Virginia Financial Group, Inc. Announces 16.2% Growth in First
Quarter Earnings CULPEPER, Va., April 18 /PRNewswire-FirstCall/ --
Virginia Financial Group, Inc. (NASDAQ:VFGI) today reported first
quarter 2005 earnings of $4.0 million or $.56 per diluted share, an
increase of 16.2% compared to earnings of $3.5 million or $.48 per
diluted share for the first quarter of 2004. Diluted earnings per
share growth represented an increase of 16.7% compared to first
quarter 2004 results. VFG's earnings for the first quarter of 2005
produced an annualized return on average assets of 1.13% and an
annualized return on average equity of 12.74%, compared to prior
year ratios of .99% and 11.51%, respectively. "We are pleased with
our financial results for the first quarter of 2005," stated O.R.
Barham, Jr. President and Chief Executive Officer of VFG.
"Highlights included continuing strong loan growth, improving
margins, a highly successful branch divestiture and solid expense
control. While our mortgage and asset management related revenue
components were down for the quarter, we are encouraged by business
activity in these revenue streams late in the quarter, which should
result in improved growth in the second quarter. REVENUE GROWTH
Total tax equivalent revenues for the first quarter of 2005 were
$17.3 million, an increase of $876 thousand or 5.3% over the $15.9
million in 2004. The largest component, net interest income,
amounted to $13.6 million for the first quarter, up $639 thousand
or 4.9% compared with $13.0 million for the same quarter in 2004.
Continuing growth in average earning assets and improvement in net
interest margin were contributors to this growth. Average earning
assets grew to $1.33 billion, an increase of $54.6 million or 4.3%
from March 2004. The net interest margin for the first quarter of
2005 was 4.15%, an improvement of six basis points when compared to
4.09% for the first quarter of 2004. Total noninterest income was
$3.7 million for the first quarter of 2005, an increase of $237
thousand or 6.9% compared to $3.5 million for the first quarter of
2004. Included in the 2005 results is a net gain of $408 thousand
in connection with the sales of two branches located in Tazewell
County. Retail banking fees increased $116 thousand or 7.5% to $1.7
million, compared to $1.5 million in the first quarter of 2004. VFG
experienced lower revenues from mortgage operations, with mortgage
banking fees amounting to $475, a decrease of $170 thousand or
26.4%, as compared to $645 thousand for the first quarter of 2004.
While revenues were down, closings and mortgage pipelines showed
solid growth. Mortgage loans available for sale increased to $9.7
million, an increase of $4.0 million or 70% from December 31, 2004.
In addition, the pipeline of mortgage loans in process increased
$37.1 million or 52.4% from December 31, 2004. Trust and brokerage
revenues were down $69 thousand or 7.1% compared to the first
quarter of 2004, with brokerage and estate related fees showing
declines for the quarter. NONINTEREST EXPENSE AND EFFICIENCY
Noninterest expense for the first quarter of 2005 amounted to $10.5
million, an increase of $99 thousand or 1.0% compared to $10.4
million for the same period in 2004. Compensation and benefits
increased $187 thousand or 3.2%, but was partially offset by a
decrease in professional fees of $71 thousand or 35.3%. Included in
noninterest expense for the first quarter of 2005 were $120
thousand in non-recurring expenses associated with severance
benefits and conversion costs associated with Virginia Commonwealth
Trust Company. VFG's efficiency ratio was 60.8% for the quarter,
compared to 63.5% for the same quarter in 2004. BALANCE SHEET
GROWTH VFG continues to see improvement in its asset mix, with loan
growth of $120.5 million or 12.5% from $965.2 million at March 31,
2004 to $1.09 billion at March 31, 2005, and growth of $24.4
million or 2.3% for the first quarter of 2005 from $1.06 billion at
December 31, 2004. Adjusting for the sale of $8.8 million of loans
in connection with the Tazewell branch sale, first quarter loan
growth would have been $33.2 million for an annualized growth rate
of 12.5%. The major component of loan growth during the past twelve
months occurred in the non-residential real estate portfolio, which
grew $96.0 million or 22.8% from $421.9 million at March 31, 2004
to $517.9 million at March 31, 2005. Construction lending
represented the next largest percentage increase, with growth of
$22.4 million or 21.4% from $104.8 million to $127.2 million. For
the quarter ended March 31, 2005, real estate construction loans
increased $10.4 million or 8.9%, residential real estate loans
increased $16.2 million or 5.5%, nonresidential real estate loans
increased $10.2 million or 2.0% and commercial loans increased $2.1
million or 2.5%. Deposits grew $26.8 million or 2.2% from $1.21
billion at March 31, 2004 to $1.24 billion at March 31, 2005, and
decreased $20.7 million or 1.6% for the first quarter of 2005.
