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What changed in BANK OF THE JAMES FINANCIAL GROUP INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of BANK OF THE JAMES FINANCIAL GROUP INC's 2024 and 2025 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 2025 report.

+439 added−480 removedSource: 10-K (2026-03-27) vs 10-K (2025-03-26)

Top changes in BANK OF THE JAMES FINANCIAL GROUP INC's 2025 10-K

439 paragraphs added · 480 removed · 305 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

43 edited+26 added−18 removed114 unchanged
Biggest changeThe 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.
Biggest changeThe 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 7 Table of Contents 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.
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.
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. 9 Table of Contents 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.
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.
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 help ensure rapid recovery, resumption and maintenance of the institution’s operations after a cyberattack.
Incentive Compensation In June 2010, the Federal Reserve, the Office of the Comptroller of the Currency (“OCC”) and the FDIC issued comprehensive final guidance on incentive compensation intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
Incentive Compensation In June 2010, the Federal Reserve, the Office of the Comptroller of the Currency (“OCC”) and the FDIC issued comprehensive final guidance on incentive compensation intended to help ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
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.
The Basel III capital rules modified asset risk-weightings to better reflect actual credit and market risks, including: 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.
General . As a state-chartered commercial bank, the Bank and its subsidiaries are subject to regulation, supervision and examination by the Federal Reserve and the Virginia State Corporation Commission’s Bureau of Financial Institutions (the “BFI”).
As a state-chartered commercial bank, the Bank and its subsidiaries are subject to regulation, supervision and examination by the Federal Reserve and the Virginia State Corporation Commission’s Bureau of Financial Institutions (the “BFI”).
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.
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, 2025, the Bank was considered “well-capitalized.” Regulatory Enforcement Authority . Applicable banking laws include substantial enforcement powers available to federal banking regulators.
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.
Although eligible, as of December 31, 2025, 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.
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. Management believes that there is acceptable risk associated with this arrangement. Investment Advisory Services .
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. Management believes the risk associated with this arrangement is acceptable. Investment Advisory Services .
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”).
The location of and services provided by each of our facilities are 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”).
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.
As of December 31, 2025, 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.
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 8 Table of Contents quality and overall financial condition.
No regulatory approval will be required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board.
No regulatory approval will be required for a financial holding company to acquire a company, other than a bank or savings as sociation, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board.
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.
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, or the Office of the Comptroller of the Currency or the Office – evaluate an institution’s 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.
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.
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.
While it maintains the majority of the regulatory structure established by the Dodd-Frank Act, the Regulatory Relief Act amends certain aspects for small depository institutions with less than $10 billion in assets, such as the Bank.
While it maintains the majority of the regulatory 10 Table of Contents structure established by the Dodd-Frank Act, the Regulatory Relief Act amends certain aspects for small depository institutions with less than $10 billion in assets, such as the Bank.
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.
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.
If we fail to meet the expectations set forth in such regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties. In November 2021, the federal bank regulatory agencies issued a final rule to improve the sharing of information about cyber incidents that may affect the U.S. banking system.
If we fail to meet the expectations set forth in such regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties. 14 Table of Contents In November 2021, the federal bank regulatory agencies issued a final rule to improve the sharing of information about cyber incidents that may affect the U.S. banking system.
A bank holding company may become a financial holding company by filing a declaration that the bank holding company wishes to become a financial holding company if each of its subsidiary banks (i) is well-capitalized under regulatory prompt corrective action provisions, (ii) is well managed, and (iii) has at least a satisfactory rating under the Community Reinvestment Act (“CRA”).
A bank holding company may become a financial holding company by filing a declaration that the bank holding company wishes to become a financial holding company if each of its subsidiary banks (i) is well-capitalized under regulatory prompt corrective action provisions, (ii) is well managed, and (iii) has at least a satisfactory rating under the Community Reinvest ment Act (“CRA”).
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.
The Bank, BOTJ Insurance, BOTJ Investment Group, Inc. (a non-operating subsidiary), and PWW are Financial’s 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 offices.
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 its market area.
The Bank may be prohibited under Virginia law from the payment of dividends if the Virginia Bureau of Financial Institutions determines that a limitation of dividends is in the public interest and is necessary to ensure the Bank’s financial soundness, and may also permit the payment of dividends not otherwise allowed by Virginia law.
The Bank may be prohibited under Virginia law from the payment of dividends if the Virginia Bureau of Financial Institutions determines that a limitation of dividends is in the public interest and is intended to help ensure the Bank’s financial soundness, and may also permit the payment of dividends not otherwise allowed by Virginia law.
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%.
Under the revised PCA rules, the Bank must maintain the following ratios to be considered “well 12 Table of Contents 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%.
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.
Since 2013, we have operated the Mortgage Division using non-delegated correspondent relationships that allow the Bank to close loans in its name before an investor purchases the loan.
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 .
Financial also 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 the Company’s financial performance and are not considered principal activities.
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.
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.
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.
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).
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 Bank incurred $518,000 and $441,000 in FDIC assessments in 2025 and 2024, respectively. Future increases in FDIC insurance premiums may negatively impact the Bank’s profitability.
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.
Total loans to all insiders collectively must not exceed the Bank’s unimpaired capital and surplus. 13 Table of Contents 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.
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.
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.
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.
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.
These laws prohibit discrimination, require the disclosure of certain basic information to mortgagors concerning credit and settlement costs, limit payment for settlement services to the reasonable value of the services rendered and require the maintenance and disclosure of information regarding the disposition of mortgage applications based on race, gender, geographical distribution and income level. ‎ 15 Table of Contents Effect of Governmental Monetary Policies Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies.
These laws prohibit discrimination, require the disclosure of certain basic information to mortgagors concerning credit and settlement costs, limit payment for settlement services to the reasonable value of the services rendered and require the maintenance and disclosure of 15 Table of Contents information regarding the disposition of mortgage applications based on race, gender, geographical distribution and income level.
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.
To date, the operating results of BOTJ Insurance have not materially impacted our financial performance. Employees As of March 25, 2026, we had approximately 175 employees, 162 of which are full-time and 13 of which are part-time.
According to publicly available information, the current populations of the localities in the Region 2000 market area were approximately as follows: City of Lynchburg – 82,000; Amherst County – 32,000; Appomattox County – 15,000; Bedford County (including the Town of Bedford) – 79,000; Campbell County (including the Town of Altavista) – 55,000.
The total population of the Region 2000 market area is approximately 267,000. Based on publicly available information, population estimates for the principal localities are approximately as follows: City of Lynchburg – 82,000; Amherst County – 32,000; Appomattox County – 15,000; Bedford County (including the Town of Bedford) – 79,000; and Campbell County (including the Town of Altavista) – 55,000.
The regulations of these various agencies govern most aspects of the Bank’s business, including required reserves against deposits, loans, investments, mergers and acquisitions, borrowings, dividends and location and number of branch offices. The laws and regulations governing the Bank generally have been promulgated to protect depositors and the deposit insurance funds, and not for the purpose of protecting shareholders.
The regulations of these various agencies govern most aspects of the Bank’s business, including required reserves against deposits, loans, investments, mergers and acquisitions, borrowings, dividends and location and number of branch offices.
The Bank was organized to engage in general retail and commercial banking business. The Bank’s principal office is located at 828 Main Street, Lynchburg, Virginia 24504 and its telephone number is (434) 846-2000. The Bank also maintains a website at www.bankofthejames.bank.
It was incorporated under the laws of the Commonwealth of Virginia as a state-chartered bank in 1998 and began banking operations in July 1999. The Bank engages in general retail and commercial banking activities. The Bank’s principal office is located at 828 Main Street, Lynchburg, Virginia 24504, and its telephone number is (434) 846-2000. The Bank’s website is www.bankofthejames.bank.
Item 1. Busine ss General Bank of the James Financial Group, Inc. (“Financial” or the “Company”) is a bank holding company with its headquarters in Lynchburg, Virginia. Financial was incorporated at the direction of Bank of the James (the “Bank” or “Bank of the James”) on October 3, 2003 to serve as a bank holding company of the Bank.
Item 1. Busine ss General Bank of the James Financial Group, Inc. (“Financial” or the “Company”) is a bank holding company headquartered in Lynchburg, Virginia.
Financial acquired all of the shares of the Bank in a statutory share exchange on a one-for-one basis on January 1, 2004. The Bank is a Virginia banking corporation headquartered in Lynchburg, Virginia. The Bank was incorporated under the laws of the Commonwealth of Virginia as a state-chartered bank in 1998 and began banking operations in July 1999.
Financial was incorporated on October 3, 2003 to serve as the bank holding company for Bank of the James (the “Bank” or “Bank of the James”) and acquired all of the outstanding shares of the Bank in a statutory share exchange on a one-for-one basis effective January 1, 2004. The Bank is a Virginia banking corporation headquartered in Lynchburg, Virginia.
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.
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 insiders. 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.
We maintain employee benefit programs that include health insurance, a health savings account, a 401(k) plan, and an employee stock purchase plan.
We maintain employee benefit programs that include health insurance, a health savings account, a 401(k) plan, and an employee stock purchase plan. Location and Market Area The Bank’s primary market area consists of Region 2000, which encompasses the Town of Altavista, Amherst County, Appomattox County, the Town of Bedford, Bedford County, Campbell County, and the City of Lynchburg.
The area is serviced by one daily newspaper and a number of radio and television stations providing diverse media outlets. Median family income in Region 2000 has risen over the past ten years. Region 2000 has a broad range of services, light industry, and manufacturing plants. Principal service, industrial, research and development employers include: BWX Technologies, Inc.
The area is served by one daily newspaper and multiple radio and television stations. Median family income in Region 2000 has increased over the past decade. Region 2000 includes a mix of service providers, light industry, and manufacturing operations.
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.
Region 2000 supports a diverse regional economy. The Bank’s market area is served by major transportation corridors, including U.S. Routes 29, 60, 221, 460, and 501, as well as Virginia State Routes 24 and 40, providing access to other regions of the Commonwealth. Regional airport and rail services provide additional transportation options.
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 recent years, the Bank has expanded beyond Region 2000 into additional markets, including Charlottesville, Roanoke, Harrisonburg, Lexington, Buchanan, Nellysford, Blacksburg, Appomattox, and Rustburg. Notwithstanding this expansion, the Bank continues to consider Region 2000 to be its primary market area.
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Location and Market Area The Bank’s market area primarily consists of Region 2000, which encompasses the seven jurisdictions of the Town of Altavista, Amherst County, Appomattox County, the Town of Bedford, Bedford County, Campbell County, and the City of Lynchburg. Region 2000 supports a diverse, well-rounded economy. U.S.
