BOTJ 10-Q Quarterly Report Sept. 30, 2025 | Alphaminr
BANK OF THE JAMES FINANCIAL GROUP INC
ALPHAMINR

BOTJ 10-Q Quarter ended Sept. 30, 2025

Balance Sheet
Cash Flow
Income Statement
Debt
BANK OF THE JAMES FINANCIAL GROUP INC
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DEF 14A
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DEF 14A
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Table of Contents

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 September 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

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 November 13, 2025.
‎

Table of Contents

TABLE OF CONTENTS

Table of Contents

PART I – FINANCIAL INFORMAT ION

Item 1. Consolidated Financial Statem ents

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Balance Sheets

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

Assets

September 30, 2025

December 31, 2024

Cash and due from banks

$ 28,450

$ 23,287

Federal funds sold

57,001

50,022

Total cash and cash equivalents

85,451

73,309

Securities held-to-maturity, at amortized cost (fair value of $ 3,308 as of September 30, 2025 and $ 3,170 as of December 31, 2024) net of allowance for credit losses of $ 0 as of September 30, 2025 and December 31, 2024

3,594

3,606

Securities available-for-sale, at fair value

202,506

187,916

Restricted stock, at cost

1,828

1,821

Loans, net of allowance for credit losses of $ 6,298 as of September 30, 2025 and $ 7,044 as of December 31, 2024

653,288

636,552

Loans held for sale

3,766

3,616

Premises and equipment, net

18,834

19,313

Interest receivable

3,001

3,065

Cash value - bank owned life insurance

23,480

22,907

Customer relationship intangible

6,305

6,725

Goodwill

2,054

2,054

Other assets

16,018

18,360

Total assets

$ 1,020,125

$ 979,244

Liabilities and Stockholders' Equity

Deposits

Noninterest bearing demand

$ 132,848

$ 129,692

NOW, money market and savings

548,110

522,208

Time

238,838

230,504

Total deposits

919,796

882,404

Capital notes, net

-

10,048

Other borrowings

8,836

9,300

Interest payable

1,292

722

Other liabilities

13,229

11,905

Total liabilities

$ 943,153

$ 914,379

Stockholders' equity

Common stock $ 2.14 par value; authorized 10,000,000 shares; issued and outstanding 4,543,338 as of September 30, 2025 and December 31, 2024

9,723

9,723

Additional paid-in-capital

35,253

35,253

Accumulated other comprehensive loss

( 15,743 )

( 22,915 )

Retained earnings

47,739

42,804

Total stockholders' equity

$ 76,972

$ 64,865

Total liabilities and stockholders' equity

$ 1,020,125

$ 979,244

1

See accompanying notes to these consolidated financial statements

Table of Contents

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 Nine Months

Ended September 30,

Ended September 30,

Interest Income

2025

2024

2025

2024

Loans

$ 9,492

$ 9,004

$ 27,739

$ 25,375

Securities

US Government and agency obligations

540

369

1,542

1,068

Mortgage backed securities

386

442

1,150

1,974

Municipals

395

316

1,078

927

Dividends

15

12

63

59

Corporates

136

136

407

407

Interest bearing deposits

150

303

400

628

Federal Funds sold

657

981

2,264

2,569

Total interest income

11,771

11,563

34,643

33,007

Interest Expense

Deposits

NOW, money market and savings

1,273

1,487

3,779

4,145

Time Deposits

2,114

2,375

6,138

6,731

Finance leases

16

18

50

58

Capital notes

-

92

163

278

Other borrowings

68

82

244

245

Total interest expense

3,471

4,054

10,374

11,457

Net interest income

8,300

7,509

24,269

21,550

Provison for (recovery of) credit losses

91

92

( 301 )

( 584 )

Net interest income after provision for
‎ (recovery of) credit losses

8,209

7,417

24,570

22,134

Noninterest income

Gains on sale of loans held for sale

1,242

1,326

3,668

3,526

Service charges, fees and commissions

1,046

991

3,002

2,930

Wealth management fees

1,362

1,244

3,917

3,583

Life insurance income

195

189

573

531

Other

297

31

340

669

Gain on sales of available-for-sale securities, net

27

42

27

82

Total noninterest income

4,169

3,823

11,527

11,321

Noninterest expenses

Salaries and employee benefits

5,516

4,920

15,650

14,256

Occupancy

523

514

1,590

1,493

Equipment

697

640

2,021

1,879

Supplies

153

131

463

397

Professional and other outside expense

725

688

3,194

2,125

Data processing

381

794

1,984

2,352

Marketing

249

220

684

481

Credit expense

216

190

665

612

FDIC insurance expense

132

94

394

329

Amortization of intangibles

140

140

420

420

Other

428

445

1,376

1,258

Total noninterest expenses

9,160

8,776

28,441

25,602

Income before income taxes

3,218

2,464

7,656

7,853

2

See accompanying notes to these consolidated financial statements

Table of Contents

Income tax expense

466

474

1,357

1,527

Net Income

$ 2,752

$ 1,990

$ 6,299

$ 6,326

Weighted average shares outstanding - basic and diluted

4,543,338

4,543,338

4,543,338

4,543,338

Net income per common share - basic and diluted

$ 0.61

$ 0.44

$ 1.39

$ 1.39


‎

3

See accompanying notes to these consolidated financial statements

Table of Contents

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 Nine Months Ended

Ended September 30,

Ended September 30,

2025

2024

2025

2024

Net Income

$ 2,752

$ 1,990

$ 6,299

$ 6,326

Other comprehensive income:

Unrealized gain on securities available-for-sale, net

3,837

7,120

9,105

4,934

Tax effect

( 806 )

( 1,496 )

( 1,912 )

( 1,036 )

Reclassification adjustment for gains included in net income

( 28 )

( 42 )

( 28 )

( 82 )

Tax effect

7

9

7

17

Other comprehensive income, net of tax

3,010

5,591

7,172

3,833

Comprehensive income

$ 5,762

$ 7,581

$ 13,471

$ 10,159


‎

4

See accompanying notes to these consolidated financial statements

Table of Contents

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(dollar amounts in thousands) (unaudited)

For the Nine Months Ended September 30,

2025

2024

Cash flows from operating activities

Net Income

$ 6,299

$ 6,326

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

993

972

Net amortization and accretion of premiums and discounts on securities

187

506

Amortization of debt issuance costs

2

4

Gain on sales of available-for-sale securities, net

( 27 )

( 82 )

Gain on sale of equipment

( 28 )

-

Gain on sales of loans held for sale

( 3,668 )

( 3,526 )

Proceeds from sales of loans held for sale

150,446

146,880

Origination of loans held for sale

( 146,928 )

( 145,335 )

Recovery of provision for credit losses

( 301 )

( 584 )

Amortization of intangibles

420

420

Bank owned life insurance income

( 573 )

( 531 )

Decrease in interest receivable

64

138

Decrease (increase) in other assets

786

( 134 )

Increase in interest payable

570

278

Increase in other liabilities

1,444

1,291

Net cash provided by operating activities

$ 9,686

$ 6,623

Cash flows from investing activities

Purchases of securities available-for-sale

$                                 ( 29,411 )

$                                 ( 15,122 )

Proceeds from maturities, calls and paydowns of securities available-for-sale

19,524

13,305

Proceeds from sales of securities available-for-sale

4,227

30,298

Purchases of bank owned life insurance

-

( 599 )

Purchases of restricted stock

( 7 )

( 280 )

Origination of loans, net of principal collected

( 16,218 )

( 24,697 )

Purchases of premises and equipment

( 532 )

( 2,209 )

Proceeds from sales of equipment

46

-

Purchase of SBIC fund

( 350 )

-

Net cash provided by (used in) investing activities

$                                 ( 22,721 )

$ 696

Cash flows from financing activities

Net increase in deposits

$ 37,392

$ 29,151

Principal payments on finance lease obligations

( 337 )

( 291 )

Repayment of capital notes

( 10,050 )

-

Repayment of other borrowings

( 464 )

( 446 )

Dividends paid to common stockholders

( 1,364 )

( 1,364 )

Net cash provided by financing activities

$ 25,177

$ 27,050

Increase in cash and cash equivalents

12,142

34,369

Cash and cash equivalents at beginning of period

$ 73,309

$ 74,838

Cash and cash equivalents at end of period

$ 85,451

$ 109,207

Supplemental schedule of noncash investing and financing activities

Noncash transactions

Unrealized gains on securities available-for-sale

$ 9,077

$ 4,852

Supplemental disclosures of cash flow information

Cash transactions

Cash paid for interest

$ 9,804

$ 11,179

Cash paid for income taxes

1,040

1,300

5

See accompanying notes to these consolidated financial statements

Table of Contents

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

For the Nine Months Ended September 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

-

-

-

2,188

-

2,188

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

$ 38,413

$           ( 22,951 )

$ 60,438

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

$ 40,104

$           ( 23,373 )

$ 61,707

Net Income

-

1,990

1,990

Dividends paid on common stock ($ 0.10 per share)

-

( 454 )

( 454 )

Other comprehensive income

-

5,591

5,591

Balance at September 30, 2024

4,543,338

$ 9,723

$ 35,253

$ 41,640

$           ( 17,782 )

$ 68,834

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

-

-

-

2,705

-

2,705

6

Table of Contents

Dividends paid on common stock ($ 0.10 per share)

-

-

-

( 454 )

-

( 454 )

Other comprehensive income

-

-

-

-

1,066

1,066

Balance at June 30, 2025

4,543,338

$ 9,723

$ 35,253

$ 45,442

$           ( 18,753 )

$ 71,665

Net Income

-

-

-

2,752

-

2,752

Dividends paid on common stock ($ 0.10 per share)

-

-

-

( 455 )

-

( 455 )

Other comprehensive income

-

-

-

-

3,010

3,010

Balance at September 30, 2025

4,543,338

$ 9,723

$ 35,253

$ 47,739

$           ( 15,743 )

$ 76,972


‎

7

Table of Contents

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 September 30, 2025 and December 31, 2024 , and for the three and nine months ended September 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 nine-month periods ended September 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 Pettyjohn, Wood & White, Inc. (“PWW”), the Company’s wholly-owned investment advisory subsidiary, 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 approximately $ 560,000 . As of September 30, 2025 and December 31, 2024 , the intangible asset, net of amortization, was $ 6,305,000 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 (“ACL”).

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.


‎

8

Table of Contents

Note 3 – Earnings Per Common Share (EPS)

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

Three Months Ended

Nine Months Ended

Sept 30,

Sept 30,

2025

2024

2025

2024

Net income

$ 2,752

$ 1,990

$ 6,299

$ 6,326

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

$ 0.61

$ 0.44

$ 1.39

$ 1.39

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

Note 4 – Debt

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 . The $ 10,050,000 cash outflow is presented in the financing activities section of the Consolidated Statement of Cash Flows.

As of September 30, 2025, there was no remaining balance outstanding under the 2020 Notes. At December 31, 2024, the balance of the 2020 Notes was $ 10,050,000 , 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 modifications described 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. A portion of the proceeds was used to purchase 100 % of the capital stock of PWW, the Company’s 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 that modification, the balloon payment date was extended to December 31, 2026, from December 31, 2024, and the interest rate was reduced to 3.90 % from 4.00 %.

On August 18, 2025, the Company entered into a Second Note Modification Agreement and Allonge (the “Second Allonge”) with NBB, effective September 1, 2025. Under the Second Allonge, the maturity date of the NBB Note was extended to August 31, 2030, the interest rate was increased to 5.65 % per annum (from 3.90 %), and the repayment terms were re-amortized to require 60 equal monthly installments of principal and interest of approximately $ 61,800 , beginning September 30, 2025, with a final balloon payment of approximately $ 7,410,000 due at maturity. The Second Allonge also provides the Company with an option, upon any prepayment of principal of $ 1,000,000 or more, to request a one-time recast of the amortization schedule over the remaining term of the loan without altering the maturity date or interest rate.

9

Table of Contents

Note 4 – Debt (continued)

As of September 30, 2025, the outstanding principal balance on the NBB Note was approximately $ 8.8 million. The note remains secured by a first-priority lien on approximately 4.95 % of the Bank’s common stock.

Management evaluated the Second Allonge in accordance with the applicable guidance and determined that the changes represent a modification rather than an extinguishment of the existing debt. Accordingly, the carrying amount of the NBB Note continues to be presented on the Consolidated Balance Sheets under “other borrowings,” net of unamortized issuance costs.

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.

10

Table of Contents

Note 5 – Fair Value Measurements (continued)

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.

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 September 30, 2025

Quoted Prices

Significant

in Active

Other

Significant

Balance as of

Markets for

Observable

Unobservable

(dollars in thousands)

September 30,

Identical Assets

Inputs

Inputs

Description

2025

(Level 1)

(Level 2)

(Level 3)

U.S. agency obligations

$ 76,200

$ -

$ 76,200

$ -

Mortgage-backed securities

58,309

-

58,309

-

Municipals

53,145

-

53,145

-

Corporates

14,852

-

14,852

-

Total available-for-sale securities

$ 202,506

$ -

$ 202,506

$ -

IRLCs - asset

136

-

-

136

Total assets at fair value

$ 202,642

$ -

$ 202,506

$ 136

Carrying Value at December 31, 2024

Quoted Prices

Significant

in Active

Other

Significant

Balance as of

Markets for

Observable

Unobservable

(dollars in thousands)

December 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


‎

11

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 September 30, 2025

(dollars in thousands)

Fair Value

Valuation Technique(s)

Unobservable Input

Range

Assets

IRLCs – asset

$

136

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 nine month period ending September 30, 2025.

Fair Value on a Non-recurring Basis

Collateral Dependent Loans with an ACL

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 management, no nonrecurring fair value adjustments were needed on collateral dependent loans at September 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. At September 31, 2025 and December 31, 2024 the Company held $ 3,766 and $ 3,616 at fair value, respectively. No nonrecurring fair value adjustments were recorded on loans held for sale at September 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.


