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 June 30, 1997

                                          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, Virgnia                      24401
(Address of principal executive ooofices)                     (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 July 31, 1997: 2,000,000

<PAGE>
                             VIRGINIA FINANCIAL CORPORATION

                                         INDEX

<TABLE>
<S> <C>
                                                                                              Page No.
                                                                                              --------
Part I.  Financial Information

         Item 1.  Financial Statements

                  Consolidated Statements of Income                                             3

                  Consolidated Balance Sheet                                                    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

Part II. Other Information

         Item 1.  Legal Proceedings                                                            13

         Item 2.  Changes in Securities                                                        13

         Item 4.  Submission of Matters to a Vote of Security Holders                          18

         Item 6.  Exhibits and Reports on Form 8-K                                             18

         Signature                                                                             19

</TABLE>


<PAGE>

<TABLE>

                         PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                         VIRGINIA FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
               (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS
<CAPTION>
<S> <C>
                                                          Three Months Ended
                                                   JUNE 30                   JUNE 30
                                                     1997                      1996
                                                 -----------               -----------
Interest Income:
Interest and Fee Income on Loans:
   Secured by Real Estate                        $     3,642               $     3,306
   To Finance Agriculture & Farmers                       71                        71
   Commercial & Industrial                               855                       835
   Individuals for Household & Personal                  859                       737
   Obligations of State & Political
     Tax-Exempt                                            5                         5
Interest and Dividend Income on Securities:
   U.S. Treas & U.S. Gov't Agencies                    1,453                     1,564
   State & Political-Taxable                              18                        19
   State & Political-Tax Exempt                          173                       195
   Other Domestic Debt Securities                          3                         9
Income on Federal Funds Sold                              18                         6
                                                 -----------               -----------
Total Interest Income                                  7,097                     6,747
Interest Expense:
Interest on Deposits:
   NOW Accounts                                          281                       277
   Money Market Accounts                                 553                       576
   Other Savings Deposits                                272                       290
   CD's of 100M or More                                  281                       322
   All Other Time Deposits                             1,683                     1,594
Interest on Fed Funds Purch'd
   & Repurchase Agreements                                94                        91
                                                 -----------               -----------
Total Interest Expense                                 3,164                     3,150
Net Interest Income                                    3,933                     3,597
Provision for Loan Losses                                238                       156
Non-Interest Income:
   Fiduciary Income                                      201                       170
   Service Charges on Deposit Accts.                     160                       162
   Other Fee Income                                      255                       177
   All Other Non-Interest Income                          28                        18
                                                 -----------               -----------
Total Non-Interest Income                                644                       527
Realized Gain (Losses) on AFS Securities                   0                         4
Non-Interest Expense:
  Salaries & Employee Benefits                         1,383                     1,303
  Expense of Premise & Fixed Assets                      284                       223
  Other Non-Interest Expense                             741                       614
                                                 -----------               -----------
Total Non-Interest Expense                             2,408                     2,140
Income Before Income Taxes                             1,931                     1,832
Applicable Income Taxes                                  603                       564
                                                 -----------               -----------
Net Income                                       $     1,328               $     1,268
                                                 ===========               ===========
Per Share Data Net Income                        $      0.66               $      0.63
Cash Dividends                                   $      0.27               $      0.23


The accompanying notes are an integral part of these statements

                                           3
<PAGE>
                             VIRGINIA FINANCIAL CORPORATION
                            CONSOLIDATED STATEMENT OF INCOME
                   (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS
<CAPTION>

                                                             Six Months Ended
                                                    JUNE 30                  JUNE 30
                                                     1997                      1996
                                                 -----------               -----------
Interest Income:
Interest and Fee Income on Loans:
   Secured by Real Estate                        $     7,181               $     6,626
   To Finance Agriculture & Farmers                      137                       141
   Commercial & Industrial                             1,686                     1,624
   Individuals for Household & Personal                1,678                     1,433
   Obligations of State & Political
     Tax-Exempt                                           10                        15

Interest and Dividend Income on Securities:
   U.S. Treas & U.S. Gov't Agencies                    2,909                     3,103
   State & Political-Taxable                              39                        38
   State & Political-Tax Exempt                          358                       378
   Other Domestic Debt Securities                          7                        18

Income on Federal Funds Sold                              27                        57
                                                 -----------               -----------
Total Interest Income                                 14,032                    13,433