Adjusting for the sale of $22.0 million of deposits in connection
with the Tazewell branch sale, first quarter deposits were
essentially flat with levels at December 31, 2004. Total asset
growth was $42.5 million or 3.0% from $1.41 billion at March 31,
2004, to $1.45 billion at March 31, 2005, and essentially flat with
$1.45 billion at December 31, 2004. ASSET QUALITY Asset quality
remains strong, with VFG's ratio of non-performing assets as a
percentage of total assets amounting to .15% as of March 31, 2005,
compared to .49% at March 31, 2004 and .28% at December 31, 2004.
Net charge-offs as a percentage of average loans receivable
amounted to .01% for the quarter ended March 31, 2005, compared to
.01% for the quarter ended March 31, 2004. At March 31, 2005, the
allowance for loan losses as a percentage of non- performing assets
was 556.2%, while the allowance as a percentage of total loans
amounted to 1.12%. The Company decreased its provision for loan
losses by $135 thousand or 19.8%, from $681 thousand for the three
months ended March 31, 2004 to $546 thousand for the three months
ended March 31, 2005, consistent with a slightly decreased rate of
growth and general improvement in asset quality during the period.
ABOUT VFG 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 organization
maintains a network of thirty-five branches serving Central and
Southwest Virginia. It also has loan production offices located in
Charlottesville and Lynchburg. SUPERVISORY AGREEMENT RELATED TO
BANK SECRECY ACT (BSA) COMPLIANCE As previously reported, VFG
continues to operate under a supervisory agreement with the Federal
Reserve Bank related to improving controls over the monitoring of
cash transactions. The Federal Reserve is currently conducting its
regularly scheduled safety and soundness examination, which
includes a follow-up examination of BSA compliance. Management
anticipates a resolution to this matter during the second quarter.
NON-GAAP FINANCIAL MEASURES This report refers to the efficiency
ratio, which is computed by dividing non-interest expense 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. 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."
FORWARD LOOKING STATEMENTS In addition to historical information,
this press release contains forward-looking statements. The
forward-looking statements are subject to certain risks and
uncertainties, which could cause actual results to differ
materially from historical results, or those anticipated. When we
use words such as "believes," "expects," "anticipates" or similar
expressions, we are making forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date
thereof. VFG wishes to caution the reader that factors, such as
those listed below, in some cases have affected and could affect
VFG's actual results, causing actual results to differ materially
from those in any forward looking statement. These factors include:
(i) expected cost savings from VFG's acquisitions and dispositions,
(ii) competitive pressure in the banking industry or in VFG's
markets may increase significantly, (iii) changes in the interest
rate environment may reduce margins, (iv) general economic
conditions, either nationally or regionally, may be less favorable
than expected, resulting in, among other things, credit quality
deterioration, (v) changes may occur in banking legislation and
regulation, or VFG may not be released from its supervisory
agreement with the Federal Reserve related to Bank Secrecy
Compliance within anticipated timeframes, (vi) changes may occur in
general business conditions and (vii) changes may occur in the
securities markets. Please refer to VFG's filings with the
Securities and Exchange Commission for additional information,
which may be accessed at http://www.vfgi.net/. QUARTERLY
PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI)
(Dollars in thousands, except per share data) Percent For the Three
Months Ended Increase 03/31/2005 03/31/2004 (Decrease) INCOME
STATEMENT Interest income - taxable equivalent $18,991 $17,842
6.44% Interest expense 5,398 4,888 10.43% Net interest income -
taxable equivalent 13,593 12,954 4.93% Less: taxable equivalent
adjustment 407 462 -11.90% Net interest income 13,186 12,492 5.56%
Provision for loan and lease losses 546 681 -19.82% Net interest
income after provision for loan and lease losses 12,640 11,811
7.02% Noninterest income 3,694 3,457 6.86% Noninterest expense
10,534 10,435 0.95% Provision for income taxes 1,787 1,378 29.68%
Net income $4,013 $3,455 16.15% PER SHARE DATA Basic earnings $0.56
$0.48 16.67% Diluted earnings $0.56 $0.48 16.67% Shares outstanding
7,163,735 7,155,519 Weighted average shares - Basic 7,163,198
7,153,348 Diluted 7,211,444 7,202,328 Dividends paid on common
shares $0.20 $0.19 PERFORMANCE RATIOS Return on average assets
1.13% 0.99% 14.14% Return on average equity 12.74% 11.51% 10.69%
Return on average realized equity (A) 12.88% 11.98% 7.51% Net yield
