Bank of the James Announces Third Quarter, Nine Months of 2021 Financial Results and Declaration of Dividend

Earnings Growth, Asset Quality, Commercial Banking Momentum, Active Mortgage Lending

LYNCHBURG, Va., Oct. 22, 2021 (GLOBE NEWSWIRE) -- Bank of the James Financial Group, Inc. (the “Company”) (NASDAQ:BOTJ), the parent company of Bank of the James (the “Bank”), a full-service commercial and retail bank serving Region 2000 (the greater Lynchburg MSA), and the Blacksburg, Charlottesville, Harrisonburg, Lexington, and Roanoke, Virginia markets, today announced unaudited results for the three and nine month periods ended September 30, 2021.

Net income for the three months ended September 30, 2021 was $1.88 million or $0.40 per diluted share compared with $1.45 million or $0.30 per diluted share for the three months ended September 30, 2020. For the nine months ended September 30, 2021, net income was $5.73 million or $1.21 per diluted share compared with $3.27 million or $0.68 per diluted share for the nine months ended September 30, 2020. The outstanding shares used to calculate earnings per share for both the 2020 and 2021 periods have been adjusted to include a 10% stock dividend declared in June 2021.

Robert R. Chapman III, CEO, Bank of the James and President of the Holding Company, commented: “The Company’s quarterly and year-to-date financial performance reflected continued success in providing efficient and effective service to customers which again resulted in solid earnings. A focus on interest expense management and maintaining strong asset quality have supported the Company’s positive financial performance.

“Working closely with customers to meet their banking needs, manage their finances and maintain credit quality during challenging times has contributed to low levels of nonperforming loans. The Company has not needed to make any provision for loan losses in 2021, which has had a positive impact on net interest income after provision for loan losses and reflects the continuing financial and economic health of our customer base.

“We actively participated in the Payroll Protection Program (PPP), which has been a significant element of our 2021 operations as our team dedicated considerable time and energy to working with customers to secure loans, and processing and managing these loans. As the program is in the final stages of winding down, we believe it has provided meaningful support for the hundreds of commercial customers who participated. We assisted existing customers and welcomed many businesses who were working with Bank of the James for the first time. We look forward to retaining many of these businesses as clients.

“Throughout the communities we serve, the signs of economic recovery are very encouraging. While it is too early to declare victory over COVID-19, the Delta variant and the lingering impact of the pandemic, all signs point to continuing normalization of life and activities. Consistent with our Company’s safe, secure operating philosophy, we are maintaining significant cash reserves and an adequate allowance for loan loss given the risks and uncertainties in the current environment. While we maintain a prudent, cautious stance, we are moving forward with confidence.”

Highlights

• Net income in the third quarter and nine months of 2021 reflected significant noninterest income contributions from mortgage loan processing fees, gains on the sale of originated residential mortgages to the secondary market and continuing growth in the Bank’s fee-based corporate electronic treasury services.

• Total interest income was $7.32 million in the third quarter of 2021 compared with $7.34 million a year earlier, and $21.91 million in the nine months of 2021 compared with $21.91 million a year earlier. Interest income from loans in the third quarter of 2021 reflected increasing organic commercial loan activity offset by declining income related to PPP loans as the program continues to wind down.

• Net interest income after provision for loan losses was $6.82 million in the third quarter of 2021 and $20.28 million in the nine months of 2021, up 24% and 28%, respectively, compared with the 2020 periods. Net interest income in the three and nine-month periods ended September 30, 2021 reflected 57% and 55% year-over-year reductions respectively of interest expense and no provision for loan losses in both periods of 2021.

• Noninterest income in the third quarter and nine months of 2021 primarily reflected income from residential mortgage loan processing fees and gains on the sale of originated mortgage loans as the Bank’s mortgage lending maintained brisk activity.

• Loans, net of the allowance for loan losses, were $583.6 million at September 30, 2021, compared with $601.9 million at December 31, 2020, primarily reflecting ongoing paydowns of PPP loans.

• Commercial real estate loans (owner occupied and non-owner occupied) increased in the third quarter of 2021 from the second quarter of 2021 and have grown by $24.3 million since September 30, 2020.

