CHARLOTTESVILLE, Va., July 19, 2024 /PRNewswire/ -- Virginia National Bankshares Corporation (NASDAQ:VABK) (the "Company") today reported quarterly net income of $4.2 million, or $0.77 per diluted share, for the quarter ended June 30, 2024, compared to $5.7 million, or $1.05 per diluted share, recognized for the quarter ended June 30, 2023.  For the six months ended June 30, 2024, the Company recognized net income of $7.8 million, or $1.45 per diluted share, compared to $11.4 million, or $2.13 per diluted share, for the six months ended June 30, 2023.  The declines in 2024 net income compared to 2023 for the quarterly and year-to-date periods are the result of 1) increased cost of funds and 2) the accretion of the credit mark related to purchased loans when satisfied by the borrower, which was significantly larger in the second quarter of 2023 when compared to the same period of 2024. President and Chief Executive Officer's comments:  "Loan balances continued to increase during the second quarter of this year, with organic growth and continued purchases of the government-guaranteed portions of USDA and SBA loans," stated Glenn W. Rust, President and Chief Executive Officer.  "We increased our loan balances 6% during the first half of the year, 19% year-over-year and our credit quality metrics remain solid.  Our capital and liquidity positions continue to be strong and stable. We are also pleased to report that Virginia National Bankshares Corporation has been included again in the Russell 2000, which reconstituted at the end of the second quarter.  Inclusion will likely enhance stock liquidity through trading by index funds and benchmarked investment strategies." Key Performance IndicatorsSecond quarter 2024 compared to fourth quarter 2023 Return on average assets increased to 1.05% from 0.79% Return on average equity increased to 11.07% from 9.03% Net interest margin (FTE)1 improved to 3.04% from 2.89% Loan-to-deposit ratio increased to 84.3% from 77.5% Efficiency ratio (FTE)1 improved to 62.7% from 64.0% June 2024 Balance Sheet Highlights The Company continued to experience loan growth in the second quarter of 2024. Gross loans outstanding as of June 30, 2024 totaled $1.2 billion, an increase of $65.5 million, or 6.0%, compared to December 31, 2023 and an increase of $184.9 million, or 19.0%, compared to June 30, 2023. Outstanding borrowings declined $36.5 million, or 54.9%, from December 31, 2023 to June 30, 2024 and declined $29.7 million, or 49.7% year-over year, as management made a concerted effort to stabilize overall cost of funds. As of June 30, 2024, the Company had unused borrowing facilities in place of approximately $196.7 million. The Company holds no brokered deposits. The Company utilizes a third-party to offer multi-million-dollar FDIC insurance to customers with balances in excess of single-bank limits through Insured Cash Sweep® (ICS) plans. Deposit balances held in ICS plans amounted to $144.8 million as of June 30, 2024, $151.5 million as of December 31, 2023 and $132.8 million as of June 30, 2023. Total deposits decreased $35.3 million, or 2.5% from December 31, 2023 to June 30, 2024 and increased $25.8 million, or 1.9% year-over-year. Securities balances declined $137.6 million from December 31, 2023 to June 30, 2024; funds from the maturities of investments were repurposed to higher yielding assets in the form of loans and to reduce the level of outstanding borrowings. Loans and Asset Quality Credit performance remains strong with nonperforming assets as a percentage of total assets of 0.25% as of June 30, 2024, 0.17% as of December 31, 2023 and 0.08% as of June 30, 2023. Nonperforming assets amounted to $4.0 million as of June 30, 2024, compared to $2.7 million as of December 31, 2023 and $1.3 million as of June 30, 2023; Ten loans to nine borrowers are in non-accrual status, totaling $2.4 million, as of June 30, 2024, compared to $1.9 million as of December 31, 2023 and $1.2 million as of June 30, 2023. Loans 90 days or more past due and still accruing interest amounted to $1.6 million as of June 30, 2024, compared to $880 thousand as of December 31, 2023 and $107 thousand as of June 30, 2023. The past due balance as of June 30, 2024 is comprised of four loans totaling $1.5 million which are 100% government-guaranteed, and seven student loans totaling $63 thousand. The Company currently holds no other real estate owned. The period-end Allowance for Credit Losses ("ACL") as a percentage of total loans