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 June 30, 2016

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: 4,378,436 shares of Common Stock, par value $2.14 per share, were outstanding at August 5, 2016.

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	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	52
PART II – OTHER INFORMATION		53
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	53
SIGNATURES		54

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) (2016 unaudited)

	June 30, 2016		December 31, 2015
Assets
Cash and due from banks	$	20,918	$	15,952
Federal funds sold		3,515		12,703
Total cash and cash equivalents		24,433		28,655
Securities held-to-maturity (fair value of $3,424 in 2016 and $2,649 in 2015)		3,309		2,519
Securities available-for-sale, at fair value		33,809		35,996
Restricted stock, at cost		1,373		1,313
Loans, net of allowance for loan losses of $4,887 in 2016 and $4,683 in 2015		452,044		430,445
Loans held for sale		4,452		1,964
Premises and equipment, net		9,866		10,007
Interest receivable		1,209		1,248
Cash value - bank owned life insurance		9,911		9,781
Other real estate owned, net of valuation allowance		2,420		1,965
Income taxes receivable		1,125		1,096
Deferred tax asset, net		912		1,399
Other assets		867		755
Total assets	$	545,730	$	527,143
Liabilities and Stockholders’ Equity
Deposits
Noninterest bearing demand	$	97,544	$	91,325
NOW, money market and savings		235,437		232,864
Time		160,554		143,421
Total deposits		493,535		467,610
Capital notes		—		10,000
Interest payable		87		61
Other liabilities		1,555		1,276
Total liabilities	$	495,177	$	478,947
Commitments and Contingencies
Stockholders’ equity

See accompanying notes to these consolidated financial statements

1

	June 30, 2016		December 31, 2015
Preferred stock; authorized 1,000,000 shares; none issued and outstanding as of June 30, 2016 and December 31, 2015	$	—	$	—
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 4,378,436 as of June 30, 2016 and December 31, 2015		9,370		9,370
Additional paid-in-capital		31,495		31,495
Retained earnings		9,333		7,920
Accumulated other comprehensive income (loss)		355		(589	)
Total stockholders’ equity	$	50,553	$	48,196
Total liabilities and stockholders’ equity	$	545,730	$	527,143

See accompanying notes to these consolidated financial statements

2

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Income

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

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016		2015		2016		2015
Interest Income
Loans	$	5,007	$	4,758	$	9,985	$	9,386
Securities
US Government and agency obligations		125		143		264		283
Mortgage backed securities		68		18		120		28
Municipals - taxable		35		22		69		47
Municipals - tax exempt		11		11		21		21
Dividends		27		29		33		34
Other (Corporates)		3		2		9		3
Interest bearing deposits		9		4		15		6
Federal Funds sold		8		4		12		9
Total interest income		5,293		4,991		10,528		9,817
Interest Expense
Deposits
NOW, money market savings		139		123		275		245
Time Deposits		411		391		811		723
Federal Funds purchased		—		—		4		1
FHLB borrowings		—		3		—		28
Capital notes		—		150		8		300
Total interest expense		550		667		1,098		1,297
Net interest income		4,743		4,324		9,430		8,520
Provision for loan losses		250		57		450		157
Net interest income after provision for loan losses		4,493		4,267		8,980		8,363
Noninterest income
Gain on sales of loans held for sale, net		681		613		1,172		1,136
Service charges, fees and commissions		362		348		734		666
Increase in cash value of life insurance		65		68		130		136
Other		45		45		60		54
Gain on sales of available-for-sale securities, net		163		4		228		33
Total noninterest income		1,316		1,078		2,324		2,025
Noninterest expenses

See accompanying notes to these consolidated financial statements

3

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016		2015		2016		2015
Salaries and employee benefits		2,162		2,128		4,399		4,211
Occupancy		305		312		637		601
Equipment		314		304		633		603
Supplies		108		108		227		204
Professional, data processing, and other outside expense		701		560		1,363		1,046
Marketing		201		148		320		224
Credit expense		106		63		189		136
Other real estate expenses		4		32		5		37
FDIC insurance expense		91		79		183		153
Other		262		201		488		400
Total noninterest expenses		4,254		3,935		8,444		7,615
Income before income taxes		1,555		1,410		2,860		2,773
Income tax expense		504		453		922		889
Net Income	$	1,051	$	957	$	1,938	$	1,884
Weighted average common shares outstanding - basic		4,378,436		3,371,616		4,378,436		3,371,616
Weighted average common shares outstanding - diluted		4,378,436		3,371,616		4,378,436		3,371,616
Earnings per common share - basic	$	0.24	$	0.28	$	0.44	$	0.56
Earnings per common share - diluted	$	0.24	$	0.28	$	0.44	$	0.56

See accompanying notes to these consolidated financial statements

4

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Three and Six Months Ended June 30, 2016 and 2015

(dollar amounts in thousands) (unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2016			2015			2016			2015
Net Income	$	1,051		$	957		$	1,938		$	1,884
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale		630			(783	)		1,659			(445	)
Tax effect		(215	)		267			(565	)		152
Reclassification adjustment for gains included in net income (1)		(163	)		(4	)		(228	)		(33	)
Tax effect (2)		56			1			78			11
Other comprehensive income (loss), net of tax		308			(519	)		944			(315	)
Comprehensive income	$	1,359		$	438		$	2,882		$	1,569

(1) Gains are included in “gain on sales of available-for-sale securities, net” 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

5

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2016 and 2015

(dollar amounts in thousands) (unaudited)

	For the Six Months Ended June 30,
	2016			2015
Cash flows from operating activities
Net Income	$	1,938		$	1,884
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		391			381
Net amortization and accretion of premiums and discounts on securities		93			34
(Gain) on sales of available-for-sale securities		(228	)		(33	)
(Gain) on call of held to maturity securities		(6	)		—
(Gain) on sales of loans held for sale		(1,172	)		(1,136	)
Provision for loan losses		450			157
(Gain) loss on sale of other real estate owned		(1	)		1
Impairment of other real estate owned		—			15
(Increase) in cash value of life insurance		(130	)		(136	)
Decrease in interest receivable		39			30
(Increase) in other assets		(112	)		(97	)
(Increase) in income taxes receivable		(29	)		(61	)
Increase in interest payable		26			16
Increase in other liabilities		279			23
Proceeds from sales of loans held for sale		38,038			42,382
Origination of loans held for sale		(39,354	)		(43,188	)
Net cash provided by operating activities	$	222		$	272
Cash flows from investing activities
Purchases of securities held-to-maturity	$	(1,290	)	$	—
Proceeds from maturities and calls of securities held-to-maturity		500			—
Purchases of securities available-for-sale		(16,242	)		(12,414	)
Proceeds from maturities, calls and paydowns of securities available-for-sale		3,972			30
Proceeds from sale of securities available-for-sale		16,029			6,856
(Purchase) redemption of Federal Home Loan Bank stock		(60	)		426
Origination of loans, net of principal collected		(22,524	)		(19,134	)
Capital improvements to other real estate owned		—			(25	)
Purchases of premises and equipment		(250	)		(305	)
Proceeds from sale of other real estate owned		21			25
Net cash (used in) investing activities	$	(19,844	)	$	(24,541	)
Cash flows from financing activities
Net increase in deposits	$	25,925		$	45,889
Net (decrease) in federal funds purchased		—			(3,189	)
Net (decrease) in Federal Home Loan Bank advances		—			(12,000	)
Dividends paid to common stockholders		(525	)		(337	)
Retirement of capital notes		(10,000	)		—

See accompanying notes to these consolidated financial statements

6

	For the Six Months Ended June 30,
	2016			2015
Net cash provided by financing activities	$	15,400		$	30,363
(Decrease) increase in cash and cash equivalents		(4,222	)		6,094
Cash and cash equivalents at beginning of period	$	28,655		$	12,743
Cash and cash equivalents at end of period	$	24,433		$	18,837
Non cash transactions
Transfer of loans to other real estate owned	$	475		$	1,125
Fair value adjustment for securities		1,431			(478	)
Common stock dividends declared, not paid		—			202
Cash transactions
Cash paid for interest	$	1,072		$	1,281
Cash paid for taxes		450			1,109

See accompanying notes to these consolidated financial statements

7

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

For the Six Months Ended June 30, 2016 and 2015

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

	Total Shares Outstanding		Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2014		3,371,616	$	7,215	$	22,919	$	5,031		$	(389	)	$	34,776
Net Income		—		—		—		1,884			—			1,884
Dividends on common stock ($0.16 per share)		—		—		—		(539	)		—			(539	)
Other comprehensive loss		—		—		—		—			(315	)		(315	)
Balance at June 30, 2015		3,371,616	$	7,215	$	22,919	$	6,376		$	(704	)	$	35,806
Balance at December 31, 2015		4,378,436	$	9,370	$	31,495	$	7,920		$	(589	)	$	48,196
Net Income		—		—		—		1,938			—			1,938
Dividends on common stock ($0.12 per share)		—		—		—		(525	)		—			(525	)
Other comprehensive income		—		—		—		—			944			944
Balance at June 30, 2016		4,378,436	$	9,370	$	31,495	$	9,333		$	355		$	50,553

See accompanying notes to these consolidated financial statements

8

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 June 30, 2016 and for the three and six months ended June 30, 2016 and 2015 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, 2015. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes for the year ended December 31, 2015 included in Financial’s Annual Report on Form 10-K. Results for the three and six month periods ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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. Recently, the Company has expanded into Charlottesville, Roanoke, and Harrisonburg.

Financial’s critical accounting policy relates to the evaluation of the allowance for loan losses which is based on management’s estimate of an amount that is adequate to absorb probable losses inherent in the 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.

Note 3 – Earnings Per Common Share (EPS)

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 diluted earnings per share. The following is a summary of the earnings per share calculation for the three and six months ended June 30, 2016 and 2015.

9

Note 3 – Earnings Per Share (continued)

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Net income	$	1,051,000	$	957,000	$	1,938,000	$	1,884,000
Basic EPS weighted average shares outstanding		4,378,436		3,371,616		4,378,436		3,371,616
Incremental shares attributable to stock options		—		—		—		—
Diluted EPS weighted average shares outstanding		4,378,436		3,371,616		4,378,436		3,371,616
Basic earnings per common share	$	0.24	$	0.28	$	0.44	$	0.56
Diluted earnings per common share	$	0.24	$	0.28	$	0.44	$	0.56

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Options excluded from calculating diluted EPS because their effect was anti-dilutive		636		66,576		636		66,576

The foregoing shares were anti-dilutive because the exercise price of the options was greater than the market price on June 30, 2016 and 2015.

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.

10

Note 4 – Stock Based Compensation (continued)

Stock option plan activity for the six months ended June 30, 2016 is summarized below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Intrinsic Value
Options outstanding, January 1, 2016		636	$	12.79
Granted		—		—
Exercised		—		—
Forfeited		—		—
Options outstanding, June 30, 2016		636		12.79		1.92	$	—
Options exercisable, June 30, 2016		636	$	12.79		1.92	$	—

Intrinsic value is calculated by subtracting the exercise price of option shares from the market price of underlying shares as of June 30, 2016 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.

11

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:

Fair Value on a Recurring Basis

Securities Available-for-Sale

Fair values of securities, excluding restricted investments in Federal Reserve Bank stock, Federal Home Loan Bank stock, and Community Bankers’ Bank stock are based on quoted prices available in an active market. If quoted prices are available, these 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.

Restricted securities noted above are classified as such because their ownership is restricted to certain types of entities and there is no established market for their resale. When the stock is repurchased, the shares are repurchased at the stock’s book value; therefore, the carrying amount of restricted securities approximate fair value. Restricted securities are considered to be Level 2.

12

Note 5 – Fair Value Measurements (continued)

			Carrying Value at June 30, 2016 (in thousands)
Description	Balance as of June 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
US agency obligations	$	11,263	$	—	$	11,263	$	—
Mortgage-backed securities		14,481		—		14,481		—
Municipals		7,531		—		7,531		—
Corporates		534				534
Total available-for-sale securities	$	33,809	$	—	$	33,809	$	—
			Carrying Value at December 31, 2015 (in thousands)
Description	Balance as of December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
US agency obligations	$	18,810	$	—	$	18,810	$	—
Mortgage-backed securities		10,647		—		10,647		—
Municipals		5,034		—		5,034		—
Corporates		1,505		—		1,505		—
Total available-for-sale securities	$	35,996	$	—	$	35,996	$	—

Fair Value on a Non-recurring Basis

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 when due. 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.

13

Note 5 – Fair Value Measurements (continued)

Loans held for sale

Loans held for sale are carried at cost which approximates 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 June 30, 2016. Gains and losses on the sale of loans are recorded within gains on sales of loans held for sale, net 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 June 30, 2016
Description	Balance as of June 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans*	$	2,718	$	—	$	—	$	2,718
Loans held for sale		4,452		—		4,452		—
Other real estate owned		2,420		—		—		2,420

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

			Carrying Value at December 31, 2015
Description	Balance as of December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans*	$	2,896	$	—	$	—	$	2,896
Loans held for sale		1,964		—		1,964		—
Other real estate owned		1,965		—		—		1,965

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

14

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 June 30, 2016 (dollars in thousands)
	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans		$2,718	Discounted appraised value	Selling cost		5% - 10% (6%)
				Discount for lack of marketability and age of appraisal		0% - 25% (15%)
OREO		2,420	Discounted appraised value	Selling cost		5% - 10% (6%)
				Discount for lack of marketability and age of appraisal		0% - 25% (15%)
	Quantitative information about Level 3 Fair Value Measurements for December 31, 2015 (dollars in thousands)
	Fair Value		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans		$2,896	Discounted appraised value	Selling cost		5% - 10% (6%)
				Discount for lack of marketability and age of appraisal		0% - 45% (15%)
OREO		1,965	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.

15

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 June 30, 2016 and December 31, 2015 and therefore are not included in the table below.

16

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 June 30, 2016 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	$	20,918	$	20,918	$	—	$	—	$	20,918
Fed funds sold		3,515		3,515						3,515
Securities
Available-for-sale		33,809		—		33,809		—		33,809
Held-to-maturity		3,309		—		3,424		—		3,424
Restricted stock		1,373				1,373				1,373
Loans, net		452,044		—		—		459,277		459,277
Loans held for sale		4,452		—		4,452		—		4,452
Interest receivable		1,209		—		1,209		—		1,209
BOLI		9,911		—		9,911		—		9,911
Liabilities
Deposits	$	493,535	$	—	$	494,664	$	—	$	494,664
Interest payable		87		—		87		—		87

			Fair Value Measurements at December 31, 2015 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	$	15,952	$	15,952	$	—	$	—	$	15,952
Fed funds sold		12,703		12,703						12,703
Securities
Available-for-sale		35,996		—		35,996		—		35,996
Held-to-maturity		2,519		—		2,649		—		2,649
Restricted stock		1,313		—		1,313				1,313
Loans, net		430,445		—		—		438,322		438,322
Loans held for sale		1,964		—		1,964		—		1,964
Interest receivable		1,248		—		1,248		—		1,248
BOLI		9,781		—		9,781		—		9,781
Liabilities
Deposits	$	467,610	$	—	$	468,773	$	—	$	468,773
Capital notes		10,000		—		10,024		—		10,024
Interest payable		61		—		61		—		61

17

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

As of December 31, 2015 Financial had $10,000,000 categorized as “Capital Notes” which represents the proceeds of the private placement of $10,000,000 in unregistered debt securities as previously disclosed (the “2012 Notes”). The 2012 Notes bore interest at the rate of 6% per year with interest payable quarterly in arrears. On December 3, 2015, Financial closed a private placement of common stock pursuant to which it received gross proceeds of $11,520,000 by selling an aggregate of 1,000,000 shares of Financials’ Common Stock at a price of $11.52 per share, as part of a private placement (the “Common Stock Private Placement”). Financial used $10,000,000 of the proceeds from the Common Stock Private Placement to prepay in full the 2012 Notes on January 5, 2016.

18

Note 7 - Securities

The following tables summarize the Bank’s holdings for both securities held-to-maturity and securities available-for-sale as of June 30, 2016 and December 31, 2015 (amounts in thousands):

			June 30, 2016
	Amortized		Gross Unrealized
	Costs		Gains		(Losses)			Fair Value
Held-to-Maturity
US agency obligations	$	3,309	$	115	$	—		$	3,424
Available-for-Sale
US agency obligations		11,114		150		(1	)		11,263
Mortgage-backed securities		14,393		88		—			14,481
Municipals		7,236		295		—			7,531
Corporates		528		6		—			534
	$	33,271	$	539	$	(1	)	$	33,809
			December 31, 2015
	Amortized		Gross Unrealized
	Costs		Gains		(Losses)			Fair Value
Held-to-Maturity
US agency obligations	$	2,519	$	130	$	—		$	2,649
Available-for-Sale
US agency obligations		19,606		3		(799	)		18,810
Mortgage-backed securities		10,778		4		(135	)		10,647
Municipals		4,984		84		(34	)		5,034
Corporates		1,521		—		(16	)		1,505
	$	36,889	$	91	$	(984	)	$	35,996

19

Note 7 – Securities (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 June 30, 2016 and December 31, 2015 (amounts in thousands):

	Less than 12 months				More than 12 months				Total
June 30, 2016	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Description of securities
U.S. agency obligations	$	3,010	$	1	$	—	$	—	$	3,010	$	1
Total	$	3,010	$	1	$	—	$	—	$	3,010	$	1
	Less than 12 months				More than 12 months				Total
December 31, 2015	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Description of securities
U.S. agency obligations	$	7,160	$	353	$	10,650	$	446	$	17,810	$	799
Mortgage-backed securities		6,726		77		1,979		58		8,705		135
Municipals		2,341		25		503		9		2,844		34
Corporates		1,505		16		—		—		1,505		16
Total	$	17,732	$	471	$	13,132	$	513	$	30,864	$	984

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 June 30, 2016, the Company did not consider the unrealized loss as an other-than-temporary loss due to the nature of the security involved. As of June 30, 2016, the Bank owned 1 security that was being evaluated for other than temporary impairment. This security is S&P rated AA+. As of June 30, the only security being evaluated for impairment was an obligation of a U.S. government sponsored entity.