Interest Expense:
Interest on Deposits:
   NOW Accounts                                          556                       541
   Money Market Accounts                               1,090                     1,222
   Other Savings Deposits                                540                       575
   CD's of 100M or More                                  576                       637
   All Other Time Deposits                             3,345                     3,174
Interest on Fed Funds Purch'd
   & Repurchase Agreements                               178                       130
                                                 -----------               -----------
Total Interest Expense                                 6,285                     6,279
Net Interest Income                                    7,747                     7,154
Provision for Loan Losses                                313                       156
Non-Interest Income:
   Fiduciary Income                                      602                       566
   Service Charges on Deposit Accts.                     311                       323
   Other Fee Income                                      525                       414
   All Other Non-Interest Income                          59                        35
                                                 -----------               -----------
Total Non-Interest Income                              1,497                     1,338
Realized Gain (Losses) on AFS Securities                   0                         4
Non-Interest Expense:
  Salaries & Employee Benefits                         2,732                     2,604
  Expense of Premise & Fixed Assets                      550                       463
  Other Non-Interest Expense                           1,409                     1,197
                                                 -----------               -----------
Total Non-Interest Expense                             4,691                     4,264
Income Before Income Taxes                             4,240                     4,076
Applicable Income Taxes                                1,330                     1,268
                                                 -----------               -----------
Net Income                                       $     2,910               $     2,808
                                                 ===========               ===========
Per Share Data Net Income                        $      1.45               $      1.40
Cash Dividends                                   $      0.54               $      0.46


The accompanying notes are an integral part of these statements

                                           4
<PAGE>
                             VIRGINIA FINANCIAL CORPORATION
                               CONSOLIDATED BALANCE SHEET

                               (IN THOUSANDS OF DOLLARS)
<CAPTION>

                                                    JUNE 30                  DECEMBER
                                                      1997                     1996
                                                 -----------               -----------
ASSETS
Cash & Due from Banks                            $    19,964               $    16,287
Federal Funds Sold                                     6,000                         0
Investments -
  U.S. Government                                     14,564                    13,561
  U.S. Agencies                                       81,264                    86,381
  Municipal Bonds                                     16,920                    18,608
  Corporate Securities                                   250                       250
                                                 -----------               -----------
     Total Investments                               112,998                   118,800

Loans
   Secured by Real Estate                            171,322                   160,573
   To Finance Agriculture & Farmers                    2,925                     2,879
   Commercial & Industrial                            34,483                    34,313
   Individuals for Household & Personal               39,594                    37,413
   Obligations of State & Political
   Tax Exempt                                            478                       582
   Other Loans                                           240                       192
                                                 -----------               -----------
     Total Loans                                     249,042                   235,952
Less Reserve for
  Loan Losses                                         (3,302)                   (3,039)
                                                 -----------               -----------
     Net Loans                                       245,740                   232,913

Bank Premises                                          4,402                     4,390
Deposit Intangibles                                      278                       290
Other Assets                                           4,919                     4,433
                                                 -----------               -----------
     Total Assets                                $   394,301               $   377,113
                                                 ===========               ===========

LIABILITIES AND CAPITAL
Deposits
  Demand                                         $    49,165               $    51,260
  NOW Accounts                                        39,169                    39,653
  Money Market Checking                               52,868                    55,480
  Savings                                             34,593                    36,267
  Time Deposits                                      171,201                   147,715
                                                 -----------               -----------
     Total Deposits                                  346,996                   330,375


Securities Sold Under
  Agmt. to Repurchase                                  6,515                     3,110
Federal Funds Purchased                                    0                     5,000
Other Liabilities                                      1,415                     1,054

Stockholders' Equity
  Capital Stock                                       10,000                    20,000
  Surplus                                             13,554                     3,554
  Unrealized Gain (Loss) on Sec.                        (120)                      (91)
  Undivided Profits                                   15,941                    14,111
                                                 -----------               -----------
     Total Equity                                     39,375                    37,574
                                                 -----------               -----------
     Total Liabilities
     and Capital                                 $   394,301               $   377,113
                                                 ===========               ===========

The accompanying notes are an integral part of these statements

                                           5
<PAGE>
                             VIRGINIA FINANCIAL CORPORATION
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (IN THOUSANDS OF DOLLARS)
<CAPTION>

                                                            Six Months Ended
                                                   JUNE 30                   JUNE 30
                                                     1997                      1996
                                                 -----------               -----------
CASH FLOWS FROM OPERATING ACTIVITIES