‎

12

Table of Contents

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 September 30, 2025, and December 31, 2024, were as follows (dollars in thousands):

Fair Value Measurements at September 30, 2025 using

Carrying

Assets

Amounts

(Level 1)

(Level 2)

(Level 3)

Balance

Cash and due from banks

$ 28,450

$ 28,450

$                      -

$                      -

$ 28,450

Federal funds sold

57,001

57,001

-

-

57,001

Securities

Available-for-sale

202,506

-

202,506

-

202,506

Held-to-maturity, net

3,594

-

3,308

-

3,308

Restricted stock

1,828

-

1,828

-

1,828

Loans, net (1)

653,288

-

-

640,567

640,567

Loans held for sale

3,766

-

3,766

-

3,766

Interest receivable

3,001

-

3,001

-

3,001

BOLI

23,480

-

23,480

-

23,480

Derivatives - IRLCs

136

-

-

-

136

Liabilities

Checking, money market, savings and NOW

$ 680,958

$                      -

$ 680,958

$                      -

$ 680,958

Time deposits

238,838

-

238,884

-

238,884

Other borrowings

8,836

-

8,437

-

8,437

Interest payable

1,292

-

1,292

-

1,292


‎

13

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 ACL.


‎

14

Table of Contents

Note 6 – Securities

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

September 30, 2025

Amortized

Gross Unrealized

Costs

Gains

(Losses)

Fair Value

Held-to-Maturity

U.S. agency obligations

$ 3,594

$ -

$                 ( 286 )

$ 3,308

Available-for-sale

U.S. agency obligations

$ 80,044

$ 475

$ ( 4,319 )

$ 76,200

Mortgage-backed securities

65,558

69

( 7,318 )

58,309

Municipals

61,331

192

( 8,378 )

53,145

Corporates

15,501

2

( 651 )

14,852

$ 222,434

$ 738

$ ( 20,666 )

$ 202,506

December 31, 2024

Amortized

Gross Unrealized

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


‎

15

Table of Contents

Note 6 – Securities (continued)

The following tables summarize the fair value of securities available-for-sale as of September 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 (dollars in thousands):

September 30, 2025

Less than 12 months

More than 12 months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Losses

Value

Losses

Value

Losses

Available-for-sale

U.S. agency obligations

$

2,047

$

47

$

49,495

$

4,272

$

51,542

$

4,319

Mortgage-backed securities

-

-

54,238

7,318

54,238

7,318

Municipals

560

3

41,788

8,375

42,348

8,378

Corporates

-

-

13,849

651

13,849

651

$

2,607

$

50

$

159,370

$

20,616

$

161,977

$

20,666

December 31, 2024

Less than 12 months

More than 12 months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Losses

Value

Losses

Value

Losses

Available-for-sale

U.S. agency obligations

$

11,455

$

324

$

61,606

$

6,592

$

73,060

$

6,916

Mortgage-backed securities

4,026

176

54,207

10,172

58,233

10,348

Municipals

1,847

31

39,714

10,531

41,561

10,562

Corporates

7,392

608

6,930

580

14,322

1,188

$

24,720

$

1,139

$

162,457

$

27,875

$

187,176

$

29,014

As of September 30, 2025, the Company owned 109 securities that were in an unrealized loss position. Of these securities, 27 were S&P rated AAA, 71 were rated AA, 4 were rated A, 2 were rated BBB, and 5 were non-rated. As of September 30, 2025, 53 of these securities were municipal issues, 44 were backed directly or indirectly by the U.S. government, and 10 were issues of publicly traded domestic corporations, and 2 were issues of non-public financial institutions. The Company monitors its municipal and corporate securities by periodically reviewing the issuer’s cash flow and revenue streams, as well as other economic factors that could affect the issuer’s ability to service and/or repay the debt.

The Company has evaluated available-for-sale securities in an unrealized loss position for credit-related impairment at September 30, 2025, and concluded no impairment existed based on a combination of factors, which included: (1) the securities are of high credit quality; (2) unrealized losses are primarily the result of market volatility and increases in market interest rates; (3) the contractual terms of the investments do not permit the issuers to settle the securities at a price less than the par value of each investment; (4) issuers continue to make timely principal and interest payments; and (5) the Company does not intend to sell any of the investments before recovery of its amortized cost basis, nor is it likely that management will be required to sell the securities. As such, there was no allowance for credit losses on available-for-sale securities at September 30, 2025.

The Company’s held-to-maturity portfolio is covered by the explicit or implied guarantee of the United States government or one of its agencies and is rated investment grade or higher. As a result, the Company did not have an allowance for credit losses on held-to-maturity securities as of September 30, 2025 or December 31, 2024.

All held-to-maturity and available-for-sale securities were current, with no securities past due or on nonaccrual as of September 30, 2025 and December 31, 2024. Sales of available-for-sale securities totaled $ 4,227,000 during the three and nine months ended September 30, 2025. Sales of available-for-sale securities totaled $ 8,754,000 and $ 30,298,000 during the three and nine months ended September 30, 2024.

16

Table of Contents

Note 6 – Securities (continued)

As of September 30, 2025 and December 31, 2024, the Company had approximately (market values):

$ 51,116,000 and $ 44,865,000 , respectively, of available-for-sale securities pledged as collateral for public deposits ;

$ 34,000,000 and $ 37,000,000 of our available-for-sale securities as collateral with correspondent banks, including the FHLBA, for collateralized lines of credit; and

$ 25,000,000 and $ 29,000,000 of our available-for-sale securities as collateral for advances at the Federal Reserve Bank’s discount window.

The amortized costs and fair values of securities at September 30, 2025, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Investment Portfolio in Maturities ( in thousands )

September 30, 2025

Amortized

Costs

Fair Value

Held-to-maturity:

Due in one year or less

$ -

$ -

Due after one year through five years

399

387

Due after five years through ten years

2,018

1,896

Due after ten years

1,177

1,025

Total securities Held-to-maturity

$ 3,594

$ 3,308

Amortized

Costs

Fair Value

Available-for-sale:

Due in one year or less

$ 2,500

$ 2,485

Due after one year through five years

57,997

55,389

Due after five years through ten years

63,019

58,579

Due after ten years

98,918

86,053

Total securities Available-for-sale

$ 222,434

$ 202,506


‎

17

Table of Contents

Note 7 – Business Segments

Segment Overview

The Company reports three business segments:

1. Community Banking – Provides loans, deposits, and related banking services to retail and commercial customers primarily in Central Virginia. Revenue is primarily from net interest income.

2. Mortgage Banking – Originates residential mortgage loans for sale into the secondary market, typically with servicing released. Revenue consists mainly of gains on loan sales.

3. Investment Advisory – Offers investment advisory and financial planning services through Pettyjohn, Wood & White, Inc. Revenue is primarily fee-based, tied to assets under management (AUM).

Segments refer business to one another when appropriate. Robert R. Chapman III, President of Financial, is the Chief Operating Decision Maker (CODM). The CODM evaluates performance and allocates resources based on segment profit (pre-tax income). Supplemental data regularly reviewed by the CODM includes total loans held for investment, total deposits, and assets under management (AUM), as these metrics provide additional insights into segment performance. Segment accounting policies are consistent with those in the consolidated financial statements.

Significant Expense Categories . Significant segment expenses reviewed regularly by the CODM and included in segment profit measures are separately presented. For the three and nine months ended September 30, 2025 and 2024, these significant approximate expenses included:

Community Banking: Salaries and employee benefits ($ 4.16 million and $ 11.92 million for the three and nine months ended September 30, 2025; and $ 3.66 million and $ 10.81 million for the three and nine months ended September 30, 2024); data processing ($ 381 thousand and $ 1.98 million in 2025; and $ 794 thousand and $ 2.35 million in 2024); professional and other outside expenses ($ 689 thousand and $ 3.059 million in 2025; and $ 645 thousand and $ 1.98 million in 2024); equipment ($ 664 thousand and $ 1.94 million in 2025; and $ 618 thousand and $ 1.80 million in 2024); and occupancy ($ 447 thousand and $ 1.48 million in 2025; and $ 446 thousand and $ 1.40 million in 2024).

Mortgage Banking: Salaries and employee benefits ($ 919 thousand and $ 2.44 million in 2025; and $ 835 thousand and $ 2.16 million in 2024); credit-related expenses ($ 158 thousand and $ 509 thousand in 2025; and $ 152 thousand and $ 457 thousand in 2024); and occupancy costs ($ 39 thousand and $ 98 thousand in 2025; and $ 25 thousand and $ 86 thousand in 2024).

Investment Advisory: Salaries and employee benefits ($ 432 thousand and $ 1.29 million in 2025; and $ 427 thousand and $ 1.29 million in 2024); and amortization of intangible assets ($ 140 thousand and $ 420 thousand in both 2025 and 2024).

Expenses not identified as significant are presented within “Other segment items” and include general and administrative costs that support the segments’ operations, including travel, liability and property insurance, and contribution expenses.

Supplemental Segment Data

Supplemental data regularly reviewed by the CODM includes total loans held for investment, total deposits, and assets under management (AUM), as these metrics provide additional insights into segment performance:

Community Banking : Total loans held for investment, net of allowance, were $ 653.3 million at September 30, 2025, compared to $ 636.6 million at December 31, 2024, and $ 627.1 million at September 30, 2024. Deposits totaled $ 922.1 million at September 30, 2025, $ 882.4 million at December 31, 2024, and $ 909.5 million at September 30, 2024.

Investment Advisory : Assets under management (AUM) were $ 984.7 million at September 30, 2025, compared to $ 854.0 million at December 31, 2024, and $ 842.8 million at September 30, 2024.

18

Table of Contents

Note 7 – Business Segments (continued)

Business Segments as of the Three Months Ended

September 30, 2025

Dollars in Thousands

Community Banking

Mortgage Banking

Investment Advisory

Holding Company

Eliminations (1)

Consolidated

Interest income

$ 11,771

$               -

$                -

$                      -

$                     -

$ 11,771

Interest expense

3,437

-

-

68

( 34 )

3,471

Net interest income

8,334

-

-

( 68 )

34

8,300

Gains on sales of loans

-

1,242

-

-

-

1,242

Wealth management fees

-

-

1,362

-

-

1,362

Other noninterest income

1,594

-

-

2,835

( 2,864 )

1,565

Net revenue

9,928

1,242

1,362

2,767

( 2,830 )

12,469

Less:

Provision for credit losses

91

-

-

-

-

91

Noninterest expense:

Salaries and employee benefits

4,164

919

432

-

1

5,516

Occupancy

447

39

33

-

4

523

Equipment

664

19

14

-

-

697

Supplies

139

6

8

-

-

153

Professional and other outside expenses

689

-

13

23

-

725

Data processing

381

-

-

-

-

381

Marketing

228

3

1

17

-

249

Credit expense

58

158

-

-

-

216

FDIC insurance expense

132

-

-

-

-

132

Amortization of intangibles

-

-

140

-

-

140

Other

448

( 51 )

31

-

-

428

Total noninterest expense

7,350

1,093

672

40

5

9,160

Segment income before income taxes

2,487

149

690

2,727

( 2,835 )

3,218

Allocated income tax expense (benefit)

349

32

110

( 25 )

-

466

Segment net income

$ 2,138

$ 117

$ 580

$ 2,752

$             ( 2,835 )

$ 2,752

Segment assets at September 30, 2025

$ 1,007,040

$ 3,992

$ 10,331

$ 102,021

$         ( 103,259 )

$ 1,020,125

Supplemental Data at September 30, 2025:

Total loans held for investment, net

$ 653,288

$               -

$                -

$                      -

$                     -

$ 653,288

Total deposits

922,113

-

-

-

( 2,317 )

919,796

Assets under management

-

-

984,747

-

-

984,747

(1) Primarily intercompany service fees and dividends eliminated in consolidation.


‎

19

Table of Contents

Note 7 – Business Segments (continued)

Segment financial information, including significant expense categories and supplemental metrics, is presented in the tables below, along with reconciliations to consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands) .

Business Segments as of the Three Months Ended

September 30, 2024

Dollars in Thousands

Community Banking

Mortgage Banking

Investment Advisory

Holding Company

Eliminations (1)

Consolidated

Interest income

$ 11,563

$               -

$                -

$                      -

$                     -

$ 11,563

Interest expense

3,920

-

-

174

( 40 )

4,054

Net interest income

7,643

-

-

( 174 )

40

7,509

Gains on sales of loans

-

1,326

-

-

-

1,326

Wealth management fees

-

-

1,244

-

-

1,244

Other noninterest income

1,277

-

-

2,155

( 2,179 )

1,253

Net revenue

8,920

1,326

1,244

1,981

( 2,139 )

11,332

Less:

Provision for credit losses

92

-

-

-

-

92

Noninterest expense:

Salaries and employee benefits

3,658

835

427

-

-

4,920

Occupancy

446

25

27

-

16

514

Equipment

618

12

10

-

-

640

Supplies

116

5

10

-

-

131

Professional and other outside expenses

645

-

22

21

-

688

Data processing

794

-

-

-

-

794

Marketing

202

2

4

12

-

220

Credit expense

38

152

-

-

-

190

FDIC insurance expense

94

-

-

-

-

94

Amortization of intangibles

-

-

140

-

-

140

Other

419

1

24

1

-

445

Total noninterest expense

7,030

1,032

664

34

16

8,776

Segment income before income taxes

1,798

294

580

1,947

( 2,155 )

2,464

Allocated income tax expense (benefit)

334

62

122

( 44 )

-

474

Segment net income

$ 1,464

$ 232

$ 458

$ 1,991

( 2,155 )

$ 1,990

Segment assets at September 30, 2024

$ 992,773

$ 5,280

$ 10,943

$ 106,281

( 107,214 )

$ 1,008,063

Supplemental Data at September 30, 2024:

Total loans held for investment, net

$ 627,112

$               -

$                -

$                      -

$                     -

$ 627,112

Total deposits

909,460

-

-

-

( 2,566 )

906,894

Assets under management

-

-

842,775

-

-

842,775

(1) Primarily intercompany service fees and dividends eliminated in consolidation.

