Note 8 – Business Segments

The Company has two reportable business segments: (i) a traditional full-service community banking segment and, (ii) a mortgage loan origination business. The community banking business segment includes Bank of the James which provides loans, deposits, investments and insurance to retail and commercial customers throughout Region 2000 and other areas within Central Virginia. The mortgage segment provides a variety of mortgage loan products principally within Region 2000. Mortgage loans are originated and sold in the secondary market through purchase commitments from investors with servicing released. Because of the pre-arranged purchase commitments, there is minimal risk to the Company.

Both of the Company’s reportable segments are service based. The mortgage business is a gain on sale business while the Bank’s primary source of revenue is net interest income. The Bank also provides a referral network for the mortgage origination business. The mortgage business may also be in a position to refer its customers to the Bank for banking services when appropriate.

Information about reportable business segments and reconciliation of such information to the consolidated financial statements for the three and six months ended June 30, 2019 and 2018 was as follows (dollars in thousands):

Note 8 – Business Segments (continued)


Business Segments

	Community
	Banking	Mortgage	Total
Six months ended June 30, 2019
Net interest income	$ 12,282	$ -	$ 12,282
Provision for loan losses	326	-	326
Net interest income after provision for loan losses	11,956	-	11,956
Noninterest income	1,112	1,766	2,878
Noninterest expenses	10,247	1,327	11,574
Income before income taxes	2,821	439	3,260
Income tax expense	557	92	649
Net income	$ 2,264	$ 347	$ 2,611
Total assets	$ 685,516	$ 4,579	$ 690,095

Six months ended June 30, 2018
Net interest income	$ 11,134	$ -	$ 11,134
Provision for loan losses	337	-	337
Net interest income after provision for loan losses	10,797	-	10,797
Noninterest income	1,132	1,495	2,627
Noninterest expenses	9,207	1,196	10,403
Income before income taxes	2,722	299	3,021
Income tax expense	546	52	598
Net income	$ 2,176	$ 247	$ 2,423
Total assets	$ 649,809	$ 6,057	$ 655,866

	Community
	Banking	Mortgage	Total
Three months ended June 30, 2019
Net interest income	$ 6,152	$ -	$ 6,152
Provision for loan losses	116	-	116
Net interest income after provision for loan losses	6,036	-	6,036
Noninterest income	584	1,075	1,659
Noninterest expenses	5,222	753	5,975
Income before income taxes	1,398	322	1,720
Income tax expense	276	67	343
Net income	$ 1,122	$ 255	$ 1,377
Total assets	$ 685,516	$ 4,579	$ 690,095

Three months ended June 30, 2018
Net interest income	$ 5,803	$ -	$ 5,803
Provision for loan losses	315	-	315
Net interest income after provision for loan losses	5,488	-	5,488
Noninterest income	566	875	1,441
Noninterest expenses	4,603	703	5,306
Income before income taxes	1,451	172	1,623
Income tax expense	298	25	323
Net income	$ 1,153	$ 147	$ 1,300
Total assets	$ 649,809	$ 6,057	$ 655,866