Form 8-K BANK OF THE JAMES FINANC For: Oct 18

Form 8-K BANK OF THE JAMES FINANC For: Oct 18

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October 21, 2016 4:31 PM EDT

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 18, 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)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 - Results of Operations and Financial Condition

On Friday, October 21, 2016, Bank of the James Financial Group, Inc. (the “Company”) issued a press release announcing financial results for the quarter ended September 30, 2016 (the “Press Release”). A copy of the Press Release is attached hereto as Exhibit 99.1.

Item 5.02 - Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

(d) On October 18, 2016, Bank of the James Financial Group, Inc. (the “Company”) announced that Phillip C. Jamerson and A. Douglas Dalton III have been appointed to the Board of Directors of both the Company and its wholly-owned subsidiary, Bank of the James (the “Bank”). Both Mr. Jamerson and Mr. Dalton have been appointed as a Group One directors. Each appointment is effective immediately. Mr. Jamerson and Mr. Dalton will serve until the 2017 annual meeting of shareholders, at which time it is anticipated that each will stand for election by the Company’s shareholders. Mr. Jamerson will serve on the Loan Committee for the Bank and Mr. Dalton will serve on the Investment Committee of the Bank.

Mr. Jamerson, 58, is Co-Owner and CEO of Jamerson Lewis Construction. He is also Vice President and Owner of Jamerson Building Supply and Jamerson Real Estate. Mr. Jamerson is a 1981 graduate of Virginia Tech and has a B.S. degree in Building Construction. He is currently serving on the Board of Directors and Executive Committee of the Lynchburg Humane Society and on the Board of Directors for Patrick Henry Family Services. He is a member of the Appomattox Economic Development Agency.

Mr. Dalton, 36, is Operations Manager for English Construction Company, Inc. He is a 2003 graduate of Virginia Tech and holds a degree in Business Management. He currently serves on the Board of Directors for Boys and Girls Club of Greater Lynchburg. Mr. Dalton has served on the Altavista Advisory Board of Bank of the James for several years.

Mr. Jamerson and Mr. Dalton will each be entitled to the same compensation as the other directors, including attendance fees for board and committee meetings and an annual retainer, all as described in the Company’s proxy statement filed in connection with 2016 annual meeting of shareholders.

There are no arrangements or understandings between Mr. Jamerson and any other persons pursuant to which Mr. Jamerson was appointed as a director. In addition, there are no current or proposed transactions involving the Company in which Mr. Jamerson or any other member of his immediate family has, or will have, a direct or indirect material interest that would require disclosure under Item 404(a) of Regulation S-K governing related party transactions.

There are no arrangements or understandings between Mr. Dalton and any other persons pursuant to which Mr. Dalton was appointed as a director. In addition, there are no current or proposed transactions involving the Company in which Mr. Dalton or any other member of his immediate family has, or will have, a direct or indirect material interest that would require disclosure under Item 404(a) of Regulation S-K governing related party transactions.

Neither Mr. Jamerson nor Mr. Dalton, directly or through their employers, maintain a borrowing relationship with Bank.

(e) Compensatory Arrangements of Certain Officers:

As previously reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 12, 2009, the Bank previously entered into Salary Continuation Agreements on August 6, 2009 with each of Robert R. Chapman III, President of the Bank; J. Todd Scruggs, Executive Vice President and Chief Financial Officer; and Harry P. Umberger, Executive Vice President and Senior Credit Officer (collectively, the “Named Executive Officers”).

The Salary Continuation Agreements provide each of the Named Executive Officers with certain supplemental benefits (“Supplemental Benefits”) upon retirement, termination of employment, death, disability or a change in control of the Bank, in certain prescribed circumstances.

On October 18, 2016, the Bank entered into First Amendments to each of the Salary Continuation Agreements (each as amended, a “First Amended Salary Continuation Agreement”) with each of the Named Executive Officers, to be effective as of October 1, 2016. In connection with Mr. Umberger’s First Amended Salary Continuation Agreement, the Bank and Mr. Umberger also entered into that certain 2016 Salary Continuation Agreement (the “2016 Salary Continuation Agreement”), to be effective as of October 1, 2016.

The First Amended Salary Continuation Agreements, and in the case of Mr. Umberger, the 2016 Salary Continuation Agreement, provide each of the Named Executive Officers with increased Supplemental Benefits, as summarized below.

Robert R. Chapman III:

Mr. Chapman’s First Amended Salary Continuation Agreement provides for a lump sum payment of $2,315,177 payable within 90 days following Mr. Chapman’s normal retirement date at age 65 or the date of his death if he is employed by the Bank at the time of his death.

If Mr. Chapman’s employment terminates prior to his reaching age 65 other than for cause, death, disability or change in control, Mr. Chapman shall be paid a lump sum equal to the Early Termination benefit set forth on Schedule A of the First Amended Salary Continuation Agreement for the applicable plan year immediately preceding such termination date. This amount is payable within 90 days following the date on which his employment terminates.

If Mr. Chapman becomes disabled prior to his reaching age 65, he shall receive a lump sum payment equal to the Disability benefit set forth on Schedule A of the First Amended Salary Continuation Agreement for the applicable plan year immediately preceding his disability. This amount shall be paid within 90 days following the date on which Mr. Chapman reaches age 65.

If Mr. Chapman’s employment with the Bank terminates within 24 months following a Change in Control (as defined in the initial Salary Continuation Agreement), Mr. Chapman shall be paid a lump sum equal to the Change in Control benefit set forth on Schedule A of the First Amended Salary Continuation Agreement for the applicable plan year immediately preceding such termination date. This payment shall be made within 90 days of the date on which Mr. Chapman’s employment terminates.

Reference is made to the First Amended Salary Continuation Agreement included as Exhibit 10.1 to this Form 8-K for other terms and conditions of Mr. Chapman’s agreement, including the Supplemental Benefits payable upon retirement, early termination, disability, death or change in control.

J. Todd Scruggs:

Mr. Scruggs’ First Amended Salary Continuation Agreement provides for annual payments of $170,484 payable in equal monthly installments for 15 years beginning within 90 days following Mr. Scruggs’ normal retirement date at age 65 or the date of his death if he is employed by the Bank at the time of his death.

If Mr. Scruggs’ employment terminates prior to his reaching age 65 other than for cause, death, disability or change in control, Mr. Scruggs shall be paid a lump sum equal to the Early Termination benefit set forth on Schedule A of the First Amended Salary Continuation Agreement for the applicable plan year immediately preceding such termination date. This amount is payable within 90 days following the date on which his employment terminates.

If Mr. Scruggs becomes disabled prior to his reaching age 65, he shall receive a lump sum payment equal to the Disability benefit set forth on Schedule A of the First Amended Salary Continuation Agreement for the applicable plan year immediately preceding his disability. This amount shall be paid within 90 days following the date on which Mr. Scruggs reaches age 65.

If Mr. Scruggs’ employment with the Bank terminates within 24 months following a Change in Control (as defined in the initial Salary Continuation Agreement), Mr. Scruggs shall be paid a lump sum equal to the Change in Control benefit set forth on Schedule A of the First Amended Salary Continuation Agreement for the applicable plan year immediately preceding such termination date. This payment shall be made within 90 days of the date on which Mr. Scruggs’ employment terminates.

Reference is made to the First Amended Salary Continuation Agreement included as Exhibit 10.2 to this Form 8-K for other terms and conditions of Mr. Scruggs’ agreement, including the Supplemental Benefits payable upon retirement, early termination, disability, death or change in control.

Harry P. Umberger:

Mr. Umberger’s First Amended Salary Continuation Agreement freezes the amount of the Supplemental Benefits provided under Mr. Umberger’s initial Salary Continuation Agreement. Supplement Benefits are also provided under Mr. Umberger’s 2016 Salary Continuation Agreement.

