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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(mark one) 
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedSeptember 30, 2005

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. SE, P.O. Box 3800, Lacey, WA 98509(Address of principal executive offices)Issuer'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 past 12 months (or for such shorter periods 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
an accelerated filer (as defined by Rule 12b-2 of the Exchange Act)                                                                                                   
Yes  XNo
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                



|Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).                                                                                                  
Yes  XNo
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                           

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 November 9, 2005Common Stock
	
	7,202,032


Venture Financial Group, Inc.

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|Table of Contents             
|------------------------------
|                              
|PART I - FINANCIAL INFORMATION
|                              
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|PART II - OTHER INFORMATION   
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|Item                          
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|SIGNATURES                    

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|VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES 

 
Condensed Consolidated Balance Sheets  
 
(Dollars in thousands)
|-------------------------------------------------------------------------------------------------------------------
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|Assets                                                                                                             
|Cash and due from banks                                                                                            
|Interest bearing deposits in banks                                                                                 
|Federal funds sold                                                                                                 
|Securities available for sale                                                                                      
|Investments in Trusts                                                                                              
|Federal Home Loan Bank stock, at cost                                                                              
|Loans held for sale                                                                                                
|                                                                                                                   
|Loans                                                                                                              
|Allowance for credit losses                                                                                        
|Net loans                                                                                                          
|                                                                                                                   
|Premises and equipment                                                                                             
|Foreclosed real estate                                                                                             
|Accrued interest receivable                                                                                        
|Cash surrender value of life insurance                                                                             
|Goodwill                                                                                                           
|Other intangible assets                                                                                            
|Other assets                                                                                                       
|                                                                                                                   
|Total assets                                                                                                       
|                                                                                                                   
|                                                                                                                   
|Liabilities                                                                                                        
|Deposits:                                                                                                          
|Demand                                                                                                             
|Savings and interest bearing demand                                                                                
|Time deposits                                                                                                      
|Total deposits                                                                                                     
|                                                                                                                   
|Federal funds purchased                                                                                            
|Short term borrowing                                                                                               
|Accrued interest payable                                                                                           
|Long-term debt                                                                                                     
|Junior subordinated debentures                                                                                     
|Other liabilities                                                                                                  
|Total liabilities                                                                                                  
|                                                                                                                   
|Stockholders' Equity                                                                                               
|Common stock, (no par value); 10,000,000 shares authorized, shares issued and                                      
|outstanding: September 2005 - 7,157,264; December 2004 - 6,527,507                                                 
|Additional paid-in-capital                                                                                         
|Retained earnings                                                                                                  
|Accumulated other comprehensive income (loss), net of tax                                                          
|Total stockholders' equity                                                                                         
|                                                                                                                   
|Total liabilities and stockholders' equity                                                                         
|                                                                                                                   
|See notes to condensed consolidated financial statements                                                           

3

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|VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)
(Dollars in thousands, except per share amounts)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                
|                                                                                                                                                                                
|                                                                                                                                                                                
|Interest income                                                                                                                                                                 
|Loans                                                                                                                                                                           
|Federal funds sold and deposits in banks                                                                                                                                        
|Investments                                                                                                                                                                     
|Total interest income                                                                                                                                                           
|                                                                                                                                                                                
|Interest Expense                                                                                                                                                                
|Deposits                                                                                                                                                                        
|Other                                                                                                                                                                           
|Total interest expense                                                                                                                                                          
|                                                                                                                                                                                
|Provision for credit losses                                                                                                                                                     
|                                                                                                                                                                                
|Net interest income after provision                                                                                                                                             
|for credit losses                                                                                                                                                               
|                                                                                                                                                                                
|Non-interest income                                                                                                                                                             
|Service charges on deposit accounts                                                                                                                                             
|Mortgage loans sold                                                                                                                                                             
|Other operating income                                                                                                                                                          
|Total non-interest income                                                                                                                                                       
|                                                                                                                                                                                
|Non-interest expense                                                                                                                                                            
|Salaries and employee benefits                                                                                                                                                  
|Occupancy and equipment                                                                                                                                                         
|Other expense                                                                                                                                                                   
|Total non-interest expense                                                                                                                                                      
|                                                                                                                                                                                
|Operating income before provision for                                                                                                                                           
|income taxes                                                                                                                                                                    
|                                                                                                                                                                                
|Provision for income taxes                                                                                                                                                      
|                                                                                                                                                                                
|Net income                                                                                                                                                                      
|                                                                                                                                                                                
|Other comprehensive income, net of tax                                                                                                                                          
|Unrealized holding gains (losses) on securities                                                                                                                                 
|arising during the period                                                                                                                                                       
|                                                                                                                                                                                
|Comprehensive Income                                                                                                                                                            
|                                                                                                                                                                                
|Earnings per Share Data                                                                                                                                                         
|Basic earnings per share                                                                                                                                                        
|Diluted earnings per share                                                                                                                                                      
|Dividends declared per share                                                                                                                                                    
|                                                                                                                                                                                
|Weighted average number of common shares                                                                                                                                        
|Weighted average number of common shares,                                                                                                                                       
|Including dilutive stock options                                                                                                                                                
|                                                                                                                                                                                
|Return on average assets (annualized)                                                                                                                                           
|Return on average equity (annualized)                                                                                                                                           
|See notes to condensed consolidated financial statements                                                                                                                        

4

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|VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Dollars in thousands)
Nine Months Ended September 30, 2004 and 2005
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                         
|                                                                                                                                                                                         
|                                                                                                                                                                                         
|                                                                                                                                                                                         
|Balance, December 31, 2003                                                                                                                                                               
|Net income                                                                                                                                                                               
|Stock options exercised                                                                                                                                                                  
|Stock repurchased                                                                                                                                                                        
|Cash dividend ($0.14 per share)                                                                                                                                                          
|Other comprehensive income                                                                                                                                                               
|Balance, September 30, 2004                                                                                                                                                              
|Balance, December 31, 2004                                                                                                                                                               
|Net income                                                                                                                                                                               
|Stock options exercised                                                                                                                                                                  
|Stock repurchased                                                                                                                                                                        
|Stock issued for purchase of                                                                                                                                                             
|Subsidiary                                                                                                                                                                               
|Purchase of WCB                                                                                                                                                                          
|WCB shares repurchased                                                                                                                                                                   
|Cash dividend ($0.21 per share)                                                                                                                                                          
|Other comprehensive income (loss)                                                                                                                                                        
|Balance, September 30, 2005                                                                                                                                                              

