Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
Contact: | ||
Jeffrey W. Farrar | ||
Executive Vice President and CFO | ||
(540) 829-1603 | ||
farrarj@vfgi.net |
VIRGINIA FINANCIAL GROUP, INC. ANNOUNCES 5%
GROWTH IN FIRST QUARTER EARNINGS
Culpeper, VA-Virginia Financial Group, Inc. (NASDAQ: VFGI) today reported first quarter 2004 earnings of $3.5 million or $.48 per diluted share, an increase of 4.9% compared to earnings of $3.3 million or $.46 per diluted share for the first quarter of 2003. Diluted earnings per share growth represented an increase of 4.4% compared to first quarter 2003 results.
VFG’S earnings for the first quarter of 2004 produced an annualized return on average assets of .99% and an annualized return on average equity of 11.51%, compared to prior year ratios of 1.20% and 11.62%, respectively.
Total revenues for the first quarter of 2004 were $15.9 million, an increase of $2.0 million or 14.4% over the $13.9 million in 2003. The largest component, net interest income, amounted to $12.5 million for the first quarter, up $2.2 million or 21.5% compared with $10.3 million for the same quarter in 2003. Continuing loan growth and contributions from eight new branches purchased late in 2003 were primarily contributors to this growth. The net interest margin for the first quarter of 2004 was 4.09%, an improvement of .18% when compared to 3.91% for the fourth quarter of 2003, but down .18% when compared to 4.27% for the first quarter of 2003.
Total noninterest income was $3.5 million for the first quarter of 2004, a decrease of $202 thousand or 5.5% compared to $3.7 million for the first quarter of 2003. Lower revenues from VFG’s mortgage operations where the primary contributor to this decline. Fees and net gains from mortgages sold were $645 thousand for the first quarter of 2004, a decrease of $418 thousand or 39.3% from the first quarter of 2003. Originations were down $20.9 million or 32.9%, from $63.5 million for the three months ended March 31, 2003 to $42.6 million for the three months ended March 31, 2004. Refinance loans represented $51.2 million or 80.6% and $27.7 million or 65.1% of total originations for the three-month periods ended March 31, 2003 and 2004, respectively. Offsetting much of this decline were retail banking fees, which increased $301 thousand to $1.5 million, compared to $1.2 million in 2003.
Noninterest expense for the first quarter of 2004 amounted to $10.4 million, an increase of $1.3 million or 14.0% compared $9.2 million for the same period in 2003. This increase is largely attributable to the Company’s expansion efforts, and the incremental costs associated with the eight purchased branches, loan production offices in Charlottesville and Lynchburg and a de novo branch in Fishersville, Virginia.
The Company continues to see improvement in its asset mix, with loan growth of $249.0 million or 34.8% from $716.1 million at March 31, 2003 to $965.2 million at March 31, 2004, and growth of $42.1 million or 4.4% for the first quarter of 2004 from $923.1 million at December 31, 2003.. Total asset growth was $275.1 million or 24.2% from $1.14 billion at March 31, 2003, to $1.41 billion at March 31, 2004, and growth of $23.7 million or 1.7% from $1.39 billion at December 31, 2003. Deposits grew $229.5 million or 23.4% from $980.2 million at March 31, 2003 to $1.21 billion at March 31, 2004, and remained essentially flat for the first quarter of 2004. A significant component of the twelve month growth relates to the branch purchase in September 2003, which initially accounted for approximately $201 million in asset and deposit growth, and $79 million in loan growth for the period.
The major component of loan growth during the past twelve months occurred in the non-residential real estate portfolio, which grew $115.4 million or 37.6% from $306.5 million at March 31, 2003 to $421.9 million at March 31, 2004. Construction lending represented the largest percentage increase, with growth of $44.6 million or 74.0% from $60.2 million to $104.8 million. Commercial lending and residential real estate portfolios also experience double-digit growth year to year. For the quarter ended March 31, 2004, real estate construction loans increased $10.4 million or 11.1%, residential real estate loans decreased $1.5 million or .5%, nonresidential real estate loans increased $17.6 million or 4.4% and commercial loans increased $6.3 million or 8.6%.