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Of these, 8 full-time and 2 part-time employees are employed by Pettyjohn, Wood & White, Inc., and 149 full-time and 11 part-time employees are employed by the Bank. None of our employees are represented by any collective bargaining agreements, and relations with employees are considered excellent.
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(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.
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Principal employers include BWX Technologies, Inc.; Framatome; Centra Health, Inc.; Southern Air, Inc.; Shentel; Frito-Lay, Inc.; 6 Table of Contents and U.S. Pipe, as well as several institutions of higher education, including Randolph College, Sweet Briar College, Liberty University, and the University of Lynchburg.
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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.
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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.
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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.
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The laws and regulations governing the Bank generally have been promulgated to protect depositors and the deposit insurance funds, and not for the purpose of protecting shareholders. 11 Table of Contents General .
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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.
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Effect of Governmental Monetary Policies Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Board, through its Federal Open Market Committee (FOMC), exerts considerable influence over commercial banks’ operating results through monetary policy decisions.
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The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits.
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These policy actions—including open market operations, adjustments to the federal funds target rate, changes in the discount rate on bank borrowings, and alterations in reserve requirements—directly impact the levels of bank loans, investments, and deposits, and are designed to promote maximum employment, stable prices, and moderate long-term interest rates. Changes in interest rates significantly affect our financial performance and condition.
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In particular, we are subject to risk from decisions of the FOMC to continue to increase the fed funds target rate.
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Rising interest rates typically pressure our net interest margin if deposit costs increase faster than loan yields, reduce the fair value of our fixed-rate investment securities and loans, and may decrease loan demand and slow economic activity.
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Such an increase could subject us to interest rate risk by, among other things, a) requiring us to increase the rates paid on deposit accounts; and b) further decreasing the value of certain assets, including our loans and investment securities.
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Declining interest rates typically compress our net interest margin as loan yields reprice downward faster than deposit costs, though they increase the fair value of our fixed-rate assets and may stimulate loan demand.
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Conversely, while rate cuts by the FOMC would result in an increase in the value of our loans and investment securities, such cuts are likely to put pressure on our net interest margin.
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The actual impact depends on the speed and magnitude of rate changes, competitive dynamics in our markets, and our ability to manage deposit pricing and loan portfolio composition.
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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.
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Following a period of aggressive rate increases from 2022 to mid-2023 that pushed the federal funds rate to a peak range of 5.00%-5.25%, the Federal Reserve shifted to an easing cycle beginning in September 2024.
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Future Regulatory Uncertainty Legislative and regulatory proposals regarding changes in banking, and the regulation of banks, federal savings institutions, and other financial institutions and bank and bank holding company powers are being considered by the executive branch of the federal government, Congress and various state governments.
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The FOMC reduced rates by 1.00 percentage point in the second half of 2024 through three cuts, followed by three additional 0.25 percentage point cuts during 2025, bringing the federal funds rate to a range of 3.50%-3.75% by year-end 2025.
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Certain of these proposals, if adopted, could significantly change the regulation or operations of banks and the financial services industry. New regulations and statutes are regularly proposed that contain wide-ranging proposals for altering the structures, regulations, and competitive relationships of the nation’s financial institutions.
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The rate reductions reflected progress in reducing inflation from peak levels, though inflation has remained persistently above the Fed’s 2% target throughout this period. The future direction and pace of monetary policy remains uncertain and highly data-dependent.
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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.
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The FOMC has signaled a more cautious approach to further rate adjustments given elevated inflation readings, labor market stabilization, and economic uncertainties including the potential effects of tariff policies and other fiscal measures. Whether interest rates rise, fall, or remain stable in 2026 and beyond, such changes could have a material impact on our results of operations and financial condition.
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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.
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Future Regulatory Uncertainty The federal and state regulatory environment governing financial institutions continues to evolve in response to economic conditions, political priorities, and policy concerns. Legislative and regulatory proposals that could materially affect banking operations, capital requirements, permissible activities, and competitive dynamics are regularly considered by Congress, federal banking agencies, and state governments.
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Additional regulation, however, could materially impact our business by increasing operational costs, requiring additional capital, or limiting certain business activities or strategic flexibility.
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The banking industry failures of 2023—including Silicon Valley Bank, Signature Bank, and First Republic Bank—prompted heightened regulatory scrutiny that has continued through 2025. Federal banking agencies have increased their focus on interest rate risk management, liquidity stress testing, uninsured deposit concentrations, and supervision of banks below the $250 billion asset threshold.
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Although President Trump’s administration has advocated for a reduction in regulations, including those impacting the banking industry, we anticipate that financial institutions, including ours, will remain subject to significant regulatory oversight and compliance obligations for the foreseeable future.
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While comprehensive new regulations have not been finalized, regulators have signaled ongoing attention to bank governance, risk management practices, and capital adequacy, particularly for institutions experiencing rapid growth or concentrated funding sources. The current presidential administration has indicated a preference for regulatory relief and reducing regulatory burden on financial institutions.
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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.
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In addition, federal banking regulators have recently proposed or implemented certain regulatory adjustments intended to tailor regulatory requirements and reduce compliance burden for community banks. These efforts have included, among other initiatives, proposed or finalized changes to capital requirements, refinements to the community bank leverage ratio framework, and updates to examination and supervisory practices.
Removed
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
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However, the regulatory environment ultimately depends on actions by independent federal banking agencies, Congressional legislation, and state regulatory authorities, and the direction, timing, and scope of future regulatory changes remain uncertain. 16 Table of Contents Regulatory reform efforts could include further modifications to capital requirements, additional adjustments to the community bank leverage ratio framework, changes to examination practices, or alterations to compliance obligations under various banking statutes.
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The evolving regulatory landscape presents both risks and potential opportunities. Increased capital or liquidity requirements, enhanced examination standards, or expanded compliance obligations could increase our operating costs, limit business activities, or require additional investment in risk management infrastructure. Conversely, regulatory relief tailored to community banks could reduce compliance burden and enhance operational flexibility.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditional growth and regulatory requirements may require us to raise additional capital in the future, and capital may not be available when it is needed or may have unfavorable terms, which could adversely affect our financial condition and results of operations. We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations.
Biggest changeWe are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. We may need to raise additional capital to support future growth or to meet regulatory capital requirements.
Because most of our loans are concentrated in the Region 2000 area in and surrounding the City of Lynchburg, a decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse.
Because most of our loans are concentrated in the Region 2000 area in and surrounding the City of Lynchburg, a decline in local economic conditions may have a greater effect on our earnings and capital than on larger financial institutions whose real estate loan portfolios are more geographically diverse.
If we must raise interest rates paid on deposits or lower interest rates charged on our loans, our net interest margin and profitability could be adversely affected. Competition could result in a decrease in loans we originate and could negatively affect our ability to grow and our results of operations.
If we must raise interest rates paid on deposits or lower interest rates charged on loans, our net interest margin and profitability could be adversely affected. Competition could result in a decrease in loans we originate and could negatively affect our ability to grow and our results of operations.
Technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures.
Technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures.
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.
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 we serve.
Any future additions to our allowance could materially decrease our net income. In addition, the Federal Reserve Bank of Richmond and the Virginia Bureau of Financial Institutions (the “BFI”) periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs.
Any future additions to our allowance could materially decrease our net income. In addition, the Federal Reserve Bank of Richmond and the Virginia Bureau of Financial Institutions periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs.
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.
CECL 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.
A percentage of the loans in our portfolio currently include exceptions to our loan policies and supervisory guidelines . All of the loans that we make are subject to written loan policies adopted by our board of directors and to supervisory guidelines imposed by our regulators.
A percentage of the loans in our portfolio currently include exceptions to our loan policies and supervisory guidelines . All loans we make are subject to written loan policies adopted by our board of directors and supervisory guidelines imposed by our regulators.
Our profitability depends upon our continued ability to successfully compete in our market areas. Increased deposit competition could increase our cost of funds and could adversely affect our ability to generate the funds necessary for our lending operations.
Our profitability depends upon our continued ability to successfully compete in our market areas. Increased deposit competition could increase our cost of funds and adversely affect our ability to generate funds necessary for our lending operations.
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 approach that reflects expected credit losses over the lives of financial assets, starting when such assets are first originated or acquired.
Many of these competing institutions have nationwide or regional operations and have greater resources than we have. We also face competition from local community institutions.
Many of these competing institutions have nationwide or regional operations and greater resources than we have, while we also face competition from local community institutions.
Ineffective internal and disclosure controls could also harm our reputation, negatively impact our operating results or cause investors to lose confidence in our reported financial information, which likely would have a negative effect on the trading price of our securities. Changes in the financial markets could impair the value of our investment portfolio.
Ineffective internal and disclosure controls could also harm our reputation, negatively impact our operating results or cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities. Changes in the financial markets could impair the value of our investment portfolio.
Implementation of changes to asset risk weightings for risk based capital calculations, items included or deducted in calculating regulatory capital or additional capital conservation buffers, or both, could result in management modifying its business strategy, and could limit our ability to make distributions, including paying out dividends or buying back shares.
Implementation of changes to asset risk weightings for risk-based capital calculations, items included or deducted in calculating regulatory capital or additional capital conservation buffers could result in management modifying its business strategy and could limit our ability to make distributions, including paying dividends or buying back shares.
Although many provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) have been fully integrated into our operations, ongoing regulatory interpretations, enforcement activities, or amendments to existing regulations may continue to impact our business, financial condition, and profitability.
Although many provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 have been fully integrated into our operations, ongoing regulatory interpretations, enforcement activities, or amendments to existing regulations may continue to impact our business, financial condition and profitability.
Any increase in our allowance for credit losses or loan charge-offs as required by regulatory authorities might have a material adverse effect on our financial condition and results of operations. Our allowance may not be adequate to cover actual credit losses.
Any increase in our allowance for credit losses or loan charge-offs as required by regulatory authorities could have a material adverse effect on our financial condition and results of operations. Our allowance for credit losses may not be adequate to cover actual losses.
For instance, such changes may limit our growth and restrict certain of our activities, including payment of dividends, mergers and acquisitions, investments, loans and interest rates charged, interest rates paid on deposits and locations of offices. We are also subject to capital requirements by our regulators.
Such changes may limit our growth and restrict certain of our activities, including payment of dividends, mergers and acquisitions, investments, loans and interest rates charged, interest rates paid on deposits and locations of offices. We are also subject to capital requirements by our regulators.
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.
