Virginia National Bankshares Corporation (NASDAQ:VABK) is a diversified financial services holding company headquartered in Charlottesville, Virginia. The company operates through its wholly-owned subsidiary, Virginia National Bank, which offers a full range of banking and related financial services to individuals, businesses, and charitable organizations within its geographic footprint. Additionally, the company provides wealth management and investment advisory services through its subsidiary, VNB Trust and Estate Services.
Business Overview
Virginia National Bankshares Corporation has a long and storied history, tracing its roots back to 1902 when the Bank of Charlottesville was founded. Over the decades, the company has grown through strategic acquisitions and organic expansion, solidifying its position as a leading community bank in central Virginia. Today, the company operates 14 full-service banking facilities across Albemarle, Fauquier, and Prince William counties, as well as the cities of Charlottesville, Richmond, Manassas, and Winchester.
The company's core banking operations focus on commercial and retail lending, deposit gathering, and treasury management services. The loan portfolio is well-diversified, with commercial loans, commercial real estate, 1-4 family residential mortgages, and consumer loans comprising the majority of the $1.1 billion in total loans as of March 31, 2024. On the deposit side, the company maintains a strong core deposit base, with noninterest-bearing demand deposits and interest-bearing transaction, money market, and savings accounts representing 75.6% of total deposits as of the same date.
In addition to its traditional banking services, the company's VNB Trust and Estate Services division provides corporate trustee services, trust and estate administration, IRA administration, and custody services. This segment generates fee-based revenue and contributes to the company's diversified income stream.
Financials
Virginia National Bankshares Corporation has demonstrated consistent financial performance, even in the face of a challenging economic environment. For the fiscal year ended December 31, 2023, the company reported net income of $19.3 million, or $3.60 per diluted share, on total revenue of $79.1 million. This represents a net profit margin of 21.0% and a return on average assets (ROAA) of 1.20%.
The company's strong earnings performance was driven by a net interest margin of 3.71% for the full year 2023, as well as disciplined expense management. Operating cash flow for the year totaled $13.9 million, while free cash flow reached $12.7 million, providing ample liquidity to support the company's growth initiatives and shareholder returns.
For the first quarter of 2024, the company reported net income of $3.6 million, or $0.68 per diluted share, on total revenue of $18.6 million. While net income declined compared to the prior-year period, this was primarily due to a decrease in net interest income as the company navigated the rising interest rate environment. The net interest margin (FTE) for the quarter was 2.93%, down from 3.71% in the first quarter of 2023.
The company's balance sheet remains strong, with total assets of $1.6 billion as of March 31, 2024. The loan portfolio grew by 3.2% during the first quarter, reaching $1.1 billion, while deposits increased by 1.6% to $1.4 billion. The company's capital ratios continue to exceed regulatory requirements, with a Tier 1 capital ratio of 17.67% and a total risk-based capital ratio of 18.49% as of March 31, 2024.
Wealth Management and Advisory Services
In addition to its core banking operations, Virginia National Bankshares Corporation offers wealth management and investment advisory services through its VNB Trust and Estate Services division. This segment provides corporate trustee services, trust and estate administration, IRA administration, and custody services to clients across the company's footprint.
As of March 31, 2024, VNB Trust and Estate Services had $1.2 billion in assets under management and administration. The division generates fee-based revenue, which contributed $426,000, or 19.5% of the company's total noninterest income, during the first quarter of 2024.
The company's wealth management capabilities complement its traditional banking services, allowing it to provide a comprehensive suite of financial solutions to its clients. This diversified revenue stream helps to offset the cyclical nature of the banking industry and provides a stable source of income.
Acquisition and Expansion
In 2021, Virginia National Bankshares Corporation completed the acquisition of Fauquier Bankshares, Inc. and its subsidiary, The Fauquier Bank. This strategic transaction expanded the company's geographic footprint into the Northern Virginia market and added approximately $600 million in assets, $500 million in deposits, and $400 million in loans to the balance sheet.
The integration of Fauquier Bankshares has been a success, with the company realizing cost savings and revenue synergies that have contributed to its strong financial performance. The company continues to explore opportunities for organic growth and strategic acquisitions that align with its long-term vision and enhance shareholder value.
Risk Management and Asset Quality
Virginia National Bankshares Corporation maintains a conservative risk profile, as evidenced by its strong asset quality metrics. As of March 31, 2024, the company's nonperforming assets (NPAs) to total assets ratio was just 0.13%, well below industry averages. The allowance for credit losses (ACL) stood at 0.73% of total loans, reflecting the company's prudent approach to credit risk management.
The company's loan portfolio is well-diversified, with commercial loans, commercial real estate, 1-4 family residential mortgages, and consumer loans accounting for the majority of the portfolio. The company's underwriting standards and proactive risk management practices have enabled it to navigate economic cycles and maintain a high-quality loan book.
Liquidity
Virginia National Bankshares Corporation maintains a robust capital position, exceeding all regulatory requirements. As of March 31, 2024, the company's Tier 1 capital ratio was 17.67%, and its total risk-based capital ratio was 18.49%, well above the "well-capitalized" thresholds set by the Federal Reserve.
The company's strong liquidity position is supported by its stable deposit base and access to various funding sources, including the Federal Home Loan Bank and the Federal Reserve's discount window. As of March 31, 2024, the company had $45.5 million in cash and cash equivalents, as well as $348.0 million in investment securities, providing ample liquidity to meet its funding needs and support future growth.
Outlook
Virginia National Bankshares Corporation remains cautiously optimistic about the future, as it navigates the evolving banking landscape. The company is closely monitoring the impact of rising interest rates and the potential for an economic slowdown, and it is prepared to adjust its strategies accordingly.
The company's growth strategies focus on organic loan and deposit growth, as well as strategic acquisitions that complement its existing footprint and capabilities. The company is also investing in technology and digital banking initiatives to enhance the customer experience and improve operational efficiency.
In the wealth management segment, the company is focused on expanding its client base and growing its assets under management and administration. The company believes that its comprehensive financial services offerings, combined with its strong community presence, position it well to capture a larger share of the wealth management market in its service area.
Overall, Virginia National Bankshares Corporation is a well-capitalized, well-managed community bank that has demonstrated its ability to deliver consistent financial performance and shareholder value. The company's diversified business model, prudent risk management practices, and strategic growth initiatives position it for continued success in the years ahead.