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What changed in BANK OF THE JAMES FINANCIAL GROUP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BANK OF THE JAMES FINANCIAL GROUP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+315 added−325 removedSource: 10-K (2025-03-26) vs 10-K (2024-03-27)

Top changes in BANK OF THE JAMES FINANCIAL GROUP INC's 2024 10-K

315 paragraphs added · 325 removed · 243 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

51 edited+16 added−25 removed108 unchanged
Biggest changeSince January 1, 2019 and the rules have required the Bank to maintain (i) a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% 12 Table of Contents common equity Tier 1 ratio, effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0%), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio, effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.
Biggest changeSince January 1, 2019, the rules have required the Bank to maintain the following minimum capital ratios: ‎ (i) Common Equity Tier 1 (CET1) capital ratio of at least 4.5% plus a capital conservation buffer of 2.5%, resulting in an effective CET1 minimum ratio of 7.0%; (ii) Tier 1 capital ratio of at least 6.0% plus the capital conservation buffer, resulting in an effective minimum Tier 1 ratio of 8.5%; (iii) Total capital ratio of at least 8.0% plus the capital conservation buffer, resulting in an effective total capital ratio of 10.5%; and (iv) Leverage ratio (Tier 1 capital to average consolidated total assets) of at least 4.0%.
Routes 29, 60, 221, 460 and 501 and State Routes 24 and 40 all pass through our market area and provide efficient access to other regions of the state. Regional airport service and rail service provide additional transportation channels. Total population in the market area equals approximately 267,000.
Routes 29, 60, 221, 460 and 501 and State Routes 24 and 40 all pass through our market area and provide efficient access to other regions of the state. Regional airport and rail service provide additional transportation channels. Total population in the market area equals approximately 267,000.
The Dodd-Frank Act also made permanent the $250,000 limit for federal deposit insurance and increased the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000. The Dodd-Frank Reform Act repealed the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts. The Dodd-Frank Reform Act required new disclosure relating to executive compensation and corporate governance. 9 Table of Contents The Dodd-Frank Reform Act implemented amendments to the Truth in Lending Act aimed at improving consumer protections with respect to mortgage originations, including originator compensation, minimum repayment standards, and prepayment considerations. The Dodd-Frank Reform Act established the Financial Stability Oversight Council, which will be responsible for identifying and monitoring systemic risks posed by financial firms, activities, and practices. The Dodd-Frank Reform Act amended the Electronic Fund Transfer Act (EFTA) to, among other things, require that debit card interchange fees must be reasonable and proportional to the actual cost incurred by the issuer with respect to the transaction.
The Dodd-Frank Act also made permanent the $250,000 limit for federal deposit insurance and increased the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000. The Dodd-Frank Reform Act repealed the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts. The Dodd-Frank Reform Act required new disclosure relating to executive compensation and corporate governance. The Dodd-Frank Reform Act implemented amendments to the Truth in Lending Act aimed at improving consumer protections with respect to mortgage originations, including originator compensation, minimum repayment standards, and prepayment considerations. The Dodd-Frank Reform Act established the Financial Stability Oversight Council, which will be responsible for identifying and monitoring systemic risks posed by financial firms, activities, and practices. The Dodd-Frank Reform Act amended the Electronic Fund Transfer Act (EFTA) to, among other things, require that debit card interchange fees must be reasonable and proportional to the actual cost incurred by the issuer with respect to the transaction.
Although issuers that have assets of less than $10 billion are exempt from the Federal Reserve Board’s regulations that set maximum interchange fees, these regulations are expected to significantly affect the interchange fees that financial institutions with less than $10 billion in assets are able to collect. The Dodd-Frank Reform Act eliminated (over time) the inclusion of trust preferred securities as a permitted element of Tier 1 capital. The Dodd-Frank Reform Act created a special regime to allow for the orderly liquidation of systemically important financial companies, including the establishment of an orderly liquidation fund. The Dodd-Frank Reform Act requires the development of regulations to address derivatives markets, including clearing and exchange trading requirements and a framework for regulating derivatives-market participants. The Dodd-Frank Reform Act enhanced supervision of credit rating agencies through the Office of Credit Ratings within the SEC. The Dodd-Frank Reform Act established the Consumer Financial Protection Bureau, within the Federal Reserve, to serve as a dedicated consumer-protection regulatory body.
Although issuers that have assets of less than $10 billion are exempt from the Federal Reserve Board’s regulations that set maximum interchange fees, these regulations are expected to significantly affect the interchange fees that financial institutions with less than $10 billion in assets are able to collect. The Dodd-Frank Reform Act eliminated (over time) the inclusion of trust preferred securities as a permitted element of Tier 1 capital. The Dodd-Frank Reform Act created a special regime to allow for the orderly liquidation of systemically important financial companies, including the establishment of an orderly liquidation fund. The Dodd-Frank Reform Act requires the development of regulations to address derivatives markets, including clearing and exchange trading requirements and a framework for regulating derivatives-market participants. 9 Table of Contents The Dodd-Frank Reform Act enhanced supervision of credit rating agencies through the Office of Credit Ratings within the SEC. The Dodd-Frank Reform Act established the Consumer Financial Protection Bureau, within the Federal Reserve, to serve as a dedicated consumer-protection regulatory body.
An insured depository institution which is less than adequately capitalized must adopt an acceptable capital restoration plan, is subject to increased regulatory oversight and is increasingly restricted in the scope of its permissible activities. As of December 31, 2023, the Bank was considered “well-capitalized.” Regulatory Enforcement Authority . Applicable banking laws include substantial enforcement powers available to federal banking regulators.
An insured depository institution which is less than adequately capitalized must adopt an acceptable capital restoration plan, is subject to increased regulatory oversight and is increasingly restricted in the scope of its permissible activities. As of December 31, 2024, the Bank was considered “well-capitalized.” Regulatory Enforcement Authority . Applicable banking laws include substantial enforcement powers available to federal banking regulators.
Financial would be compelled by the Federal Reserve Board to invest additional capital in the event the Bank experiences either significant loan losses or rapid growth of loans or deposits. The Federal Reserve Board has jurisdiction under the BHCA to approve any bank or non-bank acquisition, merger or consolidation proposed by a bank holding company.
Financial would be compelled by the Federal Reserve Board to invest additional capital in the event the Bank experiences either significant credit losses or rapid growth of loans or deposits. The Federal Reserve Board has jurisdiction under the BHCA to approve any bank or non-bank acquisition, merger or consolidation proposed by a bank holding company.
The rule, which became effective on May 1, 2022, requires a banking organization to notify its primary federal regulator within 36 hours of determining that a “computer-security incident” has materially affected - or is reasonably likely to materially affect - the viability of the banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector.
The rule, which became effective on May 1, 2022, requires a banking organization to notify its primary federal regulator within 36 hours of determining that a “computer-security incident” has materially affected - or is reasonably likely to materially affect - the viability of the banking organization’s 14 Table of Contents operations, its ability to deliver banking products and services, or the stability of the financial sector.
As such, the Bank is subject to various statutes and regulations administered by these agencies that govern, among other things, required reserves, investments, loans, lending limits, acquisitions of fixed assets, interest rates payable on deposits, transactions among affiliates and the Bank, the payment of dividends, mergers and consolidations, and establishment of branch offices.
As such, the Bank is subject to various statutes and regulations administered by these agencies that govern, among other things, required reserves, investments, loans, lending limits, acquisitions of fixed 11 Table of Contents assets, interest rates payable on deposits, transactions among affiliates and the Bank, the payment of dividends, mergers and consolidations, and establishment of branch offices.
The federal bank regulatory agencies expect financial institutions to establish appropriate security controls and to ensure that their risk management processes address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption 14 Table of Contents and maintenance of the institution’s operations after a cyberattack.
The federal bank regulatory agencies expect financial institutions to establish appropriate security controls and to ensure that their risk management processes address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the institution’s operations after a cyberattack.
It is difficult at this time to determine the direct impact of the Regulatory Relief Act on Financial or the Bank. Implementing rules and regulations are required and many have not yet been written or finalized. 11 Table of Contents Regulation of the Bank The Bank is a Virginia chartered commercial bank and a state member bank.
It is difficult at this time to determine the direct impact of the Regulatory Relief Act on Financial or the Bank. Implementing rules and regulations are required and many have not yet been written or finalized. Regulation of the Bank The Bank is a Virginia chartered commercial bank and a state member bank.
While is it is not possible to fully predict the nature or impact of future changes in monetary and fiscal policies, we anticipate that rate changes in 2024 could have a negative impact on our results of operations and/or financial condition.
While is it is not possible to fully predict the nature or impact of future changes in monetary and fiscal policies, we anticipate that rate decreases in 2025 could have a negative impact on our results of operations and/or financial condition.
Subsidiary banks of a financial holding company must continue to be well-capitalized and well-managed in order to continue to engage in activities that are financial in nature without regulatory actions or restrictions, which could include divestiture of the financial in nature subsidiary or 8 Table of Contents subsidiaries.
Subsidiary banks of a financial holding company must continue to be well-capitalized and well-managed in order to continue to engage in activities that are financial in nature without regulatory actions or restrictions, which could include divestiture of the financial in nature subsidiary or subsidiaries.
We cannot predict the effect that fiscal or monetary policies, economic control, or new federal or state legislation may have on our business and earnings in the future. 7 Table of Contents Regulation of Financial General .
We cannot predict the effect that fiscal or monetary policies, economic control, or new federal or state legislation may have on our business and earnings in the future. Regulation of Financial General .
We provide investment advisory services through Financial’s wholly-owned subsidiary, Pettyjohn, Wood & White, Inc. (“PWW”), a Lynchburg, Virginia-based investment advisor registered with the Securities and Exchange Commission. Financial purchased the issued and outstanding shares of PWW on December 31, 2021.
We provide investment advisory services through Financial’s wholly-owned subsidiary, Pettyjohn, Wood & White, Inc. (“PWW”), a Lynchburg, Virginia-based investment advisor registered with the Securities and Exchange Commission. Financial purchased the issued and outstanding shares of PWW on December 31, 2021. PWW generates revenue primarily through investment advisory fees.
Deposit Services . Deposits are a major source of our funding. The Bank offers a full range of deposit services that are typically available in most banks and other financial institutions including checking accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit.
The Bank offers a full range of deposit services that are typically available in most banks and other financial institutions including checking accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit.
The findings of the supervisory 10 Table of Contents initiatives will be included in reports of examination. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions.
The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions.
Those rules and regulations, among other things, establish standards for loan origination, prohibit discrimination, provide for inspections and appraisals of property, require credit reports on prospective borrowers and, in some cases, restrict certain loan features, and fix maximum interest rates and fees.
Among other provisions, these rules and regulations, establish standards for loan origination, prohibit discrimination, provide for inspections and appraisals of property, require credit reports on prospective borrowers and, in some cases, restrict certain loan features, and fix maximum interest rates and fees.
We sell loan participations in the ordinary course of business when a loan originated by us exceeds our legal lending limit or we otherwise want to share risk with another bank. We also purchase loan participations from time to time from other banks in the ordinary course of business. Our loan participations are without recourse against the originating bank.
We sell loan participations when a loan we originated exceeds our legal lending limit or when we choose to share risk with another bank. We also purchase loan participations from time to time from other banks in the ordinary course of business. Our loan participations are without recourse against the originating bank.
Sections in the Regulatory Relief Act address access to mortgage credit; consumer access to credit; protections for veterans, consumers, and homeowners; rules for certain bank or financial holding companies; capital access; and protections for student borrowers.
Sections in the Regulatory Relief Act address access to mortgage credit; consumer access to credit; protections for veterans, consumers, and homeowners; rules for certain bank 10 Table of Contents or financial holding companies; capital access; and protections for student borrowers.
The Bank also is associated with a shared network of automated teller machines (ATMs) that may be used by Bank customers throughout Virginia, the United States, and internationally. The Bank intends to introduce new products and services desired by the public and as permitted by the regulatory authorities. The Bank remains committed to meeting the challenges that require technology.
The Bank also is associated with a shared network of automated teller machines (ATMs) that may be used by Bank customers throughout Virginia, the United States, and internationally. The Bank intends to introduce new products and services desired by the public and as permitted by the regulatory authorities.
The transaction accounts and time certificates are tailored to the Bank’s market areas at rates competitive to those offered by other financial institutions in that market area. In addition, the Bank offers its customers Individual Retirement Accounts (IRAs) and Health Care Savings Accounts (HSAs).
The transaction accounts and time certificates are tailored to our market areas and offered at rates competitive with other financial institutions in those areas. In addition, the Bank offers its customers Individual Retirement Accounts (IRAs) and Health Care Savings Accounts (HSAs).
The Bank currently has a CRA rating of “satisfactory.” Safety and Soundness . The federal banking agencies have broad powers under current federal law to take prompt corrective action to resolve problems of insured depository institutions.
As of its most recent CRA evaluation, the Bank received a rating of “Satisfactory.” Safety and Soundness . The federal banking agencies have broad powers under current federal law to take prompt corrective action to resolve problems of insured depository institutions.
The Community Reinvestment Act (“CRA”) requires that, in connection with examinations of financial institutions within their respective jurisdictions, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency or the Office of Thrift Supervision shall evaluate the record of the financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of those institutions.
The Community Reinvestment Act (“CRA”) requires that, in connection with examinations of financial institutions, federal banking agencies – including the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency or the Office of Thrift Supervision - evaluate an institutions performance in meeting the credit needs of its local communities, particularly low and moderate income neighborhoods, consistent with the safe and sound operation of those institutions.
All deposit accounts are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to the maximum amount allowed by law (generally, $250,000 per depositor, subject to aggregation rules). The Bank solicits such accounts from individuals, businesses, associations and organizations, and governmental authorities. 4 Table of Contents Lending Services .
All deposit accounts are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to the maximum amount allowed by law (generally, $250,000 per depositor, subject to aggregation rules). The Bank solicits such accounts from individuals, businesses, associations and organizations, and governmental authorities. Lending Services . The Bank offers a full range of short- to medium-term commercial and consumer loans.
The Bank offers a full range of short- to medium-term commercial and consumer loans. Our primary focus is on making loans to small and medium-sized businesses and consumers in the Region 2000 (Lynchburg, Amherst, Bedford, Campbell) area, Charlottesville, Harrisonburg, Roanoke, Appomattox, and Blacksburg. In addition, we also provide a wide range of real estate finance services.
Our primary focus is on making loans to small and medium-sized businesses and consumers in the Region 2000 area—which includes Lynchburg, Amherst, Bedford, and Campbell—as well as in Charlottesville, Harrisonburg, Roanoke, Appomattox, Lexington, Blacksburg, Nellysford, and Buchanan. In addition, we also provide a wide range of real estate finance services.
In addition, the Bank expanded into Charlottesville in 2013 (opening a full-service branch in 2015), Harrisonburg in 2014 (opening a full-service branch in 2015), Appomattox in 2016 (opening a permanent full-service branch in 2017), Roanoke in 2013 (opening permanent a full-service branch in 2017), Blacksburg in 2018 (opening a mortgage origination office), Lexington in 2019 with a full-service branch, and Rustburg in 2019 with a full-service branch.
In addition, the Bank expanded into Charlottesville in 2013 (opening a full-service branch in 2015), Harrisonburg in 2014 (opening a full-service branch in 2015), Appomattox in 2016 (opening a permanent full-service branch in 2017), Roanoke in 2013 (opening a permanent full-service branch in 2017), Blacksburg in 2018 (opening a mortgage origination office), Lexington in 2019 with a full-service branch, Rustburg in 2019 with a full-service branch, Buchanan in 2024 with a full-service branch, and Nellysford in 2024 (operating a temporary branch that we will replace with a full-service branch in the third quarter 2025).
In addition, the Federal Reserve is authorized to determine under certain circumstances relating to the financial condition of a bank that the payment of dividends would be an unsafe and unsound practice and to prohibit payment thereof. The payment of dividends that deplete a bank’s capital base could be deemed to constitute such an unsafe and unsound banking practice.
In addition, the Federal Reserve is 8 Table of Contents authorized to determine under certain circumstances relating to the financial condition of a bank that the payment of dividends would be an unsafe and unsound practice and to prohibit payment thereof.
The Federal Reserve has indicated that banking organizations generally pay dividends only out of current operating earnings. In addition, under Virginia law, no dividend may be declared or paid out of a Virginia bank’s paid-in capital.
The payment of dividends that deplete a bank’s capital base could be deemed to constitute such an unsafe and unsound banking practice. The Federal Reserve has indicated that banking organizations generally pay dividends only out of current operating earnings. In addition, under Virginia law, no dividend may be declared or paid out of a Virginia bank’s paid-in capital.
In addition, Financial provides securities brokerage and other investment services through BOTJ Investment, a division of the Bank, and acts as an agent for insurance and annuity products through BOTJ Insurance, Inc., a wholly-owned subsidiary of the Bank.
In addition, Financial provides securities brokerage and other investment services through BOTJ Investment, a division of the Bank, and acts as an agent for insurance and annuity products through BOTJ Insurance, Inc., a wholly-owned subsidiary of the Bank. The operating results of these activities have not materially impacted our financial performance and are not considered principal activities of Financial .
