Virginia National Bankshares Corp
For the period ended Dec 31, 2024. Filed Mar 28, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 28, 2025
VABK$52.80-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-28.
0000950170-24-038005
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-28.
0000950170-25-046927
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 157 previous paragraphs and 153 current paragraphs.
96 unchanged; 54 reworded; 2 added; 7 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 27 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
These decreases were partially offset by a $904 gain on early redemption of debt realized in 2024.
Current report
Of the $593.5 million of commercial mortgages held on the balance sheet as of December 31, 2024, $309.8 million consists of non-owner occupied commercial real estate, $107.2 million of multifamily, and $176.5 million of owner occupied CRE. No CRE loans were over 90 days past due as of December 31, 2024.
Removed paragraphs (7)
Previous report
Merger with Fauquier
Previous report
On April 1, 2021, the Company merged with Fauquier, pursuant to the Agreement and Plan of Reorganization dated September 30, 2020, including a related Plan of Merger. Pursuant to the Merger Agreement, Fauquier shareholders received 0.675 shares of Company stock for each share of Fauquier common stock, with cash paid in lieu of fractional shares, resulting in the Company issuing 2,571,213 shares of common stock. In connection with the transaction, TFB, Fauquier's wholly-owned bank subsidiary, was merged with and into the Bank.
Previous report
Sturman Wealth Advisors –This segment offered wealth and investment advisory services. Revenue for this segment was generated primarily from investment advisory and financial planning fees, with a small and decreasing portion attributable to brokerage commissions. During December 2022, the Company sold this segment, including interest in the client relationships, to the individual running this line of business. More information on this sale can be found under Sale of Sturman Wealth Segment in Note 27 of the Notes to Consolidated Financial Statements, which is found in Item 8. Financial Statements and Supplementary Data.
Previous report
The Company received and recognized a $2.4 million one-time payment to resolve a commercial dispute in the first quarter of 2022;
Previous report
A $1.0 million gain was recognized in connection with the sale of two buildings during the second quarter of 2022, and
Previous report
$770 thousand of advisory and brokerage income was earned in the prior year by Sturman Wealth Advisors, and a $404 thousand gain was recognized in the fourth quarter of 2022 in connection with the sale of this business line.
Previous report
As of December 31, 2022, the Company had an off-balance sheet letter of credit in the amount of $30.0 million, issued in favor of the Commonwealth of Virginia Department of the Treasury to secure public fund depository accounts. This letter of credit was cancelled by the Company in 2023 and was previously secured by commercial mortgages.
Reworded paragraphs (54)
Previous wording
Allowance for credit losses -The Company establishes the ACL through charges to earnings in the form of a provision for credit losses. Loan losses are charged against the allowance for credit losses for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the ACL. The ACL represents management’s current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. Management’s judgment in determining the level of the ACL is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. Various national economic variables are utilized in the development of the ACL, including the national unemployment rate and national gross domestic product. In addition, management’s estimate of expected credit losses is based on the remaining life of certain consumer loans held for investment, and changes in expected prepayment behavior may result in changes in the remaining life of loans and expected credit losses. Management also assesses the risk of credit losses arising from changes in general market, economic and business conditions; the nature and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances and the value of underlying collateral in determining the recorded balance of the ACL. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. In evaluating the level of the ACL, we consider a range of possible assumptions and outcomes related to the various factors identified above. The level of the allowance is particularly sensitive to changes in the actual and forecasted national unemployment rate and changes in current conditions or reasonably expected future conditions affecting the collectability of loans.
Current wording
Allowance for credit losses -The Company establishes the ACL through charges to earnings in the form of a provision for credit losses. Loan losses are charged against the ACL for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the ACL. The ACL represents management’s current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. Management’s judgment in determining the level of the ACL is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. Various national economic variables are utilized in the development of the ACL, including the national unemployment rate and national gross domestic product. In addition, management’s estimate of expected credit losses is based on the remaining life of certain consumer loans held for investment, and changes in expected prepayment behavior may result in changes in the remaining life of loans and expected credit losses. Management also assesses the risk of credit losses arising from changes in general market, economic and business conditions; the nature and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances and the value of underlying collateral in determining the recorded balance of the ACL. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. In evaluating the level of the ACL, the Company considers a range of possible assumptions and outcomes related to the various factors identified above. The level of the ACL is particularly sensitive to changes in the actual and forecasted national unemployment rate and changes in current conditions or reasonably expected future conditions affecting the collectability of loans.
