BANK OF THE JAMES FINANCIAL GROUP INC

Previous wording

potential exposure to fraud, negligence, computer theft and cyber-crime, and the Company's ability to maintain the security of its data processing and information technology systems

Current wording

potential exposure to fraud, negligence, computer theft and cyber-crime and cyber-threats, and the Company's ability to maintain the security of its data processing and information technology systems;

Previous wording

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 had approximately $650 million in assets under management and advisement at the time of the acquisition. PWW operates as a subsidiary of Financial. PWW generates revenue primarily through investment advisory fees.

Current wording

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 $789 million in assets under management and advisement as of June 30, 2024. PWW generates revenue primarily through investment advisory fees.

Previous wording

Our operating results depend primarily upon the Bank’s net interest income, which is determined by the difference between (i) interest and dividend income on earning assets, which consist primarily of loans, investment securities and other investments, and (ii) interest expense on interest-bearing liabilities, which consist principally of deposits and other borrowings. The Bank’s net income also is 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 and 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, expense in complying with regulatory requirements, miscellaneous other expenses, franchise taxes, and income taxes.

Current wording

(ii) interest expense on interest-bearing liabilities, which consist principally of deposits and other borrowings. The Bank’s net income also is 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 and 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, expense in complying with regulatory requirements, miscellaneous other expenses, franchise taxes, and income taxes.

Previous wording

Themain office located at 828 Main Street in Lynchburg (the “Main Street Office”),

Current wording

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

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

Current wording

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

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

Current wording

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

Previous wording

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

Current wording

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

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

Current wording

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

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

Current wording

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

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

Current wording

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

Previous wording

Real property located at 19792 Main Street, Buchanan, Virginia. On August 7, 2023, the Bank purchased real property located at 19792 Main Street, Buchanan, Virginia. The building on the property previously served as a bank branch for another financial institution. The Bank anticipates that that it will open a branch at this location during the second quarter of 2024.

Current wording

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

Previous wording

Real Property located at 2935 Rockfish Valley Highway, Nellysford, Virginia. On September 18, 2023, the Bank purchased real property located at 2935 Rockfish Valley Highway, Nellysford, Virginia. The building on the property previously served as a bank branch for another financial institution. The Bank anticipates that the cost to upfit the building will be minimal. The property is a subject to a restrictive covenant that prohibits the Bank from using the property for any banking-related activity until the covenant expires in September 2025. We anticipate that we will open a temporary location in the vicinity of this property in the second quarter of 2024.

Current wording

Real Property located at 2935 Rockfish Valley Highway, Nellysford, Virginia. On September 18, 2023, the Bank purchased real property located at 2935 Rockfish Valley Highway, Nellysford, Virginia. The building on the property previously served as a bank branch for another financial institution. The Bank anticipates that the cost to upfit the building will be minimal. The property is subject to a restrictive covenant that prohibits the Bank from using the property for any banking-related activity until the covenant expires in September 2025. We anticipate that we will relocate the Temporary Nellysford Branch to this location in the fall of 2025.

Previous wording

The following discussion represents management’s discussion and analysis of the financial condition of Financial as of March 31, 2024 and December 31, 2023 and the results of operations of Financial for the three-month periods ended March 31, 2024 and 2023. This discussion should be read in conjunction with the financial statements included elsewhere herein.

Current wording

The following discussion represents management’s discussion and analysis of the financial condition of Financial as of June 30, 2024 and December 31, 2023 and the results of operations of Financial for the three and six month periods ended June 30, 2024 and 2023. This discussion should be read in conjunction with the financial statements included elsewhere herein.

Previous wording

Total assets were $984,891,000 on March 31, 2024 compared with $969,371,000 at December 31, 2023, an increase of 1.60%. The increase in total assets was primarily due to increases in cash and cash equivalents (primarily Federal funds sold) and, to a lesser extent, loans held for sale and the cash value of bank-owned life insurance.

Current wording

Total assets were $978,011,000 on June 30, 2024 compared with $969,371,000 at December 31, 2023, an increase of 0.89%. The increase in total assets was primarily due to increases in loans, net of the allowance for credit losses, loans held for sale, and the cash value of bank-owned life insurance. The increase was offset in part by a decrease in the value of securities available-for-sale.