was 0.69% as of June 30, 2024, 0.77% as of December 31, 2023 and 0.81% as of June 30, 2023. The proportionate increase in government-guaranteed loans over the respective periods is the driver of the decrease in the ACL as a percentage of total loans. Balances in government-guaranteed loans have increased $42.4 million during the second quarter of 2024 and have increased $130.2 million since June 30, 2023. Such loans are 100% government-guaranteed and do not require an ACL. The fair value mark that was allocated to the acquired loans was $21.3 million as of April 1, 2021, with a remaining balance of $8.2 million as of June 30, 2024. For the three months ended June 30, 2024, the Company recorded a net recovery of provision for credit losses of $338 thousand, primarily due to the recovery of a previously charged-off loan; this balance is net of a $180 thousand provision for unfunded commitments. Net Interest Income Net interest income for the three months ended June 30, 2024 of $11.2 million decreased $2.5 million, or 18.4%, compared to the three months ended June 30, 2023, as the increase in interest expense on deposit accounts and borrowings outweighed the increase in interest income earned on assets. Net interest margin (FTE), (a non-GAAP financial measure)2, for the three months ended June 30, 2024 was 3.04%, compared to 2.89% and 3.83% for the three months ended December 31, 2023 and the three months ended June 30, 2023, respectively. The increase as compared to the fourth quarter of 2023 was primarily due to the increase in yield on loans, increasing from 5.47% to 5.71% for the periods noted, while the decline when compared to the prior year second quarter was due to increased cost of funds. Yield on loans was 5.71% for the three months ended June 30, 2024, compared to 6.35% for the prior year same period, and was 5.67% for the six months ended June 30, 2024, compared to 5.96% for the prior year same period. The accretion of the credit mark related to purchased loans positively impacted interest income by 31 bps in the second quarter of 2024, compared to 88 bps in the second quarter of 2023, fluctuating primarily due to the treatment of the credit mark under CECL2. When a purchased loan, which was identified as purchased credit-deteriorated as of the date of the acquisition, is satisfied by the borrower, the remaining mark is recognized as interest income in accordance with CECL. The overall cost of funds, including noninterest-bearing deposits, of 210 bps incurred in the three months ended June 30, 2024 increased 77 bps from 133 bps in the same period in the prior year. Overall, the cost of interest-bearing deposits increased period over period, from a cost of 174 bps to 274 bps. Management believes that the Bank's cost of funds has stabilized during the first half of 2024, as the cost of funds and cost of interest bearing deposits is relatively unchanged from the three months ended March 31, 2024. Noninterest Income Noninterest income for the three months ended June 30, 2024 decreased $354 thousand, or 17.3%, compared to the three months ended June 30, 2023, primarily due to lower wealth management, deposit account, debit card, credit card and ATM fees.   Noninterest Expense Noninterest expense for the three months ended June 30, 2024 decreased $442 thousand, or 5.2%, compared to the three months ended June 30, 2023.  This decrease is primarily the result of lower compensation, occupancy and data processing costs, as a result of right-sizing the branch network from the merger, and reduced marketing, advertising and promotion expense. Book Value Book value per share increased to $28.70 as of June 30, 2024, compared to $26.54 as of June 30, 2023, and tangible book value per share (a non-GAAP financial measure)1 was $26.43 as of June 30, 2024 compared to $24.01 as of June 30, 2023.  These values increased as net retained income increased and unrealized losses in the investment portfolio remained relatively constant period over period. Income Taxes The effective tax rates amounted to 18.3% and 18.4% for the three months ended June 30, 2024 and 2023, respectively, which are lower than the statutory rate, due to the recognition of low-income housing tax credits and the effect of tax-exempt income from municipal bonds and income from bank owned life insurance policies. Dividends Cash dividends of $1.8 million, or $0.33 per share, were declared and paid during the second quarter of 2024. Share Repurchase Plan During the second quarter of 2024, the Company continued its share repurchase plan, repurchasing 19,476 shares at an average price of $27.32 per share.  