Previous wording
The accounting and reporting policies of the Company conform to GAAP and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of the Company’s performance. These include adjusted tangible book value per share and the following fully-taxable equivalent measures: net interest income-FTE, efficiency ratio-FTE and net interest margin-FTE. Interest on tax-exempt loans and securities is presented on a taxable-equivalent basis (which converts the income on loans and investments for which no income taxes are paid to the equivalent yield as if income taxes were paid) using the federal corporate income tax rate of 21 percent that was applicable for all periods presented.
Current wording
The accounting and reporting policies of the Company conform to GAAP and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of the Company’s performance. These include adjusted tangible book value per share and the following fully-taxable equivalent measures: net interest income-FTE, efficiency ratio-FTE and net interest margin-FTE. Interest on tax-exempt loans and securities is presented on a taxable-equivalent basis (which converts the income on loans and investments for which no income taxes are paid to the equivalent yield as if income taxes were paid) using the federal corporate income tax rate of 21% that was applicable for all periods presented.
Previous wording
Net income for the year ended December 31, 2023 was $19.3 million, or $3.58 per diluted share, an 17.81% decrease compared to $23.4 million, or $4.38 per diluted share for the year ended December 31, 2022. This decrease was the result of a $4.6 million decrease in net interest income, a $4.6 million decrease in noninterest income, offset by a $4.5 million decrease in noninterest expense. Each component of such year-over-year changes are described in more detail below.
Current wording
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 the year ended December 31, 2023. This decrease was the result of a $2.6 million decrease in net interest income and a $1.5 million decrease in noninterest income, offset by a $397.0 thousand decrease in noninterest expense. Each component of such year-over-year changes are described in more detail below.
Previous wording
The efficiency ratio (FTE) was 58.3% for the year ended December 31, 2023, compared to 57.1% for the same period of 2022, increasing due to the fluctuations in net interest income, noninterest income and noninterest expense noted above.
Current wording
The efficiency ratio (FTE) was 62.0% for the year ended December 31, 2024, compared to 58.3% for the same period of 2023, increasing due to the fluctuations in net interest income, noninterest income and noninterest expense noted above.
Previous wording
The Company had four reportable segments during the period(s) presented: the Bank, VNB Trust and Estate Services, Sturman Wealth and Masonry Capital.
Current wording
The Company had three reportable segments during the periods presented: the Bank, VNB Trust and Estate Services and Masonry Capital.
Previous wording
Masonry Capital - Masonry Capital offers investment management services for separately managed accounts and a private investment fund employing a value-based, catalyst-driven investment strategy. Revenue for this segment is generated from management fees which are derived from Assets Under Management and incentive income which is based on the investment returns generated on performance-based Assets Under Management. Note that the membership interests in this business line are planned to be sold to an officer of the Company effective April 1, 2024. Subsequent to the date of sale, the Company will receive an annual revenue-share amount for a period of six years. No expenses will be incurred by the Company related to Masonry Capital subsequent to April 1, 2024.
Current wording
Masonry Capital - Masonry Capital offers investment management services for separately managed accounts and a private investment fund employing a value-based, catalyst-driven investment strategy. Revenue for this segment is generated from management fees which are derived from Assets Under Management and incentive income which is based on the investment returns generated on performance-based Assets Under Management. Note that the membership interests in this business line were sold to an officer of the Company effective April 1, 2024. Subsequent to the date of sale, the Company will receive an annual revenue-share amount for a period of six years. No expenses have been or will be incurred by the Company related to Masonry Capital subsequent to April 1, 2024.
Previous wording
The Bank segment earned net income of $19.4 million in 2023, a $2.2 million decrease compared to the $21.6 million netted in 2022. VNB Trust and Estate Services realized a net loss of $307.0 thousand in 2023, compared to net income of $1.6 million in 2022. Masonry Capital realized net income of $145 thousand in 2023, compared to $103 thousand in 2022. Sturman Wealth earned $122 thousand in the prior year and was sold in the fourth quarter of 2022.
Current wording
The Bank segment earned net income of $17.2 million in 2024, a $2.2 million decrease compared to the $19.4 million netted in 2023. VNB Trust and Estate Services realized a net loss of $275.0 thousand in 2024, compared to a net loss of $307.0 thousand in 2023. Masonry Capital realized a net loss of $2 thousand in the first quarter of 2024 prior to the sale of the business line, compared to net income of $145 thousand in 2023.