20

Table of Contents

Note 7 – Business Segments (continued)

Business Segments as of the Nine Months Ended

September 30, 2025

Dollars in Thousands

Community Banking

Mortgage Banking

Investment Advisory

Holding Company

Eliminations (1)

Consolidated

Interest income

$ 34,643

$   -

$ -

$ -

$  -

$ 34,643

Interest expense

9,917

-

-

407

50

10,374

Net interest income

24,726

-

-

( 407 )

( 50 )

24,269

Gains on sales of loans

-

3,668

-

-

-

3,668

Wealth management fees

-

-

3,917

-

-

3,917

Other noninterest income

4,032

-

-

6,672

( 6,762 )

3,942

Net revenue

28,758

3,668

3,917

6,265

( 6,812 )

35,796

Less:

Recovery of credit losses

( 301 )

-

-

-

-

( 301 )

Noninterest expense:

Salaries and employee benefits

11,915

2,444

1,291

-

-

15,650

Occupancy

1,484

98

98

-

( 90 )

1,590

Equipment

1,941

47

33

-

-

2,021

Supplies

422

15

26

-

-

463

Professional and other outside expenses

3,059

-

74

61

-

3,194

Data processing

1,984

-

-

-

-

1,984

Marketing

630

5

11

38

-

684

Credit expense

156

509

-

-

-

665

FDIC insurance expense

394

-

-

-

-

394

Amortization of intangibles

-

-

420

-

-

420

Other

1,257

31

87

1

-

1,376

Total noninterest expense

23,242

3,149

2,040

100

( 90 )

28,441

Segment income before income taxes

5,766

519

1,878

6,165

( 6,672 )

7,656

Allocated income tax expense

949

110

431

( 133 )

-

1,357

Segment net income

$ 4,817

$ 409

$ 1,447

$ 6,298

$      ( 6,672 )

$ 6,299

Segment assets at September 30, 2025

$ 1,007,040

$ 3,992

$ 10,331

$ 102,021

$ ( 103,259 )

$ 1,020,125

Supplemental Data at September 30, 2025:

Total loans held for investment, net

$ 653,288

$   -

$ -

$ -

$  -

$ 653,288

Total deposits

922,113

-

-

-

( 2,317 )

919,796

Assets under management

-

-

984,747

-

-

984,747

(1) Primarily intercompany service fees and dividends eliminated in consolidation.


‎

21

Table of Contents

Note 7 – Business Segments (continued)

Business Segments as of the Nine Months Ended

September 30, 2024

Dollars in Thousands

Community Banking

Mortgage Banking

Investment Advisory

Holding Company

Eliminations (1)

Consolidated

Interest income

$ 33,007

$   -

$     -

$ -

$   -

$ 33,007

Interest expense

10,934

-

-

523

-

11,457

Net interest income

22,073

-

-

( 523 )

-

21,550

Gains on sales of loans

-

3,526

-

-

-

3,526

Wealth management fees

-

-

3,583

-

-

3,583

Other noninterest income

4,274

-

-

6,715

( 6,777 )

4,212

Net revenue

26,347

3,526

3,583

6,192

( 6,777 )

29,288

Less:

Recovery of credit losses

( 584 )

-

-

-

-

( 584 )

Noninterest expense:

Salaries and employee benefits

10,808

2,163

1,285

-

-

14,256

Occupancy

1,400

86

79

-

( 72 )

1,493

Equipment

1,804

44

31

-

-

1,879

Supplies

355

15

27

-

-

397

Professional and other outside expenses

1,980

-

71

74

-

2,125

Data processing

2,352

-

-

-

-

2,352

Marketing

577

2

10

( 108 )

-

481

Credit expense

155

457

-

-

-

612

FDIC insurance expense

329

-

-

-

-

329

Amortization of intangibles

-

-

420

-

-

420

Other

1,160

18

79

1

-

1,258

Total noninterest expense

20,920

2,785

2,002

( 33 )

( 72 )

25,602

Segment income before income taxes

6,011

741

1,581

6,225

( 6,705 )

7,853

Allocated income tax expense (benefit)

1,140

156

332

( 101 )

1,527

Segment net income

$ 4,871

$ 585

$ 1,249

$ 6,326

$    ( 6,705 )

$ 6,326

Segment assets at September 30, 2024

$ 992,773

$ 5,280

$ 10,943

$ 106,281

( 107,214 )

$ 1,008,063

Supplemental Data at September 30, 2024:

Total loans held for investment, net

$ 627,112

$   -

$     -

$ -

$   -

$ 627,112

Total deposits

909,460

-

-

-

( 2,566 )

906,894

Assets under management

-

-

842,775

-

-

842,775

(1) Primarily intercompany service fees and dividends eliminated in consolidation.


‎

22

Table of Contents

Note 8 – Loans and allowance for credit losses

The Company’s primary portfolio segments align with the methodology applied in estimating the allowance for credit losses and are reflected in the disclosures as of and for the periods indicated, as set forth below. Management has determined that the classifications presented below are appropriate for identifying and managing risk within the loan portfolio.

Loan Segments:

Loan Classes:

Commercial

Commercial and Industrial Loans

Commercial Real Estate

Commercial Mortgages – Owner Occupied

Commercial Mortgages – Non-Owner Occupied

Commercial Construction/Land

Consumer

Consumer Open-End

Consumer Closed-End

Residential

Residential Mortgages

Residential Consumer Construction/Land

Commercial and Commercial Real Estate

Commercial loans are primarily underwritten based on the identified cash flows of the borrower, and secondarily on the underlying collateral provided. Borrower cash flows may not meet expectations, and the value of collateral securing these loans can fluctuate. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include personal guarantees. Short-term loans may be made on an unsecured basis. For loans secured by accounts receivable, the availability of funds for repayment may substantially depend on the borrower’s ability to collect amounts due from its customers.

Commercial real estate loans are viewed primarily as cash flow loans, with the collateral serving as a secondary source of repayment. Commercial real estate lending typically involves higher loan principal amounts, with repayment generally dependent on the successful operation of the property or the business conducted on the property. These loans may be more adversely affected by conditions in the real estate markets or the general economy. The properties securing the Company’s commercial real estate portfolio are diverse but are geographically concentrated almost entirely within the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. In general, the Company avoids financing single-purpose projects unless other underwriting factors are present to help mitigate risk. Management also tracks the level of owner-occupied versus non-owner-occupied commercial real estate loans.

Consumer and Residential

Consumer and residential segments consist of residential mortgage loans and personal loans. The consumer loan segment includes home equity lines of credit (HELOCs) and other second mortgages. Home equity loans are typically secured by a subordinate interest in 1–4 family residences, while consumer personal loans may be secured by personal assets such as automobiles or recreational vehicles, or may be unsecured, such as small installment loans and certain lines of credit.

For residential mortgage loans secured by 1–4 family, generally owner-occupied residences, the Company typically establishes a maximum loan-to-value ratio. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be affected by economic conditions in the market area, such as unemployment levels. Repayment can also be impacted by changes in property values. Risk is mitigated by the smaller individual loan amounts and the diversification provided by a large number of borrowers.


‎

23

Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

A summary of loans, net of deferred costs of $ 598,000 and $ 817,000 as of September 30, 2025 and December 31, 2024 , respectively, is as follows (dollars in thousands):

As of

As of

September 30, 2025

December 31, 2024

Commercial

$ 61,987

$ 66,418

Commercial Real Estate:

Commercial Mortgages-Owner Occupied

149,824

140,443

Commercial Mortgages-Non-Owner Occupied

215,798

195,089

Commercial Construction/Land

14,364

23,883

Consumer:

Consumer Open-End

59,675

50,041

Consumer Closed-End

25,753

28,269

Residential:

Residential Mortgages

105,666

113,303

Residential Consumer Construction/Land

26,519

26,150

Total loans

$ 659,586

$ 643,596

Less: allowance for credit losses

6,298

7,044

Net loans

$ 653,288

$ 636,552

The following table presents the amortized cost basis of collateral dependent loans by loan segment:

Collateral Dependent Loans

September 30, 2025

(dollars in thousands)

Business/Other Assets

Real Estate

Commercial

$ 3,925

$ -

Commercial Real Estate

-

7,028

Consumer

-

570

Residential

-

1,592

Total

$ 3,925

$ 9,190

Collateral Dependent Loans

December 31, 2024

(dollars in thousands)

Business/Other Assets

Real Estate

Commercial

$ 3,315

$ -

Commercial Real Estate

-

7,350

Consumer

-

592

Residential

-

1,369

Total

$ 3,315

$ 9,311


‎

24

Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

The following tables present the activity in the allowance for credit losses for the three and nine-month periods ended and the distribution of the allowance by segment as of September 30, 2025, and 2024 (dollars in thousands).

Allowance for Credit Losses and Recorded Investment in Loans

As of and For the Three Months Ended September 30, 2025

Commercial

Commercial

Real Estate

Consumer

Residential

Total

Allowance for Credit Losses:

Beginning Balance, June 30, 2025

$ 747

$ 3,047

$ 799

$ 1,715

$ 6,308

Charge-Offs

-

-

( 23 )

-

( 23 )

Recoveries

1

-

2

-

3

Provision for (recovery of) credit
‎ losses

( 93 )

129

59

( 85 )

10

Ending Balance, September 30, 2025

$ 655

$ 3,176

$ 837

$ 1,630

$ 6,298

Allowance for Credit Losses and Recorded Investment in Loans

As of and For the Nine Months Ended September 30, 2025

Commercial

Commercial

Real Estate

Consumer

Residential

Total

Allowance for Credit Losses:

Beginning Balance, December 31, 2024

$ 686

$ 3,719

$ 842

$ 1,797

$ 7,044

Charge-Offs

-

-

( 235 )

( 9 )

( 244 )

Recoveries

6

1

9

-

16

Provision for (recovery of) credit
‎ losses

( 37 )

( 544 )

221

( 158 )

( 518 )

Ending Balance, September 30, 2025

$ 655

$ 3,176

$ 837

$ 1,630

$ 6,298


‎

25

Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

Allowance for Credit Losses and Recorded Investment in Loans

As of and For the Three Months Ended September 30, 2024

Commercial

Commercial

Real Estate

Consumer

Residential

Total

Allowance for Credit Losses:

Beginning Balance, June 30, 2024

$ 606

$ 3,748

$ 897

$ 1,700

$ 6,951

Charge-Offs

-

-

-

-

-

Recoveries

1

2

18

-

21

Provision for (recovery of) credit losses

( 118 )

165

( 17 )

76

106

Ending Balance, September 30, 2024

$ 489

$ 3,915

$ 898

$ 1,776

$ 7,078

Allowance for Credit Losses and Recorded Investment in Loans

As of and For the Nine Months Ended September 30, 2024

Commercial

Commercial

Real Estate

Consumer

Residential

Total

Allowance for Credit Losses:

Beginning Balance, December 31, 2023

$ 514

$ 3,985

$ 1,093

$ 1,820

$ 7,412

Charge-Offs

( 8 )

-

( 76 )

-

( 84 )

Recoveries

199

6

38

1

244

Provision for (recovery of)

( 216 )

( 76 )

( 157 )

( 45 )

( 494 )

Ending Balance, September 30, 2024

$ 489

$ 3,915

$ 898

$ 1,776

$ 7,078


‎

26

Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

In the second quarter of 2025, the Company, in collaboration with its third-party model vendor and as part of ongoing model governance, implemented updates to the quantitative CECL loss models for collectively evaluated loan segments that use discounted cash flow techniques (all segments other than agricultural loans, which uses the weighted-average remaining life method). The updates (i) revised certain maximum loss-rate parameters, (ii) incorporated additional post-COVID historical loss data, and (iii) as is customary each quarter, refreshed the economic forecasts.

The model updates were first reflected in the second quarter provision for credit losses and continued to be reflected in the allowance for credit losses in the third quarter of 2025. Using the prior-period model specification as a sensitivity, management estimates that the second quarter would have resulted in a provision of approximately $ 232,000 ; under the updated specifications, the Company recorded a net recovery of $ 555,000 on loans for that quarter. The updated models remained in use throughout the third quarter, with no further specification changes. Provision activity for the third quarter primarily reflected the ongoing application of these updated models, together with normal portfolio dynamics, updated forecasts, and loan growth trends.

Credit Quality Indicators

The Bank’s internal risk rating system is in place to grade commercial and commercial real estate loans. Category ratings are reviewed periodically by lenders and the credit review area of the Bank based on the borrower’s individual situation. Additionally, internal and external monitoring and review of credits are conducted on an annual basis.

Below is a summary and definition of the Bank’s risk rating categories:

RATING 1

Excellent

RATING 2

Above Average

RATING 3

Satisfactory

RATING 4

Acceptable / Low Satisfactory

RATING 5

Monitor

RATING 6

Special Mention

RATING 7

Substandard

RATING 8

Doubtful

RATING 9

Loss

We segregate commercial and commercial real estate loans into the above categories based on the following criteria and we review the characteristics of each rating at least annually, generally during the first quarter. The characteristics of these ratings are as follows:

“Pass.” These are loans having risk ratings of 1 through 4. Pass loans are to persons or business entities with an acceptable financial condition, appropriate collateral margins, appropriate cash flow to service the existing loan, and an appropriate leverage ratio. The borrower has paid all obligations as agreed and it is expected that this type of payment history will continue. When necessary, acceptable personal guarantors support the loan.

