VFGI Virginia Financial Grp. (MM)

CULPEPER, Va., Jan. 23 /PRNewswire-FirstCall/ -- Virginia Financial Group, Inc. (NASDAQ:VFGI) today reported record fourth quarter 2005 earnings of $5.0 million, an increase of 23.1% compared to earnings of $4.1 million for the fourth quarter of 2004. Net income per diluted share was $.69, up 23.2% compared to $.56 for the same period in 2004. VFG'S earnings for the fourth quarter of 2005 produced an annualized return on average assets (ROA) of 1.31% and an annualized return on average equity (ROE) of 14.59%, compared to prior year ratios of 1.11% and 12.84%, respectively. For the twelve months of 2005, net income was a record $18.2 million, up 19.8% from $15.2 million for the same period in 2004. Net income per diluted share was $2.52, up 19.4% from $2.11 for the twelve months of 2004. ROA and ROE for the twelve month period was 1.23% and 13.86%, respectively, compared to 1.07% and 12.40% for the same period in 2004. O.R. Barham, Jr., President and CEO, commented, "We are quite pleased with our financial results for 2005, making progress on many fronts and achieving a record level of earnings for the Company. The fourth quarter continued to show positive trends with margin expansion, excellent asset quality, improvement in efficiency and solid contribution from our mortgage division. We again saw our efficiency ratio drop to its lowest level in several years, and our return on average equity approached 15% for the fourth quarter. Balance sheet growth could frankly have been better, and we are seeing an acceleration of loan pay-off activity as increased real estate valuations have shortened the duration of many of our commercial customer's anticipated holding periods. We see this trend continuing in the first quarter of 2006. Nevertheless, we are excited about our plans for 2006 and look forward to executing our strategies with optimism and enthusiasm." REVENUE GROWTH Total revenue, comprised of net interest income and noninterest income, was $19.0 million for the fourth quarter of 2005, an increase of $2.3 million or 13.4% over $16.8 million in 2004. The largest component, net interest income, amounted to $15.2 million for the fourth quarter, up $1.9 million or 14.7% compared with $13.3 million for the same quarter in 2004. For the twelve months ended December 31, 2005, net interest income was $56.8 million, an increase of $5.4 million or 10.4% from $51.5 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 fourth quarter of 2005 was 4.40%, up four basis points sequentially compared to 4.36% for the third quarter of 2005, and up thirty-one basis points when compared to 4.09% for the fourth quarter of 2004. The net interest margin for the twelve months ended December 31, 2005 was 4.29%, compared to 4.04% for the same period in 2004. Total noninterest income was $3.8 million for the fourth quarter of 2005, an increase of $304 thousand or 8.7% compared to $3.5 million for the fourth quarter of 2004. Trust and brokerage fee income rose to $951 thousand for the quarter, an increase of $134 thousand or 16.4% over the same period in 2004. VFG experienced higher revenues and profitability from mortgage operations, with gross mortgage banking fees amounting to $910 thousand, an increase of $462 thousand or 103.1% when compared to $448 thousand for the fourth quarter of 2004, but down sequentially $112 thousand or 11.0% from the third quarter of 2005. NONINTEREST EXPENSE AND EFFICIENCY Noninterest expense for the fourth quarter of 2005 amounted to $11.3 million, up $1.1 million or 10.4% from $10.2 million for the same period in 2004, and up sequentially $185 thousand or 1.7% from the third quarter of 2005. For the twelve month period