Previous wording
Net interest income is computed as the difference between the interest income on earning assets and the interest expense on deposits and other interest bearing liabilities. Net interest income represents the principal source of revenue for the Company and accounted for 84.3% of the total revenue in 2023. Net interest margin (FTE) is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest bearing liabilities impact net interest income (FTE) and net interest margin (FTE).
Current wording
Net interest income is computed as the difference between the interest income on earning assets and the interest expense on deposits and other interest bearing liabilities. Net interest income represents the principal source of revenue for the Company and accounted for 85.9% of the total revenue in 2024. Net interest margin (FTE) is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest bearing liabilities impact net interest income (FTE) and net interest margin (FTE).
Previous wording
For 2023, net interest income (FTE) of $49.3 million was recognized, a decrease of $4.6 million over 2022. Net interest income (FTE) for 2022 totaled $53.9 million, a $8.6 million increase over the 2021 total of $45.3 million. Average earning assets decreased $212.1 million or 12.6% in 2023 compared to 2022 and increased $139.7 million or 9.1% in 2022 compared to 2021. The increase in rates in all categories of loans were the primary drivers of the increase in interest income from 2022 to 2023. The increase in the average balance of commercial loans as well as the increases in volume and rate of the securities portfolio from 2022 to 2023 also contributed to the increase in net interest income. The average balance for loans as a percentage of earnings assets for 2023 was 66.8%, compared to 58.3% and 66.1% in 2022 and 2021, respectively.
Current wording
For 2024, net interest income (FTE) of $46.7 million was recognized, a decrease of $2.6 million over 2023. Net interest income (FTE) for 2023 totaled $49.3 million, a $4.6 million decrease over the 2022 total of $53.9 million. Average earning assets increased $37.8 million or 2.6% in 2024 compared to 2023 and decreased $212.1 million or 12.6% in 2023 compared to 2022. The increase in the average balance of loans in the real estate and commercial categories were the primary drivers of the increase in interest income from 2023 to 2024. The average balance for loans as a percentage of earnings assets for 2024 was 77.5%, compared to 66.8% and 58.3% in 2023 and 2022, respectively.
Previous wording
The 2023 net interest margin (FTE) improved 15 bps to 3.36% from 3.21% in 2022. The 2022 net interest margin (FTE) improved 27 bps from 2.94% in 2021. The tax-equivalent yield on average earning assets for 2023 of 4.79% was 140 bps higher than the 2022 yield of 3.40%. The 2022 tax-equivalent yield on average earning assets was 25 bps higher than the comparable 2021 yield of 3.15%. Loan yields for 2023 were 5.72%, improving 120 bps from the loan yield of 4.52% for 2022. Average loans for 2023 of $980.6 million were $2.3 million higher than the 2022 average of $978.3 million.
Current wording
The 2024 net interest margin (FTE) declined 26 bps to 3.10% from 3.36% in 2023. The 2023 net interest margin (FTE) improved 15 bps from 3.21% in 2022. The tax-equivalent yield on average earning assets for 2024 of 5.07% was 28 bps higher than the 2023 yield of 4.79%. The 2023 tax-equivalent yield on average earning assets was 139 bps higher than the comparable 2022 yield of 3.40%. Loan yields for 2024 were 5.71%, declining only 1 bp from the loan yield of 5.72% for 2023. Average loans for 2024 of $1.2 billion were $185.1 million higher than the 2023 average of $980.6 million.
Previous wording
The increase in rates paid on deposits in 2023 compared to 2022 negatively impacted net interest income. Interest expense as a percentage of average earning assets increased to 143 bps for 2023, compared to 19 and 21 bps for 2022 and 2021, respectively. Net interest margin will be impacted by future changes in short-term and long-term interest rate levels on deposits, as well as the impact from the competitive environment. A continuing primary driver of the Company’s low cost of funds compared to peers is the Company’s level of non-interest bearing demand deposits and low-cost deposit accounts. Following is a table illustrating the average balances of deposit accounts as a percentage of total deposit account balances.
Current wording
The increase in rates paid on deposits in 2024 compared to 2023 negatively impacted net interest income. Interest expense as a percentage of average earning assets increased to 196 bps for 2024, compared to 143 bps and 19 bps for 2023 and 2022, respectively. Net interest margin will be impacted by future changes in short-term and long-term interest rate levels on deposits, as well as the impact from the competitive environment. A continuing primary driver of the Company’s low cost of funds compared to peers is the Company’s level of non-interest bearing demand deposits and low-cost deposit accounts. Following is a table illustrating the average balances of deposit accounts as a percentage of total deposit account balances.