The Bank established a mortgage loan origination division that conducts business under the name “Bank of the James Mortgage, a Division of Bank of the James” (the “Mortgage Division”). The Mortgage Division conducts business primarily from the division’s main office located in the Forest branch of the Bank and has opened several satellite offices throughout our market area.
The Mortgage Division conducts business primarily from the division’s main office located in the Forest branch of the Bank and has opened several satellite offices throughout our market area.
These included a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and nonresidential mortgage loans that are 90 days past due or otherwise on non-accrual status, a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable, a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets that are not deducted from capital, and increased risk-weights (from 0% to up to 600%) for equity exposures.
The Basel III capital rules modified asset risk-weightings to better reflect actual credit and market risks, including: 12 Table of Contents Increasing the risk weight for certain high-volatility commercial real estate (HVCRE) acquisition, development, and construction loans from 100% to 150%. Assigning a 150% risk weight (previously 100%) to nonresidential mortgage loans that are 90 days past due or on non-accrual status. Applying a 20% credit conversion factor (previously 0%) for commitments with original maturities of one year or less that are not unconditionally cancellable. Increasing the risk weight for mortgage servicing rights and deferred tax assets not deducted from capital from 100% to 250%. Introducing increased risk weights ranging from 0% up to 600% for certain equity exposures.
As of the date hereof, we offer the following insurance products: life insurance, fixed annuities, and disability insurance. We began providing these services in September 2008. To date the operating results of BOTJ Insurance have not had a material impact on our financial performance.
To date the operating results of the Investment Division have not materially impacted our financial performance . We provide insurance and annuity products through BOTJ Insurance as an agent for national insurance companies. As of the date hereof, we offer the following insurance products: life insurance, fixed annuities, and disability insurance. We began providing these services in September 2008.
It is also subject to various other federal laws as well as licensing and/or registration requirements. These laws and regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations.
These laws and regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations. 16 Table of Contents
The asset size of a qualifying holding company was increased from $1 billion to $3 billion on August 30, 2018, thus excluding holding companies in this category from consolidated capital requirements. Because total assets on a consolidated basis are less than $3 billion, Financial is not subject to the consolidated capital requirements imposed by the Bank Holding Company Act.
Because total assets on a consolidated basis are less than $3 billion, Financial is not subject to the consolidated capital requirements imposed by the Bank Holding Company Act.
Pursuant to the BHCA, the FRB has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the FRB has reasonable grounds to believe that continuation of such activity or ownership constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.
The BHCA, and other applicable laws and regulations, generally limit the activities of a bank holding company and its subsidiaries to that of banking, managing or controlling banks, or any other activity that is so closely related to banking or to managing or controlling banks as to be a proper incident thereto. 7 Table of Contents Pursuant to the BHCA, the FRB has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the FRB has reasonable grounds to believe that continuation of such activity or ownership constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.
PWW generates revenue primarily through investment advisory fees. 5 Table of Contents Other Activities We provide brokerage and investment services through the Bank’s Investment division (“Investment Division”). The Investment Division provides securities brokerage services to Bank customers and others through an agreement with Osaic Institutions, Inc. (“Osaic”), a registered broker-dealer.
Other Activities We provide brokerage and investment services through the Bank’s Investment division (“Investment Division”). The Investment Division provides securities brokerage services to Bank customers and others through an agreement with Osaic Institutions, Inc. (“Osaic”), a registered broker-dealer. Under our agreement, Osaic operates a service center at the main office located at 828 Main Street, Lynchburg, Virginia.
The Bank is subject to the restrictions contained in Section 22(h) of the Federal Reserve Act and the Federal Reserve Board’s Regulation O thereunder on loans to executive officers, directors and principal stockholders.
The Bank is subject to restrictions on loans to insiders under Section 22(h) of the Federal Reserve Act and Regulation O issued by the Federal Reserve Board.
All of the Bank’s loans to its and the Company’s executive officers, directors and greater-than-10% stockholders, and affiliated interests of such persons, comply with the requirements of Regulation W and Section 22(h) of the Federal Reserve Act and Regulation O. Community Reinvestment Act.
As of December 31, 2024, all loans and extensions of credit to executive officers, directors, principal stockholders, and their affiliated interests comply with Sections 23A and 23B of the Federal Reserve Act, Regulation W, Section 22(h), and Regulation O. Community Reinvestment Act.
(nuclear fuel); Framatome (nuclear services); Centra Health, Inc. (health care services); Southern Air, Inc. (mechanical and HVAC contractors); Shentel (telecommunications services); Frito-Lay, Inc. (snack foods); U.S. Pipe (ductile iron pipe); as well as six colleges and universities including Randolph College, Sweet Briar College, Liberty University, and the University of Lynchburg.
(nuclear fuel); Framatome (nuclear services); Centra Health, Inc. (health care services); Southern Air, Inc. (mechanical and HVAC contractors); Shentel (telecommunications services); Frito-Lay, Inc. (snack foods); U.S.
The Bank, through the Mortgage Division originates conforming and non-conforming home mortgages primarily in the Region 2000 area. Beginning in 2013 we began operating the Mortgage Division with hybrid correspondent relationships that allow the Bank to close loans in its name before an investor purchases the loan.
Since 2013, we have operated the Mortgage Division using hybrid correspondent relationships that allow the Bank to close loans in its name before an investor purchases the loan.
Employees As of March 15, 2024, we had approximately 172 employees, 163 of which are full-time and nine of which are part-time. None of our employees are represented by any collective bargaining agreements, and relations with employees are considered excellent.
To date, the operating results of BOTJ Insurance have not materially impacted our financial performance. Employees As of March 5, 2025, we had approximately 175 employees, 162 of which are full-time and 13 of which are part-time. None of our employees are represented by any collective bargaining agreements, and relations with employees are considered excellent.
The Bank provides its customers with access to the latest technological products, such as telephone banking and internet banking, including online bill pay. This service allows customers to handle routine transactions using a standard touch tone telephone or cell phone, applications for mobile devices, and via the internet at the Bank’s website. Mortgage Banking.
This service allows customers to handle routine transactions using a standard touch tone telephone or cell phone, applications for mobile devices, and via the internet at the Bank’s website. 5 Table of Contents Mortgage Banking. The Bank, through the Mortgage Division, originates conforming and non-conforming home mortgages primarily in the Region 2000 area.
Regulation O also prohibits a depository institution from paying overdrafts over $1,000 of any of its executive officers or directors unless they are paid pursuant to written pre-authorized extension of credit or transfer of funds plans.
Regulation O also restricts the Bank from paying overdrafts in excess of $1,000 incurred by directors or executive officers unless pursuant to a pre-authorized credit or transfer plan.
Even with this expansion outside of Region 2000, the Bank continues to consider its primary market to be Region 2000. Competition Retail and Commercial Banking The banking business is highly competitive.
We have also grown east into Appomattox, southwest into Blacksburg, and south into Rustburg. Even with this expansion outside of Region 2000, the Bank continues to consider its primary market to be Region 2000.
In the absence of comparable transactions, such transactions may only occur under terms and circumstances, including credit standards that in good faith would be offered to or would apply to non-affiliated companies. 13 Table of Contents Loans to Insiders.
Additionally, transactions with affiliates must be conducted on terms at least as favorable as comparable transactions with non-affiliated parties, or, in the absence of comparable transactions, under terms and conditions, including credit standards, that would apply to non-affiliates. Loans to Insiders.
Products and Services Retail and Commercial Banking The Bank currently conducts business within Virginia from 17 full-service offices, two limited service offices, and one residential mortgage loan production office. The location of and services provided by each of our facilities is described in “ Item 2 . Properties” below.
The Bank, BOTJ Insurance, BOTJ Investment Group, Inc., a non-operating subsidiary, and PWW are our only subsidiaries and primary assets. Products and Services Retail and Commercial Banking The Bank currently conducts business within Virginia from 19 full-service offices, two limited service offices, and two residential mortgage loan production office.
We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which our business may be affected by any new regulation or statute. Regulation of PWW PWW is a registered investment adviser under the Investment Advisers Act of 1940, as amended, and as such, is supervised by the SEC.
Regulation of PWW PWW is a registered investment adviser under the Investment Advisers Act of 1940, as amended, and as such, is supervised by the SEC. It is also subject to various other federal laws as well as licensing and/or registration requirements.
In 2023, the Bank expensed $419,000 in FDIC assessments which compared to $500,000 in 2022. Any increases in FDIC insurance premiums could adversely affect the Bank’s profitability.
The Bank incurred $441,000 and $419,000 in FDIC assessments in 2024 and 2023, respectively. Future increases in FDIC insurance premiums may negatively impact the Bank’s profitability.
The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA.
The CRA does not impose specific lending quotas or programs nor restrict an institution’s discretion in developing products and services suitable to its communities. .
Regulation O also prohibits the making of loans in an amount greater than $25,000 or 5% of capital and surplus but in any event not over $500,000, to directors, executive officers and greater-than-10% stockholders of a bank, and their respective affiliates, unless such loans are approved in advance by a majority of the board of directors of the bank with any “interested” director not participating in the voting.
Regulation O also requires prior approval by a majority of the Bank’s board of directors (excluding any interested director) for any loan to an insider exceeding the greater of $25,000 or 5% of the Bank’s capital and surplus, with a maximum approval threshold of $500,000.
The law and regulation limit the aggregate amount of transactions with any individual affiliate to ten percent (10%) of the capital and surplus of the Bank and also limit the aggregate amount of transactions with all affiliates to twenty percent (20%) of capital and surplus.
Specifically, these regulations limit transactions with any individual affiliate to no more than 10% of the Bank’s capital and surplus and limit the aggregate amount of all affiliate transactions to no more than 20% of capital and surplus. Extensions of credit to affiliates must be secured by qualifying collateral, and purchases of low-quality assets from affiliates are generally prohibited.
Removed
The operating results of these business operations have not had a material impact on our financial performance and are not considered principal activities of Financial at this time. The Bank, BOTJ Insurance, BOTJ Investment Group, Inc., a non-operating subsidiary, and PWW are our only subsidiaries and primary assets.
Added
The location of and services provided by each of our facilities is described in “ Item 2 . Properties” in this Form 10-K. The Bank established a mortgage loan origination division that conducts business under the name “Bank of the James Mortgage, a Division of Bank of the James” (the “Mortgage Division”).
Removed
Under our agreement, Osaic operates a service center at the main office located at 828 Main St, Lynchburg, Virginia. To date the operating results of the Investment Division have not had a material impact on our financial performance. We provide insurance and annuity products through BOTJ Insurance as an agent for national insurance companies.
Added
Our recent geographic expansions into surrounding markets such as Charlottesville, Roanoke, and Harrisonburg reflect our strategic initiative to diversify our geographic concentration, enhance growth opportunities, and mitigate economic risk inherent in our primary market. 4 Table of Contents Deposit Services . Deposits are a major source of our funding.
Removed
In recent years we have expanded into Charlottesville, Virginia (north of Region 2000), Roanoke, Virginia (west of Region 2000), Harrisonburg, Virginia (northwest of Region 2000), Appomattox (east of Region 2000), Blacksburg (southwest of Region 2000), Lexington, Virginia (northwest of Region 2000), and Rustburg, Virginia (south of Region 2000).
Added
The Bank remains committed to leveraging new technologies to meet evolving customer needs. The Bank provides its customers with access to the latest technological products, such as telephone banking and internet banking, including online bill pay.
Removed
We compete with other commercial banks, savings institutions, credit unions, financial technology companies, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, and other financial institutions operating in the Region 2000 market area and elsewhere. 6 Table of Contents Many of our nonbank competitors are not subject to the same extensive federal regulations that govern federally-insured banks and state regulations governing state-chartered banks.
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Pipe (ductile iron pipe); as well as six colleges and universities including Randolph College, Sweet Briar College, Liberty University, and the University of Lynchburg. 6 Table of Contents Our recent expansion has taken us north into Charlottesville (north of Region 2000), west into Roanoke, and northwest into Harrisonburg, Lexington, Buchanan, and Nellysford.
Removed
As a result, such nonbank competitors may have advantages over the Bank in providing certain services. Virginia law permits statewide branching by banks. Consequently, the Bank’s market area is a highly competitive, highly branched banking market. Competition in the market area for loans to individuals, small businesses, and professional concerns, the Bank’s target market, is keen, and pricing is important.
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With respect to the Bank, the rules also revised the ‘prompt corrective action’ (PCA) regulations pursuant to Section 38 of the FDIA, which establish thresholds that determine regulatory responses if capital levels decline.
Removed
Most of the Bank’s competitors have substantially greater resources and lending limits than the Bank and offer certain services, such as extensive and established branch networks and trust services, that the Bank is not currently providing. Deposit competition is strong and comes from institutions in the market, U.S.
Added
Under the revised PCA rules, the Bank must maintain the following ratios to be considered ‘well capitalized’: (i) CET1 ratio of at least 6.5%; (ii) Tier 1 capital ratio of at least 8.0%; (iii) Total capital ratio of at least 10.0%; and (iv) Tier 1 leverage ratio of at least 5.0%.
Removed
Government securities, private issuers of debt obligations and suppliers of other investment alternatives for depositors, among other sources. As a result, the Bank has paid, and may in the future pay, above-market rates to attract deposits.
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Although eligible, as of December 31, 2024, the Bank has not elected to use the Community Bank Leverage Ratio framework. The asset size of a qualifying holding company was increased from $1 billion to $3 billion on August 30, 2018, thus excluding holding companies in this category from consolidated capital requirements.
Removed
The adoption of legislation permitting nationwide interstate banking and branching and the use of financial holding companies may also increase competition in the Bank’s market area. See “ Supervision and Regulation of Financial ” below. Mortgage Banking The Mortgage Division competes with large national and regional banks, credit unions, regional mortgage lenders and local mortgage brokers.
Added
The Bank is subject to Sections 23A and 23B of the Federal Reserve Act and Regulation W issued by the Federal Reserve Board.
Removed
Following the 2008 downturn in the economy and subsequent real estate turmoil, the guidelines surrounding agency business (i.e., loans sold to Fannie Mae and Freddie Mac) became much more restrictive and the associated mortgage insurance for loans above 80 percent loan-to-value has tightened.
Added
These provisions limit the extent to which the Bank can lend or extend credit to, invest in, or engage in certain other transactions with its affiliates (entities controlled by or under common control with the Bank), as well as transactions involving third parties secured by securities or obligations of affiliates.
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These changes in the conventional market have caused a dramatic increase in government lending and state bond programs.
Added
Regulation O limits loans to executive officers, directors, and principal stockholders (persons owning more than 10% of the Bank’s voting shares), and their related interests, to amounts not exceeding the loans-to-one-borrower limit applicable to national banks (generally 15% of unimpaired capital and surplus). Total loans to all insiders collectively must not exceed the Bank’s unimpaired capital and surplus.
Removed
The Mortgage Division competes by attracting the top salespeople in our market, providing an operational infrastructure that manages the guideline changes efficiently and effectively, offering a product menu that is both competitive in loan parameters as well as price, and providing consistently high-quality customer service.
Added
Additionally, loans to insiders must be made on terms substantially similar to those offered to unrelated parties, except when made under widely available employee benefit programs that do not favor 13 Table of Contents insiders.
Removed
Although the Mortgage Division sells loans to various intermediaries, the ability of these aggregators to purchase loans would be limited if certain government-sponsored entities (e.g. Fannie Mae, Freddie Mac, etc.) cease to exist or materially limit their purchases of mortgage loans. Investment Advisory Business PWW competes with national, regional, statewide, and local investment advisors, wealth management firms and brokerage firms.
Added
The Federal Reserve Board a nd the Federal Open Market Committee (FOMC ) , through their monetary policy decisions, exert considerable influence over commercial banks’ operating results. These policy actions—including open market operations, adjustments to the federal funds target rate, changes in discount rates, and alterations in reserve requirements—are designed, among other purposes, to control inflation or stimulate economic activity.
Removed
According to publicly available information, more than 50 investment advisors and 35 brokerage firms have physical locations in Lynchburg, many of which have greater resources than PWW. Competition for wealth management clients is intense.
Added
The federal regulatory environment governing financial institutions evolves frequently, particularly in response to economic disruptions or institutional failures. The recent failures of several large regional banks in 2023—including Silicon Valley Bank, Signature Bank, and First Republic Bank—have led regulators, legislators, and commentators to advocate increased regulatory oversight of the banking sector.
Removed
The BHCA, and other applicable laws and regulations, generally limit the activities of a bank holding company and its subsidiaries to that of banking, managing or controlling banks, or any other activity that is so closely related to banking or to managing or controlling banks as to be a proper incident thereto.
Added
Potential regulatory responses under consideration include higher capital and liquidity standards, expanded supervisory stress testing beyond the largest systemic banks, and increased oversight of risk management practices. Given the uncertain legislative environment and the ongoing regulatory response to these bank failures, we cannot reliably predict whether or how any such regulations or statutes will be adopted.
