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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, 1998
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 April 15, 1998: 4,000,000
================================================================================
<PAGE>
VIRGINIA FINANCIAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Income 3
Consolidated Balance Sheet 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 Disclosures About Market Risk 11
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
</TABLE>
<PAGE>
VIRGINIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
MARCH 31 MARCH 31
1998 1997
------------------- ----------------------
<S> <C>
Interest Income:
Interest and Fee Income on Loans:
Secured by Real Estate $ 4,167 $ 3,539
To Finance Agriculture & Farmers 70 66
Commercial & Industrial 877 831
Individuals for Household & Personal 919 819
Obligations of State & Political
Tax-Exempt 3 5
Interest and Dividend Income on Securities:
U.S. Treas & U.S. Gov't Agencies 1,347 1,456
State & Political-Taxable 37 21
State & Political-Tax Exempt 169 185
Other Domestic Debt Securities 0 4
Interest on Federal Funds Sold 61 9
----------- ------------
Total Interest Income 7,650 6,935
Interest Expense:
Interest on Deposits:
NOW Accounts 285 275
Money Market Accounts 564 537
Other Savings Deposits 253 268
CD's of 100M or More 319 295
All Other Time Deposits 1,974 1,662
Interest on Fed Funds Purch'd
& Repurchase Agreements 82 84
----------- ------------
Total Interest Expense 3,477 3,121
Net Interest Income 4,173 3,814
Provision for Loan Losses 238 75
Non-Interest Income:
Fiduciary Income 310 401
Service Charges on Deposit Accts. 217 151
Other Fee Income 375 270
All Other Non-Interest Income 25 31
----------- ------------
Total Non-Interest Income 927 853
Realized Gain (Losses) on AFS Securities 0 0
Non-Interest Expense:
Salaries & Employee Benefits 1,437 1,349
Expense of Premise & Fixed Assets 295 267
Other Non-Interest Expense 732 667
----------- ------------
Total Non-Interest Expense 2,464 2,283
Income Before Income Taxes 2,398 2,309
Applicable Income Taxes 766 727
----------- ------------
Net Income $ 1,632 $ 1,582
=========== ============
Per Share Data Net Income, basic and diluted $ 0.41 $ 0.40
Cash Dividends $ 0.15 $ 0.14
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
VIRGINIA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS)
MARCH 31 DECEMBER 31
1998 1997
----------- -----------
<S> <C>
ASSETS
Cash & Due from Banks $ 15,480 $ 14,684
Federal Funds Sold 12,050 0
Securities -
U.S. Government 12,073 13,130
U.S. Agencies 74,727 82,689
Municipal Bonds 19,401 17,590
Equity Securities 1,281 0
----------- -----------
Total Securities 107,482 113,409
Loans
Secured by Real Estate 188,211 188,666
To Finance Agriculture & Farmers 3,008 2,725
Commercial & Industrial 36,076 34,434
Individuals for Household & Personal 43,794 42,958
Obligations of State & Political
Other Loans 526 799
----------- -----------
Total Loans 271,615 269,582
Less Reserve for
Loan Losses (3,827) (3,753)
----------- -----------
Net Loans 267,788 265,829
Bank Premises and Equipment 4,735 4,794
Deposit Intangibles 260 266
Other Assets 5,036 5,017
----------- -----------
Total Assets $ 412,831 $ 403,999
=========== ===========
LIABILITIES AND CAPITAL
Deposits
Demand $ 54,691 $ 54,457
NOW Accounts 43,182 42,897
Money Market Checking 58,500 57,950
Savings 34,870 35,472
Time Deposits 171,904 161,391
----------- -----------
Total Deposits 363,147 352,167
Securities Sold Under
Agmt. to Repurchase 5,190 4,960
Federal Funds Purchased 0 4,550
Other Liabilities 2,113 987
Stockholders' Equity
Capital Stock 20,000 20,000
Surplus 13,554 13,554
Unrealized Gain (Loss) on AFS Securities 169 155
Undivided Profits 8,568 7,626
----------- -----------
Total Equity 42,291 41,335
----------- -----------
Total Liabilities
and Capital $ 412,741 $ 403,999
=========== ===========
The accompanying notes are an integral part of these statements
<PAGE>
VIRGINIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
MARCH 31 MARCH 31
1998 1997
----------- -----------
<S> <C>
