FOR IMMEDIATE RELEASE

INVESTOR RELATIONS CONTACT:

Tara Y. Harrison (434) 817-8587

•

Paycheck Protection Program - As of the date of this release, Virginia National Bank has assisted nonprofits and local businesses by funding $86.9 million of Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, which were designed to provide economic relief to small businesses adversely impacted by COVID-19.  The loans carry a 1% annual interest rate. The Company recorded PPP loan origination fees of approximately $3.0 million and deferred $95 thousand in loan origination costs that are being recognized as an adjustment to yield over the contractual life of the underlying loans, most of which are over a 24-month period.  Upon repayment or forgiveness of each loan, the remaining unamortized fees and costs allocated to that loan will be recorded as income and expensed, respectively. The PPP loans generated pre-tax income of $517 thousand, from interest income, fee amortization and cost accretion, in the second quarter of 2020, with an effective yield of 2.93%.

•

Loan Deferments - Also in an effort to assist our customers during this difficult time, we processed a total of $56.8 million in loan deferments since the beginning of the pandemic, of which $27.1 million, or 47.7% were principal-only, $7.9 million, or 14.0%, were government-guaranteed loans, and $1.8 million, or 3.1%, were student loans.  As of July 29, 2020, $17.0 million in loan balances, or 29.9% of the total loan deferments approved, have returned to normal payment schedules and are now current.

•

Branch Operations – We have taken many steps to ensure the safety of our customers and employees by limiting branch activities to drive-thru services and appointment-only, as well as encouraging customers to conduct transactions at ATMs, through online banking and the Bank’s mobile app.  We also increased consumer and business mobile deposit limits to encourage customers to make deposits remotely from the safety of their home or business.  Mid-July, we took steps to resume normal branch activities with specific guidelines in place to continue to protect our customers and employees.  

¹ 

Common share data for prior periods presented has been adjusted to reflect the 5% stock dividend paid in the third quarter of 2019.

•

Gross loans outstanding at June 30, 2020 totaled $632.4 million, an increase of $92.9 million, or 17.2% compared to December 31, 2019, and an increase of $110.6 million, or 21.2%, compared to June 30, 2019.  The increases are largely due to the origination of $86.9 million in PPP loans as noted above.    

•

The balance of loans in non-accrual status decreased to $11 thousand as of June 30, 2020, from $299 thousand as of December 31, 2019 and $390 thousand at June 30, 2019.

•

Loans 90 days or more past due and still accruing interest amounted to $1.1 million as of June 30, 2020, $771 thousand as of December 31, 2019, and $617 thousand as of June 30, 2019. Each of these balances includes a government guaranteed loan of approximately $548 thousand.  The past due balance as of June 30, 2020 included one mortgage loan of $437 thousand covered by a formal forbearance agreement.  As of June 30, 2020, a total of seven loans were 90 days or more past due and still accruing interest, of which five were student loans totaling $92 thousand.

•

A provision for loan losses of $378 thousand was recognized during the second quarter of 2020, compared to $875 thousand during the fourth quarter of 2019 and a recovery of $64 thousand during the second quarter of 2019.

•

The period-end allowance for loan losses as a percentage of total loans was 0.78% as of June 30, 2020 and December 31, 2019, compared to 0.92% as of June 30, 2019.  The percentage remained flat as compared to year-end, as the increase in the necessary allowance on most of the Company’s loans due to worsening economic qualitative factors was offset by the SBA-guaranteed PPP loans not needing an allowance.  Note that the allowance for loan losses as a percentage of total loans, excluding PPP loans, would have been 0.90% as of June 30, 2020.  The decline in the percentage from the second quarter of 2019 to year-end 2019 was related to the sale of a shared national credit with a higher loan loss allowance.

•

Return on average assets (ROAA) for the second quarter of 2020 was 1.07% compared to 0.81% realized in the fourth quarter of 2019 and 1.33% realized in the second quarter of 2019.

