Bank of the James Reports Triple Digit Earnings Growth

Bank of the James Reports Triple Digit Earnings Growth 
LYNCHBURG, VA -- (Marketwired) -- 04/26/13 --  Bank of the James
Financial Group, Inc. (NASDAQ: BOTJ) 
Financial Highlights 


 
--  Net income for the quarter ended March 31, 2013 grew 118% to $788,000
    or $0.24 per diluted share, compared with net income of $360,000 or
    $0.11 per diluted share for the same period a year ago, primarily
    reflecting asset quality improvement, a 25% decline in interest
    expense, and 44% year-over-year growth in noninterest income. This
    performance followed the bank's reported 255% earnings growth in
    calendar 2012 versus 2011.
--  Sharply improved asset quality drove a 69% reduction in the company's
    provision for loan losses in first quarter 2013 compared with first
    quarter 2012.
--  Return on average assets (ROAA) was 0.74% in first quarter 2013, up
    from 0.34% in first quarter 2012, while the company's return on
    average equity increased sharply to 11.02% compared with 5.38% in the
    prior year's first quarter.
--  The company's book value per share grew to $8.94, up 10.5%, compared
    with $8.09 per share a year earlier.
--  Total stockholders' equity increased to $29.97 million at March 31,
    2013 compared with $27.04 million at March 31, 2012.
--  Net loans increased to $325.51 million in first quarter 2013, compared
    with $312.19 million in first quarter 2012 and $319.92 at December 31,
    2012, reflecting growth in commercial and residential lending.
--  The ratio of nonperforming loans to total loans declined to 1.82% in
    first quarter 2013 compared with 3.07% in first quarter 2012,
    reflecting total nonperforming loans of $6.04 million in first quarter
    2013 -- a 38% reduction from $9.78 million at the end of the first
    quarter 2012.
--  The bank and company remained "well capitalized" by accepted
    regulatory standards, with a tier 1 to average total assets ratio of
    8.65% at the bank and 7.25% at the holding company, a tier 1
    risk-based capital ratio of 11.42% at the bank and 9.57% at the
    holding company, and a total risk-based capital ratio of 12.68% at the
    bank and 10.83% at the holding company.