A significant source of risk arises from the possibility that we could sustain losses due to loan defaults and nonperformance. We maintain an allowance for credit losses in accordance with GAAP to provide for such defaults and other nonperformance.
We are subject to liquidity risk. Liquidity risk is the potential that we will be unable to meet our obligations as they become due, capitalize on growth opportunities as they arise or pay regular cash dividends because of an inability to liquidate assets or obtain adequate funding in a timely basis, at a reasonable cost and within acceptable risk tolerances.
Liquidity risk is the potential that we will be unable to meet our obligations as they become due, capitalize on growth opportunities as they arise, or pay regular cash dividends because of an inability to liquidate assets or obtain adequate funding on a timely basis, at a reasonable cost and within acceptable risk tolerances.
Many of our competitors enjoy competitive advantages, including greater name recognition, financial resources, a wider geographic presence or more accessible branch office locations, the ability to offer additional services, greater marketing resources, more favorable pricing alternatives for loans and deposits and lower origination and operating costs. We are also subject to lower lending limits than our larger competitors.
Many of our competitors enjoy competitive advantages, including greater name recognition and financial resources, a wider geographic presence, more accessible branch locations, the ability to offer additional services, greater marketing resources, more favorable pricing for loans and deposits, and lower origination and operating costs. We are also subject to lower lending limits than our larger competitors.
We lend primarily to small to medium-sized businesses, professionals and individuals, which may expose us to greater lending risks than those of banks lending to larger, better-capitalized businesses with longer operating histories.
We lend primarily to small to medium-sized businesses, professionals and individuals, which may expose us to greater lending risks than banks lending to larger, better-capitalized businesses with longer operating histories.
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.
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. ‎ 17 Table of Contents RISKS RELATED TO OUR BUSINESS Our profitability depends significantly on local economic conditions.
While initial implementation costs have stabilized, any future changes in regulatory expectations, especially regarding capital requirements, consumer protection, stress-testing for smaller banks, cybersecurity, and liquidity, could result in increased compliance costs, operational complexity, and reduced flexibility in managing our business operations.
While initial implementation costs have stabilized, any future changes in regulatory expectations, especially regarding capital requirements, consumer protection, stress-testing, cybersecurity and liquidity, could result in increased compliance costs, operational complexity and reduced flexibility in managing our business operations.
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.
In deciding whether to extend credit or enter into other transactions, we rely on information furnished 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.
In determining the amount of the allowance for credit losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for credit losses may not be sufficient to cover probable incurred losses in our loan portfolio, resulting in additions to our allowance.
In determining the amount of the allowance for credit losses, we review our loans, our loss and delinquency experience, and economic conditions. If our assumptions are incorrect, our allowance for credit losses may not be sufficient to cover losses in our loan portfolio, resulting in additions to our allowance.
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.
Accordingly, holders of our common stock 29 Table of Contents may have difficulty selling our common stock at prices they 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.
We may not be successful in continuing to penetrate this market segment, which has helped to drive some of our recent earnings. A significant percentage of our loans are commercial and industrial loans.
We may not be successful in continuing to penetrate this market segment, which has helped to drive some of our recent earnings. A significant percentage of our loans are commercial and industrial loans, and we continue to focus on this market segment.
We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to customers, we may assume that a customer’s audited financial statements conform with U.S.
We also rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit, we may assume that a customer’s audited financial statements conform 19 Table of Contents with U.S.
The local economic conditions in these areas have a significant impact on the Company’s commercial and industrial, real estate and construction loans, the ability of its borrowers to repay their loans and the value of the collateral securing these loans.
The local economic conditions in these areas have a significant impact on our commercial and industrial, real estate and construction loans, the ability of our borrowers to repay their loans and the value of the collateral securing these loans.
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 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.
Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services. We have increased and plan to continue to increase our levels of commercial and industrial loans.
Additionally, due to their size, many competitors may achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing. We have increased and plan to continue to increase our levels of commercial and industrial loans.
Any failure or circumvention of the Company’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Company’s business, results of operations and financial condition.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.
We can make no assurances that our credit loss reserves will be sufficient to absorb future credit losses or prevent a material adverse effect on our business, financial condition or results of operations. Our profitability is vulnerable to interest rate fluctuations and changes in monetary policies. Our profitability depends substantially upon our net interest income.
We can make no assurances that our credit loss reserves will be sufficient to absorb future credit losses or prevent a material adverse effect on our business, financial condition or results of operations. Our profitability is vulnerable to interest rate fluctuations and changes in monetary policies.
An adverse development with respect to one lending relationship can expose us to a significantly greater risk of loss as compared with a single-family residential mortgage loan because we typically have more than one loan with such borrowers. Additionally, these loans typically involve larger loan balances to single borrowers or groups of related borrowers compared with single-family residential mortgage loans.
An adverse development with respect to one lending relationship can expose us to significantly greater risk of loss compared with single-family residential mortgage loans because we typically have multiple loans with such borrowers. Additionally, these loans typically involve larger loan balances to single borrowers or groups of related borrowers.
If our reputation is negatively affected by the actions of our employees or otherwise, there may be an adverse effect on our ability to keep and attract customers, and we might be exposed to litigation and regulatory action. Any of such events could harm our business, and, therefore, our operating results may be materially adversely affected.
If our reputation is negatively affected by the actions of our employees or otherwise, there may be an adverse effect on our ability to keep and attract customers, and we might be exposed to litigation and regulatory action, any of which could materially adversely affect our business and operating results.
Upon liquidation, holders of any debt securities and shares of preferred stock and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our common stock. Our stockholders may experience dilution due to our issuance(s) of additional securities in the future.
Upon liquidation, holders of any debt securities and shares of preferred stock and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our common stock. Our stockholders may experience dilution due to issuances of additional securities.
Our common stock commenced trading on The NASDAQ Capital Market on January 25, 2012, and trading volumes since that time have been relatively low as compared to larger financial services companies.
Our common stock commenced trading on The NASDAQ Capital Market on January 25, 2012, and trading volumes have been relatively low compared to larger financial services companies.
Any failure to maintain effective controls or timely effect any necessary improvement of our internal and disclosure controls could hinder our ability to accurately report our operating results or cause us to fail to meet our reporting obligations, which could affect our ability to remain listed with The NASDAQ Capital Market.
Any failure to maintain effective controls or timely effect any necessary improvements could hinder our ability to accurately report our operating results or cause us to fail to meet our reporting obligations, which could affect our ability to remain listed with The NASDAQ Capital Market.
Any change in such regulation and regulatory oversight, whether in the form of regulatory policy, regulations or legislation, could have a material impact on us and our operations. Further, our compliance with Federal Reserve and the BFI regulations is costly. Because our business is highly regulated, the applicable laws, rules and regulations are subject to regular modification and change.
Any change in such regulation and regulatory oversight, whether in the form of regulatory policy, regulations or legislation, could have a material impact on us and our operations. Because our business is highly regulated, the applicable laws, rules and regulations are subject to regular modification and change.
In the event of non-compliance with regulation, governmental regulators, including the SEC, and the Financial Industry Regulatory Authority, may institute administrative or judicial proceedings that may result in censure, fines, civil penalties, the issuance of cease-and-desist orders or the deregistration or suspension of the non-compliant broker-dealer or investment adviser or other adverse consequences.
In the event of non-compliance with regulation, governmental regulators, including the SEC and the Financial Industry Regulatory Authority, may institute administrative or judicial proceedings that could result in censure, fines, civil penalties, cease-and-desist orders, deregistration or suspension, or other adverse consequences.
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. Severe weather, natural disasters, acts of war or terrorism or other adverse external events could significantly impact our business.
The loss of several key personnel could adversely affect our growth strategy and seriously harm our business, results of operations and financial condition. Severe weather, natural disasters, acts of war or terrorism or other adverse external events could significantly impact our business.
While we intend to originate these types of loans in a manner that is consistent with safety and soundness, these non-residential loans generally expose us to greater risk of loss than one- to four-family residential mortgage loans, as repayment of such commercial and industrial loans generally depends, in large part, on the borrower’s business to cover operating expenses and debt service.
While we intend to originate these loans in a manner consistent with safety and soundness, commercial and industrial loans generally expose us to greater risk of loss than one- to four-family residential mortgage loans because repayment generally depends, in large part, on the borrower’s business performance and ability to cover operating expenses and debt service.
Also, at the time that we foreclose upon a loan and take possession of a property, we estimate the value of that property using third-party appraisals and opinions and internal judgments. OREO property is valued on our books at the estimated market value of the property, less the estimated costs to sell (or “fair value”).
At the time we foreclose upon a loan and take possession of a property, we estimate the property’s value using third-party appraisals and internal judgments. OREO property is valued on our books at the estimated market value of the property, less estimated costs to sell.
The application of more stringent capital requirements for the Bank could, among other things, result in lower returns on invested capital, require the raising of additional capital and result in regulatory actions if we were to be unable to comply with such requirements.
The application of more stringent capital requirements could result in lower returns on invested capital, require the raising of additional capital and result in regulatory actions if we were unable to comply with such requirements.
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.
Although we actively manage our liquidity and funding sources, a substantial shift of customer deposits to alternative products or failure to adapt to technological changes could negatively impact our operations, profitability, and competitive position. Changes in consumers’ use of banks and changes in consumers’ spending and saving habits could adversely affect our financial results.
Checking, savings and money market deposit account balances and other forms of customer deposits can decrease when customers perceive alternatives such as other financial institutions or investments, such as the stock market, as providing a better risk/return tradeoff.
Checking, savings and money market deposit account balances can decrease when customers perceive alternatives such as other financial institutions or investments as providing a better risk/return tradeoff.
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.
Our traditional banking model depends heavily on stable customer deposits as a primary source of funding. The rising popularity of alternative financial products and services—including fintech platforms, cryptocurrencies, money market funds, and digital wallets—may lead to increased volatility in our deposit base as customers seek different ways to save and invest their funds.
In addition, if the population or income growth in the Company’s market areas is slower than projected, income levels, deposits and housing starts could be adversely affected and could result in a reduction of the Company’s expansion, growth and profitability.
If population or income growth in our market areas is slower than projected, income levels, deposits and housing starts could be adversely affected and could result in a reduction in our growth and profitability.
Negative publicity can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, acquisitions and actions taken or threatened by government regulators and community organizations in response to those activities.
Our reputation is one of the most valuable components of our business. Negative publicity can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, acquisitions and actions taken or threatened by government regulators and community organizations in response to those activities.
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.
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 and the adequacy of a financial institution’s allowance for credit losses.
