VFGI Virginia Financial Grp. (MM)

CULPEPER, Va., Oct. 23 /PRNewswire-FirstCall/ -- Virginia Financial Group, Inc. (NASDAQ:VFGI) (VFG) today reported third quarter 2006 earnings of $5.1 million, an increase of 7.4% compared to earnings of $4.7 million for the third quarter of 2005. Net income per diluted share was $.47, an increase of 9.3% compared to $.43 for the same period in 2005. VFG's earnings for the third quarter of 2006 produced an annualized return on average assets (ROA) of 1.27% and an annualized return on average equity (ROE) of 13.88%, compared to prior year ratios of 1.26% and 14.03%, respectively. For the first nine months of 2006, net income was $14.8 million, up 11.9% from $13.2 million for the same period in 2005. Net income per diluted share was $1.36, up 11.5% from $1.22 for the first nine months of 2005. ROA and ROE for the nine month period was 1.27% and 13.91%, respectively, compared to 1.20% and 13.60% for the same period in 2005. O.R. Barham, Jr., President and CEO, commented, "We are proud of our results for the quarter, particularly in light of a sharply cooled real estate market in several of our legacy markets. Margin pressure accelerated during the quarter, exacerbated by accelerating funding costs and disintermediation of core deposits into higher cost time deposits and VFG commercial paper, which represents sweep funds of significant commercial banking demand deposit customers. In spite of such trends, the net interest margin was a respectable 4.21% for the quarter. We continue to have improved earnings contribution from our Virginia Commonwealth Trust Company affiliate, which helped to offset slowing revenue growth associated with our banking affiliates. Asset quality continues to be solid. While we anticipate a continuation of challenging market dynamics during the fourth quarter, we remain confident in our ability to continue our success." Net Interest Income Net interest income amounted to $15.2 million for the third quarter, up $512 thousand or 3.5% compared with $14.7 million for the same quarter in 2005. For the nine months ended September 30, 2006, net interest income was $45.3 million, an increase of $3.7 million or 8.8% from $41.6 million for the same period in 2005. Improvements in the growth and mix of average earning assets were primary contributors to this growth. The net interest margin for the third quarter of 2006 was 4.21%, down fourteen basis points sequentially compared to 4.35% for the second quarter of 2006, and down fifteen basis points when compared to 4.36% for the third quarter of 2005. The net interest margin for the nine month period ended September 30, 2006 was 4.31%, compared to 4.25% for the same period in 2005. Further margin contraction is likely in the fourth quarter. Non-Interest Income Total non-interest income was $3.9 million for the third quarter of 2006, essentially flat with the $3.9 million for the third quarter of 2005 and the $3.9 million for the second quarter of 2006. Retail banking fee income increased $48 thousand or 2.8% to $1.8 million, compared to $1.7 million in the third quarter of 2005. Mortgage banking revenue amounted to $686 thousand, a decrease of $336 thousand or 32.9%, as compared to $1.0 million for the third quarter of 2005, and down sequentially $167 thousand or 19.6% from the second quarter of 2006. Revenues from trust and brokerage for the third quarter were $897 thousand, up $43 thousand or 5.0% compared to $854 thousand in the third quarter of 2005. Fiduciary and brokerage assets under management were $576 million at September 30, 2006, representing a 13.2% growth rate for the nine month period. Included in non-interest income during third quarter 2006 was a net gain on sale of real estate of $216 thousand and income associated with an investment in bank owned life insurance of $120 thousand. Non-interest Expense Non-interest expense for the third quarter of 2006 amounted to $11.8 million, up $665 thousand or 6.0% from $11.1 million