Virginia Financial Group, Inc. Announces Record Earnings for Fourth
Quarter and Year 2004 CULPEPER, Va., Jan. 21 /PRNewswire-FirstCall/
-- Virginia Financial Group, Inc. (NASDAQ:VFGI) today reported
record earnings of $4.1 million, an increase of 32.3% over 2003
earnings of $3.1 million. For the year ended December 31, 2004, VFG
also achieved record earnings of $15.2 million, an increase of
12.7% over 2003 earnings of $13.5 million. Diluted earnings per
share for the fourth quarter and year 2004 amounted to $.56 and
$2.11 per share, compared to $.43 and $1.88 per share in 2003.
Earnings for the three- month period produced a return on average
assets of 1.11% and a return on average equity of 12.84%. Earnings
for the twelve-month period produced a return on average assets of
1.07% and a return on average equity of 12.40%. "We are pleased to
report record earnings for the year," said President and Chief
Executive Officer O.R. Barham, Jr. "We had many accomplishments in
2004, both financial and non-financial. We have worked hard to
assimilate our family of banks and trust company to maximize the
customer experience, and position ourselves for future growth. Our
earnings growth was achieved in spite of a significant reduction in
contribution from our mortgage operations, which experienced
reductions in volume consistent with the industry. Non- financial
accomplishments included adding management strength, improving our
overall effectiveness and efficiency, and enhancing our overall
control environment. We are poised to accelerate our growth
initiatives in 2005 and look to maintaining our earnings momentum."
Review of Financial Performance Revenue Growth Revenues for the
fourth quarter of 2004 were $16.8 million, an increase of $1.1
million or 7.1% over $15.6 million in 2003. The largest component,
net interest income, amounted to $13.3 million for the fourth
quarter, up $1.1 million or 9.4% compared with $12.1 million for
the same quarter in 2003. Growth in average earning assets and an
improving net interest margin were primary contributors to this
growth. For the year ended December 31, 2004, net interest income
was $51.5 million, an increase of $7.9 million or 18.0% from $43.6
million for the same period in 2003. The net interest margin for
the fourth quarter of 2004 was 4.09%, compared to 4.02% for the
same quarter in 2003. The net interest margin for the twelve-month
period ended December 31, 2004 was 4.09%, compared to 4.16% for the
same period in 2003. Noninterest income was $3.5 million for the
fourth quarter of 2004, equal to the $3.5 million realized for the
same period in 2003. For the year ended December 31, 2004,
noninterest income was $14.5 million, a decrease of $683 thousand
or 4.5% from $15.2 million realized in 2003. Mortgage banking
revenue continued to contract consistent with refinance activity,
with revenues of $448 thousand for the quarter, compared to $582
thousand for the same period in 2003 and $534 thousand for the
third quarter of 2004. Other sources of noninterest income
experienced growth for the quarter, with retail banking services up
$283 thousand or 17.4% and fees from trust and brokerage services
up $46 thousand or 6.0%. Overhead and Efficiency Noninterest
expense was $10.2 million for the quarter, a decrease of $535
thousand or 5.0% from the $10.8 million for the fourth quarter of
2003. For the year ended December 31, 2004, noninterest expense
increased to $41.7 million, an increase of $2.7 million or 7.0%
compared to $39.0 million for the year 2003. Included in the 2003
results are non-operating expenses of $476 thousand for the fourth
quarter and $708 thousand for the year associated with the
integration of eight First Virginia Branches purchased in September
2003. Excluding these nonrecurring costs, fourth quarter overhead
was essentially flat for 2004 vs. 2003, and annual overhead
increased 8.9%. The annual increase can be attributed to growth in
expenses and amortization of intangibles associated with a full
year of operations for loan production offices in Charlottesville
and Lynchburg, and the eight branches purchased from First
Virginia. These expenses were offset somewhat by decreases in costs
associated with mortgage related commissions, medical benefit
claims experience, and other incentive related accruals. VFG's
efficiency ratio improved to 59.39% for the fourth quarter of 2004,
compared to 64.09% for the same quarter in 2003 and 60.25% in the
third quarter of 2004. For the year ended December 31, 2004, VFG's
efficiency ratio also improved to 61.45%, compared to 63.64% for
the same period in 2003, adjusted for the aforementioned
non-recurring expenses incurred in 2003. Asset Quality VFG's credit
quality continues to be sound and compares favorably with its peer
group. Nonperforming assets were $4.0 million at December 31, 2004,
representing a ratio of non-performing assets to total assets of
.28%, and a ratio to period-end loans and other real estate owned
of .38%, compared to .53% and .80% for year end 2003. Net
charge-offs as a percentage of average loans receivable amounted to
.02% for the quarter, compared to .03% on a linked-quarter
comparison and .03% for the fourth quarter in 2003. Net charge-offs
were .06% of average loans for the year ended December 31, 2004,
compared to .09% for the year ended December 31, 2003. The
allowance for loan losses represented 1.10% of loans receivable at
December 31, 2004, compared to 1.06% at December 31, 2003.
