VFGI Virginia Financial Grp. (MM)

Virginia Financial Group, Inc. Announces 21% Growth in Second Quarter Earnings CULPEPER, Va., July 22 /PRNewswire-FirstCall/ -- Virginia Financial Group, Inc. (NASDAQ:VFGI) today reported second quarter 2005 earnings of $4.5 million, an increase of 21.3% compared to earnings of $3.7 million for the second quarter of 2004. Net income per diluted share was $.62, up 21.6% compared to $.51 for the same period in 2004. VFG'S earnings for the second quarter of 2005 produced an annualized return on average assets (ROA) of 1.22% and an annualized return on average equity (ROE) of 13.80%, compared to prior year ratios of 1.05% and 12.20%, respectively. For the first six months of 2005, net income was $8.5 million, up 18.8% from $7.1 million for the same period in 2004. Net income per diluted share was $1.18, up 19.2% from $.99 for the first six months of 2004. ROA and ROE for the six month period was 1.18% and 13.28%, respectively, compared to 1.02% and 11.86% for the same period in 2004. O.R. Barham, Jr., President and CEO, commented, "We are pleased with our results for the quarter, showing solid revenue growth, expense control and earnings growth. Effective management of our balance sheet has also enabled us to benefit from the rising rate environment during the period. We look forward to maintaining our momentum during the second half of the year." REVENUE GROWTH Total revenue, comprised of net interest income and noninterest income, was $17.9 million for the second quarter of 2005, an increase of $1.4 million or 8.2% over $16.5 million in 2004. The largest component, net interest income, amounted to $13.8 million for the second quarter, up $1.2 million or 9.7% compared with $12.6 million for the same quarter in 2004. For the six months ended June 30, 2005, net interest income was $27.0 million, an increase of $1.9 million or 7.7% from $25.1 million for the same period in 2004. Improvements in the growth and mix of average earning assets, coupled with net interest margin expansion, were primarily contributors to this growth. The net interest margin for the second quarter of 2005 was 4.23%, up eight basis points sequentially compared to 4.15% for the first quarter of 2005, and up eighteen basis points when compared to 4.05% for the second quarter of 2004. The net interest margin for the six month period ended June 30, 2005 was 4.19%, compared to 4.07% for the same period in 2004. Total noninterest income was $4.1 million for the second quarter of 2005, an increase of $136 thousand or 3.4% compared to $3.9 million for the second quarter of 2004. Included in the 2005 results is a gain of $318 thousand in connection with the sale of a community bank stock investment during the quarter. Retail banking fees decreased $240 thousand or 11.7% to $1.8 million, compared to $2.1 million in the second quarter of 2004. VFG is experiencing a fifteen percent decline in the volume of NSF charges as compared to the same period in 2004, which can be attributed to trends noted with respect to a corresponding decrease in paper items processed and increase in pre-authorized electronic banking transactions such as ATM and debit card transactions. VFG experienced lower revenues from mortgage operations, with mortgage banking fees amounting to $684, a decrease of $152 thousand or 18.2%, as compared to $836 thousand for the second quarter of 2004, but up sequentially $209 thousand or 44.0% from the first quarter of 2005. Mortgage loans available for sale increased to $17.7 million, an increase of $8.0 million or 83% from March 31, 2005. Trust and brokerage revenues for the second quarter were $967 thousand, up $136 thousand or 16.4% compared to $831 thousand in the second quarter of 2004. NONINTEREST EXPENSE AND EFFICIENCY Noninterest expense for the second quarter of 2005 amounted to $10.8 million, up $166 thousand or 1.6% from $10.6 million for the same period in 2004, and up sequentially $267 thousand or 2.5% from the first quarter of 