-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QB3jOlzzMYpKG1JU9y5EVwvmQdYL7WCy7UltosqpXBd0zRCj1XZMdR4z9frKAw+G D3tAzpJukyiS2TuVGbsnKw== 0000916641-99-000910.txt : 19991117 0000916641-99-000910.hdr.sgml : 19991117 ACCESSION NUMBER: 0000916641-99-000910 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIRGINIA FINANCIAL CORP CENTRAL INDEX KEY: 0001036070 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 541829288 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22283 FILM NUMBER: 99756624 BUSINESS ADDRESS: STREET 1: 24 SOUTH AUGUSTA ST CITY: STAUNTON STATE: VA ZIP: 24401 BUSINESS PHONE: 5408851232 MAIL ADDRESS: STREET 1: 24 SOUTH AUGUSTA ST CITY: STAUNTON STATE: VA ZIP: 24401 10-Q 1 VIRGINIA FINANCIAL CORPORATION ================================================================================ 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 Sept 30, 1999 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 repo 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 Nov 10, 1999: 3,997,198 ================================================================================ VIRGINIA FINANCIAL CORPORATION INDEX
Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Statements of Income 3 Consolidated Balance Sheets 5 Consolidated Statements of Cash Flows 6 Consolidated Statements of Changes in Stockholders' Equity 8 Notes to Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 11 Item 3. Quantitative and Qualitative Disclosure about Market Risk 12 Part II. Other Information Item 1. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 14 Signature 14
Part 1 Item 1. VIRGINIA FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
Three Months Ended SEPT 30 SEPT 30 1999 1998 ------------------- --------------------- Interest Income: Interest and Fee Income on Loans: Secured by Real Estate $ 4,084 $ 4,138 To Finance Agriculture & Farmers 61 79 Commercial & Industrial 850 859 Individuals for Household & Personal 795 944 Obligations of State & Political Tax-Exempt 0 3 Other 10 0 Interest and Dividend Income on Securities: U.S. Treas & U.S. Gov't Agencies 1,389 1,381 State & Political-Taxable 81 25 State & Political-Tax Exempt 386 250 Other Domestic Debt Securities 17 0 Equity Securities 70 74 Interest on Earning Deposits Due From Banks 103 0 Interest on Federal Funds Sold 49 125 ----------- ----------- Total Interest Income 7,895 7,878 ----------- ----------- Interest Expense: Interest on Deposits: NOW Accounts 296 293 Money Market Accounts 516 588 Other Savings Deposits 293 266 CD's of 100M or More 332 344 All Other Time Deposits 1,901 2,002 Interest on Fed Funds Purch'd & Repurchase Agreements 159 121 ----------- ----------- Total Interest Expense 3,497 3,614 ----------- ----------- Net Interest Income 4,398 4,264 Provision for Loan Losses 287 604 ----------- ----------- Net Interest Income after Provision for Loan Losses 4,111 3,660 ----------- ----------- Noninterest Income: Trust Department Income 324 296 Service Charges on Deposit Accts. 306 302 Other Fee Income 411 366 All Other Non-Interest Income 46 20 ----------- ----------- Total Noninterest Income 1,087 984 ----------- ----------- Noninterest Expense: Salaries & Employee Benefits 2,004 1,408 Expense of Premise & Fixed Assets 392 315 Other Non-Interest Expense 1,012 809 ----------- ----------- Total Non-Interest Expense 3,408 2,532 ----------- ----------- Income Before Income Taxes 1,790 2,112 Provision for Income Taxes 481 646 ----------- ----------- Net Income $ 1,309 $ 1,466 =========== =========== Per Share Data Net Income, basic and diluted $ 0.33 $ 0.37 Cash Dividends $ 0.16 $ 0.15
The accompanying notes are an integral part of these statements 3 Part 1 Item 1. VIRGINIA FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
