Financial Performance - The company reported a significant increase in net interest income, driven by a rise in interest rates, resulting in a year-over-year growth of 15%[119] - Net income for the three and six months ended June 30, 2024, was $2,148,000 and $4,335,000, down from $2,534,000 and $4,518,000 in the same periods of 2023, representing a decrease of 15.2% and 4.0% respectively[152] - Basic and diluted earnings per share for the three and six months ended June 30, 2024, were $0.47 and $0.95, compared to $0.56 and $0.99 for the same periods in 2023, reflecting a decline of 16.1% and 4.0% respectively[152] - Interest income increased to $10,935,000 and $21,444,000 for the three and six months ended June 30, 2024, from $9,583,000 and $18,681,000 in 2023, marking an increase of 14.1% and 9.0% respectively[152] - Interest expense rose significantly to $3,844,000 and $7,403,000 for the three and six months ended June 30, 2024, compared to $2,238,000 and $3,694,000 in 2023, an increase of 72.0% and 100.0% respectively[154] - Net interest income for the three and six months ended June 30, 2024, was $7,091,000 and $14,041,000, down from $7,345,000 and $14,987,000 in 2023, representing decreases of 3.5% and 6.3% respectively[155] - Noninterest income increased to $4,191,000 and $7,498,000 for the three and six months ended June 30, 2024, from $3,444,000 and $6,488,000 in 2023, reflecting increases of 21.7% and 15.6% respectively[158] - Noninterest expense for the three and six months ended June 30, 2024, increased to $8,739,000 and $16,827,000, up from $7,876,000 and $15,951,000 in 2023, increases of 10.96% and 5.49% respectively[166] Asset and Liability Management - Total assets increased by 0.89% to $978,011,000 as of June 30, 2024, compared to $969,371,000 at December 31, 2023[131] - Total deposits rose by 0.73% to $884,902,000 on June 30, 2024, from $878,459,000 at the end of 2023[131] - Total loans, excluding loans held for sale, increased by 2.35% to $616,088,000 on June 30, 2024, from $601,921,000 at December 31, 2023[132] - Total earning assets increased to $941,099,000 in 2024, generating interest income of $10,940,000 with an average rate of 4.68%, compared to $892,900,000 and $9,588,000 at 4.31% in 2023[173] - Total interest-bearing deposits increased to $755,564,000 in 2024, with interest expense of $3,649,000, compared to $710,412,000 and $2,036,000 in 2023[174] - Total liabilities and stockholders' equity increased to $982,441,000 from $941,593,000[178] Credit Quality and Losses - The company’s allowance for credit losses is based on a discounted cash flow model, reflecting management's estimates of probable losses in the loan portfolio[114] - The allowance for credit losses was 1.12% of total loans outstanding as of June 30, 2024, down from 1.22% and 1.23% at December 31, 2023, and June 30, 2023 respectively[168] - Charged-off loans for the three and six months ended June 30, 2024, were $19,000 and $84,000, compared to $19,000 and $52,000 in 2023[169] - The allowance for loan losses decreased to $6,940,000 in 2024 from $7,738,000 in 2023, indicating improved asset quality[173] Branch Expansion and Market Strategy - The company plans to open additional branches in Virginia, with expectations that each new branch will become profitable within 12 to 18 months of operation[125] - The company is currently evaluating potential branch locations and may acquire properties for expansion in the next 12 months[125] - The company has identified properties for future branch locations, including a permanent branch in Nellysford, Virginia, expected to open in 2025[124] - The estimated cost for improvements to a new branch in Campbell County is projected to be between $900,000 and $1,500,000[124] - The company aims to enhance profitability by increasing market share and providing additional services to customers[119] - The company’s primary market area has expanded beyond Central Virginia to include Roanoke, Charlottesville, Harrisonburg, Blacksburg, Lexington, and Rustburg[117] Regulatory and Compliance - The company continues to monitor and ensure compliance with SEC rules and regulations[180] - Disclosure controls and procedures were evaluated as effective by the principal executive and financial officers[180] - There were no significant changes in internal controls over financial reporting during the quarter ended June 30, 2024[181] - The company is not involved in any pending legal proceedings, other than routine litigation[182] - The company reported no significant market risks applicable to its operations[180] Investment and Securities - As of June 30, 2024, the investment advisory firm PWW, acquired by the company, manages approximately $789 million in assets[118] - Securities available-for-sale decreased to $206,177,000 on June 30, 2024, from $216,510,000 at December 31, 2023[139] - The Bank has liquid assets totaling $280,804,000 as of June 30, 2024, including cash and available-for-sale investments[141] - The Bank's investment in Federal Home Loan Bank of Atlanta stock increased to $672,000 at June 30, 2024, from $643,000 at December 31, 2023[140] Taxation - For the three and six months ended June 30, 2024, the income tax expense was $518,000 and $1,053,000, respectively, compared to $633,000 and $1,120,000 for the same periods in 2023, reflecting an effective tax rate decrease to 19.43% and 19.54% from 19.99% and 19.87%[171] - The effective tax rate was lower than the statutory corporate tax rate due to federal income tax benefits from specific tax treatments[171]