Previous wording

Total deposits increased from $878,459,000 as of December 31, 2023 to $893,494,000 on March 31, 2024, an increase of 1.71%. The increase resulted in large part from increases in noninterest-bearing demand and time deposits and was offset in part by a decrease in NOW, money market and savings deposits. The increase in time deposits generally was driven by our customers’ decisions to lock in higher rates.

Current wording

Total deposits increased from $878,459,000 as of December 31, 2023 to $884,902,000 on June 30, 2024, an increase of 0.73%. The increase resulted in large part from increases in noninterest-bearing demand and time deposits and was offset in part by a decrease in NOW, money market and savings deposits. The increase in time deposits generally was driven by our customers’ decisions to lock in higher rates.

Previous wording

Total loans, excluding loans held for sale, decreased to $608,035,000 on March 31, 2024 from $609,333,000 on December 31, 2023. The decrease was due to payoff and normal amortization of loans combined with decreased loan demand due to increased interest rates. Loans, excluding loans held for sale and net of deferred fees and costs and including the allowance for credit losses, decreased to $601,115,000 on March 31, 2024 from $601,921,000 on December 31, 2023, a decrease of 0.13%. The following summarizes the position of the Bank’s loan portfolio as of the dates indicated by dollar amount and percentages (dollar amounts in thousands):

Current wording

Total loans, excluding loans held for sale, increased to $623,039,000 on June 30, 2024 from $609,333,000 on December 31, 2023. The increase was due primarily to an increase in commercial real estate loans and was offset in part by payoffs and normal amortization of loans. Loans, excluding loans held for sale and net of deferred fees and costs and including the allowance for credit losses, increased to $616,088,000 on June 30, 2024 from $601,921,000 on December 31, 2023, an increase of 2.35%. The following summarizes the position of the Bank’s loan portfolio as of the dates indicated by dollar amount and percentages (dollar amounts in thousands):

Previous wording

Total nonperforming assets, which consist of nonaccrual loans, loans past due 90 days or more and still accruing, and OREO increased to$558,000 on March 31, 2024 from $391,000 on December 31, 2023. Because we had no OREO on either March 31, 2024 or December 31, 2023, the nonperforming assets consist entirely of nonperforming loans.

Current wording

Total nonperforming assets, which consist of nonaccrual loans, loans past due 90 days or more and still accruing, and OREO increased to$797,000 on June 30, 2024 from $391,000 on December 31, 2023. Because we had no OREO on either June 30, 2024 or December 31, 2023, the nonperforming assets consist entirely of nonperforming loans.

Previous wording

As discussed in more detail below under “Results of Operations—Allowance and Provision for Credit Losses,” management has provided for the 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 there are several negative implications. First, all interest accrued but unpaid at the time of the classification is reversed and deducted from the interest income totals for the Bank. Second, accruals of interest are discontinued until it becomes certain that both principal and interest can be repaid. Third, there may be actual losses that necessitate additional provisions for credit losses charged against earnings.

Current wording

As discussed in more detail below 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 there are several negative implications. First, all interest accrued but unpaid at the time of the classification is reversed and deducted from the interest income totals for the Bank. Second, accruals of interest are discontinued until it becomes certain that both principal and interest can be repaid. Third, there may be actual losses that necessitate additional provisions for credit losses charged against earnings.

Previous wording

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 as on both March 31, 2024 and December 31, 2023. The Bank neither acquired nor disposed of any during the three-months ended March 31, 2024. As a result, the OREO balance remained $0.

Current wording

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 on June 30, 2024 and December 31, 2023. The Bank neither acquired nor disposed of any OREO during the three and six months ended June 30, 2024. As a result, the OREO balance remained $0.

Previous wording

Cash and cash equivalents increased to $88,072,000 on March 31, 2024 from $74,838,000 on December 31, 2023. Cash and cash equivalents consist of cash due from correspondents, cash in vault, and overnight investments (including Federal funds sold). This increase was due to an increase in Federal funds sold. In addition, cash and cash equivalents are subject to routine fluctuations in deposits, including fluctuations in transactional accounts and professional settlement accounts.

