Net income for the three months ended
Robert R. Chapman III, CEO, commented: “The Company’s solid fourth quarter and full-year earnings highlighted the Company’s operational efficiency, exceptionally strong asset quality and capital strength, and prompt adjustments in a rapidly shifting interest rate environment. Throughout the year, the entire
“Key performance metrics, including return on average equity and return on average assets improved in 2022. Significantly higher net interest margin and interest spread demonstrated an opportunistic response to changing interest rate scenarios. We anticipate that if and when the rate environment stabilizes during the coming year, we will see increased pressure on margins. We believe our 2022 financial performance demonstrated our ability to effectively address the challenges related to rapidly increasing interest rates.
“Asset quality was a significant highlight, with few nonperforming loans, reduced other real estate owned (OREO), and strong asset quality ratios. We believe the outlook for continuing asset quality is very good, reflecting diligent credit management practices. We have been able to grow commercial, residential mortgage and consumer loan portfolios while at the same time improving already strong loan quality.
“The Company’s consistent earnings and capital strength positioned us to enhance shareholder value by repurchasing approximately 2% of the Company’s outstanding common stock during 2022 – an action that contributed approximately
“Our served communities and customers continue to demonstrate financial and economic strength, and resilience in the face of inflation and uncertainty about recession later in 2023. We anticipate that while lending and deposit activity is likely to be less robust in the coming quarters, we are confident that
Highlights
- Net income in the fourth quarter of 2022 increased 5% from a year earlier, while net income in the 12 months of 2022 rose 18% compared with the 12 months of 2021. Income growth in 2022 was led by higher interest income from commercial real estate and retained residential mortgages, wealth management fees, and fee income from debit card transactions and treasury services.
- Total interest income in the full year of 2022 increased 9%, primarily reflecting commercial loan rate adjustments to keep pace with the rising interest rate environment, an increase in the size of the investment portfolio, and growth of retained residential mortgages. Interest income in the fourth quarter of 2022 rose 23% compared with the fourth quarter of 2021.
- Net interest income rose 22% in the fourth quarter of 2022 compared with a year earlier, primarily reflecting increased interest income and ongoing interest expense management. Net interest income in the 12 months of 2022 grew 10% compared with the 12 months of 2021.
- Prompt response to the changing interest rate environment led to expanded net interest margin and interest spread in fourth quarter and the full year of 2022 compared with both periods of 2021.
- Total noninterest income in the full year of 2022 rose 18% compared with 2021. Slowing income in the second half of 2022 from gain on sale of residential mortgage loans was offset by interchange income on card activity, growth of commercial treasury services income, and wealth management fees generated by PWW, which contributed approximately
$0.29 EPS in 2022. - Loans, net of the allowance for loan losses, increased 5% to
$605.37 million atDecember 31, 2022 compared with$576.47 million atDecember 31, 2021 , primarily reflecting residential mortgage and commercial real estate loan growth. - Asset quality remained strong, reflected in a ratio of nonperforming loans to total loans of 0.10% at
December 31, 2022 compared with 0.16% atDecember 31, 2021 . Total nonperforming loans declined by 34% year-over-year, and the Company significantly trimmed other real estate owned (OREO) during 2022, writing down a significant portion of OREO based on its recently contracted sales price. - Total deposits declined 4% at
December 31, 2022 compared withDecember 31, 2021 . Lower-cost core deposits (noninterest-bearing demand, NOW, savings and money market accounts) continued to comprise approximately 85% of total deposits. - In both periods of 2022, Return on Average Assets (ROAA) and Return on Average Equity (ROAE) ratios improved significantly from 2021.
- The Company’s share repurchases during 2022 enhanced shareholder value, contributing approximately
$0.03 to EPS. - On
January 17, 2023 the Company’s board of directors approved a quarterly dividend of$0.08 per share to stockholders of record as ofMarch 3, 2023 to be paid onMarch 17, 2023 . - On
February 6, 2023 , the Company's board of directors approved a stock repurchase plan to purchase up to$998,000 of the Company's common stock. The plan authorizes the Company to make purchases fromMarch 8, 2023 throughMarch 7, 2024 , unless extended or sooner terminated. Purchases may be made in open market transactions or privately negotiated transactions, in accordance with Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. In connection with the adoption of this plan, the board terminated any other repurchase plans still in effect.
