Virginia National Bankshares Corp [VABK] Filings

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q 1 vabk-20240930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 001-40305

VIRGINIA NATIONAL BANKSHARES CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Virginia	46-2331578
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
404 People Place
Charlottesville, Virginia	22911
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (434) 817-8621

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    Common Stock                                                                                                  

    VABK 

    The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Yes ☐ No ☒

As of November 7, 2024, the registrant had 5,370,912 shares of common stock, $2.50 par value per share, outstanding.

VIRGINIA NATIONAL BANKSHARES CORPORATION

FORM 10-Q

TABLE OF CONTENTS


Part I. Financial Information
Item 1 Financial Statements		Page 4
Consolidated Balance Sheets (unaudited)		Page 4
Consolidated Statements of Income (unaudited)		Page 5
Consolidated Statements of Comprehensive Income (Loss) (unaudited)		Page 6
Consolidated Statements of Changes in Shareholders’ Equity (unaudited)		Page 7
Consolidated Statements of Cash Flows (unaudited)		Page 8
Notes to Consolidated Financial Statements (unaudited)		Page 9

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		Page 33
Application of Critical Accounting Policies and Estimates		Page 34
Financial Condition		Page 34
Results of Operations		Page 40

Item 3 Quantitative and Qualitative Disclosures About Market Risk		Page 48

Item 4 Controls and Procedures		Page 48

Part II. Other Information
Item 1 Legal Proceedings		Page 48
Item 1A Risk Factors		Page 48
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		Page 49
Item 3 Defaults Upon Senior Securities		Page 49
Item 4 Mine Safety Disclosures		Page 49
Item 5 Other Information		Page 49
Item 6 Exhibits		Page 50

Signatures		Page 51


Glossary of Acronyms and Defined Terms
2005 Plan	-	2005 Stock Incentive Plan
2014 Plan	-	2014 Stock Incentive Plan
2022 Plan	-	2022 Stock Incentive Plan
ACL	-	Allowance for credit losses
Acquired Loans	-	Loans acquired from Fauquier
AFS	-	Available for sale
ALM	-	Asset liability management
ASC	-	Accounting Standards Codification
ASC 326	-	ASU 2016-13, Financial Instruments and Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
ASC 820	-	ASC 820, Fair Value Measurements and Disclosures
ASU	-	Accounting Standards Update
ATM	-	Automated teller machine
the Bank	-	Virginia National Bank
bps	-	Basis points
CD	-	Certificate of deposit
CDARS™	-	Certificates of Deposit Account Registry Service
CECL	-	Current expected credit losses
CME	-	Chicago Mercantile Exchange
CMO	-	Collateralized mortgage obligation
the Company	-	Virginia National Bankshares Corporation and its subsidiaries
CRE	-	Commercial real estate
DCF	-	Discounted cash flow
EBA	-	Excess Balance Account
Effective Date	-	April 1, 2021
Exchange Act	-	Securities Exchange Act of 1934, as amended
Fauquier	-	Fauquier Bankshares, Inc. and its subsidiaries
FASB	-	Financial Accounting Standards Board
Federal Reserve	-	Board of Governors of the Federal Reserve System
Federal Reserve Bank or FRB	-	Federal Reserve Bank of Richmond
FHLB	-	Federal Home Loan Bank of Atlanta
FOMC	-	Federal Open Market Committee
Form 10-K	-	Annual Report on Form 10-K for the year ended December 31, 2023
FTE	-	Fully taxable equivalent
GAAP or U.S. GAAP	-	Accounting principles generally accepted in the United States
ICS®	-	Insured Cash Sweep®
IRR	-	Interest rate risk
LIBOR	-	London Interbank Offering Rate
Masonry Capital	-	Masonry Capital Management, LLC
Merger	-	Mergers of Fauquier Bankshares, Inc. and The Fauquier Bank with and into the Company and the Bank, respectively
NPA	-	Nonperforming assets
OREO	-	Other real estate owned
PCA	-	Prompt Corrective Action
PCD	-	Purchased loan with credit deterioration
the Plans	-	2005 Stock Incentive Plan, 2014 Stock Incentive Plan and 2022 Stock Incentive Plan
ROAA	-	Return on Average Assets
ROAE	-	Return on Average Equity
SBA	-	Small Business Administration
SEC	-	U.S. Securities and Exchange Commission
SOFR	-	Secured Overnight Financing Rate
TLM	-	Troubled loan modification