Previous wording
Based on management’s continuing evaluation of the loan portfolio in 2023, the Company recorded a provision for credit losses of $734 thousand, which includes $38 thousand of provision for unfunded commitments, compared to $106 thousand in 2022 and $1.0 million in 2021. The increase in 2023 is primarily the result of the adoption of ASC 326, which increased the ACL by $2.5 million effective January 1, 2023, as well as increase in provision related to organic loan growth. The decrease in 2022 was impacted by the decline in overall loan balances as part of the Company's strategy to further improve asset quality through negotiation of loan paydowns.
Current wording
Based on management’s continuing evaluation of the loan portfolio in 2024, the Company recorded a net recovery of provision for credit losses of $600 thousand, which is net of a $118 thousand provision for unfunded commitments, compared to provision expense of $734 thousand, which includes a $38 thousand provision for unfunded commitments, in 2023 and provision expense of $106 thousand in 2022. The decrease in 2024 is primarily the result of the impact of declining expected loss rates on most of the pools of loans within the CECL segmentation. The increase in 2023 is primarily the result of the adoption of ASC 326, which increased the ACL by $2.5 million effective January 1, 2023, as well as increase in provision related to organic loan growth.
Previous wording
The allowance for credit losses as a percentage of total loans was 0.77% at December 31, 2023 compared to 0.59% at December 31, 2022.
Current wording
The ACL as a percentage of total loans was 0.68% at December 31, 2024 compared to 0.77% at December 31, 2023.
Previous wording
The following is a summary of the changes in the allowance for credit losses for the years ended December 31, 2023, 2022, and 2021:
Current wording
The following is a summary of the changes in the ACL for the years ended December 31, 2024, 2023, and 2022:
Previous wording
Noninterest income of $9.1 million for the year ended December 31, 2023 decreased $4.6 million over the prior year, as a result of the following nonrecurring items in the year ended December 31, 2022:
Current wording
Noninterest income of $7.6 million for the year ended December 31, 2024 decreased $1.5 million over the prior year, as a result of the following:
Previous wording
These decreases were partially offset by an increase in non-interest income from proceeds of bank owned life insurance collected related to the death of a former employee.
Current wording
Proceeds of bank owned life insurance were collected in 2023 related to the death of a former employee.
Previous wording
Noninterest expense of $34.1 million for the year ended December 31, 2023 decreased $4.5 million from the prior year, predominantly due to continued efficiencies gained from the Merger in the areas of salaries and employee benefits, occupancy and professional fees. In addition, expenses in salaries and employee benefits and professional fees declined year-over-year from the sale of Sturman Wealth Advisors in the fourth quarter of 2022. At December 31, 2023, the Company had 155 full-time equivalent employees compared to 157 at December 31, 2022.
Current wording
Noninterest expense of $33.7 million for the year ended December 31, 2024 decreased $397.0 thousand from the prior year, predominantly due to continued efficiencies gained from the Merger in the areas of occupancy and data processing. In addition, management reduced the level of marketing, advertising and promotion expense in 2024 compared to 2023. Normal, recurring increases in salaries and employee benefits in the form of merit increases and benefit costs were offset by a reduction in salaries and employee benefits related to Masonry, as that business line was sold effective April 1, 2024. At December 31, 2024, the Company had 146 full-time equivalent employees compared to 155 at December 31, 2023.
Previous wording
Core deposit intangible amortization expense is a result of the Merger and amounted to $1.5 million in 2023 and $1.7 million in 2022.
Current wording
Core deposit intangible amortization expense is a result of the Merger and amounted to $1.3 million in 2024 and $1.5 million in 2023.
Previous wording
For 2023, the Company provided $4.0 million for Federal income taxes, resulting in an effective income tax rate of 17.2%. In 2022, the Company provided $5.1 million for Federal income taxes, resulting in an effective income tax rate of 17.9%. The effective tax rate was lower in 2023 due to the nontaxability of proceeds from bank owned life insurance as a result of the death of a former employee. The effective income tax rates for 2023 and 2022 were lower than the U.S. statutory rate of 21% due to the effect of tax-exempt income from municipal bonds and tax-exempt interest from bank owned life insurance policies.