Removed
With respect to the Bank, the rules also revised the “prompt corrective action” regulations pursuant to Section 38 of the FDIA by (i) introducing a common equity Tier 1 capital ratio requirement at each level (other than critically undercapitalized), with the required ratio being 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio requirement for each category, with the minimum ratio for well-capitalized status being 8.0% (as compared to the previous 6.0%); and (iii) eliminating the current provision that provides that a bank with a composite supervisory rating of 1 may have a 3.0% Tier 1 leverage ratio and still be well-capitalized.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

57 edited+18 added−14 removed163 unchanged
Biggest changeThe ISO also reports the status of information security-related key risk indicators to executive management. The Company employs third parties in certain aspects of its information security and cybersecurity risk management. For example, we engage third parties to assess the information security risks related to our ISP as well as information security products, services, and security infrastructure.
Biggest changeOn a regular basis, the ISO reports to executive management and the Board information security risk issues, risk mitigation progress and developments, and information security enhancement initiatives. The ISO also reports the status of information security-related key risk indicators to executive management. The Company employs third parties in certain aspects of its information security and cybersecurity risk management.
A significant source of risk arises from the possibility that we could sustain losses due to loan defaults and nonperformance on loans. We maintain an allowance in accordance with GAAP to provide for such defaults and other nonperformance.
A significant source of risk arises from the possibility that we could sustain losses due to loan defaults and nonperformance on loans. We maintain an allowance for credit losses in accordance with GAAP to provide for such defaults and other nonperformance.
Expansion involves a number of risks, including, without limitation: the time and costs of evaluating new markets, hiring experienced local management and opening new offices; the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; our entrance into new markets where we lack experience; 20 Table of Contents the introduction of new products and services with which we have no prior experience into our business; failure to culturally integrate an acquisition target or new branches or failing to identify and select the optimal candidate for integration or expansion; and failure to identify and retain experienced key management members with local expertise and relationships in new markets.
Expansion involves a number of risks, including, without limitation: the time and costs of evaluating new markets, hiring experienced local management and opening new offices; the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; our entrance into new markets where we lack experience; the introduction of new products and services with which we have no prior experience into our business; failure to culturally integrate an acquisition target or new branches or failing to identify and select the optimal candidate for integration or expansion; and failure to identify and retain experienced key management members with local expertise and relationships in new markets.
Under the final rule, which was effective on January 1, 2021, depository institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of greater than 9 percent, will be eligible to opt into the community bank leverage ratio framework (qualifying community banking organizations).
Under the final rule, which was effective on January 1, 2021, depository 29 Table of Contents institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of greater than 9 percent, will be eligible to opt into the community bank leverage ratio framework (qualifying community banking organizations).
Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of the recent turmoil faced by banking organizations or deterioration in credit markets. We may lose lower- cost funding sources.
Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of the recent turmoil faced by banking organizations or deterioration in credit markets. 25 Table of Contents We may lose lower- cost funding sources.
These provisions include the division of our board of directors into classes with staggered terms, the ability of our board of directors to set the price, terms and rights of, and to 29 Table of Contents issue, one or more series of our preferred stock and the ability of our board of directors, in evaluating a proposed business combination or other fundamental change transaction, to consider the effect of the business combination on us and our stockholders, employees, customers and the communities which we serve.
These provisions include the division of our board of directors into classes with staggered terms, the ability of our board of directors to set the price, terms and rights of, and to issue, one or more series of our preferred stock and the ability of our board of directors, in evaluating a proposed business combination or other fundamental change transaction, to consider the effect of the business combination on us and our stockholders, employees, customers and the communities which we serve.
As of December 31, 2023, our allowance as a percentage of total loans was 1.22% and our allowance as a percentage of nonperforming loans was 1,895%. The determination of the appropriate level of allowance is an inherently difficult process and is based on numerous assumptions.
As of December 31, 2024, our allowance as a percentage of total loans was 1.22% and our allowance as a percentage of nonperforming loans was 1,895%. The determination of the appropriate level of allowance is an inherently difficult process and is based on numerous assumptions.
Additionally, acts of nature, including hurricanes, tornados, earthquakes, fires and floods, which may cause uninsured damage and other loss of value to real estate that secures these loans, may also negatively impact our financial condition. ‎ 17 Table of Contents Our loan portfolio contains a number of real estate loans with relatively large balances.
Additionally, acts of nature, including hurricanes, tornados, earthquakes, fires and floods, which may cause uninsured damage and other loss of value to real estate that secures these loans, may also negatively impact our financial condition. Our loan portfolio contains a number of real estate loans with relatively large balances.
As a result of recent economic conditions and the enactment of the Dodd-Frank Reform Act, banks are now assessed deposit insurance premiums based on the bank’s average consolidated total assets, and the FDIC has modified certain risk-based adjustments, which increase or decrease a bank’s overall assessment rate.
As a result of recent economic conditions and the enactment of the Dodd-Frank Reform Act, banks are now assessed deposit insurance premiums based on the bank’s average consolidated total assets, and the FDIC has modified certain risk-based adjustments, which increase or decrease a 26 Table of Contents bank’s overall assessment rate.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our business, financial condition, operating results and cash flows could be materially adversely affected. 16 Table of Contents RISKS RELATED TO OUR BUSINESS Our profitability depends significantly on local economic conditions.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our business, financial condition, operating results and cash flows could be materially adversely affected. RISKS RELATED TO OUR BUSINESS Our profitability depends significantly on local economic conditions.
In addition, the success of a small to medium-sized business often depends on the management talents and efforts of one or two persons or a small group of persons, and the death, disability or resignation of one or more of these persons could have a material adverse impact on the business and its ability to repay a loan.
In addition, the success of a small to 18 Table of Contents medium-sized business often depends on the management talents and efforts of one or two persons or a small group of persons, and the death, disability or resignation of one or more of these persons could have a material adverse impact on the business and its ability to repay a loan.
In deciding whether to extend credit or to enter into other transactions with clients and counterparties, we may rely on information furnished to us by or on behalf of clients and counterparties, including financial statements and other 18 Table of Contents financial information, which we do not independently verify as a matter of course.
In deciding whether to extend credit or to enter into other transactions with clients and counterparties, we may rely on information furnished to us by or on behalf of clients and counterparties, including financial statements and other financial information, which we do not independently verify as a matter of course.
A weakening of the real estate market in our primary market areas could result in an increase in the number of borrowers who default on their loans and a reduction in the value of the collateral securing their loans, which in turn could have an adverse effect on our profitability and asset quality.
A weakening of the real estate market in our primary market areas could result in an 17 Table of Contents increase in the number of borrowers who default on their loans and a reduction in the value of the collateral securing their loans, which in turn could have an adverse effect on our profitability and asset quality.
As we increase our portfolio of these loans, we may experience higher levels of non-performing assets or credit losses , or both . Our efforts to increase our levels of commercial and industrial loans may be impacted by increased interest rates, recession, or other adverse economic conditions.
As we increase our portfolio of these loans, we may experience higher levels of non-performing assets or credit losses , or both . 20 Table of Contents Our efforts to increase our levels of commercial and industrial loans may be impacted by increased interest rates, recession, or other adverse economic conditions.
Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities or otherwise negatively impact our operations. ‎ 25 Table of Contents Revenues and profitability from our investment advisory business may be adversely affected by any reduction in assets under management, which could reduce fees earned.
Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities or otherwise negatively impact our operations. Revenues and profitability from our investment advisory business may be adversely affected by any reduction in assets under management, which could reduce fees earned.
Accordingly, holders of our common stock may have difficulty selling our common stock at prices which holders find acceptable or which accurately reflect the value of the Company. Future offerings of debt or other securities may adversely affect the market price of our stock.
Accordingly, holders of our common stock may have difficulty selling our common stock at prices which holders find acceptable or which accurately reflect the value of the Company. 30 Table of Contents Future offerings of debt or other securities may adversely affect the market price of our stock.
In addition, changes in consumer spending and saving habits could adversely affect our operations, and we may be unable to timely develop competitive new products and services in response to these changes that are accepted by new and existing customers. ‎ 23 Table of Contents Failure to implement new technologies in our operations may adversely affect our growth or profits.
In addition, changes in consumer spending and saving habits could adversely affect our operations, and we may be unable to timely develop competitive new products and services in response to these changes that are accepted by new and existing customers. Failure to implement new technologies in our operations may adversely affect our growth or profits.
Accordingly, we can make no assurances of our ability to raise additional capital, if needed, on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired.
Accordingly, we can 21 Table of Contents make no assurances of our ability to raise additional capital, if needed, on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired.
The banking and financial services industry is highly competitive. We compete as a financial intermediary with other commercial banks, savings banks, credit unions, finance companies, mutual funds, insurance companies and brokerage and investment banking firms soliciting business from residents of and businesses located in the Virginia localities where the Bank has a presence, surrounding areas and elsewhere.
We compete as a financial intermediary with other commercial banks, savings banks, credit unions, finance companies, mutual funds, insurance companies and brokerage and investment banking firms soliciting business from residents of and businesses located in the Virginia localities where the Bank has a presence, surrounding areas and elsewhere.
As of December 2023, the Lynchburg MSA had an unemployment rate (not seasonally adjusted) of 3.2%, as compared to a statewide average unemployment rate of 3.0%.
As of December 2024, the Lynchburg MSA had an unemployment rate (not seasonally adjusted) of 2.9%, as compared to a statewide average unemployment rate of 3.0%.
These threats may derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure.
These threats may derive from human error, 23 Table of Contents fraud or malice on the part of employees or third parties, or may result from accidental technological failure.
Our executive management and other key personnel have not signed non-competition covenants. 21 Table of Contents Competition for personnel is intense, and we may not be successful in attracting or retaining qualified personnel.
Our executive management and other key personnel have not signed non-competition covenants. Competition for personnel is intense, and we may not be successful in attracting or retaining qualified personnel.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. Recently, there has been a pronounced rise in inflation and the Federal Reserve has raised certain benchmark interest rates in an effort to combat this trend.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. Beginning in 2021, there was pronounced rise in inflation and the Federal Reserve raised certain benchmark interest rates in an effort to combat this trend.
These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a financial institution, the classification of assets by a financial institution and the adequacy of a financial institution’s allowance for credit losses.
The Bank is primarily regulated by the BFI and the Federal Reserve. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a financial institution, the classification of assets by a financial institution and the adequacy of a financial institution’s allowance for credit losses.
PWW’s ability to pay dividends is likewise subject to certain limits imposed by state law. 28 Table of Contents Banking regulators have indicated that Virginia banking organizations should generally pay dividends only (1) from net undivided profits of the bank, after providing for all expenses, losses, interest and taxes accrued or due by the bank and (2) if the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition.
Banking regulators have indicated that Virginia banking organizations should generally pay dividends only (1) from net undivided profits of the bank, after providing for all expenses, losses, interest and taxes accrued or due by the bank and (2) if the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition.
Our decisions regarding how we manage our credit exposure may materially and adversely affect our business. We manage our credit exposure through careful monitoring of lending relationships and loan concentrations in particular industries, and through loan approval and review procedures. The adequacy of our allowance for credit losses is crucial in monitoring credit exposure.
We manage our credit exposure through careful monitoring of lending relationships and loan concentrations in particular industries, and through loan approval and review procedures. The adequacy of our allowance for credit losses is crucial in monitoring credit exposure.
Actions by monetary and fiscal authorities, including the Federal Reserve Board, could have an adverse effect on our deposit levels, loan demand or business and earnings. Inflation can have an adverse impact on our customers and their ability to repay.
Our financial condition and results of operations are affected by credit policies of monetary authorities, particularly the Federal Reserve Board. Actions by monetary and fiscal authorities, including the Federal Reserve Board, could have an adverse effect on our deposit levels, loan demand or business and earnings. Inflation can have an adverse impact on our customers and their ability to repay.
Within the overarching enterprise risk management framework, we have an information security program (“ISP”) designed to preserve the confidentiality, integrity, and availability of information or data on our systems and those of our service providers, as documented in our information security policy.
Within the overarching enterprise risk management framework, we have an information security program (“ISP”) designed to preserve the confidentiality, integrity, and availability of information or data on our systems and those of our service providers, as documented in our information security policy. 31 Table of Contents The Company maintains an ISP to support the management of cybersecurity risk as an integral component of the Company’s ERM framework.
While we take steps to minimize reputation risk in dealing with customers and other constituencies, we will continue to face additional challenges maintaining our reputation with respect to customers of the Bank in our current primary market area in Region 2000 and in establishing our reputation in new market areas.
While we take steps to minimize reputation risk in dealing with customers and other constituencies, we will continue to face additional challenges maintaining our reputation with respect to customers of the Bank in our current primary market area in Region 2000 and in establishing our reputation in new market areas. 22 Table of Contents Our decisions regarding how we manage our credit exposure may materially and adversely affect our business.
At that board meeting, management presents the enterprise risk management matrix, including the portions related to cybersecurity, to the board. In addition, the board receives regular reports from management on our cybersecurity threat risk management and strategic processes on topics including information on any cybersecurity incidents (including any remedial actions), including, for example, results of our EDR and XDR programs.
In addition, the board receives regular reports from management on our cybersecurity threat risk management and strategic processes on topics including information on any cybersecurity incidents (including any remedial actions), including, for example, results of our EDR and XDR programs. At the management level, the Company has designated an information security officer (“ISO”).
If we fail to retain PWW’s key employees, the growth and profitability of our investment advisory business could be adversely affected. PWW’s success is, and is expected to remain, highly dependent on its executive management team as well as other key personnel because of their role in, among other things, making investment decisions for PWW clients and managing client relations.
PWW’s success is, and is expected to remain, highly dependent on its executive management team as well as other key personnel because of their role in, among other things, making investment decisions for PWW clients and 27 Table of Contents managing client relations.
Prior to CECL, our allowance for credit losses generally considered only past events and current conditions. The CECL methodology requires a forward-looking methodology that reflects the expected credit losses over the lives of financial assets, starting when such assets are first originated or acquired.
The CECL methodology requires a forward-looking methodology that reflects the expected credit losses over the lives of financial assets, starting when such assets are first originated or acquired.
In addition, we cannot predict whether interest rates will continue to remain at present levels. Changes in interest rates may cause significant changes, up or down, in our net interest income.
In addition, we cannot predict whether interest rates will continue to remain at present levels. Changes in interest rates may cause significant changes, up or down, in our net interest income. Depending on our portfolio of loans and investments, our results of operations may be adversely affected by changes in interest rates.
We have adopted a Third-Party Relationship Risk Management Program to help us effectively assess, measure, monitor and control the risks associated with third party relationships, including those related to information security. The board and senior management are responsible for all vendor relationships.
For example, we engage third parties to assess the information security risks related to our ISP as well as information security products, services, and security infrastructure. We have adopted a Third -Party Relationship Risk Management Program to help us effectively assess, measure, monitor and control the risks associated with third party relationships, including those related to information security.
The ISO is responsible for administering and executing the ISP and formulating a risk-based approach for evaluating and managing technology and cybersecurity threats. Management determines and prioritizes appropriate risk responses for each identified enterprise risk. In doing so, executive and senior management work directly with our information technology team and our ISO.
The ISO has various professional certifications in relevant fields. The ISO is responsible for administering and executing the ISP and formulating a risk-based approach for evaluating and managing technology and cybersecurity threats. Management determines and prioritizes appropriate risk responses for each identified enterprise risk.
The ISO assesses and monitors information risks posed by third parties and any non-compliance with the controls created to address such risks.
The board and senior management are responsible for all 32 Table of Contents vendor relationships. The ISO assesses and monitors information risks posed by third parties and any non-compliance with the controls created to address such risks.
Effective internal control over financial reporting and disclosure controls and procedures are necessary for us to provide reliable financial reports and effectively prevent or detect fraud and to operate successfully as a public company. 24 Table of Contents The Company faces the risk that the design of its controls and procedures, including those to mitigate the risk of fraud by employees or outsiders, may prove to be inadequate or are circumvented, thereby causing delays in detection of errors or inaccuracies in data and information.
The Company faces the risk that the design of its controls and procedures, including those to mitigate the risk of fraud by employees or outsiders, may prove to be inadequate or are circumvented, thereby causing delays in detection of errors or inaccuracies in data and information.
Although we maintain safeguards to protect against these risks, we have suffered losses in the past and there can be no assurance that we will not suffer losses in the future that may be material in amount or nature. Changes in consumers’ use of banks and changes in consumers’ spending and saving habits could adversely affect our financial results.
Although we maintain safeguards to protect against these risks, we have suffered losses in the past and there can be no assurance that we will not suffer losses in the future that may be material in amount or nature. Emerging Technological Threats The pace of technological innovation introduces new challenges that can undermine our existing safeguards and business models.
Signed into law on July 21, 2010, the Dodd-Frank Reform Act has represented a significant overhaul of many aspects of the regulation of the financial services industry.
Compliance with the Dodd-Frank Reform Act will increase our regulatory compliance burdens, and may increase our operating costs and may adversely impact our earnings or capital ratios, or both. Signed into law on July 21, 2010, the Dodd-Frank Reform Act has represented a significant overhaul of many aspects of the regulation of the financial services industry.
