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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

Form 10-Q

______________________

(Mark one)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2025

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

BANK OF THE JAMES FINANCIAL GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

______________________


Virginia	001-35402	20-0500300
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(I.R.S. Employer Identification No.)

828 Main Street, Lynchburg, VA		24504
(Address of principal executive offices)		(Zip Code)

(434) 846-2000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

______________________

Securities registered or to be registered pursuant to Section 12(b) of the Act

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $2.14 per share par value

BOTJ

The NASDAQ Stock Market LLC

Table of Contents

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 4,543,338 shares of Common Stock, par value $2.14 per share, were outstanding at August 13, 2025.
‎

Table of Contents

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3. Quantitative and Qualitative Disclosures About Market Risk	57
Item 4. Controls and Procedures	57
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	57
Item 1A. Risk Factors	57
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	58
Item 3. Defaults Upon Senior Securities	58
Item 4. Mine Safety Disclosures	58
Item 5. Other Information	58
Item 6. Exhibits	58
SIGNATURES	59

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollar amounts in thousands, except per share amounts) (2025 unaudited)


	(unaudited)
Assets	June 30, 2025	December 31, 2024

Cash and due from banks	$ 22,587	$ 23,287
Federal funds sold	55,320	50,022
Total cash and cash equivalents	77,907	73,309

Securities held-to-maturity, at amortized cost	3,598	3,606
Securities available-for-sale, at fair value	196,585	187,916
Restricted stock, at cost	1,828	1,821
Loans, net of allowance for credit losses of $6,308 as of June 30, 2025 and $7,044 as of December 31, 2024	649,089	636,552
Loans held for sale	4,226	3,616
Premises and equipment, net	19,044	19,313
Interest receivable	3,148	3,065
Cash value - bank owned life insurance	23,285	22,907
Customer relationship intangible	6,445	6,725
Goodwill	2,054	2,054
Deferred tax asset, net	7,774	8,936
Other assets	9,259	9,424
Total assets	$ 1,004,242	$ 979,244


Liabilities and Stockholders' Equity

Deposits
Noninterest bearing demand	$ 137,801	$ 129,692
NOW, money market and savings	543,555	522,208
Time	229,171	230,504
Total deposits	910,527	882,404

Capital notes, net	-	10,048
Other borrowings	8,992	9,300
Income taxes payable	310	86
Interest payable	856	722
Other liabilities	11,892	11,819
Total liabilities	$ 932,577	$ 914,379

Stockholders' equity
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding
4,543,338 as of June 30, 2025 and December 31, 2024	9,723	9,723
Additional paid-in-capital	35,253	35,253
Accumulated other comprehensive loss	(18,753)	(22,915)
Retained earnings	45,442	42,804
Total stockholders' equity	$ 71,665	$ 64,865

Total liabilities and stockholders' equity	$ 1,004,242	$ 979,244

‎

See accompanying notes to these consolidated financial statements

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Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Income

(dollar amounts in thousands, except per share amounts) (unaudited)


	For the Three Months		For the Six Months
	Ended June 30,		Ended June 30,
Interest Income	2025	2024	2025	2024
Loans	$ 9,341	$ 8,347	$ 18,247	$ 16,371
Securities
US Government and agency obligations	548	361	1,002	699
Mortgage backed securities	377	723	764	1,532
Municipals	354	307	683	611
Dividends	35	35	48	47
Corporates	136	136	271	271
Interest bearing deposits	127	192	250	325
Federal Funds sold	720	834	1,607	1,588
Total interest income	11,638	10,935	22,872	21,444


Interest Expense
Deposits
NOW, money market and savings	1,258	1,383	2,506	2,658
Time Deposits	1,945	2,266	4,024	4,356
Finance leases	17	20	34	40
Other borrowings	87	94	176	186
Capital notes	81	81	163	163
Total interest expense	3,388	3,844	6,903	7,403

Net interest income	8,250	7,091	15,969	14,041

Recovery of credit losses	(528)	(123)	(391)	(676)