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.

20

Note 8 – Business Segments

The Company has two reportable business segments: (i) a traditional full service community banking segment and, (ii) a mortgage loan origination business. The community banking business segment includes Bank of the James which provides loans, deposits, investments and insurance to retail and commercial customers throughout Region 2000 and other areas within Central Virginia. The mortgage segment provides a variety of mortgage loan products principally within Region 2000. Mortgage loans are originated and sold in the secondary market through purchase commitments from investors with servicing released. Because of the pre-arranged purchase commitments, there is minimal risk to the Company.

Both of the Company’s reportable segments are service based. The mortgage business is a gain on sale business while the Bank’s primary source of revenue is net interest income. The Bank also provides a referral network for the mortgage origination business. The mortgage business may also be in a position to refer its customers to the Bank for banking services when appropriate.

Information about reportable business segments and reconciliation of such information to the consolidated financial statements for the three and six months ended June 30, 2016 and 2015 was as follows (dollars in thousands):

21

Note 8 – Business Segments (continued)

Business Segments

	Community Banking		Mortgage		Total
Six months ended June 30, 2016
Net interest income	$	9,430	$	—	$	9,430
Provision for loan losses		450		—		450
Net interest income after provision for loan losses		8,980		—		8,980
Noninterest income		1,128		1,196		2,324
Noninterest expenses		7,481		963		8,444
Income before income taxes		2,627		233		2,860
Income tax expense		843		79		922
Net income	$	1,784	$	154	$	1,938
Total assets	$	541,120	$	4,610	$	545,730
Six months ended June 30, 2015
Net interest income	$	8,520	$	—	$	8,520
Provision for loan losses		157		—		157
Net interest income after provision for loan losses		8,363		—		8,363
Noninterest income		867		1,158		2,025
Noninterest expenses		6,777		838		7,615
Income before income taxes		2,453		320		2,773
Income tax expense		780		109		889
Net income	$	1,673	$	211	$	1,884
Total assets	$	489,821	$	3,015	$	492,836
	Community Banking		Mortgage		Total
Three months ended June 30, 2016
Net interest income	$	4,743	$	—	$	4,743
Provision for loan losses		250		—		250
Net interest income after provision for loan losses		4,493		—		4,493
Noninterest income		620		696		1,316
Noninterest expenses		3,748		506		4,254
Income before income taxes		1,365		190		1,555
Income tax expense		440		64		504
Net income	$	925	$	126	$	1,051
Total assets	$	541,120	$	4,610	$	545,730
Three months ended June 30, 2015
Net interest income	$	4,324	$	—	$	4,324
Provision for loan losses		57		—		57
Net interest income after provision for loan losses		4,267		—		4,267
Noninterest income		454		624		1,078
Noninterest expenses		3,484		451		3,935
Income before income taxes		1,237		173		1,410
Income tax expense		394		59		453
Net income	$	843	$	114	$	957
Total assets	$	489,821	$	3,015	$	492,836

22

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:
	June 30, 2016		December 31, 2015
Commercial	$	86,323	$	76,773
Commercial real estate		223,922		217,125
Consumer		83,309		81,531
Residential		63,377		59,699
Total loans (1)		456,931		435,128
Less allowance for loan losses		4,887		4,683
Net loans	$	452,044	$	430,445

(1) Includes deferred costs of $225 and $263, respectively.

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.

23

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.

24

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.

Loans on Non-Accrual Status

(dollars in thousands)

	As of
	June 30, 2016		December 31, 2015
Commercial	$	369	$	483
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		865		799
Commercial Mortgages-Non-Owner Occupied		—		514
Commercial Construction		291		367
Consumer
Consumer Unsecured		—		31
Consumer Secured		63		269
Residential:
Residential Mortgages		806		695
Residential Consumer Construction		146		248
Totals	$	2,540	$	3,406

We also classify other real estate owned (OREO) as a nonperforming asset. OREO represents real property owned by the Bank either through purchase at foreclosure or received from the borrower through a deed in lieu of foreclosure. OREO increased to $2,420,000 on June 30, 2016 from $1,965,000 on December 31, 2015. The following table represents the changes in OREO balance during the six months ended June 30, 2016 and year ended December 31, 2015.

OREO Changes

(dollars in thousands)

	Six months ended June 30, 2016			Year ended December 31, 2015
Balance at the beginning of the year (net)	$	1,965		$	956
Transfers from loans		475			1,425
Capitalized costs		—			25
Writedowns		—			(75	)
Sales proceeds		(21	)		(360	)
Gain (loss) on disposition		1			(6	)
Balance at the end of the period (net)	$	2,420		$	1,965

At June 30, 2016 and December 31, 2015, the Company had no consumer mortgage loan secured by residential real estate for which foreclosure was in process. The Company held one residential real estate property in other real estate owned as of June 30, 2016 and no residential real estate property in other real estate owned as of December 31, 2015.

25

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

	Impaired Loans (dollars in thousands) As of and For the Six Months Ended June 30, 2016
2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Commercial	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate
Commercial Mortgages-Owner Occupied		1,973		1,999		—		2,528		50
Commercial Mortgage Non-Owner Occupied		531		581		—		354		18
Commercial Construction		—		—		—		14		—
Consumer
Consumer Unsecured		—		—		—		—		—
Consumer Secured		54		102		—		37		1
Residential
Residential Mortgages		1,750		1,795		—		1,874		32
Residential Consumer Construction		—		—		—		86		—
With An Allowance Recorded:
Commercial	$	998	$	1,083	$	505	$	1,089	$	16
Commercial Real Estate
Commercial Mortgages-Owner Occupied		1,707		1,719		314		1,292		52
Commercial Mortgage Non-Owner Occupied		75		75		20		374		3
Commercial Construction		204		637		114		272		—
Consumer
Consumer Unsecured		—		—		—		16		—
Consumer Secured		111		111		111		151		4
Residential
Residential Mortgages		306		323		56		478		11
Residential Consumer Construction		—		—		—		—		—
Totals:
Commercial	$	998	$	1,083	$	505	$	1,089	$	16
Commercial Real Estate
Commercial Mortgages-Owner Occupied		3,680		3,718		314		3,820		102
Commercial Mortgage Non-Owner Occupied		606		656		20		728		21
Commercial Construction		204		637		114		286		—
Consumer
Consumer Unsecured		—		—		—		16		—
Consumer Secured		165		213		111		188		5
Residential
Residential Mortgages		2,056		2,118		56		2,352		43
Residential Consumer Construction		—		—		—		86		—
	$	7,709	$	8,425	$	1,120	$	8,565	$	187

26

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

	Impaired Loans (dollars in thousands) As of and For the Year Ended December 31, 2015
2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Commercial	$	—	$	—	$	—	$	1,009	$	—
Commercial Real Estate
Commercial Mortgages-Owner Occupied		3,082		3,100		—		2,959		174
Commercial Mortgage Non-Owner Occupied		177		177		—		628		12
Commercial Construction		27		514		—		244		—
Consumer
Consumer Unsecured		—		—		—		—		—
Consumer Secured		20		20		—		21		1
Residential
Residential Mortgages		1,997		2,027		—		1,466		86
Residential Consumer Construction		171		176		—		86		4
With An Allowance Recorded:
Commercial	$	1,180	$	1,256	$	610	$	1,293	$	38
Commercial Real Estate
Commercial Mortgages-Owner Occupied		877		883		163		865		35
Commercial Mortgage Non-Owner Occupied		672		738		175		399		38
Commercial Construction		340		700		75		170		—
Consumer
Consumer Unsecured		31		32		31		16		1
Consumer Secured		190		193		153		155		10
Residential
Residential Mortgages		650		800		87		740		42
Residential Consumer Construction		—		—		—		—		—
Totals:
Commercial	$	1,180	$	1,256	$	610	$	2,302	$	38
Commercial Real Estate
Commercial Mortgages-Owner Occupied		3,959		3,983		163		3,824		209
Commercial Mortgage Non-Owner Occupied		849		915		175		1,027		50
Commercial Construction		367		1,214		75		414		—
Consumer
Consumer Unsecured		31		32		31		16		1
Consumer Secured		210		213		153		176		11
Residential
Residential Mortgages		2,647		2,827		87		2,206		128
Residential Consumer Construction		171		176		—		86		4
	$	9,414	$	10,616	$	1,294	$	10,051	$	441

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

	Allowance for Loan Losses and Recorded Investment in Loans (dollars in thousands) As of and For the Six Months Ended June 30, 2016
2016	Commercial			Commercial Real Estate			Consumer			Residential		Total
Allowance for Loan Losses:
Beginning Balance	$	1,195		$	1,751		$	1,073		$	664	$	4,683
Charge-offs		(89	)		(121	)		(168	)		—		(378	)
Recoveries		3			101			28			—		132
Provision		528			(100	)		(40	)		62		450
Ending Balance	$	1,637		$	1,631		$	893		$	726	$	4,887
Ending Balance: Individually evaluated for impairment	$	505		$	448		$	111		$	56	$	1,120
Ending Balance: Collectively evaluated for impairment		1,132			1,183			782			670		3,767
Totals:	$	1,637		$	1,631		$	893		$	726	$	4,887
Loans:
Ending Balance: Individually evaluated for impairment	$	998		$	4,490		$	165		$	2,056	$	7,709
Ending Balance: Collectively evaluated for impairment		85,325			219,432			83,144			61,321		449,222
Totals:	$	86,323		$	223,922		$	83,309		$	63,377	$	456,931

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

	Allowance for Loan Losses and Recorded Investment in Loans (dollars in thousands) As of and For the Year Ended December 31, 2015
2015	Commercial			Commercial Real Estate			Consumer			Residential		Total
Allowance for Loan Losses:
Beginning Balance	$	1,235		$	2,194		$	812		$	549	$	4,790
Charge-offs		(294	)		(64	)		(257	)		—		(615	)
Recoveries		14			122			54			36		226
Provision		240			(501	)		464			79		282
Ending Balance	$	1,195		$	1,751		$	1,073		$	664	$	4,683
Ending Balance: Individually evaluated for impairment	$	610		$	413		$	184		$	87	$	1,294
Ending Balance: Collectively evaluated for impairment		585			1,338			889			577		3,389
Totals:	$	1,195		$	1,751		$	1,073		$	664	$	4,683
Loans:
Ending Balance: Individually evaluated for impairment	$	1,180		$	5,175		$	241		$	2,818	$	9,414
Ending Balance: Collectively evaluated for impairment		75,593			211,950			81,290			56,881		425,714
Totals:	$	76,773		$	217,125		$	81,531		$	59,699	$	435,128

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

	Age Analysis of Past Due Loans as of June 30, 2016 (dollars in thousands)
2016	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days & Accruing
Commercial	$	14	$	—	$	369	$	383	$	85,940	$	86,323	$	—
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		702		100		865		1,667		79,963		81,630		—
Commercial Mortgages-Non-Owner Occupied		—		—		—		—		129,808		129,808		—
Commercial Construction		—		—		291		291		12,193		12,484		—
Consumer:
Consumer Unsecured		14		9		—		23		7,016		7,039		—
Consumer Secured		496		15		35		546		75,724		76,270		—
Residential:
Residential Mortgages		518		202		754		1,474		50,808		52,282		—
Residential Consumer Construction		—		—		146		146		10,949		11,095		—
Total	$	1,744	$	326	$	2,460	$	4,530	$	452,401	$	456,931	$	—

	Age Analysis of Past Due Loans as of December 31, 2015 (dollars in thousands)
2015	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days & Accruing
Commercial	$	—	$	244	$	483	$	727	$	76,046	$	76,773	$	—
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		425		571		426		1,422		75,549		76,971		—
Commercial Mortgages-Non-Owner Occupied		189		90		438		717		126,138		126,855		—
Commercial Construction		—		—		367		367		12,932		13,299		—
Consumer:
Consumer Unsecured		2		—		31		33		6,828		6,861		—
Consumer Secured		198		68		128		394		74,276		74,670		—
Residential:
Residential Mortgages		512		468		543		1,523		48,490		50,013		—
Residential Consumer Construction		—		—		248		248		9,438		9,686		—
Total	$	1,326	$	1,441	$	2,664	$	5,431	$	429,697	$	435,128	$	—

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

	Credit Quality Information - by Class June 30, 2016 (dollars in thousands)
2016	Pass		Monitor		Special Mention		Substandard		Doubtful		Totals
Commercial	$	82,372	$	1,605	$	1,293	$	1,053	$	—	$	86,323
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		73,500		2,272		2,103		3,755		—		81,630
Commercial Mortgages-Non Owner Occupied		125,012		3,568		658		570		—		129,808
Commercial Construction		12,193		—		—		291		—		12,484
Consumer
Consumer Unsecured		7,039		—		—		—		—		7,039
Consumer Secured		75,645		238		—		387		—		76,270
Residential:
Residential Mortgages		49,701		—		248		2,333		—		52,282
Residential Consumer Construction		11,022		—		—		73		—		11,095
Totals	$	436,484	$	7,683	$	4,302	$	8,462	$	—	$	456,931

	Credit Quality Information - by Class December 31, 2015 (dollars in thousands)
2015	Pass		Monitor		Special Mention		Substandard		Doubtful		Totals
Commercial	$	73,831	$	290	$	1,457	$	1,195	$	—	$	76,773
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		68,813		1,353		2,801		4,004		—		76,971
Commercial Mortgages-Non Owner Occupied		120,462		1,558		3,895		940		—		126,855
Commercial Construction		12,932		—		—		367		—		13,299
Consumer
Consumer Unsecured		6,830		—		—		31		—		6,861
Consumer Secured		73,825		276		50		519		—		74,670
Residential:
Residential Mortgages		47,180		—		—		2,833		—		50,013
Residential Consumer Construction		9,438		—		—		248		—		9,686
Totals	$	413,311	$	3,477	$	8,203	$	10,137	$	—	$	435,128

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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 TDRs during the three and six months ended June 30, 2016.

The following table describe the loan modifications classified as TDRs during the three and six months ended June 30, 2015:

For the Three Months Ended June 30, 2015 (dollars in thousands)
Troubled Debt Restructurings During the Period	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial Real Estate		2	$	454	$	454

For the Six Months Ended June 30, 2015 (dollars in thousands)
Troubled Debt Restructurings During the Period	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial		1	$	20	$	20
Commercial Real Estate		2	$	454	$	454

The loans noted in the table above were modified during the period to extend maturity only. These loans are factored into the determination of the allowance for loan losses as of the period indicated and are included in the Bank’s impaired loan analysis and individually evaluated for impairment.

There were no loan modifications classified as TDRs within the last twelve months that defaulted during the three and six months ended June 30, 2016 and 2015.

At June 30, 2016 and December 31, 2015, the Bank had no outstanding commitments to disburse additional funds on loans classified as TDRs.

Note 10 – Recent accounting pronouncements

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.

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Note 10 – Recent accounting pronouncements (continued)

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in ASU 2016-01, among other things: 1) Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. 3) Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). 4) Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the impact that ASU 2016-01 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its consolidated financial statements.

During March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Shares-Based Payment Accounting.” The amendments in this ASU simplify several aspects of the accounting for share-based payment award transactions including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently assessing the impact that ASU 2016-09 will have on its consolidated financial statements.

During June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments in this ASU, among

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Note 10 – Recent accounting pronouncements (continued)

other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendments in this ASU are effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements.

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

GENERAL

Critical Accounting Policies

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

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The allowance for loan losses is management’s estimate of an amount that is adequate to absorb probable losses inherent in the 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 division”), investment services through the Bank’s Investment division (which we refer to as “Investment division”), and insurance activities through BOTJ Insurance, Inc., a subsidiary of the Bank, (which we refer to as “Insurance business”). Of these three other business activities, only the Mortgage division is material to the Bank’s results and operations.

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. Historically, our primary market area has been the Central Virginia, Region 2000 area, which encompasses the seven jurisdictions of the Town of Altavista, Amherst County, Appomattox County, the Town of Bedford, Bedford County, Campbell County, and the City of Lynchburg. Within the past three years, the Bank has begun to expand to other areas in Virginia, specifically Roanoke, Charlottesville, and Harrisonburg. 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 areas.

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 our service areas, providing additional services to its customers, and controlling costs.

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The Bank services its banking customers through the following locations in Virginia:

Full Service Branches

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

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

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

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

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

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

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

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

• A branch located at 1110 Main Street, Altavista, Virginia (the “Altavista Branch”), and

• A branch located at 1391 South High Street, Harrisonburg, VA (the “Harrisonburg Branch”).

Limited Service Branches

• Westminster-Canterbury facilities located at 501 VES Road, Lynchburg, Virginia,

• Westminster-Canterbury facilities located at 250 Pantops Mountain Road, Charlottesville, Virginia,

• Luxor Office Park LLC, 1430 Rolkin Court Suite 203, Charlottesville, Virginia (the “Charlottesville Branch”).

Loan Production Offices

• Residential mortgage loan production office located at the Forest Branch,

• Commercial loan and residential mortgage loan production office located at 3959 Electric Road SW, Suite 100, Roanoke, Virginia,

• Commercial and consumer loan production office located at the Charlottesville Branch.

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The Investment division and the Insurance business operate primarily out of offices located at the Church Street Branch.

The Bank continuously evaluates areas located within our service areas 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, including the following properties that we own and are holding for expansion:

• Real property located in the Timberlake Road area of Campbell County (Lynchburg), Virginia. The Timberlake property is not suitable for its intended use as a branch bank. Management anticipates that it will be necessary to raze the current structures and replace it with appropriate new construction.

• Real property located at 5 Village Highway (near the intersection of Routes 501 and 24) in Rustburg, Virginia. The structure on the property has been demolished and removed. The Bank does not anticipate opening a branch at this location prior to 2017.