Year-to-date, the Company has repurchased 20,350 shares at an average price of $27.42 per share. _____________________________________________________________________ 1 See "Reconciliation of Certain Quarterly Non-GAAP Financial Measures" at the end of this release. 2 For more information regarding the adoption of FASB's Topic 326, Financial Instruments - Credit Losses ("CECL") effective January 1, 2023, refer to the Company's first quarter 2023 Form 10-Q. About Virginia National Bankshares Corporation Virginia National Bankshares Corporation, headquartered in Charlottesville, Virginia, is the bank holding company for Virginia National Bank. The Bank has nine banking offices throughout Fauquier and Prince William counties, three banking offices in Charlottesville and Albemarle County, and banking offices in Winchester and Richmond, Virginia.  The Bank offers a full range of banking and related financial services to meet the needs of individuals, businesses and charitable organizations, including the fiduciary services of VNB Trust and Estate Services. The Company's common stock trades on the Nasdaq Capital Market under the symbol "VABK."  Additional information on the Company is also available at www.vnbcorp.com. Non-GAAP Financial Measures The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles ("GAAP") and prevailing practices in the banking industry. However, management uses certain non-GAAP measures to supplement the evaluation of the Company's performance. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company's core businesses. These non-GAAP disclosures should not be viewed as a substitute for, or more important than, operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP measures are included at the end of this release. Forward-Looking Statements; Other Information Certain statements in this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, statements with respect to the Company's operations, performance, future strategy and goals, and are often characterized by use of qualified words such as "expect," "believe," "estimate," "project," "anticipate," "intend," "will," "should," or words of similar meaning or other statements concerning the opinions or judgement of the Company and its management about future events. While Company management believes such statements to be reasonable, future events and predictions are subject to circumstances that are not within the control of the Company and its management.  Actual results may differ materially from those included in the forward-looking statements due to a number of factors, including, without limitation, the effects of and changes in: inflation, interest rates, market and monetary fluctuations; liquidity and capital requirements; market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises, war and other military conflicts or other major events, the governmental and societal responses thereto, or the prospect of these events; changes, particularly declines, in general economic and market conditions in the local economies in which the Company operates, including the effects of declines in real estate values;  the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; the impact of changes in laws, regulations and guidance related to financial services  including, but not limited to, taxes, banking, securities and insurance; changes in accounting principles, policies and guidelines; the financial condition of the Company's borrowers; the Company's ability to attract, hire, train and retain qualified employees; an increase in unemployment levels; competitive pressures on loan and deposit pricing and demand; fluctuation in asset quality; assumptions that underlie the Company's ACL; the value of securities held in the Company's investment portfolio; performance of assets under management; cybersecurity threats or attacks and the development and maintenance of reliable electronic systems; changes in technology and their impact on the marketing of new products and services and the acceptance of these products and services by new and existing customers; the willingness of customers to substitute competitors' products and services for the Company's products and services; the risks and uncertainties described from time to time in the Company's press releases and filings with the SEC; and the Company's performance in managing the risks involved in any of the foregoing.  