10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2014

BANK OF THE JAMES FINANCIAL GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Virginia	001-35402	20-0500300
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(I.R.S. Employer Identification No.)

828 Main Street, Lynchburg, VA	24504
(Address of principal executive offices)	(Zip Code)

(434) 846-2000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 3,364,874 shares of Common Stock, par value $2.14 per share, were outstanding at May 12, 2014.

Table of Contents

PART I – FINANCIAL INFORMATION		1
Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
PART II – OTHER INFORMATION		45
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47
SIGNATURES		48

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollar amounts in thousands, except per share amounts) (2014 unaudited)

	3/31/2014			12/31/2013
Assets
Cash and due from banks	$	17,853		$	16,671
Federal funds sold		62			—
Total cash and cash equivalents		17,915			16,671
Securities held-to-maturity (fair value of $2,737 in 2014 and $3,740 in 2013)		2,535			3,537
Securities available-for-sale, at fair value		45,336			46,091
Restricted stock, at cost		1,289			1,428
Loans, net of allowance for loan losses of $5,261 in 2014 and $5,186 in 2013		349,156			339,994
Loans held for sale		1,831			1,921
Premises and equipment, net		8,340			8,408
Software, net		331			268
Interest receivable		1,356			1,360
Cash value - bank owned life insurance		9,301			9,230
Other real estate owned, net of valuation allowance		1,714			1,451
Income taxes receivable		145			448
Deferred tax asset		2,193			2,628
Other assets		1,142			1,076
Total assets	$	442,584		$	434,511
Liabilities and Stockholders’ Equity
Deposits
Noninterest bearing demand	$	71,665		$	63,256
NOW, money market and savings		228,305			226,709
Time		98,156			97,433
Total deposits		398,126			387,398
Federal funds purchased		—			4,108
FHLB borrowings		2,000			2,000
Capital notes		10,000			10,000
Interest payable		67			65
Other liabilities		1,068			1,168
Total liabilities	$	411,261		$	404,739
Stockholders’ equity
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 3,364,874 as of March 31, 2014 and December 31, 2013	$	7,201		$	7,201
Preferred stock; authorized 1,000,000 shares; 0 issued and outstanding as of March 31, 2014 and December 31, 2013		—			—
Additional paid-in-capital		22,868			22,868
Accumulated other comprehensive (loss)		(1,575	)		(2,421	)
Retained earnings		2,829			2,124
Total stockholders’ equity	$	31,323		$	29,772
Total liabilities and stockholders’ equity	$	442,584		$	434,511

See accompanying notes to these consolidated financial statements

1

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Income

(dollar amounts in thousands, except per share amounts) (unaudited)

	For the Three Months Ended March 31,
	2014			2013
Interest Income
Loans	$	4,188		$	4,163
Securities
US Government and agency obligations		180			190
Mortgage backed securities		33			4
Municipals		120			152
Dividends		6			5
Other (Corporates)		15			16
Federal Funds sold		3			7
Total interest income		4,545			4,537
Interest Expense
Deposits
NOW, money market savings		118			124
Time Deposits		301			323
Federal Funds purchased		2			—
FHLB borrowings		19			19
Reverse repurchase agreements		1			—
Capital notes		150			150
Total interest expense		591			616
Net interest income		3,954			3,921
Provision for loan losses		55			235
Net interest income after provision for loan losses		3,899			3,686
Other operating income
Mortgage fee income		289			319
Service charges, fees and commissions		350			303
Increase in cash value of life insurance		71			75
Other		13			8
Gain (loss) on sale of available-for-sale securities, net		(6	)		259
Total other operating income		717			964
Other operating expenses
Salaries and employee benefits		1,885			1,776
Occupancy		313			305
Equipment		287			261
Supplies		105			90
Professional, data processing, and other outside expense		613			561
Marketing		97			86
Credit expense		37			55
Other real estate expenses		57			79
FDIC insurance expense		30			144
Other		185			174
Total other operating expenses		3,609			3,531
Income before income taxes		1,007			1,119
Income tax expense		302			331
Net Income	$	705		$	788
Weighted average shares outstanding - basic		3,364,874			3,352,725
Weighted average shares outstanding - diluted		3,364,874			3,352,855
Income per common share - basic	$	0.21		$	0.24
Income per common share - diluted	$	0.21		$	0.24

See accompanying notes to these consolidated financial statements

2

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Three months ended March 31, 2014 and 2013

(dollar amounts in thousands) (unaudited)

	For the Three Months Ended March 31,
	2014		2013
Net Income	$	705	$	788
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale net of deferred taxes of $431 and $(132)		842		(258	)
Reclassification adjustment for (gains) losses included in net income (1), net of taxes of $(2) and $88 (2)		4		(171	)
Other comprehensive income (loss), net of tax		846		(429	)
Comprehensive income	$	1,551	$	359

(1) Gains are included in net “gain on sale of available-for-sale securities” on the consolidated statements of income.

(2) The tax effect on these reclassifications is reflected in “income tax expense” on the consolidated statements of income.

See accompanying notes to these consolidated financial statements

3

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Three Months ended March 31, 2014 and 2013

(dollar amounts in thousands) (unaudited)

	Three Months Ended March 31,
	2014			2013
Cash flows from operating activities
Net Income	$	705		$	788
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		193			179
Net amortization and accretion of premiums and discounts on securities		84			96
(Gain) loss on sale of available for sale securities		6			(259	)
Provision for loan losses		55			235
(Gain) loss on sale of other real estate owned		(3	)		21
Impairment of other real estate owned		46			25
Decrease in loans held-for-sale		90			100
(Increase) in cash value of life insurance		(71	)		(75	)
Decrease in interest receivable		4			182
(Increase) decrease in other assets		(64	)		104
Decrease in income taxes receivable		303			333
(Decrease) in interest payable		2			3
(Decrease) increase in other liabilities		(100	)		164
Net cash provided by operating activities	$	1,250		$	1,896
Cash flows from investing activities
Proceeds from maturities and calls of securities held to maturity	$	1,000		$	—
Purchases of securities available for sale		—			(7,972	)
Proceeds from maturities, calls and paydowns of securities available for sale		60			2,041
Proceeds from sale of securities available for sale		1,886			10,043
Redemption of Federal Home Loan Bank stock		139			110
Proceeds from sale of other real estate owned		—			159
Origination of loans, net of principal collected		(9,523	)		(6,234	)
Purchases of premises and equipment		(188	)		(28	)
Net cash (used in) provided by investing activities	$	(6,626	)	$	(1,881	)
Cash flows from financing activities
Net increase (decrease) in deposits	$	10,728		$	(13,821	)
Net (decrease) in federal funds purchased		(4,108	)		—
Net cash provided by (used in) financing activities	$	6,620		$	(13,821	)
Increase (decrease) in cash and cash equivalents		1,244			(13,806	)
Cash and cash equivalents at beginning of period	$	16,671		$	40,998
Cash and cash equivalents at end of period	$	17,915		$	27,192
Non cash transactions
Transfer of loans to foreclosed assets	$	384		$	411
Portion of foreclosed assets financed		78			—
Fair value adjustment for securities		1,279			(649	)
Cash transactions
Cash paid for interest	$	589		$	613
Cash paid for taxes		—			—

See accompanying notes to these consolidated financial statements

4

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(dollars in thousands) (unaudited)

	Total Shares Outstanding		Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2012		3,352,725	$	7,175	$	22,806	$	(936	)	$	568		$	29,613
Net Income		—		—		—		788			—			788
Other Comprehensive Loss		—		—		—		—			(429	)		(429	)
Balance at March 31, 2013		3,352,725	$	7,175	$	22,806	$	(148	)	$	139		$	29,972
Balance at December 31, 2013		3,364,874	$	7,201	$	22,868	$	2,124		$	(2,421	)	$	29,772
Net Income		—		—		—		705			—			705
Other Comprehensive Income		—		—		—		—			846			846
Balance at March 31, 2014		3,364,874	$	7,201	$	22,868	$	2,829		$	(1,575	)	$	31,323

See accompanying notes to these consolidated financial statements

5

Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

The unaudited consolidated financial statements have been prepared by Bank of the James Financial Group, Inc. (“Financial” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. In management’s opinion the accompanying financial statements, which unless otherwise noted are unaudited, reflect all adjustments, consisting solely of normal recurring accruals, necessary for a fair presentation of the financial information as of and for the three months ended March 31, 2014 and 2013 in conformity with accounting principles generally accepted in the United States of America. Additional information concerning the organization and business of Financial, accounting policies followed, and other related information is contained in Financial’s Annual Report on Form 10-K for the year ended December 31, 2013. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes for the year ended December 31, 2013 included in Financial’s Annual Report on Form 10-K. Results for the three month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

The Company’s primary market area consists of the area commonly referred to as Region 2000 which encompasses the seven jurisdictions of the Town of Altavista, Amherst County, Appomattox County, the Town of Bedford, Bedford County, Campbell County, and the City of Lynchburg.

Financial’s critical accounting policy relates to the evaluation of the allowance for loan losses which is based on management’s opinion of an amount that is adequate to absorb loss in the existing loan portfolio of Bank of the James (the “Bank”), Financial’s wholly-owned subsidiary. The allowance for loan losses is established through a provision for loan loss based on available information including the composition of the loan portfolio, historical loan losses (to the extent available due to limited history), specific impaired loans, availability and quality of collateral, age of the various portfolios, changes in local economic conditions, and loan performance and quality of the portfolio. Different assumptions used in evaluating the adequacy of the Bank’s allowance for loan losses could result in material changes in Financial’s financial condition and results of operations. The Bank’s policies with respect to the methodology for determining the allowance for loan losses involve a higher degree of complexity and require management to make subjective judgments that often require assumptions or estimates about uncertain matters. These critical policies and their assumptions are periodically reviewed with the Board of Directors.

Note 2 – Use of Estimates

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

6

Note 3 – Earnings Per Share

Currently, only the option shares granted to certain officers and other employees of Financial pursuant to the Amended and Restated Stock Option Plan of 1999 Financial (the “1999 Plan”) are considered in calculating dilutive earnings per share. The following is a summary of the earnings per share calculation for the three months ended March 31, 2014 and 2013.

	Three months ended
	March 31,
	2014		2013
Net income	$	705,000	$	788,000
Weight average number of shares		3,364,874		3,352,725
Options affect of incremental shares		—		130
Weighted average diluted shares		3,364,874		3,352,855
Basic EPS (weighted avg shares)	$	0.21	$	0.24
Diluted EPS (Including Option Shares)	$	0.21	$	0.24

The following table sets forth the incremental shares associated with option shares that were not included in calculating the diluted earnings because their effect was anti-dilutive:

	Three months ended March 31,
	2014		2013
Incremental shares excluded from calculating diluted EPS because their effect was anti-dilutive		111,371		169,600

Note 4 – Stock Based Compensation

Accounting standards require companies to recognize the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock, based on the fair value of those awards at the date of grant.

7

Note 4 – Stock Based Compensation (continued)

Stock option plan activity for the three months ended March 31, 2014 is summarized below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Average Intrinsic Value
Options outstanding, January 1, 2014		111,371	$	10.73
Granted		—		—
Exercised		—		—
Forfeited		—		—
Options outstanding, March 31, 2014		111,371		10.73		1.3	$	—
Options exercisable, March 31, 2014		111,371	$	10.73		1.3	$	—

Intrinsic value is calculated by subtracting the exercise price of option shares from the market price of underlying shares as of March 31, 2014 and multiplying that amount by the number of options outstanding. No intrinsic value exists where the exercise price is greater than the market price on a given date.

All compensation expense related to the foregoing stock option plan has been recognized. The Company’s ability to grant additional options shares under the 1999 Plan has expired.

Note 5 – Fair Value Measurements

Determination of Fair Value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of FASB ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

8

Note 5 – Fair Value Measurements (continued)

Fair Value Hierarchy

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

• Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Securities

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow.

Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Currently, all of the Company’s securities are considered to be Level 2 securities.

9

Note 5 – Fair Value Measurements (continued)

The following table summarizes the Company’s financial assets that were measured at fair value on a recurring basis during the period.

			Carrying Value at March 31, 2014
Description	Balance as of March 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
US Treasuries	$	3,699	$	—	$	3,699	$	—
US agency obligations		19,447		—		19,447		—
Mortgage-backed securities		4,829		—		4,829		—
Municipals		15,392		—		15,392		—
Other (corporates)		1,969		—		1,969		—
Total available-for-sale securities	$	45,336	$	—	$	45,336	$	—
			Carrying Value at December 31, 2013
Description	Balance as of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
US Treasuries	$	3,611	$	—	$	3,611	$	—
US agency obligations		20,108		—		20,108		—
Mortgage-backed securities		5,311		—		5,311		—
Municipals		15,138		—		15,138		—
Other (corporates)		1,923		—		1,923		—
Total available-for-sale securities	$	46,091	$	—	$	46,091	$	—

Impaired loans

Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Bank using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over one year old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

10

Note 5 – Fair Value Measurements (continued)

Loans held for sale

Loans held for sale are carried at estimated fair value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records fair value adjustments on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale during the period ended March 31, 2014. Gains and losses on the sale of loans are recorded within mortgage fee income on the Consolidated Statements of Income.

Other real estate owned

Certain assets such as other real estate owned (OREO) are measured at fair value less cost to sell. We believe that the fair value component in its valuation follows the provisions of ASC 820.

Real estate acquired through foreclosure is transferred to OREO. The measurement of loss associated with OREO is based on the fair value of the collateral compared to the unpaid loan balance and anticipated costs to sell the property. The value of OREO collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Bank using observable market data.

Any fair value adjustments are recorded in the period incurred and expensed against current earnings. The carrying values of all OREO properties are considered to be Level 3.

The following table summarizes the Company’s impaired loans, loans held for sale, and OREO measured at fair value on a nonrecurring basis during the period (in thousands).

			Carrying Value at March 31, 2014
Description	Balance as of March 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans*	$	4,397	$	—	$	—	$	4,397
Loans held for sale		1,831		—		1,831		—
Other real estate owned		1,714		—		—		1,714

* Includes loans charged down during the quarter to the net realizable value of the collateral.

			Carrying Value at December 31, 2013
Description	Balance as of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans*	$	4,307	$	—	$	—	$	4,307
Loans held for sale		1,921		—		1,921		—
Other real estate owned		1,451		—		—		1,451

* Includes loans charged down during the quarter to the net realizable value of the collateral.

11

Note 5 – Fair Value Measurements (continued)

The following table sets forth information regarding the quantitative inputs used to value assets classified as Level 3:

	Quantitative information about Level 3 Fair Value Measurements for March 31, 2014 (dollars in thousands)
	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$	4,397	Discounted appraised value	Selling cost	5% - 10% (6%)
				Discount for lack of marketability and age of appraisal	0% - 25% (15%)
OREO		1,714	Discounted appraised value	Selling cost	5% - 10% (6%)
				Discount for lack of marketability and age of appraisal	0% - 25% (15%)

Financial Instruments

Cash, cash equivalents and Federal Funds sold

The carrying amounts of cash and short-term instruments approximate fair values.

Loans

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for certain fixed rate loans are based on quoted market prices of similar loans adjusted for differences in loan characteristics. Fair values for other loans such as commercial real estate and commercial and industrial loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values of impaired loans are estimated as described above. The carrying values of all loans are considered to be Level 3.

Bank Owned Life Insurance (BOLI)

The carrying amount approximates fair value. The carrying values of all BOLI is considered to be Level 2.

12

Note 5 – Fair Value Measurements (continued)

Deposits

Fair values disclosed for demand deposits (e.g., interest and noninterest checking, savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed rate certificates of deposit are estimated using discounted cash flow analyses that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. The carrying values of all deposits are considered to be Level 2.

FHLB borrowings

The fair value of FHLB borrowings is estimated using discounted cash flow analysis based on the rates currently offered for borrowings of similar remaining maturities and collateral requirements. The carrying values of all FHLB borrowings are considered to be Level 2.

Short-term borrowings

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within ninety days approximate fair value. The carrying values of all short term borrowings are considered to be Level 2.

Capital notes

Fair values of capital notes are based on market prices for debt securities having similar maturity and interest rate characteristics. The carrying values of all capital notes are considered to be Level 2.

Accrued interest

The carrying amounts of accrued interest approximate fair value. The carrying values of all accrued interest is considered to be Level 2.

Off-balance sheet credit-related instruments

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. Fair value of off-balance sheet credit-related instruments were deemed to be immaterial at March 31, 2014 and December 31, 2013 and therefore are not included in the table below.

13

Note 5 – Fair Value Measurements (continued)

The estimated fair values, and related carrying or notional amounts, of Financial’s financial instruments are as follows (in thousands):

			Fair Value Measurements at March 31, 2014 using
	Carrying Amounts		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Assets
Cash and due from banks	$	17,853	$	17,853	$	—	$	—	$	17,853
Federal funds sold		62		62		—		—		62
Securities
Available-for-sale		45,336		—		45,336		—		45,336
Held-to-maturity		2,535		—		2,737		—		2,737
Loans, net		349,156		—		—		353,625		353,625
Loans held for sale		1,831		—		1,831		—		1,831
Interest receivable		1,356		—		1,356		—		1,356
BOLI		9,301		—		9,301		—		9,301
Liabilities
Deposits	$	398,126	$	—	$	399,206	$	—	$	399,206
FHLB borrowings		2,000		—		2,011		—		2,011
Capital notes		10,000		—		10,057		—		10,057
Interest payable		67		—		67		—		67

			Fair Value Measurements at December 31, 2013 using
	Carrying Amounts		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Assets
Cash and due from banks	$	16,671	$	16,671	$	—	$	—	$	16,671
Securities
Available-for-sale		46,091		—		46,091		—		46,091
Held-to-maturity		3,537		—		3,740		—		3,740
Loans, net		339,994		—		—		346,658		346,658
Loans held for sale		1,921		—		1,921		—		1,921
Interest receivable		1,360		—		1,360		—		1,360
BOLI		9,230		—		9,230		—		9,230
Liabilities
Deposits	$	387,398	$	—	$	388,363	$	—	$	388,363
FHLB borrowings		2,000		—		2,018		—		2,018
Federal funds purchased		4,108		4,108		—		—		4,108
Capital notes		10,000		—		10,091		—		10,091
Interest payable		65		—		65		—		65

14

Note 5 – Fair Value Measurements (continued)

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time Financial’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of Financial’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on-balance-sheet and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets that are not considered financial assets include deferred income taxes and bank premises and equipment; a significant liability that is not considered a financial liability is accrued post-retirement benefits. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Financial assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of Financial’s financial instruments will change when interest rate levels change, and that change may be either favorable or unfavorable to Financial. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment.

Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate Financial’s overall interest rate risk.

Note 6 – Capital Notes

During the third quarter of 2012, Financial closed the private placement of unregistered debt securities (the “2012 Offering”) pursuant to which Financial issued $10,000,000 in principal of notes (the “2012 Notes”). The 2012 Notes have not been and will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The 2012 Notes bear interest at the rate of 6% per year with interest payable quarterly in arrears. The notes mature on April 1, 2017, but are subject to prepayment in whole or in part on or after April 1, 2013 at Financial’s sole discretion on 30 days written notice to the holders. Financial used $7,000,000 of the proceeds from the 2012 Offering in April 2012 to pay, on maturity, the principal due on notes issued in 2009.

