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 GROWTH IN

SECOND QUARTER EARNINGS AND DIVIDEND

Culpeper, VA-Virginia Financial Group, Inc. (NASDAQ: VFGI) today reported second quarter 2004 earnings of $3.7 million, an increase of 2.7% compared to earnings of $3.6 million for the second quarter of 2003. Net income per diluted share was $.51, up 2.0% compared to $.50 for the same period in 2003. VFG’S earnings for the second quarter of 2004 produced an annualized return on average assets (ROA) of 1.05% and an annualized return on average equity (ROE) of 12.20%, compared to prior year ratios of 1.28% and 12.41%, respectively. For the first six months of 2004, net income was $7.1 million, up 3.7% from $6.9 million for the same period in 2003. Net income per diluted share was $.99, up 3.1% from $.96 for the first six months of 2003. ROA and ROE for the six month period was 1.02% and 11.86%, respectively.

Analysis of Financial Performance

Revenues for the second quarter of 2004 were $16.5 million, an increase of $2.2 million or 15.4% over $14.3 million in 2003. The largest component, net interest income, amounted to $12.6 million for the second quarter, up $2.2 million or 20.3% compared with $10.4 million for the same quarter in 2003. For the six months ended June 30, 2004, net interest income was $25.1 million, an increase of $4.3 million or 20.9% from $20.7 million for the same period in 2003. Significant growth in average earning assets from loan production offices in Charlottesville and Lynchburg, and nine new branches opened or purchased in 2003, were primarily contributors to this growth. The net interest margin for the second quarter of 2004 was 4.05%, down four basis points compared to 4.09% for the first quarter of 2004, and down sixteen basis points when compared to 4.21% for the second quarter of 2003. The decline is largely due to lower yields associated with significant loan growth over the past twelve month period. The net interest margin for the six month period ended June 30, 2004 was 4.07%, compared to 4.24% for the same period in 2003.

Average loans for the second quarter were $976.6 million, up $252.0 million or 34.8% from the second quarter of 2003, and average assets were $1.41 billion, up 279.0 million or 24.7% from the second quarter of 2003. Loan growth for the first six months of 2004 was $72.4 million or 7.8%. This 2004 growth was funded predominately from maturities and pay downs in the securities portfolio and short term borrowings. Average interest bearing deposits for the quarter were $991.7 million, up 23.8% from the second quarter of 2003.

VFG’s provision for loan losses for the second quarter were $636 thousand, up $314 thousand or almost 100% from the same period in 2003. For the six month period, the provision for loan losses was $1.3 million, up $672 thousand or over 100% from the same period in 2003. The increases are directly attributed to the aforementioned higher rates of loan growth for each period. Nonperforming assets and net charge-offs were at improved levels, with non-performing assets as a percentage of total assets of .31% at June 30, 2004, compared to .63% at June 30, 2003. Net charge-offs for the second quarter were $120 thousand, compared to net-charges of $345 thousand for the same period in 2003. Net charge-offs as a percentage of average loans were .01% for the second quarter and .03% for the six month period, compared to .05% and .07 % for the same periods in 2003. At June 30, 2004, the allowance for loan losses as a percentage of non-performing assets was 248.8%, while the allowance as a percentage of total loans amounted to 1.08%.

Total noninterest income was $4.0 million for the second quarter of 2004, an increase of $100 thousand or 2.0% compared to $3.9 million for the second quarter of 2003. Growth in retail banking fees offset the decline in mortgage revenue for the quarter, with revenue of $2.1 million, up $610 thousand or 42.4% from the same period in 2003. Fees and net gains from mortgages sold were $836 thousand for the second quarter of 2004, a decrease of $423 thousand or 33.6% from the second quarter of 2003. Originations were $50.4 million for the second quarter of 2004, down 20.9% compared to $63.7 million for the same period in 2003. Refinance loans represented $27.8 million or 55.2% of total originations for the second quarter of 2004.