  
Bank of the James Financial Group, Inc. (NASDAQ: BOTJ), the parent
company of Bank of the Jame
s, a full-service commercial and retail
bank serving the greater Lynchburg MSA or "Region 2000," today
announced unaudited results for the quarter ended March 31, 2013. 
"We were very pleased that our continuing focus on asset quality had
a positive impact on earnings, and we were encouraged by the forward
traction we demonstrated in our lending and deposit gathering
activities during the first quarter," said Robert R. Chapman III,
President and CEO. "We were particularly pleased with the growth of
our commercial banking business. We feel the bank's first quarter
results reflect the shift we are making from past several years,
where we needed to devote much of our attention to strengthening the
bank's balance sheet and asset quality. 
"Even when our top priority was to improve balance sheet quality, we
made investments in technology, improved credit and risk management
capabilities, and made key additions to our lending and account
relationship teams. We were confident the bank could address asset
quality issues, and wanted to be prepared to move forward with
renewed vigor to return to growing the bank. 
"We offer a full range of banking and investment services, backed by
outstanding capabilities and service, which we feel is a requirement
for winning and retaining customers. Additionally, we believe our
longstanding commitment to serving our community and understanding
our customers differentiates Bank of the James from the competition.
We continue to work through a challenging economic and interest rate
environment, however, we welcome the opportunity to return our
primary focus on growth." 
Financial Highlights and Overview 
For the three months ended March 31, 2013, net interest income after
provision for loan losses was $3.69 million, compared with net
interest income after provision for loan losses of $3.12 million for
the three months ended March 31, 2012. The increase reflected a
decline in the bank's provision for loan losses to $235,000 compared
with $750,000 in the prior year's first quarter and interest expense
of $616,000 in first quarter 2013 compared with $820,000 in first
quarter 2012. 
The bank's net interest margin was 4.06% in first quarter 2013
compared with 3.94% in first quarter 2012. During 2012, the bank
reduced its use of higher-cost Federal Home Loan Bank (FHLB)
borrowings, resulting in a decrease in FHLB-related borrowing
interest expense from $74,000 in the prior year's quarter to $19,000
in first quarter 2013, which also contributed to a modest improvement
in the bank's net interest margin. Management noted the bank's
ability to fund lending activity with core deposits; however, the
bank remains able to lock in long-term wholesale borrowings at
today's lower rates, if necessary, in order to fund continued loan
growth. 
J. Todd Scruggs, CFO, commented: "Ongoing interest rate management,
including diligence in re-pricing deposits to match prevailing rates,
contributed to holding the line on interest expense. We were
encouraged by our continuing ability to rely on lower cost core
deposits to fund lending activities, which has enabled us to reduce
our use of higher cost wholesale borrowing during the past several
quarters. This contributed to an interest spread of 3.95% in first
quarter 2013 compared with 3.82% in first quarter 2012." 
He explained the bank expects continued significant pressure on
margins as long as interest rates remain at historic lows. The bank
continues to re-price interest-bearing deposits or allow them to run
off. "We also feel our expanded commercial banking activity will
provide access to noninterest bearing demand deposits that will, to
some degree, help relieve the pressure on margins and contribute to
core deposits to fund lending. We feel overall deposit retention has
been encouraging, and reflects our willingness to offer competitive
deposit rates and a relationship-oriented approach to banking that
results in less rate-shopping." 
Non-interest income, which includes fees from mortgage origination,
gain on the sale of securities, and fees on services such as
brokerage and insurance services, was $964,000 for the quarter ended
March 31, 2013 compared with $671,000 for the quarter ended March 31,
2012. Mortgage fee income was $319,000 compared with $226,000 in the
prior year's first quarter, reflecting increased gains on sales of
residential mortgages in the secondary market. Fee income from
services grew to $303,000 in first quarter 2013 compared with
$283,000 in first quarter 2012, the increase partially reflecting
increased fees generated by an expanded suite of commercial treasury
management services implemented during the latter part of 2012, and
modest growth in the bank's insurance and investment services lines
of business. 
Noninterest expense in first quarter 2013 was $3.53 million compared
with $3.28 million in first quarter 2012. The increase primarily
reflected higher salaries, commissions, and employee benefits as the
company expanded its commercial lending and mortgage production. 
The bank's efficiency ratio was 72.28% in first quarter 2013, as
compared to 72.38% in first quarter 2012. Chapman said: "We expect
our efficiency ratio to improve as problem assets decline and we sell
OREO properties and the full
 impact of improvements and technological
upgrades to drive more efficient operations continue to take effect.
Our ability to focus more of our attention to growth rather than
dealing with troubled assets is having a positive impact on the
productivity and morale in our offices." 
Total deposits at March 31, 2013 decreased to $385.19 million from
$399.02 million at December 31, 2012 and $386.59 million at March 31,
2012. The balance as of December 31, 2012 temporarily increased
because of several deposits to professional settlement accounts
related to end-of-the-year real estate and business closings. The
decrease as of March 31, 2013 reflects the expected disbursements
from these accounts. We continued to have strong deposit retention
during the last twelve months, which is reflected by the fact that
deposits were essentially unchanged from March 31, 2012. 
Total loans, net of allowance for loan loss and including loans held
for sale, were $326.31 million at March 31, 2013, compared with
$313.19 million at March 31, 2012 and $320.83 million at December 31,
2012. The larger loan portfolio primarily reflected growth in
commercial and construction lending partially offset by a small
number of loan pay-offs in first quarter 2013 and the removal of
non-performing loans from the portfolio in 2012. 
Michael A. Syrek, EVP and Senior Lending Officer, commented: "The
bank had $23.66 million in new loans and commitments in first quarter
2013, which represented a 42% increase compared with first quarter
2012. Our commercial business continues to gain traction, and new
commercial relationships nearly doubled to 19 in the first quarter
compared with 10 a year ago. We're also experiencing success in
winning complementary deposit and treasury management services for
company owners and management and banking packages for employees from
customers, which results in a stronger and more complete
relationship."  
The company noted more activity in 1-4 family residential and
commercial construction than in the past several years, which created
opportunities to win high-quality loans with successful builders. The
bank's mortgage lending activity was up, reflecting an increase in
home purchase activity. Like many banks, the bank has experienced a
modest slowdown in refinancing activity because many people able to
refinance mortgages have already done so. 
Loan portfolio growth was highlighted by a 15% increase in commercial
real estate loans to $95.37 million at March 31, 2013 compared with
$83.08 million at March 31, 2012, led by loans on investment and
income-producing property. Construction lending rose 17% to $15.55
million in first quarter 2013 compared with $13.22 million in first
quarter 2012. 
Management noted the bank had more than $20 million of pending loans
as the bank entered second quarter 2013, including a large commercial
and industrial loan. The company has approximately $67 million in
approved an untapped lines of credit. Line usage was approximately
60%, partially reflecting seasonally lower levels of credit line
usage, compared with a more normal level of 75% usage.  
The bank's balance sheet continued to demonstrate improving quality.
The ratio of non-performing loans to total loans declined to 1.82% at
March 31, 2013 compared with 3.07% at March 31, 2012. The bank's
target for this ratio is approximately 2% or below. The company's
allowance for loan losses to total loans was 1.69% in first quarter
2013 compared with 1.89% in first quarter 2012 and 1.70% at year-end
2012. 
Coverage for losses increased significantly, with an allowance for
loan losses to non-accruing loans of 93% in first quarter 2013
compared 61% in first quarter 2012. Loan charge-offs decreased 52% in
first quarter 2013 compared with first quarter 2012. The ratio of
loans past due 30 to 90 days to total loans was 0.78%, well below the
company's target for the quarter. Other real estate owned declined to
$2.32 million at March 31, 2013 compared with $3.57 million at March
31, 2012. The bank's "Texas Ratio" declined to 21% compared with 39%
in the prior year's first quarter. 
Chapman concluded: "We were very pleased with our performance and
loan growth during the first quarter. With strengthened underwriting,
credit and risk management processes in place, we believe that the
loans we're making are well-secured and of high quality. Enhancing
the company's value to shareholders through asset quality improvement
and through revenue growth is a top priority. Although we face
economic, regulatory and interest rate challenges, we are optimistic
that Bank of the James can leverage its commitment to Region 2000 and
earn a greater share of retail, commercial, and investment services
business." 
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 is celebrating 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 