ended December 31, 2005, noninterest expense amounted to $43.7 million, an increase of $2.7 million or 6.5% over $41.0 million for the same period in 2004. As noted in our previous quarter, expenses accelerated in the fourth quarter due to increased costs associated with sales and credit training initiatives and incentive compensation related costs. The modest increase for the year is attributable to a fairly stable full-time equivalent employee count, no significant expansion activities during the period, and general improvements in overall efficiency. VFG's efficiency ratio was 57.8% for the quarter, compared to 59.4% for the same quarter in 2004. For the twelve month period ended December 31, 2005, the efficiency ratio was 59.1%, compared to 61.4% for the same period in 2004. BALANCE SHEET Average loans for the fourth quarter were $1.15 billion, up $108.2 million or 10.4% from the fourth quarter of 2004, and average total assets were $1.52 billion, up $60 million or 4.1% from the fourth quarter of 2004. Loans receivable decreased $22.0 million or 1.9% growth for the fourth quarter of 2005 on increased pay-off activity. The securities portfolio increased $28.3 million or 12.9% to $247.7 million. Average deposits for the fourth quarter were $1.27 billion, up $6 million or .5% from the fourth quarter of 2004. Excluding the impact of the sale of branches in Tazewell, Virginia during first quarter 2005, the growth rate was 2.6%. Sequentially, deposits decreased $13.3 million or 1.1% to $1.26 billion from third quarter 2005. While certificate of deposit balances were up $17.6 million or 3.5% for the quarter, VFG experienced decreases in each of its demand deposit categories. Non-interest bearing demand deposits were down $7.2 million or 2.8% for the quarter, due to lower balances associated with real estate closings, but are up $11.0 million or 4.6% when compared to a year ago. At December 31, 2005 VFG had total assets of $1.51 billion, compared to $1.45 billion at December 31, 2004. Shareholder's equity at December 31, 2005 was $136.1 million, an increase of $9.0 million or 7.1% compared to December 31, 2004. Shareholder's equity represented 9.04% of total assets at December 31, 2005, while tangible equity capital represented 7.92% of tangible assets at December 31, 2005. Book value at December 31, 2005 was $18.99 per share, compared to $17.75 at December 31, 2004. ASSET QUALITY Asset quality remains strong, with VFG's ratio of non-performing assets as a percentage of total assets amounting to .12% as of December 31, 2005, compared to .28% at December 31, 2004 and .11% at September 30, 2005. Net (recoveries) charge-offs as a percentage of average loans receivable amounted to (.003)% for the quarter and .01% for the twelve month period ended December 31, 2005, compared to .02% and .06% for the same periods in 2004. At December 31, 2005, the allowance for loan losses was approximately seven times the level of non-performing assets, while the allowance as a percentage of total loans amounted to 1.19%. VFG decreased its provision for by loan losses by $164 thousand or 28.2%, from $581 thousand for the three months ended December 31, 2004 compared to $417 thousand for the three months ended December 31, 2005. It also decreased its provision by $86 thousand when compared to the provision recorded for the third quarter of 2005, consistent with charge-off experience and general improvement in asset quality during the period. 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-six branches serving Central and Southwest Virginia, with a thirty seventh branch scheduled to open in Lynchburg next month. 