15

Note 7 – Investments

The following tables summarize the Bank’s holdings for both securities held-to-maturity and securities available-for-sale as of March 31, 2014 and December 31, 2013 (amounts in thousands):

	March 31, 2014
			Gross Unrealized
	Amortized Costs		Gains		(Losses)			Fair Value
Held-to-Maturity
US agency obligations	$	2,535	$	202	$	—		$	2,737
Available-for-Sale
US Treasuries	$	3,909	$	—	$	(210	)	$	3,699
US agency obligations		21,093		7		(1,653	)		19,447
Mortgage-backed securities		4,928		44		(143	)		4,829
Municipals		15,782		81		(471	)		15,392
Other (corporates)		2,011		—		(42	)		1,969
	$	47,723	$	132	$	(2,519	)	$	45,336
	December 31, 2013
			Gross Unrealized
	Amortized Costs		Gains		(Losses)			Fair Value
Held-to-Maturity
US agency obligations	$	3,537	$	203	$	—		$	3,740
Available-for-Sale
US Treasuries	$	3,907	$	—	$	(296	)	$	3,611
US agency obligations		22,544		—		(2,436	)		20,108
Mortgage-backed securities		5,450		11		(150	)		5,311
Municipals		15,845		35		(742	)		15,138
Other (corporates)		2,011		—		(88	)		1,923
	$	49,757	$	46	$	(3,712	)	$	46,091

16

Note 7 – Investments (continued)

The following tables show the gross unrealized losses and fair value of the Bank’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2014 and December 31, 2013 (amounts in thousands):

	Less than 12 months				More than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
March 31, 2014	Value		Losses		Value		Losses		Value		Losses
Description of securities
US Treasuries	$	3,699	$	210	$	—	$	—	$	3,699	$	210
U.S. agency obligations		10,141		752		7,081		901		17,222		1,653
Mortgage-backed securities		1,903		143		—		—		1,903		143
Municipals		5,059		211		6,170		260		11,229		471
Other (corporates)		491		2		1,478		40		1,969		42
Total	$	21,293	$	1,318	$	14,729	$	1,201	$	36,022	$	2,519
	Less than 12 months				More than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2013	Value		Losses		Value		Losses		Value		Losses
Description of securities
US Treasuries	$	3,611	$	296	$	—	$	—	$	3,611	$	296
U.S. agency obligations		14,087		1,473		5,021		963		19,108		2,436
Mortgage-backed securities		4,830		150		—		—		4,830		150
Municipals		11,163		574		1,479		168		12,642		742
Other (corporates)		1,923		88		—				1,923		88
Total	$	35,614	$	2,581	$	6,500	$	1,131	$	42,114	$	3,712

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and may do so more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) the intent of Financial, if any, to sell the security; (4) whether Financial more likely than not will be required to sell the security before recovering its cost; and (5) whether Financial does not expect to recover the security’s entire amortized cost basis (even if Financial does not intend to sell the security).

At March 31, 2014, the Company did not consider the unrealized losses as other-than-temporary losses due to the nature of the securities involved. As of March 31, 2014, the Bank owned 41 securities that were being evaluated for other than temporary impairment. Eleven of these securities were S&P rated AAA, 29 were S&P rated AA, and one was S&P rated A. As of March 31, 2014, 15 of these securities were direct obligations of the U.S. government or government sponsored entities, 23 were municipal issues, and three were investments in domestic corporate issued securities.

17

Note 7 – Investments (continued)

Based on the analysis performed by management as mandated by the Bank’s investment policy, management believes the default risk to be minimal. Because the Bank expects to recover the entire amortized cost basis, no declines currently are deemed to be other-than-temporary.

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 fee-based 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 months ended March 31, 2014 and 2013 was as follows (dollars in thousands):

Business Segments

	Community Banking		Mortgage		Total
Three months ended March 31, 2014
Net interest income	$	3,954	$	—	$	3,954
Provision for loan losses		55		—		55
Net interest income after provision for loan losses		3,899		—		3,899
Noninterest income		428		289		717
Noninterest expenses		3,350		259		3,609
Income before income taxes		977		30		1,007
Income tax expense		292		10		302
Net income	$	685	$	20	$	705
Total assets	$	440,610	$	1,974	$	442,584
Three months ended March 31, 2013
Net interest income	$	3,921	$	—	$	3,921
Provision for loan losses		235		—		235
Net interest income after provision for loan losses		3,686		—		3,686
Noninterest income		645		319		964
Noninterest expenses		3,278		253		3,531
Income before income taxes		1,053		66		1,119
Income tax expense		309		22		331
Net income	$	744	$	44	$	788
Total assets	$	427,233	$	853	$	428,086

18

Note 9 – Loans, allowance for loan losses and OREO

Management has an established methodology used to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses, the Bank has segmented certain loans in the portfolio by product type. Within these segments, the Bank has sub-segmented its portfolio into classes, based on the associated risks. The classifications set forth below do not correspond directly to the classifications set forth in the call report (Form FFIEC 041). Management has determined that the classifications set forth below are more appropriate for use in identifying and managing risk in the loan portfolio.

Loan Segments:		Loan Classes:
	Commercial		Commercial and industrial loans
	Commercial real estate		Commercial mortgages – owner occupied
			Commercial mortgages – non-owner occupied
			Commercial construction
	Consumer		Consumer unsecured
			Consumer secured
	Residential		Residential mortgages
			Residential consumer construction

A summary of loans, net is as follows (dollars in thousands):

	As of:
	March 31,		December 31,
	2014		2013
Commercial	$	58,951	$	55,803
Commercial real estate		178,352		172,117
Consumer		71,651		71,165
Residential		45,463		46,095
Total loans		354,417		345,180
Less allowance for loan losses		5,261		5,186
Net loans	$	349,156	$	339,994

The Bank’s internal risk rating system is in place to grade commercial and commercial real estate loans. Category ratings are reviewed periodically by lenders and the credit review area of the Bank based on the borrower’s individual situation. Additionally, internal and external monitoring and review of credits are conducted on an annual basis.

19

Note 9 – Loans, allowance for loan losses and OREO (continued)

Below is a summary and definition of the Bank’s risk rating categories:

RATING 1	Excellent
RATING 2	Above Average
RATING 3	Satisfactory
RATING 4	Acceptable / Low Satisfactory
RATING 5	Monitor
RATING 6	Special Mention
RATING 7	Substandard
RATING 8	Doubtful
RATING 9	Loss

We segregate loans into the above categories based on the following criteria and we review the characteristics of each rating at least annually, generally during the first quarter. The characteristics of these ratings are as follows:

• “Pass.” These are loans having risk ratings of 1 through 4. Pass loans are to persons or business entities with an acceptable financial condition, appropriate collateral margins, appropriate cash flow to service the existing loan, and an appropriate leverage ratio. The borrower has paid all obligations as agreed and it is expected that this type of payment history will continue. When necessary, acceptable personal guarantors support the loan.

• “Monitor.” These are loans having a risk rating of 5. Monitor loans have currently acceptable risk but may have the potential for a specific defined weakness in the borrower’s operations and the borrower’s ability to generate positive cash flow on a sustained basis. The borrower’s recent payment history may currently or in the future be characterized by late payments. The Bank’s risk exposure is mitigated by collateral supporting the loan. The collateral is considered to be well-margined, well maintained, accessible and readily marketable.

• “Special Mention.” These are loans having a risk rating of 6. Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank’s credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. These loans do warrant more than routine monitoring due to a weakness caused by adverse events.

• “Substandard.” These are loans having a risk rating of 7. Substandard loans are considered to have specific and well-defined weaknesses that jeopardize the viability of the Bank’s credit extension. The payment history for the loan has been inconsistent and the expected or projected primary repayment source may be inadequate to service the loan. The estimated net liquidation value of the collateral pledged and/or ability of the personal guarantor(s) to pay the loan may not adequately protect the Bank. There is a distinct possibility that the Bank will sustain some loss if the deficiencies associated with the loan are not corrected in the near term. A substandard loan would not automatically meet our definition of impaired unless the loan is significantly past due and the borrower’s performance and financial condition provides evidence that it is probable that the Bank will be unable to collect all amounts due.

• “Doubtful.” These are loans having a risk rating of 8. Doubtful rated loans have all the weaknesses inherent in a loan that is classified substandard but with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high.

• “Loss.” These are loans having a risk rating of 9. Loss rated loans are not considered collectible under normal circumstances and there is no realistic expectation for any future payment on the loan. Loss rated loans are fully charged off.

20

Note 9 – Loans, allowance for loan losses and OREO (continued)

Financing Receivables on Non-Accrual Status

(dollars in thousands)

	As of
	March 31, 2014		December 31, 2013
Commercial	$	1,941	$	1,585
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		323		537
Commercial Mortgages-Non-Owner Occupied		83		353
Commercial Construction		460		375
Consumer
Consumer Unsecured		—		—
Consumer Secured		123		33
Residential:
Residential Mortgages		377		183
Residential Consumer Construction		—		—
Totals	$	3,307	$	3,066

We also classify other real estate owned (OREO) as a nonperforming asset. OREO represents real property owned by the Bank either through purchase at foreclosure or received from the borrower through a deed in lieu of foreclosure. OREO increased to $1,714,000 on March 31, 2014 from $1,451,000 on December 31, 2013. The following table represents the changes in OREO balance during the three months ended March 31, 2014.

OREO Changes

(dollars in thousands)

	Three Months ended
	March 31, 2014
Balance at the beginning of the year (net)	$	1,451
Transfers from loans		384
Capitalized costs		—
Writedowns		(46	)
Sales proceeds		(78	)
Gain on disposition		3
Balance at the end of the period (net)	$	1,714

21

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Impaired Loans
	(dollars in thousands)
	For the Three Months Ended March 31, 2014
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
2014	Investment		Balance		Allowance		Investment		Recognized
With No Related Allowance Recorded:
Commercial	$	3,987	$	4,456	$	—	$	3,626	$	35
Commercial Real Estate
Commercial Mortgages-Owner Occupied		749		807		—		644		11
Commercial Mortgage Non-Owner Occupied		598		598		—		801		8
Commercial Construction		460		1,135		—		606		—
Consumer
Consumer Unsecured		—		—		—		—		—
Consumer Secured		21		21		—		21		—
Residential
Residential Mortgages		330		330		—		400		3
Residential Consumer Construction		—		—		—		—		—
With An Allowance Recorded:
Commercial	$	921	$	929	$	482	$	747	$	11
Commercial Real Estate
Commercial Mortgages-Owner Occupied		1,826		2,027		308		2,123		25
Commercial Mortgage Non-Owner Occupied		218		218		12		219		3
Commercial Construction		—		—		—		—		—
Consumer
Consumer Unsecured		—		—		—		—		—
Consumer Secured		40		40		40		40		1
Residential
Residential Mortgages		2,129		2,277		252		1,907		26
Residential Consumer Construction		—		—		—		—		—
Totals:
Commercial	$	4,908	$	5,385	$	482	$	4,373	$	46
Commercial Real Estate
Commercial Mortgages-Owner Occupied		2,575		2,834		308		2,767		36
Commercial Mortgage Non-Owner Occupied		816		816		12		1,020		11
Commercial Construction		460		1,135		—		606		—
Consumer
Consumer Unsecured		—		—		—		—		—
Consumer Secured		61		61		40		61		1
Residential
Residential Mortgages		2,459		2,607		252		2,307		29
Residential Consumer Construction		—		—		—		—		—
	$	11,279	$	12,838	$	1,094	$	11,134	$	123

22

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Impaired Loans
	(dollars in thousands)
	For the Year Ended December 31, 2013
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
2013	Investment		Balance		Allowance		Investment		Recognized
With No Related Allowance Recorded:
Commercial	$	3,265	$	3,699	$	—	$	2,898	$	101
Commercial Real Estate
Commercial Mortgages-Owner Occupied		539		593		—		1,566		38
Commercial Mortgage Non-Owner Occupied		1,003		1,003		—		3,686		47
Commercial Construction		751		1,274		—		746		8
Consumer
Consumer Unsecured		—		—		—		—		—
Consumer Secured		21		21		—		245		1
Residential
Residential Mortgages		470		517		—		1,304		24
Residential Consumer Construction		—		—		—		—		—
With An Allowance Recorded:
Commercial	$	573	$	573	$	406	$	597	$	38
Commercial Real Estate
Commercial Mortgages-Owner Occupied		2,420		2,617		280		3,046		108
Commercial Mortgage Non-Owner Occupied		220		221		14		530		15
Commercial Construction		—		—		—		412		—
Consumer
Consumer Unsecured		—		—		—		1		—
Consumer Secured		40		40		40		285		3
Residential
Residential Mortgages		1,684		1,820		224		1,350		118
Residential Consumer Construction		—		—		—		—		—
Totals:
Commercial	$	3,838	$	4,272	$	406	$	3,495	$	139
Commercial Real Estate
Commercial Mortgages-Owner Occupied		2,959		3,210		280		4,612		146
Commercial Mortgage Non-Owner Occupied		1,223		1,224		14		4,216		62
Commercial Construction		751		1,274		—		1,158		8
Consumer
Consumer Unsecured		—		—		—		1		—
Consumer Secured		61		61		40		530		4
Residential
Residential Mortgages		2,154		2,337		224		2,654		142
Residential Consumer Construction		—		—		—		—		—
	$	10,986	$	12,378	$	964	$	16,666	$	501

23

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Three Months Ended March 31, 2014
			Commercial
2014	Commercial		Real Estate		Consumer			Residential			Total
Allowance for Credit Losses:
Beginning Balance	$	1,015	$	2,631	$	935		$	605		$	5,186
Charge-offs		—		—		(4	)		—			(4	)
Recoveries		10		7		—			7			24
Provision		87		93		(117	)(1)		(8	)		55
Ending Balance		1,112		2,731		814			604			5,261
Ending Balance: Individually evaluated for impairment	$	482	$	320	$	40		$	252		$	1,094
Ending Balance: Collectively evaluated for impairment		630		2,411		774			352			4,167
Totals:	$	1,112	$	2,731	$	814		$	604		$	5,261
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$	4,908	$	3,851	$	61		$	2,459		$	11,279
Ending Balance: Collectively evaluated for impairment		54,043		174,501		71,590			43,004			343,138
Totals:	$	58,951	$	178,352	$	71,651		$	45,463		$	354,417

(1) The experience within the historical charge-off period used to calculate the allowance has improved which reduced the need for a provision relating to this segment.

24

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Year Ended December 31, 2013
				Commercial
2013	Commercial			Real Estate			Consumer			Residential			Total
Allowance for Credit Losses:
Beginning Balance	$	987		$	2,849		$	1,057		$	642		$	5,535
Charge-offs		(19	)		(932	)		(126	)		(28	)		(1,105	)
Recoveries		37			42			137			—			216
Provision		10			672			(133	)		(9	)		540
Ending Balance	$	1,015		$	2,631		$	935		$	605		$	5,186
Ending Balance: Individually evaluated for impairment	$	406		$	294		$	40		$	224		$	964
Ending Balance: Collectively evaluated for impairment		609			2,337			895			381			4,222
Totals:	$	1,015		$	2,631		$	935		$	605		$	5,186
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$	3,838		$	4,933		$	61		$	2,154		$	10,986
Ending Balance: Collectively evaluated for impairment		51,965			167,184			71,104			43,941			334,194
Totals:	$	55,803		$	172,117		$	71,165		$	46,095		$	345,180

25

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Age Analysis of Past Due Financing Receivables as of
	March 31, 2014
	(dollars in thousands)
2014	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days & Accruing
Commercial	$	623	$	22	$	1,941	$	2,586	$	56,365	$	58,951	$	—
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		1,081		—		323		1,404		66,970		68,374		—
Commercial Mortgages-Non-Owner Occupied		404		—		83		487		99,575		100,062		—
Commercial Construction		—		—		460		460		9,456		9,916		—
Consumer:
Consumer Unsecured		5		—		—		5		3,572		3,577		—
Consumer Secured		17		17		100		134		67,940		68,074		—
Residential:
Residential Mortgages		154		366		410		930		39,554		40,484		—
Residential Consumer Construction		—		95		—		95		4,884		4,979		—
Total	$	2,284	$	500	$	3,317	$	6,101	$	348,316	$	354,417	$	—
	Age Analysis of Past Due Financing Receivables as of
	December 31, 2013
	(dollars in thousands)
2013	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days & Accruing
Commercial	$	389	$	—	$	1,586	$	1,975	$	53,828	$	55,803	$	—
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		1,099		—		409		1,508		63,813		65,321		—
Commercial Mortgages-Non-Owner Occupied		96		—		85		181		94,542		94,723		—
Commercial Construction		—		—		375		375		11,698		12,073		—
Consumer:
Consumer Unsecured		5		—		—		5		4,717		4,722		—
Consumer Secured		71		—		33		104		66,339		66,443		—
Residential:
Residential Mortgages		704		—		183		887		39,909		40,796		—
Residential Consumer Construction		—		95		—		95		5,204		5,299		—
Total	$	2,364	$	95	$	2,671	$	5,130	$	340,050	$	345,180	$	—

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Note 9 – Loans, allowance for loan losses and OREO (continued)

	Credit Loss Disclosures
	Credit Quality Information - by Class
	March 31, 2014
	(dollars in thousands)
2014	Pass		Monitor		Special Mention		Substandard		Doubtful		Totals
Commercial	$	51,567	$	1,549	$	878	$	4,957	$	—	$	58,951
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		62,857		1,674		1,343		2,500		—		68,374
Commercial Mortgages-Non Owner Occupied		92,143		1,988		5,294		637		—		100,062
Commercial Construction		9,032		424		—		460		—		9,916
Consumer
Consumer Unsecured		3,576		—		—		1		—		3,577
Consumer Secured		66,653		703		340		378		—		68,074
Residential:
Residential Mortgages		36,402		783		587		2,712		—		40,484
Residential Consumer Construction		4,979		—		—		—		—		4,979
Totals	$	327,209	$	7,121	$	8,442	$	11,645	$	—	$	354,417
	Credit Loss Disclosures
	Credit Quality Information - by Class
	December 31, 2013
	(dollars in thousands)
2013	Pass		Monitor		Special Mention		Substandard		Doubtful		Totals
Commercial	$	48,827	$	2,109	$	979	$	3,888	$	—	$	55,803
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		58,740		2,355		1,356		2,870		—		65,321
Commercial Mortgages-Non Owner Occupied		85,474		2,737		5,468		1,044		—		94,723
Commercial Construction		11,455		—		—		618		—		12,073
Consumer
Consumer Unsecured		4,721		—		—		1		—		4,722
Consumer Secured		65,056		814		283		290		—		66,443
Residential:
Residential Mortgages		36,962		786		589		2,459		—		40,796
Residential Consumer Construction		5,299		—		—		—		—		5,299
Totals	$	316,534	$	8,801	$	8,675	$	11,170	$	—	$	345,180

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Note 9 – Loans, allowance for loan losses and OREO (continued)

There were no loan modifications that would have been classified as Troubled Debt Restructurings (TDR) during the three months ended March 31, 2014 and 2013.

There were no loan modifications classified as TDRs within the last twelve months that defaulted during the three months ended March 31, 2014 and 2013.

Note 10 – Subsequent Events

In preparing these financial statements, Financial has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

Note 11 – Recent accounting pronouncements

In January 2014, the FASB issued ASU 2014-01, “Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects (a consensus of the FASB Emerging Issues Task Force).” The amendments in this ASU permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments in this ASU should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. The amendments in this ASU are effective for public business entities for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted. The Company is currently assessing the impact that ASU 2014-01 will have on its consolidated financial statements.

In January 2014, the FASB issued ASU 2014-04, “Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force).” The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company is currently assessing the impact that ASU 2014-04 will have on its consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” The amendments in this ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results and include

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Note 11 – Recent accounting pronouncements (continued)

disposals of a major geographic area, a major line of business, or a major equity method investment. The new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. Additionally, the new guidance requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. The amendments in the ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-08 to have a material impact on its consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “plan” and similar expressions and variations thereof identify certain of such forward-looking statements which speak only as of the dates on which they were made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to: economic conditions (both generally and more specifically in the markets in which we operate); competition for our customers from other providers of financial services; government legislation and regulation relating to the banking industry (which changes from time to time and over which we have no control) including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act; changes in the value of real estate securing loans made by the Bank; changes in interest rates; and material unforeseen changes in the liquidity, results of operations, or financial condition of our customers. Other risks, uncertainties and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make.

GENERAL

Critical Accounting Policies

Bank of the James Financial Group, Inc.’s (“Financial”) financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The financial information contained within our statements is, to a significant extent, based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. We use historical loss ratios as one factor in determining the inherent loss that may be present in our loan portfolio. Actual losses could differ significantly from the historical factors that we use in estimating risk. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.