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VIRGINIA NATIONAL BANKSHARES CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)


	September 30, 2024			December 31, 2023 *
ASSETS	Unaudited
Cash and due from banks	$	10,188		$	18,074
Interest-bearing deposits in other banks		8,977			10,316
Securities:
Available for sale, at fair value		279,323			420,595
Restricted securities, at cost		7,737			8,385
Total securities		287,060			428,980
Loans, net of deferred fees and costs		1,215,512			1,092,665
Allowance for credit losses		(8,523	)		(8,395	)
Loans, net		1,206,989			1,084,270
Premises and equipment, net		15,562			16,195
Bank owned life insurance		39,762			38,904
Goodwill		7,768			7,768
Core deposit intangible, net		4,099			5,093
Right of use asset, net		5,921			6,748
Deferred tax asset, net		13,548			15,382
Accrued interest receivable and other assets		14,906			14,287
Total assets	$	1,614,780		$	1,646,017
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits:
Noninterest bearing	$	359,900		$	372,857
Interest bearing		258,439			305,541
Money market and savings deposit accounts		431,707			412,119
Certificates of deposit and other time deposits		329,857			318,581
Total deposits		1,379,903			1,409,098
Federal funds purchased		3,112			3,462
Borrowings		52,500			66,500
Junior subordinated debt, net		3,495			3,459
Lease liability		5,748			6,504
Accrued interest payable and other liabilities		4,113			3,954
Total liabilities		1,448,871			1,492,977
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, $2.50 par value		-			-
Common stock, $2.50 par value		13,257			13,258
Capital surplus		106,166			106,045
Retained earnings		80,789			73,781
Accumulated other comprehensive loss		(34,303	)		(40,044	)
Total shareholders' equity		165,909			153,040
Total liabilities and shareholders' equity	$	1,614,780		$	1,646,017

Common shares outstanding		5,370,912			5,365,982
Common shares authorized		10,000,000			10,000,000
Preferred shares outstanding		-			-
Preferred shares authorized		2,000,000			2,000,000

* Derived from audited Consolidated Financial Statements

See Notes to Consolidated Financial Statements

VIRGINIA NATIONAL BANKSHARES CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)


	For the three months ended						For the nine months ended
	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Interest and dividend income:
Loans, including fees	$	17,378		$	13,748		$	49,281		$	41,409
Federal funds sold		136			133			535			143
Other interest-bearing deposits		50			64			165			442
Investment securities:
Taxable		1,414			2,848			5,349			8,674
Tax exempt		326			327			979			983
Dividends		102			94			320			265
Total interest and dividend income		19,406			17,214			56,629			51,916

Interest expense:
Demand deposits		66			78			205			273
Money market and savings deposits		2,990			2,739			8,864			6,709
Certificates and other time deposits		3,915			2,685			11,947			5,109
Borrowings		313			505			1,187			1,271
Federal funds purchased		9			21			25			112
Junior subordinated debt		89			86			260			226
Total interest expense		7,382			6,114			22,488			13,700
Net interest income		12,024			11,100			34,141			38,216
Recovery of credit losses		(114	)		(73	)		(474	)		(60	)
Net interest income after recovery of credit losses		12,138			11,173			34,615			38,276

Noninterest income:
Wealth management fees		239			419			905			1,220
Deposit account fees		317			404			1,042			1,204
Debit/credit card and ATM fees		474			535			1,485			1,742
Bank owned life insurance income		294			981			858			1,494
Gains on sale of assets		-			132			36			132
Gain on early redemption of debt		-			-			379			-
Gain on termination of interest swap		-			-			-			460
Loss on sales of AFS, net		-			-			(4	)		(206	)
Other		128			173			620			919
Total noninterest income		1,452			2,644			5,321			6,965

Noninterest expense:
Salaries and employee benefits		3,769			3,936			11,771			12,049
Net occupancy		919			991			2,756			3,099
Equipment		176			195			514			589
Bank franchise tax		366			292			1,051			929
Computer software		219			185			703			590
Data processing		707			623			2,025			2,171
FDIC deposit insurance assessment		125			220			500			540
Marketing, advertising and promotion		166			262			571			912
Professional fees		189			202			631			592
Core deposit intangible amortization		319			368			994			1,138
Other		988			1,066			3,368			3,156
Total noninterest expense		7,943			8,340			24,884			25,765