Noninterest expense for the second quarter of 2004 amounted to $10.6 million, up $1.4 million or 15.7% from the same period in 2003, and up 1.9% from the first quarter of 2004. For the six month period ended June 30, 2004, noninterest expense amounted to $21.1 million, an increase of $2.8 million or 14.9% over the same period in 2003. The increases are largely attributable to the Company’s expansion efforts, and the incremental operating costs and intangible amortization associated with the eight purchased branches, loan production offices in Charlottesville and Lynchburg and a de novo branch in Fishersville, Virginia.

At June 30, 2004 VFG had assets of $1.41 billion, compared to $1.15 billion at June 30, 2003. Equity capital represented 8.59% of total assets at June 30, 2004. Book value at June 30, 2004 was $16.87 per share.

Dividend Increase

The Board of Directors has declared an increase in the quarterly cash dividend on its common stock to $0.20 per common share, up 5.3% from the current quarterly dividend of $0.19 per common share. The dividend is payable August 23, 2004, to shareholders of record on August 2, 2004. The new annual dividend rate will be $.80 per share, representing a 2.5% annualized yield on the most recent closing price.

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-seven branches serving Central and Southwest Virginia. It also maintains five trust and investment service offices in its markets, and 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 at www.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)
	6/30/2004			6/30/2003
INCOME STATEMENT
Interest income - taxable equivalent	$	17,703		$	15,789		12.12	%
Interest expense		4,693			4,764		-1.49	%
Net interest income - taxable equivalent		13,010			11,025		18.00	%
Less: taxable equivalent adjustment		448			586		-23.55	%
Net interest income		12,562			10,439		20.34	%
Provision for loan and lease losses		636			322		97.52	%
Net interest income after provision for loan and lease losses		11,926			10,117		17.88	%
Noninterest income		3,949			3,870		2.04	%
Noninterest expense		10,635			9,195		15.66	%
Provision for income taxes		1,555			1,203		29.26	%
Net income	$	3,685		$	3,589		2.67	%
PER SHARE DATA
Basic earnings	$	0.51		$	0.50		2.00	%
Diluted earnings	$	0.51		$	0.50		2.00	%
Shares outstanding		7,160,417			7,149,659
Weighted average shares -
Basic		7,159,654			7,154,236
Diluted		7,200,797			7,189,857
Shares repurchased		—			12,100
Average price of shares repurchased	$	—		$	30.40
Dividends paid on common shares	$	0.19		$	0.19
PERFORMANCE RATIOS
Return on average assets		1.05	%		1.28	%	-17.97	%
Return on average equity		12.20	%		12.41	%	-1.69	%
Return on average realized equity (A)		12.51	%		13.22	%	-5.37	%
Net yield on earning assets (taxable equivalent)		4.05	%		4.21	%	-3.80	%
Efficiency (taxable equivalent) (B)		62.69	%		61.85	%	1.36	%
ASSET QUALITY
Allowance for loan losses
Beginning of period	$	10,283		$	9,367
Provision for loan losses		636			323
Charge offs		(178	)		(416	)
Recoveries		58			70
End of period	$	10,799		$	9,344

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.

QUARTERLY PERFORMANCE SUMMARY

Virginia Financial Group, Inc. (NASDAQ: VFGI)

(Dollars in thousands, except per share data)