Fourth Quarter, 12 Months of 2022 Operational Review
Net interest income after recovery of loan losses for the quarter ended
For the 12 months ended
Total interest income increased to
Total interest expense in the fourth quarter of 2022 was
“We’ve held the line on deposit rates rather than try to compete by offering untenable rates, and are continuing our strong focus on attracting and retaining noninterest-bearing commercial deposits through relationship banking. We are maintaining adequate liquidity by maintaining a stable level of Fed funds and avoiding short-term borrowings, which have become very expensive.”
The net interest margin in the fourth quarter of 2022 was 3.67% and the interest spread was 3.60%, up significantly from the margin and spread in the fourth quarter of 2021. For the full year of 2022, the net interest margin was 3.23% and interest spread was 3.18%, also up from the full year of 2021.
Noninterest income in the fourth quarter of 2022 was
Because of rising interest rates during the second half of 2022, rates on in-house mortgages became more attractive and resulted in reduced sales of conventional mortgages to the secondary market. This, in combination with a decrease in conventional mortgage originations due to rising mortgage interest rates, resulted in a decrease in the volume and amount of residential mortgages sold in the secondary market. Noninterest income in 2022 was highlighted by year-over-year increased interchange income earned on card activity and overdraft fees. Income from PWW’s continuing strong performance contributed approximately
Noninterest expense in the fourth quarter of 2022 was
For the three months ended
Balance Sheet Reflects Organic Loan Growth, Strong Asset Quality
Total assets were
Loans, net of allowance for loan losses, increased to
“We have experienced a slowing of loan demand for all commercial loans in light of increasing rates and general economic uncertainty, including inflation, and the threat of recession. Commercial (C&I) lending has continued to be slow as businesses are drawing down on cash reserves and are operating cautiously. Although we anticipate more subdued commercial lending activity than in past years, we are confident we will earn our share of new business and will continue to have high client retention.”
Commercial loans (primarily C&I loans) were
Residential mortgage loans held by the Bank increased 35% to
A decline in historical loss experience, improved delinquency trends, and other net improvements in qualitative factors resulted in a reduction of the Company’s allowance for loan losses since
Total nonperforming loans of
Total deposits at
The Company’s total retained earnings increased significantly to
These decreases directly resulted from the impact that higher interest rates had on the market value of the Company’s available-for-sale securities portfolio. These mark-to-market losses are excluded from the Bank’s regulatory capital. The Company does not expect to realize the unrealized losses as it has the intent and ability to hold the securities until their recovery, which may be at maturity. The duration of the Company’s overall securities portfolio is approximately 6 years.
About the Company
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.
CONTACT:
tscruggs@bankofthejames.com
CONSOLIDATED FINANCIAL INFORMATION FOLLOWS