Current wording

Cash and cash equivalents remained relatively constant, decreasing slightly to $74,627,000 on June 30, 2024 from $74,838,000 on December 31, 2023. Cash and cash equivalents consist of cash due from correspondents, cash in vault, and overnight investments (including Federal funds sold). Cash and cash equivalents are subject to routine fluctuations in deposits, including fluctuations in transactional accounts and professional settlement accounts.

Previous wording

Securities held-to-maturity were essentially flat, decreasing slightly to $3,618,000 on March 31, 2024 from $3,622,000 on December 31, 2023. This decrease is a result of normal net amortization of premiums within the held-to-maturity portfolio.

Current wording

Securities held-to-maturity were essentially flat, decreasing slightly to $3,614,000 on June 30, 2024 from $3,622,000 on December 31, 2023. This decrease is a result of normal net amortization of premiums within the held-to-maturity portfolio.

Previous wording

Securities available-for-sale, which are carried on the balance sheet at fair market value, decreased slightly to $214,822,000 on March 31, 2024, from $216,510,000 on December 31, 2023. During the three-months ended March 31, 2024, the Bank purchased $8,162,000 in available-for-sale securities. During the three-months ended March 31, 2024 the Bank did not sell any securities available-for-sale and received $8,058,000 in proceeds from calls, maturities, and paydowns of securities available-for-sale. The market value of the securities available-for-sale decreased slightly. As of March 31, 2024, we have an unrealized tax-effected loss of $22,951,000 (or $29,052,000 prior to the tax benefit). Financial does not expect to realize the losses as it has the intent and ability to hold the securities until their recovery, which may be at maturity.

Current wording

Securities available-for-sale, which are carried on the balance sheet at fair market value, decreased to $206,177,000 on June 30, 2024, from $216,510,000 on December 31, 2023. During the six months ended June 30, 2024, the Bank purchased $12,011,000 in available-for-sale securities. During the same period the Bank sold $8,754,000 and received $11,131,000 in proceeds from calls, maturities, and paydowns of securities available-for-sale. The market value of the securities available-for-sale decreased slightly. As of June 30, 2024, we have an unrealized tax-effected loss of $23,373,000 (or $29,587,000 prior to the tax benefit). Financial does not expect to realize the losses as it has the intent and ability to hold the securities until their recovery, which may be at maturity.

Previous wording

Financial’s investment in Federal Home Loan Bank of Atlanta (FHLBA) stock totaled $643,000 at March 31, 2024 as compared to $643,000 at December 31, 2023. FHLBA stock is generally viewed as a long-term investment and because there is no market for the stock other than other Federal Home Loan Banks or member institutions, FHLBA stock is viewed as a restricted security. Therefore, when evaluating FHLBA stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.

Current wording

Financial’s investment in Federal Home Loan Bank of Atlanta (FHLBA) stock totaled $672,000 at June 30, 2024 as compared to $643,000 at December 31, 2023. FHLBA stock is generally viewed as a long-term investment and because there is no market for the stock other than other Federal Home Loan Banks or member institutions, FHLBA stock is viewed as a restricted security. Therefore, when evaluating FHLBA stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.

Previous wording

At March 31, 2024, Financial, on a consolidated basis, had liquid assets of $302,894,000 in the form of cash, interest-bearing and noninterest-bearing deposits with banks, and available-for-sale investments. The Bank has pledged:

Current wording

At June 30, 2024, Financial, on a consolidated basis, had liquid assets of $280,804,000 in the form of cash, interest-bearing and noninterest-bearing deposits with banks, and available-for-sale investments. The Bank has pledged (market values):

Previous wording

approximately $30,700,000 (market value) of our available-for-sale securities as collateral with correspondent banks, including the FHLBA, for collateralized lines of credit;

Current wording

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

Previous wording

approximately $37,100,000 (market value) of our available-for-sale securities as security for public deposits; and

Current wording

approximately $40,000,000 of our available-for-sale securities as security for public deposits; and

Previous wording

approximately $34,500,000 (par value) of our available-for-sale securities as collateral for advances at the Federal Reserve Bank’s discount window.

