Virginia Financial Grp. (MM) (NASDAQ:VFGI)
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Virginia Financial Group, Inc. Announces Record Earnings for
Fourth Quarter and Year 2004
CULPEPER, Va., Jan. 21 /PRNewswire-FirstCall/ -- Virginia Financial Group,
Inc. (NASDAQ:VFGI) today reported record earnings of $4.1 million, an increase
of 32.3% over 2003 earnings of $3.1 million. For the year ended December 31,
2004, VFG also achieved record earnings of $15.2 million, an increase of 12.7%
over 2003 earnings of $13.5 million. Diluted earnings per share for the fourth
quarter and year 2004 amounted to $.56 and $2.11 per share, compared to $.43
and $1.88 per share in 2003. Earnings for the three- month period produced a
return on average assets of 1.11% and a return on average equity of 12.84%.
Earnings for the twelve-month period produced a return on average assets of
1.07% and a return on average equity of 12.40%.
"We are pleased to report record earnings for the year," said President and
Chief Executive Officer O.R. Barham, Jr. "We had many accomplishments in 2004,
both financial and non-financial. We have worked hard to assimilate our family
of banks and trust company to maximize the customer experience, and position
ourselves for future growth. Our earnings growth was achieved in spite of a
significant reduction in contribution from our mortgage operations, which
experienced reductions in volume consistent with the industry. Non- financial
accomplishments included adding management strength, improving our overall
effectiveness and efficiency, and enhancing our overall control environment.
We are poised to accelerate our growth initiatives in 2005 and look to
maintaining our earnings momentum."
Review of Financial Performance
Revenue Growth
Revenues for the fourth quarter of 2004 were $16.8 million, an increase of $1.1
million or 7.1% over $15.6 million in 2003. The largest component, net
interest income, amounted to $13.3 million for the fourth quarter, up $1.1
million or 9.4% compared with $12.1 million for the same quarter in 2003.
Growth in average earning assets and an improving net interest margin were
primary contributors to this growth. For the year ended December 31, 2004, net
interest income was $51.5 million, an increase of $7.9 million or 18.0% from
$43.6 million for the same period in 2003. The net interest margin for the
fourth quarter of 2004 was 4.09%, compared to 4.02% for the same quarter in
2003. The net interest margin for the twelve-month period ended December 31,
2004 was 4.09%, compared to 4.16% for the same period in 2003.
Noninterest income was $3.5 million for the fourth quarter of 2004, equal to
the $3.5 million realized for the same period in 2003. For the year ended
December 31, 2004, noninterest income was $14.5 million, a decrease of $683
thousand or 4.5% from $15.2 million realized in 2003. Mortgage banking revenue
continued to contract consistent with refinance activity, with revenues of $448
thousand for the quarter, compared to $582 thousand for the same period in 2003
and $534 thousand for the third quarter of 2004. Other sources of noninterest
income experienced growth for the quarter, with retail banking services up $283
thousand or 17.4% and fees from trust and brokerage services up $46 thousand or
6.0%.
Overhead and Efficiency
Noninterest expense was $10.2 million for the quarter, a decrease of $535
thousand or 5.0% from the $10.8 million for the fourth quarter of 2003. For
the year ended December 31, 2004, noninterest expense increased to $41.7
million, an increase of $2.7 million or 7.0% compared to $39.0 million for the
year 2003. Included in the 2003 results are non-operating expenses of $476
thousand for the fourth quarter and $708 thousand for the year associated with
the integration of eight First Virginia Branches purchased in September 2003.
Excluding these nonrecurring costs, fourth quarter overhead was essentially
flat for 2004 vs. 2003, and annual overhead increased 8.9%. The annual
increase can be attributed to growth in expenses and amortization of
intangibles associated with a full year of operations for loan production
offices in Charlottesville and Lynchburg, and the eight branches purchased from
First Virginia. These expenses were offset somewhat by decreases in costs
associated with mortgage related commissions, medical benefit claims
experience, and other incentive related accruals. VFG's efficiency ratio
improved to 59.39% for the fourth quarter of 2004, compared to 64.09% for the
same quarter in 2003 and 60.25% in the third quarter of 2004. For the year
ended December 31, 2004, VFG's efficiency ratio also improved to 61.45%,
compared to 63.64% for the same period in 2003, adjusted for the aforementioned
non-recurring expenses incurred in 2003.