Interest received                                $    13,952               $    13,318
Fees and other non-interest income                     1,484                     1,338
Interest paid                                         (6,343)                   (6,259)
Cash paid to suppliers and employees                  (4,191)                   (3,816)
Income taxes paid                                     (1,455)                   (1,313)
                                                 -----------               -----------
  Net cash provided by operating activities      $     3,447               $     3,268
                                                 -----------               -----------

Cash flows from investing activities

Maturities of investment securities                   11,505                    21,976
Proceeds from sales of investment securities               0                     7,024
Purchases of investment securities                    (5,750)                  (30,513)
Net increase in loans                                (13,140)                   (9,341)
Proceeds from sale of equipment                            3                         0
Capital expenditures                                    (264)                     (247)
Purchase of other assets                                 (70)                      (12)
                                                 -----------               -----------
Net cash used in investing activities            $    (7,716)              $   (11,113)
                                                 -----------               -----------

Net cash provided by financing activities

Net increase in certificates of deposit               23,487                     4,758
Net decrease in demand deposits                       (6,866)                   (5,844)
Net (decrease) increase in federal funds purchased    (5,000)                   10,498
Net increase in securities held for resale             3,405                       340
Dividends paid                                        (1,080)                     (920)
                                                 -----------               -----------
Net cash used in financing activities            $    13,946               $     8,832
                                                 -----------               -----------

Net increase in cash and cash equivalents              9,677                       987

Cash and cash equivalents at beginning of year        16,287                    12,575
                                                 -----------               -----------

Cash and cash equivalents at end of year         $    25,964               $    13,562
                                                 ===========               ===========

                                           6
<PAGE>
                             VIRGINIA FINANCIAL CORPORATION
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (IN THOUSANDS OF DOLLARS)

                                                            Six Months Ended
                                                   JUNE 30                  JUNE 30
                                                     1997                     1996
                                                 -----------               -----------
Reconciliation of net income to net cash
  provided by operating activities

Net income                                       $     2,910               $     2,808
                                                 -----------               -----------

Adjustments to reconcile net income to net
  cash provided by operating activities
    Depreciation                                         249                       197
    Provision for loan losses                            313                       156
   (Gain) Loss on sale of equipment                        0                         0
   Realized Gains on available for sale securities         0                        (4)
    Decrease in taxes payable                             (9)                        0
    Increase in interest receivable                      (85)                      (86)
    Increase (Decrease) in interest payable              (58)                       20
    Increase in prepaid expenses                        (375)                     (181)
    Increase in accrued expenses                         427                       358
    Amortization and accretion                            60                        13
    Increase (Decrease) in deferred interest               1                       (13)
    Decrease in fees receivable                           14                         0
                                                 -----------               -----------
Total Adjustments                                $       537               $       460
                                                 -----------               -----------
Net cash provided by operating activities        $     3,447               $     3,268
                                                 ===========               ===========

The accompanying notes are an integral part of these statements

                                           7
<PAGE>
                                            VIRGINIA FINANCIAL CORPORATION
                               CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                        SIX MONTHS ENDED JUNE 30, 1996 AND 1997
                                               (IN THOUSANDS OF DOLLARS)

<CAPTION>

                                                                        Unrealized Gain/
                                                                       Loss on Securities      Retained
                                      Common Stock      Surplus        Available for Sale      Earnings         Total
                                      ------------      -------        ------------------      --------         -----    

Balances, December 31, 1995                 20,000       $3,554                      $110       $10,489        $34,153

Cash Dividends                                                                                     (920)          (920)

Net Income                                                                                        2,808          2,808

Unrealized Loss on Securities
   Available for Sale                                                                (462)                        (462)
                                     -------------    ---------             -------------     ----------    ---------- 

Balances, June 30, 1996                     20,000       $3,554                     ($352)       $12,377       $35,579
                                     =============    =========             =============     ==========    ========== 
 



                                                                        Unrealized Gain/
                                                                       Loss on Securities      Retained
                                      Common Stock      Surplus        Available for Sale      Earnings         Total
                                      ------------      -------        ------------------      --------         -----    

Balances, December 31, 1996                 20,000       $3,554                      ($91)      $14,111        $37,574

Issuance of Virginia Financial
   Corporation Common Stock
   1-2-97 Par Value $5.                    (10,000)      10,000                                                      0

Cash Dividends                                                                                   (1,080)        (1,080)

Net Income                                                                                        2,910          2,910

Increase in Unrealized Loss
   on Securities Available for Sale                                                   (29)                         (29)
                                     -------------    ---------             -------------     ----------    ---------- 

Balances, June 30, 1997                     10,000      $13,554                     ($120)       $15,941       $39,375
                                     =============    =========             =============     ==========    ========== 


The accompanying notes are an integral part of these statements
</TABLE>

                                                           8
<PAGE>
                         VIRGINIA FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  Interim Financial Statements

         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.