If the Company’s market areas experience a downturn or a recession for a prolonged period of time, the Company could experience significant increases in nonperforming loans, which could lead to operating losses, impaired liquidity and eroding capital.
If our market areas experience a downturn or recession for a prolonged period, we could experience significant increases in nonperforming loans, which could lead to operating losses, impaired liquidity and eroding capital.
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.
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. We are subject to operational risks.
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.
As of December 31, 2024, and December 31, 2025, we had unrealized losses, net of taxes, in our investment securities portfolio of $22,915,000 and $14,937,000, respectively.
Many of our competitors have greater resources than we have. Our ability to successfully attract and retain investment advisory clients is dependent upon our ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities. If we are not successful, our results of operations and financial condition may be negatively impacted.
Our ability to attract and retain investment advisory clients depends upon our ability to compete with competitors’ investment products, level of investment performance, client services, and marketing and distribution capabilities. If we are not successful, our results of operations and financial condition may be negatively impacted.
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.
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.
In addition, these types of loans typically involve larger loan balances to single borrowers or groups of related borrowers, as compared to one- to four-family residential mortgage loans. Changes in economic conditions that are beyond our or the borrower’s control could adversely affect the value of the security for the loan, including the future cash flow of the affected business.
In addition, these loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential mortgage loans. Changes in economic conditions beyond our or the borrower’s control could adversely affect the value of the loan collateral and the future cash flow of the affected business.
These provisions may also strengthen the position of current management by restricting the ability of stockholders to change the composition of the board of directors, to affect its policies generally and to benefit from actions which are opposed by the current board of directors. Item 1B. Unresolved Staff Comm ents None. Item 1.C.
These provisions may also strengthen the position of current management by restricting the ability of stockholders to change the composition of the board of directors, to affect its policies. Item 1B. Unresolved Staff Comm ents None.
Under the capital standards, in order to be well-capitalized, the Bank is required to have a common equity to Tier 1 capital ratio of 6.5% and a Tier 1 capital ratio of 8.0%.
Regulatory capital requirements could adversely affect our operations and profitability. Under current capital standards, in order to be well-capitalized, the Bank is required to have a common equity Tier 1 capital ratio of 6.5% and a Tier 1 capital ratio of 8.0%.
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.
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 about the prospects for the financial services industry. We may lose lower- cost funding sources.
For instance, small to medium-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic downturns, have fewer financial resources in terms of capital or borrowing capacity than larger entities, often need substantial additional capital to expand or compete and may experience significant volatility in operating results.
Small to medium-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic downturns, have fewer financial resources and borrowing capacity, often need substantial additional capital to expand or compete, and may experience significant volatility in operating results. Any one or more of these factors may impair a borrower’s ability to repay a loan.
In addition, the FDIA prohibits insured depository institutions such as the Bank from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become undercapitalized as defined in the statute.
In addition, the Federal Deposit Insurance Act prohibits insured depository institutions from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become undercapitalized.
We regularly review and update the Company’s internal controls, disclosure controls and procedures and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
Generally Accepted Accounting Principles (“GAAP”) and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our financial condition and results of operations could be negatively impacted to the extent we rely on financial statements that do not comply with GAAP or are materially misleading.
Generally Accepted Accounting Principles (“GAAP”) and fairly present the customer’s financial condition, results of operations and cash flows. Our financial condition and results of operations could be negatively impacted if we rely on financial statements that do not comply with GAAP or are materially misleading. Credit losses could adversely affect our earnings and financial condition.
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.
Expansion involves a number of risks, including: the time and costs of evaluating new markets, hiring experienced local management and opening new offices; time lags between expansion activities and the generation of sufficient assets and deposits to support the costs; entrance into new markets where we lack experience; introduction of new products and services with which we have no prior experience; failure to culturally integrate an acquisition target or new branches; and failure to identify and retain experienced key management with local expertise and relationships in new markets. 21 Table of Contents Foreclosed properties could lead to increased operating expenses and losses.
Economic downturns and other events that negatively impact the Company’s market areas could cause the Company to incur substantial credit losses that could negatively affect the Company’s results of operations and financial condition. We depend on the accuracy and completeness of information about clients and counterparties, and our financial condition could be adversely affected if we rely on misleading information.
Economic downturns and other events that negatively impact our market areas could cause us to incur substantial credit losses that could negatively affect our results of operations and financial condition. We depend on the accuracy of information provided by clients and counterparties.
Assets under management may decline for various reasons including declines in the market value of the assets, which could be caused by price declines in the securities markets. Assets under management may also decrease due to redemptions and other withdrawals by clients or termination of contracts.
Assets under management may decline for various reasons including declines in the market value of the assets due to price declines in the securities markets, redemptions and other withdrawals by clients, or termination of contracts in response to adverse market conditions or pursuit of other investment opportunities.
A significant decline in general economic conditions, caused by inflation, recession, pandemics, acts of terrorism, outbreaks of hostilities or other international or domestic calamities, unemployment, monetary and fiscal policies of the federal government or other factors could impact these local economic conditions and could negatively affect the Company’s financial condition, results of operations and cash flows.
A significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, outbreaks of hostilities or other calamities, unemployment, or monetary and fiscal policies of the federal government could negatively affect our financial condition, results of operations and cash flows. Future public health emergencies could adversely affect our business, financial condition, and results of operations.
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.
Additionally, acts of nature, including hurricanes, tornadoes, earthquakes, fires and floods, may cause uninsured damage to real estate that secures our loans and negatively impact our financial condition. Our loan portfolio contains a number of real estate loans with relatively large balances. A significant portion of our loan portfolio consists of real estate loans with balances in excess of $1,000,000.
If we suffer credit losses from a decline in credit quality, our earnings will decrease. We could sustain losses if borrowers, guarantors or related parties fail to perform in accordance with the terms of their loans.
We could sustain losses if borrowers, guarantors or related parties fail to perform in accordance with the terms of their loans.
We cannot predict the precise nature, extent, or timing of any additional regulatory requirements, but such developments could materially affect our operations, increase operational expenses, reduce profitability, or restrict our ability to pursue strategic opportunities or pay dividends. ‎ 28 Table of Contents Consumer Financial Protection Bureau Oversight We remain subject to the oversight of consumer financial protection regulations enforced by various agencies, including the Consumer Financial Protection Bureau (“CFPB”).
We cannot predict the precise nature, extent or timing of any additional regulatory requirements, but such developments could materially affect our operations, increase operational expenses, reduce profitability, or restrict our ability to pursue strategic opportunities or pay dividends. Consumer financial protection regulations could impact our compliance obligations and business practices.
We may also seek to acquire other financial institutions, or parts of those institutions, though we have no present plans in that regard.
We may engage in branch expansion or seek to acquire other financial institutions or parts of those institutions in the future, though we have no present acquisition plans.
As our organization grows and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture. This could negatively impact our future success. If we fail to retain our key employees, our growth and profitability could be adversely affected.
As our organization grows and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture. This could negatively impact our future success. Loss of key employees could adversely affect our business. Our success is highly dependent on our executive management team and other key personnel.
If customers move money out of bank deposits and into other investments or to other financial institutions, the Bank could lose a relatively low-cost source of funds, thereby increasing its funding costs and reducing the Bank’s net interest income and net income.
If customers move money out of bank deposits and into other investments or to other financial institutions, we could lose a relatively low-cost source of funds, thereby increasing our funding costs and reducing our net interest income and net income. Failure to maintain effective internal and disclosure controls could adversely affect our financial reporting and stock price.
This could be in response to adverse market conditions or in pursuit of other investment opportunities. If the assets under management we supervise decline and there is a related decrease in fees, it will negatively affect our results of operations. We may not be able to attract and retain investment advisory clients.
If the assets under management decline, the related decrease in fees will negatively affect our results of operations. We may not be able to attract and retain investment advisory clients.
Furthermore, the imposition of liquidity requirements in connection with the implementation of Basel III could result in our having to lengthen the term of our funding, restructure our business models or increase our holdings of liquid assets, or all or any combination of the foregoing.
Furthermore, the imposition of liquidity requirements could result in our 28 Table of Contents having to lengthen the term of our funding, restructure our business models or increase our holdings of liquid assets.
Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings. The FDIC insures deposits at FDIC-insured depository institutions, such as the Bank, up to applicable limits. The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system.
Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings. The FDIC insures deposits at FDIC-insured depository institutions up to applicable limits.
Both the Company and the Bank are subject to laws and regulations that limit the payment of cash dividends, including requirements to maintain capital at or above regulatory minimums.
The Company currently does not have any significant sources of revenue other than cash dividends paid to it by the Bank and PWW. Both the Company and the Bank are subject to laws and regulations that limit the payment of cash dividends, including requirements to maintain capital at or above regulatory minimums.
Our plans for future expansion depend, in some instances, on factors beyond our control, and an unsuccessful attempt to achieve growth could have a material adverse effect on our business, financial condition, results of operations and future prospects. We expect to continue to engage in new branch expansion in the future.
As we continue to originate these loans, we may experience higher levels of non-performing assets or credit losses, or both. Our plans for future expansion depend, in some instances, on factors beyond our control, and an unsuccessful attempt to achieve growth could have a material adverse effect on our business, financial condition, results of operations and future prospects.
In addition, we may be subject to regulatory action by federal or state banking authorities if they believe the number of exceptions in our loan portfolio represents an unsafe banking practice. As a community bank, we have different lending risks than larger banks.
As a result of these exceptions, such loans may have a higher risk of loan loss than loans that fully comply with our loan policies. In addition, we may be subject to regulatory action by federal or state banking authorities if they believe the number of exceptions in our loan portfolio represents an unsafe banking practice.
These policies and procedures necessarily rely on our making various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.
These policies and procedures, however, may not prevent unexpected losses that could materially adversely affect our results of operations. These policies and procedures necessarily rely on our making various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of real estate and other assets serving as collateral.
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.
We face the risk that the design of our internal controls and procedures, including those to mitigate the risk of fraud by employees or outsiders, may prove to be inadequate or circumvented, thereby causing delays in detection of errors or inaccuracies. We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies.

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Item 2. Properties

Properties — owned and leased real estate

7 edited+2 added−8 removed1 unchanged
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).