• Asset quality was sound with a 0.32% ratio of nonperforming loans to total loans, reflecting customers’ strong credit quality, and nonperforming loans remained at low levels. The allowance for loan losses to total loans was 1.23% at September 30, 2021 (approximately 1.27% excluding government-guaranteed PPP loans).

• Total deposits increased to $853.8 million at September 30, 2021 compared with $765.0 million at December 31, 2020, reflecting continued core deposit growth (noninterest-bearing demand, NOW, savings and money market accounts) and continued trimming of time deposits. Growth has reflected factors including increased market presence and new and expanded commercial and retail banking relationships.

• Total stockholders’ equity was $68.9 million at September 30, 2021 compared with $66.7 million at December 31, 2020. Book value per share was $14.53 at September 30, 2021 compared with $15.38 per share at December 31, 2020, primarily reflecting the 10% stock dividend declared in the second quarter of 2021.

• On October 19, 2021 the Company’s board of directors approved a quarterly $0.07 per share dividend payable to stockholders of record on November 26, 2021, to be paid on December 10, 2021.

• The Company’s current stock repurchase plan remains in effect through January 20, 2022. Although the Company did not repurchase any stock pursuant to this program during the third quarter of 2021, the Company continues to look for opportunities to repurchase shares within the safe harbor and when consistent with the Company’s goals.

• In October 2021 Michael A. Syrek was named President of the Bank. He has served as Executive Vice President and Chief Loan Officer since joining the Bank in 2012 and continues to head commercial banking operations and a growing team of bankers. Robert Chapman continues to serve as the CEO of the Bank and President of the Company.

Third Quarter, Nine Months of 2021 Operational Review

Net interest income after provision for loan losses in the third quarter of 2021 was $6.8 million compared with $5.5 million in the third quarter of 2020, with growth reflecting stable interest income, sharply reduced interest expense and no loan loss provision in the 2021 period versus a $700,000 provision in the third quarter of 2020.

Total interest income was $7.3 million in the third quarter of both 2021 and 2020. Total interest income reflected accreted fees from PPP loan processing, offset by flat organic loan growth and continued downward pressure on interest rates. The return on interest earning assets during the third quarter of 2021 was 3.33% compared with 3.71% a year earlier.

In the nine months of 2021, net interest income after provision for loan losses was $20.3 million, up 27% from $15.9 million in the nine months of 2020. The year-over-year increase during the 2021 period primarily reflected stable interest income, a 55% reduction of interest expense, and no provision for loan losses compared with a $2.3 million provision in the nine months of 2020. Total interest income in the nine months of 2021 reflected relatively flat commercial lending activity (exclusive of PPP lending), accretion of PPP loan processing fees, and pressure on interest rates. The return on interest earning assets was 3.44% compared with 3.92% a year earlier.

Lower interest expense in both periods of 2021 reflected reduced costs of time deposits and borrowings, a retirement of higher-cost debt in 2020, and continued growth of lower-cost core deposits (noninterest-bearing demand, NOW, savings and money market accounts). The rate paid on total interest-bearing liabilities was 0.28% in the third quarter of 2021, down from 0.71% a year earlier. The net interest margin was 3.11% and interest spread was 3.05% in the third quarter of 2021. The margin and interest spread in the third quarter and nine months of 2021 were relatively consistent with the margin and interest spread in the comparable 2020 periods.

In the third quarter of 2021, noninterest income, including gains from the sale of residential mortgages to the secondary market and income from the Bank’s line of treasury management services for commercial customers, was $2.8 million compared with $3.1 million in the third quarter of 2020. Fees generated by brisk residential mortgage origination activity and subsequent gains on sale of residential mortgage loans have made important income contributions throughout 2021.

For the nine months of 2021, noninterest income was $8.3 million compared with $8.0 million in the comparable period of 2020. Noninterest expense in the third quarter and nine months of 2021 increased slightly compared with both periods in 2020, primarily reflecting increased personnel expenses that included performance-based compensation for residential mortgage production and employee work on PPP loans. The Company’s Return on Average Assets and Return on Average Equity in the third quarter and nine months of 2021 trended positively in the quarterly and nine-month comparisons.