2005. For the six month period ended June 30, 2005, noninterest expense amounted to $21.3 million, an increase of $265 thousand or 1.3% over $21.1 million the same period in 2004. The relatively modest increases are attributable to a fairly stable full-time equivalent employee count and related costs associated with health and welfare benefits, a decrease in operating expenses associated with the Tazewell branch divesture, a decrease in incentives associated with loan production offices and mortgage divisions, and general improvements in overall efficiency. VFG anticipates the rate of increase in overhead to increase to a more normalized level as it accelerates its expansion efforts and implements several sales and credit training initiatives in the second half of 2005. VFG's efficiency ratio was 60.0% for the quarter, compared to 62.7% for the same quarter in 2004. For the six month period ended June 30, 2005, the efficiency ratio was 60.4%, compared to 63.1% for the same period in 2004. BALANCE SHEET GROWTH Average loans for the second quarter were $1.10 billion, up $126.4 million or 12.9% from the second quarter of 2004, and average total assets were $1.47 billion, up $59.0 million or 4.2% from the second quarter of 2004. Loan growth for the second quarter of 2005 was $27.5 million or 2.5%. Second quarter 2005 loan growth was funded from maturities and pay downs in the securities portfolio of $14.3 million or 5.8%, and deposit growth of $12.7 million or 1.0%. At June 30, 2005 VFG had total assets of $1.47 billion, compared to $1.41 billion at June 30, 2004. Shareholder's equity at June 30, 2005 was $131.5 million, an increase of $10.7 million or 8.9% compared to June 30, 2004. Shareholder's equity represented 8.97% of total assets at June 30, 2005, while tangible equity capital represented 7.80% of tangible assets at June 30, 2005. Book value at June 30, 2005 was $18.34 per share, compared to $16.87 at June 30, 2004. ASSET QUALITY Asset quality remains strong, with VFG's ratio of non-performing assets as a percentage of total assets amounting to .11% as of June 30, 2005, compared to .31% at June 30, 2004 and .15% at March 31, 2005. Net charge-offs as a percentage of average loans receivable amounted to .01% for the quarter and .01% for the six month period ended June 30, 2005, compared to .01% and .03% for the same periods in 2004. At June 30, 2005, the allowance for loan losses was approximately eight times the level of non-performing assets, while the allowance as a percentage of total loans amounted to 1.14%. The Company decreased its provision for loan losses by $90 thousand or 14.2%, from $636 thousand for the three months ended June 30, 2004 compared to $546 thousand for the three months ended June 30, 2005, consistent with a slightly decreased rate of growth and general improvement in asset quality during the period. UPDATE ON SUPERVISORY AGREEMENT REGARDING BANK SECRECY ACT COMPLIANCE VFG continues to actively work with the Federal Reserve Bank of Richmond to improve the Company's compliance with Bank Secrecy Act ("BSA") regulations. The Federal Reserve Bank's most recent review was conducted during the second quarter, and identified one area in which the regulator thought that some further refinement was needed before it would consider lifting the supervisory agreement. Since that notification, management has developed and substantially implemented a response, and plans to have the Federal Reserve revisit the area noted during the third quarter. It is anticipated that a termination of the agreement could come soon thereafter, and VFG has initiated construction on new branches as discussed below in anticipation that approvals will be in hand by completion of branch construction. While there can be no assurance that this matter will be resolved in the timeline outlined above, VFG is confident that this matter is close to a resolution. NEW BRANCHES VFG is pleased to announce ground-breaking for two new branches, one to be located at 2102 