Net interest income after recovery of credit losses	8,778	7,214	16,360	14,717


Noninterest income
Gains on sale of loans held for sale	1,589	1,273	2,426	2,200
Service charges, fees and commissions	975	986	1,956	1,939
Wealth management fees	1,300	1,176	2,555	2,339
Life insurance income	190	183	378	342
Other	21	533	43	638
Gain on sales of available-for-sale securities	-	40	-	40

Total noninterest income	4,075	4,191	7,358	7,498

Noninterest expenses
Salaries and employee benefits	5,357	4,892	10,134	9,337
Occupancy	497	486	1,067	979
Equipment	654	632	1,324	1,239
Supplies	168	121	310	266
Professional	818	695	2,533	1,496
Data processing	719	748	1,539	1,499
Marketing	237	231	435	261
Credit expense	263	234	449	422
FDIC insurance expense	120	126	262	235
Amortization of intangibles	140	140	280	280
Other	482	434	948	813
Total noninterest expenses	9,455	8,739	19,281	16,827

Income before income taxes	3,398	2,666	4,437	5,388

See accompanying notes to these consolidated financial statements

Table of Contents


Income tax expense	694	518	891	1,053

Net Income	$ 2,704	$ 2,148	$ 3,546	$ 4,335

Weighted average shares outstanding - basic	4,543,338	4,543,338	4,543,338	4,543,338

Net income per common share - basic	$ 0.60	$ 0.47	$ 0.78	$ 0.95

‎

See accompanying notes to these consolidated financial statements

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Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(dollar amounts in thousands) (unaudited)


	For the Three Months		For the Six Months Ended
	Ended June 30,		Ended June 30,
	2025	2024	2025	2024
Net Income	$ 2,704	$ 2,148	$ 3,546	$ 4,335
Other comprehensive income (loss):
Unrealized gain (loss) on securities available-for-sale	1,350	(495)	5,268	(2,186)
Tax effect	(285)	105	(1,106)	460
Other comprehensive income (loss), net of tax	1,066	(422)	4,162	(1,758)

Comprehensive income	$ 3,770	$ 1,726	$ 7,708	$ 2,577

‎

See accompanying notes to these consolidated financial statements

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Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(dollar amounts in thousands) (unaudited)


	For the Six Months Ended June 30,
	2025	2024
Cash flows from operating activities
Net Income	$ 3,546	$ 4,335

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	662	690
Net amortization and accretion of premiums and discounts on securities	139	281
Amortization of debt issuance costs	2	3
Gain on sales of available-for-sale securities	-	(40)
Gain on sales of loans held for sale	(2,426)	(2,200)
Proceeds from sales of loans held for sale	96,007	89,279
Origination of loans held for sale	(94,191)	(90,656)
Recovery of provision for credit losses	(391)	(676)
Amortization of intangibles	280	280
Bank owned life insurance income	(378)	(342)
Decrease in interest receivable	(83)	(85)
Decrease (increase) in other assets	727	(302)
Increase in interest payable	134	73
Increase in other liabilities	388	1,013

Net cash provided by operating activities	$ 4,416	$ 1,653

Cash flows from investing activities
Purchases of securities available-for-sale	$ (19,182)	$ (12,011)
Proceeds from maturities, calls and paydowns of securities available-for-sale	15,650	11,131
Proceeds from sales of securities available-for-sale	-	8,754
Purchases of bank owned life insurance	-	(600)
Purchases of restricted securities	(7)	(29)
Origination of loans, net of principal collected	(12,013)	(13,567)
Purchases of premises and equipment	(747)	(592)
Purchase of SBIC fund	(150)	-

Net cash used in investing activities	$ (16,449)	$ (6,914)

Cash flows from financing activities
Net increase in deposits	$ 28,123	$ 6,443
Principal payments on finance lease obligations	(224)	(186)
Repayment of capital notes	(10,050)	-
Repayment of other borrowings	(308)	(297)
Dividends paid to common stockholders	(910)	(910)

Net cash provided by financing activities	$ 16,631	$ 5,050

Increase in cash and cash equivalents	4,598	(211)

Cash and cash equivalents at beginning of period	$ 73,309	$ 74,838

Cash and cash equivalents at end of period	$ 77,907	$ 74,627

Supplemental schedule of noncash investing and financing activities
Noncash transactions
Unrealized gains (losses) on securities available-for-sale	$ 5,268	$ (2,226)