“Monitor.” These are loans having a risk rating of 5. Monitor loans have currently acceptable risk but may have the potential for a specific defined weakness in the borrower’s operations and the borrower’s ability to generate positive cash flow on a sustained basis. The borrower’s recent payment history may currently or in the future be characterized by late payments. The Bank’s risk exposure is mitigated by collateral supporting the loan. The collateral is considered to be well-margined, well maintained, accessible and readily marketable.

“Special Mention.” These are loans having a risk rating of 6. Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank ’s credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. These loans do warrant more than routine monitoring due to a weakness caused by adverse events.


‎

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Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

“Substandard.” These are loans having a risk rating of 7. Substandard loans are considered to have specific and well-defined weaknesses that jeopardize the viability of the Bank’s credit extension. The payment history for the loan has been inconsistent and the expected or projected primary repayment source may be inadequate to service the loan. The estimated net liquidation value of the collateral pledged and/or ability of the personal guarantor(s) to pay the loan may not adequately protect the Bank. There is a distinct possibility that the Bank will sustain some loss if the deficiencies associated with the loan are not corrected in the near term. A substandard loan would not automatically meet our definition of impaired unless the loan is significantly past due and the borrower’s performance and financial condition provides evidence that it is probable that the Bank will be unable to collect all amounts due.

“Doubtful.” These are loans having a risk rating of 8. Doubtful rated loans have all the weaknesses inherent in a loan that is classified substandard but with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high.

“Loss.” These are loans having a risk rating of 9. Loss rated loans are not considered collectible under normal circumstances and there is no realistic expectation for any future payment on the loan. Loss rated loans are fully charged off.

There are no loans classified as doubtful or loss as of September 30, 2025 or September 30, 2024.


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28

Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

The table below details the amortized cost of the classes of loans by credit quality indicator and year of origination as of September 30, 2025 (dollars in thousands).

Term Loans Amortized Cost Basis by Origination Year

2025

2024

2023

2022

2021

Prior

Revolving Loans Amortized Cost Basis

Revolving Loans Converted to Term

Total

Commercial:

Risk Rating

Pass

$ 7,927

$ 6,643

$ 2,854

$ 2,642

$ 5,857

$ 14,951

$ 17,082

$ 61

$ 58,017

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

889

9

36

531

2,358

147

3,970

Total

$ 7,927

$ 6,643

$ 3,743

$ 2,651

$ 5,893

$ 15,482

$ 19,440

$ 208

$ 61,987

Commercial Real Estate:

Commercial Mort. - Owner Occupied

Risk Rating

Pass

$ 18,493

$ 19,977

$ 7,476

$ 17,781

$ 43,672

$ 36,031

$ 1,794

$                -

$ 145,224

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

91

-

2,757

1,752

-

-

4,600

Total

$ 18,493

$ 19,977

$ 7,567

$ 17,781

$ 46,429

$ 37,783

$ 1,794

$                -

$ 149,824

Commercial Mort. - Non-Owner Occupied

Risk Rating

Pass

$ 26,153

$ 40,021

$ 13,754

$ 46,571

$ 26,013

$ 53,818

$ 7,283

$                -

$ 213,613

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

930

-

1,255

-

-

2,185

Total

$ 26,153

$ 40,021

$ 13,754

$ 47,501

$ 26,013

$ 55,073

$ 7,283

$                -

$ 215,798

Commercial Construction/Land

Risk Rating

Pass

$ 2,983

$ 1,860

$ 3,324

$ 372

$ 2,626

$ 2,369

$ 505

$                -

$ 14,038

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

326

-

-

-

326

Total

$ 2,983

$ 1,860

$ 3,324

$ 372

$ 2,952

$ 2,369

$ 505

$                -

$ 14,364

Consumer:

Consumer - Open-End

Risk Rating

Pass

$                -

$                -

$                -

$                -

$                -

$                -

$ 57,734

$ 1,371

$ 59,105

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

570

570

Total

$                -

$                -

$                -

$                -

$                -

$                -

$ 57,734

$ 1,941

$ 59,675

Consumer - Closed-End

Risk Rating

Pass

$ 1,760

$ 5,791

$ 3,478

$ 8,540

$ 280

$ 5,640

$                -

$                -

$ 25,489

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

30

-

107

-

127

-

-

264

Total

$ 1,760

$ 5,821

$ 3,478

$ 8,647

$ 280

$ 5,767

$                -

$                -

$ 25,753

29

Table of Contents

Residential:

Residential Mortgages

Risk Rating

$ 8,653

$ 16,845

$ 17,755

$ 20,513

$ 7,690

$ 32,184

$                -

$                -

$ 103,640

Pass

Special Mention

-

-

-

-

-

68

-

-

68

Substandard

-

-

-

502

-

1,456

-

-

1,958

Total

$ 8,653

$ 16,845

$ 17,755

$ 21,015

$ 7,690

$ 33,708

$                -

$                -

$ 105,666

Residential Consumer Construction/Land

Risk Rating

Pass

$ 12,762

$ 6,591

$ 1,404

$ 2,194

$ 1,046

$ 2,517

$ 5

$                -

$ 26,519

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

-

-

Total

$ 12,762

$ 6,591

$ 1,404

$ 2,194

$ 1,046

$ 2,517

$ 5

$                -

$ 26,519

Totals:

Risk Rating

Pass

$ 78,731

$ 97,728

$ 50,043

$ 98,613

$ 87,184

$ 147,510

$ 84,403

$ 1,432

$ 645,644

Special Mention

-

-

-

-

-

68

-

-

68

Substandard

-

30

980

1,548

3,118

5,122

2,358

717

13,874

Total

$ 78,731

$ 97,758

$ 51,023

$ 100,161

$ 90,302

$ 152,700

$ 86,761

$ 2,149

$ 659,586


‎

30

Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

The table below details the amortized cost of the classes of loans by credit quality indicator and year of origination as of December 31, 2024 (dollars in thousands).

Term Loans Amortized Cost Basis by Origination Year

2024

2023

2022

2021

2020

Prior

Revolving Loans Amortized Cost Basis

Revolving Loans Converted to Term

Total

Commercial

Risk Rating

Pass

$ 10,412

$ 3,680

$ 2,901

$ 7,188

$ 734

$ 16,070

$ 21,602

$ 341

$ 62,928

Special Mention

-

-

41

79

-

-

-

-

120

Substandard

-

922

13

43

-

569

1,654

169

3,370

Total

$ 10,412

$ 4,602

$ 2,955

$ 7,310

$ 734

$ 16,639

$ 23,256

$ 510

$ 66,418

Commercial Real Estate:

Commercial Mort. - Owner Occupied

Risk Rating

Pass

$ 21,261

$ 8,959

$ 21,770

$ 39,881

$ 5,663

$ 35,869

$ 1,564

$ 153

$ 135,120

Special Mention

-

-

-

-

-

451

-

-

451

Substandard

-

93

-

2,898

44

1,837

-

-

4,872

Total

$ 21,261

$ 9,052

$ 21,770

$ 42,779

$ 5,707

$ 38,157

$ 1,564

$ 153

$ 140,443

Commercial Mort. - Non-Owner Occupied

Risk Rating

Pass

$ 39,659

$ 12,203

$ 49,273

$ 27,410

$ 9,698

$ 49,206

$ 6,467

$                     -

$ 193,916

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

1,173

-

-

-

1,173

Total

$ 39,659

$ 12,203

$ 49,273

$ 27,410

$ 10,871

$ 49,206

$ 6,467

$                     -

$ 195,089

Commercial Construction/Land

Risk Rating

Pass

$ 7,180

$ 1,496

$ 768

$ 9,497

$ 1,976

$ 1,020

$ 641

$                     -

$ 22,578

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

951

354

-

-

-

-

1,305

Total

$ 7,180

$ 1,496

$ 1,719

$ 9,851

$ 1,976

$ 1,020

$ 641

$                     -

$ 23,883

Consumer:

Consumer - Open-End

Risk Rating

Pass

$                -

$                -

$                -

$                -

$                -

$                -

$ 48,531

$ 1,110

$ 49,641

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

400

400

Total

$                -

$                -

$                -

$                -

$                -

$                -

$ 48,531

$ 1,510

$ 50,041

Consumer - Closed-End

Risk Rating

Pass

$ 6,660

$ 4,548

$ 9,634

$ 382

$ 398

$ 6,366

$                -

$                     -

$ 27,988

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

37

-

119

-

-

125

-

-

281

Total

$ 6,697

$ 4,548

$ 9,753

$ 382

$ 398

$ 6,491

$                -

$                     -

$ 28,269

Residential:

Residential Mortgages

31

Table of Contents

Risk Rating

Pass

$ 18,418

$ 23,905

$ 22,954

$ 9,082

$ 8,376

$ 28,572

$                -

$                     -

$ 111,307

Special Mention

-

-

-

-

-

73

-

-

73

Substandard

-

-

265

-

103

1,555

-

-

1,923

Total

$ 18,418

$ 23,905

$ 23,219

$ 9,082

$ 8,479

$ 30,200

$                -

$                     -

$ 113,303

Residential Consumer Construction/Land

Risk Rating

Pass

$ 12,522

$ 6,375

$ 2,436

$ 1,161

$ 848

$ 2,808

$                -

$                     -

$ 26,150

Special Mention

-

-

-

-

-

-

-

-

-

Substandard

-

-

-

-

-

-

-

-

-

Total

$ 12,522

$ 6,375

$ 2,436

$ 1,161

$ 848

$ 2,808

$                -

$                     -

$ 26,150

Totals:

Risk Rating

Pass

$ 116,112

$ 61,166

$ 109,736

$ 94,601

$ 27,693

$ 139,911

$ 78,805

$ 1,604

$ 629,628

Special Mention

-

-

41

79

-

524

-

-

644

Substandard

37

1,015

1,348

3,295

1,320

4,086

1,654

569

13,324

Total

$ 116,149

$ 62,181

$ 111,125

$ 97,975

$ 29,013

$ 144,521

$ 80,459

$ 2,173

$ 643,596


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32

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Note 8 – Loans and allowance for credit losses (continued)

The following table details the gross charge-offs of loans by year of origination for the nine months ended September 30, 2025 and the year ended December 31, 2024.

Current Period Gross Charge-Offs by Origination Year (in thousands)

Nine months ended September 30, 2025

2025

2024

2023

2022

2021

Prior

Revolving Loans Amortized Cost Basis

Revolving Loans Converted to Term

Total

Commercial

$            -

$            -

$            -

$            -

$            -

$            -

$              -

$              -

$            -

Commercial Real Estate:

-

-

-

-

-

-

-

-

-

Commercial Mortgages-Owner Occupied

-

-

-

-

-

-

-

-

-

Commercial Mortgages-Non-Owner Occupied

-

-

-

-

-

-

-

-

-

Commercial Construction/Land

-

-

-

-

-

-

-

-

-

Consumer:

-

-

-

-

-

-

-

-

-

Consumer Open-End

-

-

-

49

-

6

-

-

54

Consumer Closed-End

-

-

44

110

27

-

-

-

181

Residential:

-

-

-

-

-

-

-

-

-

Residential Mortgages

-

-

-

-

-

9

-

-

9

Residential Consumer Construction/Land

-

-

-

-

-

-

-

-

-

Total

$            -

$            -

$ 44

$ 159

$ 27

$ 15

$              -

$              -

$ 244

Year ended December 31, 2024

2024

2023

2022

2021

2020

Prior

Revolving Loans Amortized Cost Basis

Revolving Loans Converted to Term

Total

Commercial

$            -

$ 8

$            -

$            -

$            -

$            -

$              -

$              -

$ 8

Commercial Real Estate:

Commercial Mortgages-Owner Occupied

-

-

-

-

-

-

-

-

-

Commercial Mortgages-Non-Owner Occupied

-

-

-

-

-

-

-

-

-

Commercial Construction/Land

-

-

-

-

-

-

-

-

-

Consumer:

Consumer Open-End

-

-

-

-

-

2

-

-

2

Consumer Closed-End

-

-

74

-

-

-

-

-

74

Residential:

Residential Mortgages

-

-

-

-

-

-

-

-

-

Residential Consumer Construction/Land

-

-

-

-

-

-

-

-

-

Total

$            -

$ 8

$ 74

$            -

$            -

$ 2

$              -

$              -

$ 84


‎

33

Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

The following tables present nonaccrual information by class of loans as of September 30, 2025 and December 31, 2024:

Loans on Nonaccrual Status

(dollars in thousands)

September 30, 2025

Nonaccrual Loans

With No Allowance

With an Allowance

Total

Commercial

$ 387

$ 72

$ 459

Commercial Real Estate:

Commercial Mortgages-Owner Occupied

30

-

30

Commercial Mortgages-Non-Owner Occupied

82

-

82

Commercial Construction/Land

325

-

325

Consumer

Consumer Open-End

174

-

174

Consumer Closed-End

187

-

187

Residential:

Residential Mortgages

638

-

638

Residential Consumer Construction/Land

-

-

-

Total

$ 1,823

$ 72

$ 1,895

December 31, 2024

Nonaccrual Loans

With No Allowance

With an Allowance

Total

Commercial

$ 279

$ 193

$ 472

Commercial Real Estate:

Commercial Mortgages-Owner Occupied

43

-

43

Commercial Mortgages-Non-Owner Occupied

-

-

-

Commercial Construction/Land

354

-

354

Consumer

Consumer Open-End

-

-

-

Consumer Closed-End

192

-

192

Residential:

Residential Mortgages

579

-

579

Residential Consumer Construction/Land

-

-

-

Total

$ 1,447

$ 193

$ 1,640

Interest income on nonaccrual loans is recognized only when received in cash. The Company did no t record any interest income on nonaccrual loans during the three and nine months ended September 30, 2025 or 2024. The Company also reversed all previously accrued but unpaid interest on nonaccrual loans during the three and nine months ended September 30, 2025 and 2024. If interest on these loans had been accrued, such income cumulatively would have approximated $ 11,000 and $ 66,000 for the three and nine months ended September 30, 2025 and $ 1,000 and $ 15,000 for the comparable periods in 2024.
‎

