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 nine months ended September 30, 2018 and 2017 was as follows (dollars in thousands):

Note 8 – Business Segments (continued)


Business Segments

	Community
	Banking	Mortgage	Total
Nine months ended September 30, 2018
Net interest income	$ 17,124	$ -	$ 17,124
Provision for loan losses	527	-	527
Net interest income after provision for loan losses	16,597	-	16,597
Noninterest income	1,785	2,262	4,047
Noninterest expenses	14,023	1,845	15,868
Income before income taxes	4,359	417	4,776
Income tax expense	891	58	949
Net income	$ 3,468	$ 359	$ 3,827
Total assets	$ 665,698	$ 2,740	$ 668,438

Nine months ended September 30, 2017
Net interest income	$ 15,262	$ -	$ 15,262
Provision for loan losses	745	-	745
Net interest income after provision for loan losses	14,517	-	14,517
Noninterest income	1,791	1,663	3,454
Noninterest expenses	12,880	1,357	14,237
Income before income taxes	3,428	306	3,734
Income tax expense	1,068	104	1,172
Net income	$ 2,360	$ 202	$ 2,562
Total assets	$ 617,720	$ 1,616	$ 619,336

	Community
	Banking	Mortgage	Total
Three months ended September 30, 2018
Net interest income	$ 5,990	$ -	$ 5,990
Provision for loan losses	190	-	190
Net interest income after provision for loan losses	5,800	-	5,800
Noninterest income	653	767	1,420
Noninterest expenses	4,816	649	5,465
Income before income taxes	1,637	118	1,755
Income tax expense	345	6	351
Net income	$ 1,292	$ 112	$ 1,404
Total assets	$ 665,698	$ 2,740	$ 668,438

Three months ended September 30, 2017
Net interest income	$ 5,284	$ -	$ 5,284
Provision for loan losses	200	-	200
Net interest income after provision for loan losses	5,084	-	5,084
Noninterest income	625	694	1,319
Noninterest expenses	4,321	593	4,914
Income before income taxes	1,388	101	1,489
Income tax expense	438	36	474
Net income	$ 950	$ 65	$ 1,015
Total assets	$ 617,720	$ 1,616	$ 619,336