Any increase in the allowance for credit losses, or expenses incurred to determine the appropriate level of the allowance for credit losses, can have an adverse effect on our financial condition and results of operations. ‎ 19 Table of Contents The markets for our deposit and lending products and services are highly competitive, and we face substantial competition.
Increases in our allowance for credit losses or additional expenses incurred to determine the allowance can adversely affect our financial condition and operating results. The markets for our deposit and lending products and services are highly competitive, and we face substantial competition. The banking and financial services industry is highly competitive.
The ISO performs an annual information security risk assessment, which, among other things, documents inherent risk levels and controls in place to manage those risks. The information security risk assessment is presented to the Board 30 Table of Contents annually. The ISO has various professional certifications in relevant fields.
The ISO also works with and oversees third-party vendors that provide us with information security services and products. The ISO performs an annual information security risk assessment, which, among other things, documents inherent risk levels and controls in place to manage those risks. The information security risk assessment is presented to the Board annually.
Our failure to compete for these personnel, or the loss of the services of several of such key personnel, could adversely affect our growth strategy and seriously harm our business, results of operations and financial condition. ‎ 26 Table of Contents REGULATORY AND LEGAL RISKS We are subject to extensive regulation that could limit or restrict our activities and impose financial requirements or limitations on the conduct of our business, which limitations or restrictions could adversely affect our profitability.
Our failure to compete for these personnel, or the loss of the services of several of such key personnel, could adversely affect our growth strategy and seriously harm our business, results of operations and financial condition.
Post incident activity, which covers incident termination, metrics, lessons learned, evidence retention, and plan maintenance is also included. The ISP follows relevant industry frameworks and standards set by the relevant legal and regulatory authorities and is being updated to align with the NIST Cybersecurity Framework 2.0. The Board is responsible for the oversight of cybersecurity risk management.
The ISP follows relevant industry frameworks and standards set by the relevant legal and regulatory authorities and is being updated to align with the NIST Cybersecurity Framework 2.0. The Board is responsible for the oversight of cybersecurity risk management. In 2022, we elevated the Enterprise Risk Committee to a “committee of the whole” of the Bank’s board of directors.
At the management level, the company has designated an information security officer (“ISO”). Our ISO is responsible for the overall administration and execution of the ISP and reports to our EVP-General Counsel. Our ISO has over twenty years of experience working in information security.
Our ISO is responsible for the overall administration and execution of the ISP and reports to our EVP-General Counsel. Our ISO has over twenty years of experience working in information security. The ISO monitors the security of, among other things, systems, applications, tools, databases, computers, websites, cloud infrastructure, vendor tools, and user access systems.
In 2022, we elevated the Enterprise Risk Committee to a “committee of the whole” of the Bank’s board of directors. At the second board meeting of each calendar quarter, a significant portion of the meeting is dedicated to enterprise risk management.
At the second board meeting of each calendar quarter, a significant portion of the meeting is dedicated to enterprise risk management. At that board meeting, management presents the enterprise risk management matrix, including the portions related to cybersecurity, to the board.
Moreover, any increase in our allowance will adversely affect our earnings by decreasing our net income. In June 2016, the FASB issued a new accounting standard, commonly referred to as the Current Expected Credit Losses (CECL) standard, which replaced the current approach under GAAP for establishing our allowance for credit losses. We adopted the standard on January 1, 2023.
Moreover, any increase in our allowance will adversely affect our earnings by decreasing our net income. 19 Table of Contents We adopted the Current Expected Credit Losses (CECL) accounting standard on January 1, 2023. Prior to CECL, our allowance for credit losses generally considered only past events and current conditions.
The Company maintains an ISP to support the management of cybersecurity risk as an integral component of the Company’s ERM framework. The ISP encompasses the Company’s cybersecurity policies and practices and procedures that we use to identify, assess, mitigate, and monitor the risks faced by the Company .
The ISP encompasses the Company’s cybersecurity policies and practices and procedures that we use to identify, assess, mitigate, and monitor the risks faced by the Company . In addition, as part of the ISP, the Company has a Cyberecurity Incident Response Policy (“CIRP”) and Incident Response Team (“IRT”).
The CECL standard requires us to record, at the time of origination, credit losses expected throughout the life of our loans, as opposed to the current practice of recording losses when it is probable that a loss event has occurred. CECL requires advanced modeling techniques, heavy reliance on assumptions, and dependence on historical data that may not accurately forecast losses.
The CECL standard requires us to record, at the time of origination, the credit losses expected throughout the life of our loans, as opposed to the previous incurred-loss method, which recorded losses only when it was probable that a loss event had already occurred.
The ISO coordinates the Company’s response to a cybersecurity incident, including investigating, recording and evaluating any potential, suspected or confirmed incidents involving non-public customer information or Company confidential information. On a regular basis, the ISO reports to executive management and the Board information security risk issues, risk mitigation progress and developments, and information security enhancement initiatives.
However, when a cybersecurity incident does occur, the Company has in place an incident response program to guide our assessment of and response to the incident. The ISO coordinates the Company’s response to a cybersecurity incident, including investigating, recording and evaluating any potential, suspected or confirmed incidents involving non-public customer information or Company confidential information.
In addition, as part of the ISP, the Company has a Cyberecurity Incident Response Policy (“CIRP”) and Incident Response Team (“IRT”). The IRT includes members of executive and senior management and other employees, including representatives from audit, compliance, human resources, finance, credit, information technology, information security, and legal.
The IRT includes members of executive and senior management and other employees, including representatives from audit, compliance, human resources, finance, credit, information technology, information security, and legal. The IRT manages how incidents are defined, identified, and classified and ensures that procedures are in place to properly escalate, report and respond to incidents, as they are defined in the policy.
The pandemic created economic and financial disruptions that have adversely affected, and have the potential to continue to adversely affect, the Company’s business, financial condition, liquidity and results of operations. Although the pandemic has subsided, a resurgence of COVID-19 or other pandemics could adversely impact our business, financial condition, liquidity and results of operations.
The Company’s business, financial condition, liquidity and results of operations may be , adversely affected by future public health emergencies . Although the COVID-19 pandemic has largely subsided and current trends do not indicate a resurgence, our business, financial condition, liquidity, and results of operations could still be adversely affected by any future public health emergencies or pandemics.
Management is accountable for our day-to-day risk management activities. We strive to minimize the occurrence of cybersecurity incidents and the risks resulting from such incidents. However, when a cybersecurity incident does occur, the Company has in place an incident response program to guide our assessment of and response to the incident.
In doing so, executive and senior management work directly with our information technology team and our ISO. Management is accountable for our day-to-day risk management activities. We strive to minimize the occurrence of cybersecurity incidents and the risks resulting from such incidents.
Our investment securities portfolio is a significant component of our total earning assets. Turmoil in the financial markets could impair the market value of our investment portfolio, which could adversely affect our net income and possibly our capital. In an effort combat inflation, the Federal reserve raised rates in 2022. Interest rates increased rapidly.
Our investment securities portfolio represents a significant component of our total earning assets. Market volatility, fluctuations in interest rates, and broader economic uncertainties could adversely affect the market value of our investment portfolio, potentially negatively impacting our net income and capital levels.
CECL can result in greater volatility in the level of the allowance for credit losses, depending on various factors and assumptions applied in the model, such as the forecasted economic conditions in the foreseeable future and loan payment behaviors.
CECL necessitates advanced modeling techniques, significant reliance on assumptions, and historical data that may not always accurately forecast future losses. Implementation of CECL can result in greater volatility in the allowance for credit losses, influenced by various factors and assumptions in our modeling process, such as forecasted economic conditions and loan repayment behavior.
These increases generally had an adverse impact on the value of our securities available-for-sale portfolio. From time to time, we hold as investments certain securities that have unrealized losses. As of December 31, 2022 and December 31, 2023, we had unrealized losses in our available-for-sale securities portfolio net of taxes of $26,781,000 and $21,615,000, respectively.
As of December 31, 2023, and December 31, 2024, we had unrealized losses, net of taxes, in our investment securities portfolio of $21,615,000 and $22,915,000, respectively.
While we currently maintain substantial liquidity which supports our intent and ability to hold these investments until they mature, or until there is a market price recovery, if we were to cease to have the ability and intent to hold these investments until maturity or if the market prices do not recover, and we were to sell these securities at a loss, it could adversely affect our net income and thereby our capital.
While we maintain sufficient liquidity to support our intent and ability to hold these securities until maturity or market recovery, if future conditions impair our liquidity or alter our intent or ability to hold these investments to maturity, we could incur losses that negatively impact our net income and potentially our capital position.
The IRT manages how incidents are defined, identified, and classified and ensures that procedures are in place to properly escalate, report and respond to incidents, as they are defined in the policy. The CIRP covers incident preparation, detection, analysis, and declaration, as well as plan execution and process guides for specific scenarios.
The CIRP covers incident preparation, detection, analysis, and declaration, as well as plan execution and process guides for specific scenarios. Post incident activity, which covers incident termination, metrics, lessons learned, evidence retention, and plan maintenance is also included.
Removed
The Company’s business, financial condition, liquidity and results of operations may be , adversely affected by a resurgence of COVID-19 or other pandemics . The COVID-19 pandemic negatively impacted the local, state, national, and world economies.
Added
For instance, advancements in quantum computing could compromise traditional encryption methods, leaving sensitive financial data and transactions exposed. Similarly, the increasing use of artificial intelligence and machine learning by malicious actors enables more sophisticated cyberattacks, such as highly targeted phishing, deepfake fraud, or automated account takeovers.
Removed
The impact would depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the resurgence of COVID-19 or subsequent pandemics, the effectiveness of the Company’s business continuity plan, the direct and indirect impact of the resurgence or pandemic on the Company’s employees, customers, clients, and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.
Added
As these threats evolve, our existing defenses may become inadequate, and the cost and complexity of upgrading our systems and processes could materially affect our operations and financial performance. In addition, the rapid emergence of decentralized finance (DeFi) platforms and blockchain technologies could disrupt traditional banking services, reducing our market share and fee income if we fail to adapt.
Removed
Depending on our portfolio of loans and investments, our results of operations may be adversely affected by changes in interest rates. 22 Table of Contents Our financial condition and results of operations are affected by credit policies of monetary authorities, particularly the Federal Reserve Board.
Added
The proliferation of new payment technologies and digital currencies may also introduce new security vulnerabilities, regulatory uncertainty, and competitive pressures. Our inability to address these emerging technological risks in a timely and effective manner could harm our reputation, weaken customer trust, and ultimately affect our long-term growth and profitability.
Removed
On December 31, 2021, the Fed funds target rate was 0% to 0.25%. By June 30, 2022, the target rate stood at 1.5% to 1.75% and by December 31, 2022 the rate was 4.25% to 4.5%. By December 31, 2023, the target rate had increased to 5.25% to 5.5% where it currently remains.
Added
Digital Banking and Cryptocurrency Exposure The continued growth and acceptance of digital banking services, cryptocurrencies, blockchain technologies, and DeFi present both opportunities and risks to our business. Increasing customer demand for digital banking services requires ongoing investments in technology infrastructure, cybersecurity, and regulatory compliance.
Removed
As a bank holding company, we are primarily regulated by the Federal Reserve. The Bank is primarily regulated by the BFI and the Federal Reserve.
Added
Additionally, growth in cryptocurrency and DeFi could reduce traditional banking deposits and income streams, challenging our ability to attract and retain customers. Regulatory uncertainty regarding cryptocurrency and DeFi could further complicate our strategic decisions, increase compliance costs, and potentially expose us to reputational and operational risks.
Removed
Regulatory authorities continue to implement provisions of the Dodd-Frank Reform Act and other financial sector regulatory requirements. Additional regulation and supervision may increase our costs and limit our ability to pursue business opportunities. The effects of any recently enacted, or proposed, legislation and regulatory programs on us cannot reliably be determined at this time.
Added
Digital Banking Trends and Deposit Volatility Our traditional banking model depends heavily on stable customer deposits as a primary source of funding. The rising popularity of alternative financial products, including fintech platforms, cryptocurrencies, money market funds, and digital wallets, may lead to increased volatility in our deposit base.
Removed
The Consumer Financial Protection Bureau’s (the “CFPB”) “ability-to-repay” and “qualified mortgage” rules may have a negative impact on our loan origination process and foreclosure proceedings, which could adversely affect our business, operating results and financial condition.
Added
Significant fluctuations in deposits could adversely affect our liquidity position, funding costs, and overall financial stability.
Removed
On January 10, 2013, the CFPB issued a final rule to implement the “qualified mortgage” provisions of the Dodd-Frank Reform Act requiring mortgage lenders to consider consumers’ ability to repay home loans before extending them credit.
Added
Although we actively manage our liquidity and funding sources, a substantial shift of customer deposits to these alternative products could negatively impact our operations, profitability, and competitive position. 24 Table of Contents Changes in consumers’ use of banks and changes in consumers’ spending and saving habits could adversely affect our financial results.
Removed
The CFPB’s “qualified mortgage” rule, which became effective on January 10, 2014, describes certain minimum requirements for lenders making ability-to-repay determinations, but does not dictate that they follow particular underwriting models. Lenders will be presumed to have complied with the ability-to-repay rule if they issue “qualified mortgages,” which are generally defined as mortgage loans prohibiting or limiting certain risky features.
Added
Effective internal control over financial reporting and disclosure controls and procedures are necessary for us to provide reliable financial reports and effectively prevent or detect fraud and to operate successfully as a public company.
Removed
Loans that do not meet the ability-to-repay standard can be challenged in court by borrowers who default, and the absence of ability-to-repay status can be used against a lender in foreclosure proceedings.
Added
If we fail to retain PWW’s key employees, the growth and profitability of our investment advisory business could be adversely affected.
Removed
Any loans that we make outside of the “qualified mortgage” criteria could expose us to an increased risk of liability and reduce or delay our ability to foreclose upon the underlying property. Any decreases in loan origination volume or increases in compliance and foreclosure costs caused by the rule could negatively affect our business, operating results and financial condition.
Added
REGULATORY AND LEGAL RISKS We are subject to extensive regulation that could limit or restrict our activities and impose financial requirements or limitations on the conduct of our business, which limitations or restrictions could adversely affect our profitability. As a bank holding company, we are primarily regulated by the Federal Reserve.
Removed
The CFPB also has adopted a number of additional requirements and issued additional guidance, including with respect to appraisals, escrow accounts and servicing, each of which entails increased compliance costs.

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Item 2. Properties

Properties — owned and leased real estate

10 edited+3 added−5 removed3 unchanged
Biggest changeThe following table describes the location and general character of our operating facilities: Address Type of Facility Year Opened Owned/Leased 5204 Fort Avenue Lynchburg, Virginia Full-service branch with drive thru and ATM 2000 Owned 4698 South Amherst Highway Madison Heights, Virginia Full-service branch with drive thru and ATM 2002 Owned 31 Table of Contents 17000 Forest Road Forest, Virginia Full-service branch with drive thru and ATM Headquarters for Mortgage Division 2005 Owned 164 South Main Street Amherst, Virginia Full-service branch with drive thru and ATM 2007 Owned 1405 Ole Dominion Blvd Bedford, Virginia Full-service branch with drive thru and ATM 2008 Owned 1110 Main Street Altavista, Virginia Full-service branch with drive thru and ATM 2009 Owned 828 Main Street Lynchburg, Virginia Corporate Headquarters; Full-service branch with drive thru and ATM 2004 Leased (1) 4935 Boonsboro Road, Suites C and D Lynchburg, Virginia Full-service branch with drive thru and ATM 2006 Leased (2) 501 VES Road Lynchburg, Virginia Limited service branch 2010 Leased (3) 250 Pantops Mountain Road Charlottesville, Virginia Limited service branch 2015 Leased (4) 1391 South High Street Harrisonburg, Virginia Full-service branch with drive thru and ATM 2015 Owned 1745 Confederate Blvd Appomattox, Virginia Full-service branch with drive thru and ATM 2017 Owned 225 Merchant Walk Avenue Charlottesville, Virginia Full-service branch with drive thru and ATM 2016 Leased (5) 3562 Electric Road Roanoke, Virginia Full-service branch with ATM 2017 Leased (6) 2001 South Main Street #107 Blacksburg, Virginia Mortgage origination office 2018 Leased (7) 550 East Water Street Suite 100 Charlottesville, Virginia Full-service branch with ATM 2019 Owned 2101 Electric Road Roanoke, Virginia Full-service branch with drive thru and ATM 2019 Leased (8) 45 South Main Street Lexington, Virginia Full-service branch with ATM 2019 Owned 13 Village Highway Rustburg, VA 24588 Full-service branch with drive thru and ATM 2019 Owned 4105 Boonsboro Road Lynchburg, Virginia Full-service branch with drive thru and ATM 2022 Owned 32 Table of Contents (1) The current term of the amended and restated lease expires in three years and the Bank has three five-year renewal options (subject to the terms and conditions outlined in the lease).
