 PPP Loan Closings, Robust Mortgage Origination, Completed Unregistered Debt OfferingLYNCHBURG, Va., July 24, 2020 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 Region 2000 the greater Lynchburg MSA, and the Blacksburg, Charlottesville, Harrisonburg, Lexington, and Roanoke, Virginia markets, today announced unaudited results for the three months and six months ended June 30, 2020. Net income for the three months ended June 30, 2020 was 821,000 or 0.19 per diluted share, compared with 1.38 million or 0.31 per diluted share for the three months ended June 30, 2019. Net income for the six months ended June 30, 2020 was 1.82 million or 0.42 per diluted share, compared with 2.61 million or 0.60 per diluted share for the six months ended June 30, 2019.Highlights Net income in the second quarter and first half of 2020 reflected noninterest expenses that included an additional 245,000 in compensation to employees for their work implementing the PPP. Additionally, in the second quarter the Company expensed approximately 750,000 related to an early retirement plan that was previously announced. Loans receivable, net of the allowance for loan losses, were 623.56 million at June 30, 2020 compared with 573.27 million at December 31, 2019. The increase primarily reflects the addition of 68 million in government-guaranteed Payroll Protection Plan loans. Commercial loans demonstrated stability and continued strong credit quality, and construction continued to be an active lending sector for the Company. Nonperforming loans increased as of June 30, 2020, primarily reflecting one relationship of approximately 3.3 million. Management anticipates a significant curtailment of the loan balance upon the sale of the collateral. The Bank has entered into a contract for the sale of the collateral, and the sale is scheduled to close later in the third quarter. Interest income from loans in the second quarter of 2020 was 6.7 million compared with 6.8 million in the second quarter of 2019 and increased to 13.7 million in the first half of 2020 compared with 13.5 million in the first half of 2019, primarily reflecting loan growth. Continuing strong residential mortgage origination, which generates income from gains on loan sales to the secondary market, contributed significantly to increased total noninterest income, which was 2.8 million in the second quarter of 2020 compared with 1.7 million a year earlier. In the first half of 2020, total noninterest income was 5.0 million, up from 2.9 million a year earlier, reflecting robust residential mortgage origination and growth in fee income from corporate treasury services and other fees. Total deposits were 746.0 million at June 30, 2020 compared with 649.5 million at December 31, 2019. The increase reflects increased core deposits noninterest-bearing demand, NOW, savings and money market accounts as customers maintained higher balances, attributable in part to PPP loan funds that had yet to be deployed. Total stockholders equity increased to 64.5 million at June 30, 2020 compared with 61.4 million at December 31, 2019. Tangible book value per share was 14.86 at June 30, 2020 compared with 14.10 per share at December 31, 2019. On July 21, 2020 the Companys board of directors approved a 0.07 per share dividend payable to stockholders of record on September 4, 2020, to be paid on September 18, 2020. Subsequent to the close of the second quarter of 2020, the Company announced on July 8, 2020 that it completed a private placement of an unregistered debt offering of 10.05 million at a 3.25 interest rate. Of that amount, 5 million was used to retire an earlier private placement carrying a higher rate. Consistent with the previously filed Form 10-Q for the quarter ended March 31, 2020, the Company again anticipates expanded disclosure related to business sectors and credit quality in its Form 10-Q Quarterly Report covering the three and six month periods ended June 30, 2020 to be filed with the Securities and Exchange Commission.Robert R. Chapman III, President and CEO, commented: Although COVID-19 and the subsequent economic slowdown present numerous challenges, we believe the Company delivered a positive financial performance. We focused on being responsive and pro-active in a fluid economic and health-conscious situation, and we will continue to do so.We appreciate our teams dedication and commitment to serving clients safely and professionally, and to keeping operations running smoothly. We implemented extensive practices to protect the health and safety of employees and customers and continued operating consistently, while recognizing that the considerable presence of COVID-19 still presents challenges.During the second quarter, Bank of the James