The Company’s asset quality remains sound, with VFG’s ratio of non-performing assets as a percentage of total assets amounting to .49% as of March 31, 2004, compared to .79% at March 31, 2003 and .53% at December 31, 2003. Net charge-offs as a percentage of average loans receivable amounted to .01% for the quarter ended March 31, 2004, compared to .02% for the quarter ended March 31, 2003 and .03% for the previous quarter ended December 31, 2003. At March 31, 2004, the allowance for loan losses as a percentage of non-performing assets was 148.5%, while the allowance as a percentage of total loans amounted to 1.07%. The Company increased its provision for loan losses by $358 thousand or over 100%, from $323 thousand for the three months ended March 31, 2003 to $681 thousand for the three months ended March 31, 2004, consistent with the loan growth experienced for the period.
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 organization maintains a network of thirty-seven branches serving Central and Southwest Virginia. It also has 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, 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 atwww.vfgi.net.
QUARTERLY PERFORMANCE SUMMARY
Virginia Financial Group, Inc. (NASDAQ: VFGI)
(Dollars in thousands, except per share data)
For the Three Months Ended | Percent Increase (Decrease) | ||||||||||
3/31/2004 | 3/31/2003 | ||||||||||
INCOME STATEMENT | |||||||||||
Interest income - taxable equivalent | $ | 17,842 | $ | 15,860 | 12.50 | % | |||||
Interest expense | 4,888 | 4,991 | -2.06 | % | |||||||
Net interest income - taxable equivalent | 12,954 | 10,869 | 19.18 | % | |||||||
Less: taxable equivalent adjustment | 462 | 588 | -21.43 | % | |||||||
Net interest income | 12,492 | 10,281 | 21.51 | % | |||||||
Provision for loan and lease losses | 681 | 323 | 110.84 | % | |||||||
Net interest income after provision for loan and lease losses | 11,811 | 9,958 | 18.61 | % | |||||||
Noninterest income | 3,457 | 3,659 | -5.52 | % | |||||||
Noninterest expense | 10,435 | 9,150 | 14.04 | % | |||||||
Provision for income taxes | 1,378 | 1,173 | 17.48 | % | |||||||
Net income | $ | 3,455 | $ | 3,294 | 4.89 | % | |||||
PER SHARE DATA | |||||||||||
Basic earnings | $ | 0.48 | $ | 0.46 | 4.35 | % | |||||
Diluted earnings | $ | 0.48 | $ | 0.46 | 4.35 | % | |||||
Shares outstanding | 7,155,519 | 7,161,234 | |||||||||
Weighted average shares - | |||||||||||
Basic | 7,153,348 | 7,168,741 | |||||||||
Diluted | 7,202,328 | 7,202,137 | |||||||||
Dividends paid on common shares | $ | 0.19 | $ | 0.18 | |||||||
PERFORMANCE RATIOS | |||||||||||
Return on average assets | 0.99 | % | 1.20 | % | -17.50 | % | |||||
Return on average equity | 11.51 | % | 11.62 | % | -0.95 | % | |||||
Return on average realized equity (A) | 11.98 | % | 12.35 | % | -3.00 | % | |||||
Net yield on earning assets (taxable equivalent) | 4.09 | % | 4.27 | % | -4.22 | % | |||||
Efficiency (taxable equivalent) (B) | 63.54 | % | 62.89 | % | 1.03 | % | |||||
ASSET QUALITY | |||||||||||
Allowance for loan losses | |||||||||||
Beginning of period | $ | 9,743 | $ | 9,180 | |||||||
Provision for loan losses | 681 | 323 | |||||||||
Charge offs | (176 | ) | (175 | ) | |||||||
Recoveries | 35 | 39 | |||||||||
End of period | $ | 10,283 | $ | 9,367 | |||||||
Non-performing assets: | |||||||||||
Non-accrual loans | $ | 2,121 | $ | 1,085 | |||||||
Loans 90+ days past due and still accruing | 78 | 46 | |||||||||
Other real estate owned | 241 | 576 | |||||||||
Troubled debt restructurings | 4,483 | 7,041 | |||||||||
Total non-performing assets | $ | 6,923 | $ | 8,748 |
NOTES: Applicable ratios are annualized