Cash flows from operating activities
Interest received $ 7,731 $ 6,833
Fees and other non-interest income 914 843
Interest paid (3,383) (3,135)
Cash paid to suppliers and employees (2,068) (1,945)
Income taxes paid (59) (2)
----------- -----------
Net cash provided by operating activities $ 3,135 $ 2,594
----------- -----------
Cash flows from investing activities
Maturities of securities 15,580 5,770
Proceeds from sales of securities 0 0
Purchases of securities (9,636) (1,234)
Net (increase) in loans (2,197) (4,262)
Proceeds from sale of equipment 0 0
Capital expenditures (75) (101)
Purchase of other assets (22) (57)
----------- -----------
Net cash used in investing activities $ 3,650 $ 116
----------- -----------
Cash flows from financing activities
Net increase (decrease) in certificates of deposit 10,513 (2,394)
Net increase in demand & savings deposits 467 5,490
Net decrease in federal funds purchased (4,550) (5,000)
Net increase in securities sold
under repurchase agreements 231 1,660
Dividends paid (600) (540)
----------- -----------
Net cash provided by (used in) financing activities $ 6,061 $ (784)
----------- -----------
Net increase in cash and cash equivalents 12,846 1,926
Cash and cash equivalents at beginning of year 14,684 16,287
----------- -----------
Cash and cash equivalents at end of year $ 27,530 $ 18,213
=========== ===========
</TABLE>
<PAGE>
VIRGINIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Three Months Ended
MARCH 31 MARCH 31
1998 1997
----------- ----------
<S> <C>
Reconciliation of net income to net cash provided by
operating activities
Net income $ 1,632 $ 1,582
----------- ----------
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation 134 123
Provision for loan losses 238 75
Increase in taxes payable 707 725
(Increase) decrease in interest receivable 85 (98)
Increase (Decrease) in interest payable 95 (15)
(Increase) in prepaid expenses (98) (115)
Increase in accrued expenses 331 276
Amortization and accretion 30 29
(Decrease) in deferred income (6) (5)
(Increase) decrease in fees receivable (13) 17
----------- ----------
Total Adjustments $ 1,503 $ 1,012
----------- ----------
Net cash provided by operating activities $ 3,135 $ 2,594
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
VIRGINIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Comprehensive Retained
Common Stock Surplus Income Income Earnings Total
------------ ------- ------ ------ -------- -----
<S> <C>
Balances, December 31, 1996 10,000 13,554 (91) 14,111 37,574
Comprehensive Income:
Net Income 1,582 1,582 1,582
Other comprehensive income,
net of tax:
Unrealized loss on available
for sale securities (329) (329) (329)
-----
Total comprehensive Income 1,253
-----
Cash dividends (540) (540)
---------- ---------- --------------- ---------- ----------
Balances, March 31, 1997 10,000 13,554 (420) 15,153 38,287
========== ========== =============== ========== ==========
Accumulated
Other
Comprehensive Comprehensive Retained
Common Stock Surplus Income Income Earnings Total
------------ ------- ------ ------ -------- -----
<CAPTION>
Balances, December 31, 1997 20,000 13,554 156 7,626 41,336
Comprehensive Income:
Net Income 1,632 1,632 1,632
Other comprehensive income,
net of tax:
Unrealized loss on available
for sale securities 13 13 13
---
Total comprehensive Income 1,645
-----
Cash dividends ________ ________ _____________ (600) (600)
----- -----
Balances, March 31, 1998 20,000 13,554 169 8,658 42,381
========== ========== =============== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
There were no reclassification adjustments for the three months ended March 31,
1998 and 1997.
<PAGE>
VIRGINIA FINANCIAL CORPORATION
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, 1997. 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, 1998 and 1997, the company's financial position at March 31, 1998 and
December 31, 1997, and cash flows for the three month periods ended March 31,
1998 and 1997. These adjustments are of a normal recurring nature.
Note 2. Securities as of March 31, 1998 and December 31, 1997 are summarized
below.