Mr. Umberger’s 2016 Salary Continuation Agreement provides for a lump sum payment of $886,660 payable within the month following the date of Mr. Umberger’s separation from service after age 65 or the date of his death if he is employed by the Bank at the time of his death. In addition to this payment, Mr. Umberger’s First Amended Salary Continuation Agreement provides for annual payments of $44,085 payable in equal monthly installments for 15 years beginning within 90 days following Mr. Umberger’s normal retirement date at age 65 or the date of his death if he is employed by the Bank at the time of his death.

If Mr. Umberger’s employment terminates prior to his reaching age 65 other than for cause, death, disability or change in control, Mr. Umberger shall be paid, pursuant to the 2016 Salary Continuation Agreement, a lump sum equal to the Early Termination benefit set forth on Schedule A of the 2016 Salary Continuation Agreement for the applicable plan year immediately preceding such termination date. This amount is payable within the month following the date on which his employment terminates. In addition to this payment, Mr. Umberger’s First Amended Salary Continuation Agreement provides for an annual benefit, payable in equal monthly installments for 15 years, in the amount necessary to fully amortize the accrued benefit amount of $188,340.22 over the 15-year period, crediting interest monthly on the unpaid portion of such accrued benefit amount at an annual rate of 6% (the “Accrued Annual Benefit”). Payments on this Accrued Annual Benefit shall begin within 90 days following the date of Mr. Umberger’s early termination

If Mr. Umberger becomes disabled prior to his reaching age 65, he shall receive, pursuant to the 2016 Salary Continuation Agreement, a lump sum payment equal to the Disability benefit set forth on Schedule A of the 2016 Salary Continuation Agreement for the applicable plan year immediately preceding his disability. This amount shall be paid within the month following the date of Mr. Umberger’s disability. In addition to this payment, Mr. Umberger’s First Amended Salary Continuation Agreement provides for the Accrued Annual Benefit in the event of Mr. Umberger’s disability. Payments on this Accrued Annual Benefit shall begin within 90 days following the date on which Mr. Umberger reaches age 65.

If Mr. Umberger’s employment with the Bank terminates within 24 months following a Change in Control (as defined in the 2016 Salary Continuation Agreement), Mr. Umberger shall be paid, pursuant to the 2016 Salary Continuation Agreement, a lump sum equal to the Change in Control benefit set forth on Schedule A of the 2016 Salary Continuation Agreement for the applicable plan year immediately preceding such termination date. This payment shall be made within the month following the date on which Mr. Umberger’s employment terminates. In addition to this payment, Mr. Umberger’s First Amended Salary Continuation Agreement provides for the Accrued Annual Benefit. Payments on this Accrued Annual Benefit shall begin within 90 days of the date on which Mr. Umberger’s employment terminates following a Change in Control.

Reference is made to the First Amended Salary Continuation Agreement included as Exhibit 10.3 to this Form 8-K, and the 2016 Salary Continuation Agreement included as Exhibit 10.4 to this Form 8-K, for other terms and conditions of Mr. Umberger’s agreement, including the Supplemental Benefits payable upon retirement, early termination, disability, death or change in control.

Item 8.01 - Other Events

On October 18, 2016, the Board of Directors of the Company declared a quarterly cash dividend of $0.06 per share of common stock. The dividend will be paid on or about December 16, 2016, to stockholders of record as of the close of business on December 2, 2016. A copy of the Press Release dated October 21, 2016 announcing the declaration of the dividend is attached hereto as Exhibit 99.1.

Item 9.01 - Financial Statements and Exhibits

(a)

Financial statements of businesses acquired – not applicable

(b)

Pro forma financial information – not applicable

(c)

Shell company transactions – not applicable

(d)

Exhibits


Exhibit No.		Exhibit Description

10.1		First Amended Salary Continuation Agreement dated effective as of October 1, 2016 by and between the Bank and Robert R. Chapman III

10.2		First Amended Salary Continuation Agreement dated effective as of October 1, 2016 by and between the Bank and J. Todd Scruggs

10.3		First Amended Salary Continuation Agreement dated effective as of October 1, 2016 by and between the Bank and Harry P. Umberger

10.4		2016 Salary Continuation Agreement dated effective as of October 1, 2016 by and between the Bank and Harry P. Umberger

99.1		Bank of the James Financial Group, Inc. Press Release dated October 21, 2016

SIGNATURE

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.

EXHIBIT INDEX


Exhibit No.		Exhibit Description

10.1		First Amended Salary Continuation Agreement dated effective as of October 1, 2016 by and between the Bank and Robert R. Chapman III

10.2		First Amended Salary Continuation Agreement dated effective as of October 1, 2016 by and between the Bank and J. Todd Scruggs

10.3		First Amended Salary Continuation Agreement dated effective as of October 1, 2016 by and between the Bank and Harry P. Umberger

10.4		2016 Salary Continuation Agreement dated effective as of October 1, 2016 by and between the Bank and Harry P. Umberger

99.1		Bank of the James Financial Group, Inc. Press Release dated October 21, 2016

Exhibit 10.1

FIRST AMENDMENT TO THE

BANK OF THE JAMES

SALARY CONTINUATION AGREEMENT

THIS AMENDMENT (the “Amendment”) is adopted October 1^st, 2016, by and between Bank of the James (the “Bank”), and Robert R. Chapman III (the “Executive”).

The Bank and the Executive executed a Salary Continuation Agreement August 6, 2009 (the “Agreement”) which provides deferred compensation benefits to the Executive under certain circumstances. The Bank and the Executive now wish to amend the Agreement to increase the benefits provided pursuant to the Agreement. The parties agree and acknowledge that this Amendment (i) shall be interpreted in accordance with Internal Revenue Code Section 409A and (ii) increases the amount of benefits provided under the Agreement, but does not change the payment schedule thereunder.

NOW, THEREFORE, the Bank and the Executive adopt the following amendments to the Agreement:

Section 2.1.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.1.1 Amount of Benefit. The lump sum benefit under this Section 2.1 is Two Million Three Hundred Fifteen Thousand One Hundred Seventy-Seven Dollars ($2,315,177).

Section 2.2.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.2.1 Amount of Benefit. The lump sum benefit under this Section 2.2 is the Early Termination benefit set forth on Schedule A for the end of the Plan Year immediately before Separation from Service.

Section 2.3.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.3.1 Amount of Benefit. The lump sum benefit under this Section 2.3 is the Disability benefit set forth on Schedule A for the end of the Plan Year immediately before Disability.

Section 2.4.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.4.1 Amount of Benefit. The lump sum benefit under this Section 2.4 is the Change in Control benefit set forth on Schedule A for the end of the Plan Year immediately before Separation from Service.

Section 3.1.1 of the Agreement shall be deleted in its entirety and replaced with the following.

3.1.1 Amount of Benefit. The lump sum benefit under this Section 3.1 is the Death benefit set forth on Schedule A for the end of the Plan Year immediately before the Executive’s death.

Section 8.3 of the Agreement shall be deleted in its entirety and replaced with the following.

8.3 Effect of Complete Termination. Notwithstanding anything to the contrary in Section 8.2, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), at certain times the Employer may completely terminate and liquidate the Agreement. In the event of a complete termination under subsection (a) or (c) below, the Employer shall pay the Executive the Accrued Benefit. In the event of a complete termination under subsection (b) below, the Employer shall pay the Executive the benefit described in Section 2.4. Such complete termination of the Agreement shall occur only under the following circumstances and conditions.

(a) Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

(b) Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.

(c) Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to

terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.

The Schedule A originally attached to the Agreement shall be replaced by the Schedule A attached hereto.