Biggest changeThe following table describes the location and general character of our primary operating facilities: Address Type of Facility Year Opened Owned/Leased 5204 Fort Avenue Lynchburg, Virginia Full-service branch with drive thru and ATM 2000 Owned 4698 South Amherst Highway Madison Heights, Virginia Full-service branch with drive thru and ATM 2002 Owned 17000 Forest Road Forest, Virginia Full-service branch with drive thru and ATM Headquarters for Mortgage Division 2005 Owned 164 South Main Street Amherst, Virginia Full-service branch with drive thru and ATM 2007 Owned 1405 Ole Dominion Blvd Bedford, Virginia Full-service branch with drive thru and ATM 2008 Owned 1110 Main Street Altavista, Virginia Full-service branch with drive thru and ATM 2009 Owned 828 Main Street Lynchburg, Virginia Corporate Headquarters; Full-service branch with drive thru and ATM 2004 Leased (1) 4935 Boonsboro Road, Suites C and D Lynchburg, Virginia Full-service branch with drive thru and ATM 2006 Leased (2) 33 Table of Contents 501 VES Road Lynchburg, Virginia Limited-service branch 2010 Leased (3) 250 Pantops Mountain Road Charlottesville, Virginia Limited-service branch 2015 Leased (4) 1391 South High Street Harrisonburg, Virginia Full-service branch with drive thru and ATM 2015 Owned 1745 Confederate Blvd Appomattox, Virginia Full-service branch with drive thru and ATM 2017 Owned 225 Merchant Walk Avenue Charlottesville, Virginia Full-service branch with drive thru and ATM 2016 Leased (5) 3562 Electric Road Roanoke, Virginia Full-service branch with ATM 2017 Leased (6) 800 South Main Street Blacksburg, Virginia Mortgage origination office 2018 Leased (7) 550 East Water Street Suite 100 Charlottesville, Virginia Full-service branch with ATM 2019 Owned 2101 Electric Road Roanoke, Virginia Full-service branch with drive thru and ATM 2019 Leased (8) 45 South Main Street Lexington, Virginia Full-service branch with ATM 2019 Owned 13 Village Highway Rustburg, VA 24588 Full-service branch with drive thru and ATM 2019 Owned 4105 Boonsboro Road Lynchburg, Virginia Full-service branch with drive thru and ATM 2022 Owned 270795 Timberlake Road Lynchburg, Virginia Full-service branch with drive thru and ATM 2025 Owned 19792 Main Street Buchanan, Virginia Full-service branch with drive thru and ATM 2024 Owned 2773 Rockfish Valley Highway ‎ Nellysford, Virginia Full-service branch with drive thru and ATM 2024 Leased (9) (1) The current term of the amended and restated lease expires in three years and the Bank has three five-year renewal options (subject to the terms and conditions outlined in the lease).
(5) Base lease expires October 31, 2026. We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease. (6) Base lease expires January 31, 2027. (7) Base lease expired February 28, 2021. The Bank currently leases on a month-to-month basis. (8) Base lease expires February 28, 2029.
We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease. (6) Base lease expires January 31, 2027. (7) Base lease expired February 28, 2021. The Bank currently leases on a month-to-month basis. (8) Base lease expires February 28, 2029.
We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease. (4) Base lease expires April 30, 2025. We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease.
(4) Base lease expires April 30, 2025. We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease. (5) Base lease expires October 31, 2026.
The Bank leases this property from Jamesview Investment, LLC, which is wholly-owned by William C. Bryant III, a member of the Board of Directors of both Financial and the Bank. (2) The previous term expired on December 31, 2021. The Bank currently leases on a month-to-month basis. (3) Base lease expires May 31, 2025.
The Bank leases this property from Jamesview Investment, LLC, which is wholly-owned by William C. Bryant III, a member of the Board of Directors of both Financial and the Bank. (2) Base lease expires March 31, 2028.
While the Bank currently does not have a timeline for a branch at this location, the space is attractive for a branch due to its close 33 Table of Contents proximity to Centra’s Lynchburg General Hospital. The investment needed to upfit the property will be minimal.
PWW is currently leasing the space from the Bank on a month-to-month basis. While the Bank currently does not have a timeline for a branch at this location, the space is attractive for a branch due to its close proximity to Centra’s Lynchburg General Hospital.
The property is a subject to a restrictive covenant that prohibits the Bank from using the property for any banking-related activity until the covenant expires in September 2025. We anticipate that we will open a temporary location in the vicinity of this property in the second quarter of 2024.
The Bank anticipates that the cost to upfit the building will be minimal. The property is a subject to a restrictive covenant that prohibits the Bank from using the property for any banking-related activity until the covenant expires in September 2025. Upon opening, this branch will replace the temporary location noted in the table above.
We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease. We believe that each of these operating facilities is maintained in good operating condition and is suitable for our operational needs.
We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease. 34 Table of Contents (3) Base lease expires May 31, 2025. We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease.
On September 18, 2023, the Bank purchased real property located at 2935 Rockfish Valley Highway, Nellysford, Virginia. The building on the property previously served as a bank branch for another financial institution. The Bank anticipates that the cost to upfit the building will be minimal.
We believe that each of these operating facilities is maintained in good operating condition and is suitable for our operational needs. Interest in Additional Properties On September 18, 2023, the Bank purchased real property located at 2935 Rockfish Valley Highway, Nellysford, Virginia. The building on the property previously served as a bank branch for another financial institution.
As discussed in “Management’s Discussion and Analysis—Expansion Plans” in addition to the facilities set forth above, the Bank owns the following properties which are being held for possible expansion: Real property located in the Timberlake Road area of Campbell County (Lynchburg), Virginia.
As discussed in “ Management’s Discussion and Analysis—Expansion Plans ” in addition to the facilities set forth above, the Bank owns real property located at 1925 Atherholt Road, Lynchburg, Virginia, which is being held for possible expansion. The Bank purchased this property in 2021. The building currently houses all personnel of the Company’s wholly-owned subsidiary, PWW.
As of March 27, 2024 the Bank conducts its operations from 19 locations, of which we own 11 and lease 8 .
As of March 26, 2025 the Bank conducts its operations from 21 locations, of which we own 13 and lease 8 . In addition, PWW operates from 1925 Atherholt Road, Lynchburg, Virginia, which it leases from the Bank.
Removed
Interest in Additional Properties The Bank recently acquired the following two properties in which it intends to open branches in 2024:  Real property located at 19792 Main Street, Buchanan, Virginia. On August 7, 2023, the Bank purchased real property located at 19792 Main Street, Buchanan, Virginia.
Added
We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease. (9) This is a temporary location. We anticipate relocating to our permanent branch in the third quarter 2025.
Removed
The building on the property previously served as a bank branch for another financial institution. The Bank anticipates that that it will open a branch at this location during the second quarter of 2024.  Real Property located at 2935 Rockfish Valley Highway, Nellysford, Virginia.
Added
Management estimates that the investment needed to upfit the property for use as a bank branch will be minimal. In addition, the Bank owns undeveloped property located in the Timberlake Road area of Campbell County (Lynchburg), Virginia.
Removed
The Bank has received regulatory approval to open the permanent location in Buchanan and the temporary location in Nellysford.
Added
The Bank purchased this for possible expansion but following acquisition of the property located at 20795 Timberlake Road, the Bank put the property on the market for sale.
Removed
The existing structure located on the property is not suitable for its intended use as a branch bank. Management anticipates that it will be necessary to raze the current structures and replace them with appropriate new construction.  Real property located at 1925 Atherholt Rd, Lynchburg, Virginia. The Bank purchased this property in 2021.
Removed
The building currently houses all personnel of the Company’s wholly-owned subsidiary, PWW. PWW is currently leasing the space from the Bank on a month-to-month basis.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed6 unchanged
Biggest changePWW’s ability to pay dividends is subject to certain limits imposed by state law. 34 Table of Contents On January 16, 2024 Financial declared a cash dividend for the fourth quarter of 2023 of $0.10 per common share. The dividend was paid on March 15, 2024 to shareholders of record at the close of business on March 1, 2024.
Biggest changePWW’s ability to pay dividends is subject to certain limits imposed by state law. On January 21, 2025 Financial declared a cash dividend for the fourth quarter of 2024 of $0.10 per common share. The dividend was paid on March 21, 2025 to shareholders of record at the close of business on March 7, 2025.
Financial will evaluate the factors set forth above when making a determination of whether to continue to pay a cash dividend in 2024. Financial does not have an active stock repurchase plan and during the quarter ended December 31, 2023, Financial repurchased no shares of common stock.
Financial will evaluate the factors set forth above when making a determination of whether to continue to pay a cash dividend in 2025. Financial does not have an active stock repurchase plan and during the quarter ended December 31, 2024, Financial repurchased no shares of common stock.
Because the Company used substantially all of the funds allocated under the Plan, on April 18, 2023, the Company’s board of directors terminated the repurchase plan. Following the termination, the Company did not have a stock repurchase plan in place.
Because the Company used substantially all of the funds allocated 36 Table of Contents under the Plan, on April 18, 2023, the Company’s board of directors terminated the repurchase plan. Following the termination, the Company did not have a stock repurchase plan in place.
OB” on some systems) and transactions generally involved a small number of shares. As of March 31, 2024, there were approximately 4,543,338 shares of Common Stock outstanding, which shares are held by approximately 1,500 active shareholders of record.
OB” on some systems) and transactions generally involved a small number of shares. As of March 26, 2025, there were approximately 4,543,338 shares of Common Stock outstanding, which shares are held by approximately 1,500 active shareholders of record.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securi ties Market Prices and Dividends As of January 25, 2012, the Common Stock of Financial is traded on the NASDAQ Capital Market LLC (NASDAQ) under the symbol “BOTJ.” Prior to this time, the Common Stock of Financial was quoted on the Over the Counter Bulletin Board (OTCBB) under the symbol “BOJF” (“BOJF .
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securi ties Market Prices and Dividends Since January 25, 2012, the Common Stock of Financial is listed and has been trading on the NASDAQ Capital Market LLC (NASDAQ) under the symbol “BOTJ.” Prior to this time, the Common Stock of Financial was quoted on the Over the Counter Bulletin Board (OTCBB) under the symbol “BOJF” (“BOJF .

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

120 edited+35 added−38 removed74 unchanged
Biggest changeThe average balances used in this table and other statistical data were calculated using average daily balances. ‎ 39 Table of Contents Net Interest Margin Analysis Average Balance Sheets For the Years Ended December 31, 2023 and 2022 (dollars in thousands) 2023 2022 Average Average Average Interest Rates Average Interest Rates Balance Income/ Earned/ Balance Income/ Earned ASSETS Sheet Expense Paid Sheet Expense /Paid Loans, including fees (1)(2) $ 616,047 $ 31,138 5.05% $ 604,990 $ 25,992 4.30% Loans held for sale 3,512 240 6.83% 3,913 183 4.68% Federal funds sold 47,316 2,462 5.20% 68,580 721 1.05% Interest-bearing bank balances 8,538 496 5.81% 18,005 282 1.57% Securities (3) 226,637 4,963 2.19% 223,137 4,628 2.07% Federal agency equities 1,325 82 6.19% 1,251 66 5.28% CBB equity 116 — 0.00% 116 — 0.00% Total earning assets 903,491 39,381 4.36% 919,992 31,872 3.46% Allowance for credit losses (7,535) (6,715) Non-earning assets 54,320 67,230 Total assets $ 950,276 $ 980,507 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits Demand interest bearing 407,268 2,321 0.57% 454,974 480 0.11% Savings 123,736 663 0.54% 132,318 75 0.06% Time deposits 183,256 5,796 3.16% 134,821 732 0.54% Total interest bearing deposits 714,260 8,780 1.23% 722,113 1,287 0.18% Other borrowed funds Other borrowings 10,185 398 3.91% 10,738 440 4.10% FHLB borrowings 614 31 5.05% — — — Financing leases 3,236 86 2.66% 3,593 96 2.67% Capital Notes 10,040 327 3.26% 10,035 327 3.26% Total interest-bearing liabilities 738,335 9,622 1.30% 746,479 2,150 0.29% Noninterest bearing deposits 153,009 166,179 Other liabilities 7,955 10,371 Total liabilities 899,299 923,029 Stockholders’ equity 50,977 57,478 Total liabilities and Stockholders’ equity $ 950,276 $ 980,507 Net interest earnings $ 29,759 $ 29,722 Net interest margin 3.29% 3.23% 40 Table of Contents Interest spread 3.06% 3.17% (1) Net deferred loan fees and costs are included in interest income.
Biggest changeNet Interest Margin Analysis Average Balance Sheets For the Years Ended December 31, 2024 and 2023 (dollars in thousands) 2024 2023 Average Average Average Interest Rates Average Interest Rates Balance Income/ Earned/ Balance Income/ Earned ASSETS Sheet Expense Paid Sheet Expense /Paid Loans, including fees (1)(2) $ 623,769 $ 34,293 5.50% $ 616,047 $ 31,138 5.05% Loans held for sale 3,494 212 6.07% 3,512 240 6.83% Federal funds sold 69,216 3,629 5.24% 47,316 2,462 5.20% Interest-bearing bank balances 8,769 775 8.84% 8,538 496 5.81% Securities (3) 232,992 5,658 2.42% 226,637 4,963 2.19% Federal agency equities 1,442 95 6.59% 1,325 82 6.19% Correspondent bank equity 218 — 0.00% 116 — 0.00% Total earning assets 939,900 44,662 4.75% 903,491 39,381 4.36% Allowance for credit losses (7,089) (7,535) Non-earning assets 62,927 54,320 Total assets $ 995,738 $ 950,276 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits Demand interest-bearing 398,428 3,589 0.90% 407,268 2,321 0.57% Savings 136,169 1,866 1.37% 123,736 663 0.54% Time deposits 225,894 9,173 4.06% 183,256 5,796 3.16% Total interest-bearing deposits 760,491 14,628 1.92% 714,260 8,780 1.23% Other borrowed funds Other borrowings 9,602 376 3.92% 10,185 398 3.91% FHLB borrowings — — - % 614 31 5.05% Financing leases 2,865 76 2.65% 3,236 86 2.66% Capital Notes 10,045 327 3.26% 10,040 327 3.26% Total interest-bearing liabilities 783,003 15,407 1.97% 738,335 9,622 1.30% Noninterest bearing deposits 140,958 153,009 42 Table of Contents Other liabilities 9,202 7,955 Total liabilities 933,163 899,299 Stockholders’ equity 62,575 50,977 Total liabilities and Stockholders’ equity $ 995,738 $ 950,276 Net interest earnings $ 29,255 $ 29,759 Net interest margin 3.11% 3.29% Interest spread 2.78% 3.06% (1) Net deferred loan fees and costs are included in interest income.
The allowance for loan credit losses represents an amount which, in management’s judgment, is adequate to absorb the lifetime expected losses that may be sustained on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions, and prepayment experience.
The allowance for credit losses on loans represents an amount which, in management’s judgment, is adequate to absorb the lifetime expected losses that may be sustained on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions, and prepayment experience.
These factors, many of which are beyond Financial’s control, include, but are not necessarily limited to the following: the effects of a resurgence of COVID-19 or other pandemic on the business, customers, employees and third-party service providers of Financial or any of its acquisition targets; problems with technology utilized by us; potential exposure to fraud, negligence, computer theft and cyber-crime, and the Company's ability to maintain the security of its data processing and information technology systems operating, legal and regulatory risks, including the effects of legislative or regulatory developments affecting the financial industry generally or Financial specifically; government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and the Consumer Protection Act and its related regulations); economic, market, political and competitive forces affecting Financial’s banking and other businesses; 35 Table of Contents competition for our customers from other providers of financial services; government legislation and regulation relating to the banking industry (which changes from time to time and over which we have no control) including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act; reliance on our management team, including our ability to attract and retain key personnel changes in interest rates, monetary policy and general economic conditions, which may impact Financial’s net interest income; changes in the value of real estate securing loans made by the Bank; adoption of new accounting standards or changes in existing standards; compliance or operational risks related to new products, services, ventures, or lines of business, if any, that Financial may pursue or implement; the risk that Financial’s analysis of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful; the stability of the overall banking industry in the United States; liquidity and perceived liquidity in the banking industry in the United States; economic and political tensions with China, the ongoing war between Russia and Ukraine and potential expansion of combatants, and the sanctions imposed on Russia by numerous countries and private companies , all of which may have a destabilizing effect on financial markets and economic activity; and other risks and uncertainties set forth in this Annual Report on Form 10 -K and, from time to time, in our other filings with the Securities and Exchanges Commission (“SEC”).
