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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 000-22283
VIRGINIA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1829288
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
24 South Augusta Street, Staunton, Virginia 24401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (540) 885-1232
NONE
(Former name, former address and former fiscal year,
if changed since last report.)
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 reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
Class: Common Stock, $5.00 par value
Outstanding as of May 10, 2001: 3,979,483
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VIRGINIA FINANCIAL CORPORATION
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Changes in Stockholders' Equity 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 10
Item 3. Quantitative and Qualitative Disclosure about Market Risk 10
Part II. Other Information
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 12
Part 1
Item 1.
VIRGINIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
Three Months Ended
MARCH 31 MARCH 30
2001 2000
------------------ ---------------------
Interest Income:
Interest and Fee Income on Loans:
Secured by Real Estate $ 5,431 $ 4,594
To Finance Agriculture & Farmers 55 63
Commercial & Industrial 1,038 922
Individuals for Household & Personal 696 771
Obligations of State & Political Tax-Exempt 59 1
Other - -
Interest and Dividend Income on Securities:
U.S. Treas & U.S. Gov't Agencies 1,124 1,346
State & Political-Taxable 119 94
State & Political-Tax Exempt 398 448
Other Domestic Debt Securities 11 11
Equity Securities 72 29
Interest on Earning Deposits Due From Banks 1 29
Interest on Federal Funds Sold 37 7
Other Interest Income 25 25
----------- -----------
Total Interest Income 9,066 8,340
----------- -----------
Interest Expense:
Interest on Deposits:
NOW Accounts 293 300
Money Market Accounts 431 485
Other Savings Deposits 296 306
CD's of 100M or More 521 322
All Other Time Deposits 2,511 2,039
Interest on Fed Funds Purch'd
& Repurchase Agreements 200 177
Interest on Other Borrowed Money 32 159
----------- -----------
Total Interest Expense 4,284 3,788
----------- -----------
Net Interest Income 4,782 4,552
Provision for Loan Losses 151 209
----------- -----------
Net Interest Income after Provision for Loan Losses 4,631 4,343
----------- -----------
Noninterest Income:
Trust Department Income 313 448
Service Charges on Deposit Accts. 417 371
Other Fee Income 451 366
All Other Non-Interest Income 31 38
----------- -----------
Total Noninterest Income 1,212 1,223
----------- -----------
Gains of securities 4 16
----------- -----------
Noninterest Expense:
Salaries & Employee Benefits 2,015 1,787
Expense of Premises & Fixed Assets 520 470
Computer Services 285 280
Other Non-Interest Expense 802 818
----------- -----------
Total Non-Interest Expense 3,622 3,355
----------- -----------
Income Before Income Taxes 2,225 2,227
Provision for Income Taxes 627 625
----------- -----------
Net Income $ 1,598 $ 1,602
=========== ===========
Per Share Data, Net Income, basic and diluted $ 0.40 $ 0.40
Cash Dividends $ 0.17 $ 0.17
The accompanying notes are an integral part of these statements
3
VIRGINIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
MARCH 31 DECEMBER 31
2001 2000
----------- -----------
Assets
Cash & Due from Banks $ 16,967 $ 18,146
Interest Earning Deposits Due From Banks 47 53
Federal Funds Sold 13,775 -
Securities (fair value: 2001, $110,294;
2000, $132,107) 110,042 132,345
Loans held for resale 3,608 2,383
Loans, net of allowance for loan losses,
2001, $3,937; 2000, $3,894 334,148 329,625
Bank Premises and Equipment, net 8,314 7,739
Deposit Intangibles 1,983 2,023
Other Assets 6,971 7,488
----------- -----------
Total Assets $ 495,855 $ 499,802
=========== ===========
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand $ 69,893 $ 71,114
NOW Accounts 52,209 53,900
Money Market Checking 55,832 55,043
Savings 41,476 40,416
Time Deposits 207,332 204,768
----------- -----------
Total Deposits 426,742 425,241
Securities Sold Under
Agmt. to Repurchase 14,135 12,495
Other Borrowed Money - 3,000
Federal Funds Purchased - 6,000
Other Liabilities 2,361 2,140
-----------
----------- -----------
Total Liabilities $ 443,238 $ 448,876
----------- -----------
Stockholders' Equity
Common Stock $ 19,898 $ 19,905