See notes to condensed consolidated financial statements

5

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|VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES                           
|-------------------------------------------------------------------------
|Condensed Consolidated Statements of Cash Flows (Unaudited)              
|(Dollars in thousands)                                                   
|                                                                         
|                                                                         
|Cash Flows from Operating Activities                                     
|Net Income                                                               
|Adjustments to reconcile net income to net cash provided                 
|by operating activities:                                                 
|Provision for credit losses                                              
|Depreciation and amortization                                            
|Income from mortgage loans sold                                          
|Increase in cash surrender value of life insurance                       
|Gain on sale of other real estate owned                                  
|Other - net                                                              
|                                                                         
|Originations of loans held for sale                                      
|Proceeds from sales of loans held for sale                               
|Net cash provided by operating activities                                
|                                                                         
|Cash Flows from Investing Activities                                     
|Net (increase) decrease in interest bearing deposits in banks            
|Net (increase) decrease in federal funds sold                            
|Purchases of securities available for sale                               
|Proceeds from maturities and prepayments of available-for-sale securities
|Net increase in loans                                                    
|Proceeds from sale of other real estate                                  
|Additions to premises and equipment                                      
|Cash paid to WCB shareholders                                            
|Acquisition, net of cash acquired                                        
|Net cash used by investing activities                                    
|                                                                         
|Cash Flows from Financing Activities                                     
|Net increase in deposits                                                 
|Net increase (decrease) in fed funds purchased                           
|Net increase (decrease) in short-term borrowings                         
|Sale of common stock                                                     
|Repurchase of common stock                                               
|Net increase (decrease) in long-term borrowings                          
|Payment of cash dividends                                                
|Net cash provided by financing activities                                
|                                                                         
|Net change in cash and due from banks                                    
|                                                                         
|Cash and Due from Banks:                                                 
|Beginning of period                                                      
|                                                                         
|End of period                                                            
|                                                                         
|Supplemental Disclosures of Cash Flow Information:                       
|Cash payments for:                                                       
|Interest                                                                 
|Taxes                                                                    
|                                                                         
|Supplemental Disclosures of Non-Cash Investing and Financing Activities: 
|Fair value adjustment of securities available for sale, net              
|Foreclosed real estate acquired in settlement of loans                   
|Trust preferred securities                                               
|Reclassification of long-term borrowings to short-term borrowings        
|                                                                         
|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)

1. Basis of Presentation

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, 2004 consolidated financial statements, including notes thereto, included in the Company's 2004 Annual Report to Shareholders. Operating results for the nine months ended September 30, 2005 are not necessarily
indicative of the results anticipated for the year ending December 31, 2005.

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.

Stock Based Compensation

The Company accounts 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 has been recognized in the condensed consolidated financial statements for employee and director stock arrangements where the grant price is equal to market
price. However, the required pro forma disclosures of the effects of all options granted on or after January 1, 1995have been provided in accordance with SFAS No.
123,

Accounting for Stock-Based Compensation,as amended.

At September 30, 2005 and September 30, 2004, the Company had one stock-based employee and director compensation plan. The following illustrates 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 Stock-Based Compensation,to stock-based compensation awards for the effects of all
options granted on or after January 1, 1995 for the periods ended September 30:

|                                                              |  | Three Months Ended |  | Nine Months Ended
|------------------------------------------------------------- |  | ------------------ |  | -----------------
|                                                              |  | 2005               |  | 2004             
|                                                             
|Net income, as reported                                       |  | $2,300             |  | $2,187           
|Less total stock-based compensation expense determined        |  |                    |  |                  
|under fair value method for all qualifying awards, net of tax |  | 97                 |  | 101              
|                                                             
|Pro forma net income                                          |  | $2,203             |  | $2,086           
|                                                             
|Earnings per Share                                            |  |                    |  |                  
|Basic:                                                        |  |                    |  |                  
|As reported                                                   |  | $.34               |  | $.34             
|Pro forma                                                     |  | .33                |  | .32              
|Diluted:                                                      |  |                    |  |                  
|As reported                                                   |  | .33                |  | .33              
|Pro forma                                                     |  | .32                |  | .31              

7

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|2. Basic and Diluted Earnings per Share
|---------------------------------------

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 assumes all dilutive
stock options outstanding are issued such that their dilutive effect is maximized.

|                                 |  |           |  | Three Months Ended |  |                       |  | Nine Months Ended
|-------------------------------- |  | --------- |  | ------------------ |  | --------------------- |  | -----------------
|                                 |  |           |  | September 30,      |  |                       |  | September 30,    
|                                
|                                 |  |           |  | 2005               |  |                       |  | 2004             
|Basic EPS computation            |  | $         |  | 2,300              |  | $              2,187  |  | $                
|Numerator - Net Income           |  |           |  |                    |  |                       |  |                  
|                                
|Denominator - Weighted Average   |  |           |  |                    |  |                       |  |                  
|common shares outstanding        |  | 6,741,838 |  | 6,525,881          |  | 6,630,121             |  | 6,477 ,238       
|                                
|Basic EPS                        |  | $         |  | .34                |  | $                 .34 |  | $                
|                                
|                                 |  |           |  | Three Months Ended |  |                       |  | Nine Months Ended
|                                 |  |           |  | September 30,      |  |                       |  | September 30,    
|                                
|                                 |  |           |  | 2005               |  |                       |  | 2004             
|Diluted EPS computation          |  | $         |  | 2,300              |  | $              2,187  |  | $                
|Numerator - Net Income           |  |           |  |                    |  |                       |  |                  
|Denominator - Weighted average   |  | 6,741,838 |  | 6,525,881          |  | 6,630,121             |  | 6,477,238        
|common shares outstanding        |  |           |  |                    |  |                       |  |                  
|Effect of dilutive stock options |  |           |  | 217,571            |  |                       |  | 164,526          
|Weighted average common shares   |  | 6,959,409 |  | 6,690,407          |  | 6,847,692             |  | 6,641,764        
|and common stock equivalents     |  |           |  |                    |  |                       |  |                  
|                                
|Diluted EPS                      |  | $         |  | .33                |  | $ 
.33                |  | $                

8

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3. Recent Accounting Pronouncements

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004),Share-Based Payment, which is a revision of FASB No. 123,Accounting for Stock Based Compensation.

