Buchanan-based Bank of Botetourt has released its unaudited financial results for the quarter-ended March 31, 2021. The bank produced net income amounting to $1,980,000, the most profitable quarter in its history. The net income equated to $1.14 per basic share in the first quarter. This amount compares to a net income of $1,038,000, or $0.60 per share, for the same period last year.
At March 31, 2021, select financial highlights include:
- Return on average assets of 1.29%
- Return on average equity of 14.49%
- Book value of $32.05
- Total deposit growth of 7.6%
- Total asset growth of 7.2%
- Community Bank Leverage Ratio of 9.20%
As a result of the strong financial performance, the board of directors voted to pay the $0.18 per share quarterly dividend, or $0.72 per share annualized, payable on May 19, 2021 to shareholders of record May 12, 2021.
President & CEO G. Lyn Hayth III said, “Our first quarter performance is historic and gratifying. PPP loan forgiveness and subsequent revenue recognition contributed to our successful first quarter. Our employees continue to work diligently in helping our customers during this phase of the pandemic. In addition, mortgage lending was a positive contributor to our earnings. We are cautiously optimistic for favorable economic trends along with the hope that the coronavirus cases continue to subside.”
Net income for the three months ended March 31, 2021 was $1,980,000, compared to $1,038,000 for the same period last year, representing an increase of $942,000 or 90.8%.
Basic and diluted earnings per share increased $0.54 from $0.60 at March 31, 2020 to $1.14 at March 31, 2021. The increase in net income is primarily due to $367,000 in PPP loan revenue recognized, $423,000 in secondary market mortgage income, and a one-time non-recurring special commission of $93,800 for insurance sales by the bank’s subsidiary.
Net income was augmented because there of no provision for loan losses required by the quarterly calculation for the three months ended March 31, 2021 as compared to $445,000 for March 31, 2020. The decrease in the provision is due to a reduction in exposure on impaired loans, overall improved economic trends, and partially offset by the historic loss factor in the allowance for loan loss reserve calculation. The distribution of the COVID-19 vaccine, improved unemployment metrics, and favorable GDP trends offset the provisional needs of the first quarter growth in the loan portfolio.
At March 31, 2021 total assets amounted to $641,084,000, an increase of 7.2% above total assets at December 31, 2020 of $597,794,000, or $43,290,000. Total net loans increased $901,000 or 0.2% from $454,680,000 at December 31, 2020 to $455,581,000 at March 31, 2021. Total deposits at December 31, 2020 amounted to $536,805,000, compared to $577,737,000 at March 31, 2021, an increase of 7.6% or $40,932,000. The increase in deposits was attributable to organic growth and fiscal stimulus payments.
Capital Ratios
Bank of Botetourt qualified for and adopted the optional, simplified measure of capital adequacy, the community bank leverage ratio framework, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. A qualifying community banking organization is defined as having less than $10 billion in total consolidated assets, a leverage ratio greater than 9%, off-balance sheet exposures of 25% or less of total consolidated assets, and trading assets and liabilities of 5% or less of total consolidated assets. It also cannot be an advanced approaches institution.
Bank of Botetourt qualified to opt-in to the Community Bank Leverage Ratio (“CBLR”). As of March 31, 2021 Bank of Botetourt reported its CBLR ratio at 9.20%, which exceeds the required regulatory minimum ratio. The CARES Act temporarily reduced the CBLR minimum ratio from 9.0% to 8.5% through December 31, 2021.
Paycheck Protection Program
Bank of Botetourt is a participant in the Paycheck Protection Program (“PPP”) initiated by the U.S. Department of the Treasury. The $26.2 million in PPP loans at December 31, 2020 decreased to $18.0 million, comprised of 259 loans, at March 31, 2021 after receiving SBA forgiveness on $8.2 million. The deferred PPP loan servicing fees balance of $744,000 at December 31, 2020 decreased to $401,000 at March 31, 2021 as the bank recognized $343,000 in revenue from the forgiven loans.
In 2021, the bank participated in the next round of the SBA’s PPP Program. During the first quarter, the bank generated 226 new PPP loans for $15.9 million with deferred revenue of $468,000, which will be recognized over the life of the loan. The bank recognized $24,000 in revenue related to this tranche of PPP lending in the first quarter.
At March 31, 2021, PPP loan balances, from both rounds, totaled $31.5 million with $869,000 in deferred revenue.
About Bank of Botetourt
Bank of Botetourt was chartered in 1899 and operates 12 retail offices in Botetourt, Rockbridge, Roanoke, and Franklin counties and the City of Salem. Bank of Botetourt also operates a mortgage division, Virginia Mountain Mortgage, and a financial services division, Botetourt Wealth Management.