Consolidated Balance Sheets
(dollar amounts in thousands, except per share amounts)
(unaudited)
Assets | |||||||
Cash and due from banks | $ | 30,025 | $ | 29,337 | |||
Federal funds sold | 31,737 | 153,816 | |||||
Total cash and cash equivalents | 61,762 | 183,153 | |||||
Securities held-to-maturity (fair value of | 3,639 | 3,655 | |||||
Securities available-for-sale, at fair value | 185,787 | 161,267 | |||||
Restricted stock, at cost | 1,387 | 1,324 | |||||
Loans, net of allowance for loan losses of | 605,366 | 576,469 | |||||
Loans held for sale | 2,423 | 1,628 | |||||
Premises and equipment, net | 17,974 | 18,351 | |||||
Interest receivable | 2,736 | 2,064 | |||||
Cash value - bank owned life insurance | 19,237 | 18,785 | |||||
Customer relationship Intangible | 7,845 | 8,406 | |||||
2,054 | 3,001 | ||||||
Other real estate owned | 566 | 761 | |||||
Other assets | 17,795 | 8,770 | |||||
Total assets | $ | 928,571 | $ | 987,634 | |||
Liabilities and Stockholders' Equity | |||||||
Deposits | |||||||
Noninterest bearing demand | $ | 154,884 | $ | 162,286 | |||
NOW, money market and savings | 560,479 | 582,000 | |||||
Time | 132,775 | 142,770 | |||||
Total deposits | 848,138 | 887,056 | |||||
Capital notes, net | 10,037 | 10,031 | |||||
Other borrowings | 10,457 | 10,985 | |||||
Interest payable | 89 | 46 | |||||
Other liabilities | 9,624 | 10,087 | |||||
Total liabilities | $ | 878,345 | $ | 918,205 | |||
Stockholders' equity | |||||||
Common stock | |||||||
4,628,657 as of | 9,905 | 10,145 | |||||
Additional paid-in-capital | 36,068 | 37,230 | |||||
Accumulated other comprehensive (loss) | (26,781 | ) | (1,386 | ) | |||
Retained earnings | 31,034 | 23,440 | |||||
Total stockholders' equity | $ | 50,226 | $ | 69,429 | |||
Total liabilities and stockholders' equity | $ | 928,571 | $ | 987,634 |
Consolidated Statements of Income
(dollar amounts in thousands, except per share amounts)
(unaudited)
For the Three Months | For the Year | ||||||||||||||
Ended | Ended | ||||||||||||||
Interest Income | 2022 | 2021 | 2022 | 2021 | |||||||||||
Loans | $ | 7,266 | $ | 6,440 | $ | 26,175 | $ | 26,529 | |||||||
Securities | |||||||||||||||
324 | 235 | 1,235 | 875 | ||||||||||||
Mortgage backed securities | 460 | 163 | 1,656 | 462 | |||||||||||
Municipals | 285 | 266 | 1,152 | 865 | |||||||||||
Dividends | 30 | 28 | 66 | 67 | |||||||||||
Corporates | 171 | 88 | 566 | 243 | |||||||||||
Interest bearing deposits | 147 | 7 | 282 | 33 | |||||||||||
Federal Funds sold | 258 | 40 | 721 | 107 | |||||||||||
Total interest income | 8,941 | 7,267 | 31,853 | 29,181 | |||||||||||
Interest Expense | |||||||||||||||
Deposits | |||||||||||||||
NOW, money market savings | 181 | 145 | 555 | 564 | |||||||||||
Time Deposits | 265 | 215 | 732 | 1,105 | |||||||||||
Finance leases | 23 | 26 | 96 | 106 | |||||||||||
Other borrowings | 101 | - | 440 | - | |||||||||||
Capital notes | 82 | 82 | 327 | 327 | |||||||||||
Total interest expense | 652 | 468 | 2,150 | 2,102 | |||||||||||
Net interest income | 8,289 | 6,799 | 29,703 | 27,079 | |||||||||||
Recovery of loan losses | - | (500 | ) | (900 | ) | (500 | ) | ||||||||
Net interest income after recovery of loan losses | 8,289 | 7,299 | 30,603 | 27,579 | |||||||||||
Noninterest income | |||||||||||||||
Gains on sale of loans held for sale | 581 | 2,090 | 5,256 | 8,265 | |||||||||||
