Virginia National Bankshares (VABK) - 2022 Q1 - Quarterly Report

Part I. Financial Information Financial Statements This section presents the unaudited Consolidated Financial Statements for Q1 2022, including Balance Sheets, Income, Comprehensive Loss, Equity, and Cash Flows, with detailed notes on accounting policies and the Fauquier merger Consolidated Balance Sheets Total assets decreased slightly to $1.94 billion as of March 31, 2022, from $1.97 billion at year-end 2021, primarily due to reduced net loans, while shareholders' equity declined to $146.0 million due to increased comprehensive loss Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,935,207 | $1,972,184 | | Loans, net | $1,001,128 | $1,055,227 | | Securities | $346,498 | $308,767 | | Total Deposits | $1,774,348 | $1,796,170 | | Total Liabilities | $1,789,188 | $1,810,197 | | Total Shareholders' Equity | $146,019 | $161,987 | | Accumulated other comprehensive loss | ($21,641) | ($2,211) | Consolidated Statements of Income Net income for Q1 2022 significantly increased to $4.9 million from $1.5 million year-over-year, driven by higher net interest income and a $2.4 million one-time payment from a commercial dispute resolution Quarterly Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Interest Income | $11,425 | $5,974 | | Provision for loan losses | $148 | $351 | | Total Noninterest Income | $4,787 | $1,039 | | - Resolution of commercial dispute | $2,400 | - | | Total Noninterest Expense | $10,095 | $4,781 | | Net Income | $4,924 | $1,505 | | Net Income per common share, diluted | $0.92 | $0.55 | Notes to Consolidated Financial Statements These notes detail significant accounting policies, the April 2021 merger with Fauquier Bankshares, Inc., and specifics on securities, loan portfolios, ALLL methodology, goodwill, intangible assets, and fair value measurements - On April 1, 2021, the Company completed its merger with Fauquier Bankshares, Inc. for $78.0 million, recording $7.8 million in goodwill and $9.7 million in core deposit intangibles[20][31][35] - The Company will adopt the new Current Expected Credit Losses (CECL) standard on January 1, 2023, expecting significant changes to financial statements, including the allowance for credit losses (ACL)[25] - The company is assessing the impact of ASU 2020-04 to facilitate the transition away from LIBOR for impacted loans[28] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial performance, highlighting significant year-over-year growth driven by the April 2021 Fauquier merger, covering changes in financial condition, results of operations, and the impact of COVID-19 - The April 1, 2021, merger with Fauquier Bankshares, Inc. is the primary driver of year-over-year changes in financial condition and results of operations[151] - Key financial performance measures significantly improved in Q1 2022: ROAA increased to 1.03% from 0.68%, ROAE rose to 12.53% from 7.40%, and diluted EPS grew to $0.92 from $0.55[161] - While economic recovery signs are encouraging post-COVID-19, risks from inflation, labor markets, and supply chain disruptions persist, with negligible pandemic-related loan deferrals as of March 31, 2022[157][159] Financial Condition Total assets were $1.9 billion as of March 31, 2022, a 110.7% increase year-over-year due to the Fauquier acquisition, while total loans decreased to $1.0 billion, and the company maintained strong capital ratios exceeding 'well capitalized' minimums Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Commercial loans | $88,858 | $96,696 | | Real estate mortgage | $867,422 | $911,111 | | Consumer | $50,682 | $53,404 | | Total loans | $1,006,962 | $1,061,211 | Allowance for Loan Losses (ALLL) Ratios | Ratio | March 31, 2022 | Dec 31, 2021 | March 31, 2021 | | :--- | :--- | :--- | :--- | | ALLL to total loans | 0.58% | 0.56% | 0.90% | | Nonaccrual loans to total loans | 0.05% | 0.05% | 0.00% | - The ALLL to total loans ratio decreased from 0.90% to 0.58% year-over-year, as Fauquier acquisition loans were recorded at fair value without carrying over Fauquier's existing ALLL[184] - The company's capital ratios significantly exceeded minimum requirements as of March 31, 2022, with a Common Equity Tier 1 ratio of 15.09% and a Total Capital ratio of 15.66%[204] Results of Operations Net income for Q1 2022 surged to $4.9 million, a 227% increase year-over-year, driven by a $5.5 million rise in net interest income and a $2.4 million one-time payment, despite a 111.1% increase in noninterest expense Noninterest Income Breakdown (in thousands) | Category | Q1 2022 | Q1 2021 | Variance % | | :--- | :--- | :--- | :--- | | Wealth management fees | $557 | $329 | 69.3% | | Deposit account fees | $465 | $160 | 190.6% | | Debit/credit card and ATM fees | $707 | $154 | 359.1% | | Resolution of commercial dispute | $2,400 | $0 | N/A | | Total Noninterest Income | $4,787 | $1,039 | 360.7% | Noninterest Expense Breakdown (in thousands) | Category | Q1 2022 | Q1 2021 | Variance % | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $4,731 | $2,402 | 97.0% | | Net occupancy | $1,197 | $495 | 141.8% | | Data processing | $738 | $289 | 155.4% | | Core deposit intangible amortization | $439 | $0 | N/A | | Total Noninterest Expense | $10,095 | $4,781 | 111.1% | - Net interest margin (FTE) decreased by 24 basis points to 2.59% for Q1 2022 from 2.83% in Q1 2021[211] - A provision for loan losses of $148 thousand was recorded in Q1 2022, compared to $351 thousand in Q1 2021[218] Quantitative and Qualitative Disclosures About Market Risk This section is not required for the registrant's filing - Quantitative and Qualitative Disclosures About Market Risk are not required for this report[225] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022[228] - No material changes to internal control over financial reporting occurred during the quarter[228] Part II. Other Information Legal Proceedings The company reports no legal proceedings for the period - There are no legal proceedings to report[229] Risk Factors No material changes to risk factors have occurred since the 2021 Form 10-K filing - No material changes to risk factors have occurred since the filing of the 2021 Form 10-K[229] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds for the period - None reported[230] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial statements - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and financial data in Inline XBRL format[231][232]