See accompanying notes to these consolidated financial statements

Table of Contents

Supplemental disclosures of cash flow information
Cash transactions
Cash paid for interest	$ 6,769	$ 7,330
Cash paid for income taxes	690	850

See accompanying notes to these consolidated financial statements

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Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

For the Three and Six Months Ended June 30, 2025 and 2024

(dollars in thousands, except per share amounts) (unaudited)


					Accumulated
			Additional		Other
	Shares	Common	Paid-in	Retained	Comprehensive
	Outstanding	Stock	Capital	Earnings	(Loss)	Total

Balance at December 31, 2023	4,543,338	$ 9,723	$ 35,253	$ 36,678	$ (21,615)	$ 60,039

Net Income	-	-	-	2,187	-	2,187

Dividends paid on common stock ($0.10 per share)	-	-	-	(453)	-	(453)

Other comprehensive loss	-	-	-	-	(1,336)	(1,336)

Balance at March 31, 2024	4,543,338	$ 9,723	$ 35,253	$ 38,412	$ (22,951)	$ 60,437

Net Income	-	-	-	2,148	-	2,148

Dividends paid on common stock ($0.10 per share)	-	-	-	(457)	-	(457)

Repurchase of common stock

Other comprehensive loss	-	-	-	-	(422)	(422)

Balance at June 30, 2024	4,543,338	$ 9,723	$ 35,253	$ 40,103	$ (23,373)	$ 61,706

Balance at December 31, 2024	4,543,338	$ 9,723	$ 35,253	$ 42,804	$ (22,915)	$ 64,865

Net Income	-	-	-	842	-	842

Dividends paid on common stock ($0.10 per share)	-	-	-	(455)	-	(455)

Other comprehensive income	-	-	-	-	3,096	3,096

Balance at March 31, 2025	4,543,338	$ 9,723	$ 35,253	$ 43,191	$ (19,819)	$ 68,348

Net Income	-	-	-	2,704	-	2,704

Dividends paid on common stock ($0.10 per share)	-	-	-	(455)	-	(455)

Other comprehensive income	-	-	-	-	1,066	1,066

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Balance at June 30, 2025

4,543,338

$ 9,723

$ 35,253

$ 45,442

$ (18,753)

$ 71,665

‎

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Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

Bank of the James Financial Group, Inc.’s (“Financial” or the “Company”) primary market area consists of the area commonly referred to as 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. Within the last several years, the Company expanded into Charlottesville, Roanoke, Blacksburg, Harrisonburg, Lexington, Rustburg, Wytheville, Buchanan, and Nellysford.

The unaudited consolidated financial statements have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission. In management’s opinion, the accompanying financial statements, which unless otherwise noted are unaudited, reflect all adjustments, consisting solely of normal recurring accruals, necessary for a fair presentation of the financial information as of June 30, 2025 and December 31, 2024, and for the three and six months ended June 30, 2025 and 2024, in conformity with accounting principles generally accepted in the United States of America. Additional information concerning the organization and business of Financial, accounting policies followed, and other related information is contained in Financial’s Annual Report on Form 10-K for the year ended December 31, 2024. These financial statements should be read in conjunction with the audited consolidated financial statements and related footnotes for the year ended December 31, 2024 included in Financial’s Annual Report on Form 10-K. Results for the three and six-month periods ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

In connection with the acquisition of PWW, the Company recorded an intangible asset for customer relationships in the amount of $8,406,000. The Company is using straight line amortization over a period of 15 years, resulting in annual amortization of $560,000. As of June 30, 2025 and December 31, 2024, the intangible asset, net of amortization, was $6,445,000 and $6,725,000, respectively.

Note 2 – Significant Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for credit losses on loans (“ACLL”) and the valuation of our available-for-sale securities.

Significant Accounting Policies and Estimates

Application of the principles of GAAP and practices within the banking industry requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements may reflect different estimates, assumptions, and judgments. Certain policies inherently rely more extensively on the use of estimates, assumptions, and judgments and as such may have a greater possibility of producing results that could be materially different than originally reported.