Nine Months Ended SEPT 30 SEPT 30 1999 1998 ------------------- --------------------- Interest Income: Interest and Fee Income on Loans: Secured by Real Estate $ 12,070 $ 12,403 To Finance Agriculture & Farmers 193 226 Commercial & Industrial 2,612 2,619 Individuals for Household & Personal 2,486 2,780 Obligations of State & Political Tax-Exempt 2 9 Other 23 0 Interest and Dividend Income on Securities: U.S. Treas & U.S. Gov't Agencies 3,992 4,152 State & Political-Taxable 188 99 State & Political-Tax Exempt 1,005 613 Other Domestic Debt Securities 39 0 Equity Securities 258 79 Interest on Earning Deposits Due From Banks 103 0 Interest on Federal Funds Sold 194 264 ----------- ----------- Total Interest Income 23,165 23,244 ----------- ----------- Interest Expense: Interest on Deposits: NOW Accounts 870 879 Money Market Accounts 1,468 1,708 Other Savings Deposits 841 778 CD's of 100M or More 994 960 All Other Time Deposits 5,670 6,015 Interest on Fed Funds Purch'd & Repurchase Agreements 406 286 ----------- ----------- Total Interest Expense 10,249 10,626 ----------- ----------- Net Interest Income 12,916 12,618 Provision for Loan Losses 698 1,012 ----------- ----------- Net Interest Income after Provision for Loan Losses 12,218 11,606 ----------- ----------- Noninterest Income: Trust Department Income 1,090 918 Service Charges on Deposit Accts. 917 737 Other Fee Income 1,421 1,140 All Other Non-Interest Income 289 73 ----------- ----------- Total Noninterest Income 3,717 2,868 ----------- ----------- Noninterest Expense: Salaries & Employee Benefits 5,337 4,316 Expense of Premise & Fixed Assets 1,108 893 Other Non-Interest Expense 2,954 2,303 ----------- ----------- Total Non-Interest Expense 9,399 7,512 ----------- ----------- Income Before Income Taxes 6,536 6,962 Provision for Income Taxes 1,920 2,188 ----------- ----------- Net Income $ 4,616 $ 4,774 =========== =========== Per Share Data Net Income, basic and diluted $ 1.15 $ 1.19 Cash Dividends $ 0.48 $ 0.45
The accompanying notes are an integral part of these statements 4 VIRGINIA FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
SEPT 30 DECEMBER 31 1999 1998 ----------- ----------- ASSETS Cash & Due from Banks $ 15,269 $ 17,503 Interest Earning Deposits Due From Banks 16,143 54 Federal Funds Sold 0 0 Securities - U.S. Government 11,393 11,254 U.S. Agencies 84,932 80,836 Municipal Bonds 44,906 29,829 Equity Securities 4,234 7,873 Corporate Securities 1,222 500 ----------- ----------- Total Securities 146,687 130,292 Loans Secured by Real Estate 202,309 194,383 To Finance Agriculture & Farmers 2,543 2,598 Commercial & Industrial 33,752 37,693 Individuals for Household & Personal 39,475 43,527 Obligations of State & Political Tax Exempt 7 164 Other Loans 437 204 ----------- ----------- Total Loans 278,523 278,569 Less Reserve for Loan Losses (3,280) (3,212) ----------- ----------- Net Loans 275,243 275,357 Bank Premises and Equipment 7,547 5,782 Deposit Intangibles 2,217 242 Other Assets 6,701 4,910 ----------- ----------- Total Assets $ 469,807 $ 434,140 =========== =========== LIABILITIES AND CAPITAL Deposits Demand $ 65,694 $ 62,608 NOW Accounts 48,775 45,938 Money Market Checking 59,733 53,393 Savings 42,468 37,226 Time Deposits 188,076 171,267 ----------- ----------- Total Deposits 404,746 370,432 Securities Sold Under Agmt. to Repurchase 10,190 7,695 Federal Funds Purchased 6,625 9,475 Other Liabilities 1,773 1,074 Stockholders' Equity Common Stock 19,986 20,000 Surplus 13,478 13,554 Retained Earnings 14,130 11,434 Accumulated Other Comprehensive Income (1,121) 476 ----------- ----------- Total Stockholder's Equity 46,473 45,464 ----------- ----------- Total Liabilities and Stockholders' Equity $ 469,807 $ 434,140 =========== ===========
The accompanying notes are an integral part of these statements 5 VIRGINIA FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
Nine Months Ended SEPT 30 SEPT 30 1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Interest received $ 22,422 $ 22,934 Fees and other non-interest income 3,553 2,853 Interest paid (10,059) (10,513) Cash paid to suppliers and employees (8,311) (6,546) Income taxes paid (2,084) (2,294) ----------- ----------- Net cash provided by operating activities $ 5,521 $ 6,434 ----------- ----------- Cash flows from investing activities Maturities of securities 35,444 42,020 Proceeds from sales of securities 18,505 3,745 Purchases of securities (72,576) (53,976) Net increase in loans (584) (1,928) Proceeds from sale of assets 226 1 Capital expenditures (2,411) (967) Net increase in other assets (2,102) (164) Other real estate acquired in settlement of loans (540) (21) Proceeds from sale of other real estate 422 0 ----------- ----------- Net cash used in investing activities $ (23,616) $ (11,290) ----------- ----------- Cash flows from financing activities Net increase in certificates of deposit 16,810 7,390 Net increase in demand & savings deposits 17,505 3,160 Net decrease in federal funds purchased (2,850) (4,550) Net increase in securities sold under repurchase agreements 2,495 5,096 Payment to repurchase common stock (90) 0 Dividends paid (1,920) (1,800) ----------- ----------- Net cash provided by financing activities $ 31,950 $ 9,296 ----------- ----------- Net increase (decrease) in cash and cash equivalents 13,855 4,440 Cash and cash equivalents at beginning of year 17,557 14,685 ----------- ----------- Cash and cash equivalents at end of year $ 31,412 $ 19,125 =========== ===========