Service charges, fees and commissions | 1,028 | 693 | 3,591 | 2,496 | |||||||||||
Wealth management fees | 997 | - | 3,932 | - | |||||||||||
Life insurance income | 114 | 115 | 452 | 430 | |||||||||||
Other | 8 | 6 | 16 | 18 | |||||||||||
Loss on sales of available-for-sale securities | (3 | ) | - | (3 | ) | - | |||||||||
Total noninterest income | 2,725 | 2,904 | 13,244 | 11,209 | |||||||||||
Noninterest expenses | |||||||||||||||
Salaries and employee benefits | 4,631 | 4,476 | 17,682 | 16,377 | |||||||||||
Occupancy | 466 | 403 | 1,814 | 1,673 | |||||||||||
Equipment | 683 | 643 | 2,553 | 2,526 | |||||||||||
Supplies | 141 | 117 | 521 | 471 | |||||||||||
Professional, data processing, and other outside expense | 1,512 | 1,116 | 5,056 | 4,094 | |||||||||||
Marketing | 259 | 214 | 920 | 934 | |||||||||||
Credit expense | 158 | 234 | 923 | 1,103 | |||||||||||
Other real estate expenses, net | 7 | 28 | 214 | 102 | |||||||||||
118 | 123 | 500 | 548 | ||||||||||||
Amortization of intangibles | 140 | - | 560 | - | |||||||||||
Other | 503 | 559 | 1,994 | 1,509 | |||||||||||
Total noninterest expenses | 8,618 | 7,913 | 32,737 | 29,337 | |||||||||||
Income before income taxes | 2,396 | 2,290 | 11,110 | 9,451 | |||||||||||
Income tax expense | 442 | 431 | 2,151 | 1,862 | |||||||||||
Net Income | $ | 1,954 | $ | 1,859 | $ | 8,959 | $ | 7,589 | |||||||
Weighted average shares outstanding - basic and diluted (1) | 4,628,657 | 4,740,657 | 4,698,041 | 4,747,821 | |||||||||||
Net income per common share - basic and diluted (1) | $ | 0.42 | $ | 0.39 | $ | 1.91 | $ | 1.60 | |||||||
(1) Shares and per share amounts for all periods have been adjusted to reflect a 10% stock dividend declared in |
Dollar amounts in thousands, except per share data
unaudited
Selected Data: | Three months ending 2022 | Three months ending 2021 | Change | Year to date 2022 | Year to date 2021 | Change | |||||||||||
Interest income | $ | 8,941 | $ | 7,267 | 23.04 | % | $ | 31,853 | $ | 29,181 | 9.16 | % | |||||
Interest expense | 652 | 468 | 39.32 | % | 2,150 | 2,102 | 2.28 | % | |||||||||
Net interest income | 8,289 | 6,799 | 21.91 | % | 29,703 | 27,079 | 9.69 | % | |||||||||
Recovery of loan losses | - | (500 | ) | -100.00 | % | (900 | ) | (500 | ) | 80.00 | % | ||||||
Noninterest income | 2,725 | 2,904 | -6.16 | % | 13,244 | 11,209 | 18.16 | % | |||||||||
Noninterest expense | 8,618 | 7,913 | 8.91 | % | 32,737 | 29,337 | 11.59 | % | |||||||||
Income taxes | 442 | 431 | 2.55 | % | 2,151 | 1,862 | 15.52 | % | |||||||||
Net income | 1,954 | 1,859 | 5.11 | % | 8,959 | 7,589 | 18.05 | % | |||||||||
Weighted average shares outstanding - basic and diluted (1) | 4,628,657 | 4,740,657 | (112,000 | ) | 4,698,041 | 4,747,821 | (49,780 | ) | |||||||||
Basic and diluted net income per share (1) | $ | 0.42 | $ | 0.39 | $ | 0.03 | $ | 1.91 | $ | 1.60 | $ | 0.31 |
Balance Sheet at period end: | 2022 | 2021 | Change | 2021 | 2020 | Change | ||||||||
Loans, net | $ | 605,366 | $ | 576,469 | 5.01 | % | $ | 576,469 | $ | 601,934 | -4.23 | % | ||
Loans held for sale | 2,423 | 1,628 | 48.83 | % | 1,628 | 7,102 | -77.08 | % | ||||||
Total securities | 189,426 | 164,922 | 14.86 | % | 164,922 | 93,856 | 75.72 | % | ||||||
Total deposits | 848,138 | 887,056 | -4.39 | % | 887,056 | 764,967 | 15.96 | % | ||||||
Stockholders' equity | 50,226 | 69,429 | -27.66 | % | 69,429 | 66,732 | 4.04 | % | ||||||
