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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, 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 endedJune 30, 2006

OR

[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from _________ to  _________

Commission File Number0-24024

VENTURE FINANCIAL GROUP, INC.(Exact name of registrant as specified in its charter)



|Washington                                                     |  | 91 -1277503                         
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)
|                                                              
|721 College Street S.E., P.O. Box 3800, Lacey, WA 98509       
|(Address of Principal Executive Offices)                      

Registrant's telephone number: 
(360) 459-1100

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:XYes
No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act. (Check one):

Large accelerated filer ___                                           Accelerated filer ___                                
Non-accelerated filerX

Indicate by check mark whether the registrant is
a shell company (as defined by Rule 12b-2 of the Exchange Act). YesX
No

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

|Title of Class |  | Outstanding at August 8, 2006
|-------------- |  | -----------------------------
|Common Stock   |  | 7,168,190                    

1

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|Venture Financial Group, Inc. 
|------------------------------
|Table of Contents             
|                              
|PART I - FINANCIAL INFORMATION
|                              
|Item                          
|                              
|                              
|                              
|                              
|                              
|Item                          
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|Item                          
|Item                          
|                              
|PART II - OTHER INFORMATION   
|                              
|Item                          
|Item                          
|Item                          
|Item                          
|Item                          
|                              
|SIGNATURES                    

2

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Item 1. Financial Statements

VENTURE FINANCIAL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(dollars in thousands)

|ASSETS                                                           
|-----------------------------------------------------------------
|                                                                 
|                                                                 
|                                                                 
|Cash and due from banks                                          
|Interest bearing deposits in other banks                         
|Federal funds sold                                               
|Securities available-for-sale, at fair value                     
|Investment in trusts                                             
|Federal Home Loan Bank stock, at cost                            
|Loans held-for-sale                                              
|                                                                 
|Loans                                                            
|Allowance for credit losses                                      
|Net loans                                                        
|                                                                 
|Premises and equipment, net of accumulated depreciation          
|Foreclosed real estate                                           
|Accrued interest receivable                                      
|Cash surrender value of bank owned life insurance                
|Goodwill                                                         
|Other intangible assets                                          
|Other assets                                                     
|                                                                 
|Total assets                                                     
|                                                                 
|LIABILITIES AND SHAREHOLDERS' EQUITY                             
|Deposits                                                         
|Demand deposits and non-interest bearing                         
|Savings and interest bearing demand                              
|Time certificates of deposit                                     
|Total deposits                                                   
|                                                                 
|Securities sold under agreement to repurchase                    
|Short-term borrowings                                            
|Accrued interest payable                                         
|Long-term debt                                                   
|Junior subordinated debentures                                   
|Other liabilities                                                
|Total liabilities                                                
|                                                                 
|SHAREHOLDERS' EQUITY                                             
|Common stock (no par value); 10,000,000 shares authorized, shares
|issued and outstanding: June 2006 -7,194,047;                    
|December 2005 - 7,218,152                                        
|Additional paid-in capital                                       
|Retained earnings                                                
|restricted stock award                                           
|Advance to KSOP                                                  
|Accumulated other comprehensive income (loss)                    
|Total shareholders' equity                                       
|                                                                 
|Total liabilities and shareholders' equity                       

3

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|VENTURE FINANCIAL GROUP, INC.                           |  |                            |  |                          |  |         |  |        
|------------------------------------------------------- |  | -------------------------- |  | ------------------------ |  | ------- |  | -------
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
|(dollars in thousands, except per share data)           |  |                            |  |                          |  |         |  |        
|                                                       
|                                                       
|                                                        |  | For the three months ended |  | For the six months ended
|                                                        |  |                            |  | June 30,                 |  |         |  |        
|                                                        |  |                            |  |                         
|                                                        |  | 2006                       |  | 2005                     |  | 2006    |  | 2005   
|INTEREST INCOME                                         |  |                            |  |                          |  |         |  |        
|Loans                                                   |  | $13,662                    |  | $ 8,700                  |  | $25,806 |  | $16,695
|Federal funds sold and deposits in banks                |  |                            |  | 120                      |  |         |  | 48     
|Investment securities                                   |  | 1,722                      |  |                          |  | 743     |  | 2,492  
|                                                       
|Total interest income                                   |  | 15,504                     |  |                          |  | 9,491   |  | 28,449 
|                                                       
|INTEREST EXPENSE                                        |  |                            |  |                          |  |         |  |        
|Deposits                                                |  |                            |  | 4,978                    |  |         |  | 1,457  
|Federal funds purchased                                 |  |                            |  | 128                      |  |         |  | 16     
|Short-term repurchase agreements and borrowings         |  |                            |  | 977                      |  |         |  | 834    
|Long-term repurchase agreements and debt                |  |                            |  | 952                      |  |         |  | 516    
|                                                       
|Total interest expense                                  |  | 7,035                      |  |                          |  | 2,823   |  | 12,164 
|                                                       
|Net interest income                                     |  | 8,469                      |  |                          |  | 6,668   |  | 16,285 
|                                                       
|PROVISION FOR CREDIT LOSSES                             |  |                            |  | 150                      |  |         |  | 338    
|Net interest income after provision for credit losses   |  | 8,319                      |  |                          |  | 6,330   |  | 15,985 
|                                                       
|NON-INTEREST INCOME                                     |  |                            |  |                          |  |         |  |        
|Service charges on deposit accounts                     |  |                            |  | 1,039                    |  |         |  | 859    
|Origination fees and gain on sales of loans             |  |                            |  | 440                      |  |         |  | 435    
|Other operating income                                  |  |                            |  | 804                      |  |         |  | 709    
|                                                       
|Total non-interest income                               |  |                            |  | 2,283                    |  |         |  | 2,003  
|                                                       
|NON-INTEREST EXPENSES                                   |  |                            |  |                          |  |         |  |        
|Salaries and employee benefits                          |  |                            |  | 3,441                    |  |         |  | 2,911  
|Occupancy and equipment                                 |  |                            |  | 1,039                    |  |         |  | 858    
|Amortization of intangible assets                       |  |                            |  | 71                       |  |         |  | 27     
|Other                                                   |  | 2,008                      |  |                          |  | 1,594   |  | 3,577  
|                                                       
|Total non-interest expenses                             |  |                            |  | 6,559                    |  |         |  | 5,390  
|                                                       
|Income before provision for income taxes                |  |                            |  | 4,043                    |  |         |  | 2,943  
|                                                       
|PROVISION FOR INCOME TAXES                              |  |                            |  | 1,414                    |  |         |  | 907    
|                                                       
|NET INCOME                                              |  | $                          |  | 2,629                    |  | $ 2,036 |  | $ 4,943
|                                                       
|OTHER COMPREHENSIVE INCOME                              |  |                            |  |                          |  |         |  |        
|Unrealized holding gains (losses) on securities arising |  | (1,982)                    |  |                          |  | (641)   |  | (2,193)
|during the period, net of tax                           |  |                            |  |                          |  |         |  |        
|Minimum pension liability adjustment                    |  |                            |  | (124)                    |  |         |  | -      
|                                                       
|COMPREHENSIVE INCOME                                    |  | $                          |  | 523                      |  | $       |  | 1,395  
|                                                       
|EARNINGS PER SHARE                                      |  |                            |  |                          |  |         |  |        
|Basic                                                   |  | $                          |  | 0.37                     |  | $       |  | 0.31   
|Diluted                                                 |  |                            |  | 0.36                     |  |         |  | 0.30   

4

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|VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES                       
|---------------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
|(Dollars in thousands)                                               
|Six Months Ended June 30, 2005 and 2006                              
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Balance, December 31, 2004                                           
|Comprehensive income:                                                
|Net income                                                           
|Other comprehensive income, net of tax                               
|Change in fair value of securities available for sale, net of tax    
|(benefit) of ($330)                                                  
|Comprehensive Income                                                 
|Stock options exercised                                              
|Stock issued for purchase of WAM                                     
|Stock repurchased                                                    
|Cash dividend ($0.14 per share)                                      
|Balance, June 30, 2005                                               
|                                                                     
|Balance, December 31, 2005                                           
|Comprehensive income:                                                
|Net income                                                           
|Other comprehensive income, net of tax                               
|Change in fair value of securities available for sale, net of tax    
|(benefit) of ($92)                                                   
|Minimum pension liability adjustment, net of tax (benefit) of        
|($61)                                                                
|Comprehensive Income                                                 
|Stock options exercised                                              
|Stock Issued for purchase of WAM                                     
|Common stock repurchased                                             
|Restricted stock award                                               
|Compensation expense for stock options                               
|Cash dividend ($0.14 per share)                                      
|Excess tax benefit from share-based payment arrangements             
|Reclassify restricted stock awards                                   
|Compensation for restricted stock awards                             
|Balance, June 30, 2006                                               