 
                                                                            
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                  Three      Three               Year       Year            
                 months     months                to         to             
                 ending     e
nding               date       date            
                 Mar 31,    Mar 31,             Mar 31,    Mar 31,          
Selected Data:    2013       2012     Change     2013       2012     Change 
----------------------------------------------------------------------------
Interest                                                                    
 income        $    4,537 $    4,686   -3.18% $    4,537 $    4,686   -3.18%
----------------------------------------------------------------------------
Interest                                                                    
 expense              616        820  -24.88%        616        820  -24.88%
----------------------------------------------------------------------------
Net interest                                                                
 income             3,921      3,866    1.42%      3,921      3,866    1.42%
----------------------------------------------------------------------------
Provision for                                                               
 loan losses          235        750  -68.67%        235        750  -68.67%
----------------------------------------------------------------------------
Noninterest                                                                 
 income               964        671   43.67%        964        671   43.67%
----------------------------------------------------------------------------
Noninterest                                                                 
 expense            3,531      3,284    7.52%      3,531      3,284    7.52%
----------------------------------------------------------------------------
Income taxes          331        143  131.47%        331        143  131.47%
----------------------------------------------------------------------------
Net income            788        360  118.89%        788        360  118.89%
----------------------------------------------------------------------------
Weighted                                                                    
 average                                                                    
 shares                                                                     
 outstanding    3,352,725  3,342,415    0.31%  3,352,725  3,342,415    0.31%
----------------------------------------------------------------------------
Basic net                                                                   
 income per                                                                 
 share         $     0.24 $     0.11 $  0.13  $     0.24 $     0.11 $  0.13 
----------------------------------------------------------------------------
Fully diluted                                                               
 net income                                                                 
 per share     $     0.24 $     0.11 $  0.13  $     0.24 $     0.11 $  0.13 
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
Balance Sheet                                                               
 at              Mar 31,    Dec 31,             Mar 31,    Dec 31,          
period end:       2013       2012     Change     2012       2011     Change 
----------------------------------------------------------------------------
Loans, net     $  325,510 $  319,922    1.75% $  312,185 $  318,754   -2.06%
----------------------------------------------------------------------------
Loans held for                                                              
 sale                 804        904  -11.06%      1,005        434  131.57%
----------------------------------------------------------------------------
Total                                                                       
 securities        48,771     53,369   -8.62%     65,260     56,471   15.56%
----------------------------------------------------------------------------
Total deposits    385,194    399,015   -3.46%    386,591    374,234    3.30%
----------------------------------------------------------------------------
Stockholders'                                                               
 equity            29,972     29,613    1.21%     27,036     26,805    0.86%
----------------------------------------------------------------------------
Total assets      428,086    441,381   -3.01%    433,372    427,436    1.39%
----------------------------------------------------------------------------
Shares                                                                      
 outstanding    3,352,725  3,352,725       -   3,342,418  3,342,418       - 
----------------------------------------------------------------------------
Book value per                                                              
 share         $     8.94 $     8.83 $  0.11  $     8.09 $     8.02 $  0.07 
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
                    Three      Three              Year       Year           
                   months     months               to         to            
                   ending     ending              date       date           
                   Mar 31,    Mar 31,            Mar 31,    Mar 31,         
Daily averages:     2013       2012    Change     2013       2012    Change 
----------------------------------------------------------------------------
Loans, net       $  321,431 $  316,253   1.64% $  321,431 $  316,253   1.64%
----------------------------------------------------------------------------
Loans held for                                                              
 sale                   964        774  24.55%        964        774  24.55%
----------------------------------------------------------------------------
Total securities     53,003     61,017 -13.13%     53,003     61,017 -13.13%
----------------------------------------------------------------------------
Total deposits      387,999    375,435   3.35%    387,999    375,435   3.35%
----------------------------------------------------------------------------
Stockholders'                                                               
 equity              28,989     26,818   8.10%     28,989     26,818   8.10%
----------------------------------------------------------------------------
Interest earning                                                            
 assets             391,029    393,195  -0.55%    391,029    393,195  -0.55%
----------------------------------------------------------------------------
Interest bearing                                                            
 liabilities        333,404    344,208  -3.14%    333,404    344,208  -3.14%
----------------------------------------------------------------------------
Total assets        429,431    426,030   0.80%    429,431    426,030   0.80%
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
                       Three     Three             Year      Year           
                      Months    months              to        to            
                      Ending    ending             date      date           
                      Mar 31,   Mar 31,           Mar 31,   Mar 31,         
Financial Ratios:      2013      2012    Change    2013      2012    Change 
----------------------------------------------------------------------------
Return on average              
                                             