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The allowance for loan losses is management’s estimate of the losses that may be sustained in our loan portfolio. The allowance is based on two basic principles of accounting: (i) ASC 450 “Contingencies”, which requires that losses be accrued when they are probable of occurring and are reasonably estimable and (ii) ASC 310 “Impairment of a Loan”, which requires that losses on impaired loans be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance. Guidelines for determining allowances for loan losses are also provided in the SEC Staff Accounting Bulletin No. 102 – “Selected Loan Loss Allowance Methodology and Documentation Issues” and the Federal Financial Institutions Examination Council’s interagency guidance, “Interagency Policy Statement on the Allowance for Loan and Lease Losses” (the “FFIEC Policy Statement”). See “Management Discussion and Analysis Results of Operations – Allowance for Loan Losses and Loan Loss Reserve” below for further discussion of the allowance for loan losses.

Overview

Financial is a bank holding company headquartered in Lynchburg, Virginia. Our primary business is retail banking which we conduct through our wholly-owned subsidiary, Bank of the James (which we refer to as the “Bank”). We conduct three other business activities: mortgage banking through the Bank’s Mortgage division (which we refer to as “Mortgage”), investment services through the Bank’s Investment division (which we refer to as “Investment”), and insurance activities through BOTJ Insurance, Inc., a subsidiary of the Bank, (which we refer to as “Insurance”).

The Bank is a Virginia banking corporation headquartered in Lynchburg, Virginia. The Bank was incorporated under the laws of the Commonwealth of Virginia as a state chartered bank in 1998 and began banking operations in July 1999. The Bank was organized to engage in general retail and commercial banking business. The Bank is a community-oriented financial institution that provides varied banking services to individuals, small and medium-sized businesses, and professional concerns in the Central Virginia, Region 2000 area, which encompasses the seven jurisdictions of the Town of Altavista, Amherst County, Appomattox County, the Town of Bedford, Bedford County, Campbell County, and the City of Lynchburg. The Bank strives to provide its customers with products comparable to statewide regional banks located in its market area, while maintaining the prompt response time and level of service of a community bank. Management believes this operating strategy has particular appeal in the Bank’s market area.

The Bank’s principal office is located at 828 Main Street, Lynchburg, Virginia 24504 and its telephone number is (434) 846-2000. The Bank also maintains a website at www.bankofthejames.com.

Our operating results depend primarily upon the Bank’s net interest income, which is determined by the difference between (i) interest and dividend income on earning assets, which consist primarily of loans, investment securities and other investments, and (ii) interest expense on interest-bearing liabilities, which consist principally of deposits and other borrowings. The Bank’s net income also is affected by its provision for loan losses, as well as the level of its non-interest income, including loan fees and service charges, and its non-interest expenses, including salaries and employee benefits, occupancy expense, data processing expenses, Federal Deposit Insurance Corporation premiums, expense in complying with the Sarbanes-Oxley Act of 2002, miscellaneous other expenses, franchise taxes, and income taxes.

The Bank intends to enhance its profitability by increasing its market share in the Region 2000 area, providing additional services to its customers, and controlling costs.

The Bank now services its banking customers through the following nine full service branch locations in the Region 2000 area.

• The main office located at 828 Main Street in Lynchburg (opened October 2004) (the “Main Street Office”),

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• A branch located at 615 Church Street in Lynchburg (opened July 1999) (the “Church Street Branch”),

• A branch located at 5204 Fort Avenue in Lynchburg (opened November 2000) (the “Fort Avenue Branch”),

• A branch located on South Amherst Highway in Amherst County (opened June 2002) (the “Madison Heights Branch”),

• A branch located at 17000 Forest Road in Forest (opened February 2005) (the “Forest Branch”),

• A branch located at 4935 Boonsboro Road, Suites C and D in Lynchburg (opened April 2006) (the “Boonsboro Branch”),

• A branch located at 164 South Main Street, Amherst, Virginia (opened January 2007) (the “Amherst Branch”),

• A branch located at 1405 Ole Dominion Boulevard in the Town of Bedford, Virginia, located off of Independence Boulevard (opened October 2008) (the “Bedford Branch”),

• A branch located at 1110 Main Street, Altavista, Virginia (relocated from temporary branch in June 2009) (the “Altavista Branch”), and

The Bank also has opened a limited-service branch located in the Westminster-Canterbury facilities located at 501 VES Road, Lynchburg, Virginia 24503 and a commercial loan production office located at Luxor Office Park LLC, 1430 Rolkin Court Suite 203, Charlottesville, Virginia

In addition, the Bank, through its Mortgage division, originates residential mortgage loans through two offices—one located at the Forest Branch and the other located at 133 Salem Avenue, NW, in Roanoke, Virginia.

The Investment division operates primarily out of its office located at the Church Street Branch.

The Bank continuously evaluates areas located within Region 2000 to identify additional viable branch locations. Based on this ongoing evaluation, the Bank may acquire one or more additional suitable sites.

Subject to regulatory approval, the Bank anticipates opening additional branches during the next two fiscal years. Although numerous factors could influence the Bank’s expansion plans, the following discussion provides a general overview of the additional branch locations that the Bank currently is considering.

Timberlake Road Area, Campbell County (Lynchburg), Virginia. As previously disclosed, the Bank has purchased certain real property located at the intersection of Turnpike and Timberlake Roads, Campbell County, Virginia. The Bank has not determined when it will open a branch at this location. The Bank has determined that the existing structure is not suitable for use as a bank branch.

Rustburg, Virginia. As previously disclosed, in March, 2011 the Bank purchased certain real property near the intersection of Routes 501 and 24 in Rustburg, Virginia. The structure on the property is being demolished and removed. The Bank has not determined when it will open a branch at this location.

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Appomattox, Virginia. As previously disclosed, in July, 2013 the Bank purchased certain real property located near the intersection of Confederate Boulevard and Moses Avenue for future branch expansion. The Bank has not determined when it will open a branch at this location.

The Bank estimates that the cost of improvements, furniture, fixtures, and equipment necessary to upfit the property will be between $900,000 and $1,500,000 per location.

Although the Bank cannot predict with certainty the financial impact of each new branch, management generally anticipates that each new branch will become profitable within 12 to 18 months of operation.

Except as set forth herein, the Bank does not expect to purchase any significant property or equipment in the upcoming 12 months. Future branch openings are subject to regulatory approval.

OFF-BALANCE SHEET ARRANGEMENTS

The Bank is a party to various financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the balance sheets and could impact the overall liquidity and capital resources to the extent customers accept and/or use these commitments.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. A summary of the Bank’s commitments is as follows:

	March 31, 2014 (in thousands)
Commitments to extend credit	$	72,123
Letters of Credit		762
Total	$	72,885

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on the Bank’s credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances that the Bank deems necessary.

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SUMMARY OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion represents management’s discussion and analysis of the financial condition of Financial as of March 31, 2014 and December 31, 2013 and the results of operations of Financial for the three month periods ended March 31, 2014 and 2013. This discussion should be read in conjunction with the financial statements included elsewhere herein.

All financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Financial Condition Summary

March 31, 2014 as Compared to December 31, 2013

Total assets were $442,584,000 on March 31, 2014 compared with $434,511,000 at December 31, 2013, an increase of 1.86%. The increase as of March 31, 2014 reflects the increased demand deposit accounts generated from new commercial relationships.

Total deposits increased from $387,398,000 as of December 31, 2013 to $398,126,000 on March 31, 2014, an increase of 2.77%. Total deposits increased for the reasons set forth in the prior paragraph.

Total loans, excluding loans held for sale, increased to $354,417,000 on March 31, 2014 from $345,180,000 on December 31, 2013. Loans, net of unearned income and allowance, increased to $349,156,000 on March 31, 2014 from $339,994,000 on December 31, 2013, an increase of 2.69%. The following summarizes the position of the Bank’s loan portfolio as of the dates indicated by dollar amount and percentages (dollar amounts in thousands):

	March 31, 2014					December 31, 2013
	Amount		Percentage			Amount		Percentage
Commercial	$	58,951		16.64	%	$	55,803		16.17	%
Commercial Real Estate		178,352		50.32	%		172,117		49.86	%
Consumer		71,651		20.21	%		71,165		20.61	%
Residential		45,463		12.83	%		46,095		13.36	%
Total loans	$	354,417		100.00	%	$	345,180		100.00	%

Total nonperforming assets, which consist of non-accrual loans, loans past due 90 days or more and still accruing, and other real estate owned (“OREO”) increased to $5,021,000 on March 31, 2014 from $4,517,000 on December 31, 2013. This increase was due to an increase in both non-accrual (or nonperforming) loans and OREO. Non-accrual loans increased 7.08% to $3,307,000 on March 31, 2014 from $3,066,000 on December 31, 2013. As discussed in more detail below under “Results of Operations—Allowance for Loan Losses,” management has provided for the anticipated losses on these loans in the loan loss reserve. If interest on non-accrual loans had been accrued, such interest on a cumulative basis would have approximated $1,214,000 and $1,173,000 as of March 31, 2014 and December 31, 2013, respectively. Loan payments received on non-accrual loans are first applied to principal. When a loan is placed on non-accrual status there are several negative implications. First, all interest accrued but unpaid at the time of the classification is reversed and deducted from the interest income totals for the Bank. Second, accruals of interest are discontinued until it becomes certain that both principal and interest can be repaid. Third, there may be actual losses that necessitate additional provisions for credit losses charged against earnings. These loans were included in the non-performing loan totals listed above.

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OREO represents real property acquired by the Bank for debts previously contracted, including through foreclosure, deeds in lieu of foreclosure or repossession. On December 31, 2013, the Bank was carrying 17 OREO properties on its books at a value of $1,451,000. During the three months ended March 31, 2014, the Bank acquired 2 additional OREO properties and disposed of 3 OREO properties, and as of March 31, 2014 the Bank is carrying 16 OREO properties at a value of $1,714,000. The OREO properties are available for sale and are being actively marketed on the Bank’s website and through other means.

The Bank had loans in the amount of $561,000 at March 31, 2014 classified as performing Troubled Debt Restructurings (“TDRs”) as compared to $564,000 at December 31, 2013. None of these TDRs were included in non-accrual loans. These loans have had their original terms modified to facilitate payment by the borrower. The loans have been classified as TDRs primarily due to a change to interest only payments and the maturity of these modified loans is primarily less than one year.

Cash and cash equivalents increased to $17,915,000 on March 31, 2014 from $16,671,000 on December 31, 2013. Cash and cash equivalents consist of cash due from correspondents, cash in vault, and overnight investments (including federal funds sold). This increase is in large part due to the increase in Federal funds sold and due from bank balances resulting from the increase in deposits as explained above. Cash and cash equivalents can vary due to routine fluctuations in deposits, including fluctuations in transactional accounts and professional settlement accounts, both of which are subject to fluctuations.

Securities held-to-maturity decreased to $2,535,000 on March 31, 2014 from $3,537,000 on December 31, 2013. Securities available-for-sale decreased to $45,336,000 on March 31, 2014, from $46,091,000 December 31, 2013. During the three months ended March 31, 2014 the Bank received $60,000 in proceeds from maturities, paydowns, and/or calls of securities available-for-sale and $1,886,000 in proceeds from the sale of securities available-for-sale. The Bank purchased no securities held-to-maturity or available-for sale during the same period. The decrease from December 31, 2013 in securities available-for-sale was primarily due to the liquidation of securities in anticipation of funding loan growth.

Financial’s investment in Federal Home Loan Bank of Atlanta (FHLBA) stock totaled $481,000 at March 31, 2014 and $620,000 at December 31, 2013, a decrease of $139,000. FHLBA stock is generally viewed as a long-term investment and because there is no market for the stock other than other Federal Home Loan Banks or member institutions, FHLBA stock is viewed as a restricted security. Therefore, when evaluating FHLBA stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.

Liquidity and Capital

At March 31, 2014, Financial, on a consolidated basis, had liquid assets of $63,251,000 in the form of cash, interest-bearing and noninterest-bearing deposits with banks, federal funds sold and available-for-sale investments. Management believes that liquid assets were adequate at March 31, 2014. Management anticipates that additional liquidity will be provided by the growth in deposit accounts and loan repayments at the Bank. In addition, the Bank has the ability to purchase federal funds on the open market and borrow from the Federal Reserve Bank’s discount window, if necessary.

Financial has $12,000,000 categorized as “Other borrowings” which consists of the following: i) $2,000,000, on which the Bank pays a fixed rate of 3.785%, from a Federal Home Loan Bank Advance that matures in April 2015; and ii) $10,000,000 from the private placement of unregistered debt securities as previously disclosed (the “2012 Notes”). The 2012 Notes bear interest at the rate of 6% per year with interest payable quarterly in arrears. The notes mature on April 1, 2017, but are subject to prepayment in whole or in part on or after April 1, 2013 at Financial’s sole discretion on 30 days written notice to the holders.

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Management is not aware of any trends, events or uncertainties that are reasonably likely to have a material negative impact on Financial’s short-term or long-term liquidity.

At March 31, 2014, the Bank had a leverage ratio of 9.29%, a Tier 1 risk-based capital ratio of 11.96% and a total risk-based capital ratio of 13.21%. As of March 31, 2014 and December 31, 2013 the Bank’s regulatory capital levels exceeded those established for well-capitalized institutions. The following table sets forth the minimum capital requirements and the Bank’s capital position as of March 31, 2014 and December 31, 2013:

Bank Level Only Capital Ratios

Analysis of Capital (in 000’s)	March 31, 2014		December 31, 2013
Tier 1 capital
Common Stock	$	3,742	$	3,742
Surplus		19,325		19,325
Retained earnings		17,389		16,563
Total Tier 1 capital	$	40,456	$	39,630
Tier 2 capital
Allowance for loan losses	$	4,241	$	4,166
Total Tier 2 capital:	$	4,241	$	4,166
Total risk-based capital	$	44,697	$	43,796
Risk weighted assets	$	338,271	$	332,280
Average total assets	$	435,532	$	435,236

	Actual						Regulatory Benchmarks
	March 31, 2014			December 31, 2013			For Capital Adequacy Purposes			For Well Capitalized Purposes
Capital Ratios:
Tier 1 capital to average total assets		9.29	%		9.11	%		4.00	%		5.00	%
Tier 1 risk-based capital ratio		11.96	%		11.93	%		4.00	%		6.00	%
Total risk-based capital ratio		13.21	%		13.18	%		8.00	%		10.00	%

The above tables set forth the capital position and analysis for the Bank only. Because total assets on a consolidated basis are less than $500,000,000, Financial is not subject to the consolidated capital requirements imposed by the Bank Holding Company Act. The capital ratios for the Company on a consolidated basis, while remaining “well capitalized,” would be lower than the comparable capital ratios of the Bank because the proceeds from the private placement of the 6% capital notes due on April 1, 2017 do not qualify as equity capital on a consolidated basis.

In July 2013, the Federal Reserve Board approved a final rule establishing a regulatory capital framework for smaller, less complex financial institutions. The rule implements in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the final

35

rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations. The rule includes a new minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets that will apply to all supervised financial institutions. The rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations. The phase-in period for this rule is not scheduled to begin until January 2015. We are currently evaluating the impact of the implementation of the new capital standards.

Results of Operations

Comparison of the Three months Ended March 31, 2014 and 2013

Earnings Summary

Financial had net income including all operating segments of $705,000 for the three months ended March 31, 2014 compared to $788,000 for the comparable period in 2013. The basic and diluted earnings per common share for the three months ended March 31, 2014 was $0.21, compared to basic and diluted earnings per share of $0.24 for the three months ended March 31, 2013.

The decrease in net income was due in large part to a decrease in non-interest income, which primarly was due to decrease in loan originations and the Mortgage Division, and a decrease in gains on sales of securities-available-for-sale. The decrease income was partially offset by a decrease in the expense associated with the loan loss provision.

These operating results represent an annualized return on stockholders’ equity of 8.90% for the three months ended March 31, 2014, compared with 11.02% for the same period in 2013 The Company had an annualized return on average assets for the three months ended March 31, 2014 of 0.65% compared with 0.74% for the same period in 2013.

See “Non-Interest Income” below for mortgage business segment discussion.

Interest Income, Interest Expense, and Net Interest Income

Interest income increased to $4,545,000 for the three months ended March 31, 2014 from $4,537,000 for the same period in 2013, an increase of 0.18%. Interest income increased primarily because increased balances in the loan portfolio. The average rate received on earning assets decreased to 4.60% for the three months ended March 31, 2014 as compared with 4.74% for the comparable period in 2013. The rate on total average earning assets decreased largely because of a decrease in market rates of interest resulting from a competitive banking environment. Management expects that competition will continue to pressure the rates we receive on loans and therefore may negatively impact our interest income.

Interest expense decreased to $591,000 for the three months ended March 31, 2014 from $616,000 for the same period in 2013, a decrease of 4.06%. This decrease in interest expense resulted in large part from a decrease in rates paid on time deposits and demand interest bearing accounts. The Bank’s average rate paid on interest earning deposits was 0.52% during the three month period ended March 31, 2014 as compared to 0.56% for the same period in 2013. This resulted from management’s efforts to minimize the Bank’s interest expense and maximize its net interest margin.

The fundamental source of the Bank’s revenue is net interest income, which is determined by the difference between (i) interest and dividend income on interest earning assets, which consist primarily of loans, investment securities and other investments, and (ii) interest expense on interest-bearing liabilities, which consist principally of deposits and other borrowings. Net interest income for the three months

36

ended March 31, 2014 was $3,954,000 compared with $3,921,000 for the same period in 2013. The change in net interest income for the three months ended March 31, 2014 as compared with the comparable period in 2013 was immaterial because the increase in interest earning assets offset the decrease in rates received. The net interest margin was 4.01% for the three months ended March 31, 2014, as compared to 4.10% for the same period a year ago.

Financial’s net interest margin analysis and average balance sheets are shown in Schedule I below.

Non-Interest Income

Non-interest income is comprised primarily of fees and charges on transactional deposit accounts, mortgage loan origination fees, commissions on sales of investments and the Bank’s ownership interest in a title insurance agency. Non-interest income exclusive of gains on sales of securities increased to $723,000 for the three months ended March 31, 2014 from $705,000 for the three months ended March 31, 2013. This increase for the three months ended March 31, 2014 as compared to the same period last year was due primarily to an increase in service charges, fees and commissions which were partially offset by a decrease in mortgage fee income. Purchase mortgage originations comprised 75% of the mortgage loans originated in the quarter ended March 31, 2014. The percentage and amount of home purchase mortgages increased as a result of an increase in interest rates and the resulting decrease in refinancing activity. Management expects that although purchase money loans will offset a portion of the decline in refinance activity, revenue from the mortgage segment will be under pressure during the rising interest rate environment. In addition, Management believes that regulatory pressure may result in a decreased number of competitors to the Mortgage division and this could result in an increase in market share. Net gain (loss) on sales of securities decreased to ($6,000) for the three months ended March 31, 2014 from $259,000 for the same period in 2013.

The Bank, through the Mortgage division, originates both conforming and non-conforming consumer residential mortgage loans in the Region 2000 area. As part of the Bank’s overall risk management strategy, all of the loans originated and closed by the Mortgage division are presold to major national mortgage banking or financial institutions. The Mortgage division assumes no credit or interest rate risk on these mortgages.

Despite the recent increase in rates, management anticipates that residential mortgage rates will remain near the current historic lows for the remainder of 2014. Management expects that low rates and government-assisted programs such as Home Affordable Refinance Program (HARP) coupled with the Mortgage division’s reputation in Region 2000 will allow us to maintain revenue at the Mortgage division. Because many people able to refinance mortgages have already done so, management expects refinancing activity to decrease. As a result of the rising interest rates, management expects that loans for home purchases (as opposed to refinances) will constitute the majority of mortgage originations.

