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 September 30, 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 November 7, 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	31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
	Item 4.	Controls and Procedures	50
PART II – OTHER INFORMATION			50
	Item 1.	Legal Proceedings	50
	Item 1A.	Risk Factors	50
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
	Item 3.	Defaults Upon Senior Securities	50
	Item 4.	Mine Safety Disclosures	50
	Item 5.	Other Information	50
	Item 6.	Exhibits	51
SIGNATURES			52

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)

	9/30/2014			12/31/2013
Assets
Cash and due from banks	$	14,850		$	16,671
Securities held-to-maturity (fair value of $2,702 in 2014 and $3,740 in 2013)		2,530			3,537
Securities available-for-sale, at fair value		33,940			46,091
Restricted stock, at cost		1,289			1,428
Loans, net of allowance for loan losses of $4,874 in 2014 and $5,186 in 2013		373,390			339,994
Loans held for sale		2,003			1,921
Premises and equipment, net		8,177			8,408
Software, net		384			268
Interest receivable		1,219			1,360
Cash value - bank owned life insurance		9,443			9,230
Other real estate owned, net of valuation allowance		1,160			1,451
Income taxes receivable		415			448
Deferred tax asset, net		1,836			2,628
Other assets		1,050			1,076
Total assets	$	451,686		$	434,511
Liabilities and Stockholders’ Equity
Deposits
Noninterest bearing demand	$	77,507		$	63,256
NOW, money market and savings		224,257			226,709
Time		97,067			97,433
Total deposits		398,831			387,398
Federal funds purchased		5,976			4,108
FHLB borrowings		2,000			2,000
Capital notes		10,000			10,000
Interest payable		58			65
Other liabilities		1,385			1,168
Total liabilities	$	418,250		$	404,739
Stockholders’ equity
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 3,364,874 as of September 30, 2014 and December 31, 2013	$	7,201		$	7,201
Preferred stock; authorized 1,000,000 shares; 0 issued and outstanding as of September 30, 2014 and December 31, 2013		—			—
Additional paid-in-capital		22,868			22,868
Accumulated other comprehensive (loss)		(883	)		(2,421	)
Retained earnings		4,250			2,124
Total stockholders’ equity	$	33,436		$	29,772
Total liabilities and stockholders’ equity	$	451,686		$	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				For the Nine Months
	Ended September 30,				Ended September 30,
	2014		2013		2014		2013
Interest Income
Loans	$	4,453	$	4,213	$	12,909	$	12,575
Securities
US Government and agency obligations		172		182		526		544
Mortgage backed securities		13		25		71		39
Municipals		71		124		291		417
Dividends		5		4		37		34
Other (Corporates)		8		16		34		44
Federal Funds sold		4		9		13		24
Total interest income		4,726		4,573		13,881		13,677
Interest Expense
Deposits
NOW, money market savings		125		121		364		369
Time Deposits		281		316		879		956
Federal Funds purchased		2		—		4		—
FHLB borrowings		19		19		57		57
Reverse repurchase agreements		—		—		1		—
Capital notes		150		150		450		450
Total interest expense		577		606		1,755		1,832
Net interest income		4,149		3,967		12,126		11,845
Provision for loan losses		—		—		55		290
Net interest income after provision for loan losses		4,149		3,967		12,071		11,555
Other operating income
Mortgage fee income		518		295		1,214		954
Service charges, fees and commissions		322		351		1,036		979
Increase in cash value of life insurance		70		75		213		226
Other		13		37		54		74
Gain on sale of available-for-sale securities, net		6		11		86		405
Total other operating income		929		769		2,603		2,638
Other operating expenses
Salaries and employee benefits		1,978		1,755		5,767		5,257
Occupancy		287		302		912		892
Equipment		322		259		937		760
Supplies		92		84		294		267
Professional, data processing, and other outside expense		593		582		1,768		1,712
Marketing		113		93		342		274
Credit expense		80		55		167		174
Other real estate expenses		9		60		166		400
FDIC insurance expense		77		143		184		430
Other		188		235		568		604
Total other operating expenses		3,739		3,568		11,105		10,770
Income before income taxes		1,339		1,168		3,569		3,423
Income tax expense		425		355		1,107		1,025
Net Income	$	914	$	813	$	2,462	$	2,398
Weighted average shares outstanding - basic		3,364,874		3,352,725		3,364,874		3,352,725
Weighted average shares outstanding - diluted		3,364,874		3,356,874		3,364,874		3,354,290
Income per common share - basic	$	0.27	$	0.24	$	0.73	$	0.72
Income per common share - diluted	$	0.27	$	0.24	$	0.73	$	0.71

See accompanying notes to these consolidated financial statements

2

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

For the Three and Nine months ended September 30, 2014 and 2013

(dollar amounts in thousands) (unaudited)

	For the Three Months Ended September 30,						For the Nine months Ended September 30,
	2014			2013			2014			2013
Net Income	$	914		$	813		$	2,462		$	2,398
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale net of deferred taxes of $33 and $(319) for the three month periods and $821 and $(1,290) for the nine month periods ended September 30, 2014 and 2013 respectively.		61			(621	)		1,595			(2,506	)
Reclassification adjustment for (gains) included in net income (1), net of taxes of $(2) and $(4) for the three month periods and $(29) and $(138) for the nine month periods ended September 30, 2014 and 2013 respectively (2)		(4	)		(7	)		(57	)		(267	)
Other comprehensive income (loss), net of tax		57			(628	)		1,538			(2,773	)
Comprehensive income (loss)	$	971		$	185		$	4,000		$	(375	)

(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

Nine months ended September 30, 2014 and 2013

(dollar amounts in thousands) (unaudited)

	Nine Months Ended September 30,
	2014			2013
Cash flows from operating activities
Net Income	$	2,462		$	2,398
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		546			521
Net amortization and accretion of premiums and discounts on securities		199			260
(Gain) on sale of available for sale securities		(86	)		(405	)
(Gain) on sale of assets		(3	)		—
Provision for loan losses		55			290
(Gain) loss on sale of other real estate owned		(1	)		40
Impairment of other real estate owned		178			304
(Increase) decrease in loans held-for-sale		(82	)		105
(Increase) in cash value of life insurance		(213	)		(226	)
Decrease in interest receivable		141			248
Decrease in other assets		26			204
Decrease in income taxes receivable		33			2
(Decrease) in interest payable		(7	)		(3	)
Increase in other liabilities		217			256
Net cash provided by operating activities	$	3,465		$	3,994
Cash flows from investing activities
Purchases of securities held to maturity	$	—		$	(485	)
Proceeds from maturities and calls of securities held to maturity		1,000			—
Purchases of securities available for sale		(3,139	)		(25,162	)
Proceeds from maturities, calls and paydowns of securities available for sale		120			2,188
Proceeds from sale of securities available for sale		17,394			22,418
Redemption of Federal Home Loan Bank stock		139			110
Proceeds from sale of other real estate owned		318			777
Origination of loans, net of principal collected		(33,655	)		(11,550	)
Proceeds from sale of fixed assets		3			—
Purchases of premises and equipment		(431	)		(616	)
Net cash (used in) investing activities	$	(18,251	)	$	(12,320	)
Cash flows from financing activities
Net increase (decrease) in deposits	$	11,433		$	(5,887	)
Net increase in federal funds purchased		1,868			—
Dividends paid to common stockholders		(336	)		—
Net cash provided by (used in) financing activities	$	12,965		$	(5,887	)
(Decrease) in cash and cash equivalents		(1,821	)		(14,213	)
Cash and cash equivalents at beginning of period	$	16,671		$	40,998
Cash and cash equivalents at end of period	$	14,850		$	26,785
Non cash transactions
Transfer of loans to foreclosed assets	$	459		$	710
Portion of foreclosed assets financed		255			347
Fair value adjustment for securities		2,330			(4,201	)
Cash transactions
Cash paid for interest	$	1,762		$	1,835
Cash paid for taxes		1,075			1,023

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, except per share amounts) (unaudited)

										Accumulated
					Additional		Retained			Other
	Total		Common		Paid-in		Earnings			Comprehensive
	Outstanding		Stock		Capital		(Deficit)			Income (Loss)			Total
Balance at December 31, 2012		3,352,725	$	7,175	$	22,806	$	(936	)	$	568		$	29,613
Net Income		—		—		—		2,398			—			2,398
Other Comprehensive Loss		—		—		—		—			(2,773	)		(2,773	)
Balance at September 30, 2013		3,352,725	$	7,175	$	22,806	$	1,462		$	(2,205	)	$	29,238
Balance at December 31, 2013		3,364,874	$	7,201	$	22,868	$	2,124		$	(2,421	)	$	29,772
Net Income		—		—		—		2,462			—			2,462
Dividends paid on common stock (total of $0.10 per share year-to-date)		—		—		—		(336	)		—			(336	)
Other Comprehensive Income		—		—		—		—			1,538			1,538
Balance at September 30, 2014		3,364,874	$	7,201	$	22,868	$	4,250		$	(883	)	$	33,436

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 and nine months ended September 30, 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 and nine month periods ended September 30, 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, 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 and nine months ended September 30, 2014 and 2013.

	Three Months Ended				Year to date
	September 30,				September 30,
	2014		2013		2014		2013
Net income	$	914,000	$	813,000	$	2,462,000	$	2,398,000
Weighted average number of shares		3,364,874		3,352,725		3,364,874		3,352,725
Options affect of incremental shares		—		4,149		—		1,565
Weighted average diluted shares		3,364,874		3,356,874		3,364,874		3,354,290
Basic EPS (weighted avg shares)	$	0.27	$	0.24	$	0.73	$	0.72
Diluted EPS (Including Option Shares)	$	0.27	$	0.24	$	0.73	$	0.71

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				Nine months ended
	September 30,				September 30,
	2014		2013		2014		2013
Incremental shares excluded from calculating diluted EPS because their effect was anti-dilutive		110,147		113,294		110,645		168,069

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 nine months ended September 30, 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		(1,224	)		10.23
Options outstanding, September 30, 2014		110,147			10.74		0.8	$	—
Options exercisable, September 30, 2014		110,147		$	10.74		0.8	$	—

Intrinsic value is calculated by subtracting the exercise price of option shares from the market price of underlying shares as of September 30, 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 September 30, 2014
Description	Balance as of September 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
US Treasuries	$	3,797	$	—	$	3,797	$	—
US agency obligations		17,789		—		17,789		—
Mortgage-backed securities		1,951		—		1,951		—
Municipals		8,403		—		8,403		—
Other (corporates)		2,000		—		2,000		—
Total available-for-sale securities	$	33,940	$	—	$	33,940	$	—
			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 September 30, 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 September 30, 2014
Description	Balance as of September 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans*	$	4,842	$	—	$	—	$	4,842
Loans held for sale		2,003		—		2,003		—
Other real estate owned		1,160		—		—		1,160

* 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 September 30, 2014
	(dollars in thousands)
	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$	4,842	Discounted appraised value	Selling cost	5% - 10% (6%)
				Discount for lack of marketability and age of appraisal	0% - 25% (15%)
OREO		1,160	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 September 30, 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 September 30, 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	$	14,850	$	14,850	$	—	$	—	$	14,850
Securities
Available-for-sale		33,940		—		33,940		—		33,940
Held-to-maturity		2,530		—		2,702		—		2,702
Loans, net		373,390		—		—		378,841		378,841
Loans held for sale		2,003		—		2,003		—		2,003
Interest receivable		1,219		—		1,219		—		1,219
BOLI		9,443		—		9,443		—		9,443
Liabilities
Deposits	$	398,831	$	—	$	400,006	$	—	$	400,006
FHLB borrowings		2,000		—		2,009		—		2,009
Federal funds purchased		5,976		5,976		—		—		5,976
Capital notes		10,000		—		10,045		—		10,045
Interest payable		58		—		58		—		58

			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 September 30, 2014 and December 31, 2013 (amounts in thousands):

	September 30, 2014
	Amortized Costs		Gross Unrealized					Fair Value
			Gains		(Losses)
Held-to-Maturity
US agency obligations	$	2,530	$	172	$	—		$	2,702
Available-for-Sale
US Treasuries	$	3,914	$	—	$	(117	)	$	3,797
US agency obligations		18,859		—		(1,070	)		17,789
Mortgage-backed securities		2,043		—		(92	)		1,951
Municipals		8,425		109		(131	)		8,403
Other (corporates)		2,035		—		(35	)		2,000
	$	35,276	$	109	$	(1,445	)	$	33,940
	December 31, 2013
	Amortized Costs		Gross Unrealized					Fair Value
			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

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 September 30, 2014 and December 31, 2013 (amounts in thousands):

	Less than 12 months				More than 12 months				Total
September 30, 2014	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Description of securities
US Treasuries	$	—	$	—	$	3,797	$	117	$	3,797	$	117
U.S. agency obligations		994		6		16,795		1,064		17,789		1,070
Mortgage-backed securities		—		—		1,951		92		1,951		92
Municipals		1,510		17		4,348		114		5,858		131
Other (corporates)		1,004		11		996		24		2,000		35
Total	$	3,508	$	34	$	27,887	$	1,411	$	31,395	$	1,445
	Less than 12 months				More than 12 months				Total
December 31, 2013	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized 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 September 30, 2014, the Company did not consider the unrealized losses as other-than-temporary losses due to the nature of the securities involved. As of September 30, 2014, the Bank owned 31 securities that were being evaluated for other than temporary impairment. Eight of these securities were S&P rated AAA, 22 were S&P rated AA, and one was S&P rated A. As of September 30, 2014, 15 of these securities were direct obligations of the U.S. government or government sponsored entities, 14 were municipal issues, and two 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.