Biggest changeThe following table describes the location and general character of the Bank’s primary operating facilities: Address Type of Facility Year Opened Owned/Leased 5204 Fort Avenue Lynchburg, Virginia Full-service branch with drive-through and ATM 2000 Owned 4698 South Amherst Highway Madison Heights, Virginia Full-service branch with drive-through and ATM 2002 Owned 17000 Forest Road Forest, Virginia Full-service branch with drive-through and ATM Headquarters for Mortgage Division 2005 Owned 164 South Main Street Amherst, Virginia Full-service branch with drive-through and ATM 2007 Owned 1405 Ole Dominion Blvd Bedford, Virginia Full-service branch with drive-through and ATM 2008 Owned 1110 Main Street Altavista, Virginia Full-service branch with drive-through and ATM 2009 Owned 32 Table of Contents 828 Main Street Lynchburg, Virginia Corporate Headquarters; Full-service branch with drive-through and ATM 2004 Leased (1) 4935 Boonsboro Road, Suites C and D Lynchburg, Virginia Full-service branch with drive-through 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-through and ATM 2015 Owned 1745 Confederate Blvd Appomattox, Virginia Full-service branch with drive-through and ATM 2017 Owned 225 Merchant Walk Avenue Charlottesville, Virginia Full-service branch with drive-through 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-through 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-through and ATM 2019 Owned 4105 Boonsboro Road Lynchburg, Virginia Full-service branch with drive-through and ATM 2022 Owned 20795 Timberlake Road Lynchburg, Virginia Full-service branch with drive-through and ATM 2025 Owned 19792 Main Street Buchanan, Virginia Full-service branch with drive-through and ATM 2024 Owned 2935 Rockfish Valley Highway ‎ Nellysford, Virginia Full-service branch with drive-through and ATM 2025 Owned (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).
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.
(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.
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.
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. 33 Table of Contents (2) Base lease expires March 31, 2028.
(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.
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. We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease.
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.
As of March 25, 2026 the Bank conducts its operations from 23 locations, of which we own 15 and lease 8. In addition, PWW operates from 1925 Atherholt Road, Lynchburg, Virginia, which it leases from the Bank.
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.
We have one or more renewal options that we may exercise at our discretion subject to the terms and conditions outlined in the lease. (3) Base lease expired May 31, 2025. The Bank currently leases the property on a month-to-month basis. (4) Base lease expires April 30, 2030.
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.
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 1925 Atherholt Road, Lynchburg, Virginia currently serves as the office for the Company’s wholly-owned subsidiary, PWW, which leases the space from the Bank on a month-to-month basis.
Removed
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.
Added
The property is held for possible future branch expansion, although the Bank does not currently have a timeline for opening a branch at this location. The Bank also owns two additional properties in its market area, one held for possible future expansion or sale and one under contract for sale, subject to due diligence and other customary closing conditions.
Removed
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.
Added
The opening of any additional branches is contingent upon receipt of applicable regulatory approvals.
Removed
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.
Removed
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.
Removed
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 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
Management of the Bank continues to look for and evaluate additional locations for future branch growth and will consider opening an additional branch in the next 18 months if a suitable location is available on acceptable terms. The opening of all additional branches is contingent upon the receipt of regulatory approval.
Removed
We will use the internet, consistent with applicable regulatory guidelines, to augment our growth plans. We currently offer online account access, bill payment, and account management functions through our website and apps for mobile devices.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−3 removed5 unchanged
Biggest changeFinancial 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.
Biggest changeFinancial will evaluate the factors set forth above in determining whether to continue paying cash dividends in 2026. Financial does not have an active stock repurchase plan. During the quarter ended December 31, 2025, Financial repurchased no shares of common stock.
PWW’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.
PWW’s ability to pay dividends is subject to certain limits imposed by state law. On January 27, 2026, Financial declared a cash dividend for the fourth quarter of 2025 of $0.11 per common share. The dividend was paid on March 6, 2026, to shareholders of record at the close of business on February 17, 2026.
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.
OB” on some systems) and transactions generally involved a small number of shares. 34 Table of Contents As of March 25, 2026, there were approximately 4,543,338 shares of Common Stock outstanding, which shares are held by approximately 1,700 active shareholders of record.
Removed
On February 6, 2023, the Company’s board of directors approved a stock repurchase plan to purchase up to $998,000 of the Company’s common stock. The plan authorized the Company to make purchases from March 8, 2023 through March 7, 2024, unless extended or sooner terminated.
Removed
The plan allowed the Company to make purchases in open market transactions or privately negotiated transactions, in accordance with Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Pursuant to the Plan, the Company purchased an aggregate of 85,319 shares between the adoption date and April 6, 2023.
Removed
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.

Item 6. [Reserved]

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

121 edited+82 added−59 removed49 unchanged
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.
Biggest changeThe average balances used in this table and other statistical data were calculated using average daily balances. ‎ 40 Table of Contents Net Interest Margin Analysis Average Balance Sheets For the Years Ended December 31, 2025 and 2024 (dollars in thousands) 2025 2024 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) $ 654,835 $ 37,052 5.66% $ 623,769 $ 34,293 5.50% Loans held for sale 3,271 202 6.18% 3,494 212 6.07% Federal funds sold 70,528 3,020 4.28% 69,216 3,629 5.24% Interest-bearing bank balances 13,972 559 4.00% 8,769 775 8.84% Securities taxable (3) 220,154 5,589 2.54% 229,574 5,566 2.42% Securities non taxable 4,848 171 3.53% 3,419 92 2.69% Total securities 225,002 5,760 2.56% 232,993 5,658 2.43% Federal agency equities 1,458 92 6.31% 1,442 95 6.59% Correspondent bank equity 367 6 1.63% 218 - 0.00% Total earning assets 969,433 46,691 4.82% 939,901 44,662 4.75% Allowance for credit losses (6,623) (7,089) Non-earning assets 57,346 62,927 Total assets $ 1,020,156 $ 995,739 LIABILITIES AND STOCKHOLDERS ’ EQUITY Deposits Demand interest bearing 409,353 2,997 0.73% 398,428 3,589 0.90% Savings 147,634 1,952 1.32% 136,169 1,866 1.37% Time deposits 228,401 8,282 3.63% 225,894 9,173 4.06% Total interest bearing deposits 785,388 13,231 1.68% 760,491 14,628 1.92% Other borrowed funds Financing leases 2,446 65 2.66% 2,865 76 - % Other borrowings 9,013 389 4.32% 9,602 376 3.92% Capital Notes 4,845 163 3.36% 10,045 327 3.26% Total interest-bearing liabilities 801,692 13,848 1.73% 783,003 15,407 1.97% Noninterest bearing deposits 136,100 140,958 Other liabilities 11,231 9,202 Total liabilities 949,023 933,163 Stockholders ’ equity 71,133 62,575 Total liabilities and Stockholders ’ equity $ 1,020,156 $ 995,738 41 Table of Contents Net interest earnings $ 32,843 $ 29,255 Net interest margin 3.39% 3.11% Interest spread 3.09% 2.78% (1) Net deferred loan fees and costs are included in interest income.
The Bank, through the Mortgage Division originates both conforming and non-conforming consumer residential mortgages and reverse mortgage loans primarily in the Region 2000 area as well as in Charlottesville, Harrisonburg, Roanoke, Lexington, and Blacksburg.
The Bank, through the Mortgage Division originates both conforming and non-conforming consumer residential mortgages and reverse mortgage loans primarily in the Region 2000 area as well as in Charlottesville, Harrisonburg, Roanoke, Lexington, Blacksburg, and Wytheville.
Within the quantitative portion of the calculation, the Company utilizes at least one or a combination of loss drivers, which may include unemployment rates and/or gross domestic product (“GDP”), to adjust its loss rates over a reasonable and supportable forecast period of one year.
Within the quantitative portion of the calculation, the Company utilizes at least one or more loss drivers, which may include unemployment rates and/or gross domestic product (“GDP”), to adjust its loss rates over a reasonable and supportable forecast period of one year.
Financial does not expect to realize the losses, as it has the intent and ability to hold the securities until their recovery, which may be at maturity. Asset Quality We perform monthly reviews of all delinquent loans and loan officers are charged with working with customers to resolve potential payment issues.
Financial does not expect to realize the losses, as it has the intent and ability to hold the securities until their recovery, which may be at maturity. ‎ 56 Table of Contents Asset Quality We perform monthly reviews of all delinquent loans and loan officers are charged with working with customers to resolve potential payment issues.
Pursuant to this arrangement, the third-party broker-dealer operates a service center adjacent to one of the branches of the Bank. The center is staffed by dual employees of the Bank and the broker-dealer. Investment receives commissions on transactions generated and, in some cases, ongoing management fees such as mutual fund 12b-1 fees.
Pursuant to this arrangement, the third-party broker-dealer operates a service center adjacent to one of the branches of the Bank. The center is staffed by dual employees of the Bank and the broker-dealer. Investment receives commissions on 43 Table of Contents transactions generated and, in some cases, ongoing management fees such as mutual fund 12b-1 fees.
Management’s goal is to maximize net interest income with acceptable levels of risk to changes in interest rates. Management seeks to meet this goal by influencing the maturity and re-pricing characteristics of the various lending and deposit taking lines of business and by managing discretionary balance sheet asset and liability portfolios.
Management’s goal is to maximize net interest income with 60 Table of Contents acceptable levels of risk to changes in interest rates. Management seeks to meet this goal by influencing the maturity and re-pricing characteristics of the various lending and deposit taking lines of business and by managing discretionary balance sheet asset and liability portfolios.
Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements generally may be identified by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “should,” “will,” “intend,” or similar expressions.
Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements generally may be 35 Table of Contents identified by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “should,” “will,” “intend,” or similar expressions.
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 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).
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.
We maintain a valuation allowance to the extent that the measure of the loan individually evaluated is less than 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.
Our ongoing risk management includes: Utilizing enhanced risk rating systems specific to CRE exposures; Obtaining regular third-party loan reviews of the CRE portfolio; Obtaining subsequent appraisals when either required by regulations or dictated by our internal policies; Stress testing of property cash flows using various vacancy and rate scenarios during underwriting; Regular monitoring of local market conditions and property sector trends; Meeting at least annually with clients to which the Bank has significant exposure along with market-level monitoring of vacancy rates and rental trends; Performing annual reviews, including the review of current financial information, rate shocking, and collecting and analyzing rent rolls and operating statements at least annually; and Utilizing a risk rating system that incorporates both property and borrower performance metrics. 61 Table of Contents Credit Enhancements Where appropriate, we mitigate risk by obtaining credit enhancements.
