Bank of the James Financial (BOTJ) - 2024 Q2 - Quarterly Report

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]