Statement 123(R) supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees, and amends FASB Statement No. 95,Statement of Cash Flows.Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all
share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. Statement 123(R) permits public companies to adopt
its requirements using the "modified prospective" method which the Company intends to adopt. Under the "modified prospective" method, the compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement
123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement 123 all awards granted to employees prior to the effective date of Statement 123(R) that remain unvested on the effective date. The
Securities and Exchange Commission (SEC) announced the adoption of a new rule that amends the compliance dates for Statement 123(R) for public companies. Under the Statement as issued by the FASB, fair-value accounting would have been mandatory for
the first interim or annual reporting period beginning after June 15, 2005, for public companies that are not small business issuers; all other companies, including all nonpublic companies, were to begin using the new rules for reporting periods
after December 15, 2005. The SEC's new rule allows public companies to implement Statement 123(R) at the beginning of their next fiscal year, instead of the next reporting period, after June 15 or December 15, 2005, as applicable. The SEC's new rule
does not change the accounting required by Statement 123(R); only the compliance deadlines have been altered. With the recent extension, the Company expects to adopt Statement 123 (R) on January 1, 2006.

As permitted by Statement 123, the Company currently accounts for share-based payments to employees using APB 25's intrinsic value method and, as such, generally recognizes no compensation cost for employee stock
options. Accordingly, the adoption of Statement 123(R)'s fair value method will have an impact on our result of operations, although it will have no impact on our overall financial position. The impact of adoption of Statement 123(R) cannot be
predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact of Statement 123 as
described in the disclosure of pro forma net income and earnings per share as previously disclosed.

4. Purchase of Redmond National Bank

On September 2, 2005 Venture Financial Group merged with Washington Commercial Bancorp (WCB) of Redmond Washington, the parent company of Redmond National Bank, in an acquisition accounted for under the purchase method
of accounting. The results of WCB's operations have been included in the consolidated financial statements since that date. This merger continues Venture's expansion into King County.

The aggregate purchase price was $23,690,000 consisting of cash consideration of $12,354,056 and the issuance of 574,559 shares of VFG stock in exchange for 568,683 shares of WCB stock. The value of the VFG
stock was determined to be $19.73 per share at the time of the announcement of the merger for a total of $11,336,049. VFG incurred $665,000 in direct merger related costs which is accounted for as a component of intangible assets. The
Company is currently in the process of determining the fair value of the assets acquired and the liabilities assumed in the business combination which is subject to estimation and for which we expect to make reallocation of the purchase price during
an allocation period that is allowed under generally accepted accounting principles. Such reallocations may result in revisions of estimates that may, to some extent result in effects in the income statement reported in future periods.

9

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The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

Fair Value of Washington Commercial Bancorp Assets acquired and Liabilities assumed as of September 2, 2005

|Assets                                |  |        
|------------------------------------- |  | -------
|Cash and due from banks               |  | $ 2,802
|Securities available for sale         |  | 1,889  
|Investments in Trusts                 |  | 93     
|Federal Home Loan Bank stock, at cost |  | 545    
|                                     
|Loans                                 |  | 107,133

|Allowance for credit losses         |  | 1,241   
|----------------------------------- |  | --------
|Net loans                           |  | 105,892 
|                                   
|Premises and equipment              |  | 2,502   
|Foreclosed real estate              |  | 155     
|Accrued interest receivable         |  | 525     
|Goodwill                            |  | 13,090  
|Core deposit intangible             |  | 880     
|Other assets                        |  | 193     
|                                   
|Total assets                        |  | $128,566
|                                   
|                                   
|Liabilities                         |  |         
|Deposits:                           |  |         
|Demand                              |  | $ 15,751
|Savings and interest bearing demand |  | 21,195  
|Time deposits                       |  | 49,975  
|Total deposits                      |  | 86,921  
|                                   
|Short term borrowing                |  | 13,700  
|Accrued interest payable            |  | 138     
|Junior subordinated debentures      |  | 3,093   
|Other liabilities                   |  | 1,024   
|Total liabilities                   |  | 104,876 

The core deposit intangible asset shown in the table above represents the value ascribed to the long-term deposit relationships acquired. This intangible asset will be amortized on a straight line basis over a term of
five years. Goodwill represents the excess of the total purchase price paid for Washington Commercial Bancorp over the fair values of the assets acquired, net of liabilities assumed. Goodwill is not amortized, but is evaluated for possible
impairment at least annually and more frequently if events and circumstances indicate that the asset might be impaired. No impairment losses were recognized in connection with core deposit intangible or goodwill assets during the three and nine
month periods ended September 30, 2005 and 2004.

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 nine months ended and as of September 30, 2005. When warranted, comparisons
are made to the same period in 2004, and to the previous year ended December 31, 2004. 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, 2004, which contains additional statistics and explanations.  All dollars in tables, except per share data, are expressed in thousands.