Income before income taxes		5,647			5,477			15,052			19,476
Provision for income taxes		1,047			824			2,647			3,381
Net income	$	4,600		$	4,653		$	12,405		$	16,095

Net income per common share, basic	$	0.86		$	0.87		$	2.31		$	3.00
Net income per common share, diluted	$	0.85		$	0.86		$	2.30		$	2.99
Weighted average common shares outstanding, basic		5,370,912			5,365,982			5,371,616			5,354,086
Weighted average common shares outstanding, diluted		5,396,936			5,395,483			5,387,537			5,382,145

See Notes to Consolidated Financial Statements

VIRGINIA NATIONAL BANKSHARES CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

(Unaudited)


	For the three months ended					For the nine months ended
	September 30, 2024		September 30, 2023			September 30, 2024		September 30, 2023
Net income	$	4,600	$	4,653		$	12,405	$	16,095
Other comprehensive income (loss):
Unrealized gains (losses) on securities, net of tax of $2,309 and $1,525 for the three and nine months ended September 30, 2024, respectively, and net of tax benefit of ($2,603) and ($1,837) for the three and nine months ended September 30, 2023, respectively		8,685		(9,792	)		5,738		(6,911	)
Reclassification adjustment for realized gain on termination of interest rate swap, net of tax of $97 for the nine months ended September 30, 2023		—		—			—		(363	)
Reclassification adjustment for realized losses on securities, net of tax of $1 and $43 for the nine months ended September 30, 2024 and 2023, respectively		—		—			3		163
Unrealized losses on interest rate swaps, net of tax benefit of ($9) for the nine months ended September 30, 2023		—		—			—		(37	)
Total other comprehensive income (loss)		8,685		(9,792	)		5,741		(7,148	)
Total comprehensive income (loss)	$	13,285	$	(5,139	)	$	18,146	$	8,947

See Notes to Consolidated Financial Statements

VIRGINIA NATIONAL BANKSHARES CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Dollars in thousands, except per share data)

(Unaudited)


	Common Stock			Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance, December 31, 2022	$	13,214		$	105,344		$	63,482		$	(48,624	)	$	133,416
Exercise of stock options		3			15			-			-			18
Stock option expense		-			42			-			-			42
Restricted stock grant expense		-			111			-			-			111
Vested stock grants		21			(21	)		-			-			-
Cash dividends declared ($0.33 per share)		-			-			(1,762	)		-			(1,762	)
Impact of adoption of CECL		-			-			(1,890	)		-			(1,890	)
Net income		-			-			5,791			-			5,791
Other comprehensive income		-			-			-			5,771			5,771
Balance, March 31, 2023	$	13,238		$	105,491		$	65,621		$	(42,853	)	$	141,497
Stock option expense		-			68			-			-			68
Restricted stock grant expense		-			120			-			-			120
Vested stock grants		12			(12	)		-			-			-
Cash dividends declared ($0.33 per share)		-			-			(1,770	)		-			(1,770	)
Net income		-			-			5,651			-			5,651
Other comprehensive loss		-			-			-			(3,127	)		(3,127	)
Balance, June 30, 2023	$	13,250		$	105,667		$	69,502		$	(45,980	)	$	142,439
Stock option expense		-			18			-			-			18
Restricted stock grant expense		-			180			-			-			180
Vested stock grants		3			(3	)		-			-			-
Cash dividends declared ($0.33 per share)		-			-			(1,771	)		-			(1,771	)
Net income		-			-			4,653			-			4,653
Other comprehensive loss		-			-			-			(9,792	)		(9,792	)
Balance, September 30, 2023	$	13,253		$	105,862		$	72,384		$	(55,772	)	$	135,727

Balance, December 31, 2023	$	13,258		$	106,045		$	73,781		$	(40,044	)	$	153,040
Stock option expense		-			24			-			-			24
Restricted stock grant expense		-			171			-			-			171
Vested stock grants		21			(21	)		-			-			-
Shares repurchased		(2	)		(24	)		-			-			(26	)
Cash dividends declared ($0.33 per share)		-			-			(1,770	)		-			(1,770	)
Net income		-			-			3,646			-			3,646
Other comprehensive loss		-			-			-			(2,508	)		(2,508	)
Balance, March 31, 2024	$	13,277		$	106,195