Current wording
For 2024, the Company provided $3.9 million for Federal income taxes, resulting in an effective income tax rate of 18.8%. In 2023, the Company provided $4.0 million for Federal income taxes, resulting in an effective income tax rate of 17.2%. The effective tax rate was higher in 2024 due to the adoption of the proportional method of accounting for LIHTCs, as described in Note 26 - Investment in Affordable Housing Projects of the Notes to Consolidated Financial Statements which is found in Item 8. Financial Statements and Supplementary Data. In addition, the effective tax rate was lower in 2023 due to the nontaxability of proceeds from bank owned life insurance as a result of the death of a former employee. The effective income tax rates for 2024 and 2023 were lower than the U.S. statutory rate of 21% due to the effect of tax-exempt income from municipal bonds and tax-exempt interest from bank owned life insurance policies.
Previous wording
As of December 31, 2023, the Company’s investment portfolio totaled $429.0 million, with obligations of U.S. government corporations and government-sponsored enterprises amounting to $316.5 million, or approximately 74% of the total. The Company’s investment portfolio totaled $543.3 million as of December 31, 2022.
Current wording
As of December 31, 2024, the Company’s investment portfolio totaled $269.7 million, with obligations of U.S. government corporations and government-sponsored enterprises amounting to $163.9 million, or approximately 61% of the total. The Company’s investment portfolio totaled $429.0 million as of December 31, 2023.
Previous wording
During the year ended December 31, 2023, $49.8 million of securities were sold incurring a pre-tax loss of $206 thousand, as part of a strategic decision to reinvest proceeds into higher yielding assets. During the year ended December 31, 2022, there were no sales of securities. Management proactively manages the mix of earning assets and cost of funds to maximize the earning capacity of the Company.
Current wording
During the years ended December 31, 2024, and December 31, 2023, $40.0 million and $49.8 million of securities were sold incurring pre-tax losses of $4 thousand and $206 thousand, respectively. All of these sales were part of strategic decisioning to reinvest proceeds into higher yielding assets. Management proactively manages the mix of earning assets and cost of funds to maximize the earning capacity of the Company.
Previous wording
In accordance with ASC 320, “Investments - Debt and Equity Securities,” the Company has categorized its unrestricted securities portfolio as Available for Sale. Securities classified as AFS may be sold in the future, prior to maturity. Any decision to sell a security classified as AFS would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. AFS securities are carried at fair value. Net aggregate unrealized gains or losses on these securities are included, net of taxes, as a component of shareholders’ equity. All of the Company’s unrestricted securities were investment grade or better as of December 31, 2023. Management has evaluated whether the decline in fair value is the result of credit losses and has determined that no credit loss provision is required as of December 31, 2023 related to the AFS portfolio. AFS securities included gross unrealized losses of $50.9 million as of December 31, 2023.
Current wording
In accordance with ASC 320, “Investments - Debt and Equity Securities,” the Company has categorized its unrestricted securities portfolio as Available for Sale. Securities classified as AFS may be sold in the future, prior to maturity. Any decision to sell a security classified as AFS would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. AFS securities are carried at fair value. Net aggregate unrealized gains or losses on these securities are included, net of taxes, as a component of shareholders’ equity. All of the Company’s unrestricted securities were investment grade or better as of December 31, 2024. Management has evaluated whether the decline in fair value is the result of credit losses and has determined that no credit loss provision is required as of December 31, 2024 related to the AFS portfolio. AFS securities included gross unrealized losses of $53.0 million as of December 31, 2024.
Previous wording
All mortgage-backed securities included in the above tables were issued by U.S. government agencies and corporations. At December 31, 2023, the securities issued by political subdivisions or agencies were highly rated with 100% of the municipal bonds having A+ or higher ratings. Approximately 63% of the municipal bonds are general obligation bonds, and issuers are geographically diverse. The Company held no issues that exceeded 10% of the Company’s shareholders' equity at December 31, 2023.
Current wording
All mortgage-backed securities included in the above tables were issued by U.S. government agencies and corporations. At December 31, 2024, the securities issued by political subdivisions or agencies were highly rated with 93% of the municipal bonds having A+ or higher ratings. Approximately 63% of the municipal bonds are general obligation bonds, and issuers are geographically diverse. The Company held no issues that exceeded 10% of the Company’s shareholders' equity at December 31, 2024.