Financial Performance - Net interest income after recovery of credit losses for Q2 2024 was $7.21 million, down from $7.60 million in Q2 2023, representing a decrease of 5.13%[2] - For the first half of 2024, net interest income after recovery of credit losses was $14.72 million, compared to $15.10 million in the same period last year, a decline of 2.52%[2] - Total interest income for Q2 2024 was $10.94 million, compared to $9.58 million in Q2 2023, representing an increase of 14.19%[10] - Total interest income for Q2 2024 was $10.94 million, a 14% increase from $9.58 million in Q2 2023, and $21.44 million for the first half of 2024, up 15% from $18.68 million a year earlier[23] - Net income for the three months ended June 30, 2024, was $2.15 million, or $0.47 per share, compared to $2.53 million, or $0.56 per share for the same period in 2023, reflecting a decrease of 15.23%[29] - Interest income increased by 14.11% year-over-year, reaching $10.94 million for the three months ended June 30, 2024[27] - Noninterest income for the first half of 2024 was $7.50 million, up from $6.49 million in the same period last year, a growth of 15.59%[10] - Noninterest income rose by 21.69% year-over-year, totaling $4.19 million for the three months ended June 30, 2024[27] Asset and Equity Growth - Total assets as of June 30, 2024, were $978.01 million, an increase from $969.37 million as of December 31, 2023, reflecting a growth of 0.66%[8] - Stockholders' equity rose to $61.71 million as of June 30, 2024, up from $60.04 million at the end of 2023, indicating an increase of 2.78%[16] - The company's total assets increased by 0.89% to $978.01 million as of June 30, 2024, from $969.37 million at the end of 2023[27] - Stockholders' equity rose by 2.78% to $61.71 million as of June 30, 2024, compared to $60.04 million at the end of 2023[27] Deposits and Liabilities - Total deposits increased to $884.90 million as of June 30, 2024, compared to $878.46 million at the end of 2023, marking a rise of 0.50%[15] - Total deposits grew by 0.73% to $884.90 million as of June 30, 2024, compared to $878.46 million at the end of 2023[27] - Total liabilities as of June 30, 2024, were $916.31 million, compared to $909.33 million at the end of 2023, reflecting a slight increase of 0.22%[15] Loan Performance - Loans held for sale increased by 9.77% to $4.13 million in Q2 2024 from $3.77 million in Q2 2023[11] - Loans held for sale surged by 284.34%, amounting to $4.84 million as of June 30, 2024, compared to $1.26 million at the end of 2023[27] - The ratio of nonperforming loans to total loans was 0.13% at June 30, 2024, up from 0.06% at December 31, 2023[24] - Total nonperforming loans increased to $797,000 at June 30, 2024, a 103.84% increase from $391,000 at December 31, 2023[22] - The allowance for credit losses to total loans decreased to 1.12% at June 30, 2024, from 1.21% at December 31, 2023[19] Strategic Initiatives - The company opened two new branches in Virginia to enhance outreach and deposit-gathering capabilities[24] - A quarterly dividend of $0.10 per common share was approved, payable on September 20, 2024[24] Market Outlook - The company maintained exceptional liquidity and asset quality while growing loans and deposits[30] - The competitive landscape remains favorable, with opportunities arising from larger banks reducing services in the company's markets[30] - The company anticipates continued strong performance and positive economic indicators supporting financial strength in the second half of 2024[30]

Robert R. Chapman III, CEO of the Bank, commented: "The Company's earnings performance continued to demonstrate success in responding to prevailing market conditions, providing financial solutions for our commercial and retail customers and efficiently managing our operations. We grew loans and deposits, interest income and noninterest income year-over-year, while maintaining exceptional liquidity and asset quality. "Business conditions and residential real estate activity in our served markets has been hea ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ Form 10-Q ______________________ (Mark one) ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2024 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from BANK OF THE JAMES FINANCIAL GROUP, INC. (Exact Name of Registrant as Specified in Its Charter) ____ ...