Current wording

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

Previous wording

Further, if additional liquidity is needed, the Bank has the ability to purchase up to $53,000,000 of Fed funds through the Bank’s correspondent relationships and borrow from the FHLBA using investments within the Bank’s portfolio as collateral. In addition to the above, the Bank has borrowing capacity with the FHLBA of approximately $21,000,000 related to loans it has pledged to the FHLBA.

Current wording

Further, if additional liquidity is needed, the Bank has the ability to purchase up to $53,000,000 of Fed funds through the Bank’s correspondent relationships and borrow from the FHLBA using investments within the Bank’s portfolio as collateral. In addition to the above, the Bank has borrowing capacity with the FHLBA of approximately $20,000,000 related to loans it has pledged to the FHLBA.

Previous wording

As of March 31, 2024, the Bank has no borrowings from any of these sources. Immediately following the failure of Silicon Valley Bank in the spring of 2023, out of an abundance of caution the Bank borrowed $14,000,000 from the FHLBA to test its contingency funding plan. Approximately two weeks later, the Bank repaid the advance. During the first three-months of 2024, the Bank did not experience any unusual inflows or outflows of deposits.

Current wording

As of June 30, 2024, the Bank has no borrowings from any of these sources. Immediately following the failure of Silicon Valley Bank in the spring of 2023, out of an abundance of caution the Bank borrowed $14,000,000 from the FHLBA to test its contingency funding plan. Approximately two weeks later, the Bank repaid the advance. During the first six months of 2024, the Bank did not experience any unusual inflows or outflows of deposits.

Previous wording

While we have not experienced any unusual pressure on our deposit balances or our liquidity position, management continues to closely monitor our sources and uses of funds in order to meet our cash flow requirements while attempting to maximize profits. The Company’s total uninsured deposits, which are the amount of deposits, subject to the aggregation rules, that exceed the FDIC insurance limit (currently $250,000) were approximately $252,000,000, approximately 28% of our total deposits, at March 31, 2024. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes.

Current wording

While we have not experienced any unusual pressure on our deposit balances or our liquidity position, management continues to closely monitor our sources and uses of funds in order to meet our cash flow requirements while attempting to maximize profits. The Company’s total uninsured deposits, which are the amount of deposits, subject to the aggregation rules, that exceed the FDIC insurance limit (currently $250,000) were approximately $255,000,000, approximately 29% of our total deposits, at June 30, 2024. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes.

Previous wording

At March 31, 2024, the Bank had a leverage ratio of approximately 9.60%, a Tier 1 risk-based capital ratio and a CET1 ratio of approximately 12.62% and a total risk-based capital ratio of approximately 13.56%. As of March 31, 2024 and December 31,

Current wording

At June 30, 2024, the Bank had a leverage ratio of approximately 9.51%, a Tier 1 risk-based capital ratio and a CET1 ratio of approximately 12.45% and a total risk-based capital ratio of approximately 13.38%. As of June 30, 2024 and December 31, 2023, the Bank’s regulatory capital levels exceeded those established for well-capitalized institutions. The following table sets forth the minimum capital requirements and the Bank’s capital position as of June 30, 2024 and December 31, 2023:

Previous wording

Comparison of the Three-months Ended March 31, 2024 and 2023

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

Financial had net income including all operating segments of $2,187,000 for the three-months ended March 31, 2024, compared to $1,984,000 for the comparable period in 2023. Basic and diluted earnings per common share for the three-months ended March 31, 2024 were $0.48, compared to basic and diluted earnings per share of $0.43 for the three-months ended March 31, 2023.

Current wording

Financial had net income including all operating segments of $2,148,000 and $4,335,000 for the three and six months ended June 30, 2024, compared to $2,534,000 and $4,518,000 for the comparable periods in 2023. Basic and diluted earnings per common share for the three and six months ended June 30, 2024 were $0.47 and $0.95, compared to basic and diluted earnings per share of $0.56 and $0.99 for the three and six months ended June 30, 2023.