34

Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

The following tables present an aging analysis of the loan portfolio by class and past due as of September 30, 2025 and December 31, 2024 (dollars in thousands):

Age Analysis of Past Due Loans as of September 30, 2025

Recorded

Greater

Investment

30-59 Days

60-89 Days

than

Total Past

Total

> 90 Days &

Past Due

Past Due

90 Days

Due

Current

Loans

Accruing

Commercial

$

-

$

-

$

398

$

398

$

61,589

$

61,987

$

-

Commercial Real Estate:

Commercial Mortgages-Owner Occupied

-

-

-

-

149,824

149,824

-

Commercial Mortgages-Non-Owner Occupied

-

-

82

82

215,716

215,798

-

Commercial Construction/Land

53

-

-

53

14,311

14,364

-

Consumer:

Consumer Open-End

-

112

41

153

59,522

59,675

-

Consumer Closed-End

25

-

80

105

25,649

25,753

-

Residential:

Residential Mortgages

1,852

109

57

2,018

103,647

105,666

-

Residential Consumer Construction/Land

70

-

-

70

26,449

26,519

-

Total

$

2,000

$

221

$

658

$

2,879

$

656,707

$

659,586

$

-

Age Analysis of Past Due Loans as of December 31, 2024

Greater

Investment

30-59 Days

60-89 Days

than

Total Past

Total

> 90 Days &

Past Due

Past Due

90 Days

Due

Current

Loans

Accruing

Commercial

$

-

$

398

$

74

$

472

$

65,946

$

66,418

$

-

Commercial Real Estate:

Commercial Mortgages-Owner Occupied

-

-

43

43

140,400

140,443

-

Commercial Mortgages-Non-Owner Occupied

-

-

-

-

195,089

195,089

-

Commercial Construction/Land

-

-

-

-

23,883

23,883

-

Consumer:

Consumer Open-End

39

1

-

40

50,001

50,041

-

Consumer Closed-End

112

73

-

185

28,084

28,269

-

Residential:

Residential Mortgages

174

358

340

872

112,431

113,303

-

Residential Consumer Construction/Land

-

-

-

-

26,150

26,150

-

Total

$

325

$

830

$

457

$

1,612

$

641,984

$

643,596

$

-


‎

35

Table of Contents

Note 8 – Loans and allowance for credit losses (continued)

Occasionally, the Bank modifies loans for borrowers experiencing financial difficulties by providing principal forgiveness, term extensions, interest rate reductions, or payment deferrals. Because the effect of most modifications is already included in the allowance for credit losses due to the measurement methodologies used in its estimate, the allowance is typically not adjusted upon modification. When principal forgiveness is provided, the amount forgiven is charged against the allowance for credit losses.

There were no loan modifications for borrowers experiencing financial difficulty during the three and nine months ended September 30, 2025 or September 30, 2024. As of September 30, 2025, no previously modified loans had defaulted within the past twelve months.

ACL on Unfunded Commitments

The Company maintains an allowance for off-balance sheet credit exposures, such as unfunded balances for existing lines of credit, commitments to extend future credit, and both standby and commercial letters of credit, when there is a contractual obligation to extend credit and such extension is not unconditionally cancellable by the Company. The allowance for off-balance sheet credit exposures is adjusted through a provision for (or recovery of) credit losses in the Consolidated Statements of Income.

The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, as well as an estimate of expected credit losses on commitments expected to be funded over their estimated life, using the same loss rates that are applied in computing the allowance for loan credit losses.

The allowance for credit losses for unfunded loan commitments was $ 760 thousand at September 30, 2025 , and is separately classified within Other Liabilities on the Consolidated Balance Sheets.

The following table presents the balance and activity in the allowance for credit losses (ACL) for unfunded commitments for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands):

Allowance for Credit Losses on Unfunded Commitments

Balance, June 30, 2025

$ 678

Provision for credit losses

82

Balance September 30, 2025

$ 760

Balance, December 31, 2024

$ 543

Provision for credit losses

217

Balance September 30, 2025

$ 760

Allowance for Credit Losses on Unfunded Commitments

Balance, June 30, 2024

$ 589

Recovery of credit losses

( 14 )

Balance September 30, 2024

$ 575

Balance, December 31, 2023

$ 665

Recovery of credit losses

( 90 )

Balance September 30, 2024

$ 575

Other Real Estate Owned

At September 30, 2025 and December 31, 2024, the Company had no consumer mortgage loans secured by residential real estate for which foreclosure was in process. The Company held no residential real estate properties in other real estate owned as of September 30, 2025 and December 31, 2024.

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Note 9 – Recent accounting pronouncements and other authoritative guidance

In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires public companies to disclose specified types of expenses included in the captions presented on the face of the income statement, along with certain related information. In January 2025, the FASB issued ASU 2025-01, which clarified the effective date of ASU 2024-03. All public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.

Note 10 - Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before the financial statements are issued. Recognized subsequent events are those that provide additional evidence about conditions that existed as of the balance sheet date, including the estimates inherent in the preparation of the financial statements. Non-recognized subsequent events are those that provide evidence about conditions that did not exist at the balance sheet date but arose after that date.

Management has reviewed events occurring through the date the financial statements were available to be issued and has determined that no subsequent events occurred requiring accrual or disclosure, other than those already disclosed in the footnotes to the Company’s unaudited consolidated financial statements as of September 30, 2025.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Resu lts of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Statements made in this document and in any documents incorporated by reference that are not purely historical are forward-looking statements, including statements regarding management’s plans, objectives, or goals for future operations, products or services, and forecasts of revenues, earnings, or other performance measures. 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 words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “should,” “will,” “intend,” or similar expressions. Shareholders should note that many factors, some of which are discussed elsewhere in this document, could affect the future financial results of Financial and could cause those results to differ materially from those expressed in forward-looking statements. These factors, many of which are beyond Financial’s control, include, but are not limited to, the following:

Problems with technology utilized by us, including potential exposure to fraud, negligence, computer theft, cyber-crime, cyber-threats, 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, such as government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related regulations), which change from time to time and over which we have no control, and increased competition from other providers of financial services due to such regulations.

Economic, market, political, and competitive forces affecting Financial's banking and other businesses, including changes in interest rates, monetary policy, and general economic conditions, which may impact net interest income, credit quality, loan demand, or overall conditions in our market area.

Geopolitical risks, including economic and political tensions with China, the ongoing war between Russia and Ukraine and potential expansion of combatants, sanctions on Russia, and the potential impact of tariffs, trade restrictions, or changes in U.S. trade policy on businesses in our market area and our business and agricultural borrowers, all of which may have a destabilizing effect on financial markets and economic activity and could indirectly affect credit quality, loan demand, or overall economic conditions in our market area.

The ability to maintain adequate liquidity by retaining deposit customers and secondary funding sources, especially if the Company’s or banking industry’s reputation becomes damaged.

The adequacy of the level of the Company’s allowance for credit losses, the amount of credit loss provisions required in future periods, and the failure of assumptions underlying the allowance for credit losses.

Reliance on our management team, including our ability to attract and retain key personnel.

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 is incorrect or that the strategies developed to address them are unsuccessful.

The stability of the overall banking industry in the United States.

Prolonged U.S. federal government shutdowns (lapses in appropriations), which may disrupt economic activity, delay or reduce federal payments and guaranty programs (including small‑business lending), constrain capital markets or regulatory processes, and reduce the availability of government economic data relied upon by market participants and monetary policymakers.

Developments related to digital assets, including cryptocurrencies and stablecoins, and changes in related laws, supervisory expectations, capital or accounting frameworks, customer adoption, or payment rails, any of which could affect deposit flows, liquidity management, third‑party relationships, operational resiliency, compliance obligations, or reputational risk.

Our ability to pay dividends, repurchase shares, or otherwise return capital to shareholders, which is subject to our capital position and earnings, applicable laws and regulations (including capital buffer and stress‑testing requirements), regulatory approvals or supervisory actions, and the discretion of our Board of Directors.

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Changes in federal, state, or local tax laws, regulations, rates, or administrative interpretations and the timing of regulatory guidance or implementation that could affect our effective tax rate, deferred tax assets, capital planning, or after‑tax earnings.

Other risks and uncertainties set forth in this Quarterly l Report on Form 10-Q and, from time to time, in our other filings with the Securities and Exchange Commission (“SEC”).

Other risks, uncertainties, and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

These factors should be considered when evaluating the forward-looking statements, and you should not place undue reliance on such statements. This discussion and analysis should be read in conjunction with the description of our “Risk Factors” in Item 1A of the most recently filed Form 10-K.

GENERAL

Critical Accounting Policies

Bank of the James Financial Group, Inc.’s (“Financial” or the “Company”) financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). As a community bank primarily serving central Virginia, 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, such as lending activities tied to local real estate markets and small business operations. A variety of factors—particularly regional economic conditions, fluctuations in interest rates, and changes in real estate values in our market area—could affect the ultimate value obtained when earning income, recognizing an expense, recovering an asset, or relieving a liability. In addition, GAAP itself may evolve from one previously acceptable method to another, potentially altering the timing of how these events impact our transactions, even if the underlying economics remain unchanged.

The Allowance for Credit Losses on Loans (“ACL”) is management’s estimate of the current expected credit losses in our loan portfolio and held-to-maturity securities portfolio. With the exception of loans related to agriculture, the Company uses a discounted cash flow model to estimate its current expected credit losses in our loan portfolio and held-to-maturity securities portfolio . Actual losses could differ significantly from the historical factors that we use in estimating risk. For information on the Company’s policies on the ACL, please refer to Note 2 – “Allowance for Credit Losses - Loans” in the Company’s Form 10-K for the year ended December 31, 2024. See “Management’s Discussion and Analysis Results of Operations – Allowance and Provision for Credit losses” below for further discussion of the allowance for credit losses.

Overview

The following overview of our business has not materially changed since our Annual Report on Form 10-K for the year ended December 31, 2024.

Financial is a bank holding company headquartered in Lynchburg, Virginia. Our primary business is retail banking which we conduct through our wholly-owned subsidiary, Bank of the James (which we refer to as the “Bank”). 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 Business”), and as of December 31, 2021, investment advisory services through the Company’s wholly-owned subsidiary, Pettyjohn, Wood & White, Inc. (which we refer to as “PWW”).

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. The Bank was organized to engage in general retail and commercial banking business. The Bank is a community-oriented financial institution that provides varied banking services to individuals, small and medium-sized businesses, and professional concerns. Historically, our primary market area has been the Central Virginia, Region 2000 area, 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. The Bank has expanded to other areas in Virginia, specifically Roanoke, Charlottesville, Harrisonburg, Blacksburg, Lexington, Rustburg, Buchanan, and Nellysford. The Bank strives to provide its customers with products comparable to statewide regional banks located in its market areas, while maintaining the prompt response time and level of service of a community bank . Management believes this operating strategy has particular appeal in the Bank’s market areas.

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We conduct our investment advisory business through PWW, which Financial acquired on December 31, 2021. PWW is a Lynchburg, Virginia-based investment advisory firm that has approximately $ 984,746,000 in assets under management and advisement as of September 30, 2025. PWW generates revenue primarily through investment advisory fees.

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.

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—consisting primarily of loans, investment securities, and other investments—and (ii) interest expense on interest-bearing liabilities, consisting principally of deposits and other borrowings. The Bank’s net income is also affected by its provision for credit losses, as well as the level of its noninterest income (including gains on sales of loans held for sale, service charges, and investment advisory fees) and its noninterest expenses (including salaries and employee benefits, occupancy expense, data processing expenses, Federal Deposit Insurance Corporation premiums, expenses in complying with regulatory requirements, miscellaneous other expenses, franchise taxes, and income taxes).

The Bank intends to enhance its profitability by increasing its market share in its service areas, providing additional services to customers, and controlling costs.

The Bank services its banking customers through the following locations in Virginia:

Full-Service Branches

The main office located at 828 Main Street in Lynchburg, Virginia (the “Main Street Office”),

A branch located at 5204 Fort Avenue in Lynchburg, Virginia (the “Fort Avenue Branch”),

A branch located at 4935 Boonsboro Road, Suites C and D in Lynchburg, Virginia (the “Boonsboro Branch”),

A branch located at 4105 Boonsboro Road in Lynchburg, Virginia (the “Peakland Branch”),

A branch located at 4698 South Amherst Highway in Amherst County, Virginia (the “Madison Heights Branch”),

A branch located at 17000 Forest Road in Forest, Virginia (the “Forest Branch”),

A branch located at 164 South Main Street, Amherst, Virginia (the “Amherst Branch”),

A branch located at 1405 Ole Dominion Boulevard in the Town of Bedford, Virginia, located off of Independence Boulevard (the “Bedford Branch”),

A branch located at 1110 Main Street, Altavista, Virginia (the “Altavista Branch”),

A branch located at 1391 South High Street, Harrisonburg, Virginia (the “Harrisonburg Branch”),

A branch located at 1745 Confederate Blvd, Appomattox, Virginia (the “Appomattox Branch”),

A branch located at 225 Merchant Walk Avenue, Charlottesville, Virginia (the “5th Street Station Branch”),

A branch located at 3562 Electric Road, Roanoke, Virginia (the “Roanoke Branch”),

A branch located at 45 South Main St., Lexington, Virginia (the “Lexington Branch”),

A branch located at 550 Water St., Charlottesville, Virginia (the “Water Street Branch”),

A branch located at 2101 Electric Rd, Roanoke, Virginia (the “Oak Grove Branch”),

A branch l ocated at 13 Village Highway, Rustburg, Virginia (the “Rustburg Branch”),

A branch located at 19792 Main Street, Buchanan, Virginia (the “Buchanan Branch”);

A branch located at 2935 Rockfish Valley Highway, Nellysford, Virginia (the “Nellysford Branch”); and

A branch located at 20795 Timberlake Road, Lynchburg, Virginia (the “Timberlake Branch”).