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

The third quarter of 2005 saw several significant events and highlights take place.  On September 2, 2005 the Company completed its merger with Washington Commercial Bancorp (WCB) and Venture Bank's merger with WCB's
principal operating subsidiary Redmond National Bank. With this merger Ken F. Parsons, Sr. will continue to lead the combined organization as Chairman and CEO of the Company, James F. Arneson, former President and CEO of Washington Commercial
Bancorp and Redmond National Bank, will serve as President of Venture Financial Group, Inc. and as President and CEO of Venture Bank. Before joining Redmond National Bank, Mr. Arneson served Venture Bank for 10 years including time as its Chief
Financial Officer.  Venture's acquisition of WCB and it's approximately $129 million in assets will significantly enhance Venture Bank's presence in King County-a key element of the Company's strategic growth plans.

In addition to the merger with WCB, Venture Bank opened a new financial center in Lakewood, Washington which continues management's strategic objective of growing operations along the Puget Sound I-5 corridor. In
addition, the Company completed its rebranding effort on two other financial centers (Downtown Olympia and Pioneer - Gig Harbor).

10

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In the third quarter the Company terminated its loan funding arrangement with Advance America for the funding of small consumer loans in the state of Arkansas. The Company received income from Advance America during
the third quarter and continues to seek other opportunities to replace revenues received from the small loan division

The rising rate environment has a direct effect on the Company's operations. The Company continues to monitor and measure the inherent interest rate risk in its balance sheet.

|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 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 September 30, 2005 totaling $736,889,000 represents a 32.5% or $180,673,000 increase from December 31, 2004 assets totaling $556,216,000.  This increase is represented
primarily by a $128,566,000 increase due to the merger with WCB.  Without the merger, total assets would have increased by $52,107,000 or 9.4% for the nine months ending September 30, 2005.

Loans and loans held for sale

Loans have increased $131,533,000 as of September 30, 2005 compared to December 31, 2004. The merger with WCB accounted for $107,133,000 of the growth.  The balance of the growth has been focused in commercial,
commercial real estate and real estate construction lending.

Loans held for sale increased $1,225,000 to $4,343,000 as of September 30, 2005. The increase is largely due to the hiring of several new mortgage loan originators.

|The composition of the loan portfolio was as follows (dollars in thousands): |  |             
|---------------------------------------------------------------------------- |  | ------------
|                                                                            
|                                                                             |  | September 30
|                                                                             |  | 2005        
|Commercial                                                                   |  | $68,746     
|Real Estate                                                                  |  |             
|Residential 1-4                                                              |  | 20,851      
|Commercial                                                                   |  | 275,316     
|Construction                                                                 |  | 186,430     
|Consumer                                                                     |  | 9,713       
|Small Loans                                                                  |  | 0           
|Total
Loans                                                                  |  | $561,056    

11

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The total non-performing loans, defined as those
loans on non-accrual and accruing loans over 90-days past due, decreased since
December 31, 2004 by $262,000 as shown in the following table of non-performing
assets.

|(dollars in thousands):                 |  |              |  |             |  |      
|--------------------------------------- |  | ------------ |  | ----------- |  | -----
|                                        |  | September 30 |  | December 31
|                                        |  | 2005         |  |             |  | 2004 
|                                       
|Non-accrual loans                       |  | $ 4,978      |  | $           |  | 3,081
|Accruing loans past due 90 days or more |  | 96           |  |             |  | 2,005
|Foreclosed real estate                  |  | 474          |  |             |  | 718  
|Other assets                            |  | 0            |  |             |  | 6    
|                                        |  | $ 5,548      |  | $           |  | 5,810

The percentage of non-performing loans to total loans decreased to 0.90% on September 30, 2005 from 1.18% on December 31, 2004. Non-accrual loans increased $1,897,000 during the first nine months of 2005, while
foreclosed real estate and other assets decreased $250,000 during the same period. The increase in non-accrual loans was mainly due to the addition of one commercial real estate loan for $1,830,000 added in the first quarter 2005. In July,
2005 the guarantors remedied the default and have maintained the monthly principal and interest payment called for by the note and at the completion of six month's performance it is anticipated this loan will be put back on accrual status.

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 September 30, 2005, 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 increased $1,287,000 for the first nine months of 2005, with the ratio of the allowance for credit losses to loans at 1.51% on September 30, 2005 compared to 1.66% on December 31,
2004. During the first nine months, an additional $714,000 was reserved for potential losses, $1,241,000 was added from the merger with WCB, and net charge-offs were $668,000, or 0.11% of the loan portfolio. The allowance for credit
losses to nonperforming loans was 167.05% on September 30, 2005, compared to 141.35% on December 31, 2004. Management believes the allowance is at an appropriate level.

Investment Portfolio

Investment securities decreased $8,536,000, or 11.65% during the first nine months of 2005 to a total of $64,755,000. The decrease in securities available for sale is primarily attributed to principal reductions
on mortgage backed securities and agency securities matured.  Cash received from these investments was partially redirected into the Bank's loan portfolio. Securities are typically purchased from time to time as either collateral for various
operational purposes or for additional income in times of excess liquidity.

12

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Premises and Equipment

The $6,873,000 increase in premises and equipment is due to an increase of $2,502,000 from the merger with WCB, $2,000,000 used to purchase land for the Company's future corporate headquarters and the
remaining was used to construct a new financial center in Lakewood and to construct a new building located at the Pioneer Way Financial Center. The additional increases are a result of the continuation of re-branding/remodeling efforts in several of
the Company's financial centers.

Deposits and Borrowings

Total deposits increased $202,362,000 or 61.9% in the nine months ended September 30, 2005 to $529,083,000. Of this increase, $86,921,000 was due to the merger with WCB.  WCB's deposit mix immediately prior
to closing included savings and interest bearing deposits totaling $21,195,000 (24.4%); time deposits totaling $49,975,000 (57.5%) and non-interest bearing deposits totaling $15,751,000 (18.1%) . Excluding deposits acquired in this
merger, deposits increased $115,441,000 or 35.3% . Savings and interest-bearing deposit accounts and non-interest bearing demand increased $84,307,000 or 37.7% while time deposits increased $118,055,000 or 114.3% . The increase in time
deposits is primarily attributed to the Bank's obtaining wholesale CD's totaling $23,331,000 and brokered time deposits of $45,610,000.  Obtaining this funding was done to serve as a source of liquidity for the Company. Management
continually monitors the level of wholesale time deposits for maturity and gap analysis as well as pricing and net interest margin.  The remaining time deposit increase of $49,114,000 is due to targeted marketing campaigns. In an effort to shift
the deposit base toward savings and demand deposit accounts, Management continues to implement programs which encourage growth in these products.

