Bank of the James Financial (BOTJ) - 2023 Q1 - Quarterly Report

Financial Performance - Net income for the three months ended March 31, 2023, was $1,984,000, compared to $2,139,000 for the same period in 2022[103]. - Basic and diluted earnings per share for the three months ended March 31, 2023, were $0.43, down from $0.45 for the same period in 2022[103]. - Net income for the three months ended March 31, 2023, decreased due to a provision for credit losses of $140,000 compared to a recovery of $300,000 in the same period in 2022[107]. - The annualized return on average stockholders' equity increased to 16.25% for the three months ended March 31, 2023, up from 12.27% for the same period in 2022[108]. - Noninterest income decreased to $3,044,000 for the three months ended March 31, 2023, from $3,631,000 in the same period in 2022, mainly due to a decline in gains on loan sales[116]. Interest Income and Expense - Interest income rose to $9,098,000 for the three months ended March 31, 2023, compared to $6,915,000 for the same period in 2022, driven by an increase in interest rates on earning assets[110]. - Interest expense increased significantly to $1,456,000 for the three months ended March 31, 2023, from $525,000 for the same period in 2022, primarily due to higher rates on deposits[111]. - Net interest income for the three months ended March 31, 2023, was $7,642,000, compared to $6,390,000 for the same period in 2022, with a net interest margin of 3.48% compared to 2.86% in 2022[112]. Assets and Liabilities - Total assets increased by 2.10% to $948,101,000 as of March 31, 2023, compared to $928,571,000 at December 31, 2022[76]. - Total liabilities decreased to $892.135 billion in 2023 from $906.943 billion in 2022[134]. - Total interest-bearing deposits decreased to $699.050 billion in 2023 from $716.749 billion in 2022[134]. - Total loans, excluding loans held for sale, increased by 2.12% to $618,223,000 on March 31, 2023, from $605,366,000 at December 31, 2022[82]. Credit and Risk Management - The Bank's exposure to credit loss from financial instruments includes commitments to extend credit and standby letters of credit, which involve credit risk and interest rate risk[70]. - The allowance for credit losses was 1.23% of total loans outstanding as of March 31, 2023, compared to 1.22% at December 31, 2022[127]. - The allowance for credit losses increased to $7.531 billion in 2023 from $6.964 billion in 2022[134]. Branch Expansion and Commitments - The company reported commitments to extend credit amounting to $189,955,000 and letters of credit totaling $2,267,000, leading to a total of $192,222,000 in commitments[70]. - Financial aims to enhance profitability by increasing market share, providing additional services, and controlling costs[62]. - The company anticipates that new branches will become profitable within 12 to 18 months of operation and is evaluating additional branch locations for potential expansion[68]. - The company continuously evaluates its service areas to identify viable branch locations for future expansion[67]. Operational Improvements - The estimated cost for improvements and construction of a new branch at the Timberlake Road area is projected to be between $900,000 and $1,500,000[72]. - Noninterest expense increased by $427,000 to $8,075,000 for the three months ended March 31, 2023, representing a 5.58% increase from $7,648,000 in 2022[123]. Regulatory and Compliance - The company adopted the CECL accounting standard effective January 1, 2023, implementing new controls over financial reporting[138]. - The company is not involved in any pending legal proceedings at this time, other than routine litigation incidental to its business[139].