Business Context and Reporting Period
Company: Bank of the James Financial Group, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: September 16, 2008 (Event Date: September 7, 2008)
Context: The filing addresses the impact of the federal conservatorship of Fannie Mae and Freddie Mac, announced on September 7, 2008, on the Company's investment portfolio.
Key Financial Metrics
- Impaired Asset: Preferred stock issued by Fannie Mae.
- Par Value: $2,000,000.
- Book Value (as of Sept 18, 2008): Approximately $1,900,000.
- Current Market Value: Trading at less than 5% of par value.
- Estimated Impairment Charge: Between $1,700,000 and $1,900,000 (non-cash, other-than-temporary impairment).
- Regulatory Capital Status: The Company and the Bank remain "well-capitalized" even if the full value is written down.
Material Changes
The primary material change is the anticipated recognition of a significant non-cash impairment charge during the quarter ending September 30, 2008. This charge results from the drastic decline in the fair market value of Fannie Mae preferred securities following the government takeover. The filing does not provide comparative revenue, profit, or cash flow data for the period.
Outlook, Risks, and Management Commentary
- Accounting Treatment: The Company expects to record the impairment in accordance with FAS 115 based on the fair market value existing at the time of the quarter-end.
- Uncertainty: Management notes it is unclear if the value of the securities will improve, necessitating the charge.
- Exposure Limits: Neither the Bank nor its affiliates hold any common or other equity securities of Fannie Mae or Freddie Mac.
- Financial Stability: Management asserts that the impairment will not compromise the regulatory capital status of the Bank or the Company.
Investor Verification Checklist
- Verify the exact fair market value of the Fannie Mae preferred securities at the close of the quarter ending September 30, 2008.
- Confirm the final recorded impairment charge amount in the subsequent quarterly report (10-Q).
- Review the attached Press Release (Exhibit 99.1) for additional details on the impact on earnings per share.
- Monitor regulatory capital ratios in the next filing to confirm the "well-capitalized" status post-charge.