VFGI Virginia Financial Grp. (MM)

CULPEPER, Va., Oct. 20 /PRNewswire-FirstCall/ -- Virginia Financial Group, Inc. (NASDAQ:VFGI) today reported third quarter 2005 earnings of $4.7 million, an increase of 18.2% compared to earnings of $4.0 million for the third quarter of 2004. Net income per diluted share was $.65, also up 18.2% compared to $.55 for the same period in 2004. VFG'S earnings for the third quarter of 2005 produced an annualized return on average assets (ROA) of 1.26% and an annualized return on average equity (ROE) of 14.03%, compared to prior year ratios of 1.11% and 12.99%, respectively. For the first nine months of 2005, net income was $13.2 million, up 18.6% from $11.1 million for the same period in 2004. Net income per diluted share was $1.83, up 18.1% from $1.55 for the first nine months of 2004. ROA and ROE for the nine month period was 1.20% and 13.60%, respectively, compared to 1.05% and 12.24% for the same period in 2004. O.R. Barham, Jr., President and CEO, commented, "We are quite pleased with our results for the quarter, particularly with revenue and balance sheet growth. Revenue growth was fueled by an 18.5% annualized growth rate in loans for the quarter and a 13 basis point improvement in net interest margin sequentially. We saw our efficiency ratio drop to its lowest level in several years, and our return on average equity eclipse 14% for the quarter. Deposit growth also showed some improvement, and we are excited about the prospects of deposit growth from new branches coming on-line in the next several quarters. Our balance sheet reached the $1.5 billion level, an important milestone and one in which we can be proud of." REVENUE GROWTH Total revenue, comprised of net interest income and noninterest income, was $18.5 million for the third quarter of 2005, an increase of $1.7 million or 10.3% over $16.8 million in 2004. The largest component, net interest income, amounted to $14.7 million for the third quarter, up $1.5 million or 11.4% compared with $13.2 million for the same quarter in 2004. For the nine months ended September 30, 2005, net interest income was $41.6 million, an increase of $3.4 million or 8.9% from $38.2 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 third quarter of 2005 was 4.36%, up thirteen basis points sequentially compared to 4.23% for the second quarter of 2005, and up twenty-two basis points when compared to 4.14% for the third quarter of 2004. The net interest margin for the nine month period ended September 30, 2005 was 4.25%, compared to 4.09% for the same period in 2004. Total noninterest income was $3.9 million for the third quarter of 2005, an increase of $228 thousand or 6.3% compared to $3.6 million for the third quarter of 2004. Retail banking fees decreased $266 thousand or 13.2% to $1.7 million, compared to $2.0 million in the third quarter of 2004. VFG continues to see decline in the volume of NSF charges attributable 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 higher revenues and profitability from mortgage operations, with gross mortgage banking fees amounting to $1.0 million, a increase of $488 thousand or 91.4%, as compared to $534 thousand for the third quarter of 2004, and up sequentially $345 thousand or 51.1% from the second quarter of 2005. Revenues and profitability are anticipated to decline somewhat in the fourth quarter due to seasonal fluctuation and potential increases in mortgage rates. NONINTEREST EXPENSE AND EFFICIENCY Noninterest expense for the third quarter of 2005 amounted to $11.1 million, up $661 thousand or 6.3% from $10.4 million for the same period in 2004, and up sequentially $293 thousand or 2.7% from the second quarter of 2005. For the nine month period ended September 30, 2005, noninterest expense amounted to $32.4 million, an increase of $921 thousand or 2.9% over $31.5 million for 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, no significant expansion activities during the period, and general improvements in overall efficiency. Some acceleration of costs associated with training and professional fees was noted in the quarter, and management anticipates that these increases will continue to grow to a more normalized level as it accelerates its expansion efforts and completes several sales and credit training initiatives in the fourth quarter of 2005. VFG's efficiency ratio was 58.3% for