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, (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 12/31/2005 12/31/2004 (Decrease) INCOME STATEMENT Interest income - taxable equivalent $ 22,324 $ 18,972 17.67% Interest expense 6,687 5,272 26.84% Net interest income - taxable equivalent 15,637 13,700 14.14% Less: taxable equivalent adjustment 422 434 -2.76% Net interest income 15,215 13,266 14.69% Provision for loan and lease losses 417 581 -28.23% Net interest income after provision for loan and lease losses 14,798 12,685 16.66% Noninterest income 3,800 3,496 8.70% Noninterest expense 11,279 10,220 10.36% Provision for income taxes 2,307 1,889 22.13% Net income $ 5,012 $ 4,072 23.08% PER SHARE DATA Basic earnings $ 0.70 $ 0.57 22.81% Diluted earnings $ 0.69 $ 0.56 23.21% Shares outstanding 7,172,734 7,161,499 Weighted average shares - Basic 7,171,232 7,160,782 Diluted 7,224,963 7,208,699 Dividends paid on common shares $ 0.22 $ 0.20 PERFORMANCE RATIOS Return on average assets 1.31% 1.11% 18.02% Return on average equity 14.59% 12.84% 13.63% Return on average realized equity(A) 14.46% 13.13% 10.13% Net interest margin (taxable equivalent) 4.40% 4.09% 7.58% Efficiency (taxable equivalent)(B) 57.78% 59.39% -2.71% ASSET QUALITY Allowance for loan losses Beginning of period $ 13,128 $ 11,300 Provision for loan losses 417 581 Charge offs (49) (264) Recoveries 85 89 End of period $ 13,581 $ 11,706 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 Twelve Months Ended Increase 12/31/2005 12/31/2004 (Decrease) INCOME STATEMENT Interest income - taxable equivalent $ 82,326 $ 72,889 12.95% Interest expense 23,861 19,628 21.57% Net interest income - taxable equivalent 58,465 53,261 9.77% Less: taxable equivalent adjustment 1,620 1,780 -8.99% Net interest income 56,845 51,481 10.42% Provision for loan and lease losses 2,012 2,534 -20.60% Net interest income after provision for loan and lease losses 54,833 48,947 12.03% Noninterest income 15,443 14,544 6.18% Noninterest expense 43,702 41,723 4.74% Provision for income taxes 8,358 6,565 27.31% Net income $ 18,216 $ 15,203 19.82% PER SHARE DATA Basic earnings $ 2.54 $ 2.12 19.81% Diluted earnings $ 2.52 $ 2.11 19.43% Shares outstanding 7,172,734 7,161,499 Weighted average shares - Basic 7,168,027 7,158,574 Diluted 7,217,368 7,201,750 Dividends paid on common shares $ 0.84 $ 0.78 PERFORMANCE RATIOS Return on average assets 1.23% 1.07% 14.95% Return on average equity 13.86% 12.40% 11.77% Return on average realized equity(A) 13.88% 12.70% 9.29% Net interest margin (taxable equivalent) 4.29% 4.09% 4.89% Efficiency (taxable equivalent)(B) 59.15% 61.44% -3.73% ASSET QUALITY Allowance for loan losses Beginning of period $ 11,706 $ 9,743 Provision for loan losses 2,012 2,534 Charge offs (452) (802) Recoveries 315 231 End of period $ 13,581 $ 11,706 Non-performing assets: Non-accrual loans $ 1,604 $ 2,552 Loans 90+ days past due and still accruing - - Other real estate owned 75 5 Troubled debt restructurings 154 1,451 Total non-performing assets $ 1,833 $ 4,008 to total assets: 0.12% 0.28% to total loans plus OREO: 0.16% 0.38% Allowance for loan losses to total loans 1.19% 1.10% Net charge-offs (recoveries) $ 137 $ 571 Net charge-offs to average loans outstanding 0.01% 0.06% 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 12/31/2005 12/31/2004 (Decrease) SELECTED BALANCE SHEET DATA End of period balances Cash and cash equivalents $ 48,017 $ 39,326 22.10% Securities available for sale 243,364 286,309 -15.00% Securities held to maturity 4,287 5,849 -26.71% Total securities 247,651 292,158 -15.23% Real estate - construction 115,944 116,888 -0.81% Real estate - 1-4 family residential 327,618 293,859 11.49% Real estate - commercial and multifamily 576,497 507,707 13.55% Commercial, financial and