5

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VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

|(Dollars in thousands)                                                    |  | Six months ended June 30,
|------------------------------------------------------------------------- |  | -------------------------
|                                                                          |  | 2006                     
|                                                                         
|Cash Flows from Operating Activities                                      |  |                          
|Net Income                                                                |  | $ 4,943                  
|Adjustments to reconcile net income to net cash provided                  |  |                          
|by operating activities:                                                  |  |                          
|Provision for credit losses                                               |  | 300                      
|Depreciation and amortization                                             |  | 834                      
|Income from mortgage loans sold                                           |  | (882)                    
|Increase in cash surrender value of life insurance                        |  | (319)                    
|Compensation expense for share options                                    |  | 108                      
|Restricted stock award compensation                                       |  | 14                       
|Increase in minimum employee pension                                      |  | (237)                    
|Excess tax benefit from share-based payment arrangements                  |  | (202)                    
|Gain on sale of other real estate owned                                   |  | - -                      
|Other                                                                     |  | (480)                    
|Originations of loans held for sale                                       |  | (40,273)                 
|Proceeds from sales of loans held for sale                                |  | 41,335                   
|Net cash provided by operating activities                                 |  | 5,141                    
|                                                                         
|Cash Flows from Investing Activities                                      |  |                          
|Net (increase) decrease in interest bearing deposits in banks             |  | 1,050                    
|Net increase in federal funds sold                                        |  | (8,125)                  
|Purchases of securities available for sale                                |  | (101,387)                
|Proceeds from maturities and prepayments of available-for-sale securities |  | 9,130                    
|Proceeds from sales of securities available for sale                      |  | 4,936                    
|Purchase of other equity securities                                       |  | (100)                    
|Net increase in loans                                                     |  | (64,882)                 
|Proceeds from sale of other real estate                                   |  | - -                      
|Purchase of life insurance policies                                       |  | (191)                    
|Additions to premises and equipment                                       |  | (4,255)                  
|Net cash used by investing activities                                     |  | (163,824)                
|                                                                         
|Cash Flows from Financing Activities                                      |  |                          
|Net increase in deposits                                                  |  | 197,675                  
|Net increase (decrease) in repurchase agreements                          |  | 8,088                    
|Net decrease in short-term borrowings                                     |  | (41,976)                 
|Issuance of common stock for WAM Acquisition                              |  | 31                       
|Exercise of share options                                                 |  | 578                      
|Repurchase of common stock                                                |  | (1,808)                  
|Net increase in long-term borrowings                                      |  | - -                      
|Excess tax benefits from share-based payment arrangements                 |  | 202                      
|Payment of cash dividends                                                 |  | (1,016)                  
|Net cash provided by financing activities                                 |  | 161,774                  
|                                                                         
|Net change in cash and due from banks                                     |  | 3,091                    
|                                                                         
|Cash and Due from Banks:                                                  |  |                          
|Beginning of period                                                       |  | 16,791                   
|End of period                                                             |  | $19,882                  
|                                                                         
|Supplemental Disclosures of Cash Flow Information:                        |  |                          
|Cash payments for:                                                        |  |                          
|Interest                                                                  |  | $11,941                  
|Taxes                                                                     |  | 2,722                    
|                                                                         
|Supplemental Disclosures of Non-Cash Investing and Financing Activities:  |  |                          
|Fair value adjustment of securities available for sale, net               |  | (2,193)                  
|                                                                         
|                                                                         
|See notes to condensed consolidated financial statements                  |  |                          

6

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VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements(Unaudited)

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information
and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial
statements.  In the opinion of management, adjustments considered necessary for a fair presentation (consisting of normally recurring accruals) have been included. The interim condensed consolidated financial statements should be read in conjunction
with the December 31, 2005 consolidated financial statements, including notes thereto, included in the Company's 2005 Annual Report to Shareholders. Operating results for the six months ended June 30, 2006 are not necessarily indicative of the
results anticipated for the year ending December 31, 2006.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses.

Certain prior year amounts have been reclassified to conform to the 2006 presentation. The reclassifications had no effect on net income or retained earnings as previously reported.

2. Share Based Compensation

On June 30, 2006, the Company had one active share based compensation plan which is described below.  The compensation cost that has been charged to income year-to-date in 2006 for both stock options and restricted
stock grants is $121,077. The total income tax benefits recognized in the income statement for share based compensation arrangements in 2006 is $190,089.

The Company's Stock Incentive Plan ("2004 Plan"), which is shareholder approved, permits the grant of share-based awards to its employees and directors for up to 300,000 shares of common stock.  The 2004 Plan addresses
non-qualified stock options, incentive stock options, restricted stock awards, and other stock based compensation awards. The Company believes that such awards better align the interest of its employees and directors with those of its shareholders.
Awards are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant. The outstanding stock option awards have been granted with a 10 year term.  The stock option awards when granted have a
vesting period of five years with 20% of the shares vesting per year.  There are two outstanding restricted stock awards; one award for 5,000 shares vests over a 4 year period with 25% of the shares vesting per year. The other award for 750 shares
cliff vests over a 2 year period with all shares vesting at the end of 2 years. Unlike the option shares, restricted stock awards are granted at no cost to the recipient. These awards are subject to forfeiture until certain restrictions have lapsed,
including continued employment for a specified period. The recipient of a share of restricted stock is entitled to voting rights and dividends on the common stock. Certain option and share awards provide for accelerated vesting if there is a change
in control (as defined in the Plan). At June 30, 2006, 99,750 option shares and 5,750 restricted stock award shares have been granted under the Plan since Plan inception. At June 30, 2006, 1,400 shares previously granted under the 2004 Plan since
Plan inception were forfeited and returned to the Plan and are available for future grants. 195,900 shares remain available for grant under the 2004 Plan. It is the Company's policy to issue authorized but unissued shares of common stock upon stock
option exercises or restricted stock awards.  The Company may, as part of its repurchase program purchase shares that have been listed for sale that may have been acquired through the 2004 share-based award plan or previous plans.

As permitted by Statement No. 123, prior to January 1, 2006, the Company accounted for stock-based awards to employees and directors using the intrinsic value method, in accordance with APB No. 25,Accounting for Stock Issued to Employees.Accordingly, no compensation expense was recognized in the consolidated financial statements for employee and director stock arrangements
where the grant price was equal to market price on the date of grant. However, the required pro forma disclosures of the effects of all options granted on or after January 1, 1995 were provided in accordance with SFAS No. 123,Accounting for Share-Based Compensation.

Effective January 1, 2006, the Company adopted SFAS No. 123(R) which permits public companies to adopt its requirements using the "modified prospective" method. Under the "modified prospective" method, the compensation
cost is recognized beginning with the effective date (a) based on the requirements of SFAS No.123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement No. 123 for all awards granted to
employees and directors prior to the effective date of SFAS 123(R) that remain unvested on the effective date.

7

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Beginning January 1, 2006 the Company began accounting for stock-based awards to employees and directors using the fair value method, in accordance with SFAS No. 123(R),Share-Based Payment. The Company currently uses the Black-Scholes valuation model to estimate the fair value of stock option awards. The following assumptions are used in the Black-Scholes
model: expected volatility, expected dividends, expected term and risk-free rate. Expected volatilities are not based on implied volatilities from traded options on the Company stock because the Company stock does not have any options traded on it.
Instead, expected volatilities are based on the historical volatility of the Company stock and other factors.  The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of
employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and management's experience and represents the
period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

2006
	2005
	2004
	2003Expected volatility
	23.90%
	24.32%
	19.37%
	22.60%Expected dividends
	1.40%
	2.33%
	1.58%
	1.80%Expected term (in years)
	6.5 years
	7 years
	7 years
	7 yearsRisk-free rate
	4.92%
	4.38%
	3.89%
	3.60%


The weighted average fair value of options granted during 2006, 2005, 2004, and 2003 was $6.03, $5.02, $3.70, and $3.41, respectively. In the opinion of management, the assumptions used in the option
pricing model are subjective and represent only one estimate of possible value, as there is no active market for Company options granted.

Options granted by the Company during 2006, 2005, 2004, and 2003 are 20% vested on each of the five subsequent anniversaries of the grant date. Options granted by Washington Commercial Bancorp were all vested effective
as of the date of the merger, September 2, 2005 and therefore will not be expensed subsequent to the merger but were added to goodwill. Stock option and per share amounts for current and prior periods have been adjusted to reflect the effect of
stock splits. Actual forfeited shares and the related compensation expense of those shares is taken out at the time of forfeiture.  Management's estimate of future forfeitures, after reviewing historical trends is based on future forfeiture
expectations.