Langhorne Rd. in Lynchburg, Virginia, and the other to be located one block east of the Mill Creek Road/Avon Street intersection in Charlottesville, Virginia. The Lynchburg branch will be a 6,000 square foot two story building and serve as a main office facility for several future sites in various stages of planning for that market. The Avon Street branch will be a 3,000 square foot structure, and also the first of several planned retail sites in the Charlottesville market. These branches will support our highly successful loan production offices in those two markets. Plans are to have both branches open by the end of the year. 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 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-five 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. 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 excluding gain on sale of securities. 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 06/30/2005 06/30/2004 (Decrease) INCOME STATEMENT Interest income -- taxable equivalent $19,904 $17,703 12.43% Interest expense 5,719 4,693 21.86% Net interest income -- taxable equivalent 14,185 13,010 9.03% Less: taxable equivalent adjustment 399 448 -10.94% Net interest income 13,786 12,562 9.74% Provision for loan and lease losses 546 636 -14.15% Net interest income after provision for loan and lease losses 13,240 11,926 11.02% Noninterest income 4,085 3,949 3.44% Noninterest expense 10,801 10,635 1.56% Provision for income taxes 2,054 1,555 32.09% Net income $4,470 $3,685 21.30% PER SHARE DATA Basic earnings $0.62 $0.51 21.57% Diluted earnings $0.62 $0.51 21.57% Shares outstanding 7,169,929 7,160,417 Weighted average shares -- Basic 7,166,969 7,159,654 Diluted 7,214,171 7,200,797 Dividends paid on common shares $0.21 $0.19 PERFORMANCE RATIOS Return on average assets 1.22% 1.05% 16.19% Return on average equity 13.80% 12.20% 13.11% Return on average realized equity(A) 13.80% 12.51% 10.31% Net yield on earning assets (taxable equivalent) 4.23% 4.05% 4.44% Efficiency (taxable equivalent)(B) 59.96% 62.69% -4.35% ASSET QUALITY Allowance for loan losses Beginning of period $12,181 $10,283 Provision for loan losses 546 636 Charge offs (130) (178) Recoveries 67 58 End of period $12,664 $10,799 Non-performing assets: Non-accrual loans $1,347 $2,325 Loans 90+ days past due and still accruing - 13 Other real estate owned - 5 Troubled debt restructurings 193 1,998 Total non-performing assets $1,540 $4,341 to total assets: 0.11% 0.31% to total loans plus OREO: 0.14% 0.44% Allowance for loan losses to total loans 1.14% 1.09% Net charge-offs (recoveries) $62 $120 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 securities gains (losses) and 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 Six Months Ended Increase 06/30/2005 06/30/2004 (Decrease) INCOME STATEMENT Interest income -- taxable equivalent $38,894 $35,545 9.42% Interest expense 11,116 9,581 16.02% Net interest income -- taxable equivalent 27,778 25,964 6.99% Less: taxable equivalent adjustment 806 910 -11.43% Net interest income 26,972 25,054 7.66% Provision for loan and lease losses 1,092 1,317 -17.08% Net interest income after provision for loan and lease losses 25,880 23,737 9.03% Noninterest income 7,779 7,406 5.04% Noninterest expense 21,335 21,070 1.26% Provision for income taxes 3,841 2,933 30.96% Net income $8,483 $7,140 18.81% PER SHARE DATA Basic earnings $1.18 $1.00 18.00% Diluted earnings $1.18 $0.99 19.19% Shares outstanding 7,169,929 7,160,417 Weighted average shares -- Basic 7,165,128 7,156,505 Diluted 7,212,554 7,199,256 Dividends paid on common shares $0.41 $0.38 PERFORMANCE RATIOS Return on average assets 1.18% 1.02% 15.69% Return on average equity 13.28% 11.86% 11.97% Return on average realized equity(A) 13.37% 12.24% 9.23% Net yield on earning assets (taxable equivalent) 4.19% 4.08% 2.70% Efficiency (taxable equivalent)(B) 60.37% 63.11% -4.34% ASSET QUALITY Allowance for loan losses Beginning of period $11,706 $9,743 Provision for loan