Limited Service Branches

Westminster -Canterbury facilities located at 501 VES Road, Lynchburg, Virginia, and

Westminster- Canterbury facilities located at 250 Pantops Mountain Road, Charlottesville, Virginia.

Loan Production Offices

Residential mortgage loan production office located at the Forest Branch,

Residential mortgage loan production office located at 570 West Main St., Wytheville, Virginia,

Residential mortgage loan production office located at 2001 South Main Street, Blacksburg, Virginia, and

Commercial, consumer and residential mortgage loan production office located at the Water Street Branch.

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The Investment division and the Insurance Business operate primarily out of offices located at the Main Street Office. PWW operates our investment advisory business primarily from its offices at 1925 Atherholt Road in Lynchburg.

In September 2025, the Bank opened its full-service branch in Nellysford, Virginia and closed the temporary branch it had been operating.

The Bank continuously evaluates areas within our service areas to identify viable branch locations. Based on this evaluation, the Bank may acquire additional suitable sites.

Subject to regulatory approval, the Bank may open additional branches during the next two fiscal years. Although numerous factors could influence the Bank’s expansion plans, the following discussion provides a general overview of the additional branch locations that the Bank currently is considering, including the following property that we own and are holding for expansion:

Real property located at 1925 Atherholt Road, Lynchburg, Virginia . On December 31, 2021, the Bank purchased real property located at 1925 Atherholt Road, Lynchburg, Virginia. The building currently serves as the offices for Financial’s wholly-owned subsidiary, PWW. PWW is currently leasing the space from the Bank on a month-to-month basis. While the Bank currently does not have a timeline for a branch at this location, the space is attractive for a branch due to its close proximity to Centra’s Lynchburg General Hospital. The investment needed to upfit the property will be minimal.

Although the Bank cannot predict the financial impact of each new branch with certainty, management generally expects that each new branch will become profitable within 12 to 18 months of operation.

The Bank continues to evaluate suitable branch locations and may acquire properties for expansion in the next 12 months. Future branch openings are subject to regulatory approval.

OFF-BALANCE SHEET ARRANGEMENTS

The Bank is party to various financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit risk and interest rate risk exceeding the amount recognized in the balance sheets and could impact the overall liquidity and capital resources to the extent customers accept or use these commitments.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. A summary of the Bank’s commitments follows (dollars in thousands):

September 30, 2025

December 31, 2024

Commitments to extend credit

$ 201,227

$ 182,522

Letters of Credit

2,458

3,507

Total

$ 203,685

$ 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. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on the Bank’s credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on the Bank’s credit evaluation of the customer.

The Bank has rate lock commitments to originate mortgage loans through its Mortgage Division. The Bank has entered into corresponding commitments with third-party investors to sell each of these loans that close. No other obligation exists. As a result of these contractual relationships with these investors, the Bank is not exposed to losses, nor will it ultimately realize gains related to its rate lock commitments due to changes in interest rates.

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SUMMARY OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion represents management’s discussion and analysis of the financial condition of Financial as of September 30, 2025 and December 31, 2024 and the results of operations of Financial for the three and nine-month periods ended September 30, 2025 and 2024. This discussion should be read in conjunction with the financial statements included elsewhere herein. All financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Financial Condition Summary

September 30, 2025 as Compared to December 31, 2024

Total assets were $1,020,125,000 on September 30, 2025, compared with $979,244,000 at December 31, 2024, an increase of 4.18%. The increase in total assets was primarily due to growth in federal funds sold, securities available-for-sale, and loans (net of the allowance for credit losses), reflecting continued loan demand and prudent liquidity management.

Total deposits increased from $882,404,000 as of December 31, 2024, to $919,796,000 on September 30, 2025, an increase of 4.24%. This growth was largely driven by customer inflows into money market and time deposit products as well as non-interet bearing deposits. The Company continues to utilize the reciprocal portion of the Insured Cash Sweep (ICS) program for customers requiring full FDIC insurance, and may re-deploy the non-reciprocal option as market and liquidity conditions warrant.

Total loans, excluding loans held for sale, increased to $659,586,000 on September 30, 2025, from $643,596,000 on December 31, 2024, an increase of 2.37%. Growth was driven primarily by increases in commercial and commercial real estate portfolios, reflecting ongoing regional business activity, while residential and consumer lending levels remained stable.

The following summarizes the position of the Bank’s loan portfolio as of the dates indicated by dollar amount and percentages (dollar in thousands):

September 30, 2025

December 31, 2024

Amount

Percentage

Amount

Percentage

Commercial

$                      61,987

9.40%

$                      66,418

10.32%

Commercial Real Estate

379,986

57.61%

359,415

55.84%

Consumer

85,428

12.95%

78,310

12.17%

Residential

132,185

20.04%

139,453

21.67%

Total loans

$                    659,586

100.00%

$                    643,596

100.00%

Total loans, excluding loans held for sale and net of the allowance for loan losses, increased to $653,288,000 on September 30, 2025, from $636,552,000 on December 31, 2024, an increase of 2.63%. Growth was driven primarily by increases in commercial and commercial real estate portfolios, reflecting ongoing regional business activity, while residential and consumer lending levels remained stable.

Loans held for sale totaled $3,766,000 at September 30, 2025, compared to $3,616,000 at December 31, 2024, an increase of 4.15%, due primarily to normal quarterly fluctuations in mortgage production and secondary market sales.

Subsegments of the loan portfolio are set forth in Note 8 of our financial statements. As a community bank , the Bank is committed to growing assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets it serves. Based on the loan portfolio as of September 30, 2025, non-owner-occupied commercial real estate loans and construction and land development loans totaled $230,162,000, representing approximately 34.9% of total loans.

We have expertise and a long history of originating and managing commercial real estate loans. Our strong credit underwriting process includes management and board oversight. We perform rigorous monitoring, stress testing and reporting of these portfolios at the management and board levels, and we continue to monitor concentration levels in our commercial real estate loans monthly.

The Bank closely monitors concentrations within its commercial real estate loan portfolio. As of September 30, 2025, non-owner occupied commercial real estate loans totaled $215,798,000, or approximately 32.7% of total loans. This amount was calculated by purpose code and is consistent with the Call Report that the Bank files with the FDIC. The Bank has minimal exposure to loans secured by large office buildings or shopping centers (less than 5% of the non-owner occupied commercial real estate (CRE) portfolio). The majority of our non-owner occupied commercial loans are secured by smaller, multi-tenant properties diversified across various industries and geographies within our market areas.

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The Bank does not have any non-owner occupied commercial loans secured by properties in major city centers. We have not seen an increase in delinquencies in loans secured by non-owner occupied commercial real estate.

In addition, to help manage risk, we actively manage and monitor our commercial real estate risk through the following, when appropriate:

Origination and Analysis

We have a thorough loan origination process. For all CRE loans secured by real estate collateral, we require an appraisal or valuation at the time of origination. We generally do not approve loans with a loan-to-value ratio exceeding 80%. An individual property cash flow analysis is performed, and, if appropriate, a global cash flow analysis is also conducted. We generally require a debt service coverage ratio of at least 1.2x.

Ongoing Risk Management

Following origination, we continue to manage risk. 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;

Regularly monitoring 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.

Credit Enhancements

Where appropriate, we mitigate risk by obtaining credit enhancements. Typical enhancements to CRE loans include personal guarantees, secondary collateral, and liquid collateral.

The following table sets forth information for non-owner occupied CRE loans for the four largest categories of loans (classified by purpose code and collateral description) having the highest current principal balance:


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CRE Loan Portfolio

Non-Owner Occupied

(dollars in thousands)

As of September 30, 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)

39

$ 50,110

7.61%

$ 1,271

53.28%

Office Building

35

38,082

5.79%

1,088

42.06%

Hotel/Motel

9

31,542

4.79%

3,504

57.01%

Retail Store

26

19,788

3.01%

792

61.28%

(1) Loan-to-value is based on collateral valuation at origination date against current bank-owned principal.

The following table sets forth information for owner occupied CRE Loans set forth the four largest categories of loans (classified by purpose code and collateral description) having the highest current principal balance:

CRE Loan Portfolio

Owner Occupied

(dollars in thousands)

As of September 30, 2025

Collateral Description

Total Number of Loans

Current Balance

% of Total Loans

Average Balance

Weighted Avg LTV of Top 5 Loans (1)

Industrial

33

33,156

5.04%

1,036

42.50%

Office Building

80

$ 31,233

4.75%

$ 400

55.59%

Retail Store

30

14,532

2.21%

501

56.60%

Medical Building

25

12,736

1.94%

509

71.49%

(1) Loan-to-value is based on collateral valuation at origination date against current bank-owned principal.

Total nonperforming assets, which consist of nonaccrual loans, loans past due 90 days or more and still accruing were $1,895,000 at September 30, 2025, compared with $1,640,000 at December 31, 2024. As discussed under “Results of Operations—Allowance and Provision for Credit Losses,” management has provided for any anticipated losses on these loans in the allowance for credit losses.

Loan payments received on nonaccrual loans are first applied to principal. When a loan is placed on nonaccrual status, all accrued but unpaid interest is reversed, accrual of interest is discontinued until repayment is assured, and additional provisions may be necessary for actual losses.

Other real estate owned (“OREO”) represents real property acquired by the Bank for debts previously contracted, including through foreclosure or deeds in lieu of foreclosure. We had no OREO at September 30, 2025 and December 31, 2024. The Bank neither acquired nor disposed of any OREO during the three and nine months ended September 30, 2025..

Cash and cash equivalents increased to $85,451,000 at September 30, 2025, from $73,309,000 at December 31, 2024. Cash and cash equivalents consist of cash due from correspondents, cash in vault, and overnight investments (including federal funds sold). The increase was primarily attributable to higher federal funds sold balances, which rose to $57,001,000 at September 30, 2025, compared to $50,022,000 at December 31, 2024. Deposit inflows during the period allowed management to deploy excess liquidity into overnight Fed funds. Cash and cash equivalents remain subject to routine fluctuations in transactional and professional settlement accounts.

Securities held-to-maturity decreased slightly to $3,594,000 at September 30, 2025, from $3,606,000 at December 31, 2024, due to normal net amortization of premiums.

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Securities available-for-sale, carried at fair market value, increased to $202,506,000 at September 30, 2025, from $187,916,000 at December 31, 2024, an increase of $14,590,000, reflecting portfolio growth and reinvestment of excess liquidity, as well as an increase in fair value resulting from a decline in interest rates from December 31, 2024. As of September 30, 2025, unrealized losses on securities available‑for‑sale totaled $19.928 million pre‑tax and $15.743 million after tax (21% tax effect). These losses are primarily related to market interest rate movements, and management does not expect to realize them, as the Bank has both the intent and ability to hold the securities until recovery or maturity.

Restricted stock, consisting of stock in the Federal Reserve, the Federal Home Loan Bank of Atlanta (FHLBA), and our correspondent banks, totaled $1,828,000 at September 30, 2025, compared with $1,821,000 at December 31, 2024. These holdings are carried at cost and evaluated for impairment based on par value recoverability rather than temporary market declines.

Liquidity and Capital

Liquid assets, on a consolidated basis, were $287,957,000 on September 30, 2025, in the form of cash, interest-bearing and noninterest-bearing deposits with banks, federal funds sold, and available-for-sale investments. This represents an increase from December 31, 2024, when liquid assets totaled approximately $261,225,000, primarily reflecting higher balances in federal funds sold and investment securities.

The Bank has pledged (market values):

approximately $34,000,000 of our available-for-sale securities as collateral with correspondent banks, including the FHLBA, for collateralized lines of credit;

approximately $51,000,000 of our available-for-sale securities as security for public deposits; and

approximately $25,000,000 of our available-for-sale securities as collateral for advances at the Federal Reserve Bank’s discount window.

If additional liquidity is needed, the Bank can purchase up to $53,000,000 of Fed funds through correspondent relationships and borrow from the FHLBA by pledging additional investments. In addition, the Bank has borrowing capacity with the FHLBA of approximately $17,000,000 related to pledged loans. As of September 30, 2025, the Bank had no borrowings from any of these sources. Management believes that liquid assets were adequate at September 30, 2025 and anticipates additional liquidity from deposit growth and loan repayments.

As of September 30, 2025, the Bank had no borrowings from any of these sources. Management believes that liquid assets were adequate at September 30, 2025. Management anticipates that additional liquidity will be provided by the growth in deposit accounts and loan repayments from customers.

While we have not experienced unusual pressure on deposit balances or liquidity, management continues to closely monitor sources and uses of funds to meet cash flow requirements while seeking to maximize profits. The Company’s total uninsured deposits—amounts, subject to aggregation rules, that exceed the FDIC insurance limit of $250,000—were approximately $276,000,000, or 30% of total deposits, at September 30, 2025. These were estimated using the same methodologies and assumptions as regulatory reporting.

At September 30, 2025, the Bank had a leverage ratio of 9.02%, a Tier 1 risk-based capital ratio and Common Equity Tier 1 (CET1) ratio of 11.41%, and a total risk-based capital ratio of 12.20%. As of both September 30, 2025 and December 31, 2024, the Bank’s regulatory capital levels exceeded those established for well-capitalized institutions.

The Tier 1 risk-based capital ratio decreased modestly from December 31, 2024, primarily due to the dividend payment to Financial of $5,000,000 during 2025, which Financial used toward the retirement of approximately $10,050,000 in debt at maturity. This impact was partially offset by net income of $6,298,000 for the nine months ended September 30, 2025.