Balance Sheet Review: Asset Quality, Positive Commercial Lending Outlook

Total assets were $942.6 million at September 30, 2021 compared with $851.4 million at December 31, 2020, with the increase primarily reflecting an increase in cash, cash equivalents, and securities available-for-sale resulting from an increase in deposits.

Loans, net of allowance for loan losses of $7.3 million, were $583.6 million at September 30, 2021 compared with loans, net of allowance for loan losses of $7.2 million of $601.9 million at December 31, 2020. On a consecutive quarter basis, the decline in net loans primarily reflected the ongoing paydowns and forgiveness of PPP loans as the program continues to wind down. At September 30, 2021, the Company had approximately $19.0 million of government-guaranteed PPP loans which should decline significantly in the fourth quarter of 2021.

Commercial loans, including outstanding PPP loans, were $116.9 million at September 30, 2021 compared with $145.1 million at December 31, 2020. As noted, this decline primarily reflects paydowns of PPP loans. Slower business activity and conservative borrowing during the pandemic has slowed normal commercial & industrial lending; however, management notes as business conditions improve there are positive signs of increasingly normalized banking activity and growing full-service relationships.

Michael A. Syrek, President of the Bank, commented: “Even during the pandemic, we have been very successful generating CRE and construction lending. In particular, the Lynchburg and Harrisonburg markets have been especially active for lending and commercial banking.

“Importantly, we continue to expand banking relationships with a host of customers in our served markets, and are earning new business because of our extensive product capabilities and services that we believe exceed those of our competitors. Electronic commercial treasury services, cash management, and depository products complement lending. We have continued to approve and close a large volume of new commercial loans, although not at a sufficient pace to offset significant PPP forgiveness payoffs combined with normal amortization.

“As a regional community bank with significant scope and scale, our wide range of sophisticated products combined with expertise and personalized financial solutions give us a significant competitive advantage. As a result, we can look beyond transactional banking and focus on establishing and growing full-service banking relationships with business customers. Our commercial loan pipeline is robust, and we are regularly earning new customers. We believe that as the climate for businesses continues to normalize, we will experience even greater momentum.”

Commercial real estate and commercial construction lending have increased modestly during the past year despite the pandemic and economic uncertainties. At September 30, 2021, owner-occupied commercial mortgages were $123.0 million compared with $102.7 million a year earlier. Non-owner occupied commercial mortgages were $178.1 million at September 30, 2021 compared with $174.2 million at September 30, 2020. Commercial construction loans were $26.5 million compared with $21.6 million a year earlier.

Consumer loans increased slightly year-over-year. Retained residential mortgage totals declined to $34.7 million at September 30, 2021 from $48.5 million at September 30, 2020, reflecting the Company’s ongoing practice of selling originated residential mortgages to the secondary market and judicious management of retained mortgage loans. Residential construction loans increased by 38% year-over-year, reflecting the active demand for new homes in several of the Company’s markets.

Asset quality has remained strong, with a ratio of nonperforming loans to total loans of 0.32% at September 30, 2021. The ratio has remained consistently low throughout the first three quarters of 2021. The allowance for loan losses to total loans was 1.23% at September 30, 2021 compared with 1.17% at December 31, 2020 (approximately 1.27% excluding PPP loans for both periods). Total nonperforming loans were $1.9 million at September 30, 2021 compared with $2.1 million at December 31, 2020. Other real estate owned was $806,000 at September 30, 2021 compared with $1.1 million at December 31, 2020.

The Company maintained a 382% allowance for loan losses to nonperforming loans ratio. While loan and asset quality have remained sound throughout the pandemic period, management has maintained adequate reserves against continued loan portfolio risk primarily attributable to the continuing economic uncertainties arising from COVID-19 and the Delta variant.