Increases noted in the provision for loan losses for the quarter
and year was consistent with the level of loan growth and change in
loan mix experienced in 2004. Balance Sheet VFG's loan portfolio
increased $139.9 million or 15.2% to $1.063 billion at December 31,
2004, compared to $923.1 million as of the same date in 2003. For
the fourth quarter of 2004, VFG's loan portfolio grew $28.0 million
or 2.7%. The growth in loans for the quarter was fairly distributed
between our Culpeper, Fredericksburg, Charlottesville and Lynchburg
lending units. Annual loans growth was funded with deposit growth
of $58.8 million, long term borrowings of $24.9 million, and
proceeds from maturities in its securities portfolio of $64.1
million. VFG ended the year with assets of $1.449 billion, compared
to $1.387 billion at the same date last year, representing growth
of $62 million or 4.4%. Virginia Commonwealth Trust Company ended
the year with fiduciary and brokerage assets of $515 million, up
$27.0 million or 7.2% from 2003. VFG is the holding company for
Planters Bank & Trust Company of Virginia -- in Staunton;
Second Bank & Trust -- in Culpeper; Virginia Heartland Bank --
in Fredericksburg and Virginia Commonwealth Trust Company -- in
Culpeper. The Company is a traditional community banking provider,
offering a full range of business and consumer banking services
including trust and asset management service via its trust company
affiliate. The organization maintains a network of thirty-seven
branches serving Central and Southwest Virginia. It also maintains
five trust and investment service offices in its markets, and loan
production offices located in Charlottesville and Lynchburg. This
press release contains forward-looking statements as defined by
federal securities laws. These statements may address certain
results that are expected or anticipated to occur or otherwise
state the company's predictions for the future. These particular
forward-looking statements and all other statements that are not
historical facts are subject to a number of risks and
uncertainties, and actual results may differ materially. Such
factors include but are not limited to: general economic
conditions, changes in the lending environment, significant
fluctuations in interest rates that could reduce net interest
margin; difficulties in executing integration plans: reduction of
fee income from existing products due to market conditions; and the
amount of growth in the company's general and administrative
expenses. Consequently, these cautionary statements qualify all
forward-looking statements made herein. Please refer to VFG's
filings with the Securities and Exchange Commission for additional
information, which may be accessed at http://www.vfgi.net/. This
press release refers to the efficiency ratio, which is computed by
dividing non-interest expense excluding expenses on other real
estate owned by the sum of net interest income on a tax equivalent
basis and non-interest income. This is a non-GAAP financial measure
that we believe provides investors with important information
regarding our operational efficiency. This press release also
contains financial information that excludes non- operating charges
incurred in 2003 to arrive at what management considers being core
operating results. Such information is not in accordance with
generally accepted accounting principles (GAAP) and should not be
construed as such. Management believes such financial information
is meaningful to the reader in understanding operating performance,
but cautions that such information not be viewed as a substitute
for GAAP. VFG, in referring to its net income, is referring to
income under generally accepted accounting principles, or "GAAP."
QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc.
