Potomac Bancshares, Inc. Reports 2024 Third Quarter Results

CHARLES TOWN, W.Va., Nov. 4, 2024 /PRNewswire/ -- Potomac Bancshares, Inc. (the "Company") (OTC: PTBS), the one bank holding company for Bank of Charles Town (BCT), also known as The Community's Bank, for the quarter ended September 30, 2024, earned $1.761 million or $0.42 per share compared to $1.729 million or $0.42 per share for the quarter ended September 30, 2023, and $1.421 million in the second quarter of 2024 or $0.34 per share.

Net income was $4.857 million for the nine months ended September 30, 2024, or $1.17 per share compared to $5.554 million or $1.34 per share for the nine months ended September 30, 2023. Excluding the investment security after-tax loss of $300 thousand taken in the second quarter of 2024, net income for the nine months ended September 30, 2024, would have been $5.157 million, $1.24 per share.

Alice P. Frazier, CEO and President commented, "This quarter's results reflect a number of successes by the BCT team for which we are proud. We celebrated substantial wins with BCT Wealth accounts that grew assets under management over 20% during the quarter. Momentum continues with new commercial relationships driving loan and related noninterest-bearing deposit growth. Our net interest margin remained stable due to the strategic investment portfolio losses along with our disciplined deposit pricing. Cumulatively, these actions provided solid returns for the quarter."

Selected Highlights

• Total assets as of Q3 2024 were $871.4 million compared to Q3 2023 total assets of $809.6 million, an increase of $61.8 million or 7.6%.
• Return on Assets (ROA) for the nine months ended September 30, 2024, was 0.78% compared to 0.96% for the same period in 2023.
• Return on Equity (ROE) for the nine months ended September 30, 2024, was 9.69% compared to 12.02% for the same period in 2023.
• Net interest income was $19.9 million for the first nine months of 2024 up from $19.2 million for the same period in 2023.
• Net interest margin for the first nine months of 2024 was 3.20% compared to 3.36% for the same period in 2023.

Linked Quarter Q3 2024 Compared to Q2 2024 Highlights

• Total assets as of Q3 were $871.4 compared to Q2 total assets of $832.5 million, an increase of $38.9 million or 4.7%.
• Loan growth was $22.4 million or 3.4% for Q3 as pipelines continue to build with strategically planned growth in government contracting and SBA lending.
• Net unrealized losses in the AFS portfolio in Q3 decreased $2.6 million, moving to $5.8 million from $8.4 million in Q2.
• Deposits increased $9.7 million during Q3 or 1.3% from Q2.
  • Noninterest-bearing deposits increased $3.7 million or 2.2%, and interest-bearing deposits increased $6.0 million or 1.0%.
  • Deposits were inflated during Q3 by $40 million, related to a single client who disbursed the funds on September 30, 2024.
• The Tier 1 leverage capital ratio for BCT was 9.67% as of Q3 and 9.99% as of Q2. For the Company, the tangible equity / tangible assets ratio was 8.32% as of Q3 compared to 8.33% as of Q2.
• The net interest margin remained stable at 3.21% for Q3 and Q2. See Table 4 for additional details.
  • The yield on loans increased 15 basis points (bps) to 5.29%.
  • The cost of interest-bearing deposits increased 12 bps to 2.41%. The cost of interest-bearing deposits was impacted this quarter by a single large deposit that was disbursed on September 30, 2024.
• The allowance for credit losses was 1.03% and 1.04% of total loans outstanding as of Q3 and Q2, respectively.
• Non-performing assets as a percentage of total assets was 0.30% for Q3 and 0.36% in Q2. The decrease is due to one nonaccrual relationship settled with no loss of income or principal.
• Non-interest income improved in Q3 by $23 thousand or 1.3% from Q2. Wealth and Investments advisory fees grew 18.9% during the quarter primarily due to the growth in new accounts. See Table 3 for additional details.
  • The increase in other operating income is due to increases in equity securities market values and fee income from negotiated contracts.
• Non-interest expense was $6.3 million for Q3, an increase of $289 thousand (excluding the loss on sale of securities in Q2 of $386 thousand) or 4.8% from Q2. The increase is primarily in salary and employee benefits and other operating expenses which included multiple one-time expenses as noted below. See Table 3 for additional details.
  • Salary and employee benefits were up due to increased incentive-related expenses partially offset by lower payroll tax expenses.
  • Computer services and communications decreased as a result of contract negotiations that were completed in June 2024.
  • Professional fees included one-time recruiting expenses of approximately $70 thousand.
  • Other operating expenses increased primarily due to losses related to fraudulent checks of $174 thousand.