Our Investment division provides brokerage services through an agreement with a third-party broker-dealer. Pursuant to this arrangement, the third party broker-dealer operates a service center adjacent to one of the branches of the Bank. The center is staffed by dual employees of the Bank and the broker-dealer. Investment receives commissions on transactions generated and in some cases ongoing management fees such as mutual fund 12b-1 fees. The Investment division’s financial impact on our consolidated revenue has been immaterial. Although management cannot predict the financial impact of Investment with certainty, management anticipates the Investment division’s impact on noninterest income will remain immaterial in 2014.

In the third quarter of 2008, we began providing insurance and annuity products to Bank customers and others, through the Bank’s Insurance subsidiary. The Bank has one full-time and one part-time

37

employee that are dedicated to selling insurance products through Insurance. Insurance generates minimal revenue and its financial impact on our consolidated revenue has been immaterial. Management anticipates that Insurance’s impact on noninterest income will remain immaterial in 2014.

Non-Interest Expense

Non-interest expense for the three months ended March 31, 2014 increased to $3,609,000 from $3,531,000, or a increase of 2.21%, for the comparable period in 2013. This increase resulted from an increase in expenses related to increased data processing charges related to a larger customer based and the startup costs related to the introduction of new products. Total personnel expense was $1,885,000 for the three month period ended March 31, 2014 as compared to $1,776,000 for the same period in 2013. The increase in personnel expense can primarily be attributed to an increase in pay for some staff and the cost of additional staff in the new Charlottesville loan production office.

Allowance for Loan Losses

The allowance for loan losses represents an amount that, in our judgment, will be adequate to absorb any losses on existing loans that may become uncollectible. The provision for loan losses increases the allowance, and loans charged off, net of recoveries, reduce the allowance. The provision to the allowance for loan losses is charged to earnings to bring the total allowance to a level deemed appropriate by management and is based upon many factors, including calculations of specific impairment of certain loans, general economic conditions, actual and expected credit losses, loan performance measures, historical trends and specific conditions of the individual borrower. Based on the application of the loan loss calculation, the bank provided $55,000 to the allowance for loan loss for the three month period ended March 31, 2014. This compares to provisions of $235,000 for the comparable period in 2013, representing a decrease of 76.60%.

The decrease in the loan loss provision for the three months ended March 31, 2014 as compared to the same period in 2013 was due to the following factors:

• The Bank’s asset quality has improved as problem assets, including certain commercial loans and residential speculative housing construction loans have decreased as the collateral for those loans has been liquidated or the loans have been paid off. Management’s evaluation of these asset classes resulted in the decreased provision in the quarter ended March 31, 2014.

• In light of the current economic environment, management continues its ongoing assessment of specific impairment in the Bank’s loan portfolio. The analysis resulted in a decrease in the provision for the quarter ended March 31, 2014 as compared to the same quarter in 2013.

• General reserves related to consumer loans collectively evaluated for impairment have also increased, but this increase has been offset by a significant decline in charge-offs from $186,000 for the three month period ended March 31, 2013 to $4,000 for the comparable period in 2014.

The decrease in the percentage of the allowance for loan loss reserve to total loans as of March 31, 2014 to 1.48% as compared to 1.50% as of December 31, 2013 is a direct result of the increase in the average balances in the loan portfolio. The overall balance in the allowance for loan loss increased from $5,186,000 as of December 31, 2013 to $5,261,000 as of March 31, 2014. This increase is a result of the slight increase in non-performing loans and OREO previously discussed in “Financial Condition Summary.”

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Management believes that the current allowance for loan loss of $5,261,000 (or 1.48% of total loans) at March 31, 2014, as compared to $5,186,000 (or 1.50% of total loans) as of December 31, 2013, is adequate.

39

The following tables summarize the allowance activity for the periods indicated:

2014	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Three months Ended March 31, 2014
	Commercial		Commercial Real Estate		Consumer			Residential			Total
Allowance for Credit Losses:
Beginning Balance	$	1,015	$	2,631	$	935		$	605		$	5,186
Charge-offs		—		—		(4	)		—			(4	)
Recoveries		10		7		—			7			24
Provision		87		93		(117	)		(8	)		55
Ending Balance		1,112		2,731		814			604			5,261
Ending Balance: Individually evaluated for impairment	$	482	$	320	$	40		$	252		$	1,094
Ending Balance: Collectively evaluated for impairment		630		2,411		774			352			4,167
Totals:	$	1,112	$	2,731	$	814		$	604		$	5,261
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$	4,908	$	3,851	$	61		$	2,459		$	11,279
Ending Balance: Collectively evaluated for impairment		54,043		174,501		71,590			43,004			343,138
Totals:	$	58,951	$	178,352	$	71,651		$	45,463		$	354,417

40

2013	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Year Ended December 31, 2013
	Commercial			Commercial Real Estate			Consumer			Residential			Total
Allowance for Credit Losses:
Beginning Balance	$	987		$	2,849		$	1,057		$	642		$	5,535
Charge-offs		(19	)		(932	)		(126	)		(28	)		(1,105	)
Recoveries		37			42			137			—			216
Provision		10			672			(133	)		(9	)		540
Ending Balance		1,015			2,631			935			605			5,186
Ending Balance: Individually evaluated for impairment	$	406		$	294		$	40		$	224		$	964
Ending Balance: Collectively evaluated for impairment		609			2,337			895			381			4,222
Totals:	$	1,015		$	2,631		$	935		$	605		$	5,186
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$	3,838		$	4,933		$	61		$	2,154		$	10,986
Ending Balance: Collectively evaluated for impairment		51,965			167,184			71,104			43,941			334,194
Totals:	$	55,803		$	172,117		$	71,165		$	46,095		$	345,180

The following sets forth the reconciliation of the allowance for loan loss:

	Three months ended March 31, (in thousands)
	2014			2013
Balance, beginning of period	$	5,186		$	5,535
Provision for loan losses		55			235
Loans charged off		(4	)		(186	)
Recoveries of loans charged off		24			22
Net charge offs		20			(164	)
Balance, end of period	$	5,261		$	5,606

The Bank’s internal risk rating system is in place to grade commercial and commercial real estate loans. Category ratings are reviewed periodically by lenders and the credit review area of the Bank based on the borrower’s individual situation. Additionally, internal and external monitoring and review of credits are conducted on an annual basis.

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Below is a summary and definition of the Bank’s risk rating categories:

RATING 1	Excellent
RATING 2	Above Average
RATING 3	Satisfactory
RATING 4	Acceptable / Low Satisfactory
RATING 5	Monitor
RATING 6	Special Mention
RATING 7	Substandard
RATING 8	Doubtful
RATING 9	Loss

We segregate loans into the above categories based on the following criteria and we review the characteristics of each rating at least annually, generally during the first quarter. The characteristics of these ratings are as follows:

• “Pass.” These are loans having risk ratings of 1 through 4. Pass loans are to persons or business entities with an acceptable financial condition, appropriate collateral margins, appropriate cash flow to service the existing loan, and an appropriate leverage ratio. The borrower has paid all obligations as agreed and it is expected that this type of payment history will continue. When necessary, acceptable personal guarantors support the loan.

• “Monitor.” These are loans having a risk rating of 5. Monitor loans have currently acceptable risk but may have the potential for a specific defined weakness in the borrower’s operations and the borrower’s ability to generate positive cash flow on a sustained basis. The borrower’s recent payment history may currently or in the future be characterized by late payments. The Bank’s risk exposure is mitigated by collateral supporting the loan. The collateral is considered to be well-margined, well maintained, accessible and readily marketable.

• “Special Mention.” These are loans having a risk rating of 6. Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank’s credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. These loans do warrant more than routine monitoring due to a weakness caused by adverse events.

• “Substandard.” These are loans having a risk rating of 7. Substandard loans are considered to have specific and well-defined weaknesses that jeopardize the viability of the Bank’s credit extension. The payment history for the loan has been inconsistent and the expected or projected primary repayment source may be inadequate to service the loan. The estimated net liquidation value of the collateral pledged and/or ability of the personal guarantor(s) to pay the loan may not adequately protect the Bank. There is a distinct possibility that the Bank will sustain some loss if the deficiencies associated with the loan are not corrected in the near term. A substandard loan would not automatically meet our definition of impaired unless the loan is significantly past due and the borrower’s performance and financial condition provides evidence that it is probable that the Bank will be unable to collect all amounts due.

• “Doubtful.” These are loans having a risk rating of 8. Doubtful rated loans have all the weaknesses inherent in a loan that is classified substandard but with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high.

• “Loss.” These are loans having a risk rating of 9. Loss rated loans are not considered collectible under normal circumstances and there is no realistic expectation for any future payment on the loan. Loss rated loans are fully charged off.

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The decrease in the percentage of the allowance for loan loss reserve to total loans as of March 31, 2014 to 1.48% as compared to 1.50% as of December 31, 2013 is a direct result of the increase in the average balances in the loan portfolio. The overall balance in the allowance for loan loss increased from $5,186,000 as of December 31, 2013 to $5,261,000 as of March 31, 2014. This increase is a result of the slight increase in non-performing loans and OREO previously discussed above. The loan loss reserve is determined as discussed above.

In the three months ended March 31, 2014, the Bank’s recoveries exceeded its charge offs by $20,000. In the comparable period in 2013, charge offs exceeded recoveries by $164,000. Charged off loans, which are loans that management deems uncollectible, are written against the loan loss reserve and constitute a realized loss. While a charged off loan may subsequently be collected, such recoveries generally are realized over an extended period of time.

Income Taxes

For the three months ended March 31, 2014, Financial had an income tax expense of $302,000, as compared to $331,000 for the three months ended March 31, 2013. This represents an effective tax rate of 29.99% the for the three month period ended March 31, 2014 and 29.58% for the three month period ended March 31, 2013.

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Schedule I

Net Interest Margin Analysis

Average Balance Sheets

For the Quarter Ended March 31, 2014 and 2013

	2014								2013
	Average Balance Sheet			Interest Income/ Expense		Average Rates Earned/ Paid			Average Balance Sheet			Interest Income/ Expense		Average Rates Earned/ Paid
ASSETS
Loans, including fees (1) (2)	$	348,611		$	4,180		4.86	%	$	326,992		$	4,154		5.15	%
Loans held for sale		634			8		5.12	%		964			9		3.79	%
Federal funds sold		922			3		1.32	%		8,544			7		0.33	%
Securities (3)		51,287			373		2.94	%		53,003			398		3.04	%
Federal agency equities		1,295			6		1.88	%		1,410			5		1.44	%
CBB equity		116			—		—			116			—		—
Total earning assets		402,865			4,570		4.60	%		391,029			4,573		4.74	%
Allowance for loan losses		(5,219	)							(5,561	)
Non-earning assets		42,178								43,963
Total assets	$	439,824							$	429,431
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand interest bearing	$	96,660		$	52		0.22	%	$	91,069		$	53		0.24	%
Savings		129,925			66		0.21	%		137,317			71		0.21	%
Time deposits		98,166			301		1.24	%		93,018			323		1.41	%
Total interest bearing deposits		324,751			419		0.52	%		321,404			447		0.56	%
Other borrowed funds
Fed funds purchased		766			2		1.06	%		—			—		—
Repurchase agreements		900			1		0.45	%		—			—		—
Other borrowings		2,000			19		3.65	%		2,000			19		3.85	%
Capital Notes		10,000			150		6.00	%		10,000			150		6.00	%
Total interest-bearing liabilities		338,417			591		0.71	%		333,404			616		0.75	%
Non-interest bearing deposits		68,422								66,595
Other liabilities		843								443
Total liabilities		407,682								400,442
Stockholders’ equity		32,142								28,989
Total liabilities and Stockholders’ equity	$	439,824							$	429,431
Net interest income				$	3,979							$	3,956
Net interest margin							4.01	%							4.10	%
Interest spread							3.89	%							3.99	%

(1) Net deferred loan fees and costs are included in interest income.

(2) Nonperforming loans are included in the average balances. However, interest income and yields calculated do not reflect any accrued interest associated with non-accrual loans.

(3) The interest income and yields calculated on securities have been tax affected to reflect any tax exempt interest on municipal securities.

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(1) Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Financial’s management, including Financial’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, Financial’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that Financial files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

There have been no significant changes during the quarter ended March 31, 2014, in the Company’s internal controls over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) or in other factors that could have significantly affected those controls subsequent to the date of our most recent evaluation of internal controls over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not involved in any pending legal proceedings at this time, other than routine litigation incidental to its business.

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Item 1A. Risk Factors

Not applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

46

Item 6. Exhibits

Exhibit No.	Description of Exhibit
31.1	Certification of Robert R. Chapman III Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 12, 2014
31.2	Certification of J. Todd Scruggs Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 12, 2014
32.1	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002, dated May 12, 2014
101	The following materials from Bank of the James Financial Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets (unaudited) as of March 31, 2014 and December 31, 2013; (ii) Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2014 and 2013 (iv) Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2014 and 2013 (v) Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2014 and 2013; (vi) Notes to Unaudited Consolidated Financial Statements.*

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

47

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BANK OF THE JAMES FINANCIAL GROUP, INC.
Date: May 12, 2014	By	/S/ Robert R. Chapman III
		Robert R. Chapman III, President
		(Principal Executive Officer)
Date: May 12, 2014	By	/S/ J. Todd Scruggs
		J. Todd Scruggs, Secretary and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

48

Index of Exhibits

Exhibit No.	Description of Exhibit
31.1	Certification of Robert R. Chapman III Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 12, 2014
31.2	Certification of J. Todd Scruggs Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 12, 2014
32.1	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002, dated May 12, 2014
101	The following materials from Bank of the James Financial Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets (unaudited) as of March 31, 2014 and December 31, 2013; (ii) Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2014 and 2013 (iv) Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2014 and 2013 (v) Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2014 and 2013; (vi) Notes to Unaudited Consolidated Financial Statements.*

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

49

EX-31.1

Exhibit 31.1

Certification—Principal Executive Officer

I, Robert R. Chapman III, President of Bank of the James Financial Group, Inc. certify that:

(1) I have reviewed this Form 10-Q of Bank of the James Financial Group, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

(4) The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;

(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

(5) The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: May 12, 2014	By	/S/ Robert R. Chapman III
		Robert R. Chapman III, President
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification—Principal Financial Officer and Principal Accounting Officer

I, J. Todd Scruggs, Secretary and Treasurer of Bank of the James Financial Group, Inc., certify that:

(1) I have reviewed this Form 10-Q of Bank of the James Financial Group, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

(4) The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;

(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

(5) The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: May 12, 2014	By	/S/ J. Todd Scruggs
		J. Todd Scruggs, Secretary and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies that this Quarterly Report on Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Bank of the James Financial Group, Inc.

	BANK OF THE JAMES FINANCIAL GROUP, INC.
Date: May 12, 2014	By	/S/ Robert R. Chapman III
		Robert R. Chapman III, President
		(Principal Executive Officer)
Date: May 12, 2014	By	/S/ J. Todd Scruggs
		J. Todd Scruggs, Secretary and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

XML

Loans, Allowance For Loan Losses And OREO (Summary Of Loans, Net) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Loans, Allowance For Loan Losses And OREO [Abstract]
Commercial	$ 58,951	$ 55,803
Commercial real estate	178,352	172,117
Consumer	71,651	71,165
Residential	45,463	46,095
Total Financing Receivables	354,417	345,180
Less allowance for loan losses	5,261	5,186
Net loans	$ 349,156	$ 339,994

XML

Capital Notes (Details) (USD $)	1 Months Ended	3 Months Ended
	Apr. 30, 2012	Mar. 31, 2014	Sep. 30, 2012
Capital Notes [Abstract]
Capital notes issued			$ 10,000,000
Debt instrument, interest rate, stated percentage		6.00%
Debt instrument, maturity date		Apr. 01, 2017
Duration of written notice to holders		30 days
Payment on maturity principal	$ 7,000,000

XML

Loans, Allowance For Loan Losses And OREO (Tables)

3 Months Ended

Mar. 31, 2014

Loans, Allowance For Loan Losses And OREO [Abstract]

Summary Of Loans, Net

	As of:
	March 31,	December 31,
	2014	2013
Commercial	$ 58,951	$ 55,803
Commercial real estate	178,352	172,117
Consumer	71,651	71,165
Residential	45,463	46,095
Total loans	354,417	345,180
Less allowance for loan losses	5,261	5,186
Net loans	$ 349,156	$ 339,994

Financing Receivables On Non-Accrual Status

Financing Receivables on Non-Accrual Status
(dollars in thousands)
	As of
	March 31, 2014	December 31, 2013
Commercial	$ 1,941	$ 1,585
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	323	537
Commercial Mortgages-Non-Owner Occupied	83	353
Commercial Construction	460	375
Consumer
Consumer Unsecured	-	-
Consumer Secured	123	33
Residential:
Residential Mortgages	377	183
Residential Consumer Construction	-	-
Totals	$ 3,307	$ 3,066

Changes In OREO Balance

OREO Changes
(dollars in thousands)
	Three Months ended
	March 31, 2014
Balance at the beginning of the year (net)	$ 1,451
Transfers from loans	384
Capitalized costs	-
Writedowns	(46)
Sales proceeds	(78)
Gain on disposition	3
Balance at the end of the period (net)	$ 1,714

Impaired Loans

	Impaired Loans
	(dollars in thousands)
	For the Three Months Ended March 31, 2014
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2014	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$3,987	$ 4,456	$      -	$ 3,626	$ 35
Commercial Real Estate
Commercial Mortgages-Owner Occupied	749	807	-	644	11
Commercial Mortgage Non-Owner Occupied	598	598	-	801	8
Commercial Construction	460	1,135	-	606	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	21	21	-	21	-
Residential
Residential Mortgages	330	330	-	400	3
Residential Consumer Construction	-	-	-	-	-
With An Allowance Recorded:
Commercial	$ 921	$ 929	$ 482	$ 747	$ 11
Commercial Real Estate
Commercial Mortgages-Owner Occupied	1,826	2,027	308	2,123	25
Commercial Mortgage Non-Owner Occupied	218	218	12	219	3
Commercial Construction	-	-	-	-	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	40	40	40	40	1
Residential
Residential Mortgages	2,129	2,277	252	1,907	26
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$ 4,908	$ 5,385	$ 482	$ 4,373	$ 46
Commercial Real Estate
Commercial Mortgages-Owner Occupied	2,575	2,834	308	2,767	36
Commercial Mortgage Non-Owner Occupied	816	816	12	1,020	11
Commercial Construction	460	1,135	-	606	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	61	61	40	61	1
Residential
Residential Mortgages	2,459	2,607	252	2,307	29
Residential Consumer Construction	-	-	-	-	-
	$ 11,279	$ 12,838	$ 1,094	$ 11,134	$ 123

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Impaired Loans
	(dollars in thousands)
	For the Year Ended December 31, 2013
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2013	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$ 3,265	$ 3,699	$     -	$ 2,898	$ 101
Commercial Real Estate
Commercial Mortgages-Owner Occupied	539	593	-	1,566	38
Commercial Mortgage Non-Owner Occupied	1,003	1,003	-	3,686	47
Commercial Construction	751	1,274	-	746	8
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	21	21	-	245	1
Residential
Residential Mortgages	470	517	-	1,304	24
Residential Consumer Construction	-	-	-	-	-
With An Allowance Recorded:
Commercial	$ 573	$ 573	$ 406	$ 597	$ 38
Commercial Real Estate
Commercial Mortgages-Owner Occupied	2,420	2,617	280	3,046	108
Commercial Mortgage Non-Owner Occupied	220	221	14	530	15
Commercial Construction	-	-	-	412	-
Consumer
Consumer Unsecured	-	-	-	1	-
Consumer Secured	40	40	40	285	3
Residential
Residential Mortgages	1,684	1,820	224	1,350	118
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$ 3,838	$ 4,272	$ 406	$ 3,495	$ 139
Commercial Real Estate
Commercial Mortgages-Owner Occupied	2,959	3,210	280	4,612	146
Commercial Mortgage Non-Owner Occupied	1,223	1,224	14	4,216	62
Commercial Construction	751	1,274	-	1,158	8
Consumer
Consumer Unsecured	-	-	-	1	-
Consumer Secured	61	61	40	530	4
Residential
Residential Mortgages	2,154	2,337	224	2,654	142
Residential Consumer Construction	-	-	-	-	-
	$ 10,986	$ 12,378	$ 964	$ 16,666	$ 501

Allowance For Credit Losses And Recorded Investment In Financing Receivables

	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Three Months Ended March 31, 2014
		Commercial
2014	Commercial	Real Estate	Consumer		Residential	Total
Allowance for Credit Losses:
Beginning Balance	$ 1,015	$ 2,631	$ 935		$ 605	$ 5,186
Charge-offs	-	-	(4)		-	(4)
Recoveries	10	7	-		7	24
Provision	87	93	(117)	(1)	(8)	55
Ending Balance	1,112	2,731	814		604	5,261
Ending Balance: Individually evaluated for impairment	$ 482	$ 320	$ 40		$ 252	$ 1,094
Ending Balance: Collectively evaluated for impairment	630	2,411	774		352	4,167
Totals:	$ 1,112	$ 2,731	$ 814		$ 604	$ 5,261
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$ 4,908	$ 3,851	$ 61		$ 2,459	$ 11,279
Ending Balance: Collectively evaluated for impairment	54,043	174,501	71,590		43,004	343,138
Totals:	$ 58,951	$ 178,352	$ 71,651		$ 45,463	$ 354,417

(1) The experience within the historical charge-off period used to calculate the allowance has improved which reduced the need for a provision relating to this segment.