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have executed this Amendment as indicated below:


Executive	Bank

	By:
	Its:	CLO - EVP

Salary Continuation Agreement

Schedule A

Robert R. Chapman, III


*Birth Date: xx/xx/1962* *Plan Anniversary Date:* *Dec. 31* *Normal Retirement Date:* *7/21/2027, Age 65* *Normal Retirement Payment:* *Lump Sum*			Early Termination Amount Payable In a Lump Sum at Separation of Service		Disability Amount Payable In a Lump Sum at Normal Retirement Age		Change in Control Amount Payable In a Lump Sum at Separation of Service		Death Amount Payable In a Lump Sum Upon Death
									Death Amount Payable In a Lump Sum Upon Death
Values As Of	Age		Lump Sum Benefit		Lump Sum Benefit		Lump Sum Benefit		Lump Sum Benefit
10/1/2016		54		463,249		885,937		2,076,757		2,315,177
12/31/2016		54		493,846		930,426		2,093,332		2,315,177
12/31/2017		55		620,917		1,101,871		2,110,570		2,315,177
12/31/2018		56		755,826		1,263,357		2,128,497		2,315,177
12/31/2019		57		899,055		1,415,461		2,147,142		2,315,177
12/31/2020		58		1,051,119		1,558,729		2,166,532		2,315,177
12/31/2021		59		1,212,561		1,693,674		2,186,698		2,315,177
12/31/2022		60		1,383,961		1,820,779		2,207,671		2,315,177
12/31/2023		61		1,565,932		1,940,500		2,229,482		2,315,177
12/31/2024		62		1,759,127		2,053,265		2,252,166		2,315,177
12/31/2025		63		1,964,238		2,159,480		2,275,758		2,315,177
12/31/2026		64		2,181,999		2,259,524		2,300,293		2,315,177
7/21/2027		65		2,315,177		2,315,177		2,315,177		2,315,177

The first line represents the plan values as of October 1, 2016.

IF THERE IS A CONFLICT BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT.


Robert R. Chapman, III	By
Date 10-18-16	Title	EVP - CLO
	Date	October 18, 2016

Exhibit 10.2

FIRST AMENDMENT TO

THE BANK OF THE JAMES

SALARY CONTINUATION AGREEMENT

THIS AMENDMENT (the “Amendment”) is adopted October 1^st, 2016, by and between Bank of the James (the “Bank”), and J. Todd Scruggs (the “Executive”).

NOW, THEREFORE, the Bank and the Executive adopt the following amendments to the Agreement:

Section 2.1.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is One Hundred Seventy Thousand Two Hundred Sixty-Four Dollars ($170,484).

Section 2.2.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.2.1 Amount of Benefit. The lump benefit under this Section 2.2 is the Early Termination benefit set forth on Schedule A for the end of the Plan Year immediately before Separation from Service.

Section 2.3.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.3.1 Amount of Benefit. The lump sum benefit under this Section 2.3 is the Disability benefit set forth on Schedule A for the end of the Plan Year immediately before Disability.

Section 2.4.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.4.1 Amount of Benefit. The lump sum benefit under this Section 2.4 is the Change in Control benefit set forth on Schedule A for the end of the Plan Year immediately before Separation from Service.

Section 3.1.1 of the Agreement shall be deleted in its entirety and replaced with the following.

3.1.1 Amount of Benefit. The annual benefit under this Section 3.1 is the Death benefit set forth on Schedule A for the end of the Plan Year immediately before the Executive’s death.

Section 8.3 of the Agreement shall be deleted in its entirety and replaced with the following.

(b) Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-l(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.

(c) Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-l(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to

terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-l(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.

The Schedule A originally attached to the Agreement shall be replaced by the Schedule A attached hereto.

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have executed this Amendment as indicated below:


Executive	Bank

	By:
	Its:	President & CEO

Salary Continuation Agreement

Schedule A

J. Todd Scruggs


*Birth Date: xx/xx/1967* *Plan Anniversary Date:* *Dec. 31* *Normal Retirement Date:* *12/9/2032, Age 65* *Normal Retirement Payment:* *Monthly for 15 Years*			Early Termination Amount Payable In a Lump Sum at Separation of Service		Disability Amount Payable In a Lump Sum at Normal Retirement Age		Change in Control Amount Payable In a Lump Sum at Separation of Service		Death Amount Payable Monthly for 15 Years Upon Death
									Death Amount Payable Monthly for 15 Years Upon Death
Values As Of	Age		Lump Sum Benefit		Lump Sum Benefit		Lump Sum Benefit		Annual Benefit ¹
10/1/2016		48		209,291		553,518		1,445,764		170,484
12/31/2016		49		222,881		580,706		1,456,155		170,484
12/31/2017		50		279,321		685,479		1,466,961		170,484
12/31/2018		51		339,242		784,165		1,478,200		170,484
12/31/2019		52		402,858		877,118		1,489,888		170,484
12/31/2020		53		470,399		964,671		1,502,043		170,484
12/31/2021		54		542,105		1,047,138		1,514,685		170,484
12/31/2022		55		618,234		1,124,814		1,527,833		170,484
12/31/2023		56		699,059		1,197,977		1,541,506		170,484
12/31/2024		57		784,869		1,266,890		1,555,727		170,484
12/31/2025		58		875,971		1,331,799		1,570,516		170,484
12/31/2026		59		972,692		1,392,938		1,585,896		170,484
12/31/2027		60		1,075,379		1,450,524		1,601,892		170,484
12/31/2028		61		1,184,399		1,504,766		1,618,528		170,484
12/31/2029		62		1,300,143		1,555,856		1,635,829		170,484
12/31/2030		63		1,423,026		1,603,978		1,653,823		170,484
12/31/2031		64		1,553,488		1,649,304		1,672,535		170,484
12/9/2032		65		1,691,997		1,691,997		1,691,997		170,484

The first line represents the plan values as of October 1, 2016.

¹	The annual benefit amount will be distributed in 12 equal monthly payments for a total of 180 monthly payments.

Salary Continuation Agreement

Schedule A

IF THERE IS A CONFLICT BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT.


J. Todd Scruggs	By
Date 10-16-18	Title	President & CEO
	Date	October 18, 2016

Exhibit 10.3

FIRST AMENDMENT TO THE

BANK OF THE JAMES

SALARY CONTINUATION AGREEMENT

THIS AMENDMENT (the “Amendment”) is adopted October 1^st, 2016, by and between Bank of the James (the “Bank”), and Harry P. Umberger (the “Executive”).

The Bank and the Executive executed a Salary Continuation Agreement August 6, 2009 (the “Agreement”), which provides deferred compensation benefits to the Executive under certain circumstances. The Bank and the Executive now wish to amend the Agreement to freeze the benefits provided pursuant to the Agreement. The parties agree and acknowledge that this Amendment (i) shall be interpreted in accordance with Internal Revenue Code Section 409A and (ii) freezes the amount of benefits provided under the Agreement, but does not change the payment schedule thereunder.

NOW, THEREFORE, the Bank and the Executive adopt the following amendments to the Agreement:

Section 1.1 of the Agreement shall be deleted in its entirety and replaced with the following.

1.1

“Accrued Benefit” means the dollar value of the liability that should be accrued by the Company, under Generally Accepted Accounting Principles, for the Company’s obligation to the Executive under this Agreement, calculated by applying Accounting Standards Codification 710-10 and the Discount Rate. The Accrued Benefit as of the date of this Amendment is $188,340.22. Interest shall be credited monthly on the unpaid portion of the Accrued Benefit at an annual rate equal to 6% until benefits under this Agreement are fully paid.

Section 1.14 of the Agreement shall be deleted in its entirety.