for the same period in 2005, and up sequentially $304 thousand or 2.7% from the second quarter of 2006. For the nine month period ended September 30, 2006, non-interest expense amounted to $34.4 million, an increase of $2.0 million or 6.1% over $32.4 million for the same period in 2005. These increases reflect operating costs associated with the openings of the Seminole Trail, Mill Creek and Langhorne Road branches during the past nine months. Professional fees associated with business advisory services and recruiting fees also added to the increase for the quarter. VFG's efficiency ratio was 60.8% for the quarter, compared to 58.3% for the same quarter in 2005. For both the nine month period ended September 30, 2006, and 2005 the efficiency ratio was 59.6%. Management anticipates some increase in operating expenses associated with the hiring of four additional commercial loan officers during the later stages of the third quarter, and the opening of our thirty-ninth and fortieth branches during the fourth quarter. Loan Portfolio Average loans for the third quarter were $1.19 billion, up $56.1 million or 4.9% from the third quarter of 2005, and flat sequentially with the $1.19 billion for the second quarter of 2006. Period end loans were up $5.2 million for the quarter and $61.4 million for the nine month period. While pipelines are down significantly from peaks experienced in early 2006, activity and levels appear to have stabilized. In addition, the previously mentioned additions to our commercial lending staff should supplement some loan growth in the fourth quarter. Deposits and Borrowings Average deposits for the third quarter were $1.28 billion, up $26.8 million or 2.1% from the third quarter of 2005, and up sequentially from the $1.26 billion for the second quarter of 2006. Average borrowings for the third quarter amounted to $148.2 million, an increase of $67.0 million or 83.0% compared to the same period in 2005, and up sequentially $4.3 million or 3.0% from the second quarter of 2006. Average balances in VFG commercial paper, which represents sweep funds of significant commercial demand deposit customers of each affiliate bank, increased to $56.5 million for the quarter, compared to $10.8 million for the same period in 2005. Capital At September 30, 2006 VFG had total assets of $1.59 billion, compared to $1.50 billion at September 30, 2005. Shareholder's equity at September 30, 2006 was $147.1 million, an increase of $13.0 million or 9.7% compared to September 30, 2005. Shareholder's equity represented 9.24% of total assets at September 30, 2006, while tangible equity capital represented 8.21% of tangible assets at September 30, 2006. Book value at September 30, 2006 was $13.72 per share, compared to $12.47 at September 30, 2005. Asset Quality Asset quality remains strong, with VFG's ratio of non-performing assets as a percentage of total assets amounting to .18% as of September 30, 2006, compared to .11% at September 30, 2005 and .16% at June 30, 2006. Net charge- offs (recoveries) as a percentage of average loans receivable amounted to (.02)% for the quarter and (.01)% for the nine month period ended September 30, 2006, compared to none and .02% for the same periods in 2005. At September 30, 2006, the allowance for loan losses was approximately five times the level of non-performing assets, while the allowance as a percentage of total loans amounted to 1.19%. VFG did not record a provision for loan losses for the third quarter, compared to $503 thousand for the three months ended September 30, 2005. Factors that lead to the reduction in provision included the receipt of loss recoveries of $357 thousand during the quarter, including a large unanticipated recovery of $289 thousand, as well as reduced loan growth and continuing strong asset quality during the period. Charter Consolidation VFG previously announced on October 16 that it will combine its Second Bank & Trust (Culpeper) affiliate and Virginia Heartland Bank (Fredericksburg) affiliate. The combined bank will retain the Second Bank & Trust name and charter, with 15 branches and pro forma assets of $715 million at September 30, 2006. The move is designed to create banks of sufficient size and depth to compete more effectively and accelerate growth prospects. The two banks to be combined are geographically contiguous, share increasingly similar market dynamics and offer the opportunity to create efficiencies and management depth. Pending regulatory approval, the banks will be combined in February 2007. Branching VFG had one new branch open during the third quarter, a Planters Bank branch located at 2102 Langhorne Rd. in Lynchburg, Virginia. This 14,000 square foot two story building will serve as a main office facility for several current and future sites in various stages of planning for that market. This branch represents the second entry into that market. Groundbreaking occurred as scheduled for two additional locations, including a branch at 1391 South High Street in Harrisonburg, Virginia, and a new main office facility for our Virginia Heartland affiliate located on Route 1 in Fredericksburg, Virginia. Subsequent to the end of the quarter, VFG's Second Bank affiliate opened its third branch in Charlottesville, a leased facility located at 1924 Arlington Boulevard in Charlottesville, Virginia. Planters Bank has also established a loan production operation in the greater Winchester market. 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-nine branches serving Central and Southwest Virginia. It also maintains five trust and investment service offices in its markets. 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 9/30/2006 9/30/2005 (Decrease) INCOME STATEMENT Interest income - taxable equivalent $25,246 $21,091 19.70% Interest expense 9,582 6,040 58.64% Net interest income - taxable equivalent 15,664 15,051 4.07% Less: taxable equivalent adjustment 495 394 25.63% Net interest income 15,169 14,657 3.49% Provision for loan and lease losses - 503 -100.00% Net interest income after provision for loan and lease losses 15,169 14,154 7.17% Noninterest income 3,898 3,870 0.72% Noninterest expense 11,759 11,094 5.99% Provision for income taxes 2,239 2,211 1.27% Net income $5,069 $4,719 7.42% PER SHARE DATA Basic earnings $0.47 $0.44 6.82% Diluted earnings $0.47 $0.43 8.46% Shares outstanding 10,771,272 10,756,242 Weighted average shares - Basic 10,771,661 10,755,788 Diluted 10,856,835 10,828,869 Dividends paid on common shares $0.15 $0.14 PERFORMANCE RATIOS Return on average assets 1.27% 1.26% 0.79% Return on average equity 13.88% 14.03% -1.07% Return on average realized equity (A) 13.75% 14.03% -2.00% Net interest margin (taxable equivalent) 4.21% 4.36% -3.44% Efficiency (taxable equivalent) (B) 60.77% 58.29% 4.25% ASSET QUALITY Allowance for loan losses Beginning of period $14,043 $12,664 Provision for loan losses - 503 Charge offs (88) (83) Recoveries 357 44 End of period $14,312 13,128 Non-performing assets: Non-accrual loans $2,757 $1,422 Loans 90+ days past due and still accruing - - Other real estate owned 123 41 Troubled debt restructurings - 173 Total non-performing assets $2,880 $1,636 to total assets: 0.18% 0.11% to total loans plus OREO: 0.24% 0.14% Allowance for loan losses to total loans 1.19% 1.13% Net charge-offs (recoveries) $(269) $39 Net charge-offs (recoveries) to average loans outstanding -0.02% 0.00% 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. (C) Individual amounts shown above are calculated from actual, not rounded amounts in the thousands, which appear above. QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands, except per share data) Percent For the Nine Months Ended Increase 9/30/2006 9/30/2005 (Decrease) INCOME STATEMENT Interest income - taxable equivalent $71,847 $60,002 19.74% Interest expense 25,112 17,173 46.23% Net interest income - taxable equivalent 46,735 42,829 9.12% Less: taxable equivalent adjustment 1,459 1,199 21.68% Net interest