012      2011     Change    2012      2011     Change 
                   --------  --------  -------  --------  --------  ------- 
Loans, net         $319,714  $316,319     1.07% $317,198  $318,878    -0.53%
Loans held for                                                              
 sale                 1,109       947    17.11%    1,109       409   171.15%
Total securities     51,231    59,213   -13.48%   57,353    58,516    -1.99%
Total deposits      390,340   373,834     4.42%  384,802   375,138     2.58%
Stockholders'                                                               
 equity              28,189    26,947     4.61%   27,474    26,657     3.06%
Interest earning                                                            
 assets             390,849   391,588    -0.19%  392,855   394,374    -0.39%
Interest bearing                                                            
 liabilities        336,040   345,023    -2.60%  341,846   349,747    -2.26%
Total assets        430,578   427,373     0.75%  429,897   427,513     0.56%
                                                                            
                                                                            
                                                                            
                     Three     T
hree               Year      Year           
                     months    months               to        to            
                     ending    ending              date      date           
                    Dec 31,   Dec 31,            Dec 31,   Dec 31,          
Financial Ratios:     2012      2011     Change    2012      2011     Change
                   --------  --------  -------- --------  --------  --------
Return on average                                                           
 assets                0.69%    -0.20%     0.89     0.50%     0.14%     0.36
Return on average                                                           
 equity               10.51%    -3.21%    13.72     7.76%     2.25%     5.51
Net interest                                                                
 margin                4.10%     4.03%     0.07     4.03%     3.89%     0.14
Efficiency ratio      69.53%    67.08%     2.45    73.08%    70.74%     2.34
Average equity to                                                           
 average assets        6.55%     6.31%     0.24     6.39%     6.24%     0.16
                                                                            
                                                                            
                                                                            
                     Three     Three              Year      Year            
                    months    months               to        to             
                    ending    ending              date      date            
Allowance for loan  Dec 31,   Dec 31,            Dec 31,   Dec 31,          
 losses:             2012      2011     Change    2012      2011     Change 
                   --------  --------  -------  --------  --------  ------- 
Beginning balance  $  5,693  $  5,461     4.25% $  5,612  $  5,467     2.65%
Provision for                                                               
 losses                 513     2,050   -74.98%    2,289     4,807   -52.38%
Charge-offs            (749)   (1,920)  -60.99%   (2,599)   (4,716)  -44.89%
Recoveries               78        21   271.43%      233        54   331.48%
Ending balance        5,535     5,612    -1.37%    5,535     5,612    -1.37%
                                                                            
                                
                                            
Nonperforming       Dec 31,   Dec 31,            Dec 31,   Dec 31,          
 assets:             2012      2011     Change    2011      2010     Change 
                   --------  --------  -------  --------  --------  ------- 
Total                                                                       
 nonperforming                                                              
 loans             $  6,346  $ 10,376   -38.84% $ 10,376  $  8,366    24.03%
Other real estate                                                           
 owned                2,112     3,253   -35.08%    3,253     3,440    -5.44%
Total                                                                       
 nonperforming                                                              
 assets               8,458    13,629   -37.94%   13,629    11,806    15.44%
Troubled debt                                                               
 restructurings -                                                           
 (performing                                                                
 portion)               572       783   -26.95%      783     4,987   -84.30%
      
 
                                                                      
Asset quality       Dec 31,   Dec 31,            Dec 31,   Dec 31,          
 ratios:              2012      2011    Change     2011      2010    Change 
                   --------  --------  -------  --------  --------  ------- 
Nonperforming                                                               
 loans to total                                                             
 loans                 1.95%     3.20%   (1.25)     3.20%     2.56%    0.63 
Allowance for loan                                                          
 losses to total                                                            
 loans                 1.70%     1.73%   (0.03)     1.73%     1.68%    0.05 
Allowance for loan                                                          
 losses to                                                                  
 nonperforming                                                              
 loans                87.22%    54.09%   33.13     54.09%    65.35%  (11.26)

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