LYNCHBURG, Va., April 21, 2017 (GLOBE NEWSWIRE) -- Bank of the James Financial Group, Inc. (the “Company”) (NASDAQ:BOTJ), the parent company of Bank of the James, a full-service commercial and retail bank serving the greater Lynchburg area (Region 2000), and the Charlottesville, Harrisonburg, and Roanoke, Virginia markets, today announced unaudited results for the three months ended March 31, 2017.

Net income for the three months ended March 31, 2017 was $760,000 or $0.17 per diluted share compared with $887,000 or $0.20 per diluted share for the three months ended March 31, 2016.

Robert R. Chapman III, President and CEO, stated: “Our financial performance in the first quarter continued to demonstrate the Company’s focus on steady, long-term growth of our balance sheet, which reflected meaningful year-over-year growth of loans, deposits and assets. An emphasis on growing commercial banking was evident.

“Year-over-year net income comparison reflected higher noninterest expense related to investments to expand our market reach, including building our banking teams in several markets. We are seeing positive results from our investment in growth, and anticipate that increased productivity and accelerating revenue will enhance profitability.”

Highlights

• Interest income from earning assets increased 5.2% in the first quarter of 2017 compared with the first quarter of 2016.
• Net interest income before the provision for loan losses for the three months ended March 31, 2017 was $4.84 million, up 3.2% from $4.69 million for the three months ended March 31, 2016.
• Driven primarily by increased commercial lending, total loans, net of the allowance for loan losses, were a Company record $466.24 million at March 31, 2017, up from $464.35 million at December 31, 2016, and $433.70 million a year earlier.
• Commercial loans (primarily C&I) increased 12% year-over-year, while owner occupied real estate, led by commercial real estate (CRE) portfolio growth, rose 13% at March 31, 2017 compared with March 31, 2016.
• Total assets rose to $578.43 million at March 31, 2017, the highest in Company history.
• Asset quality ratios reflected continuing loan portfolio strength, with a 0.67% ratio of nonperforming loans to total loans.
• Total stockholders’ equity was $50.19 million, up from $49.42 million at December 31, 2016 and $49.46 million at March 31, 2016. Book value per share rose to $11.46 at March 31, 2017 from $11.29 at December 31, 2016.
• Based on the results achieved in the first quarter, on April 18, 2017 the Company’s board of directors approved a $0.06 per share dividend payable to shareholders of record on June 9, 2017, to be paid on June 23, 2017.

Chapman noted: “Additional loans drove year-over-year net interest income growth, although both commercial and residential loan demand in the first quarter of 2017 was somewhat slower than anticipated. In particular, slower residential mortgage activity – perhaps partially related to the area’s current lean housing inventory – impacted originations and subsequent noninterest income from gains on mortgage sales to the secondary market. We entered the second quarter with good pipelines in commercial and residential lending, and feel confident about ongoing lending activity.”

First Quarter 2017 Operational Review

Total interest income was $5.51 million in the first quarter of 2017, growing 5.2% compared with total interest income of $5.24 million in the first quarter of 2016. Average rates earned on loans, including fees, was 4.46% in the first quarter of 2017, down slightly from 4.60% in the first quarter of 2016, and consistent with 4.48% in the fourth quarter of 2016. The average rate earned on total earning assets in the first quarter of 2017 was 4.16%, consistent with the fourth quarter of 2016 and down slightly from 4.35% in the first quarter of 2016.

“Considering the competitive lending market and continued pricing pressure in a low interest rate environment, we have been pleased with our ability to lend while maintaining relatively stable pricing and attracting quality loans,” commented J. Todd Scruggs, Executive Vice President and CFO. “We believe our ability to add value through excellent service and customized financial solutions remains a strong selling point for us.”

Total interest expense was $671,000 for the three months ended March 31, 2017, compared with $548,000 for the three months ended March 31, 2016. The increase partially reflected interest paid on capital notes issued in February 2017. Year-over-year growth in lower-interest bearing demand deposits and rate reductions in time deposits contributed to an average rate paid on interest bearing accounts of 0.62% in the first quarter of 2017. The Company’s net interest margin was 3.65% and net interest spread was 3.50%, consistent with the fourth quarter of 2016.

Net interest income was $4.84 million for the three months ended March 31, 2017, a 3.2% increase from $4.69 million for the three months ended March 31, 2016. Net interest income after provision for loan losses was $4.74 million for the three months ended March 31, 2017 compared with $4.49 million for the three months ended March 31, 2016.