These factors, many of which are beyond Financial’s control, include, but are not necessarily limited to the following: the effects of a pandemic on the business, customers, employees and third-party service providers of Financial or any of its acquisition targets; problems with technology utilized by us; potential exposure to fraud, negligence, computer theft and cyber-crime, and the Company’s ability to maintain the security of its data processing and information technology systems; operating, legal and regulatory risks, including the effects of legislative or regulatory developments affecting the financial industry generally or Financial specifically; government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and the Consumer Protection Act and its related regulations); economic, market, political and competitive forces affecting Financial’s banking and other businesses; competition for our customers from other providers of financial services; government legislation and regulation relating to the banking industry (which changes from time to time and over which we have no control) including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act; reliance on our management team, including our ability to attract and retain key personnel; changes in interest rates, monetary policy and general economic conditions, which may impact Financial’s net interest income; changes in the value of real estate securing loans made by the Bank; adoption of new accounting standards or changes in existing standards; compliance or operational risks related to new products, services, ventures, or lines of business, if any, that Financial may pursue or implement; 37 Table of Contents the risk that Financial’s analysis of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful; the stability of the overall banking industry in the United States; liquidity and perceived liquidity in the banking industry in the United States; economic and political tensions with China, the ongoing war between Russia and Ukraine and potential expansion of combatants, and the sanctions imposed on Russia by numerous countries and private companies , all of which may have a destabilizing effect on financial markets and economic activity; and other risks and uncertainties set forth in this Annual Report on Form 10 -K and, from time to time, in our other filings with the Securities and Exchanges Commission (“SEC”).
Investment’s financial impact on our consolidated revenue has been minimal. Although management cannot predict the financial impact of Investment with certainty, management anticipates it will continue to be a relatively small component of revenue in 2024. In the third quarter of 2008, we began providing insurance and annuity products to Bank customers and others, through the Bank’s Insurance subsidiary.
Investment’s financial impact on our consolidated revenue has been minimal. Although management cannot predict the financial impact of Investment with certainty, management anticipates it will continue to be a relatively small component of revenue in 2025. In the third quarter of 2008, we began providing insurance and annuity products to Bank customers and others through the Bank’s Insurance subsidiary.
If interest rates continue to rise and/or the U.S. economy experiences a recession, certain borrowers may experience difficulty and the level of nonperforming loans, charge-offs and delinquencies could rise and require increases in the allowance for credit losses. The process of identifying potential credit losses is a subjective process.
If interest rates rise and/or the U.S. economy experiences a recession, certain borrowers may experience difficulty and the level of nonperforming loans, charge-offs and delinquencies could rise and require increases in the allowance for credit losses. The process of identifying potential credit losses is a subjective process.
This resulted in a one-time credit to income tax expense and led to a sharp decrease in the effective tax rate in 2023 as compared to 2022. Note 12 of the consolidated financial statements provides additional information with respect to our 2022 and 2023 federal income tax expense and deferred tax accounts.
This resulted in a one-time credit to income tax expense and led to a sharp decrease in the effective tax rate in 2023 as compared to 2024. Note 12 of the consolidated financial statements provides additional information with respect to our 2023 and 2024 federal income tax expense and deferred tax accounts.
Insurance generates minimal revenue and its financial impact on our consolidated revenue has been immaterial. Management anticipates that Insurance’s impact on noninterest income will remain immaterial in 2024. We conduct our investment advisory business through PWW, which Financial acquired on December 31, 2021.
Insurance generates minimal revenue, and its financial impact on our consolidated revenue has been immaterial. Management anticipates that Insurance’s impact on noninterest income will remain immaterial in 2025. We conduct our investment advisory business through PWW, which Financial acquired on December 31, 2021.
The guidelines define capital as Tier 1 (primarily common stockholders’ equity, defined to include certain debt obligations) and Tier 2 (remaining capital generally consisting of a limited amount of subordinated debt, certain hybrid capital instruments and other debt securities, preferred stock and a limited amount of the general valuation allowance for credit losses).
The guidelines define capital as Tier 1 (primarily common stockholders’ equity, defined to include certain debt obligations) and Tier 2 (remaining capital generally consisting of a limited amount of subordinated 55 Table of Contents debt, certain hybrid capital instruments and other debt securities, preferred stock and a limited amount of the general valuation allowance for credit losses).
The income stream of Financial is subject to risk resulting from interest rate fluctuations to the extent there is a difference between the amount of Financial’s interest earning assets and the amount of interest-bearing liabilities 56 Table of Contents that prepay, mature or reprice in specified periods.
The income stream of Financial is subject to risk resulting from interest rate fluctuations to the extent there is a difference between the amount of Financial’s interest earning assets and the amount of interest-bearing liabilities that prepay, mature or reprice in specified periods.
We anticipate that going forward, PWW will enhance our operating results by providing additional noninterest income (generally investment advisory fees less operating expenses).
We anticipate that going forward, PWW will continue to enhance our operating results by providing additional noninterest income (generally investment advisory fees less operating expenses).
Our effective tax rate was lower than the statutory corporate tax rate in 2023 because, in addition to the same factors from 2022, i n the fourth quarter we utilized a tax benefit for Virginia state income tax purposes that has accumulated as a result of parent company only (i.e., not consolidated) losses over time.
Our effective tax rate was lower than the statutory corporate tax rate in 2023 because, in addition to the same factors in 2024, in the fourth quarter we utilized a tax benefit for Virginia state income tax purposes that has accumulated as a result of parent company-only (i.e., not consolidated) losses over time.
By using the Bank’s 41 Table of Contents funds to close the loan (as compared to a broker relationship in which loans are funded by the purchaser of the mortgage), the Bank is able to obtain better pricing due to the slight increase in risk.
By using the Bank’s funds to close the loan (as compared to a broker relationship in which loans are funded by the purchaser of the mortgage), the Bank is able to obtain better pricing due to the slight increase in risk.
The Bank established the Mortgage Division to serve potential customers that desired fixed rate loans in excess of five years. Management monitors interest rate levels on a daily basis and meets quarterly with the board of directors, who acts as the Enterprise Risk Management and Asset/Liability Committee (“ALCO”).
The Bank established the Mortgage Division to serve potential customers that desired longer fixed rate loans, generally in excess of ten years. Management monitors interest rate levels on a daily basis and meets quarterly with the board of directors, who acts as the Enterprise Risk Management and Asset/Liability Committee (“ALCO”).
Our effective tax rate was lower than the statutory corporate tax rate in 2022 because of federal income tax benefits resulting from the tax treatment of earnings on bank owned life insurance, and certain tax-free municipal securities.
Our effective tax rate was lower than the statutory corporate tax rate in 2024 because of federal income tax benefits resulting from the tax treatment of earnings on bank-owned life insurance and certain tax-free municipal securities and loans.
Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently in events and circumstances exists that indicate that a goodwill impairment test should be performed.
Goodwill and intangible assets acquired in a 53 Table of Contents purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently in events and circumstances exists that indicate that a goodwill impairment test should be performed.
At December 31, 2023, the allowance for credit losses was 1.22% of total loans outstanding, versus 1.02% of total loans outstanding at December 31, 2022. Management intends to continue to be proactive in quantifying and mitigating the ongoing risk associated with all asset classes.
At December 31, 2024, the allowance for credit losses was 1.09% of total loans outstanding, versus 1.22% of total loans outstanding at December 31, 2023. Management intends to continue to be proactive in quantifying and mitigating the ongoing risk associated with all asset classes.
Short-term borrowings may also include federal funds purchased, which are unsecured overnight borrowings from other financial institutions, which totaled $0 as of December 31, 2023 and December 31, 2022. As set forth under “ Analysis of Financial Condition - Liquidity ,” above, the Bank has the ability to borrow funds from a number of sources.
Short-term borrowings may also include federal funds purchased, which are unsecured overnight borrowings from other financial institutions, which totaled $0 as of December 31, 2024 and December 31, 2023. As set forth under “ Analysis of Financial Condition - Liquidity ,” above, the 63 Table of Contents Bank has the ability to borrow funds from a number of sources.
The level of net interest income is impacted primarily by variations in the volume and mix of these assets and liabilities, as well as changes in interest rates when compared to previous periods of operation. Interest income increased to $39,362,000 for the year ended December 31, 2023 from $31,853,000 for the year ended December 31, 2022 .
The level of net interest income is impacted primarily by variations in the volume and mix of these assets and liabilities, as well as changes in interest rates when compared to previous periods of operation. Interest income increased to $44,643,000 for the year ended December 31, 2024, from $39,362,000 for the year ended December 31, 2023.
As explained in more detail below, deposits increased from $848,138,000 on December 31, 2022 to $878,459,000 on December 31, 2023 . These deposits were in large part used to purchase fed funds sold and securities available for sale. Loans Our loan portfolio is the largest and most profitable component of our earning assets.
As explained in more detail below, deposits increased from $878,459,000 on December 31, 2023, to $882,404,000 on December 31, 2024. These deposits were in large part used to purchase fed funds sold and securities available for sale. Loans Our loan portfolio is the largest and most profitable component of our earning assets.
Therefore, the Company maintains a general reserve to cover credit losses within the portfolio. No non-accrual loans were excluded from impaired loans at December 31, 2023 and 2022. If interest on these loans had been accrued, such income cumulatively would have approximated $37,000 and $79,000 at December 31, 2023 and 2022, respectively.
Therefore, the Company maintains a general reserve to cover credit losses within the portfolio. No non-accrual loans were excluded from loans individually evalauted impaired loans at December 31, 2024 and 2023. If interest on these loans had been accrued, such income cumulatively would have approximated $72,000 and $37,000 at December 31, 2024 and 2023, respectively.
See “ Capital Resources, ” below. The objective of liquidity management for the Bank is to ensure the continuous availability of funds to meet the demands of depositors, borrowers, creditors, and others. Liquidity management involves monitoring the Bank’s sources and uses of funds in order to meet the day-to-day cash flow requirements while maximizing profits.
The objective of liquidity management for the Bank is to ensure the continuous availability of funds to meet the demands of depositors, borrowers, creditors, and others. Liquidity management involves monitoring the Bank’s sources and uses of funds in order to meet the day-to-day cash flow requirements while maximizing profits.
Our management continues to review and consider areas where noninterest income can be increased. Noninterest income (excluding securities gains and losses) consists of income from mortgage originations and sales, service fees, income from life insurance, income from credit and debit card transactions, fees generated by the investment services of Investment, and since January 1, 2022, income from PWW.
Our management continues to review and consider areas where noninterest income can be increased. Noninterest income (excluding securities gains and losses) consists of income from mortgage originations and sales, service fees, income from life insurance, income from credit and debit card transactions, fees generated by the investment services of Investment, and wealth management fees earned by PWW.
Service charges and fees and commissions increased to $3,901,000 for the year ended December 31, 2023 from $3,591,000 for the year ended December 31, 2022 primarily due to increases related to commissions on the sales of securities, debit card fees, and treasury management fees. Investment provides brokerage services through an agreement with a third-party broker-dealer.
Service charges, fees, and commissions increased to $4,003,000 for the year ended December 31, 2024, from $3,901,000 for the year ended December 31, 2023, primarily due to increases related to commissions on the sales of securities, debit card fees, and treasury management fees. Investment provides brokerage services to its clients through an agreement with a third-party broker-dealer.
Investment securities traditionally provide a secondary source of liquidity because they can be converted into cash in a timely manner. However, approximately $ 30,166,000 (current market value) of these securities are pledged to secure public deposits and $5,210,000 (current market value) are pledged to secure unfunded lines of credit.
Investment securities traditionally provide a secondary source of liquidity because they can be converted into cash in a timely manner. However, approximately $50,187,000 (current market value) of these securities are pledged to secure public deposits and unfunded lines of credit.
This increase was due primarily to an increase in the yields on average earning assets which primarily consist of loans and investment securities, as discussed below. Net interest income for 2023 increased slightly, to $29,740,000 from $29,703,000 in 2022.
This increase was due primarily to an increase in the yields on average earning assets, which primarily consist of loans and investment securities, as discussed below. Net interest income for 2024 decreased slightly, to $29,236,000 from $29,740,000 in 2023.
The Bank has in place several agreements that will provide alternative sources of funding, including, but not limited to, lines of credit, sale of investment securities, purchase of federal funds, advances through the Federal Home Loan Bank of Atlanta (“FHLBA”) and correspondents, and brokered certificate of deposit arrangements. Specifically, Additional borrowings may be obtained through the FHLBA.
The Bank has in place several agreements that will provide alternative sources of funding, including, but not limited to, lines of credit, sale of investment securities, purchase of federal funds, advances through the Federal Home Loan Bank of Atlanta (“FHLBA”) and correspondents, and brokered certificate of deposit arrangements.
The Bank had no amounts outstanding on these facilities as of December 31, 2023 and 2022. Off-Balance Sheet Arrangements At December 31, 2023, the Bank had rate lock commitments to originate mortgage loans through its Mortgage Division amounting to approximately $11,562,000.
The Bank had no amounts outstanding on these facilities as of December 31, 2024 and 2023. Off-Balance Sheet Arrangements At December 31, 2024, the Bank had rate lock commitments to originate mortgage loans through its Mortgage Division amounting to approximately $9,303,000.
As part of the Bank’s overall risk management strategy, all of the loans originated and closed by the Mortgage Division are presold to mortgage banking or other financial institutions. The Mortgage Division assumes no credit or interest rate risk on these mortgages. In addition, overall home inventory for sale decreased in our market areas.
As part of the Bank’s overall risk management strategy, all of the loans originated and closed by the Mortgage Division are presold to mortgage banking or other financial institutions. The Mortgage Division assumes no credit or interest rate risk on these mortgages. In addition, overall home inventory in our market areas has remains below historical levels.
Qualifying community banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than 9 percent will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules (generally applicable rule) and, if applicable, will be considered to have met the well-capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act.
Qualifying community banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than 9 percent will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules (generally applicable rule) and, if applicable, will be considered to have met the well-capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act. 56 Table of Contents The Bank’s regulatory capital levels exceed those established for well-capitalized institutions.
The increase was primarily caused by an increase in average time deposits, which pay a higher rate than demand interest bearing and savings deposits, from $134,821,000 for the year ended December 31, 2022 to $183,256,000 for the year ended December 31, 2023.
The increase was primarily caused by an increase in average time deposits, which generally pay a higher rate than demand interest-bearing and savings deposits, from $183,256,000 for the year ended December 31, 2023, to $225,894,000 for the year ended December 31, 2024.
These concessions typically were made for loss mitigation purposes and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Performing TDRs were $431,000 on December 31, 2022.
These concessions typically were made for loss mitigation purposes and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Performing loan modifications were $354,000 and $431,000 on December 31, 2024 and 2023.
Beginning in 2013 we began operating the Mortgage Division with hybrid correspondent relationships that allow the Bank to close loans in its name before an investor purchases the loan.
We operate the Mortgage Division with hybrid correspondent relationships that allow the Bank to close loans in its name before an investor purchases the loan.
The Bank recorded $107,000 in other assets in relation to its interest 57 Table of Contents rate lock commitments at December 31, 2023. The Bank has entered into corresponding commitments with third party investors to sell each of these loans that close. No other obligation exists.
The Bank recorded $42,000 in net other assets in relation to its interest rate lock commitments at December 31, 2024. The Bank has entered into corresponding commitments with third party investors to sell each of these loans that close. No other obligation exists.
Assets under management may fluctuate due to both client action and fluctuations in the equity and debt markets. Despite the potential for fluctuation, we anticipate that PWW will continue to contribute meaningfully to the Company’s consolidated net income.
The investment advisory fees will vary based on the value of assets under management. Assets under management may fluctuate due to both client action and fluctuations in the equity and debt markets. Despite the potential for fluctuation, we anticipate that PWW will continue to contribute meaningfully to the Company’s consolidated net income.
Management expects that the investment needed to upfit the property will be minimal. Although the Bank cannot predict with certainty the financial impact of each new branch, management generally anticipates that each new branch will become profitable within 12 to 18 months of opening.
Although the Bank cannot predict with certainty the financial impact of each new branch, management generally anticipates that each new branch will become profitable within 12 to 18 months of opening.
The following table (along with Note 18 of the consolidated financial statements) shows the minimum capital requirements and the Bank’s capital position as of December 31, 2023 and 2022. 52 Table of Contents Analysis of Capital for Bank of the James (Bank only) (dollars in thousands) December 31, December 31, Analysis of Capital (in 000’s) 2023 2022 Tier 1 capital Common Stock $ 3,742 $ 3,742 Surplus 22,325 22,325 Retained earnings 65,172 57,840 Total Tier 1 capital $ 91,239 $ 83,907 Common Equity Tier 1 Capital (CET1) $ 91,239 $ 83,907 Tier 2 capital Allowance for credit losses $ 7,412 $ 6,259 Total Tier 2 capital: $ 7,412 $ 6,259 Total risk-based capital $ 98,651 $ 90,166 Risk weighted assets $ 737,505 $ 752,515 Average total assets $ 953,757 $ 934,277 Actual Regulatory Benchmarks For Capital For Well December 31, December 31, Adequacy Capitalized 2023 2022 Purposes (1) Purposes Capital Ratios: Tier 1 capital to average total assets 9.57% 8.98% 4.000% 5.000% Common Equity Tier 1 capital 12.37% 11.15% 7.000% 6.500% Tier 1 risk-based capital ratio 12.37% 11.15% 8.500% 8.000% Total risk-based capital ratio 13.38% 11.98% 10.500% 10.000% (1) Includes capital conservation buffer of 2.5%, where applicable.