Financial Performance - Net income for Q1 2024 was $2.19 million, or $0.48 per share, compared to $1.98 million, or $0.43 per share, in Q1 2023, reflecting a year-over-year growth of approximately 10.61%[14] - Net income for the three months ending March 31, 2024, was $2,187 thousand, representing a 10.23% increase from $1,984 thousand in the same period of 2023[30] - Basic and diluted net income per share increased to $0.48, up $0.05 from $0.43 in the prior year[30] Interest Income and Margin - Total interest income increased to $10.51 million in Q1 2024, up 15.51% from $9.10 million in Q1 2023, driven by higher commercial loan interest rates and new mortgages[4] - Interest income rose to $10,509 thousand, a 15.51% increase compared to $9,098 thousand for the same period last year[30] - Net interest margin decreased to 3.02% in Q1 2024 from 3.48% in Q1 2023, while the interest rate spread fell to 2.73% from 3.33% year-over-year[5] - The net interest margin decreased to 3.02% from 3.48% year-over-year[32] Deposits and Loans - Total deposits rose to $893.50 million at March 31, 2024, an increase from $878.46 million at December 31, 2023, marking a growth of approximately 1.19%[5] - Total deposits increased by 1.71% to $893,494 thousand from $878,459 thousand at the end of 2023[30] - The Company added $15.00 million in deposits during Q1 2024, supporting its lending capabilities and reducing reliance on borrowings[7] - Loans held for sale surged by 268.84% to $4,640 thousand from $1,258 thousand at December 31, 2023[30] Asset Quality - The ratio of nonperforming loans to total loans was 0.09% at March 31, 2024, indicating strong asset quality with minimal levels of nonperforming loans[5] - Nonperforming loans increased to $558 thousand, a 42.71% rise from $391 thousand at December 31, 2023[32] - The allowance for credit losses to total loans ratio decreased to 1.14% from 1.22%[32] Equity and Book Value - Book value per share increased to $13.30 at March 31, 2024, up from $13.21 at December 31, 2023, and significantly higher than $11.41 a year earlier[8] - Stockholders' equity rose to $60,437 thousand, a 0.66% increase from $60,039 thousand at the end of 2023[30] Noninterest Income - Total noninterest income for Q1 2024 was $3.31 million, compared to $3.04 million in Q1 2023, with contributions from commercial treasury services and wealth management[5] Future Plans - The Company plans to expand its presence in the Roanoke, Lexington, and Charlottesville markets by opening new offices in Buchanan and Nellysford, Virginia[3] Dividends - The board of directors approved a quarterly dividend of $0.10 per common share, to be paid on June 21, 2024, reflecting the Company's commitment to returning value to shareholders[5] Total Assets - Total assets increased to $984,891 thousand as of March 31, 2024, up 1.60% from $969,371 thousand at December 31, 2023[25]

LYNCHBURG, Va., April 26, 2024 (GLOBE NEWSWIRE) -- Bank of the James Financial Group, Inc. (the "Company") (NASDAQ:BOTJ), the parent company of Bank of the James (the "Bank"), a full-service commercial and retail bank, and Pettyjohn, Wood & White, Inc. ("PWW"), an SEC-registered investment advisor, today announced unaudited results of operations for the three month period ended March 31, 2024. The Bank serves Region 2000 (the greater Lynchburg MSA) and the Blacksburg, Charlottesville, Harrisonburg, Lexingto ...

The Bank is also subject to various laws and regulations that attempt to combat money laundering and terrorist financing. The Bank Secrecy Act requires all financial institutions to, among other things, create a system of controls designed to prevent money laundering and the financing of terrorism, and imposes recordkeeping and reporting requirements. The USA Patriot Act facilitates information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money la ...