Noninterest income from fees, service charges and commissions, including gains from the sale of residential mortgages to the secondary market, and income from the bank's line of treasury management services for commercial customers, was $881,000 in the first quarter of 2017 compared with $1.01 million in the first quarter of 2016. Fee income increased year-over-year, however, slower residential mortgage origination resulted in lower gains from the sale of loans in the first quarter of 2017 compared with a year earlier.

Noninterest expense for the three months ended March 31, 2017 was $4.52 million, an increase of 7.8% from the same period a year earlier. Higher expenses primarily reflected costs related to the Company's market expansion, including increased employee compensation, an expanded commercial banking team, and additional staff and management in the bank’s served markets. Occupancy costs increased moderately year-over-year, primarily reflecting additional facilities. The Company increased marketing expenditures to build brand visibility throughout an expanded geographic market.

Balance Sheet Reflects Consistent Growth

Loans held for investment, net of the allowance for loan losses, were a Company record $466.24 million at March 31, 2017, compared with $464.35 million at December 31, 2016, and up 7.5% compared with $433.70 million at March 31, 2016. The Company’s commercial loan portfolio was $89.00 million at March 31, 2017, up $9.51 million from March 31, 2016. Owner occupied real estate loans, led by CRE, increased to $142.39 million in the first quarter of 2017, up $16.39 million from $126.01 million a year earlier. Non-owner occupied real estate (primarily commercial and investment property) increased to $144.68 million, up 7.2% from $135.00 million a year ago. Total construction loans were down 16.8%, while consumer lines of credit (primarily home equity) grew 4.9% year-over-year.

Total deposits at March 31, 2017 were $521.20 million compared with $523.11 million at December 31, 2016, and up from $473.45 million at March 31, 2016. The Bank continued to attract noninterest bearing deposits, which increased to $105.28 million at March 31, 2017 from $102.65 million at December 31, 2016. Core deposits (noninterest bearing, NOW, money market and savings deposits) of $356.19 million comprised approximately 68% of the Company’s total deposits.

“Continuing growth of core deposits has been a meaningful highlight for the Company, providing attractive funding for loans, and reflecting new banking relationships and growth in Harrisonburg, Charlottesville and Roanoke,” Chapman said. “An expanding presence in Appomattox should further support deposit growth and new banking relationships.”

Total assets were a record $578.43 million at March 31, 2017, up from $574.20 million at December 31, 2016 and $524.61 million at March 31, 2016. Asset growth primarily reflected increased retained loans and increased securities available-for-sale.

The Company's asset quality remained sound, with a 0.67% ratio of nonperforming loans to total loans at March 31, 2017. The Company's allowance for loan losses to total loans was 1.21%, and the Company's allowance for loan losses as a percent of nonperforming loans was 182%.

Total nonperforming loans were $3.15 million at March 31, 2017, compared with $2.55 million at December 31, 2016. The increase primarily reflected one classified commercial loan being moved to nonperforming status during the first quarter of 2017. Total nonperforming assets were $5.90 million and other real estate owned was $2.75 million. The Bank's regulatory capital ratios continued to exceed accepted regulatory standards for a well-capitalized institution.

The Company grew measures of shareholder value, including tangible book value per share and total stockholders' equity. Total stockholders' equity increased to $50.19 million at March 31, 2017, compared with $49.42 million at December 31, 2016 and $49.46 million at March 31, 2016. Retained earnings rose to $10.65 million at March 31, 2017 from $10.16 million at December 31, 2016.

About the Company

Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc., serves Lynchburg, Charlottesville, Harrisonburg, Roanoke, Appomattox and other markets in Virginia. The bank operates 13 full service locations, two limited service branches, two loan production offices, and an investment/insurance services division. Bank of the James Financial Group, Inc. common stock is listed under the symbol "BOTJ" on the NASDAQ Stock Market, LLC.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "estimate," "expect," "intend," "anticipate," "plan" and similar expressions and variations thereof identify certain of such forward-looking statements which speak only as of the dates on which they were made. Bank of the James Financial Group, Inc. (the "Company") undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Such factors include, but are not limited to, competition, general economic conditions, potential changes in interest rates, and changes in the value of real estate securing loans made by Bank of the James (the "Bank"), a subsidiary of the Company. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the 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
(000's) except ratios and percent data
unaudited

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

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