FOR IMMEDIATE RELEASE

INVESTOR RELATIONS CONTACT:

Tara Y. Harrison (434) 817-8587

•

Paycheck Protection Program – During 2020, Virginia National Bank (the “Bank”) assisted nonprofit organizations 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.  As of December 31, 2020, 37% of the total dollars of PPP loans had been forgiven by the SBA, with $55.1 million outstanding. The Company recognized $2.1 million in PPP loan origination fees in 2020.

•

Loan Deferments – Also to assist our customers whose businesses were impacted by COVID-19, we processed a total of $59.0 million in loan deferments since the beginning of the pandemic, of which $28.7 million, or 48.6%, were principal-only deferments; $20.0 million, or 33.9%, were principal and interest deferments; $8.6 million, or 14.5%, were government-guaranteed loans; and $1.8 million, or 3.0%, were student loans.  As of December 31, 2020, $55.7 million in loan balances, or 94.3% of the total loan deferments approved, have returned to normal payment schedules and are now current, leaving a remaining balance of deferments of $3.3 million.  Of this remaining balance, $2.8 million, or 83.9%, are 100% government-guaranteed loans for which the deferrals were approved by the United States Department of Agriculture; and $540 thousand, or 16.1%, are student loans, which are private student loans not subject to potential federal forgiveness.  All organic, portfolio loans have come out of deferment and are now current.

•

Gross loans outstanding at December 31, 2020 totaled $609.4 million, an increase of $69.9 million, or 13.0% compared to December 31, 2019.  The increase is due to the origination of PPP loans as noted above, of which $55.1 million remain outstanding as of December 31, 2020, as well as $14.8 million in net organic, non-PPP loan growth. Strategic decisions made in 2019 to expand the lending teams and add new products put us in a better position to increase organic loan growth without having to supplement the portfolio with purchased loans.  

•

2020 Full-Year and Selected Balance Sheet Financial Highlights (continued)

•

The balance of loans in non-accrual status decreased to $8 thousand as of December 31, 2020, from $299 thousand as of December 31, 2019.  

•

Loans 90 days or more past due and still accruing interest amounted to $137 thousand as of December 31, 2020, compared to $771 thousand as of December 31, 2019. The December 2019 balance included a government guaranteed loan of approximately $548 thousand, which was brought current in 2020.

•

The period-end allowance for loan losses (“ALLL”) as a percentage of total loans was 0.90% as of December 31, 2020, and 0.78% as of December 31, 2019.   Note that the ALLL a percentage of total loans, excluding PPP loans, (a non-GAAP financial measure) would have been 0.98% as of December 31, 2020.  (See “Reconciliation of Certain Non-GAAP Financial Measures” at the end of this release.)

•

Return on average assets (“ROAA”) for 2020 was 1.00% compared to 1.02% realized in the prior year.

•

Return on average equity (“ROAE”) for 2020 was 10.01% compared to 8.99% realized in 2019.

•

A provision for loan losses of $1.6 million was recognized during 2020, compared to $1.4 million recognized in the prior year.

•

The Company incurred $988 thousand in merger-related expenses during 2020 related to the combination with Fauquier Bankshares, Inc. (“Fauquier”), which is anticipated to close in the first half of 2021.  

•

The efficiency ratio on a fully tax equivalent basis (“FTE”) (a non-GAAP financial measure) was 61.4% for 2020, compared to 64.9% for 2019.  (See “Reconciliation of Certain Non-GAAP Financial Measures” at the end of this release.)

•

The loan-to-deposit ratio was 83.4% at December 31, 2020, compared to 86.9% at December 31, 2019.

•

Net interest income for 2020 of $23.9 million increased $2.0 million or 8.9%, compared to 2019.  The higher net interest income was driven by the increase in interest and fees on loans of $765 thousand period-over-period, and the increase in interest on investment securities of $623 thousand, as well as the decline in interest expense of $922 thousand.

•

The cost of funds of 47 basis points (“bps”) incurred in 2020 decreased 27 bps from 74 bps in 2019, due to lower rates paid on deposit accounts.  Low-cost deposits, which include noninterest checking accounts and interest-bearing checking, savings and money market accounts, remained in excess of 82% of total deposits at the end of 2020 and 2019.