The Company’s significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in Note 2 of the audited financial statements and notes for the year ended December 31, 2024 and are contained in the Company’s 2024 Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2024.

‎

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Note 3 – Earnings Per Common Share (EPS)

The following is a summary of the earnings per share calculation for the three and six months ended June 30, 2025 and 2024 (dollars in thousands except per share data):



	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2025	2024	2025	2024

Net income	$ 2,704	$ 2,148	$ 3,546	$ 4,335

Weighted average number of shares outstanding - basic and diluted	4,543,338	4,543,338	4,543,338	4,543,338

Earnings per common share - basic and diluted	$ 0.60	$ 0.47	$ 0.78	$ 0.95

There were no potentially dilutive shares outstanding as of June 30, 2025 and 2024. Consequently, the weighted average shares and weighted average diluted shares were identical.

Note 4 – Debt (Current and Long Term)

Capital Notes

On April 13, 2020, the Company commenced a private placement of unregistered, unsecured subordinated notes (the “2020 Offering”). Between April 13, 2020 and July 8, 2020, the Company issued an aggregate principal amount of $10,050,000 of 3.25% fixed‑rate notes (the “2020 Notes”). Interest was payable quarterly in arrears.

The 2020 Notes matured and were payable in full on June 30, 2025. On the maturity date, the Company repaid the entire $10,050,000 principal plus accrued interest of approximately $82,000 from parent‑company cash. In accordance with Accounting Standards Codification (ASC) 405-20, no gain or loss was recognized on the settlement of the notes at par. The $10,050,000 cash outflow is presented in the financing activities section of the consolidated statement of cash flows.

The balance of the 2020 Notes as of June 30, 2025 and December 31, 2024 is presented net of unamortized issuance costs on the Consolidated Balance Sheet.

Other Long Term Debt

On December 29, 2021, Financial borrowed $11,000,000 from National Bank of Blacksburg (“NBB”) pursuant to a secured promissory note (the “NBB Note”). Prior to the modification discussed below, the NBB Note bore interest at a rate of 4.00% and was being amortized over a fifteen-year period, with a balloon payment of approximately $9,375,000 due on December 31, 2024. The note is secured by a first-priority lien on approximately 4.95% of the Bank’s common stock. The balance of the NBB Note is presented on the Consolidated Balance Sheets under “other borrowings” and is net of unamortized issuance costs. A portion of the proceeds was used to purchase 100% of the capital stock of Pettyjohn, Wood & White, Inc. (“PWW”), our wholly-owned investment advisory subsidiary.

On June 30, 2022, NBB agreed to modify the terms of the NBB Note, effective July 1, 2022. Pursuant to the modification, the balloon payment date was extended to December 31, 2026, from December 31, 2024, and the interest rate was lowered to 3.90% from 4.00%. The principal balance on the NBB Note was approximately $8,992,000 at June 30, 2025, and $9,300,000 at December 31, 2024. Absent further modification, the approximate amount of the balloon payment on December 31, 2026 will be $8,104,000.

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Note 5 – Fair Value Measurements

Determination of Fair Value

The Company uses fair value measurements to record adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of FASB ASC 820, the fair value of a financial instrument is defined as the price that would be received to sell an asset or paid to transfer a liability (an “exit price”) in the principal or most advantageous market, in an orderly transaction between market participants at the measurement date.

Fair value is best determined based on quoted market prices. However, in many instances, quoted market prices are not available for the Company’s various financial instruments. In such cases, fair values are estimated using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, emphasizing exit price in the principal or most advantageous market, and in an orderly transaction (not a forced liquidation or distressed sale) between market participants at the measurement date, under current market conditions. If there has been a significant decrease in the volume and level of activity for an asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact depends on the facts and circumstances and requires significant judgment. The fair value selected should be a reasonable point within the range most representative of fair value under current market conditions.

Fair Value Hierarchy

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Fair Value on a Recurring Basis

Securities Available-for-Sale

Fair values of securities available-for-sale are based on quoted prices available in an active market. If quoted prices are available, these securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds, mortgage products, and exchange-traded equities. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow.

Level 2 securities include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions, and certain corporate, asset-backed, and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Currently, all of the Company’s securities are considered Level 2 securities.