LYNCHBURG, Va., Feb. 02, 2024 (GLOBE NEWSWIRE) -- Bank of the James Financial Group, Inc. (the "Company") (NASDAQ:BOTJ), the parent company of Bank of the James (the "Bank"), a full-service commercial and retail bank, and Pettyjohn, Wood & White, Inc. ("PWW"), an SEC-registered investment advisor, today announced unaudited results of operations for the three and 12 month periods ended December 31, 2023. The Bank serves Region 2000 (the greater Lynchburg MSA) and the Blacksburg, Charlottesville, Harrisonburg ...

LYNCHBURG, Va., Jan. 19, 2024 (GLOBE NEWSWIRE) -- On January 16, 2024, the Board of Directors of Bank of the James Financial Group, Inc. (the "Company") (NASDAQ:BOTJ), the parent company of Bank of the James (the "Bank"), a full-service commercial and retail bank, and Pettyjohn, Wood & White, Inc., an SEC-registered investment advisor, declared a cash dividend in the amount of $0.10 per common share. This is an increase of $0.02 per common share, or 25%, from the dividend declared in October 2023. The divid ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements for the periods ended September 30, 2023, and December 31, 2022 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section details the company's assets, liabilities, and stockholders' equity as of September 30, 2023, and December 31, 2022 **Consolidated Balance Sheet Highlights (in thousands)** | Item | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total cash and cash equivalents | $99,529 | $61,762 | | Securities held-to-maturity (amortized cost) | $3,626 | $3,639 | | Securities available-for-sale (fair value) | $181,977 | $185,787 | | Loans, net of allowance for credit losses | $599,585 | $605,366 | | Total assets | $960,887 | $928,571 | | Total deposits | $880,203 | $848,138 | | Total liabilities | $910,758 | $878,345 | | Total stockholders' equity | $50,129 | $50,226 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) This section outlines the company's revenues, expenses, and net income for the three and nine months ended September 30, 2023 and 2022 **Consolidated Statements of Income Highlights (in thousands)** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total interest income | $10,143 | $8,399 | $28,824 | $22,912 | | Total interest expense | $2,779 | $499 | $6,473 | $1,498 | | Net interest income | $7,364 | $7,900 | $22,351 | $21,414 | | Recovery of credit losses | $(164) | $(300) | $(278) | $(900) | | Total noninterest income | $3,201 | $3,854 | $9,689 | $10,519 | | Total noninterest expenses | $8,140 | $8,879 | $24,091 | $24,119 | | Income before income taxes | $2,589 | $3,175 | $8,227 | $8,714 | | Income tax expense | $511 | $601 | $1,631 | $1,709 | | Net Income | $2,078 | $2,574 | $6,596 | $7,005 | | Earnings per common share - basic and diluted | $0.46 | $0.55 | $1.44 | $1.48 | [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section reports the company's net income and other comprehensive income, including unrealized gains and losses on securities **Consolidated Statements of Comprehensive Income (Loss) (in thousands)** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $2,078 | $2,574 | $6,596 | $7,005 | | Unrealized (loss) on securities available-for-sale | $(5,462) | $(7,368) | $(3,794) | $(32,530) | | Tax effect | $1,147 | $1,548 | $797 | $6,832 | | Other comprehensive loss, net of tax | $(4,315) | $(5,820) | $(2,997) | $(25,698) | | Comprehensive (loss) income | $(2,237) | $(3,246) | $3,599 | $(18,693) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30 **Consolidated Statements of Cash Flows Highlights (in thousands)** | Item | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,969 | $5,363 | | Net cash provided by (used in) investing activities | $2,531 | $(100,452) | | Net cash provided by (used in) financing activities | $29,267 | $(7,044) | | Increase (decrease) in cash and cash equivalents | $37,767 | $(102,133) | | Cash and cash equivalents at end of period | $99,529 | $81,020 | | Fair value adjustment for securities available-for-sale | $(3,793) | $(32,530) | [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section details the changes in the company's equity accounts, including net income, dividends, and stock repurchases - The company's **total stockholders' equity decreased slightly** from $50,226 thousand at December 31, 2022, to $50,129 thousand at September 30, 2023, influenced by net income, dividends, stock repurchases, and other comprehensive losses[325](index=325&type=chunk)[331](index=331&type=chunk)[356](index=356&type=chunk) - The adoption of ASU 2016-13 (CECL) on January 