•

The efficiency ratio on a fully tax equivalent basis (FTE) was 59.5% for the second quarter of 2020, compared to 61.2% for the fourth quarter of 2019 and 65.2% for the second quarter of 2019.  (See footnote 4 on the Financial Highlights page for an explanation of the efficiency ratio calculation.)

•

Second quarter 2020 net interest income increased $294 thousand, or 5.4%, compared to the amount recognized in the second quarter of 2019.  This increase was primarily the result of lower cost of funds period-over-period.

•

The cost of funds incurred in the second quarter of 2020 was 43 basis points, an improvement over the 76 basis points and 77 basis points incurred during the fourth quarter of 2019 and the second quarter of 2019, respectively, primarily due to the decline in interest paid on deposits.  Low-cost deposits, which include noninterest checking accounts and interest-bearing checking, savings, and money market accounts, remained in excess of 78% of total deposits at the end of the second quarters of 2020 and 2019, as well as the end of the year in 2019.

•

Net interest margin (FTE) declined 19 basis points to 3.12% from 3.31% during the fourth quarter of 2019, and declined 55 basis points from 3.67% for the second quarter of 2019. Net interest margin (FTE) would have been 3.17% for the second quarter of 2020, without the interest and fees associated with the PPP loans, which had an average balance of $77.8 million during the quarter and carried a 1% interest rate.

•

Noninterest income for the second quarter of 2020 decreased $74 thousand, or 4.4%, compared to the second quarter of 2019, due to fluctuations in several categories.  Earnings from the proceeds of bank owned life insurance declined by $357 thousand, as the result of the death benefit received in the second quarter of 2019.  Trust income declined $174 thousand due to restructuring of the entities and market conditions.  In addition, deposit account fees and debit/credit card and ATM fees declined in total by $104 thousand due to suppressed customer activity.   Those declines were offset by $526 thousand in gains on sales of securities which was used to provide liquidity for PPP funding, and an $86 thousand increase in loan swap fee income.  The Company anticipates receiving approximately $800 thousand from the return of unearned insurance premiums related to the student loan portfolio, although the timing of the payment is uncertain at this time.

•

Noninterest expense for the second quarter of 2020 decreased $281 thousand, or 6.0%, compared to the second quarter of 2019 when $300 thousand was accrued in connection with a settlement of claims related to pending and threatened legal proceedings.  

•

The loan-to-deposit ratio was 88.6% at June 30, 2020, compared to 86.9% at December 31, 2019 and 94.3% at June 30, 2019.

•

Tangible book value per share as of June 30, 2020, which reflects the 5% stock dividend effective July 2019, was $28.86.  This compares to $28.72 as of June 30, 2019, which was prior to, and therefore not adjusted for, the 2019 5% stock dividend.  

•

Capital ratios continue to be well in excess of regulatory requirements for well-capitalized banks.  

•

Cash dividends of $814 thousand were declared during the second quarter of 2020, while the remaining net income of $1.3 million, or 61.0%, was retained.  

June 30,

2020

December 31,

2019 *

June 30,

2019

(Unaudited)

(Unaudited)

ASSETS

Cash and due from banks

$

10,116

$

14,908

$

12,483

Federal funds sold

24,771

4,177

12,311

Securities:

Available for sale, at fair value

102,772

114,041

56,848

Restricted securities, at cost

1,736

1,683

1,684

Total securities

104,508

115,724

58,532

Loans

632,394

539,533

521,763

Allowance for loan losses

(4,917

)

(4,209

)

(4,817

)

Loans, net

627,477

535,324

516,946

Premises and equipment, net

5,669

6,145

6,594

Bank owned life insurance

16,628

16,412

16,190

Goodwill

372

372

372

Other intangible assets, net

374

408

441

Accrued interest receivable and other assets

8,958

9,157

9,904

Total assets

$

798,873

$

702,627

$

633,773

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Demand deposits:

Noninterest-bearing

$

197,227

$

166,975

$

158,166

Interest-bearing

136,274

122,994

97,620

Money market and savings deposit accounts

284,101

221,964

175,740

Certificates of deposit and other time deposits

96,599

109,278

121,993

Total deposits

714,201

621,211

553,519

Accrued interest payable and other liabilities

5,580

5,309

5,911

Total liabilities

719,781

626,520

559,430

Commitments and contingent liabilities

Shareholders' equity:

Preferred stock, $2.50 par value, 2,000,000 shares authorized,

   no shares outstanding

-

-

-

Common stock, $2.50 par value, 10,000,000 shares authorized; 2,714,273

   (including 26,268 nonvested shares), 2,692,005 (including 4,000 nonvested

   shares) and 2,560,138 shares issued and outstanding at June 30, 2020,

   December 31, 2019, and June 30, 2019, respectively

6,720

6,720

6,400

Capital stock dividend distributable

-

-

320

Capital surplus

32,307

32,195

32,138

Retained earnings

39,102

37,235

35,522

Accumulated other comprehensive income (loss)

963

(43

)

(37

)

Total shareholders' equity

79,092

76,107

74,343

Total liabilities and shareholders' equity

$

798,873

$

702,627

$

633,773

*

Derived from audited consolidated financial statements

For the three months ended

For the six months ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Interest and dividend income:

Loans, including fees

$

6,156

$

6,105

$

12,027

$

12,202

Federal funds sold

10

74

95

93

Investment securities:

Taxable

229

246

738

498

Tax exempt

92

76

167

157

Dividends

24

31

48

57

Total interest and dividend income

6,511

6,532

13,075

13,007

Interest expense:

Demand and savings deposits

390

463

1,085

844

Certificates and other time deposits

366

586

860

1,045

Repurchase agreements and other borrowings

-

22

-

89

Total interest expense

756

1,071

1,945

1,978

Net interest income

5,755

5,461

11,130

11,029

Provision for (recovery of) loan losses

378

(64

)

1,143

620

Net interest income after provision for (recovery of) loan losses

5,377

5,525

9,987

10,409

Noninterest income:

Trust income

228

402

538

749

Advisory and brokerage income

163

156

341

292

Royalty income

24

4

71

8

Deposit account fees

143

192

322

373

Debit/credit card and ATM fees

134

189

291

346

Earnings/increase in value of bank owned life insurance

109

466

216

576

Fees on mortgage sales

30

56

77

86

Gains on sales of securities

590

64

643

64

Loan swap fee income

124

38

633

46

Other

81

133

163

219

Total noninterest income

1,626

1,700

3,295

2,759

Noninterest expense:

Salaries and employee benefits

2,258

2,321

4,682

4,667

Net occupancy

452

444

904

923

Equipment

136

114

267

231

Data processing

338

330

666

646

Other

1,220

1,476

2,428

2,629

Total noninterest expense

4,404

4,685

8,947

9,096

Income before income taxes

2,599

2,540

4,335

4,072

Provision for income taxes

511

425

843

711

Net income

$

2,088

$

2,115

$

3,492

$

3,361

Net income per common share, basic *

$

0.77

$

0.79

$

1.29

$

1.25

Net income per common share, diluted *

$

0.77

$

0.79

$

1.29

$

1.25

Weighted average common shares outstanding, basic *

2,710,019

2,688,005

2,701,411

2,683,122

Weighted average common shares outstanding, diluted *

2,711,017

2,688,965

2,702,311

2,687,391

*

Shares and per share data have been retroactively adjusted to reflect a 5% stock dividend effective July 5, 2019.