A summary of option activity under the Plan as of June 30, 2006, and changes during the quarter then ended is presented below:

|                                |  |          |  |          |  |          |  |          |  | Weighted    |  |          
|------------------------------- |  | -------- |  | -------- |  | -------- |  | -------- |  | ----------- |  | ---------
|                                |  |          |  |          |  |          |  | Weighted |  | Average     |  | Aggregate
|                                |  |          |  |          |  |          |  | Average  |  | Remaining   |  | Intrinsic
|                                |  | Director |  | Employee |  | Total    |  | Exercise |  | Contractual |  | Value    
|Options                         |  | Shares   |  | Shares   |  | Shares   |  | Price    |  | Term        |  | (000's)  
|                                |  |          |  |          |  |          |  |          |  |             |  |          
|Outstanding at January 1, 2006  |  | 117,042  |  | 285,715  |  | 402,757  |  | $10.94   |  |             |  |          
|Granted 1stquarter 2006         |  | -        |  |          |  |          |  | -        |  |             |  |          
|Exercised 1stquarter 2006       |  | (38,148) |  | (8,238)  |  | (46,386) |  | $8.50    |  |             |  |          
|Forfeited or expired 1stquarter |  | -        |  |          |  |          |  |          |  |             |  |          
|2006                            |  |          |  |          |  |          |  |          |  |             |  |          
|Outstanding at March 31, 2006   |  | 78,894   |  | 277,477  |  | 356,371  |  | $11.23   |  | 6.07 years  |  | $3,154   
|Exercisable at March 31, 2006   |  | 44,244   |  | 175,727  |  | 219,971  |  | $9.16    |  | 4.98 years  |  | $2,402   
|Granted 2ndquarter 2006         |  | 5,250    |  | 51,500   |  | 56,750   |  | $20.00   |  |             |  |          
|Exercised 2ndquarter 2006       |  | (6,871)  |  | (10,783) |  | (17,654) |  | $10.47   |  |             |  |          
|Forfeited or expired 2ndquarter |  | (5,400)  |  | (300)    |  | (5,700)  |  | $11.85   |  |             |  |          
|2006                            |  |          |  |          |  |          |  |          |  |             |  |          
|Outstanding at June 30, 2006    |  | 71,873   |  | 317,894  |  | 389,767  |  | $12.53   |  | 6.36 years  |  | $2,810   
|Exercisable at June 30, 2006    |  | 45,743   |  | 186,344  |  | 232,087  |  | $9.07    |  | 4.92 years  |  | $2,474   

The aggregate intrinsic value that is calculated for the total outstanding shares at June 30, 2006 does not include the second quarter 2006 grants at $20.00 per share because they are out of the money. The weighted
average price of the stock for June, 2006 (fair market value) is $19.73 per share. The intrinsic value is the fair market value times the total shares less the exercise price times the total shares.

The total intrinsic value of options exercised during 2006 was $684,391 (64,040 shares times $19.73 less the cost of exercise to the recipient, $579,118) with a related tax benefit of $196,841.

8

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The following summarizes information about stock options outstanding at June 30, 2006:

|                 |  | Options Outstanding |  |              |  | Options Exercisable
|---------------- |  | ------------------- |  | ------------ |  | -------------------
|                 |  |                     |  | Weighted     |  |                    
|                 |  |                     |  | Average      |  | Weighted           
|Range of         |  |                     |  | Remaining    |  | Average            
|Exercise         |  | Number              |  | Contractual  |  | Exercise           
|Prices           |  | Outstanding         |  | Life (Years) |  | Price              
|                
|Under $7.00      |  | 63,476              |  | 5.39         |  | $ 6.66             
|$7.67 to $9.31   |  | 88,449              |  | 3.74         |  | $ 7.95             
|$10.00           |  | 39,000              |  | 2.65         |  | $10.00             
|$13.19 to $13.67 |  | 51,442              |  | 7.68         |  | $13.46             
|$15.33           |  | 49,350              |  | 7.80         |  | $15.33             
|$19.25           |  | 41,300              |  | 8.81         |  | $19.25             
|$20.00           |  | 56,750              |  | 9.81         |  | $20.00             
|                 |  |                     |  |              |  |                    
|                
|                 |  | 389,767             |  | 6.36         |  | $12.56             
|                 |  |                     |  |              |  |                    

A summary of the status of the Company's nonvested shares as of June 30, 2006 and changes during the quarters ended March 31, 2006 and June 30, 2006, is presented below:

|                             |  |          |  |          |  |          |  | Weighted  
|---------------------------- |  | -------- |  | -------- |  | -------- |  | ----------
|                             |  |          |  |          |  |          |  | Average   
|                             |  | Director |  | Employee |  | Total    |  | Grant Date
|Nonvested Shares             |  | Shares   |  | Shares   |  | Shares   |  | Fair Value
|                             |  |          |  |          |  |          |  |           
|Nonvested at January 1, 2006 |  | 34,650   |  | 101,750  |  | 136,400  |  | $3.95     
|Granted                      |  | -        |  | -        |  | -        |  | -         
|Vested                       |  | -        |  | -        |  | -        |  | -         
|Forfeited                    |  | -        |  | -        |  | -        |  | -         
|Nonvested At March 31, 2006  |  | 34,650   |  | 101,750  |  | 136,400  |  | $3.95     
|Granted                      |  | 5,250    |  | 51,500   |  | 56,750   |  | $6.03     
|Vested                       |  | (8,820)  |  | (21,400) |  | (30,220) |  | $3.62     
|Forfeited                    |  | (4,950)  |  | (300)    |  | (5,250)  |  | $3.29     
|Nonvested At June 30, 2006   |  | 26,130   |  | 131,550  |  | 157,680  |  | $4.67     

As of June 30, 2006 there was $470,531 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized using graded
vesting over a five year vesting period which accelerates the expense to a weighted average period of under 2 years. The Company has granted awards with graded vesting; the awards vest 20% at the end of each year over five years. The Company has
elected to treat each vesting tranche as a separate award with compensation cost for each award recognized over its vesting period. This approach results in a greater amount of compensation cost recognized in the earlier periods of the grant with a
declining amount recognized in later periods. The total grant date fair value of shares vested during the quarter ended June 30, 2006 was $109,254.

The table below illustrates the effect on net income and earnings per share for the Company applying the fair value recognition provisions of SFAS No. 123(R),Share-Based
Paymentto stock-based compensation awards granted on or after January 1, 1995 for the period ended June 30, 2006. The table also illustrates on a pro forma basis the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS No. 123,Accounting for Share-Based Compensation,to stock-based compensation awards
granted on or after January 1, 1995 for the period ended June 30, 2005:

|                                                              |  | Six Months Ended June 30                     
|------------------------------------------------------------- |  | ---------------------------------------------
|                                                              |  | (dollars in thousands, except per share data)
|                                                              |  |                                              
|                                                              |  | 2006                                         
|Net income, as reported                                       |  | $4,943                                       
|Less total stock-based compensation expense determined        |  |                                              
|under fair value method for all qualifying awards, net of tax |  | NA                                           
|Actual Pro forma net income                                   |  | NA                                           
|Earnings per Share                                            |  |                                              
|Basic:                                                        |  |                                              
|As reported                                                   |  | $ .69                                        
|Pro forma                                                     |  | NA                                           
|Diluted:                                                      |  |                                              
|As reported                                                   |  | .67                                          
|Pro forma                                                     |  | NA                                           

9

---

Compensation expense for restricted stock is measured based upon the number of shares granted and the stock price at the grant date. Compensation expense is recognized in earnings over the required service period.
Accordingly,compensation expense has been recognized in the condensed consolidated financial statements for employee and director stock arrangements in the first
quarter of 2006. Compensation expense is now measured at the grant date of the award at fair value and adjusted to reflect actual forfeitures and the outcome of certain conditions.

4. Pension and Other Postretirement Benefit Plans

Effective January 1, 2005 we replaced the Company's Salary Continuation Plans and adopted the Supplemental Executive Retirement Plan (SERP), which is a defined benefit pension plan.  The SERP is a master nonqualified
retirement plan covering a select group of employees. On an annual or more frequent basis, the SERP is analyzed on an actuarial basis to determine the necessary amounts to expense to cover the plan obligations.  Prior to 2005 the liability to
individual employees was based on their individual agreements and now is accounted for on a group basis. The SERP has no assets.

Net periodic expense for the SERP for the first quarter of 2005 is not available. However, net periodic expense for the SERP for the year ended December 31, 2005 and for the six months ending June 30, 2006 was as
follows:

| |  |                                              |  | For the six months  |  | For the year           
| |  | -------------------------------------------- |  | ------------------- |  | -----------------------
| |  |                                              |  | ended June 30, 2006 |  | ended December 31, 2005
| |  |                                              |  |                     |  |                        
| |  | Service cost                                 |  | $287,638            |  | $455,910               
| |  | Interest cost                                |  | 137,791             |  | 222,098                
| |  | Expected return on plan assets               |  | -                   |  | -                      
| |  | Amortization of Net Obligation at Transition |  | -                   |  | -                      
| |  | Amortization of Prior Service Cost           |  | -                   |  | -                      
| |  | Recognized Net Actuarial (Gain)/Loss         |  | 11,845              |  | 167,970                
| |  |                                              |  |                     |  |                        
| |  | Net Periodic Benefit Cost                    |  | $437,274            |  | $845,978               
|
| |  |                                              |  |                     |  |                        

Basic and diluted earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding during the periods presented.  Diluted earnings per share assume all dilutive stock
options outstanding are issued such that their dilutive effect is maximized. Unallocated shares of the KSOP are excluded from the weighted average common shares outstanding to the extent they have not been committed to be released. The restricted
share awards are excluded from the weighted average common shares outstanding to the extent they have not been vested or earned.