income 45,276 41,630 8.76% Provision for loan and lease losses 610 1,595 -61.76% Net interest income after provision for loan and lease losses 44,666 40,035 11.57% Noninterest income 11,041 11,643 -5.17% Noninterest expense 34,400 32,424 6.09% Provision for income taxes 6,535 6,051 8.00% Net income $14,772 $13,203 11.88% PER SHARE DATA Basic earnings $1.37 $1.23 11.68% Diluted earnings $1.36 $1.22 11.48% Shares outstanding 10,771,272 10,756,242 Weighted average shares - Basic 10,769,170 10,750,421 Diluted 10,851,158 10,822,208 Dividends paid on common shares $0.45 $0.41 PERFORMANCE RATIOS Return on average assets 1.27% 1.20% 5.83% Return on average equity 13.91% 13.60% 2.28% Return on average realized equity (A) 13.74% 13.67% 0.51% Net interest margin (taxable equivalent) 4.31% 4.25% 1.41% Efficiency (taxable equivalent) (B) 59.60% 59.64% -0.07% ASSET QUALITY Beginning of period $13,581 $11,706 Provision for loan losses 610 1,595 Charge offs (314) (403) Recoveries 435 230 End of period $14,312 $13,128 Non-performing assets Non-accrual loans $2,757 $1,422 Loans 90+ days past due and still accruing - - Other real estate owned 123 41 Troubled debt restructurings - 173 Total non-performing assets $2,880 $1,636 to total assets: 0.18% 0.11% to total loans plus OREO: 0.24% 0.14% Allowance for loan losses to total loans 1.19% 1.13% Net charge-offs (recoveries) $(121) $173 Net charge-offs (recoveries) to average loans outstanding -0.01% 0.02% 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. (C) Individual amounts shown above are calculated from actual, not rounded amounts in the thousands, which appear above QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands, except per share data) Percent Increase 9/30/2006 9/30/2005 (Decrease) SELECTED BALANCE SHEET DATA End of period balances Cash and cash equivalents $44,803 $52,874 -15.26% Securities available for sale 267,789 215,070 24.51% Securities held to maturity 3,326 4,284 -22.36% Total securities 271,115 219,354 23.60% Real estate - construction 192,113 132,073 45.46% Real estate - 1-4 family residential 302,706 325,860 -7.11% Real estate - commercial and multifamily 566,497 577,243 -1.86% Commercial, financial and agricultural 101,920 84,951 19.98% Consumer loans 34,134 41,943 -18.62% All other loans 6,585 2,496 163.82% Total loans 1,203,955 1,164,566 3.38% Deferred loan costs 858 477 79.87% Allowance for loan losses (14,312) (13,128) 9.02% Net loans 1,190,501 1,151,915 3.35% Other assets 86,135 80,750 6.67% Total assets 1,592,554 1,504,893 5.83% Noninterest bearing deposits 241,666 257,019 -5.97% Money market & interest checking 347,851 379,579 -8.36% Savings 100,462 129,051 -22.15% CD's and other time deposits 595,543 503,180 18.36% Total deposits 1,285,522 1,268,829 1.32% Federal funds purchased and securities sold under agreements to repurchase - 15,650 -100.00% Federal Home Loan Bank advances 65,000 40,000 62.50% Trust preferred capital notes 20,619 20,619 0.00% Commercial paper 61,632 15,965 286.04% Other borrowed funds 1,335 866 54.16% Other liabilities 11,306 8,855 27.68% Total liabilities 1,445,414 1,370,784 5.44% Total stockholders' equity $147,140 $134,109 9.72% Accumulated comprehensive loss $(1,137) $(480) 136.88% Average balances For the Nine Months Percent Ended Increase 9/30/2006 9/30/2005 (Decrease) Total assets $1,557,652 $1,465,144 6.31% Total stockholders' equity $141,955 $129,799 9.37% For the Three Months Ended 9/30/2006 9/30/2005 Total assets $1,587,664 $1,480,148 7.26% Total stockholders' equity $144,848 $133,444 8.55% OTHER DATA End of period full time employees 569 504 QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands) For the Three Months Percent Ended Increase 9/30/2006 9/30/2005 (Decrease) Interest Income Interest and fees on loans $21,618 $18,335 17.91% Interest on deposits in other banks 5 4 25.00% Interest and dividends on securities: Taxable 1,772 1,532 15.67% Tax-exempt 844 641 31.67% Dividends 131 79 65.82% Interest income on federal funds