Q3 2024 Compared to Q3 2023 Highlights

• Commercial loan growth of $28.4 million, mortgage loan growth of $3.9 million, and home equity growth of $3.8 million, drove an overall increase in loans outstanding of $36.0 million or 5.5%.
  • Non-owner-occupied office property loans were $38.4 million or 5.7% of the total loan portfolio as of Q3 2024. As of Q3 2023, non-owner-occupied office property loans were $45.1 million or 6.9% of the total loan portfolio. Most of the office property loans are for main street small offices.
• The incremental restructurings of the investment portfolio over the past year increased the portfolio yield by 56 bps to 3.11% while duration decreased to 3.60 as of Q3 2024 compared to 4.18 as of Q3 2023.
  • Net unrealized losses in the AFS portfolio were $5.8 million as of Q3 2024 and $11.9 million as of Q3 2023.
• Total deposits increased $28.5 million or 4.0%. Noninterest-bearing deposits were up $13.0 million or 8.1%, while interest-bearing deposits were up $15.5 million or 2.8%.
• The Tier 1 leverage capital ratio for BCT was 9.67% as of Q3 2024 compared to 9.93% as of Q3 2023. For the Company, the tangible equity / tangible assets ratio was 8.32% as of Q3 2024 and 7.75% as of Q3 2023.
• Net interest margin remained relatively stable at 3.21% for Q3 2024 compared to 3.23% in Q3 2023. See Table 4 for additional details.
  • The earning asset yield increased 45 bps to 5.07% in Q3 2024 compared to 4.62% as of Q3 2023.
  • The cost of interest-bearing deposits increased 58 bps in Q3 2024 to 2.41% compared to 1.83% as of Q3 2023. The cost of interest-bearing deposits was impacted this quarter by a single large deposit that was disbursed on September 30, 2024.
• The allowance for credit losses was 1.03% of total loans outstanding as of Q3 2024 and 1.04% as of Q3 2023.
• Non-performing assets as a percentage of total assets was 0.30% as of Q3 2024 and 0.33% as of Q3 2023.
• Non-interest income for Q3 2024 was $1.8 million, an increase of $127 thousand or 7.8%, compared to Q3 2023. As noted above, Wealth and Investments advisory fees increased 13.4% from both assets under management and estate settlements. Other operating income increased by annual true-ups related to VISA marketing agreements which was partially offset by a decrease in secondary market fee income. See Table 3 for additional details.
• Non-interest expense excluding loss on sales of securities was $6.3 million for Q3 2024, an increase of $706 thousand or 12.7% over Q3 2023. Increases are in salaries and employee benefits, computer services and communications, other professional services, and other operating expenses. See Table 3 for additional details.
  • Salary and employee benefits were higher as a result of new personnel supporting growth, incentives, and group insurance, partially offset by a reduction in pension and 401(k) expenses. Through contract negotiations, group insurance will be reduced by 20% in future quarters.
  • Computer services and communications were higher due to investments in technology in support of growth and business continuity offset by negotiated decreases in core services.
  • Other professional services saw increases in audit & compliance, Wealth and Investments outsourcing associated with the growth of assets under management, and recruiting expenses.
  • Other operating expenses increased due to check fraud losses, franchise taxes, and net adjustments in the Bank Tech Investment value.

Dividend Announcement

At our October Board meeting, Potomac Bancshares, Inc.'s Board of Directors, declared a quarterly dividend of $0.12 per share. The dividend is for all shareholders of record on November 1, 2024, and will be paid on November 8, 2024.