Stockholders’ equity totaled $76,972,000 at September 30, 2025, compared with $64,865,000 at December 31, 2024, an increase of 18.66%, primarily reflecting retained earnings growth and a reduction in accumulated other comprehensive loss due to


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improving unrealized positions on available-for-sale securities.

Bank Level Only Capital Ratios

Analysis of Capital for Bank of the James (Bank only)

(dollars in thousands)

September 30,

December 31,

Analysis of Capital

2025

2024

Tier 1 capital

Common Stock

$             3,742

$            3,742

Surplus

22,325

22,325

Retained earnings

65,117

65,292

Total Tier 1 capital

$           91,184

$          91,359

Common Equity Tier 1 Capital (CET1)

$           91,184

$          91,359

Tier 2 capital

Allowance for credit losses

$             6,297

$            7,044

Total Tier 2 capital:

6,297

7,044

Total risk-based capital

$           97,481

$          98,403

Risk weighted assets

$         796,054

$        766,614

Average total assets

$      1,007,064

$     1,010,594

Actual

Regulatory Benchmarks

For Capital

For Well

September 30,

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

11.45%

11.92%

7.000%

6.500%

Tier 1 risk-based capital ratio

11.45%

11.92%

8.500%

8.000%

Total risk-based capital ratio

12.25%

12.84%

10.500%

10.000%

(1) Includes the capital conservation buffer of 2.50% for all ratios, excluding the Tier 1 capital to average total assets ratio.

The above tables set forth the capital position and analysis for the Bank only. Because total assets on a consolidated basis are less than $3,000,000,000, 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. If calculated, the capital ratios for the Company on a consolidated basis at September 30, 2025 would be lower than those of the Bank, because a portion of the proceeds from the sale of notes previously issued by the holding company were contributed to the Bank as equity.

In July 2013, the Federal Reserve Board approved a final rule establishing a regulatory capital framework for smaller, less complex financial institutions. The rule was fully implemented on January 1, 2019, and established a capital conservation buffer of 2.5%. As a result, the Bank is required to maintain a minimum ratio of Tier 1 capital to average total assets of 4.00% (exclusive of the capital conservation buffer), a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 7.0% (inclusive of the capital conservation buffer), and a Tier 1 risk-based capital ratio of 8.5% (inclusive of the capital conservation buffer). Failure to maintain the capital conservation buffer will limit the ability of the Bank and Financial to pay dividends, repurchase shares, or pay discretionary bonuses. The rule also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations.


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Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

Earnings Summary

For the three and nine months ended September 30, 2025, the Company reported net income of $2,752,000 and $6,298,000, respectively, compared with net income of $1,990,000 and $6,326,000 for the same periods in 2024. This represents an increase of $762,000, or 38.3%, for the three-month period, and a slight decrease of $28,000, or 0.4%, for the nine-month period.

Basic and diluted earnings per common share were each $0.61 and $1.39 for the three and nine months ended September 30, 2025, compared with $0.44 and $1.39 for the same periods in 2024.

The increase in net income for the three months ended September 30, 2025, compared with the same period in 2024, was primarily driven by higher net interest income, lower interest expense, and growth in noninterest income, partially offset by an increase in noninterest expense. The slight decrease in net income for the nine-month period ended September 30, 2025, compared with the same period in 2024, was primarily due to higher operating expenses associated with technology investments and personnel growth, which offset improvements in revenue and credit performance.

A more detailed analysis of the components that impacted net income for the three and nine-month periods ended September 30, 2025, compared with the same periods in 2024, follows:

Net interest income increased to $8,300,000 and $24,269,000 for the three and nine months ended September 30, 2025, from $7,509,000 and $21,550,000 for the same periods in 2024, reflecting growth in the loan portfolio and improved yields on earning assets.

The Company recorded a provision for credit losses of $91,000 for the three months ended September 30, 2025, compared with $92,000 for the same period in 2024. For the nine-month period, the Company recorded a recovery of provision for credit losses of $301,000, compared with a recovery of provision of credit losses of $584,000 in 2024.

Noninterest income increased to $4,169,000 and $11,527,000 for the three and nine months ended September 30, 2025, compared with $3,823,000 and $11,321,000 for the same periods in 2024, driven by higher wealth management fees and loan sale gains.

Noninterest expense increased to $9,160,000 and $28,441,000 for the three and nine months ended September 30, 2025, from $8,776,000 and $25,602,000 for the same periods in 2024, primarily reflecting increases in salaries and benefits, and, in the nine months ended September 30, 2025, consulting fees incurred in negotiation the Bank’s core provider contract.

These operating results produced an annualized return on average stockholders’ equity of 15.24% and 12.34% for the three and nine-month periods ended September 30, 2025, compared with 12.86% and 13.95% for the same periods in 2024. The annualized return on average assets was 1.07% and 0.83% for the three and nine-month periods ended September 30, 2025, compared with 0.80% and 0.86% for the same periods in 2024.

The improvement in profitability during the third quarter of 2025 reflects continued balance sheet growth, disciplined funding cost management, and stable asset quality, while year-to-date results were tempered by higher operating expenses associated with technology initiatives and regulatory compliance investments.

See “ Noninterest Income” below for mortgage business and wealth management segment discussions.

Interest Income, Interest Expense, and Net Interest Income

For the three and nine months ended September 30, 2025, interest income increased to $11,771,000 and $34,643,000, respectively, compared with $11,563,000 and $33,007,000 for the same periods in 2024. The increase in interest income was primarily attributable to higher average loan balances and improved yields on earning assets. The average rate on loans was approximately 5.70% and 5.65%% for the three and nine months ended September 30, 2025, compared with 5.65% and 5.45% for the same periods in 2024. Yields on total interest-earning assets also rose, driven by loan repricing and origination of new loans at higher market rates.

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For the three and nine months ended September 30, 2025, interest expense was $3,471,000 and $10,374,000, compared with $4,054,000 and $11,457,000 for the same periods in 2024—a decline of 14.4% and 9.5%, respectively. The decrease in interest expense resulted primarily from repricing of maturing time deposits and money market accounts at lower rates, along with disciplined deposit pricing strategies during the period. The Company’s average rate paid on interest-bearing deposits and total interest-bearing liabilities was approximately 1.72% and 1.73%, respectively, for the three months ended September 30, 2025 compared with 2.01% and 2.05% for the same period in 2024. The Company’s average rate paid on interest-bearing deposits and total interest-bearing liabilities was approximately 1.70% and 1.74%, respectively, for the nine months ended September 30, 2025 compared with 1.93% and 1.97% for the same period in 2024.

The fundamental source of the Bank’s net revenue is net interest income —the difference between (i) interest and dividend income on interest-earning assets (primarily loans, investment securities, and other investments) and (ii) interest expense on interest-bearing liabilities (principally deposits and other borrowings).

Net interest income for the three and nine months ended September 30, 2025, was $8,300,000 and $24,269,000, respectively, compared to $7,509,000 and $21,550,000 for the same periods in 2024, representing increases of 10.5% and 12.6%.

The net interest margin was 3.44% for the quarter ended September 30, 2025, and 3.37% for the nine-month period, compared with 3.16% and 3.07% for the corresponding periods in 2024. Margin expansion was largely the result of rising loan yields and lower funding costs , reflecting an improved balance between asset sensitivity and funding mix. Although short-term interest rates have stabilized, future rate movements could continue to influence the margin depending on loan repricing and deposit rate competition. For example,

While management does not anticipate it will be necessary to raise deposit rates, if we need to raise rates on deposits, there likely would be an adverse impact on our margin and profitability.

A stabilizing interest rate environment is likely to allow us to increase our net interest margin.

In the event of rapid rate decreases, our net interest margin could come under pressure in the short term, as the Bank is currently asset-sensitive.

Other financial impacts could occur, though such potential impacts are unknown at this time.

Financial’s net interest margin analysis and average balance sheets are shown in Schedule I below.

Noninterest Income

Noninterest income is comprised primarily of fees and charges on transactional deposit accounts, gains on sales of mortgage loans held for sale, commissions on sales of investments, fees generated from treasury management services, fees generated from our investment advisory business, and bank-owned life insurance income.

Noninterest income totaled $4,169,000 and $11,527,000 for the three and nine months ended September 30, 2025, compared to $3,823,000 and $11,321,000 for the same periods in 2024, representing increases of 9.1% and 1.8%, respectively. The improvement for the quarter was primarily attributable to higher gains on sales of loans held for sale, increased wealth management fees, and stable service fee income, partially offset by lower other income and reduced gains on available-for-sale securities.

The major components of noninterest income for the three and nine months ended September 30, 2025, as compared to the comparable periods in 2024, were as follows:

Gains on sale of loans held for sale , primarily through the Mortgage Division, totaled $1,242,000 and $3,668,000 , compared with $1,326,000 and $3,526,000 for the same periods in 2024.

Wealth management fees increased to $1,362,000 and $3,917,000 , up from $1,244,000 and $3,583,000 for the comparable 2024 periods, reflecting continued growth in client assets under management.

Service charges, fees, and commissions were $1,046,000 and $3,002,000 , compared with $991,000 and $2,930,000 for the same periods in 2024, reflecting steady transactional and deposit activity.

Life insurance incom e grew slightly to $195,000 and $573,000 , from $189,000 and $531,000 , driven by the continued accumulation of cash surrender value on bank-owned life insurance policies.

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Other income was $297,000 and $340,000 , compared with $31,000 and $669,000 in the same 2024 periods. The increase for the three month period was due to SBIC fund income. The decrease for the nine month periods reflects reflects lower miscellaneous gains and fewer one-time income items.

Gains on sales of available-for-sale securities totaled $27,000 for both the three- and nine-month periods ended September 30, 2025, compared with $42,000 and $82,000 for the corresponding 2024 periods.

The increase in noninterest income for the third quarter demonstrates the Company’s ability to generate consistent fee-based revenue, particularly in wealth management and mortgage banking, despite lower securities gains and fewer nonrecurring items.

The Bank, through its Mortgage division , originates both conforming and non-conforming consumer residential mortgage loans in the markets we serve. As part of the Bank’s overall risk management strategy, all loans originated and closed by the Mortgage Division are presold to major national mortgage banking or financial institutions. The Mortgage Division’s primary source of revenue is gains on sale of loans held for sale. The Mortgage Division assumes no credit or interest rate risk on these mortgages, except in limited circumstances such as first payment default.

Purchase mortgage originations totaled $42,830,847 and $123,948,096, or 81.22% and 84.36%, respectively, of total mortgage loans originated in the three and nine months ended September 30, 2025, as compared to $31,015,512 and $120,657,357, or 84.98% and 83.02%, respectively, of the total mortgage loans originated in the same periods in 2024. Because of a relatively higher mortgage interest rate environment, management anticipates that in the short term, purchase mortgage originations will continue to represent a significant percentage of mortgage originations. Management also believes that a continued elevated interest environment could continue to limit refinancing activity.

Mortgage rates increased dramatically in 2022 and 2023 and, despite recent declines, remain elevated compared with recent history. While rates have generally stabilized or declined since then, he elevated interest rate environment continues to have a negative impact on mortgage origination volume compared to pre-2022 levels. Due to the uncertainty surrounding current and near-term economic conditions—arising from inflation, as well as geopolitical and economic concerns—management cannot predict future mortgage rates. Management also believes that relatively high interest rates may continue to put pressure on revenue from the mortgage segment.

Our Investment division provides brokerage services through an agreement with a third-party broker-dealer. Pursuant to this arrangement, the third-party broker-dealer operates a service center adjacent to one of the Bank’s branches. The center is staffed by two 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. The Investment division ’s financial impact on our consolidated revenue has been minimal. Although management cannot predict the financial impact of Investment with certainty, management anticipates that the Investment division ’s revenue as a percentage of our overall noninterest income will remain minimal in 2025.

We conduct our investment advisory business through PWW , which Financial acquired on December 31, 2021. PWW, based in Lynchburg, Virginia, had approximately $984,747,000 in assets under management and advisement as of September 30, 2025, as compared to $853,997,000 on December 31, 2024. This increase was due to both the inflow of new assets of over $32,000,000 during the nine months ended September 30, 2025 and investment returns on the assets under management. PWW operates as a subsidiary of Financial and generates revenue primarily through investment advisory fees, which vary based on the value of assets under management. These assets may fluctuate due to client action and market conditions. Despite potential fluctuations, we anticipate that PWW will continue to contribute meaningfully to the Company’s consolidated net income.

The Bank provides insurance and annuity products to its customers and others through its Insurance subsidiary. The Bank has three employees licensed to sell insurance products through Insurance. 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 for the remainder of 2025.

Noninterest Expense

Noninterest expense for the three and nine months ended September 30, 2025, increased to $9,160,000 and $28,441,000, from $8,776,000 and $25,602,000 for the same periods in 2024 — representing increases of 4.4% for the quarter and 11.1% year-to-date. The increase primarily resulted from higher salaries and employee benefits and continued investment in technology, data processing, and customer-facing systems.

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Total personnel expense (salaries and employee benefits) was $5,516,000 and $15,650,000 for the three and nine months ended September 30, 2025, compared to $4,920,000 and $14,256,000 for the same periods in 2024, reflecting merit increases, normal annual adjustments, and staffing additions to support commercial and retail growth, as well as accruals for anticipated year-end employee compensation.

Professional and other outside expenses totaled $725,000 and $3,194,000 for the three and nine months ended September 2025, compared to $688,000 and $2,125,000 for the same periods in 2024. The increase for the nine-month period was primarily due to a one-time consulting fees incurred earlier in the year related to the core processing system contract renewal.

Data processing expense totaled $381,000 and $1,984,000 for the three and nine months ended September 2025, compared to $794,000 and $2,352,000. The decrease in data processing costs was driven by lower ongoing fees following the renewal of the core processing system contract and the application of vendor credits.