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. These include overnight investments in interest bearing deposits
in banks and federal funds sold and investment securities, particularly those of shorter maturity, and are the principal source of asset liquidity. At September 30, 2005, cash, deposits in banks, federal funds sold and securities available for sale
totaled $110,246,000.  External sources refer to the ability to access new borrowings and capital.  They include increasing savings and demand deposits, federal funds purchased, short and long term borrowings, and the issuance of capital and
debt securities. At September 30, 2005, short and long term borrowing lines of credit totaled $125,835,000.  These credit facilities are being used regularly as a source of funds. At September 30, 2005, $60,000,000 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 nine months ended September 30, 2005 contributed $9,771,000 to liquidity compared to $9,516,000 for the nine months ended September 30, 2004. The majority of the cash provided from operating
activities for the first nine months of 2005 was contributed from net income in the amount of $6,369,000. Cash flow from investing activity used cash of $171,466,000 for the nine months ended September 30, 2005 compared to $27,097,000
for the same period in 2004. Cash used to fund investment activities during the first nine months of 2005 included an increase in net loans of $132,514,000, the increase of federal funds sold of $28,350,000, the purchase of securities
available for sale of $4,455,000, and addition of premises and equipment of $8,070,000. The addition to premises and equipment is comprised primarily of the Bank's merger with WCB, the acquisition of land for the future corporate office and
the construction of a new financial center in Lakewood. Certain investment activities also provided cash during the first nine months including $11,410,000 from cash paydowns on mortgage back securities, matured securities and securities called,
and $3,545,000 from the purchase of WCB.  Cash flow from financing activities provided cash of $163,698,000 as of September 30, 2005 compared to $18,243,000 during the same period in 2004.  The substantial majority of cash provided came
from the increase in net deposits of $202,362,000, of which $86,921,000 was due to the merger with WCB, an increase in long term borrowings of $32,093,000 and the sale of common stock in the amount of $12,435,000. These monies were
partially used to fund financing activities including the repurchase of common stock in the amount of $1,997,000 and the reduction of short term borrowings of $74,271,000.

The stock repurchase program authorizes the Company to make scheduled purchases over time in either privately negotiated transactions or through the open market. On June 16, 2004 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 July 1, 2004 and has an expiration date of December 31, 2005. As of September 30, 2005 the Company had
repurchased 142,755 under this plan at a cost of $2.8 million, at an average price of $19.73.

Management believes that the Company's liquidity position at September 30, 2005 was adequate to fund ongoing operations.

13

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|Capital
|-------

Consolidated capital of the Company increased $14,284,000 or 24.7% during the first nine months of 2005. The net income for the first nine months and its corresponding increase to retained earnings increased
capital by $6,369,000, the issuance of 574,559 shares of VFG stock at $19.73 for the purchase of WCB increased capital $11,336,000, and the addition of the capital on WCB's books increased capital another $11,689,000, while stock
options exercised for the nine months totaled $1,066,000. Capital decreases were the result of $12,355,000 in stock being acquired from WCB shareholders for cash, $1,997,000 in stock repurchases under board approved plans, a decrease in
the market value of securities available for sale of $508,000 and quarterly cash dividends paid to shareholders totaling $1,349,000.

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) to total assets. For the most highly rated holding companies this ratio must be at least 3%, and for others it must be 4 to 5%. At September 30, 2005 the Company's leverage ratio was 12.04%, compared to
12.94% at year-end 2004.  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 September 30, 2005 the Company's Tier I capital ratio was 9.90%, and total capital was 11.07% . At December 31, 2004 the Company's Tier I capital ratio was 12.24% and
the total capital ratio was 13.49% .

On March 5, 2005 the Federal Reserve Banking System passed a regulation that mandates the 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 calculations are done in accordance with this regulation  and the entire issued amount of Trust Preferred Securities, or junior subordinated debentures,
qualified as Tier 1 Capital under 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
|---------------------

|General
|-------

Net income for the nine months ended September 30, 2005 increased 6.42% to $6,369,000 compared to $5,985,000 for the same period in 2004. The increase in net income can be attributed to an increase in loan
interest and fee income, an increase in fed funds sold interest 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.

Interest income for the nine months ended September 30, 2005 increased $5,413,000, or 23.25%, from the same period in the prior year. Increased volume of earning assets provided $3,751,000 of interest income
for the first nine months and an increase in earnings rate on these assets provided another $1,662,000, in interest income. Average earning assets for the first nine months of 2005 were $70,360,000 or 15.09% higher than in the same period of
2004. The average rate earned on assets increased to 7.15% for the first nine months of 2005 from 6.67% for the same period in 2004, an increase of 48 basis points.

Total interest expense for the nine months ended September 30, 2005 increased $3,916,000, or 83.87%, from the comparable period in the prior year. The increase in the rates paid on deposits and borrowings of 95
basis points, to 2.58% in the first nine months of 2005 from 1.63% for the same period of 2004, resulted in an increase in interest expense of $2,158,000.  In addition, the average volume of these liabilities increased by $62,601,000
resulting in another $1,757,000 in interest expense. The increase in liabilities was primarily to fund the Company's loan growth.

The net affect of the above is an increase in net interest income of $1,497,000 or 8.04% for the nine months ended September 30, 2005 compared to the same period in 2004.

The net interest margin decreased by 32 basis points to 5.01% from 5.33% in the first nine months of 2005 compared to the same period in 2004, as the average cost of funds increased at a more rapid rate than the
average rates earned on the Company's earning assets.