About the Company
Founded in 1871, BCT - Bank of Charles Town, also known as The Community's Bank, is a wholly owned subsidiary of Potomac Bancshares, Inc. (OTC:PTBS). The Company conducts operations through its main office, an additional eight branch offices, and two loan production offices. BCT's offices are located in Jefferson and Berkeley Counties (WV), Washington County (MD), and Loudoun and Stafford Counties (VA). The Bank provides various banking products and services including free access to over 55,000 ATMs through the Allpoint® network plus another approximately 675 free access ATMs through another partnership. The Bank provides convenient online and mobile banking for individuals, businesses, and local governments. The Bank also offers commercial lines and term loans, residential and commercial construction loans, commercial real estate loans, agricultural loans, and government contractor loans. The Bank is also a Small Business Administration (SBA) Preferred Lender. The Residential Lending division offers secondary market and portfolio mortgage loans, one-time close construction to perm loans, as well as home equity loans and lines of credit. For over 70 years, BCT Wealth Advisors has provided trust services, growing into a premier financial management, investments, and estate services provider. BCT was voted Winner in the LoudounNow 2024 Loudoun's Favorites readers' poll in four categories: Bank, Mortgage Company, Banker, and Financial Planner. Additionally, BCT was voted a "Best of the Best" Winner in the 2024 Journal-News Readers' Choice Awards in three categories: Bank, Financial Planning, and Loan Services. In 2023, American Banker selected BCT as a "Top 200 Community Bank," an annual listing of the best performing banks in the United States with assets under $2 billion. In five of the last six years, the Bank was named a "Best Bank To Work For" by American Banker.

Forward Looking Statements

Certain statements made in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about events or results or otherwise are not statements of historical facts, such as statements about the Company's growth strategy and deployment of capital. Although the Company believes that its expectations with respect to such forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ from those discussed in such forward-looking statements include, but are not limited to, the following: (1) general economic conditions, especially in the communities and markets in which the Company conducts its business; (2) credit risk, including risk that negative credit quality trends may lead to a deterioration of asset quality, risk that our allowance for credit losses may not be sufficient to absorb actual losses in the Company's loan portfolio, and risk from concentrations in the Company's loan portfolio; (3) changes in the real estate market, including the value of collateral securing portions of the Company's loan portfolio; (4) changes in the interest rate environment; (5) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (6) changes in technology and increased competition, including competition from non-bank financial institutions; (7) changes in consumer preferences, spending and borrowing habits, demand for our products and services, and customers' performance and creditworthiness; (8) difficulty growing loan and deposit balances; (9) the Company's ability to effectively execute its business plan; (10) changes in regulations, laws, taxes, government policies, monetary policies and accounting policies affecting bank holding companies and their subsidiaries, including changes in deposit insurance premiums; (11) deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions; (12) regulatory enforcement actions and adverse legal actions; (13) difficulty attracting and retaining key employees; and (14) other economic, competitive, technological, operational, governmental, regulatory, and market factors affecting the Company's operations. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise, except as required by applicable law.

CONSOLIDATED FINANCIAL HIGHLIGHTS
POTOMAC BANCSHARES, INC.
Table 1
				Nine Months
(Unaudited - dollars in thousands, except per share data)
				September 30, 2024		September 30, 2023
Earnings Performance
	Interest and dividend income			$30,800		$25,756
	Interest expense			10,889		6,533
	Net interest income			19,911		19,223
	Provision for credit losses			511		222
	Non-interest income			5,111		4,637
	Non-interest expense			18,265	**	16,474	***
		Income Before Income Tax Expense		6,246		7,164
	Income tax expense			1,389		1,610
		Net Income		$4,857		$5,554
	Return on average equity			9.69 %		12.02 %
	Return on average assets			0.78 %		0.96 %
	Net interest margin			3.20 %		3.36 %
				September 30, 2024		September 30, 2023
Balance Sheet Highlights
	Total assets			$871,363		$809,607
	Investment securities			82,369		82,575
	Loans held for sale			1,219		2,159
	Loans, net of allowance for credit losses of $7,097 in 2024 and $6,768 in 2023			679,558		643,921
	Deposits			749,750		721,253
	Long term FHLB borrowings			31,000		6,000
	Subordinated debt, net of issuance costs			9,942		9,882
	Shareholders' equity			$72,509		$62,770
				September 30, 2024		September 30, 2023
Shareholders' Value (per share)
	Earnings per share, basic			$1.17		$1.34
	Earnings per share, diluted			$1.17		$1.34
	Cash dividends declared (per share)			0.34		0.28
	Book value at period end (per share)			$17.49		$15.15
	End of period number of shares outstanding			4,144,561		4,144,561
				September 30, 2024		September 30, 2023
Safety and Soundness
	Tier 1 capital ratio (leverage ratio)*			9.67 %		9.93 %
	Tangible Equity/Tangible Assets			8.32 %		7.75 %
	Non-performing assets as a percentage of
		total assets including OREO		0.30 %		0.33 %
	Allowance for credit losses as a percentage of
		period end loans		1.03 %		1.04 %
	Ratio of net charge offs (recoveries) annualized during the period to
		average loans outstanding during the period		0.006 %		-0.005 %

* The capital ratio presented is for Bank of Charles Town. When computing capital ratios, the net of unrealized holding gains (losses) on securities available for sale and the unfunded liability for pension and other post-retirement benefits, all computed net of tax, are added back to these shareholders' equity figures.

