Bank of the James Financial (BOTJ) - 2025 Q2 - Quarterly Results

Executive Summary and Company Overview This section provides an overview of the company's Q2/H1 2025 financial performance and strategic highlights Company Introduction and Q2/H1 2025 Performance Highlights Bank of the James Financial Group reported significant Q2 2025 net income growth, while H1 2025 net income decreased, operating as a full-service bank and investment advisor in Virginia Net Income and EPS Performance (Q2 & H1 2025 vs. 2024) | Metric | Q2 2025 | Q2 2024 | Change | H1 2025 | H1 2024 | Change | | :-------------------- | :------ | :------ | :----- | :------ | :------ | :----- | | Net Income ($ millions) | $2.70 | $2.15 | +25.58% | $3.55 | $4.34 | -18.20% | | EPS (basic & diluted) | $0.60 | $0.47 | +27.66% | $0.79 | $0.95 | -16.84% | - Bank of the James Financial Group, Inc. (NASDAQ:BOTJ) is the parent company of Bank of the James, a full-service commercial and retail bank, and Pettyjohn, Wood & White, Inc. (PWW), an SEC-registered investment advisor[1] - The Bank serves Region 2000 (greater Lynchburg metropolitan statistical area) and other Virginia markets including Blacksburg, Buchanan, Charlottesville, Harrisonburg, Lexington, Nellysford, Roanoke, and Wytheville[1] CEO Commentary CEO Robert R. Chapman III highlighted strong Q2 2025 performance driven by lending and deposits, improved net interest margin, and the retirement of capital notes - Financial results, particularly Q2 2025, demonstrated continued traction in commercial lending, mortgage originations, and core deposits[3] - Net interest margin consistently improved, reaching 3.45% in Q2 2025, the highest in a number of quarters, reflecting a focus on loan yields, controlling interest expense, and managing borrowings[4] - The parent company retired approximately $10 million in capital notes, expected to reduce annual interest expense by approximately $327,000[8] Key Capitalization Metric | Metric | June 30, 2025 | | :------------------ | :------------ | | Tier 1 leverage ratio | 8.85% | - The Company continues building value for shareholders, evidenced by growth in stockholders' equity, retained earnings, and book value per share[10] Financial Highlights and Operational Review This section details the financial performance and operational drivers for the second quarter and first half of 2025 Second Quarter, First Half of 2025 Highlights Key financial highlights include a significant recovery of allowance for credit losses, increased interest income, improved net interest margin, and growth in commercial real estate loans - Net income and EPS in Q2 2025 partially reflected a $528,000 recovery of allowance for credit losses[11] Interest Income and Net Interest Income (Q2 & H1 2025 vs. 2024) | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | YoY Change | H1 2025 ($ millions) | H1 2024 ($ millions) | YoY Change | | :------------------------------------------ | :------------------- | :------------------- | :--------- | :------------------- | :------------------- | :--------- | | Total Interest Income | $11.64 | $10.94 | +6% | $22.87 | $21.44 | +7% | | Net Interest Income after Recovery of Credit Losses | $8.78 | $7.21 | +22% | $16.36 | $14.72 | +11% | Interest Expense and Net Interest Margin (Q2 & H1 2025 vs. 2024) | Metric | Q2 2025 | Q2 2024 | YoY Change | Q1 2025 | H1 2025 | H1 2024 | YoY Change | | :---------------- | :------ | :------ | :--------- | :------ | :------ | :------ | :--------- | | Interest Expense | | | -12% | | | | -7% | | Net Interest Margin | 3.45% | 3.02% | +0.43 ppt | 3.25% | 3.34% | 3.02% | +0.32 ppt | Key Balance Sheet Items (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 ($ millions) | Dec 31, 2024 ($ millions) | Change | | :------------------------------------ | :------------------------- | :------------------------- | :----- | | Loans, net of allowance for credit losses | $649.09 | $636.55 | +$12.54M | | Commercial Real Estate Loans | $355.67 | $335.53 | +$20.14M | | Total Assets | $1,040.00 | $979.24 | +$60.76M | | Total Deposits | $910.53 | $882.40 | +$28.13M | | Book Value Per Share | $15.77 | $14.28 | +$1.49 | - The Company's board of directors approved a quarterly dividend of $0.10 per common share on July 12, 2025[18] Second Quarter, First Half of 2025 Operational Review Operational review shows strong net interest income growth from loan yields and controlled interest expense, stable