14

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

|                           |          |  | 2005     |  |       |  |          |  | 2004     |  |        
|-------------------------- | -------- |  | -------- |  | ----- |  | -------- |  | -------- |  | -------
|                           | Average  |  | Interest |  |       |  | Average  |  | Interest |  | Average
|                           |          |  |          |  |       |  |          |  |          |  | Balance
|                           |          |  |          |  |       |  |          |  |          |  |        
|                           |         
|Earning Assets:            |         
|Loans (Interest and fees)a | $449,909 |  | $26,116  |  | 7.76% |  | $383,705 |  | $20,795  |  | 7.24%  
|Federal funds sold         | 13,893   |  | 344      |  | 3.31% |  | 2,693    |  | 22       |  | 1.09%  
|Investment securitiesb     | 72,861   |  | 2,236    |  | 4.10% |  | 79,905   |  | 2,466    |  | 4.12%  
|Total earning assets       |         
|and interest income        | $536,663 |  | $28,696  |  | 7.15% |  | $466,303 |  | $23,283  |  | 6.67%  

|Interest bearing liabilities:                                        |          |  |          |  |       |  |          |  |          |  |      
|-------------------------------------------------------------------- | -------- |  | -------- |  | ----- |  | -------- |  | -------- |  | -----
|Deposits:                                                            |          |  |          |  |       |  |          |  |          |  |      
|Savings, NOW, and                                                    |          |  |          |  |       |  |          |  |          |  |      
|Money Market Deposits                                                | $168,182 |  | $(1,630) |  | 1.30% |  | $193,192 |  | $(1,253) |  | 0.87%
|Time deposits                                                        | 134,462  |  | (3,142)  |  | 3.12% |  | 110,186  |  | (1,827)  |  | 2.21%
|Total interest bearing deposits                                      | $302,644 |  | $(4,772) |  | 2.11% |  | $303,378 |  | $(3,080) |  | 1.36%
|Other borrowings                                                     | 142,781  |  | (3,813)  |  | 3.57% |  | 79,445   |  | (1,589)  |  | 2.67%
|Total interest bearing liabilities                                   |          |  |          |  |       |  |          |  |          |  |      
|and interest expense                                                 | $445,425 |  | $(8,585) |  | 2.58% |  | $382,823 |  | $(4,669) |  | 1.63%
|                                                                     |          |  |          |  |       |  |          |  |          |  |      
|Net interest income                                                  |          |  | $20,111  |  |       |  |          |  | $18,614  |  |      
|                                                                     |          |  |          |  |       |  |          |  |          |  |      
|Net interest margin as a percent 
        of average earning assets: |          |  |          |  | 5.01% |  |          |  |          |  | 5.33%

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

|                                         |  | 2005 compared to 2004                                                  
|---------------------------------------- |  | -----------------------------------------------------------------------
|                                         |  | Increase (decrease)   
                                          due to
|                                         |  | Volume                                                                 
|Interest earned on:                      |  |                                                                        
|Loansc                                   |  | $ 3,753                                                                
|Federal funds sold and deposits in banks |  | 216                                                                    
|Investment securities                    |  | (218)                                                                  
|Total interest income                    |  | 3,751                                                                  
|Interest paid on:                        |  |                                                                        
|Savings, NOW and MMA                     |  | (266)                                                                  
|Time deposits                            |  | 459                                                                    
|Other borrowings                         |  | 1,564                                                                  
|Total Interest expense                   |  | 1,757                                                                  
|Net interest income                      |  | $ 1,994                                                                

aAverage loan balance includes non accrual loans.bThe yield on investment
securities is calculated using historical cost basis.cBalances of nonaccrual loans, if any, and related income recognized
have been included for computational purposes.

15

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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.

Non interest income for the nine months ended September 30, 2005 increase by $343,000 compared to the same period for 2004.  This was due largely to an increase in fee income on mortgage loans sold of $295,000
and an increase in other operating income of $492,000. Mortgage loan fee income improved with the addition of several new loan originators combined with a continued strong mortgage market. The increase in other operating income can be primarily
attributed to a $300,000 recovery on a loan previously charged off. These gains were offset by a $444,000 decrease in service charges on deposit accounts, a direct result of having fewer customers and accounts as a result of the sale of
seven financial centers in the fourth quarter 2004.

Non interest expense increased for the nine months ended September 30, 2005 by $1,161,000 or 7.54% compared to the same period in 2004. The increase in expenses is attributable to higher costs associated with
complying with the Sarbanes - Oxley Act of 2002, higher payroll costs associated with commissions related to mortgage originations, and legal costs incurred related to the departure of the Company's President and the Company's Chief Financial
Officer during the first quarter. Marketing expenses were also higher as the Company initiated campaigns intended to attract new deposits.

Net income for the three months ended September 30, 2005 increased 5.17% to $2,300,000, compared to $2,187,000 for the same period in 2004.  The increase in net income is attributed to an increase in loan and
fee income, and fed funds sold income, in the amounts of $2,063,000 and $233,000, respectively.

Interest income for the three months ended September 30, 2005 increased $2,260,000, or 27.70%, from the same period in the prior year. Increased volume of earning assets provided an additional $1,910,000 of
interest income for the third quarter, and increased volumes resulted in an additional $350,000 in interest income.  Average earning assets for the third quarter of 2005 were $116,732,000 or 24.58% higher than in the same period of 2004.
The average rate earned on assets increased to 6.99% in the third quarter of 2005 from 6.83% for the same period in 2004, an increase of 16 basis points.

Total interest expense for the three months ended September 30, 2005 increased $1,789,000, or 108.42%, from the comparable period in the prior year. The volume of these liabilities, which rose from an average of
$386,349,000 in 2004 to $487,386,000 in 2005, produced additional interest expense of $713,000. The interest rate paid on these liabilities increased 110 basis points from 1.69% to 2.80% resulting in additional expense of $1,076,000.
 The increase in volume and rate are the result of the increased borrowings and use of brokered certificates of deposits acquired to offset the reduction in deposits from the sale of seven branches in the fourth quarter 2004.