	For the Six Months Ended						Percent Increase (Decrease)
	6/30/2004			6/30/2003
INCOME STATEMENT
Interest income - taxable equivalent	$	35,545		$	31,649		12.31	%
Interest expense		9,581			9,755		-1.78	%
Net interest income - taxable equivalent		25,964			21,894		18.59	%
Less: taxable equivalent adjustment		910			1,174		-22.49	%
Net interest income		25,054			20,720		20.92	%
Provision for loan and lease losses		1,317			645		104.19	%
Net interest income after provision for loan and lease losses		23,737			20,075		18.24	%
Noninterest income		7,406			7,529		-1.63	%
Noninterest expense		21,070			18,345		14.85	%
Provision for income taxes		2,933			2,376		23.44	%
Net income	$	7,140		$	6,883		3.73	%
PER SHARE DATA
Basic earnings	$	1.00		$	0.96		4.17	%
Diluted earnings	$	0.99		$	0.96		3.13	%
Shares outstanding		7,160,417			7,149,659
Weighted average shares -
Basic		7,156,505			7,161,280
Diluted		7,199,256			7,196,207
Shares repurchased		—			28,507
Average price of shares repurchased	$	—		$	28.68
Dividends paid on common shares	$	0.38		$	0.37
PERFORMANCE RATIOS
Return on average assets		1.02	%		1.24	%	-17.74	%
Return on average equity		11.86	%		11.97	%	-0.92	%
Return on average realized equity (A)		12.24	%		12.85	%	-4.75	%
Net yield on earning assets (taxable equivalent)		4.07	%		4.24	%	-4.01	%
Efficiency (taxable equivalent) (B)		63.11	%		62.36	%	1.20	%
ASSET QUALITY
Allowance for loan losses
Beginning of period	$	9,743		$	9,180
Provision for loan losses		1,317			646
Charge offs		(354	)		(591	)
Recoveries		93			109
End of period	$	10,799		$	9,344
Non-performing assets:
Non-accrual loans	$	2,325		$	1,257
Loans 90+ days past due and still accruing		13			512
Other real estate owned		5			1,052
Troubled debt restructurings		1,998			4,707
Total non-performing assets	$	4,341		$	7,528

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 for all periods.

QUARTERLY PERFORMANCE SUMMARY

Virginia Financial Group, Inc. (NASDAQ: VFGI)

(Dollars in thousands, except per share data)

	For the Six Months Ended						Percent Increase (Decrease)
	6/30/2004			6/30/2003
SELECTED BALANCE SHEET DATA
End of period balances
Securities available for sale	$	294,003		$	319,332		-7.93	%
Securities held to maturity		5,843			7,056		-17.19	%
Total securities		299,846			326,388		-8.13	%
Real estate - construction		102,907			64,635		59.21	%
Real estate - 1-4 family residential		311,626			234,621		32.82	%
Real estate - commercial and multifamily		451,480			311,779		44.81	%
Commercial, financial and agricultural		78,278			66,548		17.63	%
Consumer loans		46,459			48,275		-3.76	%
All other loans		4,685			17,812		-73.70	%
Total loans		995,435			743,670		33.85	%
Allowance for loan losses		(10,799	)		(9,344	)	15.57	%
Other earning assets		749			9,210		-91.87	%
Total earning assets		1,296,030			1,079,268		20.08	%
Total assets		1,406,422			1,145,670		22.76	%
Non-interest bearing deposits		225,416			186,024		21.18	%
Money market & interest checking		362,894			286,186		26.80	%
Savings		142,207			112,541		26.36	%
CD’s and other time deposits		488,398			403,682		20.99	%
Total deposits		1,218,915			988,433		23.32	%
Short-term borrowed funds		25,498			21,528		18.44	%
Trust preferred capital notes		20,000			—		100.00	%
Federal Home Loan Bank advances		14,100			9,180		53.59	%
Total interest-bearing liabilities		1,053,097			833,117		26.40	%
Total shareholders’ equity	$	120,769		$	119,501		1.06	%
Average balances
Total assets	$	1,405,147		$	1,120,681		25.38	%
Total shareholders’ equity	$	121,089		$	115,955		4.43	%
	For the Three Months Ended						Percent Increase (Decrease)
Average balances	6/30/2004			6/30/2003
Total assets	$	1,406,614		$	1,127,594		24.74	%
Total shareholders’ equity	$	121,446		$	115,952		4.74	%