Surplus 12,994 13,027
Undivided Profits 18,803 17,882
Accumulated Other Comprehensive Income 922 112
----------- -----------
Total Stockholders' Equity $ 52,617 $ 50,926
----------- -----------
Total Liabilities
and Stockholders' Equity $ 495,855 $ 499,802
=========== ===========
The accompanying notes are an integral part of these statements
4
VIRGINIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
Three Months Ended
MARCH 31 MARCH 31
2001 2000
----------- -----------
Cash Flows from Operating Activities
Interest received $ 9,369 $ 8,141
Fees and other non-interest income 1,216 1,239
Interest paid (4,301) (3,754)
Origination of loans available for sale (11,304) (4,969)
Proceeds from sale of loans availabe for sale 10,585 5,047
Cash paid to suppliers and employees (3,507) (2,849)
Income taxes paid (9) -
----------- -----------
Net cash provided by operating activities $ 2,049 $ 2,855
----------- -----------
Cash Flows from Investing Activities
Proceeds from maturities and calls of securities $ 25,572 $ 772
Proceeds from sales of securities 979 1,616
Purchases of securities (3,019) (281)
Net increase in loans (5,280) (11,502)
Proceeds from sale of equipment - -
Capital expenditures (850) (58)
Net increase in other assets (302) (8)
Proceeds from sale of other real estate 17 49
----------- -----------
Net cash provided by (used in) investing
activities $ 17,117 $ (9,412)
----------- -----------
Cash Flows from Financing Activities
Net increase in certificates of deposit $ 2,564 $ 2,600
Net increase (decrease) in demand & savings deposits (1,063) 5,571
Net decrease in federal funds purchased (6,000) (3,900)
Net decrease in Federal Home Loan Bank advances (3,000) (4,000)
Net increase in securities sold
under repurchase agreements 1,640 1,610
Payment to repurchase common stock (40) (517)
Dividends paid (677) (680)
----------- -----------
Net cash provided by (used in) financing
activities $ (6,576) $ 684
----------- -----------
Net increase (decrease) in cash and cash
equivalents $ 12,590 $ (5,873)
Cash and cash equivalents at beginning of year 18,199 28,159
----------- -----------
Cash and cash equivalents at end of year $ 30,789 $ 22,286
=========== ===========
5
VIRGINIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(IN THOUSANDS OF DOLLARS)
Three Months Ended
MARCH 31 MARCH 31
2001 2000
----------- ----------
Reconciliation of net income to net cash provided by
operating activities
Net income $ 1,598 $ 1,602
----------- ----------
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation $ 232 $ 229
Provision for loan losses 151 209
Gain on sale of assets 41 -
Provision for deferred taxes - -
Origination of loans available for sale (11,304) (4,969)
Proceeds from sale of loans availabe for sale 10,585 5,047
Gain on sale of securities (4) (16)
Increase in taxes payable 454 212
Decrease (Increase) in interest receivable 301 (137)
Increase (Decrease) in interest payable (17) 34
Decrease in prepaid expenses 144 382
Increase (Decrease) in accrued expenses (216) 232
Premium amortization (discount accretion)
on securities, net 80 16
Increase (decrease) in deferred income - (2)
Decrease in fees receivable 4 16
----------- ----------
Total Adjustments $ 451 $ 1,253
----------- ----------
Net cash provided by operating activities $ 2,049 $ 2,855
=========== ==========
Supplemental schedule of non-cash investing activities:
Other real estate acquired in settlement of loans 101 0
=========== ==========
Unrealized gain on securities available for sale 1,229 66
=========== ==========
The accompanying notes are an integral part of these statements
6
VIRGINIA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREEE MONTHS ENDED MARCH 31, 2000 AND 2001
(IN THOUSANDS OF DOLLARS)
Accumulated
Other
Common Capital Retained Comprehensive Comprehensive
Stock Surplus Earnings Income (Loss) Income Total
---------- ---------- ---------- ------------- ------------- -----
Balance, December 31, 1999 19,986 13,478 14,389 (1,733) 46,120
Comprehensive income:
Net income 1,602 1,602 1,602
Other comprehensive income net of tax,
Unrealized holding gains arising
during the period (net of tax,
$27,910) 55
Reclassification adjustment (net of
tax, $5,498) (11)
---------
Other comprehensive income (net of
tax, $22,412) 44 44 44
---------
Total comprehensive income 1,646
=========
Cash dividends ($0.17 per share) (680) (680)
Stock repurchase of 15,726 shares (79) (438) (517)
