CULPEPER, Va., April 24 /PRNewswire-FirstCall/ -- Virginia
Financial Group, Inc. (NASDAQ:VFGI) today reported first quarter
2006 earnings of $4.5 million, an increase of 11.2% compared to
earnings of $4.0 million for the first quarter of 2005. Net income
per diluted share was $.62, up 10.7% compared to $.56 for the same
period in 2005. VFG'S earnings for the first quarter of 2006
produced an annualized return on average assets (ROA) of 1.19% and
an annualized return on average equity (ROE) of 13.08%, compared to
prior year ratios of 1.13% and 12.74%, respectively. O.R. Barham,
Jr., President and CEO, commented, "We are pleased with our
financial results for the first quarter, with stronger than
expected loan growth, solid core revenue growth and a continuation
of excellent asset quality. Our results were positive in spite of
several reorganization events that impacted earnings during the
period and are discussed below. Our net interest margin was down
slightly on a sequential basis, as interest bearing liability costs
continue to catch up to short term rate movements over the past
year. Double digit growth in fees from fiduciary and brokerage
operations were a highlight, as was continued strength in mortgage
revenue for the period. Our efficiency ratio began to increase as
anticipated, but came in at a respectable 59.50%. We had our first
branch open in Lynchburg during the quarter, and plan to open one
additional branch in both Charlottesville and Lynchburg during the
second quarter." REVENUE GROWTH Total revenue, comprised of net
interest income and noninterest income, was $18.1 million for the
first quarter of 2006, an increase of $1.2 million or 7.4% over
$16.9 million in 2005. The largest component, net interest income,
amounted to $14.9 million for the first quarter, up $1.7 million or
12.7% compared with $13.2 million for the same quarter in 2005.
Improvements in the growth and mix of average earning assets,
coupled with net interest margin expansion over the past year, were
primarily contributors to this growth. The net interest margin for
the first quarter of 2006 was 4.35%, down five basis points
sequentially compared to 4.40% for the fourth quarter of 2005, and
up twenty basis points when compared to 4.15% for the first quarter
of 2005. As interest rates have continued to increase over the past
year, interest costs associated with interest bearing liabilities
have accelerated. The average rate on interest bearing liabilities
for the first quarter was 2.60%, up 21 basis points sequentially
compared to 2.39% for the fourth quarter of 2005, and up 56 basis
points when compared to the first quarter of 2005. Management
anticipates the net interest margin to decline modestly for the
foreseeable future as continuing pressures on deposit pricing in
VFG's markets are anticipated. Total noninterest income was $3.3
million for the first quarter of 2006, a decrease of $431 thousand
or 11.7% compared to $3.7 million for the first quarter of 2005.
The 2006 results include a loss of $181 thousand on sale of
securities available for sale associated with branch realignment
within the company. Approximately $20 million in securities sold
were reinvested at a yield pickup of approximately 120 basis
points. Included in the 2005 results is a net gain of $408 thousand
in connection with the sales of two branches located in Tazewell
County. Trust and brokerage fee income rose to $1.04 million for
the quarter, an increase of $133 thousand or 14.7% over the same
period in 2005. Gross mortgage banking fees amounted to $633
thousand, an increase of $158 thousand or 33.3% when compared to
$475 thousand for the first quarter of 2005, but down sequentially
$277 thousand or 30.4% from the fourth quarter of 2005. NONINTEREST
EXPENSE AND EFFICIENCY Noninterest expense for the first quarter of
2006 amounted to $11.2 million, up $649 thousand or 6.2% from $10.5
million for the same period in 2005. Compensation and employee
benefits increased $554 thousand or 9.2% over the same quarter a
year ago. This increase reflects new positions for the openings of
the Seminole Trail and Graves Mill branches during the fourth
quarter 2005 and first quarter 2006, respectively. It also reflects
approximately $160 thousand in non-recurring severance benefits
associated with a reorganization of management within our Virginia
Commonwealth Trust Company affiliate during the first quarter.