QUARTERLY PERFORMANCE SUMMARY

Virginia Financial Group, Inc. (NASDAQ: VFGI)

(Dollars in thousands)

	For the Three Months Ended				For the Six Months Ended
	6/30/2004		6/30/2003		6/30/2004		6/30/2003
Interest Income
Interest and fees on loans	$	14,239	$	12,006	$	28,294	$	24,214
Interest on deposits in other banks		1		—		2		2
Interest on investment securities:
Taxable		92		114		187		228
Interest and dividends on securities available for sale:
Taxable		2,126		1,970		4,557		3,890
Nontaxable		713		940		1,462		1,834
Dividends		77		108		124		163
Interest income on federal funds sold		7		65		9		144
Total Interest Income		17,255		15,203		34,635		30,475
Interest Expense
Interest on deposits		4,237		4,535		8,771		9,285
Interest on trust preferred		194		—		222		—
Interest on Federal Home Loan Bank advances		183		178		338		370
Interest on federal funds repurchased and securities sold under agreements to repurchase		35		49		106		97
Interest on other short-term borrowings		44		2		144		3
Total Interest Expense		4,693		4,764		9,581		9,755
Net Interest Income		12,562		10,439		25,054		20,720
Provision for loan losses		636		322		1,317		645
Net Interest Income after Provision for Loan Losses		11,926		10,117		23,737		20,075
Other Income
Retail banking fees		2,050		1,440		3,599		2,688
Fees from fiduciary activities		684		710		1,460		1,489
Brokerage services		147		115		345		348
Other operating income		232		300		521		612
Gains (losses) on securities available for sale		—		46		—		70
Gains (losses) on other real estate owned		—		—		—		—
Gains (losses) on sale of fixed assets		—		—		—		—
Fees on mortgage loans sold		836		1,259		1,481		2,322
Total Other Income		3,949		3,870		7,406		7,529
Other Expense
Compensation and employee benefits		5,948		5,326		11,808		10,584
Net occupancy expense		670		548		1,376		1,118
Supplies and equipment		1,095		999		2,139		1,947
Amortization-intangible assets		174		40		347		79
Computer services		442		291		741		632
Professional fees		290		144		491		356
Other operating expenses		2,016		1,847		4,168		3,629
Total Other Expense		10,635		9,195		21,070		18,345
Income Before Income Tax Expense		5,240		4,792		10,073		9,259
Income tax expense		1,555		1,203		2,933		2,376
Net Income	$	3,685	$	3,589	$	7,140	$	6,883

VIRGINIA FINANCIAL GROUP INC.

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES

THREE MONTHS ENDED JUNE 30, 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	$	976,562,652	$	14,297,176	5.89	%	$	724,539,057	$	12,078,005	6.69	%
Investment securities
Taxable		244,109,495		2,299,787	3.79	%		222,572,066		2,188,121	3.93	%
Tax exempt		66,607,619		1,096,467	6.62	%		78,652,021		1,458,173	7.42	%
Total Investments		310,717,114		3,396,254	4.40	%		283,418,600		3,469,081	4.84	%
FHLB int bearing		504,116		1,291	1.03	%		510,920		701	0.55	%
Federal funds sold		3,220,790		7,378	0.92	%		22,537,806		64,277	1.14	%
		314,442,020		3,404,923	4.36	%		311,331,379		3,549,940	4.58	%
Total Earning Assets	$	1,291,004,672		17,702,099	5.51	%	$	1,048,811,870		15,789,277	6.03	%
Liabilities and Stockholders’ Equity
Time and savings deposits
Interest-bearing transaction accounts	$	189,402,247	$	184,872	0.39	%	$	127,181,960	$	237,023	0.75	%
Money market deposit accounts		170,697,590		375,130	0.88	%		159,828,257		464,712	1.17	%
Passbook savings accounts		141,020,480		235,474	0.67	%		111,358,903		274,445	0.99	%
Certificates of deposit >$100k		119,938,527		993,335	3.33	%		90,714,140		875,184	3.87	%
Certificates of deposit <$100k		370,676,906		2,448,607	2.66	%		311,830,873		2,683,191	3.45	%
Total Time and Savings Deposits		991,735,750		4,237,418	1.72	%		800,914,133		4,534,555	2.27	%
Federal funds purchased		21,632,939		34,370	0.64	%		20,940,226		48,623	0.93	%
Trust preferred capital notes		20,000,000		194,133	3.90	%
Other short term borrowings		10,813,186		45,875	1.71	%		600,053		1,306	0.87	%
Federal Home Loan Bank advances		14,117,803		182,676	5.20	%		10,912,088		178,786	6.57	%
		66,563,928		457,054	2.76	%		32,193,091		241,016	3.01	%
Total Interest- Bearing Liabilities	$	1,058,299,678		4,694,472	1.78	%	$	833,366,500		4,763,270	2.29	%
Net interest income (tax equivalent)			$	13,007,627					$	11,026,007
Average interest rate spread					3.73	%					3.78	%
Interest expense as percentage of average earning assets					1.46	%					1.82	%
Net interest margin					4.05	%					4.21	%