Asset Quality
VFG's credit quality continues to be sound and compares favorably with its peer
group. Nonperforming assets were $4.0 million at December 31, 2004,
representing a ratio of non-performing assets to total assets of .28%, and a
ratio to period-end loans and other real estate owned of .38%, compared to .53%
and .80% for year end 2003. Net charge-offs as a percentage of average loans
receivable amounted to .02% for the quarter, compared to .03% on a
linked-quarter comparison and .03% for the fourth quarter in 2003. Net
charge-offs were .06% of average loans for the year ended December 31, 2004,
compared to .09% for the year ended December 31, 2003. The allowance for loan
losses represented 1.10% of loans receivable at December 31, 2004, compared to
1.06% at December 31, 2003. Increases noted in the provision for loan losses
for the quarter and year was consistent with the level of loan growth and
change in loan mix experienced in 2004.
Balance Sheet
VFG's loan portfolio increased $139.9 million or 15.2% to $1.063 billion at
December 31, 2004, compared to $923.1 million as of the same date in 2003. For
the fourth quarter of 2004, VFG's loan portfolio grew $28.0 million or 2.7%.
The growth in loans for the quarter was fairly distributed between our
Culpeper, Fredericksburg, Charlottesville and Lynchburg lending units. Annual
loans growth was funded with deposit growth of $58.8 million, long term
borrowings of $24.9 million, and proceeds from maturities in its securities
portfolio of $64.1 million.
VFG ended the year with assets of $1.449 billion, compared to $1.387 billion at
the same date last year, representing growth of $62 million or 4.4%. Virginia
Commonwealth Trust Company ended the year with fiduciary and brokerage assets
of $515 million, up $27.0 million or 7.2% from 2003.
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-seven branches serving Central and Southwest Virginia. It also
maintains five trust and investment service offices in its markets, and loan
production offices located in Charlottesville and Lynchburg.
This press release contains forward-looking statements as defined by federal
securities laws. These statements may address certain results that are
expected or anticipated to occur or otherwise state the company's predictions
for the future. These particular forward-looking statements and all other
statements that are not historical facts are subject to a number of risks and
uncertainties, and actual results may differ materially. Such factors include
but are not limited to: general economic conditions, changes in the lending
environment, significant fluctuations in interest rates that could reduce net
interest margin; difficulties in executing integration plans: reduction of fee
income from existing products due to market conditions; and the amount of
growth in the company's general and administrative expenses. Consequently,
these cautionary statements qualify all forward-looking statements made herein.
Please refer to VFG's filings with the Securities and Exchange Commission for
additional information, which may be accessed at http://www.vfgi.net/.
This press release refers to the efficiency ratio, which is computed by
dividing non-interest expense excluding expenses on other real estate owned by
the sum of net interest income on a tax equivalent basis and non-interest
income. This is a non-GAAP financial measure that we believe provides
investors with important information regarding our operational efficiency. This
press release also contains financial information that excludes non- operating
charges incurred in 2003 to arrive at what management considers being core
operating results. 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."
QUARTERLY PERFORMANCE SUMMARY
Virginia Financial Group, Inc. (NASDAQ:VFGI)
(Dollars in thousands, except per share data)
Percent
For the Three Months Ended Increase
12/31/2004 12/31/2003 (Decrease)
INCOME STATEMENT
Interest income -- taxable equivalent $18,972 $17,606 7.76%
Interest expense 5,272 4,980 5.86%
Net interest income -- taxable
equivalent 13,700 12,626 8.51%
Less: taxable equivalent adjustment 434 502 -13.55%
Net interest income 13,266 12,124 9.42%
Provision for loan and lease losses 581 322 80.43%
Net interest income after provision
for loan and lease losses 12,685 11,802 7.48%
Noninterest income 3,496 3,522 -0.74%
Noninterest expense 10,220 10,755 -4.97%
Provision for income taxes 1,889 1,492 26.61%
Net income $4,072 $3,077 32.34%
PER SHARE DATA
Basic earnings $0.57 $0.43 32.56%
Diluted earnings $0.56 $0.43 30.23%
Shares outstanding 7,161,499 7,152,885
Weighted average shares --
Basic 7,160,782 7,150,864
Diluted 7,208,699 7,191,748
Shares repurchased - -
Average price of shares repurchased $- $-
Dividends paid on common shares $0.20 $0.19
PERFORMANCE RATIOS
Return on average assets 1.11% 0.89% 24.72%
Return on average equity 12.84% 10.36% 23.94%
Return on average realized equity(A) 13.13% 10.69% 22.83%
Net yield on earning assets
(taxable equivalent) 4.09% 4.02% 1.74%
Efficiency (taxable equivalent)(B) 59.39% 64.09% -7.33%
ASSET QUALITY
Allowance for loan losses
Beginning of period $11,300 $9,658
Provision for loan losses 581 322
Charge offs (264) (277)
Recoveries 89 40
End of period $11,706 $9,743
Allowance for loan losses to total loans
Net charge-offs (recoveries) $175 $237
Net charge-offs to average loans
outstanding 0.02% 0.03%
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 foreclosed property expense for all periods.