Management would anticipate some increase in operating expenses as
two new branches open middle to late second quarter. VFG's
efficiency ratio was 59.5% for the quarter, compared to 60.8% for
the same quarter in 2005. BALANCE SHEET Average loans for the first
quarter were $1.16 billion, up $85.8 million or 8.0% from the first
quarter of 2005. Loans receivable were $1.19 billion at March 31,
2006, up $46.1 million or 4.0% from December 31, 2005. The first
quarter growth occurred in real estate construction,
non-residential real estate and commercial loan portfolios. Average
deposits for the first quarter were $1.25 billion, up $10 million
or .8% from the first quarter of 2005. Excluding the impact of the
sale of branches in Tazewell, Virginia during first quarter 2005,
the growth rate was 2.0%. Sequentially, deposits increased $17.5
million or 1.4% to $1.27 billion from December 31, 2005.
Certificate of deposit balances were up $45.4 million or 8.7% for
the quarter, reflecting consumer preferences in the current rate
environment as well as promotions conducted during the period.
Savings, money market and interest checking accounts all
experienced decreases during the period. Noninterest bearing demand
deposits were up $7.1 million or 2.9% for the quarter, and
represent 20.2% of total deposits at March 31, 2006. At March 31,
2006 VFG had total assets of $1.55 billion, compared to $1.45
billion at March 31, 2005. Shareholder's equity at March 31, 2006
was $139.3 million, an increase of $10.3 million or 8.0% compared
to March 31, 2005. Shareholder's equity represented 8.98% of total
assets at March 31, 2006, while tangible equity capital represented
7.90% of tangible assets at March 31, 2006. Book value at March 31,
2006 was $19.40 per share, compared to $18.00 at March 31, 2005.
ASSET QUALITY Asset quality remains strong, with VFG's ratio of
non-performing assets as a percentage of total assets amounting to
.13% as of March 31, 2006, compared to .15% at March 31, 2005 and
.12% at December 31, 2005. Net charge-offs as a percentage of
average loans receivable amounted to .01% for the quarter,
unchanged when compared to the same period in 2005. At March 31,
2006, 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 1.17%. VFG decreased its
provision for loan losses by $36 thousand or 6.6%, from $546
thousand for the three months ended March 31, 2005 to $510 thousand
for the three months ended March 31, 2006. 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 and
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 noninterest expense by the sum of net
interest income on a tax equivalent basis and noninterest income
excluding gain (loss) on sale of securities and other real estate
owned. 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
3/31/2006 3/31/2005 (Decrease) INCOME STATEMENT Interest income -
taxable equivalent $22,631 $18,991 19.17% Interest expense 7,308
5,398 35.38% Net interest income - taxable equivalent 15,323 13,593
12.73% Less: taxable equivalent adjustment 458 407 12.53% Net
interest income 14,865 13,186 12.73% Provision for loan and lease
losses 510 546 -6.59% Net interest income after provision for loan
and lease losses 14,355 12,640 13.57% Noninterest income 3,263
3,694 -11.67% Noninterest expense 11,183 10,534 6.16% Provision for
income taxes 1,971 1,787 10.30% Net income $4,464 $4,013 11.24% PER
SHARE DATA Basic earnings $0.62 $0.56 10.71% Diluted earnings $0.62
$0.56 10.71% Shares outstanding 7,178,964 7,163,735 Weighted
average shares - Basic 7,176,815 7,163,198 Diluted 7,231,617
7,210,848 Dividends paid on common shares $0.22 $0.20 PERFORMANCE
RATIOS Return on average assets 1.19% 1.13% 5.31% Return on average