         The Company  was not  operational  in 1996;  therefore,  the  financial
statements  and  discussions  for  1996  in  this  quarterly  report  relate  to
operations  of Planters  Bank & Trust  Company of Virginia  and its  subsidiary.
Planters  Bank & Trust  Company of Virginia is the sole bank  subsidiary  of the
Company.  The Company has no material operations other than the ownership of the
Bank.

         The accompanying financial statements of Virginia Financial Corporation
and its  Subsidiary  have not been audited by  independent  accountants  for the
second  quarter of 1997.  The balance  sheet at December  31,  1996,  reflecting
Planters  Bank & Trust  Company of  Virginia  has been  audited  by  independent
accountants.

Note 2.  Securities as of June 30, 1997 and December 31, 1996 are summarized 
         below.
<TABLE>
<CAPTION>
<S> <C>
                                                                         (000 Omitted)
                                                       June 30, 1997                     December 31, 1996
                                                                  Unrealized                              Unrealized
                                              Book       Market   Gain (Loss)        Book      Market     Gain (Loss)
                                              ----       ------   -----------        ----      ------     -----------
Securities Available for Sale

            U.S. Treasury Securities        $14,529     $14,565          $36        $12,515    $12,563          ($48)
            U.S. Agency Securities           38,790      38,573         (217)        38,282     38,096           186
            Obligations of State and
               Political Subdivisions             0           0            0              0          0             0
            Other Securities                      0           0            0              0          0             0
                                          ----------  ----------  -----------      --------- ----------  ------------
Total Securities Available for Sale         $53,319     $53,138        ($181)       $50,797    $50,659          $138



Securities Held to Maturity

            U.S. Treasury Securities             $0          $0           $0           $999       $999            $0
            U.S. Agency Securities           42,691      42,429         (262)        48,285     47,954          (331)
            Obligations of State and
               Political Subdivisions        16,920      16,921            1         18,608     18,613             5
            Other Securities                    250         250            0            250        251             1
                                          ----------  ----------  -----------      --------- ----------  ------------
Total Securities Held to Maturity           $59,861     $59,600        ($261)       $68,142    $67,817         ($325)
</TABLE>


                                        9
<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>
<S> <C>
                                                             June 30, 1997        December 31, 1996
                                                             -------------        -----------------
Real Estate Loans:
  Construction and Land Development                              $16,255                $14,205
  Secured by Farm Land                                             1,271                    933
  Secured by 1-4 Family residential                              114,167                106,693
  Other Real Estate Loans                                         39,629                 38,965
Loans to Farmers (Except Those Secured by Real Estate)             2,925                  2,879
Commercial and Industrial Loans
      (Except Those Secured by Real Estate)                       34,483                 34,313
Loans to Individuals for Personal Expenditures                    39,984                 37,542
All Other Loans                                                      718                    774
                                                             ------------            -----------
      Total Loans                                               $249,432               $236,304
Less Unearned Income Reflected in Loans                              390                    352
                                                             ------------            -----------
      Loans, Net of Unearned Income                             $249,042               $235,952
                                                             ============            ===========
</TABLE>

The Bank had loans in a  Nonaccrual  category of $194 on  December  31, 1996 and
$1,367 on June 30, 1997.


Note 4.  Allowance for Loan Losses

Analysis of the Allowance for Loan Losses

                                                For the Six Months Ended

                                            June 30, 1997        June 30, 1996
                                            -------------        -------------
Balance at Beginning of Period                  $3,039                $2,786

Charge-Offs                                        (75)                 (119)

Recoveries                                          25                    15
                                              ---------            ----------

Net Charge-Offs                                    (50)                 (104)

Provision for Loan Losses                          313                   156
                                              ---------            ----------

Balance at End of Period                        $3,302                $2,838
                                              =========            ==========

                                       10
<PAGE>
                         VIRGINIA FINANCIAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5.  New Accounting Pronouncements

         FASB  Statement  No. 125,  "Accounting  for  Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities" was issued in June, 1996 and
establishes, among other things, new criteria for determining whether a transfer
of  financial  assets  in  exchange  for cash of other  consideration  should be
accounted  for as a sale or as a pledge of  collateral  in a secured  borrowing.
Statement  125  also   establishes  new  accounting   requirements  for  pledged
collateral.  As  issued,  Statement  125 is  effective  for  all  transfers  and
servicing of financial assets and extinguishments of liabilities occurring after
December 1996.