Previous wording
The Company’s holdings of restricted securities totaled $8.4 million and $5.1 million at December 31, 2023 and December 31, 2022, respectively, and consisted of stock in the Federal Reserve Bank, stock in the FHLB, and stock in CBB Financial Corporation, the holding company for Community Bankers’ Bank, and an investment in an SBA loan fund. The Bank is required to hold stock in the Federal Reserve Bank and the FHLB as a condition of membership with each of these correspondent banks. The amount of stock required to be held by the Bank is periodically assessed by each bank, and the Bank may be subject to purchase or surrender stock held in these banks, as determined by their respective calculations. Stock ownership in the bank holding company for Community Bankers’ Bank provides the Bank with several benefits that are not available to non-shareholder correspondent banks. None of these stock issues are traded on the open market and can only be redeemed by the respective issuer. Restricted stock holdings are recorded at cost.
Current wording
The Company’s holdings of restricted securities totaled $6.2 million and $8.4 million at December 31, 2024 and December 31, 2023, respectively, and consisted of stock in the Federal Reserve Bank, stock in the FHLB, and stock in CBB Financial Corporation, the holding company for Community Bankers’ Bank, and an investment in an SBA loan fund. The Bank is required to hold stock in the Federal Reserve Bank and the FHLB as a condition of membership with each of these correspondent banks. The amount of stock required to be held by the Bank is periodically assessed by each bank, and the Bank may be subject to purchase or surrender stock held in these banks, as determined by their respective calculations. Stock ownership in the bank holding company for Community Bankers’ Bank provides the Bank with several benefits that are not available to non-shareholder correspondent banks. None of these stock issues are traded on the open market and can only be redeemed by the respective issuer. Restricted stock holdings are recorded at cost.
Previous wording
Weighted average yield is calculated based on the relative amortized cost of the securities. Yields on tax-exempt securities have been computed on a tax-equivalent basis using the federal corporate income tax rate of 21 percent.
Current wording
Weighted average yield is calculated based on the relative amortized cost of the securities. Yields on tax-exempt securities have been computed on a tax-equivalent basis using the federal corporate income tax rate of 21%.
Previous wording
As stated, the preceding table reflects the distribution of the contractual maturities of the investment portfolio at December 31, 2023. Management’s investment portfolio strategy is to structure the portfolio so that it is a constant source of liquidity for the balance sheet. In order to achieve greater liquidity in the portfolio, securities that have a monthly flow of principal repayments become a key component. To illustrate the difference between contractual maturity and average life, consider the difference for the fixed rate mortgage-backed securities (MBS) component of this portfolio. At December 31, 2023, the weighted average maturity of the fixed rate MBS sector was 16.5 years, and the projected average life for this group of securities is 7.3 years.
Current wording
As stated, the preceding table reflects the distribution of the contractual maturities of the investment portfolio at December 31, 2024. Management’s investment portfolio strategy is to structure the portfolio so that it is a constant source of liquidity for the balance sheet. In order to achieve greater liquidity in the portfolio, securities that have a monthly flow of principal repayments become a key component. To illustrate the difference between contractual maturity and average life, consider the difference for the fixed rate mortgage-backed securities (MBS) component of this portfolio. At December 31, 2024, the weighted average maturity of the fixed rate MBS sector was 15.6 years, and the projected average life for this group of securities is 6.0 years.
Previous wording
Another indication of the investment portfolio’s liquidity potential is shown by the projected annual principal cash flow from maturities, callable bonds, and monthly principal repayments. For the next three years, the principal cash flows are estimated to be $161.0 million for 2024, $32.4 million for 2025, and $25.0 million for 2026, based upon rates remaining at current levels. This represents approximately 46% of the investment portfolio’s AFS balance at December 31, 2023 that will be available to support the future liquidity needs of the Company. Cash flow projections are subject to change based upon changes to market interest rates.
Current wording
Another indication of the investment portfolio’s liquidity potential is shown by the projected annual principal cash flow from maturities, callable bonds, and monthly principal repayments. For the next three years, the principal cash flows are estimated to be $33.5 million for 2025, $24.4 million for 2026, and $30.9 million for 2027, based upon rates remaining at current levels. This represents approximately 28% of the investment portfolio’s AFS balance at December 31, 2024 that will be available to support the future liquidity needs of the Company. Cash flow projections are subject to change based upon changes to market interest rates.