losses 1,092 1,317 Charge offs (319) (354) Recoveries 185 93 End of period $12,664 $10,799 Non-performing assets: Non-accrual loans $1,347 $2,325 Loans 90+ days past due and still accruing - 13 Other real estate owned - 5 Troubled debt restructurings 193 1,998 Total non-performing assets $1,540 $4,341 to total assets: 0.11% 0.31% to total loans plus OREO: 0.14% 0.44% Allowance for loan losses to total loans 1.14% 1.09% Net charge-offs (recoveries) $133 $261 Net charge-offs to average loans outstanding 0.01% 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 securities gains (losses) and foreclosed property expense for all periods. QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands, except per share data) Percent Increase 06/30/2005 06/30/2004 (Decrease) SELECTED BALANCE SHEET DATA End of period balances Securities available for sale $229,435 $294,003 -21.96% Securities held to maturity 4,856 5,843 -16.89% Total securities 234,291 299,846 -21.86% Real estate -- construction 126,288 102,907 22.72% Real estate -- 1-4 family residential 315,290 311,626 1.18% Real estate -- commercial and multifamily 540,888 451,480 19.80% Commercial, financial and agricultural 87,075 78,278 11.24% Consumer loans 41,122 46,459 -11.49% All other loans 2,414 4,685 -48.47% Total loans 1,113,077 995,250 11.84% Deferred loan costs 610 185 229.73% Allowance for loan losses (12,664) (10,799) 17.27% Net loans 1,101,023 984,636 11.82% Other assets 130,582 121,940 7.09% Total assets 1,465,896 1,406,422 4.23% Non-interest bearing deposits 265,137 225,416 17.62% Money market & interest checking 352,092 362,894 -2.98% Savings 132,557 142,207 -6.79% CD's and other time deposits 499,384 488,398 2.25% Total deposits 1,249,170 1,218,915 2.48% Short-term borrowed funds 25,676 25,498 0.70% Trust preferred capital notes 20,619 20,000 3.10% Federal Home Loan Bank advances 30,020 14,100 112.91% Other liabilities 8,906 7,135 24.82% Total liabilities 1,334,391 1,285,648 3.79% Total stockholders' equity $131,505 $120,774 8.89% Average balances Percent For the Six Months Ended Increase 06/30/2005 06/30/2004 (Decrease) Total assets $1,455,971 $1,405,147 3.62% Total stockholders' equity $128,868 $121,089 6.42% For the Three Months Ended 06/30/2005 06/30/2004 Total assets $1,465,571 $1,406,613 4.19% Total stockholders' equity $129,972 $121,446 7.02% QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands) For the Three Months Percent Ended Increase 06/30/2005 06/30/2004 (Decrease) Interest Income Interest and fees on loans $17,123 $14,239 20.25% Interest on deposits in other banks 3 1 200.00% Interest and dividends on securities: Taxable 1,600 2,217 -27.83% Tax-exempt 641 714 -10.22% Dividends 125 77 62.34% Interest income on federal funds sold 12 7 71.43% Total interest income 19,504 17,255 13.03% Interest Expense Interest on deposits 4,868 4,237 14.89% Interest on federal funds repurchased and securities sold under agreements to repurchase 144 35 311.43% Interest on Federal Home Loan Bank advances 248 183 35.52% Interest on trust preferred capital notes 294 194 51.55% Interest on other short-term borrowings 164 44 272.73% Total interest expense 5,718 4,693 21.84% Net interest income 13,786 12,562 9.74% Provision for loan losses 546 636 -14.15% Net interest income after provision for loan losses 13,240 11,926 11.02% Noninterest Income Retail banking fees 1,810 2,050 -11.71% Commissions and fees from fiduciary activities 787 684 15.06% Investment fee income 180 147 22.45% Other operating income 326 232 40.52% Gains (losses) on sale of fixed assets (1) - - Gains (losses) on securities available for sale 296 - - Gains (losses) on sale of other real estate owned - - - Gains (losses) on sale of branches 3 - - Gain on sale of mortgage loans 684 836 -18.18% Total noninterest income 4,085 3,949 3.44% Noninterest Expense Compensation and employee benefits 6,048 5,948 1.68% Net occupancy expense 706 670 5.37% Supplies and equipment expenses 1,092 1,095 -0.27% Amortization-intangible assets 159 