noninterest income, and increased noninterest expenses from strategic investments Net Interest Income and Yield on Earning Assets (Q2 & H1 2025 vs. 2024) | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | YoY Change | H1 2025 ($ millions) | H1 2024 ($ millions) | YoY Change | | :-------------------------- | :------------------- | :------------------- | :--------- | :------------------- | :------------------- | :--------- | | Net Interest Income | $8.25 | $7.09 | +16% | $15.97 | $14.04 | +14% | | Yield on Total Earning Assets | 4.86% | 4.68% | +0.18 ppt | 4.79% | 4.62% | +0.17 ppt | - Total interest expense declined in both Q2 and H1 2025 primarily due to a relatively stable interest rate environment and the Bank's management of rates paid on interest-bearing deposits[15] Net Interest Margin and Interest Spread (Q2 & H1 2025 vs. 2024) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :---------------- | :------ | :------ | :--------- | :------ | :------ | :--------- | | Net Interest Margin | 3.45% | 3.02% | +0.43 ppt | 3.34% | 3.04% | +0.30 ppt | | Interest Spread | 3.15% | 2.69% | +0.46 ppt | 3.15% | 2.68% | +0.47 ppt | - Noninterest income was predominantly generated by fees from debit card activity, commercial treasury services, gains on sale of loans held for sale by the mortgage division, and wealth management fees from PWW[17] - Noninterest expense increases reflected consulting fees for a major vendor agreement amendment, the addition of revenue-generating employees, new banking facilities, and quarterly accruals of year-end employee compensation[18][19] Balance Sheet and Asset Quality This section reviews the company's balance sheet growth, asset composition, and maintained high asset quality metrics Balance Sheet Overview Total assets surpassed $1.04 billion, driven by growth in securities and commercial real estate loans, while construction loans saw mixed trends Key Balance Sheet Growth (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 ($ millions) | Dec 31, 2024 ($ millions) | Change | | :------------------------------------ | :------------------------- | :------------------------- | :----- | | Total Assets | $1,040.00 | $979.24 | +$60.76M | | Loans, net of allowance for credit losses | $649.09 | $636.55 | +$12.54M | | Commercial Real Estate Loans (total) | $355.68 | $335.53 | +$20.15M | | Commercial Construction/Land Loans | $10.68 | $23.88 | -$13.20M | | Residential Construction/Land Loans | $29.04 | $26.15 | +$2.89M | | Commercial and Industrial Loans | $70.51 | $66.42 | +$4.09M | - The Bank closely monitors concentrations in commercial real estate segments and has no commercial real estate loans secured by large office buildings in large metropolitan city centers[21] - Residential mortgage loans intended to be kept on the balance sheet totaled $108.88 million, with the Bank continuing to focus on selling the majority of originated mortgage loans to the secondary market[23] Asset Quality The company maintained strong asset quality with low nonperforming loans and no OREO, reflecting diligent credit management Asset Quality Metrics (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 | Dec 31, 2024 | Change (ppt) | | :------------------------------------ | :------------ | :------------ | :----------- | | Nonperforming loans to total loans | 0.28% | 0.25% | +0.03 | | Allowance for credit losses for loans to total loans | 0.96% | 1.09% | (0.13) | - Total nonperforming loans were $1.85 million at June 30, 2025, and there was no other real estate owned (OREO), meaning total nonperforming assets were equal to total nonperforming loans[25] Deposits and Shareholder Value Total deposits and core deposits increased, contributing to positive trends in stockholders' equity, retained earnings, and book value per share Deposit Growth (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 ($ millions) | Dec 31, 2024 ($ millions) | Change | | :------------- | :------------------------- | :------------------------- | :----- | | Total Deposits | $910.53 | $882.40 | +$28.13M | | Core Deposits | $681.36 | $651.90 | +$29.46M | - The Bank had no brokered deposits at June 30, 2025, and December 31, 2024, reflecting its focus on growing and retaining lower-cost core deposits[26] Shareholder Value Metrics (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 ($ millions) | Dec 31, 2024 ($ millions) | Change | | :------------------- | :------------------------- | :------------------------- | :----- | | Stockholders' Equity | $71.67 | $64.87 | +$6.80M | | Retained Earnings | $45.44 | $42.80 | +$2.64M | | Book Value Per Share | $15.77 | $14.28 | +$1.49 | Available-for-Sale Securities Portfolio The portfolio, primarily government-guaranteed, experiences fair value adjustments due to interest rate fluctuations, with unrealized losses excluded from regulatory capital - The available-for-sale securities portfolio is composed primarily of securities with explicit or implicit government guarantees, including U.S. Treasuries and U.S. agency obligations, and other highly rated debt instruments[29] - Interest rate fluctuations result in adjustments to the fair value (mark-to-market) of the available-for-sale securities portfolio, reflected in accumulated other comprehensive loss, but these losses are excluded when calculating the Bank's regulatory capital ratios[29] - 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[29] Corporate Information This section provides details about the company's structure, services, and a cautionary statement regarding forward-looking information About the Company Bank of the James Financial Group is the parent company of Bank of the James, offering comprehensive banking, investment, and insurance services across Virginia - Bank of the James Financial Group, Inc. (NASDAQ:BOTJ) is the parent company of Bank of the James, headquartered in Lynchburg, Virginia[30] - The Bank offers full investment and insurance services through its BOTJ Investment Services division and BOTJ Insurance, Inc. subsidiary, and mortgage loan origination through Bank of the James Mortgage[30] - The Company provides investment advisory services through its wholly-owned subsidiary, Pettyjohn, Wood & White, Inc., an SEC-registered investment advisor[30] Cautionary Statement Regarding Forward-Looking Statements This standard disclaimer warns that forward-looking statements are subject to risks and uncertainties, and actual results may differ materially - The press release contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995, identified by words like "believe," "estimate," "expect," "intend," and "anticipate"[31] - Readers are cautioned that forward-looking statements are not guarantees of future performance and involve risks and uncertainties, with actual results potentially differing materially[31] - Factors that could cause actual results to differ include competition, general economic conditions, potential changes in interest rates, changes in real estate values, and geopolitical conditions[31] Consolidated Financial Statements and Supplementary Data This section presents detailed consolidated financial statements, including balance sheets, income statements, and selected financial data Consolidated Balance Sheets The consolidated balance sheet shows total assets exceeding $1 billion, driven by growth in securities and loans, with increased deposits and stockholders' equity Consolidated Balance Sheet Highlights (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Total assets | $1,004,242 | $979,244 | | Loans, net of allowance for credit losses | $649,089 | $636,552 | | Securities available-for-sale, at fair value | $196,585 | $187,916 | | Total deposits | $910,527 | $882,404 | | Capital notes, net | $- | $10,048 | | Total stockholders' equity | $71,665 | $64,865 | Consolidated Statements of Income Q2 2025 net income increased significantly due to higher interest income and lower interest expense, while H1 2025 net income decreased year-over-year Consolidated Statements of Income (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | Change (%) | | :----------------------------------- | :-------------------- | :-------------------- | :--------- | | Total interest income | $11,638 | $10,935 | 6.43% | | Total interest expense | $3,388 | $3,844 | -11.86% | | Net interest income | $8,250 | $7,091 | 16.34% | | Recovery of credit losses | $(528) | $(123) | 329.27% | | Net income | $2,704 | $2,148 | 25.88% | | Basic net income per common share | $0.60 | $0.47 | 27.66% | Consolidated Statements of Income (H1 2025 vs. H1 2024) | Metric | H1 2025 ($ thousands) | H1 2024 ($ thousands) | Change (%) | | :----------------------------------- | :-------------------- | :-------------------- | :--------- | | Total interest income | $22,872 | $21,444 | 6.66% | | Total interest expense | $6,903 | $7,403 | -6.75% | | Net