Previous wording
The Company’s objective is to maintain the historically strong credit quality of the loan portfolio by maintaining rigorous underwriting standards. These standards coupled with regular evaluation of the creditworthiness of, and the designation of lending limits for, each borrower has helped the Company achieve this objective. The primary portfolio strategy includes seeking industry and loan size diversification in order to minimize credit exposure and originating loans in markets with which the Company is familiar. The predominant market area for loans includes Charlottesville, Albemarle County, Fauquier County, Prince William County, Winchester, Frederick County, Manassas, Richmond and areas in the Commonwealth of Virginia, State of Maryland, District of Columbia and portions of West Virginia that are within a 100 mile radius of any Virginia National Bank location.
Current wording
The Company’s objective is to maintain the historically strong credit quality of the loan portfolio by maintaining rigorous underwriting standards. These standards coupled with regular evaluation of the creditworthiness of, and the designation of lending limits for, each borrower has helped the Company achieve this objective. The primary portfolio strategy includes seeking industry and loan size diversification in order to minimize credit exposure and originating loans in markets with which the Company is familiar. The predominant market area for loans includes Charlottesville, Albemarle County, Fauquier County, Prince William County, Winchester, Frederick County, Manassas, and Richmond, as well as other areas in Virginia, Maryland, West Virginia and the District of Columbia.
Previous wording
The Company’s loan portfolio totaled $1.1 billion as of December 31, 2023 or 66.4% of total assets. Loan balances increased $156.3 million, or 16.7%, from the balance of $936.4 million as of December 31, 2022. Note that all loan balances are presented net of credit and other fair value discounts, when applicable. The table below shows the composition of the loan portfolio:
Current wording
The Company’s loan portfolio totaled $1.2 billion as of December 31, 2024 or 76.4% of total assets. Loan balances increased $143.3 million, or 13.1%, from the balance of $1.1 billion as of December 31, 2023. Note that all loan balances are presented net of credit and other fair value discounts, when applicable. The table below shows the composition of the loan portfolio:
Previous wording
At December 31, 2023, the loan-to-deposit ratio stood at 77.5%, compared to 63.3% at December 31, 2022.
Current wording
At December 31, 2024, the loan-to-deposit ratio stood at 86.8%, compared to 77.5% at December 31, 2023.
Previous wording
The Company’s real estate loan portfolio increased by $82.3 million to a balance of $902.1 million at December 31, 2023 from $819.9 million at December 31, 2022. This category comprises 82.6% of all loans, and these loans are secured by mortgages on real property located principally in our market area. Of this amount, approximately $317.6 million represented loans on 1-4 family residential properties. Commercial real estate loans totaled $550.9 million as of December 31, 2023. Sources of repayment are from the borrower’s operating profits, cash flows and liquidation of pledged collateral. The remaining real estate loans were comprised of construction and land development loans which totaled $33.7 million as of December 31, 2023.
Current wording
The Company’s real estate loan portfolio increased by $42.0 million to a balance of $944.1 million at December 31, 2024 from $902.1 million at December 31, 2023. This category comprises 76.4% of all loans, and these loans are secured by mortgages on real property located principally in the Company's market area. Of this amount, approximately $313.6 million represented loans on 1-4 family residential properties. Commercial real estate loans totaled $593.5 million as of December 31, 2024. Sources of repayment are from the borrower’s operating profits, cash flows and liquidation of pledged collateral. The remaining real estate loans were comprised of construction and land development loans which totaled $37.0 million as of December 31, 2024.
Previous wording
As of December 31, 2023, the Company’s commercial and industrial loan portfolio totaled $152.5 million, a $81.4 million increase from the $71.1 million balance at year-end 2022. This category, representing approximately 14.0% of all loans, includes loans made to individuals and small to medium-sized businesses, as well as loans purchased in the government guaranteed market.
Current wording
As of December 31, 2024, the Company’s commercial and industrial loan portfolio totaled $257.7 million, a $105.2 million increase from the $152.5 million balance at year-end 2023. This category, representing approximately 20.8% of all loans, includes loans made to individuals and small to medium-sized businesses, as well as loans purchased in the government guaranteed market. As of December 31, 2024 and December 31, 2023, the portfolio of government guaranteed loans, included in the commercial loan balance, was $218.3 million and $109.7 million, respectively.
Previous wording
Consumer loans, comprised of student loans purchased, revolving credit, and other fixed payment loans, totaled $38.0 million as of December 31, 2023 or 3.5% of all loans. Consumer loans ended 2023 with balances $7.4 million lower than the prior year-end, primarily due to normal amortization within the student loan portfolio.
