What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-10 compared with 2020-11-06 · 187 added, 283 removed, 704 unchanged (40% of the section changed)

3 unchanged sentences

(Dollars in thousands, except per share data)

September 30, 2020

March 31, 2021

December 31, 2020*

25 unchanged sentences

2,728,327 (including 36,179 nonvested) shares issued

and outstanding as of September 30, 2020 and 2,692,005

and outstanding as of March 31, 2021 and 2,714,273

(including 25,268 nonvested) shares issued and outstanding

11 unchanged sentences

For the three months ended

For the nine months ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Interest and dividend income:

9 unchanged sentences

Net interest income

Provision for (recovery of) loan losses

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

Provision for loan losses

Net interest income after provision for loan losses

Noninterest income:

14 unchanged sentences

Merger expenses

Settlement of claims

Total noninterest expense

5 unchanged sentences

VIRGINIA NATIONAL BANKSHARES CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

For the three months ended

For the nine months ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Other comprehensive income

Unrealized gain on securities, net of tax

of $ 81 and $ 484 for the three and nine months

ended September 30, 2020;

March 31, 2021

March 31, 2020

Other comprehensive income (loss)

Unrealized losses on securities, net of tax

of ($ 900 ) for the three months ended

March 31, 2021;

and net of tax of

$ 29 and $ 372 for the three and nine months

ended September 30, 2019

($ 109 ) for the three months ended

March 31, 2020

Reclassification adjustment for realized gains

on sales of securities, net of tax of ($ 19 ) and

($ 154 ) for the three and nine months ended

September 30, 2020;

on sales of securities, net of tax of ($ 0 )

for the three months ended

March 31, 2021;

and net of tax of ($ 11 )

and ($ 15 ) for the three and nine months

ended September 30, 2019

Total other comprehensive income

Total comprehensive income

for the three months ended

March 31, 2020

Total other comprehensive loss

Total comprehensive (loss) income

See Notes to Consolidated Financial Statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Dollars in thousands, except per share data)

2 unchanged sentences

Balance, December 31, 2019

Stock options exercised

Stock option expense

Unrestricted stock grants

Cash dividends declared ($ 0.30 per share)

Other comprehensive income

Balance, March 31, 2019

Stock option expense

Stock dividend distributable *

Cash dividends declared ($ 0.30 per share)

Other comprehensive income

Balance, June 30, 2019

Stock option expense

Cash in lieu of fractional shares

Cash dividends declared ($ 0.30 per share)

Other comprehensive income

Balance, September 30, 2019

Balance, December 31, 2019

Stock option expense

Restricted stock grant expense

2 unchanged sentences

Balance, March 31, 2020

Stock option expense

Restricted stock grant expense

Cash dividends declared ($ 0.30 per share)

Other comprehensive income

Balance, June 30, 2020

Balance, December 31, 2020

Exercise of stock options

Stock option expense

2 unchanged sentences

Cash dividends declared ($ 0.30 per share)

Other comprehensive income

Balance, September 30, 2020

* Common stock and capital surplus as of June 30, 2019 includes the 5 % stock dividend distributable effective July 5, 2019.

Other comprehensive loss

Balance, March 31, 2021

See Notes to Consolidated Financial Statements

2 unchanged sentences

(dollars in thousands)

For the nine months ended

September 30, 2020

September 30, 2019

For the three months ended

March 31, 2021

March 31, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

7 unchanged sentences

Stock option expense

Stock grants, unrestricted

Stock grant expense, restricted

4 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Net increase in restricted investments

Net decrease (increase) in restricted investments

Purchases of available for sale securities

1 unchanged sentence

Proceeds from sales of available for sale securities

Net decrease (increase) in organic loans

Net increase in organic loans

Net decrease in purchased loans

Cash payment for wealth management book of business

Proceeds from settlement of bank owned life insurance

Purchase of bank premises and equipment

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase (decrease) in demand deposits, NOW accounts, and money market accounts

Net increase in demand deposits, NOW accounts, and money market accounts

Net increase (decrease) in certificates of deposit and other time deposits

Net increase in borrowings

Proceeds from stock options exercised

Cash payment for stock dividend fractional shares

Cash dividends paid

Net cash provided by financing activities

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS:

4 unchanged sentences

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING

Unrealized gain on available for sale securities

Initial right-of-use assets obtained in exchange for new operating lease liabilities

Unrealized losses on available for sale securities

See Notes to Consolidated Financial Statements

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

Significant Accounting Policies

9 unchanged sentences

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses (including impaired loans), other-than-temporary impairment of securities, intangible assets, and fair value measurements.

Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

The statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company’s Form 10-K for the year ended December 31, 2020.

1 unchanged sentence

No such reclassifications were significant.

Adoption of New Accounting Guidance

Interagency COVID-19 Guidance I n March 2020, various regulatory agencies, including the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (“the agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19.

The interagency statement was effective immediately and impacted accounting for loan modifications.

Under Accounting Standards Codification (“ASC”) 310-40, “Receivables – Troubled Debt Restructurings by Creditors,” (“ASC 310-40”), issued by the Financial Accounting Standards Board (“FASB”), a restructuring of debt constitutes a troubled debt restructuring (“TDR”) if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs.

This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

This interagency guidance may have a material impact on the Company’s financial statements;

however, this impact cannot be quantified at this time.

Merger with Fauquier Bankshares, Inc.

On April 1, 2021 , the Company completed its merger with Fauquier Bankshares, Inc.

(“Fauquier”).

The merger of Fauquier with and into the Company (the “Merger”) was effected pursuant to the terms and conditions of the Agreement and Plan of Reorganization, dated as of September 30, 2020, between the Company and Fauquier, and a related Plan of Merger (together, the “Merger Agreement”).

Pursuant to the Merger Agreement, holders of shares of Fauquier common stock received 0.675 shares of the Company’s common stock for each share of Fauquier common stock held immediately prior to the effective date of the Merger, plus cash in lieu of fractional shares.

Each share of the Company’s common stock outstanding immediately prior to the Merger remained outstanding and was unaffected by the Merger.

Shortly after the effective time of the Merger, The Fauquier Bank, Fauquier’s wholly-owned bank subsidiary, was merged with and into Virginia National Bank, the Company’s wholly-owned bank subsidiary, with Virginia National Bank surviving.

The first quarter balance sheet and financial results of the Company do not include the financial position or results of Fauquier.

At March 31, 2021, Fauquier had total assets of $ 911.3 million, net loans of $ 616.4 million and total deposits of $ 817.5 million.

Recent Accounting Pronouncements

Financial Instruments – Credit Losses In June 2016, the FASB issued Accounting Standards Update (“ASU”) No.

2016-13, “Financial Instruments – Credit Losses (Topic 326):

Financial Instruments – Credit Losses In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

1 unchanged sentence

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses.

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASUs 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03.

8 unchanged sentences

Effective November 25, 2019, the SEC adopted Staff Accounting Bulletin (“SAB”) 119.

SAB 119 updated portions of SEC interpretative guidance to align with FASB ASC 326, “Financial Instruments – Credit Losses.” It covers topics including (1) measuring current expected credit losses;

SAB 119 updated portions of SEC interpretative guidance to align with FASB Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses.” It covers topics including (1) measuring current expected credit losses;

(2) development, governance, and documentation of a systematic methodology;

1 unchanged sentence

and (4) validating a systematic methodology.

Income Taxes In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.” The ASU is expected to reduce cost and complexity related to the accounting for income taxes by removing specific exceptions to general principles in Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and improving financial statement preparers’ application of certain income tax-related guidance.

This ASU is part of the FASB’s simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects.

For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted.

The Company does not expect the adoption of ASU 2019-12 to have a material impact on its consolidated financial statements.

Investments – Equity Securities In January 2020, the FASB issued ASU 2020-01, “Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the FASB’s Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions.

ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting.

For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted.

The Company does not expect the adoption of ASU 2020-01 to have a material impact on its consolidated financial statements.

LIBOR and Other Reference Rates In March 2020, the FASB issued ASU No.

2020-04 “Reference Rate Reform (Topic 848):

LIBOR and Other Reference Rates In March 2020, the FASB issued ASU 2020-04 “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform.

2 unchanged sentences

The guidance is effective for all entities as of March 12, 2020 through December 31, 2022.

To facilitate an orderly transition from LIBOR, Inter-bank Offered Rate (“IBOR”) and other benchmark rates to alternative reference rates (“ARRs”), the Company has established a focus committee, which includes members of senior management, including the Chief Credit Officer and Chief Financial Officer, among others.

The task of this committee is to identify, assess and monitor risk associated with the expected discontinuation or unavailability of benchmarks, including LIBOR, achieve operations readiness and engage impacted clients in connection with the transition to ARRs.

Subsequently, in January 2021, the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848):

Scope.” This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition.