(A) | Excludes the effect on average shareholders’ equity of unrealized gains (losses) that result from changes in market values of securities and other comprehensive pension expense. |
(B) | Excludes foreclosed property expense and non-recurring items for all periods. |
Consolidated Balance Sheets
Selected Balance Sheet Data
Virginia Financial Group, Inc. (NASDAQ: VFGI)
(Dollars in thousands)
3/31/2004 | 3/31/2003 | Percent Increase (Decrease) | |||||||||
End of period balances | |||||||||||
Securities available for sale | $ | 325,001 | $ | 308,580 | 5.32 | % | |||||
Securities held to maturity | 5,840 | 7,053 | -17.20 | % | |||||||
Total securities | 330,841 | 315,633 | 4.82 | % | |||||||
Real estate - construction | 104,804 | 60,243 | 73.97 | % | |||||||
Real estate - 1-4 family residential | 307,097 | 219,682 | 39.79 | % | |||||||
Real estate - commercial and multifamily | 421,887 | 306,510 | 37.64 | % | |||||||
Commercial, financial and agricultural | 80,173 | 66,363 | 20.81 | % | |||||||
Consumer loans | 47,428 | 51,109 | -7.20 | % | |||||||
All other loans | 3,761 | 12,211 | -69.20 | % | |||||||
Total loans | 965,150 | 716,118 | 34.78 | % | |||||||
Allowance for loan losses | (10,283 | ) | (9,367 | ) | 9.78 | % | |||||
Other earning assets | 8,935 | 37,696 | -76.30 | % | |||||||
Total earning assets | 1,304,926 | 1,069,447 | 22.02 | % | |||||||
Total assets | 1,410,928 | 1,135,793 | 24.22 | % | |||||||
Non-interest bearing deposits | 219,413 | 181,807 | 20.68 | % | |||||||
Money market & interest checking | 361,498 | 286,395 | 26.22 | % | |||||||
Savings | 139,807 | 109,210 | 28.02 | % | |||||||
CD’s and other time deposits | 488,979 | 402,800 | 21.39 | % | |||||||
Total deposits | 1,209,697 | 980,212 | 23.41 | % | |||||||
Short-term borrowed funds | 34,038 | 21,938 | 55.16 | % | |||||||
Trust preferred capital notes | 20,000 | — | 100.00 | % | |||||||
Federal Home Loan Bank advances | 14,120 | 9,140 | 54.49 | % | |||||||
Total interest-bearing liabilities | 1,058,442 | 849,483 | 24.60 | % | |||||||
Total shareholders’ equity | 123,429 | 115,566 | 6.80 | % | |||||||
Average balances | |||||||||||
Total assets | 1,403,681 | 1,110,692 | 26.38 | % | |||||||
Total shareholder’s equity | $ | 120,732 | $ | 115,058 | 4.93 | % |
Consolidated Statements of Income
Virginia Financial Group, Inc. (NASDAQ: VFGI)
(Dollars in thousands)
For the Three Months Ended | ||||||
3/31/2004 | 3/31/2003 | |||||
Interest Income | ||||||
Interest and fees on loans | $ | 14,055 | $ | 12,208 | ||
Interest on deposits in other banks | 1 | 2 | ||||
Interest on investment securities: | ||||||
Taxable | 95 | 114 | ||||
Interest and dividends on securities available for sale: | ||||||
Taxable | 2,431 | 1,920 | ||||
Nontaxable | 749 | 894 | ||||
Dividends | 47 | 55 | ||||
Interest income on federal funds sold | 2 | 79 | ||||
Total Interest Income | 17,380 | 15,272 | ||||
Interest Expense | ||||||
Interest on deposits | 4,534 | 4,750 | ||||
Interest on trust preferred capital notes | 28 | — | ||||
Interest on Federal Home Loan Bank advances | 155 | 192 | ||||
Interest on federal funds repurchased and securities sold under agreements to repurchase | 100 | 48 | ||||
Interest on other short-term borrowings | 71 | 1 | ||||
Total Interest Expense | 4,888 | 4,991 | ||||
Net Interest Income | 12,492 | 10,281 | ||||
Provision for loan losses | 681 | 323 | ||||
Net Interest Income after Provision for Loan Losses | 11,811 | 9,958 | ||||
Other Income | ||||||
Retail banking fees | 1,549 | 1,248 | ||||
Fees from fiduciary activities | 776 | 779 | ||||
Brokerage services | 198 | 233 | ||||
Other operating income | 289 | 312 | ||||
Gains (losses) on securities available for sale | — | 24 | ||||