18

Note 8 – Business Segments (continued)

Information about reportable business segments and reconciliation of such information to the consolidated financial statements for the three and nine months ended September 30, 2014 and 2013 was as follows (dollars in thousands):

Business Segments

	Community Banking		Mortgage			Total
Nine months ended September 30, 2014
Net interest income	$	12,126	$	—		$	12,126
Provision for loan losses		55		—			55
Net interest income after provision for loan losses		12,071		—			12,071
Noninterest income		1,389		1,214			2,603
Noninterest expenses		10,071		1,034			11,105
Income before income taxes		3,389		180			3,569
Income tax expense		1,044		63			1,107
Net income	$	2,345	$	117		$	2,462
Total assets	$	449,623	$	2,063		$	451,686
Nine months ended September 30, 2013
Net interest income	$	11,845	$	—		$	11,845
Provision for loan losses		290		—			290
Net interest income after provision for loan losses		11,555		—			11,555
Noninterest income		1,684		954			2,638
Noninterest expenses		10,006		764			10,770
Income before income taxes		3,233		190			3,423
Income tax expense		960		65			1,025
Net income	$	2,273	$	125		$	2,398
Total assets	$	434,493	$	879		$	435,372
	Community Banking		Mortgage			Total
Three months ended September 30, 2014
Net interest income	$	4,149	$	—		$	4,149
Provision for loan losses		—		—			—
Net interest income after provision for loan losses		4,149		—			4,149
Noninterest income		411		518			929
Noninterest expenses		3,224		515			3,739
Income before income taxes		1,336		3			1,339
Income tax expense		409		16			425
Net income (loss)	$	927	$	(13	)	$	914
Total assets	$	449,623	$	2,063		$	451,686
Three months ended September 30, 2013
Net interest income	$	3,967	$	—		$	3,967
Provision for loan losses		—		—			—
Net interest income after provision for loan losses		3,967		—			3,967
Noninterest income		474		295			769
Noninterest expenses		3,376		192			3,568
Income before income taxes		1,065		103			1,168
Income tax expense		332		23			355
Net income	$	733	$	80		$	813
Total assets	$	434,493	$	879		$	435,372

19

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:
	September 30,		December 31,
	2014		2013
Commercial	$	65,050	$	55,803
Commercial real estate		190,675		172,117
Consumer		72,528		71,165
Residential		50,011		46,095
Total loans		378,264		345,180
Less allowance for loan losses		4,874		5,186
Net loans	$	373,390	$	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.

20

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.

21

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

Financing Receivables on Non-Accrual Status

(dollars in thousands)

	As of
	September 30, 2014		December 31, 2013
Commercial	$	2,116	$	1,585
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		212		537
Commercial Mortgages-Non-Owner Occupied		72		353
Commercial Construction		460		375
Consumer
Consumer Unsecured		—		—
Consumer Secured		—		33
Residential:
Residential Mortgages		312		183
Residential Consumer Construction		91		—
Totals	$	3,263	$	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 decreased to $1,160,000 on September 30, 2014 from $1,451,000 on December 31, 2013. The following table represents the changes in OREO balance during the nine months ended September 30, 2014.

OREO Changes

(dollars in thousands)

	Nine Months ended
	September 30, 2014
Balance at the beginning of the year (net)	$	1,451
Transfers from loans		459
Capitalized costs		—
Writedowns		(178	)
Sales proceeds		(573	)
Gain on disposition		1
Balance at the end of the period (net)	$	1,160

22

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

	Impaired Loans
	(dollars in thousands)
	As of and For the Nine Months Ended September 30, 2014
2014	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Commercial	$	2,558	$	2,798	$	—	$	2,912	$	68
Commercial Real Estate
Commercial Mortgages-Owner Occupied		2,300		2,350		—		1,420		110
Commercial Mortgage Non-Owner Occupied		712		712		—		858		32
Commercial Construction		84		531		—		418		—
Consumer
Consumer Unsecured		—		—		—		—		—
Consumer Secured		21		21		—		21		1
Residential
Residential Mortgages		463		463		—		467		47
Residential Consumer Construction		—		—		—		—		—
With An Allowance Recorded:
Commercial	$	1,806	$	2,234	$	832	$	1,190	$	32
Commercial Real Estate
Commercial Mortgages-Owner Occupied		1,056		1,225		60		1,738		45
Commercial Mortgage Non-Owner Occupied		306		306		33		263		12
Commercial Construction		376		644		17		188		—
Consumer
Consumer Unsecured		—		—		—		—		—
Consumer Secured		119		119		119		80		6
Residential
Residential Mortgages		1,497		1,659		284		1,591		50
Residential Consumer Construction		—		—		—		—		—
Totals:
Commercial	$	4,364	$	5,032	$	832	$	4,102	$	100
Commercial Real Estate
Commercial Mortgages-Owner Occupied		3,356		3,575		60		3,158		155
Commercial Mortgage Non-Owner Occupied		1,018		1,018		33		1,121		44
Commercial Construction		460		1,175		17		606		—
Consumer
Consumer Unsecured		—		—		—		—		—
Consumer Secured		140		140		119		101		7
Residential
Residential Mortgages		1,960		2,122		284		2,058		97
Residential Consumer Construction		—		—		—		—		—
	$	11,298	$	13,062	$	1,345	$	11,146	$	403

23

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

	Impaired Loans
	(dollars in thousands)
	As of and For the Year Ended December 31, 2013
2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income 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

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 Nine Months Ended September 30, 2014
2014	Commercial			Commercial Real Estate			Consumer			Residential			Total
Allowance for Credit Losses:
Beginning Balance	$	1,015		$	2,631		$	935		$	605		$	5,186
Charge-offs		(165	)		(188	)		(34	)		(40	)		(427	)
Recoveries		27			9			24			—			60
Provision		473			(490	)		(182	)		254			55
Ending Balance	$	1,350		$	1,962		$	743		$	819		$	4,874
Ending Balance: Individually evaluated for impairment	$	832		$	110		$	119		$	284		$	1,345
Ending Balance: Collectively evaluated for impairment		518			1,852			624			535			3,529
Totals:	$	1,350		$	1,962		$	743		$	819		$	4,874
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$	4,364		$	4,834		$	140		$	1,960		$	11,298
Ending Balance: Collectively evaluated for impairment		60,686			185,841			72,388			48,051			366,966
Totals:	$	65,050		$	190,675		$	72,528		$	50,011		$	378,264

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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
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

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

	Age Analysis of Past Due Financing Receivables as of
	September 30, 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	$	88	$	94	$	2,116	$	2,298	$	62,752	$	65,050	$	—
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		646		857		212		1,715		68,798		70,513		—
Commercial Mortgages-Non-Owner Occupied		—		55		72		127		111,078		111,205		—
Commercial Construction		—		—		460		460		8,497		8,957		—
Consumer:
Consumer Unsecured		32		—		—		32		4,204		4,236		—
Consumer Secured		379		107		—		486		67,806		68,292		—
Residential:
Residential Mortgages		595		657		312		1,564		41,347		42,911		—
Residential Consumer Construction		—		—		—		—		7,100		7,100		—
Total	$	1,740	$	1,770	$	3,172	$	6,682	$	371,582	$	378,264	$	—
	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
	September 30, 2014
	(dollars in thousands)
2014	Pass		Monitor		Special Mention		Substandard		Doubtful		Totals
Commercial	$	59,258	$	1,210	$	90	$	4,492	$	—	$	65,050
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		65,844		1,098		308		3,263		—		70,513
Commercial Mortgages-Non Owner Occupied		104,323		1,809		4,338		735		—		111,205
Commercial Construction		8,073		424		—		460		—		8,957
Consumer
Consumer Unsecured		4,236		—		—		—		—		4,236
Consumer Secured		67,260		510		97		425		—		68,292
Residential:
Residential Mortgages		39,149		776		843		2,143		—		42,911
Residential Consumer Construction		7,009		—		—		91		—		7,100
Totals	$	355,152	$	5,827	$	5,676	$	11,609	$	—	$	378,264

	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 and nine months ended September 30, 2014 and 2013.

There were no loan modifications classified as TDRs within the last twelve months that defaulted during the three and nine months ended September 30, 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

29

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.

In June 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606”. This ASU applies to any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The guidance supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, most industry-specific guidance, and some cost guidance included in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts”. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To be in alignment with the core principle, an entity must apply a five step process including: identification of the contract(s) with a customer, identification of performance obligations in the contract(s), determination of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue when (or as) the entity satisfies a performance obligation. Additionally, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer have also been amended to be consistent with the guidance on recognition and measurement. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The Company is currently assessing the impact that ASU 2014-09 will have on its consolidated financial statements.

In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic 915, “Development Stage Entities”, from the FASB Accounting Standards Codification. In addition, this ASU adds an example disclosure and removes an exception provided to development stage entities in Topic 810, “Consolidation”, for determining whether an entity is a variable interest entity. The presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective for annual periods beginning after December 15, 2015. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-10 to have a material impact on its consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-11, “Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures”. This ASU aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. The new guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement. The amendments in the ASU also require a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the

30

Note 11 – Recent accounting pronouncements (continued)

exposure to the economic return on the transferred financial assets throughout the term of the transaction. Additional disclosures will be required for the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The amendments in this ASU are effective for the first interim or annual period beginning after December 15, 2014; however, the disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Early adoption is not permitted. The Company is currently assessing the impact that ASU 2014-11 will have on its consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The new guidance applies to reporting entities that grant employees share-based payments in which the terms of the award allow a performance target to be achieved after the requisite service period. The amendments in the ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Existing guidance in “Compensation – Stock Compensation (Topic 718)”, should be applied to account for these types of awards. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted and reporting entities may choose to apply the amendments in the ASU either on a prospective or retrospective basis. The Company is currently assessing the impact that ASU 2014-12 will have on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This update is intended to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management is required under the new guidance to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued when preparing financial statements for each interim and annual reporting period. If conditions or events are identified, the ASU specifies the process that must be followed by management and also clarifies the timing and content of going concern footnote disclosures in order to reduce diversity in practice. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-15 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

31

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.

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

32

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”),

• 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 limited service branch and commercial loan production office located at Luxor Office Park LLC, 1430 Rolkin Court Suite 203, Charlottesville, Virginia.

33

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. 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.

Appomattox, Virginia. 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

34

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:

	September 30, 2014 (in thousands)
Commitments to extend credit	$	76,907
Letters of Credit		1,905
Total	$	78,812

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.

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 September 30, 2014 and December 31, 2013 and the results of operations of Financial for the three and nine month periods ended September 30, 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

September 30, 2014 as Compared to December 31, 2013

Total assets were $451,686,000 on September 30, 2014 compared with $434,511,000 at December 31, 2013, an increase of 3.95%. The increase as of September 30, 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 $398,831,000 on September 30, 2014, an increase of 2.95%. Total deposits increased for the reasons set forth in the prior paragraph.