1, 2023, resulted in a **reduction of retained earnings by $1,599 thousand**[331](index=331&type=chunk)[360](index=360&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the accounting policies and methodologies used in preparing the financial statements [Note 1 – Basis of Presentation](index=12&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) - The consolidated financial statements are prepared in accordance with GAAP, requiring management estimates and assumptions, particularly for the allowance for credit losses[29](index=29&type=chunk)[334](index=334&type=chunk) - The Company adopted ASC 326 (CECL) effective January 1, 2023, using a modified retrospective approach, resulting in an **approximate $1.6 million reduction to retained earnings** after tax[30](index=30&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk) [Note 2 – Significant Accounting Policies and Estimates](index=12&type=section&id=Note%202%20%E2%80%93%20Significant%20Accounting%20Policies%20and%20Estimates) - The Company adopted ASU 2016-13 (CECL) on January 1, 2023, replacing the incurred loss methodology with an **expected loss methodology** for financial assets[359](index=359&type=chunk) - ASU 2022-02, which **eliminates accounting guidance for troubled debt restructurings (TDRs)** for CECL adopters, was adopted prospectively on January 1, 2023, with no material impact[49](index=49&type=chunk) [Note 3 – Earnings Per Common Share (EPS)](index=15&type=section&id=Note%203%20%E2%80%93%20Earnings%20Per%20Common%20Share%20(EPS)) **Earnings Per Common Share (in thousands, except per share amounts)** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | $2,078 | $2,574 | $6,596 | $7,005 | | Weighted average shares outstanding - basic and diluted | 4,543,338 | 4,683,581 | 4,568,789 | 4,721,423 | | Earnings per common share - basic and diluted | $0.46 | $0.55 | $1.44 | $1.48 | - No potentially dilutive shares were outstanding in 2023 and 2022, resulting in **identical weighted average basic and diluted shares**[51](index=51&type=chunk) [Note 4 – Stock Based Compensation](index=15&type=section&id=Note%204%20%E2%80%93%20Stock%20Based%20Compensation) - The Company's 2018 Equity Incentive Plan permits the issuance of up to **250,000 shares of common stock** for awards to key employees[71](index=71&type=chunk) - All restricted stock units (RSUs) granted in 2019 vested by January 2, 2022, resulting in **$0 stock-based compensation expense** for the reported 2023 and 2022 periods[51](index=51&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [Note 5 – Fair Value Measurements](index=16&type=section&id=Note%205%20%E2%80%93%20Fair%20Value%20Measurements) - The Company uses a three-level hierarchy for fair value measurements: **Level 1** (quoted prices), **Level 2** (observable inputs), and **Level 3** (unobservable inputs)[52](index=52&type=chunk)[53](index=53&type=chunk)[77](index=77&type=chunk) - All of the Company's available-for-sale securities are classified as **Level 2**, while Interest Rate Lock Commitments (IRLCs) are classified as **Level 3**[54](index=54&type=chunk)[79](index=79&type=chunk)[101](index=101&type=chunk) - Loans held for sale are carried at cost, which approximates fair value (**Level 2**), due to their short duration between origination and sale[58](index=58&type=chunk)[105](index=105&type=chunk) [Note 6 – Securities](index=21&type=section&id=Note%206%20%E2%80%93%20Securities) **Securities Holdings (in thousands)** | Type | Amortized Cost (Sep 30, 2023) | Fair Value (Sep 30, 2023) | Amortized Cost (Dec 31, 2022) | Fair Value (Dec 31, 2022) | | :--- | :--- | :--- | :--- | :--- | | Held-to-maturity | $3,626 | $3,028 | $3,639 | $3,135 | | Available-for-sale | $219,671 | $181,977 | $219,688 | $185,787 | | Total | $223,297 | $185,005 | $223,327 | $188,922 | **Unrealized Losses on Available-for-Sale Securities (in thousands)** | Period | Total Unrealized Losses | | :--- | :--- | | September 30, 2023 | $(37,694) | | December 31, 2022 | $(33,901) | - The Company evaluated available-for-sale securities in an unrealized loss position and concluded **no credit impairment existed** as of September 30, 2023[117](index=117&type=chunk) [Note 7 – Business Segments](index=23&type=section&id=Note%207%20%E2%80%93%20Business%20Segments) - The Company operates three reportable business segments: **community banking, mortgage loan origination, and wealth management**[95](index=95&type=chunk) - The community banking segment's primary revenue is net interest income, while the mortgage and investment advisory businesses are driven by gain-on-sale and