Total assets | 928,571 | 987,634 | -5.98 | % | 987,634 | 851,386 | 16.00 | % | ||||||
Shares outstanding (1) | 4,628,657 | 4,740,657 | (112,000 | ) | 4,740,657 | 4,339,436 | 401,221 | |||||||
Book value per share | $ | 10.85 | $ | 14.65 | $ | (3.80 | ) | $ | 14.65 | $ | 15.38 | $ | (0.73 | ) |
Daily averages: | Three months ending 2022 | Three months ending 2021 | Change | Year to date 2022 | Year to date 2021 | Change | ||||||
Loans | $ | 618,948 | $ | 589,277 | 5.04 | % | $ | 604,990 | $ | 601,272 | 0.62 | % |
Loans held for sale | 3,722 | 5,929 | -37.22 | % | 3,913 | 5,815 | -32.71 | % | ||||
Total securities | 229,884 | 159,307 | 44.30 | % | 223,137 | 128,886 | 73.13 | % | ||||
Total deposits | 867,569 | 873,894 | -0.72 | % | 888,292 | 833,216 | 6.61 | % | ||||
Stockholders' equity | 48,207 | 69,173 | -30.31 | % | 57,478 | 66,937 | -14.13 | % | ||||
Interest earning assets | 897,711 | 906,409 | -0.96 | % | 919,992 | 862,500 | 6.67 | % | ||||
Interest bearing liabilities | 737,375 | 718,714 | 2.60 | % | 746,479 | 682,089 | 9.44 | % | ||||
Total assets | 950,558 | 962,006 | -1.19 | % | 980,507 | 920,474 | 6.52 | % |
Financial Ratios: | Three months ending 2022 | Three months ending 2021 | Change | Year to date 2022 | Year to date 2021 | Change | ||||||
Return on average assets | 0.82 | % | 0.77 | % | 0.05 | 0.91 | % | 0.82 | % | 0.09 | ||
Return on average equity | 16.08 | % | 10.66 | % | 5.42 | 15.59 | % | 11.34 | % | 4.25 | ||
Net interest margin | 3.67 | % | 2.98 | % | 0.69 | 3.23 | % | 3.14 | % | 0.09 | ||
Efficiency ratio | 78.25 | % | 81.55 | % | (3.30 | ) | 76.23 | % | 76.62 | % | (0.39 | ) |
Average equity to average assets | 5.07 | % | 7.19 | % | (2.12 | ) | 5.86 | % | 7.27 | % | (1.41 | ) |
Allowance for loan losses: | Three months ending 2022 | Three months ending 2021 | Change | Year to date 2022 | Year to date 2021 | Change | ||||||||||
Beginning balance | $ | 6,394 | $ | 7,276 | -12.12 | % | $ | 6,915 | $ | 7,156 | -3.37 | % | ||||
Recovery of loan losses | - | (500 | ) | -100.00 | % | (900 | ) | (500 | ) | 80.00 | % | |||||
Charge-offs | (152 | ) | (11 | ) | 1281.82 | % | (162 | ) | (91 | ) | 78.02 | % | ||||
Recoveries | 17 | 150 | -88.67 | % | 406 | 350 | 16.00 | % | ||||||||
Ending balance | 6,259 | 6,915 | -9.49 | % | 6,259 | 6,915 | -9.49 | % |
Nonperforming assets: | 2022 | 2021 | Change | 2021 | 2020 | Change | ||||||
Total nonperforming loans | $ | 633 | $ | 954 | -33.65 | % | $ | 954 | $ | 2,064 | -53.78 | % |
Other real estate owned | 566 | 761 | -25.62 | % | 761 | 1,105 | -31.13 | % | ||||
Total nonperforming assets | 1,199 | 1,715 | -30.09 | % | 1,715 | 3,169 | -45.88 | % | ||||
Troubled debt restructurings - (performing portion) | 431 | 372 | 15.86 | % | 372 | 392 | -5.10 | % |
Asset quality ratios: | 2022 | 2021 | Change | 2021 | 2020 | Change | ||||||
Nonperforming loans to total loans | 0.10 | % | 0.16 | % | (0.06 | ) | 0.16 | % | 0.34 | % | (0.18 | ) |
Allowance for loan losses to total loans | 1.02 | % | 1.19 | % | (0.17 | ) | 1.19 | % | 1.17 | % | 0.02 | |
Allowance for loan losses to nonperforming loans | 988.78 | % | 724.84 | % | 263.94 | 724.84 | % | 346.71 | % | 378.13 |
(1) Shares and per share amounts for all periods have been adjusted to reflect a 10% stock dividend declared in
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