BANK OF THE JAMES FINANCIAL GROUP INC Income Taxes Disclosure
The Company files income tax returns in the U.S. federal jurisdiction and the states of Virginia and North Carolina. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2022.
The Company’s pre-tax earnings are derived solely from domestic sources. The following table provides information on the components of income tax expense for the years ended December 31, 2025 and 2024.
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|
|
|
| Year Ended December 31, | ||
($ in thousands) | 2025 |
| 2024 |
Current tax expense (benefit): |
|
|
|
Federal | $ 2,279 |
| $ 1,957 |
State | - |
| (6) |
Total current tax expense | $ 2,279 |
| $ 1,951 |
Deferred tax expense (benefit): |
|
|
|
Federal | (282) |
| (106) |
State | 126 |
| 134 |
Total deferred tax (benefit) expense | (156) |
| 28 |
Total income tax expense | $ 2,123 |
| $ 1,979 |
The following table provides a reconciliation of tax expense computed at the statutory federal tax rate and the recorded tax expense (in dollars and percentages) for the years ended December 31, 2025 and 2024.
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| Year Ended December 31, | ||||||
| 2025 |
| 2024 | ||||
($ in thousands) | Amount |
| Percent |
| Amount |
| Percent |
Tax at federal statutory rate | $ 2,340 |
| 21% |
| $ 2,084 |
| 21% |
State income taxes, net of federal tax effect (1) | 100 |
| 0.9 |
| 101 |
| 1.0 |
Nontaxable or nondeductible items |
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|
|
|
|
|
|
Appreciation in cash surrender value of life insurance | (162) |
| (1.5) |
| (151) |
| (1.5) |
Tax-exempt interest income | (109) |
| (1.0) |
| (113) |
| (1.1) |
Other | (46) |
| (0.4) |
| 58 |
| 0.6 |
Income tax expense | $ 2,123 |
| 19.0% |
| $ 1,979 |
| 19.9% |
(1)The State of Virginia made up the majority of the tax effect in this category.
Note 12 - Income taxes (continued)
The following table provides information on the significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024.
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|
|
|
($ in thousands) | 2025 |
| 2024 |
Deferred tax assets |
|
|
|
Lease liabilities | $ 703 |
| $ 825 |
Allowance for credit losses | 1,355 |
| 1,479 |
Unfunded commitment liability | 141 |
| 114 |
Unrealized losses on available-for-sale securities | 3,971 |
| 6,091 |
Non-accrual interest | 120 |
| 36 |
Net operating losses | 207 |
| 283 |
Deferred compensation | 1,311 |
| 1,117 |
Other | 26 |
| - |
Gross deferred tax assets | $ 7,834 |
| $ 9,945 |
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|
|
Deferred tax liabilities |
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|
|
Right-of-use assets | 613 |
| 729 |
Depreciation | 140 |
| 173 |
Intangibles | 141 |
| 86 |
Other | 50 |
| 103 |
Gross deferred tax liabilities | 944 |
| 1,091 |
Net deferred tax asset | $ 6,890 |
| $ 8,854 |
At December 31, 2025, the Company had state net operating losses of $4,376, of which $2,019 will begin to expire in 2034, if not fully utilized. The Company has recorded a deferred tax asset of $207 at December 31, 2025, which represents the tax effect of these carryforwards.
During the years ended December 31, 2025 and 2024, the Company made payments to tax authorities for income taxes as set forth in the table below.
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|
|
| Years Ended December 31, |
|
|
($ in thousands) | 2025 |
| 2024 |
Federal | $ 2,340 |
| $ 1,850 |
Income taxes paid represents amounts paid (net of refunds received) to taxing authorities during the respective years, including payments for income taxes related to prior years and excluding payments for the current year that will be made in subsequent periods.
For the years ended December 31, 2025 and 2024, federal income taxes paid includes amounts related to current year estimated tax payments and prior year tax liabilities. No state income taxes were paid during 2025 or 2024, as available net operating loss carryforwards offset state taxable income in the jurisdictions where the Company files. State income taxes paid represents amounts paid to the Commonwealth of Virginia.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 27, 2026 | Showing above |
| 2024 | Mar 26, 2025 | |
| 2023 | Mar 27, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 29, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.