interest income | $15,969 | $14,041 | 13.73% | | Recovery of credit losses | $(391) | $(676) | -42.16% | | Net income | $3,546 | $4,335 | -18.20% | | Basic net income per common share | $0.79 | $0.95 | -16.84% | Selected Financial Data This section provides a comparative overview of key financial metrics for the three and six months ended June 30, 2025, and 2024, highlighting significant year-over-year changes Selected Income Statement Changes (Q2 2025 vs. Q2 2024) | Metric | Change (%) | | :------------------------------------------ | :--------- | | Interest income | 6.43% | | Interest expense | -11.86% | | Net interest income | 16.34% | | Provision for (recovery of) credit losses | 329.27% | | Noninterest income | -2.77% | | Noninterest expense | 8.19% | | Net income | 25.88% | Selected Income Statement Changes (H1 2025 vs. H1 2024) | Metric | Change (%) | | :------------------------------------------ | :--------- | | Interest income | 6.66% | | Interest expense | -6.75% | | Net interest income | 13.73% | | Provision for (recovery of) credit losses | -42.16% | | Noninterest income | -1.87% | | Noninterest expense | 14.58% | | Net income | -18.20% | Selected Balance Sheet Changes (June 30, 2025 vs. Dec 31, 2024) | Metric | Change (%) | | :------------------- | :--------- | | Loans, net | 1.97% | | Loans held for sale | 16.87% | | Total securities | 4.52% | | Total deposits | 3.19% | | Stockholders' equity | 10.48% | | Total assets | 2.55% | | Book value per share | $1.49 (absolute change) | Daily Averages and Financial Ratios This section presents daily average balances for key assets and liabilities, along with important financial ratios, providing insights into profitability and operational efficiency Key Financial Ratios (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (ppt) | | :-------------------------- | :------ | :------ | :----------- | | Return on average assets | 1.06% | 0.87% | 0.19 | | Return on average equity | 15.89% | 14.35% | 1.54 | | Net interest margin | 3.45% | 3.02% | 0.43 | | Efficiency ratio | 76.71% | 77.46% | (0.75) | | Average equity to average assets | 6.69% | 6.05% | 0.64 | Key Financial Ratios (H1 2025 vs. H1 2024) | Metric | H1 2025 | H1 2024 | Change (ppt) | | :-------------------------- | :------ | :------ | :----------- | | Return on average assets | 0.70% | 0.89% | (0.19) | | Return on average equity | 10.81% | 14.60% | (3.79) | | Net interest margin | 3.34% | 3.02% | 0.32 | | Efficiency ratio | 82.66% | 78.12% | 4.54 | | Average equity to average assets | 6.52% | 6.11% | 0.41 | Daily Average Balances (H1 2025 vs. H1 2024) | Metric | H1 2025 ($ thousands) | H1 2024 ($ thousands) | Change (%) | | :---------------------- | :-------------------- | :-------------------- | :--------- | | Loans | $650,292 | $611,375 | 6.37% | | Total deposits | $921,241 | $891,152 | 3.38% | | Stockholders' equity | $66,526 | $60,045 | 10.79% | | Interest earning assets | $964,062 | $934,396 | 3.17% | | Total assets | $1,020,182 | $982,441 | 3.84% | Allowance for Credit Losses and Nonperforming Assets This section details the allowance for credit losses and nonperforming assets, showing changes in balances and asset quality ratios reflecting ongoing credit management Allowance for Credit Losses (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 ($ thousands) | Dec 31, 2024 ($ thousands) | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Beginning balance | $7,022 | $7,044 | | Provision for (recovery of) credit losses* | $(555) | $(391) | | Charge-offs | $(160) | $(223) | | Recoveries | $1 | $13 | | Ending balance | $6,308 | $6,308 | *does not include provision for or recovery of unfunded loan commitment liability Nonperforming Assets (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 ($ thousands) | Dec 31, 2024 ($ thousands) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | | Total nonperforming loans | $1,846 | $1,640 | 12.56% | | Total nonperforming assets | $1,846 | $1,640 | 12.56% | Asset Quality Ratios (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 | Dec 31, 2024 | Change (ppt) | | :------------------------------------------ | :------------ | :------------ | :----------- | | Nonperforming loans to total loans | 0.28% | 0.25% | 0.03 | | Allowance for credit losses for loans to total loans | 0.96% | 1.09% | (0.13) | | Allowance for credit losses for loans to nonperforming loans | 341.71% | 429.51% | (87.80) |