|                                 |  | Three Months Ended June 30, |  | Six Months Ended June 30,
|-------------------------------- |  | --------------------------- |  | -------------------------
|                                 |  | 2006                        |  |                          
|Basic EPS computation            |  | $         2,629             |  | $                        
|Numerator - Net Income           |  |                             |  |                          
|Denominator - Weighted Average   |  |                             |  |                          
|common shares outstanding        |  | 7,196,060                   |  | 6,594,514                
|Basic EPS                        |  | $           
..37           |  | $                        
|                                
|                                 |  | Three Months Ended June 30, |  | Six Months Ended June 30,
|                                 |  | 2006                        |  |                          
|Diluted EPS computation          |  | $        2,629              |  | $             2,036      
|Numerator - Net Income           |  |                             |  |                          
|Denominator - Weighted average   |  | 7,196,060                   |  | 6,594,514                
|common shares outstanding        |  |                             |  |                          
|Effect of dilutive stock options |  | 110,482                     |  |                          
|Weighted average common shares   |  | 7,306,542                   |  | 6,712,486                
|and common stock equivalents     |  |                             |  |                          
|Diluted EPS                      |  | $         
..36             |  | $                        

10

---

|6. Cash Dividends
|-----------------

On January 18, 2006, the Company declared a quarterly cash dividend of $0.07 cents per share payable on February 10, 2006 to shareholders of record on January 30, 2006. On April 19, 2006, the Company declared a
quarterly cash dividend of $0.07 cents per share payable on May 12, 2006 to shareholders of record as of May 1, 2006. Subsequent to the second quarter ending June 30, 2006, on July 19, 2006, the Company declared a quarterly cash dividend of
$0.075 cents per share payable on August 18, 2006 to shareholders of record as of August 4, 2006.

7. Purchase of Washington Commercial Bancorp (WCB), parent company of Redmond National Bank

The Company merged with WCB on September 2, 2005 in an acquisition accounted for under the purchase method of accounting. WCB's wholly owned subsidiary Redmond National Bank merged with and into Venture Bank. This
merger continued the Company's expansion into King County. The aggregate purchase price was approximately $26 million. Total assets, loans and deposits of WCB on the date of acquisition were $131,840,000, $107,133,000 and
$86,894,000, respectively. Subsequent to the purchase date, share options that were fully vested and assumed as part of the merger were exercised. The increase in fair market value of the share options since the merger date has been recorded as
a reduction in goodwill of $229,000.

8. Purchase of Washington Asset Management Tacoma, LLC

On March 8, 2004 Venture Wealth Management, a wholly owned subsidiary of Venture Bank, purchased Washington Asset Management Tacoma, LLC (WAM). The purchase price was approximately $200,000. $126,000 was paid
in cash at closing and the balance was scheduled to be paid in VFG common stock in three equal annual installments.

|9. Recent Accounting Pronouncements
|-----------------------------------

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments ("SFAS 155") - an amendment to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"), and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"). SFAS 155 provides the framework for fair value remeasurement of any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation as well as establishes a requirement to evaluate interests in securitized financial assets to identify interests. SFAS 155 further amends SFAS 140 to eliminate the prohibition on a
qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The SFAS 155 guidance also clarifies which interest-only strips and
principal-only strips are not subject to the requirement of SFAS 133 and which concentrations of credit risk in the form of subordination are not embedded derivatives. This statement is effective for all financial instruments acquired or issued
after the beginning of an entity's first fiscal year that begins after September 15, 2006. SFAS 155 is not expected to have a material impact on our consolidated financial statements.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets ("SFAS 156") - an amendment of SFAS 140. SFAS 156 requires the recognition of a servicing asset or servicing liability under
certain circumstances when an obligation to service a financial asset by entering into a servicing contract. SFAS 156 also requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value utilizing
the amortization method or fair market value method. SFAS 156 is effective for an entity's first fiscal year that begins after September 15, 2006. SFAS 156 is not expected to have a material impact on our consolidated financial statements.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). FIN 48 requires recognition and measurement of uncertain tax positions using a "more-likely-than-not"
approach. FIN 48 is effective for fiscal years beginning after December 31, 2006, and is not expected to have a material impact on our consolidated financial statements.

Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains a review of the Company's and its subsidiaries' operating results and financial condition for the three and six month periods ending June 30, 2006. When warranted, comparisons are made
to the same period in 2005, and to the previous year ended December 31, 2005.  The discussion should be read in conjunction with the financial statements (unaudited) and related notes contained elsewhere in this report. The reader is assumed to have
access to the Company's Form 10-K for the year ended December 31, 2005, which contains additional statistics and explanations.

11

---

|Critical Accounting Estimates and Accounting Policies
|-----------------------------------------------------

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in
the financial statements. Changes in these estimates and assumptions are considered reasonably possible and may have a material impact on the financial statements and thus actual results could differ from the amounts reported and disclosed
herein.

In particular, management has identified several accounting policies that we believe, due to judgments, estimates and assumptions inherent in those policies are important to an understanding of the Company's financial
statement. These policies relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and deferred income taxes. These policies are described in more
detail in the Annual Report on Form 10-K for the year ended December 31, 2005.

|Overview and Highlights
|-----------------------

The second quarter of 2006 was a record second quarter for the Company in terms of net income. Asset, loan, and deposit growth were also at record levels year to date. A portion of the growth in deposits and assets was
due to a wholesale funding strategy discussed below involving the purchase of brokered certificates of deposit.

The continued rising interest rate environment in the second quarter and flat yield curve has a direct effect on the Company's operations.  Compression of interest rate margins and the challenges faced in gathering
core deposits continue to put pressure on the Company's earnings and growth and affect the banking industry as a whole.  The Company continues to manage, monitor and measure the inherent interest rate risk in its balance sheet. Management is
actively managing the balance sheet and changing the mix of assets. The balance sheet diversification is intended to add more liquidity, pledging capacity and income, while maximizing the use of Company capital.

|Forward-Looking Information
|---------------------------

In addition to historical information, statements appearing in this report which are not historical in nature, including the discussions of the adequacy of the Company's capital resources and allowance for credit
losses, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that expressly or implicitly predict future results, performance, or events should be considered forward-looking.
Forward-looking statements are subject to risks and uncertainties that may cause actual future results to differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of
this Quarterly Report. The Company does not undertake any obligation to publicly release any revisions to forward-looking statements contained in this Quarterly Report, with respect to events or circumstances after the date of this Report, or to
reflect the occurrence of unanticipated events.

Risks and uncertainties with respect to the Company include, among others, those set forth in Item 1A of our Annual Report on Form 10-K filed with the SEC and updated as appropriate and those related to the general
economic environment, particularly in the region in which the Company operates; competitive products and pricing that may lead to pricing pressures on rates the Bank charges on loans and pays on deposits; loss of customers of greatest value to the
Bank; litigation or other losses; fiscal and monetary policies of the federal government; changes in government regulations affecting financial institutions; acquisitions and the integration of acquired businesses; credit risk management and
asset/liability management; the financial and securities markets; changes in technology or required investments in technology; and the availability of and costs associated with sources of liquidity.

|Financial Condition
|-------------------

General

The Company's consolidated assets at June 30, 2006 totaling $917,269,000 represents a 21.8% or $164,476,000 increase from December 31, 2005 assets totaling $752,793,000. This increase is represented
primarily by an increase in Loans of $63,248,000, and an $84,243,000 increase in Securities Available for Sale.

Loans and loans held for sale

Loans and loans held for sale have increased $63,248,000 or 10.5% as of June 30, 2006 compared to December 31, 2005. The balance of the growth has been focused in residential real estate and real estate
construction lending.

12

---

|The composition of the loan portfolio was as follows (dollars in thousands): |  |              
|---------------------------------------------------------------------------- |  | -------------
|                                                                             |  | June 30, 2006
|                                                                             |  |              
|Commercial                                                                   |  | $ 69,409     
|Real Estate                                                                  |  |              
|Residential 1-4                                                              |  | 32,207       
|Commercial                                                                   |  | 276,821      
|Construction                                                                 |  | 267,744      
|Consumer                                                                     |  | 13,883       
|Total
Loans                                                                  |  | 660,064      
|Loans Held for Sale                                                          |  | 5,519        
|Total Loans and Loans Held for Sale                                          |  | $665,583     

The total non-performing loans, defined as those loans on non-accrual and accruing loans over 90 days past due, and other non-performing assets decreased since December 31, 2005 by $114,000 as shown in the
following table of non-performing assets (dollars in thousands):

|                                        |  | June 30, 2006 |  | December 31, 2005
|--------------------------------------- |  | ------------- |  | -----------------
|                                        |  |               |  |                  
|Non-accrual loans                       |  | $ 2,082       |  | $ 2,186          
|Accruing loans past due 90 days or more |  | 29            |  | 41               
|Foreclosed real estate                  |  | 474           |  | 474              
|Other assets                            |  | 2             |  | 0                
|                                        |  |               |  |                  
|                                        |  | $ 2,587       |  | $ 2,701          

The percentage of non-performing loans to total loans decreased to 0.32% on June 30, 2006 from 0.37% on December 31, 2005. Non-accrual loans decreased $104,000 during the first six months of 2006, while loans past
due 90 days or more and still accruing decreased $12,000 during the same period.