• Real property located near the intersection of Confederate Boulevard and Moses Avenue in Appomattox, Virginia. There is no structure on the property. The bank is considering opening a temporary full-service branch while it builds a permanent facility. The Bank does not anticipate opening the temporary branch at this location prior to the fourth quarter of 2016.

• Real property located at 45 South Main Street, Lexington, Virginia. The bank does not anticipate opening a branch at this location prior to the second quarter of 2017.

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

In addition, the Bank determined that a portion of real property located on Route 460 (Bedford County) is suitable for branch expansion and has reclassified the property accordingly.

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

37

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:

	June 30, 2016 (in thousands)
Commitments to extend credit	$	95,945
Letters of Credit		2,984
Total	$	98,929

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. 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.

The Bank has rate lock commitments to originate mortgage loans through its Mortgage Division. The Bank has entered into corresponding commitments with third party investors to sell each of these loans that close. No other obligation exists. As a result of these contractual relationships with these investors, the Bank is not exposed to losses nor will it realize gains related to its rate lock commitments due to changes in interest rates.

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 June 30, 2016 and December 31, 2015 and the results of operations of Financial for the three and six month periods ended June 30, 2016 and 2015. 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

June 30, 2016 as Compared to December 31, 2015

Total assets were $545,730,000 on June 30, 2016 compared with $527,143,000 at December 31, 2015, an increase of 3.53%. The increase in total assets was due to an increase in deposits which were used to fund loan growth for the first half of 2016. On January 5, 2016, the Company retired $10,000,000 in capital notes issued by the Company in 2012, which offset the increase in deposits as of June 30, 2016 from December 31, 2015.

Total deposits increased from $467,610,000 as of December 31, 2015 to $493,535,000 on June 30, 2016, an increase of 5.54%. The increase resulted from an increase in each of our deposit categories. In particular, time deposits increased from $143,421,000 on December 31, 2015 to $160,554,000 on June 30, 2016.

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Total loans, excluding loans held for sale, increased to $456,931,000 on June 30, 2016 from $435,128,000 on December 31, 2015. Loans, excluding loans held for sale and net of deferred fees and costs and the allowance for loan losses, increased to $452,044,000 on June 30, 2016 from $430,445,000 on December 31, 2015, an increase of 5.02%. 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):

	June 30, 2016					December 31, 2015
	Amount		Percentage			Amount		Percentage
Commercial	$	86,323		18.89	%	$	76,773		17.64	%
Commercial Real Estate		223,922		49.01	%		217,125		49.90	%
Consumer		83,309		18.23	%		81,531		18.74	%
Residential		63,377		13,87	%		59,699		13.72	%
Total loans	$	456,931		100.00	%	$	435,128		100.00	%

Total nonperforming assets, which consist of non-accrual loans, loans past due 90 days or more and still accruing, and other real estate owned (“OREO”) decreased to $4,960,000 on June 30, 2016 from $5,371,000 on December 31, 2015. OREO increased to $2,420,000 on June 30, 2016 from $1,965,000 on December 31, 2015. This increase was due to the Bank’s foreclosure on two properties in the first quarter and two properties in the second quarter on real estate that secured loans then classified as non-performing. Following the foreclosure and subsequent re-categorization, non-performing loans decreased from $3,406,000 at December 31, 2015 to $2,540,000 at June 30, 2016. As discussed in more detail below under “Results of Operations—Allowance for Loan Losses,” management had provided for the anticipated losses on these loans in the allowance for loan losses. If interest on non-accrual loans had been accrued, such interest cumulatively would have approximated $361,000 and $472,000 as of June 30, 2016 and December 31, 2015, 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 loan 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, 2015, the Bank was carrying three OREO properties on its books at a value of $1,965,000. During the six months ended June 30, 2016, the Bank acquired four additional OREO properties and disposed of one OREO property, and as of June 30, 2016 the Bank is carrying six OREO properties at a value of $2,420,000. 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 $639,000 at June 30, 2016 classified as performing Troubled Debt Restructurings (“TDRs”) as compared to $646,000 at December 31, 2015. 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 $24,433,000 on June 30, 2016 from $28,655,000 on December 31, 2015. Cash and cash equivalents consist of cash due from correspondents, cash in vault, and overnight investments (including federal funds sold). The decrease in cash and cash equivalents was due primarily to the use of $10,000,000 from the common stock private placement to retire the Company’s capital notes in the first quarter. In addition, cash and cash equivalents are subject to routine fluctuations in deposits, including fluctuations in transactional accounts and professional settlement accounts. The increase in time deposits discussed above has been used to fund loans and investments.

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Securities held-to-maturity increased to $3,309,000 on June 30, 2016 from $2,519,000 on December 31, 2015. Following the call of a security in the amount of $500,000, the Bank reinvested the proceeds plus an additional $790,000 in another security. Securities available-for-sale decreased to $33,809,000 on June 30, 2016, from $35,996,000 on December 31, 2015. The decrease resulted from the sale of securities in order to fund loans. During the six months ended June 30, 2016 the Bank received $3,972,000 in proceeds from calls of securities available-for-sale and $16,029,000 in proceeds from the sale of securities available-for-sale. The Bank purchased $16,242,000 in securities available-for sale during the same period.

Financial’s investment in Federal Home Loan Bank of Atlanta (FHLBA) stock totaled $565,000 at June 30, 2016 and $505,000 at December 31, 2015, an increase of $60,000. This increase is attributable to the FHLBA’s increase in minimum ownership requirements. 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 June 30, 2016, Financial, on a consolidated basis, had liquid assets of $58,242,000 in the form of cash, interest-bearing and noninterest-bearing deposits with banks, and available-for-sale investments. Of this amount, approximately $10,793,000 of the available-for-sale securities are pledged as collateral with $6,123,000 pledged as security for public deposits and $4,670,000 pledged as security on a line of credit the Bank may draw on from time to time to meet liquidity needs. This line of credit currently has a zero balance. Management believes that liquid assets were adequate at June 30, 2016. Management anticipates that additional liquidity will be provided by the growth in deposit accounts and loan repayments at the Bank. In addition, if additional liquidity is needed, the Bank has the ability to purchase federal funds on the open market, borrow from the FHLBA using loans or investments within the Bank’s portfolio as collateral, and to borrow from the Federal Reserve Bank’s discount window.

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.

As of December 31, 2015, Financial had $10,000,000 categorized as “Capital Notes” which represents the proceeds of the private placement of $10,000,000 in unregistered debt securities as previously disclosed (the “2012 Notes”). The 2012 Notes bore interest at the rate of 6% per year with interest payable quarterly in arrears. On December 3, 2015, Financial closed a private placement of common stock pursuant to which it received gross proceeds of $11,520,000 by selling an aggregate of 1,000,000 shares of Financials’ Common Stock at a price of $11.52 per share, as part of a private placement (the “Common Stock Private Placement”). Financial used $10,000,000 of the proceeds from the Common Stock Private Placement to prepay in full the 2012 Notes on January 5, 2016.

At June 30, 2016, the Bank had a leverage ratio of approximately 9.34%, a Tier 1 risk-based capital ratio and a CET1 ratio of approximately 10.75% and a total risk-based capital ratio of approximately 11.80%. As of June 30, 2016 and December 31, 2015 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 June 30, 2016 and December 31, 2015:

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Bank Level Only Capital Ratios

Analysis of Capital (in 000’s)	June 30, 2016		December 31, 2015
Tier 1 capital
Common Stock	$	3,742	$	3,742
Surplus		19,325		19,325
Retained earnings		26,751		24,711
Total Tier 1 capital	$	49,818	$	47,778
Tier 2 capital
Allowance for loan losses	$	4,887	$	4,683
Total Tier 2 capital:	$	4,887	$	4,683
Total risk-based capital	$	54,705	$	52,461
Risk weighted assets	$	463,433	$	446,201
Average total assets	$	533,592	$	518,096

	Actual						Regulatory Benchmarks
	June 30, 2016			December 31, 2015			For Capital Adequacy Purposes			For Well Capitalized Purposes
Capital Ratios:
Tier 1 capital to average total assets		9.34	%		9.22	%		4.00	%		5.00	%
Common Equity Tier 1 capital		10.75	%		10.71	%		4.50	%		6.50	%
Tier 1 risk-based capital ratio		10.75	%		10.71	%		6.00	%		8.00	%
Total risk-based capital ratio		11.80	%		11.76	%		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 $1,000,000,000, 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 at June 30, 2016 would be comparable to those of the Bank.

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. The phase-in period for this rule began in January 2015. 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 capital conservation buffer will be phased in between January 1, 2016 when it will begin at 0.625% and increase by an additional 0.625% annually until it reaches 2.5% on January 1, 2019. This will result in an effective Tier 1 capital ratio of 8.5% upon full implementation. The capital conservation buffer will limit capital distributions, stock redemptions, and certain discretionary bonuses. Beginning January 1, 2016, failure to maintain the capital conservation buffer will limit the ability of the Bank and the

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Company to pay dividends, repurchase shares or pay discretionary bonuses. 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.

Results of Operations

Comparison of the Three and Six months Ended June 30, 2016 and 2015

Earnings Summary

Financial had net income including all operating segments of $1,051,000 and $1,938,000 for the three and six months ended June 30, 2016, compared to $957,000 and $1,884,000 for the comparable periods in 2015. Basic and diluted earnings per common share for the three and six months ended June 30, 2016 were $0.24 and $0.44, compared to basic and diluted earnings per share of $0.28 and $0.56 for the three and six months ended June 30, 2015.

The increase in net income for the three and six months ended June 30, 2016 as compared to the prior year was due primarily to increases in net interest income and non-interest income. The increases were partially offset by an increase in non-interest expense arising from the Bank’s recent expansion into Charlottesville, Harrisonburg, and Roanoke. These expansions resulted in increases in personnel expense, occupancy expense (for the six months ended June 30, 2016), professional and data processing expense, and marketing expense.

These operating results represent an annualized return on average stockholders’ equity of 8.54% and 7.93% for the three and six months ended June 30, 2016, compared with 10.71% for each of the same periods in 2015. This decrease was the result of an increase in outstanding shares resulting from the company’s issuance of common stock in December 2015. The Company had an annualized return on average assets of 0.79% and 0.74% for the three and six months ended June 30, 2016 compared with 0.79% for each of the same periods in 2015. The decrease for the six months ended June 30, 2016 largely resulting from an increase in average assets since June 30, 2015.

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

Interest Income, Interest Expense, and Net Interest Income

Interest income increased to $5,293,000 and $10,528,000 for the three and six months ended June 30, 2016 from $4,991,000 and $9,817,000 for the same periods in 2015, an increase of 6.05% and 7.24%, respectively. Interest income increased primarily because of increased balances in the loan portfolio. The average rate received on earning assets decreased to 4.24% and 4.30% for the three and six months ended June 30, 2016 as compared with 4.38% for each of the comparable periods in 2015. The rate on total average earning assets decreased primarily because of a decrease in the rate received on loans 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 $550,000 and $1,098,000 for the three and six months ended June 30, 2016 from $667,000 and $1,297,000 for the same periods in 2015, decreases of 17.54% and 15.34%, respectively. This decreases in interest expense resulted primarily from the elimination of interest paid on capital notes which the Company retired in January. This decrease was offset by increase in interest paid on time deposits as well as interest bearing demand deposits. The Bank’s average rate paid on interest bearing deposits was 0.57% and 0.57% during the three and six month periods ended June 30, 2016 as compared to 0.58% and 0.56% for the same periods in 2015.

The fundamental source of the Bank’s net 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

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liabilities, which consist principally of deposits and other borrowings. Net interest income for the three and six months ended June 30, 2016 was $4,743,000 and $9,430,000 compared to $4,324,000 and $8,520,000 for the same periods in 2015. The change in net interest income for the three and six months ended June 30, 2016 as compared with the comparable period in 2015 primarily is attributable to the increase in loan balances previously discussed. The net interest margin was 3.80% and 3.85% for the three and six months ended June 30, 2016, as compared to 3.79% and 3.80% 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, gains on sales of mortgage loans held for sale, commissions on sales of investments and the Bank’s ownership interest in a title insurance agency. Non-interest income increased to $1,316,000 and $2,324,000 for the three and six months ended June 30, 2016 from $1,078,000 and $2,025,000 for the three and six months ended June 30, 2015. These increases for the three and six months ended June 30, 2016 as compared to the same periods last year were due primarily due to an increase in service charges, fees, and commissions from $348,000 and $666,000 for three and six months ended June 30, 2015 to $362,000 and $734,000 for the three and six months ended June 30, 2016, gains on sales of securities from $4,000 and $33,000 to $163,000 and $228,000 for the same periods last year, as well as increase in gains on sales of residential mortgage loans from $613,000 and $1,136,000 for the three and six months ended June 30, 2015 to $681,000 and $1,172,000 for the three and six months ended June 30, 2016.

The Bank, through its Mortgage division, originates both conforming and non-conforming consumer residential mortgage loans in the markets we serve. 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, except in limited circumstances such as first payment default, no credit or interest rate risk on these mortgages.

Purchase mortgage originations totaled approximately $15,441,000 and $26,480,000, or 67% of the total mortgage loans originated in both the three and six months ended June 30, 2016 as compared to approximately $10,941,000 and $26,310,000, or 63% and 61%, of the total mortgage loans originated in the same periods in 2015. The increase in amount of purchase mortgage originations resulted from an increased market presence in Roanoke as well as an increase in home purchase activity. Refinancing activity decreased due to an overall decrease in the number of consumers that would benefit from refinancing. Because many people able to refinance mortgages have already done so, management expects refinancing activity to continue to decrease. Management anticipates that purchase mortgage originations will continue to represent a majority of mortgage originations. 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.

Despite the recent fluctuations in rates, management anticipates that residential mortgage rates will remain near the current historic lows for the remainder of 2016. Management expects that attractive rates coupled with the Mortgage division’s reputation in Region 2000 and the hiring of additional mortgage loan originators will allow us to maintain or increase revenue at the Mortgage division. 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. In the event that interest rates rise, management expects revenue from the mortgage segment could be under pressure.

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

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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 2016.

The Bank provides insurance and annuity products to Bank customers and others, through the Bank’s Insurance subsidiary. The Bank has three full-time employees 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 2016.

Non-Interest Expense

Non-interest expense for the three and six months ended June 30, 2016 increased to $4,254,000 and $8,444,000 from $3,935,000 and $7,615,000, an increase of 8.11% and 10.89%, respectively, from the comparable periods in 2015. This resulted from increases for personnel expense primarily related to the expansion into Charlottesville, Harrisonburg, and Roanoke, as well as increases in professional, data processing and outside expenses, marketing expenses, occupancy expenses (for the six months ended), equipment expenses and, supplies expense. Credit expense also increased primarily related to the increase in mortgage volume. Total personnel expense was $2,162,000 and $4,399,000 for the three and six month periods ended June 30, 2016 as compared to $2,128,000 and $4,211,000 for the same periods in 2015.

Allowance for Loan Losses

The allowance for loan losses represents an amount that, in our judgment, will be adequate to absorb probable losses inherent in the loan portfolio. 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 two components – specific impairment and general reserves. As discussed below, loans having a risk rating of 7 or below that are significantly past due, and the borrower’s performance and financial condition provide evidence that it is probable that the Bank will be unable to collect all amounts when due, are evaluated for specific impairment. The general reserve component is based on an evaluation of general economic conditions, actual and expected credit losses, and loan performance measures. Based on the application of the loan loss calculation, the Bank provided $250,000 and $450,000 to the allowance for loan losses for the three and six month periods ended June 30, 2016. This compares to provisions of $57,000 and $157,000 for the comparable periods in 2015, representing increases of 338.60% and 186.62%, respectively.

General reserves related to historical loss experience have trended downward for several quarters. This downward trend is directly attributable to the Bank’s charge-off history through the most recent negative credit cycle. A significant part of the general reserve calculation incorporates how a particular loan class performs over a period of time (that is, its charge-off history). Following the financial crisis in 2008 and beyond that disrupted the banking and financial systems, the Bank’s asset quality deteriorated. This deterioration resulted in a significant increase in charge-offs against the Bank’s loan portfolio. The elevated charge-offs continued through 2011. During this period, the Bank’s loan loss methodology, which is based in part on the Bank’s charge-off history, dictated an increase in the amount allocated to the general reserve component of the loan loss reserve. Beginning in 2011, asset quality began to rapidly improve. Since that time general reserves have declined based on overall improvement in the Bank’s asset quality and historical charge-off experience.

Charged-off loans, which are loans that management deems uncollectible, are charged against the allowance for loan losses and constitute a realized loss. Charged-off loans were $127,000 and $378,000

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for the three and six months ended June 30, 2016 as compared to $259,000 and $460,000 for the comparable periods in 2015. While a charged off loan may subsequently be collected, such recoveries generally are realized over an extended period of time. In the three and six months ended June 30, 2016, the Bank had recoveries of charged off loans of $14,000 and $132,000 as compared with $42,000 and $99,000 for the comparable periods in 2015.

In light of the current economic environment, management continues its ongoing assessment of specific impairment in the Bank’s loan portfolio. As set forth in the tables below, the Bank’s allowance arising from the specific impairment evaluation as of June 30, 2016 decreased as compared to December 31, 2015.

The percentage of the allowance for loan losses to total loans was 1.07% as of June 30, 2016 and 1.08% as of December 31, 2015. The overall balance in the allowance for loan losses increased from $4,683,000 as of December 31, 2015 to $4,887,000 as of June 30, 2016. Despite the decrease in specific and general reserves, primarily due to the overall improvement in asset quality, the inherent risks associated with the increasing industry concentrations and commercial real estate concentrations within the portfolio have increased the qualitative portion of the general reserve. Management believes that the current allowance for loan losses is adequate.

