Virginia National Bankshares (US:VABK)2025-03-28 21:13Company Overview - The Company was incorporated in Virginia on February 21, 2013, to acquire all outstanding shares of the Bank and became its holding company[17]. - Virginia National Bank, the principal operating subsidiary, commenced operations on July 29, 1998, and offers a full range of banking services including checking accounts, loans, and treasury management[19][25][26]. - The Company formed Masonry Capital Management, LLC in 2018, which will provide an annual revenue-share amount for six years after its membership interests are sold[23]. - The Company actively competes with other banks and financial institutions, facing strong competition for deposits and loans in its market areas[28][30]. - The Company’s market areas include Virginia communities around Charlottesville, Winchester, Manassas, and Richmond, with a focus on higher education and medical services[27]. Workforce and Diversity - As of December 31, 2024, the Company had 146 full-time equivalent employees, with women representing 75% and racial and ethnic minorities 17% of the workforce[36]. - The Company has a commitment to diversity, with a workforce that reflects the communities it serves, actively recruiting minorities and women[36]. - The Company has created the Finance Career & Leadership Academy to develop young talent in the financial industry, offering free training and potential career opportunities[31][32]. Regulatory Environment - The Company is subject to extensive regulation under federal and state laws, including supervision by the Federal Reserve and the SEC[18][39]. - The Federal Reserve and FDIC proposed rules in July 2023 that may impact banks with total assets of $100 billion or more, but these do not apply to the Company[61]. - The Company is subject to various legal limitations on dividend payments, which may be restricted based on its financial condition[52]. - The Company and the Bank are monitoring regulatory developments related to the Corporate Transparency Act (CTA) and assessing its potential impact[92]. - The Company and the Bank are subject to consumer protection regulations primarily enforced by the Federal Reserve Board and the OCC due to their asset size being below $10 billion[98]. Financial Performance - Net income for the year ended December 31, 2024, was $17.0 million, or $3.15 per diluted share, an 11.9% decrease compared to $19.3 million, or $3.58 per diluted share for 2023[189]. - Net interest income (FTE) for 2024 was $46,723 thousand, down from $49,316 thousand in 2023, reflecting a decrease of $2.6 million[186]. - The efficiency ratio (FTE) increased to 62.0% in 2024 from 58.3% in 2023, indicating a decline in operational efficiency[190]. - The Bank segment earned net income of $17.2 million in 2024, a decrease of $2.2 million compared to $19.4 million in 2023[192]. - Noninterest income for 2024 was $7,589 thousand, a decrease of $1,512 thousand or 16.6% compared to $9,101 thousand in 2023[211]. Capital and Risk Management - The Company's Tier 1 capital ratio was 17.94% as of December 31, 2024, exceeding the minimum requirements[59]. - The Bank's CET1 capital ratio was 17.77% as of December 31, 2024, also exceeding the minimum requirements[59]. - The Company expects to maintain a leverage ratio of 11.68% as of December 31, 2024, above the required minimum[59]. - The Company manages credit risk through consistent underwriting standards and a continuous quality assessment process, but there is no assurance that these measures will be fully effective[109]. - The allowance for credit losses (ACL) as a percentage of total loans was 0.68% at December 31, 2024, down from 0.77% at December 31, 2023[209]. Economic and Market Conditions - Economic conditions, including prolonged inflation, could negatively affect the Company's profitability and increase default rates on loans[118]. - A deterioration in economic conditions could lead to increased loan delinquencies and a decline in demand for the Company's products and services[118]. - The Company may face increased scrutiny from banking regulators due to its concentration in commercial real estate lending, which could require improved risk management policies[114]. - The Company focuses on lending to small to mid-sized businesses, which may increase credit risk due to their limited financial resources and vulnerability to economic conditions[112]. Operational Risks - Operational risks include reputational risk, legal compliance risk, and potential fraud, which could negatively impact the Company's financial results[132]. - The Company faces risks from cybersecurity threats, which could lead to legal claims, regulatory penalties, and damage to its reputation[142]. - The Company is required to maintain effective internal controls over financial reporting, and failures in this area could harm its reputation and operating results[136]. Shareholder Information - The Company is currently paying a quarterly cash dividend of $0.33 per share, having done so since July 2013[153]. - The cash dividend payout ratio increased to 41.80% in 2024 from 33.47% in 2023, reflecting a higher proportion of earnings distributed as dividends[189]. - The share repurchase plan approved in June 2023 allows for the repurchase of up to 5% of outstanding common stock, with no shares repurchased during the three months ending December 31, 2024[173]. - The Company had approximately 660 shareholders of record as of March 26, 2025[171]. Future Outlook - Future regulatory changes could significantly alter the operating environment for the Company and the Bank, impacting costs and permissible activities[105]. - The ability to attract deposits and identify attractive loan opportunities is crucial for the Company's growth strategy[128]. - The Company plans to consider acquisitions or expansion into new product lines to fulfill strategic objectives, but may face competition from larger financial institutions[129].