Section 2.1.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.1.1

Amount of Benefit. The annual benefit under this Section 2.1 is Forty-Four Thousand Eighty-Five Dollars ($44,085).

Section 2.2.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.2.1

Amount of Benefit. The annual benefit under this Section 2.2 is the amount necessary to fully amortize the Accrued Benefit over the period described in Section 2.2.2, crediting interest monthly on the unpaid portion of the Accrued Benefit at an annual rate equal to 6%.

Section 2.3.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.3.1

Amount of Benefit. The annual benefit under this Section 2.3 is the amount necessary to fully amortize the Accrued Benefit over the period described in Section 2.3.2, crediting interest monthly on the unpaid portion of Accrued Benefit at an annual rate equal to 6%.

Section 2.4.1 of the Agreement shall be deleted in its entirety and replaced with the following.

2.4.1

Amount of Benefit. The annual benefit under this Section 2.4 is the amount necessary to fully amortize the Accrued Benefit over the period described in Section 2.4.2, crediting interest monthly on the unpaid portion of Accrued Benefit at an annual rate equal to 6%.

Section 3.1.1 of the Agreement shall be deleted in its entirety and replaced with the following.

3.1.1

Amount of Benefit. The annual benefit under this Section 2.1 is Forty-Four Thousand Eighty-Five Dollars ($44,085).

The following Section 2.8 shall be inserted in to the Agreement immediately following Section 2.7:

2.8 Excise Tax Limitation. Notwithstanding any provision of this Agreement to the contrary, if any benefit payment hereunder would be treated as an “excess parachute payment” under Code Section 280G, the Bank shall reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment. The Executive shall be entitled to only the reduced benefit and shall forfeit any amount over and above the reduced amount.

Section 8.3 of the Agreement shall be deleted in its entirety and replaced with the following

8.3	Plan Terminations Under Code Section 409A. Notwithstanding anything to the contrary in Section 8.2, if the Bank terminates this Agreement in the following circumstances:

(a)

Within thirty (30) days before or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following the termination of this Agreement and further provided that all the Bank’s arrangements which are substantially similar to this Agreement are terminated so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of such termination;

(b)

Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under this Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or

(c)

Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulations Section 1.409A-1(c) if the Executive participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) all termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the Accrued Benefit, determined as of the date of the termination of this Agreement, to the Executive subject to the above terms.

The Schedule A originally attached to the Agreement shall be deleted in its entirety.

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have executed this Amendment as indicated below:


Executive	Bank

	By:
	Its:	President & CEO

Salary Continuation Agreement - Frozen Plan

Projected Benefits (Not Part of Agreement)

Harry P. Umberger


*Birth Date: xx/xx/1965* *Plan Anniversary Date: Dec. 31* *Normal Retirement Date:* *10/25/2030, Age 65* *Normal Retirement Payment:* *Monthly for 15 Years*			Early Termination Amount Payable Monthly for 15 Years at Separation of Service		Disability Amount Payable Monthly for 15 Years at Normal Retirement Age		Change in Control Amount Payable Monthly for 15 Years at Separation of Service		Death Amount Payable Monthly for 15 Years Upon Death
Values As Of	Age		Annual Benefit ¹		Annual Benefit ¹		Annual Benefit ¹		Annual Benefit ¹
10/1/2016		50		18,977		44,085		18,977		44,085
12/31/2016		51		19,263		44,085		19,263		44,085
12/31/2017		52		20,451		44,085		20,451		44,085
12/31/2018		53		21,713		44,085		21,713		44,085
12/31/2019		54		23,052		44,085		23,052		44,085
12/31/2020		55		24,474		44,085		24,474		44,085
12/31/2021		56		25,983		44,085		25,983		44,085
12/31/2022		57		27,586		44,085		27,586		44,085
12/31/2023		58		29,287		44,085		29,287		44,085
12/31/2024		59		31,093		44,085		31,093		44,085
12/31/2025		60		33,011		44,085		33,011		44,085
12/31/2026		61		35,047		44,085		35,047		44,085
12/31/2027		62		37,209		44,085		37,209		44,085
12/31/2028		63		39,504		44,085		39,504		44,085
12/31/2029		64		41,940		44,085		41,940		44,085
10/25/2030		65		44,085		44,085		44,085		44,085

The first line represents the plan values as of October 1, 2016.

¹	The annual benefit amount will be distributed in 12 equal monthly payments for a total of 180 monthly payments.

Salary Continuation Agreement - Frozen Plan

Projected Benefits (Not Part of Agreement)

IF THERE IS A CONFLICT BETWEEN THIS SCHEDULE AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT.


Harry P. Umberger	By
Date 10-18-16	Title	President & CEO
	Date	October 18, 2016

Exhibit 10.4

2016 SALARY CONTINUATION AGREEMENT

This Salary Continuation Agreement (the “Agreement”), by and between Bank of the James, located in Lynchburg, Virginia (the “Employer”), and Harry P. Umberger (the “Executive”), made this 1^st day of October, 2016, formalizes the agreements and understanding between the Employer and the Executive.

WITNESSETH:

WHEREAS, the Executive is employed by the Employer;

WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to encourage the Executive’s continued employment and to provide the Executive with additional incentive to achieve corporate objectives;

WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional retirement benefits to the Executive;

WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and

WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental retirement benefits for the Executive, a member of select group of management or highly compensated employee of the Employer.

NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:

ARTICLE 1

DEFINITIONS

For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:

1.1 “Accrued Benefit” means the dollar value of the liability that should be accrued by the Employer, under Generally Accepted Accounting Principles, for the Employer’s obligation to the Executive under this Agreement, calculated by applying Accounting Standards Codification 710-10 and the Discount Rate.

1.2 “Administrator” means the Board or its designee.

1.3 “Affiliate” means any business entity with whom the Employer would be considered a single employer under Section 414(b) and 414(c) of the Code. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.

1.4 “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.

1.5 “Board” means the Board of Directors of the Employer.

1.6 “Cause” means any of the following acts or circumstances: gross negligence or gross neglect of duties to the Employer; conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Employer; or fraud, disloyalty, dishonesty or willful violation of any law or significant Employer policy committed in connection with the Executive’s employment and resulting in a material adverse effect on the Employer.

1.7 “Change in Control” means a change in the ownership or effective control of the Employer, or in the ownership of a substantial portion of the assets of the Employer, as such change is defined in Code Section 409A and regulations thereunder.

1.8 “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

1.9 “Code” means the Internal Revenue Code of 1986, as amended.

1.10 “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.

1.11 “Discount Rate” means the rate used by the Administrator for determining the Accrued Benefit. The initial Discount Rate is six per cent (6%). The Administrator may adjust the Discount Rate to maintain the rate within reasonable standards according to Generally Accepted Accounting Principles and applicable bank regulatory guidance.

1.12 “Early Termination” means Separation from Service before Normal Retirement Age except when such Separation from Service occurs within twenty-four (24) months following a Change in Control or due to termination for Cause.

1.13 “Effective Date” means October 1, 2016.

1.14 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.15 “Normal Retirement Age” means the date the Executive attains age sixty-five (65).

1.16 “Plan Year” means each twelve (12) month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date and end on the following December 31.

1.17 “Schedule A” means the schedule attached hereto and made a part hereof. Schedule A shall be updated upon a change to any of the benefits described in Article 2 hereof.

1.18 “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation of Service on the next day following the expiration of such six (6) month period. In determining whether a Separation of Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-l(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.

1.19 “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an

established securities market or otherwise, as defined in Code §1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.

ARTICLE 2

PAYMENT OF BENEFITS

2.1 Normal Retirement Benefit. Upon Separation from Service after Normal Retirement Age, the Employer shall pay the Executive a benefit of Eight Hundred Eighty-Six Thousand Six Hundred Sixty Dollars ($886,660) in lieu of any other benefit hereunder. The benefit will be paid in a lump sum the month following Separation from Service.