We have not identified any other potential problem loans that were not classified as non-performing but for which known information about the borrower's financial condition caused management to have concern about the
ability of the borrower to comply with the repayment terms of the loans.

Allowance for Credit Losses

The allowance for credit losses reflects management's current estimate of the amount required to absorb losses on existing loans, and commitments to extend credit. Determination of the appropriate level of the
allowance is based on an analysis of various factors including historical loss experience based on volumes and types of loans; volumes and trends in delinquencies and non-accrual loans; trends in portfolio volume; results of internal credit reviews;
and economic conditions. All commercial and real estate loans in the portfolio are assigned a grade indicating credit quality by the originating loan officer at the time of loan origination. These grades are reviewed at regular intervals and, if
performance concerns arise on an individual loan, the grade is lowered to the appropriate level. Management reviews the composite changes in loan grades within the portfolio in its assessment of the adequacy of the allowance. If a loan becomes
impaired, the Company's loss exposure on that loan is measured based on expected cash flows or collateral values, and if necessary, a portion of the allowance for credit losses is allocated to that loan. After reviewing the composition of the loan
portfolio at June 30, 2006, the levels of classified loans, losses experienced during the period, and the changes in the economy, management has determined the allowance for credit losses to be adequate to cover the loss exposure in the loan
portfolio at that date. An analysis of the adequacy of the allowance is subject to quarterly review by the Board of Directors. State and federal regulatory agencies, as an integral part of their examination process, periodically review the Bank's
allowance for loan losses. Such agencies may require the Bank to recognize changes to the allowance based on their judgments of information available at the time of their examination.

The allowance for credit losses decreased $324,000 for the first six months of 2006, with the ratio of the allowance for credit losses to loans ending at 1.23% on June 30, 2006 compared to 1.41% on December 31,
2005. During the first six months, the allowance decrease can be attributed to an additional $300,000 added to the reserve for potential losses less net charge-offs for the first six months of 2006 totaling $624,000. In the first quarter of
2006, there was a $750,000 unsecured credit that was in non-accrual.  During the second quarter, due to a bankruptcy filing and judgments against the borrowers, the bank charged off the loan.  The allowance for credit losses to nonperforming
loans was 384.18% on June 30, 2006, compared to 378.72% on December 31, 2005.  Management believes the allowance is at an appropriate level.

13

---

Investment Portfolio

Investment securities increased $84,243,000, or 138.3% during the first six months of 2006 to a total of $145,154,000. The increase in securities available for sale is due to the purchase of $101,387,000 in
securities offset by maturities and principal pay downs of $9,130,000 and sales of securities of $4,936,000. The mix of the securities at June 30, 2006 has been changed to include more mortgage backed securities and municipal securities that
will provide capital appreciation in a declining rate environment. The risk weighting of securities is considered in purchase decisions to maximize the utilization of capital.

Premises and Equipment

Premises and equipment increased by $3,421,000 or 18.0% in the first six months of 2006. This increase is mainly attributable to $2,318,000 used for the construction of the new corporate headquarters in DuPont
and $867,000 used to purchase land to be used for a future financial center in Hawks Prairie.

Deposits and Borrowings

Total deposits increased $197,675,000 or 38.5% to $711,703,000 in the six months ended June 30, 2006 compared to $514,028,000 at December 31, 2005.  Of this increase, $53,097,000 was the net increase in
purchased wholesale funding including brokered deposits. Brokered deposits are at competitive rates and can be purchased in large blocks that require less overhead cost. These funds were acquired to fund loan growth and purchase securities available
for sale.

Liquidity

Liquidity management involves the ability to meet cash flow requirements of customers who may be either depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to
meet their credit needs. Liquidity is generated from both internal and external sources. Internal sources are those assets that can be converted to cash with little or no risk of loss.  Internal sources include overnight investments in interest
bearing deposits in banks, federal funds sold and all or a portion of available for sale investment securities. At June 30, 2006, cash, deposits in banks, federal funds sold and all securities available for sale totaled $179,649,000. External
sources refer to the ability to access new deposits, new borrowings and capital. They include increasing savings and demand deposits, certificates of deposit, federal funds purchased, short and long term borrowings, and the issuance of capital and
debt securities. At June 30, 2006, short and long term borrowing lines of credit totaled $198,298,000. These credit facilities are being used regularly as a source of funds. At June 30, 2006, $56,000,000 was borrowed against these lines of
credit in the form of short and long term advances.

Net cash flows from operations and financing activities contributed to liquidity while net cash flows from investing activities used liquidity. As indicated on the Company's Condensed Consolidated Statement of Cash
Flows, net cash from operating activities for the six months ended June 30, 2006 contributed $5,141,000 to liquidity while the operating activities for the six months ended June 30, 2005 contributed $1,053,000.  The majority of the cash
provided from operating activities for the first six months of 2006 was contributed from net income in the amount of $4,943,000. Cash flow from investing activity used cash of $163,824,000 for the six months ended June 30, 2006 compared to
$36,607,000 for the same period in 2005. Cash used to fund investment activities during the first six months of 2006 included an increase in net loans of $64,882,000, an increase of federal funds sold of $8,125,000, the purchase of
securities available for sale of $101,387,000, and addition of premises and equipment of $4,255,000. The addition to premises and equipment is comprised primarily of the construction of the Company's headquarters in DuPont and the
acquisition of land for a future financial center in Hawks Prairie. Certain investment activities also provided cash during the first six months including $14,066,000 from cash pay downs on mortgage back securities, matured securities,
securities sold and securities called. Cash flow from financing activities provided cash of $161,774,000 as of June 30, 2006 compared to $36,482,000 during the same period in 2005. The majority of cash provided came from the increase in net
deposits of $197,675,000, an increase in repurchase agreements of $8,088,000 and the exercise of stock options the amount of $578,000.  These monies were partially used to fund financing activities including the repurchase of common
stock in the amount of $1,808,000, the reduction of short term borrowings of $41,976,000 and the payment of cash dividends of $1,016,000.

The stock repurchase program authorizes the Company to make scheduled purchases over time in either privately negotiated transactions or through the open market.  On November 15, 2005 the Company's Board of Directors
authorized 200,000 shares for a stock repurchase program, or approximately 3% of the then issued and outstanding shares. This plan commenced on January 1, 2006 and has an expiration date of May 15, 2007. Under this plan the Company has repurchased
90,507 shares at a cost of $1,808,000, at an average price of $19.97.

Management believes that the Company's liquidity position at June 30, 2006 was adequate to fund ongoing operations.

14

---

|Capital
|-------

Consolidated capital of the Company increased $622,000 or 0.8% during the first six months of 2006. The net income increase for the first six months and its corresponding increase to retained earnings increased
capital by $4,943,000. Other capital increases include stock options exercised for the six months totaling $578,000 and stock issued in regard to the contractual purchase arrangement of Washington Asset Management totaling $31,000. Other
increases included a $202,000 increase for the tax benefit recognized from the exercise of non qualified stock options and a $14,000 increase in
restricted stock awards. Capital decreases were the result of $1,808,000 in stock
repurchased under Board approved plans, a decrease in the market value of securities available for sale of $2,193,000 net of tax for the quarter due to rising interest rates during the quarter, quarterly cash dividends paid to shareholders
totaling $1,016,000, and an increase in the additional minimum pension liability of $237,000 to estimate the expected 2006 year end actuarially determined amount.

There are regulatory constraints placed upon capital adequacy, and it is necessary to maintain an appropriate ratio between capital and assets. Regulations require banks and holding companies to maintain a minimum
"leverage" ratio (primary capital ratio) of capital to total assets. For holding companies with the highest regulatory ratings, this ratio must be at least 3%, and for others it must be 4 to 5%. At June 30, 2006 the Company's leverage ratio was
9.59%, compared to 12.01% at year-end 2005. In addition, banks and holding companies are required to meet minimum risk-based capital guidelines under which risk percentages are assigned to various categories of assets and off-balance-sheet items to
calculate a risk-adjusted capital ratio. Tier I capital generally consists of common stockholders' equity, less goodwill, while total capital includes the allowance for possible credit losses, subject to 1.25% limitation of risk-adjusted assets. The
rules require Tier I capital of 4% of risk-adjusted assets and total capital of 8%. At June 30, 2006 the Company's Tier I capital ratio was 9.52%, and total capital was 10.53% . At December 31, 2005 the Company's Tier I capital ratio was 9.37% and
the total capital ratio was 10.46% .

On March 5, 2005 the Federal Reserve Banking System adopted a regulation that mandates the maximum amount of Trust Preferred Securities that may be included in the Company's Tier 1 Capital calculation.  This regulation
has a phase- in period with final compliance required by March 31, 2009.  The Company's capital ratios are calculated in accordance with this regulation and the entire issued amount of Trust Preferred Securities, or junior subordinated debentures,
qualified as Tier 1 Capital for regulatory capital purposes. We retain the ability to issue additional Trust Preferred Securities and have such securities qualify as Tier 1 Capital under the new rules.

|Results of Operations
|---------------------

|Comparison of Six Months Ended June 30, 2006 and 2005
|-----------------------------------------------------

Net income for the six months ended June 30, 2006 increased 21.48% to $4,943,000 compared to $4,069,000 for the same period in 2005. The increase in net income can be attributed to an increase in loan interest
and fee income, an increase in fed funds sold interest, an increase in interest income from available for sale securities and an increase in non-interest income. This positive impact to net income was offset by an increase in interest expense and an
increase in non-interest expense.  In addition to the increase in net income attributed to organic growth, a portion of the net income increases from first six months of 2006 as compared to first six months of 2005 can be attributed to the purchase
of Redmond National Bank and the spread received on purchasing wholesale funds  and investing in available for sale investment securities.