Total deposits at September 30, 2021 were $853.8 million, compared with $765.0 million at December 31, 2020. As in the past several quarters, increased demand deposits accounted for the growth, in part due to increased balances held by businesses, organic growth in the Bank’s markets and also new customer deposits. The Bank continued to trim time deposits, which have declined to $140.3 million at September 30, 2021 from $158.1 million at December 31, 2020. Core deposits (noninterest bearing demand, NOW, money market and savings) were approximately 84% of total deposits at September 30, 2021.

The Company’s measures of shareholder value included total stockholders’ equity of $68.9 million at September 30, 2021, compared with $66.7 million at December 31, 2020, and book value per share of $14.53 compared with $15.38 at December 31, 2020, primarily reflecting a 10% stock dividend declared in the second quarter of 2021.

About the Company

Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc. opened for business in July 1999 and is headquartered in Lynchburg, Virginia. The bank currently services customers in Virginia from offices located in Altavista, Amherst, Appomattox, Bedford, Blacksburg, Charlottesville, Forest, Harrisonburg, Lexington, Lynchburg, Madison Heights, Roanoke, and Rustburg. The bank offers full investment and insurance services through its BOTJ Investment Services division and BOTJ Insurance, Inc. subsidiary. The bank provides mortgage loan origination through Bank of the James Mortgage, a division of Bank of the James. Bank of the James Financial Group, Inc. common stock is listed under the symbol “BOTJ” on the NASDAQ Stock Market, LLC. Additional information on the Company is available at www.bankofthejames.bank.

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, the effect of the COVID-19 pandemic, and changes in the value of real estate securing loans made by Bank of the James (the "Bank"), a subsidiary of the Company. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Company's filings with the Securities and Exchange Commission and previously filed by the Bank (as predecessor of the Company) with the Federal Reserve Board.

CONTACT: J. Todd Scruggs, Executive Vice President and Chief Financial Officer (434) 846-2000.
tscruggs@bankofthejames.com

FINANCIAL STATEMENTS FOLLOW

Bank of the James Financial Group, Inc. and Subsidiaries
Dollar amounts in thousands, except per share data
unaudited

Selected Data:	Three months ending Sep 30, 2021			Three months ending Sep 30, 2020			Change			Year to date Sep 30, 2021			Year to date Sep 30, 2020			Change
Interest income	$	7,315		$	7,338			-0.31	%	$	21,914		$	21,907			0.03	%
Interest expense		493			1,135			-56.56	%		1,634			3,650			-55.23	%
Net interest income		6,822			6,203			9.98	%		20,280			18,257			11.08	%
Provision for loan losses		-			700			-100.00	%		-			2,348			-100.00	%
Noninterest income		2,822			3,064			-7.90	%		8,305			8,039			3.31	%
Noninterest expense		7,298			6,744			8.21	%		21,424			19,876			7.79	%
Income taxes		465			369			26.02	%		1,431			802			78.43	%
Net income		1,881			1,454			29.37	%		5,730			3,270			75.23	%
Weighted average shares outstanding - basic (1)		4,740,657			4,773,380			(32,723	)		4,750,235			4,776,523			(26,288	)
Weighted average shares outstanding - diluted (1)		4,740,657			4,773,380			(32,723	)		4,750,235			4,776,523			(26,288	)
Basic net income per share (1)	$	0.40		$	0.30		$	0.10		$	1.21		$	0.68		$	0.53
Fully diluted net income per share (1)	$	0.40		$	0.30		$	0.10		$	1.21		$	0.68		$	0.53

(1) Shares and per share amounts for all periods have been adjusted to reflect a 10% stock dividend declared in June 2021.

Balance Sheet at period end:	Sep 30, 2021			Dec 31, 2020			Change			Sep 30, 2020			Dec 31, 2019			Change
Loans, net	$	583,572		$	601,934			-3.05	%	$	616,581		$	573,274			7.55	%
Loans held for sale		6,462			7,102			-9.01	%		10,232			4,221			142.41	%
Total securities		155,957			93,856			66.17	%		79,303			63,343			25.20	%
Total deposits		853,829			764,967			11.62	%		763,933			649,459			17.63	%
Stockholders' equity		68,902			66,732			3.25	%		65,782			61,445			7.06	%
Total assets		942,631			851,386			10.72	%		849,129			725,394			17.06	%
Shares outstanding		4,740,657			4,339,436			401,221			4,339,436			4,357,436			(18,000	)
Book value per share	$	14.53		$	15.38		$	(0.85	)	$	15.16		$	14.10		$	1.06