Derivatives Assets/Liabilities – Interest Rate Lock Commitments (IRLCs)

The Company recognizes IRLCs at fair value based on the price of the underlying loans obtained from an investor for loans that will be delivered on a best efforts basis while taking into consideration the probability that the rate lock commitments will close. All of the Company’s IRLCs are classified as Level 3.

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Note 5 – Fair Value Measurements (continued)

The below tables summarize the Company’s financial assets that were measured at fair value on a recurring basis during the period presented.


		Carrying Value at June 30, 2025
		Quoted Prices	Significant
		in Active	Other	Significant
	Balance as of	Markets for	Observable	Unobservable
(dollars in thousands)	June 30,	Identical Assets	Inputs	Inputs
Description	2025	(Level 1)	(Level 2)	(Level 3)
U.S. agency obligations	$ 79,180	$ -	$ 79,180	$ -
Mortgage-backed securities	57,148	-	57,148	-
Municipals	45,492	-	45,492	-
Corporates	14,765	-	14,765	-

Total available-for-sale securities	$ 196,585	$ -	$ 196,585	$ -
IRLCs - asset	239	-	-	239
Total assets at fair value	$ 196,824	$ -	$ 196,585	$ 239


		Carrying Value at December 31, 2024
		Quoted Prices	Significant
		in Active	Other	Significant
	Balance as of	Markets for	Observable	Unobservable
(dollars in thousands)	Dec 31,	Identical Assets	Inputs	Inputs
Description	2024	(Level 1)	(Level 2)	(Level 3)
U.S. agency obligations	$ 73,060	$ -	$ 73,060	$ -
Mortgage-backed securities	58,973	-	58,973	-
Municipals	41,561	-	41,561	-
Corporates	14,322	-	14,322	-

Total available-for-sale securities	$ 187,916	$ -	$ 187,916	$ -
IRLCs - asset	42	-	-	42
Total assets at fair value	$ 187,958	$ -	$ 187,916	$ 42

‎

Table of Contents

Note 5 – Fair Value Measurements (continued)

The following table provides additional quantitative information about assets measured at fair value on a recurring basis and for which we utilize Level 3 inputs to determine fair value:


Quantitative information about Level 3 Fair Value Measurements for June 30, 2025
(dollars in thousands)
	Fair Value		Valuation Technique(s)	Unobservable Input	Range
Assets
IRLCs – asset	$	239	Market approach	Range of pull through rate	70% - 100% (85%)

(1) Weighted based on the relative value of the instruments


Quantitative information about Level 3 Fair Value Measurements for December 31, 2024
(dollars in thousands)
	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average) (1)
Assets
IRLCs - asset	$	42	Market approach	Range of pull through rate	70% - 100% (85%)

There were no transfers of financial assets between hierarchy levels during the three and six month period ending June 30, 2025.

Fair Value on a Non-recurring Basis

Collateral Dependent Loans with an ACLL

In accordance with ASC 326, the Company may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay, collateral deficiencies, the relative risk grade of the loan, and economic conditions affecting the borrower’s industry, among other factors.

A loan is considered collateral dependent when, based on management’s assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The Company reevaluates the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting such loans is evaluated by appraisal services using methodologies consistent with the Uniform Standards of Professional Appraisal Practice. Based the review of managment, no nonrecurring fair value adjustments were needed on collateral dependent loans at June 30, 2025 or December 31, 2024.

Loans Held for Sale

Loans held for sale are carried at cost, which approximates estimated fair value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on prices currently offered by secondary markets for similar loans using observable market data, which is not materially different from cost due to the short duration between origination and sale (Level 2). As such, the Company records fair value adjustments on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at June 30, 2025 or December 31, 2024. Gains and losses on the sale of loans are recorded within “Gain on sales of loans held for sale” on the Consolidated Statements of Income.

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Note 5 – Fair Value Measurements (continued)

Financial Instruments

FASB ASC 825, Financial Instruments, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The carrying amounts and estimated fair values of the Company’s financial instruments are presented in the following tables whether or not recognized on the Consolidated Balance Sheets at fair value.