Our ongoing risk management includes: Utilizing enhanced risk rating systems specific to CRE exposures; Obtaining regular third-party loan reviews of the CRE portfolio; Obtaining subsequent appraisals when either required by regulations or dictated by our internal policies; Stress testing of property cash flows using various vacancy and rate scenarios during underwriting; Regular monitoring of local market conditions and property sector trends; 59 Table of Contents Meeting at least annually with clients to which the Bank has significant exposure along with market-level monitoring of vacancy rates and rental trends; Performing annual reviews, including the review of current financial information, rate shocking, and collecting and analyzing rent rolls and operating statements at least annually; and Utilizing a risk rating system that incorporates both property and borrower performance metrics.
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.
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.
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.
Because of Financial’s asset 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.
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.
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 $313,000 and $354,000 on December 31, 2025 and 2024.
We conduct four other business activities: mortgage banking through the Bank’s Mortgage Division (which we refer to as “Mortgage”), investment services through the Bank’s Investment division (which we refer to as “Investment Division”), insurance activities through BOTJ Insurance, Inc., a subsidiary of the Bank, (which we refer to as “Insurance”), and subsequent to December 31, 2021, investment advisory services through the Company’s wholly-owned subsidiary, Pettyjohn, Wood & White, Inc.
We conduct four other business activities: mortgage banking through the Bank’s Mortgage Division (which we refer to as “Mortgage”), investment services through the Bank’s Investment division (which we refer to as “Investment Division”), certain insurance activities through BOTJ Insurance, Inc., a subsidiary of the Bank, (which we refer to as “Insurance”), and investment advisory services through the Company’s wholly-owned subsidiary, Pettyjohn, Wood & White, Inc.
Although we intend to increase other sources of revenue, our operating results depend primarily upon the Bank’s net interest income, which is determined by the difference between (i) interest and dividend income on earning assets, which consist primarily of loans, investment securities and other investments, and (ii) interest expense on interest-bearing liabilities, which consist principally of deposits and other borrowings.
(which we refer to as “PWW”). 36 Table of Contents Although we intend to increase other sources of revenue, our operating results depend primarily upon the Bank’s net interest income, which is determined by the difference between (i) interest and dividend income on earning assets, which consist primarily of loans, investment securities and other investments, and (ii) interest expense on interest-bearing liabilities, which consist principally of deposits and other borrowings.
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.
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 $46,655,000 for the year ended December 31, 2025, from $44,643,000 for the year ended December 31, 2024.
Additional analysis and detailed information on the ACL and loan portfolio quality can be found in “Management’s Discussion and Analysis – Analysis of Financial Condition – Asset Quality.” Goodwill , resulting from business combinations, represents the excess of consideration transferred over the fair value of net identifiable assets acquired.
Additional analysis and detailed information on the ACL and loan portfolio quality can be found in “Management’s Discussion and Analysis – Analysis of Financial Condition – Asset Quality.” Goodwill resulting from business combinations represents the excess of consideration transferred over the fair value of net identifiable assets acquired and is assigned to the applicable reporting unit.
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”).
These factors, many of which are beyond Financial’s control, include, but are not necessarily limited to the following: the effects of widespread health emergencies or public health crises 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 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; 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; geopolitical conflicts, international tensions, and related economic sanctions, 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”).
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.
We operate the Mortgage Division primarily with non-delegated correspondent relationships that allow the Bank to close loans in its name before an investor purchases the loan.
Management also anticipates that in the near to medium term, if rates continue to stay above 5% to 6% and prices remain relatively steady or increase, refinancing opportunities will be scarce, and the majority of the loan mix will continue to lean towards new home purchases and away from refinancing.
Management also anticipates that in the near to medium term, if rates are above the mid- 6% range and prices remain relatively steady or increase, refinancing opportunities will be limited, and the majority of the loan mix will continue to lean towards new home purchases and away from refinancing.
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.
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 2026. We provide insurance and annuity products to Bank customers and others through the Bank’s Insurance subsidiary.
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.
On April 13, 2020, the Company commenced a private placement of unregistered debt securities (the “2020 Offering”). In the 2020 Offering, the Company sold $10,050,000 in principal of fixed-rate subordinated notes (the “2020 Notes”) during the second and third quarters of 2020. The 2020 Notes bore interest at the rate of 3.25% per year with interest payable quarterly in arrears.
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.
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 requirements imposed by the Bank Holding Company Act. Consequently, Financial does not calculate its financial ratios on a consolidated basis.
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 sets forth select financial ratios: For the Year Ended December 31, 2025 2024 Return on average equity 12.68% 12.70% Return on average assets 0.88% 0.80% Dividend yield % 2.15% 2.52% Average equity to total average assets 6.97% 6.28% Effect of Economic Trends A variety and wide scope of economic factors affect Financial’s success and earnings.
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.
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 2026. We conduct our investment advisory business through PWW, a wholly-owned subsidiary of Financial acquired on December 31, 2021.
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.
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.
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.
The Bank recorded $99,000 in other assets on the consolidated balance sheets in relation to its interest rate lock commitments at December 31, 2025. The Bank has entered into corresponding commitments with third party investors to sell each of these loans that close. No other obligation exists.
Recently, the Mortgage Division has established a presence in the Wytheville market area. Management expects that the Mortgage Division’s reputation in its markets and our recently added offices and producers present an opportunity for us to continue to grow the Mortgage Division’s market share and, in the longer term, revenue.
The Mortgage Division’s presence in the Wytheville market area continues to develop. Management expects that the Mortgage Division’s reputation in its markets and our offices and producers present an opportunity for us to continue to grow the Mortgage Division’s market share and, in the longer term, revenue.
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.
A summary of the Bank’s commitments is as follows: Contract Amounts at December 31, (dollars in thousands) 2025 2024 Commitments to extend credit $ 181,358 $ 182,522 Standby letters of credit 2,086 3,507 Total $ 183,444 $ 186,029 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.
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.
The Bank had no amounts outstanding on any of these facilities as of December 31, 2025 and 2024. 61 Table of Contents Off-Balance Sheet Arrangements At December 31, 2025, the Bank had rate lock commitments to originate mortgage loans through its Mortgage Division amounting to approximately $14,337,000.
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 (along with Note 18 of the consolidated financial statements) shows the minimum capital requirements and the Bank’s capital position as of December 31, 2025 and 2024: Analysis of Capital for Bank of the James (Bank only) (dollars in thousands) Analysis of Capital (in 000’s) 2025 2024 Tier 1 capital Common Stock $ 3,743 $ 3,742 Surplus 22,325 22,325 Retained earnings 67,680 65,292 Total Tier 1 capital $ 93,748 $ 91,359 Common Equity Tier 1 Capital (CET1) $ 93,748 $ 91,359 Tier 2 capital Allowance for credit losses $ 6,450 $ 7,044 Total Tier 2 capital: $ 6,450 $ 7,044 Total risk-based capital $ 100,197 $ 98,403 55 Table of Contents Risk weighted assets $ 799,304 $ 766,614 Average total assets $ 1,035,821 $ 1,010,594 Actual Regulatory Benchmarks For Capital For Well December 31, December 31, Adequacy Capitalized 2025 2024 Purposes (1) Purposes Capital Ratios: Tier 1 capital to average total assets 9.05% 9.04% 4.000% 5.000% Common Equity Tier 1 capital 11.73% 11.92% 7.000% 6.500% Tier 1 risk-based capital ratio 11.73% 11.92% 8.500% 8.000% Total risk-based capital ratio 12.54% 12.84% 10.500% 10.000% (1) Includes capital conservation buffer of 2.5%, where applicable.
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.
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.
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 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.
For example, the timing of maturities of securities held-to-maturity is fairly predictable and subject to a high degree of control at the time investment decisions are made. However, net non-maturity deposit inflows and outflows are far less predictable and are not subject to the same degree of control.
For example, the timing of maturities of securities held-to-maturity is fairly predictable and subject to a high degree of control at the time investment decisions are made.
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.
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. In 2025 and 2024, approximately 15.04% and 13.21% percent of our loans by total origination amount.
The ACL is initially recognized upon origination or acquisition of loans and reflects management’s ongoing evaluation of the loan portfolio based on current conditions, past events, and reasonable and supportable forecasts of future economic conditions, including anticipated prepayments.
The allowance for credit losses (“ACL”) on loans represents management’s best estimate of lifetime expected losses in the loan portfolio as of the reporting date. The ACL is initially recognized upon origination or acquisition of loans and reflects management’s ongoing evaluation based on current conditions, past events, and reasonable and supportable forecasts of future economic conditions, including anticipated prepayments.
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.
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 and assumes negligible credit or interest rate risk on these mortgages.
The consumer portfolio includes residential real estate mortgages, home equity lines and installment loans. Loans, net of unearned income and the allowance, increased to $636,552,000 on December 31, 2024, from $601,921,000 on December 31, 2023.
The consumer portfolio includes residential real estate mortgages, home equity lines and installment loans. Loans, net of unearned income and the allowance, increased to $661,357,000 on December 31, 2025, from $636,552,000 on December 31, 2024, representing growth of $24,805,000 or 3.9%.
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.
The Company is the owner and sole beneficiary of the BOLI policies. As of December 31, 2025, the BOLI had a cash surrender value of $23,676,000, an increase of $769,000 from the cash surrender value of $22,907,000, as of December 31, 2024. The Company purchased no additional BOLI in 2025 and $600,000 in 2024.
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.
Securities held-to-maturity at amortized cost decreased from $3,606,000 at December 31, 2024, to $3,590,000 at December 31, 2025, due to normal amortization of premiums and scheduled paydowns/maturities.
Effective January 1, 2015, the final rules require the Bank to comply with the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of 4.5% of risk-weighted assets; (ii) a Tier 1 capital ratio of 6.0% of risk-weighted assets; (iii) a total capital ratio of 8.0% of risk-weighted assets (unchanged from the previous requirement); and (iv) a leverage ratio of 4.0% of total assets.
The current regulatory framework requires the Bank to comply with the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of 4.5% of risk-weighted assets; (ii) a Tier 1 capital ratio of 6.0% of risk-weighted assets; (iii) a total capital ratio of 8.0% of risk-weighted assets; and (iv) a leverage ratio of 4.0% of total assets.
Note 13 of the consolidated financial statements provides additional information with respect to the calculation of Financial’s earnings per share. The decrease of $760,000 in 2024 net income compared to 2023 was due in large part to a decrease in our net interest income as detailed below.
Note 13 of the consolidated financial statements provides additional information with respect to the calculation of Financial’s earnings per share. The increase of $1,078,000 in 2025 net income compared to 2024 was due primarily to a significant increase in our net interest income.
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.
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. As of December 31, 2025, PWW’s assets under management were approximately $1,028,928,000. PWW generates revenue primarily through investment advisory fees. The investment advisory fees will vary based on the value of assets under management.
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.