agricultural 78,110 94,887 -17.68% Consumer loans 40,876 44,379 -7.89% All other loans 3,485 3,448 1.07% Total loans 1,142,530 1,061,168 7.67% Deferred loan costs 546 407 34.15% Allowance for loan losses (13,581) (11,706) 16.02% Net loans 1,129,495 1,049,869 7.58% Other assets 80,021 68,255 17.24% Total assets 1,505,184 1,449,608 3.83% Noninterest bearing deposits 249,775 238,735 4.62% Money market & interest checking 360,656 379,793 -5.04% Savings 124,297 139,018 -10.59% CD's and other time deposits 520,781 499,618 4.24% Total deposits 1,255,509 1,257,164 -0.13% Short-term borrowed funds 45,865 21,970 108.76% Trust preferred capital notes 20,619 20,619 0.00% Federal Home Loan Bank advances 35,000 14,060 148.93% Other liabilities 12,086 8,706 38.82% Total liabilities 1,369,079 1,322,519 3.52% Total stockholders' equity $ 136,105 $ 127,090 7.09% Accumulated comprehensive income (loss) $ (2,013) $ 1,639 -222.82% Average balances Percent For the Twelve Months Ended Increase 12/31/2005 12/31/2004 (Decrease) Total assets $1,477,718 $1,423,204 3.83% Total stockholders' equity $ 131,437 $ 122,650 7.16% For the Three Months Ended 12/31/2005 12/31/2004 Total assets $1,515,012 $1,454,842 4.14% Total stockholders' equity $ 136,282 $ 126,157 8.03% QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands) Percent For the Three Months Ended Increase 12/31/2005 12/31/2004 (Decrease) Interest Income Interest and fees on loans $ 19,211 $ 15,676 22.55% Interest on deposits in other banks 30 1 - Interest and dividends on securities: Taxable 1,493 1,911 -21.87% Tax-exempt 695 696 -0.14% Dividends 136 134 1.49% Interest income on federal funds sold 338 120 181.67% Total interest income 21,903 18,538 18.15% Interest Expense Interest on deposits 5,593 4,766 17.35% Interest on federal funds repurchased and securities sold under agreements to repurchase 145 77 88.31% Interest on other short-term borrowings 179 2 - Interest on Federal Home Loan Bank advances 415 186 123.12% Interest on trust preferred capital notes 356 241 47.72% Total interest expense 6,688 5,272 26.86% Net interest income 15,215 13,266 14.69% Provision for loan losses 417 581 -28.23% Net interest income after provision for loan losses 14,798 12,685 16.66% Noninterest Income Retail banking fees 1,735 1,912 -9.26% Commissions and fees from fiduciary activities 747 668 11.83% Brokerage fee income 204 149 36.91% Other operating income 266 330 -19.39% Gains (losses) on sale of fixed assets (62) 6 - Gains (losses) on securities available for sale - 3 - Gains (losses) on sale of other real estate owned - (20) - Gains (losses) on sale of branches - - - Gain on sale of mortgage loans 910 448 103.13% Total noninterest income 3,800 3,496 8.70% Noninterest Expense Compensation and employee benefits 6,732 5,747 17.14% Net occupancy expense 601 648 -7.25% Supplies and equipment expenses 929 1,109 -16.23% Amortization-intangible assets 158 174 -9.20% Marketing 133 145 -8.28% State franchise taxes 208 144 44.44% Data processing 447 373 19.84% Telecommunications 248 261 -4.98% Professional fees 174 209 -16.75% Other operating expenses 1,649 1,410 16.95% Total noninterest expense 11,279 10,220 10.36% Income before income taxes 7,319 5,961 22.78% Income tax expense 2,307 1,889 22.13% Net income $ 5,012 $ 4,072 23.08% QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands) Percent For the Twelve Months Ended Increase 12/31/2005 12/31/2004 (Decrease) Interest Income Interest and fees on loans $ 70,712 $ 58,232 21.43% Interest on deposits in other banks 41 4 - Interest and dividends on securities: Taxable 6,447 8,770 -26.49% Tax-exempt 2,645 2,854 -7.32% Dividends 397 390 1.79% Interest income on federal funds sold 464 152 205.26% Total