         FASB  Statement  No. 127,  "Deferral of the  Effective  Date of Certain
Provisions of FASB  Statement No. 125",  defers for one year the effective  date
(a) paragraph 15 of Statement 125 and (b) for repurchase agreement, dollar-roll,
securities  lending,  or similar  transactions,  of paragraph 9-12 and 237(b) of
Statement 125.

         The effects of these Statements on the Company's consolidated financial
statements are not expected to be material.


                ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Results of Operations


         Net income for the first six months of 1997 was $2,909,695  compared to
$2,807,516  for the first six months of 1996.  This  represents  an  increase of
$102,179  or 3.64  percent.  Net  income  for the  second  quarter  of 1997  was
$1,327,664  compared  to  $1,268,255  for  the  second  quarter  of  1996.  This
represents  an  increase  of  $59,409 or 4.68  percent.  Total  interest  income
comparing  the two six  month  periods  increased  in 1997 by  $599,001  or 4.46
percent  while total  interest  expense  increased  only $6,401 or .10  percent.
Non-interest  income  increased in 1997  comparing  the two six month periods by
$159,361 or 11.91  percent due  primarily to increases in trust  department  and
secondary  mortgage  department income.  Non-interest  expense comparing the two
periods  increased in 1997 by $427,719 or 10.03 percent due to increased cost of
ongoing operational expenses, salaries and benefits.

Financial Condition

         Total assets increased the first six months of 1997 by $17.2 million or
4.56 percent  compared to an increase of $11.5 million or 3.24 percent the first
six months of 1996. Assets increased the second quarter of 1997 by $15.7 million
compared  to $5.4  million the second  quarter of 1996.  This  increased  growth
during  the  second  quarter of 1997 was due to a  promotion  of a twenty  month
certificate  of deposit with an APY of 6.25  percent.  Loan growth the first six
months of 1997 was $13.1 million  compared to $9.2 million  growth the first six
months  of 1996.  Deposit  growth  for the  first  six  months of 1997 was $16.6
million  compared to a decrease of $1.1  million  during the first six months of
1996.  The loan  growth  during  the first six months of 1996 was funded by $8.0
million  dollars in federal funds and $2.8 million  dollars in  securities  sold
under agreement to repurchase.

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 third quarter of 1997.

                                       11

<PAGE>
<TABLE>

                                            VIRGINIA FINANCIAL CORPORATION
                                AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
<CAPTION>
<S> <C>
                                                                             (000 Omitted)
                                                                         Six Months Ended June 30,
                                                                   1997                              1996
                                                       Average    Income/   Yield/        Average   Income/   Yield/
ASSETS                                                 Balance    Expense    Rate         Balance   Expense    Rate
                                                      ---------  ---------  -------      ---------  --------  -------
Balances at Correspondent Banks - Interest Bearing          $0          $0     N/A             $0        $0      N/A

Securities:
   Taxable                                              99,594       2,955     5.93%      109,948     3,159     5.75%
   Tax-exempt (1)                                       16,166         543     6.72%       16,314       572     7.01%
                                                      ---------  ---------  -------      ---------  -------   ------
              Total Securities                         115,760       3,498     6.04%      126,262     3,731     5.91%

Loans (net of earned income):
   Taxable                                             239,907      10,681     8.90%      213,878     9,825     9.19%
   Tax-Exempt (1)                                          523          16     6.12%          731        22     6.02%
                                                      ---------  ---------- -------      ---------  -------   ------
              Total Loans                              240,430      10,697     8.90%      214,609     9,847     9.18%
Fed Funds Sold and Repurchase Agreements                 1,011          27     5.34%        2,176        57     5.24%
                                                      ---------  ---------- -------      ---------  -------   ------
              Total Earning Assets                     357,201      14,222     7.96%      343,047    13,635     7.95%
Less Allowance for Loan Losses                          (3,118)                            (2,788)
Total Nonearning Assets                                 23,100                             20,685
                                                      ---------                          ---------
              Total Assets                            $377,183                           $360,944
                                                      =========                          =========

LIABILITIES AND SHAREHOLDER EQUITY

Interest bearing deposits:
              NOW Accounts                              40,145         556     2.77%       38,747       541     2.79%
              Money Market Savings                      57,683       1,090     3.78%       63,321     1,222     3.86%
              Regular Savings                           36,604         540     2.95%       38,747       575     2.97%
              Certificates of Deposit:
                 Less than $100,000                    126,162       3,345     5.30%      113,388     3,174     5.60%
                 $100,000 and More                      20,689         576     5.57%       21,896       637     5.82%
                                                      ---------  ---------  -------      ---------  -------   ------
Total Interest Bearing Deposits                        281,283       6,107     4.34%      276,099     6,149     4.45%