Current wording
Consumer loans, comprised of student loans purchased, revolving credit, and other fixed payment loans, totaled $34.2 million as of December 31, 2024 or 2.8% of all loans. Consumer loans ended 2024 with balances $3.8 million lower than the prior year-end, primarily due to normal amortization within the student loan portfolio.
Previous wording
Total loans at December 31, 2023 and 2022 included loans purchased in connection with the Merger. These loans were recorded at estimated fair value on the date of acquisition without the carryover of the related ALLL. The following table presents the outstanding principal balance and the carrying amount of purchased loans as of December 31, 2023:
Current wording
Total loans at December 31, 2024 and 2023 included loans purchased in connection with the Merger. These loans were recorded at estimated fair value on the date of acquisition without the carryover of the related allowance for loan loss. The following table presents the outstanding principal balance and the carrying amount of purchased loans as of December 31, 2024:
Previous wording
At December 31, 2023 and 2022, the Company had loans classified as non-accrual with balances of $1.9 million and $673 thousand, respectively. The non-accrual balance as of December 31, 2023 consists of eight loans to seven borrowers.
Current wording
At December 31, 2024 and 2023, the Company had loans classified as non-accrual with balances of $2.3 million and $1.9 million, respectively. The non-accrual balance as of December 31, 2024 consists of twelve loans to eleven borrowers and 100% of such balance is secured by real estate.
Previous wording
Loans 90 days or more past due and still accruing interest amounted to $879 thousand as of December 31, 2023, compared to $705 thousand as of December 31, 2022. The 2023 balance includes two loans totaling $782 thousand which are 100% government-guaranteed, and five student loans totaling $97 thousand.
Current wording
Loans 90 days or more past due and still accruing interest amounted to $754 thousand as of December 31, 2024, compared to $879 thousand as of December 31, 2023. The 2024 balance includes three loans totaling $705 thousand which are 100% government-guaranteed, and three student loans totaling $49 thousand. No CRE loans were 90 days or more past due as of December 31, 2024.
Previous wording
Activity for the allowance for credit losses is provided in the following table:
Current wording
Activity for the ACL is provided in the following table:
Previous wording
As of December 31, 2023, the ACL was $8.4 million, an increase of $2.8 million from $5.6 million at December 31, 2022, due to the adoption of CECL and increased balances in the loan portfolio. Management’s estimates for the ACL resulted in the Company’s allowance to total loans outstanding ratio of 0.77% at December 31, 2023, compared to 0.59% at December 31, 2022.
Current wording
As of December 31, 2024, the ACL was $8.5 million, an increase of $60 thousand from $8.4 million at December 31, 2023, due to the increased balances in the loan portfolio and also impacted by net recoveries of previously charged-off loans due to strong and successful collection efforts. Management’s estimates for the ACL resulted in the Company’s ACL to total loans outstanding ratio of 0.68% at December 31, 2024, compared to 0.77% at December 31, 2023.
Previous wording
During 2023, there were $721 thousand in loan balances charged off, with a total of $377 thousand in recoveries of previously charged-off balances, resulting in net charge-offs of $344 thousand. During 2022, there were $1.3 million in loan balances charged off, with a total of $717 thousand in recoveries of previously charged-off balances, resulting in net charge-offs of $538 thousand. The ratio of net charge-offs to average loans was 0.04% and 0.05% for 2023 and 2022, respectively.
Current wording
During 2024, there were $759 thousand in loan balances charged off, with a total of $1.5 million in recoveries of previously charged-off balances, resulting in net charge-offs of $778 thousand. During 2023, there were $721 thousand in loan balances charged off, with a total of $377 thousand in recoveries of previously charged-off balances, resulting in net charge-offs of $344 thousand. The ratio of net charge-offs to average loans was 0.07% (net recovery) and 0.04% for 2024 and 2023, respectively.
Previous wording
The table below provides an allocation of year-end allowance for credit losses by loan type; however, allocation of a portion of the allowance to one loan category does not preclude its availability to absorb losses in other categories.
Current wording
The table below provides an allocation of year-end ACL by loan type; however, allocation of a portion of the allowance to one loan category does not preclude its availability to absorb losses in other categories.
Showing the first 40 of 54 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Investment management income of $632 thousand and performance fees of $376 thousand were recognized in 2023 related to the Masonry business line. The membership interests in this business line were sold to an officer of the Company effective April 1, 2024. Subsequent to the date of sale, the Company will receive an annual revenue-share amount for a period of six years. See below for impact of the sale on Masonry on 2024's noninterest expense.