---------- ---------- ---------- ---------- ---------
Balance, March 31, 2000 $ 19,907 $ 13,040 $ 15,311 $ (1,689) $ 46,569
========== ========== ========== ========== =========
Accumulated
Other
Common Capital Retained Comprehensive Comprehensive
Stock Surplus Earnings Income (Loss) Income Total
---------- ---------- ---------- ------------- ------------- -----
Balance, December 31, 2000 19,905 13,027 17,882 112 50,926
Comprehensive income:
Net income 1,598 1,598 1,598
Other comprehensive income net of tax:
Unrealized holding gains arising
during the period (net of tax,
$418,656) 812
Reclassification adjustment (net of
tax, $1,204) (2)
----------
Other comprehensive income (net of
tax, $417,452) 810 810 810
----------
Total comprehensive income 2,408
==========
Cash dividends ($0.17 per share) (677) (677)
Stock repurchase of 1,525 shares (7) (33) (40)
---------- ---------- ---------- ---------- ---------
Balance, March 31, 2001 $ 19,898 $ 12,994 $ 18,803 $ 922 $ 52,617
========== ========== ========== ========== =========
The accompanying notes are an integral part of these statements
7
VIRGINIA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Interim Financial Statements
The accompanying financial statements of Virginia Financial
Corporation and its Subsidiary have not been audited by independent accountants
except for the balance sheet at December 31, 2000. In the opinion of the
company's management, the financial statements reflect all adjustments necessary
to present fairly the results of operations for the three month periods ended
March 31, 2001 and 2000, the company's financial position at March 31, 2001 and
December 31, 2000, and cash flows for the three month periods ended March 31,
2001 and 2000. These adjustments are of a normal recurring nature.
On November 14, 1996, the shareholders approved an Agreement and Plan
of Reorganization and related Plan of Share Exchange, relating to the adoption
of a bank holding company structure, with Virginia Financial Corporation (herein
after referred to as "the Company"), serving as the holding company for the
Bank. This transaction was consumated on January 2, 1997.
Note 2. Securities as of March 31, 2001 and December 31, 2000 are summarized
below.
(IN THOUSANDS OF DOLLARS)
March 31, 2001 December 31, 2000
Unrealized Unrealized
Book Market Gain (Loss) Book Market Gain (Loss)
---- ------ ----------- ---- ------ -----------
Securities Available for Sale
U.S. Treasury Securities $ 5,950 $ 6,309 $ 359 $ 5,947 $ 6,159 $ 212
U.S. Agency Securities 48,552 49,016 464 34,069 34,059 (10)
Obligations of State and
Political Subdivisions 35,875 36,755 880 30,520 30,730 210
Other Securities 7,870 7,564 (306) 5,826 5,585 (241)
----------- ---------- ------------ ---------- ---------- ------------
Total Securities Available for Sale $ 98,247 $ 99,644 $ 1,397 $ 76,362 $ 76,533 $ 171
=========== ========== ============ ========== ========== ============
Securities Held to Maturity
U.S. Treasury Securities $ 4,494 $ 4,569 $ 75 $ 4,493 $ 4,515 $ 22
U.S. Agency Securities 0 0 0 39,791 39,503 (288)
Obligations of State and
Political Subdivisions 5,904 6,080 176 11,528 11,556 28
Other Securities - - - - - -
----------- ---------- ------------ ---------- ---------- ------------
Total Securities Held to Maturity $ 10,398 $ 10,649 $ 251 $ 55,812 $ 55,574 $ (238)
=========== ========== ============ ========== ========== ============
8
VIRGINIA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
Note 3. The consolidated loan portfolio, stated at face amount, is composed of
the following:
March 31, 2001 December 31, 2000
-------------- -----------------
Real Estate Loans:
Construction and Land Development $ 29,477 $ 22,633
Secured by Farmland 3,523 3,738
Secured by 1-4 Family residential 132,975 129,510
Other Real Estate Loans 93,857 94,893
Loans to Farmers (Except Those Secured by Real Estate) 2,207 2,534
Commercial and Industrial Loans
(Except Those Secured by Real Estate) 47,526 45,836
Loans to Individuals for Personal Expenditures 27,944 29,916
All Other Loans 4,491 4,783
------------ ------------
Total Loans 342,000 333,843
Less, Unearned Income Reflected in Loans 308 324
------------ ------------
Loans, Net of Unearned Income $ 341,692 $ 333,519
============ ============
The Bank had loans in a Nonaccrual category of $965 on December 31, 2000 and
$948 on March 31, 2001.