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Year Ended December 31, 2013
		Commercial
2013	Commercial	Real Estate	Consumer	Residential	Total
Allowance for Credit Losses:
Beginning Balance	$ 987	$ 2,849	$ 1,057	$ 642	$ 5,535
Charge-offs	(19)	(932)	(126)	(28)	(1,105)
Recoveries	37	42	137	-	216
Provision	10	672	(133)	(9)	540
Ending Balance	$ 1,015	$ 2,631	$ 935	$ 605	$ 5,186
Ending Balance: Individually evaluated for impairment	$ 406	$ 294	$ 40	$ 224	$ 964
Ending Balance: Collectively evaluated for impairment	609	2,337	895	381	4,222
Totals:	$ 1,015	$ 2,631	$ 935	$ 605	$ 5,186
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$ 3,838	$ 4,933	$ 61	$ 2,154	$ 10,986
Ending Balance: Collectively evaluated for impairment	51,965	167,184	71,104	43,941	334,194
Totals:	$ 55,803	$ 172,117	$ 71,165	$ 46,095	$ 345,180

Age Analysis Of Past Due Financing Receivables

	Age Analysis of Past Due Financing Receivables as of
	March 31, 2014
	(dollars in thousands)
			Greater			Total	Recorded Investment
	30-59 Days	60-89 Days	than	Total Past		Financing	> 90 Days &
2014	Past Due	Past Due	90 Days	Due	Current	Receivables	Accruing
Commercial	$ 623	$ 22	$ 1,941	$ 2,586	$ 56,365	$ 58,951	$     -
Commercial Real Estate:
Commercial Mortgages-   Owner Occupied	1,081	-	323	1,404	66,970	68,374	-
Commercial Mortgages-Non-Owner Occupied	404	-	83	487	99,575	100,062	-
Commercial Construction	-	-	460	460	9,456	9,916	-
Consumer:
Consumer Unsecured	5	-	-	5	3,572	3,577	-
Consumer Secured	17	17	100	134	67,940	68,074	-
Residential:
Residential Mortgages	154	366	410	930	39,554	40,484	-
Residential Consumer Construction	-	95	-	95	4,884	4,979	-
Total	$ 2,284	$ 500	$ 3,317	$ 6,101	$ 348,316	$ 354,417	$  -

	Age Analysis of Past Due Financing Receivables as of
	December 31, 2013
	(dollars in thousands)
			Greater			Total	Recorded Investment
	30-59 Days	60-89 Days	than	Total Past		Financing	> 90 Days &
2013	Past Due	Past Due	90 Days	Due	Current	Receivables	Accruing
Commercial	$ 389	$-	$ 1,586	$ 1,975	$ 53,828	$ 55,803	$     -
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	1,099	-	409	1,508	63,813	65,321	-
Commercial Mortgages-Non-Owner Occupied	96	-	85	181	94,542	94,723	-
Commercial Construction	-	-	375	375	11,698	12,073	-
Consumer:
Consumer Unsecured	5	-	-	5	4,717	4,722	-
Consumer Secured	71	-	33	104	66,339	66,443	-
Residential:
Residential Mortgages	704	-	183	887	39,909	40,796	-
Residential Consumer Construction	-	95	-	95	5,204	5,299	-
Total	$ 2,364	$ 95	$ 2,671	$ 5,130	$ 340,050	$ 345,180	$    -

Credit Quality Information

	Credit Loss Disclosures
	Credit Quality Information - by Class
	March 31, 2014
	(dollars in thousands)
2014	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$ 51,567	$ 1,549	$ 878	$ 4,957	$   -	$ 58,951
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	62,857	1,674	1,343	2,500	-	68,374
Commercial Mortgages-Non Owner Occupied	92,143	1,988	5,294	637	-	100,062
Commercial Construction	9,032	424	-	460	-	9,916
Consumer
Consumer Unsecured	3,576	-	-	1	-	3,577
Consumer Secured	66,653	703	340	378	-	68,074
Residential:
Residential Mortgages	36,402	783	587	2,712	-	40,484
Residential Consumer Construction	4,979	-	-	-	-	4,979
Totals	$ 327,209	$ 7,121	$ 8,442	$ 11,645	$-	$ 354,417

	Credit Loss Disclosures
	Credit Quality Information - by Class
	December 31, 2013
	(dollars in thousands)
2013	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$ 48,827	$ 2,109	$ 979	$ 3,888	$     -	$ 55,803
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	58,740	2,355	1,356	2,870	-	65,321
Commercial Mortgages-Non Owner Occupied	85,474	2,737	5,468	1,044	-	94,723
Commercial Construction	11,455	-	-	618	-	12,073
Consumer
Consumer Unsecured	4,721	-	-	1	-	4,722
Consumer Secured	65,056	814	283	290	-	66,443
Residential:
Residential Mortgages	36,962	786	589	2,459	-	40,796
Residential Consumer Construction	5,299	-	-	-	-	5,299
Totals	$ 316,534	$ 8,801	$ 8,675	$ 11,170	$    -	$ 345,180

XML

Loans, Allowance For Loan Losses And OREO (Impaired Loans) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Totals: Recorded Investment	$ 11,279	$ 10,986
Totals: Unpaid Principal Balance	12,838	12,378
Related Allowance	1,094	964
Totals: Average Recorded Investment	11,134	16,666
Totals: Interest Income Recognized	123	501
Commercial [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	3,987	3,265
With No Related Allowance Recorded: Unpaid Principal Balance	4,456	3,699
With No Related Allowance Recorded: Average Recorded Investment	3,626	2,898
With No Related Allowance Recorded: Interest Income Recognized	35	101
With An Allowance Recorded: Recorded Investment	921	573
With An Allowance Recorded: Unpaid Principal Balance	929	573
With An Allowance Recorded: Average Recorded Investment	747	597
With An Allowance Recorded: Interest Income Recognized	11	38
Totals: Recorded Investment	4,908	3,838
Totals: Unpaid Principal Balance	5,385	4,272
Related Allowance	482	406
Totals: Average Recorded Investment	4,373	3,495
Totals: Interest Income Recognized	46	139
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	749	539
With No Related Allowance Recorded: Unpaid Principal Balance	807	593
With No Related Allowance Recorded: Average Recorded Investment	644	1,566
With No Related Allowance Recorded: Interest Income Recognized	11	38
With An Allowance Recorded: Recorded Investment	1,826	2,420
With An Allowance Recorded: Unpaid Principal Balance	2,027	2,617
With An Allowance Recorded: Average Recorded Investment	2,123	3,046
With An Allowance Recorded: Interest Income Recognized	25	108
Totals: Recorded Investment	2,575	2,959
Totals: Unpaid Principal Balance	2,834	3,210
Related Allowance	308	280
Totals: Average Recorded Investment	2,767	4,612
Totals: Interest Income Recognized	36	146
Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	598	1,003
With No Related Allowance Recorded: Unpaid Principal Balance	598	1,003
With No Related Allowance Recorded: Average Recorded Investment	801	3,686
With No Related Allowance Recorded: Interest Income Recognized	8	47
With An Allowance Recorded: Recorded Investment	218	220
With An Allowance Recorded: Unpaid Principal Balance	218	221
With An Allowance Recorded: Average Recorded Investment	219	530
With An Allowance Recorded: Interest Income Recognized	3	15
Totals: Recorded Investment	816	1,223
Totals: Unpaid Principal Balance	816	1,224
Related Allowance	12	14
Totals: Average Recorded Investment	1,020	4,216
Totals: Interest Income Recognized	11	62
Commercial Construction [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	460	751
With No Related Allowance Recorded: Unpaid Principal Balance	1,135	1,274
With No Related Allowance Recorded: Average Recorded Investment	606	746
With No Related Allowance Recorded: Interest Income Recognized		8
With An Allowance Recorded: Average Recorded Investment		412
Totals: Recorded Investment	460	751
Totals: Unpaid Principal Balance	1,135	1,274
Totals: Average Recorded Investment	606	1,158
Totals: Interest Income Recognized		8
Consumer Unsecured [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment
With No Related Allowance Recorded: Unpaid Principal Balance
With No Related Allowance Recorded: Average Recorded Investment
With No Related Allowance Recorded: Interest Income Recognized
With An Allowance Recorded: Average Recorded Investment		1
Totals: Average Recorded Investment		1
Consumer Secured [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	21	21
With No Related Allowance Recorded: Unpaid Principal Balance	21	21
With No Related Allowance Recorded: Average Recorded Investment	21	245
With No Related Allowance Recorded: Interest Income Recognized		1
With An Allowance Recorded: Recorded Investment	40	40
With An Allowance Recorded: Unpaid Principal Balance	40	40
With An Allowance Recorded: Average Recorded Investment	40	285
With An Allowance Recorded: Interest Income Recognized	1	3
Totals: Recorded Investment	61	61
Totals: Unpaid Principal Balance	61	61
Related Allowance	40	40
Totals: Average Recorded Investment	61	530
Totals: Interest Income Recognized	1	4
Residential Mortgages [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	330	470
With No Related Allowance Recorded: Unpaid Principal Balance	330	517
With No Related Allowance Recorded: Average Recorded Investment	400	1,304
With No Related Allowance Recorded: Interest Income Recognized	3	24
With An Allowance Recorded: Recorded Investment	2,129	1,684
With An Allowance Recorded: Unpaid Principal Balance	2,277	1,820
With An Allowance Recorded: Average Recorded Investment	1,907	1,350
With An Allowance Recorded: Interest Income Recognized	26	118
Totals: Recorded Investment	2,459	2,154
Totals: Unpaid Principal Balance	2,607	2,337
Related Allowance	252	224
Totals: Average Recorded Investment	2,307	2,654
Totals: Interest Income Recognized	29	142
Residential Consumer Construction [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment
With No Related Allowance Recorded: Unpaid Principal Balance
With No Related Allowance Recorded: Average Recorded Investment
With No Related Allowance Recorded: Interest Income Recognized
With An Allowance Recorded: Recorded Investment
With An Allowance Recorded: Unpaid Principal Balance
With An Allowance Recorded: Average Recorded Investment
With An Allowance Recorded: Interest Income Recognized
Totals: Recorded Investment
Totals: Unpaid Principal Balance
Related Allowance
Totals: Average Recorded Investment
Totals: Interest Income Recognized

XML

Business Segments (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2014 segment	Mar. 31, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Net interest income	$ 3,954,000	$ 3,921,000
Provision for loan losses	55,000	235,000	540,000
Net interest income after provision for loan losses	3,899,000	3,686,000
Noninterest income	717,000	964,000
Noninterest expenses	3,609,000	3,531,000
Income before income taxes	1,007,000	1,119,000
Income tax expense	302,000	331,000
Net income	705,000	788,000
Total assets	442,584,000	428,086,000	434,511,000
Number of reportable segments	2
Community Banking [Member]
Segment Reporting Information [Line Items]
Net interest income	3,954,000	3,921,000
Provision for loan losses	55,000	235,000
Net interest income after provision for loan losses	3,899,000	3,686,000
Noninterest income	428,000	645,000
Noninterest expenses	3,350,000	3,278,000
Income before income taxes	977,000	1,053,000
Income tax expense	292,000	309,000
Net income	685,000	744,000
Total assets	440,610,000	427,233,000
Mortgage [Member]
Segment Reporting Information [Line Items]
Noninterest income	289,000	319,000
Noninterest expenses	259,000	253,000
Income before income taxes	30,000	66,000
Income tax expense	10,000	22,000
Net income	20,000	44,000
Total assets	$ 1,974,000	$ 853,000

XML

Basis Of Presentation

3 Months Ended

Mar. 31, 2014

Basis Of Presentation [Abstract]

Basis Of Presentation

Note 1 – Basis of Presentation

The unaudited consolidated financial statements have been prepared by Bank of the James Financial Group, Inc. (“Financial” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. In management’s opinion the accompanying financial statements, which unless otherwise noted are unaudited, reflect all adjustments, consisting solely of normal recurring accruals, necessary for a fair presentation of the financial information as of and for the three months ended March 31, 2014 and 2013 in conformity with accounting principles generally accepted in the United States of America. Additional information concerning the organization and business of Financial, accounting policies followed, and other related information is contained in Financial’s Annual Report on Form 10-K for the year ended December 31, 2013.  These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes for the year ended December 31, 2013 included in Financial’s Annual Report on Form 10-K. Results for the three month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

The Company’s primary market area consists of the area commonly referred to as Region 2000 which encompasses the seven jurisdictions of the Town of Altavista, Amherst County, Appomattox County, the Town of Bedford, Bedford County, Campbell County, and the City of Lynchburg.

Financial’s critical accounting policy relates to the evaluation of the allowance for loan losses which is based on management’s opinion of an amount that is adequate to absorb loss in the existing loan portfolio of Bank of the James (the “Bank”), Financial’s wholly-owned subsidiary. The allowance for loan losses is established through a provision for loan loss based on available information including the composition of the loan portfolio, historical loan losses (to the extent available due to limited history), specific impaired loans, availability and quality of collateral, age of the various portfolios, changes in local economic conditions, and loan performance and quality of the portfolio. Different assumptions used in evaluating the adequacy of the Bank’s allowance for loan losses could result in material changes in Financial’s financial condition and results of operations. The Bank’s policies with respect to the methodology for determining the allowance for loan losses involve a higher degree of complexity and require management to make subjective judgments that often require assumptions or estimates about uncertain matters. These critical policies and their assumptions are periodically reviewed with the Board of Directors.

XML

Loans, Allowance For Loan Losses And OREO (Allowance For Credit Losses And Recorded Investment In Financing Receivables) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			12 Months Ended
	Mar. 31, 2014		Mar. 31, 2013	Dec. 31, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance	$ 5,186		$ 5,535	$ 5,535
Allowance for Credit Losses: Charge-offs	(4)			(1,105)
Allowance for Credit Losses: Recoveries	24			216
Allowance for credit losses: Provision	55		235	540
Allowance for Credit Losses: Ending Balance	5,261			5,186
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	1,094			964
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	4,167			4,222
Allowance for Credit Losses: Totals	5,261			5,186
Financing Receivables: Ending Balance: Individually evaluated for impairment	11,279			10,986
Financing Receivables: Ending Balance: Collectively evaluated for impairment	343,138			334,194
Total Financing Receivables	354,417			345,180
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance	1,015		987	987
Allowance for Credit Losses: Charge-offs				(19)
Allowance for Credit Losses: Recoveries	10			37
Allowance for credit losses: Provision	87			10
Allowance for Credit Losses: Ending Balance	1,112			1,015
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	482			406
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	630			609
Allowance for Credit Losses: Totals	1,112			1,015
Financing Receivables: Ending Balance: Individually evaluated for impairment	4,908			3,838
Financing Receivables: Ending Balance: Collectively evaluated for impairment	54,043			51,965
Total Financing Receivables	58,951			55,803
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance	2,631		2,849	2,849
Allowance for Credit Losses: Charge-offs				(932)
Allowance for Credit Losses: Recoveries	7			42
Allowance for credit losses: Provision	93			672
Allowance for Credit Losses: Ending Balance	2,731			2,631
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	320			294
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	2,411			2,337
Allowance for Credit Losses: Totals	2,731			2,631
Financing Receivables: Ending Balance: Individually evaluated for impairment	3,851			4,933
Financing Receivables: Ending Balance: Collectively evaluated for impairment	174,501			167,184
Total Financing Receivables	178,352			172,117
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance	935		1,057	1,057
Allowance for Credit Losses: Charge-offs	(4)			(126)
Allowance for Credit Losses: Recoveries				137
Allowance for credit losses: Provision	(117)	[1]		(133)
Allowance for Credit Losses: Ending Balance	814			935
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	40			40
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	774			895
Allowance for Credit Losses: Totals	814			935
Financing Receivables: Ending Balance: Individually evaluated for impairment	61			61
Financing Receivables: Ending Balance: Collectively evaluated for impairment	71,590			71,104
Total Financing Receivables	71,651			71,165
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance	605		642	642
Allowance for Credit Losses: Charge-offs				(28)
Allowance for Credit Losses: Recoveries	7
Allowance for credit losses: Provision	(8)			(9)
Allowance for Credit Losses: Ending Balance	604			605
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	252			224
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	352			381
Allowance for Credit Losses: Totals	604			605
Financing Receivables: Ending Balance: Individually evaluated for impairment	2,459			2,154
Financing Receivables: Ending Balance: Collectively evaluated for impairment	43,004			43,941
Total Financing Receivables	$ 45,463			$ 46,095

[1] The experience within the historical charge-off period used to calculate the allowance has improved which reduced the need for a provision relating to this segment.

XML

Fair Value Measurements (Fair Value Assets Measured On Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	$ 45,336	$ 46,091
Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	45,336	46,091
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
US Treasuries [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	3,699	3,611
US Treasuries [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
US Treasuries [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	3,699	3,611
US Treasuries [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
US Agency Obligations [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	19,447	20,108
US Agency Obligations [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
US Agency Obligations [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	19,447	20,108
US Agency Obligations [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	4,829	5,311
Mortgage-Backed Securities [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
Mortgage-Backed Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	4,829	5,311
Mortgage-Backed Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
Municipals [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	15,392	15,138
Municipals [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
Municipals [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	15,392	15,138
Municipals [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
Other (Corporates) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	1,969	1,923
Other (Corporates) [Member] | Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value
Other (Corporates) [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	1,969	1,923
Other (Corporates) [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value

XML

Stock Based Compensation (Details) (USD $)	3 Months Ended
	Mar. 31, 2014
Stock Based Compensation [Abstract]
Options outstanding, January 1, 2014, Shares	111,371
Granted, Shares
Exercised, Shares
Forfeited, Shares
Options outstanding, March 31, 2014, Shares	111,371
Options exercisable, March 31, 2014, Shares	111,371
Options outstanding, January 1, 2014, Weighted Average Exercise Price	$ 10.73
Granted, Weighted Average Exercise Price
Exercised, Weighted Average Exercise Price
Forfeited, Weighted Average Exercise Price
Options outstanding, March 31, 2014, Weighted Average Exercise Price	$ 10.73
Options exercisable, March 31, 2014, Weighted Average Exercise Price	$ 10.73
Options outstanding, March 31, 2014, Weighted Average Remaining Contractual Life (in years)	1 year 3 months 18 days
Options exercisable, March 31, 2014, Weighted Average Remaining Contractual Life (in years)	1 year 3 months 18 days

XML

Loans, Allowance For Loan Losses And OREO (Age Analysis Of Past Due Financing Receivables) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	$ 2,284	$ 2,364
60 - 89 Days Past Due	500	95
Greater than 90 Days	3,317	2,671
Total Past Due	6,101	5,130
Current	348,316	340,050
Total Financing Receivables	354,417	345,180
Recorded Investment > 90 Days & Accruing
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	623	389
60 - 89 Days Past Due	22
Greater than 90 Days	1,941	1,586
Total Past Due	2,586	1,975
Current	56,365	53,828
Total Financing Receivables	58,951	55,803
Recorded Investment > 90 Days & Accruing
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	1,081	1,099
Greater than 90 Days	323	409
Total Past Due	1,404	1,508
Current	66,970	63,813
Total Financing Receivables	68,374	65,321
Recorded Investment > 90 Days & Accruing
Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	404	96
Greater than 90 Days	83	85
Total Past Due	487	181
Current	99,575	94,542
Total Financing Receivables	100,062	94,723
Recorded Investment > 90 Days & Accruing
Commercial Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Greater than 90 Days	460	375
Total Past Due	460	375
Current	9,456	11,698
Total Financing Receivables	9,916	12,073
Recorded Investment > 90 Days & Accruing
Consumer Unsecured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	5	5
Total Past Due	5	5
Current	3,572	4,717
Total Financing Receivables	3,577	4,722
Recorded Investment > 90 Days & Accruing
Consumer Secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	17	71
60 - 89 Days Past Due	17
Greater than 90 Days	100	33
Total Past Due	134	104
Current	67,940	66,339
Total Financing Receivables	68,074	66,443
Recorded Investment > 90 Days & Accruing
Residential Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	154	704
60 - 89 Days Past Due	366
Greater than 90 Days	410	183
Total Past Due	930	887
Current	39,554	39,909
Total Financing Receivables	40,484	40,796
Recorded Investment > 90 Days & Accruing
Residential Consumer Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
60 - 89 Days Past Due	95	95
Total Past Due	95	95
Current	4,884	5,204
Total Financing Receivables	4,979	5,299
Recorded Investment > 90 Days & Accruing

XML

Fair Value Measurements (Impaired Loans And Other Real Estate Owned Measured At Fair Value On A Nonrecurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	$ 4,397	[1]	$ 4,307	[1]
Loans held for sale	1,831		1,921
Other real estate owned	1,714		1,451
Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans		[1]		[1]
Loans held for sale
Other real estate owned
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for sale	1,831		1,921
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	4,397	[1]	4,307	[1]
Loans held for sale
Other real estate owned	$ 1,714		$ 1,451

[1] Includes loans charged down during the quarter to the net realizable value of the collateral.