Daily averages:	Three months ending Sep 30, 2021			Three months ending Sep 30, 2020			Change		Year to date Sep 30, 2021			Year to date Sep 30, 2020			Change
Loans, net	$	587,129		$	619,574		-5.24	%	$	598,135		$	601,382		-0.54	%
Loans held for sale		5,638			8,881		-36.52	%		5,777			6,072		-4.86	%
Total securities		142,670			63,743		123.82	%		118,662			59,358		99.91	%
Total deposits		843,452			768,618		9.74	%		820,517			720,009		13.96	%
Stockholders' equity		67,657			62,309		8.58	%		66,183			61,778		7.13	%
Interest earning assets		869,899			793,709		9.60	%		847,730			744,246		13.90	%
Interest bearing liabilities		692,709			638,166		8.55	%		669,535			608,968		9.95	%
Total assets		930,846			849,820		9.53	%		906,389			798,106		13.57	%

Financial Ratios:	Three months ending Sep 30, 2021		Three months ending Sep 30, 2020		Change		Year to date Sep 30, 2021		Year to date Sep 30, 2020		Change
Return on average assets	0.80	%	0.68	%	0.12		0.85	%	0.55	%	0.30
Return on average equity	11.03	%	9.26	%	1.77		11.58	%	7.05	%	4.53
Net interest margin	3.11	%	3.10	%	0.01		3.20	%	3.27	%	(0.07	)
Efficiency ratio	75.67	%	72.77	%	2.90		74.95	%	75.59	%	(0.64	)
Average equity to
average assets	7.27	%	7.33	%	(0.06	)	7.30	%	7.74	%	(0.44	)

Allowance for loan losses:	Three months ending Sep 30, 2021			Three months ending Sep 30, 2020			Change		Year to date Sep 30, 2021			Year to date Sep 30, 2020			Change
Beginning balance	$	7,212		$	6,193		16.45	%	$	7,156		$	4,829		48.19	%
Provision for losses		-			700		-100.00	%		-			2,348		-100.00	%
Charge-offs		(16	)		(57	)	-71.93	%		(80	)		(396	)	-79.80	%
Recoveries		80			130		-38.46	%		200			185		8.11	%
Ending balance		7,276			6,966		4.45	%		7,276			6,966		4.45	%

Nonperforming assets:	Sep 30, 2021			Dec 31, 2020			Change		Sep 30, 2020			Dec 31, 2019			Change
Total nonperforming loans	$	1,904		$	2,064		-7.75	%	$	2,538		$	1,301		95.08	%
Other real estate owned		806			1,105		-27.06	%		1,405			2,339		-39.93	%
Total nonperforming assets		2,710			3,169		-14.48	%		3,943			3,640		8.32	%
Troubled debt restructurings - (performing portion)		376			392		-4.08	%		397			410		-3.17	%

Asset quality ratios:	Sep 30, 2021		Dec 31, 2020		Change		Sep 30, 2020		Dec 31, 2019		Change
Nonperforming loans to total loans	0.32	%	0.34	%	(0.02	)	0.41	%	0.23	%	0.18
Allowance for loan losses to total loans	1.23	%	1.17	%	0.06		1.12	%	0.84	%	0.28
Allowance for loan losses to nonperforming loans	382.14	%	346.71	%	35.43		274.47	%	371.18	%	(96.71	)

Bank of the James Financial Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollar amounts in thousands, except per share amounts)