** Non-Interest Expense includes the Loss on Sale of AFS Securities of $386k in April 2024.

*** Non-Interest Expense includes the Loss on Sale of AFS Securities of $274K In September 2023.

			CONSOLIDATED FINANCIAL HIGHLIGHTS
			POTOMAC BANCSHARES, INC.
TABLE 2			Quarterly Financial Data
			Three Months Ended
(Unaudited - dollars in thousands, except per share data)
			9/30/2024		6/30/2024		3/31/2024		12/31/2023		9/30/2023
Earnings Performance
	Interest and dividend income		$10,965		$10,088		$9,747		$9,827		$9,176
	Interest expense		4,012		3,521		3,356		3,034		2,752
	Net interest income		6,953		6,567		6,391		6,793		6,424
	Provision for credit losses		202		129		180		-		-
	Non-interest income		1,760		1,737		1,614		1,662		1,633
	Non-interest expense		6,253		6,350	****	5,662		6,266	**	5,821	***
		Income Before Income Tax Expense	2,258		1,825		2,163		2,189		2,236
	Income tax expense		497		404		488		479		507
		Net Income	$1,761		$1,421		$1,675		$1,710		$1,729
	Return on average equity		10.75 %		9.73 %		10.00 %		11.21 %		11.86 %
	Return on average assets		0.86 %		0.79 %		0.81 %		0.85 %		0.93 %
	Net interest margin		3.21 %		3.21 %		3.16 %		3.29 %		3.23 %
			9/30/2024		6/30/2024		3/31/2024		12/31/2023		9/30/2023
Balance Sheet Highlights
	Total assets		$871,363		$832,450		$855,330		$830,555		$809,607
	Investment securities		82,369		83,476		84,972		84,127		82,575
	Loans held for sale		1,219		1,396		2,210		678		2,159
	Loans, net of allowance for credit losses		679,558		657,188		648,804		644,687		643,921
	Deposits		749,750		740,096		762,927		739,680		721,253
	Long term FHLB borrowings		31,000		6,000		6,000		6,000		6,000
	Subordinated debt, net of issuance costs		9,942		9,927		9,912		9,897		9,882
	Shareholders' equity		$72,509		$69,305		$67,760		$66,874		$62,770
			9/30/2024		6/30/2024		3/31/2024		12/31/2023		9/30/2023
Shareholders' Value (per share)
	Earnings per share, basic		$0.42		$0.34		$0.40		$0.41		$0.42
	Earnings per share, diluted		$0.42		$0.34		$0.40		$0.41		$0.42
	Cash dividends declared (per share)		0.12		0.12		0.10		0.10		0.10
	Book value at period end (per share)		$17.49		$16.72		$16.35		$16.14		$15.15
	End of period number of shares outstanding		4,144,561		4,144,561		4,144,561		4,144,561		4,144,561
			9/30/2024		6/30/2024		3/31/2024		12/31/2023		9/30/2023
Safety and Soundness
	Tier 1 capital ratio (leverage ratio)*		9.67 %		9.99 %		9.98 %		9.77 %		9.93 %
	Tangible Equity/Tangible Assets		8.32 %		8.33 %		7.92 %		8.05 %		7.75 %
	Non-performing assets as a percentage of
		total assets including OREO	0.30 %		0.36 %		0.32 %		0.32 %		0.33 %
	Allowance for credit losses as a percentage of
		period end loans	1.03 %		1.04 %		1.04 %		1.02 %		1.04 %
	Ratio of net (recoveries) charge offs annualized during the period to
		average loans outstanding during the period	-0.022 %		0.029 %		0.013 %		0.046 %		0.004 %

* The capital ratio presented is for Bank of Charles Town. When computing capital ratios, the net of unrealized holding gains (losses) on securities available for sale and the unfunded liability for pension and other post-retirement benefits, all computed net of tax, are added back to these shareholders' equity figures.