Note 4. Allowance for Loan Losses
Analysis of the Allowance for Loan Losses
For the Three Months Ended
March 31, 2001 March 31, 2000
-------------- --------------
Balance at Beginning of Period 3,894 3,470
Charge-Offs (141) (95)
Recoveries 33 17
------------ ------------
Net Charge-Offs (108) (78)
Provision for Loan Losses 151 209
------------ ------------
Balance at End of Period $ 3,937 $ 3,601
============ ============
9
Part 1
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net income for the first quarter of 2001 was $1,598,000 compared to
$1,602,000 for the first quarter of 2000. This represents a decrease of $4,000
or .2%. Interest income on a tax equivalent basis increased $782,000 or 9.1% and
total average earning assets increased $21,065,000 or 4.8%. The yield on average
earning assets was 8.1% and 7.8% for the first quarters of 2001 and 2000
respectively. Interest expense increased $496,000 or 13.1% and total average
interest bearing liabilities increased $15,199,000 or 4.2%. The cost of funds
was 4.6% and 4.2% for the first quarters of 2001 and 2000. The net interest
spread was 3.5% and 3.6% for the first quarters of 2001 and 2000 respectively.
Non-interest income decreased $11,000 or .9% the first quarter of 2001
compared to 2000. This decrease was due to the declining market affecting the
trust and investment departments' income. Non-interest expense increased
$267,000 or 8.0% the first quarter of 2001 compared to 2000. This increase was
due to increases in salaries and employee benefits and increases in premises and
fixed asset expense due to the equipment costs associated with the conversion to
a new computer system.
Financial Condition
- -------------------
Total assets decreased $3,947,000 the first quarter of 2001 compared to
an increase of $2,805,000 the first quarter of 2000.
During the first quarter of 2001, the investment portfolio was reduced
by $22,303,000; deposits increased by $1,501,000 and cash & due from banks
decreased $1,179,000. These sources of funds were used to fund loan growth of
$5,748,000; increase federal funds sold by $13,775,000 and reduce short-term
borrowings by $7,360,000.
During the first quarter of 2000, cash & due from banks decreased
$9,803,000; interest earning deposits due from banks decreased $3,170,000; the
investment portfolio was reduced by $1,966,000; deposit growth was $8,171,000;
and securities sold under agreements to repurchase increased by $1,610,000.
These sources of funds were used to fund loan growth of $11,215,000; increased
federal funds sold by $7,100,000; decreased federal funds purchased by
$3,900,000; and decreased other borrowed money by $4,000,000.
Future Operations
- -----------------
Planters Bank & Trust Company of Virginia is nearing the completion of
the construction of an 18,000 square foot operations center. The estimated
completion date of this construction is June 15, 2001. The new operations center
will house the bank's proof and transit department, secondary mortgage
department and other operational support departments. The new building will help
alleviate the present overcrowded condition at the main office location. The
total cost for this entire project is estimated to be $2,000,000.
Part 1
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in information reported as of
December 31, 2000, in Form 10-K.