XML

Fair Value Measurements (Information Regarding Quantitative Inputs Used To Value Assets Classified As Level 3 ) (Details) (Significant Unobservable Inputs (Level 3) [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value	$ 4,397
Impaired Loans [Member] | Maximum [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	10.00%
Discount for lack of marketability and age of appraisal	25.00%
Impaired Loans [Member] | Minimum [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	5.00%
Discount for lack of marketability and age of appraisal	0.00%
Impaired Loans [Member] | Weighted Average [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	6.00%
Discount for lack of marketability and age of appraisal	15.00%
OREO [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value	$ 1,714
OREO [Member] | Maximum [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	10.00%
Discount for lack of marketability and age of appraisal	25.00%
OREO [Member] | Minimum [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	5.00%
Discount for lack of marketability and age of appraisal	0.00%
OREO [Member] | Weighted Average [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	6.00%
Discount for lack of marketability and age of appraisal	15.00%

XML

Consolidated Statements Of Changes In Stockholders' Equity (USD $) In Thousands, except Share data	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings (Deficit) [Member]	Accumulated Other Comprehensive Gain [Member]	Total
Balance at Dec. 31, 2012	$ 7,175	$ 22,806	$ (936)	$ 568	$ 29,613
Balance, shares at Dec. 31, 2012	3,352,725
Net Income			788		788
Other Comprehensive Income (Loss)				(429)	(429)
Balance at Mar. 31, 2013	7,175	22,806	(148)	139	29,972
Balance, shares at Mar. 31, 2013	3,352,725
Balance at Dec. 31, 2013	7,201	22,868	2,124	(2,421)	29,772
Balance, shares at Dec. 31, 2013	3,364,874				3,364,874
Net Income			705		705
Other Comprehensive Income (Loss)				846	846
Balance at Mar. 31, 2014	$ 7,201	$ 22,868	$ 2,829	$ (1,575)	$ 31,323
Balance, shares at Mar. 31, 2014	3,364,874				3,364,874

XML

Fair Value Measurements (Fair Value Carrying And Notional Amounts) (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Federal funds sold	$ 62,000
Available-for-sale Securities	45,336,000	46,091,000
Securities held-to-maturity	2,737,000	3,740,000
Federal funds purchased		4,108,000
Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	17,853,000	16,671,000
Federal funds sold	62,000
Available-for-sale Securities
Federal funds purchased		4,108,000
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available-for-sale Securities	45,336,000	46,091,000
Securities held-to-maturity	2,737,000	3,740,000
Loans held for sale	1,831,000	1,921,000
Interest receivable	1,356,000	1,360,000
BOLI	9,301,000	9,230,000
Deposits	399,206,000	388,363,000
FHLB borrowings	2,011,000	2,018,000
Capital notes	10,057,000	10,091,000
Interest payable	67,000	65,000
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available-for-sale Securities
Loans, net	353,625,000	346,658,000
Carrying Amounts [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	17,853,000	16,671,000
Federal funds sold	62,000
Available-for-sale Securities	45,336,000	46,091,000
Securities held-to-maturity	2,535,000	3,537,000
Loans, net	349,156,000	339,994,000
Loans held for sale	1,831,000	1,921,000
Interest receivable	1,356,000	1,360,000
BOLI	9,301,000	9,230,000
Deposits	398,126,000	387,398,000
FHLB borrowings	2,000,000	2,000,000
Federal funds purchased		4,108,000
Capital notes	10,000,000	10,000,000
Interest payable	67,000	65,000
Fair Values [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	17,853,000	16,671,000
Federal funds sold	62,000
Available-for-sale Securities	45,336,000	46,091,000
Securities held-to-maturity	2,737,000	3,740,000
Loans, net	353,625,000	346,658,000
Loans held for sale	1,831,000	1,921,000
Interest receivable	1,356,000	1,360,000
BOLI	9,301,000	9,230,000
Deposits	399,206,000	388,363,000
FHLB borrowings	2,011,000	2,018,000
Federal funds purchased		4,108,000
Capital notes	10,057,000	10,091,000
Interest payable	$ 67,000	$ 65,000

XML

Loans, Allowance For Loan Losses And OREO (Financing Receivables On Non-Accrual Status) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	$ 3,307	$ 3,066
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	1,941	1,585
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	323	537
Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	83	353
Commercial Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	460	375
Consumer Unsecured [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status
Consumer Secured [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	123	33
Residential Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	377	183
Residential Consumer Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status

XML

Consolidated Balance Sheets (USD $)	Mar. 31, 2014	Dec. 31, 2013
Assets
Cash and due from banks	$ 17,853,000	$ 16,671,000
Federal funds sold	62,000
Total cash and cash equivalents	17,915,000	16,671,000
Securities held-to-maturity (fair value of $2,737 in 2014 and $3,740 in 2013	2,535,000	3,537,000
Securities available-for-sale, at fair value	45,336,000	46,091,000
Restricted stock, at cost	1,289,000	1,428,000
Loans, net of allowance for loan losses of $5,261 in 2014 and $5,186 in 2013	349,156,000	339,994,000
Loans held for sale	1,831,000	1,921,000
Premises and equipment, net	8,340,000	8,408,000
Software, net	331,000	268,000
Interest receivable	1,356,000	1,360,000
Cash value - bank owned life insurance	9,301,000	9,230,000
Other real estate owned, net of valuation allowance	1,714,000	1,451,000
Income taxes receivable	145,000	448,000
Deferred tax asset	2,193,000	2,628,000
Other assets	1,142,000	1,076,000
Total assets	442,584,000	434,511,000
Deposits
Noninterest bearing demand	71,665,000	63,256,000
NOW, money market and savings	228,305,000	226,709,000
Time	98,156,000	97,433,000
Total deposits	398,126,000	387,398,000
Federal funds purchased		4,108,000
FHLB borrowings	2,000,000	2,000,000
Capital notes	10,000,000	10,000,000
Interest payable	67,000	65,000
Other liabilities	1,068,000	1,168,000
Total liabilities	411,261,000	404,739,000
Stockholders' equity
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 3,364,874 as of March 31, 2014 and December 31, 2013	7,201,000	7,201,000
Preferred stock; authorized 1,000,000 shares; 0 issued and outstanding as of March 31, 2014 and December 31, 2013
Additional paid-in-capital	22,868,000	22,868,000
Accumulated other comprehensive income (loss)	(1,575,000)	(2,421,000)
Retained earnings	2,829,000	2,124,000
Total stockholders' equity	31,323,000	29,772,000
Total liabilities and stockholders' equity	$ 442,584,000	$ 434,511,000

XML

Loans, Allowance For Loan Losses And OREO (Credit Quality Information) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	$ 354,417	$ 345,180
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	327,209	316,534
Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	7,121	8,801
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	8,442	8,675
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	11,645	11,170
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	58,951	55,803
Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	51,567	48,827
Commercial [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1,549	2,109
Commercial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	878	979
Commercial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	4,957	3,888
Commercial [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	68,374	65,321
Commercial Mortgages-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	62,857	58,740
Commercial Mortgages-Owner Occupied [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1,674	2,355
Commercial Mortgages-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1,343	1,356
Commercial Mortgages-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	2,500	2,870
Commercial Mortgages-Owner Occupied [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	100,062	94,723
Commercial Mortgages-Non-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	92,143	85,474
Commercial Mortgages-Non-Owner Occupied [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1,988	2,737
Commercial Mortgages-Non-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	5,294	5,468
Commercial Mortgages-Non-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	637	1,044
Commercial Mortgages-Non-Owner Occupied [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Commercial Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	9,916	12,073
Commercial Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	9,032	11,455
Commercial Construction [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	424
Commercial Construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	460	618
Commercial Construction [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Consumer Unsecured [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	3,577	4,722
Consumer Unsecured [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	3,576	4,721
Consumer Unsecured [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1	1
Consumer Unsecured [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Consumer Secured [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	68,074	66,443
Consumer Secured [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	66,653	65,056
Consumer Secured [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	703	814
Consumer Secured [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	340	283
Consumer Secured [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	378	290
Consumer Secured [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Residential Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	40,484	40,796
Residential Mortgages [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	36,402	36,962
Residential Mortgages [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	783	786
Residential Mortgages [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	587	589
Residential Mortgages [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	2,712	2,459
Residential Mortgages [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Residential Consumer Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	4,979	5,299
Residential Consumer Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	4,979	5,299
Residential Consumer Construction [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables

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Consolidated Statements Of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Consolidated Statements Of Comprehensive Income [Abstract]
Unrealized (losses) gains on securities available-for-sale, deferred tax	$ 431		$ (132)
Reclassification adjustment for gains (loss) included in net income, tax	$ (2)	[1]	$ 88	[1]

[1] The tax effect on these reclassifications is reflected in “income tax expense” on the consolidated statements of income.

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Investments (Summary Of Securities Held-To-Maturity And Securities Available-For-Sale) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Held-to-Maturity, Fair Value	$ 2,737	$ 3,740
Available-for-Sale, Amortized Costs	47,723	49,757
Available-for-Sale, Gross Unrealized Gains	132	46
Available-for-Sale, Gross Unrealized (Losses)	(2,519)	(3,712)
Available-for-sale, Fair Value	45,336	46,091
US Treasuries [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	3,909	3,907
Available-for-Sale, Gross Unrealized (Losses)	(210)	(296)
Available-for-sale, Fair Value	3,699	3,611
US Agency Obligations [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	21,093	22,544
Available-for-Sale, Gross Unrealized Gains	7
Available-for-Sale, Gross Unrealized (Losses)	(1,653)	(2,436)
Available-for-sale, Fair Value	19,447	20,108
Mortgage-Backed Securities [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	4,928	5,450
Available-for-Sale, Gross Unrealized Gains	44	11
Available-for-Sale, Gross Unrealized (Losses)	(143)	(150)
Available-for-sale, Fair Value	4,829	5,311
Municipals [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	15,782	15,845
Available-for-Sale, Gross Unrealized Gains	81	35
Available-for-Sale, Gross Unrealized (Losses)	(471)	(742)
Available-for-sale, Fair Value	15,392	15,138
Other (Corporates)[Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	2,011	2,011
Available-for-Sale, Gross Unrealized (Losses)	(42)	(88)
Available-for-sale, Fair Value	1,969	1,923
US Agency Obligations [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Held-to-Maturity, Amortized Costs	2,535	3,537
Held-to-Maturity, Gross Unrealized Gains	202	203
Held-to-Maturity, Fair Value	$ 2,737	$ 3,740

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Measurements [Abstract]

Fair Value Assets Measured On Recurring Basis

		Carrying Value at March 31, 2014
Description	Balance as of March 31, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US Treasuries	$ 3,699	$       -	$ 3,699	$       -
US agency obligations	19,447	-	19,447	-
Mortgage-backed securities	4,829	-	4,829	-
Municipals	15,392	-	15,392	-
Other (corporates)	1,969	-	1,969	-
Total available-for-sale securities	$ 45,336	$       -	$ 45,336	$       -
		Carrying Value at December 31, 2013
Description	Balance as of December 31, 2013	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US Treasuries	$ 3,611	$       -	$ 3,611	$       -
US agency obligations	20,108	-	20,108	-
Mortgage-backed securities	5,311	-	5,311	-
Municipals	15,138	-	15,138	-
Other (corporates)	1,923	-	1,923	-
Total available-for-sale securities	$ 46,091	$       -	$ 46,091	$       -

Impaired Loans And Other Real Estate Owned Measured At Fair Value On A Nonrecurring Basis

		Carrying Value at March 31, 2014
Description	Balance as of March 31, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$ 4,397	$     -	$          -	$ 4,397
Loans held for sale	1,831	-	1,831	-
Other real estate owned	1,714	-	-	1,714

*  Includes loans charged down during the quarter to the net realizable value of the collateral.

		Carrying Value at December 31, 2013
Description	Balance as of December 31, 2013	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$ 4,307	$      -	$       -	$ 4,307
Loans held for sale	1,921	-	1,921	-
Other real estate owned	1,451	-	-	1,451

*  Includes loans charged down during the quarter to the net realizable value of the collateral.

Information Regarding Quantitative Inputs Used To Value Assets Classified As Level 3

	Quantitative information about Level 3 Fair Value Measurements for March 31, 2014 (dollars in thousands)
	Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$ 4,397	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)
OREO	1,714	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)

Fair Value Carrying And Notional Amounts

		Fair Value Measurements at March 31, 2014 using
			Quoted Prices	Significant
			in Active	Other	Significant
			Markets for	Observable	Unobservable
	Carrying		Identical Assets	Inputs	Inputs
Assets	Amounts		(Level 1)	(Level 2)	(Level 3)	Balance
Cash and due from banks	$ 17,853		$ 17,853	$      -	$      -	$ 17,853
Federal funds sold	62		62	-	-	62
Securities
Available-for-sale	45,336		-	45,336	-	45,336
Held-to-maturity	2,535		-	2,737	-	2,737
Loans, net	349,156		-	-	353,625	353,625
Loans held for sale	1,831		-	1,831	-	1,831
Interest receivable	1,356		-	1,356	-	1,356
BOLI	9,301		-	9,301	-	9,301
Liabilities
Deposits	$ 398,126		$      -	$ 399,206	$      -	$ 399,206
FHLB borrowings	2,000		-	2,011	-	2,011
Capital notes	10,000		-	10,057	-	10,057
Interest payable	67		-	67	-	67

		Fair Value Measurements at December 31, 2013 using
		Quoted Prices	Significant
		in Active	Other	Significant
		Markets for	Observable	Unobservable
	Carrying	Identical Assets	Inputs	Inputs
Assets	Amounts	(Level 1)	(Level 2)	(Level 3)	Balance
Cash and due from banks	$ 16,671	$ 16,671	$      -	$      -	$ 16,671
Securities
Available-for-sale	46,091	-	46,091	-	46,091
Held-to-maturity	3,537	-	3,740	-	3,740
Loans, net	339,994	-	-	346,658	346,658
Loans held for sale	1,921	-	1,921	-	1,921
Interest receivable	1,360	-	1,360	-	1,360
BOLI	9,230	-	9,230	-	9,230
Liabilities
Deposits	$ 387,398	$      -	$ 388,363	$      -	$ 388,363
FHLB borrowings	2,000	-	2,018	-	2,018
Federal funds purchased	4,108	4,108	-	-	4,108
Capital notes	10,000	-	10,091	-	10,091
Interest payable	65	-	65	-	65

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Investments (Gross Unrealized Losses And Fair Value Of The Bank's Investments) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	$ 21,293	$ 35,614
Unrealized Losses, Less than 12 months	1,318	2,581
Fair Value, More than 12 months	14,729	6,500
Unrealized Losses, More than 12 months	1,201	1,131
Fair Value, Total	36,022	42,114
Unrealized Losses, Total	2,519	3,712
US Treasuries [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	3,699	3,611
Unrealized Losses, Less than 12 months	210	296
Fair Value, More than 12 months
Unrealized Losses, More than 12 months
Fair Value, Total	3,699	3,611
Unrealized Losses, Total	210	296
US Agency Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	10,141	14,087
Unrealized Losses, Less than 12 months	752	1,473
Fair Value, More than 12 months	7,081	5,021
Unrealized Losses, More than 12 months	901	963
Fair Value, Total	17,222	19,108
Unrealized Losses, Total	1,653	2,436
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	1,903	4,830
Unrealized Losses, Less than 12 months	143	150
Fair Value, More than 12 months
Unrealized Losses, More than 12 months
Fair Value, Total	1,903	4,830
Unrealized Losses, Total	143	150
Municipals [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	5,059	11,163
Unrealized Losses, Less than 12 months	211	574
Fair Value, More than 12 months	6,170	1,479
Unrealized Losses, More than 12 months	260	168
Fair Value, Total	11,229	12,642
Unrealized Losses, Total	471	742
Other (Corporates) [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	491	1,923
Unrealized Losses, Less than 12 months	2	88
Fair Value, More than 12 months	1,478
Unrealized Losses, More than 12 months	40
Fair Value, Total	1,969	1,923
Unrealized Losses, Total	$ 42	$ 88

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Business Segments (Tables)

3 Months Ended

Mar. 31, 2014

Business Segments [Abstract]

Schedule Of Segment Reporting Information, By Segment

Business Segments
	Community
	Banking	Mortgage	Total
Three months ended March 31, 2014
Net interest income	$        3,954	$            -	$        3,954
Provision for loan losses	55	-	55
Net interest income after provision for loan losses	3,899	-	3,899
Noninterest income	428	289	717
Noninterest expenses	3,350	259	3,609
Income before income taxes	977	30	1,007
Income tax expense	292	10	302
Net income	$           685	$          20	$           705
Total assets	$    440,610	$     1,974	$    442,584
Three months ended March 31, 2013
Net interest income	$        3,921	$            -	$        3,921
Provision for loan losses	235	-	235
Net interest income after provision for loan losses	3,686	-	3,686
Noninterest income	645	319	964
Noninterest expenses	3,278	253	3,531
Income before income taxes	1,053	66	1,119
Income tax expense	309	22	331
Net income	$           744	$          44	$           788
Total assets	$    427,233	$        853	$    428,086

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Cash flows from operating activities
Net Income	$ 705	$ 788
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	193	179
Net amortization and accretion of premiums and discounts on securities	84	96
(Gain) loss on sale of available for sale securities	6	(259)
Provision for loan losses	55	235	540
(Gain) loss on sale of other real estate owned	(3)	21
Impairment of other real estate owned	46	25
Decrease in loans held-for-sale	90	100
(Increase) in cash value of life insurance	(71)	(75)
Decrease in interest receivable	4	182
(Increase) decrease in other assets	(64)	104
Decrease in income taxes receivable	303	333
(Decrease) in interest payable	2	3
(Decrease) increase in other liabilities	(100)	164
Net cash provided by operating activities	1,250	1,896
Cash flows from investing activities
Proceeds from maturities and calls of securities held to maturity	1,000
Purchases of securities available for sale		(7,972)
Proceeds from maturities, calls and paydowns of securities available-for-sale	60	2,041
Proceeds from sale of securities available for sale	1,886	10,043
Redemption of Federal Home Loan Bank stock	139	110
Proceeds from sale of other real estate owned		159
Origination of loans, net of principal collected	(9,523)	(6,234)
Purchases of premises and equipment	(188)	(28)
Net cash (used in) provided by investing activities	(6,626)	(1,881)
Cash flows from financing activities
Net increase (decrease) in deposits	10,728	(13,821)
Net (decrease) in federal funds purchased	(4,108)
Net cash provided by (used in) financing activities	6,620	(13,821)
Increase (decrease) in cash and cash equivalents	1,244	(13,806)
Cash and cash equivalents at beginning of period	16,671	40,998	40,998
Cash and cash equivalents at end of period	17,915	27,192	16,671
Non cash transactions
Transfer of loans to foreclosed assets	384	411
Portion of foreclosed assets financed	78
Fair value adjustment for securities	1,279	(649)
Cash transactions
Cash paid for interest	589	613
Cash paid for taxes

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Consolidated Balance Sheets [Abstract]
Securities held-to-maturity	$ 2,737	$ 3,740
Loans, allowance for loan losses	$ 5,261	$ 5,186
Common stock, par value	$ 2.14	$ 2.14
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	3,364,874	3,364,874
Common stock, shares outstanding	3,364,874	3,364,874
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

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Loans, Allowance For Loan Losses And OREO

3 Months Ended

Mar. 31, 2014

Loans, Allowance For Loan Losses And OREO [Abstract]

Loans, Allowance For Loan Losses And OREO

Note 9 – Loans, allowance for loan losses and OREO

Management has an established methodology used to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio.  For purposes of determining the allowance for loan losses, the Bank has segmented certain loans in the portfolio by product type.  Within these segments, the Bank has sub-segmented its portfolio into classes, based on the associated risks.  The classifications set forth below do not correspond directly to the classifications set forth in the call report (Form FFIEC 041).  Management has determined that the classifications set forth below are more appropriate for use in identifying and managing risk in the loan portfolio.