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

	Allowance for Loan Losses and Recorded Investment in Loans (dollars in thousands) As of and For the Six Months Ended June 30, 2016
2016	Commercial			Commercial Real Estate			Consumer			Residential		Total
Allowance for Loan Losses:
Beginning Balance	$	1,195		$	1,751		$	1,073		$	664	$	4,683
Charge-offs		(89	)		(121	)		(168	)		—		(378	)
Recoveries		3			101			28			—		132
Provision		528	(2)		(100	)(1)		(40	)(1)		62		450
Ending Balance	$	1,637		$	1,631		$	893		$	726	$	4,887
Ending Balance: Individually evaluated for impairment	$	505		$	448		$	111		$	56	$	1,120
Ending Balance: Collectively evaluated for impairment		1,132			1,183			782			670		3,767
Totals:	$	1,637		$	1,631		$	893		$	726	$	4,887
Loans:
Ending Balance: Individually evaluated for impairment	$	998		$	4,490		$	165		$	2,056	$	7,709
Ending Balance: Collectively evaluated for impairment		85,325			219,432			83,144			61,321		449,222
Totals:	$	86,323		$	223,922		$	83,309		$	63,377	$	456,931

(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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(2) The increased concentration of loan balances in the commercial segment resulted in an increase in the provision for this category. Management has a process for the ongoing evaluation of our loans and the specific risks associated with concentrations in each segment.

	Allowance for Loan Losses and Recorded Investment in Loans (dollars in thousands) As of and For the Year Ended December 31, 2015
2015	Commercial			Commercial Real Estate			Consumer			Residential		Total
Allowance for Loan Losses:
Beginning Balance	$	1,235		$	2,194		$	812		$	549	$	4,790
Charge-offs		(294	)		(64	)		(257	)		—		(615	)
Recoveries		14			122			54			36		226
Provision		240			(501	)(1)		464			79		282
Ending Balance	$	1,195		$	1,751		$	1,073		$	664	$	4,683
Ending Balance: Individually evaluated for impairment	$	610		$	413		$	184		$	87	$	1,294
Ending Balance: Collectively evaluated for impairment		585			1,338			889			577		3,389
Totals:	$	1,195		$	1,751		$	1,073		$	664	$	4,683
Loans:
Ending Balance: Individually evaluated for impairment	$	1,180		$	5,175		$	241		$	2,818	$	9,414
Ending Balance: Collectively evaluated for impairment		75,593			211,950			81,290			56,881		425,714
Totals:	$	76,773		$	217,125		$	81,531		$	59,699	$	435,128

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

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

	Three months ended June 30, (in thousands)						Six months ended June 30, (in thousands)
	2016			2015			2016			2015
Balance, beginning of period	$	4,750		$	4,746		$	4,683		$	4,790
Provision for loan losses		250			57			450			157
Loans charged off		(127	)		(259	)		(378	)		(460	)
Recoveries of loans charged off		14			42			132			99
Net (charge offs)		(113	)		(217	)		(246	)		(361	)
Balance, end of period	$	4,887		$	4,586		$	4,887		$	4,586

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No nonaccrual loans were excluded from impaired loan disclosure under current accounting rules at June 30, 2016 and December 31, 2015. If interest on these loans had been accrued, such income cumulatively would have approximated $361,000 and $472,000 on June 30, 2016 and December 31, 2015, respectively. Loan payments received on nonaccrual loans are applied to principal. When a loan is placed on nonaccrual status there are several negative implications. First, all interest accrued but unpaid at the time of the classification is 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.

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

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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.

Income Taxes

For the three and six months ended June 30, 2016, Financial had an income tax expense of $504,000 and $922,000 as compared to $453,000 and $889,000 for the same periods in 2015. This represents an effective tax rate of 32.41% and 32.24% for the three and six months ended June 30, 2016 as compared with 31.10% and 30.60% for the three and six months ended June 30, 2015. Our effective rate was lower than the statutory corporate tax rate in both quarters because of federal income tax benefits resulting from the tax treatment of earnings on bank owned life insurance and certain tax free municipal securities.

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Schedule I

Net Interest Margin Analysis

Average Balance Sheets

For the Quarter Ended June 30, 2016 and 2015

(dollars in thousands)

	2016								2015
	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)	$	442,326		$	4,968		4.50	%	$	411,723		$	4,739		4.62	%
Loans held for sale		4,457			39		3.51	%		2,199			19		3.47	%
Fed funds sold		7,119			8		0.45	%		6,606			4		0.24	%
Interest bearing bank balances		6,000			9		0.60	%		5,000			4		0.24	%
Securities (3)		39,668			248		2.51	%		30,728			202		2.63	%
Federal agency equities		1,256			27		8.62	%		1,197			29		9.72	%
CBB equity		116			—		—			116			—		—
Total earning assets		500,942			5,299		4.24	%		457,569			4,997		4.38	%
Allowance for loan losses		(4,707	)							(4,729	)
Non-earning assets		37,413								34,234
Total assets	$	533,648							$	487,074
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand interest bearing	$	125,523		$	79		0.26	%	$	105,462		$	59		0.22	%
Savings		110,893			60		0.21	%		114,052			64		0.23	%
Time deposits		149,253			411		1.10	%		138,562			391		1.13	%
Total interest bearing deposits		385,669			550		0.57	%		358,076			514		0.58	%
Other borrowed funds
Fed funds purchased		1			—		—			57			—		—
Other borrowings		—			—		—			308			3		3.91	%
Capital Notes		—			—		—			10,000			150		6.00	%
Total interest-bearing liabilities		385,670			550		0.57	%		368,441			667		0.73	%
Non-interest bearing deposits		97,784								82,178
Other liabilities		843								621

49

	2016							2015
	Average Balance Sheet		Interest Income/ Expense		Average Rates Earned/ Paid			Average Balance Sheet		Interest Income/ Expense		Average Rates Earned/ Paid
Total liabilities		484,297							451,240
Stockholders’ equity		49,351							35,834
Total liabilities and Stockholders’ equity	$	533,648						$	487,074
Net interest income			$	4,749						$	4,330
Net interest margin						3.80	%						3.79	%
Interest spread						3.67	%						3.65	%

(1) Net accretion or amortization of 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.

50

Net Interest Margin Analysis

Average Balance Sheets

For the Six Months Ended June 30, 2016 and 2015

(dollars in thousands)

	2016								2015
	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)	$	439,626		$	9,929		4.55	%	$	406,880		$	9,352		4.64	%
Loans held for sale		3,380			56		3.34	%		1,884			34		3.64	%
Federal funds sold		5,095			12		0.47	%		8,323			9		0.22	%
Interest bearing bank balances		6,000			15		0.50	%		5,000			6		0.24	%
Securities (3)		39,325			494		2.53	%		28,897			393		2.74	%
Federal agency equities		1,228			33		5.42	%		1,341			34		5.11	%
CBB equity		116			—		—			116			—		—
Total earning assets		494,770			10,539		4.30	%		452,441			9,828		4.38	%
Allowance for loan losses		(4,723	)							(4,746	)
Non-earning assets		37,252								33,621
Total assets	$	527,299							$	481,316
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand interest bearing	$	122,120		$	155		0.26	%	$	104,656		$	115		0.22	%
Savings		112,014			120		0.22	%		116,220			130		0.23	%
Time deposits		147,061			811		1.11	%		129,464			723		1.13	%
Total interest bearing deposits		381,195			1,086		0.57	%		350,340			968		0.56	%
Other borrowed funds
Fed funds purchased		744			4		1.08	%		245			1		0.82	%
Repurchase agreements		—			—		—			—			—		—
Other borrowings		—			—		—			4,575			28		1.23	%
Capital Notes		165			8		6.00	%		10,000			300		6.00	%
Total interest-bearing liabilities		382,104			1,098		0.58	%		365,160			1,297		0.72	%
Non-interest bearing deposits		95,291								80,053
Other liabilities		862								622

51

	2016							2015
	Average Balance Sheet		Interest Income/ Expense		Average Rates Earned/ Paid			Average Balance Sheet		Interest Income/ Expense		Average Rates Earned/ Paid
Total liabilities		478,257							445,835
Stockholders’ equity		49,041							35,481
Total liabilities and Stockholders’ equity	$	527,298						$	481,316
Net interest income			$	9,441						$	8,531
Net interest margin						3.85	%						3.80	%
Interest spread						3.72	%						3.66	%

(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.

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 six months ended June 30, 2016, 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.

52

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

We described the most significant risk factors applicable to the Company in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2015 filed on March 17, 2016. We believe there have been no material changes from the risk factors disclosed on Form 10-K.

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

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 August 5, 2016
31.2	Certification of J. Todd Scruggs Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 5, 2016
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 August 5, 2016
101	The following materials from Bank of the James Financial Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets (unaudited) as of June 30, 2016 and December 31, 2015; (ii) Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2016 and 2015; (iii) Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2016 and 2015 (iv) Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2016 and 2015 (v) Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2016 and 2015; (vi) Notes to Unaudited Consolidated Financial Statements.

53

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: August 5, 2016	By	/S/ Robert R. Chapman III
		Robert R. Chapman III, President
		(Principal Executive Officer)
Date: August 5, 2016	By	/S/ J. Todd Scruggs
		J. Todd Scruggs, Secretary and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

54

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 August 5, 2016
31.2	Certification of J. Todd Scruggs Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 5, 2016
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 August 5, 2016
101	The following materials from Bank of the James Financial Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets (unaudited) as of June 30, 2016 and December 31, 2015; (ii) Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2016 and 2015; (iii) Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2016 and 2015 (iv) Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2016 and 2015 (v) Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2016 and 2015; (vi) Notes to Unaudited Consolidated Financial Statements.

55

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: August 5, 2016	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: August 5, 2016	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: August 5, 2016	By	/S/ Robert R. Chapman III
		Robert R. Chapman III, President
		(Principal Executive Officer)
Date: August 5, 2016	By	/S/ J. Todd Scruggs
		J. Todd Scruggs, Secretary and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 05, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2016
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		4,378,436

XML

Consolidated Balance Sheets - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Assets
Cash and due from banks	$ 20,918,000	$ 15,952,000
Federal Funds Sold	3,515,000	12,703,000
Total cash and cash equivalents	24,433,000	28,655,000
Securities held-to-maturity (fair value of $3,424 in 2016 and $2,649 in 2015)	3,309,000	2,519,000
Securities available-for-sale, at fair value	33,809,000	35,996,000
Restricted stock, at cost	1,373,000	1,313,000
Loans, net of allowance for loan losses of $4,887 in 2016 and $4,683 in 2015	452,044,000	430,445,000
Loans held for sale	4,452,000	1,964,000
Premises and equipment, net	9,866,000	10,007,000
Interest receivable	1,209,000	1,248,000
Cash value - bank owned life insurance	9,911,000	9,781,000
Other real estate owned, net of valuation allowance	2,420,000	1,965,000
Income taxes receivable	1,125,000	1,096,000
Deferred tax asset, net	912,000	1,399,000
Other assets	867,000	755,000
Total assets	545,730,000	527,143,000
Deposits
Noninterest bearing demand	97,544,000	91,325,000
NOW, money market and savings	235,437,000	232,864,000
Time	160,554,000	143,421,000
Total deposits	493,535,000	467,610,000
Capital notes		10,000,000
Interest payable	87,000	61,000
Other liabilities	1,555,000	1,276,000
Total liabilities	495,177,000	478,947,000
Commitments and Contingencies
Stockholders' equity
Preferred stock; authorized 1,000,000 shares; none issued and outstanding as of June 30, 2016 and December 31, 2015
Common stock $2.14 par value; authorized 10,000,000 shares; issued and outstanding 4,378,436 as of June 30, 2016 and December 31, 2015	9,370,000	9,370,000
Additional paid-in-capital	31,495,000	31,495,000
Retained earnings	9,333,000	7,920,000
Accumulated other comprehensive income (loss)	355,000	(589,000)
Total stockholders' equity	50,553,000	48,196,000
Total liabilities and stockholders' equity	$ 545,730,000	$ 527,143,000

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Consolidated Balance Sheets [Abstract]
Securities held-to-maturity, fair value	$ 3,424	$ 2,649
Loans, allowance for loan losses	$ 4,887	$ 4,683
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 2.14	$ 2.14
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	4,378,436	4,378,436
Common stock, shares outstanding	4,378,436	4,378,436

XML

Consolidated Statements Of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Interest Income
Loans	$ 5,007	$ 4,758	$ 9,985	$ 9,386
Securities
US Government and agency obligations	125	143	264	283
Mortgage backed securities	68	18	120	28
Municipals - taxable	35	22	69	47
Municipals - taxable exempt	11	11	21	21
Dividends	27	29	33	34
Other (Corporates)	3	2	9	3
Interest bearing deposits	9	4	15	6
Federal Funds sold	8	4	12	9
Total interest income	5,293	4,991	10,528	9,817
Deposits
NOW, money market savings	139	123	275	245
Time Deposits	411	391	811	723
Federal Funds purchased			4	1
FHLB borrowings		3		28
Capital notes		150	8	300
Total interest expense	550	667	1,098	1,297
Net interest income	4,743	4,324	9,430	8,520
Provision for loan losses	250	57	450	157
Net interest income after provision for loan losses	4,493	4,267	8,980	8,363
Noninterest income
Gain on sales of loans held for sale, net	681	613	1,172	1,136
Service charges, fees and commissions	362	348	734	666
Increase in cash value of life insurance	65	68	130	136
Other	45	45	60	54
Gain on sales of available-for-sale securities, net	163	4	228	33
Total Non-interest income	1,316	1,078	2,324	2,025
Noninterest expenses
Salaries and employee benefits	2,162	2,128	4,399	4,211
Occupancy	305	312	637	601
Equipment	314	304	633	603
Supplies	108	108	227	204
Professional, data processing, and other outside expense	701	560	1,363	1,046
Marketing	201	148	320	224
Credit expense	106	63	189	136
Other real estate expenses	4	32	5	37
FDIC insurance expense	91	79	183	153
Other	262	201	488	400
Total non-interest expenses	4,254	3,935	8,444	7,615
Income before income taxes	1,555	1,410	2,860	2,773
Income tax expense	504	453	922	889
Net Income	$ 1,051	$ 957	$ 1,938	$ 1,884
Weighted average common shares outstanding - basic	4,378,436	3,371,616	4,378,436	3,371,616
Weighted average common shares outstanding- diluted	4,378,436	3,371,616	4,378,436	3,371,616
Earnings per common share - basic	$ 0.24	$ 0.28	$ 0.44	$ 0.56
Earnings per common share - diluted	$ 0.24	$ 0.28	$ 0.44	$ 0.56

XML

Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Consolidated Statements Of Comprehensive Income [Abstract]
Net Income		$ 1,051	$ 957	$ 1,938	$ 1,884
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale		630	(783)	1,659	(445)
Unrealized gains on securities available-for-sale, Tax effect		(215)	267	(565)	152
Reclassification adjustment for gains included in net income	[1]	(163)	(4)	(228)	(33)
Reclassification adjustment for gains included in net income, Tax effect	[2]	56	1	78	11
Other comprehensive income (loss), net of tax		308	(519)	944	(315)
Comprehensive income		$ 1,359	$ 438	$ 2,882	$ 1,569

[1] Gains are included in "gain on sales of available-for-sale securities, net" 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

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Cash flows from operating activities
Net Income	$ 1,051	$ 957	$ 1,938	$ 1,884
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			391	381
Net amortization and accretion of premiums and discounts on securities			93	34
(Gain) on sales of available for-sale-securities	(163)	(4)	(228)	(33)
(Gain) on call of held to maturity securities			(6)
Gain on sales of loans held for sale	(681)	(613)	(1,172)	(1,136)
Provision for loan losses	250	57	450	157	$ 282
(Gain) loss on sale of other real estate owned			(1)	1	6
Impairment of other real estate owned				15	75
(Increase) in cash value of life insurance	(65)	(68)	(130)	(136)
Decrease in interest receivable			39	30
(Increase) in other assets			(112)	(97)
(Increase) in income taxes receivable			(29)	(61)
Increase in interest payable			26	16
Increase in other liabilities			279	23
Proceeds from sales of loans held for sale			38,038	42,382
Origination of loans held for sale			(39,354)	(43,188)
Net cash provided by operating activities			222	272
Cash flows from investing activities
Purchases of securities held to maturity			(1,290)
Proceeds from maturities and calls of securities held-to-maturity			500
Purchases of securities available-for-sale			(16,242)	(12,414)
Proceeds from maturities, calls and paydowns of securities available-for-sale			3,972	30
Proceeds from sale of securities available-for-sale			16,029	6,856
(Purchase) redemption of Federal Home Loan Bank stock			(60)	426
Origination of loans, net of principal collected			(22,524)	(19,134)
Capital improvements to other real estate owned				(25)
Purchases of premises and equipment			(250)	(305)
Proceeds from sale of other real estate owned			21	25
Net cash (used in) investing activities			(19,844)	(24,541)
Cash flows from financing activities
Net increase in deposits			25,925	45,889
Net (decrease) in federal funds purchased				(3,189)
Net (decrease) in Federal Home Loan Bank advances				(12,000)
Dividends paid to common stockholders			(525)	(337)
Retirement of capital notes			(10,000)
Net cash provided by financing activities			15,400	30,363
(Decrease) increase in cash and cash equivalents			(4,222)	6,094
Cash and cash equivalents at beginning of period			28,655	12,743	12,743
Cash and cash equivalents at end of period	$ 24,433	18,837	24,433	18,837	28,655
Non cash transactions
Transfer of loans to other real estate owned			475	1,125	$ 1,425
Fair value of adjustment for securities			1,431	(478)
Common stock dividends declared, not paid		$ 202		202
Cash transactions
Cash paid for interest			1,072	1,281
Cash paid for taxes			$ 450	$ 1,109

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Consolidated Statements Of Changes In Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive (Loss) [Member]	Total
Balance at Dec. 31, 2014	$ 7,215	$ 22,919	$ 5,031	$ (389)	$ 34,776
Balance, shares at Dec. 31, 2014	3,371,616
Net Income			1,884		1,884
Dividends on common stock			(539)		(539)
Other Comprehensive Income (loss)				(315)	(315)
Balance at Jun. 30, 2015	$ 7,215	22,919	6,376	(704)	35,806
Balance, shares at Jun. 30, 2015	3,371,616
Balance at Dec. 31, 2015	$ 9,370	31,495	7,920	(589)	48,196
Balance, shares at Dec. 31, 2015	4,378,436
Net Income			1,938		1,938
Dividends on common stock			(525)		(525)
Other Comprehensive Income (loss)				944	944
Balance at Jun. 30, 2016	$ 9,370	$ 31,495	$ 9,333	$ 355	$ 50,553
Balance, shares at Jun. 30, 2016	4,378,436

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Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) - $ / shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Consolidated Statements Of Changes In Stockholders' Equity [Abstract]
Dividend on common stock, per share	$ 0.12	$ 0.16

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Basis Of Presentation

6 Months Ended

Jun. 30, 2016

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 June 30, 2016 and for the three and six months ended June 30, 2016 and 2015 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, 2015.  These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes for the year ended December 31, 2015 included in Financial’s Annual Report on Form 10-K.  Results for the three and six month periods ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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.  Recently, the Company has expanded into Charlottesville, Roanoke, and Harrisonburg.