Fed Funds Purchased                                      1,673          47     5.62%        1,461        41     5.61%
Short Term Borrowings                                    5,102         131     5.14%        3,526        89     5.05%
Long Term Borrowings                                         0           0      N/A             0         0      N/A
                                                      ---------  ---------  -------      ---------  -------   ------
Total Interest Bearing Liabilities                     288,058       6,285     4.36%      281,086     6,279     4.47%

Noninterest Bearing Liabilities
              Demand Deposits                           48,362                             42,755
              Other Liabilities                          1,923                              1,837
                                                      ---------                          ---------
Total Liabilities                                      338,343                            325,678
Stockholders' Equity                                    38,840                             35,266
                                                      ---------                          ---------
Total Liabilities and Stockholders' Equity            $377,183                           $360,944

Net Interest Income                                                  7,937                            7,356
Interest Rate Spread                                                           3.60%                            3.48%
Interest Expense as a Percent of Average
   Earning Assets                                                              3.52%                            3.66%
Net Interest Margin                                                            4.44%                            4.29%

</TABLE>

(1) Income and yields are  reported  on a  taxable-equivalent  basis  assuming a
federal tax rate of 34% in 1996 and 1997

                                       12


<PAGE>



                         VIRGINIA FINANCIAL CORPORATION

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

         As of June 30, 1997 neither the corporation nor the Bank was a party to
any legal proceedings.

Item 2.  Changes in Securities

(a) The articles of incorporation of the Registrant as amended and restated (the
"Restated  Articles")  (see also item 4 below  relating to the Annual Meeting of
Shareholders)  provide for certain changes defining the rights of holders of the
Registrant's Common Stock, par value $5.00. The discussion below is qualified in
its entirety by  reference  to the actual text of the  Restated  Articles as set
forth in Exhibit 3 to this Form 10-Q and made a part hereof.

         The Restated Articles  provide:  (i) the number of authorized shares of
Common  Stock,  par value  $5.00  per  share,  is  increased  from five  million
(5,000,000) to ten million  (10,000,000) shares; (ii) the number of directors is
fixed within a range of five to fifteen individuals, and the exact number within
such range may be changed from time to time by the Board of Directors; (iii) the
directors may be removed with or without cause upon the  affirmative  vote of at
least  two-thirds of the  outstanding  shares  entitled to vote; (iv) provisions
relating to the voting  requirements for the approval by shareholders of certain
significant business  transactions are inserted;  and (v) provisions relating to
the  limitation  on  liability  and broader  indemnification  of  directors  and
officers of the Registrant are inserted.

         Certain Effects of the Restated Articles. The Restated Articles provide
shareholders with substantially the same voting rights,  privileges,  and equity
interest in the Registrant as they had prior to amendment. The Restated Articles
do not affect the absence of  preemptive  rights to  subscribe  for and purchase
additional  shares of stock nor do they affect the absence of cumulative  voting
rights with respect to the election of directors.


                                       13
<PAGE>

         Increase in Authorized  Shares of Common Stock.  The Restated  Articles
authorize  the  Registrant  to issue ten million  (10,000,000)  shares of common
stock.  Following the amendment,  the  Registrant  has in reserve  approximately
eight million  authorized but unissued shares of common stock.  The management
of  the  Registrant  believes  that  the  availability  of an  ample reservoir
of authorized  but unissued  shares  enhances the  flexibility  of the
Registrant in raising  additional  capital and in negotiating the acquisition of
other businesses through the issuance of Registrant common stock.

         Fixing a Range of Directors.  The amendment fixing a range of directors
in the Restated  Articles does not represent an actual,  immediate change in the
number of directors  who  currently  serve on the Board of  Directors.  Both the
current  Bylaws and the  Restated  Articles  fix this  number  between  five and
fifteen individuals and the Board of Directors is given the authority to set the
actual  number  within  this  range  from time to time as it deems  appropriate.
Currently the Bylaws of the  Registrant may be amended by action of the Board of
Directors without  shareholder action. The Restated Articles provision providing
for the range of five to fifteen  directors may only be amended by a vote of the
shareholders.  (See  also  Article  VI in  the  Restated  Articles  relating  to
shareholder  approval  of  certain  transactions,  including  amendment  of  the
Articles of  Incorporation).  Article VI will impact how future revisions to the
Articles of Incorporation are effected.  Therefore,  the insertion of provisions
in the Restated  Articles  relating to fixing the number of directors  will make
future changes to the range more difficult to implement since a shareholder vote
will be required,  thus, potentially acting to inhibit a change in the number of
directors that is not supported by the incumbent directors and the shareholders.
Therefore, this change may have an anti-takeover effect.