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. For the year ended December 31, 2024, PWW had fee income of $4,843,000.
The Bank closely monitors concentrations within its commercial real estate loan portfolio. As of December 31, 2024, non-owner occupied commercial real estate loans totaled $195,089,000, or 30.31% of total loans. The Bank has minimal exposure to loans secured by large office buildings or shopping centers, which comprise less than 5% of the non-owner occupied commercial real estate portfolio.
As of December 31, 2025, non-owner occupied commercial real estate loans totaled $215,301,000, or 32.24% of total loans. The Bank has minimal exposure to loans secured by large office buildings or shopping centers, which comprise less than 6% of the non-owner occupied commercial real estate portfolio.
In the event any secured line of credit is drawn upon, the related debt would need to be repaid before the securities could be sold and converted to cash.
However, approximately $115,815,000 of these securities are pledged to secure public deposits and unfunded lines of credit. In the event any secured line of credit is drawn upon, the related debt would need to be repaid before the securities could be sold and converted to cash.
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.
Management believes that the Bank has the ability to meet its liquidity needs. ‎ 53 Table of Contents The following table sets forth non-deposit sources of funding: Funding Sources (dollars in thousands) December 31, 2025 Source Capacity Outstanding Available Federal funds purchased lines (unsecured) $ 58,000 $ - $ 58,000 Federal funds purchased lines (secured) 5,117 - 5,117 Borrowings from FHLB Atlanta (1) 303,408 - 303,408 Total $ 366,525 $ - $ 366,525 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 (1) Currently the Bank has in place collateral in the form of 1-4 family residential mortgages and securities with a book value of approximately $27,220,000 against which $0 was drawn and outstanding on December 31, 2025.
The capital requirements also include changes in the risk weights of assets to better reflect credit risk and other risk exposures.
Risk Weighting of Assets The capital requirements include specific risk weights for various asset categories to better reflect credit risk and other exposures.
Borrowings include funding of a short and long-term nature. Short-term borrowings consist of securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold.
Short-term borrowings consist of securities sold under agreements to repurchase, which are secured transactions with customers and generally mature the day following the date sold. Short-term borrowings may also include federal funds purchased, which are unsecured overnight borrowings from other financial institutions.
These operating results represent a return on average stockholders’ equity of 12.70% for the year ended December 31, 2024, compared to 17.07% for the year ended December 31, 2023. Our return on average stockholders’ equity decreased due to our decrease in net income and the increase in equity.
These operating results represent a return on average stockholders’ equity of 12.68% for the year ended December 31, 2025, compared to 12.70% for the year ended December 31, 2024.
These include 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.
Notable risk weights include: 150% for certain high volatility commercial real estate acquisition, development and construction loans and nonresidential mortgage loans that are 90 days past due or on non-accrual status; 250% for mortgage servicing rights and deferred tax assets that are not deducted from capital; and varying risk weights (0% to 600%) for equity exposures.
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.
Investment Securities The investment securities portfolio of the Bank is used as a source of income and liquidity. ‎ 49 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, 2025 2024 Held-to-maturity U.S. agency obligations $ 3,315 $ 3,170 Available-for-sale U.S. agency obligations $ 85,363 $ 73,060 Mortgage backed securities 61,040 58,973 Municipals 55,163 41,561 Corporates 12,562 14,322 Total available-for-sale $ 214,128 $ 187,916 Deposited funds are generally invested in overnight vehicles, including federal funds sold, until approved loans are funded.
The allowance for loan credit losses is measured and recorded upon the initial recognition of a financial asset. The allowance for loan credit losses is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for (or recovery of) credit losses, which is recorded in the Consolidated Statements of Income.
The allowance is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for (or recovery of) credit losses, which is recorded in the Consolidated Statements of Income. The Company utilizes a discounted cash flow model to estimate its current expected credit losses.
Typical enhancements to CRE loans include personal guarantees, secondary collateral, and liquid collateral.
Credit Enhancements Where appropriate, we mitigate risk by obtaining credit enhancements. Typical enhancements to CRE loans include personal guarantees, secondary collateral, and liquid collateral.
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.
For the year ended December 31, 2025, Financial recorded total income tax expense (federal and state) of $2,123,000, compared to total income tax expense (federal and state) of $1,979,000 for the year ended December 31, 2024, resulting in effective tax rates of 19.05% and 19.94%, respectively.
Recent Accounting Pronouncements For information regarding recent accounting pronouncements and their effect on us, see “ Impact of Recent Accounting Pronouncements ” in Note 24 to the consolidated financial statements included in Item 8 of this Form 10-K. Item 7A. Quantitative and Qualitative Disclosure About Market Risk Not applicable
Any expansion would be subject to regulatory approval and influenced by numerous factors, including market conditions and strategic priorities. Recent Accounting Pronouncements For information regarding recent accounting pronouncements and their effect on us, see “ Impact of Recent Accounting Pronouncements ” in Note 24 to the consolidated financial statements included in Item 8 of this Form 10-K. Item 7A.
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.
Management intends to continue to be proactive in quantifying and mitigating the ongoing risk associated with all asset classes. 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 57 Table of Contents allowance for credit losses.
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.
As discussed in more detail below, For the year ended December 31, 2025, Financial had net income of $9,022,000, an increase of $1,078,000 from net income of $7,944,000 for the year ended December 31, 2024. For the year ended December 31, 2025, earnings per basic and diluted common share were $1.99, as compared to earnings of $1.75 per basic and diluted common share for the year ended December 31, 2024. Net interest income increased to $32,807,000 for the current year from $29,236,000 for the year ended December 31, 2024. Noninterest income increased to $15,852,000 for the year ended December 31, 2025, from $15,137,000 for the year ended December 31, 2024. Total assets as of December 31, 2025, were $1,039,024,000 compared to $979,244,000 at the end of 2024, an increase of $59,780,000 or 6.10%. Net loans (excluding loans held for sale), net of unearned income and the allowance for credit losses, increased to $661,357,000 as of December 31, 2025 from $636,552,000 as of December 31, 2024. The net interest margin increased by 28 basis points to 3.39% for 2025, compared to 3.11% for 2024.
The following table sets forth information for non-owner occupied CRE Loans for each loan category (classified by purpose code and collateral description) that comprises more than one percent (1%) of our total loans: Commercial Real Estate Loan Portfolio (CRE) Non-Owner Occupied (in thousands) As of December 31, 2024 Collateral Description Total Number of Loans Current Balance % of Total Loans Average Balance Weighted Avg LTV of Top 5 Loans (1) Multi-Family (5 or more) 43 $ 52,583 8.19% $ 1,239 53.39% Hotel/Motel 9 32,560 5.07% 3,618 57.34% Office Building 37 25,631 3.99% 693 58.77% Retail Store 27 20,131 3.13% 774 62.81% Medical Building 6 8,835 1.38% 1,473 56.60% (1) Loan-to-value is based on collateral valuation at origination date against current bank-owned principal.
The following table sets forth information for non-owner occupied CRE Loans for each loan category (classified by purpose code and collateral description) that comprises more than one percent (1%) of our total loans: Commercial Real Estate Loan Portfolio (CRE) Non-Owner Occupied ( dollars in thousands) As of December 31, 2025 Collateral Description Total Number of Loans Current Balance % of Total Loans Average Balance Weighted Avg LTV of Top 5 Loans (1) Multi-Family (5 or more) 42 $ 52,107 7.83% $1,270 61.11% Hotel/Motel 10 33,336 5.01% 3,334 57.23% Office Building 34 37,806 5.68% 1,112 54.50% Retail Store 24 18,552 2.79% 807 60.76% Medical Building 5 8,301 1.25% 1,660 54.14% (1) Loan-to-value is based on collateral valuation at origination date against current bank-owned principal.
As of December 31, 2024, we had an unrealized loss in our securities available-for-sale portfolio of $22,915,000 as compared to $21,615,000 on December 31, 2023. The unrealized loss is due to changes in market rates of interest rather than the creditworthiness of the issuers.
As of December 31, 2025, we had an unrealized loss in our securities available-for-sale portfolio of $14,937,000 as compared to $22,915,000 on December 31, 2024.
The Company is utilizing a discounted cash flow model to estimate its current expected credit losses. For the purposes of calculating its quantitative reserves, the Company has segmented its loan portfolio based on loans which share similar risk characteristics.
For purposes of calculating quantitative reserves, the Company has segmented its loan portfolio based on loans that share similar risk characteristics.
The following table sets forth information for owner occupied CRE Loans for the four largest categories of loans (classified by purpose code and collateral description) that comprises more than one percent (1%) of our total loans: Commercial Real Estate Loan Portfolio (CRE) Owner Occupied (in thousands) As of December 31, 2024 Collateral Description Total Number of Loans Current Balance % of Total Loans Average Balance Weighted Avg LTV of Top 5 Loans (1) Industrial 32 $ 33,046 5.14% $ 1,066 59.19% Office Building 65 27,282 4.25% 379 55.58% Medical Building 25 15,232 2.37% 609 72.99% Retail Store 30 14,326 2.23% 494 58.74% (1) Loan-to-value is based on collateral valuation at origination date against current bank-owned principal. ‎ 62 Table of Contents Interest Rate Sensitivity The most important element of asset/liability management is the monitoring of Financial’s sensitivity to interest rate movements.
The following table sets forth information for owner occupied CRE Loans for the four largest categories of loans (classified by purpose code and collateral description) that comprises more than one percent (1%) of our total loans: Commercial Real Estate Loan Portfolio (CRE) Owner Occupied ( dollars in thousands ) As of December 31, 2025 Collateral Description Total Number of Loans Current Balance % of Total Loans Average Balance Weighted Avg LTV of Top 5 Loans (1) Industrial 32 $32,803 4.93% $1,025 56.37% Office Building 83 31,964 4.80% 389 55.99% Retail Store 28 13,838 2.08% 494 54.78% Medical Building 26 13,624 2.05% 524 71.64% (1) Loan-to-value is based on collateral valuation at origination date against current bank-owned principal.
Competition for qualified borrowers continues to remain strong. 47 Table of Contents As of December 31, 2024, the Bank had $1,640,000 , or 0.25% of its total loans, in non-accrual status compared with $391,000, or 0.06% of its total loans, at December 31, 2023.
Competition for qualified borrowers continues to remain strong, with pricing pressure in certain segments as competitors seek to deploy excess liquidity. As of December 31, 2025, the Bank had $1,704,000, or 0.26% of total loans, in nonaccrual status, compared with $1,640,000, or 0.25% of total loans, at December 31, 2024.
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.