Total loans, excluding loans held for sale, increased to $378,264,000 on September 30, 2014 from $345,180,000 on December 31, 2013. Loans, excluding loans held for sale and net of unearned income and allowance, increased to $373,390,000 on September 30, 2014 from $339,994,000 on December 31, 2013, an increase of 9.82%. 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):

	September 30, 2014					December 31, 2013
	Amount		Percentage			Amount		Percentage
Commercial	$	65,050		17.20	%	$	55,803		16.17	%
Commercial Real Estate		190,675		50.40	%		172,117		49.86	%
Consumer		72,528		19.17	%		71,165		20.61	%
Residential		50,011		13.23	%		46,095		13.36	%
Total loans	$	378,264		100.00	%	$	345,180		100.00	%

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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”) decreased slightly to $4,423,000 on September 30, 2014 from $4,518,000 on December 31, 2013. This decrease was due to a decrease in OREO, which was partially offset by an increase in total non-accrual loans. Non-accrual loans increased 6.42% to $3,263,000 on September 30, 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 $823,000 and $676,000 as of September 30, 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.

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 nine months ended September 30, 2014, the Bank acquired 3 additional OREO properties and disposed of 16 OREO properties, and as of September 30, 2014 the Bank is carrying 4 OREO properties at a value of $1,160,000. 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 $556,000 at September 30, 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 decreased to $14,850,000 on September 30, 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 decrease is in large part due to a decrease in the target balance held in a settlement account at the Bank’s primary correspondent. The proceeds from this decrease were used to fund loans. Cash and cash equivalents also 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 $2,530,000 on September 30, 2014 from $3,537,000 on December 31, 2013. Securities available-for-sale decreased to $33,940,000 on September 30, 2014, from $46,091,000 December 31, 2013. During the nine months ended September 30, 2014 the Bank received $1,000,000 in proceeds from maturities, paydowns, and/or calls of securities held to maturity and $120,000 in proceeds from principal payments received from securities available-for-sale and proceeds from the sale of securities available-for-sale were $17,394,000. The Bank purchased no securities held-to-maturity

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and $3,139,000 in securities 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 funding loan growth and anticipating future loan growth.

Financial’s investment in Federal Home Loan Bank of Atlanta (FHLBA) stock totaled $481,000 at September 30, 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 September 30, 2014, Financial, on a consolidated basis, had liquid assets of $48,790,000 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 September 30, 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.

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. Based in part on recent loan growth, the Bank is monitoring liquidity to ensure it is able to fund future loans.

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At September 30, 2014, the Bank had a leverage ratio of approximately 9.43%, a Tier 1 risk-based capital ratio of approximately 12.07% and a total risk-based capital ratio of approximately 13.32%. As of September 30, 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 September 30, 2014 and December 31, 2013:

Bank Level Only Capital Ratios

Analysis of Capital (in 000’s)	September 30, 2014		December 31, 2013
Tier 1 capital
Common Stock	$	3,742	$	3,742
Surplus		19,325		19,325
Retained earnings		19,403		16,563
Total Tier 1 capital	$	42,470	$	39,630
Tier 2 capital
Allowance for loan losses	$	4,405	$	4,166
Total Tier 2 capital:	$	4,405	$	4,166
Total risk-based capital	$	46,875	$	43,796
Risk weighted assets	$	351,936	$	332,280
Average total assets	$	450,347	$	435,236

	Actual						Regulatory Benchmarks
	September 30, 2014			December 31, 2013			For Capital Adequacy Purposes			For Well Capitalized Purposes
Capital Ratios:
Tier 1 capital to average total assets		9.43	%		9.11	%		4.00	%		5.00	%
Tier 1 risk-based capital ratio		12.07	%		11.93	%		4.00	%		6.00	%
Total risk-based capital ratio		13.32	%		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. Consequently, Financial does not calculate its financial ratios on a consolidated basis. If calculated, 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 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.

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Results of Operations

Comparison of the Three and Nine months Ended September 30, 2014 and 2013

Earnings Summary

Financial had net income including all operating segments of $914,000 and $2,462,000 for the three and nine months ended September 30, 2014 compared to $813,000 and $2,398,000 for the comparable periods in 2013. The basic and diluted earnings per common share for the three and nine months ended September 30, 2014 were $0.27 and $0.73, compared to basic and diluted earnings per share of $0.24 for the three months and basic earnings of $0.72 ($0.71 diluted) for the nine months ended September 30, 2013.

The increase in net income for the three and nine months ended September 30, 2014 as compared to the prior year was due primarily to an increase in interest received due to an increase in interest earning assets, a decrease in the provision for loan losses, and was partially offset by an increase in non-interest expense. Non-interest income increased for the three months ended September 30, 2014 but decreased for the nine months ended September 30, 2014 due to higher gains on sales of securities in the nine months ended September 30, 2013 as compared to 2014.

These operating results represent an annualized return on stockholders’ equity of 10.82% and 10.02% for the three and nine months ended September 30, 2014, compared with 10.55% and 10.76% for the same periods in 2013. The Company had an annualized return on average assets for the three and nine months ended September 30, 2014 of 0.80% and 0.74% compared with 0.74% and 0.74% for the same periods in 2013.

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

Interest Income, Interest Expense, and Net Interest Income

Interest income increased to $4,726,000 and $13,881,000 for the three and nine months ended September 30, 2014 from $4,573,000 and $13,677,000 for the same periods in 2013, an increase of 3.35% and 1.49%, respectively. Interest income increased primarily because of increased balances in the loan portfolio. The average rate received on earning assets decreased to 4.52% and 4.55% for the three and nine months ended September 30, 2014 as compared with 4.66% and 4.69% for the comparable periods in 2013. The rate on total average earning assets decreased primarily 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 $577,000 and $1,755,000 for the three and nine months ended September 30, 2014 from $606,000 and $1,832,000 for the same periods in 2013, decreases of 4.79% and 4.20%, respectively. These decreases in interest expense resulted in large part from a decrease in rates paid on time deposits. The Bank’s average rate paid on interest earning deposits was 0.49% and 0.51% during the three and nine month periods ended September 30, 2014 as compared to 0.53% and 0.55% for the same periods 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 and nine months ended September 30, 2014 was $4,149,000 and $12,126,000 compared with $3,967,000 and $11,845,000 for the same periods in 2013. The change in net interest income for the three and nine months ended September 30, 2014 as compared with the comparable period in 2013 was minor because

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the increase in interest earning assets offset the decrease in rates received. The net interest margin was 3.97% and 3.98% for the three and nine months ended September 30, 2014, as compared to 4.06% and 4.06% for the same periods 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 $923,000 and $2,517,000 for the three and nine months ended September 30, 2014 from $758,000 and $2,233,000 for the three and nine months ended September 30, 2013. This increase for the three and nine months ended September 30, 2014 as compared to the same periods last year was due primarily to an increase in mortgage fee income of $223,000 and $260,000, respectively. The increase in mortgage fee income is directly attributable to the production in the Bank’s Roanoke mortgage office in 2014. For the three months ended September 30, 2014, service charges and commissions decreased by $29,000 and for the nine months ended September 30, 2014, service charges and fees increased by $57,000.

Purchase mortgage originations totaled $13,427,000 or 67.91% of the total mortgage loans originated and $32,325,115 or 69.32% of the total mortgage loans originated in the three and nine months ended September 30, 2014 respectively. 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 on sales of securities decreased to $6,000 and $86,000 for the three and nine months ended September 30, 2014 from $11,000 and $405,000 for the same periods 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.

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The Bank provides insurance and annuity products to Bank customers and others, through the Bank’s Insurance subsidiary. The Bank has two full-time and one part-time 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 and nine months ended September 30, 2014 increased to $3,739,000 and $11,105,000 from $3,568,000 and $10,770,000, an increase of 4.79% and 3.11%, respectively, for the comparable periods in 2013. This resulted from increases for data processing, compensation and employee benefit expense, equipment, and marketing expenses, primarily related to the expansion into Roanoke and Charlottesville. These increases were offset in part by a decrease in OREO expense from $60,000 and $400,000 for the three and nine months ended September 30, 2013 to $9,000 and $166,000 for the same periods in 2014. Total personnel expense was $1,978,000 and $5,767,000 for the three and nine month periods ended September 30, 2014 as compared to $1,755,000 and $5,257,000 for the same periods in 2013. For the three months ended September 30, 2014, the Bank also had an increase in credit expenses which is directly related to the volume of loans originated by the Mortgage Division.

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 $0 and $55,000 to the allowance for loan losses for the three and nine month periods ended September 30, 2014. This compares to a provision of $0 and $290,000 for the comparable periods in 2013, representing decreases of 100.00% and 81.03%, respectively.

The decrease in the loan loss provision for the three and nine months ended September 30, 2014 as compared to the same periods 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 three and nine months ended September 30, 2014.

• In light of the current economic environment, management continues its ongoing assessment of specific impairment in the Bank’s loan portfolio. The Bank’s provision for the three and nine months ended September 30, 2014 decreased as compared to the same periods in 2013. The decrease resulted from a decrease in the unallocated environmental reserves. That decrease was offset by an increase to the specific impairment component of the reserve as allocations within the reserve were reclassified from general to specific on a small number of loans within the commercial real estate and consumer segments.

• Charged-off loans, which are loans that management deems uncollectible, are written against the loan loss reserve and constitute a realized loss. Charged-off loans decreased to $326,000 and $427,000 for the three and nine months ended September 30, 2014 from $513,000

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and $970,000 for the comparable periods in 2013. While a charged off loan may subsequently be collected, such recoveries generally are realized over an extended period of time. In the three and nine months ended September 30, 2014, the Bank had recoveries of charged off loans of $23,000 and $60,000 as compared with $21,000 and $128,000 for the comparable periods in 2013.

• A decline in historical charge-offs resulting from an improvement in credit quality has had the effect of lowering the need for provision. The improvements in credit quality are reflected in the below tables.

The decrease in the percentage of the allowance for loan loss reserve to total loans as of September 30, 2014 to 1.29% as compared to 1.50% as of December 31, 2013 resulted from a decline in historical charge offs as discussed above. The overall balance in the allowance for loan loss decreased from $5,186,000 as of December 31, 2013 to $4,874,000 as of September 30, 2014. Management believes that the current allowance for loan is adequate.

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

	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Nine months Ended September 30, 2014
2014	Commercial			Commercial Real Estate			Consumer			Residential			Total
Allowance for Credit Losses:
Beginning Balance	$	1,015		$	2,631		$	935		$	605		$	5,186
Charge-offs		(165	)		(188	)		(34	)		(40	)		(427	)
Recoveries		27			9			24			—			60
Provision		473			(490	) (1)		(182	) (1)		254			55
Ending Balance	$	1,350		$	1,962		$	743		$	819		$	4,874
Ending Balance: Individually evaluated for impairment	$	832		$	110		$	119		$	284		$	1,345
Ending Balance: Collectively evaluated for impairment		518			1,852			624			535			3,529
Totals:	$	1,350		$	1,962		$	743		$	819		$	4,874
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$	4,364		$	4,834		$	140		$	1,960		$	11,298
Ending Balance: Collectively evaluated for impairment		60,686			185,841			72,388			48,051			366,966
Totals:	$	65,050		$	190,675		$	72,528		$	50,011		$	378,264

(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 these segments.

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	Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands) For the Year Ended December 31, 2013
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	) (1)		(9	) (1)		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

(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 these segments.

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

	Three months ended September 30, (in thousands)						Nine months ended September 30, (in thousands)
	2014			2013			2014			2013
Balance, beginning of period	$	5,177		$	5,475		$	5,186		$	5,535
Provision for loan losses		—			—			55			290
Loans charged off		(326	)		(513	)		(427	)		(970	)
Recoveries of loans charged off		23			21			60			128
Net charge offs		(303	)		(492	)		(367	)		(842	)
Balance, end of period	$	4,874		$	4,983		$	4,874		$	4,983

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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.

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.

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• “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.

Income Taxes

For the three and nine months ended September 30, 2014, Financial had an income tax expense of $425,000 and $1,107,000, as compared to $355,000 and $1,025,000 for the three and nine months ended September 30, 2013. This represents an effective tax rate of 31.70% and 31.00% the for the three and nine month periods ended September 30, 2014 as compared with 30.40% and 29.90% for the three and nine month periods ended September 30, 2013.