	(unaudited)
Assets	9/30/2021				12/31/2020
Cash and due from banks	$	30,340			$	31,683
Federal funds sold		116,956				69,203
Total cash and cash equivalents		147,296				100,886
Securities held-to-maturity (fair value of $4,028 in 2021 and $4,192 in 2020)		3,659				3,671
Securities available-for-sale, at fair value		152,298				90,185
Restricted stock, at cost		1,324				1,551
Loans, net of allowance for loan losses of $7,276 in 2021 and $7,156 in 2020		583,572				601,934
Loans held for sale		6,462				7,102
Premises and equipment, net		17,030				16,621
Software, net		208				361
Interest receivable		2,106				2,350
Cash value - bank owned life insurance		18,670				16,355
Other real estate owned		806				1,105
Income taxes receivable		312				-
Deferred tax asset		1,798				1,219
Other assets		7,090				8,046
Total assets	$	942,631			$	851,386
Liabilities and Stockholders' Equity
Deposits
Noninterest bearing demand		163,510				143,345
NOW, money market and savings		549,989				463,506
Time		140,330				158,116
Total deposits		853,829				764,967
Capital notes		10,031				10,027
Income taxes payable		-				286
Interest payable		49				85
Other liabilities		9,820				9,289
Total liabilities	$	873,729			$	784,654
Stockholders' equity
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding
4,740,657 and 4,339,436 as of September 30, 2021 and December 31, 2020		10,145				9,286
Additional paid-in-capital		37,230				30,989
Accumulated other comprehensive (loss) income		(386	)			1,792
Retained earnings		21,913				24,665
Total stockholders' equity	$	68,902			$	66,732
Total liabilities and stockholders' equity	$	942,631			$	851,386

Bank of the James Financial Group, Inc. and Subsidiaries
Consolidated Statements of Income
(dollar amounts in thousands, except per share amounts)
(unaudited)

	For the Three Months								For the Nine Months
	Ended September 30,								Ended September 30,
Interest Income	2021				2020				2021				2020
Loans	$	6,605			$	6,958			$	20,089			$	20,695
Securities
US Government and agency obligations		230				168				640				506
Mortgage backed securities		138				50				299				164
Municipals		243				94				599				249
Dividends		4				15				39				48
Other (Corporates)		55				25				155				71
Interest bearing deposits		7				15				26				85
Federal Funds sold		33				13				67				89
Total interest income		7,315				7,338				21,914				21,907
Interest Expense
Deposits
NOW, money market savings		146				177				419				669
Time Deposits		239				798				890				2,559
Finance leases		26				29				80				87
Brokered time deposits		-				46				-				143
Capital notes		82				85				245				192
Total interest expense		493				1,135				1,634				3,650
Net interest income		6,822				6,203				20,280				18,257
Provision for loan losses		-				700				-				2,348
Net interest income after provision for loan losses		6,822				5,503				20,280				15,909
Noninterest income
Gains on sale of loans held for sale		2,091				2,459				6,175				5,586
Service charges, fees and commissions		612				498				1,803				1,500
Life insurance income		117				101				315				289
Other		2				6				12				20
Gain on sales of available-for-sale securities		-				-				-				644
Total noninterest income		2,822				3,064				8,305				8,039
Noninterest expenses
Salaries and employee benefits		4,093				3,713				11,901				11,040
Occupancy		437				419				1,270				1,237
Equipment		626				560				1,883				1,738
Supplies		120				120				354				353
Professional, data processing, and other outside expense		1,029				990				2,978				2,884
Marketing		209				185				720				500
Credit expense		309				359				869				831
Other real estate expenses		1				15				74				135
FDIC insurance expense		137				76				425				220
Other		337				307				950				938
Total noninterest expenses		7,298				6,744				21,424				19,876
Income before income taxes		2,346				1,823				7,161				4,072
Income tax expense		465				369				1,431				802
Net Income	$	1,881			$	1,454			$	5,730			$	3,270
Weighted average shares outstanding - basic (1)		4,740,657				4,773,380				4,750,235				4,776,523
Weighted average shares outstanding - diluted (1)		4,740,657				4,773,380				4,750,235				4,776,523
Net income per common share - basic (1)	$	0.40			$	0.30			$	1.21			$	0.68
Net income per common share - diluted (1)	$	0.40			$	0.30			$	1.21			$	0.68

(1) Shares and per share amounts for all periods have been adjusted to reflect a 10% stock dividend declared in June 2021.