Financial’s critical accounting policy relates to the evaluation of the allowance for loan losses which is based on management’s estimate of an amount that is adequate to absorb probable losses inherent in the  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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Use Of Estimates

6 Months Ended

Jun. 30, 2016

Use Of Estimates [Abstract]

Use Of Estimates

Note 2 – Use of Estimates

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

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Earnings Per Common Share (EPS)

6 Months Ended

Jun. 30, 2016

Earnings Per Common Share (EPS) [Abstract]

Earnings Per Common Share (EPS)

Note 3 – Earnings Per Common Share (EPS)

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 diluted earnings per share.  The following is a summary of the earnings per share calculation for the three and six months ended June 30, 2016 and 2015.

Note 3 – Earnings Per Share (continued)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2015
Net income	$     1,051,000	$        957,000	$     1,938,000	$     1,884,000
Basic EPS weighted average shares outstanding	4,378,436	3,371,616	4,378,436	3,371,616
Incremental shares attributable to stock options	-	-	-	-
Diluted EPS weighted average shares outstanding	4,378,436	3,371,616	4,378,436	3,371,616
Basic earnings per common share	$              0.24	$              0.28	$              0.44	$              0.56
Diluted earnings per common share	$              0.24	$              0.28	$              0.44	$              0.56

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

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2015
Options excluded from calculating diluted EPS because their effect was anti-dilutive	636	66,576	636	66,576

The foregoing shares were anti-dilutive because the exercise price of the options was greater than the market price on June 30, 2016 and 2015.

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Stock Based Compensation

6 Months Ended

Jun. 30, 2016

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 six months ended June 30, 2016 is summarized below:

			Weighted
		Weighted	Average
		Average	Remaining
		Exercise	Contractual	Intrinsic
	Shares	Price	Life (in years)	Value
Options outstanding, January 1, 2016	636	$      12.79
Granted	-	-
Exercised	-	-
Forfeited	-	-
Options outstanding, June 30, 2016	636	12.79	1.92	$              -
Options exercisable, June 30, 2016	636	$      12.79	1.92	$              -

Intrinsic value is calculated by subtracting the exercise price of option shares from the market price of underlying shares as of June 30, 2016 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

6 Months Ended

Jun. 30, 2016

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:

Fair Value on a Recurring Basis

Securities Available-for-Sale

Fair values of securities, excluding restricted investments in Federal Reserve Bank stock, Federal Home Loan Bank stock, and Community Bankers’ Bank stock are based on quoted prices available in an active market. If quoted prices are available, these 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.

Restricted securities noted above are classified as such because their ownership is restricted to certain types of entities and there is no established market for their resale. When the stock is repurchased, the shares are repurchased at the stock’s book value; therefore, the carrying amount of restricted securities approximate fair value. Restricted securities are considered to be Level 2.

Note 5 – Fair Value Measurements (continued)

		Carrying Value at June 30, 2016 (in thousands)
Description	Balance as of June 30, 2016	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US agency obligations	$11,263	$       -	$11,263	$       -
Mortgage-backed securities	14,481	-	14,481	-
Municipals	7,531	-	7,531	-
Corporates	534		534
Total available-for-sale securities	$33,809	$       -	$33,809	$       -
		Carrying Value at December 31, 2015 (in thousands)
Description	Balance as of December 31, 2015	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US agency obligations	$18,810	$       -	$18,810	$       -
Mortgage-backed securities	10,647	-	10,647	-
Municipals	5,034	-	5,034	-
Corporates	1,505	-	1,505	-
Total available-for-sale securities	$35,996	$       -	$35,996	$       -

Fair Value on a Non-recurring Basis

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 when due. 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 cost which approximates 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 June 30, 2016.  Gains and losses on the sale of loans are recorded within gains on sales of loans held for sale, net 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 June 30, 2016
Description	Balance as of June 30, 2016	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$2,718	$     -	$          -	$2,718
Loans held for sale	4,452	-	4,452	-
Other real estate owned	2,420	-	-	2,420

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

		Carrying Value at December 31, 2015
Description	Balance as of December 31, 2015	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$2,896	$      -	$       -	$2,896
Loans held for sale	1,964	-	1,964	-
Other real estate owned	1,965	-	-	1,965

*  Includes loans charged down 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 June 30, 2016 (dollars in thousands)
	Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$2,718	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)
OREO	2,420	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)

	Quantitative information about Level 3 Fair Value Measurements for December 31, 2015 (dollars in thousands)
	Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$2,896	Discounted appraised value	Selling cost	5% - 10%  (6%)
			Discount for lack of marketability and age of appraisal	0% - 45%  (15%)
OREO	1,965	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 tobe immaterial at June 30, 2016 and December 31, 2015 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 June 30, 2016 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	$20,918		$20,918	$      -	$      -	$20,918
Fed funds sold	3,515		3,515			3,515
Securities
Available-for-sale	33,809		-	33,809	-	33,809
Held-to-maturity	3,309		-	3,424	-	3,424
Restricted stock	1,373			1,373		1,373
Loans, net	452,044		-	-	459,277	459,277
Loans held for sale	4,452		-	4,452	-	4,452
Interest receivable	1,209		-	1,209	-	1,209
BOLI	9,911		-	9,911	-	9,911
Liabilities
Deposits	$493,535		$      -	$494,664	$      -	$494,664
Interest payable	87		-	87	-	87

		Fair Value Measurements at December 31, 2015 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	$15,952	$15,952	$      -	$      -	$15,952
Fed funds sold	12,703	12,703			12,703
Securities
Available-for-sale	35,996	-	35,996	-	35,996
Held-to-maturity	2,519	-	2,649	-	2,649
Restricted stock	1,313	-	1,313		1,313
Loans, net	430,445	-	-	438,322	438,322
Loans held for sale	1,964	-	1,964	-	1,964
Interest receivable	1,248	-	1,248	-	1,248
BOLI	9,781	-	9,781	-	9,781
Liabilities
Deposits	$467,610	$      -	$468,773	$      -	$468,773
Capital notes	10,000	-	10,024	-	10,024
Interest payable	61	-	61	-	61

Note 5 – Fair Value Measurements (continued)

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

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

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

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

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Capital Notes

6 Months Ended

Jun. 30, 2016

Capital Notes [Abstract]

Capitol Notes

Note 6 – Capital Notes

AsofDecember31,2015Financialhad$10,000,000categorizedas“CapitalNotes”whichrepresentstheproceedsoftheprivateplacementof$10,000,000inunregistereddebtsecuritiesaspreviouslydisclosed(the“2012Notes”).The2012Notesboreinterestattherateof6%peryearwithinterestpayablequarterlyinarrears.OnDecember 3, 2015,Financialclosedaprivateplacementofcommonstockpursuanttowhichitreceivedgrossproceedsof$11,520,000bysellinganaggregateof1,000,000sharesofFinancials’CommonStockataprice of $11.52pershare,aspartofaprivateplacement(the“CommonStockPrivatePlacement”).Financialused$10,000,000oftheproceedsfromtheCommonStockPrivatePlacementtoprepayinfullthe2012NotesonJanuary5,2016.

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Securities

6 Months Ended

Jun. 30, 2016

Securities [Abstract]

Securities

Note 7 - Securities

The following tables summarize the Bank’s holdings for both securities held-to-maturity and securities available-for-sale as of June 30, 2016 and December 31, 2015 (amounts in thousands):

		June 30, 2016
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$3,309	$115	$      -	$3,424
Available-for-Sale
US agency obligations	11,114	150	(1)	11,263
Mortgage-backed securities	14,393	88	-	14,481
Municipals	7,236	295	-	7,531
Corporates	528	6	-	534
	$33,271	$539	$(1)	$33,809
		December 31, 2015
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$2,519	$130	$         -	$2,649
Available-for-Sale
US agency obligations	19,606	3	(799)	18,810
Mortgage-backed securities	10,778	4	(135)	10,647
Municipals	4,984	84	(34)	5,034
Corporates	1,521	-	(16)	1,505
	$36,889	$91	$(984)	$35,996

Note 7 – Securities (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 June 30, 2016 and December 31, 2015(amounts in thousands):

	Less than 12 months		More than 12 months		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
June 30, 2016	Value	Losses	Value	Losses	Value	Losses
Description of securities
U.S. agency obligations	$3,010	$1	$    -	$     -	$3,010	$1
Total	$3,010	$1	$    -	$     -	$3,010	$1
	Less than 12 months		More than 12 months		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
December 31, 2015	Value	Losses	Value	Losses	Value	Losses
Description of securities
U.S. agency obligations	$7,160	$353	$10,650	$446	$17,810	$799
Mortgage-backed securities	6,726	77	1,979	58	8,705	135
Municipals	2,341	25	503	9	2,844	34
Corporates	1,505	16	-	-	1,505	16
Total	$17,732	$471	$13,132	$513	$30,864	$984

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 June 30, 2016, the Company did not consider the unrealized loss as an other-than-temporary loss due to the nature of the security involved.  As of June 30, 2016, the Bank owned 1security that was being evaluated for other than temporary impairment.  This security is S&P rated AA+.  As of June 30, the only security being evaluated for impairment was an obligation of a U.S. government sponsored entity.

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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Business Segments

6 Months Ended

Jun. 30, 2016

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 gain on sale business while the Bank’s primary source of revenue is net interest income.  The Bank also provides a referral network for the mortgage origination business.  The mortgage business may also be in a position to refer its customers to the Bank for banking services when appropriate.

Information about reportable business segments and reconciliation of such information to the consolidated financial statements for the three and six months ended June 30, 2016 and 2015 was as follows (dollars in thousands):

Note 8 – Business Segments (continued)

Business Segments
	Community
	Banking	Mortgage	Total
Six months ended June 30, 2016
Net interest income	$        9,430	$            -	$        9,430
Provision for loan losses	450	-	450
Net interest income after provision for loan losses	8,980	-	8,980
Noninterest income	1,128	1,196	2,324
Noninterest expenses	7,481	963	8,444
Income before income taxes	2,627	233	2,860
Income tax expense	843	79	922
Net income	$        1,784	$        154	$        1,938
Total assets	$    541,120	$     4,610	$    545,730
Six months ended June 30, 2015
Net interest income	$        8,520	$            -	$        8,520
Provision for loan losses	157	-	157
Net interest income after provision for loan losses	8,363	-	8,363
Noninterest income	867	1,158	2,025
Noninterest expenses	6,777	838	7,615
Income before income taxes	2,453	320	2,773
Income tax expense	780	109	889
Net income	$        1,673	$        211	$        1,884
Total assets	$    489,821	$     3,015	$    492,836
	Community
	Banking	Mortgage	Total
Three months ended June 30, 2016
Net interest income	$        4,743	$            -	$        4,743
Provision for loan losses	250	-	250
Net interest income after provision for loan losses	4,493	-	4,493
Noninterest income	620	696	1,316
Noninterest expenses	3,748	506	4,254
Income before income taxes	1,365	190	1,555
Income tax expense	440	64	504
Net income	$           925	$        126	$        1,051
Total assets	$    541,120	$     4,610	$    545,730
Three months ended June 30, 2015
Net interest income	$        4,324	$            -	$        4,324
Provision for loan losses	57	-	57
Net interest income after provision for loan losses	4,267	-	4,267
Noninterest income	454	624	1,078
Noninterest expenses	3,484	451	3,935
Income before income taxes	1,237	173	1,410
Income tax expense	394	59	453
Net income	$           843	$        114	$           957
Total assets	$    489,821	$     3,015	$    492,836

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Loans, Allowance For Loan Losses and OREO

6 Months Ended

Jun. 30, 2016

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:
	June 30,	December 31,
	2016	2015
Commercial	$86,323	$76,773
Commercial real estate	223,922	217,125
Consumer	83,309	81,531
Residential	63,377	59,699
Total loans (1)	456,931	435,128
Less allowance for loan losses	4,887	4,683
Net loans	$452,044	$430,445

(1) Includes deferred costs of $225 and $263, respectively.

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.

Loans on Non-Accrual Status
(dollars in thousands)
	As of
	June 30, 2016	December 31, 2015
Commercial	$369	$483
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	865	799
Commercial Mortgages-Non-Owner Occupied	-	514
Commercial Construction	291	367
Consumer
Consumer Unsecured	-	31
Consumer Secured	63	269
Residential:
Residential Mortgages	806	695
Residential Consumer Construction	146	248
Totals	$2,540	$3,406

We also classify other real estate owned (OREO) as a nonperforming asset.  OREO represents real property owned by the Bank either through purchase at foreclosure or received from the borrower through a deed in lieu of foreclosure. OREO increased to $2,420,000 on June 30, 2016 from $1,965,000 on December 31, 2015.   The following table represents the changes in OREO balance during the six months ended June 30, 2016 and year ended December 31, 2015.

OREO Changes
(dollars in thousands)
	Six months ended	Year ended
	June 30, 2016	December 31, 2015
Balance at the beginning of the year (net)	$1,965	$956
Transfers from loans	475	1,425
Capitalized costs	-	25
Writedowns	-	(75)
Sales proceeds	(21)	(360)
Gain (loss) on disposition	1	(6)
Balance at the end of the period (net)	$2,420	$1,965

At June 30, 2016 and December 31, 2015, the Company had no consumer mortgage loan secured by residential real estate for which foreclosure was in process.  The Company held one residential real estate property in other real estate owned as ofJune 30, 2016 and no residential real estate property in other real estate owned as of December 31, 2015.

Note 9 – Loans, allowance for loan losses and OREO (continued)
	Impaired Loans
	(dollars in thousands)
	As of and For the Six Months Ended June 30, 2016
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2016	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$  -	$  -	$      -	$   -	$    -
Commercial Real Estate
Commercial Mortgages-Owner Occupied	1,973	1,999	-	2,528	50
Commercial Mortgage Non-Owner Occupied	531	581	-	354	18
Commercial Construction	-	-	-	14	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	54	102	-	37	1
Residential
Residential Mortgages	1,750	1,795	-	1,874	32
Residential Consumer Construction	-	-	-	86	-
With An Allowance Recorded:
Commercial	$998	$1,083	$505	$1,089	$16
Commercial Real Estate
Commercial Mortgages-Owner Occupied	1,707	1,719	314	1,292	52
Commercial Mortgage Non-Owner Occupied	75	75	20	374	3
Commercial Construction	204	637	114	272	-
Consumer
Consumer Unsecured	-	-	-	16	-
Consumer Secured	111	111	111	151	4
Residential
Residential Mortgages	306	323	56	478	11
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$998	$1,083	$505	$1,089	$16
Commercial Real Estate
Commercial Mortgages-Owner Occupied	3,680	3,718	314	3,820	102
Commercial Mortgage Non-Owner Occupied	606	656	20	728	21
Commercial Construction	204	637	114	286	-
Consumer
Consumer Unsecured	-	-	-	16	-
Consumer Secured	165	213	111	188	5
Residential
Residential Mortgages	2,056	2,118	56	2,352	43
Residential Consumer Construction	-	-	-	86	-
	$7,709	$8,425	$1,120	$8,565	$187

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

	Impaired Loans
	(dollars in thousands)
	As of and For the Year Ended December 31, 2015
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2015	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$     -	$     -	$     -	$1,009	$   -
Commercial Real Estate
Commercial Mortgages-Owner Occupied	3,082	3,100	-	2,959	174
Commercial Mortgage Non-Owner Occupied	177	177	-	628	12
Commercial Construction	27	514	-	244	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	20	20	-	21	1
Residential
Residential Mortgages	1,997	2,027	-	1,466	86
Residential Consumer Construction	171	176	-	86	4
With An Allowance Recorded:
Commercial	$1,180	$1,256	$610	$1,293	$38
Commercial Real Estate
Commercial Mortgages-Owner Occupied	877	883	163	865	35
Commercial Mortgage Non-Owner Occupied	672	738	175	399	38
Commercial Construction	340	700	75	170	-
Consumer
Consumer Unsecured	31	32	31	16	1
Consumer Secured	190	193	153	155	10
Residential
Residential Mortgages	650	800	87	740	42
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$1,180	$1,256	$610	$2,302	$38
Commercial Real Estate
Commercial Mortgages-Owner Occupied	3,959	3,983	163	3,824	209
Commercial Mortgage Non-Owner Occupied	849	915	175	1,027	50
Commercial Construction	367	1,214	75	414	-
Consumer
Consumer Unsecured	31	32	31	16	1
Consumer Secured	210	213	153	176	11
Residential
Residential Mortgages	2,647	2,827	87	2,206	128
Residential Consumer Construction	171	176	-	86	4
	$9,414	$10,616	$1,294	$10,051	$441