Previous wording

The increase in net income for the three-months ended March 31, 2024, as compared to the prior year period was due primarily to an increase in both interest and noninterest income, a significant recovery of ACLL, and was offset in part by a significant increase in interest expense of $2,103,000 in the three-months ended March 31, 2024 from the comparable period in 2023.

Current wording

The decrease in net income for the three and six months ended June 30, 2024, as compared to the prior year periods was due primarily to an increase in interest expense of $1,606,000 and $3,709,000 in the three and six months ended June 30, 2024 from the comparable periods in 2024. The decrease was offset in part by increase in interest income and noninterest income.

Previous wording

For the three-months ended March 31, 2024, interest income increased to $10,509,000 from $9,098,000 for the same period in 2023, due primarily to an increase in interest rates received on our interest-earning assets. The average rate on loans was 5.28% for the three-months ended March 31, 2024, as compared to 4.85% for the same period in 2023. The rate on total average earning assets increased during the three-months ended March 31, 2024 because of a general increase in market rates. The average rate on average earning assets was 4.60% for the three-months ended March 31, 2024 as compared to 4.14% for the three-months ended March 31, 2023.

Current wording

For the three and six months ended June 30, 2024, interest income increased to $10,935,000 and $21,444,000 from $9,583,000 and $18,681,000 for the same periods in 2023, primarily to an increase in interest rates received on our interest-earning assets. The average rate on loans was 5.42% and 5.35% for the three and six months ended June 30, 2024, as compared to 4.99% and 4.92% for the same periods in 2023. The rate on total average earning assets increased to 4.68% and 4.62% during the three and six months ended June 30, 2024 because of a general increase in market rates and because the loans that we originated in the last six to twelve months had rates significantly higher than the rates referenced above.

Previous wording

Interest expense increased significantly to $3,559,000 for the three-months ended March 31, 2024 from $1,456,000 for the three-months ended March 31, 2023. The increase for the three-months resulted primarily from an increase in deposit balances and an increase in interest rates paid on deposits during the first three-months of the year. The Company’s average rate paid on interest-bearing deposits was 1.82% for the three-months ended March 31, 2024 as compared to 0.71% for the same period in 2023. The Company’s average rate paid on interest-bearing liabilities was 1.87% for the three-months ended March 31, 2024 as compared to 0.81% for the same period in 2023.

Current wording

Interest expense increased significantly to $3,844,000 and $7,403,000 for the three and six months ended June 30, 2024 from $2,238,000 and $3,694,000 for the three and six months ended June 30, 2023. The increase for the three and six months resulted primarily from an increase in deposit balances and an increase in interest rates paid on deposits during the three and six months ended June 30, 2024. The Company’s average rate paid on interest-bearing deposits was 1.94% and 1.88% for the three and six months ended June 30, 2024 as compared to 1.15% and 0.93% for the same periods in 2023. The Company’s average rate paid on interest-bearing liabilities was 1.99% and 1.93% for the three and six months ended June 30, 2024 as compared to 1.22% and 1.02% for the same periods in 2023.

Previous wording

The fundamental source of the Bank’s net revenue is net interest income, which is determined by the difference between (i) interest and dividend income on interest-earning assets, which consist primarily of loans, investment securities and other investments, and (ii) interest expense on interest-bearing liabilities, which consist principally of deposits and other borrowings. Net interest income for the three-months ended March 31, 2024 was $6,950,000 as compared to $7,642,000 for the same period in 2023. The net interest margin was 3.02% for the three-months ended March 31, 2024 as compared to 3.48% for the comparable period in 2023. The decrease for the three-month period ended March 31, 2024, was in large part due to interest rates on interest-bearing liabilities increasing more rapidly than the rates received on interest-earning assets during the first quarter of the year. This was exacerbated by a change in deposit mix, with the balance of time deposits, which generally pay a higher rate than demand deposits, increasing year over year while the average balance of interest-bearing demand deposits decreased over the same period. Due to continued inflation, economic uncertainties have arisen that are likely to impact net interest margin. Over the past several years, the FOMC has implemented a series of interest rate increases that has negatively impacted our net interest margin and is likely to continue to cause long-term uncertainty. Other financial impacts could occur, though such potential impacts are unknown at this time. Because of the interest rate environment, the Bank may need to continue to raise deposit rates, which would have an adverse impact on our margin and profitability. Management expects the Company’s interest rate margin to remain the same or compress in near to mid-term.