174 -8.62% Data processing 313 442 -29.19% Telecommunications 229 268 -14.55% Marketing 309 149 107.38% State franchise taxes 223 141 58.16% Professional fees 267 290 -7.93% Other operating expenses 1,455 1,458 -0.21% Total noninterest expense 10,801 10,635 1.56% Income before income taxes 6,524 5,240 24.50% Income tax expense 2,054 1,555 32.09% Net income $4,470 $3,685 21.30% QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands) Percent For the Six Months Ended Increase 06/30/2005 06/30/2004 (Decrease) Interest Income Interest and fees on loans $33,166 $28,294 17.22% Interest on deposits in other banks 7 2 250.00% Interest and dividends on securities: Taxable 3,407 4,744 -28.18% Tax-exempt 1,296 1,462 -11.35% Dividends 192 124 54.84% Interest income on federal funds sold 20 9 122.22% Total interest income 38,088 34,635 9.97% Interest Expense Interest on deposits 9,620 8,771 9.68% Interest on federal funds repurchased and securities sold under agreements to repurchase 288 106 171.70% Interest on Federal Home Loan Bank advances 428 338 26.63% Interest on trust preferred capital notes 559 222 151.80% Interest on other short-term borrowings 221 144 53.47% Total interest expense 11,116 9,581 16.02% Net interest income 26,972 25,054 7.66% Provision for loan losses 1,092 1,317 -17.08% Net interest income after provision for loan losses 25,880 23,737 9.03% Noninterest Income Retail banking fees 3,475 3,599 -3.45% Commissions and fees from fiduciary activities 1,511 1,460 3.49% Investment fee income 361 345 4.64% Other operating income 567 521 8.83% Gains (losses) on sale of fixed assets (1) - - Gains (losses) on securities available for sale 296 - - Gains (losses) on sale of other real estate owned - - - Gains (losses) on sale of branches 411 - - Gain on sale of mortgage loans 1,159 1,481 -21.74% Total noninterest income 7,779 7,406 5.04% Noninterest Expense Compensation and employee benefits 12,095 11,808 2.43% Net occupancy expense 1,457 1,376 5.89% Supplies and equipment expenses 2,206 2,139 3.13% Amortization-intangible assets 327 347 -5.76% Data processing 627 741 -15.38% Telecommunications 497 524 -5.15% Marketing 448 302 48.34% State franchise taxes 454 310 46.45% Professional fees 397 491 -19.14% Other operating expenses 2,827 3,032 -6.76% Total noninterest expense 21,335 21,070 1.26% Income before income taxes 12,324 10,073 22.35% Income tax expense 3,841 2,933 30.96% Net income $8,483 $7,140 18.81% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED JUNE 30, 2005 AND 2004 (Dollars in thousands) Three months ended June 30, 2005 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $1,102,991 $17,171 6.24% Investment securities Taxable 179,428 1,732 3.87% Tax exempt 61,415 985 6.43% Total investments 240,843 2,717 4.53% Interest bearing deposits 220 3 5.47% Federal funds sold 1,368 13 3.81% 242,431 2,733 4.53% Total earning assets 1,345,422 19,904 5.93% Total nonearning assets 120,149 Total assets $1,465,571 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $195,952 $204 0.42% Money market 166,521 461 1.11% Savings 132,431 221 0.67% Time deposits: Less than $100,000 363,045 2,827 3.12% $100,000 and more 134,441 1,155 3.45% Total interest-bearing deposits 992,390 4,868 1.97% Federal funds purchased and repos 21,397 145 2.72% Trust Preferred Securities 20,619 294 5.72% Other short term borrowings 19,165 163 3.41% Federal Home Loan Bank advances 20,389 249 4.90% 81,570 851 4.18% Total interest-bearing liabilities 1,073,960 5,719 2.14% Total noninterest-bearing liabilities 261,639 Total liabilities 1,335,599 Stockholders' equity 129,972 Total liabilities and stockholders' equity $1,465,571 Net interest income (tax equivalent) $14,185 Average interest rate spread 3.79% Interest expense as percentage of average earning assets 1.70% Net interest margin 4.23% Three months ended June 30, 2004 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $976,563 $14,297 5.89% Investment securities Taxable 244,109 2,300 3.79% Tax exempt 66,608 1,096 