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

	Allowance for Loan Losses and Recorded Investment in Loans (dollars in thousands) As of and For the Six Months Ended June 30, 2016
		Commercial
2016	Commercial	Real Estate	Consumer	Residential	Total
Allowance for Loan Losses:
Beginning Balance	$1,195	$1,751	$1,073	$664	$4,683
Charge-offs	(89)	(121)	(168)	-	(378)
Recoveries	3	101	28	-	132
Provision	528	(100)	(40)	62	450
Ending Balance	$1,637	$1,631	$893	$726	$4,887
Ending Balance: Individually evaluated for impairment	$505	$448	$111	$56	$1,120
Ending Balance: Collectively evaluated for impairment	1,132	1,183	782	670	3,767
Totals:	$1,637	$1,631	$893	$726	$4,887
Loans:
Ending Balance: Individually evaluated for impairment	$998	$4,490	$165	$2,056	$7,709
Ending Balance: Collectively evaluated for impairment	85,325	219,432	83,144	61,321	449,222
Totals:	$86,323	$223,922	$83,309	$63,377	$456,931

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

	Allowance for Loan Losses and Recorded Investment in Loans (dollars in thousands) As of and For the Year Ended December 31, 2015
		Commercial
2015	Commercial	Real Estate	Consumer	Residential	Total
Allowance for Loan Losses:
Beginning Balance	$1,235	$2,194	$812	$549	$4,790
Charge-offs	(294)	(64)	(257)	-	(615)
Recoveries	14	122	54	36	226
Provision	240	(501)	464	79	282
Ending Balance	$1,195	$1,751	$1,073	$664	$4,683
Ending Balance: Individually evaluated for impairment	$610	$413	$184	$87	$1,294
Ending Balance: Collectively evaluated for impairment	585	1,338	889	577	3,389
Totals:	$1,195	$1,751	$1,073	$664	$4,683
Loans:
Ending Balance: Individually evaluated for impairment	$1,180	$5,175	$241	$2,818	$9,414
Ending Balance: Collectively evaluated for impairment	75,593	211,950	81,290	56,881	425,714
Totals:	$76,773	$217,125	$81,531	$59,699	$435,128

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

	Age Analysis of Past Due Loans as of
	June 30, 2016
	(dollars in thousands)
			Greater				Recorded Investment
	30-59 Days	60-89 Days	than	Total Past		Total	> 90 Days &
2016	Past Due	Past Due	90 Days	Due	Current	Loans	Accruing
Commercial	$14	$  -	$369	$383	$85,940	$86,323	$     -
Commercial Real Estate:
Commercial Mortgages-   Owner Occupied	702	100	865	1,667	79,963	81,630	-
Commercial Mortgages-Non-Owner Occupied	-	-	-	-	129,808	129,808	-
Commercial Construction	-	-	291	291	12,193	12,484	-
Consumer:
Consumer Unsecured	14	9	-	23	7,016	7,039	-
Consumer Secured	496	15	35	546	75,724	76,270	-
Residential:
Residential Mortgages	518	202	754	1,474	50,808	52,282	-
Residential Consumer Construction	-	-	146	146	10,949	11,095	-
Total	$1,744	$326	$2,460	$4,530	$452,401	$456,931	$  -

	Age Analysis of Past Due Loans as of
	December 31, 2015
	(dollars in thousands)
			Greater				Recorded Investment
	30-59 Days	60-89 Days	than	Total Past		Total	> 90 Days &
2015	Past Due	Past Due	90 Days	Due	Current	Loans	Accruing
Commercial	$   -	$244	$483	$727	$76,046	$76,773	$     -
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	425	571	426	1,422	75,549	76,971	-
Commercial Mortgages-Non-Owner Occupied	189	90	438	717	126,138	126,855	-
Commercial Construction	-	-	367	367	12,932	13,299	-
Consumer:
Consumer Unsecured	2	-	31	33	6,828	6,861	-
Consumer Secured	198	68	128	394	74,276	74,670	-
Residential:
Residential Mortgages	512	468	543	1,523	48,490	50,013	-
Residential Consumer Construction	-	-	248	248	9,438	9,686	-
Total	$1,326	$1,441	$2,664	$5,431	$429,697	$435,128	$    -

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

	Credit Quality Information - by Class
	June 30, 2016
	(dollars in thousands)
2016	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$82,372	$1,605	$1,293	$1,053	$   -	$86,323
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	73,500	2,272	2,103	3,755	-	81,630
Commercial Mortgages-Non Owner Occupied	125,012	3,568	658	570	-	129,808
Commercial Construction	12,193	-	-	291	-	12,484
Consumer
Consumer Unsecured	7,039	-	-	-	-	7,039
Consumer Secured	75,645	238	-	387	-	76,270
Residential:
Residential Mortgages	49,701	-	248	2,333	-	52,282
Residential Consumer Construction	11,022	-	-	73	-	11,095
Totals	$436,484	$7,683	$4,302	$8,462	$    -	$456,931

	Credit Quality Information - by Class
	December 31, 2015
	(dollars in thousands)
2015	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$73,831	$290	$1,457	$1,195	$     -	$76,773
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	68,813	1,353	2,801	4,004	-	76,971
Commercial Mortgages-Non Owner Occupied	120,462	1,558	3,895	940	-	126,855
Commercial Construction	12,932	-	-	367	-	13,299
Consumer
Consumer Unsecured	6,830	-	-	31	-	6,861
Consumer Secured	73,825	276	50	519	-	74,670
Residential:
Residential Mortgages	47,180	-	-	2,833	-	50,013
Residential Consumer Construction	9,438	-	-	248	-	9,686
Totals	$413,311	$3,477	$8,203	$10,137	$    -	$435,128

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

There were noloan modifications that would have been classified as TDRs during the three and six months ended June 30, 2016.

The following table describe the loan modifications classified as TDRs during the three and six months ended June 30, 2015:

For the Three Months Ended June 30, 2015 (dollars in thousands)
Troubled Debt Restructurings During the Period	Number of Contracts	Pre-Modification Outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
Commercial Real Estate	2	$454	$454

For the Six Months Ended June 30, 2015 (dollars in thousands)
Troubled Debt Restructurings During the Period	Number of Contracts	Pre-Modification Outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
Commercial	1	$20	$20
Commercial Real Estate	2	$454	$454

The loans noted in the table above were modified during the period to extend maturity only.  These loansare factored into the determination of the allowance for loan losses as of the period indicated and are included in the Bank’s impaired loan analysis and individually evaluated for impairment.

There were no loan modifications classified as TDRs within the last twelve months that defaulted during the three and six months ended June 30, 2016 and 2015.

At June 30, 2016 and December 31, 2015, the Bank had no outstanding commitments to disburse additional funds on loans classified as TDRs.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2016

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 10 – Recent accounting pronouncements

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

Note 10 – Recent accounting pronouncements (continued)

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.  

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.”  The amendments in ASU 2016-01, among other things: 1) Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. 3) Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). 4) Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the impact that ASU 2016-01 will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its consolidated financial statements.

During March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Shares-Based Payment Accounting.” The amendments in this ASU simplify several aspects of the accounting for share-based payment award transactions including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently assessing the impact that ASU 2016-09 will have on its consolidated financial statements.

During June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”  The amendments in this ASU, among

other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendments in this ASU are effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Note 10 – Recent accounting pronouncements (continued)

The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements.

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Earnings Per Common Share (EPS) (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Common Share (EPS) [Abstract]

Earnings Per Share

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2015
Net income	$     1,051,000	$        957,000	$     1,938,000	$     1,884,000
Basic EPS weighted average shares outstanding	4,378,436	3,371,616	4,378,436	3,371,616
Incremental shares attributable to stock options	-	-	-	-
Diluted EPS weighted average shares outstanding	4,378,436	3,371,616	4,378,436	3,371,616
Basic earnings per common share	$              0.24	$              0.28	$              0.44	$              0.56
Diluted earnings per common share	$              0.24	$              0.28	$              0.44	$              0.56

Schedule Of Antidilutive Securities Excluded From Computation Of Earnings Per Share

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2015
Options excluded from calculating diluted EPS because their effect was anti-dilutive	636	66,576	636	66,576

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Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Stock Based Compensation [Abstract]

Summary Of Stock Option Activity

			Weighted
		Weighted	Average
		Average	Remaining
		Exercise	Contractual	Intrinsic
	Shares	Price	Life (in years)	Value
Options outstanding, January 1, 2016	636	$      12.79
Granted	-	-
Exercised	-	-
Forfeited	-	-
Options outstanding, June 30, 2016	636	12.79	1.92	$              -
Options exercisable, June 30, 2016	636	$      12.79	1.92	$              -

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Measurements [Abstract]

Fair Value Assets Measured On Recurring Basis

		Carrying Value at June 30, 2016 (in thousands)
Description	Balance as of June 30, 2016	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US agency obligations	$11,263	$       -	$11,263	$       -
Mortgage-backed securities	14,481	-	14,481	-
Municipals	7,531	-	7,531	-
Corporates	534		534
Total available-for-sale securities	$33,809	$       -	$33,809	$       -
		Carrying Value at December 31, 2015 (in thousands)
Description	Balance as of December 31, 2015	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
US agency obligations	$18,810	$       -	$18,810	$       -
Mortgage-backed securities	10,647	-	10,647	-
Municipals	5,034	-	5,034	-
Corporates	1,505	-	1,505	-
Total available-for-sale securities	$35,996	$       -	$35,996	$       -

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

		Carrying Value at June 30, 2016
Description	Balance as of June 30, 2016	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$2,718	$     -	$          -	$2,718
Loans held for sale	4,452	-	4,452	-
Other real estate owned	2,420	-	-	2,420

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

		Carrying Value at December 31, 2015
Description	Balance as of December 31, 2015	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Impaired loans*	$2,896	$      -	$       -	$2,896
Loans held for sale	1,964	-	1,964	-
Other real estate owned	1,965	-	-	1,965

*  Includes loans charged down 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 June 30, 2016 (dollars in thousands)
	Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$2,718	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)
OREO	2,420	Discounted appraised value	Selling cost	5% - 10% (6%)
			Discount for lack of marketability and age of appraisal	0% - 25% (15%)

	Quantitative information about Level 3 Fair Value Measurements for December 31, 2015 (dollars in thousands)
	Fair Value	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Assets
Impaired loans	$2,896	Discounted appraised value	Selling cost	5% - 10%  (6%)
			Discount for lack of marketability and age of appraisal	0% - 45%  (15%)
OREO	1,965	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 June 30, 2016 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	$20,918		$20,918	$      -	$      -	$20,918
Fed funds sold	3,515		3,515			3,515
Securities
Available-for-sale	33,809		-	33,809	-	33,809
Held-to-maturity	3,309		-	3,424	-	3,424
Restricted stock	1,373			1,373		1,373
Loans, net	452,044		-	-	459,277	459,277
Loans held for sale	4,452		-	4,452	-	4,452
Interest receivable	1,209		-	1,209	-	1,209
BOLI	9,911		-	9,911	-	9,911
Liabilities
Deposits	$493,535		$      -	$494,664	$      -	$494,664
Interest payable	87		-	87	-	87

		Fair Value Measurements at December 31, 2015 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	$15,952	$15,952	$      -	$      -	$15,952
Fed funds sold	12,703	12,703			12,703
Securities
Available-for-sale	35,996	-	35,996	-	35,996
Held-to-maturity	2,519	-	2,649	-	2,649
Restricted stock	1,313	-	1,313		1,313
Loans, net	430,445	-	-	438,322	438,322
Loans held for sale	1,964	-	1,964	-	1,964
Interest receivable	1,248	-	1,248	-	1,248
BOLI	9,781	-	9,781	-	9,781
Liabilities
Deposits	$467,610	$      -	$468,773	$      -	$468,773
Capital notes	10,000	-	10,024	-	10,024
Interest payable	61	-	61	-	61

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Securities (Tables)

6 Months Ended

Jun. 30, 2016

Securities [Abstract]

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

		June 30, 2016
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$3,309	$115	$      -	$3,424
Available-for-Sale
US agency obligations	11,114	150	(1)	11,263
Mortgage-backed securities	14,393	88	-	14,481
Municipals	7,236	295	-	7,531
Corporates	528	6	-	534
	$33,271	$539	$(1)	$33,809
		December 31, 2015
	Amortized	Gross Unrealized		Fair Value
	Costs	Gains	(Losses)
Held-to-Maturity
US agency obligations	$2,519	$130	$         -	$2,649
Available-for-Sale
US agency obligations	19,606	3	(799)	18,810
Mortgage-backed securities	10,778	4	(135)	10,647
Municipals	4,984	84	(34)	5,034
Corporates	1,521	-	(16)	1,505
	$36,889	$91	$(984)	$35,996

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
June 30, 2016	Value	Losses	Value	Losses	Value	Losses
Description of securities
U.S. agency obligations	$3,010	$1	$    -	$     -	$3,010	$1
Total	$3,010	$1	$    -	$     -	$3,010	$1
	Less than 12 months		More than 12 months		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
December 31, 2015	Value	Losses	Value	Losses	Value	Losses
Description of securities
U.S. agency obligations	$7,160	$353	$10,650	$446	$17,810	$799
Mortgage-backed securities	6,726	77	1,979	58	8,705	135
Municipals	2,341	25	503	9	2,844	34
Corporates	1,505	16	-	-	1,505	16
Total	$17,732	$471	$13,132	$513	$30,864	$984

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Business Segments (Tables)

6 Months Ended

Jun. 30, 2016

Business Segments [Abstract]

Schedule Of Segment Reporting Information, By Segment

Business Segments
	Community
	Banking	Mortgage	Total
Six months ended June 30, 2016
Net interest income	$        9,430	$            -	$        9,430
Provision for loan losses	450	-	450
Net interest income after provision for loan losses	8,980	-	8,980
Noninterest income	1,128	1,196	2,324
Noninterest expenses	7,481	963	8,444
Income before income taxes	2,627	233	2,860
Income tax expense	843	79	922
Net income	$        1,784	$        154	$        1,938
Total assets	$    541,120	$     4,610	$    545,730
Six months ended June 30, 2015
Net interest income	$        8,520	$            -	$        8,520
Provision for loan losses	157	-	157
Net interest income after provision for loan losses	8,363	-	8,363
Noninterest income	867	1,158	2,025
Noninterest expenses	6,777	838	7,615
Income before income taxes	2,453	320	2,773
Income tax expense	780	109	889
Net income	$        1,673	$        211	$        1,884
Total assets	$    489,821	$     3,015	$    492,836
	Community
	Banking	Mortgage	Total
Three months ended June 30, 2016
Net interest income	$        4,743	$            -	$        4,743
Provision for loan losses	250	-	250
Net interest income after provision for loan losses	4,493	-	4,493
Noninterest income	620	696	1,316
Noninterest expenses	3,748	506	4,254
Income before income taxes	1,365	190	1,555
Income tax expense	440	64	504
Net income	$           925	$        126	$        1,051
Total assets	$    541,120	$     4,610	$    545,730
Three months ended June 30, 2015
Net interest income	$        4,324	$            -	$        4,324
Provision for loan losses	57	-	57
Net interest income after provision for loan losses	4,267	-	4,267
Noninterest income	454	624	1,078
Noninterest expenses	3,484	451	3,935
Income before income taxes	1,237	173	1,410
Income tax expense	394	59	453
Net income	$           843	$        114	$           957
Total assets	$    489,821	$     3,015	$    492,836

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Loans, Allowance For Loan Losses and OREO (Tables)

6 Months Ended

Jun. 30, 2016

Loans, Allowance For Loan Losses and OREO [Abstract]

Summary Of Loans, Net

	As of:
	June 30,	December 31,
	2016	2015
Commercial	$86,323	$76,773
Commercial real estate	223,922	217,125
Consumer	83,309	81,531
Residential	63,377	59,699
Total loans (1)	456,931	435,128
Less allowance for loan losses	4,887	4,683
Net loans	$452,044	$430,445

(1) Includes deferred costs of $225 and $263, respectively.