fee-for-service models, respectively[145](index=145&type=chunk) **Net Income by Business Segment (in thousands)** | Segment | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Community Banking | $1,636 | $2,023 | $5,156 | $5,317 | | Mortgage | $(67) | $152 | $284 | $621 | | Advisory Services | $509 | $399 | $1,156 | $1,067 | | Total Net Income | $2,078 | $2,574 | $6,596 | $7,005 | [Note 8 – Loans, allowance for credit losses and OREO](index=25&type=section&id=Note%208%20%E2%80%93%20Loans%2C%20allowance%20for%20credit%20losses%20and%20OREO) - The Company adopted CECL on January 1, 2023, changing its methodology for estimating the allowance for credit losses[123](index=123&type=chunk)[148](index=148&type=chunk) **Loan Portfolio Composition (in thousands)** | Loan Segment | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Commercial | $65,827 | $95,885 | | Commercial Real Estate | $329,464 | $354,025 | | Consumer | $77,931 | $97,959 | | Residential | $133,683 | $63,756 | | Total loans | $606,905 | $611,625 | | Less allowance for credit losses | $7,320 | $6,259 | | Net loans | $599,585 | $605,366 | **Allowance for Credit Losses Activity (in thousands)** | Item | 9 Months Ended Sep 30, 2023 | | :--- | :--- | | Beginning Balance, December 31, 2022 | $6,259 | | Adoption of ASU 2016-13 (CECL) | $1,245 | | Charge-Offs | $(196) | | Recoveries | $200 | | Provision (Recovery of) | $(188) | | Ending Balance, September 30, 2023 | $7,320 | - **Total nonperforming assets decreased** to $585 thousand on September 30, 2023, from $1,199 thousand on December 31, 2022, with no OREO[7](index=7&type=chunk)[183](index=183&type=chunk) - The Company adopted ASU 2022-02 on January 1, 2023, **eliminating accounting guidance for Troubled Debt Restructurings (TDRs)**[168](index=168&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - The allowance for credit losses for unfunded commitments was **$690 thousand** at September 30, 2023, an increase from $0 at December 31, 2022, due to the adoption of CECL[189](index=189&type=chunk)[190](index=190&type=chunk) [Note 9 – Revenue Recognition](index=37&type=section&id=Note%209%20%E2%80%93%20Revenue%20Recognition) - Service charges on deposit accounts are recognized over the service period for monthly fees and at a point in time for transactional fees[172](index=172&type=chunk) - Fees, exchange, and other service charges are recognized when services are rendered or upon completion[194](index=194&type=chunk) - Wealth management fees are primarily earned over time, charged quarterly based on the market value of client assets under management[174](index=174&type=chunk)[222](index=222&type=chunk) [Note 10 – Acquisitions](index=38&type=section&id=Note%2010%20%E2%80%93%20Acquisitions) - Financial acquired Pettyjohn, Wood & White, Inc (PWW), an investment advisory firm, on December 31, 2021, for **$10.5 million in cash**[175](index=175&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - The acquisition resulted in approximately **$3.0 million in goodwill** and **$8.4 million in amortizable intangible assets**[224](index=224&type=chunk) - Goodwill was adjusted in 2022 due to a working capital payment and an IRC 338(h)(10) election, **reducing it by $1.8 million**[197](index=197&type=chunk) [Note 11 – Recent accounting pronouncements and other authoritative guidance](index=39&type=section&id=Note%2011%20%E2%80%93%20Recent%20accounting%20pronouncements%20and%20other%20authoritative%20guidance) - ASU 2023-03 (Presentation of Financial Statements) was issued in July 2023; the Company does not expect a material impact[199](index=199&type=chunk) - ASU 2022-06 (Reference Rate Reform) was issued in December 2022, deferring the sunset date of Topic 848 to December 31, 2024; the Company has minimal exposure[200](index=200&type=chunk)[228](index=228&type=chunk) - ASU 2023-01 (Leases: Common Control Arrangements) was issued in March 2023; the Company does not expect a material impact[227](index=227&type=chunk) - ASU 2023-06 (Disclosure Improvements) was issued in October 2023; the Company does not expect a material impact[226](index=226&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the reported periods [CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS](index=40&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) - The report contains forward-looking statements subject to risks and uncertainties, including economic, market, and regulatory factors[202](index=202&type=chunk)[230](index=230&type=chunk) - Shareholders are cautioned that **actual results could differ materially** from projections, and