Interest income for the six months ended June 30, 2006 increased $10,172,000, or 55.65%, from the same period in the prior year. An increased volume of earning assets provided $8,287,000 of interest income for
the first six months and an increase in earnings rate on these assets provided another $1,885,000 in interest income. Average earning assets for the first six months of 2006 were $221,543,000 or 42.41% higher than in the same period of 2005.
The average rate earned on assets increased to 7.71% for the first six months of 2006 from 7.06% for the same period in 2005, an increase of 65 basis points.

Total interest expense for the six months ended June 30, 2006 increased $7,018,000, or 136.38%, from the comparable period in the prior year.  Increased volume of interest bearing liabilities resulted in
$3,542,000 in additional interest expense while a 146 basis point increase in the cost of these funds resulted in an additional $3,476,000 interest expense when compared to the previous year.

The net effect of the above is an increase in net interest income of $3,154,000, or 24.02%, for the six months ended June 30, 2006 compared to the same period in 2005.

The net interest margin decreased by 66 basis points to 4.41% from 5.07% in the first six months of 2006 compared to the same period in 2005, as the average cost of funds increased at a more rapid rate than the average
rates earned on the Company's earning assets.

15

---

The yield and cost of funds for earning assets and interest bearing liabilities were as follows as of and for the six months ended June 30 (dollars in thousands):

|                                   |  |          |  | 2006      |  |         |  |          |  | 2005      |  |        
|---------------------------------- |  | -------- |  | --------- |  | ------- |  | -------- |  | --------- |  | -------
|                                   |  |          |  |           |  |         |  |          |  |           |  |        
|                                   |  |          |  | Interest  |  |         |  |          |  | Interest  |  |        
|                                   |  | Average  |  | Income    |  | Average |  | Average  |  | Income    |  | Average
|                                   |  | Balance  |  | (Expense) |  | Yields  |  | Balance  |  | (Expense) |  | Yields 
|                                   |  |          |  |           |  |         |  |          |  |           |  |        
|                                  
|Earning Assets:                    |  |          |  |           |  |         |  |          |  |           |  |        
|Loans (Interest and fees)1         |  | $633,080 |  | $25,806   |  | 8.22%   |  | $447,004 |  | $16,695   |  | 7.53%  
|Federal funds sold and interest    |  |          |  |           |  |         |  |          |  |           |  |        
|bearing deposits                   |  | 6,546    |  | 151       |  | 4.65%   |  | 4,257    |  | 54        |  | 2.56%  
|Investment securities2             |  | 104,257  |  | 2,492     |  | 4.82%   |  | 71,079   |  | 1,528     |  | 4.34%  
|Total earning assets               |  |          |  |           |  |         |  |          |  |           |  |        
|and interest income                |  | $743,883 |  | 28,449    |  | 7.71%   |  | 522,340  |  | $18,277   |  | 7.06%  
|Interest bearing liabilities:      |  |          |  |           |  |         |  |          |  |           |  |        
|Deposits:                          |  |          |  |           |  |         |  |          |  |           |  |        
|Savings and interest bearing       |  |          |  |           |  |         |  |          |  |           |  |        
|demand                             |  | $192,223 |  | $(1,892)  |  | 1.98%   |  | 160,814  |  | $(962)    |  | 1.21%  
|Time deposits                      |  | 285,087  |  | (6,244)   |  | 4.42%   |  | 120,326  |  | (1,659)   |  | 2.78%  
|Total interest bearing deposits    |  | $477,310 |  | $(8,136)  |  | 3.44%   |  | $281,140 |  | $(2,621)  |  | 1.88%  
|Other borrowings                   |  | 158,139  |  | (4,028)   |  | 5.14%   |  | 151,278  |  | (2,525)   |  | 3.37%  
|Total interest bearing liabilities |  |          |  |           |  |         |  |          |  |           |  |        
|and interest expense               |  | $635,449 |  | $(12,164) |  | 3.86%   |  | $432,418 |  | $(5,146)  |  | 2.40%  
|Net interest income                |  |          |  | $16,285   |  |         |  |          |  | $13,131   |  |        
|Net interest margin as a percent   |  |          |  |           |  |         |  |          |  |           |  |        
|of average earning
assets          |  |          |  |           |  | 4.41%   |  |          |  |           |  | 5.07%  

__________________________________________________

|(1) | Average loan balance includes non accrual loans.                                                                                                                                                                                             
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The yield on assets is calculated on a pre-tax, book value basis which does not consider the effect of tax exempt loans and investments.The
after tax yield on investment securities at June 30, 2006 is 5.26% and atJune 30, 2005 was 4.51%.

An analysis of the change in net interest income is as follows for the six months ended June 30 (dollars in thousands):

|                                         |  | 2006 compared to 2005     
|---------------------------------------- |  | --------------------------
|                                         |  | Increase (decrease) due to
|                                         |  |                           
|                                         |  | Volume                    
|                                         |  |                           
|Interest earned on:                      |  |                           
|Loans3                                   |  | $ 7,471                   
|Federal Funds sold and deposits in banks |  | 38                        
|Investment securities                    |  | 778                       
|Total interest income                    |  | 8,287                     
|Interest paid on:                        |  |                           
|Savings, NOW and MMA                     |  | 216                       
|Time Deposits                            |  | 3,207                     
|Other borrowings                         |  | 119                       
|Total Interest expense                   |  | 3,542                     
|Net Interest income                      |  | $ 4,745                   

__________________________________________________

|(3) | Balances of nonaccrual loans, if any, and related income recognized have been included for computational purposes.
|--- | ------------------------------------------------------------------------------------------------------------------
|   

The change in interest, due to both rate and volume, has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

16

---

Non-interest income for the six months ended 2006 was $4,250,000 which is an increase of 4.86% or $197,000 compared to $4,053,000 (which includes a $300,000 one-time OREO gain) for the same period of
2005. Excluding a one-time $300,000 gain on the sale of OREO in the first quarter of 2005, non-interest income increased for the six months ended June 30, 2006 as compared to the first six months of 2005 by $497,000 or 13.24% .  The major
components of non-interest income include salable mortgage loan fee income, service charge income and other income.  In spite of continued rising interest rates in the marketplace, residential mortgage volume remained strong providing fee income of
$882,000 for the first six months of 2006 as compared to $846,000 for the first six months of 2005. Service charge income of $1,979,000 for the first six months of 2006 compares to $1,594,000 for the first six months 2005. This
significant 24.15% increase is partially attributed to the purchase of Redmond National Bank and the related increase in deposit accounts. Other non-interest income for the first six months of 2006 was $1,389,000, virtually unchanged in the
first quarter of 2006 from the first quarter of 2005 level of $1,613,000 when excluding our one-time $300,000 gain on the sale of OREO.

Total non-interest expense increased by $1,931,000 or 18.01% for the six months ended June 30, 2006 compared to the six months ended June 30, 2005. All of the components of non-interest expense (salaries and
benefits, occupancy, and other expenses) increased comparing the six months ended June 30, 2006 to the same period ending June 30, 2005. The increases are primarily attributed to the costs associated with the new financial centers in Redmond and
Lakewood.

|Comparison of Three Months Ended June 30, 2006 and 2005
|-------------------------------------------------------

Net income for the three months ended June 30, 2006 increased 29.13% to $2,629,000 compared to $2,036,000 for the same period in 2005. The increase in net income primarily can be attributed to an increase in
interest income on loans, interest income on investments and non interest income. These increases are offset by an increase in interest expense and non-interest expense.

Interest income for the three months ended June 30, 2006 increased $6,013,000 or 63.35%, from the same period in the prior year. Increased volume of earning assets provided an additional $4,833,000 of interest
income for the second quarter 2006, while $1,180,000 in interest income was due to the increased earnings rate of these assets. Average earning assets for the second quarter of 2006 were $263,069,000 or 49.31% higher than in the same period
of 2005. The average rate earned on assets increased to 7.81% in the second quarter of 2006 from 7.14% for the same period in 2005, an increase of 67 basis points.

Total interest expense for the three months ended June 30, 2006 increased $4,212,000, or 149.20%, from the comparable period in the prior year. The increase in the interest rate paid on deposits and borrowings,
which increased 154 basis points, to 4.10% in the second quarter of 2006 from 2.56% in the second quarter of 2005, resulted in an increase in interest expense of $1,906,000. In addition, interest expense for the three months ended June 30, 2006
increased by $2,306,000 due to a $245,887,000 increase in the volume of these liabilities, which rose from an average of $441,547,000 in 2005 to $687,434,000 in 2006.

