Virginia National Bankshares (VABK) - 2025 Q2 - Quarterly Results

Earnings Announcement & Corporate Actions Second Quarter 2025 Earnings Summary The company reported stable quarterly net income of $4.2 million and year-to-date net income growth to $8.7 million Net Income and Diluted EPS (Q2 & YTD) | Period | Net Income ($ millions) | Diluted EPS ($) | | :----- | :---------------------- | :-------------- | | Q2 2025 | 4.2 | 0.78 | | Q2 2024 | 4.2 | 0.77 | | YTD 2025 | 8.7 | 1.61 | | YTD 2024 | 7.8 | 1.45 | - The increase in net income year-over-year was primarily due to increased net interest income from higher average loan balances and decreased interest expense[3] Dividend Declaration The Board of Directors declared a quarterly cash dividend of $0.36 per share, payable on August 29, 2025 Quarterly Dividend Declaration | Metric | Value | | :----- | :---- | | Dividend per share | $0.36 | | Annual Yield | ~3.78% | President and CEO's Comments The CEO highlighted steady earnings results for 2025, attributing success to a focus on operating efficiencies and asset quality - Year-to-date earnings of $8.7 million are 12% ahead of 2024[5] - Focus on operating efficiencies and asset quality enables exceptional service and positive returns for stakeholders[5] Financial Performance Analysis Key Performance Indicators (Summary) The company demonstrated improved efficiency and net interest margin in Q2 2025 while maintaining a steady return on assets Key Performance Indicators (Q2 2025 vs. Q2 2024) | Indicator | June 30, 2025 | June 30, 2024 | Change | | :---------------------- | :------------ | :------------ | :----- | | Return on average assets | 1.05% | 1.05% | Steady | | Net interest margin (FTE) | 3.40% | 3.04% | +0.36% | | Loan-to-deposit ratio | 89.4% | 84.3% | +5.1% | | Efficiency ratio (FTE) | 61.2% | 62.7% | -1.5% | Balance Sheet Highlights (Summary) Gross loan balances grew 7.2% year-over-year to $1.2 billion, while securities were reduced to fund higher-yielding assets Balance Sheet Highlights (YoY Changes) | Metric | June 30, 2025 | June 30, 2024 | Change ($ millions) | Change (%) | | :---------------- | :------------ | :------------ | :------------------ | :--------- | | Gross loan balances | $1.2 billion | $1.158 billion | +$83.5 | +7.2% | | Deposit balances | - | - | +$15.2 | +1.1% | - Securities balances declined $28.3 million from June 30, 2024, as funds were repurposed to higher yielding loans[11] Loans and Asset Quality The company saw continued loan growth and strong credit performance, though nonperforming assets increased due to government-guaranteed loans Loan Growth and Securities Strategy - Gross loan balances increased $83.5 million (7.2%) compared to June 30, 2024, totaling $1.2 billion[8] - Securities balances declined $28.3 million from June 30, 2024, as funds were strategically repurposed to higher yielding loans[11] Deposit Balances and Borrowings - Deposit balances increased $15.2 million (1.1%) from June 30, 2024, reflecting efforts to stabilize the cost of funds[8] - Deposit balances held in Insured Cash Sweep® (ICS) plans amounted to $159.6 million as of June 30, 2025[11] - Outstanding borrowings from the FHLB increased by $41.0 million to $61.0 million as of June 30, 2025, from year-end 2024[11] Credit Performance and Nonperforming Assets Nonperforming Assets (NPA) Trends | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :----------- | :------------ | | Nonperforming assets ($ millions) | $7.8 | $3.0 | $4.0 | | NPA as a % of total assets | 0.48% | 0.19% | 0.25% | - Non-accrual loans totaled $2.6 million as of June 30, 2025, compared to $2.4 million a year prior[11] - Loans 90 days or more past due and still accruing interest amounted to $5.2 million, primarily comprised of $5.1 million in 100% government-guaranteed loans[11] Allowance for Credit Losses (ACL) Allowance for Credit Losses (ACL) Trends | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :----------- | :------------ | | ACL as a percentage of total loans | 0.67% | 0.68% | 0.69% | - The ACL ratio remained fairly steady due to nominal changes in loss rates and the increase in government-guaranteed loans[11] - A net charge to the provision for credit losses of $3 thousand was recorded for Q2 2025[11] Net Interest Income and Margin Net interest income increased 14.4% year-over-year to $12.8 million, driven by a higher net interest margin of 3.40% Net Interest Income and Margin (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | Change ($ millions) | Change (%) | | :---------------------- | :------------------- | :------------------- | :------------------ | :--------- | | Net interest income | $12.8 | $11.2 | +$1.6 | +14.4% | | Net interest margin (FTE) | 3.40% | 3.04% | +0.36% | - | | Yield on loans | 5.60% | 5.71% | -0.11% | - | | Overall cost of funds | 177 bps | 210 bps | -33 bps | - | - The decrease in interest expense on interest-bearing deposits was 51 bps, from 274 bps to 223 bps[11] - The cost of borrowings decreased 39 bps from 5.13% to 4.74%[11] Noninterest Income Noninterest income for Q2 2025 decreased by 22.5% compared to Q2 2024, primarily due to lower fee income Noninterest Income (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :--------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Noninterest income | $1,311 | $1,691 | -$380 | -22.5% | - The decrease was primarily a result of lower wealth management fees, and lower fee income from deposit accounts and debit card usage[12] Noninterest Expense Noninterest expense increased by 6.9% in Q2 2025 compared to Q2 2024, driven by higher taxes and operational costs Noninterest Expense (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :--------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Noninterest expense | $8,681 | $8,122 | +$559 | +6.9% | - Increased franchise taxes and the cost of data processing and professional and legal fees for special projects drove increases[13] Efficiency Ratio The company's efficiency ratio (FTE) improved to 61.2% for Q2 2025, primarily due to increased net interest income Efficiency Ratio (FTE) Trends | Period | Efficiency Ratio (FTE) | | :----- | :--------------------- | | Q2 2025 | 61.2% | | Q2 2024 | 62.7% | | YTD 2025 | 61.8% | | YTD 2024 | 64.8% | - The improvement was primarily due to increased net interest income (FTE)[14] Income Taxes The effective tax rate for Q2 2025 was 21.9%, influenced by tax credits and tax-exempt income sources Effective Tax Rates | Period | Effective Tax Rate | | :----- | :----------------- | | Q2 2025 | 21.9% | | Q2 2024 | 18.3% | - Differences from the U.S. statutory rate are due to low-income housing tax credits and tax-exempt income[15] Book Value Book value per share increased to $31.67 as of June 30, 2025, driven by retained net income Book Value Per Share Trends | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Book value per share | $31.67 | $28.70 | | Tangible book value per share | $29.63 | $26.43 | - Values increased as net retained income increased and the impact of intangible assets declined[16] Dividends Paid (Detailed) Cash dividends of $1.9 million were paid during Q2 2025, with 54% of net income retained by the company Q2 2025 Dividends Paid | Metric | Value | | :-------------------- | :---- | | Cash dividends paid | $1.9 million | | Per share | $0.36 | | Net income retained | 54% | Company Information & Disclosures About Virginia National Bankshares Corporation The company is the bank holding company for Virginia National Bank, offering a full range of financial services across Virginia - Headquartered in Charlottesville, Virginia, operating Virginia National Bank[21] - Offers a full range of banking and financial services, including fiduciary services, through multiple offices[21] - Common stock trades on the Nasdaq Capital Market under "VABK"[21] Non-GAAP Financial Measures Management utilizes certain non-GAAP financial measures to provide supplemental information for understanding core business results - Management uses non-GAAP measures to supplement GAAP for evaluating performance[23] - Non-GAAP disclosures provide useful supplemental information for understanding core business operating results[23] - Non-GAAP measures should not be viewed as a substitute for GAAP, and reconciliations are included[23] Forward-Looking Statements This release contains forward-looking statements subject to various risks and uncertainties that could affect actual results - Statements may contain forward-looking information subject to various risks and uncertainties[25] - Factors affecting actual results include inflation, interest rates, market fluctuations, and economic conditions[25] - The Company does not undertake to update any forward-looking statements[25] Consolidated Financial Statements Consolidated Balance Sheets The balance sheets detail the company's assets, liabilities, and equity, with total assets reaching $1.63 billion at June 30, 