the Company disclaims any obligation to update these statements[202](index=202&type=chunk)[203](index=203&type=chunk)[230](index=230&type=chunk) [GENERAL](index=41&type=section&id=GENERAL) - Bank of the James Financial Group, Inc is a bank holding company primarily engaged in retail banking, mortgage banking, and investment advisory services[208](index=208&type=chunk) - The Company's operating results depend primarily on **net interest income**, provision for credit losses, noninterest income, and noninterest expenses[211](index=211&type=chunk) - The Bank aims to enhance profitability by increasing market share, providing additional services, and controlling costs[236](index=236&type=chunk)[239](index=239&type=chunk)[241](index=241&type=chunk) - Off-balance sheet arrangements include **$180,365 thousand in commitments to extend credit** and **$3,208 thousand in letters of credit** as of September 30, 2023[215](index=215&type=chunk)[216](index=216&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) [SUMMARY OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=44&type=section&id=SUMMARY%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section summarizes key changes in the company's financial condition and operational results [Financial Condition Summary](index=44&type=section&id=Financial%20Condition%20Summary) - **Total assets increased by 3.48%** to $960,887 thousand on September 30, 2023, from $928,571 thousand at December 31, 2022[245](index=245&type=chunk) - **Total loans decreased** to $606,905 thousand on September 30, 2023, from $611,625 thousand at year-end 2022, mainly due to decreased loan demand[246](index=246&type=chunk) - **Nonperforming assets decreased** to $585 thousand on September 30, 2023, from $1,199 thousand on December 31, 2022[7](index=7&type=chunk)[248](index=248&type=chunk) - Securities available-for-sale decreased slightly to $181,977 thousand on September 30, 2023, from $185,787 thousand at December 31, 2022[249](index=249&type=chunk) - **Cash and cash equivalents increased** to $99,529 thousand on September 30, 2023, from $61,762 thousand on December 31, 2022[1](index=1&type=chunk) - **Total deposits increased by 3.78%** to $880,203 thousand on September 30, 2023, driven by an increase in time deposits[273](index=273&type=chunk) **Bank Level Capital Ratios** | Ratio | Sep 30, 2023 | Dec 31, 2022 | Regulatory Minimum | Well Capitalized Minimum | | :--- | :--- | :--- | :--- | :--- | | Tier 1 capital to average total assets | 9.48% | 8.98% | 4.000% | 5.000% | | Common Equity Tier 1 capital | 12.11% | 11.15% | 7.000% | 6.500% | | Tier 1 risk-based capital ratio | 12.11% | 11.15% | 8.500% | 8.000% | | Total risk-based capital ratio | 13.11% | 11.98% | 10.500% | 10.000% | - The Bank's regulatory capital levels **exceeded those established for well-capitalized institutions** at both September 30, 2023, and December 31, 2022[281](index=281&type=chunk) [Results of Operations](index=48&type=section&id=Results%20of%20Operations) - **Net income decreased** for the three and nine months ended September 30, 2023, compared to prior year periods, primarily due to a significant increase in interest expense[258](index=258&type=chunk) **Key Performance Indicators** | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (in thousands) | $2,078 | $2,574 | $6,596 | $7,005 | | Basic and diluted EPS | $0.46 | $0.55 | $1.44 | $1.48 | | Annualized Return on Average Stockholders' Equity | 15.68% | 19.47% | 17.20% | 15.45% | | Annualized Return on Average Assets | 0.86% | 1.05% | 0.93% | 0.95% | - Net interest income for the three months ended September 30, 2023, **decreased to $7,364 thousand** from $7,900 thousand in 2022[259](index=259&type=chunk) - The **net interest margin decreased to 3.21%** for the three-month period but increased to 3.33% for the nine-month period[259](index=259&type=chunk) - **Noninterest income decreased** for both three and nine-month periods ended September 30, 2023, primarily due to lower gains on loan sales[316](index=316&type=chunk) - **Noninterest expense decreased** for both three and nine-month periods ended September 30, 2023, mainly due to decreases in equipment and OREO expenses[292](index=292&type=chunk) - The allowance for credit losses **increased to 1.21% of total loans** outstanding at September 30, 2023, from 1.02% at December 31, 2022, driven by the adoption of CECL[293](index=293&type=chunk) - The **effective tax rate** for the nine months ended September 30, 2023, was **19.82%**, lower than the statutory rate due to tax benefits[294](index=294&type=chunk)[266](index=266&type=chunk) [Net