Loans On Non-Accrual Status

Loans on Non-Accrual Status
(dollars in thousands)
	As of
	June 30, 2016	December 31, 2015
Commercial	$369	$483
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	865	799
Commercial Mortgages-Non-Owner Occupied	-	514
Commercial Construction	291	367
Consumer
Consumer Unsecured	-	31
Consumer Secured	63	269
Residential:
Residential Mortgages	806	695
Residential Consumer Construction	146	248
Totals	$2,540	$3,406

Changes In OREO Balance

OREO Changes
(dollars in thousands)
	Six months ended	Year ended
	June 30, 2016	December 31, 2015
Balance at the beginning of the year (net)	$1,965	$956
Transfers from loans	475	1,425
Capitalized costs	-	25
Writedowns	-	(75)
Sales proceeds	(21)	(360)
Gain (loss) on disposition	1	(6)
Balance at the end of the period (net)	$2,420	$1,965

Impaired Loans

	Impaired Loans
	(dollars in thousands)
	As of and For the Six Months Ended June 30, 2016
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2016	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$  -	$  -	$      -	$   -	$    -
Commercial Real Estate
Commercial Mortgages-Owner Occupied	1,973	1,999	-	2,528	50
Commercial Mortgage Non-Owner Occupied	531	581	-	354	18
Commercial Construction	-	-	-	14	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	54	102	-	37	1
Residential
Residential Mortgages	1,750	1,795	-	1,874	32
Residential Consumer Construction	-	-	-	86	-
With An Allowance Recorded:
Commercial	$998	$1,083	$505	$1,089	$16
Commercial Real Estate
Commercial Mortgages-Owner Occupied	1,707	1,719	314	1,292	52
Commercial Mortgage Non-Owner Occupied	75	75	20	374	3
Commercial Construction	204	637	114	272	-
Consumer
Consumer Unsecured	-	-	-	16	-
Consumer Secured	111	111	111	151	4
Residential
Residential Mortgages	306	323	56	478	11
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$998	$1,083	$505	$1,089	$16
Commercial Real Estate
Commercial Mortgages-Owner Occupied	3,680	3,718	314	3,820	102
Commercial Mortgage Non-Owner Occupied	606	656	20	728	21
Commercial Construction	204	637	114	286	-
Consumer
Consumer Unsecured	-	-	-	16	-
Consumer Secured	165	213	111	188	5
Residential
Residential Mortgages	2,056	2,118	56	2,352	43
Residential Consumer Construction	-	-	-	86	-
	$7,709	$8,425	$1,120	$8,565	$187

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

	Impaired Loans
	(dollars in thousands)
	As of and For the Year Ended December 31, 2015
		Unpaid		Average	Interest
	Recorded	Principal	Related	Recorded	Income
2015	Investment	Balance	Allowance	Investment	Recognized
With No Related Allowance Recorded:
Commercial	$     -	$     -	$     -	$1,009	$   -
Commercial Real Estate
Commercial Mortgages-Owner Occupied	3,082	3,100	-	2,959	174
Commercial Mortgage Non-Owner Occupied	177	177	-	628	12
Commercial Construction	27	514	-	244	-
Consumer
Consumer Unsecured	-	-	-	-	-
Consumer Secured	20	20	-	21	1
Residential
Residential Mortgages	1,997	2,027	-	1,466	86
Residential Consumer Construction	171	176	-	86	4
With An Allowance Recorded:
Commercial	$1,180	$1,256	$610	$1,293	$38
Commercial Real Estate
Commercial Mortgages-Owner Occupied	877	883	163	865	35
Commercial Mortgage Non-Owner Occupied	672	738	175	399	38
Commercial Construction	340	700	75	170	-
Consumer
Consumer Unsecured	31	32	31	16	1
Consumer Secured	190	193	153	155	10
Residential
Residential Mortgages	650	800	87	740	42
Residential Consumer Construction	-	-	-	-	-
Totals:
Commercial	$1,180	$1,256	$610	$2,302	$38
Commercial Real Estate
Commercial Mortgages-Owner Occupied	3,959	3,983	163	3,824	209
Commercial Mortgage Non-Owner Occupied	849	915	175	1,027	50
Commercial Construction	367	1,214	75	414	-
Consumer
Consumer Unsecured	31	32	31	16	1
Consumer Secured	210	213	153	176	11
Residential
Residential Mortgages	2,647	2,827	87	2,206	128
Residential Consumer Construction	171	176	-	86	4
	$9,414	$10,616	$1,294	$10,051	$441

Allowance For Loan Losses And Recorded Investment In Loans

	Allowance for Loan Losses and Recorded Investment in Loans (dollars in thousands) As of and For the Six Months Ended June 30, 2016
		Commercial
2016	Commercial	Real Estate	Consumer	Residential	Total
Allowance for Loan Losses:
Beginning Balance	$1,195	$1,751	$1,073	$664	$4,683
Charge-offs	(89)	(121)	(168)	-	(378)
Recoveries	3	101	28	-	132
Provision	528	(100)	(40)	62	450
Ending Balance	$1,637	$1,631	$893	$726	$4,887
Ending Balance: Individually evaluated for impairment	$505	$448	$111	$56	$1,120
Ending Balance: Collectively evaluated for impairment	1,132	1,183	782	670	3,767
Totals:	$1,637	$1,631	$893	$726	$4,887
Loans:
Ending Balance: Individually evaluated for impairment	$998	$4,490	$165	$2,056	$7,709
Ending Balance: Collectively evaluated for impairment	85,325	219,432	83,144	61,321	449,222
Totals:	$86,323	$223,922	$83,309	$63,377	$456,931

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

	Allowance for Loan Losses and Recorded Investment in Loans (dollars in thousands) As of and For the Year Ended December 31, 2015
		Commercial
2015	Commercial	Real Estate	Consumer	Residential	Total
Allowance for Loan Losses:
Beginning Balance	$1,235	$2,194	$812	$549	$4,790
Charge-offs	(294)	(64)	(257)	-	(615)
Recoveries	14	122	54	36	226
Provision	240	(501)	464	79	282
Ending Balance	$1,195	$1,751	$1,073	$664	$4,683
Ending Balance: Individually evaluated for impairment	$610	$413	$184	$87	$1,294
Ending Balance: Collectively evaluated for impairment	585	1,338	889	577	3,389
Totals:	$1,195	$1,751	$1,073	$664	$4,683
Loans:
Ending Balance: Individually evaluated for impairment	$1,180	$5,175	$241	$2,818	$9,414
Ending Balance: Collectively evaluated for impairment	75,593	211,950	81,290	56,881	425,714
Totals:	$76,773	$217,125	$81,531	$59,699	$435,128

Age Analysis Of Past Due Financing Receivables

	Age Analysis of Past Due Loans as of
	June 30, 2016
	(dollars in thousands)
			Greater				Recorded Investment
	30-59 Days	60-89 Days	than	Total Past		Total	> 90 Days &
2016	Past Due	Past Due	90 Days	Due	Current	Loans	Accruing
Commercial	$14	$  -	$369	$383	$85,940	$86,323	$     -
Commercial Real Estate:
Commercial Mortgages-   Owner Occupied	702	100	865	1,667	79,963	81,630	-
Commercial Mortgages-Non-Owner Occupied	-	-	-	-	129,808	129,808	-
Commercial Construction	-	-	291	291	12,193	12,484	-
Consumer:
Consumer Unsecured	14	9	-	23	7,016	7,039	-
Consumer Secured	496	15	35	546	75,724	76,270	-
Residential:
Residential Mortgages	518	202	754	1,474	50,808	52,282	-
Residential Consumer Construction	-	-	146	146	10,949	11,095	-
Total	$1,744	$326	$2,460	$4,530	$452,401	$456,931	$  -

	Age Analysis of Past Due Loans as of
	December 31, 2015
	(dollars in thousands)
			Greater				Recorded Investment
	30-59 Days	60-89 Days	than	Total Past		Total	> 90 Days &
2015	Past Due	Past Due	90 Days	Due	Current	Loans	Accruing
Commercial	$   -	$244	$483	$727	$76,046	$76,773	$     -
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	425	571	426	1,422	75,549	76,971	-
Commercial Mortgages-Non-Owner Occupied	189	90	438	717	126,138	126,855	-
Commercial Construction	-	-	367	367	12,932	13,299	-
Consumer:
Consumer Unsecured	2	-	31	33	6,828	6,861	-
Consumer Secured	198	68	128	394	74,276	74,670	-
Residential:
Residential Mortgages	512	468	543	1,523	48,490	50,013	-
Residential Consumer Construction	-	-	248	248	9,438	9,686	-
Total	$1,326	$1,441	$2,664	$5,431	$429,697	$435,128	$    -

Credit Quality Information-By Class

	Credit Quality Information - by Class
	June 30, 2016
	(dollars in thousands)
2016	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$82,372	$1,605	$1,293	$1,053	$   -	$86,323
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	73,500	2,272	2,103	3,755	-	81,630
Commercial Mortgages-Non Owner Occupied	125,012	3,568	658	570	-	129,808
Commercial Construction	12,193	-	-	291	-	12,484
Consumer
Consumer Unsecured	7,039	-	-	-	-	7,039
Consumer Secured	75,645	238	-	387	-	76,270
Residential:
Residential Mortgages	49,701	-	248	2,333	-	52,282
Residential Consumer Construction	11,022	-	-	73	-	11,095
Totals	$436,484	$7,683	$4,302	$8,462	$    -	$456,931

	Credit Quality Information - by Class
	December 31, 2015
	(dollars in thousands)
2015	Pass	Monitor	Special	Substandard	Doubtful	Totals
			Mention
Commercial	$73,831	$290	$1,457	$1,195	$     -	$76,773
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	68,813	1,353	2,801	4,004	-	76,971
Commercial Mortgages-Non Owner Occupied	120,462	1,558	3,895	940	-	126,855
Commercial Construction	12,932	-	-	367	-	13,299
Consumer
Consumer Unsecured	6,830	-	-	31	-	6,861
Consumer Secured	73,825	276	50	519	-	74,670
Residential:
Residential Mortgages	47,180	-	-	2,833	-	50,013
Residential Consumer Construction	9,438	-	-	248	-	9,686
Totals	$413,311	$3,477	$8,203	$10,137	$    -	$435,128

Loan modifcations classified as TDR's

For the Three Months Ended June 30, 2015 (dollars in thousands)
Troubled Debt Restructurings During the Period	Number of Contracts	Pre-Modification Outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
Commercial Real Estate	2	$454	$454

For the Six Months Ended June 30, 2015 (dollars in thousands)
Troubled Debt Restructurings During the Period	Number of Contracts	Pre-Modification Outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
Commercial	1	$20	$20
Commercial Real Estate	2	$454	$454

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Earnings Per Common Share (EPS) (Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Common Share (EPS) [Abstract]
Net income	$ 1,051	$ 957	$ 1,938	$ 1,884
Basic EPS weighted average shares outstanding	4,378,436	3,371,616	4,378,436	3,371,616
Diluted EPS weighted average shares outstanding	4,378,436	3,371,616	4,378,436	3,371,616
Basic earnings per common share	$ 0.24	$ 0.28	$ 0.44	$ 0.56
Diluted earnings per common share	$ 0.24	$ 0.28	$ 0.44	$ 0.56

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Earnings Per Common Share (EPS) (Schedule Of Antidilutive Securities Excluded From Computation Of Earnings Per Share) (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Common Share (EPS) [Abstract]
Options excluded from calculating diluted EPS because their effect was anti-dilutive	636	66,576	636	66,576

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Stock Based Compensation (Summary Of Stock Option Activity) (Details)	6 Months Ended
	Jun. 30, 2016 USD ($) $ / shares shares
Stock Based Compensation [Abstract]
Options outstanding, January 1, 2016, Shares | shares	636
Options outstanding, Granted, Shares | shares
Options outstanding, exercised, Shares | shares
Options outstanding, forfeited, Shares | shares
Options outstanding, June 30, 2016, Shares | shares	636
Options exercisable, June 30, 2016, Shares | shares	636
Options outstanding, January 1, 2016, Weighted Average Exercise Price | $ / shares	$ 12.79
Options outstanding, granted, Weighted Average Exercise Price | $ / shares
Options outstanding, exercised, Weighted Average Exercise Price | $ / shares
Options outstanding, forfeited, Weighted Average Exercise Price | $ / shares
Options outstanding, June 30, 2016, Weighted Average Exercise Price | $ / shares	12.79
Options exercisable, June 30, 2016, Weighted Average Exercise Price | $ / shares	$ 12.79
Options outstanding, June 30, 2016, Weighted Average Remaining Contractual Life (in years)	1 year 11 months 1 day
Options exercisable, June 30, 2016, Weighted Average Remaining Contractual Life (in years)	1 year 11 months 1 day
Options outstanding, June 30, 2016, Intrinsic Value | $
Options exercisable, June 30, 2016, Intrinsic Value | $

XML

Fair Value Measurements (Fair Value Assets Measured On Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	$ 33,809	$ 35,996
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	33,809	35,996
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	11,263	18,810
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	11,263	18,810
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	14,481	10,647
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	14,481	10,647
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	7,531	5,034
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	7,531	5,034
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
Corporates [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available-for-sale, at fair value	534	1,505
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
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	534	1,505
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 ($)		Jun. 30, 2016	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	[1]	$ 2,718,000	$ 2,896,000
Loans held for sale		4,452,000	1,964,000
Other real estate owned		2,420,000	1,965,000	$ 956,000
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for sale		0
Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	[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		4,452,000	1,964,000
Loans held for sale		4,452,000	1,964,000
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans	[1]	2,718,000	2,896,000
Loans held for sale
Other real estate owned		$ 2,420,000	$ 1,965,000

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

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Fair Value Measurements (Information Regarding Quantitative Inputs Used To Value Assets Classified As Level 3) (Details) - Significant Unobservable Inputs (Level 3) [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value	$ 2,718,000	$ 2,896,000
Impaired Loans [Member] | Maximum [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	10.00%	10.00%
Discount for lack of marketability and age of appraisal	25.00%	45.00%
Impaired Loans [Member] | Minimum [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	5.00%	5.00%
Discount for lack of marketability and age of appraisal	0.00%	0.00%
Impaired Loans [Member] | Weighted Average [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	6.00%	6.00%
Discount for lack of marketability and age of appraisal	15.00%	15.00%
OREO [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value	$ 2,420,000	$ 1,965,000
OREO [Member] | Maximum [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	10.00%	10.00%
Discount for lack of marketability and age of appraisal	25.00%	25.00%
OREO [Member] | Minimum [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	5.00%	5.00%
Discount for lack of marketability and age of appraisal	0.00%	0.00%
OREO [Member] | Weighted Average [Member] | Discounted Appraised Value [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Selling cost	6.00%	6.00%
Discount for lack of marketability and age of appraisal	15.00%	15.00%

XML

Fair Value Measurements (Fair Value Carrying And Notional Amounts) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	$ 20,918	$ 15,952
Federal funds sold	3,515	12,703
Available-for-sale Securities	33,809	35,996
Held-to-maturity Securities	3,309	2,519
Restricted stock	1,373	1,313
Interest receivable	1,209	1,248
BOLI	9,911	9,781
Interest payable	87	61
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	20,918	15,952
Federal funds sold	3,515	12,703
Available-for-sale Securities
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available-for-sale Securities	33,809	35,996
Held-to-maturity Securities	3,424	2,649
Restricted stock	1,373	1,313
Loans held for sale	4,452	1,964
Interest receivable	1,209	1,248
BOLI	9,911	9,781
Deposits	494,664	468,773
Capital notes		10,024
Interest payable	87	61
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available-for-sale Securities
Loans, net	459,277	438,322
Carrying Amounts [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	20,918	15,952
Federal funds sold	3,515	12,703
Available-for-sale Securities	33,809	35,996
Held-to-maturity Securities	3,309	2,519
Restricted stock	1,373	1,313
Loans, net	452,044	430,445
Loans held for sale	4,452	1,964
Interest receivable	1,209	1,248
BOLI	9,911	9,781
Deposits	493,535	467,610
Capital notes		10,000
Interest payable	87	61
Fair Values [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	20,918	15,952
Federal funds sold	3,515	12,703
Available-for-sale Securities	33,809	35,996
Held-to-maturity Securities	3,424	2,649
Restricted stock	1,373	1,313
Loans, net	459,277	438,322
Loans held for sale	4,452	1,964
Interest receivable	1,209	1,248
BOLI	9,911	9,781
Deposits	494,664	468,773
Capital notes		10,024
Interest payable	$ 87	$ 61

XML

Capital Notes (Details) - USD ($)			6 Months Ended
	Jan. 05, 2016	Dec. 03, 2015	Jun. 30, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Proceeds used to pay off debt			$ 10,000,000
Common Stock Private Placement [Member]
Debt Instrument [Line Items]
Private placement transaction date			Dec. 03, 2015
Gross proceeds from private placement issuance		$ 11,520,000
Shares issued in private placement sale		1,000,000
Price per share in private placement sale		$ 11.52
Capital Notes [Member] | 2012 Notes [Member]
Debt Instrument [Line Items]
Capital notes issued				$ 10,000,000
Debt instrument, interest rate, stated percentage				6.00%
Proceeds used to pay off debt	$ 10,000,000

XML

Securities (Narrative) (Details)	Jun. 30, 2016 security
Securities [Abstract]
Securities evaluated for other than temporary impairment	1

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Securities (Summary Of Securities Held-To-Maturity And Securities Available-For-Sale) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Securities Held-to-maturity	$ 3,309	$ 2,519
Held-to-Maturity, Fair Value	3,424	2,649
Available-for-Sale, Amortized Costs	33,271	36,889
Available-for-Sale, Gross Unrealized Gains	539	91
Available-for-Sale, Gross Unrealized (Losses)	(1)	(984)
Available-for-sale, Fair Value	33,809	35,996
US Agency Obligations [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	11,114	19,606
Available-for-Sale, Gross Unrealized Gains	150	3
Available-for-Sale, Gross Unrealized (Losses)	(1)	(799)
Available-for-sale, Fair Value	11,263	18,810
Mortgage-Backed Securities [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	14,393	10,778
Available-for-Sale, Gross Unrealized Gains	88	4
Available-for-Sale, Gross Unrealized (Losses)		(135)
Available-for-sale, Fair Value	14,481	10,647
Municipals [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	7,236	4,984
Available-for-Sale, Gross Unrealized Gains	295	84
Available-for-Sale, Gross Unrealized (Losses)		(34)
Available-for-sale, Fair Value	7,531	5,034
Corporates [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Available-for-Sale, Amortized Costs	528	1,521
Available-for-Sale, Gross Unrealized Gains	6
Available-for-Sale, Gross Unrealized (Losses)		(16)
Available-for-sale, Fair Value	534	1,505
US Agency Obligations [Member]
Schedule Of Available-For-Sale Securities And Held-To-Maturity Securities [Line Items]
Securities Held-to-maturity	3,309	2,519
Held-to-maturity, Gross Unrealized Gains	115	130
Held-to-Maturity, Fair Value	$ 3,424	$ 2,649

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Securities (Gross Unrealized Losses And Fair Value Of The Bank's Investments) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	$ 3,010	$ 17,732
Unrealized Losses, Less than 12 months	1	471
Fair Value, More than 12 months		13,132
Unrealized Losses, More than 12 months		513
Fair Value, Total	3,010	30,864
Unrealized Losses, Total	1	984
US Agency Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months	3,010	7,160
Unrealized Losses, Less than 12 months	1	353
Fair Value, More than 12 months		10,650
Unrealized Losses, More than 12 months		446
Fair Value, Total	3,010	17,810
Unrealized Losses, Total	$ 1	799
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months		6,726
Unrealized Losses, Less than 12 months		77
Fair Value, More than 12 months		1,979
Unrealized Losses, More than 12 months		58
Fair Value, Total		8,705
Unrealized Losses, Total		135
Municipals [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months		2,341
Unrealized Losses, Less than 12 months		25
Fair Value, More than 12 months		503
Unrealized Losses, More than 12 months		9
Fair Value, Total		2,844
Unrealized Losses, Total		34
Corporates [Member]
Schedule of Available-for-sale Securities [Line Items]
Fair Value, Less than 12 months		1,505
Unrealized Losses, Less than 12 months		16
Fair Value, More than 12 months
Unrealized Losses, More than 12 months
Fair Value, Total		1,505
Unrealized Losses, Total		$ 16