(NASDAQ:VFGI) (Dollars in thousands, except per share data) Percent
For the Three Months Ended Increase 12/31/2004 12/31/2003
(Decrease) INCOME STATEMENT Interest income -- taxable equivalent
$18,972 $17,606 7.76% Interest expense 5,272 4,980 5.86% Net
interest income -- taxable equivalent 13,700 12,626 8.51% Less:
taxable equivalent adjustment 434 502 -13.55% Net interest income
13,266 12,124 9.42% Provision for loan and lease losses 581 322
80.43% Net interest income after provision for loan and lease
losses 12,685 11,802 7.48% Noninterest income 3,496 3,522 -0.74%
Noninterest expense 10,220 10,755 -4.97% Provision for income taxes
1,889 1,492 26.61% Net income $4,072 $3,077 32.34% PER SHARE DATA
Basic earnings $0.57 $0.43 32.56% Diluted earnings $0.56 $0.43
30.23% Shares outstanding 7,161,499 7,152,885 Weighted average
shares -- Basic 7,160,782 7,150,864 Diluted 7,208,699 7,191,748
Shares repurchased - - Average price of shares repurchased $- $-
Dividends paid on common shares $0.20 $0.19 PERFORMANCE RATIOS
Return on average assets 1.11% 0.89% 24.72% Return on average
equity 12.84% 10.36% 23.94% Return on average realized equity(A)
13.13% 10.69% 22.83% Net yield on earning assets (taxable
equivalent) 4.09% 4.02% 1.74% Efficiency (taxable equivalent)(B)
59.39% 64.09% -7.33% ASSET QUALITY Allowance for loan losses
Beginning of period $11,300 $9,658 Provision for loan losses 581
322 Charge offs (264) (277) Recoveries 89 40 End of period $11,706
$9,743 Allowance for loan losses to total loans Net charge-offs
(recoveries) $175 $237 Net charge-offs to average loans outstanding
0.02% 0.03% NOTES: Applicable ratios are annualized (A) Excludes
the effect on average stockholders' equity of unrealized gains
(losses) that result from changes in market values of securities
and other comprehensive pension expense. (B) Excludes foreclosed
property expense for all periods. QUARTERLY PERFORMANCE SUMMARY
Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands,
except per share data) For the Twelve Months Percent Ended Increase
12/31/2004 12/31/2003 (Decrease) INCOME STATEMENT Interest income
-- taxable equivalent $72,889 $65,168 11.85% Interest expense
19,628 19,357 1.40% Net interest income -- taxable equivalent
53,261 45,811 16.26% Less: taxable equivalent adjustment 1,780
2,200 -19.09% Net interest income 51,481 43,611 18.05% Provision
for loan and lease losses 2,534 1,290 96.43% Net interest income
after provision for loan and lease losses 48,947 42,321 15.66%
Noninterest income 14,544 15,227 -4.49% Noninterest expense 41,723
39,007 6.96% Provision for income taxes 6,565 5,049 30.03% Net
income $15,203 $13,492 12.68% PER SHARE DATA Basic earnings $2.12
$1.89 12.17% Diluted earnings $2.11 $1.88 12.23% Shares outstanding
7,161,499 7,152,885 Weighted average shares -- Basic 7,158,574
7,155,814 Diluted 7,203,540 7,192,484 Shares repurchased - 28,507
Average price of shares repurchased $- $28.68 Dividends paid on
common shares $0.78 $0.76 PERFORMANCE RATIOS Return on average
assets 1.07% 1.13% -5.31% Return on average equity 12.40% 11.47%
8.11% Return on average realized equity(A) 12.70% 12.12% 4.79% Net
yield on earning assets (taxable equivalent) 4.09% 4.16% -1.68%
Efficiency (taxable equivalent)(B) 61.44% 63.28% -2.91% ASSET
QUALITY Non-performing assets: Non-accrual loans $2,552 $2,677
Loans 90+ days past due and still accruing - 25 Other real estate
owned 5 136 Troubled debt restructurings 1,451 4,525 Total
non-performing assets $4,008 $7,363 to total assets: 0.28% 0.53% to
total loans plus OREO: 0.38% 0.80% Allowance for loan losses to
total loans Net charge-offs (recoveries) $571 $727 Net charge-offs
to average loans outstanding 0.06% 0.09% NOTES: Applicable ratios
are annualized (A) Excludes the effect on average stockholders'
equity of unrealized gains (losses) that result from changes in
market values of securities and other comprehensive pension
expense. (B) Excludes foreclosed property expense for all periods.
QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc.
