Bank of the James Financial (BOTJ) 8-K Bank of the James Financial Group, Inc. Announces Results

Exhibit 99.1

Contact: J. Todd Scruggs, Executive Vice President and CFO

(434) 846-2000 tscruggs@bankofthejames.com

For Immediate Release

Bank of the James Financial Group, Inc. Announces Results

For 3rd Quarter 2004

Lynchburg Va., October 21, 2004 ............Bank of the James Financial Group, Inc. (OTCBB:BOJF) (quarterly consolidated results unaudited) reported today total net income after tax of $201,000 or $0.19 per basic share ($0.18 diluted) for the quarter ended September 30, 2004 and $981,000 or $0.96 per basic share ($0.94 diluted) year-to-date compared to net income of $383,000 or $0.41 per basic share ($0.39 diluted) and $1,102,000 or $1.18 per basic share ($1.14 diluted) for the respective periods a year ago. Earnings per share amounts for 2004 reflect the 10% stock dividend paid by the company during January, 2004.

The decline in net income in the third quarter 2004 as compared to third quarter 2003 was due primarily to a loan loss provision of $503,000 in the third quarter 2004 as compared with a loan loss provision of $142,000 in the third quarter 2003. In the course of calculating loan impairment in accordance with FASB 114 for the third quarter of 2004, management determined that certain loans should be downgraded because of deterioration in their credit quality. Of the $503,000 provision made in the third quarter 2004, $199,000 resulted from the reclassification of these loans due to management’s belief that these impaired loans are likely to result in a loss. Although the Bank currently has loans in excess of $900,000 classified as non-performing, management believes the impairment on these loans will be immaterial because the potential losses associated with these loans were charged off against the loan loss reserve in the third quarter. Management does not believe that the amount of non performing loans will increase at an unacceptable rate.

Despite the aforementioned charge associated with the loan loss provision in the third quarter, several positive trends for the quarter and year-to-date were identified. Non-interest income, in large part due to the increase in fees from mortgage origination volume, improved both in the third quarter 2004 and year-to-date 2004. Net interest income for the quarter ended September 30, 2004 was $1,766,000 as compared to net interest income of $1,415,000 in the same quarter of 2003, an increase of 24.8%. The net interest margin, although decreasing to 4.49% in the third quarter of 2004 as compared to 4.69% in the same period a year ago, showed an improvement of 8 basis points from the second quarter 2004. The improvement from the second quarter of 2004 to the third quarter 2004 is attributable to the recent increases in short term rates by the FOMC and the subsequent positive effects on interest income as a result of the Bank’s heavy concentration of adjustable rate loans in the portfolio.

Total assets as of September 30, 2004 were $169,905,000 compared to $145,011,000 at the end of 2003, an increase of $24,894,000 or 17.2%. The increase is attributed to deposit growth and specifically the opening of the Forest, VA branch, as well as the increasing interest rate environment. Deposits grew from $133,486,000 at the period ended December 31, 2003 to $153,509,000 at the end of the third quarter, 2004, for an increase of 15.0%

Loans, net of unearned income and loan loss provision, increased from $114,604,000 as of December 31, 2003 to $132,416,000 as of September 30, 2004, an increase of 15.5%. This

increase can be attributed to the Bank’s increased presence in the market and the Bank’s reputation for service, both of which have resulted in additional opportunities for the Bank to participate in quality credit requests. The loan loss reserve of $1,454,000 represented 1.09% of total loans at the end of the third quarter 2004 as compared with $1,543,000 or 1.23% at the end of the second quarter 2004. The decrease in the loan loss reserve is a result of management’s decision to charge off $631,000 in non-performing loans. Management deems this provision to be adequate.

Bank of the James, a wholly owned subsidiary of Bank of the James Financial Group, Inc., currently operates four full service locations as well as a mortgage division in the Lynchburg, Virginia area. The Bank has received regulatory approval to open an additional branch location at 828 Main Street in the downtown area of the City of Lynchburg in the fourth quarter of 2004. Bank of the James Financial Group, Inc. common stock is quoted on the Over The Counter Bulletin Board under the symbol “BOJF” (some web sites require BOJF.OB to quote).

Selected financial highlights are shown below.

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Cautionary Statement Regarding Forward-Looking Statements

This press release report 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. The Bank 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 the Bank. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in Bank of the James’ filings with the Federal Reserve Board.

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Bank of the James Financial Group, Inc.