At or For the Three Months Ended

June 30,

2020

March 31,

2020

December 31,

2019

September 30,

2019

June 30,

2019

Common Share Data:

Net income per weighted average share, basic ¹

$

0.77

$

0.52

$

0.53

$

0.71

$

0.79

Net income per weighted average share, diluted ¹

$

0.77

$

0.52

$

0.53

$

0.71

$

0.79

Weighted average shares outstanding, basic ¹

2,710,019

2,692,803

2,692,005

2,689,092

2,688,005

Weighted average shares outstanding, diluted ¹

2,711,017

2,694,090

2,693,437

2,690,142

2,688,965

Actual shares outstanding

2,714,273

2,702,373

2,692,005

2,692,005

2,560,138

Tangible book value per share at period end

$

28.86

$

27.95

$

27.98

$

27.77

$

28.72

Key Ratios:

Return on average assets²

1.07

%

0.78

%

0.81

%

1.15

%

1.33

%

Return on average equity²

10.64

%

7.28

%

7.43

%

9.96

%

11.53

%

Net interest margin (FTE)³

3.12

%

3.20

%

3.31

%

3.54

%

3.67

%

Efficiency ratio (FTE)⁴

59.47

%

64.31

%

61.22

%

66.90

%

65.24

%

Loan-to-deposit ratio

88.55

%

87.22

%

86.85

%

90.10

%

94.26

%

Net Interest Income:

Net interest income

$

5,755

$

5,375

$

5,421

$

5,474

$

5,461

Net interest income (FTE)^3,4

$

5,780

$

5,395

$

5,440

$

5,491

$

5,481

Capital Ratios:

Tier 1 leverage ratio

9.84

%

10.59

%

10.81

%

11.42

%

11.51

%

Total risk-based capital ratio

15.56

%

14.04

%

15.08

%

15.55

%

15.68

%

Assets and Asset Quality:

Average Earning Assets

$

744,760

$

678,941

$

653,195

$

616,306

$

599,836

Average Gross Loans

$

618,096

$

535,824

$

526,249

$

516,637

$

524,424

Allowance for loan losses:

Beginning of period

$

4,704

$

4,209

$

3,983

$

4,817

$

4,905

Provision for (recovery of) loan losses

378

765

875

(120

)

(64

)

Charge-offs

(193

)

(388

)

(689

)

(747

)

(114

)

Recoveries

28

118

40

33

90

Net charge-offs

(165

)

(270

)

(649

)

(714

)

(24

)

End of period

$

4,917

$

4,704

$

4,209

$

3,983

$

4,817

Non-accrual loans

$

11

$

273

$

299

$

337

$

390

Loans 90 days or more past due and still accruing

1,076

733

771

199

617

OREO

-

-

-

-

-

Total nonperforming assets (NPA)

$

1,087

$

1,006

$

1,070

$

536

$

1,007

NPA as a % of total assets

0.14

%

0.14

%

0.15

%

0.08

%

0.16

%

NPA as a % of total loans plus OREO

0.17

%

0.18

%

0.20

%

0.10

%

0.19

%

Allowance for loan losses to total loans

0.78

%

0.85

%

0.78

%

0.76

%

0.92

%

Non-accruing loans to total loans

0.00

%

0.05

%

0.06

%

0.06

%

0.07

%

Net charge-offs to average loans²

0.11

%

0.20

%

0.49

%

0.55

%

0.02

%

¹

Share and per share data have been retroactively adjusted to reflect a 5% stock dividend effective July 5, 2019.

²

Ratio is computed on an annualized basis.

³

The net interest margin and net interest income are reported on a fully tax equivalent basis (FTE), using a Federal income tax rate of 21%.

⁴

The efficiency ratio is computed as a percentage of noninterest expense divided by the sum of fully tax equivalent (FTE) net interest income and noninterest income. This is a non-GAAP financial measure that management believes provides investors with important information regarding operational efficiency. Management believes such financial information is meaningful to the reader in understanding operating performance, but cautions that such information should not be viewed as a substitute for GAAP.  Comparison of our efficiency ratio with those of other companies may not be possible because other companies may calculate them differently.