6 VIRGINIA FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (IN THOUSANDS OF DOLLARS)
Nine Months Ended SEPT 30 SEPT 30 1999 1998 ----------- ---------- Reconciliation of net income to net cash provided by operating activities Net income $ 4,616 $ 4,774 ----------- ---------- Adjustments to reconcile net income to net cash provided by operating activities Depreciation 554 412 Provision for loan losses 698 1,012 Gain on sale of assets (128) 0 Provision for deferred taxes 0 0 Gain on sale of investment securities (58) 0 Decrease in taxes payable 0 (61) (Increase) in interest receivable (604) (243) Increase in interest payable 190 113 Increase in prepaid expenses (288) (117) Increase in accrued expenses 521 536 Amortization and accretion (8) 30 Increase (decrease) in deferred income 6 (8) (Increase) decrease in fees receivable 22 (14) ----------- ---------- Total Adjustments $ 905 $ 1,660 ----------- ---------- Net cash provided by operating activities $ 5,521 $ 6,434 =========== ========== Supplemental schedule of non-cash investing activities: Other real estate acquired in settlement of loans 540 0 =========== ========== Unrealized gain (loss) on securities available for sale (2,420) 897 =========== ==========
The accompanying notes are an integral part of these statements 7 VIRGINIA FINANCIAL CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY NINE MONTHS ENDED SEPT 30, 1998 AND 1999 (IN THOUSANDS OF DOLLARS)
Accumulated Other Common Caital Retained Comprehensive Comprehensive Stock Surplus Earnings Income Income Total ---------- ---------- ---------- ------------- ---------- --------- Balances, December 31, 1997 20,000 13,554 7,626 155 41,335 Comprehensive income: Net income 4,774 4,774 4,774 Other comprehensive income net of tax, unrealized holding gains arising during the period (net of tax, $304,970) 592 592 592 ---------- Total comprehensive income 5,366 ========== Cash dividends ($0.15 per share) (1,800) (1,800) ---------- ---------- ---------- ------------- --------- Balances, Sept 30, 1998 20,000 13,554 10,600 747 44,901 ========== ========== ========== ============= =========
Accumulated Other Common Caital Retained Comprehensive Comprehensive Stock Surplus Earnings Income Income Total ---------- ---------- ---------- ------------- ---------- --------- Balances, December 31, 1998 20,000 13,554 11,434 476 45,464 Comprehensive income: Net income 4,616 4,616 4,616 Other comprehensive income (loss) net of tax, unrealized holding (losses) arising during the period (net of tax, $822,819) (1,597) (1,597) (1,597) ---------- Total comprehensive income 3,019 ========== Repurchase of common stock (14) (76) (90) Cash dividends ($0.16 per share) (1,920) (1,920) ---------- ---------- ---------- ------------- --------- Balances, Sept 30, 1999 19,986 13,478 14,130 (1,121) 46,473 ========== ========== ========== ------------- =========
The accompanying notes are an integral part of these statements 8 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, 1998. In the opinion of the company's management, the financial statements reflect all adjustments necessary to present fairly the results of operations for the nine month periods ended Sept 30, 1999 and 1998, the company's financial position at Sept 30, 1999 and December 31, 1998, and cash flows for the nine month periods ended Sept 30, 1999 and 1998. 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, Virginia Financial Corporation (herein after referred to as "the Company"), which will serve as the holding company of the Bank. This transaction was consumated on January 2, 1997. Note 2. Securities as of Sept 30, 1999 and December 31, 1998 are summarized below.