The estimated fair values, and related carrying or notional amounts, of Financial’s financial instruments and their placement in the fair value hierarchy at June 30, 2025, and December 31, 2024, were as follows (in thousands):


		Fair Value Measurements at June 30, 2025 using
	Carrying
Assets	Amounts	(Level 1)	(Level 2)	(Level 3)	Balance
Cash and due from banks	$ 22,587	$ 22,587	$ -	$ -	$ 22,587
Federal funds sold	55,320	55,320	-	-	55,320
Securities
Available-for-sale	196,585	-	196,585	-	196,585
Held-to-maturity, net	3,598	-	3,251	-	3,251
Restricted stock	1,828	-	1,828	-	1,828
Loans, net (1)	649,089	-	-	635,045	635,045
Loans held for sale	4,226	-	4,226	-	4,226
Interest receivable	3,148	-	3,148	-	3,148
BOLI	23,285	-	23,285	-	23,285
Derivatives - IRLCs	239	-	-	239	239

Liabilities
Checking , money market, savings and NOW	$ 681,358	$ -	$ 681,358	$ -	$ 681,358
Time deposits	229,171		228,378		228,378
Other borrowings	8,992	-	8,739	-	8,739
Interest payable	856	-	856	-	856

‎

Table of Contents

Note 5 – Fair Value Measurements (continued)


		Fair Value Measurements at December 31, 2024 using
	Carrying
Assets	Amounts	(Level 1)	(Level 2)	(Level 3)	Balance
Cash and due from banks	$ 23,287	$ 23,827	$ -	$ -	$ 23,827
Federal funds sold	50,022	50,022	-	-	50,022
Securities					-
Available-for-sale	187,916	-	187,916	-	187,916
Held-to-maturity	3,606	-	3,170	-	3,170
Restricted stock	1,821	-	1,821	-	1,821
Loans, net (1)	636,552	-	—	613,984	613,984
Loans held for sale	3,616	-	3,616	-	3,616
Interest receivable	3,065	-	3,065	-	3,065
Cash value - bank owned life insurance	22,907	-	22,907	-	22,907
Derivatives - IRLCs	42	-	—	42	42

Liabilities
Checking , money market, savings and NOW	$ 651,895	$ -	$ 651,895	$ -	$ 651,895
Time deposits	230,509		230,027		$ 230,027
Capital notes	10,048	-	9,836	-	9,836
Other borrowings	9,300	-	8,929	-	8,929
Interest payable	722	-	722	-	722

(1) Carrying amount is net of unearned income and the ACLL.

‎

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Note 6 – Securities

The following tables summarize the Bank’s holdings for securities held-to-maturity and available-for-sale as of June 30, 2025 and December 31, 2024 (amounts in thousands) are summarized below:


		June 30, 2025
	Amortized	Gross Unrealized
(in thousands)	Costs	Gains	(Losses)	Fair Value
Held-to-Maturity
U.S. agency obligations	$ 3,598	$ -	$ (347)	$ 3,251

Available-for-sale
U.S. agency obligations	84,033	243	(5,096)	79,180
Mortgage-backed securities	65,644	24	(8,520)	57,148
Municipals	55,141	21	(9,670)	45,492
Corporates	15,504	-	(739)	14,765
	$ 220,322	$ 288	$ (24,025)	$ 196,585


		December 31, 2024
	Amortized	Gross Unrealized
(in thousands)	Costs	Gains	(Losses)	Fair Value
Held-to-Maturity
U.S. agency obligations	$ 3,606	$ -	$ (436)	$ 3,170

Available-for-sale
U.S. agency obligations	79,976	-	(6,916)	73,060
Mortgage-backed securities	69,312	9	(10,348)	58,973
Municipals	52,123	-	(10,562)	41,561
Corporates	15,510	-	(1,188)	14,322
	$ 216,921	$ 9	$ (29,014)	$ 187,916

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Table of Contents

Note 6 – Securities (continued)

The following tables summarize the fair value of securities available-for-sale as of June 30, 2025 and as of December 31, 2024 and the corresponding amounts of unrealized losses. Management uses the valuation as of month-end in determining when securities are in an unrealized loss position (amounts in thousands):

BANK OF THE JAMES FINANCIAL GROUP INC 10-Q