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Schedule I

Net Interest Margin Analysis

Average Balance Sheets

For the Quarter Ended September 30, 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)	$	371,244		$	4,427		4.73	%	$	334,296		$	4,205		4.99	%
Loans held for sale		2,198			26		4.69	%		891			8		3.56	%
Federal funds sold		2,333			4		0.68	%		10,121			9		0.35	%
Securities (3)		38,033			271		2.83	%		50,404			440		3.46	%
Federal agency equities		1,173			5		1.69	%		1,312			4		1.21	%
CBB equity		116			—		—			116			—		—
Total earning assets		415,097			4,733		4.52	%		397,140			4,666		4.66	%
Allowance for loan losses		(5,349	)							(5,349	)
Non-earning assets		43,000								42,885
Total assets	$	452,748							$	434,676
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand interest bearing	$	104,645		$	53		0.21	%	$	95,997		$	50		0.21	%
Savings		126,176			69		0.22	%		133,461			71		0.21	%
Time deposits		96,563			281		1.15	%		95,939			316		1.31	%
Total interest bearing deposits		327,384			406		0.49	%		325,397			437		0.53	%
Other borrowed funds
Fed funds purchased		913			2		0.87	%		—			—		—
Other borrowings		2,000			19		3.77	%		2,000			19		3.77	%
Capital Notes		10,000			150		6.00	%		10,000			150		6.00	%
Total interest-bearing liabilities		340,297			577		0.67	%		337,397			606		0.71	%
Non-interest bearing deposits		78,086								66,267
Other liabilities		849								442
Total liabilities		419,232								404,106
Stockholders’ equity		33,516								30,570
Total liabilities and Stockholders’ equity	$	452,748							$	434,676
Net interest income				$	4,156							$	4,060
Net interest margin							3.97	%							4.06	%
Interest spread							3.85	%							3.95	%

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(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.

47

Net Interest Margin Analysis

Average Balance Sheets

For the Nine months Ended September 30, 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)	$	359,229		$	12,863		4.79	%	$	331,198		$	12,550		5.07	%
Loans held for sale		1,463			46		4.20	%		921			25		3.63	%
Federal funds sold		2,471			13		0.70	%		8,607			24		0.37	%
Securities (3)		44,785			973		2.90	%		50,601			1,137		3.00	%
Federal agency equities		1,213			37		4.08	%		1,344			34		3.38	%
CBB equity		116			—		—			116			—		—
Total earning assets		409,277			13,932		4.55	%		392,787			13,770		4.69	%
Allowance for loan losses		(5,174	)							(5,488	)
Non-earning assets		42,935								43,774
Total assets	$	447,038							$	431,073
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand interest bearing	$	101,038		$	161		0.21	%	$	92,670		$	155		0.22	%
Savings		127,928			203		0.21	%		135,289			214		0.21	%
Time deposits		97,605			879		1.20	%		94,551			956		1.35	%
Total interest bearing deposits		326,571			1,243		0.51	%		322,510			1,325		0.55	%
Other borrowed funds
Fed funds purchased		581			4		0.92	%		16			—		—
Repurchase agreements		297			1		0.45	%		—			—		—
Other borrowings		2,000			57		3.81	%		2,000			57		3.81	%
Capital Notes		10,000			450		6.00	%		10,000			450		6.00	%
Total interest-bearing liabilities		339,449			1,755		0.69	%		334,526			1,832		0.73	%
Non-interest bearing deposits		73,930								66,317
Other liabilities		814								436
Total liabilities		414,193								401,279
Stockholders’ equity		32,845								29,794
Total liabilities and Stockholders’ equity	$	447,038							$	431,073
Net interest income				$	12,177							$	11,938
Net interest margin							3.98	%							4.06	%
Interest spread							3.86	%							3.96	%

48

(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.

49

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 three and nine months ended September 30, 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.

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

50

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 November 7, 2014
31.2	Certification of J. Todd Scruggs Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 7, 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 November 7, 2014
101	The following materials from Bank of the James Financial Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets (unaudited) as of September 30, 2014 and December 31, 2013; (ii) Consolidated Statements of Income (unaudited) for the Three and Nine months Ended September 30, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three and Nine months Ended September 30, 2014 and 2013 (iv) Consolidated Statements of Cash Flows (unaudited) for the Nine months Ended September 30, 2014 and 2013 (v) Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Nine months Ended September 30, 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.

51

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: November 7, 2014	By	/S/ Robert R. Chapman III
		Robert R. Chapman III, President
		(Principal Executive Officer)
Date: November 7, 2014	By	/S/ J. Todd Scruggs
		J. Todd Scruggs, Secretary and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

52

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 November 7, 2014
31.2	Certification of J. Todd Scruggs Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 7, 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 November 7, 2014
101	The following materials from Bank of the James Financial Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets (unaudited) as of September 30, 2014 and December 31, 2013; (ii) Consolidated Statements of Income (unaudited) for the Three and Nine months Ended September 30, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three and Nine months Ended September 30, 2014 and 2013 (iv) Consolidated Statements of Cash Flows (unaudited) for the Nine months Ended September 30, 2014 and 2013 (v) Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Nine months Ended September 30, 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.

53

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: November 7, 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: November 7, 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: November 7, 2014	By	/S/ Robert R. Chapman III
		Robert R. Chapman III, President
		(Principal Executive Officer)
Date: November 7, 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 (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014 contract	Sep. 30, 2013 contract	Sep. 30, 2014 contract	Sep. 30, 2013 contract	Dec. 31, 2013
Loans, Allowance For Loan Losses And OREO [Abstract]
Other real estate owned	$ 1,160		$ 1,160		$ 1,451
Number of loans classified as TDRs	0	0	0	0
Number of Contracts (That Subsequently Defaulted)	0	0	0	0

XML

Loans, Allowance For Loan Losses And OREO (Credit Quality Information-By Class) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	$ 378,264	$ 345,180
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	355,152	316,534
Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	5,827	8,801
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	5,676	8,675
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	11,609	11,170
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	65,050	55,803
Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	59,258	48,827
Commercial [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1,210	2,109
Commercial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	90	979
Commercial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	4,492	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	70,513	65,321
Commercial Mortgages-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	65,844	58,740
Commercial Mortgages-Owner Occupied [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1,098	2,355
Commercial Mortgages-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	308	1,356
Commercial Mortgages-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	3,263	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	111,205	94,723
Commercial Mortgages-Non-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	104,323	85,474
Commercial Mortgages-Non-Owner Occupied [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1,809	2,737
Commercial Mortgages-Non-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	4,338	5,468
Commercial Mortgages-Non-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	735	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	8,957	12,073
Commercial Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	8,073	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	4,236	4,722
Consumer Unsecured [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	4,236	4,721
Consumer Unsecured [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables		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	68,292	66,443
Consumer Secured [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	67,260	65,056
Consumer Secured [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	510	814
Consumer Secured [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	97	283
Consumer Secured [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	425	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	42,911	40,796
Residential Mortgages [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	39,149	36,962
Residential Mortgages [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	776	786
Residential Mortgages [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	843	589
Residential Mortgages [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	2,143	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	7,100	5,299
Residential Consumer Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	7,009	5,299
Residential Consumer Construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	91
Residential Consumer Construction [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables

XML

Fair Value Measurements (Fair Value Carrying And Notional Amounts) (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	$ 14,850,000	$ 16,671,000
Available-for-sale Securities	33,940,000	46,091,000
Securities Held-to-maturity	2,530,000	3,537,000
Interest receivable	1,219,000	1,360,000
BOLI	9,443,000	9,230,000
Federal funds purchased	5,976,000	4,108,000
Interest payable	58,000	65,000
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	14,850,000	16,671,000
Available-for-sale Securities
Federal funds purchased	5,976,000	4,108,000
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available-for-sale Securities	33,940,000	46,091,000
Securities Held-to-maturity	2,702,000	3,740,000
Loans held for sale	2,003,000	1,921,000
Interest receivable	1,219,000	1,360,000
BOLI	9,443,000	9,230,000
Deposits	400,006,000	388,363,000
FHLB borrowings	2,009,000	2,018,000
Capital notes	10,045,000	10,091,000
Interest payable	58,000	65,000
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available-for-sale Securities
Loans, net	378,841,000	346,658,000
Carrying Amounts [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	14,850,000	16,671,000
Available-for-sale Securities	33,940,000	46,091,000
Securities Held-to-maturity	2,530,000	3,537,000
Loans, net	373,390,000	339,994,000
Loans held for sale	2,003,000	1,921,000
Interest receivable	1,219,000	1,360,000
BOLI	9,443,000	9,230,000
Deposits	398,831,000	387,398,000
FHLB borrowings	2,000,000	2,000,000
Federal funds purchased	5,976,000	4,108,000
Capital notes	10,000,000	10,000,000
Interest payable	58,000	65,000
Fair Values [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	14,850,000	16,671,000
Available-for-sale Securities	33,940,000	46,091,000
Securities Held-to-maturity	2,702,000	3,740,000
Loans, net	378,841,000	346,658,000
Loans held for sale	2,003,000	1,921,000
Interest receivable	1,219,000	1,360,000
BOLI	9,443,000	9,230,000
Deposits	400,006,000	388,363,000
FHLB borrowings	2,009,000	2,018,000
Federal funds purchased	5,976,000	4,108,000
Capital notes	10,045,000	10,091,000
Interest payable	$ 58,000	$ 65,000

XML

Business Segments (Tables)

9 Months Ended

Sep. 30, 2014

Business Segments [Abstract]

Schedule Of Segment Reporting Information, By Segment

Business Segments
	Community
	Banking	Mortgage	Total
Nine months ended September 30, 2014
Net interest income	$       12,126	$            -	$      12,126
Provision for loan losses	55	-	55
Net interest income after provision for loan losses	12,071	-	12,071
Noninterest income	1,389	1,214	2,603
Noninterest expenses	10,071	1,034	11,105
Income before income taxes	3,389	180	3,569
Income tax expense	1,044	63	1,107
Net income	$         2,345	$        117	$        2,462
Total assets	$     449,623	$     2,063	$    451,686
Nine months ended September 30, 2013
Net interest income	$       11,845	$            -	$      11,845
Provision for loan losses	290	-	290
Net interest income after provision for loan losses	11,555	-	11,555
Noninterest income	1,684	954	2,638
Noninterest expenses	10,006	764	10,770
Income before income taxes	3,233	190	3,423
Income tax expense	960	65	1,025
Net income	$         2,273	$        125	$        2,398
Total assets	$     434,493	$        879	$    435,372
	Community
	Banking	Mortgage	Total
Three months ended September 30, 2014
Net interest income	$         4,149	$            -	$        4,149
Provision for loan losses	-	-	-
Net interest income after provision for loan losses	4,149	-	4,149
Noninterest income	411	518	929
Noninterest expenses	3,224	515	3,739
Income before income taxes	1,336	3	1,339
Income tax expense	409	16	425
Net income (loss)	$            927	$         (13)	$           914
Total assets	$     449,623	$     2,063	$    451,686
Three months ended September 30, 2013
Net interest income	$         3,967	$            -	$        3,967
Provision for loan losses	-	-	-
Net interest income after provision for loan losses	3,967	-	3,967
Noninterest income	474	295	769
Noninterest expenses	3,376	192	3,568
Income before income taxes	1,065	103	1,168
Income tax expense	332	23	355
Net income	$            733	$          80	$           813
Total assets	$     434,493	$        879	$    435,372

XML

Loans, Allowance For Loan Losses And OREO (Changes In OREO Balance) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Loans, Allowance For Loan Losses And OREO [Abstract]
Balance at the beginning of the year (net)	$ 1,451
Transfers from loans	459	710
Capitalized costs
Writedowns	(178)
Sales proceeds	(573)
Gain on disposition	1	(40)
Balance at the end of the period (net)	$ 1,160