equity 13.08% 12.74% 2.67% Return on average realized equity (A)
12.95% 12.88% 0.54% Net interest margin (taxable equivalent) 4.35%
4.15% 4.82% Efficiency (taxable equivalent) (B) 59.50% 60.79%
-2.12% ASSET QUALITY Allowance for loan losses Beginning of period
$13,581 $11,706 Provision for loan losses 510 546 Charge offs (173)
(189) Recoveries 23 118 End of period $13,941 $12,181
Non-performing assets: Non-accrual loans $1,787 $1,917 Loans 90+
days past due and still accruing - - Other real estate owned 79 55
Troubled debt restructurings 134 218 Total non-performing assets
$2,000 $2,190 to total assets: 0.13% 0.15% to total loans plus
OREO: 0.17% 0.20% Allowance for loan losses to total loans 1.17%
1.12% Net charge-offs (recoveries) $149 $71 Net charge-offs to
average loans outstanding 0.01% 0.01% 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 Three Months Ended Increase 3/31/2006
3/31/2005 (Decrease) SELECTED BALANCE SHEET DATA End of period
balances Cash and cash equivalents $40,923 $59,775 -31.54%
Securities available for sale 228,462 242,774 -5.90% Securities
held to maturity 3,321 5,853 -43.26% Total securities 231,783
248,627 -6.77% Real estate - construction 166,924 127,248 31.18%
Real estate - 1-4 family residential 303,639 310,062 -2.07% Real
estate - commercial and multifamily 586,054 517,913 13.16%
Commercial, financial and agricultural 93,503 85,745 9.05% Consumer
loans 36,909 40,942 -9.85% All other loans 1,558 3,205 -51.39%
Total loans 1,188,587 1,085,115 9.54% Deferred loan costs 659 493
33.67% Allowance for loan losses (13,941) (12,181) 14.45% Net loans
1,175,305 1,073,427 9.49% Other assets 103,109 71,550 44.11% Total
assets 1,551,120 1,453,379 6.73% Noninterest bearing deposits
256,910 239,660 7.20% Money market & interest checking 337,063
369,922 -8.88% Savings 112,905 133,919 -15.69% CD's and other time
deposits 566,174 492,950 14.85% Total deposits 1,273,052 1,236,451
2.96% Federal Home Loan Bank advances 60,000 14,040 327.35% Trust
preferred capital notes 20,619 20,619 0.00% Other borrowed funds
46,167 42,955 7.48% Other liabilities 11,995 10,349 15.90% Total
liabilities 1,411,833 1,324,414 6.60% Total stockholders' equity
$139,287 $128,965 8.00% Accumulated comprehensive income (loss)
$(1,794) $861 -308.36% Average balances Percent For the Three
Months Ended Increase 3/31/2006 3/31/2005 (Decrease) Total assets
$1,525,345 $1,446,263 5.47% Total stockholders' equity $138,364
$127,751 8.31% QUARTERLY PERFORMANCE SUMMARY Virginia Financial
Group, Inc. (NASDAQ:VFGI) (Dollars in thousands) Percent For the
Three Months Ended Increase 3/31/2006 3/31/2005 (Decrease) Interest
Income Interest and fees on loans $19,433 $16,043 21.13% Interest
on deposits in other banks 35 4 775.00% Interest and dividends on
securities: Taxable 1,499 1,806 -17.00% Tax-exempt 815 656 24.24%
Dividends 115 67 71.64% Interest income on federal funds sold 276 8
3350.00% Total interest income 22,173 18,584 19.31% Interest
Expense Interest on deposits 5,960 4,752 25.42% Interest on federal
funds repurchased and securities sold under agreements to
repurchase 86 144 -40.28% Interest on Federal Home Loan Bank
advances 582 180 223.33% Interest on trust preferred capital notes
374 265 41.13% Interest on other borrowings 306 57 436.84% Total
interest expense 7,308 5,398 35.38% Net interest income 14,865
13,186 12.73% Provision for loan losses 510 546 -6.59% Net interest
income after provision for loan losses 14,355 12,640 13.57%
Noninterest Income Retail banking fees 1,607 1,665 -3.48%
Commissions and fees from fiduciary activities 811 724 12.02%
Brokerage fee income 227 181 25.41% Other operating income 170 241
-29.46% Loss on sale of fixed assets (4) - - Loss on securities