For the year ended December 31, 2025 and 2024, the Mortgage Division accounted for approximately 6.27% and 8.33% of Financial’s pre-tax net income, contributing $699,000 and $827,000, respectively. Because of the uncertainty surrounding current and near-term economic conditions, management cannot predict future mortgage rates.
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.
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, 2025 2024 Amount Percent of Loans to Total Loans Amount Percent of Loans to Total Loans Commercial $ 697 9.94% $ 686 10.32% Commercial real estate 3,262 57.16% 3,719 55.84% Consumer 839 13.20% 842 12.17% Residential 1,652 19.70% 1,797 21.67% Total $ 6,450 100.00% $ 7,044 100.00% The following table provides information on the Bank’s nonperforming assets as of the dates indicated: Nonperforming Assets (dollars in thousands) At December 31, 2025 2024 Nonaccrual loans Commercial $ 459 $ 472 Commercial Real Estate 346 397 Consumer 335 192 Residential 564 579 Total nonaccrual loans $ 1,704 $ 1,640 Foreclosed Properties Commercial - - Commercial Real Estate - - Consumer - - Residential - - Total foreclosed properties $ - $ - Repossessed Assets - - 58 Table of Contents Total Nonperforming assets $ 1,704 $ 1,640 Total nonperforming loans as a percentage of total loans 0.26% 0.25% Total nonperforming loans as a percentage of total assets 0.17% 0.17% Allowance for credit losses on loans as a percentage of nonperforming loans 378.50% 429.43% Allowance for credit losses on loans as a percentage of period end loans 0.97% 1.09% Total nonaccrual loans as a percentage of total loans 0.26% 0.25% Allowance for loan losses on loans as a percentage of nonaccrual loans 378.50% 429.43% As set forth in the preceding table, the allowance for credit losses as a percentage of non-accrual loans declined from 429.4% in 2024 to 378.5% in 2025.
The following table summarizes our noninterest income for the periods indicated: Noninterest Income of Financial Noninterest Income (dollars in thousands) December 31, 2024 2023 Gains on sale of loans held for sale $ 4,494 $ 3,938 Service charges, fees and commissions 4,003 3,901 Wealth management fees 4,843 4,197 Life insurance income 721 548 Other 1,014 283 Gain on sales and calls of securities, net 62 — Total noninterest income $ 15,137 $ 12,867 The following table details the Company’s noninterest expense: Noninterest Expense of Financial Noninterest Expense (dollars in thousands) December 31, 2024 2023 Salaries and employee benefits $ 19,294 $ 18,311 Occupancy 1,964 1,819 Equipment 2,499 2,416 Supplies 542 530 Professional and other outside expenses 3,471 2,513 Data processing 3,057 2,783 Marketing 768 919 Credit expense 816 805 Other real estate expenses, net — 40 FDIC insurance expense 441 419 Amortization of intangibles 560 560 Other 1,693 1,392 Total noninterest expense $ 35,105 $ 32,507 The increase in noninterest expense from $32,507,000 in 2023 to $35,105,000 in 2024 was primarily driven by increases in salaries and employee benefits, professional and other outside expenses, data processing, and other expenses, partially offset by decreased marketing expenses.
The following table details our noninterest income for the periods indicated: Noninterest Income (dollars in thousands) December 31, 2025 2024 Gains on sale of loans held for sale $ 4,853 $ 4,494 Service charges, fees and commissions 4,273 4,003 Wealth management fees 5,347 4,843 Life insurance income 769 721 Income from SBIC fund 506 934 Other 77 80 Gain on sales and calls of securities, net 27 62 Total noninterest income $ 15,852 $ 15,137 44 Table of Contents The following table details the Company’s noninterest expense for the periods indicated: Noninterest Expense (dollars in thousands) December 31, 2025 2024 Salaries and employee benefits $ 20,960 $ 19,294 Occupancy 2,136 1,964 Equipment 2,765 2,499 Supplies 631 542 Professional and other outside expenses 3,967 3,471 Data processing 2,487 3,057 Marketing 867 768 Credit expense 904 816 FDIC insurance expense 518 441 Amortization of intangibles 561 560 Other 1,753 1,693 Total noninterest expense $ 37,549 $ 35,105 The increase in noninterest expense from $35,105,000 in 2024 to $37,549,000 in 2025 was driven by normal operating cost increases, including salaries and employee benefits reflecting annual compensation adjustments and the impact of staffing for a branch location opened in April 2025.
(2) Nonperforming loans are included in the average balances. However, interest income and yields calculated do not reflect any accrued interest associated with non-accrual loans.
(2) Nonperforming loans are included in the average balances. However, interest income and yields calculated do not reflect any accrued interest associated with non-accrual loans. (3) The interest income and yields calculated on securities have been tax affected to reflect any tax-exempt interest on municipal securities using the Company’s applicable federal tax rate of 21% for each year.
Management is continuing its efforts to reduce non-performing assets through enhanced collection efforts and the liquidation of underlying collateral when applicable. The Bank attempts to work with borrowers on a case-by-case basis to protect the Bank’s interests.
Management continues to focus on maintaining nonperforming assets at low levels through proactive collection efforts and, when appropriate, the liquidation of underlying collateral. The Bank works with borrowers on a case-by-case basis to protect its interests.
Capital Resources Capital adequacy is an important measure of financial stability and performance. Management’s objectives are to maintain a level of capitalization that is sufficient to sustain asset growth and promote depositor and investor confidence. Regulatory agencies measure capital adequacy utilizing a formula that takes into account the individual risk profiles of financial institutions.
Additional collateral would be required to be pledged in order for the full $303,408,000 to be available. Capital Resources Capital adequacy is an important measure of financial stability and performance. Management’s objectives are to maintain a level of capitalization that is sufficient to sustain asset growth and promote depositor and investor confidence.
Based on our loan portfolio as of December 31, 2024, the non-owner occupied commercial real estate loans and the construction and land development loans were approximately 231.87% and 32.00% (based on interagency CRE guidelines) of total risk-based capital, respectively. We have expertise and a long history in originating and managing commercial real estate loans.
Based on our loan portfolio as of December 31, 2025, the non-owner occupied commercial real estate loans and the construction and land development loans were approximately 241.81% and 26.95% (based on interagency CRE guidelines) of total risk-based capital, respectively. The Bank closely monitors concentrations within its commercial real estate loan portfolio.
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.
The balance of the NBB Note is presented on the December 31, 2025 and 2024 consolidated balance sheets under “other borrowings” and is net of unamortized issuance costs. The Bank may use borrowings in conjunction with deposits to fund lending and investing activities, including both short-term and long-term funding.
As a community bank, the Bank remains committed to growing assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets we serve.
This decrease reflects a modest increase in non-accrual loans from $1,640,000 to $1,704,000. As a community bank, the Bank remains committed to growing assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets we serve. We have expertise and a long history in originating and managing commercial real estate loans.
The financial information contained within our statements is, to a significant extent, based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability.
A variety of factors could affect the ultimate value obtained when earning income, recognizing an expense, recovering an asset, or relieving a liability. The following critical accounting policies involve significant management judgment and have a material impact on our financial statements.
The decision to purchase investment securities is based on several factors or a combination thereof, including: a) The fact that yields on acceptably rated investment securities (S&P “A” rated or better) are significantly better than the overnight federal funds rate; b) Whether demand for loan funding exceeds the rate at which deposits are growing, which leads to higher or lower levels of surplus cash; c) Management’s target of maintaining a minimum of 6% of the Bank’s total assets in a combination of federal funds sold and investment securities (aggregate of available-for-sale and held-to-maturity portfolios); and d) Whether the maturity or call schedule meets management’s asset/liability plan.
The decision to purchase investment securities is based on several factors, individually or in combination, including: a) Whether yields on investment securities rated “A” or better by Standard & Poor’s are materially higher than the overnight federal funds rate, while credit quality and duration characteristics remain within the Company’s risk tolerance; b) Whether demand for loan funding exceeds the rate of deposit growth, which affects the level of surplus liquidity; c) Management’s objective of maintaining a minimum of 6% of the Bank’s total assets in a combination of federal funds sold and investment securities (including both available-for-sale and held-to-maturity portfolios); and d) Whether the maturity and call structure of potential investments aligns with management’s asset/liability management strategy.
On December 29, 2021 Financial borrowed $11,000,000 from National Bank of Blacksburg pursuant to a secured promissory note (the “NBB Note”). The note was modified as of July 1, 2022. Pursuant to the modified note, the note bears interest at the rate of 3.90%.
On December 29, 2021, Financial borrowed $11,000,000 from National Bank of Blacksburg pursuant to a secured promissory note (the “NBB Note”). Financial used the proceeds of the loan primarily to purchase 100% of the capital stock of Pettyjohn, Wood & White, with the remainder retained for general corporate purposes. The note was modified as of July 1, 2022.
Stockholders’ Equity Stockholders' equity increased from December 31, 2023, to December 31, 2024, primarily due to net income earned during the year, partially offset by dividends paid to stockholders and a decrease of $1,300,000 in the market value (mark-to-market adjustment, net of taxes) of available-for-sale securities during 2024.
This increase was primarily due to record net income of $9,022,000 earned during the year and an improvement of $7,978,000 in the mark-to-market adjustment (net of taxes) of available-for-sale securities during 2025, partially offset by dividends paid to stockholders.
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.
RESULTS OF OPERATIONS Year Ended December 31, 2025 compared to year ended December 31, 2024 Net Income The net income for Financial for the year ended December 31, 2025, was $9,022,000 or $1.99 per basic and diluted share compared with net income of $7,944,000 or $1.75 per basic and diluted share for the year ended December 31, 2024.
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.
This increase was due to growth in average earning assets, which increased 3.14% as loan balances increased, and a modest increase in the yields on average earning assets, which primarily consist of loans and investment securities, as discussed below.
The Mortgage Division’s revenue is derived from gains on sales of loans held-for-sale to the secondary market. For the year ended December 31, 2024, the Mortgage Division accounted for 7.52% of Financial’s total revenue, as compared with 7.54% of Financial’s total revenue for the year ended December 31, 2023.
Loans for new home purchases comprised 80.66% of the total volume in 2025, as compared to 81% in 2024. The Mortgage Division’s revenue is derived from gains on sales of loans held-for-sale to the secondary market.
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.
The Company’s effective tax rate was lower than the federal statutory corporate tax rate of 21% in both periods primarily due to permanent tax benefits associated with earnings on bank-owned life insurance and certain tax-exempt municipal securities and loans. These benefits were partially offset by the impact of state income taxes.

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