10
VIRGINIA FINANCIAL CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
(000 Omitted)
Three Months Ended March 31
2001 2000
Average Income/ Yield/ Average Income/ Yield/
ASSETS Balance Expense Rate Balance Expense Rate
----------- --------- ---------- ----------- --------- --------
Securities:
Taxable $ 83,007 $ 1,309 6.31% $ 96,123 $ 1,467 6.10%
Tax-exempt (1) 40,385 682 6.75% 41,428 702 6.78%
----------- --------- ---------- ----------- --------- --------
Total Securities $ 123,392 $ 1,991 6.45% $ 137,551 $ 2,169 6.31%
Loans (net of earned income):
Taxable 330,487 7,220 8.74% 299,882 6,349 8.47%
Tax-Exempt (1) 4,346 90 8.28% 128 2 6.25%
----------- --------- ---------- ----------- --------- --------
Total Loans 334,833 7,310 8.73% 300,010 6,351 8.47%
Federal Home Loan Bank Stock 1,301 25 7.69% 1,269 25 7.88%
Interest Earning Deposits Due From Banks 63 1 6.35% 2,024 29 5.73%
Fed Funds Sold and Repurchase Agreements 2,792 37 5.30% 462 8 6.93%
----------- --------- ---------- ----------- --------- --------
Total Earning Assets 462,381 9,364 8.10% 441,316 8,582 7.78%
--------- ---------
Less Allowance for Loan Losses (3,896) (3,539)
Total Nonearning Assets 36,704 31,955
----------- -----------
Total Assets $ 495,189 $ 469,732
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits:
NOW Accounts $ 53,132 $ 293 2.21% $ 49,585 $ 300 2.42%
Money Market Savings 55,136 431 3.13% 54,977 485 3.53%
Regular Savings 40,991 296 2.89% 41,461 306 2.95%
Certificates of Deposit:
Less than $100,000 171,859 2,511 5.84% 161,953 2,039 5.04%
$100,000 and More 34,458 521 6.05% 26,253 322 4.91%
----------- --------- ---------- ----------- --------- --------
Total Interest Bearing Deposits 355,576 4,052 4.56% 334,229 3,452 4.13%
Fed Funds Purchased & Repurchase Agreements 15,678 200 5.10% 13,547 177 5.23%
Other Borrowed Money 2,194 32 5.83% 10,473 159 6.07%
----------- --------- ---------- ----------- --------- --------
Total Interest Bearing Liabilities 373,448 4,284 4.59% 358,249 3,788 4.23%
--------- ---------
Noninterest Bearing Liabilities
Demand Deposits 68,011 63,221
Other Liabilities 2,342 1,880
----------- -----------
Total Liabilities 443,801 423,350
Stockholders' Equity 51,388 46,382
----------- -----------
Total Liabilities and Stockholders' Equity $ 495,189 $ 469,732
=========== ===========
Net Interest Income $ 5,080 $ 4,794
========= =========
Interest Rate Spread 3.51% 3.55%
Interest Expense as a Percent of Average
Earning Assets 3.71% 3.43%
Net Interest Margin 4.39% 4.35%
(1) Income and yields are reported on a taxable-equivalent basis assuming a federal tax rate of 34% in 2000 and 2001
11
VIRGINIA FINANCIAL CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As of March 31, 2001 neither the corporation nor the bank was a party
to any legal proceedings.
Item 2. Not Applicable
Item 3. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the Quarter ended March 31, 2001.
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed during the Quarter ended March
31, 2001.
(b) Exhibits
The following exhibits are filed with this Form 10-Q or
incorporated by reference to previous filings.
Number Description
------ -----------
Exhibit 3. (i) Articles of Incorporation
incorporated by reference to
Exhibit 3.1 of the Company's
Form 8-B successor registration
statement filed March 24, 1997.
(ii) Bylaws incorporated by
reference to Exhibit 3.2 of the
Company's Form 8-B successor
registration statement filed
March 24, 1997.
Exhibit 11. EPS Computation attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Virginia Financial Corporation
(Registrant)
Date May 15, 2001 /s/ Fred D. Bowers
---------------- -----------------------------------------
Fred D. Bowers, Secretary/Treasurer
(Principal Accounting Officer and Duly
Authorized Officer)