processed and closed approximately 68 million in Payroll Protection Plan PPP loans to more than 500 small businesses, affecting approximately 9000 employees and families. We believe we accomplished this process quickly and efficiently so businesses could put funding to work immediately. Recognizing the exceptional dedication of our team, we provided approximately 245,000 in financial rewards to those who worked so hard to implement the PPP program, and to our essential employees who put in extra effort to serve customers and provide operational support therefore offsetting the challenges of social distancing and working from home.Margins, returns and interest income were impacted by expected business slowdowns and the issuance of low-interest PPP loans. Importantly, the Bank did not experience any unusual pressure on deposit balances or liquidity positions as a result of COVID-19. We believe the Companys fundamentals are strong. We have prepared for this period by increasing capital resources, expanding reserves and provisioning for potential loan losses, building cash reserves, and more.Our second quarter financial performance was encouraging, and we were able to build shareholder value and pay a dividend to shareholders. We believe the Company is positioned to meet the financial challenges and uncertainty ahead.Second Quarter, First Half of 2020 Operational ReviewTotal interest income was 7.1 million in the second quarter of 2020 compared with 7.4 million a year earlier. Interest expense was 1.2 million in the second quarter of 2020 compared with 1.2 million a year earlier. Although interest rates declined, interest expense remained constant because of a larger deposit base and increased core deposits. The rate paid on liabilities in the second quarter of 2020 was 0.76 compared with 0.93 a year earlier.Net interest income after provision for loan losses was 5.2 million for the three months ended June 30, 2020 compared with 6.0 million the previous year. The average rate earned on loans was 4.33 in the second quarter of 2020 compared with 4.97 a year earlier, and the net interest margin was 3.13 compared with 3.82, primarily reflecting the impact of the lower-yielding PPP loans.For the six months of 2020, total interest income was 14.6 million compared with 14.6 million in the first six months of 2019. Total interest expense was 2.5 million in the first half of 2020 compared with 2.3 million a year earlier. For the first six months of 2020, net interest income after provision for loan losses was 10.4 million compared with 12.0 million a year earlier, primarily reflecting slower commercial loan activity and an increased loan loss provision. The net interest margin was 3.37 in the first half of 2020 compared with 3.87 a year earlier.The provision for loan losses was 760,000 and 1,648,000 in the three and six months ended June 30, 2020 compared with 116,000 and 326,000 for the same period a year earlier. The increase primarily reflects increased qualitative allocations related to the COVID-19 pandemic as well as a 300,000 specific reserve for the large loan relationship previously mentioned as migrating to a nonperforming status during the quarter. Of the 1,648,000 in provision in the first six months of 2020, approximately 1,048,000 is attributed to qualitative factors related to the COVID-19 pandemic and its effect on economic conditions, loan concentrations in sectors adversely affected by the pandemic, and loans that have been granted payment deferrals or have been granted interest only payment status in the short term.J. Todd Scruggs, Executive Vice President and CFO, commented: The impact of carrying 68 million in PPP loans while also carrying additional contingent liquidity in the form of Fed funds, and a Fed rate cut in the second quarter was clearly evident in our net interest margin and interest rate spread. In general, rates on non-PPP loans have been relatively stable. We dont anticipate carrying PPP loans for an extended period, so we expect to return to more normalized margins as the PPP program begins to wind down and loan forgiveness begins.Noninterest income, including gains from the sale of residential mortgages to the secondary market, revenue contributions from BOTJ Investment Services, and income from the Banks line of treasury management services for commercial customers was 2.8 million in the second quarter of 2020, up from 1.7 million in the second quarter of 2019. In the first half of 2020, total noninterest income was 5.0 million compared with 2.9 million in the first half of 2019. The increase in noninterest income was also driven by gains on sales of available-for-sale securities of 213,000 and 644,000 respectively for the three and six months of 2020. 