(IN THOUSANDS OF DOLLARS) Sept 30, 1999 December 31, 1998 Unrealized Unrealized Book Market Gain (Loss) Book Market Gain (Loss) Securities Available for Sale ---- ------ ----------- ---- ------ ----------- U.S. Treasury Securities $ 5,935 $ 5,933 $ (2) $ 11,139 $ 11,254 $ 115 U.S. Agency Securities 37,627 37,179 (448) 48,163 48,646 483 Obligations of State and Political Subdivisions 28,334 27,242 (1,092) 9,910 10,031 121 Other Securities 5,127 4,969 (158) 8,371 8,373 2 ----------- ---------- ------------ ---------- ---------- ------------ Total Securities Available for Sale $ 77,023 $ 75,323 $ (1,700) $ 77,583 $ 78,304 $ 721 =========== ========== ============ ========== ========== ============ Securities Held to Maturity U.S. Treasury Securities $ 5,460 $ 5,484 $ 24 $ 0 $ 0 $ 0 U.S. Agency Securities 47,753 46,846 (907) 32,190 32,131 (59) Obligations of State and Political Subdivisions 17,664 17,509 (155) 19,798 20,180 382 Other Securities 487 487 0 0 0 0 ----------- ---------- ------------ ---------- ---------- ------------ Total Securities Held to Maturity $ 71,364 $ 70,326 $ (1,038) $ 51,988 $ 52,311 $ 323 =========== ========== ============ ========== ========== ============
9 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:
Sept 30, 1999 December 31, 1998 Real Estate Loans: ------------- ----------------- Construction and Land Development $ 5,804 $ 20,065 Secured by Farm Land 3,760 1,284 Secured by 1-4 Family residential 113,194 113,477 Other Real Estate Loans 79,880 59,752 Loans to Farmers (Except Those Secured by Real Estate) 2,543 2,598 Commercial and Industrial Loans (Except Those Secured by Real Estate) 33,752 37,693 Loans to Individuals for Personal Expenditures 39,475 43,676 All Other Loans 444 368 ------------ ------------ Total Loans 278,852 278,913 Less Unearned Income Reflected in Loans 329 344 ------------ ------------ Loans, Net of Unearned Income $ 278,523 $ 278,569 ============ ============
The Bank had loans in a Nonaccrual category of $1,973 on December 31, 1998 and $1,199 on Sept 30, 1999 Note 4. Allowance for Loan Losses Analysis of the Allowance for Loan Losses
For the Nine Months Ended Sept 30, 1999 Sept 30, 1998 ------------- ------------- Balance at Beginning of Period 3,212 3,753 ------------ ------------ Charge-Offs (692) (1,670) Recoveries 62 43 ------------ ------------ Net Charge-Offs (630) (1,627) Provision for Loan Losses 698 1,012 ------------ ------------ Balance at End of Period $ 3,280 $ 3,138 ============ ============
Note 5. New Accounting Pronouncements In June 1998, The Financial Accounting Standards Board issued Statement No. 133, 'Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards for derivative financial instruments and other similar financial instruments and for hedging activities. The Statement also allows securities classified as held-to-maturity to be transferred to the available-for-sale category at the date of initial application of this standard. Statement No 133 is effective for all fiscal years beginning after June 15, 2000. Management is currently reviewing this statement to determine the impact, if any, it will have since the Company does not currently employ such derivative instruments and does not intend to do so in the future. The effects of these Statements on the company's consolidated financial statements are not expected to be material. 10 VIRGINIA FINANCIAL CORPORATION AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
(000 Omitted) Nine Months Ended Sept 30 1999 1998 Average Income/ Yield/ Average Income/ Yield/ ASSETS Balance Expense Rate Balance Expense Rate ----------- --------- ---------- ----------- --------- -------- Securities: Taxable $ 100,651 $ 4,487 5.94% $ 96,348 $ 4,330 5.99% Tax-exempt (1) 30,161 1,523 6.73% 18,172 929 6.82% ----------- --------- ---------- ----------- --------- -------- Total Securities $ 130,812 $ 6,010 6.13% $ 114,520 $ 5,259 6.12% Loans (net of earned income): Taxable 272,951 17,385 8.49% 268,304 18,029 8.96% Tax-Exempt (1) 78 3 5.13% 287 13 6.04% ----------- --------- ---------- ----------- --------- -------- Total Loans 273,029 17,388 8.49% 268,591 18,042 8.96% Interest Earning Deposits Due From Banks 2,482 103 5.55% 0 0 0.00% Fed Funds Sold and Repurchase Agreements 5,428 194 4.77% 6,386 263 5.49% ----------- --------- ---------- ----------- --------- -------- Total Earning Assets 411,751 23,695 7.67% 389,497 23,564 8.07% Less Allowance for Loan Losses (3,261) (3,138) Total Nonearning Assets 31,030 26,201 ----------- ----------- Total Assets $ 439,520 $ 412,560 =========== ===========