XML

Investments (Gross Unrealized Losses And Fair Value Of The Bank's Investments) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	$ 3,508	$ 35,614
Unrealized Losses, Less than 12 months	34	2,581
Fair Value, More than 12 months	27,887	6,500
Unrealized Losses, More than 12 months	1,411	1,131
Fair Value, Total	31,395	42,114
Unrealized Losses, Total	1,445	3,712
US Treasuries [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months		3,611
Unrealized Losses, Less than 12 months		296
Fair Value, More than 12 months	3,797
Unrealized Losses, More than 12 months	117
Fair Value, Total	3,797	3,611
Unrealized Losses, Total	117	296
US Agency Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	994	14,087
Unrealized Losses, Less than 12 months	6	1,473
Fair Value, More than 12 months	16,795	5,021
Unrealized Losses, More than 12 months	1,064	963
Fair Value, Total	17,789	19,108
Unrealized Losses, Total	1,070	2,436
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months		4,830
Unrealized Losses, Less than 12 months		150
Fair Value, More than 12 months	1,951
Unrealized Losses, More than 12 months	92
Fair Value, Total	1,951	4,830
Unrealized Losses, Total	92	150
Municipals [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	1,510	11,163
Unrealized Losses, Less than 12 months	17	574
Fair Value, More than 12 months	4,348	1,479
Unrealized Losses, More than 12 months	114	168
Fair Value, Total	5,858	12,642
Unrealized Losses, Total	131	742
Other (Corporates) [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	1,004	1,923
Unrealized Losses, Less than 12 months	11	88
Fair Value, More than 12 months	996
Unrealized Losses, More than 12 months	24
Fair Value, Total	2,000	1,923
Unrealized Losses, Total	$ 35	$ 88

XML

Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) (USD $)	9 Months Ended
	Sep. 30, 2014
Consolidated Statements Of Changes In Stockholders' Equity [Abstract]
Dividend paid on common stock, per share	$ 0.10

XML

Loans, Allowance For Loan Losses And OREO (Impaired Loans) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Totals: Recorded Investment	$ 11,298	$ 10,986
Totals: Unpaid Principal Balance	13,062	12,378
Related Allowance	1,345	964
Totals: Average Recorded Investment	11,146	16,666
Totals: Interest Income Recognized	403	501
Commercial [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	2,558	3,265
With No Related Allowance Recorded: Unpaid Principal Balance	2,798	3,699
With No Related Allowance Recorded: Average Recorded Investment	2,912	2,898
With No Related Allowance Recorded: Interest Income Recognized	68	101
With An Allowance Recorded: Recorded Investment	1,806	573
With An Allowance Recorded: Unpaid Principal Balance	2,234	573
With An Allowance Recorded: Average Recorded Investment	1,190	597
With An Allowance Recorded: Interest Income Recognized	32	38
Totals: Recorded Investment	4,364	3,838
Totals: Unpaid Principal Balance	5,032	4,272
Related Allowance	832	406
Totals: Average Recorded Investment	4,102	3,495
Totals: Interest Income Recognized	100	139
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	2,300	539
With No Related Allowance Recorded: Unpaid Principal Balance	2,350	593
With No Related Allowance Recorded: Average Recorded Investment	1,420	1,566
With No Related Allowance Recorded: Interest Income Recognized	110	38
With An Allowance Recorded: Recorded Investment	1,056	2,420
With An Allowance Recorded: Unpaid Principal Balance	1,225	2,617
With An Allowance Recorded: Average Recorded Investment	1,738	3,046
With An Allowance Recorded: Interest Income Recognized	45	108
Totals: Recorded Investment	3,356	2,959
Totals: Unpaid Principal Balance	3,575	3,210
Related Allowance	60	280
Totals: Average Recorded Investment	3,158	4,612
Totals: Interest Income Recognized	155	146
Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	712	1,003
With No Related Allowance Recorded: Unpaid Principal Balance	712	1,003
With No Related Allowance Recorded: Average Recorded Investment	858	3,686
With No Related Allowance Recorded: Interest Income Recognized	32	47
With An Allowance Recorded: Recorded Investment	306	220
With An Allowance Recorded: Unpaid Principal Balance	306	221
With An Allowance Recorded: Average Recorded Investment	263	530
With An Allowance Recorded: Interest Income Recognized	12	15
Totals: Recorded Investment	1,018	1,223
Totals: Unpaid Principal Balance	1,018	1,224
Related Allowance	33	14
Totals: Average Recorded Investment	1,121	4,216
Totals: Interest Income Recognized	44	62
Commercial Construction [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	84	751
With No Related Allowance Recorded: Unpaid Principal Balance	531	1,274
With No Related Allowance Recorded: Average Recorded Investment	418	746
With No Related Allowance Recorded: Interest Income Recognized		8
With An Allowance Recorded: Recorded Investment	376
With An Allowance Recorded: Unpaid Principal Balance	644
With An Allowance Recorded: Average Recorded Investment	188	412
Totals: Recorded Investment	460	751
Totals: Unpaid Principal Balance	1,175	1,274
Related Allowance	17
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	1
With An Allowance Recorded: Recorded Investment	119	40
With An Allowance Recorded: Unpaid Principal Balance	119	40
With An Allowance Recorded: Average Recorded Investment	80	285
With An Allowance Recorded: Interest Income Recognized	6	3
Totals: Recorded Investment	140	61
Totals: Unpaid Principal Balance	140	61
Related Allowance	119	40
Totals: Average Recorded Investment	101	530
Totals: Interest Income Recognized	7	4
Residential Mortgages [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	463	470
With No Related Allowance Recorded: Unpaid Principal Balance	463	517
With No Related Allowance Recorded: Average Recorded Investment	467	1,304
With No Related Allowance Recorded: Interest Income Recognized	47	24
With An Allowance Recorded: Recorded Investment	1,497	1,684
With An Allowance Recorded: Unpaid Principal Balance	1,659	1,820
With An Allowance Recorded: Average Recorded Investment	1,591	1,350
With An Allowance Recorded: Interest Income Recognized	50	118
Totals: Recorded Investment	1,960	2,154
Totals: Unpaid Principal Balance	2,122	2,337
Related Allowance	284	224
Totals: Average Recorded Investment	2,058	2,654
Totals: Interest Income Recognized	97	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

Stock Based Compensation (Details) (USD $)	9 Months Ended
	Sep. 30, 2014
Stock Based Compensation [Abstract]
Options outstanding, January 1, 2014, Shares	111,371
Granted, Shares
Exercised, Shares
Forfeited, Shares	(1,224)
Options outstanding, September 30, 2014, Shares	110,147
Options exercisable, September 30, 2014, Shares	110,147
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	$ 10.23
Options outstanding, September 30, 2014, Weighted Average Exercise Price	$ 10.74
Options exercisable, September 30, 2014, Weighted Average Exercise Price	$ 10.74
Options outstanding, September 30, 2014, Weighted Average Remaining Contractual Life (in years)	9 months 18 days
Options exercisable, September 30, 2014, Weighted Average Remaining Contractual Life (in years)	9 months 18 days

XML

Earnings Per Share (Schedule Of Antidilutive Securities Excluded From Computation Of Earnings Per Share) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share [Abstract]
Incremental shares excluded from calculating diluted EPS because their effect was anti-dilutive	110,147	113,294	110,645	168,069

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	9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 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	(427)		(1,105)
Allowance for Credit Losses: Recoveries	60		216
Allowance for credit losses: Provision	55	290	540
Allowance for Credit Losses: Ending Balance	4,874		5,186
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	1,345		964
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	3,529		4,222
Allowance for Credit Losses: Totals	4,874		5,186
Financing Receivables: Ending Balance: Individually evaluated for impairment	11,298		10,986
Financing Receivables: Ending Balance: Collectively evaluated for impairment	366,966		334,194
Total Financing Receivables	378,264		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	(165)		(19)
Allowance for Credit Losses: Recoveries	27		37
Allowance for credit losses: Provision	473		10
Allowance for Credit Losses: Ending Balance	1,350		1,015
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	832		406
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	518		609
Allowance for Credit Losses: Totals	1,350		1,015
Financing Receivables: Ending Balance: Individually evaluated for impairment	4,364		3,838
Financing Receivables: Ending Balance: Collectively evaluated for impairment	60,686		51,965
Total Financing Receivables	65,050		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	(188)		(932)
Allowance for Credit Losses: Recoveries	9		42
Allowance for credit losses: Provision	(490)		672
Allowance for Credit Losses: Ending Balance	1,962		2,631
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	110		294
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	1,852		2,337
Allowance for Credit Losses: Totals	1,962		2,631
Financing Receivables: Ending Balance: Individually evaluated for impairment	4,834		4,933
Financing Receivables: Ending Balance: Collectively evaluated for impairment	185,841		167,184
Total Financing Receivables	190,675		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	(34)		(126)
Allowance for Credit Losses: Recoveries	24		137
Allowance for credit losses: Provision	(182)		(133)
Allowance for Credit Losses: Ending Balance	743		935
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	119		40
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	624		895
Allowance for Credit Losses: Totals	743		935
Financing Receivables: Ending Balance: Individually evaluated for impairment	140		61
Financing Receivables: Ending Balance: Collectively evaluated for impairment	72,388		71,104
Total Financing Receivables	72,528		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	(40)		(28)
Allowance for credit losses: Provision	254		(9)
Allowance for Credit Losses: Ending Balance	819		605
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment	284		224
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment	535		381
Allowance for Credit Losses: Totals	819		605
Financing Receivables: Ending Balance: Individually evaluated for impairment	1,960		2,154
Financing Receivables: Ending Balance: Collectively evaluated for impairment	48,051		43,941
Total Financing Receivables	$ 50,011		$ 46,095

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Fair Value Measurements (Fair Value Assets Measured On Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	$ 33,940	$ 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	33,940	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	3,797	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	3,797	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	17,789	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	17,789	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	1,951	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	1,951	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	8,403	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	8,403	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	2,000	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	2,000	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

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	Sep. 30, 2014		Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	$ 4,842	[1]	$ 4,307	[1]
Loans held for sale	2,003		1,921
Other real estate owned	1,160		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	2,003		1,921
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	4,842	[1]	4,307	[1]
Loans held for sale
Other real estate owned	$ 1,160		$ 1,451

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

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 Income (Loss) [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			2,398		2,398
Other Comprehensive Income (Loss)				(2,773)	(2,773)
Balance at Sep. 30, 2013	7,175	22,806	1,462	(2,205)	29,238
Balance, shares at Sep. 30, 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
Net Income			2,462		2,462
Dividends paid on common stock (total of $0.10 per share year-to-date)			(336)		(336)
Other Comprehensive Income (Loss)				1,538	1,538
Balance at Sep. 30, 2014	$ 7,201	$ 22,868	$ 4,250	$ (883)	$ 33,436
Balance, shares at Sep. 30, 2014	3,364,874

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	9 Months Ended
	Sep. 30, 2014
Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value	$ 4,842
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	$ 1,160
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

Loans, Allowance For Loan Losses And OREO (Summary Of Loans, Net) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Loans, Allowance For Loan Losses And OREO [Abstract]
Commercial	$ 65,050	$ 55,803
Commercial real estate	190,675	172,117
Consumer	72,528	71,165
Residential	50,011	46,095
Total Financing Receivables	378,264	345,180
Less allowance for loan losses	4,874	5,186
Net loans	$ 373,390	$ 339,994

XML

Consolidated Balance Sheets (USD $)	Sep. 30, 2014	Dec. 31, 2013
Assets
Cash and due from banks	$ 14,850,000	$ 16,671,000
Securities held-to-maturity (fair value of $2,702 in 2014 and $3,740 in 2013)	2,530,000	3,537,000
Securities available-for-sale, at fair value	33,940,000	46,091,000
Restricted stock, at cost	1,289,000	1,428,000
Loans, net of allowance for loan losses of $4,874 in 2014 and $5,186 in 2013	373,390,000	339,994,000
Loans held for sale	2,003,000	1,921,000
Premises and equipment, net	8,177,000	8,408,000
Software, net	384,000	268,000
Interest receivable	1,219,000	1,360,000
Cash value - bank owned life insurance	9,443,000	9,230,000
Other real estate owned, net of valuation allowance	1,160,000	1,451,000
Income taxes receivable	415,000	448,000
Deferred tax asset, net	1,836,000	2,628,000
Other assets	1,050,000	1,076,000
Total assets	451,686,000	434,511,000
Deposits
Noninterest bearing demand	77,507,000	63,256,000
NOW, money market and savings	224,257,000	226,709,000
Time	97,067,000	97,433,000
Total deposits	398,831,000	387,398,000
Federal funds purchased	5,976,000	4,108,000
FHLB borrowings	2,000,000	2,000,000
Capital notes	10,000,000	10,000,000
Interest payable	58,000	65,000
Other liabilities	1,385,000	1,168,000
Total liabilities	418,250,000	404,739,000
Stockholders' equity
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 3,364,874 as of September 30, 2014 and December 31, 2013	7,201,000	7,201,000
Preferred stock; authorized 1,000,000 shares; 0 issued and outstanding as of September 30, 2014 and December 31, 2013
Additional paid-in-capital	22,868,000	22,868,000
Accumulated other comprehensive income (loss)	(883,000)	(2,421,000)
Retained earnings	4,250,000	2,124,000
Total stockholders' equity	33,436,000	29,772,000
Total liabilities and stockholders' equity	$ 451,686,000	$ 434,511,000