         Removal of Directors. The previous Articles of the Registrant contained
no provision  relating to removal of directors;  therefore,  the Virginia  Stock
Corporation Act (the "Virginia SCA")  provisions  governed removal of directors.
The Virginia SCA provides that shareholders may remove directors with or without
cause,  unless the  articles of  incorporation  provide  that  directors  may be
removed only with cause. Additionally, the Virginia SCA requires, in the absence

                                       14
<PAGE>

of a provision in a corporation's articles of incorporation, that the removal of
a director  must be approved  by a majority  vote of  shareholders  at an annual
meeting or a special meeting specifically called for the purpose of removing the
director.  The Restated  Articles provide that a director may be removed with or
without cause,  but increase the required  shareholder vote from approval by the
holders of a majority of the outstanding shares entitled to vote to the approval
by holders of at least  two-thirds of the  outstanding  shares entitled to vote.
Thus,  removal of a director may be more difficult.  This provision  prohibiting
the removal of directors except by a two-thirds vote stabilizes the Registrant's
Board of  Directors  by making the  removal and  replacement  of a director by a
substantial   shareholder  or  group  of  shareholders  more  difficult,   thus,
potentially having an anti-takeover effect.

         Shareholder  Vote  Required  for  Certain  Actions.  The  Virginia  SCA
provides that certain  significant  corporate actions must be approved by a vote
of more than two-thirds of the votes entitled to be cast on the matter, unless a
corporation's  articles  of  incorporation  provide  for a higher or lower vote.
These  corporate  actions  include  amendments  to a  corporation's  articles of
incorporation,  plans of merger or exchange,  sales of substantially  all of the
corporation's assets other than in the ordinary course of business,  or plans of
dissolution ("Fundamental Actions").  Virginia law provides that a corporation's
articles  of  incorporation  may either  increase  the vote  required to approve
Fundamental  Actions  or may  decrease  the  required  vote to not  less  than a
majority of the votes entitled to be cast.

                                       15
<PAGE>

         Article VI of the Registrant's  Restated Articles  decreases in certain
instances the shareholder vote requirement to approve Fundamental Actions if the
Board of Directors of the Registrant  overwhelmingly  approves of a transaction.
Article VI reduces the shareholder  vote requirement to a majority of the shares
entitled to be cast for the  proposal,  provided  that 80% of the members of the
Board of Directors then in office have approved and  recommended the Fundamental
Action.  In the absence of such approval and  recommendation  by the Board,  the
vote required for approval of  Fundamental  Actions is two-thirds or more of the
shares entitled to vote on the matter.  As noted above,  the statutory  approval
requirement under which the Registrant  previously operated required approval of
Fundamental  Actions by a vote of  greater  than  two-thirds  vote of the shares
entitled to be cast on such matters.

         This provision makes shareholder  approval of Fundamental  Actions less
difficult (a simple majority of the outstanding  shares) if a proposal  receives
substantial  (80%) support from the Board of Directors.  If the incumbent  Board
does not approve a Fundamental Action by at least 80%, then a two-thirds vote by
shareholders  is required for  approval.  For this  reason,  the  provisions  of
Article  VI have  anti-takeover  implications  in that they  make a  Fundamental
Action not approved by the Board more difficult to adopt.

         Limitation of Liability and  Indemnification of Directors and Officers.
The Virginia SCA provides  that in any  proceeding  brought by or on behalf of a
corporation or brought by or on behalf of shareholders of the  corporation,  the
damages  assessed  against  an  officer  or  director  arising  out of a  single
transaction,  occurrence,  or course of conduct may not exceed the lesser of (i)
the monetary  amount,  including the elimination of liability,  specified in the
articles of incorporation or, if approved by the shareholders,  in the bylaws as
a limitation on or elimination  of the liability of the officer or director;  or
(ii) the greater of (a) $100,000 or (b) the amount of cash compensation received
by the  officer or  director  from the  corporation  during  the  twelve  months
immediately  preceding the act or omission for which liability was imposed. This
statutory  limitation  of liability  pertains to the remedy of monetary  damages

                                       16
<PAGE>

only and does not affect the availability of equitable remedies, for example, an
action to enjoin or rescind a  transaction.  Further,  the  provisions  limiting
liability do not apply if the officer or director engaged in willful  misconduct
or knowing  violations of the criminal law or of any federal or state securities
and banking law.