•

Noninterest income for 2020 increased $1.0 million, or 18.3%, compared to 2019, primarily due to the increase in loan swap fee income of $1.1 million.  Gains on sales of securities increased $669 thousand over the same period.  Also, in 2020 the Company realized a partial recovery of $401 thousand of unearned insurance premiums related to the loss of insurance on the student loan portfolio.  The Company expects to receive the balance of unearned premiums of approximately $400 thousand in 2021.  These increases in 2020 were offset by declines in wealth management fee income of $565 thousand, bank-owned life insurance earnings related to a death benefit of $361 thousand received in 2019, and fees on mortgage sales of $112 thousand due to elimination of the department.  

•

Noninterest expense for 2020 increased $895 thousand, or 5.0%, compared to 2019, largely due to $988 thousand of merger-related expenses.  Salaries and employee benefits increased $217 thousand, or 2.4%, and the Company incurred $183 thousand in expenses in 2020 directly related to COVID-19.  In 2019, the Company incurred an expense of $460 thousand related to the settlement of a claim.  

•

Tangible book value per share as of December 31, 2020 was $30.17, compared to $27.98 as of December 31, 2019.  

•

The effective tax rate for 2020 amounts to 20.6%, compared to 18.6% for 2019.  The non-deductibility of certain merger-related expenses for tax purposes in 2020 caused the effective rate to increase while the tax-exempt bank-owned life insurance death benefit in 2019 caused the effective rate to decline in that year.  

•

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

•

A provision for loan losses of $255 thousand was recognized during the fourth quarter of 2020, compared to a provision of $875 thousand during the fourth quarter of 2019.  

•

Fourth quarter 2020 net interest income increased $1.3 million, or 23.6%, compared to the amount recognized in the fourth quarter of 2019.  The increase in fees on loans of $736 thousand and the decline in interest expense of $508 thousand contributed to this overall increase period-over-period.

•

The cost of funds incurred in the fourth quarter of 2020 was 36 bps, an improvement of 40 bps over the 76 bps incurred during the same period in the prior year, primarily due to the decline in interest paid on deposits.  

•

Net interest margin (FTE) (a non-GAAP financial measure) for the fourth quarter of 2020 increased 1 basis point to 3.32% compared to 3.31% for the fourth quarter of 2019.  (See “Reconciliation of Certain Non-GAAP Financial Measures” at the end of this release.)

•

Noninterest income for the fourth quarter of 2020 increased $380 thousand, or 25.9%, to $1.8 million, compared to $1.5 million for the fourth quarter of 2019, due to fluctuations in several categories.  As noted above, the Company realized a partial recovery of $401 thousand in 2020 of unearned insurance premiums related to the student loan portfolio. Loan swap fee income increased $286 thousand, however wealth management fees declined $240 thousand and fees on mortgage sales declined $60 thousand.

•

Noninterest expense for the fourth quarter of 2020 increased $670 thousand, or 15.9%, compared to the fourth quarter of 2019 due largely to $439 thousand in merger-related expenses.  In addition, marketing expense increased $105 thousand from the fourth quarter of 2019 to the same period in 2020 due to the timing of expenses, and FDIC assessment expense increased $99 thousand period-over-period due to the expiration of credits.  The Company also incurred $46 thousand in expenses in the fourth quarter of 2020 directly related to COVID-19.

•

Cash dividends of $814 thousand were declared during the fourth quarter of 2020, while the remaining net income of $1.8 million, or 68.9%, was retained.  

December 31,

2020

December 31,

2019 *

(Unaudited)

ASSETS

Cash and due from banks

$

8,116

$

14,908

Federal funds sold

26,579

4,177

Securities:

Available for sale, at fair value

174,086

114,041

Restricted securities, at cost

3,010

1,683

Total securities

177,096

115,724

Loans

609,406

539,533

Allowance for loan losses

(5,455

)

(4,209

)

Loans, net

603,951

535,324

Premises and equipment, net

5,238

6,145

Bank owned life insurance

16,849

16,412

Goodwill

372

372

Other intangible assets, net

341

408

Accrued interest receivable and other assets

9,868

9,157

Total assets

$

848,410

$

702,627

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Demand deposits:

Noninterest-bearing

$

209,772

$

166,975

Interest-bearing

148,910

122,994

Money market and savings deposit accounts

270,369

221,964

Certificates of deposit and other time deposits

101,713

109,278

Total deposits

730,764

621,211

Advances from the FHLB

30,000

-

Accrued interest payable and other liabilities

5,048

5,309

Total liabilities

765,812

626,520

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 25,268 nonvested) shares issued

   and outstanding as of December 31, 2020 and 2,692,005

   (including 4,000 nonvested) shares issued and outstanding

   as of December 31, 2019

6,722

6,720

Capital surplus

32,457

32,195

Retained earnings

41,959

37,235

Accumulated other comprehensive income (loss)