LIABILITIES AND SHAREHOLDER EQUITY
Interest bearing deposits: NOW Accounts $ 46,294 $ 870 2.51% $ 42,286 $ 879 2.77% Money Market Savings 57,041 1,468 3.43% 58,856 1,708 3.87% Regular Savings 38,005 841 2.95% 34,995 778 2.96% Certificates of Deposit: Less than $100,000 149,255 5,671 5.07% 146,759 6,015 5.46% $100,000 and More 26,194 994 5.06% 22,228 960 5.76% ----------- --------- ---------- ----------- --------- -------- Total Interest Bearing Deposits 316,789 9,844 4.14% 305,124 10,340 4.52% Fed Funds Purchased 1,128 37 4.37% 213 9 5.63% Short Term Borrowings 10,738 369 4.58% 6,913 277 5.34% ----------- --------- ---------- ----------- --------- -------- Total Interest Bearing Liabilities 328,655 10,250 4.16% 312,250 10,626 4.54% Noninterest Bearing Liabilities Demand Deposits 61,713 54,971 Other Liabilities 2,430 2,297 ----------- ----------- Total Liabilities 392,798 369,518 Stockholders' Equity 46,722 43,042 ----------- ----------- Total Liabilities and Stockholders' Equity $ 439,520 $ 412,560 =========== =========== Net Interest Income 13,445 12,618 Interest Rate Spread 3.51% 3.53% Interest Expense as a Percent of Average Earning Assets 3.32% 3.64% Net Interest Margin 4.35% 4.43%
(1) Income and yields are reported on a taxable-equivalent basis assuming a federal tax rate of 34% in 1998 and 1999 13 Part 1 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Net income for the third quarter of 1999 was $1,309,000 compared to $1,466,000 for the third quarter of 1998. This represents a decrease of $157,000 or 10.71%. During the third quarter interest income increased $247,000 and Total Earning Assets increased $32,470,000 while the yield on average earning assets decreased from 7.70% to 7.67%. Interest-bearing liabilities increased by $30,097,000 and interest expense increased $144,000 during the third quarter. The interest spread decreased from 3.52% to 3.51% comparing the third quarter and second quarter of 1999. Non-interest income increased $103,000 the third quarter of 1999 compared to 1998. This increase was due to increases in fee income, fiduciary income and gains from the sale of securities and other assets. Non-interest expense increased the third quarter of 1999 compared to the third quarter of 1998 by $876,000. This increase was due to increases in salaries and employee benefits and other non-interest operating expenses. Financial Condition - ------------------- Total assets increased $35,179,000 the third quarter of 1999 compared to an increase of $6,652,000 the third quarter of 1998. Assets the first nine months of 1999 increased $35,667,000 or 8.22% compared to an increase of $15,242,000 or 3.77% the first nine months of 1998. Deposit growth was $33,783,000 the third quarter of 1999 while it increased $1,454,000 the third quarter of 1998. Deposits the first nine months of 1999 increased $34,314,000 or 9.26% compared to an increase of $10,550,000 or 3.00% the first nine months of 1998. The deposit growth in 1999 has been in all deposit types, while in 1998 it was primarily in Time Deposits. The investment portfolio was increased by $14,255,000 the third quarter of 1999 and decreased by $436,000 the third quarter of 1998. Through the first nine months of 1999, investments have increased $16,395,000 or 12.58% compared to an increase of $9,167,000 or 8.08% the first nine months of 1998. The increase in asset size has led to the increase in the security portfolio and an increase in Interest Earning Deposits Due From Banks of $16,000,000. During the first nine months of 1999 the deposit growth was used to fund the investment growth. Future Operations - ----------------- The Bank opened, effective April 23, 1999, an office at 100 Lucy Lane, Waynesboro, Virginia, providing another full service bank to the Waynesboro area. The Bank also opened, effective September 23, 1999, a branch located at 1197 North Lee Highway, Lexington, Virginia. Along with the opening of these two branches, the Bank has also purchased two other branches located at 9 Lloyd Tolley Road, Natural Bridge Station, Virginia and 2101 Forest Avenue, Buena Vista, Virgina. The