Bank of the James Reports Record Earnings in Third Quarter, Nine Months of 2013

Bank of the James Reports Record Earnings in Third Quarter, Nine Months of 2013 
LYNCHBURG, VA -- (Marketwired) -- 10/23/13 --   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, commonly known as "Region 2000" and other
markets in Central Virginia, today announced unaudited results for
the three months and nine months ended September 30, 2013. 
Performance Highlights 


 
--  Net income for the three months ended September 30, 2013 was $813,000
    or $0.24 per diluted share, a quarterly earnings record and up 51%
    compared with $539,000 or $0.16 per diluted for the three months ended
    September 30, 2012.
--  Net income for the nine months ended September 30, 2013 was $2.40
    million or $0.71 per diluted share, a 73% increase compared with $1.39
    million or $0.41 per diluted share for the nine months ended September
    30, 2012. This was the highest nine months' earnings in the company's
    14-year history.
--  Net interest income after provision for loan losses was $3.97 million
    in third quarter 2013 compared with $3.43 million in third quarter
    2012, while for the nine months of 2013, net interest income after
    loan loss provision was $11.56 million, up 16% compared with the nine
    months of 2012.
--  Ongoing interest expense management and noninterest-bearing deposit
    growth contributed to an 18% and 23% reduction in total interest
    expense in third quarter and nine months of 2013, respectively,
    compared with the same periods in 2012.
--  The ratio of nonperforming assets to total assets was 1.32% in third
    quarter 2013 compared with 1.95% at year-end 2012, while the dollar
    amount of total nonperforming assets declined 32% to $5.72 million at
    September 30, 2013 compared with $8.46 million at December 31, 2012.
    The bank's allowance for loan losses to nonperforming loans continued
    to exceed 100% at September 30, 2013.
--  For the nine months of 2013, return on average assets (ROAA) and
    return on average equity (ROAE) increased year over year to 0.74% and
    10.76%, respectively, reflecting both improved balance sheet quality
    and earnings growth.
--  Book value per share was 
$8.72 at September 30, 2013 compared with
    $8.68 per share at September 30, 2012.