6.62% Total investments 310,717 3,396 4.40% Interest bearing deposits 504 1 1.03% Federal funds sold 3,221 8 0.92% 314,442 3,405 4.36% Total earning assets 1,291,005 17,702 5.51% Total nonearning assets 115,608 Total assets $1,406,613 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $189,402 $185 0.39% Money market 170,698 375 0.88% Savings 141,020 235 0.67% Time deposits: Less than $100,000 370,677 2,449 2.66% $100,000 and more 119,939 993 3.33% Total interest-bearing deposits 991,736 4,237 1.72% Federal funds purchased and repos 21,633 34 0.63% Trust Preferred Securities 20,000 194 3.90% Other short term borrowings 10,813 46 1.71% Federal Home Loan Bank advances 14,118 182 5.18% 66,564 456 2.76% Total interest-bearing liabilities 1,058,300 4,693 1.78% Total noninterest-bearing liabilities 226,867 Total liabilities 1,285,167 Stockholders' equity 121,446 Total liabilities and stockholders' equity $1,406,613 Net interest income (tax equivalent) $13,009 Average interest rate spread 3.73% Interest expense as percentage of average earning assets 1.46% Net interest margin 4.05% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES SIX MONTHS ENDED JUNE 30, 2005 AND 2004 (Dollars in thousands) Six months ended June 30, 2005 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $1,087,577 $33,267 6.17% Investment securities Taxable 185,563 3,605 3.92% Tax exempt 61,868 1,995 6.50% Total investments 247,431 5,600 4.57% Interest bearing deposits 370 7 3.82% Federal funds sold 1,246 20 3.24% 249,047 5,627 4.56% Total earning assets 1,336,624 38,894 5.87% Total nonearning assets 119,347 Total assets $1,455,971 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $197,385 $399 0.41% Money market 170,358 943 1.12% Savings 133,996 443 0.67% Time deposits: Less than $100,000 366,258 5,587 3.08% $100,000 and more 131,310 2,247 3.45% Total interest-bearing deposits 999,307 9,619 1.94% Federal funds purchased and repos 22,203 288 2.62% Trust Preferred Securities 20,619 559 5.47% Other short term borrowings 14,418 221 3.09% Federal Home Loan Bank advances 17,241 429 5.02% 74,481 1,497 4.05% Total interest-bearing liabilities 1,073,788 11,116 2.09% Total noninterest-bearing liabilities 253,315 Total liabilities 1,327,103 Stockholders' equity 128,868 Total liabilities and stockholders' equity $1,455,971 Net interest income (tax equivalent) $27,778 Average interest rate spread 3.78% Interest expense as percentage of average earning assets 1.68% Net interest margin 4.19% Six months ended June 30, 2004 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $959,816 $28,411 5.95% Investment securities Taxable 250,962 4,874 3.91% Tax exempt 68,759 2,248 6.57% Total investments 319,721 7,122 4.48% Interest bearing deposits 526 2 0.78% Federal funds sold 2,040 10 0.93% 322,287 7,134 4.45% Total earning assets 1,282,103 35,545 5.58% Total nonearning assets 123,044 Total assets $1,405,147 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $192,967 $570 0.59% Money market 169,963 781 0.92% Savings 139,020 484 0.70% Time deposits: Less than $100,000 371,508 4,956 2.68% $100,000 and more 117,896 1,980 3.38% Total interest-bearing deposits 991,354 8,771 1.78% Federal funds purchased and repos 28,024 106 0.76% Trust Preferred Securities 11,538 222 3.87% Other short term borrowings 18,614 144 1.56% Federal Home Loan Bank advances 11,820 338 5.75% 69,996 810 2.33% Total interest-bearing liabilities 1,061,350 9,581 1.82% Total noninterest-bearing liabilities 222,708 Total liabilities 1,284,058 Stockholders' equity 121,089 Total liabilities and stockholders' equity $1,405,147 Net interest income (tax equivalent) $25,964 Average interest rate spread 3.76% Interest expense as percentage of average earning assets 1.50% Net interest margin 4.07% DATASOURCE: Virginia Financial Group, Inc. CONTACT: Jeffrey W. Farrar, Executive Vice President and CFO of Virginia Financial Group, Inc., +1-540-829-1603, or Web site: http://www.vfgi.net/

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