Bank of the James Q3 Earnings Rise Y/Y, Profit Margin Expands

Shares of Bank of the James Financial Group, Inc. BOTJ have gained 4.6% since reporting third-quarter 2025 results, outperforming the S&P 500 Index’s 0.6% decline over the same period. Over the past month, the stock has climbed 8%, outperforming the broader market’s 1.9% growth, reflecting investors’ favorable reaction to the company’s record quarterly results and margin expansion.

Earnings & Revenue Performance

For the third quarter ended Sept. 30, 2025, Bank of the James delivered record net income of $2.75 million, marking a 38.3% increase from $1.99 million in the year-ago quarter. Earnings per share rose to 61 cents from 44 cents, while EPS for the first nine months of 2025 was flat at $1.39 compared with the same period in 2024. Total interest income for the quarter inched up 1.8% year over year to $11.77 million, and increased 4.9% to $34.64 million for the first nine months of 2025.

Modest revenue growth was supported by higher loan yields and strong commercial real estate lending activity. Net interest income advanced 10.5% year over year to $8.30 million for the quarter and 12.6% to $24.27 million for the first nine months of 2025, underscoring effective rate and balance sheet management.

Bank of the James Financial Group, Inc. Price, Consensus and EPS Surprise

 

Bank of the James Financial Group, Inc. price-consensus-eps-surprise-chart | Bank of the James Financial Group, Inc. Quote

Other Key Business Metrics

The company’s net interest margin expanded 28 basis points to 3.44% in the third quarter of 2025 from 3.16% a year earlier. The interest spread also improved to 3.15% from 2.81%, aided by reduced funding costs and disciplined deposit pricing. Total interest expenses fell 14.3% to $3.47 million from $4.05 million in the prior-year quarter due to the retirement of $10 million in capital notes in the second quarter of 2025.

Non-interest income rose 9% year over year to $4.17 million, driven by gains on mortgage loan sales; wealth management fees from Pettyjohn and Wood & White; and service fees from treasury and debit card activities. However, non-interest expenses increased 4.4% to $9.16 million, reflecting higher salaries, consulting fees and costs associated with new banking facilities.

Despite this, the efficiency ratio improved to 73.46% from 77.44%, showing enhanced operating leverage. Return on average assets climbed to 1.07% from 0.80%, and return on equity improved to 15.24% from 12.86%, highlighting stronger profitability metrics.

Management Commentary

CEO Robert R. Chapman III attributed the record performance to “disciplined focus on fundamentals,” emphasizing strategic management of loan yields, controlled interest expenses and the successful retirement of the company’s capital notes. He noted that the diversified revenue base, spanning commercial banking, wealth management, cash management and mortgage originations, supported sustainable earnings even amid economic uncertainty.

President Mike Syrek added that the bank’s asset growth above $1 billion and the exceptionally low non-performing loan ratio of 0.29% underscored its prudent credit management and strong market positioning.

Factors Influencing Results

Earnings growth was primarily fueled by expanding net interest margins and stable non-interest revenues. The easing interest rate environment in the quarter supported lower funding costs, while upward adjustments on variable-rate commercial and residential loans improved yields on earning assets, which rose to 4.88% from 4.86% in the prior year.

Credit quality remained robust, with the allowance for credit losses declining to $6.30 million from $7.04 million at the end of 2024 due to model refinements in the company’s current expected credit loss methodology. Non-performing loans totaled $1.90 million, representing just 0.29% of total loans, indicative of exceptional asset quality.

The balance sheet showed broad-based strength. Total assets reached $1.02 billion, up 4.2% since December 2024, while total deposits rose 4.2% to $919.8 million, reflecting growth in low-cost core deposits. Loans, net of allowance, increased to $653.29 million, led by commercial real estate lending. Shareholders’ equity advanced 18.7% year to date to $76.97 million, and book value per share rose to $16.94 from $14.28 at the end of 2024.

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Management expressed optimism about sustaining profitability through disciplined balance sheet management and prudent credit practices. The statement accompanying the results indicated that the company expects continued margin stability as rate pressures ease and loan demand in its regional markets remains resilient. Management reaffirmed its commitment to maintaining high asset quality and expanding its presence across Virginia through strategic investments in people and facilities.

Other Developments

In the quarter, Bank of the James extinguished approximately $10 million in capital notes, improving its funding profile and reducing interest expenses. This move strengthened the balance sheet and contributed to a rebound in the Tier 1 leverage ratio, which improved to 9.02% as of Sept. 30, 2025, after dipping below 9% earlier in the year. The board also declared a quarterly dividend of 10 cents per share, payable on Dec. 5, 2025, to shareholders of record as of Nov. 21, 2025.

In summary, Bank of the James delivered its strongest quarter on record, underscored by double-digit net interest income growth, expanding margins and superior asset quality. Cost discipline and the strategic retirement of debt enhanced profitability, positioning the company for continued steady performance. With rising equity, a robust deposit base and a diversified earnings stream, BOTJ appears well-placed to navigate evolving market conditions while maintaining its community banking focus.

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