  
Robert R. Chapman III, President and CEO, commented: "We are pleased to
report continued quarterly earnings growth and record financial
results for the third quarter and nine months of 2013. As an
indication of how well the bank has performed in the past few
quarters, net income in our first nine months this year alone
exceeded last year's total net income. Net loans are up $12 million
from September 30, 2012, and the growth reflects our commitment to
adding high quality commercial and residential loans that we hold. In
our mortgage division, we have seen a decline in mortgage refinancing
activity with growth in mortgages used to purchase homes, which now
comprise more than 70% of the division's total mortgage originations. 
"We have managed interest expense carefully while replacing some
higher-cost funding with lower-priced core deposits, including
noninterest-bearing commercial deposits as part of an overall
commercial banking relationship. We are enthusiastic about the
traction our commercial lending and business banking team is getting,
which is contributing significantly to a more diversified and
profitable loan, deposit and revenue mix. 
"We are leveraging the strength, reputation, capabilities and
contacts we have developed in Region 2000 to judiciously expand
beyond the Lynchburg MSA. In the near future, we hope to establish a
full-service location in Appomattox, Virginia, and are well along the
path of expanding our footprint by establishing a commercial loan
production office in a market outside of Region 2000. We are
experiencing very positive reception to our suite of commercial
banking products and services, with new lending relationships also
incorporating deposits and fee-based treasury management services. 
"As in past quarters this year, improved asset quality is a major
contributor to year-over-year earnings improvement. While we will
continue working to reduce levels of OREO, trim nonperforming loans,
and return non-accruing loans back to accruing status when possible,
our asset quality ratios are close to or below our internal targets.
We're measuring our ongoing performance on growth, productivity, and
carefully managing costs." 
Third Quarter and Nine Month Financial Overview  
For the three months ended September 30, 2013, total interest income
was $4.57 million compared with $4.76 million for the three months
ended September 30, 2012, primarily reflecting stable income from
loans and slightly lower income from investments. Net interest income
after provision for loan losses was $3.97 million in third quarter
2013, compared with $3.43 million in third quarter 2012. 
The company lowered interest expense by 18% to $606,000 in third
quarter 2013 compared with $736,000 in third quarter 2012.
Additionally, the company did not need to add to its loan loss
reserve in third quarter 2013 compared with a provision of $601,000
in third quarter 2012. Despite continuing pressure on margins, the
bank's net interest margin was 4.06% in third quarter 2013 compared
with 4.09% in third quarter 2012. 
J. Todd Scruggs, CFO, commented: "We have been able to maintain
margins by carefully controlling interest expense and finding strong
lending opportunities. We have focused on borrowers who recognize the
value of the relationship with us and are not shopping around based
solely on pricing. As part of a broader relationship package, we've
been able to offer efficient and cost-effective treasury management
services that enhance value. Should rates increase, our adjustable
rate loan portfolio should support margin expansion." 
Noninterest income in third quarter 2013 was $769,000 compared with
$1.05 million in third quarter 2012, partially reflecting a decline
in mortgage fee income as refinancing activity slowed. Gains on sale
of securities decreased to $11,000 in the third quarter of 2013 as
compared to $241,000 realized in the third quarter 2012 which also
contributed to the decrease in noninterest income. Income generated
from service charges, fee income from treasury management services
and investment management services increased to $351,000 in third
quarter 2013 compared with $317,000 in third quarter 2012.  
Noninterest income for the nine months ended September 30, 2013 was
$2.64 million compared with $2.57 for the nine months of 2012.
Chapman noted that noninterest income growth in the nine months of
2013 included a tenfold increase in fees from commercial treasury
management services, which are anticipated to grow in future periods.
Noninterest expense was $10.77 million for the nine months ended
September 30, 2013 compared with $10.63 million for the same nine
months of 2012. This reflected modest increases in compensation
expenses and lower other real estate owned (OREO) expenses as the
company continued to reduce its portfolio of foreclosed and OREO
properties. 
For the nine months ended September 30, 2013, net interest income was
$11.85 million compared with $11.73 million for the nine months ended
September 30, 2012, with the increase primarily reflecting a 23%
interest expense reduction, and higher levels of interest income from
increased loan principal balances. The comp
any's net interest income
after provision for loan losses increased to $11.56 million in the
nine months of 2013 compared with $9.95 million in the nine months of
2012, reflecting an 84% lower loan loss provision in the 2013 period
versus the 2012 period.  
Balance Sheet Highlights and Outlook  
Loans, net of allowance, were $330.47 million at September 30, 2013,
up $10.55 million from $319.92 million at December 31, 2012. Total
deposits at September 30, 2013 were $393.13 million, compared with
$399.02 million at December 31, 2012. Year-end 2012 totals reflected
a temporary increase to professional settlement accounts related to
end-of-the-year real estate and business closings. On a consecutive
quarter basis, deposits in third quarter 2013 were up from $388.79
million in second quarter 2013 and $385.19 million in first quarter
2013, partially reflecting growth in commercial banking-related
deposits. 
The bank's balance sheet continued to demonstrate improved
year-over-year strength. Total nonperforming loans declined 37% to
$4.02 million compared with $6.35 million at December 31, 2012. This
lowered the company's ratio of nonperforming loans to total loans to
1.20% at September 30, 2013 compared with 1.95% at December 31, 2012. 
With sufficient reserves for loan losses and a decline in problem
credits, the company's allowance for loan losses to nonperforming
loans was 124% at September 30, 2013 compared with 87% at December
31, 2012. The bank's "Texas Ratio" (Non Performing Assets + Troubled
Debt Restructurings: Capital + Loan Loss Reserve), a measurement of
asset quality, was 15.1% at September 30, 2013. Other real estate
owned (OREO) declined to $1.70 million at September 30, 2013 compared
with $2.11 million at December 31, 2012 and $2.27 million at
September 30, 2012, reflecting steady disposition of owned properties
and few assets being added to OREO. 
Continued improvement in asset quality and overall bank performance
contributed to a return on average assets of 0.74% in the nine months
of 2013, up from 0.43% in the nine months of 2012, and a return on
average equity of 10.76% in the nine months of 2013 compared with
6.78% in the nine months of 2012. 
The bank remained "well capitalized" by accepted regulatory
standards, with an approximate tier 1 to average total assets ratio
of 9.01%, an approximate tier 1 risk-based capital ratio of 11.87%
and an approximate total risk-based capital ratio of 13.12%. 
Chapman concluded: "We are excited about our performance and
optimistic as we continue our service to a strengthening Region 2000
economy and, when strategically appropriate, expand our presence to
new markets. Continuing on the course we have established, we look to
grow while maintaining the stringent controls we have in place for
risk management and credit quality." 
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, and other markets in Central Virginia. 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                                                                   
                                                                            