on earning assets (taxable equivalent) 4.15% 4.09% 1.47% Efficiency
(taxable equivalent) (B) 60.79% 63.54% -4.33% ASSET QUALITY
Allowance for loan losses Beginning of period $11,706 $9,743
Provision for loan losses 546 681 Charge offs (189) (176)
Recoveries 118 35 End of period $12,181 $10,283 Non-performing
assets: Non-accrual loans $1,917 $2,121 Loans 90+ days past due and
still accruing - 78 Other real estate owned 55 241 Troubled debt
restructurings 218 4,483 Total non-performing assets 2,190 $6,923
to total assets: 0.15% 0.49% to total loans plus OREO: 0.20% 0.72%
Allowance for loan losses to total loans Net charge-offs
(recoveries) $71 $141 Net charge-offs to average loans outstanding
0.01% 0.01% 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 Three Months Ended Increase
03/31/2005 03/31/2004 (Decrease) SELECTED BALANCE SHEET DATA End of
period balances Securities available for sale $242,774 $325,001
-25.30% Securities held to maturity 5,853 5,840 0.22% Total
securities 248,627 330,841 -24.85% Real estate - construction
127,248 104,804 21.42% Real estate - 1-4 family residential 310,062
307,097 0.97% Real estate - commercial and multifamily 517,913
421,887 22.76% Commercial, financial and agricultural 85,745 80,173
6.95% Consumer loans 40,942 47,428 -13.68% All other loans 3,698
3,761 -1.68% Total loans 1,085,608 965,150 12.48% Allowance for
loan losses (12,181) (10,283) 18.46% Other earning assets 10,478
8,935 17.27% Total earning assets 1,344,713 1,304,926 3.05% Total
assets 1,453,379 1,410,928 3.01% Non-interest bearing deposits
239,660 219,413 9.23% Money market & interest checking 264,121
361,498 -26.94% Savings 239,720 139,807 71.46% CD's and other time
deposits 492,950 488,979 0.81% Total deposits 1,236,451 1,209,697
2.21% Short-term borrowed funds 42,955 34,038 26.20% Trust
preferred capital notes 20,619 20,000 100.00% Federal Home Loan
Bank advances 14,040 14,120 -0.57% Total interest-bearing
liabilities 1,074,405 1,058,442 1.51% Total stockholders' equity
$128,965 $123,429 4.49% Average balances Total assets $1,446,263
$1,403,681 3.03% Total stockholders' equity $127,751 $120,732 5.81%
QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc.
(NASDAQ:VFGI) (Dollars in thousands) For the Three Months Percent
Ended Increase 3/31/2005 3/31/2004 (Decrease) Interest Income
Interest and fees on loans $16,043 $14,055 14.14% Interest on
deposits in other banks 4 1 300.00% Interest and dividends on
securities: Taxable 1,806 2,526 -28.50% Tax-exempt 656 749 -12.42%
Dividends 67 47 42.55% Interest income on federal funds sold 8 2
300.00% Total Interest Income 18,584 17,380 6.93% Interest Expense
Interest on deposits 4,752 4,534 4.81% Interest on trust preferred
265 28 846.43% Interest on Federal Home Loan Bank advances 180 155
16.13% Interest on federal funds repurchased and securities sold
under agreements to repurchase 144 100 44.00% Interest on other
short-term borrowings 57 71 -19.72% Total Interest Expense 5,398
4,888 10.43% Net Interest Income 13,186 12,492 5.56% Provision for
loan losses 546 681 -19.82% Net Interest Income after Provision for
Loan Losses 12,640 11,811 7.02% Other Income Retail banking fees
1,665 1,549 7.49% Fees from fiduciary activities 724 776 -6.70%
Brokerage services 181 198 -8.59% Other operating income 241 289
-16.61% Gains (losses) on securities available for sale - - - Gains
(losses) on other real estate owned - - - Gains (losses) on sale of
branches 408 - - Fees on mortgage loans sold 475 645 -26.36% Total
Other Income 3,694 3,457 6.86% Other Expense Compensation and
employee benefits 6,047 5,860 3.19% Net occupancy expense 751 706
6.37% Supplies and equipment 1,114 1,044 6.70%
Amortization-intangible assets 168 173 -2.89% Computer services 314
299 5.02% Professional fees 130 201 -35.32% Other operating
expenses 2,010 2,152 -6.60% Total Other Expense 10,534 10,435 0.95%
Income Before Income Tax Expense 5,800 4,833 20.01% Income tax
expense 1,787 1,378 29.68% Net Income $4,013 $3,455 16.15% VIRGINIA
FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND
RATES THREE MONTHS ENDED MARCH, 2005 AND 2004 (Dollars in
thousands) Three months Ending MARCH 31, 2005 Average Interest
Average Dollars in thousands Balance Inc/Exp Rates Assets Loans
receivable, net $1,071,992 $16,096 6.09% Investment securities
Taxable 191,766 1,873 3.96% Tax exempt 62,326 1,010 6.57% Total
Investments 254,092 2,883 4.60% FHLB int bearing 521 4 3.11%
Federal funds sold 1,122 8 2.89% 255,735 2,895 4.59% Total Earning
Assets 1,327,727 18,991 5.80% Tax Eql. Non-Earning Assets 118,536
Total Assets 1,446,263 Liabilities and Stockholders' Equity Time
and savings deposits Interest-bearing transaction accounts $198,834
$195 0.40% Money market deposit accounts 174,238 481 1.12% Passbook
savings accounts 135,578 223 0.67% Certificates of deposit
>$100k 128,145 1,092 3.46% Certificates of deposit
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