Loan Segments:	Loan Classes:
Commercial	Commercial and industrial loans
Commercial real estate	Commercial mortgages – owner occupied
	Commercial mortgages – non-owner occupied
	Commercial construction
Consumer	Consumer unsecured
	Consumer secured
Residential	Residential mortgages
	Residential consumer construction

A summary of loans, net is as follows (dollars in thousands):

	As of:
	March 31,	December 31,
	2014	2013
Commercial	$ 58,951	$ 55,803
Commercial real estate	178,352	172,117
Consumer	71,651	71,165
Residential	45,463	46,095
Total loans	354,417	345,180
Less allowance for loan losses	5,261	5,186
Net loans	$ 349,156	$ 339,994

The Bank’s internal risk rating system is in place to grade commercial and commercial real estate loans.  Category ratings are reviewed periodically by lenders and the credit review area of the Bank based on the borrower’s individual situation.  Additionally, internal and external monitoring and review of credits are conducted on an annual basis. 

Note 9 – Loans, allowance for loan losses and OREO (continued)

Below is a summary and definition of the Bank’s risk rating categories:

RATING 1	Excellent
RATING 2	Above Average
RATING 3	Satisfactory
RATING 4	Acceptable / Low Satisfactory
RATING 5	Monitor
RATING 6	Special Mention
RATING 7	Substandard
RATING 8	Doubtful
RATING 9	Loss

We segregate loans into the above categories based on the following criteria and we review the characteristics of each rating at least annually, generally during the first quarter.  The characteristics of these ratings are as follows:

· “Pass.”  These are loans having risk ratings of 1 through 4.  Pass loans are to persons or business entities with an acceptable financial condition, appropriate collateral margins, appropriate cash flow to service the existing loan, and an appropriate leverage ratio.  The borrower has paid all obligations as agreed and it is expected that this type of payment history will continue.  When necessary, acceptable personal guarantors support the loan.

· “Monitor.”  These are loans having a risk rating of 5.  Monitor loans have currently acceptable risk but may have the potential for a specific defined weakness in the borrower’s operations and the borrower’s ability to generate positive cash flow on a sustained basis. The borrower’s recent payment history may currently or in the future be characterized by late payments. The Bank’s risk exposure is mitigated by collateral supporting the loan. The collateral is considered to be well-margined, well maintained, accessible and readily marketable.

· “Special Mention.”  These are loans having a risk rating of 6.  Special Mention loans have weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank’s credit position at some future date.  Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.  These loans do warrant more than routine monitoring due to a weakness caused by adverse events.

· “Substandard.”  These are loans having a risk rating of 7.  Substandard loans are considered to have specific and well-defined weaknesses that jeopardize the viability of the Bank’s credit extension. The payment history for the loan has been inconsistent and the expected or projected primary repayment source may be inadequate to service the loan. The estimated net liquidation value of the collateral pledged and/or ability of the personal guarantor(s) to pay the loan may not adequately protect the Bank. There is a distinct possibility that the Bank will sustain some loss if the deficiencies associated with the loan are not corrected in the near term. A substandard loan would not automatically meet our definition of impaired unless the loan is significantly past due and the borrower’s performance and financial condition provides evidence that it is probable that the Bank will be unable to collect all amounts due.

· “Doubtful.”  These are loans having a risk rating of 8.  Doubtful rated loans have all the weaknesses inherent in a loan that is classified substandard but with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high.

Note 9 – Loans, allowance for loan losses and OREO (continued)

· “Loss.” These are loans having a risk rating of 9. Loss rated loans are not considered collectible under normal circumstances and there is no realistic expectation for any future payment on the loan. Loss rated loans are fully charged off.

Financing Receivables on Non-Accrual Status
(dollars in thousands)
	As of
	March 31, 2014	December 31, 2013
Commercial	$ 1,941	$ 1,585
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	323	537
Commercial Mortgages-Non-Owner Occupied	83	353
Commercial Construction	460	375
Consumer
Consumer Unsecured	-	-
Consumer Secured	123	33
Residential:
Residential Mortgages	377	183
Residential Consumer Construction	-	-
Totals	$ 3,307	$ 3,066

We also classify other real estate owned (OREO) as a nonperforming asset.  OREO represents real property owned by the Bank either through purchase at foreclosure or received from the borrower through a deed in lieu of foreclosure. OREO increased to $1,714,000 on March 31, 2014 from $1,451,000 on December 31, 2013.   The following table represents the changes in OREO balance during the three months ended March 31, 2014.

OREO Changes
(dollars in thousands)
	Three Months ended
	March 31, 2014
Balance at the beginning of the year (net)	$ 1,451
Transfers from loans	384
Capitalized costs	-
Writedowns	(46)
Sales proceeds	(78)
Gain on disposition	3
Balance at the end of the period (net)	$ 1,714

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Impaired Loans
	(dollars in thousands)
	For the Three Months Ended March 31, 2014
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2014	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$3,987	$ 4,456	$      -	$ 3,626	$ 35
Commercial Real Estate
Commercial Mortgages-Owner Occupied	749	807	-	644	11
Commercial Mortgage Non-Owner Occupied	598	598	-	801	8
Commercial Construction	460	1,135	-	606	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	21	21	-	21	-
Residential
Residential Mortgages	330	330	-	400	3
Residential Consumer Construction	-	-	-	-	-
With An Allowance Recorded:
Commercial	$ 921	$ 929	$ 482	$ 747	$ 11
Commercial Real Estate
Commercial Mortgages-Owner Occupied	1,826	2,027	308	2,123	25
Commercial Mortgage Non-Owner Occupied	218	218	12	219	3
Commercial Construction	-	-	-	-	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	40	40	40	40	1
Residential
Residential Mortgages	2,129	2,277	252	1,907	26
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$ 4,908	$ 5,385	$ 482	$ 4,373	$ 46
Commercial Real Estate
Commercial Mortgages-Owner Occupied	2,575	2,834	308	2,767	36
Commercial Mortgage Non-Owner Occupied	816	816	12	1,020	11
Commercial Construction	460	1,135	-	606	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	61	61	40	61	1
Residential
Residential Mortgages	2,459	2,607	252	2,307	29
Residential Consumer Construction	-	-	-	-	-
	$ 11,279	$ 12,838	$ 1,094	$ 11,134	$ 123

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Impaired Loans
	(dollars in thousands)
	For the Year Ended December 31, 2013
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2013	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$ 3,265	$ 3,699	$     -	$ 2,898	$ 101
Commercial Real Estate
Commercial Mortgages-Owner Occupied	539	593	-	1,566	38
Commercial Mortgage Non-Owner Occupied	1,003	1,003	-	3,686	47
Commercial Construction	751	1,274	-	746	8
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	21	21	-	245	1
Residential
Residential Mortgages	470	517	-	1,304	24
Residential Consumer Construction	-	-	-	-	-
With An Allowance Recorded:
Commercial	$ 573	$ 573	$ 406	$ 597	$ 38
Commercial Real Estate
Commercial Mortgages-Owner Occupied	2,420	2,617	280	3,046	108
Commercial Mortgage Non-Owner Occupied	220	221	14	530	15
Commercial Construction	-	-	-	412	-
Consumer
Consumer Unsecured	-	-	-	1	-
Consumer Secured	40	40	40	285	3
Residential
Residential Mortgages	1,684	1,820	224	1,350	118
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$ 3,838	$ 4,272	$ 406	$ 3,495	$ 139
Commercial Real Estate
Commercial Mortgages-Owner Occupied	2,959	3,210	280	4,612	146
Commercial Mortgage Non-Owner Occupied	1,223	1,224	14	4,216	62
Commercial Construction	751	1,274	-	1,158	8
Consumer
Consumer Unsecured	-	-	-	1	-
Consumer Secured	61	61	40	530	4
Residential
Residential Mortgages	2,154	2,337	224	2,654	142
Residential Consumer Construction	-	-	-	-	-
	$ 10,986	$ 12,378	$ 964	$ 16,666	$ 501

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Three Months Ended March 31, 2014
		Commercial
2014	Commercial	Real Estate	Consumer		Residential	Total
Allowance for Credit Losses:
Beginning Balance	$ 1,015	$ 2,631	$ 935		$ 605	$ 5,186
Charge-offs	-	-	(4)		-	(4)
Recoveries	10	7	-		7	24
Provision	87	93	(117)	(1)	(8)	55
Ending Balance	1,112	2,731	814		604	5,261
Ending Balance: Individually evaluated for impairment	$ 482	$ 320	$ 40		$ 252	$ 1,094
Ending Balance: Collectively evaluated for impairment	630	2,411	774		352	4,167
Totals:	$ 1,112	$ 2,731	$ 814		$ 604	$ 5,261
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$ 4,908	$ 3,851	$ 61		$ 2,459	$ 11,279
Ending Balance: Collectively evaluated for impairment	54,043	174,501	71,590		43,004	343,138
Totals:	$ 58,951	$ 178,352	$ 71,651		$ 45,463	$ 354,417

(1) The experience within the historical charge-off period used to calculate the allowance has improved which reduced the need for a provision relating to this segment.

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Year Ended December 31, 2013
		Commercial
2013	Commercial	Real Estate	Consumer	Residential	Total
Allowance for Credit Losses:
Beginning Balance	$ 987	$ 2,849	$ 1,057	$ 642	$ 5,535
Charge-offs	(19)	(932)	(126)	(28)	(1,105)
Recoveries	37	42	137	-	216
Provision	10	672	(133)	(9)	540
Ending Balance	$ 1,015	$ 2,631	$ 935	$ 605	$ 5,186
Ending Balance: Individually evaluated for impairment	$ 406	$ 294	$ 40	$ 224	$ 964
Ending Balance: Collectively evaluated for impairment	609	2,337	895	381	4,222
Totals:	$ 1,015	$ 2,631	$ 935	$ 605	$ 5,186
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$ 3,838	$ 4,933	$ 61	$ 2,154	$ 10,986
Ending Balance: Collectively evaluated for impairment	51,965	167,184	71,104	43,941	334,194
Totals:	$ 55,803	$ 172,117	$ 71,165	$ 46,095	$ 345,180

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Age Analysis of Past Due Financing Receivables as of
	March 31, 2014
	(dollars in thousands)
			Greater			Total	Recorded Investment
	30-59 Days	60-89 Days	than	Total Past		Financing	> 90 Days &
2014	Past Due	Past Due	90 Days	Due	Current	Receivables	Accruing
Commercial	$ 623	$ 22	$ 1,941	$ 2,586	$ 56,365	$ 58,951	$     -
Commercial Real Estate:
Commercial Mortgages-   Owner Occupied	1,081	-	323	1,404	66,970	68,374	-
Commercial Mortgages-Non-Owner Occupied	404	-	83	487	99,575	100,062	-
Commercial Construction	-	-	460	460	9,456	9,916	-
Consumer:
Consumer Unsecured	5	-	-	5	3,572	3,577	-
Consumer Secured	17	17	100	134	67,940	68,074	-
Residential:
Residential Mortgages	154	366	410	930	39,554	40,484	-
Residential Consumer Construction	-	95	-	95	4,884	4,979	-
Total	$ 2,284	$ 500	$ 3,317	$ 6,101	$ 348,316	$ 354,417	$  -

	Age Analysis of Past Due Financing Receivables as of
	December 31, 2013
	(dollars in thousands)
			Greater			Total	Recorded Investment
	30-59 Days	60-89 Days	than	Total Past		Financing	> 90 Days &
2013	Past Due	Past Due	90 Days	Due	Current	Receivables	Accruing
Commercial	$ 389	$-	$ 1,586	$ 1,975	$ 53,828	$ 55,803	$     -
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	1,099	-	409	1,508	63,813	65,321	-
Commercial Mortgages-Non-Owner Occupied	96	-	85	181	94,542	94,723	-
Commercial Construction	-	-	375	375	11,698	12,073	-
Consumer:
Consumer Unsecured	5	-	-	5	4,717	4,722	-
Consumer Secured	71	-	33	104	66,339	66,443	-
Residential:
Residential Mortgages	704	-	183	887	39,909	40,796	-
Residential Consumer Construction	-	95	-	95	5,204	5,299	-
Total	$ 2,364	$ 95	$ 2,671	$ 5,130	$ 340,050	$ 345,180	$    -

Note 9 – Loans, allowance for loan losses and OREO (continued)

	Credit Loss Disclosures
	Credit Quality Information - by Class
	March 31, 2014
	(dollars in thousands)
2014	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$ 51,567	$ 1,549	$ 878	$ 4,957	$   -	$ 58,951
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	62,857	1,674	1,343	2,500	-	68,374
Commercial Mortgages-Non Owner Occupied	92,143	1,988	5,294	637	-	100,062
Commercial Construction	9,032	424	-	460	-	9,916
Consumer
Consumer Unsecured	3,576	-	-	1	-	3,577
Consumer Secured	66,653	703	340	378	-	68,074
Residential:
Residential Mortgages	36,402	783	587	2,712	-	40,484
Residential Consumer Construction	4,979	-	-	-	-	4,979
Totals	$ 327,209	$ 7,121	$ 8,442	$ 11,645	$-	$ 354,417

	Credit Loss Disclosures
	Credit Quality Information - by Class
	December 31, 2013
	(dollars in thousands)
2013	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$ 48,827	$ 2,109	$ 979	$ 3,888	$     -	$ 55,803
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	58,740	2,355	1,356	2,870	-	65,321
Commercial Mortgages-Non Owner Occupied	85,474	2,737	5,468	1,044	-	94,723
Commercial Construction	11,455	-	-	618	-	12,073
Consumer
Consumer Unsecured	4,721	-	-	1	-	4,722
Consumer Secured	65,056	814	283	290	-	66,443
Residential:
Residential Mortgages	36,962	786	589	2,459	-	40,796
Residential Consumer Construction	5,299	-	-	-	-	5,299
Totals	$ 316,534	$ 8,801	$ 8,675	$ 11,170	$    -	$ 345,180

Note 9 – Loans, allowance for loan losses and OREO (continued)

There were no loan modifications that would have been classified as Troubled Debt Restructurings (TDR) during the three months ended March 31, 2014 and 2013.

There were no loan modifications classified as TDRs within the last twelve months that defaulted during the three months ended March 31, 2014 and 2013.

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Document And Entity Information	3 Months Ended
	Mar. 31, 2014	May 12, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2014
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2014
Entity Registrant Name	BANK OF THE JAMES FINANCIAL GROUP INC
Entity Central Index Key	0001275101
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		3,364,874

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Subsequent Events

3 Months Ended

Mar. 31, 2014

Subsequent Events [Abstract]

Subsequent Events

Note 10 – Subsequent Events

In preparing these financial statements, Financial has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

XML

Consolidated Statements Of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Interest Income
Loans	$ 4,188	$ 4,163
Securities
US Government and agency obligations	180	190
Mortgage backed securities	33	4
Municipals	120	152
Dividends	6	5
Other (Corporates)	15	16
Federal Funds sold	3	7
Total interest income	4,545	4,537
Deposits
NOW, money market savings	118	124
Time deposits	301	323
Federal Funds purchased	2
FHLB borrowings	19	19
Reverse repurchase agreements	1
Capital notes	150	150
Total interest expense	591	616
Net interest income	3,954	3,921
Provision for loan losses	55	235
Net interest income after provision for loan losses	3,899	3,686
Other Operating Income
Mortgage fee income	289	319
Service charges, fees and commissions	350	303
Increase in cash value of life insurance	71	75
Other	13	8
Gain (loss) on sale of available-for-sale securities, net	(6)	259
Total other operating income	717	964
Other operating expenses
Salaries and employee benefits	1,885	1,776
Occupancy	313	305
Equipment	287	261
Supplies	105	90
Professional, data processing, and other outside expense	613	561
Marketing	97	86
Credit expense	37	55
Other real estate expenses	57	79
FDIC insurance expense	30	144
Other	185	174
Total other operating expenses	3,609	3,531
Income before income taxes	1,007	1,119
Income tax expense	302	331
Net Income	$ 705	$ 788
Weighted average shares outstanding - basic	3,364,874	3,352,725
Weighted average shares outstanding- diluted	3,364,874	3,352,855
Income per common share - basic	$ 0.21	$ 0.24
Income per common share - diluted	$ 0.21	$ 0.24

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Stock Based Compensation

3 Months Ended

Mar. 31, 2014

Stock Based Compensation [Abstract]

Stock Based Compensation

Note 4 – Stock Based Compensation

Accounting standards require companies to recognize the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock, based on the fair value of those awards at the date of grant.

Note 4 – Stock Based Compensation (continued)

Stock option plan activity for the three months ended March 31, 2014 is summarized below:

			Weighted
		Weighted	Average
		Average	Remaining	Average
		Exercise	Contractual	Intrinsic
	Shares	Price	Life (in years)	Value
Options outstanding, January 1, 2014	111,371	$      10.73
Granted	-	-
Exercised	-	-
Forfeited	-	-
Options outstanding, March 31, 2014	111,371	10.73	1.3	$              -
Options exercisable, March 31, 2014	111,371	$      10.73	1.3	$              -

Intrinsic value is calculated by subtracting the exercise price of option shares from the market price of underlying shares as of March 31, 2014 and multiplying that amount by the number of options outstanding.  No intrinsic value exists where the exercise price is greater than the market price on a given date.

All compensation expense related to the foregoing stock option plan has been recognized.  The Company’s ability to grant additional options shares under the 1999 Plan has expired.

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Earnings Per Share

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Note 3 – Earnings Per Share

Currently, only the option shares granted to certain officers and other employees of Financial pursuant to the Amended and Restated Stock Option Plan of 1999 Financial (the “1999 Plan”) are considered in calculating dilutive earnings per share.  The following is a summary of the earnings per share calculation for the three months ended March 31, 2014 and 2013.

