Virginia Financial Group, Inc. Announces 13% Growth in Third
Quarter Earnings CULPEPER, Va., Oct. 20 /PRNewswire-FirstCall/ --
Virginia Financial Group, Inc. (NASDAQ:VFGI) today reported third
quarter 2004 earnings of $4.0 million or $.55 per share, an
increase of 13.0% compared to earnings of $3.5 million or $.49 per
share for the quarter ended September 30, 2003. Diluted earnings
per share for the quarter increased 12.2% compared to third quarter
2003 results. Earnings for the first nine months of 2004 amounted
to $11.1 million or $1.55 per diluted share compared to earnings of
$10.4 million or $1.45 per diluted share. This earnings growth
represents a 6.9% increase in net income and diluted earnings per
share. VFG'S earnings for the third quarter produced an annualized
return on average assets of 1.11% and an annualized return on
average equity of 12.99%, compared to prior year ratios of 1.20%
and 12.09%, respectively. Earnings for the nine month period
yielded an annualized return on average assets of 1.05% and an
annualized return on average shareholders' equity of 12.24%,
compared with prior year ratios of 1.22% and 11.97%, respectively.
Analysis of Financial Performance Revenues for the third quarter of
2004 were $16.8 million, an increase of $1.9 million or 12.4% over
$14.9 million in 2003. The largest component, net interest income,
amounted to $13.2 million for the third quarter, up $2.4 million or
22.2% compared with $10.8 million for the same quarter in 2003.
Growth in average earning assets and an improving net interest
margin were primarily contributors to this growth. For the nine
months ended September 30, 2004, net interest income was $38.2
million, an increase of $6.7 million or 21.4% from $31.5 million
for the same period in 2003. The net interest margin for the third
quarter of 2004 was 4.14%, compared to 4.12% for the same quarter
in 2003, and 4.05% for the second quarter of 2004. The net interest
margin for the nine month period ended September 30, 2004 was
4.10%, compared to 4.21% for the same period in 2003. Total
noninterest income was $3.6 million for the third quarter of 2004,
a decrease of 12.8% compared to $4.2 million for the same period in
2003. Excluding securities gains of $365 thousand in 2003, the
decrease in 2004 as compared to 2003 amounted to $169 thousand or
4.4%. VFG continued to see a decrease in mortgage refinance
activity, with total mortgage revenue decreasing $754 thousand or
41.5% to $534 thousand for the third quarter of 2004. VFG's
mortgage operation originations for the quarter constituted 66.3%
purchase loan activity. Fees from retail banking operations
amounted to $2.0 million for the third quarter of 2004, an increase
of $556 thousand or 38.2%. Fees from trust and investment services
for the third quarter of 2004 amounted to $845 thousand, an
increase of $69 thousand or 8.9% compared to the same quarter in
2003. Noninterest expense for the third quarter of 2004 amounted to
$10.4 million, an increase of $526 thousand or 5.3% for the same
quarter in 2003. Excluding nonrecurring expenses in 2003 of $340
thousand associated with integration of the First Virginia
branches, noninterest expenses increased $866 thousand or 9.1%.
Components of this increase are higher operating costs associated
with the loan production office in Lynchburg, amortization of
intangibles, tele-communication costs and professional fees. These
expenses were offset somewhat by decreases in costs associated with
mortgage related commissions, medical benefits, and other incentive
related accruals. VFG's efficiency ratio was 60.25% for the third
quarter of 2004, compared to 63.22% for the same quarter in 2003.
VFG's loan portfolio increased $161.2 million or 18.5% to $1.034
billion at September 30, 2004, compared to the same date in 2003.
For the third quarter of 2004, VFG's loan portfolio grew $38.3
million or 3.8%, funded by deposit growth of $31.8 million
representing growth of 2.6%. For the nine months ended September
30, 2004, loan growth amounted to $110.4 million or 12.0%. The
growth in loans for the quarter was fairly distributed between our
Culpeper, Fredericksburg, Charlottesville and Lynchburg lending
units. VFG anticipates some slowing in its loan growth during the
fourth quarter based on current pipeline levels. VFG ended the
quarter with assets of $1.440 billion, compared to $1.383 billion
at the same date last year, representing growth of $57 million or
4.1% VFG's ratio of non-performing assets as a percentage of total
assets amounted to .28% at the end of the third quarter of 2004,
compared to .55% for the same quarter in 2003. VFG's ratio of
non-performing assets to loans and other real estate owned amounted
to .39% at the end of the quarter, compared to .88% for the same
quarter in 2003. Net charge-offs as a percentage of average loans
receivable amounted to .01% for the quarter, compared to less than
.01% for the same quarter in 2003. At September 30, 2004, the
allowance for loan losses as a percentage of non-performing assets
was 279.4%, while the allowance as a percentage of total loans
amounted to 1.09%. 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/.
QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc.
(NASDAQ:VFGI) (Dollars in thousands, except per share data) Percent
For the Three Months Ended Increase 09/30/2004 09/30/2003
(Decrease) INCOME STATEMENT Interest income - taxable equivalent $
18,372 $ 15,912 15.46% Interest expense 4,775 4,622 3.31% Net
interest income - taxable equivalent 13,597 11,290 20.43% Less:
taxable equivalent adjustment 436 523 -16.63% Net interest income
13,161 10,767 22.23% Provision for loan and lease losses 636 323
96.90% Net interest income after provision for loan and lease
losses 12,525 10,444 19.93% Noninterest income 3,642 4,176 -12.79%
Noninterest expense 10,433 9,907 5.31% Provision for income taxes
1,743 1,181 47.59% Net income $ 3,991 $ 3,532 13.00% PER SHARE DATA
Basic earnings $ 0.56 $ 0.49 14.29% Diluted earnings $ 0.55 $ 0.49
12.24% Shares outstanding 7,160,417 7,149,926 Weighted average
shares - Basic 7,160,417 7,149,926 Diluted 7,204,399 7,185,547
Shares repurchased - - Average price of shares repurchased $ - $ -
Dividends paid on common shares $ 0.20 $ 0.19 PERFORMANCE RATIOS
Return on average assets 1.11% 1.20% -7.50% Return on average
equity 12.99% 12.09% 7.44% Return on average realized equity(A)
13.12% 12.70% 3.31% Net yield on earning assets (taxable
equivalent) 4.14% 4.12% 0.49% Efficiency (taxable equivalent)(B)
60.25% 63.22% -4.70% ASSET QUALITY Allowance for loan losses
Beginning of period $ 10,799 $ 9,344 Provision for loan losses 636
322 Charge offs (184) (88) Recoveries 49 80 End of period $ 11,300
$ 9,658 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 Nine Months Ended Increase
09/30/2004 09/30/03 (Decrease) INCOME STATEMENT Interest income -
taxable equivalent $ 53,917 $ 47,562 13.36% Interest expense 14,356
14,377 -0.15% Net interest income - taxable equivalent 39,561
33,185 19.21% Less: taxable equivalent adjustment 1,346 1,698
-20.73% Net interest income 38,215 31,487 21.37% Provision for loan
and lease losses 1,953 968 101.76% Net interest income after
provision for loan and lease losses 36,262 30,519 18.82%
Noninterest income 11,048 11,705 -5.61% Noninterest expense 31,503
28,252 11.51% Provision for income taxes 4,676 3,557 31.46% Net
income $ 11,131 $ 10,415 6.87% PER SHARE DATA Basic earnings $ 1.56
$ 1.46 6.85% Diluted earnings $ 1.55 $ 1.45 6.90% Shares
outstanding 7,160,417 7,149,926 Weighted average shares - Basic
7,157,833 7,157,482 Diluted 7,201,815 7,192,409 Shares repurchased
- 28,507 Average price of shares repurchased $ - $ 28.68 Dividends
paid on common shares $ 0.58 $ 0.56 PERFORMANCE RATIOS Return on
average assets 1.05% 1.22% -13.93% Return on average equity 12.24%
11.97% 2.26% Return on average realized equity(A) 12.55% 12.62%
-0.55% Net yield on earning assets (taxable equivalent) 4.10% 4.21%
-2.61% Efficiency (taxable equivalent)(B) 62.13% 62.75% -0.99%
ASSET QUALITY Allowance for loan losses Beginning of period $ 9,743
$ 9,180 Provision for loan losses 1,953 968 Charge offs (538) (679)
Recoveries 142 189 End of period $ 11,300 $ 9,658 Non-performing
assets: Non-accrual loans $ 2,116 $ 1,824 Loans 90+ days past due
and still accruing 1 11 Other real estate owned 5 1,233 Troubled
debt restructurings 1,937 4,572 Total non-performing assets $ 4,059
$ 7,640 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 Nine Months Ended Increase
09/30/2004 09/30/2003 (Decrease) SELECTED BALANCE SHEET DATA End of
period balances Securities available for sale $ 292,096 $ 379,847
-23.10% Securities held to maturity 5,846 6,335 -7.72% Total
securities 297,942 386,182 -22.85% Real estate - construction
106,356 75,099 41.62% Real estate - 1-4 family residential 316,425
314,507 0.61% Real estate - commercial and multifamily 479,760
347,190 38.18% Commercial, financial and agricultural 82,307 75,119
9.57% Consumer loans 45,587 56,657 -19.54% All other loans 3,073
3,733 -17.68% Total loans 1,033,508 872,305 18.48% Allowance for
loan losses (11,300) (9,658) 17.00% Other earning assets 3,527
9,191 -61.63% Total earning assets 1,334,977 1,267,678 5.31% Total