Net interest income increased $1,801,000, an increase of 27.01% for the three months ended June 30, 2006 over the same period for 2005.

The yield and cost of funds for earning assets and interest bearing liabilities were as follows as of and for the three months ended June 30 (dollars in thousands):

|                           |  |          |  | 2006      |  |         |  |          |  | 2005      |  |        
|-------------------------- |  | -------- |  | --------- |  | ------- |  | -------- |  | --------- |  | -------
|                           |  | Average  |  | Interest  |  |         |  | Average  |  | Interest  |  | Average
|                           |  | Balance  |  | Income    |  | Average |  | Balance  |  | Income    |  | Rates  
|                           |  |          |  | (Expense) |  | Rates   |  |          |  | (Expense) |  |        
|Earning Assets:            |  |          |  |           |  |         |  |          |  |           |  |        
|Loans (Interest and fees)4 |  | $650,086 |  | $13,662   |  | 8.43%   |  | $456,971 |  | $8,700    |  | 7.64%  
|Federal funds sold         |  | 9,212    |  | 120       |  | 5.22%   |  | 7,034    |  | 48        |  | 2.74%  
|Investment securities5     |  | 137,205  |  | 1,722     |  | 5.03%   |  | 69,429   |  | 743       |  | 4.29%  

4Average loan balance includes non-accrual loans. Interest income on non-accrual loans has been included.
5The yield on investment securities is calculated using historical cost basis.The yield on
assets is calculated on a pre-tax, book value basis which does not consider the effect of tax exempt loans and investments.The after tax yield on investment securities in
2006 and 2005 are 5.37% and 4.47% respectively.

17

---

|Total earning assets               |  |          |  |          |  |       |  |          |  |          |  |      
|---------------------------------- |  | -------- |  | -------- |  | ----- |  | -------- |  | -------- |  | -----
|and interest income                |  | $796,503 |  | $15,504  |  | 7.81% |  | $533,434 |  | $9,491   |  | 7.14%
|Interest bearing liabilities:      |  |          |  |          |  |       |  |          |  |          |  |      
|Deposits:                          |  |          |  |          |  |       |  |          |  |          |  |      
|Savings, NOW, and                  |  |          |  |          |  |       |  |          |  |          |  |      
|Money Market Deposits              |  | $201,230 |  | $(1,163) |  | 2.32% |  | $166,510 |  | $(532)   |  | 1.28%
|Time deposits                      |  | 332,837  |  | (3,815)  |  | 4.60% |  | 128,020  |  | (925)    |  | 2.90%
|Total interest bearing deposits    |  | $534,067 |  | $(4,978) |  | 3.74% |  | $294,530 |  | $(1,457) |  | 1.98%
|Other borrowings                   |  | 153,367  |  | (2,057)  |  | 5.38% |  | 147,017  |  | (1,366)  |  | 3.73%
|Total interest bearing liabilities |  |          |  |          |  |       |  |          |  |          |  |      
|and interest expense               |  | $687,434 |  | $(7,035) |  | 4.10% |  | $441,547 |  | $(2,823) |  | 2.56%
|Net interest income                |  |          |  | $ 8,469  |  |       |  |          |  | $6,668   |  |      
|Net interest margin as a percent   |  |          |  |          |  |       |  |          |  |          |  |      
|of average earning assets:         |  |          |  |          |  | 4.26% |  |          |  |          |  | 5.01%

An analysis of the change in net interest income is as follows for the three months ended June 30 (dollars in thousands):

|                                         |  | 2006 compared to 2005     
|---------------------------------------- |  | --------------------------
|                                         |  | Increase (decrease) due to
|                                         |  |                           
|                                         |  | Volume                    
|                                         |  |                           
|Interest earned on:                      |  |                           
|Loans6                                   |  | $ 3,983                   
|Federal Funds sold and deposits in banks |  | 18                        
|Investment securities                    |  | 832                       
|Total interest income                    |  | 4,833                     
|Interest paid on:                        |  |                           
|Savings, NOW and MMA                     |  | 129                       
|Time Deposits                            |  | 2,115                     
|Other borrowings                         |  | 62                        
|Total Interest expense                   |  | 2,306                     
|Net Interest income                      |  | $ 2,527                   

____________________________________________

|(6) | Balances of non-accrual loans, if any, and related income recognized have been included for computational purposes.
|--- | -------------------------------------------------------------------------------------------------------------------
|   

The change in net interest income, due to both rate and volume, has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Non-interest income for the second quarter of 2006 was $2,283,000 which is an increase of 13.98% or $280,000 compared to $2,003,000 in the second quarter of 2005. The major components of non-interest income
include salable mortgage loan fee income, service charge income, and other income. In spite of continued rising interest rates in the marketplace, residential mortgage volume remained strong providing fee income of $440,000 for the second
quarter of 2006 as compared to $435,000 for the second quarter of 2005. Service charge income of $1,039,000 for the second quarter of 2006 compares to $859,000 for the second quarter 2005. Other non-interest income for the second quarter
of 2006 was $804,000 compared to $709,000 for the second quarter of 2005.

Total non-interest expense increased by $1,169,000 or 21.69% for the three months ended June 30, 2006 compared to the three months ended June 30, 2005.  All of the components of non-interest expense (salaries and
benefits, occupancy, and other expenses) increased comparing the three months ended June 30, 2006 to the same period ending June 30, 2005. The increases are primarily attributed to the costs associated with the new financial centers in Redmond and
Lakewood

18

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|Business Segment Reporting
|--------------------------

The Company is now managed as a whole, not by discrete operating segments. The Company was formerly managed along two major lines of business: community banking, its core business, and the small loan division, which
was entered into late in the fourth quarter of 2000. Community banking consists of all lending, deposit and administrative operations conducted through the Bank's 17 offices in Washington State. Formerly, the small loan division provided small,
short-term consumer loans to customers in Arkansas and Alabama through Marketing and Servicing Agreements with Advance America. Effective July 1, 2005 the Bank terminated its relationship with Advance America and no longer offered small short-term
consumer loans.

When the Company began offering small loans, it segregated operating results in the general ledger system to better manage financial performance. The financial performance of the business lines were measured by the
Company's profitability reporting process, which utilized various management accounting techniques to more accurately reflect each business line's financial results. Revenues and expenses were primarily assigned directly to business
lines.

The organizational structure of the Company and its business line's financial results were not necessarily comparable across companies. As such, the Company business line performance was not directly comparable with
similar information from other financial institutions.

Financial highlights by line of business as of, and for the six months ended June 30 were as follows (dollars in thousands):

|Six months ended June 30, 2006                        |  |   |  | Community |  |   |  | Small |  |   |  |        
|----------------------------------------------------- |  | - |  | --------- |  | - |  | ----- |  | - |  | -------
|                                                      |  |   |  | Banking   |  |   |  | Loans |  |   |  | Total  
|                                                      |  |   |  |           |  |  
|                                                     
|Net Interest income after provision for credit losses |  | $ |  | 15,985    |  | $ |  | --    |  | $ |  | 15,985 
|Non-interest income                                   |  |   |  | 4,250     |  |   |  | --    |  |   |  | 4,250  
|Non-interest expense                                  |  |   |  | 12,652    |  |   |  | --    |  |   |  | 12,652 
|Income taxes                                          |  |   |  | 2,640     |  |   |  | --    |  |   |  | 2,640  
|Net Income                                            |  | $ |  | 4,943     |  | $ |  | --    |  | $ |  | 4,943  
|Total assets                                          |  | $ |  | 917,269   |  | $ |  | --    |  | $ |  | 917,269
|Total Loans                                           |  | $ |  | 660,064   |  | $ |  | --    |  | $ |  | 660,064
|                                                     
|                                                     
|Six months ended June 30, 2005                        |  |   |  | Community |  |   |  | Small |  |   |  |        
|                                                      |  |   |  | Banking   |  |   |  | Loans |  |   |  | Total  
|                                                      |  |   |  |           |  |  
|                                                     
|Net Interest income after provision for credit losses |  | $ |  | 11,912    |  | $ |  | 666   |  | $ |  | 12,578 
|Non-interest income                                   |  |   |  | 4,044     |  |   |  | 9     |  |   |  | 4,053  
|Non-interest expense                                  |  |   |  | 10,661    |  |   |  | 60    |  |   |  | 10,721 
|Income taxes                                          |  |   |  | 1,644     |  |   |  | 197   |  |   |  | 1,841  
|Net Income                                            |  | $ |  | 3,651     |  | $ |  | 418   |  | $ |  | 4,069  
|Total assets                                          |  | $ |  | 588,147   |  | $ |  | 6,283 |  | $ |  | 594,430
|Total Loans                                           |  | $ |  | 450,964   |  | $ |  | 3,556 |  | $ |  | 454,520
|                                                     

Item 3Quantitative and Qualitative Disclosures About Market Risk

Management considers interest rate risk to be a risk that could have a material effect on the Company's financial condition and results of operations. The Company does not currently use derivatives to manage market and
interest rate risk.