interest income 80,706 70,402 14.64% Interest Expense Interest on deposits 20,408 17,859 14.27% Interest on federal funds repurchased and securities sold under agreements to repurchase 568 238 138.66% Interest on other short-term borrowings 468 143 227.27% Interest on Federal Home Loan Bank advances 1,157 705 64.11% Interest on trust preferred capital notes 1,260 683 84.48% Total interest expense 23,861 19,628 21.57% Net interest income 56,845 50,774 11.96% Provision for loan losses 2,012 2,534 -20.60% Net interest income after provision for loan losses 54,833 48,240 13.67% Noninterest Income Retail banking fees 6,954 7,522 -7.55% Commissions and fees from fiduciary activities 2,954 2,804 5.35% Brokerage fee income 723 663 9.05% Other operating income 1,065 1,102 -3.36% Gains (losses) on sale of fixed assets (61) 6 - Gains (losses) on securities available for sale 296 3 - Gains (losses) on sale of other real estate owned - (20) - Gains (losses) on sale of branches 421 - - Gain on sale of mortgage loans 3,091 2,464 25.45% Total noninterest income 15,443 14,544 6.18% Noninterest Expense Compensation and employee benefits 25,284 22,669 11.54% Net occupancy expense 2,888 2,721 6.14% Supplies and equipment expenses 4,056 4,333 -6.39% Amortization-intangible assets 643 694 -7.35% Marketing 887 636 39.47% State franchise taxes 870 599 45.24% Data processing 1,389 1,464 -5.12% Telecommunications 1,017 1,055 -3.60% Professional fees 804 922 -12.80% Other operating expenses 5,864 5,923 -1.00% Total noninterest expense 43,702 41,016 6.55% Income before income taxes 26,574 21,768 22.08% Income tax expense 8,358 6,565 27.31% Net income $ 18,216 $ 15,203 19.82% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004 (Dollars in thousands) Three months ended December 31, 2005 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $ 1,146,423 $ 19,258 6.66% Investment securities Taxable 159,606 1,628 4.05% Tax exempt 67,135 1,070 6.32% Total investments 226,741 2,698 4.72% Interest bearing deposits 3,135 30 3.80% Federal funds sold 32,408 338 4.14% 262,284 3,066 4.64% Total earning assets 1,408,707 22,324 6.2872% Total nonearning assets 106,305 Total assets $ 1,515,012 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $ 187,417 $ 206 0.44% Money market 189,142 781 1.64% Savings 126,811 215 0.67% Time deposits: Less than $100,000 362,229 3,019 3.31% $100,000 and more 147,962 1,372 3.68% Total interest-bearing deposits 1,013,561 5,593 2.19% Federal funds purchased and securities sold under agreements to repurchase 16,209 145 3.55% Trust preferred capital notes 20,619 356 6.85% Other short term borrowings 25,337 178 2.79% Federal Home Loan Bank advances 35,000 415 4.70% 97,165 1,094 4.47% Total interest-bearing liabilities 1,110,726 6,687 2.3895% Total noninterest-bearing liabilities 268,004 Total liabilities 1,378,730 Stockholders' equity 136,282 Total liabilities and stockholders' equity $ 1,515,012 Net interest income (tax equivalent) $ 15,637 Average interest rate spread 3.90% Interest expense as percentage of average earning assets 1.88% Net interest margin 4.40% Three months ended December 31, 2004 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $ 1,038,215 $ 15,731 6.03% Investment securities Taxable 205,682 2,036 3.94% Tax exempt 63,703 1,084 6.77% Total investments 269,385 3,120 4.61% Interest bearing deposits 289 1 1.03% Federal funds sold 25,984 120 0.92% 295,658 3,241 4.36% Total earning assets 1,333,873 18,972 5.66% Total nonearning assets 120,969 Total assets $ 1,454,842 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $ 198,527 $ 196 0.39% Money market 183,725 454 0.98% Savings 141,549 231 0.65% Time deposits: Less than $100,000 370,884 2,806 3.01% $100,000 