Net interest income increased $471,000, an increase of 7.24% for the three months ended September 30, 2005 over the same period for 2004.



16

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

|                                   |  |          |  | 2005      |  |         |  |          |  | 2004      |  |        
|---------------------------------- |  | -------- |  | --------- |  | ------- |  | -------- |  | --------- |  | -------
|                                   |  | Average  |  | Interest  |  | Average |  | Average  |  | Interest  |  | Average
|                                   |  | Balance  |  | Income    |  | Rates   |  | Balance  |  | Income    |  | Rates  
|                                   |  |          |  | (Expense) |  |         |  |          |  | (Expense) |  |        
|Earning Assets:                    |  |          |  |           |  |         |  |          |  |           |  |        
|Loans (Interest and fees)d         |  | $492,008 |  | $9,421    |  | 7.60%   |  | $396,796 |  | $7,358    |  | 7.38%  
|Federal funds sold                 |  | 33,030   |  | 286       |  | 3.44%   |  | 2,259    |  | 8         |  | 1.41%  
|Investment securitiese             |  | 66,688   |  | 712       |  | 4.24%   |  | 75,939   |  | 793       |  | 4.15%  
|Total earning assets               |  |          |  |           |  |         |  |          |  |           |  |        
|and interest income                |  | $591,726 |  | $10,419   |  | 6.99%   |  | $474,994 |  | $8,159    |  | 6.83%  
|Interest bearing liabilities:      |  |          |  |           |  |         |  |          |  |           |  |        
|Deposits:                          |  |          |  |           |  |         |  |          |  |           |  |        
|Savings, NOW, and                  |  |          |  |           |  |         |  |          |  |           |  |        
|Money Market Deposits              |  | $189,787 |  | $(668)    |  | 1.40%   |  | $206,046 |  | $(477)    |  | 0.92%  
|Time deposits                      |  | 178,653  |  | (1,483)   |  | 3.29%   |  | 103,352  |  | (583)     |  | 2.24%  
|Total interest bearing deposits    |  | $368,440 |  | $(2,151)  |  | 2.32%   |  | $309,398 |  | $(1,060)  |  | 1.36%  
|Other borrowings                   |  | 118,946  |  | (1,288)   |  | 4.30%   |  | 76,951   |  | (590)     |  | 3.04%  
|Total interest bearing liabilities |  |          |  |           |  |         |  |          |  |           |  |        
|and interest expense               |  | $487,386 |  | $(3,439)  |  | 2.80%   |  | $386,349 |  | $(1,650)  |  | 1.69%  
|                                  
|Net interest income                |  |          |  | $6,980    |  |         |  |          |  | $6,509    |  |        
|Net interest margin as a percent   |  |          |  |           |  |         |  |          |  |           |  |        
|of average earning assets:         |  |          |  |           |  | 4.68%   |  |          |  |           |  | 5.44%  

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

|                                         |  | 2005 compared to 2004                           
|---------------------------------------- |  | ------------------------------------------------
|                                         |  | Increase (decrease) 
                     due to
|                                         |  | Volume                                          
|Interest earned on:                      |  |                                                 
|Loansf                                   |  | $ 1,835                                         
|Federal funds sold and deposits in banks |  | 251                                             
|Investment securities                    |  | (176)                                           
|Total interest income                    |  | 1,910                                           
|Interest paid on:                        |  |                                                 
|Savings, NOW and MMA                     |  | (234)                                           
|Time deposits                            |  | 548                                             
|Other borrowings                         |  | 399                                             
|Total Interest expense                   |  | 713                                             
|Net interest income                      |  | $ 1,197                                         

dAverage loan balance includes nonaccrual loans. Interest income on nonaccrual loans has been included.eThe yield on investment securities is calculated using historical cost basis.
fBalances 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.

Non-interest income for the three months ended September 30, 2005 increased $74,000 or 3.51% compared to the same time period in 2004 to a total of $2,180,000. This increase can be attributed in part to
increases in the volumes in our mortgage origination activities, offset in part by a decrease in service charges on deposit accounts due primarily to the sale of seven financial centers in the fourth quarter 2004.

Non-interest expense for the three months ended September 30, 2005 increased by $489,000 or 9.15% over the same quarter in 2004.  Salaries and benefits increased by $216,000 in the third quarter 2005 compared
to third quarter 2004. This increase in expense is primarily attributed to the increase in mortgage commissions associated with increased mortgage loan originations.  Other expenses for the quarter ended September 30, 2005 increased $214,000 or
14.97% compared to the same period in 2004. The increase in other expense is spread among costs associated with complying with the Sarbanes - Oxley Act of 2002, legal costs, and marketing costs associated with the Company's efforts to attract new
depository customers.

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

The Company is managed along two major lines of business; business banking, its core business, and the small loan division, which began operations in the fourth quarter of 2000. Business banking consists of all
lending, deposit and



17

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administrative operations conducted through the Company's 17 offices in Washington State. The small loan division provided small, short-term consumer loans to customers until June 30, 2005 in the state of Arkansas.
Effective July 1, 2005 the Company discontinued originating small loans in Arkansas, but through December 31, 2005 will continue to receive income comparable to the amount the Company would have received if it had continued to originate these loans.

Prior to 2001, the Company was managed as a whole, not by discrete operating segments.  When the Company began offering small loans, its operating results were segregated in the general ledger system to better manage
financial performance. The financial performance of the business lines is measured by the Company's profitability reporting process, which utilizes various management accounting techniques to more accurately reflect each business line's financial
results. Revenues and expenses are primarily assigned directly to business lines.