Bank began the operations of these branches on August 20, 1999. The expansion in Waynesboro, Virginia will provide Planters Bank with relief from the overflow of the present office at Poplar and Ohio Street plus serve the southern portion of the city. The expansions in Lexington, Buena Vista, and Natural Bridge Station, Virginia will provide the Bank with a presence in those market areas. Year 2000 - --------- The Year 2000 issue involves the risk that the computer systems may not be able to perform without interruption into the Year 2000. If computer systems do not correctly recognize the date change from December 31, 1999 to January 1, 2000, computer applications that rely on the date field could fail or could create erroneous results. Such erroneous results could affect interest payments or due dates and could cause the temporary inability to process transactions and to engage in ordinary business activities. The failure of the Corporation, its suppliers, and its borrowers to address the Year 2000 issue could have a materially adverse effect on the Corporation's financial condition, results of operations, or liquidity. In 1997, the Corporation initiated a review and assessment of all data processing systems, hardware and software to confirm that it will function properly in the year 2000. Based on this assessment, the Corporation's data processing systems, hardware and banking software are currently Year 2000 compliant. However, testing is required to confirm this. Testing began in the second quarter of 1998 and has been completed in the third quarter of 1999. For certain other systems, the Corporation has replaced or modified certain pieces of hardware and/or software so that the systems will properly function in the year 2000. For systems on which the Corporation relies on third party vendors, these vendors have been contacted and have indicated that the hardware and/or software will be Year 2000 compliant. The Corporation has also initiated formal communications with all significant loan customers to determine the extent to which the Corporation is vulnerable to those third parties' failures to remedy their own Year 2000 issues. The Corporation believes that exposure to customers who are not Year 2000 compliant is minimal. The Corporation does have in place contingency plans if any problems occur due to the Year 2000 issue. The Corporation has placed $13,000,000 into Interest Earning Bank Deposits Due From Banks that will mature before year end. As these term deposits mature, they will provide the Corporation with the ability to respond to above normal cash requests if necessary. Along with accounting for the potential cash problem, the Corporation has also installed a generator at the Rosser Avenue branch located at 100 Lucy Lane, Waynesboro, Virginia. This will allow the Corporation to continue its operations, out of this office, if there is any kind of power failure as a result of the year 2000 issue. The Corporation has completed the Year 2000 project as of Sept 30, 1999. To date, the Corporation has expensed $29,137 related to the assessment of, and efforts in connection with, the Year 2000 issue. Remaining expenditures are not expected to have material effects on the Corporation's consolidated financial statements. Part 1 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in information reported as of December 31, 1998, in Form 10-K. 15 VIRGINIA FINANCIAL CORPORATION PART II. OTHER INFORMATION Item 1. Legal Proceedings As of Sept 30, 1999 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 September 30, 1999. Item 5. Not Applicable Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the Quarter ended Sept 30, 1999. Exhibit 27 See 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 Nov 10, 1999 /s/Fred D. Bowers - ----------------------------- -------------------------------------------- Fred D. Bowers, Secretary/Treasurer (Principal Accounting Officer and Duly Authorized Officer) 16 EX-27 2 EXIBIT 27
9 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 15,269 16,143 0 0 75,323 71,364 70,326 278,523 3,280 469,807 404,746 16,815 1,773 0 0 0 19,986 26,487 469,807 17,386 5,482 297 23,165 9,843 10,249 12,916 698 66 9,399 6,536 6,536 0 0 4,616 1.15 1.15 4.35 1,199 614 0 0 3,212 692 62 3,280 2,857 0 423
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