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, 2004

¨	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) 540-829-1633

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 ¨.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b – 2 of the Exchange Act). Yes x No ¨

As of July 31, 2004, there were 7,160,417 shares of common stock, $5.00 par value, issued and outstanding.

VIRGINIA FINANCIAL GROUP, INC.

INDEX


		Page No.
	PART I - FINANCIAL INFORMATION

ITEM 1	Consolidated Financial Statements:

	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 Consolidated Financial Statements	9-15

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16-23

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	24

ITEM 4	Controls and Procedures	24

	PART II - OTHER INFORMATION

ITEM 1	Legal Proceedings	24

ITEM 2	Change in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	24

ITEM 3	Defaults Upon Senior Securities	24

ITEM 4	Submission of Matters to a Vote of Security Holders	24

ITEM 5	Other Information	25

ITEM 6	Exhibits and Reports on Form 8-K	26

- 2 -

PART I - FINANCIAL INFORMATION

ITEM 1. Financial statements

VIRGINIA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(000 OMITTED)


	JUNE 30, 2004		DECEMBER 31, 2003
	(unaudited)
ASSETS
Cash and due from depository institutions	$	51,593	$	43,719
Federal funds sold		413		1,222
Interest-bearing deposits in banks		336		237
Securities (market value: 2004, $300,307; 2003, $364,926)		299,846		364,298
Loans held for sale		8,249		5,174
Loans receivable, net		984,636		912,946
Bank premises and equipment, net		26,881		27,311
Interest receivable		5,782		5,914
Other real estate owned		5		454
Core deposit intangibles, net		5,900		6,247
Goodwill		14,033		14,033
Other assets		8,748		5,656

Total Assets	$	1,406,422	$	1,387,211

LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	225,416	$	216,560
Interest-bearing deposits		993,499		994,214

Total deposits		1,218,915		1,210,774

Federal funds purchased and securities sold under agreements to repurchase		20,600		33,155
Short-term borrowings		4,898		6,526
Federal Home Loan Bank advances		14,100		9,140
Trust preferred capital notes		20,000		—
Interest payable		2,114		2,223
Other liabilities		5,021		5,563
Commitments and contingencies		—		—

Total Liabilities		1,285,648		1,267,381

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 7,160,417 and 7,152,885 respectively)		35,802		35,764
Capital surplus		7,742		7,578
Retained earnings		76,671		72,255
Accumulated other comprehensive income, net		559		4,233

Total Stockholders’ Equity		120,774		119,830

Total Liabilities and Stockholders’ Equity	$	1,406,422	$	1,387,211

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,
	2004		2003
	(unaudited)		(unaudited)
Interest Income
Interest and fees on loans	$	14,239	$	12,006
Interest on deposits in other banks		1		—
Interest on investment securities:
Taxable		92		114
Interest and dividends on securities available for sale:
Taxable		2,125		1,970
Nontaxable		714		940
Dividends		77		108
Interest income on federal funds sold		7		65

Total Interest Income		17,255		15,203

Interest Expense
Interest on deposits		4,237		4,535
Interest on Federal Home Loan Bank advances		183		178
Interest on federal funds purchased and securities sold under agreements to repurchase		35		49
Interest on other short-term borrowings		44		2
Interest on trust preferred capital notes		194		—

Total Interest Expense		4,693		4,764

Net Interest Income		12,562		10,439
Less: Provision for loan losses		636		322

Net Interest Income after Provision for Loan Losses		11,926		10,117
Noninterest Income
Retail banking fees		2,050		1,440
Fees from fiduciary activities		684		710
Mortgage banking fees		836		1,259
Brokerage services		147		115
Other operating income		232		300
Gains on securities available for sale		—		46

Total Noninterest Income		3,949		3,870

Noninterest Expense
Compensation and employee benefits		5,948		5,326
Net occupancy expense		670		548
Supplies and equipment		1,095		999
Amortization-intangible assets		174		40
Computer services		442		291
Marketing		149		209
Capital stock taxes		141		195
Professional fees		290		144
Other operating expenses		1,726		1,443

Total Noninterest Expense		10,635		9,195

Income Before Income Tax Expense		5,240		4,792
Income tax expense		1,555		1,203

Net Income	$	3,685	$	3,589

Earnings per Share, basic and diluted	$	.51	$	.50

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,
	2004		2003
	(unaudited)		(unaudited)
Interest Income
Interest and fees on loans	$	28,294	$	24,214
Interest on deposits in other banks		2		2
Interest on investment securities:
Taxable		187		228
Interest and dividends on securities available for sale:
Taxable		4,557		3,890
Nontaxable		1,462		1,834
Dividends		124		163
Interest income on federal funds sold		9		144

Total Interest Income		34,635		30,475

Interest Expense
Interest on deposits		8,771		9,285
Interest on Federal Home Loan Bank advances		338		370
Interest on federal funds purchased and securities sold under agreements to repurchase		106		97
Interest on other short-term borrowings		144		3
Interest on trust preferred capital notes		222		—

Total Interest Expense		9,581		9,755

Net Interest Income		25,054		20,720
Less: Provision for loan losses		1,317		645

Net Interest Income after Provision for Loan Losses		23,737		20,075
Noninterest Income
Retail banking fees		3,599		2,688
Fees from fiduciary activities		1,460		1,489
Mortgage banking fees		1,481		2,322
Brokerage services		345		348
Other operating income		521		612
Gains on securities available for sale		—		70

Total Noninterest Income		7,406		7,529

Noninterest Expense
Compensation and employee benefits		11,808		10,584
Net occupancy expense		1,376		1,118
Supplies and equipment		2,139		1,947
Amortization-intangible assets		347		79
Computer services		741		632
Marketing		302		310
Capital stock taxes		310		385
Professional fees		491		356
Other operating expenses		3,556		2,934

Total Noninterest Expense		21,070		18,345

Income Before Income Tax Expense		10,073		9,259
Income tax expense		2,933		2,376

Net Income	$	7,140	$	6,883

Earnings per Share, basic	$	1.00	$	.96

Earnings per Share, diluted	$	.99	$	.96

See accompanying notes to consolidated financial statements.

- 5 -

VIRGINIA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

(000 OMITTED)

(unaudited)


	Common Stock		Capital Surplus		Accumulated Other Comprehensive Income		Retained Earnings		Comprehensive Income		Total
Balance, January 1, 2003	$	35,884	$	8,143	$	6,210	$	64,134			$	114,371
Net income		—		—		—		6,883		6,883		6,883
Other Comprehensive Income, net of tax:
Unrealized gain on securities available for sale during the period, net of tax of $964		—		—		—		—		1,792		—

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