Note 3 – Earnings Per Share (continued)

	Three months ended
	March 31,
	2014	2013
Net income	$        705,000	$        788,000
Weight average number of shares	3,364,874	3,352,725
Options affect of incremental shares	-	130
Weighted average diluted shares	3,364,874	3,352,855
Basic EPS (weighted avg shares)	$              0.21	$              0.24
Diluted EPS (Including Option Shares)	$              0.21	$              0.24

The following table sets forth the incremental shares associated with option shares that were not included in calculating the diluted earnings because their effect was anti-dilutive:

	Three months ended
	March 31,
	2014	2013
Incremental shares excluded from calculating diluted EPS because their effect was anti-dilutive	111,371	169,600

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Investments (Tables)

3 Months Ended

Mar. 31, 2014

Investments [Abstract]

Summary Of Securities Held-To-Maturity And Securities Available-For-Sale

		March 31, 2014
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$ 2,535	$ 202	$      -	$ 2,737
Available-for-Sale
US Treasuries	$ 3,909	$     -	$ (210)	$ 3,699
US agency obligations	21,093	7	(1,653)	19,447
Mortgage-backed securities	4,928	44	(143)	4,829
Municipals	15,782	81	(471)	15,392
Other (corporates)	2,011	-	(42)	1,969
	$ 47,723	$ 132	$ (2,519)	$ 45,336
		December 31, 2013
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$ 3,537	$ 203	$         -	$ 3,740
Available-for-Sale
US Treasuries	$ 3,907	$          -	$ (296)	$ 3,611
US agency obligations	22,544	-	(2,436)	20,108
Mortgage-backed securities	5,450	11	(150)	5,311
Municipals	15,845	35	(742)	15,138
Other (corporates)	2,011	-	(88)	1,923
	$ 49,757	$ 46	$ (3,712)	$ 46,091

Gross Unrealized Losses And Fair Value Of The Bank's Investments

	Less than 12 months		More than 12 months		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
March 31, 2014	Value	Losses	Value	Losses	Value	Losses
Description of securities
US Treasuries	$ 3,699	$ 210	$   -	$    -	$ 3,699	$ 210
U.S. agency obligations	10,141	752	7,081	901	17,222	1,653
Mortgage-backed securities	1,903	143	-	-	1,903	143
Municipals	5,059	211	6,170	260	11,229	471
Other (corporates)	491	2	1,478	40	1,969	42
Total	$ 21,293	$ 1,318	$ 14,729	$ 1,201	$ 36,022	$ 2,519
	Less than 12 months		More than 12 months		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
December 31, 2013	Value	Losses	Value	Losses	Value	Losses
Description of securities
US Treasuries	$ 3,611	$ 296	$           -	$        -	$ 3,611	$ 296
U.S. agency obligations	14,087	1,473	5,021	963	19,108	2,436
Mortgage-backed securities	4,830	150	-	-	4,830	150
Municipals	11,163	574	1,479	168	12,642	742
Other (corporates)	1,923	88	-		1,923	88
Total	$ 35,614	$ 2,581	$ 6,500	$ 1,131	$ 42,114	$ 3,712

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Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2014

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 11  – Recent accounting pronouncements

In January 2014, the FASB issued ASU 2014-01, “Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects (a consensus of the FASB Emerging Issues Task Force).”  The amendments in this ASU permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met.  Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit).  The amendments in this ASU should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. The amendments in this ASU are effective for public business entities for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted.  The Company is currently assessing the impact that ASU 2014-01 will have on its consolidated financial statements.  

In January 2014, the FASB issued ASU 2014-04, “Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force).”  The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.  The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company is currently assessing the impact that ASU 2014-04 will have on its consolidated financial statements.  

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” The amendments in this ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results and include

Note 11 – Recent accounting pronouncements (continued)

disposals of a major geographic area, a major line of business, or a major equity method investment. The new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. Additionally, the new guidance requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. The amendments in the ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted.  The Company does not expect the adoption of ASU 2014-08 to have a material impact on its consolidated financial statements.  

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Investments

3 Months Ended

Mar. 31, 2014

Investments [Abstract]

Investments

Note 7 - Investments

The following tables summarize the Bank’s holdings for both securities held-to-maturity and securities available-for-sale as of March 31, 2014 and December 31, 2013 (amounts in thousands):

		March 31, 2014
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$ 2,535	$ 202	$      -	$ 2,737
Available-for-Sale
US Treasuries	$ 3,909	$     -	$ (210)	$ 3,699
US agency obligations	21,093	7	(1,653)	19,447
Mortgage-backed securities	4,928	44	(143)	4,829
Municipals	15,782	81	(471)	15,392
Other (corporates)	2,011	-	(42)	1,969
	$ 47,723	$ 132	$ (2,519)	$ 45,336
		December 31, 2013
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$ 3,537	$ 203	$         -	$ 3,740
Available-for-Sale
US Treasuries	$ 3,907	$          -	$ (296)	$ 3,611
US agency obligations	22,544	-	(2,436)	20,108
Mortgage-backed securities	5,450	11	(150)	5,311
Municipals	15,845	35	(742)	15,138
Other (corporates)	2,011	-	(88)	1,923
	$ 49,757	$ 46	$ (3,712)	$ 46,091

Note 7 – Investments (continued)

The following tables show the gross unrealized losses and fair value of the Bank’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2014 and December 31, 2013(amounts in thousands):

	Less than 12 months		More than 12 months		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
March 31, 2014	Value	Losses	Value	Losses	Value	Losses
Description of securities
US Treasuries	$ 3,699	$ 210	$   -	$    -	$ 3,699	$ 210
U.S. agency obligations	10,141	752	7,081	901	17,222	1,653
Mortgage-backed securities	1,903	143	-	-	1,903	143
Municipals	5,059	211	6,170	260	11,229	471
Other (corporates)	491	2	1,478	40	1,969	42
Total	$ 21,293	$ 1,318	$ 14,729	$ 1,201	$ 36,022	$ 2,519
	Less than 12 months		More than 12 months		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
December 31, 2013	Value	Losses	Value	Losses	Value	Losses
Description of securities
US Treasuries	$ 3,611	$ 296	$           -	$        -	$ 3,611	$ 296
U.S. agency obligations	14,087	1,473	5,021	963	19,108	2,436
Mortgage-backed securities	4,830	150	-	-	4,830	150
Municipals	11,163	574	1,479	168	12,642	742
Other (corporates)	1,923	88	-		1,923	88
Total	$ 35,614	$ 2,581	$ 6,500	$ 1,131	$ 42,114	$ 3,712

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and may do so more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) the intent of Financial, if any, to sell the security; (4) whether Financial more likely than not will be required to sell the security before recovering its cost; and (5) whether Financial does not expect to recover the security’s entire amortized cost basis (even if Financial does not intend to sell the security).

At March 31, 2014, the Company did not consider the unrealized losses as other-than-temporary losses due to the nature of the securities involved.  As of March 31, 2014, the Bank owned 41 securities that were being evaluated for other than temporary impairment.  Eleven of these securities were S&P rated AAA, 29 were S&P rated AA, and one was S&P rated A.  As of March 31, 2014,  15 of these securities were direct obligations of the U.S. government or government sponsored entities, 23 were municipal issues, and three were investments in domestic corporate issued securities.

Note 7 – Investments (continued)

Based on the analysis performed by management as mandated by the Bank’s investment policy, management believes the default risk to be minimal.  Because the Bank expects to recover the entire amortized cost basis, no declines currently are deemed to be other-than-temporary.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2014

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 5  –Fair Value Measurements

Determination of Fair Value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of FASB ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

Note 5 – Fair Value Measurements (continued)

Fair Value Hierarchy

In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

· Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. 

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Securities

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow.

Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Currently, all of the Company’s securities are considered to be Level 2 securities.

The following table summarizes the Company’s financial assets that were measured at fair value on a recurring basis during the period.

Note 5 – Fair Value Measurements (continued)

		Carrying Value at March 31, 2014
Description	Balance as of March 31, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US Treasuries	$ 3,699	$       -	$ 3,699	$       -
US agency obligations	19,447	-	19,447	-
Mortgage-backed securities	4,829	-	4,829	-
Municipals	15,392	-	15,392	-
Other (corporates)	1,969	-	1,969	-
Total available-for-sale securities	$ 45,336	$       -	$ 45,336	$       -
		Carrying Value at December 31, 2013
Description	Balance as of December 31, 2013	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US Treasuries	$ 3,611	$       -	$ 3,611	$       -
US agency obligations	20,108	-	20,108	-
Mortgage-backed securities	5,311	-	5,311	-
Municipals	15,138	-	15,138	-
Other (corporates)	1,923	-	1,923	-
Total available-for-sale securities	$ 46,091	$       -	$ 46,091	$       -

Impaired loans

Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Bank using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over one year old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

Note 5 – Fair Value Measurements (continued)

Loans held for sale

Loans held for sale are carried at estimated fair value.  These loans currently consist of one-to-four family residential loans originated for sale in the secondary market.  Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2).  As such, the Company records fair value adjustments on a nonrecurring basis.  No nonrecurring fair value adjustments were recorded on loans held for sale during the period ended March 31, 2014.  Gains and losses on the sale of loans are recorded within mortgage fee income on the Consolidated Statements of Income.

Other real estate owned

Certain assets such as other real estate owned (OREO) are measured at fair value less cost to sell.  We believe that the fair value component in its valuation follows the provisions of ASC 820.

Real estate acquired through foreclosure is transferred to OREO. The measurement of loss associated with OREO is based on the fair value of the collateral compared to the unpaid loan balance and anticipated costs to sell the property. The value of OREO collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Bank using observable market data.

Any fair value adjustments are recorded in the period incurred and expensed against current earnings.  The carrying values of all OREO properties are considered to be Level 3.

The following table summarizes the Company’s impaired loans, loans held for sale, and OREO measured at fair value on a nonrecurring basis during the period (in thousands).

		Carrying Value at March 31, 2014
Description	Balance as of March 31, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$ 4,397	$     -	$          -	$ 4,397
Loans held for sale	1,831	-	1,831	-
Other real estate owned	1,714	-	-	1,714

*  Includes loans charged down during the quarter to the net realizable value of the collateral.

		Carrying Value at December 31, 2013
Description	Balance as of December 31, 2013	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$ 4,307	$      -	$       -	$ 4,307
Loans held for sale	1,921	-	1,921	-
Other real estate owned	1,451	-	-	1,451

*  Includes loans charged down during the quarter to the net realizable value of the collateral.

Note 5 – Fair Value Measurements (continued)

The following table sets forth information regarding the quantitative inputs used to value assets classified as Level 3:

	Quantitative information about Level 3 Fair Value Measurements for March 31, 2014 (dollars in thousands)
	Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$ 4,397	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)
OREO	1,714	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)

Financial Instruments

Cash, cash equivalents and Federal Funds sold

The carrying amounts of cash and short-term instruments approximate fair values.

Loans

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for certain fixed rate loans are based on quoted market prices of similar loans adjusted for differences in loan characteristics. Fair values for other loans such as commercial real estate and commercial and industrial loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values of impaired loans are estimated as described above.  The carrying values of all loans are considered to be Level 3.

Bank Owned Life Insurance (BOLI)

The carrying amount approximates fair value.  The carrying values of all BOLI is considered to be Level 2.

Note 5 – Fair Value Measurements (continued)

Deposits

Fair values disclosed for demand deposits (e.g., interest and noninterest checking, savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed rate certificates of deposit are estimated using discounted cash flow analyses that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.  The carrying values of all deposits are considered to be Level 2.

FHLB borrowings

The fair value of FHLB borrowings is estimated using discounted cash flow analysis based on the rates currently offered for borrowings of similar remaining maturities and collateral requirements.  The carrying values of all FHLB borrowings are considered to be Level 2.

Short-term borrowings

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within ninety days approximate fair value.  The carrying values of all short term borrowings are considered to be Level 2.

Capital notes

Fair values of capital notes are based on market prices for debt securities having similar maturity and interest rate characteristics.  The carrying values of all capital notes are considered to be Level 2.

Accrued interest

The carrying amounts of accrued interest approximate fair value.  The carrying values of all accrued interest is considered to be Level 2.

Off-balance sheet credit-related instruments

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.  Fair value of off-balance sheet credit-related instruments were deemed to be immaterial at March 31, 2014 and December 31, 2013 and therefore are not included in the table below.

Note 5 – Fair Value Measurements (continued)

The estimated fair values, and related carrying or notional amounts, of Financial’s financial instruments are as follows (in thousands):

		Fair Value Measurements at March 31, 2014 using
			Quoted Prices	Significant
			in Active	Other	Significant
			Markets for	Observable	Unobservable
	Carrying		Identical Assets	Inputs	Inputs
Assets	Amounts		(Level 1)	(Level 2)	(Level 3)	Balance
Cash and due from banks	$ 17,853		$ 17,853	$      -	$      -	$ 17,853
Federal funds sold	62		62	-	-	62
Securities
Available-for-sale	45,336		-	45,336	-	45,336
Held-to-maturity	2,535		-	2,737	-	2,737
Loans, net	349,156		-	-	353,625	353,625
Loans held for sale	1,831		-	1,831	-	1,831
Interest receivable	1,356		-	1,356	-	1,356
BOLI	9,301		-	9,301	-	9,301
Liabilities
Deposits	$ 398,126		$      -	$ 399,206	$      -	$ 399,206
FHLB borrowings	2,000		-	2,011	-	2,011
Capital notes	10,000		-	10,057	-	10,057
Interest payable	67		-	67	-	67

		Fair Value Measurements at December 31, 2013 using
		Quoted Prices	Significant
		in Active	Other	Significant
		Markets for	Observable	Unobservable
	Carrying	Identical Assets	Inputs	Inputs
Assets	Amounts	(Level 1)	(Level 2)	(Level 3)	Balance
Cash and due from banks	$ 16,671	$ 16,671	$      -	$      -	$ 16,671
Securities
Available-for-sale	46,091	-	46,091	-	46,091
Held-to-maturity	3,537	-	3,740	-	3,740
Loans, net	339,994	-	-	346,658	346,658
Loans held for sale	1,921	-	1,921	-	1,921
Interest receivable	1,360	-	1,360	-	1,360
BOLI	9,230	-	9,230	-	9,230
Liabilities
Deposits	$ 387,398	$      -	$ 388,363	$      -	$ 388,363
FHLB borrowings	2,000	-	2,018	-	2,018
Federal funds purchased	4,108	4,108	-	-	4,108
Capital notes	10,000	-	10,091	-	10,091
Interest payable	65	-	65	-	65

Note 5 – Fair Value Measurements (continued)

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time Financial’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of Financial’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on-balance-sheet and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets that are not considered financial assets include deferred income taxes and bank premises and equipment; a significant liability that is not considered a financial liability is accrued post-retirement benefits. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Financial assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of Financial’s financial instruments will change when interest rate levels change, and that change may be either favorable or unfavorable to Financial. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest  rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment.

Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate Financial’s overall interest rate risk.

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Capital Notes

3 Months Ended

Mar. 31, 2014

Capital Notes [Abstract]

Capital Notes

Note 6 – Capital Notes

During the third quarter of 2012, Financial closed the private placement of unregistered debt securities (the “2012 Offering”) pursuant to which Financial issued $10,000,000 in principal of notes (the “2012 Notes”).The 2012 Notes have not been and will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.  The 2012 Notes bear interest at the rate of 6% per year with interest payable quarterly in arrears.  The notes mature on April 1, 2017, but are subject to prepayment in whole or in part on or after April 1, 2013 at Financial’s sole discretion on 30 days written notice to the holders.  Financial used $7,000,000 of the proceeds from the 2012 Offering in April 2012 to pay, on maturity, the principal due on notes issued in 2009.

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Business Segments

3 Months Ended

Mar. 31, 2014

Business Segments [Abstract]

Business Segments

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 fee-based 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 months ended March 31, 2014 and 2013 was as follows (dollars in thousands):

Business Segments
	Community
	Banking	Mortgage	Total
Three months ended March 31, 2014
Net interest income	$        3,954	$            -	$        3,954
Provision for loan losses	55	-	55
Net interest income after provision for loan losses	3,899	-	3,899
Noninterest income	428	289	717
Noninterest expenses	3,350	259	3,609
Income before income taxes	977	30	1,007
Income tax expense	292	10	302
Net income	$           685	$          20	$           705
Total assets	$    440,610	$     1,974	$    442,584
Three months ended March 31, 2013
Net interest income	$        3,921	$            -	$        3,921
Provision for loan losses	235	-	235
Net interest income after provision for loan losses	3,686	-	3,686
Noninterest income	645	319	964
Noninterest expenses	3,278	253	3,531
Income before income taxes	1,053	66	1,119
Income tax expense	309	22	331
Net income	$           744	$          44	$           788
Total assets	$    427,233	$        853	$    428,086

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Investments (Narrative) (Details)	Mar. 31, 2014 security
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	41
US Agency Obligations [Member]
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	15
Municipals [Member]
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	23
US Corporation [Member]
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	3
S&P Rated AAA [Member]
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	11
S&P Rated AA [Member]
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	29
S&P Rated A [Member]
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	1

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Stock Based Compensation (Tables)

3 Months Ended

Mar. 31, 2014

Stock Based Compensation [Abstract]

Summary Of Stock Option Activity

			Weighted
		Weighted	Average
		Average	Remaining	Average
		Exercise	Contractual	Intrinsic
	Shares	Price	Life (in years)	Value
Options outstanding, January 1, 2014	111,371	$      10.73
Granted	-	-
Exercised	-	-
Forfeited	-	-
Options outstanding, March 31, 2014	111,371	10.73	1.3	$              -
Options exercisable, March 31, 2014	111,371	$      10.73	1.3	$              -

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Earnings Per Share (Earnings Per Share) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Net income	$ 705	$ 788
Weighted average number of shares	3,364,874	3,352,725
Options affect of incremental shares		130
Weighted average diluted shares	3,364,874	3,352,855
Basic EPS (weighted avg shares)	$ 0.21	$ 0.24
Diluted EPS (Including Option Shares)	$ 0.21	$ 0.24

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Loans, Allowance For Loan Losses And OREO (Changes In OREO Balance) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Loans, Allowance For Loan Losses And OREO [Abstract]
Balance at the beginning of the year (net)	$ 1,451
Transfers from loans	384	411
Capitalized costs
Writedowns	(46)
Sales proceeds	(78)
Gain on disposition	3	(21)
Balance at the end of the period (net)	$ 1,714

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Consolidated Statements Of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Consolidated Statements Of Comprehensive Income [Abstract]
Net Income	$ 705		$ 788
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale net of deferred taxes of $431 and $(132)	842		(258)
Reclassification adjustment for (gains) losses included in net income, net of taxes of $(2) and $88	4	[1]	(171)	[1]
Other comprehensive income (loss), net of tax	846		(429)
Comprehensive income	$ 1,551		$ 359

[1] Gains are included in net “gain on sale of available-for-sale securities” on the consolidated statements of income.

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Use Of Estimates

3 Months Ended

Mar. 31, 2014

Use Of Estimates [Abstract]

Use Of Estimates

Note 2  – Use of Estimates

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

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Earnings Per Share (Schedule Of Antidilutive Securities Excluded From Computation Of Earnings Per Share) (Details)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Incremental shares excluded from calculating diluted EPS because their effect was anti-dilutive	111,371	169,600

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Loans, Allowance For Loan Losses And OREO (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 contract	Mar. 31, 2013 contract	Dec. 31, 2013
Loans, Allowance For Loan Losses And OREO [Abstract]
Other real estate owned	$ 1,714		$ 1,451
Number of loans classified as TDRs	0	0
Number of Contracts (That Subsequently Defaulted)	0	0

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share

	Three months ended
	March 31,
	2014	2013
Net income	$        705,000	$        788,000
Weight average number of shares	3,364,874	3,352,725
Options affect of incremental shares	-	130
Weighted average diluted shares	3,364,874	3,352,855
Basic EPS (weighted avg shares)	$              0.21	$              0.24
Diluted EPS (Including Option Shares)	$              0.21	$              0.24

Schedule Of Antidilutive Securities Excluded From Computation Of Earnings Per Share

	Three months ended
	March 31,
	2014	2013
Incremental shares excluded from calculating diluted EPS because their effect was anti-dilutive	111,371	169,600