the quarter, compared to 60.2% for the same quarter in 2004. For the nine month period ended September 30, 2005, the efficiency ratio was 59.6%, compared to 62.1% for the same period in 2004. BALANCE SHEET Average loans for the third quarter were $1.13 billion, up $121.3 million or 12.0% from the third quarter of 2004, and average total assets were $1.48 billion, up $54.8 million or 3.8% from the third quarter of 2004. Loan growth for the third quarter of 2005 was $51.5 million or 4.6%, with approximately 70% of the increase originating from the non-residential real estate component of the portfolio. Third quarter 2005 loan growth was funded from maturities and pay downs in the securities portfolio of $12.9 million, deposit growth of $19.7 million and wholesale funding of $16.8 million. Deposit growth was predominately in the money market component, with money market balances up $27.5 million or 7.8% for the quarter, reflecting a successful deposit campaign during the period. Non-interest bearing demand deposits were down $8.1 million or 3.1% for the quarter, due to lower balances associated with real estate closings, but are up $36.7 million or 16.6% when compared to a year ago. At September 30, 2005 VFG had total assets of $1.50 billion, compared to $1.44 billion at September 30, 2004. Shareholder's equity at September 30, 2005 was $134.5 million, an increase of $8.4 million or 6.7% compared to September 30, 2004. Shareholder's equity represented 8.91% of total assets at September 30, 2005, while tangible equity capital represented 7.78% of tangible assets at September 30, 2005. Book value at September 30, 2005 was $18.70 per share, compared to $17.55 at September 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 September 30, 2005, compared to .28% at September 30, 2004 and .11% at June 30, 2005. Net charge- offs as a percentage of average loans receivable amounted to .01% for the quarter and .02% for the nine month period ended September 30, 2005, compared to .01% and .04% for the same periods in 2004. At September 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 1.13%. VFG decreased its provision for loan losses by $133 thousand or 20.9%, from $636 thousand for the three months ended September 30, 2004 compared to $503 thousand for the three months ended September 30, 2005, consistent with charge-off experience and general improvement in asset quality during the period. UPDATE ON SUPERVISORY AGREEMENT REGARDING BANK SECRECY ACT COMPLIANCE VFG has received verbal notification from the Federal Reserve Bank of Richmond that it now is in full compliance with Bank Secrecy Act ("BSA") regulations, and has recommended the lifting of the supervisory agreement to the Federal Reserve Board. VFG continues to anticipate this event occurring in the near future, but can give no assurances as to the timing of such event. 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 09/30/2005 09/30/2004 (Decrease) INCOME STATEMENT Interest income - taxable equivalent $21,091 $18,372 14.80% Interest expense 6,040 4,775 26.49% Net interest income - taxable equivalent 15,051 13,597 10.69% Less: taxable equivalent adjustment 394 436 -9.63% Net interest income 14,657 13,161 11.37% Provision for loan and lease losses 503 636 -20.91% Net interest income after provision for loan and lease losses 14,154 12,525 13.01% Noninterest income 3,870 3,642 6.26% Noninterest expense 11,094 10,433 6.34% Provision for income taxes 2,211 1,743 26.85% Net income $4,719 $3,991 18.24% PER SHARE DATA Basic earnings $0.66 $0.56 17.86% Diluted earnings $0.65 $0.55 18.18% Shares outstanding 7,170,828 7,160,417 Weighted average shares - Basic 7,170,525 7,160,417 Diluted 7,218,383 7,201,641 Dividends paid on common shares $0.21 $0.20 PERFORMANCE RATIOS Return on average assets 1.26% 1.11% 13.51% Return on average equity 14.03% 12.99% 8.01% Return on average realized equity (A) 14.03% 13.12% 6.94% Net interest margin (taxable equivalent) 4.36% 4.14% 5.31% Efficiency (taxable equivalent) (B) 58.29% 60.25% -3.26% ASSET QUALITY Allowance for loan losses Beginning of period $12,664 $10,799 Provision for loan losses 503 636 Charge offs (84) (184) Recoveries 44 49 End of period $13,127 $11,300 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 Nine Months Ended Increase 09/30/2005 09/30/2004 (Decrease) INCOME STATEMENT Interest income - taxable equivalent $60,002 $53,917 11.29% Interest expense 17,173 14,356 19.62% Net interest income - taxable equivalent 42,829 39,561 8.26% Less: taxable equivalent adjustment 1,199 1,346 -10.92% Net interest income 41,630 38,215 8.94% Provision for loan and lease losses 1,595 1,953 -18.33% Net interest income after provision for loan and lease losses 40,035 36,262 10.40% Noninterest income 11,643 11,048 5.39% Noninterest expense 32,424 31,503 2.92% Provision for income taxes 6,051 4,676 29.41% Net income $13,203 $11,131 18.61% PER SHARE DATA Basic earnings $1.84 $1.56 17.95% Diluted earnings $1.83 $1.55 18.06% Shares outstanding 7,170,828 7,160,417 Weighted average shares - Basic 7,166,947 7,157,833 Diluted 7,215,668 7,201,815 Dividends paid on common shares $0.62 $0.58 PERFORMANCE RATIOS Return on average assets 1.20% 1.05% 14.29% Return on average equity 13.60% 12.24% 11.11% Return on average realized equity (A) 13.67% 12.55% 8.92% Net interest margin (taxable equivalent) 4.25% 4.09% 3.91% Efficiency (taxable equivalent) (B) 59.64% 62.13% -4.01% ASSET QUALITY Allowance for loan losses Beginning of period $11,706 $9,743 Provision for loan losses 1,595 1,953 Charge offs (403) (538) Recoveries 229 142 End of period $13,127 $11,300 Non-performing assets: Non-accrual loans $1,422 $2,116 Loans 90+ days past due and still accruing - 1 Other real estate owned 41 5 Troubled debt restructurings 173 1,937 Total non-performing assets $1,636 $4,059 to total assets: 0.11% 0.28% to total loans plus OREO: 0.14% 0.39% Allowance for loan losses to total loans 1.13% 1.09% Net charge-offs (recoveries) $174 $396 Net charge-offs to average loans outstanding 0.02% 0.04% 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 09/30/2005 09/30/2004 (Decrease) SELECTED BALANCE SHEET DATA End of period balances Cash and Cash Equivalents $52,874 $52,662 0.40% Securities available for sale 215,070 292,096 -26.37% Securities held to maturity 4,284 5,846 -26.72% Total securities 219,354 297,942 -26.38% Real estate - construction 132,073 106,356 24.18% Real estate - 1-4 family residential 325,860 316,425 2.98% Real estate - commercial and multifamily 577,243 479,760 20.32% Commercial, financial and agricultural 84,951 82,307 3.21% Consumer loans 41,943 45,587 -7.99% All other loans 2,496 2,740 -8.91% Total loans 1,164,566 1,033,175 12.72% Deferred loan costs 476 333 42.94% Allowance for loan losses (13,127) (11,300) 16.17% Net loans 1,151,915 1,022,208 12.69% Other assets 133,624 119,606 11.72% Total assets 1,504,893 1,439,756 4.52% Non-interest bearing deposits 257,019 220,355 16.64% Money market & interest checking 379,579 389,970 -2.66% Savings 129,051 141,508 -8.80% CD's and other time deposits 503,180 498,888 0.86% Total deposits 1,268,829 1,250,721 1.45% Short-term borrowed funds 37,481 20,400 83.73% Trust preferred capital notes 20,619 20,000 3.10% Federal Home Loan Bank advances 35,000 14,080 148.58% Other liabilities 8,856 8,876 -0.23% Total liabilities 1,370,785 1,314,077 4.32% Total stockholders' equity $134,108 $125,679 6.71% Accumulated Comprehensive Income (Loss) $(480) $2,903 -116.53% Average balances Percent For the Nine Months Ended Increase 09/30/2005 09/30/2004 (Decrease) Total assets $1,465,144 $1,411,928 3.77% Total stockholders' equity $129,799 $121,472 6.86% For the Three Months Ended 09/30/2005 09/30/2004 Total assets $1,480,148 $1,425,341 3.85% Total stockholders' equity $133,444 $122,230 9.17% QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands) For the Three Months Percent Ended Increase 09/30/2005 09/30/2004 (Decrease) Interest Income Interest and fees on loans $18,335 $14,969 22.49% Interest on deposits in other banks 5 1 400.00% Interest and dividends on securities: Taxable 1,530 2,115 -27.66% Tax-exempt 642 696 -7.76% Dividends 79 132 -40.15% Interest income on federal funds sold 106 23 360.87% Total interest income 20,697 17,936 15.39% Interest Expense Interest on deposits 5,195 4,322 20.20% Interest on federal funds repurchased and securities sold under agreements to repurchase 135 47 187.23% Interest on Federal Home Loan Bank advances 313 181 72.93% Interest on trust preferred capital notes 328 220 49.09% Interest on other short-term borrowings 69 5 1280.00% Total interest expense 6,040 4,775 26.49% Net interest income 14,657 13,161 11.37% Provision for loan losses 503 636 -20.91% Net interest income after provision