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 September 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 October 30, 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	16-25

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	26

ITEM 4	Controls and Procedures	26

PART II - OTHER INFORMATION

ITEM 1	Legal Proceedings	26

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	26

ITEM 3	Defaults Upon Senior Securities	27

ITEM 4	Submission of Matters to a Vote of Security Holders	27

ITEM 5	Other Information	27

ITEM 6	Exhibits	27

PART I – FINANCIAL INFORMATION

ITEM 1. Financial statements

VIRGINIA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(000 OMITTED)


	SEPTEMBER 30, 2004		DECEMBER 31, 2003
	(unaudited)
ASSETS
Cash and due from depository institutions	$	49,135	$	43,719
Federal funds sold		3,395		1,222
Interest-bearing deposits in banks		132		237
Securities (market value: 2004, $298,349; 2003, $364,926)		297,942		364,298
Loans held for sale		5,924		5,174
Loans receivable, net		1,022,208		912,946
Bank premises and equipment, net		26,748		27,311
Interest receivable		5,669		5,914
Other real estate owned		5		454
Core deposit intangibles, net		5,726		6,247
Goodwill		14,033		14,033
Other assets		8,839		5,656

Total Assets	$	1,439,756	$	1,387,211

LIABILITIES
Deposits:
Noninterest-bearing demand deposits	$	220,355	$	216,560
Interest-bearing deposits		1,030,366		994,214

Total deposits		1,250,721		1,210,774

Federal funds purchased and securities sold under agreements to repurchase		20,160		33,155
Short-term borrowings		240		6,526
Federal Home Loan Bank advances		14,080		9,140
Trust preferred capital notes		20,000		—
Interest payable		2,135		2,223
Other liabilities		6,741		5,563
Commitments and contingencies		—		—

Total Liabilities		1,314,077		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 7,149,926 respectively)		35,802		35,764
Capital surplus		7,742		7,578
Retained earnings		79,232		72,255
Accumulated other comprehensive income, net		2,903		4,233

Total Stockholders’ Equity		125,679		119,830

Total Liabilities and Stockholders’ Equity	$	1,439,756	$	1,387,211

See accompanying notes to consolidated financial statements.

VIRGINIA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(000 OMITTED)


	THREE MONTHS ENDED SEPTEMBER 30,
	2004		2003
	(unaudited)		(unaudited)
Interest Income
Interest and fees on loans	$	14,969	$	12,167
Interest on deposits in other banks		1		29
Interest on investment securities:
Taxable		92		109
Interest and dividends on securities available for sale:
Taxable		2,023		2,066
Nontaxable		696		897
Dividends		132		96
Interest income on federal funds sold		23		25

Total Interest Income		17,936		15,389

Interest Expense
Interest on deposits		4,322		4,396
Interest on Federal Home Loan Bank advances		181		163
Interest on federal funds purchased and securities sold under agreements to repurchase		47		62
Interest on other short-term borrowings		5		1
Interest on trust preferred capital notes		220		—

Total Interest Expense		4,775		4,622

Net Interest Income		13,161		10,767
Less: Provision for loan losses		636		323

Net Interest Income after Provision for Loan Losses		12,525		10,444
Noninterest Income
Retail banking fees		2,011		1,455
Fees from fiduciary activities		676		673
Mortgage banking fees		534		1,288
Brokerage services		169		103
Other operating income		252		272
Gains on securities available for sale		—		365
Gains on other real estate owned		—		20

Total Noninterest Income		3,642		4,176

Noninterest Expense
Compensation and employee benefits		5,793		5,690
Net occupancy expense		697		561
Supplies and equipment		1,085		893
Amortization-intangible assets		173		39
Computer services		350		270
Telecommunications		227		184
Marketing		165		169
Capital stock taxes		145		193
Professional fees		162		219
Other operating expenses		1,636		1,689

Total Noninterest Expense		10,433		9,907

Income Before Income Tax Expense		5,734		4,713
Income tax expense		1,743		1,181

Net Income	$	3,991	$	3,532

Earnings per Share, basic	$	.56	$	.49

Earnings per Share, diluted	$	.55	$	.49

See accompanying notes to consolidated financial statements.

VIRGINIA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(000 OMITTED)


	NINE MONTHS ENDED SEPTEMBER 30,
	2004		2003
	(unaudited)		(unaudited)
Interest Income
Interest and fees on loans	$	43,263	$	36,381
Interest on deposits in other banks		3		31
Interest on investment securities:
Taxable		279		337
Interest and dividends on securities available for sale:
Taxable		6,580		5,956
Nontaxable		2,158		2,731
Dividends		256		259
Interest income on federal funds sold		32		169

Total Interest Income		52,571		45,864

Interest Expense
Interest on deposits		13,093		13,681
Interest on Federal Home Loan Bank advances		519		533
Interest on federal funds purchased and securities sold under agreements to repurchase		161		159
Interest on other short-term borrowings		141		4
Interest on trust preferred capital notes		442		—

Total Interest Expense		14,356		14,377

Net Interest Income		38,215		31,487
Less: Provision for loan losses		1,953		968

Net Interest Income after Provision for Loan Losses		36,262		30,519
Noninterest Income
Retail banking fees		5,610		4,143
Fees from fiduciary activities		2,136		2,162
Mortgage banking fees		2,015		3,610
Brokerage services		514		451
Other operating income		773		884
Gains on securities available for sale		—		435
Gains on other real estate owned		—		20

Total Noninterest Income		11,048		11,705

Noninterest Expense
Compensation and employee benefits		17,601		16,274
Net occupancy expense		2,073		1,679
Supplies and equipment		3,224		2,840
Amortization-intangible assets		520		118
Computer services		1,091		902
Telecommunications		794		567
Marketing		467		479
Capital stock taxes		455		578
Professional fees		653		575
Other operating expenses		4,624		4,240

Total Noninterest Expense		31,502		28,252

Income Before Income Tax Expense		15,808		13,972
Income tax expense		4,677		3,557

Net Income	$	11,131	$	10,415

Earnings per Share, basic	$	1.56	$	1.46

Earnings per Share, diluted	$	1.55	$	1.45

See accompanying notes to consolidated financial statements.

VIRGINIA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 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		—		—		—		10,415		10,415		10,415
Other Comprehensive Income, net of tax: </

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