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Loans, Allowance For Loan Losses And OREO (Age Analysis Of Past Due Financing Receivables) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	$ 1,740	$ 2,364
60 - 89 Days Past Due	1,770	95
Greater than 90 Days	3,172	2,671
Total Past Due	6,682	5,130
Current	371,582	340,050
Total Financing Receivables	378,264	345,180
Recorded Investment > 90 Days & Accruing
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	88	389
60 - 89 Days Past Due	94
Greater than 90 Days	2,116	1,586
Total Past Due	2,298	1,975
Current	62,752	53,828
Total Financing Receivables	65,050	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	646	1,099
60 - 89 Days Past Due	857
Greater than 90 Days	212	409
Total Past Due	1,715	1,508
Current	68,798	63,813
Total Financing Receivables	70,513	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		96
60 - 89 Days Past Due	55
Greater than 90 Days	72	85
Total Past Due	127	181
Current	111,078	94,542
Total Financing Receivables	111,205	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	8,497	11,698
Total Financing Receivables	8,957	12,073
Recorded Investment > 90 Days & Accruing
Consumer Unsecured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	32	5
Total Past Due	32	5
Current	4,204	4,717
Total Financing Receivables	4,236	4,722
Recorded Investment > 90 Days & Accruing
Consumer Secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	379	71
60 - 89 Days Past Due	107
Greater than 90 Days		33
Total Past Due	486	104
Current	67,806	66,339
Total Financing Receivables	68,292	66,443
Recorded Investment > 90 Days & Accruing
Residential Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	595	704
60 - 89 Days Past Due	657
Greater than 90 Days	312	183
Total Past Due	1,564	887
Current	41,347	39,909
Total Financing Receivables	42,911	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
Total Past Due		95
Current	7,100	5,204
Total Financing Receivables	7,100	5,299
Recorded Investment > 90 Days & Accruing

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Consolidated Statements Of Comprehensive Income (Loss) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Consolidated Statements Of Comprehensive Income (Loss) [Abstract]
Unrealized (losses) gains on securities available-for-sale, deferred tax	$ 33		$ (319)		$ 821		$ (1,290)
Reclassification adjustment for gains (loss) included in net income, tax	$ (2)	[1]	$ (4)	[1]	$ (29)	[1]	$ (138)	[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 (Narrative) (Details)	Sep. 30, 2014 security
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	31
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	14
US Corporation [Member]
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	2
S&P Rated AAA [Member]
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	8
S&P Rated AA [Member]
Number Of Securities Evaluated For Other Than Temporary Impairment [Line Items]
Securities evaluated for other than temporary impairment	22
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)

9 Months Ended

Sep. 30, 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	(1,224)	10.23
Options outstanding, September 30, 2014	110,147	10.74	0.8	$              -
Options exercisable, September 30, 2014	110,147	$      10.74	0.8	$              -

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Investments (Summary Of Securities Held-To-Maturity And Securities Available-For-Sale) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Held-to-Maturity, Fair Value	$ 2,702	$ 3,740
Available-for-Sale, Amortized Costs	35,276	49,757
Available-for-Sale, Gross Unrealized Gains	109	46
Available-for-Sale, Gross Unrealized (Losses)	(1,445)	(3,712)
Available-for-sale, Fair Value	33,940	46,091
US Treasuries [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	3,914	3,907
Available-for-Sale, Gross Unrealized (Losses)	(117)	(296)
Available-for-sale, Fair Value	3,797	3,611
US Agency Obligations [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	18,859	22,544
Available-for-Sale, Gross Unrealized (Losses)	(1,070)	(2,436)
Available-for-sale, Fair Value	17,789	20,108
Mortgage-Backed Securities [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	2,043	5,450
Available-for-Sale, Gross Unrealized Gains		11
Available-for-Sale, Gross Unrealized (Losses)	(92)	(150)
Available-for-sale, Fair Value	1,951	5,311
Municipals [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	8,425	15,845
Available-for-Sale, Gross Unrealized Gains	109	35
Available-for-Sale, Gross Unrealized (Losses)	(131)	(742)
Available-for-sale, Fair Value	8,403	15,138
Other (Corporates) [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	2,035	2,011
Available-for-Sale, Gross Unrealized (Losses)	(35)	(88)
Available-for-sale, Fair Value	2,000	1,923
US Agency Obligations [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Held-to-Maturity, Amortized Costs	2,530	3,537
Held-to-Maturity, Gross Unrealized Gains	172	203
Held-to-Maturity, Fair Value	$ 2,702	$ 3,740

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Investments (Tables)

9 Months Ended

Sep. 30, 2014

Investments [Abstract]

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

		September 30, 2014
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$ 2,530	$ 172	$      -	$ 2,702
Available-for-Sale
US Treasuries	$ 3,914	$     -	$ (117)	$ 3,797
US agency obligations	18,859	-	(1,070)	17,789
Mortgage-backed securities	2,043	-	(92)	1,951
Municipals	8,425	109	(131)	8,403
Other (corporates)	2,035	-	(35)	2,000
	$ 35,276	$ 109	$ (1,445)	$ 33,940
		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
September 30, 2014	Value	Losses	Value	Losses	Value	Losses
Description of securities
US Treasuries	$    -	$     -	$ 3,797	$ 117	$ 3,797	$ 117
U.S. agency obligations	994	6	16,795	1,064	17,789	1,070
Mortgage-backed securities	-	-	1,951	92	1,951	92
Municipals	1,510	17	4,348	114	5,858	131
Other (corporates)	1,004	11	996	24	2,000	35
Total	$ 3,508	$ 34	$ 27,887	$ 1,411	$ 31,395	$ 1,445
	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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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Cash flows from operating activities
Net Income	$ 2,462	$ 2,398
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	546	521
Net amortization and accretion of premiums and discounts on securities	199	260
(Gain) on sale of available for sale securities	(86)	(405)
(Gain) on sale of assets	(3)
Provision for loan losses	55	290	540
(Gain) loss on sale of other real estate owned	(1)	40
Impairment of other real estate owned	178	304
(Increase) decrease in loans held-for-sale	(82)	105
(Increase) in cash value of life insurance	(213)	(226)
Decrease in interest receivable	141	248
Decrease in other assets	26	204
Decrease in income taxes receivable	33	2
(Decrease) in interest payable	(7)	(3)
Increase in other liabilities	217	256
Net cash provided by operating activities	3,465	3,994
Cash flows from investing activities
Purchases of securities held to maturity		(485)
Proceeds from maturities and calls of securities held to maturity	1,000
Purchases of securities available for sale	(3,139)	(25,162)
Proceeds from maturities, calls and paydowns of securities available-for-sale	120	2,188
Proceeds from sale of securities available for sale	17,394	22,418
Redemption of Federal Home Loan Bank stock	139	110
Proceeds from sale of other real estate owned	318	777
Origination of loans, net of principal collected	(33,655)	(11,550)
Proceeds from sale of fixed assets	3
Purchases of premises and equipment	(431)	(616)
Net cash (used in) investing activities	(18,251)	(12,320)
Cash flows from financing activities
Net increase (decrease) in deposits	11,433	(5,887)
Net increase in federal funds purchased	1,868
Dividends paid to common stockholders	(336)
Net cash provided by (used in) financing activities	12,965	(5,887)
(Decrease) in cash and cash equivalents	(1,821)	(14,213)
Cash and cash equivalents at beginning of period	16,671	40,998	40,998
Cash and cash equivalents at end of period	14,850	26,785	16,671
Non cash transactions
Transfer of loans to foreclosed assets	459	710
Portion of foreclosed assets financed	255	347
Fair value adjustment for securities	2,330	(4,201)
Cash transactions
Cash paid for interest	1,762	1,835
Cash paid for taxes	$ 1,075	$ 1,023

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Consolidated Balance Sheets [Abstract]
Securities held-to-maturity	$ 2,702	$ 3,740
Loans, allowance for loan losses	$ 4,874	$ 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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Business Segments

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2014 and 2013 was as follows (dollars in thousands):

Note 8 – Business Segments (continued)

Business Segments
	Community
	Banking	Mortgage	Total
Nine months ended September 30, 2014
Net interest income	$       12,126	$            -	$      12,126
Provision for loan losses	55	-	55
Net interest income after provision for loan losses	12,071	-	12,071
Noninterest income	1,389	1,214	2,603
Noninterest expenses	10,071	1,034	11,105
Income before income taxes	3,389	180	3,569
Income tax expense	1,044	63	1,107
Net income	$         2,345	$        117	$        2,462
Total assets	$     449,623	$     2,063	$    451,686
Nine months ended September 30, 2013
Net interest income	$       11,845	$            -	$      11,845
Provision for loan losses	290	-	290
Net interest income after provision for loan losses	11,555	-	11,555
Noninterest income	1,684	954	2,638
Noninterest expenses	10,006	764	10,770
Income before income taxes	3,233	190	3,423
Income tax expense	960	65	1,025
Net income	$         2,273	$        125	$        2,398
Total assets	$     434,493	$        879	$    435,372
	Community
	Banking	Mortgage	Total
Three months ended September 30, 2014
Net interest income	$         4,149	$            -	$        4,149
Provision for loan losses	-	-	-
Net interest income after provision for loan losses	4,149	-	4,149
Noninterest income	411	518	929
Noninterest expenses	3,224	515	3,739
Income before income taxes	1,336	3	1,339
Income tax expense	409	16	425
Net income (loss)	$            927	$         (13)	$           914
Total assets	$     449,623	$     2,063	$    451,686
Three months ended September 30, 2013
Net interest income	$         3,967	$            -	$        3,967
Provision for loan losses	-	-	-
Net interest income after provision for loan losses	3,967	-	3,967
Noninterest income	474	295	769
Noninterest expenses	3,376	192	3,568
Income before income taxes	1,065	103	1,168
Income tax expense	332	23	355
Net income	$            733	$          80	$           813
Total assets	$     434,493	$        879	$    435,372

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Document And Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 07, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014
Document Fiscal Period Focus	Q3
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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Loans, Allowance For Loan Losses And OREO

9 Months Ended

Sep. 30, 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:
	September 30,	December 31,
	2014	2013
Commercial	$ 65,050	$ 55,803
Commercial real estate	190,675	172,117
Consumer	72,528	71,165
Residential	50,011	46,095
Total loans	378,264	345,180
Less allowance for loan losses	4,874	5,186
Net loans	$ 373,390	$ 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
	September 30, 2014	December 31, 2013
Commercial	$ 2,116	$ 1,585
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	212	537
Commercial Mortgages-Non-Owner Occupied	72	353
Commercial Construction	460	375
Consumer
Consumer Unsecured	-	-
Consumer Secured	-	33
Residential:
Residential Mortgages	312	183
Residential Consumer Construction	91	-
Totals	$ 3,263	$ 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 decreased to $1,160,000 on September 30, 2014 from $1,451,000 on December 31, 2013.   The following table represents the changes in OREO balance during the nine months ended September 30, 2014.