2.2 Early Termination Benefit. If Early Termination occurs, the Employer shall pay the Executive the amount shown on Schedule A for the Plan Year ending immediately prior to Separation from Service, in lieu of any other benefit hereunder. The benefit will be paid in a lump sum the month following Separation from Service.

2.3 Disability Benefit. In the event the Executive suffers a Disability prior to Normal Retirement Age the Employer shall pay the Executive the amount shown on Schedule A for the Plan Year ending immediately prior to Disability, in lieu of any other benefit hereunder. The benefit will be paid in a lump sum the month following Disability.

2.4 Change in Control Benefit. If a Change in Control occurs, followed within twenty-four (24) months by Separation of Service prior to Normal Retirement Age, the Employer shall pay the Executive the amount shown on Schedule A for the Plan Year ending immediately prior to Separation from Service in lieu of any other benefit hereunder. The benefit will be paid in a lump sum the month following Separation from Service.

2.5 Death Prior to Commencement of Benefit Payments. In the event the Executive dies prior to Separation from Service, the Employer shall pay the Beneficiary the amount shown on Schedule A for the Plan Year ending immediately prior to the Executive’s death in lieu of any other benefit hereunder. The benefit will be paid in a lump sum the month following the Executive’s death.

2.6 Termination for Cause. If the Employer terminates the Executive’s employment for Cause, then the Executive shall not be entitled to any benefits under the terms of this Agreement.

2.7 Restriction on Commencement of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.

2.8 Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.

2.9 Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated Participants on a reasonably consistent basis.

(a) Payments subject to Code Section 162(m). If the Employer reasonably anticipates that the Employer’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution from this Agreement is deductible, the Employer may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Executive (or the Beneficiary in the event of the Executive’s death) at the earliest date the Employer reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).

(b) Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.

(c) Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.

2.10 Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this

Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15^th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.

2.11 Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.

2.12 Excise Tax Limitation. Notwithstanding any provision of this Agreement to the contrary, if any benefit payment hereunder would be treated as an “excess parachute payment” under Code Section 280G, the Employer shall reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment. The Executive shall be entitled to only the reduced benefit and shall forfeit any amount over and above the reduced amount.

2.13 Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:

(a) must take effect not less than twelve (12) months after the amendment is made;

(b) must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

(c) must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and

(d) may not accelerate the time or schedule of any distribution.

ARTICLE 3

BENEFICIARIES

3.1 Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form

prescribed by the Administrator, and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.

3.2 Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.

ARTICLE 4

ADMINISTRATION

4.1 Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

4.2 Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.

4.3 Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.

4.4 Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and/or recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.

4.5 Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.

4.6 Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to cease further benefit accruals hereunder.

4.7 Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.

ARTICLE 5

CLAIMS AND REVIEW PROCEDURES

5.1 Claims Procedure. A Claimant who has not received benefits under this Agreement that he or she believes should be distributed shall make a claim for such benefits as follows.

(a) Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

(b) Timing of Administrator Response. The Administrator shall respond to such Claimant within ninety (90) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional ninety (90) days by notifying the Claimant in writing, prior to the end of the initial ninety (90) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(c) Notice of Decision. If the Administrator denies part or all of the claim, the Administrator shall notify the Claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a description of any additional information or material necessary for the Claimant to perfect the claim and an explanation of why it is needed; (iv) an explanation of this Agreement’s review procedures and the time limits applicable to such procedures; and (v) a statement of the Claimant’s right to bring a civil action under ERISA Section S02(a) following an adverse benefit determination on review.

5.2 Review Procedure. If the Administrator denies part or all of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.

(a) Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.

(b) Additional Submissions – Information Access. The Claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.

(c) Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(d) Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within sixty (60) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional sixty (60) days by notifying the Claimant in writing, prior to the end of the initial sixty (60) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(e) Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (a) the specific reasons for the denial; (b) a reference to the specific provisions of this Agreement on which the denial is based; (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and (d) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 6

AMENDMENT AND TERMINATION

6.1 Agreement Amendment Generally. .Except as provided in Section 6.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.

6.2 Amendment to Insure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, ii) to conform the Agreement to the requirements of any applicable law or iii) to comply with the written instructions of the Employer’s auditors or banking regulators.

6.3 Agreement Termination Generally. Except as provided in Section 6.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 2.

6.4 Effect of Complete Termination. Notwithstanding anything to the contrary in Section 6.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), at certain times the Employer may completely terminate and liquidate the Agreement. In the event of a complete termination under subsection (a) or (c) below, the Employer shall pay the Executive the Accrued Benefit. In the event of a complete termination under subsection (b) below, the Employer shall pay the Executive the benefit described in Section 2.4. Such complete termination of the Agreement shall occur only under the following circumstances and conditions.

(b) Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-l(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.

with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.

ARTICLE 7

MISCELLANEOUS

7.1 No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.

7.2 State Law. To the extent not governed by ERISA, the provisions of this Agreement shall be construed and interpreted according to the internal law of the State of Virginia without regard to its conflicts of laws principles.

7.3 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

7.4 Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

7.5 Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.

7.6 Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.

7.7 Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.

7.8 Suicide or Misstatement. No benefit shall be distributed hereunder if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.

7.9 Removal. Notwithstanding anything in this Agreement to the contrary, the Employer shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued pursuant to Section 8(e) of the Federal Deposit Insurance Act. Furthermore, any payments made to the Executive pursuant to this Agreement shall, if required, comply with 12 U.S.C. 1828, FDIC Regulation 12 CFR Part 359 and any other regulations or guidance promulgated thereunder.

7.10 Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.

7.11 Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

7.12 Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.

7.13 Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

7.14 Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.

7.15 Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder.

7.16 Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.

IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement document as indicated below:

Salary Continuation Agreement

Schedule A

Harry P. Umberger


*Birth Date: xx/xx/1965* *Plan Anniversary Date: Dec. 31* *Normal Retirement Date:* *10/25/2030, Age 65* *Normal Retirement Payment:* *Lump Sum*			Early Termination Amount Payable In a Lump Sum at Separation of Service		Disability Amount Payable In a Lump Sum at Normal Retirement Age		Change in Control Amount Payable In a Lump Sum at Separation of Service		Death Amount Payable In a Lump Sum Upon Death


Values As Of	Age		Lump Sum Benefit		Lump Sum Benefit		Lump Sum Benefit		Lump Sum Benefit
10/1/2016		50		0		0		597,141		886,660
12/31/2016		51		10,103		23,121		578,441		886,660
12/31/2017		52		52,059		112,220		597,435		886,660
12/31/2018		53		96,603		196,142		616,926		886,660
12/31/2019		54		143,895		275,190		636,934		886,660
12/31/2020		55		194,103		349,645		657,450		886,660
12/31/2021		56		247,408		419,775		678,487		886,660
12/31/2022		57		304,001		485,830		700,032		886,660
12/31/2023		58		364,084		548,048		722,103		886,660
12/31/2024		59		427,873		606,652		744,690		886,660
12/31/2025		60		495,597		661,851		767,785		886,660
12/31/2026		61		567,497		713,843		791,395		886,660
12/31/2027		62		643,833		762,815		815,507		886,660
12/31/2028		63		724,876		808,942		840,122		886,660
12/31/2029		64		810,918		852,389		865,233		886,660
10/25/2030		65		886,660		886,660		886,660		886,660

The first line represents the plan values as of October 1, 2016.

IF THERE IS A CONFLICT BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL

Salary Continuation Agreement

Schedule A

PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT.