VIRGINIA FINANCIAL GROUP INC.

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES

SIX MONTHS ENDED JUNE 30, 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	$	959,815,870	$	28,411,355	5.95	%	$	720,644,465	$	24,388,254	6.82	%
Investment securities
Taxable		250,962,439		4,873,764	3.91	%		213,254,425		4,281,597	4.02	%
Tax exempt		68,758,399		2,248,430	6.58	%		79,118,539		2,833,778	7.16	%
Total Investments		319,720,838		7,122,194	4.48	%		292,372,964		7,115,375	4.87	%
FHLB int bearing		526,413		2,045	0.78	%		498,774		2,264	0.92	%
Federal funds sold		2,039,684		9,463	0.93	%		24,981,072		143,573	1.16	%
		322,286,935		7,133,702	4.45	%		317,852,810		7,261,212	4.57	%
Total Earning Assets	$	1,282,102,805		35,545,057	5.58	%	$	1,038,497,275		31,649,466	6.13	%
Liabilities and Stockholders’ Equity
Time and savings deposits
Interest-bearing transaction accounts	$	192,967,259	$	569,971	0.59	%	$	125,540,059	$	473,162	0.76	%
Money market deposit accounts		169,963,217		780,953	0.92	%		158,157,304		1,000,935	1.28	%
Passbook savings accounts		139,019,591		484,043	0.70	%		109,153,144		584,781	1.08	%
Certificates of deposit >$100k		117,895,192		1,980,014	3.38	%		90,578,537		1,759,991	3.92	%
Certificates of deposit <$100k		371,508,318		4,956,422	2.68	%		312,212,634		5,466,008	3.53	%
Total Time and Savings Deposits		991,353,577		8,771,403	1.78	%		795,641,678		9,284,877	2.35	%
Federal funds purchased		28,024,444		106,092	0.78	%		20,237,567		96,623	0.96	%
Trust preferred capital notes		11,538,462		221,866	3.87	%
Other short term borrowings		18,613,736		144,290	1.53	%		527,230		2,766	1.06	%
Federal Home Loan Bank advances		11,820,000		337,552	5.74	%		11,561,215		370,342	6.46	%
		69,996,642		809,800	2.33	%		32,326,012		469,731	2.93	%
Total Interest - Bearing Liabilities	$	1,061,350,219		9,581,203	1.82	%	$	827,967,690		9,754,608	2.38	%
Net interest income (tax equivalent)			$	25,963,854					$	21,894,858
Average interest rate spread					3.76	%					3.76	%
Interest expense as percentage of average earning assets					1.50	%					1.89	%
Net interest margin					4.07	%					4.24	%