Many of these factors and additional risks and uncertainties are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 and other reports filed from time to time by the Company with the Securities and Exchange Commission. These statements speak only as of the date made, and the Company does not undertake to update any forward-looking statements to reflect changes or events that may occur after this release.   VIRGINIA NATIONAL BANKSHARES CORPORATION CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share and per share data) June 30, 2024 December 31, 2023* June 30, 2023 (Unaudited) (Unaudited) ASSETS Cash and due from banks $ 8,785 $ 18,074 $ 9,714 Interest-bearing deposits in other banks 8,515 10,316 20,225 Securities: Available for sale (AFS), at fair value 284,698 420,595 473,868 Restricted securities, at cost 6,667 8,385 7,438 Total securities 291,365 428,980 481,306 Loans, net of deferred fees and costs 1,158,214 1,092,665 973,348 Allowance for credit losses (8,028) (8,395) (7,863) Loans, net 1,150,186 1,084,270 965,485 Premises and equipment, net 15,818 16,195 17,564 Bank owned life insurance 39,468 38,904 39,065 Goodwill 7,768 7,768 7,768 Core deposit intangible, net 4,418 5,093 5,815 Right of use asset, net 6,287 6,748 6,634 Deferred tax asset, net 15,860 15,382 16,961 Accrued interest receivable and other assets 25,350 14,287 13,551 Total assets $ 1,573,820 $ 1,646,017 $ 1,584,088 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Demand deposits:  Noninterest-bearing $ 357,931 $ 372,857 $ 412,273  Interest-bearing 257,365 305,541 312,773 Money market and savings deposit accounts 423,055 412,119 398,074 Certificates of deposit and other time deposits 335,490 318,581 224,956 Total deposits 1,373,841 1,409,098 1,348,076 Federal funds purchased 2,438 3,462 20,503 Borrowings 30,000 66,500 59,666 Junior subordinated debt, net 3,483 3,459 3,436 Lease liability 6,102 6,504 6,301 Accrued interest payable and other liabilities 3,792 3,954 3,667 Total liabilities 1,419,656 1,492,977 1,441,649 Commitments and contingent liabilities Shareholders' equity: Preferred stock, $2.50 par value - - - Common stock, $2.50 par value 13,256 13,258 13,250 Capital surplus 105,935 106,045 105,667 Retained earnings 77,961 73,781 69,502 Accumulated other comprehensive loss (42,988) (40,044) (45,980) Total shareholders' equity 154,164 153,040 142,439 Total liabilities and shareholders' equity $ 1,573,820 $ 1,646,017 $ 1,584,088 Common shares outstanding 5,370,912 5,365,982 5,365,982 Common shares authorized 10,000,000 10,000,000 10,000,000 Preferred shares outstanding - - - Preferred shares authorized 2,000,000 2,000,000 2,000,000 *  Derived from audited consolidated financial statements   VIRGINIA NATIONAL BANKSHARES CORPORATION CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share and share data) (Unaudited) For the three months ended For the six months ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Interest and dividend income: Loans, including fees $ 16,242 $ 14,894 $ 31,903 $ 27,661 Federal funds sold 160 10 399 10 Other interest-bearing deposits 58 119 115 378 Investment securities:  Taxable 1,776 2,876 3,935 5,826  Tax exempt 327 329 653 656  Dividends 100 104 218 171 Total interest and dividend income 18,663 18,332 37,223 34,702 Interest expense: Demand deposits 68 106 139 195 Money market and savings deposits 2,952 2,197 5,874 3,970 Certificates and other time deposits 3,982 1,776 8,032 2,424 Borrowings 388 439 874 766 Federal funds purchased 9 32 16 91 Junior subordinated debt 83 79 171 140  Total interest expense 7,482 4,629 15,106 7,586  Net interest income 11,181 13,703 22,117 27,116 Provision for (recovery of) credit losses (338) 261 (360) 13 Net interest income after provision for (recovery of) credit losses 11,519 13,442 22,477 27,103 Noninterest income: Wealth management fees 240 397 666 801 Deposit account fees 338 399 725 800 Debit/credit card and ATM fees 523 636 1,011 1,207 Bank owned life insurance income 289 261 564 513 Gains (losses) on sales of assets, net (3) - 36 - Gain on early redemption of debt - - 379 - Gain on termination of interest rate swap - - - 460 Losses on sales of AFS, net - - (4) (206) Other 304 352 492 746 Total noninterest income 1,691 2,045 3,869 4,321 Noninterest expense: Salaries and employee benefits 3,850 4,062 8,002 8,113 Net occupancy 865 929 1,837 2,108 Equipment 167 176 338 394 Bank franchise tax 345 313 685 637 Computer software 276 203