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Business Segments (Schedule Of Segment Reporting Information, By) (Details) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) segment	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment			2
Net interest income	$ 4,743	$ 4,324	$ 9,430	$ 8,520
Provision for loan losses	250	57	450	157	$ 282
Net interest income after provision for loan losses	4,493	4,267	8,980	8,363
Noninterest income	1,316	1,078	2,324	2,025
Noninterest expenses	4,254	3,935	8,444	7,615
Income before income taxes	1,555	1,410	2,860	2,773
Income tax expense	504	453	922	889
Net Income	1,051	957	1,938	1,884
Total assets	545,730	492,836	545,730	492,836	$ 527,143
Community Banking [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Net interest income	4,743	4,324	9,430	8,520
Provision for loan losses	250	57	450	157
Net interest income after provision for loan losses	4,493	4,267	8,980	8,363
Noninterest income	620	454	1,128	867
Noninterest expenses	3,748	3,484	7,481	6,777
Income before income taxes	1,365	1,237	2,627	2,453
Income tax expense	440	394	843	780
Net Income	925	843	1,784	1,673
Total assets	541,120	489,821	541,120	489,821
Mortgage [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Noninterest income	696	624	1,196	1,158
Noninterest expenses	506	451	963	838
Income before income taxes	190	173	233	320
Income tax expense	64	59	79	109
Net Income	126	114	154	211
Total assets	$ 4,610	$ 3,015	$ 4,610	$ 3,015

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Loans, Allowance For Loan Losses and OREO (Narrative) (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016 USD ($) item contract	Jun. 30, 2015 contract	Jun. 30, 2016 USD ($) item contract	Jun. 30, 2015 contract	Dec. 31, 2015 USD ($) item contract	Dec. 31, 2014 USD ($)
Loans, Allowance For Loan Losses and OREO [Abstract]
Other real estate owned | $	$ 2,420,000		$ 2,420,000		$ 1,965,000	$ 956,000
Loan modifications that would have been classified as TDRs			0
Loan modifications classified as TDRs	0	0	0	0
Outstanding commitments to disburse additional funds on TDR's			0		0
Consumer mortgage loan secured by residential real estate | $	$ 0		$ 0		$ 0
Number of real estate properties held | item	0		0		0

XML

Loans, Allowance For Loan Losses and OREO (Summary Of Loans, Net) (Details) - USD ($) $ in Thousands		Jun. 30, 2016	Dec. 31, 2015
Loans, Allowance For Loan Losses and OREO [Abstract]
Commercial		$ 86,323	$ 76,773
Commercial real estate		223,922	217,125
Consumer		83,309	81,531
Residential		63,377	59,699
Total loans	[1]	456,931	435,128
Less allowance for loan losses		4,887	4,683
Net loans		452,044	430,445
Deferred loan costs		$ 225	$ 263

[1] Includes deferred costs of $225 and $263, respectively.

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Loans, Allowance For Loan Losses and OREO (Loans On Non-Accrual Status) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	$ 2,540	$ 3,406
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	865	799
Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status		514
Commercial Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	291	367
Consumer Unsecured [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status		31
Consumer Secured [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	63	269
Residential Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	806	695
Residential Consumer Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	146	248
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivables on Non-Accrual Status	$ 369	$ 483

XML

Loans, Allowance For Loan Losses and OREO (Changes In OREO Balance) (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Loans, Allowance For Loan Losses and OREO [Abstract]
Balance at the beginning of the year (net)	$ 1,965,000	$ 956,000	$ 956,000
Transfers from loans	475,000	1,125,000	1,425,000
Capitalized costs			25,000
Writedowns		(15,000)	(75,000)
Sales proceeds	(21,000)		(360,000)
Gain (Loss) on disposition	1,000	$ (1,000)	(6,000)
Balance at the end of the period (net)	$ 2,420,000		$ 1,965,000

XML

Loans, Allowance For Loan Losses and OREO (Impaired Loans) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Impaired [Line Items]
Totals: Recorded Investment	$ 7,709	$ 9,414
Totals: Unpaid Principal Balance	8,425	10,616
Totals: Related Allowance	1,120	1,294
Totals: Average Recorded Investment	8,565	10,051
Totals: Interest Income Recognized	187	441
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	1,973	3,082
With No Related Allowance Recorded: Unpaid Principal Balance	1,999	3,100
With No Related Allowance Recorded: Average Recorded Investment	2,528	2,959
With No Related Allowance Recorded: Interest Income Recognized	50	174
With An Allowance Recorded: Recorded Investment	1,707	877
With An Allowance Recorded: Unpaid Principal Balance	1,719	883
With An Allowance Recorded: Average Recorded Investment	1,292	865
With An Allowance Recorded: Interest Income Recognized	52	35
Totals: Recorded Investment	3,680	3,959
Totals: Unpaid Principal Balance	3,718	3,983
Totals: Related Allowance	314	163
Totals: Average Recorded Investment	3,820	3,824
Totals: Interest Income Recognized	102	209
Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	531	177
With No Related Allowance Recorded: Unpaid Principal Balance	581	177
With No Related Allowance Recorded: Average Recorded Investment	354	628
With No Related Allowance Recorded: Interest Income Recognized	18	12
With An Allowance Recorded: Recorded Investment	75	672
With An Allowance Recorded: Unpaid Principal Balance	75	738
With An Allowance Recorded: Average Recorded Investment	374	399
With An Allowance Recorded: Interest Income Recognized	3	38
Totals: Recorded Investment	606	849
Totals: Unpaid Principal Balance	656	915
Totals: Related Allowance	20	175
Totals: Average Recorded Investment	728	1,027
Totals: Interest Income Recognized	21	50
Commercial Construction [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment		27
With No Related Allowance Recorded: Unpaid Principal Balance		514
With No Related Allowance Recorded: Average Recorded Investment	14	244
With An Allowance Recorded: Recorded Investment	204	340
With An Allowance Recorded: Unpaid Principal Balance	637	700
With An Allowance Recorded: Average Recorded Investment	272	170
Totals: Recorded Investment	204	367
Totals: Unpaid Principal Balance	637	1,214
Totals: Related Allowance	114	75
Totals: Average Recorded Investment	286	414
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: Recorded Investment		31
With An Allowance Recorded: Unpaid Principal Balance		32
With An Allowance Recorded: Average Recorded Investment	16	16
With An Allowance Recorded: Interest Income Recognized		1
Totals: Recorded Investment		31
Totals: Unpaid Principal Balance		32
Totals: Related Allowance		31
Totals: Average Recorded Investment	16	16
Totals: Interest Income Recognized		1
Consumer Secured [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	54	20
With No Related Allowance Recorded: Unpaid Principal Balance	102	20
With No Related Allowance Recorded: Average Recorded Investment	37	21
With No Related Allowance Recorded: Interest Income Recognized	1	1
With An Allowance Recorded: Recorded Investment	111	190
With An Allowance Recorded: Unpaid Principal Balance	111	193
With An Allowance Recorded: Average Recorded Investment	151	155
With An Allowance Recorded: Interest Income Recognized	4	10
Totals: Recorded Investment	165	210
Totals: Unpaid Principal Balance	213	213
Totals: Related Allowance	111	153
Totals: Average Recorded Investment	188	176
Totals: Interest Income Recognized	5	11
Residential Mortgages [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment	1,750	1,997
With No Related Allowance Recorded: Unpaid Principal Balance	1,795	2,027
With No Related Allowance Recorded: Average Recorded Investment	1,874	1,466
With No Related Allowance Recorded: Interest Income Recognized	32	86
With An Allowance Recorded: Recorded Investment	306	650
With An Allowance Recorded: Unpaid Principal Balance	323	800
With An Allowance Recorded: Average Recorded Investment	478	740
With An Allowance Recorded: Interest Income Recognized	11	42
Totals: Recorded Investment	2,056	2,647
Totals: Unpaid Principal Balance	2,118	2,827
Totals: Related Allowance	56	87
Totals: Average Recorded Investment	2,352	2,206
Totals: Interest Income Recognized	43	128
Residential Consumer Construction [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Recorded Investment		171
With No Related Allowance Recorded: Unpaid Principal Balance		176
With No Related Allowance Recorded: Average Recorded Investment	86	86
With No Related Allowance Recorded: Interest Income Recognized		4
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		171
Totals: Unpaid Principal Balance		176
Totals: Related Allowance
Totals: Average Recorded Investment	86	86
Totals: Interest Income Recognized		4
Commercial [Member]
Financing Receivable, Impaired [Line Items]
With No Related Allowance Recorded: Average Recorded Investment		1,009
With An Allowance Recorded: Recorded Investment	998	1,180
With An Allowance Recorded: Unpaid Principal Balance	1,083	1,256
With An Allowance Recorded: Average Recorded Investment	1,089	1,293
With An Allowance Recorded: Interest Income Recognized	16	38
Totals: Recorded Investment	998	1,180
Totals: Unpaid Principal Balance	1,083	1,256
Totals: Related Allowance	505	610
Totals: Average Recorded Investment	1,089	2,302
Totals: Interest Income Recognized	$ 16	$ 38

XML

Loans, Allowance For Loan Losses and OREO (Allowance For Loan Losses And Recorded Investment In Loans) (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended		12 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance				$ 4,683	$ 4,790	$ 4,790
Allowance for Credit Losses: Charge-offs				(378)		(615)
Allowance for Credit Losses: Recoveries				132		226
Allowance for credit losses: Provision		$ 250	$ 57	450	157	282
Allowance for Credit Losses: Ending Balance		4,887		4,887		4,683
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment		1,120		1,120		1,294
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment		3,767		3,767		3,389
Allowance for Credit Losses: Totals		4,887		4,887		4,683
Financing Receivables: Ending Balance: Individually evaluated for impairment		7,709		7,709		9,414
Financing Receivables: Ending Balance: Collectively evaluated for impairment		449,222		449,222		425,714
Total loans	[1]	456,931		456,931		435,128
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance				1,195	1,235	1,235
Allowance for Credit Losses: Charge-offs				(89)		(294)
Allowance for Credit Losses: Recoveries				3		14
Allowance for credit losses: Provision				528		240
Allowance for Credit Losses: Ending Balance		1,637		1,637		1,195
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment		505		505		610
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment		1,132		1,132		585
Allowance for Credit Losses: Totals		1,637		1,637		1,195
Financing Receivables: Ending Balance: Individually evaluated for impairment		998		998		1,180
Financing Receivables: Ending Balance: Collectively evaluated for impairment		85,325		85,325		75,593
Total loans		86,323		86,323		76,773
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance				1,751	2,194	2,194
Allowance for Credit Losses: Charge-offs				(121)		(64)
Allowance for Credit Losses: Recoveries				101		122
Allowance for credit losses: Provision				(100)		(501)
Allowance for Credit Losses: Ending Balance		1,631		1,631		1,751
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment		448		448		413
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment		1,183		1,183		1,338
Allowance for Credit Losses: Totals		1,631		1,631		1,751
Financing Receivables: Ending Balance: Individually evaluated for impairment		4,490		4,490		5,175
Financing Receivables: Ending Balance: Collectively evaluated for impairment		219,432		219,432		211,950
Total loans		223,922		223,922		217,125
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance				1,073	812	812
Allowance for Credit Losses: Charge-offs				(168)		(257)
Allowance for Credit Losses: Recoveries				28		54
Allowance for credit losses: Provision				(40)		464
Allowance for Credit Losses: Ending Balance		893		893		1,073
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment		111		111		184
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment		782		782		889
Allowance for Credit Losses: Totals		893		893		1,073
Financing Receivables: Ending Balance: Individually evaluated for impairment		165		165		241
Financing Receivables: Ending Balance: Collectively evaluated for impairment		83,144		83,144		81,290
Total loans		83,309		83,309		81,531
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Credit Losses: Beginning Balance				664	$ 549	549
Allowance for Credit Losses: Recoveries						36
Allowance for credit losses: Provision				62		79
Allowance for Credit Losses: Ending Balance		726		726		664
Allowance for Credit Losses: Ending Balance: Individually evaluated for impairment		56		56		87
Allowance for Credit Losses: Ending Balance: Collectively evaluated for impairment		670		670		577
Allowance for Credit Losses: Totals		726		726		664
Financing Receivables: Ending Balance: Individually evaluated for impairment		2,056		2,056		2,818
Financing Receivables: Ending Balance: Collectively evaluated for impairment		61,321		61,321		56,881
Total loans		$ 63,377		$ 63,377		$ 59,699

[1] Includes deferred costs of $225 and $263, respectively.

XML

Loans, Allowance For Loan Losses and OREO (Age Analysis Of Past Due Financing Receivables) (Details) - USD ($) $ in Thousands		Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		$ 4,530	$ 5,431
Current		452,401	429,697
Total loans	[1]	456,931	435,128
Recorded Investment > 90 Days & Accruing
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,667	1,422
Current		79,963	75,549
Total loans		81,630	76,971
Recorded Investment > 90 Days & Accruing
Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due			717
Current		129,808	126,138
Total loans		129,808	126,855
Recorded Investment > 90 Days & Accruing
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		291	367
Current		12,193	12,932
Total loans		12,484	13,299
Recorded Investment > 90 Days & Accruing
Consumer Unsecured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		23	33
Current		7,016	6,828
Total loans		7,039	6,861
Recorded Investment > 90 Days & Accruing
Consumer Secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		546	394
Current		75,724	74,276
Total loans		76,270	74,670
Recorded Investment > 90 Days & Accruing
Residential Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,474	1,523
Current		50,808	48,490
Total loans		52,282	50,013
Recorded Investment > 90 Days & Accruing
Residential Consumer Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		146	248
Current		10,949	9,438
Total loans		11,095	9,686
Recorded Investment > 90 Days & Accruing
30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,744	1,326
30 to 59 Days Past Due [Member] | Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		702	425
30 to 59 Days Past Due [Member] | Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due			189
30 to 59 Days Past Due [Member] | Consumer Unsecured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		14	2
30 to 59 Days Past Due [Member] | Consumer Secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		496	198
30 to 59 Days Past Due [Member] | Residential Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		518	512
60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		326	1,441
60 to 89 Days Past Due [Member] | Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		100	571
60 to 89 Days Past Due [Member] | Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due			90
60 to 89 Days Past Due [Member] | Consumer Unsecured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		9
60 to 89 Days Past Due [Member] | Consumer Secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		15	68
60 to 89 Days Past Due [Member] | Residential Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		202	468
Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		2,460	2,664
Greater than 90 Days Past Due [Member] | Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		865	426
Greater than 90 Days Past Due [Member] | Commercial Mortgages-Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due			438
Greater than 90 Days Past Due [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		291	367
Greater than 90 Days Past Due [Member] | Consumer Unsecured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due			31
Greater than 90 Days Past Due [Member] | Consumer Secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		35	128
Greater than 90 Days Past Due [Member] | Residential Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		754	543
Greater than 90 Days Past Due [Member] | Residential Consumer Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		146	248
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		383	727
Current		85,940	76,046
Total loans		86,323	76,773
Recorded Investment > 90 Days & Accruing
Commercial [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		14
Commercial [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due			244
Commercial [Member] | Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		369	483
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans		223,922	217,125
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans		63,377	59,699
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total loans		$ 83,309	$ 81,531

[1] Includes deferred costs of $225 and $263, respectively.

XML

Loans, Allowance For Loan Losses and OREO (Credit Quality Information-By Class) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	$ 456,931	$ 435,128
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	436,484	413,311
Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	7,683	3,477
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	4,302	8,203
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	8,462	10,137
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Commercial Mortgages-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	81,630	76,971
Commercial Mortgages-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	73,500	68,813
Commercial Mortgages-Owner Occupied [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	2,272	1,353
Commercial Mortgages-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	2,103	2,801
Commercial Mortgages-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	3,755	4,004
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	129,808	126,855
Commercial Mortgages-Non-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	125,012	120,462
Commercial Mortgages-Non-Owner Occupied [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	3,568	1,558
Commercial Mortgages-Non-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	658	3,895
Commercial Mortgages-Non-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	570	940
Commercial Mortgages-Non-Owner Occupied [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	12,484	13,299
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	12,193	12,932
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	291	367
Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Consumer Unsecured [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	7,039	6,861
Consumer Unsecured [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	7,039	6,830
Consumer Unsecured [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables		31
Consumer Unsecured [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Consumer Secured [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	76,270	74,670
Consumer Secured [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	75,645	73,825
Consumer Secured [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	238	276
Consumer Secured [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables		50
Consumer Secured [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	387	519
Consumer Secured [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Residential Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	52,282	50,013
Residential Mortgages [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	49,701	47,180
Residential Mortgages [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	248
Residential Mortgages [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	2,333	2,833
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	11,095	9,686
Residential Consumer Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	11,022	9,438
Residential Consumer Construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	73	248
Residential Consumer Construction [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	86,323	76,773
Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	82,372	73,831
Commercial [Member] | Monitor [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1,605	290
Commercial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	1,293	1,457
Commercial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables	$ 1,053	1,195
Commercial [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivables

XML

Loans, Allowance For Loan Losses And OREO (Loan modifcations classified as TDR's) (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2015 USD ($) contract	Jun. 30, 2016 contract	Jun. 30, 2015 USD ($) contract
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract		0
Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract			1
Pre-Modification Oustanding Recorded Investment			$ 20,000
Post-Modifications Outstanding Recorded Investment			$ 20,000
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract	2		2
Pre-Modification Oustanding Recorded Investment	$ 454,000		$ 454,000
Post-Modifications Outstanding Recorded Investment	$ 454,000		$ 454,000