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, 2018 and 2017 was as follows (dollars in thousands):

Note 8 – Business Segments (continued)


Business Segments

	Community
	Banking	Mortgage	Total
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

Six months ended June 30, 2017
Net interest income	$ 9,978	$ -	$ 9,978
Provision for loan losses	545	-	545
Net interest income after provision for loan losses	9,433	-	9,433
Noninterest income	1,096	969	2,065
Noninterest expenses	8,489	764	9,253
Income before income taxes	2,040	205	2,245
Income tax expense	630	68	698
Net income	$ 1,410	$ 137	$ 1,547
Total assets	$ 592,998	$ 2,639	$ 595,637

	Community
	Banking	Mortgage	Total
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

Three months ended June 30, 2017
Net interest income	$ 5,140	$ -	$ 5,140
Provision for loan losses	445	-	445
Net interest income after provision for loan losses	4,695	-	4,695
Noninterest income	606	598	1,204
Noninterest expenses	4,361	395	4,756
Income before income taxes	940	203	1,143
Income tax expense	289	67	356
Net income	$ 651	$ 136	$ 787
Total assets	$ 592,998	$ 2,639	$ 595,637