<TABLE>
<CAPTION>
(000 Omitted)
March 31, 1998 December 31, 1997
Unrealized Unrealized
Book Market Gain (Loss) Book Market Gain (Loss)
Securities Available for Sale
<S> <C>
U.S. Treasury Securities $ 11,973 $ 12,073 $ 100 $ 13,025 $ 13,130 $ 105
U.S. Agency Securities 39,907 40,062 155 42,899 43,029 130
Total Securities Available for Sale $ 51,880 $ 52,135 $ 255 $ 55,924 $ 56,159 $ 235
Securities Held to Maturity
U.S. Treasury Securities $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
U.S. Agency Securities 34,665 34,634 (31) 39,660 39,604 (56)
Obligations of State and
Political Subdivisions 19,401 19,563 162 17,590 17,762 172
Other Securities 1,281 1,281 0 0 0 0
----------- ---------- ------------ ---------- ---------- -----------
Total Securities Held to Maturity $ 55,347 $ 55,478 $ 131 $ 57,250 $ 57,366 $ 116
</TABLE>
<PAGE>
VIRGINIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
Note 3. The consolidated loan portfolio, stated at face amount, is composed
of the following:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C>
Real Estate Loans:
Construction and Land Development 17,382 20,183
Secured by Farm Land 1,110 1,316
Secured by 1-4 Family residential 116,748 128,130
Other Real Estate Loans 53,185 39,037
Loans to Farmers (Except Those Secured by Real Estate) 3,008 2,725
Commercial and Industrial Loans
(Except Those Secured by Real Estate) 36,076 34,434
Loans to Individuals for Personal Expenditures 43,960 43,364
All Other Loans 526 799
------------ ------------
Total Loans 271,995 269,988
Less Unearned Income Reflected in Loans 380 406
------------ ------------
Loans, Net of Unearned Income 271,615 269,582
============ ============
</TABLE>
The Bank had loans in a Nonaccrual category of $813 on December 31, 1997 and
$931 on March 31, 1998
Note 4. Allowance for Loan Losses
Analysis of the Allowance for Loan Losses
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C>
Balance at Beginning of Period 3,753 3,039
Charge-Offs (176) (30)
Recoveries 12 8
------------ ------------
Net Charge-Offs (164) (22)
Provision for Loan Losses 238 75
------------ ------------
Balance at End of Period 3,827 3,092
============ ============
</TABLE>
<PAGE>
<PAGE>
VIRGINIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. New Accounting Pronouncements
During June of 1997, the FASB issued FASB No. 131, "Disclosures about
Segments of an Enterprise and Related Information." FASB No. 131 establishes
standards for the way that public enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
This statement becomes effective for financial statements for periods beginning
after December 31, 1997.
The effects of these Statements on the Company's consolidated financial
statements are not expected to be material.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net income for the first quarter of 1998 was $1,632,000 compared to
$1,582,000 for the first quarter of 1997. This represents an increase of $50,000
or 3.16%. Interest income increased $715,000 and Total Average Earning Assets
increased $27,029,000, and the yield on earning assets increased from 7.92% to
8.10% comparing the first quarter of 1998 to the first quarter 1997. Average
interest-bearing liabilities increased by $20,546,000 and interest expense
increased $356,000 comparing the two quarters. The interest spread was 3.58%
both the first quarter of 1998 and 1997. Non-interest income increased $74,000
the first quarter of 1998 compared to 1997. This increase was due to increases
in fee income and other non-interest income. Non-interest expense increased the
first quarter of 1998 compared to the first quarter of 1997 by $181,000. This
increase was due to increases in salaries and employee benefits and other
non-interest operating expenses.
Financial Condition
Total assets increased $8,832,000 the first quarter of 1998 compared to
an increase of $1,451,000 the first quarter of 1997. Deposit growth was
$10,980,000 the first quarter of 1998 and $3,096,000 the first quarter of 1997.
This deposit growth both in 1998 and 1997 was primarily in Time Deposits. The
investment portfolio was reduced by $5,927,000 the first quarter of 1998 and
reduced by $5,034,000 the first quarter of 1997. These funds in 1998 were used
to fund loan growth of $1,959,000, Federal Funds sold by $12,050,000 and the
reduction of Federal Funds purchased of $4,550,000. During the first quarter of
1997 the deposit growth and the reduction of the investment portfolio was used
to fund loan growth of $4,187,000 and the reduction of Federal Funds purchased
by $5,000,000.
Future Operations
Management has not planned and does not anticipate any significant
changes in the nature or methods of operations of the Bank's ongoing business in
the second quarter of 1998.