The following table (along with Note 18 of the consolidated financial statements) shows the minimum capital requirements and the Bank’s capital position as of December 31, 2024 and 2023: Analysis of Capital for Bank of the James (Bank only) (dollars in thousands) December 31, December 31, Analysis of Capital (in 000’s) 2024 2023 Tier 1 capital Common Stock $ 3,742 $ 3,742 Surplus 22,325 22,325 Retained earnings 65,292 65,172 Total Tier 1 capital $ 91,359 $ 91,239 Common Equity Tier 1 Capital (CET1) $ 91,359 $ 91,239 Tier 2 capital Allowance for credit losses $ 7,044 $ 7,412 Total Tier 2 capital: $ 7,044 $ 7,412 Total risk-based capital $ 98,403 $ 98,651 Risk weighted assets $ 766,614 $ 737,505 Average total assets $ 1,010,594 $ 953,757 Actual Regulatory Benchmarks For Capital For Well December 31, December 31, Adequacy Capitalized 2024 2023 Purposes (1) Purposes Capital Ratios: Tier 1 capital to average total assets 9.04% 9.57% 4.000% 5.000% Common Equity Tier 1 capital 11.92% 12.37% 7.000% 6.500% Tier 1 risk-based capital ratio 11.92% 12.37% 8.500% 8.000% Total risk-based capital ratio 12.84% 13.38% 10.500% 10.000% (1) Includes capital conservation buffer of 2.5%, where applicable.
The following table sets forth non-deposit sources of funding: Funding Sources (dollars in thousands) December 31, 2023 Source Capacity Outstanding Available Federal funds purchased lines (unsecured) $ 53,000 $ — $ 53,000 Federal funds purchased lines (secured) 4,597 — 4,597 Borrowings from FHLB Atlanta (1) 239,927 — 239,927 Total $ 297,524 $ — $ 297,524 December 31, 2022 Source Capacity Outstanding Available Federal funds purchased lines (unsecured) $ 33,000 $ — $ 33,000 Federal funds purchased lines (secured) 4,689 — 4,689 Reverse repurchase agreements 5,000 — 5,000 Borrowings from FHLB Atlanta 229,637 — 229,637 Total $ 272,326 $ — $ 272,326 (1) Currently the Bank has in place collateral in the form of 1-4 family residential mortgages and securities in the amount of approximately $ 34,535 ,000, against which $0 was drawn and outstanding on December 31, 2023.
The following table sets forth non-deposit sources of funding: Funding Sources (dollars in thousands) December 31, 2024 Source Capacity Outstanding Available Federal funds purchased lines (unsecured) $ 53,000 $ — $ 53,000 Federal funds purchased lines (secured) 4,950 — 4,950 Borrowings from FHLB Atlanta (1) 242,535 — 242,535 Total $ 300,485 $ — $ 300,485 December 31, 2023 Source Capacity Outstanding Available Federal funds purchased lines (unsecured) $ 53,000 $ — $ 53,000 Federal funds purchased lines (secured) 4,597 — 4,597 Borrowings from FHLB Atlanta (1) 239,927 — 239,927 Total $ 297,524 $ — $ 297,524 (1) Currently the Bank has in place collateral in the form of 1-4 family residential mortgages and securities in the amount of approximately $33,210,000, against which $0 was drawn and outstanding on December 31, 2024.
In response to higher inflation and supply chain issues exacerbated by the war in Ukraine, on March 17, 2022, the FOMC increased the target rate to a range of 0.25% to 0.50%.
In response to higher inflation and supply chain issues exacerbated by the war in Ukraine, the FOMC began increasing the target rate in March 2022, starting with a range of 0.25% to 0.50%.
A summary of the Bank’s commitments is as follows: Contract Amounts (dollars in thousands) at December 31, 2023 2022 Commitments to extend credit $ 173,148 $ 196,218 Standby letters of credit 2,636 3,606 Total $ 175,784 $ 199,824 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
A summary of the Bank’s commitments is as follows: Contract Amounts (dollars in thousands) at December 31, 2024 2023 Commitments to extend credit $ 182,522 $ 173,148 Standby letters of credit 3,507 2,636 Total $ 186,029 $ 175,784 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
We maintain a valuation allowance to the extent that the measure of the impaired loan is less than the recorded investment. TDRs occurred when we agreed to significantly modify the original terms of a loan by granting a concession due to the deterioration in the financial condition of the borrower. TDRs were considered impaired loans.
We maintain a valuation allowance to the extent that the measure of the loan individually evaluated is less than 58 Table of Contents the recorded investment. Loan modifications occurred when we agreed to significantly modify the original terms of a loan by granting a concession due to the deterioration in the financial condition of the borrower.
The following table sets forth selected financial ratios: For the Year Ended December 31, 2023 2022 Return on average equity 17.07% 15.59% Return on average assets 0.92% 0.91% Dividend yield % 2.68% 2.29% Average equity to total average assets 5.36% 5.86% Effect of Economic Trends A variety and wide scope of economic factors affect Financial’s success and earnings.
The following table sets forth select financial ratios: For the Year Ended December 31, 2024 2023 Return on average equity 12.70% 17.07% Return on average assets 0.80% 0.92% Dividend yield % 2.52% 2.68% Average equity to total average assets 6.28% 5.36% Effect of Economic Trends A variety and wide scope of economic factors affect Financial’s success and earnings.
The following table shows the average balances of total interest earning assets and total interest bearing liabilities for the periods indicated, showing the average distribution of assets, liabilities, stockholders’ equity and related revenue, expense and corresponding weighted average yields and rates.
The following table shows the average balances of total interest earning assets and total interest-bearing liabilities for the periods indicated, showing the average distribution of assets, liabilities, stockholders’ equity and related revenue, expense and corresponding weighted average yields and rates. The average balances used in this table and other statistical data were calculated using average daily balances.
The amount allocated during the year to the provision for credit losses represents management’s analysis of the existing loan portfolio and credit risks. Management’s policy is to maintain the allowance for credit losses at a level sufficient to absorb the probable expected losses inherent in the loan portfolio.
The amount allocated during the year to the provision for credit losses represents management’s estimate of expected credit losses in the existing loan portfolio. Management’s policy is to maintain the allowance for credit losses at a level sufficient to absorb all expected losses over the life of the loans.
This decrease was offset in part by a decrease in income tax expense, an increase in wealth management fees to $4,197,000 in 2023 from $3,932,000 in 2022 as well as a decrease in other expenses.
This decrease in net income was also was offset in part by an increase in wealth management fees to $4,843,000 in 2024 from $4,197,000 in 2023, as well as a decrease in other expenses.
We measure impaired loans based on the present value of expected future cash flows discounted at the effective interest rate of the loan or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.
We classified loan modifications as both performing and nonperforming assets. Loans individually evaluated are based on the present value of expected future cash flows discounted at the effective interest rate of the loan or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.
PWW is a Lynchburg, Virginia-based investment advisory firm that had approximately $650 million in assets under management and advisement at the time of the acquisition. PWW operates as a subsidiary of Financial. PWW generates revenue primarily through investment advisory fees. The investment advisory fees will vary based on the value of assets under management.
PWW is a Lynchburg, Virginia-based investment advisory firm that had approximately $650 million in assets under management and advisement at the time of the acquisition. PWW operates as a subsidiary of Financial. As of December 31, 2024, PWW’s asset under management was approximately $853,970,000. PWW generates revenue primarily through investment advisory fees.
On December 31, 2021, Financial completed its acquisition of Pettyjohn, Wood & White, Inc. (“PWW”), a 49 Table of Contents Lynchburg, Virginia-based investment advisory firm with approximately $650 million in assets under management and advisement at the time of the acquisition. PWW operates as a subsidiary of Financial.
On December 31, 2021, Financial completed its acquisition of Pettyjohn, Wood & White, Inc. (“PWW”), a Lynchburg, Virginia-based investment advisory firm with approximately $650 million in assets under management and advisement at the time of the acquisition. PWW operates as a subsidiary of Financial. The acquisition date fair value of consideration transferred totaled $10.5 million, which was paid in cash.
Additional collateral would be required to be pledged in order for the full $297,524,000 to be available. At the end of 2023, approximately 28.07%, or $171,016,000 of the loan portfolio could mature or could reprice within a one-year period. At December 31, 2023, non-deposit sources of available funds totaled $297,524,000, which included $239,927,000 available from the FHLBA.
Additional collateral would be required to be pledged in order for the full $300,485,000 to be available. At the end of 2024, approximately 31.17%, or $200,583,000 of the loan portfolio could mature or could reprice within a one-year period. At December 31, 2024, non-deposit sources of available funds totaled $300,485,000, which included $242,535,000 available from the FHLBA.
Although numerous factors could influence the Bank’s expansion plans, the following discussion provides a general overview of the real property the Bank is holding for potential branch expansion. Real property located at 19792 Main Street, Buchanan, Virginia. On August 7, 2023, the Bank purchased real property located at 19792 Main Street, Buchanan, Virginia.
Although numerous factors could influence the Bank’s expansion plans, the following discussion provides a general overview of the real property the Bank is holding for potential branch expansion. Real Property located at 2935 Rockfish Valley Highway, Nellysford, Virginia. On September 18, 2023, the Bank purchased real property located at 2935 Rockfish Valley Highway, Nellysford, Virginia.
The return on average assets for the year ended December 31, 2023 was 0.92% compared to 0.91% in 2022 primarily due to a decrease in average assets, which was offset by a decrease in net income.
The return on average assets for the year ended December 31, 2024, was 0.80% compared to 0.92% in 2023, primarily due to a decrease in net income and an increase in average assets.
The net interest margin increased to 3.29% in 2023 from 3.23% in 2022. The average rate on earning assets increased 90 basis points from 3.46% in 2022 to 4.36% in 2023 and the average rate on interest-bearing deposits increased from 0.18% in 2022 to 1.23% in 2023.
The net interest margin decreased to 3.11% in 2024 from 3.29% in 2023. The average rate on earning assets increased 39 basis points from 4.36% in 2023 to 4.75 % in 2024, and the average rate on interest-bearing deposits increased from 1.23% in 2023 to 1.92 % in 2024.
The rates charged on loans and received on investments grew faster than rates paid on deposits, which was the primary driver in the increase of our net interest income. Our interest expense increased over 348% from $2,150,000 in 2022 to $9,622,000 in 2023.
The rates charged on loans and received on investments grew more slowly than rates paid on deposits, which was the primary driver in the decrease of our net interest income. Our interest expense increased over 60.12% , from $9,622,000 in 2023 to $15,407,000 in 2024.
Because of Financial’s asset interest rate sensitivity, we anticipate that a gradual decrease in interest rates generally would have a negative impact on our results of operations.
Because of Financial’s asset 41 Table of Contents interest rate sensitivity, we anticipate that a decrease in interest rates likely would have a negative impact on our results of operations while an increase likely would have a positive impact on our results of operations.
The liquidity of Financial depends primarily on Financial’s current assets, available credit, and the dividends paid to it by the Bank and PWW. Payment of cash dividends by the Bank is limited by regulations of the Federal Reserve Board and is tied to the regulatory capital requirements. Management believes that Financial has sufficient liquidity to meet its current obligations.
Payment of cash dividends by the Bank is limited by regulations of the Federal Reserve Board and is tied to the regulatory capital requirements. Management believes that Financial has sufficient liquidity to meet its current obligations. See “ Capital Resources, ” below.
OREO is the value of real property acquired by the Bank following default by the borrower. During the twelve months ended December 31, 2023 the Bank disposed of two (2) OREO properties and did not acquire any OREO properties. As of December 31, 2023 the Bank was carrying no OREO properties.
We also classify other real estate owned (OREO) as a nonperforming asset. OREO is the value of real property acquired by the Bank following default by the borrower. During the twelve months ended December 31, 2024 the Bank disposed of two (2) OREO properties and did not acquire any OREO properties.
ANALYSIS OF FINANCIAL CONDITION As of December 31, 2023 and December 31, 2022 General Our total assets were $969,371,000 at December 31, 2023 , an increase of $40,800,000 or 4.39% from $928,571,000 at December 31, 2022 , primarily due to increases in federal funds sold and securities available for sale and partially offset by decreases in cash and due from banks and loans, net of allowance for credit losses.
ANALYSIS OF FINANCIAL CONDITION As of December 31, 2024 and December 31, 2023 General Our total assets were $979,244,000 at December 31, 2024, an increase of $9,873,000 or 1.02% from $969,371,000 at December 31, 2023, primarily due to increases in loans, net of allowance for credit losses and loans held for sale and partially offset by decreases in securities available-for-sale.
Both the amount of the provision and the level of the allowance for credit losses are impacted by many factors, including general economic conditions, actual and expected credit losses, loan performance measures, historical trends and specific conditions of the individual borrower. In performing its credit loss analysis, the Bank assigns a risk rating to each loan in the Bank’s portfolio.
Both the amount of the provision and the level of the allowance for credit losses are influenced by numerous factors, including current and forecasted economic conditions, historical credit loss experience, loan performance metrics, borrower-specific conditions, and other relevant qualitative considerations. In performing its credit loss analysis, the Bank assigns a risk rating to each loan in the Bank’s portfolio.
OREO Changes (dollars in thousands) Year Ended December 31, 2023 2022 Balance at the beginning of the year (net) $ 566 $ 761 Transfers from Loans — — Capitalized costs — — Valuation Adjustment (23) (195) Sales proceeds (540) — Loss on sales (3) — Balance at the end of the year (net) $ — $ 566 Non-accrual loans plus OREO decreased to $391,000 on December 31, 2023 from $1,199,000 on December 31, 2022, a decrease of 67.39%.
The following table represents the changes in OREO balance in 2024 and 2023: OREO Changes (dollars in thousands) Year Ended December 31, 2024 2023 Balance at the beginning of the year (net) $ — $ 566 Transfers from Loans — — Capitalized costs — — Valuation Adjustment — (23) Sales proceeds — (540) Loss on sales — (3) Balance at the end of the year (net) $ — $ — Non-accrual loans plus OREO increased to $1,640,000 on December 31, 2024 from $391,000 on December 31, 2023, an increase of 319.44%.
The Bank attempts to work with borrowers on a case-by-case basis to attempt to protect the Bank’s interests. However, despite our commitment, a reduction of non-accrual loans can be dependent on a number of factors, including an increase in unemployment, adverse housing market conditions, and overall economic conditions at the local, regional and national levels.
However, despite our commitment, a reduction of non-accrual loans can be dependent on a number of factors, including an increase in unemployment, adverse housing market conditions, and overall economic conditions at the local, regional, and national levels. See “ Asset Quality ” below.
As discussed in more detail below, For the year ended December 31, 2023, Financial had net income of $8,704,000, a decrease of $255,000 from net income of $8,959,000, for the year ended December 31, 2022; For the year ended December 31, 2023, earnings per basic and diluted common share were $1.91, as compared to earnings of $1.91 per basic and diluted common share for the year ended December 31, 2022; 36 Table of Contents Net interest income increased to $29,740,000 for the current year from $29,703,000 for the year ended December 31, 2022; Noninterest income (exclusive of net gains on sales and calls of securities) decreased to $12,867,000 for the year ended December 31, 2023 from $13,247,000 for the year ended December 31, 2022; Total assets as of December 31, 2023 were $969,371,000 compared to $928,571,000 at the end of 2022, an increase of $40,800,000 or 4.39%; Net loans (excluding loans held for sale), net of unearned income and the allowance for credit losses, decreased to $601,921, 000 as of December 31, 2023 from $605,366,000 as of the end of December 31, 2022, a decrease of 0.57%; and The net interest margin increased 6 basis points to 3.29% for 2023, compared to 3.23% for 2022.
As discussed in more detail below, For the year ended December 31, 2024, Financial had net income of $7,944,000, a decrease of $760,000 from net income of $8,704,000 for the year ended December 31, 2023. For the year ended December 31, 2024, earnings per basic and diluted common share were $1.75, as compared to earnings of $1.91 per basic and diluted common share for the year ended December 31, 2023. Net interest income decreased to $29,236,000 for the current year from $29,740,000 for the year ended December 31, 2023. Noninterest income (exclusive of net gains on sales and calls of securities) increased to $15,075,000 for the year ended December 31, 2024, from $12,867,000 for the year ended December 31, 2023. Total assets as of December 31, 2024, were $979,244,000 compared to $969,371,000 at the end of 2023, an increase of $9,873,000 or 1.02%. Net loans (excluding loans held for sale), net of unearned income and the allowance for credit losses, increased to $636,552,000 as of December 31, 2024 from $601,921,000 as of December 31, 2023. 38 Table of Contents The net interest margin decreased by 18 basis point to 3.11% for 2024, compared to 3.29% for 2023.
The average balance of interest bearing liabilities decreased 1.09% from $746,479,000 for the year ended December 31, 2022 to $738,335,000 for the year ended December 31, 2023. The average interest rate paid on interest bearing liabilities increased by 101 basis points to 1.30% in 2023 from 0.29% in 2022.