sold 381 106 259.43% Total interest income 24,751 20,697 19.59% Interest Expense Interest on deposits 7,601 5,195 46.31% Interest on federal funds repurchased and securities sold under agreements to repurchase 25 135 -81.48% Interest on Federal Home Loan Bank advances 860 297 189.56% Interest on trust preferred capital notes 434 328 32.32% Interest on commercial paper 658 80 722.50% Interest on other borrowings 4 5 -20.00% Total interest expense 9,582 6,040 58.64% Net interest income 15,169 14,657 3.49% Provision for loan losses - 503 -100.00% Net interest income after provision for loan losses 15,169 14,154 7.17% Noninterest Income Retail banking fees 1,793 1,745 2.75% Commissions and fees from fiduciary activities 728 696 4.60% Brokerage fee income 169 158 6.96% Other operating income 306 247 23.89% Gain on sale of fixed assets 216 2 10700.00% Gain (loss) on securities available for sale - - - Gains (losses) on sale of other real estate owned - - - Gain on sale of mortgage loans 686 1,022 -32.88% Total noninterest income 3,898 3,870 0.72% Noninterest Expense Compensation and employee benefits 6,636 6,456 2.79% Net occupancy expense 750 787 -4.70% Supplies and equipment expenses 1,042 919 13.38% Amortization-intangible assets 161 158 1.90% Marketing 329 296 11.15% State franchise tax 252 208 21.15% Data processing 333 315 5.71% Telecommunications 223 273 -18.32% Professional fees 355 232 53.02% Other operating expenses 1,678 1,450 15.72% Total noninterest expense 11,759 11,094 5.99% Income before income taxes 7,308 6,930 5.45% Income tax expense 2,239 2,211 1.27% Net income $5,069 $4,719 7.42% QUARTERLY PERFORMANCE SUMMARY Virginia Financial Group, Inc. (NASDAQ:VFGI) (Dollars in thousands) For the Nine Months Percent Ended Increase 9/30/2006 9/30/2005 (Decrease) Interest Income Interest and fees on loans $61,885 $51,501 20.16% Interest on deposits in other banks 70 11 536.36% Interest and dividends on securities: Taxable 4,782 4,967 -3.72% Tax-exempt 2,504 1,937 29.27% Dividends 357 261 36.78% Interest income on federal funds sold 790 126 526.98% Total interest income 70,388 58,803 19.70% Interest Expense Interest on deposits 20,157 14,815 36.06% Interest on federal funds repurchased and securities sold under agreements to repurchase 173 423 -59.10% Interest on Federal Home Loan Bank advances 2,065 936 120.62% Interest on trust preferred capital notes 1,209 904 33.74% Interest on commercial paper 1,491 82 1718.29% Interest on other borrowings 17 13 30.77% Total interest expense 25,112 17,173 46.23% Net interest income 45,276 41,630 8.76% Provision for loan losses 610 1,595 -61.76% Net interest income after provision for loan losses 44,666 40,035 11.57% Noninterest Income Retail banking fees 5,166 5,219 -1.02% Commissions and fees from fiduciary activities 2,321 2,207 5.17% Brokerage fee income 566 519 9.06% Other operating income 722 799 -9.64% Gain on sale of fixed assets 292 1 29100.00% Gain (loss) on securities available for sale (199) 296 -167.23% Gain on sale of branches - 421 - Gain on sale of mortgage loans 2,173 2,181 -0.37% Total noninterest income 11,041 11,643 -5.17% Noninterest Expense Compensation and employee benefits 19,833 18,552 6.90% Net occupancy expense 2,248 2,184 2.93% Supplies and equipment expenses 3,035 3,127 -2.94% Amortization-intangible assets 417 485 -14.02% Marketing 762 754 1.06% State franchise tax 716 662 8.16% Data processing 1,024 942 8.70% Telecommunications 770 770 0.00% Professional fees 634 629 0.79% Other operating expenses 4,961 4,319 14.86% Total noninterest expense 34,400 32,424 6.09% Income before income taxes 21,307 19,254 10.66% Income tax expense 6,535 6,051 8.00% Net income $14,772 $13,203 11.88% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (Dollars in thousands) Three months ended September 30, 2006 2005 Average Interest Average Average Interest Average Dollars in thousands Balance Inc/Exp Rates Balance Inc/Exp Rates Assets Loans receivable, net $1,192,675 $21,658 7.20% $1,130,355 $18,383 6.45% Investment securities Taxable 171,150 1,903 4.41% 164,792 1,610 3.88% Tax exempt 84,315 1,299 6.11% 61,207 988 6.40% Total investments 255,465 3,202 4.97% 225,999 2,598 4.56% Interest bearing deposits 575 5 3.45% 823 4 1.93% Federal funds sold 28,174 381 5.37% 12,422 106 3.39% 284,214 3,588 5.01% 239,244 2,708 4.49% Total earning assets 1,476,889 25,246 6.78% 1,369,599 21,091 6.11% Total nonearning assets 110,775 110,549 Total assets $1,587,664 $1,480,148 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $166,206 $240 0.57% $189,899 $202 0.42% Money market 170,955 1,020 2.37% 176,364 601 1.35% Savings 104,623 179 0.68% 130,959 222 0.67% Time deposits: Less than $100,000 406,289 4,040 3.95% 363,943 2,883 3.14% $100,000 and more 194,008 2,122 4.34% 138,015 1,287 3.70% Total interest -bearing deposits 1,042,081 7,601 2.89% 999,180 5,195 2.06% Federal funds purchased and securities sold under agreements to repurchase 1,829 25 5.42% 17,607 135 3.04% Federal Home Loan Bank advances 69,348 860 4.92% 32,018 297 3.68% Trust preferred capital notes 20,619 434 8.35% 20,619 328 6.31% Commercial paper 56,092 658 4.65% 10,345 80 3.07% Other borrowings 374 4 4.24% 444 5 4.47% 148,262 1,981 5.30% 81,033 845 4.14% Total interest- bearing liabilities 1,190,343 9,582 3.19% 1,080,213 6,040 2.22% Total noninterest- bearing liabilities 252,473 266,491 Total liabilities 1,442,816 1,346,704 Stockholders' equity 144,848 133,444 Total liabilities and stockholders' equity $1,587,664 $1,480,148 Net interest income (tax equivalent) $15,664 $15,051 Average interest 3.59% 3.89% rate spread Interest expense as percentage of average earning assets 2.57% 1.75% Net interest margin 4.21% 4.36% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (Dollars in thousands) Nine months ended September 30, 2006 2005 Average Interest Average Average Interest Average Dollars in thousands Balance Inc/Exp Rates Balance Inc/Exp Rates Assets Loans receivable, net $1,179,781 $61,996 7.03% $1,102,011 $51,650 6.27% Investment securities Taxable 159,480 5,139 4.31% 178,407 5,216 3.91% Tax exempt 83,102 3,852 6.20% 61,645 2,999 6.50% Total investments 242,582 8,991 4.96% 240,052 8,215 4.58% Interest bearing deposits 3,439 70 2.72% 524 11 2.81% Federal funds sold 27,148 790 3.89% 6,417 126 2.63% 273,169 9,851 4.83% 246,993 8,352 4.53% Total earning assets 1,452,950 71,847 6.62% 1,349,004 60,002 5.95% Total nonearning assets 104,702 116,140 Total assets $1,557,652 $1,465,144 Liabilities and Stockholders' Equity Interest-bearing deposits Interest checking $173,469 $683 0.53% $194,863 $601 0.41% Money market 164,785 2,399 1.95% 172,382 1,544 1.20% Savings 111,483 548 0.66% 132,972 665 0.67% Time deposits: Less than $100,000 390,365 10,833 3.71% 365,460 8,454 3.09% $100,000 and more 184,747 5,693 4.12% 133,570 3,551 3.55% Total interest- bearing deposits 1,024,849 20,156 2.63% 999,247 14,815 1.98% Federal funds purchased and securities sold under agreements to repurchase 12,074 173 1.92% 22,868 423 2.47% Federal Home Loan Bank advances 60,470 2,065 4.57% 30,715 936 4.07% Trust preferred capital notes 20,619 1,210 7.85% 20,619 904 5.86% Commercial paper 45,142 1,491 4.42% 3,603 82 3.04% Other borrowings 365 17 6.23% 1,098 13 1.58% 138,670 4,956 4.78% 78,903 2,358 4.00% Total interest- bearing liabilities 1,163,519 25,112 2.89% 1,078,150 17,173 2.13% Total noninterest- bearing liabilities 252,178 257,195 Total liabilities 1,415,697 1,335,345 Stockholders' equity 141,955 129,799 Total liabilities and stockholders' equity $1,557,652 $1,465,144 Net interest income (tax equivalent) $46,735 $42,829 Average interest rate spread 3.73% 3.82% Interest expense as percentage of average earning assets 2.31% 1.70% Net interest margin 4.31% 4.25% DATASOURCE: Virginia Financial Group, Inc. CONTACT: Jeffrey W. Farrar, Executive Vice President and CFO of Virginia Financial Group, Inc., +1-540-829-1603, Web site: http://www.vfgi.net/

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