Occupancy and equipment expenses were $523,000 and $697,000, respectively, for the quarter, up modestly from $514,000 and $640,000 in the prior-year period, reflecting ongoing branch improvements and facility maintenance.

Other noninterest expenses, including marketing, credit-related costs, FDIC insurance, and amortization of intangibles, totaled $1,318,000 for the quarter, up from $1,240,000 in the same period of 2024, primarily due to higher insurance and operating costs associated with the Company’s growth.

The Company remains focused on managing expenses efficiently while investing in strategic initiatives to support long-term growth, technology advancement, and customer engagement.

Management anticipates that the amended core-service provider contract, with its 65-month term which began April 1, 2025, will generate significant cost savings—projected at over $40,000 per month over the life of the agreement—as compared to our previous arrangement, subject to standard provisions regarding early termination or adjustment.

Allowance and Provision for Credit Losses

The allowance for credit losses represents an amount that, in our judgment, is adequate to absorb expected losses in the loan portfolio. The provision for credit losses increases the allowance, while loans charged off, net of recoveries, reduce it. The provision is charged to earnings to bring the total allowance to a level deemed appropriate by management. Loans with a risk rating of 7 or below that are significantly past due, and loans with borrowers whose performance and financial condition indicate the Bank will likely be unable to collect all amounts when due, are evaluated for specific impairment. The general reserve component is based on an evaluation of general economic conditions, actual and expected credit losses, and loan performance measures.

As part of our regular model governance cycle, we worked with our external CECL vendor in the second quarter of 2025 to update several inputs in our discounted cash flow models including the following: raising certain loss-rate ceilings, incorporating post-pandemic loss history, and updating prepayment and curtailment expectations. While these refinements better align the models with current credit conditions, they also shifted the second quarter’s allowance calculation (which impacted the nine months ended September 30, 2025) from what would otherwise have been a charge to earnings to a net recovery. See Note 8 for additional details. Management made no changes to the model in the third quarter 2025.

Based on the application of the credit-loss calculation, the Bank recorded a provision for credit losses of $91,000 for the three months ended September 30, 2025, and a recovery of provision for credit losses of $300,000 for the nine months ended September 30, 2025, compared to a provision of $92,000 and a recovery of $584,000 for the same periods in 2024. The provision attributable to unfunded commitments and recorded in other liabilities was $82,000 for the three months ended September 30, 2025.

At September 30, 2025, the allowance for credit losses was $6,298,000, or 0.95% of total loans outstanding, compared with $7,044,000, or 1.09%, at December 31, 2024, and $7,078,000, or 1.12%, at September 30, 2024. The decrease from year-end reflected continued stable credit quality, limited charge-offs, and ongoing strong loan performance (see Note 8 for detail). The allowance for credit losses for individually evaluated loans was $71,000 September 30, 2025 as compared to $193,000 at December 31, 2024.

Charged-off loans, which are loans that management deems uncollectible, are charged against the allowance for credit losses and constitute realized losses. The Bank recorded net charge-offs of approximately $20,000 for the three months ended September 30, 2025, compared with net recoveries of $21,000 for the same period in 2024. While a charged-off loan may subsequently be collected, such recoveries generally are realized over an extended period of time.

At September 30, 2025, nonperforming loans totaled approximately $1,895,000, compared with $1,640,000 at December 31, 2024, and $1,295,000 at September 30, 2024. If interest on these loans had been accrued, such income cumulatively would have approximated $66,000, $72,000, and $16,000, as of the applicable dates.

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Nonperforming loans represented 0.29% of total loans at September 30, 2025, compared with 0.25% at December 31, 2024. The allowance for credit losses for loans to total loans ratio was 0.95%, while the allowance for credit losses to nonperforming loans ratio was 332.35%, indicating a strong coverage position.

The Company continues to maintain disciplined credit standards and conservative lending practices. Credit metrics remain solid across all portfolio segments, and management believes the current allowance is appropriate to absorb expected losses inherent in the loan portfolio.

Income Taxes

The income tax expense for the three and nine months ended September 30, 2025, was $466,000 and $1,357,000, respectively, compared to $474,000 and $1,527,000 for the same periods in 2024. This represents an effective tax rate of approximately 14.5% for the three months ended September 30, 2025, and 17.7% for the nine months ended September 30, 2025, compared with 19.2% and 19.4% for the corresponding 2024 periods.

The Company’s income tax expense decreased for both the three- and nine-month periods ended September 30, 2025, primarily reflecting the impact of amended federal and state income tax returns filed for the 2021 through 2024 tax years. The amended filings resulted in a tax overpayment, which reduced the Company’s third-quarter tax payment and carried through to the year-to-date results. In addition, the effective tax rate was favorably affected by higher levels of tax-exempt income from municipal securities and tax-advantaged earnings on bank-owned life insurance (“BOLI”). These factors collectively reduced the Company’s effective tax rate below the statutory rate for both the quarterly and year-to-date periods.


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Schedule I

Net Interest Margin Analysis

Average Balance Sheets

For the Three Months Ended September 30,

2025

2024

Average

Interest

Average

Average

Interest

Average

Balance

Income/

Rates

Balance

Income/

Rates

Sheet

Expense

Earned/Paid

Sheet

Expense

Earned/Paid

ASSETS

Loans, including fees

$  657,028

$    9,443

5.70%

$        629,860

$          8,939

5.65%

Loans AFS

3,011

49

6.46%

3,745

65

6.90%

Federal funds sold

59,830

657

4.36%

71,724

981

5.44%

Interest bearing bank balances

12,787

150

4.65%

18,736

303

6.43%

Securities taxable

219,634

1,418

2.56%

217,317

1,245

2.28%

Securities nontaxable

5,324

49

3.65%

3,413

23

2.66%

total securities

224,958

1,467

2.59%

220,730

1,268

2.28%

Federal agency equities

1,461

15

4.07%

1,454

12

3.28%

CBB equity

367

-

0.00%

269

-

0.00%

Total earning assets

$  959,442

$  11,781

4.88%

$        946,518

$        11,568

4.86%

Allowance for credit losses

(6,300)

(6,965)

Non-earning assets

64,730

55,548

Total assets

$     1,017,872

$        995,101

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits

Demand interest bearing

$  401,813

739

0.73%

$        394,973

947

0.95%

Savings

147,623

534

1.44%

139,161

540

1.54%

Time deposits

234,183

2,114

3.58%

229,451

2,375

4.12%

Total interest bearing deposits

$  783,619

$    3,387

1.72%

$        763,585

$          3,862

2.01%

Other borrowed funds

Financing leases

2,389

16

2.66%

2,822

18

2.54%

Other borrowings

8,923

68

3.02%

9,528

92

3.84%

Capital Notes

-

10,045

82

3.25%

Total interest-bearing liabilities

$  794,931

$    3,471

1.73%

$        785,980

$          4,054

2.05%

Non-interest bearing deposits

138,651

139,030

Other liabilities

12,649

8,515

Total liabilities

$  946,231

$        933,525

Stockholders' equity

71,641

61,576

Total liabilities and

Stockholders equity

$ 1,017,872

$        995,101

Net interest earnings

$    8,310

$          7,514

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Net interest margin

3.44%

3.16%

Interest spread

3.15%

2.81%

(1) Net accretion or amortization of deferred loan fees and costs are included in interest income.

(2) Nonperforming loans are included in the average balances. However, interest income and yields calculated do not reflect any accrued interest associated with nonaccrual loans.

(3) The interest income and yields calculated on securities have been tax affected to reflect any tax-exempt interest on municipal securities. Assumed income tax rates of 21% were used for the periods presented.


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Net Interest Margin Analysis

Average Balance Sheets

For the Nine Months Ended Sept 30,

2025

2024

Average

Interest

Average

Average

Interest

Average

Balance

Income/

Rates

Balance

Income/

Rates

Sheet

Expense

Earned/Paid

Sheet

Expense

Earned/Paid

ASSETS

Loans, including fees

$     652,562

$       27,588

5.65%

$ 617,582

$ 25,210

5.45%

Loans AFS

3,022

151

6.68%

3,454

165

6.38%

Federal funds sold

68,745

2,264

4.40%

63,006

2,569

5.45%

Interest bearing bank balances

12,256

400

4.36%

14,931

628

5.62%

Securities taxable

218,763

4,095

2.50%

233,791

4,321

2.47%

Securities nontaxable

4,238

82

2.59%

3,424

70

2.72%

total securities

223,001

4,177

2.50%

237,215

4,391

2.47%

Federal agency equities

1,458

63

5.78%

1,438

59

5.48%

CBB equity

367

-

0.00%

167

-

0.00%

Total earning assets

$ 961,411

$ 34,643

4.81%

$ 937,793

$ 33,022

4.70%

Allowance for credit losses

(6,753)

(7,091)

Non-earning assets

63,731

55,430

Total assets

$ 1,021,780

$ 987,144

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits

Demand interest bearing

$ 407,180

$ 2,242

0.74%

$ 396,795

$   2,763

0.93%

Savings

146,423

1,537

1.40%

134,407

1,382

1.37%

Time deposits

225,254

6,138

3.64%

222,832

6,731

4.03%

Total interest bearing deposits

$  778,857

$ 9,917

1.70%

$ 754,034

$ 10,876

1.93%

Other borrowed funds

Financing leases

2,502

50

2.67%

2,918

58

2.66%

Capital Notes

6,478

244

5.04%

9,676

278

3.84%

Other borrowings

9,077

163

2.40%

10,044

245

3.26%

Total interest-bearing liabilities

$  796,914

$ 10,374

1.74%

$ 776,672

$ 11,457

1.97%

Non-interest bearing deposits

142,731

140,966

Other liabilities

10,494

7,930

Total liabilities

$  950,139

$ 925,568

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Stockholders' equity

$    71,641

$   61,576

Total liabilities and

Stockholders equity

$ 1,021,780

$ 987,144

Net interest earnings

$ 24,269

$ 21,565

Net interest margin

3.37%

3.07%

Interest spread

3.07%

2.73%

(1) Net accretion or amortization of deferred loan fees and costs are included in interest income.

(2) Nonperforming loans are included in the average balances. However, interest income and yields calculated do not reflect any accrued interest associated with nonaccrual loans.

(3) The interest income and yields calculated on securities have been tax affected to reflect any tax-exempt interest on municipal securities. Assumed income tax rates of 21% were used for the periods presented.

Item 3. Quantitative and Qualitative Disclosures About Mark et Risk

Not applicable

Item 4. Controls and Pro cedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Financial’s management, including Financial’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, Financial’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that Financial files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

There have been no significant changes during the quarter ended September 30, 2025, in the Company’s internal controls over financial reporting (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934) or in other factors that could have significantly affected those controls subsequent to the date of our most recent evaluation of internal controls over financial reporting.

PART II – OTHER INFORMATI ON

Item 1. Legal Procee dings

The Company is not involved in any pending legal proceedings at this time, other than routine litigation incidental to its business.

Item 1A. Risk Fact ors

For information regarding the Company’s risk factors , see Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on March 26, 2025. There have been no material changes to the risk factors as previously disclosed in Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2024.

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Item 2. Unregistered Sales of Equity Securities, Use of Proceeds , and Issuer Purchases of Equity Securities

(a) Not applicable.

(b) Not applicable.

(c) Not applicable.

Item 3. Defaults Upon Senior Secur ities

Not applicable

Item 4. Mine Safety Disclo sures

Not applicable

Item 5. Other Informat ion

Not applicable

Item 6. Exhib its

Exhibit No.

Description of Exhibit

31.1

Certification of Robert R. Chapman III Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 14, 2025

31.2

Certification of J. Todd Scruggs Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 1 4 , 2025

32.1

Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002, dated November 14, 2025

101

The following materials from Bank of the James Financial Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets (unaudited) as of September 30, 2025 and December 31, 2024;(ii) Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2025 and 2024; (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2025 and 2024; (iv) Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2025 and 2024; (v) Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the nine months ended September 30, 2025 and 2024; and (vi) Notes to Unaudited Consolidated Financial Statements.


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Table of Contents

SIGNATUR ES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BANK OF THE JAMES FINANCIAL GROUP, INC.

Date: November 14, 2025

By /S/ Robert R. Chapman III

Robert R. Chapman III, President

(Principal Executive Officer)

Date: November 14, 2025

By /S/ J. Todd Scruggs

J. Todd Scruggs, Secretary and Treasurer

(Principal Financial Officer and Principal Accounting Officer)

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TABLE OF CONTENTS
Part I Financial InformatItem 1. Consolidated Financial StatementsItem 1. Consolidated Financial StatemNote 1 Basis Of PresentationNote 2 Significant Accounting Policies and EstimatesNote 3 Earnings Per Common Share (eps)Note 4 DebtNote 4 Debt (continued)Note 5 Fair Value MeasurementsNote 5 Fair Value Measurements (continued)Note 6 SecuritiesNote 6 Securities (continued)Note 7 Business SegmentsNote 7 Business Segments (continued)Note 8 Loans and Allowance For Credit LossesNote 8 Loans and Allowance For Credit Losses (continued)Note 9 Recent Accounting Pronouncements and Other Authoritative GuidanceNote 10 - Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 2. Management S Discussion and Analysis Of Financial Condition and ResuItem 3. Quantitative and Qualitative Disclosures About MarkItem 4. Controls and ProceduresPart II Other InformationPart II Other InformatiItem 1. Legal ProceedingsItem 1. Legal ProceeItem 1A. Risk FactorsItem 1A. Risk FactItem 2. Unregistered Sales Of Equity Securities, Use OfItem 3. Defaults Upon Senior SecuritiesItem 3. Defaults Upon Senior SecurItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. ExhibitsItem 6. Exhib

Exhibits

31.1 Certification of Robert R. Chapman III Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 14, 2025 31.2 Certification of J. Todd Scruggs Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 14, 2025 32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002, dated November 14, 2025