** Includes $154 thousand pre tax loss on sale of securities.

*** Includes $274 thousand pre tax loss on sale of securities.

**** Includes $386 thousand pre tax loss on sale of securities.

			CONSOLIDATED FINANCIAL HIGHLIGHTS
			POTOMAC BANCSHARES, INC.
			Noninterest Income & Noninterest Expense
TABLE 3			Three Months Ended
(Unaudited - dollars in thousands)
			9/30/2024		6/30/2024		3/31/2024		12/31/2023		9/30/2023
Noninterest Income:
	Wealth and Investments		$514		$432		$418		$471		$453
	Service charges on deposit accounts		273		265		246		254		266
	Secondary market income		170		274		196		140		223
	Interchange fees		522		520		493		506		515
	Other operating income		281		246		261		291		176
		Total Noninterest Income	$1,760		$1,737		$1,614		$1,662		$1,633
Noninterest Expenses:
	Salaries and employee benefits		$3,302		$3,197		$2,984		$3,348		$3,083
	Net occupancy expense of premises		278		266		276		256		261
	Furniture and equipment expenses		353		367		367		341		349
	Advertising and public relations		103		116		68		92		105
	Computer services and communications		486		535		529		485		486
	Other professional services		442		429		348		410		329
	ATM and check card expenses		248		263		249		258		243
	Loss on sale of AFS securities		-		386		-		154		274
	Other operating expenses		1,041		791		841		922		691
		Total Noninterest Expenses	$6,253		$6,350		$5,662		$6,266		$5,821
	Total Noninterest Expenses
		Excluding loss on sale of AFS securities	$6,253		$5,964		$5,662		$6,112		$5,547

		CONSOLIDATED FINANCIAL HIGHLIGHTS
		POTOMAC BANCSHARES, INC.
		AVERAGE BALANCE SHEET, INTEREST AND RATES
TABLE 4
		Three Months Ended				Three Months Ended				Three Months Ended
(Unaudited - dollars in thousands)		9/30/2024				6/30/2024				9/30/2023
ASSETS:		Average Balance	Interest Income/ Expense	Average Yields/Rate (annualized)		Average Balance	Interest Income/ Expense	Average Yields/Rate (annualized)		Average Balance	Interest Income/ Expense	Average Yields/Rate (annualized)
Interest Earning Assets:
Loans:
	Loans held for sale	$ 1,178	$ 21	7.09 %		$ 1,775	$ 30	6.80 %		$ 1,856	$ 30	6.41 %
	Portfolio loans (1)	675,868	8,985	5.29 %		654,120	8,361	5.14 %		648,910	8,063	4.93 %
Available for sale securities (2)		89,854	707	3.13 %		92,975	724	3.13 %		94,677	545	2.28 %
Federal Reserve		91,497	1,206	5.24 %		70,581	926	5.28 %		40,476	498	4.88 %
Other interest earning assets		2,708	46	6.76 %		2,172	47	8.70 %		2,311	40	6.87 %
Total Interest Earning Assets		861,105	$10,965	5.07 %		821,623	$10,088	4.94 %		788,230	$9,176	4.62 %
Other Assets		22,984				19,997				17,485
Total Assets		$ 884,089				$841,620				$805,715
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing Deposits		$ 601,792	$ 3,648	2.41 %		$581,787	$ 3,307	2.29 %		$550,424	$2,535	1.83 %
Federal Funds and repurchase agreements		3,215	7	0.87 %		3,706	7	0.76 %		5,232	10	0.76 %
Subordinated debt		9,933	140	5.61 %		9,918	140	5.68 %		9,873	139	5.59 %
FHLB advances		20,402	217	4.23 %		6,000	67	4.49 %		6,011	68	4.49 %
Total Interest-Bearing Liabilities		635,342	$ 4,012	2.51 %		601,411	$ 3,521	2.35 %		571,540	$2,752	1.91 %
Non-interest-bearing deposits and other liabilities		178,110				172,221				171,033
Total Liabilities		813,452				773,632				742,573
Stockholders' Equity		70,637				67,988				63,142
Total Liabilities and Stockholders' Equity		$ 884,089				$841,620				$805,715
Interest Rate Spread				2.56 %				2.59 %				2.71 %
Net Interest Income			$ 6,953				$ 6,567				$6,424
Net Interest Margin				3.21 %				3.21 %				3.23 %

(1) Total loan interest income includes amortization of deferred loan fees, net of deferred loan costs.

(2) Average balances exclude unrealized gains/losses.

SOURCE Potomac Bancshares, Inc.