assets 1,439,756 1,382,540 4.14% Non-interest bearing deposits
220,355 223,721 -1.50% Money market & interest checking 389,970
354,345 10.05% Savings 141,508 137,536 2.89% CD's and other time
deposits 498,888 491,741 1.45% Total deposits 1,250,721 1,207,343
3.59% Short-term borrowed funds 20,400 34,698 -41.21% Trust
preferred capital notes 20,000 - 100.00% Federal Home Loan Bank
advances 14,080 9,160 53.71% Total interest-bearing liabilities
1,084,846 1,027,480 5.58% Total stockholders' equity $ 125,679 $
117,738 6.74% Average balances Total assets $1,411,928 $1,141,813
23.66% Total stockholders' equity $ 121,472 $ 116,384 4.37% Percent
Average Balances For the Three Months Ended Increase 09/30/2004
09/30/2003 (Decrease) Total assets $1,425,340 $1,181,658 20.62%
Total stockholders' equity $ 122,230 $ 117,236 4.26% QUARTERLY
PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI)
(Dollars in thousands) For the Three For the Nine Months Ended
Months Ended 09/30/ 09/30/ 09/30/ 09/30/ 2004 2003 2004 2003
Interest Income Interest and fees on loans $14,969 $12,167 $43,263
$36,381 Interest on deposits in other banks 1 29 3 31 Interest on
investment securities: Taxable 92 109 279 337 Interest and
dividends on securities available for sale: Taxable 2,023 2,066
6,580 5,956 Nontaxable 696 897 2,158 2,731 Dividends 132 96 256 259
Interest income on federal funds sold 23 25 32 169 Total Interest
Income 17,936 15,389 52,571 45,864 Interest Expense Interest on
deposits 4,322 4,396 13,093 13,681 Interest on trust preferred 220
- 442 - Interest on Federal Home Loan Bank advances 181 163 519 533
Interest on federal funds repurchased and securities sold under
agreements to repurchase 47 62 161 159 Interest on other short-term
borrowings 5 1 141 4 Total Interest Expense 4,775 4,622 14,356
14,377 Net Interest Income 13,161 10,767 38,215 31,487 Provision
for loan losses 636 323 1,953 968 Net Interest Income after
Provision for Loan Losses 12,525 10,444 36,262 30,519 Other Income
Retail banking fees 2,011 1,455 5,610 4,143 Fees from fiduciary
activities 676 673 2,136 2,162 Brokerage services 169 103 514 451
Other operating income 252 272 773 884 Gains (losses) on securities
available for sale - 365 - 435 Gains (losses) on other real estate
owned - 20 - 20 Gains (losses) on sale of fixed assets - - - - Fees
on mortgage loans sold 534 1,288 2,015 3,610 Total Other Income
3,642 4,176 11,048 11,705 Other Expense Compensation and employee
benefits 5,793 5,690 17,601 16,274 Net occupancy expense 697 561
2,073 1,679 Supplies and equipment 1,085 893 3,224 2,840
Amortization-intangible assets 173 39 520 118 Computer services 350
270 1,091 902 Professional fees 162 219 653 575 Other operating
expenses 2,173 2,235 6,341 5,864 Total Other Expense 10,433 9,907
31,503 28,252 Income Before Income Tax Expense 5,734 4,713 15,807
13,972 Income tax expense 1,743 1,181 4,676 3,557 Net Income $
3,991 $ 3,532 $11,131 $10,415 VIRGINIA FINANCIAL GROUP INC.
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003 Three months Ending SEPTEMBER 30, 2004
Average Interest Average Dollars in thousands Balance Inc/Exp Rates
Assets Loans receivable, net $1,009,098,814 $15,027,427 5.92%
Investment securities Taxable 226,490,641 2,249,404 3.95% Tax
exempt 65,267,961 1,071,656 6.53% Total Investments 291,758,602
3,321,060 4.53% FHLB int bearing 323,067 1,289 1.59% Federal funds
sold 5,962,083 22,108 1.48% 298,043,752 3,344,457 4.46% Total
Earning Assets 1,307,142,566 18,371,884 5.59% Tax Eql. Non-Earning
Assets 118,197,929 Total Assets 1,425,340,495 Liabilities and
Stockholders' Equity Time and savings deposits Interest-bearing
transaction accounts $196,014,562 $184,026 0.37% Money market
deposit accounts 181,754,438 413,743 0.91% Passbook savings
accounts 144,072,154 233,693 0.65% Certificates of deposit
>$100k 122,270,427 1,020,227 3.32% Certificates of deposit $100k
119,364,249 3,000,241 3.36% Certificates of deposit
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