and more 126,407 1,079 3.40% Total interest-bearing deposits 1,021,092 4,766 1.86% Federal funds purchased and securities sold under agreements to repurchase 20,073 77 1.53% Trust preferred capital notes 20,000 241 4.79% Other short term borrowings 188 2 4.23% Federal Home Loan Bank advances 14,076 186 5.26% 54,337 506 3.70% Total interest-bearing liabilities 1,075,429 5,272 1.95% Total noninterest-bearing liabilities 253,256 Total liabilities 1,328,685 Stockholders' equity 126,157 Total liabilities and stockholders' equity $ 1,454,842 Net interest income (tax equivalent) $ 13,700 Average interest rate spread 3.71% Interest expense as percentage of average earning assets 1.57% Net interest margin 4.09% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES TWELVE MONTHS ENDED DECEMBER 31, 2005 AND 2004 (Dollars in thousands) Twelve months ended December 31, 2005 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $ 1,113,206 $ 70,908 6.37% Investment securities Taxable 173,668 6,844 3.94% Tax exempt 63,029 4,069 6.46% Total investments 236,697 10,913 4.61% Interest bearing deposits 1,256 41 3.26% Federal funds sold 12,968 464 3.58% 250,921 11,418 4.55% Total earning assets 1,364,127 82,326 6.04% Total nonearning assets 113,591 Total assets $ 1,477,718 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $ 192,987 $ 807 0.42% Money market 176,606 2,325 1.32% Savings 131,420 880 0.67% Time deposits: Less than $100,000 364,645 11,473 3.15% $100,000 and more 137,197 4,923 3.59% Total interest-bearing deposits 1,002,855 20,408 2.03% Federal funds purchased and securities sold under agreements to repurchase 21,189 568 2.68% Trust preferred capital notes 20,619 1,260 6.11% Other short term borrowings 16,486 468 2.84% Federal Home Loan Bank advances 25,212 1,157 4.59% 83,506 3,453 4.14% Total interest-bearing liabilities 1,086,361 23,861 2.19% Total noninterest-bearing liabilities 259,920 Total liabilities 1,346,281 Stockholders' equity 131,437 Total liabilities and stockholders' equity $ 1,477,718 Net interest income (tax equivalent) $ 58,465 Average interest rate spread 3.85% Interest expense as percentage of average earning assets 1.75% Net interest margin 4.29% Twelve months ended December 31, 2004 Average Interest Average Dollars in thousands Balance Inc/Exp Rates Assets Loans receivable, net $ 991,911 $ 58,463 5.89% Investment securities Taxable 233,429 9,160 3.92% Tax exempt 66,610 4,403 6.61% Total investments 300,039 13,563 4.52% Interest bearing deposits 416 4 0.96% Federal funds sold 9,044 152 1.68% 309,499 13,719 4.43% Total earning assets 1,301,410 72,182 5.55% Total nonearning assets 121,794 Total assets $ 1,423,204 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $ 195,131 $ 950 0.49% Money market 176,386 1,649 0.94% Savings 140,925 948 0.67% Time deposits: Less than $100,000 370,746 10,233 2.76% $100,000 and more 121,135 4,079 3.37% Total interest-bearing deposits 1,004,323 17,859 1.78% Federal funds purchased and securities sold under agreements to repurchase 23,801 238 1.00% Trust preferred capital notes 16,281 683 4.20% Other short term borrowings 10,277 143 1.39% Federal Home Loan Bank advances 12,960 705 5.44% 63,319 1,769 2.79% Total interest-bearing liabilities 1,067,642 19,628 1.84% Total noninterest-bearing liabilities 232,912 Total liabilities 1,300,554 Stockholders' equity 122,650 Total liabilities and stockholders' equity $ 1,423,204 Net interest income (tax equivalent) $ 52,554 Average interest rate spread 3.71% Interest expense as percentage of average earning assets 1.51% Net interest margin 4.04% First Call Analyst: FCMN Contact: 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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