Current wording

The fundamental source of the Bank’s net revenue is net interest income, which is determined by the difference between (i) interest and dividend income on interest-earning assets, which consist primarily of loans, investment securities and other investments, and (ii) interest expense on interest-bearing liabilities, which consist principally of deposits and other borrowings. Net interest income for the three and six months ended June 30, 2024 was $7,091,000 and $14,041,000 as compared to $7,345,000 and $14,987,000 for the same periods in 2023. The net interest margin was 3.03% and 3.02% for the three and six months ended June 30, 2024 as compared to 3.30% and 3.40% for the comparable periods in 2023. The decreases for the three and six month periods ended June 30, 2024, were in large part due to interest rates on interest-bearing liabilities increasing more rapidly than the rates received on interest-earning assets during each of the first two quarters of the year. This was exacerbated by a change in deposit mix, with the balance of time deposits, which generally pay a higher rate than demand deposits, increasing year over year while the average balance of interest-bearing demand deposits decreased over the same period. To combat inflation, the FOMC implemented a series of interest rate increases. These increases negatively impacted our net interest margin and the current interest rate environment is likely to continue to cause long-term uncertainty. Other financial impacts could occur, though such potential impacts are unknown at this time. While management does not anticipate it will be necessary to raise deposit rates, if we need to continue to raise deposit rates, 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. However, markets expect that the FOMC will cut the Fed funds by September 2024. In the event of rapid rate decreases, in the short term our net interest margin could come under pressure as the Bank is currently asset sensitive.

Previous wording

Noninterest income increased to $3,307,000 for the three-month period ended March 31, 2024 from $3,044,000 for same periods in 2023. The increase was due to an increase in wealth management fees, life insurance income, and income received from an investment in a Small Business investment company, which is reflected in other income.

Current wording

Noninterest income increased to $4,191,000 and $7,498,000 for the three and six month periods ended June 30, 2024 from $3,444,000 and $6,488,000 for same periods in 2023. While all noninterest income categories showed increases, the overall increases primarily were due to increases in wealth management fees, life insurance income, and income received from an investment in a Small Business Investment Company, which is reflected in other income.

Previous wording

Purchase mortgage originations totaled $31,016,000, or 84.98%, of the total mortgage loans originated in the three-months ended March 31, 2024, as compared to $26,868,000, or 82.30%, respectively, of the total mortgage loans originated in the same period in 2023. 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 increase in long-term market interest rates could limit refinancing activity.

Current wording

Purchase mortgage originations totaled $47,203,000 and $78,218,000 or 87.15% and 86.28% respectively, of the total mortgage loans originated in the three and six months ended June 30, 2024, as compared to $40,549,000 and $67,417,000 or 82.02% and 82.12%, respectively, of the total mortgage loans originated in the same period in 2023. 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 increase in long-term market interest rates could limit refinancing activity.

Previous wording

Mortgage rates increased dramatically in 2022 and 2023 and remain elevated compared to recent history. These increases continue to have a negative impact on mortgage origination volume. Because of uncertainty surrounding current and near-term economic conditions arising from inflation, and geopolitical and economic concerns, management cannot predict future mortgage rates. Management also believes that the relatively high interest rates could cause revenue from the mortgage segment to remain under additional pressure.

Current wording

Mortgage rates increased dramatically in 2022 and 2023 and remain elevated compared to recent history. These increases continue to have a negative impact on mortgage origination volume. Because of the uncertainty surrounding current and near-term economic conditions arising from inflation and geopolitical and economic concerns, management cannot predict future mortgage rates. Management also believes that the relatively high interest rates could cause revenue from the mortgage segment to remain under additional pressure.