Bank of the James Financial Group, Inc. (BOTJ) is a Virginia-based bank holding company that operates through its wholly-owned subsidiary, Bank of the James. The company serves the Central Virginia region, with a focus on providing retail and commercial banking services to individuals, small and medium-sized businesses, and professional concerns.

Financials

In the fiscal year 2023, BOTJ reported annual net income of $8,704,000 and annual revenue of $52,189,000. The company's annual operating cash flow was $4,389,000, while its annual free cash flow stood at $1,015,000. These financial results demonstrate BOTJ's ability to generate consistent earnings and cash flow, even in the face of economic challenges.

For the first quarter of 2024, BOTJ reported net income of $2,187,000, a 10.2% increase from the $1,984,000 reported in the same period of 2023. This growth was driven by a 15.5% increase in interest income, which rose from $9,098,000 in Q1 2023 to $10,509,000 in Q1 2024. The company's net interest margin, however, decreased from 3.48% in Q1 2023 to 3.02% in Q1 2024, as the increase in interest expense outpaced the rise in interest income.

BOTJ's loan portfolio totaled $608,035,000 as of March 31, 2024, a slight decrease from the $609,333,000 reported at the end of 2023. The company's loan mix remained relatively stable, with commercial real estate loans accounting for 53.92% of the total loan portfolio, followed by residential loans at 22.55%, consumer loans at 12.30%, and commercial loans at 11.23%.

The company's asset quality metrics remained strong, with nonperforming assets (consisting of nonaccrual loans and loans past due 90 days or more) increasing slightly from $391,000 at the end of 2023 to $558,000 as of March 31, 2024. The allowance for credit losses stood at $6,920,000, or 1.14% of total loans, as of the end of the first quarter of 2024, down from 1.22% at the end of 2023.

Liquidity

BOTJ's liquidity position remained robust, with cash and cash equivalents totaling $88,072,000 as of March 31, 2024, up from $74,838,000 at the end of 2023. The company's deposit base grew 1.71% during the first quarter, reaching $893,494,000 as of March 31, 2024, driven by increases in noninterest-bearing demand and time deposits.

The company's capital ratios remained well above regulatory requirements, with a Tier 1 capital ratio of 12.62% and a total risk-based capital ratio of 13.56% as of March 31, 2024. These strong capital levels provide BOTJ with the flexibility to navigate the current economic environment and pursue strategic growth opportunities.

Noninterest Income and Expenses

BOTJ's noninterest income increased 8.6% in the first quarter of 2024, rising from $3,044,000 in Q1 2023 to $3,307,000 in Q1 2024. This growth was primarily driven by a 15.6% increase in wealth management fees, which reached $1,163,000 in the first quarter of 2024. The company's mortgage banking division also contributed to the increase in noninterest income, with gains on sales of loans held for sale rising from $923,000 in Q1 2023 to $927,000 in Q1 2024.

BOTJ's noninterest expenses remained relatively flat, increasing by just 0.16% from $8,075,000 in Q1 2023 to $8,088,000 in Q1 2024. This disciplined approach to expense management has helped the company maintain its profitability in the face of economic headwinds.

Outlook

Looking ahead, BOTJ's management team remains cautiously optimistic about the company's prospects. In the company's latest guidance, management indicated that they expect the current interest rate environment to continue to put pressure on the company's net interest margin in the near to mid-term. However, the company's diversified revenue streams, strong asset quality, and prudent expense management are expected to help offset the impact of margin compression.

Business Overview

BOTJ's geographic footprint is primarily concentrated in the Central Virginia region, with a focus on the area commonly referred to as Region 2000. The company has also expanded into other areas of Virginia, including Roanoke, Charlottesville, Harrisonburg, Blacksburg, Lexington, and Rustburg. This regional diversification has helped BOTJ mitigate the impact of localized economic challenges and capitalize on growth opportunities in new markets.

In terms of revenue breakdowns, BOTJ's primary sources of income are net interest income, which accounted for 67.8% of total revenue in the first quarter of 2024, and noninterest income, which made up the remaining 32.2%. Within noninterest income, the company's wealth management and mortgage banking divisions have been key contributors, generating 35.2% and 28.0% of noninterest income, respectively, in the first quarter of 2024.

BOTJ's liquidity position remains a key strength, with the company's cash and cash equivalents representing 8.9% of total assets as of March 31, 2024. This strong liquidity profile provides BOTJ with the flexibility to withstand potential economic disruptions and pursue strategic growth initiatives.

Conclusion

Bank of the James Financial Group, Inc. (BOTJ) is a well-capitalized, community-focused bank that has demonstrated its ability to navigate challenging economic conditions. The company's diversified revenue streams, prudent expense management, and strong liquidity position have positioned BOTJ to continue delivering value to its shareholders. While the current interest rate environment may present near-term headwinds, BOTJ's management team remains committed to driving long-term growth and profitability for the organization.