OREO Changes
(dollars in thousands)
	Nine Months ended
	September 30, 2014
Balance at the beginning of the year (net)	$ 1,451
Transfers from loans	459
Capitalized costs	-
Writedowns	(178)
Sales proceeds	(573)
Gain on disposition	1
Balance at the end of the period (net)	$ 1,160

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

	Impaired Loans
	(dollars in thousands)
	As of and For the Nine Months Ended September 30, 2014
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2014	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$2,558	$ 2,798	$      -	$ 2,912	$ 68
Commercial Real Estate
Commercial Mortgages-Owner Occupied	2,300	2,350	-	1,420	110
Commercial Mortgage Non-Owner Occupied	712	712	-	858	32
Commercial Construction	84	531	-	418	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	21	21	-	21	1
Residential
Residential Mortgages	463	463	-	467	47
Residential Consumer Construction	-	-	-	-	-
With An Allowance Recorded:
Commercial	$ 1,806	$ 2,234	$ 832	$ 1,190	$ 32
Commercial Real Estate
Commercial Mortgages-Owner Occupied	1,056	1,225	60	1,738	45
Commercial Mortgage Non-Owner Occupied	306	306	33	263	12
Commercial Construction	376	644	17	188	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	119	119	119	80	6
Residential
Residential Mortgages	1,497	1,659	284	1,591	50
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$ 4,364	$ 5,032	$ 832	$ 4,102	$ 100
Commercial Real Estate
Commercial Mortgages-Owner Occupied	3,356	3,575	60	3,158	155
Commercial Mortgage Non-Owner Occupied	1,018	1,018	33	1,121	44
Commercial Construction	460	1,175	17	606	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	140	140	119	101	7
Residential
Residential Mortgages	1,960	2,122	284	2,058	97
Residential Consumer Construction	-	-	-	-	-
	$ 11,298	$ 13,062	$ 1,345	$ 11,146	$ 403

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

	Impaired Loans
	(dollars in thousands)
	As of and 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 Nine Months Ended September 30, 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	(165)	(188)	(34)	(40)	(427)
Recoveries	27	9	24	-	60
Provision	473	(490)	(182)	254	55
Ending Balance	$ 1,350	$ 1,962	$ 743	$ 819	$ 4,874
Ending Balance: Individually evaluated for impairment	$ 832	$ 110	$ 119	$ 284	$ 1,345
Ending Balance: Collectively evaluated for impairment	518	1,852	624	535	3,529
Totals:	$ 1,350	$ 1,962	$ 743	$ 819	$ 4,874
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$ 4,364	$ 4,834	$ 140	$ 1,960	$ 11,298
Ending Balance: Collectively evaluated for impairment	60,686	185,841	72,388	48,051	366,966
Totals:	$ 65,050	$ 190,675	$ 72,528	$ 50,011	$ 378,264

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
	September 30, 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	$ 88	$ 94	$ 2,116	$ 2,298	$ 62,752	$ 65,050	$     -
Commercial Real Estate:
Commercial Mortgages-   Owner Occupied	646	857	212	1,715	68,798	70,513	-
Commercial Mortgages-Non-Owner Occupied	-	55	72	127	111,078	111,205	-
Commercial Construction	-	-	460	460	8,497	8,957	-
Consumer:
Consumer Unsecured	32	-	-	32	4,204	4,236	-
Consumer Secured	379	107	-	486	67,806	68,292	-
Residential:
Residential Mortgages	595	657	312	1,564	41,347	42,911	-
Residential Consumer Construction	-	-	-	-	7,100	7,100	-
Total	$ 1,740	$ 1,770	$ 3,172	$ 6,682	$ 371,582	$ 378,264	$  -

	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
	September 30, 2014
	(dollars in thousands)
2014	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$ 59,258	$ 1,210	$ 90	$ 4,492	$   -	$ 65,050
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	65,844	1,098	308	3,263	-	70,513
Commercial Mortgages-Non Owner Occupied	104,323	1,809	4,338	735	-	111,205
Commercial Construction	8,073	424	-	460	-	8,957
Consumer
Consumer Unsecured	4,236	-	-	-	-	4,236
Consumer Secured	67,260	510	97	425	-	68,292
Residential:
Residential Mortgages	39,149	776	843	2,143	-	42,911
Residential Consumer Construction	7,009	-	-	91	-	7,100
Totals	$ 355,152	$ 5,827	$ 5,676	$ 11,609	$-	$ 378,264

	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 and nine months ended September 30, 2014 and 2013.

There were no loan modifications classified as TDRs within the last twelve months that defaulted during the three and nine months ended September 30, 2014 and 2013.

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Consolidated Statements Of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Interest Income
Loans	$ 4,453	$ 4,213	$ 12,909	$ 12,575
Securities
US Government and agency obligations	172	182	526	544
Mortgage backed securities	13	25	71	39
Municipals	71	124	291	417
Dividends	5	4	37	34
Other (Corporates)	8	16	34	44
Federal Funds sold	4	9	13	24
Total interest income	4,726	4,573	13,881	13,677
Deposits
NOW, money market savings	125	121	364	369
Time Deposits	281	316	879	956
Federal Funds purchased	2		4
FHLB borrowings	19	19	57	57
Reverse repurchase agreements			1
Capital notes	150	150	450	450
Total interest expense	577	606	1,755	1,832
Net interest income	4,149	3,967	12,126	11,845
Provision for loan losses			55	290
Net interest income after provision for loan losses	4,149	3,967	12,071	11,555
Other Operating Income
Mortgage fee income	518	295	1,214	954
Service charges, fees and commissions	322	351	1,036	979
Increase in cash value of life insurance	70	75	213	226
Other	13	37	54	74
Gain on sale of available-for-sale securities, net	6	11	86	405
Total other operating income	929	769	2,603	2,638
Other operating expenses
Salaries and employee benefits	1,978	1,755	5,767	5,257
Occupancy	287	302	912	892
Equipment	322	259	937	760
Supplies	92	84	294	267
Professional, data processing, and other outside expense	593	582	1,768	1,712
Marketing	113	93	342	274
Credit expense	80	55	167	174
Other real estate expenses	9	60	166	400
FDIC insurance expense	77	143	184	430
Other	188	235	568	604
Total other operating expenses	3,739	3,568	11,105	10,770
Income before income taxes	1,339	1,168	3,569	3,423
Income tax expense	425	355	1,107	1,025
Net Income	$ 914	$ 813	$ 2,462	$ 2,398
Weighted average shares outstanding - basic	3,364,874	3,352,725	3,364,874	3,352,725
Weighted average shares outstanding- diluted	3,364,874	3,356,874	3,364,874	3,354,290
Income per common share - basic	$ 0.27	$ 0.24	$ 0.73	$ 0.72
Income per common share - diluted	$ 0.27	$ 0.24	$ 0.73	$ 0.71

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Earnings Per Share

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2014 and 2013.

Note 3 – Earnings Per Share (continued)

	Three Months Ended		Year to date
	September 30,		September 30,
	2014	2013	2014	2013
Net income	$        914,000	$        813,000	$     2,462,000	$     2,398,000
Weighted average number of shares	3,364,874	3,352,725	3,364,874	3,352,725
Options affect of incremental shares	-	4,149	-	1,565
Weighted average diluted shares	3,364,874	3,356,874	3,364,874	3,354,290
Basic EPS (weighted avg shares)	$              0.27	$              0.24	$              0.73	$              0.72
Diluted EPS (Including Option Shares)	$              0.27	$              0.24	$              0.73	$              0.71

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		Nine months ended
	September 30,		September 30,
	2014	2013	2014	2013
Incremental shares excluded from calculating diluted EPS because their effect was anti-dilutive	110,147	113,294	110,645	168,069

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Use Of Estimates

9 Months Ended

Sep. 30, 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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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Measurements [Abstract]

Fair Value Assets Measured On Recurring Basis

		Carrying Value at September 30, 2014
Description	Balance as of September 30, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US Treasuries	$ 3,797	$       -	$ 3,797	$       -
US agency obligations	17,789	-	17,789	-
Mortgage-backed securities	1,951	-	1,951	-
Municipals	8,403	-	8,403	-
Other (corporates)	2,000	-	2,000	-
Total available-for-sale securities	$ 33,940	$       -	$ 33,940	$       -
		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 September 30, 2014
Description	Balance as of September 30, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$ 4,842	$     -	$          -	$ 4,842
Loans held for sale	2,003	-	2,003	-
Other real estate owned	1,160	-	-	1,160

*  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 September 30, 2014 (dollars in thousands)
	Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$ 4,842	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)
OREO	1,160	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 September 30, 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	$ 14,850		$ 14,850	$      -	$      -	$ 14,850
Securities
Available-for-sale	33,940		-	33,940	-	33,940
Held-to-maturity	2,530		-	2,702	-	2,702
Loans, net	373,390		-	-	378,841	378,841
Loans held for sale	2,003		-	2,003	-	2,003
Interest receivable	1,219		-	1,219	-	1,219
BOLI	9,443		-	9,443	-	9,443
Liabilities
Deposits	$ 398,831		$      -	$ 400,006	$      -	$ 400,006
FHLB borrowings	2,000		-	2,009	-	2,009
Federal funds purchased	5,976		5,976	-	-	5,976
Capital notes	10,000		-	10,045	-	10,045
Interest payable	58		-	58	-	58

		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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Subsequent Events

9 Months Ended

Sep. 30, 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.

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Capital Notes

9 Months Ended

Sep. 30, 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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Stock Based Compensation

9 Months Ended

Sep. 30, 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 nine months ended September 30, 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	(1,224)	10.23
Options outstanding, September 30, 2014	110,147	10.74	0.8	$              -
Options exercisable, September 30, 2014	110,147	$      10.74	0.8	$              -

Intrinsic value is calculated by subtracting the exercise price of option shares from the market price of underlying shares as of September 30, 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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Fair Value Measurements

9 Months Ended

Sep. 30, 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 September 30, 2014
Description	Balance as of September 30, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US Treasuries	$ 3,797	$       -	$ 3,797	$       -
US agency obligations	17,789	-	17,789	-
Mortgage-backed securities	1,951	-	1,951	-
Municipals	8,403	-	8,403	-
Other (corporates)	2,000	-	2,000	-
Total available-for-sale securities	$ 33,940	$       -	$ 33,940	$       -
		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 September 30, 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 September 30, 2014
Description	Balance as of September 30, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$ 4,842	$     -	$          -	$ 4,842
Loans held for sale	2,003	-	2,003	-
Other real estate owned	1,160	-	-	1,160

*  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 September 30, 2014 (dollars in thousands)
	Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$ 4,842	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)
OREO	1,160	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 September 30, 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 September 30, 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	$ 14,850		$ 14,850	$      -	$      -	$ 14,850
Securities
Available-for-sale	33,940		-	33,940	-	33,940
Held-to-maturity	2,530		-	2,702	-	2,702
Loans, net	373,390		-	-	378,841	378,841
Loans held for sale	2,003		-	2,003	-	2,003
Interest receivable	1,219		-	1,219	-	1,219
BOLI	9,443		-	9,443	-	9,443
Liabilities
Deposits	$ 398,831		$      -	$ 400,006	$      -	$ 400,006
FHLB borrowings	2,000		-	2,009	-	2,009
Federal funds purchased	5,976		5,976	-	-	5,976
Capital notes	10,000		-	10,045	-	10,045
Interest payable	58		-	58	-	58

		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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Investments

9 Months Ended

Sep. 30, 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 September 30, 2014 and December 31, 2013 (amounts in thousands):

		September 30, 2014
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$ 2,530	$ 172	$      -	$ 2,702
Available-for-Sale
US Treasuries	$ 3,914	$     -	$ (117)	$ 3,797
US agency obligations	18,859	-	(1,070)	17,789
Mortgage-backed securities	2,043	-	(92)	1,951
Municipals	8,425	109	(131)	8,403
Other (corporates)	2,035	-	(35)	2,000
	$ 35,276	$ 109	$ (1,445)	$ 33,940
		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 September 30, 2014 and December 31, 2013(amounts in thousands):

	Less than 12 months		More than 12 months		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
September 30, 2014	Value	Losses	Value	Losses	Value	Losses
Description of securities
US Treasuries	$    -	$     -	$ 3,797	$ 117	$ 3,797	$ 117
U.S. agency obligations	994	6	16,795	1,064	17,789	1,070
Mortgage-backed securities	-	-	1,951	92	1,951	92
Municipals	1,510	17	4,348	114	5,858	131
Other (corporates)	1,004	11	996	24	2,000	35
Total	$ 3,508	$ 34	$ 27,887	$ 1,411	$ 31,395	$ 1,445
	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 September 30, 2014, the Company did not consider the unrealized losses as other-than-temporary losses due to the nature of the securities involved.  As of September 30, 2014, the Bank owned 31 securities that were being evaluated for other than temporary impairment.  Eight of these securities were S&P rated AAA, 22 were S&P rated AA, and one was S&P rated A.  As of September 30, 2014,  15 of these securities were direct obligations of the U.S. government or government sponsored entities, 14 were municipal issues, and two  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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Capital Notes (Details) (USD $)	1 Months Ended	3 Months Ended	9 Months Ended
	Apr. 30, 2012	Sep. 30, 2012	Sep. 30, 2014
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