QUARTERLY PERFORMANCE SUMMARY
Virginia Financial Group, Inc. (NASDAQ:VFGI)
(Dollars in thousands, except per share data)
For the Twelve Months Percent
Ended Increase
12/31/2004 12/31/2003 (Decrease)
INCOME STATEMENT
Interest income -- taxable equivalent $72,889 $65,168 11.85%
Interest expense 19,628 19,357 1.40%
Net interest income -- taxable
equivalent 53,261 45,811 16.26%
Less: taxable equivalent adjustment 1,780 2,200 -19.09%
Net interest income 51,481 43,611 18.05%
Provision for loan and lease losses 2,534 1,290 96.43%
Net interest income after provision
for loan and lease losses 48,947 42,321 15.66%
Noninterest income 14,544 15,227 -4.49%
Noninterest expense 41,723 39,007 6.96%
Provision for income taxes 6,565 5,049 30.03%
Net income $15,203 $13,492 12.68%
PER SHARE DATA
Basic earnings $2.12 $1.89 12.17%
Diluted earnings $2.11 $1.88 12.23%
Shares outstanding 7,161,499 7,152,885
Weighted average shares --
Basic 7,158,574 7,155,814
Diluted 7,203,540 7,192,484
Shares repurchased - 28,507
Average price of shares repurchased $- $28.68
Dividends paid on common shares $0.78 $0.76
PERFORMANCE RATIOS
Return on average assets 1.07% 1.13% -5.31%
Return on average equity 12.40% 11.47% 8.11%
Return on average realized equity(A) 12.70% 12.12% 4.79%
Net yield on earning assets
(taxable equivalent) 4.09% 4.16% -1.68%
Efficiency (taxable equivalent)(B) 61.44% 63.28% -2.91%
ASSET QUALITY
Non-performing assets:
Non-accrual loans $2,552 $2,677
Loans 90+ days past due and still
accruing - 25
Other real estate owned 5 136
Troubled debt restructurings 1,451 4,525
Total non-performing assets $4,008 $7,363
to total assets: 0.28% 0.53%
to total loans plus OREO: 0.38% 0.80%
Allowance for loan losses to total loans
Net charge-offs (recoveries) $571 $727
Net charge-offs to average loans
outstanding 0.06% 0.09%
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 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
12/31/2004 12/31/2003 (Decrease)
SELECTED BALANCE SHEET DATA
End of period balances
Securities available for sale $286,310 $359,124 -20.28%
Securities held to maturity 5,848 5,174 13.03%
Total securities 292,158 364,298 -19.80%
Real estate -- construction 116,888 94,372 23.86%
Real estate -- 1-4 family residential 315,736 303,408 4.06%
Real estate -- commercial and
multifamily 496,562 394,700 25.81%
Commercial, financial and
agricultural 85,324 76,075 12.16%
Consumer loans 44,625 50,163 -11.04%
All other loans 3,423 3,972 -13.82%
Total loans 1,062,558 922,690 15.16%
Allowance for loan losses (11,706) (9,743) 20.15%
Other earning assets 1,794 1,459 22.96%
Total earning assets 1,356,510 1,288,447 5.28%
Total assets 1,449,000 1,387,211 4.45%
Non-interest bearing deposits 238,497 216,560 10.13%
Money market & interest checking 379,793 373,225 1.76%
Savings 139,018 136,757 1.65%
CD's and other time deposits 499,618 484,232 3.18%
Total deposits 1,256,926 1,210,774 3.81%
Short-term borrowed funds 21,970 39,681 -44.63%
Trust preferred capital notes 20,000 - 100.00%
Federal Home Loan Bank advances 14,060 9,140 53.83%
Total interest-bearing
liabilities 1,074,459 1,043,035 3.01%
Total stockholders' equity $127,090 $119,830 6.06%