Gains (losses) on other real estate owned | — | — | ||||
Gains (losses) on sale of fixed assets | — | — | ||||
Fees on mortgage loans sold | 645 | 1,063 | ||||
Total Other Income | 3,457 | 3,659 | ||||
Other Expense | ||||||
Compensation and employee benefits | 5,860 | 5,258 | ||||
Net occupancy expense | 706 | 570 | ||||
Supplies and equipment | 1,044 | 948 | ||||
Amortization-intangible assets | 173 | 39 | ||||
Computer services | 299 | 341 | ||||
Professional fees | 201 | 212 | ||||
Other operating expenses | 2,152 | 1,782 | ||||
Total Other Expense | 10,435 | 9,150 | ||||
Income Before Income Tax Expense | 4,833 | 4,467 | ||||
Income tax expense | 1,378 | 1,173 | ||||
Net Income | $ | 3,455 | $ | 3,294 |
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES
VIRGINIA FINANCIAL GROUP INC. (NASDAQ: VFGI)
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
2004 | 2003 | |||||||||||||||||
Dollars in thousands | Average Balance | Interest Income/ Expense | Average Rates | Average Balance | Interest Income/ Expense | Average Rates | ||||||||||||
Assets | ||||||||||||||||||
Loans receivable, net | $ | 942,969,430 | $ | 14,114,179 | 6.02 | % | $ | 716,686,783 | $ | 12,310,249 | 6.97 | % | ||||||
Investment securities | ||||||||||||||||||
Taxable | 257,815,886 | 2,573,977 | 4.02 | % | 203,826,441 | 2,093,476 | 4.11 | % | ||||||||||
Tax exempt | 70,909,182 | 1,151,963 | 6.53 | % | 79,592,159 | 1,375,605 | 6.91 | % | ||||||||||
Total Investments | 328,725,068 | 3,725,940 | 4.56 | % | 283,418,600 | 3,469,081 | 4.90 | % | ||||||||||
FHLB interest bearing | 548,712 | 754 | 0.55 | % | 486,712 | 1,563 | 1.30 | % | ||||||||||
Federal funds sold | 858,579 | 2,085 | 0.98 | % | 27,426,067 | 79,296 | 1.17 | % | ||||||||||
330,132,359 | 3,728,779 | 4.54 | % | 311,331,379 | 3,549,940 | 4.56 | % | |||||||||||
Total Earning Assets | $ | 1,273,101,789 | 17,842,958 | 5.64 | % | $ | 1,028,018,162 | 15,860,189 | 6.24 | % | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||
Time and savings deposits | ||||||||||||||||||
Interest-bearing transaction accounts | $ | 196,532,271 | $ | 385,099 | 0.79 | % | $ | 123,863,743 | $ | 236,139 | 0.77 | % | ||||||
Money market deposit accounts | 169,228,844 | 405,823 | 0.96 | % | 156,452,419 | 536,223 | 1.39 | % | ||||||||||
Passbook savings accounts | 137,018,701 | 248,569 | 0.73 | % | 106,919,155 | 310,336 | 1.18 | % | ||||||||||
Certificates of deposit >$100k | 115,851,857 | 986,679 | 3.43 | % | 90,441,424 | 884,807 | 3.97 | % | ||||||||||
Certificates of deposit <$100k | 372,339,730 | 2,507,815 | 2.71 | % | 312,594,143 | 2,782,817 | 3.61 | % | ||||||||||
Total Time and Savings Deposits | 990,971,403 | 4,533,985 | 1.84 | % | 790,270,884 | 4,750,322 | 2.44 | % | ||||||||||
Federal funds purchased | 32,568,564 | 71,722 | 0.89 | % | 19,521,938 | 48,000 | 1.00 | % | ||||||||||
Trust preferred capital notes | 3,076,923 | 27,733 | 3.63 | % | ||||||||||||||
Other short term borrowings | 26,414,286 | 98,415 | 1.50 | % | 453,597 | 1,460 | 1.31 | % | ||||||||||
Federal Home Loan Bank advances | 9,522,198 | 154,876 | 6.54 | % | 12,217,556 | 191,556 | 6.36 | % | ||||||||||
71,581,971 | 352,746 | 1.98 | % | 32,193,091 | 241,016 | 3.04 | % | |||||||||||
Total Interest- Bearing Liabilities | $ | 1,062,553,374 | 4,886,731 | 1.85 | % | $ | 822,463,975 | 4,991,338 | 2.46 | % | ||||||||
Net interest income (tax equivalent) | $ | 12,956,227 | $ | 10,868,851 | ||||||||||||||
Average interest rate spread | 3.79 | % | 3.78 | % | ||||||||||||||
Interest expense as percentage of | ||||||||||||||||||
average earning assets | 1.54 | % | 1.97 | % | ||||||||||||||
Net interest margin | 4.09 | % | 4.27 | % | ||||||||||||||