Harry P. Umberger	By
	Title	President & CEO
Date 10-18-16	Date October 18, 2016

Exhibit 99.1

LOGO

Bank of the James Announces Third Quarter,

Nine Months of 2016 Financial Results and Declaration of Dividend

Record Third Quarter Net Income; Consistent Loan Growth Throughout Expanded Market

LYNCHBURG, Va., October 21, 2016 — Bank of the James Financial Group, Inc. (the “Company”) (NASDAQ: BOTJ), the parent company of Bank of the James, a full-service commercial and retail bank serving the greater Lynchburg area (Region 2000), and the Charlottesville, Harrisonburg, and Roanoke, Virginia markets, today announced unaudited results for the three months and nine months ended September 30, 2016.

Net income for the three months ended September 30, 2016 was $1.06 million or $0.24 per diluted share compared with $983,000 or $0.29 per diluted share for the three months ended September 30, 2015. Net income for the nine months ended September 30, 2016 was $2.99 million or $0.68 per diluted share compared with $2.87 million or $0.85 per diluted share for the nine months ended September 30, 2015. Diluted earnings per share in the third quarter and nine months of 2016 reflected a 30% increase in the number of weighted average shares outstanding compared with the third quarter and nine months of 2015, resulting primarily from the issuance of one million new shares of the Company’s common stock on December 3, 2015.

Robert R. Chapman III, President and CEO, stated: “We reported a solid financial quarter, with company-record third quarter and nine-months net income that reflected steady progress in our core Region 2000 market and accelerating contributions from operations in Charlottesville, Harrisonburg and Roanoke. We have made prudent and meaningful investments in experienced, proven individuals to drive revenue, and facilities and technology to support success.

“Even as we have invested, we believe maintaining a year-over-year efficiency ratio of 72%, growing commercial lending and residential mortgage originations, attracting new clients and high levels of client retention, while maintaining strong asset and credit quality demonstrate the positive impact of our investments and the resulting growth and productivity.

“We are excited to soon be opening a full-service branch in Appomattox, headed by banking veteran and Appomattox native Thomas R. Cobb as Vice President and Regional Manager. We have served Appomattox clients for many years, and this will enhance our presence in this important Region 2000 market. We are also weeks away from opening a full-service branch in Charlottesville, which has proven to be a dynamic market for Bank of the James since we established a loan production office there in 2013.

“We entered fourth quarter 2016 with a strong pipeline of loans and an ever-expanding number of clients, encouraging us that the company can finish the year with strong results and move confidently into 2017.”

Highlights

•

Interest income from earning assets increased 5.4% in third quarter 2016 and 6.6% in the nine months of 2016 from a year earlier, primarily due to commercial loan growth.

•

Net interest income increased 8.4% for the three months ended September 30, 2016 and 9.9% for the nine months ended September 30, 2016 compared with the prior year’s periods, reflecting interest income growth, disciplined deposit pricing, and elimination of interest expense resulting from the retirement of outstanding debt in January 2016.

•

Noninterest income increased 11.9% in the nine months of 2016 compared with the same period in 2015, primarily reflecting consistent growth in gains on sale of purchase mortgage originations, service charges and income from treasury management and corporate credit card services, and gains on the sale of investment securities.

•

Total deposits were a Company record $507.40 million, up 8.5% from December 31, 2015.

•

Total loans, net of the allowance for loan losses, were a Company record $457.14 million at September 30, 2016 as the Company continued to build its portfolio of commercial loans. Loans held for sale at September 30, 2016 were $3.05 million compared with $1.96 million at December 31, 2015, reflecting continued strength in residential purchase mortgage originations.

•

Commercial loans (primarily C&I) increased 15% year-over-year, with a portfolio of $84.28 million at September 30, 2016 compared with $73.15 million at September 30, 2015. Owner occupied real estate loans grew 10.16% year-over-year, primarily reflecting increased commercial real estate lending.

•

Total stockholders’ equity increased to $51.02 million at September 30, 2016, up 5.9% from December 31, 2015. Book value per share was $11.65 at September 30, 2016, up from $11.01 at December 31, 2015.

•

Based on the results achieved in the third quarter, on October 18, 2016 the Company’s board of directors approved a $0.06 per share dividend payable to shareholders of record on December 2, 2016, to be paid on December 16, 2016.

Third Quarter 2016 Operational Review

Net income of $1.06 million for the three months ended September 30, 2016 was a company-record for third quarter earnings. Interest income was $5.48 million in third quarter 2016, up 5.4% from third quarter 2015.

Interest expense declined 13.4% to $610,000 in third quarter 2016 from $704,000 in third quarter 2015. As in the first and second quarters of 2016, interest expense reduction primarily reflected the elimination of interest paid on capital notes that were retired in January 2016 following the Company’s common equity placement. The Company grew deposits year-over-year, both core and time deposits, with an average rate paid on interest bearing accounts of 0.61% compared with 0.62% in the prior year’s third quarter.

J. Todd Scruggs, Executive Vice President and CFO, noted: “Eliminating the interest expense on our retired capital notes was the primary driver in reducing the company’s interest expense. In addition, our disciplined investment strategy has enabled us to generate returns on investments contributing to an interest rate spread we believe is quite strong in such a low-rate environment. It has required significant diligence, which has continued to support margins in excess of many of our peer institutions.”

The Company’s net interest margin was 3.75% and net interest spread was 3.62% for the three months ended September 30, 2016 compared with 3.76% and 3.59%, respectively, for the three months ended September 30, 2015. The Company’s margin and spread have remained relatively stable on a consecutive quarter basis throughout 2016. Average rates earned on loans, including fees, was 4.52% in third quarter 2016, compared with 4.50% in second quarter 2016, 4.60% in first quarter 2016, and 4.62% in third quarter 2015. The average rate earned on total earning assets in third quarter 2016 was 4.22%.

Net interest income in third quarter 2016 was $4.87 million, an 8.4% increase from $4.49 million in third quarter 2015. The Company’s provision for loan losses was $145,000 in third quarter 2016 compared with $120,000 in third quarter 2015.

Noninterest income from fees, service charges and commissions, including gains from the sale of residential mortgages to the secondary market, and income from the bank’s line of treasury management services for commercial customers, was $1.28 million in third quarter 2016 compared with $1.20 million in third quarter 2015. Gains from the Company’s sale of securities contributed $218,000 to noninterest income in third quarter 2016.

“Commercial treasury services, which we feel are competitive with any bank, are not only contributing to noninterest income, but are opening doors to serve a broader range of clients that require them,” Chapman explained. “Our capabilities definitely provide a competitive advantage, giving us the tools to offer cash management options our customers want.”

Noninterest expense for the three months ended September 30, 2016 was $4.45 million compared with $4.12 million for the three months ended September 30, 2015, primarily reflecting costs related to the Company’s market expansion, including the hiring of revenue-generating personnel, and investing in technology and security.

Nine Months Operations Reflect Steady Growth

The increase in net income to $2.99 million for the nine months ended September 30, 2016 from $2.87 million for the same period in 2015 resulted from increases in both interest and noninterest income.

Interest income of $16.01 million in the nine months of 2016 rose 6.6% compared with $15.01 million in the nine months of 2015. Net interest income in the nine months of 2016 was $14.30 million, a 9.9% increase compared with $13.01 million in the nine months of 2015, reflecting the growth of interest income and lower interest expense related to diligent interest expense management and the elimination of interest paid on capital notes subsequent to their retirement in January 2016. The Company’s provision for loan losses was $595,000 for the nine months of 2016 compared with $277,000 for the nine months of 2015, reflecting provisioning related to loan growth.

The Company’s net interest margin was 3.80% and net interest spread was 3.66% for the nine months ended September 30, 2016 compared with 3.79% and 3.65%, respectively, for the nine months of 2015. Average rates earned on loans, including fees, was 4.52% in the nine months of 2016 and the average yield on total earning assets was 4.22%.