(000’s) except ratios and percent data

audited

Selected Data:	Three months ending Sept 30, 2004		Three months ending Sept 30, 2003		Change			Year to date Sept 30, 2004		Year to date Sept 30, 2003		Change
Interest income	$	2,407	$	1,953		23.25	%	$	6,795	$	5,698		19.25	%
Interest expense		641		538		19.14	%		1,817		1,708		6.38	%
Net Interest income		1,766		1,415		24.81	%		4,978		3,990		24.76	%
Provision for loan losses		503		142		254.23	%		634		434		46.08	%
Noninterest income		528		425		24.24	%		1,306		1,301		0.38	%
Noninterest expense		1,486		1,117		33.03	%		4,164		3,177		31.07	%
Income taxes		104		198		-47.47	%		505		578		-12.63	%
Net income		201		383		-47.52	%		981		1,102		-10.98	%
Weighted Average Shares Outstanding		1,031,218		935,630		10.22	%		1,021,155		935,630		9.14	%
Basic net income per share *	$	0.19	$	0.41	$	(0.22	)	$	0.96	$	1.18	$	(0.22	)
Fully diluted net income per share	$	0.18	$	0.39	$	(0.21	)	$	0.94	$	1.14	$	(0.20	)
Balance Sheet at period end:	Sept 30, 2004		Dec 31, 2003		Change			Sept 30, 2003		Dec 31, 2002		Change
Loans, net	$	132,416	$	114,604		15.54	%	$	107,830	$	85,750		25.75	%
Total securities		23,716		14,956		58.57	%		10,427		16,478		-36.72	%
Total deposits		153,509		133,486		15.00	%		122,495		103,509		18.34	%
Stockholders’ equity		12,321		11,309		8.95	%		11,009		9,973		10.39	%
Total assets		169,905		145,011		17.17	%		133,741		114,071		17.24	%
Shares Outstanding		1,031,632		935,630		96,002			935,630		935,630		—
Book value per share		11.94		12.09		(0.14	)		11.77		10.66	$	1.11
Daily averages:	Three months ending Sept 30, 2004		Three months ending Sept 30, 2003		Change			Year to date Sept 30, 2004		Year to date Sept 30, 2003		Change
Loans, net	$	128,752	$	104,672		23.01	%	$	122,360	$	97,699		25.24	%
Total securities		23,216		9,579		142.36	%		19,265		11,140		72.94	%
Total deposits		148,526		115,926		28.12	%		142,071		107,435		32.24	%
Stockholders’ equity		12,336		10,909		13.08	%		11,932		10,555		13.05	%
Interest earning assets		156,170		119,771		30.39	%		148,263		112,472		31.82	%
Interest bearing liabilities		131,085		99,583		31.63	%		126,576		93,656		35.15	%
Total Assets		164,137		127,098		29.14	%		156,329		119,124		31.23	%

Financial Ratios:	Three months ending Sept 30, 2004			Three months ending Sept 30, 2003			Change		Year to date Sept 30, 2004			Year to date Sept 30, 2003			Change
Return on average assets		0.49	%		1.20	%	(0.71	)		0.84	%		1.24	%	(0.40	)
Return on average equity		6.46	%		13.93	%	(7.46	)		10.99	%		13.96	%	(2.97	)
Net Interest Margin		4.49	%		4.69	%	(0.20	)		4.49	%		4.74	%	(0.25	)
Efficiency ratio		64.78	%		60.71	%	4.07			66.26	%		60.05	%	6.22
Average Equity to average assets		7.52	%		8.58	%	(1.07	)		7.63	%		8.86	%	(1.23	)
Allowance for loan losses:	Three months ending Sept 30, 2004			Three months ending Sept 30, 2003			Change		Year to date Sept 30, 2004			Year to date Sept 30, 2003			Change
Beginning balance	$	1,543		$	1,277		20.83	%	$	1,451		$	1,081		34.23	%
Provision for losses		503			142		254.23	%		634			434		46.08	%
Charge-offs		(631	)		(82	)	669.51	%		(725	)		(202	)	258.91	%
Recoveries		39			39		0.00	%		94			63		49.21	%
Ending balance		1,454			1,376		5.67	%		1,454			1,376		5.67	%
Nonperforming assets:	Sept 30, 2004			Dec 31, 2003			Change		Sept 30, 2003			Dec 31, 2002			Change
Nonaccrual loans		902			100		802.00	%		100			42		138.10	%
Restructured loans		none			none		—			none			none		—
Total nonperforming loans		902			100		802.00	%		100			42		138.10	%
Other real estate owned		335			none		—			none			none		—
Total nonperforming assets		1,237			100		1137.00	%		100			42		138.10	%
Asset quality ratios:	Sept 30, 2004			Dec 31, 2003			Change		Sept 30, 2003			Dec 31, 2002			Change
Nonperforming loans to total loans		0.67	%		0.09	%	0.59			0.09	%		0.05	%	0.04
Allowance for loan losses to total loans		1.09	%		1.25	%	(0.16	)		1.26	%		1.24	%	0.02
Allowance for loan losses to nonperforming loans		161.20	%		1451.00	%	(1,289.80	)		1376.00	%		2573.81	%	(1,197.81	)

* Basic EPS is calculated using the average shares outstanding for the period. Average shares outstanding increased in 2004 due to the effects of the 10% stock dividend paid on 1/27/04.