 assets                  0.74%     0.34%   0.40      0.74%     0.34%   0.40 
----------------------------------------------------------------------------
Return on average                                                           
 equity                 11.02%     5.38%   5.64     11.02%     5.38%   5.64 
----------------------------------------------------------------------------
Net interest margin      4.06%     3.94%   0.12      4.06%     3.94%   0.12 
----------------------------------------------------------------------------
Efficiency ratio        72.28%    72.38%  (0.10)    72.28%    72.38%  (0.10)
----------------------------------------------------------------------------
Average equity to                                                           
 average assets          6.75%     6.29%   0.46      6.75%     6.29%   0.46 
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
                       Three     Three              Year      Year          
                       months    months              to        to           
                       ending    ending             date      date          
Allowance for loan    Mar 31,   Mar 31,           Mar 31,   Mar 31,         
 losses:                2013      2012    Change    2013      2012    Change
----------------------------------------------------------------------------
Beginning balance    $  5,535  $  5,612   -1.37% $  5,535  $  5,612   -1.37%
----------------------------------------------------------------------------
Provision for losses      235       750  -68.67%      235       750  -68.67%
----------------------------------------------------------------------------
Charge-offs              (186)     (384) -51.56%     (186)     (384) -51.56%
----------------------------------------------------------------------------
Recoveries                 22        28  -21.43%       22        28  -21.43%
----------------------------------------------------------------------------
Ending balance          5,606     6,006   -6.66%    5,606     6,006   -6.66%
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
Nonperforming         Mar 31,   Dec 31,           Mar 31,   Dec 31,         
 assets:                2013      2012    Change    2012      2011    Change
----------------------------------------------------------------------------
Total nonperforming                                                         
 loans               $   6,040 $   6,346  -4.82% $   9,779 $  10,376  -5.75%
----------------------------------------------------------------------------
Other real estate                                                           
 owned                   2,318     2,112   9.75%     3,566     3,253   9.62%
----------------------------------------------------------------------------
Total nonperforming                                                         
 assets                  8,358     8,458  -1.18%    13,345    13,629  -2.08%
----------------------------------------------------------------------------
Troubled debt                                                               
 restructurings -                                                           
 (performing                                                                
 portion)                  569       572  -0.52%       187       783 -76.12%
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
Asset quality         Mar 31,   Dec 31,           Mar 31,   Dec 31,         
 ratios:               2013      2012    Change    2012      2011    Change 
----------------------------------------------------------------------------
Nonperforming loans                                                         
 to total loans          1.82%     1.95%  (0.13)     3.07%     3.20%  (0.13)
----------------------------------------------------------------------------
Allowance for loan                                                          
 losses to total                                                            
 loans                   1.69%     1.70%  (0.01)     1.89%     1.73%   0.16 
----------------------------------------------------------------------------
Allowance for loan                                                          
 losses to                                                                  
 nonperforming loans    92.81%    87.22%   5.59     61.42%    54.09%   7.33 
----------------------------------------------------------------------------

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