for loan losses 14,154 12,525 13.01% Noninterest Income Retail banking fees 1,745 2,011 -13.23% Commissions and fees from fiduciary activities 696 676 2.96% Investment fee income 158 169 -6.51% Other operating income 247 252 -1.98% Gains (losses) on sale of fixed assets 2 - - Gains (losses) on securities available for sale - - - Gains (losses) on sale of other real estate owned - - - Gains (losses) on sale of branches - - - Gain on sale of mortgage loans 1,022 534 91.39% Total noninterest income 3,870 3,642 6.26% Noninterest Expense Compensation and employee benefits 6,456 5,793 11.44% Net occupancy expense 787 697 12.91% Supplies and equipment expenses 919 1,085 -15.30% Amortization-intangible assets 158 173 -8.67% Marketing 296 165 79.39% State franchise taxes 208 145 43.45% Data processing 315 350 -10.00% Telecommunications 273 227 20.26% Professional fees 232 162 43.21% Other operating expenses 1,450 1,636 -11.37% Total noninterest expense 11,094 10,433 6.34% Income before income taxes 6,930 5,734 20.86% Income tax expense 2,211 1,743 26.85% Net income $4,719 $3,991 18.24% QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands) For the Nine Months Percent Ended Increase 09/30/2005 09/30/2004 (Decrease) Interest Income Interest and fees on loans $51,501 $43,263 19.04% Interest on deposits in other banks 11 3 266.67% Interest and dividends on securities: Taxable 4,955 6,859 -27.76% Tax-exempt 1,949 2,158 -9.68% Dividends 261 256 1.95% Interest income on federal funds sold 126 32 293.75% Total interest income 58,803 52,571 11.85% Interest Expense Interest on deposits 14,815 13,093 13.15% Interest on federal funds repurchased and securities sold under agreements to repurchase 423 161 162.73% Interest on Federal Home Loan Bank advances 742 519 42.97% Interest on trust preferred capital notes 904 442 104.52% Interest on other short-term borrowings 289 141 104.96% Total interest expense 17,173 14,356 19.62% Net interest income 41,630 38,215 8.94% Provision for loan losses 1,595 1,953 -18.33% Net interest income after provision for loan losses 40,035 36,262 10.40% Noninterest Income Retail banking fees 5,219 5,610 -6.97% Commissions and fees from fiduciary activities 2,207 2,136 3.32% Investment fee income 519 514 0.97% Other operating income 1,220 773 57.83% 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 - - - Gain on sale of mortgage loans 2,181 2,015 8.24% Total noninterest income 11,643 11,048 5.39% Noninterest Expense Compensation and employee benefits 18,552 17,601 5.40% Net occupancy expense 2,184 2,073 5.35% Supplies and equipment expenses 3,127 3,224 -3.01% Amortization-intangible assets 485 520 -6.73% Marketing 754 467 61.46% State franchise taxes 662 455 45.49% Data processing 942 1,091 -13.66% Telecommunications 770 794 -3.02% Professional fees 629 653 -3.68% Other operating expenses 4,319 4,624 -6.60% Total noninterest expense 32,424 31,502 2.93% Income before income taxes 19,254 15,808 21.80% Income tax expense 6,051 4,677 29.38% Net income $13,203 $11,131 18.61% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (Dollars in thousands) Three months ended September 30, 2005 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $1,130,355 $18,383 6.45% Investment securities Taxable 164,792 1,610 3.88% Tax exempt 61,207 988 6.40% Total investments 225,999 2,598 4.56% Interest bearing deposits 823 4 1.93% Federal funds sold 12,422 106 3.39% 239,244 2,708 4.49% Total earning assets 1,369,599 21,091 6.11% Total nonearning assets 110,549 Total assets $1,480,148 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $189,899 $202 0.42% Money market 176,364 601 1.35% Savings 130,959 222 0.67% Time deposits: Less than $100,000 363,943 2,883 3.14% $100,000 and more 138,015 1,287 3.70% Total interest-bearing deposits 999,180 5,195 2.06% Federal funds purchased and securities sold under agreements to repurchase 17,607 135 3.04% Trust preferred capital notes 20,619 328 6.31% Other short term borrowings 11,702 69 2.34% Federal Home Loan Bank advances 31,105 313 3.99% 81,033 845 4.14% Total interest-bearing liabilities 1,080,213 6,040 2.22% Total noninterest-bearing liabilities 266,491 Total liabilities 1,346,704 Stockholders' equity 133,444 Total liabilities and stockholders' equity $1,480,148 Net interest income (tax equivalent) $15,051 Average interest rate spread 3.89% Interest expense as percentage of