A number of measures are used to monitor and manage interest rate risk, including income simulations and interest sensitivity (gap) analyses. An income simulation model is the primary tool used to assess the direction
and magnitude of changes in net interest income resulting from changes in interest rates.  Key assumptions in the model include repayment speeds on certain assets, cash flows and maturities of other investment securities, loan and deposit volumes
and pricing. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest income or precisely predict the impact of higher or lower interest rates on net interest income.

Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies, among other factors. Interest Rate Gap
Analysis is limited in its usefulness as it does not reflect the changes in the values of the assets held and what they could be sold for at a gain or loss at various repricing terms depending on the changes to market rates. At June 30, 2006, based
on the

19

---

measures used to monitor and manage interest rate risk, there has not been a material change in the Company's interest rate risk since December 31, 2005. For additional information, refer to the Company's Annual Report
on Form 10-K for the year ended December 31, 2005. Interest rate sensitivity is measured as the difference between the volume of assets and liabilities, known as an "interest sensitivity gap", at a point in time that are subject to repricing at
various time horizons. The table below sets forth the interest sensitivity gaps for assets and liabilities repricing within one year, between one to five years and after five years.

Interest Rate Gap AnalysisJune 30, 2006

|                                    |  |            |  | Repricing Intervals(dollars in thousands) |  |            |  |          |  |         
|----------------------------------- |  | ---------- |  | ----------------------------------------- |  | ---------- |  | -------- |  | --------
|                                    |  |            |  | After One                                 |  |            |  |          |  |         
|                                    |  | Within     |  | But Within                                |  | After      |  |         
|                                    |  | One Year   |  | Five Years                                |  | Five Years |  | Total   
|                                    |  |            |  |                                           |  |            |  |         
|                                   
|Loans                               |  | $413,923   |  | $184,470                                  |  |            |  | $61,671  |  | $660,064
|Securities:                         |  |            |  |                                           |  |            |  |          |  |         
|Available for sale                  |  | 4,829      |  |                                           |  | 32,709     |  |          |  | 104,417 
|Federal funds sold                  |  | 14,355     |  |                                           |  | - -        |  |          |  | - -     
|Interest bearing deposits in banks  |  | 258        |  |                                           |  | - -        |  |          |  | - -     
|Total Earning Assets                |  | $433,365   |  | $217,179                                  |  | $166,088   |  | $816,632
|Deposits:                           |  |            |  |                                           |  |            |  |          |  |         
|Savings and interest bearing demand |  | $259,466   |  | $                                         |  | - -        |  | $        |  | - -     
|Time deposits                       |  | 233,533    |  |                                           |  | 114,559    |  |          |  | - -     
|Repurchase agreements               |  | 41,397     |  |                                           |  | - -        |  |          |  | - -     
|Short term borrowings               |  | 26,513     |  |                                           |  | - -        |  |          |  | - -     
|Long term debt                      |  | - -        |  |                                           |  | 30,000     |  |          |  | 22,682  
|                                   
|Total Interest Bearing Liabilities  |  | $560,909   |  | $144,559                                  |  |            |  | $22,682  |  | $728,150
|                                    |  |            |  |                                           |  |            |  |         
|Net Interest Rate Sensitivity Gap   |  | $(127,544) |  |                                           |  | $72,620    |  | $143,406 |  | $88,482 
|                                   

Evaluation of Disclosure Controls and Procedures

The Company's disclosure controls and procedures are designed to ensure that information VFG must disclose in its reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
is recorded, processed, summarized, and reported on a timely basis. The Company carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer ("CEO") and Chief Financial Officer, of the effectiveness of
disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the CEO and Chief Financial Officer have concluded that VFG's disclosure controls and procedures are effective in bringing to their
attention, on a timely basis, information required to be disclosed by VFG reports that it files or submits under the Exchange Act. Also, since the date of their evaluation, there have not been any significant changes in VFG' s internal controls or
in other factors that could significantly affect those controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

|Changes in Internal Controls
|----------------------------

In the second quarter ended June 30, 2006, the Company did not make any significant change in, nor take any corrective actions regarding, its internal controls or other factors that could significantly affect these
controls.  The Company continued to implement suggestions from its internal auditor and independent auditors on ways to strengthen existing controls.

20



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| | Venture Financial Group, Inc.PART II - OTHER INFORMATIONItem 1 Legal Proceedings
| | --------------------------------------------------------------------------------

> Due to the nature of banking, we are involved in legal proceedings in the ordinary course of business. At this time, we do not believe that there is pending litigation the outcome of which will have a material adverse
> affect on the financial condition, results of operations, or liquidity of the Company.

| | Item 1A Risk Factors
| | --------------------

> There are no material changes to the Company's risk factors from what was previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2005.

Item 2 
  Unregistered Sales of Equity Securities and Use of Proceeds

Share counts reflect a three-for-two stock dividend declared on May 16, 2004.

(c) 
  Issuer Purchases of Equity Securities

|                            |  |        |  |                  |  |                    |  | Total number of     |  |                    
|--------------------------- |  | ------ |  | ---------------- |  | ------------------ |  | ------------------- |  | -------------------
|                            |  |        |  |                  |  |                    |  | shares purchased as |  |                    
|                            |  |        |  |                  |  |                    |  | part of publicly    |  | Maximum number of  
|                            |  |        |  | Total number of  |  | Average price paid |  | announced plans or  |  | shares that may yet
|                            |  | Period |  | shares purchased |  | per share          |  | programs            |  | be purchased       
|                           
|                           
|Month #1                    |  |        |  |                  |  |                    |  |                     |  |                    
|April 1, 2006 through April |  |        |  |                  |  |                    |  |                    
|30, 2006                    |  |        |  | - -              |  | - -                |  | - -                 |  | 174,612            
|                           
|Month #2                    |  |        |  |                  |  |                    |  |                     |  |                    
|May 1, 2006 through May     |  |        |  |                  |  |                    |  |                    
|31, 2006                    |  |        |  | 61,979           |  | $19.96             |  | 61,979              |  | 112,633            
|                           
|Month #2                    |  |        |  |                  |  |                    |  |                     |  |                    
|June 1, 2006 through June   |  |        |  |                  |  |                    |  |                    
|30, 2006                    |  |        |  | 3,140            |  | $19.83             |  | 3,140               |  | 109,493            
|                           
|                           
|Total                       |  |        |  | 65,119           |  | $19.96             |  | 65,119              |  | 109,493            

|Date repurchase authorized |  | Date publicly announced |  | # of shares authorized |  | Expiration Date  
|-------------------------- |  | ----------------------- |  | ---------------------- |  | -----------------
|                          
|February 19, 2003          |  | March 5, 2003           |  | 131,370                |  | August 19, 2004  
|September 18, 2003         |  | September 24, 2003      |  | 56,130                 |  | December 18, 2004
|October 15, 2003           |  | October 17, 2003        |  | 225,000                |  | April 15, 2005   
|September 16, 2004         |  | September 22, 2004      |  | 200,000                |  | December 31, 2005
|November 15, 2005          |  | February 27, 2006       |  | 200,000                |  | May 15, 2007     
|                          
|Total                      |  |                         |  | 812,500                |  |                  
|                          

21

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Item 4 Submission of Matters of a Vote of Security Holders

|(a) | On May 4, 2006, the Company held its annual meeting of shareholders for the sole purpose of electing directors.                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(c) | Shareholders voted on the election of Ken F. Parsons, Sr., Jewell C. Manspeaker and Patrick L. Martin to terms expiring with the 2009 annual meeting of shareholders. The vote was as follows:
|   

|Nominee             |  | Votes For |  | Votes Withheld |  | Abstentions and Broker
|------------------- |  | --------- |  | -------------- |  | ----------------------
|                    |  |           |  |                |  | Non-Votes             
|                   
|Jewell Manspeaker   |  | 5,827,361 |  | 39,319         |  |                       
|Patrick Martin      |  | 5,680,115 |  | 186,565        |  |                       
|Ken F. Parsons, Sr. |  | 5,738,530 |  | 128,150        |  |                       

Item 6  Exhibits

3.1         Second Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005; SEC Accession No.
0000896595-05-000206, filed May 16, 2005)

3.2         Bylaws (incorporated by reference to Exhibit 3(b) of the Registrant Annual Report on Form 10-K for the Fiscal year ending December 31, 2001; SEC Accession No. 0001104659-02-001200, filed April 1, 2002

31.1Certifications of the Chief Executive Officer

31.2Certifications of the Chief Financial Officer

32Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of Sarbanes-Oxley Act of 2002

22

---

|Venture Financial Group, Inc.
|-----------------------------

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.

VENTURE FINANCIAL GROUP, INC.

(Registrant)

Date: August 11, 2006

| | By:                 |  | /s/ Ken F. Parsons, Sr.                          
| | ------------------- |  | -------------------------------------------------
| | Ken F. Parsons, Sr.
| |                     |  | Chief Executive Officer and Chairman of the Board

| |                      |  |                             
| | -------------------- |  | ----------------------------
| |                      |  |                             
| | By:                  |  | /s/ Sandra L. Sager         
| | Sandra L. Sager, CPA
| |                      |  | EVP, Chief Financial Officer

---

---