VIRGINIA FINANCIAL GROUP INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

	x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2002

		OR

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 000-22283

Virginia Financial Group, Inc.

(Exact name of registrant as specified in its charter)

Virginia		54-1829288

(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

102 South Main Street, Culpeper, Virginia		22701

(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code) 540-829-1603

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.

As of August 2, 2002, there were 7,302,006 shares of common stock, $5.00 par value, outstanding and the aggregate market value of common stock of Virginia Financial Group, Inc. held by nonaffiliates was approximately $209,130,000.

VIRGINIA FINANCIAL GROUP, INC.

INDEX

PART I - FINANCIAL INFORMATION

			Page No.

ITEM 1	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets		3

	Consolidated Statements of Income		4-5

	Consolidated Statements of Changes in Stockholders’ Equity		6

	Consolidated Statements of Cash Flows		7-8

	Notes to Financial Statements		9-12

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13-17

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk		18

	PART II - OTHER INFORMATION

ITEM 1	Legal Proceedings		18

ITEM 2	Change in Securities		18

ITEM 3	Defaults Upon Senior Securities		18

ITEM 4	Submission of Matters to a Vote of Security Holders		18

ITEM 5	Other Information		19

ITEM 6	Exhibits and Reports on Form 8-K		19

		SIGNATURES	20

- 2 -

VIRGINIA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000 OMITTED)

			JUNE 30, 2002		DECEMBER 31, 2001

			(unaudited)
ASSETS
Cash and due from depository institutions			$	37,491	$	42,573
Federal funds sold				29,227		20,908
Interest-bearing deposits in banks				519		556
Securities (market value: 2002, $300,862; 2001, $266,082)				300,358		265,773
Loans held for sale				6,926		17,384
Loans receivable, net				659,147		658,416
Bank premises and equipment				19,796		20,111
Interest receivable				5,857		5,656
Other real estate owned				100		547
Intangibles				1,787		1,866
Other assets				7,809		6,914

Total Assets			$	1,069,017	$	1,040,704

LIABILITIES
Deposits:
	Noninterest-bearing demand deposits		$	161,621	$	146,850
	Savings and interest-bearing demand deposits			351,570		337,030
	Time deposits			407,778		413,579

		Total deposits		920,969		897,459

Securities sold under agreements to repurchase				16,325		16,430
Federal funds purchased				—		500
Federal Home Loan Bank advances				12,260		12,300
Short-term borrowings				903		1,053
Interest payable				2,179		2,579
Other liabilities				3,892		3,677

	Total Liabilities			956,528		933,998

STOCKHOLDERS’ EQUITY
Preferred stock, no par value; (Authorized 5,000,000 shares, no shares outstanding)				—		—
Common stock, par value $5.00 per share; (Authorized 25,000,000 shares; issued and outstanding 7,302,006 shares in 2002 and 7,286,400 in 2001)				36,510		36,432
Capital surplus				11,516		11,332
Retained earnings				60,508		57,060
Accumulated other comprehensive income				3,955		1,882

	Total Stockholders’ Equity			112,489		106,706

Total Liabilities and Stockholders’ Equity			$	1,069,017	$	1,040,704

See accompanying notes to consolidated financial statements.

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VIRGINIA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(000 OMITTED)

				THREE MONTHS ENDED JUNE 30,
				2002		2001

				(unaudited)		(unaudited)
Interest Income
	Interest and fees on loans			$	12,392	$	14,023
	Interest on deposits in other banks				2		24
	Interest on investment securities:
		Taxable			188		162
	Interest and dividends on securities available for sale:
		Taxable			2,166		2,001
		Nontaxable			851		733
		Dividends			86		57
	Interest income on federal funds sold				120		414

			Total Interest Income		15,805		17,414
Interest Expense
	Interest on deposits				5,651		7,964
	Interest on Federal Home Loan Bank advances				200		242
	Interest on federal funds purchased and securities sold under agreements to repurchase				63		166
	Interest on other short-term borrowings				1		6

			Total Interest Expense		5,915		8,378

	Net Interest Income				9,890		9,036
Less: Provision for loan losses					400		461

	Net Interest Income after Provision for Loan Losses				9,490		8,575
Other Income
	Service charges on deposit accounts				1,063		884
	Commissions and fees from fiduciary activities				742		706
	Investment fee income				159		98
	Other operating income				334		225
	Gain on sale of available for sale securities				237		99
	Gain on sale of other real estate owned				10		14
	Gain on sale of mortgage loans				560		682

			Total Other Income		3,105		2,708

Other Expense
	Compensation and employee benefits				5,082		4,595
	Net occupancy and equipment expense				1,039		998
	Computer services				423		412
	Professional fees				275		189
	Other operating expenses				1,851		1,547

			Total Other Expense		8,670		7,741

	Income Before Income Tax Expense				3,925		3,542
Income tax expense					1,000		951

	Net Income			$	2,925	$	2,591

Earnings per Share, basic				$	.40	$	.35

Earnings per Share, diluted				$	.40	$	.35

Dividends per Share				$	.18	$	.17

See accompanying notes to consolidated financial statements.

- 4 -

VIRGINIA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(000 OMITTED)

				SIX MONTHS ENDED JUNE 30,
				2002		2001

				(unaudited)		(unaudited)
Interest Income
	Interest and fees on loans			$	25,077	$	28,194
	Interest on deposits in other banks				4		46
	Interest on investment securities:
		Taxable			350		324
	Interest and dividends on securities available for sale:
		Taxable			4,261		4,359
		Nontaxable			1,709		1,405
		Dividends			158		114
	Interest income on federal funds sold				264		586

			Total Interest Income		31,823		35,028

Interest Expense
	Interest on deposits				11,534		15,904
	Interest on Federal Home Loan Bank advances				403		516
	Interest on federal funds purchased and securities sold under agreements to repurchase				153		367
	Interest on other short-term borrowings				4		15

			Total Interest Expense		12,094		16,802

	Net Interest Income				19,729		18,226
Less: Provision for loan losses					801		816

	Net Interest Income after Provision for Loan Losses				18,928		17,410
Other Income
	Service charges on deposit accounts				1,813		1,722
	Commissions and fees from fiduciary activities				1,593		1,321
	Investment fee income				312		175
	Other operating income				715		553
	Gain on sale of available for sale securities				231		173
	Gain on sale of other real estate owned				56		4
	Gain on sale of mortgage loans				1,246		1,103

			Total Other Income		5,966		5,051

Other Expense
	Compensation and employee benefi

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