         The prior Articles of Incorporation of the Registrant did not limit the
liability of its directors and officers and, as a result,  such liability  would
be limited, as described in the discussion of applicable Virginia SCA provisions
immediately  above,  to the  greater of (a)  $100,000  or (b) the amount of cash
compensation received by the officer or director from the corporation during the
twelve months immediately  preceding the act or omission for which liability was
imposed.  Additionally, the Registrant's prior Articles of Incorporation did not
require  indemnification of the Registrant's directors and officers,  rather the
Registrant  directors were indemnified only at the discretion of the Board or if
such indemnification was mandatory under the Virginia SCA.

         However,  by comparison,  Article VII of the Restated Articles requires
that the Registrant indemnify its officers and directors against actions brought
by reason of having  been such an  officer  or  director  by or on behalf of the
Registrant or by shareholders  of the Registrant.  The Registrant is required to
indemnify  its  directors  and officers for monetary  damages to the full extent
permitted by the Virginia  SCA.  Under the Restated  Articles,  liability of the
directors and officers of the Registrant for monetary damages will be limited or
eliminated in connection with any shareholder or derivative  lawsuit,  except in

                                       17
<PAGE>

cases  of  willful  misconduct  or  knowing  violations  of  the  criminal  law.
Additionally, some federal agencies have taken the position that indemnification
for liabilities arising under the federal securities and banking laws is against
public policy and, therefore, is unenforceable.

         The  Board  believes  that  limitation  or  elimination  of  directors'
liability in shareholder and derivative suits and the mandatory  indemnification
provisions  provided in the  Restated  Articles  will assist the  Registrant  in
attracting  highly-qualified  directors in the future.  The  Registrant  has not
experienced any problems  attracting and retaining directors and officers in the
past,  nor has the Registrant  experienced  problems in maintaining or obtaining
liability  insurance  for its  directors  and officers at a reasonable  cost. No
recent  incidents  or  litigation  involving  directors or officers has occurred
which might have encouraged adoption of these provisions.  The adoption of these
provisions  incidentally may benefit the current directors of the Registrant who
will serve on the Board of the Registrant by providing greater  protections from
liability  as  a  director.  However,  the  provisions  are  adopted  solely  in
anticipation of providing adequate protections to attract experienced  directors
and  officers  and to bring the  limitation  of  liability  and  indemnification
provisions in-line with permitted corporate governance practices.

(b) Not applicable.

(c) 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 Tuesday, April 8, 1997 in Staunton, Virginia. Three items were submitted to
the  shareholders  to be voted upon:  (1) To approve  the  Amended and  Restated
Articles of Incorporation of the company,  (2) to elect directors of the company
and (3) to ratify  the  appointment  of Yount,  Hyde & Barbour,  P.C.  Certified
Public Accountants, as independent outside auditors for the year ending December
31, 1997.

    The votes cast for, against or withheld for the three items were as follows:

          (1) To approve the Amended and Restated Articles

                      For          Against           Abstentions
                      ---          -------           -----------
                  1,487,799         2,334                 0

          (2) Election of Directors of the company.

                     Name                    For       Against      Abstentions
                     ----                    ---       -------      -----------
                Lee S. Baker              1,587,545     15,804           0
                Benham M. Black           1,602,469        880           0
                Harry V. Boney, Jr.       1,602,761        588           0
                Jan S. Hoover             1,602,873        476           0
                Martin F. Lightsey        1,602,173      1,176           0
                James S. Quarforth        1,588,353     14,996           0

          (3) Ratification of Yount, Hyde & Barbour P.C. Certified Public
              Accounts.

                      For          Against           Abstentions
                      ---          -------           -----------
                   1,601,219        2,130                 0

Item 5. Not Applicable

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits.  The following exhibits to this Form 10-Q are filed herewith.

             Exhibit No.                         Item
             -----------                         ----
                  3             Amended and Restated Articles of Incorporation
                                of Virginia Financial Corporation

                 27             Financial Data Schedule

(b)      Not applicable.

                                       18


<PAGE>



                                   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     August 5, 1997                  /S/ Fred D. Bowers
    ------------------------          --------------------------------------
                                     Fred D. Bowers, Secretary/Treasurer
                                         (Principal Accounting Officer and Duly
                                              Authorized Officer)













                                       19