1,460

(43

)

Total shareholders' equity

82,598

76,107

Total liabilities and shareholders' equity

$

848,410

$

702,627

*

Derived from audited consolidated financial statements

For the three months ended

For the twelve months ended

December 31, 2020

December 31, 2019

December 31, 2020

December 31, 2019

Interest and dividend income:

Loans, including fees

$

6,743

$

5,957

$

24,945

$

24,180

Federal funds sold

6

192

104

459

Investment securities:

Taxable

452

369

1,602

1,158

Tax exempt

149

69

475

290

Dividends

34

24

104

110

Total interest and dividend income

7,384

6,611

27,230

26,197

Interest expense:

Demand and savings deposits

356

663

1,824

2,038

Certificates and other time deposits

288

527

1,454

2,146

Repurchase agreements and other borrowings

38

-

73

89

Total interest expense

682

1,190

3,351

4,273

Net interest income

6,702

5,421

23,879

21,924

Provision for loan losses

255

875

1,622

1,375

Net interest income after provision for loan losses

6,447

4,546

22,257

20,549

Noninterest income:

Wealth management fees

332

572

1,133

1,698

Advisory and brokerage income

184

154

700

605

Royalty income

16

4

103

17

Deposit account fees

167

201

651

766

Debit/credit card and ATM fees

177

186

612

723

Earnings/increase in value of bank owned life insurance

110

111

437

798

Fees on mortgage sales

-

60

77

189

Gains on sales of securities

9

3

743

74

Loan swap fee income

336

50

1,313

214

Other

514

124

796

467

Total noninterest income

1,845

1,465

6,565

5,551

Noninterest expense:

Salaries and employee benefits

2,462

2,449

9,466

9,249

Net occupancy

503

451

1,908

1,824

Equipment

62

114

463

430

Data processing

266

331

1,234

1,236

Merger expenses

439

-

988

-

Settlement of claims

-

-

-

460

Other

1,165

882

4,720

4,685

Total noninterest expense

4,897

4,227

18,779

17,884

Income before income taxes

3,395

1,784

10,043

8,216

Provision for income taxes

779

353

2,065

1,527

Net income

$

2,616

$

1,431

$

7,978

$

6,689

Net income per common share, basic

$

0.96

$

0.53

$

2.94

$

2.49

Net income per common share, diluted

$

0.96

$

0.53

$

2.94

$

2.49

Weighted average common shares outstanding, basic

2,714,273

2,692,005

2,707,877

2,686,866

Weighted average common shares outstanding, diluted

2,714,905

2,693,437

2,708,567

2,689,977

At or For the Three Months Ended

December 31,

2020

September 30,

2020

June 30,

2020

March 31,

2020

December 31,

2019

Common Share Data:

Net income per weighted average share, basic

$

0.96

$

0.69

$

0.77

$

0.52

$

0.53

Net income per weighted average share, diluted

$

0.96

$

0.69

$

0.77

$

0.52

$

0.53

Weighted average shares outstanding, basic

2,714,273

2,714,273

2,710,019

2,692,803

2,692,005

Weighted average shares outstanding, diluted

2,714,905

2,716,710

2,711,017

2,694,090

2,693,437

Actual shares outstanding

2,714,273

2,714,273

2,714,273

2,702,373

2,692,005

Tangible book value per share at period end

$

30.17

$

29.37

$

28.86

$

27.95

$

27.98

Key Ratios:

Return on average assets ¹

1.23

%

0.89

%

1.07

%

0.78

%

0.81

%

Return on average equity ¹

12.75

%

9.18

%

10.64

%

7.28

%

7.43

%

Net interest margin (FTE) ²

3.32

%

3.05

%

3.12

%

3.20

%

3.31

%

Efficiency ratio (FTE) ³

57.03

%

65.68

%

59.47

%

64.31

%

61.22

%

Loan-to-deposit ratio

83.39

%

91.71

%

88.55

%

87.22

%

86.85

%

Net Interest Income:

Net interest income

$

6,702

$

6,047

$

5,755

$

5,375

$

5,421

Net interest income (FTE) ^2,3

$

6,741

$

6,089

$

5,780

$

5,395

$

5,440

Capital Ratios:

Tier 1 leverage ratio

9.54

%

9.41

%

9.84

%

10.59

%

10.81

%

Total risk-based capital ratio

15.35

%

15.41

%

15.56

%

14.04

%

15.08

%

Assets and Asset Quality:

Average Earning Assets

$

807,414

$

793,712

$

744,760

$

678,941

$

653,195

Average Gross Loans

$

618,296

$

630,704

$

618,096

$

535,824

$

526,249

Paycheck Protection Program Loans, end of period

$

55,120

$

86,883

$

86,859

$

-

$

-

Loan Deferrals, Pandemic Related

$

3,346

$

9,439

$

39,800

$

-

$

-

Allowance for loan losses:

Beginning of period

$

5,334

$

4,917

$

4,704

$

4,209

$

3,983

Provision for loan losses

255

224

378

765

875

Charge-offs

(162

)

(62

)

(193

)

(388

)

(689

)

Recoveries

28

255

28

118

40

Net recoveries (charge-offs)

(134

)

193

(165

)

(270

)

(649

)

End of period

$

5,455

$

5,334

$

4,917

$

4,704

$

4,209

Non-accrual loans

$

8

$

9

$

11

$

273

$

299

Loans 90 days or more past due and still accruing

137

61

1,076

733

771

OREO

-

-

-

-

-

Total nonperforming assets (NPA)

$

145

$

70

$

1,087

$

1,006

$

1,070

NPA as a % of total assets

0.02

%

0.01

%

0.14

%

0.14

%

0.15

%

NPA as a % of total loans plus OREO

0.02

%

0.01

%

0.17

%

0.18

%

0.20

%

ALLL to total loans

0.90

%

0.84

%

0.78

%

0.85

%

0.78

%

ALLL to total loans, excluding PPP loans (non-GAAP)

0.98

%

0.97

%

0.90

%

0.85

%

0.78

%

Non-accruing loans to total loans

0.00

%

0.00

%

0.00

%

0.05

%

0.06

%

Net charge-offs (recoveries) to average loans ¹

0.09

%

-0.12

%

0.11

%

0.20

%

0.49

%

¹

Ratio is computed on an annualized basis.

²

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

³

The efficiency ratio (FTE) is computed as a percentage of noninterest expense divided by the sum of  net interest income (FTE) 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.  Refer to the Reconciliation of Certain Non-GAAP Financial (FTE) Measures on the following page.

Three Months Ended

December 31,

2020

September 30,

2020

June 30,

2020

March 31,

2020

December 31,

2019

Fully tax-equivalent measures

Net interest income

$

6,702

$

6,047

$

5,755

$

5,375

$

5,421

Fully tax-equivalent adjustment

39

42

25

20

19

Net interest income (FTE) ¹

$

6,741

$

6,089

$

5,780

$

5,395

$

5,440

Efficiency ratio ²

57.3

%

66.0

%

59.7

%

64.5

%

61.4

%

Fully tax-equivalent adjustment

-0.3

%

-0.3

%

-0.2

%

-0.2

%

-0.2

%

Efficiency ratio (FTE) ³

57.0

%

65.7

%

59.5

%

64.3

%

61.2

%

Net interest margin

3.30

%

3.03

%

3.11

%

3.18

%

3.30

%

Fully tax-equivalent adjustment

0.02

%

0.02

%

0.01

%

0.02

%

0.01

%

Net interest margin (FTE) ¹

3.32

%

3.05

%

3.12

%

3.20

%

3.31

%

Performance measures

Return on average assets ("ROAA")

1.23

%

0.89

%

1.07

%

0.78

%

0.81

%

Impact of merger expenses

0.05

%

0.07

%

—

—

—

Operating ROAA (non-GAAP)

1.28

%

0.96

%

1.07

%

0.78

%

0.81

%

Return on average equity ("ROAE")

12.75

%

9.18

%

10.64

%

7.28

%

7.43

%

Impact of merger expenses

0.54

%

0.68

%

—

—

—

Operating ROAE (non-GAAP)

13.29

%

9.86

%

10.64

%

7.28

%

7.43

%

Allowance for loan loss measures

ALLL to total loans

0.90

%

0.84

%

0.78

%

0.85

%

0.78

%

Impact of PPP loans

0.08

%

0.13

%

0.12

%

—

—

ALLL to total loans, excluding PPP loans (non-GAAP)

0.98

%

0.97

%

0.90

%

0.85

%

0.78

%

¹

FTE calculations use a Federal income tax rate of 21%.

²

The efficiency ratio, GAAP basis, is computed by dividing noninterest expense by the sum of net interest income and noninterest income.