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share

	Three Months Ended		Year to date
	September 30,		September 30,
	2014	2013	2014	2013
Net income	$        914,000	$        813,000	$     2,462,000	$     2,398,000
Weighted average number of shares	3,364,874	3,352,725	3,364,874	3,352,725
Options affect of incremental shares	-	4,149	-	1,565
Weighted average diluted shares	3,364,874	3,356,874	3,364,874	3,354,290
Basic EPS (weighted avg shares)	$              0.27	$              0.24	$              0.73	$              0.72
Diluted EPS (Including Option Shares)	$              0.27	$              0.24	$              0.73	$              0.71

Schedule Of Antidilutive Securities Excluded From Computation Of Earnings Per Share

	Three months ended		Nine months ended
	September 30,		September 30,
	2014	2013	2014	2013
Incremental shares excluded from calculating diluted EPS because their effect was anti-dilutive	110,147	113,294	110,645	168,069

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Loans, Allowance For Loan Losses And OREO (Tables)

9 Months Ended

Sep. 30, 2014

Loans, Allowance For Loan Losses And OREO [Abstract]

Summary Of Loans, Net

	As of:
	September 30,	December 31,
	2014	2013
Commercial	$ 65,050	$ 55,803
Commercial real estate	190,675	172,117
Consumer	72,528	71,165
Residential	50,011	46,095
Total loans	378,264	345,180
Less allowance for loan losses	4,874	5,186
Net loans	$ 373,390	$ 339,994

Financing Receivables On Non-Accrual Status

Financing Receivables on Non-Accrual Status
(dollars in thousands)
	As of
	September 30, 2014	December 31, 2013
Commercial	$ 2,116	$ 1,585
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	212	537
Commercial Mortgages-Non-Owner Occupied	72	353
Commercial Construction	460	375
Consumer
Consumer Unsecured	-	-
Consumer Secured	-	33
Residential:
Residential Mortgages	312	183
Residential Consumer Construction	91	-
Totals	$ 3,263	$ 3,066

Changes In OREO Balance

OREO Changes
(dollars in thousands)
	Nine Months ended
	September 30, 2014
Balance at the beginning of the year (net)	$ 1,451
Transfers from loans	459
Capitalized costs	-
Writedowns	(178)
Sales proceeds	(573)
Gain on disposition	1
Balance at the end of the period (net)	$ 1,160

Impaired Loans

	Impaired Loans
	(dollars in thousands)
	As of and For the Nine Months Ended September 30, 2014
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2014	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$2,558	$ 2,798	$      -	$ 2,912	$ 68
Commercial Real Estate
Commercial Mortgages-Owner Occupied	2,300	2,350	-	1,420	110
Commercial Mortgage Non-Owner Occupied	712	712	-	858	32
Commercial Construction	84	531	-	418	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	21	21	-	21	1
Residential
Residential Mortgages	463	463	-	467	47
Residential Consumer Construction	-	-	-	-	-
With An Allowance Recorded:
Commercial	$ 1,806	$ 2,234	$ 832	$ 1,190	$ 32
Commercial Real Estate
Commercial Mortgages-Owner Occupied	1,056	1,225	60	1,738	45
Commercial Mortgage Non-Owner Occupied	306	306	33	263	12
Commercial Construction	376	644	17	188	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	119	119	119	80	6
Residential
Residential Mortgages	1,497	1,659	284	1,591	50
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$ 4,364	$ 5,032	$ 832	$ 4,102	$ 100
Commercial Real Estate
Commercial Mortgages-Owner Occupied	3,356	3,575	60	3,158	155
Commercial Mortgage Non-Owner Occupied	1,018	1,018	33	1,121	44
Commercial Construction	460	1,175	17	606	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	140	140	119	101	7
Residential
Residential Mortgages	1,960	2,122	284	2,058	97
Residential Consumer Construction	-	-	-	-	-
	$ 11,298	$ 13,062	$ 1,345	$ 11,146	$ 403

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

	Impaired Loans
	(dollars in thousands)
	As of and 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 Nine Months Ended September 30, 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	(165)	(188)	(34)	(40)	(427)
Recoveries	27	9	24	-	60
Provision	473	(490)	(182)	254	55
Ending Balance	$ 1,350	$ 1,962	$ 743	$ 819	$ 4,874
Ending Balance: Individually evaluated for impairment	$ 832	$ 110	$ 119	$ 284	$ 1,345
Ending Balance: Collectively evaluated for impairment	518	1,852	624	535	3,529
Totals:	$ 1,350	$ 1,962	$ 743	$ 819	$ 4,874
Financing Receivables:
Ending Balance: Individually evaluated for impairment	$ 4,364	$ 4,834	$ 140	$ 1,960	$ 11,298
Ending Balance: Collectively evaluated for impairment	60,686	185,841	72,388	48,051	366,966
Totals:	$ 65,050	$ 190,675	$ 72,528	$ 50,011	$ 378,264

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
	September 30, 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	$ 88	$ 94	$ 2,116	$ 2,298	$ 62,752	$ 65,050	$     -
Commercial Real Estate:
Commercial Mortgages-   Owner Occupied	646	857	212	1,715	68,798	70,513	-
Commercial Mortgages-Non-Owner Occupied	-	55	72	127	111,078	111,205	-
Commercial Construction	-	-	460	460	8,497	8,957	-
Consumer:
Consumer Unsecured	32	-	-	32	4,204	4,236	-
Consumer Secured	379	107	-	486	67,806	68,292	-
Residential:
Residential Mortgages	595	657	312	1,564	41,347	42,911	-
Residential Consumer Construction	-	-	-	-	7,100	7,100	-
Total	$ 1,740	$ 1,770	$ 3,172	$ 6,682	$ 371,582	$ 378,264	$  -

	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-By Class

	Credit Loss Disclosures
	Credit Quality Information - by Class
	September 30, 2014
	(dollars in thousands)
2014	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$ 59,258	$ 1,210	$ 90	$ 4,492	$   -	$ 65,050
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	65,844	1,098	308	3,263	-	70,513
Commercial Mortgages-Non Owner Occupied	104,323	1,809	4,338	735	-	111,205
Commercial Construction	8,073	424	-	460	-	8,957
Consumer
Consumer Unsecured	4,236	-	-	-	-	4,236
Consumer Secured	67,260	510	97	425	-	68,292
Residential:
Residential Mortgages	39,149	776	843	2,143	-	42,911
Residential Consumer Construction	7,009	-	-	91	-	7,100
Totals	$ 355,152	$ 5,827	$ 5,676	$ 11,609	$-	$ 378,264

	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

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Loans, Allowance For Loan Losses And OREO (Financing Receivables On Non-Accrual Status) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	$ 3,263	$ 3,066
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	2,116	1,585
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	212	537
Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	72	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		33
Residential Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	312	183
Residential Consumer Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	$ 91

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Consolidated Statements Of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Consolidated Statements Of Comprehensive Income (Loss) [Abstract]
Net Income	$ 914		$ 813		$ 2,462		$ 2,398
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale net of deferred taxes of $33 and $(319) for the three month periods and $821 and $(1,290) for the nine month periods ended September 30, 2014 and 2013 respectively.	61		(621)		1,595		(2,506)
Reclassification adjustment for (gains) included in net income, net of taxes of $(2) and $(4) for the three month periods and $(29) and $(138) for the nine month periods ended September 30, 2014 and 2013 respectively	(4)	[1]	(7)	[1]	(57)	[1]	(267)	[1]
Other comprehensive income (loss), net of tax	57		(628)		1,538		(2,773)
Comprehensive income (loss)	$ 971		$ 185		$ 4,000		$ (375)

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

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Basis Of Presentation

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 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 and nine month periods ended September 30, 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, 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.

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Earnings Per Share (Earnings Per Share) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share [Abstract]
Net income	$ 914	$ 813	$ 2,462	$ 2,398
Weighted average number of shares	3,364,874	3,352,725	3,364,874	3,352,725
Options affect of incremental shares		4,149		1,565
Weighted average diluted shares	3,364,874	3,356,874	3,364,874	3,354,290
Basic EPS (weighted avg shares)	$ 0.27	$ 0.24	$ 0.73	$ 0.72
Diluted EPS (Including Option Shares)	$ 0.27	$ 0.24	$ 0.73	$ 0.71

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Business Segments (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 segment	Sep. 30, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Number of reportable segments			2
Net interest income	$ 4,149,000	$ 3,967,000	$ 12,126,000	$ 11,845,000
Provision for loan losses			55,000	290,000	540,000
Net interest income after provision for loan losses	4,149,000	3,967,000	12,071,000	11,555,000
Noninterest income	929,000	769,000	2,603,000	2,638,000
Noninterest expenses	3,739,000	3,568,000	11,105,000	10,770,000
Income before income taxes	1,339,000	1,168,000	3,569,000	3,423,000
Income tax expense	425,000	355,000	1,107,000	1,025,000
Net income (loss)	914,000	813,000	2,462,000	2,398,000
Total assets	451,686,000	435,372,000	451,686,000	435,372,000	434,511,000
Community Banking [Member]
Segment Reporting Information [Line Items]
Net interest income	4,149,000	3,967,000	12,126,000	11,845,000
Provision for loan losses			55,000	290,000
Net interest income after provision for loan losses	4,149,000	3,967,000	12,071,000	11,555,000
Noninterest income	411,000	474,000	1,389,000	1,684,000
Noninterest expenses	3,224,000	3,376,000	10,071,000	10,006,000
Income before income taxes	1,336,000	1,065,000	3,389,000	3,233,000
Income tax expense	409,000	332,000	1,044,000	960,000
Net income (loss)	927,000	733,000	2,345,000	2,273,000
Total assets	449,623,000	434,493,000	449,623,000	434,493,000
Mortgage [Member]
Segment Reporting Information [Line Items]
Noninterest income	518,000	295,000	1,214,000	954,000
Noninterest expenses	515,000	192,000	1,034,000	764,000
Income before income taxes	3,000	103,000	180,000	190,000
Income tax expense	16,000	23,000	63,000	65,000
Net income (loss)	(13,000)	80,000	117,000	125,000
Total assets	$ 2,063,000	$ 879,000	$ 2,063,000	$ 879,000

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 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.  

In June 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606”. This ASU applies to any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The guidance supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, most industry-specific guidance, and some cost guidance included in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts”. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To be in alignment with the core principle, an entity must apply a five step process including: identification of the contract(s) with a customer, identification of performance obligations in the contract(s), determination of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue when (or as) the entity satisfies a performance obligation.  Additionally, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer have also been amended to be consistent with the guidance on recognition and measurement.  The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The Company is currently assessing the impact that ASU 2014-09 will have on its consolidated financial statements.  

In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic 915, “Development Stage Entities”, from the FASB Accounting Standards Codification. In addition, this ASU adds an example disclosure and removes an exception provided to development stage entities in Topic 810, “Consolidation”, for determining whether an entity is a variable interest entity.  The presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective for annual periods beginning after December 15, 2015.  Early adoption is permitted. The Company does not expect the adoption of ASU 2014-10 to have a material impact on its consolidated financial statements.  

In June 2014, the FASB issued ASU No. 2014-11, “Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures”.  This ASU aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. The new guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement. The amendments in the ASU also require a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the

Note 11 – Recent accounting pronouncements (continued)

exposure to the economic return on the transferred financial assets throughout the term of the transaction. Additional disclosures will be required for the nature of collateral pledged in repurchase agreements and

similar transactions accounted for as secured borrowings.  The amendments in this ASU are effective for the first interim or annual period beginning after December 15, 2014; however, the disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Early adoption is not permitted.  The Company is currently assessing the impact that ASU 2014-11 will have on its consolidated financial statements.  

In June 2014, the FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The new guidance applies to reporting entities that grant employees share-based payments in which the terms of the award allow a performance target to be achieved after the requisite service period. The amendments in the ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.  Existing guidance in “Compensation – Stock Compensation (Topic 718)”, should be applied to account for these types of awards. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted and reporting entities may choose to apply the amendments in the ASU either on a prospective or retrospective basis.  The Company is currently assessing the impact that ASU 2014-12 will have on its consolidated financial statements.  

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”.  This update is intended to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures.  Management is required under the new guidance to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued when preparing financial statements for each interim and annual reporting period.  If conditions or events are identified, the ASU specifies the process that must be followed by management and also clarifies the timing and content of going concern footnote disclosures in order to reduce diversity in practice.  The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted.  The Company does not expect the adoption of ASU 2014-15 to have a material impact on its consolidated financial statements.