                  Three      Three               Year       Year            
                 months     months                to         to             
                 ending     ending               date       date            
                 Sep 30,    Sep 30,             Sep 30,    Sep 30,          
Selected Data:    2013       2012     Change     2013       2012     Change 
----------------------------------------------------------------------------
Interest                                                                    
 income        $    4,573 $    4,763   -3.99% $   13,677 $   14,094   -2.96%
----------------------------------------------------------------------------
Interest                                                                    
 expense              606        736  -17.66%      1,832      2,365  -22.54%
----------------------------------------------------------------------------
Net interest                                                                
 income             3,967      4,027   -1.49%     11,845     11,729    0.99%
----------------------------------------------------------------------------
Provision for                         -100.0                                
 loan losses            -        601       0%        290      1,776  -83.67%
----------------------------------------------------------------------------
Noninterest                                                                 
 income               769      1,052  -26.90%      2,638      2,566    2.81%
----------------------------------------------------------------------------
Noninterest                                                                 
 expense            3,568      3,783   -5.68%     10,770     10,626    1.36%
----------------------------------------------------------------------------
Income taxes          355        156  127.56%      1,025        508  101.77%
----------------------------------------------------------------------------
Net income     
       813        539   50.83%      2,398      1,385   73.14%
----------------------------------------------------------------------------
Weighted                                                                    
 average                                                                    
 shares                                                                     
 outstanding    3,352,725  3,342,418    0.31%  3,352,725  3,342,416    0.31%
----------------------------------------------------------------------------
Basic net                                                                   
 income per                                                                 
 share         $     0.24 $     0.16 $  0.08  $     0.72 $     0.41 $  0.31 
----------------------------------------------------------------------------
Fully diluted                                                               
 net income                                                                 
 per share     $     0.24 $     0.16 $  0.08  $     0.71 $     0.41 $  0.31 
----------------------------------------------------------------------------
                                                                             
Balance Sheet                                                                
 at               Sep 30,    Dec 31,             Sep 30,    Dec 31,          
period end:        2013       2012     Change     2012       2011     Change 
-----------------------------------------------------------------------------
Loans, net      $  330,472 $  319,922    3.30% $  318,712 $  318,754   -0.01%
-----------------------------------------------------------------------------
Loans held for                                                               
 sale                  799        904  -11.62%      4,163        434  859.22%
-----------------------------------------------------------------------------
Total                                                                        
 securities         50,354     53,369   -5.65%     55,341     56,471   -2.00%
-----------------------------------------------------------------------------
Total deposits     393,128    399,015   -1.48%    384,349    374,234    2.70%
-----------------------------------------------------------------------------
Stockholders'                                                                
 equity             29,238     29,613   -1.27%     29,009     26,805    8.22%
-----------------------------------------------------------------------------
Total assets       435,372    441,381   -1.36%    426,077    427,436   -0.32%
-----------------------------------------------------------------------------
Shares                                                                       
 outstanding     3,352,725  3,352,725       -   3,342,418  3,342,415       3 
-----------------------------------------------------------------------------
Book value per                                                               
 share          $     8.72 $     8.83   (0.11) $     8.68 $     8.02 $  0.66 
-----------------------------------------------------------------------------
                                                                            
                  Three      Three               Year       Year            
                 months     months                to         to             
                 ending     ending               date       date            
Daily            Sep 30,    Sep 30,             Sep 30,    Sep 30,          
 averages:        2013       2012     Change     2013       2012     Change 
----------------------------------------------------------------------------
Loans, net     $  328,947 $  318,105    3.41% $  325,710 $  316,355    2.96%
----------------------------------------------------------------------------
Loans held for                                                              
 sale                 891      1,663  -46.42%        921      1,109  -16.95%
----------------------------------------------------------------------------
Total                                                                       
 securities        50,404     57,489  -12.32%     50,601     59,409  -14.83%
----------------------------------------------------------------------------
Total deposits    391,664    388,535    0.81%    388,827    382,942    1.54%
----------------------------------------------------------------------------
Stockholders'                                                               
 equity            30,570     27,656   10.54%     29,794     27,223    9.44%
----------------------------------------------------------------------------
Interest                                                                    
 earning                                                                    
 assets           397,140    393,735    0.86%    392,787    393,529   -0.19%
----------------------------------------------------------------------------
Interest                                                                    
 bearing                                                                    
 liabilities      337,397    342,887   -1.60%    334,526    343,807   -2.70%
----------------------------------------------------------------------------
Total assets      434,676    432,332    0.54%    431,073    429,656    0.33%
----------------------------------------------------------------------------
                                                                            