Average balances
Total assets $1,422,715 $1,196,873 18.87%
Total stockholders' equity $122,650 $117,580 4.31%
Average Balances For the Three Months Percent
Ended Increase
12/31/2004 12/31/2003 (Decrease)
Total assets $ 1,454,842 $1,372,613 5.99%
Total stockholders' equity $126,157 $114,133 10.54%
QUARTERLY PERFORMANCE SUMMARY
Virginia Financial Group, Inc. (NASDAQ:VFGI)
(Dollars in thousands)
For the Three For the Twelve
Months Ended Months Ended
12/31/04 12/31/03 12/31/04 12/31/03
Interest Income
Interest and fees on loans $15,676 $13,609 $58,939 $49,990
Interest on deposits in other banks 1 28 4 59
Interest on investment securities:
Taxable 61 103 340 440
Interest and dividends on securities
available for sale:
Taxable 1,850 2,455 8,430 8,411
Nontaxable 696 791 2,854 3,522
Dividends 134 99 390 358
Interest income on federal funds sold 120 19 152 188
Total Interest Income 18,538 17,104 71,109 62,968
Interest Expense
Interest on deposits 4,766 4,753 17,859 18,434
Interest on trust preferred 241 - 683 -
Interest on Federal Home Loan Bank
advances 186 161 705 694
Interest on federal funds
repurchased and securities sold
under agreements to repurchase 77 30 238 189
Interest on other short-term
borrowings 2 36 143 40
Total Interest Expense 5,272 4,980 19,628 19,357
Net Interest Income 13,266 12,124 51,481 43,611
Provision for loan losses 581 322 2,534 1,290
Net Interest Income after Provision
for Loan Losses 12,685 11,802 48,947 42,321
Other Income
Retail banking fees 1,912 1,629 7,522 5,772
Fees from fiduciary activities 668 640 2,804 2,802
Brokerage services 149 131 663 582
Other operating income 330 432 1,103 1,316
Gains (losses) on securities
available for sale 3 6 3 441
Gains (losses) on other real estate
owned (20) 6 (20) 26
Gains (losses) on sale of fixed
assets 6 96 6 96
Fees on mortgage loans sold 448 582 2,463 4,192
Total Other Income 3,496 3,522 14,544 15,227
Other Expense
Compensation and employee benefits 5,747 5,609 23,348 21,883
Net occupancy expense 648 639 2,721 2,318
Supplies and equipment 1,109 1,389 4,333 4,229
Amortization-intangible assets 174 173 694 291
Computer services 373 244 1,464 1,146
Professional fees 209 386 862 961
Other operating expenses 1,960 2,315 8,301 8,179
Total Other Expense 10,220 10,755 41,723 39,007
Income Before Income Tax Expense 5,961 4,569 21,768 18,541
Income tax expense 1,889 1,492 6,565 5,049
Net Income $4,072 $3,077 $15,203 $13,492
VIRGINIA FINANCIAL GROUP INC.
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES
THREE MONTHS ENDED DECEMBER, 2004 AND 2003
Three months Ending 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%
FHLB int bearing 289 1 0.85%
Federal funds sold 25,984 120 1.83%
295,658 3,241 4.36%
Total Earning Assets 1,333,873 18,972 5.66% Tax Eql.
Non-Earning Assets 120,969
Total Assets 1,454,842
Liabilities and Stockholders' Equity
Time and savings deposits
Interest-bearing transaction
accounts $198,527 $196 0.39%
Money market deposit accounts 183,725 454 0.98%
Passbook savings accounts 141,549 231 0.65%
Certificates of deposit >$100k 126,407 1,079 3.40%
Certificates of deposit $100k 121,135 4,079 3.37%
Certificates of deposit