2025 Consolidated Balance Sheets (Selected Data) | Metric ($ thousands) | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :-------------------------- | :------------ | :----------- | :------------ | | Total assets | $1,632,695 | $1,616,826 | $1,573,820 | | Total deposits | $1,389,065 | $1,423,546 | $1,373,841 | | Total liabilities | $1,461,923 | $1,456,524 | $1,419,656 | | Total shareholders' equity | $170,772 | $160,302 | $154,164 | Consolidated Statements of Income The income statements present financial performance for Q2 and YTD 2025, showing net income of $4.2 million and $8.7 million respectively Consolidated Statements of Income (Selected Data) | Metric ($ thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------- | :------- | | Total interest and dividend income | $19,136 | $18,663 | $38,142 | $37,223 | | Total interest expense | $6,340 | $7,482 | $13,052 | $15,106 | | Net interest income | $12,796 | $11,181 | $25,090 | $22,117 | | Total noninterest income | $1,311 | $1,691 | $3,071 | $3,869 | | Total noninterest expense | $8,681 | $8,122 | $17,505 | $16,941 | | Net income | $4,238 | $4,159 | $8,727 | $7,805 | Financial Highlights This section provides a comprehensive overview of key financial metrics and ratios across multiple quarterly periods Financial Highlights (Selected Data) | Metric | June 30, 2025 | March 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :------------- | :----------- | :----------- | :------------ | | Net income ($ thousands) | $4,238 | $4,489 | $4,561 | $4,600 | $4,159 | | Diluted EPS | $0.78 | $0.83 | $0.85 | $0.85 | $0.77 | | Return on average assets | 1.05% | 1.12% | 1.12% | 1.15% | 1.05% | | Net interest margin (FTE) | 3.40% | 3.28% | 3.21% | 3.24% | 3.04% | | Efficiency ratio (FTE) | 61.2% | 62.4% | 60.2% | 58.6% | 62.7% | | Loan-to-deposit ratio | 89.4% | 86.6% | 86.8% | 88.1% | 84.3% | | Total nonperforming assets ($ thousands) | $7,792 | $5,038 | $3,021 | $5,327 | $3,961 | | NPA as a % of total assets | 0.48% | 0.31% | 0.19% | 0.33% | 0.25% | Interest Rate and Yield Analysis Average Balances, Income, Expenses, Yields and Rates (Three Months) This table details average balances and yields for Q2 2025 and 2024, highlighting a net interest margin (FTE) of 3.40% for Q2 2025 Average Balances, Income, Expenses, Yields and Rates (Q2) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Total Earning Assets (Avg Balance) | $1,521,345 | $1,491,821 | | Total Interest-Bearing Liabilities (Avg Balance) | $1,073,611 | $1,063,413 | | Net Interest Income (FTE) ($ thousands) | $12,881 | $11,268 | | Interest Rate Spread | 2.70% | 2.23% | | Cost of Funds | 1.77% | 2.10% | | Net Interest Margin (FTE) | 3.40% | 3.04% | Average Balances, Income, Expenses, Yields and Rates (Six Months) This table presents average balances and yields for the six months ended June 30, showing a YTD net interest margin (FTE) of 3.34% Average Balances, Income, Expenses, Yields and Rates (YTD) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Total Earning Assets (Avg Balance) | $1,525,514 | $1,502,882 | | Total Interest-Bearing Liabilities (Avg Balance) | $1,082,927 | $1,072,704 | | Net Interest Income (FTE) ($ thousands) | $25,262 | $22,291 | | Interest Rate Spread | 2.63% | 2.17% | | Cost of Funds | 1.82% | 2.11% | | Net Interest Margin (FTE) | 3.34% | 2.98% | Reconciliation of Non-GAAP Financial Measures Reconciliation of Certain Quarterly Non-GAAP Financial Measures This section provides detailed reconciliations of key non-GAAP financial measures to their most comparable GAAP measures Reconciliation of Non-GAAP Financial Measures (Selected Data) | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | :------ | | Net interest income (GAAP) ($ thousands) | $12,796 | $12,295 | $12,235 | $12,024 | $11,181 | | Net interest income (FTE) ($ thousands) | $12,881 | $12,381 | $12,321 | $12,111 | $11,268 | | Efficiency ratio (GAAP) | 61.5% | 62.8% | 60.6% | 58.9% | 63.1% | | Efficiency ratio (FTE) | 61.2% | 62.4% | 60.2% | 58.6% | 62.7% | | Net interest margin (GAAP) | 3.37% | 3.26% | 3.19% | 3.22% | 3.01% | | Net interest margin (FTE) | 3.40% | 3.28% | 3.21% | 3.24% | 3.04% | | Book value per share | $31.67 | $30.93 | $29.85 | $30.89 | $28.70 | | Tangible book value per share | $29.63 | $28.84 | $27.70 | $28.68 | $26.43 | - FTE calculations use a Federal income tax rate of 21%[42] - Intangible assets include goodwill and core deposit intangible assets, net of accumulated amortization[43]