                  Three      Three                Year       Year           
                  months     months                to         to            
                  ending     ending               date       date           
Financial        Sep 30,    Sep 30,             Sep 30,    Sep 30,          
 Ratios:           2013       2012     Change     2013       2012     Change
----------------------------------------------------------------------------
Return on                                                                   
 average assets      0.74%      0.49%    0.25       0.74%      0.43%    0.31
----------------------------------------------------------------------------
Return on                                                                   
 average equity     10.55%      7.73%    2.82      10.76%      6.78%    3.98
----------------------------------------------------------------------------
Net interest                                                                
 margin              4.06%      4.09%   (0.03)      4.06%      4.01%    0.05
----------------------------------------------------------------------------
Efficiency                                                                  
 ratio              75.34%     74.48%    0.86      74.36%     74.33%    0.03
----------------------------------------------------------------------------
Average equity                                                              
 to average                                                                 
 assets              7.03%      6.40%    0.63       6.91%      6.34%    0.58
----------------------------------------------------------------------------
                                                                            
                 Three      Three                Year       Year            
                 months     months                to         to             
                 ending     ending               date       date            
Allowance for   Sep 30,    Sep 30,             Sep 30,    Sep 30,           
 loan losses:     2013       2012     Change     2013       2012     Change 
----------------------------------------------------------------------------
Beginning                                                                   
 balance       $   5,475  $   5,693    -3.83% $   5,535  $   5,612    -1.37%
----------------------------------------------------------------------------
Provision for                                                               
 losses                -        601  -100.00%       290      1,776   -83.67%
----------------------------------------------------------------------------
Charge-offs         (513)      (619)  -17.12%      (970)    (1,850)  -47.57%
----------------------------------------------------------------------------
Recoveries            21         18    16.67%       128        155   -17.42%
----------------------------------------------------------------------------
Ending balance     4,983      5,693   -12.47%     4,983      5,693   -12.47%
----------------------------------------------------------------------------
                                                                            
Nonperforming     Sep 30,    Dec 31,            Sep 30,    Dec 31,          
 assets:           2013       2012    Change     2012       2011     Change 
----------------------------------------------------------------------------
Total                                                                       
 nonperforming                                                              
 loans          $    4,022 $    6,346 -36.62% $    5,752 $   10,376  -44.56%
----------------------------------------------------------------------------
Other real                                                                  
 estate owned        1,701      2,112 -19.46%      2,267      3,253  -30.31%
----------------------------------------------------------------------------
Total                                                                       
 nonperforming                                                              
 assets              5,723      8,458 -32.34%      8,020     13,629  -41.15%
----------------------------------------------------------------------------
Troubled debt                                                               
 restructurings                                                             
 - (performing                                                              
 portion)              567        572  -0.87%        187        783  -76.12%
----------------------------------------------------------------------------
                                                                            
Asset quality   Sep 30,    Dec 31,             Sep 30,    Dec 31,           
 ratios:          2013       2012     Change     2012       2011     Change 
----------------------------------------------------------------------------
Nonperforming                                                               
 loans to                                                                   
 total loans        1.20%      1.95%   (0.75)      1.77%      3.20%   (1.43)
----------------------------------------------------------------------------
Allowance for                                                               
 loan losses                                                                
 to total                                                                   
 loans              1.49%      1.70%   (0.22)      1.75%      1.73%    0.02 
----------------------------------------------------------------------------
Allowance for                                                               
 loan losses                                                                
 to                                                                         
 nonperforming                                                              
 loans            123.89%     87.22%   36.67      98.97%     54.09%   44.89 
----------------------------------------------------------------------------

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