Interest Margin Analysis and Average Balance Sheets](index=49&type=section&id=Net%20Interest%20Margin%20Analysis%20and%20Average%20Balance%20Sheets) This section provides a detailed analysis of the company's net interest margin and average balance sheet components **Average Balance Sheets and Net Interest Margin (in thousands, except rates)** | Item | Average Balance (2023) | Interest Income/Expense (2023) | Average Rates (2023) | Average Balance (2022) | Interest Income/Expense (2022) | Average Rates (2022) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total earning assets | $897,364 | $28,839 | 4.30% | $927,482 | $22,927 | 3.31% | | Total interest-bearing liabilities | $733,343 | $6,473 | 1.18% | $749,545 | $1,498 | 0.27% | | Net interest earnings | | $22,366 | | | $21,429 | | | Net interest margin | | | 3.33% | | | 3.09% | | Interest spread | | | 3.12% | | | 3.04% | - The **average rate on loans increased to 4.99%** for the nine months ended September 30, 2023, from 4.18% in the same period of 2022[6](index=6&type=chunk)[287](index=287&type=chunk) - The **average rate paid on interest-bearing deposits significantly increased to 1.10%** for the nine months ended September 30, 2023, from 0.16% in 2022[6](index=6&type=chunk)[312](index=312&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section indicates no specific disclosures about market risk are provided in this report - The section on Quantitative and Qualitative Disclosures About Market Risk is marked as **'Not applicable'** in this report[311](index=311&type=chunk) [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and notes no significant changes in internal controls - Financial's management concluded that **disclosure controls and procedures were effective** as of September 30, 2023[374](index=374&type=chunk) - There have been **no significant changes** in the Company's internal controls over financial reporting during the quarter ended September 30, 2023[369](index=369&type=chunk) [PART II – OTHER INFORMATION](index=55&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) This section states the company is only involved in routine litigation incidental to its business - The Company is not involved in any pending legal proceedings, aside from **routine litigation incidental to its business**[370](index=370&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the Annual Report for risk factors and confirms no material changes - For information regarding the Company's risk factors, refer to Part I, Item 1A 'Risk Factors' in the Company's **Annual Report on Form 10-K** for the year ended December 31, 2022[375](index=375&type=chunk) - There have been **no material changes** from risk factors as previously disclosed in the Company's Form 10-K for the year ended December 31, 2022[375](index=375&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the company's stock repurchase activities during the period - On February 6, 2023, the Company's board approved a stock repurchase plan to purchase up to **$998,000 of common stock**[367](index=367&type=chunk) - The Company purchased **85,319 shares** between the adoption date and April 6, 2023, under the plan[367](index=367&type=chunk) - The repurchase plan was **terminated on April 18, 2023**, and no shares were repurchased during the quarter ended September 30, 2023[367](index=367&type=chunk) [Item 3. Defaults Upon Senior Securities](index=56&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there are no defaults upon senior securities to report - The section on Defaults Upon Senior Securities is marked as **'Not applicable'** in this report[372](index=372&type=chunk) [Item 4. Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that there are no mine safety disclosures to report - The section on Mine Safety Disclosures is marked as **'Not applicable'** in this report[363](index=363&type=chunk) [Item 5. Other Information](index=56&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - The section on Other Information is marked as **'Not applicable'** in this report[368](index=368&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including financial data and officer certifications - Exhibit 101 includes **XBRL formatted** Consolidated Balance Sheets, Statements of Income, Comprehensive Income (Loss), Cash Flows, and Changes in Stockholders' Equity[364](index=364&type=chunk) - **Certifications from the President and Treasurer** pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as exhibits[366](index=366&type=chunk)[373](index=373&type=chunk)[378](index=378&type=chunk)