(NASDAQ:VFGI) (Dollars in thousands, except per share data) Percent
For the Twelve Months Ended Increase 12/31/2004 12/31/2003
(Decrease) SELECTED BALANCE SHEET DATA End of period balances
Securities available for sale $286,310 $359,124 -20.28% Securities
held to maturity 5,848 5,174 13.03% Total securities 292,158
364,298 -19.80% Real estate -- construction 116,888 94,372 23.86%
Real estate -- 1-4 family residential 315,736 303,408 4.06% Real
estate -- commercial and multifamily 496,562 394,700 25.81%
Commercial, financial and agricultural 85,324 76,075 12.16%
Consumer loans 44,625 50,163 -11.04% All other loans 3,423 3,972
-13.82% Total loans 1,062,558 922,690 15.16% Allowance for loan
losses (11,706) (9,743) 20.15% Other earning assets 1,794 1,459
22.96% Total earning assets 1,356,510 1,288,447 5.28% Total assets
1,449,000 1,387,211 4.45% Non-interest bearing deposits 238,497
216,560 10.13% Money market & interest checking 379,793 373,225
1.76% Savings 139,018 136,757 1.65% CD's and other time deposits
499,618 484,232 3.18% Total deposits 1,256,926 1,210,774 3.81%
Short-term borrowed funds 21,970 39,681 -44.63% Trust preferred
capital notes 20,000 - 100.00% Federal Home Loan Bank advances
14,060 9,140 53.83% Total interest-bearing liabilities 1,074,459
1,043,035 3.01% Total stockholders' equity $127,090 $119,830 6.06%
Average balances Total assets $1,422,715 $1,196,873 18.87% Total
stockholders' equity $122,650 $117,580 4.31% Average Balances For
the Three Months Percent Ended Increase 12/31/2004 12/31/2003
(Decrease) Total assets $ 1,454,842 $1,372,613 5.99% Total
stockholders' equity $126,157 $114,133 10.54% QUARTERLY PERFORMANCE
SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in
thousands) For the Three For the Twelve Months Ended Months Ended
12/31/04 12/31/03 12/31/04 12/31/03 Interest Income Interest and
fees on loans $15,676 $13,609 $58,939 $49,990 Interest on deposits
in other banks 1 28 4 59 Interest on investment securities: Taxable
61 103 340 440 Interest and dividends on securities available for
sale: Taxable 1,850 2,455 8,430 8,411 Nontaxable 696 791 2,854
3,522 Dividends 134 99 390 358 Interest income on federal funds
sold 120 19 152 188 Total Interest Income 18,538 17,104 71,109
62,968 Interest Expense Interest on deposits 4,766 4,753 17,859
18,434 Interest on trust preferred 241 - 683 - Interest on Federal
Home Loan Bank advances 186 161 705 694 Interest on federal funds
repurchased and securities sold under agreements to repurchase 77
30 238 189 Interest on other short-term borrowings 2 36 143 40
Total Interest Expense 5,272 4,980 19,628 19,357 Net Interest
Income 13,266 12,124 51,481 43,611 Provision for loan losses 581
322 2,534 1,290 Net Interest Income after Provision for Loan Losses
12,685 11,802 48,947 42,321 Other Income Retail banking fees 1,912
1,629 7,522 5,772 Fees from fiduciary activities 668 640 2,804
2,802 Brokerage services 149 131 663 582 Other operating income 330
432 1,103 1,316 Gains (losses) on securities available for sale 3 6
3 441 Gains (losses) on other real estate owned (20) 6 (20) 26
Gains (losses) on sale of fixed assets 6 96 6 96 Fees on mortgage
loans sold 448 582 2,463 4,192 Total Other Income 3,496 3,522
14,544 15,227 Other Expense Compensation and employee benefits
5,747 5,609 23,348 21,883 Net occupancy expense 648 639 2,721 2,318
Supplies and equipment 1,109 1,389 4,333 4,229
Amortization-intangible assets 174 173 694 291 Computer services
373 244 1,464 1,146 Professional fees 209 386 862 961 Other
operating expenses 1,960 2,315 8,301 8,179 Total Other Expense
10,220 10,755 41,723 39,007 Income Before Income Tax Expense 5,961
4,569 21,768 18,541 Income tax expense 1,889 1,492 6,565 5,049 Net
Income $4,072 $3,077 $15,203 $13,492 VIRGINIA FINANCIAL GROUP INC.
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED
DECEMBER, 2004 AND 2003 Three months Ending DECEMBER 31, 2004
Average Interest Average Dollars in thousands Balance Inc/Exp Rates
Assets Loans receivable, net $1,038,215 $15,731 6.03% Investment
securities Taxable 205,682 2,036 3.94% Tax exempt 63,703 1,084
6.77% Total Investments 269,385 3,120 4.61% FHLB int bearing 289 1
0.85% Federal funds sold 25,984 120 1.83% 295,658 3,241 4.36% Total
Earning Assets 1,333,873 18,972 5.66% Tax Eql. Non-Earning Assets
120,969 Total Assets 1,454,842 Liabilities and Stockholders' Equity
Time and savings deposits Interest-bearing transaction accounts
$198,527 $196 0.39% Money market deposit accounts 183,725 454 0.98%
Passbook savings accounts 141,549 231 0.65% Certificates of deposit
>$100k 126,407 1,079 3.40% Certificates of deposit $100k 121,135
4,079 3.37% Certificates of deposit
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