<PAGE>
VIRGINIA FINANCIAL CORPORATION
AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
<TABLE>
<CAPTION>
(000 Omitted)
Three Months Ended March 31
1998 1997
Average Income/ Yield/ Average Income/ Yield/
ASSETS Balance Expense Rate Balance Expense Rate
----------- --------- --------- ----------- -------- --------
<S> <C>
Securities:
Taxable $ 92,863 $ 1,384 5.96% $ 100,050 $ 1,480 5.92%
Tax-exempt (1) 15,405 256 6.65% 16,709 281 6.73%
----------- --------- ------ ----------- -------- -------
Total Securities $ 108,268 $ 1,640 6.06% $ 116,759 $ 1,761 6.03%
Loans (net of earned income):
Taxable 269,208 6,034 8.97% 237,273 5,255 8.86%
Tax-Exempt (1) 339 5 5.90% 550 8 5.82%
----------- --------- ------- ----------- -------- -------
Total Loans 269,547 6,039 8.96% 237,823 5,263 8.85%
Fed Funds Sold and Repurchase Agreements 4,446 60 5.40% 650 9 5.54%
----------- --------- ------- ----------- -------- -------
Total Earning Assets 382,261 7,739 8.10% 355,232 7,033 7.92%
Less Allowance for Loan Losses (3,827) (3,079)
Total Nonearning Assets 26,241 22,314
----------- -----------
Total Assets $ 404,675 $ 374,467
=========== ===========
LIABILITIES AND SHAREHOLDER EQUITY
Interest bearing deposits:
NOW Accounts $ 41,558 $ 285 2.74% $ 39,898 $ 275 2.76%
Money Market Savings 58,263 564 3.87% 57,314 537 3.75%
Regular Savings 34,534 253 2.93% 36,456 269 2.95%
Certificates of Deposit:
Less than $100,000 146,573 1,974 5.39% 125,811 1,662 5.28%
$100,000 and More 20,829 319 6.13% 21,303 294 5.52%
----------- --------- ------- ----------- -------- ------
Total Interest Bearing Deposits 301,757 3,395 4.50% 280,782 3,037 4.3%
Fed Funds Purchased 568 8 5.63% 1,729 23 5.32%
Short Term Borrowings 5,613 74 5.27% 4,881 61 5.00%
----------- --------- ------- ----------- -------- ------
Total Interest Bearing Liabilities 307,938 3,477 4.52% 287,392 3,121 4.34%
Noninterest Bearing Liabilities
Demand Deposits 52,572 46,980
Other Liabilities 2,048 1,716
----------- -----------
Total Liabilities 362,558 336,088
Stockholders' Equity 42,117 38,379
----------- -----------
Total Liabilities and Stockholders' Equity $ 404,675 $ 374,467
Net Interest Income 4,262 3,912
Interest Rate Spread 3.58% 3.58%
Interest Expense as a Percent of Average
Earning Assets 3.64% 3.51%
Net Interest Margin 4.46% 4.41%
</TABLE>
(1) Income and yields are reported on a taxable-equivalent basis assuming a
federal tax rate of 34% in 1997 and 1998
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Management has determined that market risk remains substantially the same as the
amounts disclosed in the Corporation's Annual Report on Form 10-K.
<PAGE>
VIRGINIA FINANCIAL CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As of March 31, 1998 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
Virginia Financial Corporation's annual meeting of shareholders was
held on Monday, April 27, 1998 at the Corporation's main banking facility in
Staunton, Virginia. Information relating to the solicitation of proxies required
by this item is incorporated by reference from the Corporation's proxy statement
dated _____________________ for the Corporation's Annual Meeting of Shareholders
held April 27, 1998, filed with the Commission on ____________ __________.
There were no matters submitted to a vote of security holders during
the Quarter ended March 31, 1997.
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
NONE
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 12, 1998 /s/ Fred D. Bowers
---------------------------- -----------------------------------------
Fred D. Bowers, Secretary/Treasurer
(Principal Accounting Officer and Duly
Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<NAME> VIRGINIA FINANCIAL CORPORATION
<CIK> 0001036070
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 15,480
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 12,050
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 52,135
<INVESTMENTS-CARRYING> 55,347
<INVESTMENTS-MARKET> 55,478
<LOANS> 271,615
<ALLOWANCE> 3,827
<TOTAL-ASSETS> 412,831
<DEPOSITS> 363,147
<SHORT-TERM> 5,190
<LIABILITIES-OTHER> 2,113
<LONG-TERM> 0
0
0
<COMMON> 20,000
<OTHER-SE> 22,381
<TOTAL-LIABILITIES-AND-EQUITY> 412,831
<INTEREST-LOAN> 6,036
<INTEREST-INVEST> 1,553
<INTEREST-OTHER> 61
<INTEREST-TOTAL> 7,650
<INTEREST-DEPOSIT> 3,395
<INTEREST-EXPENSE> 3,477
<INTEREST-INCOME-NET> 4,173
<LOAN-LOSSES> 238
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,464
<INCOME-PRETAX> 2,398
<INCOME-PRE-EXTRAORDINARY> 2,398
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,632
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
<YIELD-ACTUAL> 8.10
<LOANS-NON> 931
<LOANS-PAST> 632
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,753
<CHARGE-OFFS> 176
<RECOVERIES> 12
<ALLOWANCE-CLOSE> 3,827
<ALLOWANCE-DOMESTIC> 3,223
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 604
</TABLE>
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