Noninterest income was $3.61 million for the nine months of 2016, a 11.9% increase from $3.22 million in the nine months of 2015. Fee income increased slightly year-over-year, driven primarily by increased implementation of commercial treasury services, gains on sales of residential mortgages to the secondary market, and gains on sales of securities, which contributed $446,000 to noninterest income in the nine months of 2016. Noninterest expense for the nine months ended September 30, 2016 was $12.89 million compared with $11.73 million for the nine months ended September 30, 2015, primarily reflecting increased salaries and benefits, technology investments, marketing and operating expense increases.

Balance Sheet Review

Loans held for investment, net of the allowance for loan losses, were $457.14 million at September 30, 2016 compared with $430.45 million at December 31, 2015, and up from $426.85 million at September 30, 2015. Loans held for sale were $3.05 million at September 30, 2016 compared with $1.96 million at December 31, 2015. The comparison reflects a healthy mortgage origination business throughout our markets, with particularly strong contributions in the third quarter 2016 from the Harrisonburg market.

Michael A. Syrek, Executive Vice President and Senior Loan Officer, commented: “The bank’s strategy of focusing on winning commercial banking clients, retaining clients despite rate competition for quality loans, and building strong and lasting relationships by offering superior service and a variety of products continues to earn business in Region 2000 and Charlottesville. Expanded commercial banking capabilities in Harrisonburg and Roanoke are providing traction in those markets. Our mortgage lending strategy, which is to provide a variety of options to our retail clients and be the mortgage originator of choice, has supported our traditional strengths in serving individuals.”

Total commercial and residential real estate loans at September 30, 2016 were $279.43 million compared with $259.95 million at September 30, 2015, with the 7.5% growth primarily reflecting conservative additions to the bank’s commercial real estate portfolio. Total construction loans were $22.97 million at September 30, 2016 compared with $24.73 million at September 30, 2015, primarily reflecting the completion of client projects.

Total deposits at September 30, 2016 were $507.40 million compared with $467.61 million at December 31, 2015. The bank continued to attract noninterest bearing deposits, which increased to $102.55 million at September 30, 2016 from $91.33 million at December 31, 2015. Core deposits (noninterest bearing, NOW, money market and savings deposits) increased to $343.43 million at September 30, 2016 compared with $324.19 million at December 31, 2015.

Total assets were $559.95 million at September 30, 2016 compared with $527.14 million at December 31, 2015, primarily reflecting growth in loans, net of allowance for loan losses. Loans held for sale were higher, primarily based on increase in mortgage origination volume and the timing of sale of the mortgages, and securities held-to-maturity and the fair value of securities available-for-sale both increased from December 31, 2015.

The Company’s asset quality remained strong and stable, with a 0.53% ratio of nonperforming loans to total loans at September 30, 2016. Relatively consistent with prior quarters, the Company’s allowance for loan losses to total loans was 1.07%. The Company’s allowance for loan losses as a percent of nonperforming loans increased to 203.5% at September 30, 2016 compared with 137.5% at December 31, 2015.

Total nonperforming loans were $2.43 million, down 28.5% from $3.41 million at December 31, 2015. Total nonperforming assets were $4.80 million and other real estate owned was $2.37 million. The bank’s regulatory capital ratios continued to exceed accepted regulatory standards for a well-capitalized institution.

The Company grew measures of shareholder value, including tangible book value per share and total stockholders’ equity. Total stockholders’ equity was $51.02 million at September 30, 2016, compared with $48.20 million at December 31, 2015, and up from $37.16 at September 30, 2015. Retained earnings rose to $10.13 million at September 30, 2016 compared with and $7.92 million at December 31, 2015.

Return on average assets (ROAA) was 0.76% in third quarter 2016, generally consistent with the ROAA in prior year’s third quarter as well as the first and second quarter 2016. Return on average equity (ROAE) in third quarter 2016 was 8.34%, down from 10.64% in third quarter 2015. The decline in year-over-year ROAE primarily reflected the sharp increase in outstanding shares resulting from the Company’s common equity issue in December 2015.

Conclusion

“We have significant opportunity to grow business in Region 2000, where Bank of the James is well established,” Chapman said, “and we believe there is meaningful potential for growth in the Charlottesville, Roanoke and Harrisonburg markets. Technology, healthcare and education are important economic drivers in all our markets, and we are demonstrating results, from new clients to expanded client relationships.”

Scruggs added: “We are keeping a close eye on return on investment from our investment in people, facilities and products. Our team is very aware that the company’s investments must translate to results, and the results demonstrate that this is happening.”

Chapman concluded: “We have led our expansion in Region 2000 and other markets with finding and hiring quality individuals who are proven producers. Our markets appear to be generally economically healthy. With a full line of products and capabilities, combined with market opportunity, we look forward to serving clients and continuing to build value for our shareholders.”

About the Company

Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc., serves Lynchburg, Charlottesville, Harrisonburg, Roanoke, and other markets in Virginia. The bank operates 10 full service locations, two limited service branches, two loan production offices, and an investment/insurance services division. Bank of the James Financial Group, Inc. common stock is listed under the symbol “BOTJ” on the NASDAQ Stock Market, LLC.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains statements that constitute “forward-looking statements” within the meaning of 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. Bank of the James Financial Group, Inc. (the “Company”) undertakes 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. Such factors include, but are not limited to, competition, general economic conditions, potential changes in interest rates, and changes in the value of real estate securing loans made by Bank of the James (the “Bank”), a subsidiary of the Company. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Company’s filings with the Securities and Exchange Commission and previously filed by the Bank (as predecessor of the Company) with the Federal Reserve Board.

Bank of the James Financial Group, Inc. and Subsidiaries

(000’s) except ratios and percent data

unaudited


Selected Data:	Three months ending Sep 30, 2016		Three months ending Sep 30, 2015		Change			Year to date Sep 30, 2016		Year to date Sep 30, 2015		Change
Interest income	$	5,477	$	5,195		5.43	%	$	16,005	$	15,012		6.61	%
Interest expense		610		704		-13.35	%		1,708		2,001		-14.64	%
Net interest income		4,867		4,491		8.37	%		14,297		13,011		9.88	%
Provision for loan losses		145		120		20.83	%		595		277		114.80	%
Noninterest income		1,281		1,198		6.93	%		3,605		3,223		11.85	%
Noninterest expense		4,449		4,118		8.04	%		12,893		11,733		9.89	%
Income taxes		499		468		6.62	%		1,421		1,357		4.72	%
Net income		1,055		983		7.32	%		2,993		2,867		4.39	%
Weighted average shares outstanding		4,378,436		3,371,616		29.86	%		4,378,436		3,371,616		29.86	%
Basic net income per share	$	0.24	$	0.29	$	(0.05	)	$	0.68	$	0.85	$	(0.17	)
Fully diluted net income per share	$	0.24	$	0.29	$	(0.05	)	$	0.68	$	0.85	$	(0.17	)

Balance Sheet at period end:	Sep 30, 2016		Dec 31, 2015		Change			Sep 30, 2015		Dec 31, 2014		Change
Loans, net	$	457,136	$	430,445		6.20	%	$	426,850	$	394,573		8.18	%
Loans held for sale		3,048		1,964		55.19	%		3,823		1,030		271.17	%
Total securities		43,226		38,515		12.23	%		35,645		26,923		32.40	%
Total deposits		507,397		467,610		8.51	%		458,656		399,497		14.81	%
Stockholders’ equity		51,015		48,196		5.85	%		37,158		34,776		6.85	%
Total assets		559,952		527,143		6.22	%		507,615		460,865		10.14	%
Shares outstanding		4,378,436		4,378,436		—			3,371,616		3,371,616		—
Book value per share	$	11.65	$	11.01		0.64		$	11.02	$	10.31	$	0.71