The average balance of interest-bearing liabilities increased 6.05% , from $738,335,000 for the year ended December 31, 2023, to $783,003,000 for the year ended December 31, 2024. The average interest rate paid on interest-bearing liabilities increased by 67 basis points to 1.97% in 2024 from 1.30% in 2023.
On June 7, 2012, the Federal Reserve issued a series of proposed rules that would revise and strengthen its risk-based and leverage capital requirements and its method for calculating risk-weighted assets.
On June 7, 2012, the Federal Reserve issued a series of proposed rules that would revise and strengthen its risk-based and leverage capital requirements and its method for calculating risk-weighted assets. The rules were proposed to implement the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.
The building currently serves as the offices for Financial’s wholly-owned subsidiary, PWW. PWW is currently leasing the space from the Bank on a month-to-month basis. While the Bank currently does not have a timeline for a branch at this location, the space is attractive for a branch due to its close proximity to Centra’s Lynchburg General Hospital.
PWW is currently leasing the space from the Bank on a month-to-month basis. While the Bank currently does not have a timeline for a branch at this location, the space is attractive for a branch due to its close proximity to Centra’s Lynchburg General Hospital. Management expects that the investment needed to upfit the property will be minimal.
Investment Securities The investment securities portfolio of the Bank is used as a source of income and liquidity. ‎ 46 Table of Contents The following table summarizes the fair value of the Bank’s securities portfolio for the periods indicated: Securities Portfolio (dollars in thousands) December 31, 2023 2022 Held-to-maturity U.S. agency obligations $ 3,231 $ 3,135 Available-for-sale U.S. treasuries $ 4,947 $ 4,741 U.S. agency obligations 60,955 59,273 Mortgage - backed securities 95,079 67,842 Municipals 40,789 37,855 Corporates 14,740 16,076 Total available-for-sale $ 216,510 $ 185,787 Deposited funds are generally invested in overnight vehicles, including federal funds sold, until approved loans are funded.
The following table summarizes the fair value of the Bank’s securities portfolio for the periods indicated: Securities Portfolio (dollars in thousands) December 31, 2024 2023 Held-to-maturity U.S. agency obligations $ 3,170 $ 3,231 Available-for-sale U.S. treasuries $ — $ 4,947 U.S. agency obligations 73,060 60,955 Mortgage - backed securities 58,973 95,079 Municipals 41,561 40,789 Corporates 14,322 14,740 Total available-for-sale $ 187,916 $ 216,510 Deposited funds are generally invested in overnight vehicles, including federal funds sold, until approved loans are funded.
Agency Fair value $ — $ 35,838 $ 23,291 $ 1,826 $ 60,955 Weighted average yield 1.50% 1.55% 2.09% Mortgage Backed Securities Fair value $ — $ 643 $ 11,014 $ 83,422 $ 95,079 Weighted average yield 1.67% 1.91% 3.53% Municipals Fair value $ 486 $ 3,147 $ 10,510 $ 26,646 $ 40,789 Weighted average yield 1.50% 2.04% 2.02% 2.60% Corporates Fair value $ — $ 4,228 $ 10,512 $ — $ 14,740 Weighted average yield 2.62% 3.85% Total portfolio Fair value $ 5,433 $ 43,856 $ 57,526 $ 112,926 $ 219,741 Weighted average yield 1.71% 1.65% 2.14% 3.11% 48 Table of Contents Securities Portfolio Maturity Distribution / Yield Analysis (dollars in thousands) At December 31, 2022 Less than ‎ One Year One to ‎ Five Years Five to ‎ Ten Years Greater than ‎ Ten Years Total Held-to-maturity U.S.
Agency Fair value $ — $ 35,838 $ 23,291 $ 1,826 $ 60,955 Weighted average yield 1.50% 1.55% 2.09% Mortgage Backed Securities Fair value $ — $ 643 $ 11,014 $ 83,422 $ 95,079 Weighted average yield 1.67% 1.91% 3.53% Municipals Fair value $ 486 $ 3,147 $ 10,510 $ 26,646 $ 40,789 Weighted average yield 1.50% 2.04% 2.02% 2.60% Corporates Fair value $ — $ 4,228 $ 10,512 $ — $ 14,740 Weighted average yield 2.62% 3.85% Total portfolio Fair value $ 5,433 $ 43,856 $ 57,526 $ 112,926 $ 219,741 Weighted average yield 1.71% 1.65% 2.14% 3.11% Cash surrender value of bank-owned life insurance The Company has funded bank-owned life insurance (BOLI) for certain of its officers.
No non-recurring adjustments were made to the calculation of the efficiency ratio. ‎ 43 Table of Contents Income Tax Expense For the year ended December 31, 2023 , Financial had federal income tax expense of $1,575,000 as compared to a federal income tax expense of $2,151,000, in 2022, which equates to effective tax rates of 15.32% and 19.36%, respectively.
Income Tax Expense For the year ended December 31, 2024, Financial had federal income tax expense of $1,979,000 as compared to a federal income tax expense of $1,575,000 in 2023, which equates to effective tax rates of 19.94 % and 15.32%, respectively.
The Bank has comprehensive policies and procedures which cover both commercial and consumer loan origination and management of credit risk. Loans are underwritten in a manner that focuses on the borrower’s ability to repay. Management’s goal is not to avoid risk, but to manage it and to include credit risk as part of the pricing decision for each product.
The Bank has comprehensive policies and procedures which cover both commercial and consumer loan origination and management of credit risk. Loans are underwritten in a manner that focuses on the borrower’s ability to repay through cash flow.
These loans were included in the nonperforming loan totals listed below. ‎ 55 Table of Contents The following table shows the balance and percentage of the Bank’s allowance for credit losses allocated to each major category of loans: Allocation of Allowance for Credit Losses (dollars in thousands) At December 31, 2023 2022 Amount Percent of Loans to Total Loans Amount Percent of Loans to Total Loans Commercial $ 514 10.72% $ 1,102 15.68% Commercial real estate 3,985 53.97% 2,902 57.88% Consumer 1,093 12.56% 904 16.02% Residential 1,820 22.76% 1,351 10.42% Total $ 7,412 100.00% $ 6,259 100.00% The following table provides information on the Bank’s nonperforming assets as of the dates indicated: Nonperforming Assets (dollars in thousands) At December 31, 2023 2022 Non-accrual loans Commercial $ — $ — Commercial Real Estate 391 518 Consumer — 20 Residential — 95 Total non-accrual loans $ 391 $ 633 Foreclosed Properties Commercial — — Commercial Real Estate — 500 Consumer — — Residential — 66 Total foreclosed properties $ — $ 566 Repossessed Assets — — Total Nonperforming assets $ 391 $ 1,199 Total nonperforming loans as a percentage of total loans 0.06% 0.10% Total nonperforming loans as a percentage of total assets 0.04% 0.07% Allowance for credit losses on loans as a percentage of nonperforming loans 1894.56% 989.42% Allowance for credit losses on loans as a percentage of period end loans 1.22% 1.02% Total non-accrual loans as a percentage of total loans 0.06% 0.10% Allowance for credit losses on loans as a percentage of non-accrual loans 1894.56% 989.42% The allowance for credit losses as a percentage of non-accrual loans increased from 2022 to 2023 due to the sharp decrease in non-accrual loans for the same periods.
These loans were included in the nonperforming loan totals listed below. ‎ 59 Table of Contents The following table shows the balance and percentage of the Bank’s allowance for credit losses allocated to each major category of loans: Allocation of Allowance for Credit Losses (dollars in thousands) At December 31, 2024 2023 Amount Percent of Loans to Total Loans Amount Percent of Loans to Total Loans Commercial $ 686 10.72% $ 514 10.72% Commercial real estate 3,719 53.97% 3,985 53.97% Consumer 842 12.56% 1,093 12.56% Residential 1,797 22.76% 1,820 22.76% Total $ 7,044 100.00% $ 7,412 100.00% The following table provides information on the Bank’s nonperforming assets as of the dates indicated: Nonperforming Assets (dollars in thousands) At December 31, 2024 2023 Nonaccrual loans Commercial $ 472 $ — Commercial Real Estate 397 391 Consumer 192 — Residential 579 — Total nonaccrual loans $ 1,640 $ 391 Foreclosed Properties Commercial — — Commercial Real Estate — — Consumer — — Residential — — Total foreclosed properties $ — $ — Repossessed Assets — — Total Nonperforming assets $ 1,640 $ 391 Total nonperforming loans as a percentage of total loans 0.25% 0.06% Total nonperforming loans as a percentage of total assets 0.17% 0.04% Allowance for credit losses on loans as a percentage of nonperforming loans 429.43% 1894.56% Allowance for credit losses on loans as a percentage of period end loans 1.09% 1.22% Total nonaccrual loans as a percentage of total loans 0.25% 0.06% Allowance for credit losses on loans as a percentage of nonaccrual loans 429.43% 1894.56% The allowance for credit losses as a percentage of non-accrual loans decreased from 2023 to 2024 due to a increase in non-accrual loans during 2024.
For the year ended December 31, 2022, its first year of operations as a subsidiary of Financial, PWW had fee income of $3,932,000. PWW’s fee income increased to $4,197,000 for the year ended December 31, 2023. For the year ended December 31, 2023 and 2022 , PWW accounted for 8.04% and 8.72% of Financial’s total revenue, respectively.
For the year ended December 31, 2023, its second year of operations as a subsidiary of Financial, PWW had fee income of $4,197,000. PWW’s fee income increased to $4,843,000 for the year ended December 31, 2024.
The NBB Note bears interest at the rate of 4.00%, and is being amortized over a fifteen year period with a balloon payment of approximately $9,375,000 due on December 31, 2024. The note is secured by a first priority lien on approximately 4.95% of the Bank’s common stock.
The note is being amortized over a 15-year period from the original date, with a balloon payment of approximately $8,104,000 on December 31, 2026. The note is secured by a first priority lien on approximately 4.95% of the Bank’s common stock.
The Company is the owner and sole beneficiary of the BOLI policies. As of December 31, 2023, the BOLI had a cash surrender value of $21,586,000 an increase of $2,349,000 from the cash surrender value of $19,237,000, as of December 31, 2022.
The Company is the owner and sole beneficiary of the BOLI policies. As of December 31, 2024, the BOLI had a cash surrender value of $22,907,000, an increase of $1,321,000 from the cash surrender value of $21,586,000, as of December 31, 2023. The Company purchased additional BOLI in 2024 and 2023 in the amounts of $600,000 and $1,800,000, respectively.
Securities held-to-maturity at amortized cost decreased slightly from $3,639,000 as of December 31, 2022 to $3,622,000 as of December 31, 2023 . This decrease resulted from the amortization of premiums within the held-to-maturity portfolio.
Securities held-to-maturity at amortized cost decreased slightly from $3,622,000 at December 31, 2023, to $3,606,000 at December 31, 2024, due to normal amortization of premiums.
Because total assets on a consolidated basis are less than $3 billion, Financial is not subject to the consolidated capital requirements imposed by the Bank Holding Company Act. Consequently, Financial does not calculate its financial ratios on a consolidated basis.
The capital ratios set forth in the above tables state the capital position and analysis for the Bank only. Because total assets on a consolidated basis are less than $3 billion, Financial is not subject to the consolidated capital 57 Table of Contents requirements imposed by the Bank Holding Company Act.
Volume and Rate (dollars in thousands) Years Ending December 31, 2023 2022 Change in Change in Volume Rate Income/ Volume Rate Income/ Effect Effect Expense Effect Effect Expense Loans $ 474 $ 4,729 $ 5,203 $ 69 $ (423) $ (354) Federal funds sold (148) 1,889 1,741 (24) 638 614 Interest-bearing deposits (52) 266 214 (1) 250 249 Securities 71 264 335 1,946 223 2,169 Restricted stock 4 12 16 (2) 1 (1) Total earning assets 349 7,160 7,509 1,988 689 2,677 Liabilities: Demand interest bearing (47) 1,888 1,841 34 — 34 Savings (5) 593 588 30 (73) (43) Time deposits 349 4,715 5,064 (67) (306) (373) FHLB borrowings — 31 31 — — — Capital notes — — — — — — Financing leases (10) — (10) (10) — (10) Other borrowings (22) (20) (42) — — — Total interest-bearing liabilities $ 265 $ 7,207 $ 7,472 $ (13) $ (379) $ (392) Change in net interest income $ 84 $ (47) $ 37 $ 2,001 $ 1,068 $ 3,069 Noninterest Income of Financial Noninterest income has been and will continue to be an important factor for increasing our profitability.
The following table shows the direct causes of the year-to-year changes in components of net interest income on a taxable equivalent basis: Volume and Rate (dollars in thousands) Years Ending December 31, 2024 2023 Change in Change in Volume Rate Income/ Volume Rate Income/ Effect Effect Expense Effect Effect Expense Loans $ 383 $ 2,744 $ 3,127 $ 474 $ 4,729 $ 5,203 Federal funds sold 1,148 19 1,167 (148) 1,889 1,741 Interest-bearing deposits 14 265 279 (52) 266 214 Securities 146 549 695 71 264 335 Restricted stock 9 4 13 4 12 16 Total earning assets 1,700 3,581 5,281 349 7,160 7,509 Liabilities: Demand interest bearing (49) 1,317 1,268 (47) 1,888 1,841 Savings 74 1,129 1,203 (5) 593 588 Time deposits 1,519 1,860 3,379 349 4,715 5,064 FHLB borrowings (16) (16) (32) — 31 31 Capital notes — — — — — — Financing leases (10) — (10) (10) — (10) Other borrowings (23) — (23) (22) (20) (42) Total interest-bearing liabilities $ 1,495 $ 4,290 $ 5,785 $ 265 $ 7,207 $ 7,472 Change in net interest income $ 205 $ (709) $ (504) $ 84 $ (47) $ 37 Noninterest Income of Financial Noninterest income has been and will continue to be an important factor for increasing our profitability.
RESULTS OF OPERATIONS Year Ended December 31, 2023 compared to year ended December 31, 2022 Net Income The net income for Financial for the year ended December 31, 2023 was $8,704,000 or $1.91 per basic and diluted share compared with net income of $8,959,000 or $1.91 per basic and diluted share for the year ended December 38 Table of Contents 31, 2022 .
Goodwill is the only intangible asset with an indefinite life reflected on our consolidated balance sheet. ‎ 40 Table of Contents RESULTS OF OPERATIONS Year Ended December 31, 2024 compared to year ended December 31, 2023 Net Income The net income for Financial for the year ended December 31, 2024, was $7,944,000 or $1.75 per basic and diluted share compared with net income of $8,704,000 or $1.91 per basic and diluted share for the year ended December 31, 2023.
The balance of the NBB Note is presented on the December 31, 2023 consolidated balance sheet under “other borrowings” and is net of unamortized issuance costs. A portion of the proceeds were used to purchase 100% of the capital stock of PWW. On June 30, 2022, NBB agreed to modify the terms of the NBB Note effective July 1, 2022.
The balance of the NBB Note is presented on the December 31, 2024 and 2023 consolidated balance sheets under “other borrowings” and is net of unamortized issuance costs. A portion of the proceeds were used to purchase 100% of the capital stock of PWW. Financial uses borrowing in conjunction with deposits to fund lending and investing activities.
Other Borrowings On April 13, 2020, the Company commenced a private placement of unregistered debt securities (the “2020 Offering”). In the 2020 Offering, the Company sold and closed $10,050,000 in principal of notes (the “2020 Notes”) during the 2 nd and 3 rd quarters of 2020. The 2020 Offering officially ended on July 8, 2020.
Other Borrowings On April 13, 2020 the Company commenced a private placement of unregistered debt securities (the “2020 Offering”). In the 2020 Offering, the Company issued $10,050,000 in principal of notes (the “2020 Notes”) during the second and third quarters of 2020. The 2020 Notes bear interest at the rate of 3.25% per year with interest payable quarterly in arrears.
In a continued effort to bring the rate of inflation in line with Federal Reserve’s target of 2.0%, on March 22, 2023, May 3, 2023 and July 26, 2023, the FOMC raised the target rate by 25 basis points, bringing the target rate to 5.25% to 5.50%.
Continuing its efforts to bring inflation in line with the Federal Reserve’s 2.0% target, the FOMC implemented three additional 25 basis point increases in March, May, and July 2023, bringing the target rate to 5.25% to 5.50%.
The Bank’s loan portfolio consists of commercial short-term lines of credit, term loans, mortgage financing and construction loans that are used by the borrower to build or develop real estate properties, and consumer loans. The consumer portfolio includes residential real estate mortgages, home equity lines and installment loans.
Management’s goal is not to avoid risk, but to manage it and to include credit risk as part of the pricing decision for each product. The Bank’s loan portfolio consists of commercial short-term lines of credit, term loans, mortgage financing and construction loans that are used by the borrower to build or develop real estate properties, and consumer loans.
Because of the uncertainty surrounding current and near-term economic conditions, management cannot predict future mortgage rates.
Mortgage contributed $827,000 and $452,000 to Financial’s pre-tax net income in 2024 and 2023, respectively. Because of the uncertainty surrounding current and near-term economic conditions, management cannot predict future mortgage rates.

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