available for sale (181) - - Gain on sale of branches - 408 - Gain
on sale of mortgage loans 633 475 33.26% Total noninterest income
3,263 3,694 -11.67% Noninterest Expense Compensation and employee
benefits 6,601 6,047 9.16% Net occupancy expense 766 751 2.00%
Supplies and equipment expenses 977 1,114 -12.30%
Amortization-intangible assets 100 168 -40.48% Marketing 125 144
-13.19% State franchise taxes 248 199 24.62% Data processing 383
314 21.97% Telecommunications 274 268 2.24% Professional fees 130
130 0.00% Other operating expenses 1,579 1,399 12.87% Total
noninterest expense 11,183 10,534 6.16% Income before income taxes
6,435 5,800 10.95% Income tax expense 1,971 1,787 10.30% Net income
$4,464 $4,013 11.24% VIRGINIA FINANCIAL GROUP INC. CONSOLIDATED
AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED MARCH 31,
2006 AND 2005 (Dollars in thousands) Three months ended March 31,
2006 Average Interest Average Dollars in thousands Balance Inc/Exp
Rates Assets Loans receivable, net $1,157,736 $19,453 6.81%
Investment securities Taxable 152,945 1,614 4.28% Tax exempt 80,623
1,253 6.30% Total investments 233,568 2,867 4.98% Interest bearing
deposits 5,961 35 2.38% Federal funds sold 30,691 276 3.65% 270,220
3,178 4.77% Total earning assets 1,427,956 22,631 6.43% Total
nonearning assets 96,907 Total assets $1,524,863 Liabilities and
Stockholders' Equity Interest-bearing deposits Interest checking
$180,122 $198 0.45% Money market 166,666 701 1.71% Savings 120,090
195 0.66% Time deposits: Less than $100,000 372,152 3,185 3.47%
$100,000 and more 175,314 1,681 3.89% Total interest-bearing
deposits 1,014,344 5,960 2.38% Federal funds purchased and
securities sold under agreements to repurchase 14,801 86 2.36%
Federal Home Loan Bank advances 56,427 582 4.18% Trust preferred
capital notes 20,619 374 7.36% Other borrowings 30,856 306 4.02%
122,703 1,348 4.46% Total interest-bearing liabilities 1,137,047
7,308 2.60% Total noninterest-bearing liabilities 249,452 Total
liabilities 1,386,499 Stockholders' equity 138,364 Total
liabilities and stockholders' equity $1,524,863 Net interest income
(tax equivalent) $15,323 Average interest rate spread 3.82%
Interest expense as percentage of average earning assets 2.08% Net
interest margin 4.35% Three months ended March 31, 2005 Average
Interest Average Dollars in thousands Balance Inc/Exp Rates Assets
Loans receivable, net $1,071,992 $16,096 6.09% Investment
securities Taxable 191,766 1,873 3.96% Tax exempt 62,326 1,010
6.57% Total investments 254,092 2,883 4.60% Interest bearing
deposits 521 4 3.11% Federal funds sold 1,122 8 2.89% 255,735 2,895
4.59% Total earning assets 1,327,727 18,991 5.80% Total nonearning
assets 118,536 Total assets $1,446,263 Liabilities and
Stockholders' Equity Interest-bearing deposits Interest checking
$198,834 $195 0.40% Money market 174,238 481 1.12% Savings 135,578
223 0.67% Time deposits: Less than $100,000 369,507 2,761 3.03%
$100,000 and more 128,145 1,092 3.46% Total interest-bearing
deposits 1,006,302 4,752 1.92% Federal funds purchased and
securities sold under agreements to repurchase 23,018 144 2.54%
Federal Home Loan Bank advances 14,058 180 5.19% Trust preferred
capital notes 20,619 265 5.21% Other borrowings 9,618 57 2.40%
67,313 646 3.89% Total interest-bearing liabilities 1,073,615 5,398
2.04% Total noninterest-bearing liabilities 244,897 Total
liabilities 1,318,512 Stockholders' equity 127,751 Total
liabilities and stockholders' equity $1,446,263 Net interest income
(tax equivalent) $13,593 Average interest rate spread 3.76%
Interest expense as percentage of average earning assets 1.65% Net
interest margin 4.15% 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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