average earning assets 1.75% Net interest margin 4.36% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (Dollars in thousands) Three months ended September 30, 2004 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $1,009,099 $15,028 5.92% Investment securities Taxable 226,491 2,249 3.95% Tax exempt 65,268 1,072 6.53% Total investments 291,759 3,321 4.53% Interest bearing deposits 323 1 1.03% Federal funds sold 5,962 22 0.92% 298,044 3,344 4.46% Total earning assets 1,307,143 18,372 5.59% Total nonearning assets 118,198 Total assets $1,425,341 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $196,015 $185 0.38% Money market 181,754 414 0.91% Savings 144,072 233 0.64% Time deposits: Less than $100,000 369,101 2,470 2.66% $100,000 and more 122,270 1,020 3.32% Total interest-bearing deposits 1,013,212 4,322 1.70% Federal funds purchased and securities sold under agreements to repurchase 21,755 46 0.84% Trust preferred capital notes 20,000 221 4.40% Other short term borrowings 1,293 5 1.54% Federal Home Loan Bank advances 13,505 181 5.33% 56,553 453 3.19% Total interest-bearing liabilities 1,069,765 4,775 1.78% Total noninterest-bearing liabilities 233,346 Total liabilities 1,303,111 Stockholders' equity 122,230 Total liabilities and stockholders' equity $1,425,341 Net interest income (tax equivalent) $13,597 Average interest rate spread 3.81% Interest expense as percentage of average earning assets 1.45% Net interest margin 4.14% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (Dollars in thousands) Nine months ended September 30, 2005 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $1,102,011 $51,650 6.27% Investment securities Taxable 178,407 5,216 3.91% Tax exempt 61,645 2,999 6.50% Total investments 240,052 8,215 4.58% Interest bearing deposits 524 11 2.81% Federal funds sold 6,417 126 2.63% 246,993 8,352 4.53% Total earning assets 1,349,004 60,002 5.95% Total nonearning assets 116,140 Total assets $1,465,144 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $194,863 $601 0.41% Money market 172,382 1,544 1.20% Savings 132,972 665 0.67% Time deposits: Less than $100,000 365,460 8,454 3.09% $100,000 and more 133,570 3,551 3.55% Total interest-bearing deposits 999,247 14,815 1.98% Federal funds purchased and securities sold under agreements to repurchase 22,868 423 2.47% Trust preferred capital notes 20,619 904 5.86% Other short term borrowings 13,503 289 2.86% Federal Home Loan Bank advances 21,913 742 4.53% 78,903 2,358 4.00% Total interest-bearing liabilities 1,078,150 17,173 2.13% Total noninterest-bearing liabilities 257,195 Total liabilities 1,335,345 Stockholders' equity 129,799 Total liabilities and stockholders' equity $1,465,144 Net interest income (tax equivalent) $42,829 Average interest rate spread 3.82% Interest expense as percentage of average earning assets 1.70% Net interest margin 4.25% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (Dollars in thousands) Nine months ended September 30, 2004 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $976,363 $43,439 5.94% Investment securities Taxable 242,746 7,115 3.92% Tax exempt 67,586 3,328 6.58% Total investments 310,332 10,443 4.49% Interest bearing deposits 458 3 0.78% Federal funds sold 3,357 32 0.93% 314,147 10,478 4.46% Total earning assets 1,290,510 53,917 5.58% Total nonearning assets 121,418 Total assets $1,411,928 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $193,991 $754 0.52% Money market 173,922 1,195 0.92% Savings 140,716 718 0.68% Time deposits: Less than $100,000 370,700 7,426 2.68% $100,000 and more 119,364 3,000 3.36% Total interest-bearing deposits 998,693 13,093 1.75% Federal funds purchased and securities sold under agreements to repurchase 25,919 161 0.83% Trust preferred capital notes 14,380 442 4.11% Other short term borrowings 12,798 141 1.47% Federal Home Loan Bank advances 12,585 519 5.51% 65,682 1,263 2.57% Total interest-bearing liabilities 1,064,375 14,356 1.80% Total noninterest-bearing liabilities 226,081 Total liabilities 1,290,456 Stockholders' equity 121,472 Total liabilities and stockholders' equity $1,411,928 Net interest income (tax equivalent) $39,561 Average interest rate spread 3.78% Interest expense as percentage of average earning assets 1.49% Net interest margin 4.09% 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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