Daily averages:	Three months ending Sep 30, 2016			Three months ending Sep 30, 2015			Change			Year to date Sep 30, 2016			Year to date Sep 30, 2015			Change
Loans, net	$	455,542		$	419,359			8.63	%	$	441,834		$	407,660			8.38	%
Loans held for sale		4,082			3,009			35.66	%		3,615			2,263			59.74	%
Total securities		42,263			34,726			21.70	%		41,204			30,862			33.51	%
Total deposits		501,171			446,823			12.16	%		483,247			439,301			10.00	%
Stockholders’ equity		50,160			36,644			36.88	%		49,417			36,028			37.16	%
Interest earning assets		520,087			473,971			9.73	%		503,270			459,419			9.54	%
Interest bearing liabilities		401,332			366,736			9.43	%		388,559			369,058			5.28	%
Total assets		552,347			494,023			11.81	%		534,576			489,125			9.29	%

Financial Ratios:	Three months ending Sep 30, 2016			Three months ending Sep 30, 2015			Change			Year to date Sep 30, 2016			Year to date Sep 30, 2015			Change
Return on average assets		0.76	%		0.79	%		(0.03	)		0.75	%		0.78	%		(0.03	)
Return on average equity		8.34	%		10.64	%		(2.30	)		8.10	%		10.64	%		(2.54	)
Net interest margin		3.75	%		3.76	%		(0.01	)		3.80	%		3.79	%		0.01
Efficiency ratio		72.36	%		72.39	%		(0.03	)		72.02	%		72.27	%		(0.25	)
Average equity to average assets		9.08	%		7.42	%		1.66			9.24	%		7.37	%		1.88

Allowance for loan losses:	Three months ending Sep 30, 2016			Three months ending Sep 30, 2015			Change			Year to date Sep 30, 2016			Year to date Sep 30, 2015			Change
Beginning balance	$	4,887		$	4,586			6.56	%	$	4,683		$	4,790			-2.23	%
Provision for losses		145			120			20.83	%		595			277			114.80	%
Charge-offs		(114	)		(29	)		293.10	%		(492	)		(489	)		0.61	%
Recoveries		35			71			-50.70	%		167			170			-1.76	%
Ending balance		4,953			4,748			4.32	%		4,953			4,748			4.32	%


Nonperforming assets:	Sep 30, 2016			Dec 31, 2015			Change			Sep 30, 2015			Dec 31, 2014			Change
Total nonperforming loans	$	2,434		$	3,406			-28.54	%	$	1,594		$	3,505			-54.52	%
Other real estate owned		2,370			1,965			20.61	%		2,265			956			136.92	%
Total nonperforming assets		4,804			5,371			-10.56	%		3,859			4,461			-13.49	%
Troubled debt restructurings - (performing portion)		457			646			-29.26	%		843			376			124.20	%

Asset quality ratios:	Sep 30, 2016			Dec 31, 2015			Change			Sep 30, 2015			Dec 31, 2014			Change
Nonperforming loans to total loans		0.53	%		0.78	%		(0.25	)		0.37	%		0.88	%		(0.50	)
Allowance for loan losses to total loans		1.07	%		1.08	%		0.01			1.10	%		1.20	%		(0.10	)
Allowance for loan losses to nonperforming loans		203.49	%		137.49	%		66.00			297.87	%		136.66	%		161.21

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollar amounts in thousands, except per share amounts)


	(unaudited) 9/30/2016		12/31/2015
Assets
Cash and due from banks	$	16,206	$	15,952
Federal funds sold		9,725		12,703

Total cash and cash equivalents		25,931		28,655

Securities held-to-maturity (fair value of $3,425 in 2016 and $2,649 in 2015)		3,304		2,519
Securities available-for-sale, at fair value		39,922		35,996
Restricted stock, at cost		1,373		1,313
Loans, net of allowance for loan losses of $4,953 in 2016 and $4,683 in 2015		457,136		430,445
Loans held for sale		3,048		1,964
Premises and equipment, net		9,991		9,751
Software, net		189		256
Interest receivable		1,307		1,248
Cash value - bank owned life insurance		12,586		9,781
Other real estate owned		2,370		1,965
Income taxes receivable		1,226		1,096
Deferred tax asset		1,082		1,399
Other assets		487		755

Total assets	$	559,952	$	527,143

Liabilities and Stockholders’ Equity
Deposits
Noninterest bearing demand	$	102,547	$	91,325
NOW, money market and savings		240,885		232,864
Time		163,965		143,421

Total deposits		507,397		467,610
Capital notes		—		10,000
Interest payable		77		61
Other liabilities		1,463		1,276

Total liabilities	$	508,937	$	478,947


Stockholders’ equity
Preferred stock; authorized 1,000,000 shares; none issued and outstanding as of September 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 September 30, 2016 and December 31, 2015		9,370		9,370
Additional paid-in-capital		31,495		31,495
Retained earnings		10,126		7,920
Accumulated other comprehensive income (loss)		24		(589	)

Total stockholders’ equity	$	51,015	$	48,196

Total liabilities and stockholders’ equity	$	559,952	$	527,143

Bank of the James Financial Group, Inc. and Subsidiaries

Consolidated Statements of Income

(dollar amounts in thousands, except per share amounts)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2016		2015		2016		2015
Interest Income
Loans	$	5,227	$	4,968	$	15,212	$	14,354
Securities
US Government and agency obligations		104		144		368		427
Mortgage backed securities		46		30		166		58
Municipals		73		39		163		107
Dividends		6		6		39		40
Other (Corporates)		4		2		13		5
Interest bearing deposits		13		3		28		9
Federal Funds sold		4		3		16		12

Total interest income		5,477		5,195		16,005		15,012

Interest Expense
Deposits
NOW, money market savings		153		130		428		375
Time Deposits		390		394		1,132		1,065
Federal Funds purchased		—		1		4		2
FHLB borrowings		—		—		—		28
Brokered time deposits		67		29		136		81
Capital notes 6% due 4/1/2017		—		150		8		450

Total interest expense		610		704		1,708		2,001

Net interest income		4,867		4,491		14,297		13,011
Provision for loan losses		145		120		595		277

Net interest income after provision for loan losses		4,722		4,371		13,702		12,734

Noninterest income
Mortgage fee income		593		623		1,765		1,759
Service charges, fees and commissions		373		397		1,107		1,063
Increase in cash value of life insurance		75		68		205		204
Other		22		100		82		154
Gain on sale of available-for-sale securities		218		10		446		43

Total noninterest income		1,281		1,198		3,605		3,223


Noninterest expenses
Salaries and employee benefits		2,318		2,135		6,717		6,346
Occupancy		333		302		970		903
Equipment		316		360		949		963
Supplies		119		100		346		304
Professional, data processing, and other outside expense		696		591		2,059		1,637
Marketing		178		97		498		321
Credit expense		110		94		299		230
Other real estate expenses		52		63		57		100
FDIC insurance expense		92		87		275		240
Other		235		289		723		689

Total noninterest expenses		4,449		4,118		12,893		11,733

Income before income taxes		1,554		1,451		4,414		4,224
Income tax expense		499		468		1,421		1,357

Net Income	$	1,055	$	983	$	2,993	$	2,867

Weighted average shares outstanding - basic and diluted		4,378,436		3,371,616		4,378,436		3,371,616

Net income per common share - basic and diluted	$	0.24	$	0.29	$	0.68	$	0.85

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Date: October 21, 2016

BANK OF THE JAMES FINANCIAL GROUP, INC.

/s/ J. Todd Scruggs

J. Todd Scruggs

Secretary-Treasurer