The organizational structure of the Company is not necessarily comparable with other companies.  As such, the Company's business line performance may not be directly comparable with similar information from other
financial institutions. Selected comparative financial information for business banking and the small loan division, which are included in the overall financial results, as of and for the nine months ended September 30, are as follows (dollars in
thousands):

|                                                     
|-----------------------------------------------------
|Nine months ended September 30, 2005                 
|                                                     
|                                                     
|                                                     
|Net Interest income after provision for credit losses
|Non-interest income                                  
|Non-interest expense                                 
|Income taxes                                         
|Net Income                                           
|Total assets                                         
|Total Loans                                          
|                                                     
|                                                     
|                                                     
|Nine months ended September 30, 2004                 
|                                                     
|                                                     
|                                                     
|Net Interest income after provision for credit losses
|Non-Interest income                                  
|Non-Interest expense                                 
|Income taxes                                         
|Net Income                                           
|Total assets                                         
|Total Loans                                          

|Regulatory Developments
|-----------------------

As previously reported, on March 2, 2005 the Federal Deposit Insurance Corporation (FDIC) issued revised payday lending guidelines.  The full text of such guidelines is available on the FDIC website athttp://www.fdic.gov/.  The effective date for compliance with this guidance was July 1, 2005. Compliance with this guidance would have an impact on earnings to the
point where the Company decided to discontinue its operations in Arkansas effective July

1, 2005.  To assist in forestalling any negative effect that may occur from these developments the Company is engaging in a small loan participation program with another bank in South Dakota that provides small loans
with Advance America.  While the Company believes it will be able to minimize any long-term negative impact on its earnings from these developments, there can be no assurance that its efforts will be wholly successful.

The FDIC recently adopted a final rule increasing the asset threshold for internal control reporting under the Federal Deposit Insurance Corporation Improvement Act (FDICIA)
from $500 million to
$1 billion in total assets, which could result in lower audit fees paid to outside accountants.

Item 3Quantitative and Qualitative Disclosure 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.

18

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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. At September 30, 2005,
based on the 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, 2004. For additional information, refer to the Company's annual report on Form 10-K for
the year ended December 31, 2004.

|Interest Rate Gap Analysis        
|----------------------------------
|September 30, 2005                
|                                  
|                                  
|                                  
|(dollars in thousands)            
|                                  
|Loans                             
|Securities:                       
|Available for sale                
|Federal funds sold                
|Interest bearing deposits in banks
|Total Earning Assets              
|Deposits:                         
|Savings, NOW and money market     
|Time deposits                     
|Fed funds purchased               
|Short term borrowings             
|Long term debt                    
|                                  
|Total Interest Bearing Liabilities
|Net Interest Rate Sensitivity Gap 
|                                  
|                                  
|Item 4                            
|                                  
|(a)                               

Management of the Company, including the Chief Executive Officer and the Chief Financial Officer, have conducted an evaluation of the Company's disclosure controls and procedures in accordance with Rule 13a-15(b) under
the Securities Exchange Act of 1934 as of September 30, 2005. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the evaluation date, the Company's disclosure controls and procedures were
effective in ensuring that all material information relating to the Company required to be filed in this quarterly report has been made known to them in a timely manner.

|(b) Changes in Internal Controls
|--------------------------------

Since the evaluation date, there have been no changes to the Company's internal controls or in other factors that could significantly affect those controls.

19

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Venture Financial Group, Inc.

PART II - OTHER INFORMATION

Item 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 2 Unregistered Sales of Equity Securities and Use of Proceeds

Share counts and per share data reflects 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
|                           |  |                                       |  | Total number of        |  | Average price paid |  | announced plans or |  | shares that may yet
|                           |  | Period                                |  | shares purchased       |  |                    |  | per share          |  |                     |  | programs        
|                          
|                          
|Month #1                   |  |                                       |  |                        |  |                    |  |                    |  |                     |  |                 
|July 1, 2005 through       |  |                                       |  |                        |  |                    |  |                    |  |                     |  |                 
|July 31, 2005              |  | --                                    |  |                        |  | --                 |  |                    |  | --                  |  | 72,412          
|                          
|Month #2                   |  |                                       |  |                        |  |                    |  |                    |  |                     |  |                 
|August 1, 2005 through     |  |                                       |  |                        |  |                    |  |                    |  |                     |  |                 
|August 31, 2005            |  | --                                    |  |                        |  | --                 |  |                    |  | --                  |  | 72,412          
|                          
|Month #3                   |  |                                       |  |                        |  |                    |  |                    |  |                     |  |                 
|September 1, 2005          |  |                                       |  |                        |  |                    |  |                    |  |                     |  |                 
|through                    |  | 15,167                                |  |                        |  | $20.85             |  |                    |  | 15,167              |  | 57,245          
|September 30, 2005         |  |                                       |  |                        |  |                    |  |                    |  |                     |  |                 
|                          
|                          
|Total                      |  | 15,167                                |  |                        |  | $20.85             |  |                    |  | 15,167              |  | 57,245          
|                          
|                          
|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 
|                          
|Total                      |  |                                       |  |                        |  | 612,500            |  |                    |  |                    
|                          

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|Item 6  Exhibits
|----------------

The following exhibits are filed herewith, and this list constitutes the exhibit index:

3.1 Second Amended and Restated Articles of Incorporation (incorporated y reference to the Company's Form 10-Q for the quarter ended March 31, 2005, filed May 16, 2005)

3.2 Bylaws (incorporated by reference to the Company's Form 10-K for the year ended December 31, 2001, filed April 1, 2002)

|10.1     
First Amendment to Venture Financial Group, Inc. 2004 Stock Incentive Plan                                                  
|--------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                      
|31.1     
Certifications of the Chief Executive Officer                                                                               
|                                                                                                                                      
|31.2     
Certifications of the Chief Financial Officer                                                                               
|                                                                                                                                      
|32     
Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of

         Sarbanes-Oxley Act of 2002
|                                                                                                                                      

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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: November 14, 2005 |  |  |  | By: /s/ Ken F. Parsons, Sr.                          |  | 
|                        |  |  |  | Ken F. Parsons, Sr.Chairman, Chief Executive Officer |  | 

| |  |  |  |                                           |  | 
| |  |  |  | ----------------------------------------- |  | 
| |  |  |  |                                           |  | 
| |  |  |  | By: /s/ James F. Arneson                  |  | 
| |  |  |  | President, Acting Chief Financial Officer

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