An entity may elect to apply ASU 2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued.

An entity may elect to apply ASU 2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020.

The Company has identified all loans that are directly or indirectly impacted by LIBOR.

The Company is assessing ASU 2020-04 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments.

SEC Filing Requirements On March 12, 2020, the SEC finalized amendments to the definitions of its “accelerated filer” and “large accelerated filer” definitions.

The amendments increase the threshold criteria for meeting these filer classifications and are effective on April 27, 2020.

Any changes in filer status are to be applied beginning with the filer’s first annual report filed with the SEC subsequent to the effective date.

Prior to these changes, the Company was required to comply with section 404(b) of the Sarbanes Oxley Act concerning auditor attestation over internal control over financial reporting as an “accelerated filer” as it had more than $75 million in public float but less than $700 million at the end of the Company’s most recent second quarter.

The rule change expands the definition of “smaller reporting companies” to include entities with public float of less than $700 million and less than $100 million in annual revenues.

The Company expects that it will no longer be considered an accelerated filer beginning in 2021.

If the Company’s annual revenues

exceed $100 million, its category will chan ge back to “accelerated filer”.

The classifications of “accelerated filer” and “large accelerated filer” require a public company to obtain an auditor attestation concerning the effectiveness of internal control over financial reporting ( “ ICFR ” ) and include the opinion on ICFR in its annual report on Form 10-K.

All public companies are required to obtain and file annual financial statement audits, as well as provide management’s assertion on effectiveness of internal control over financial reporting, but the external auditor attestation of internal control over financial reporting is not required f or smaller reporting companies .

As the Bank ’s total assets exceed $ 500 m illion, it remains subject to FDICIA ’s internal reporting requirements, but does not require an auditor attestation concerning internal controls over financial reporting.

As such, professional and consulting expenditures should decline by an immaterial amount.

Recently Adopted Accounting Developments

Accounting for Income Taxes In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.” The ASU is expected to reduce cost and complexity related to the accounting for income taxes by removing specific exceptions to general principles in Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and improving financial statement preparers’ application of certain income tax-related guidance.

This ASU is part of the FASB’s simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects.

ASU 2019-12 was effective for the Company on January 1, 2021.

The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements.

Nonrefundable Fees and Other Costs In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable fees and Other Costs.” This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period.

For public business entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

Early adoption is not permitted.

All entities should apply ASU No.

2020-08 on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities.

The Company does not expect the adoption of ASU 2020-08 to have a material impact on its consolidated financial statements.

The amortized cost and fair values of securities available for sale as of September 30, 2020 and December 31, 2019 were as follows (dollars in thousands):

September 30, 2020

ASU 2020-08 was effective for the Company on January 1, 2021.

The adoption of ASU 2020-08 did not have a material impact on the Company’s consolidated financial statements.

CARES Act In December 2020, the Consolidated Appropriates Act of 2021 (“CAA”) was passed.

Under Section 541 of the CAA, Congress extended or modified many of the relief programs first created by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), including the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”)

and treatment of certain loan modifications related to the COVID-19 pandemic.

The adoption of the CAR E S Act had no material impact on the Company’s consolidated financial statements.

See further discussion of PPP loans and loan modifications in Note s 3 and 4 of the notes to the Consolidated Financial Statements.

The amortized cost and fair values of securities available for sale as of March 31, 2021 and December 31, 2020 were as follows (dollars in thousands):

March 31, 2021

Government agencies

4 unchanged sentences

Government agencies

Corporate bonds

Mortgage-backed securities/CMOs

1 unchanged sentence

Total Securities Available for Sale

As of September 30, 2020, there were $ 53.1 million, or 32 issues of individual securities, held in an unrealized loss position.

These securities have an unrealized loss of $ 349 thousand and consisted of 11 mortgage-backed/collateralized mortgage obligations (“CMOs”), 12 municipal bonds, and 9 agency bonds.

The following table summarizes all securities with unrealized losses, segregated by length of time in a continuous unrealized loss position, at September 30, 2020, and December 31, 2019 (dollars in thousands):

September 30, 2020

As of March 31, 2021, there were $ 130.7 million, or 80 issues of individual securities, held in an unrealized loss position.

These securities have an unrealized loss of $ 3.5 million and consisted of 29 mortgage-backed/collateralized mortgage obligations (“CMOs”), 34 municipal bonds, and 17 agency bonds.

The following table summarizes all securities with unrealized losses, segregated by length of time in a continuous unrealized loss position, at March 31, 2021, and December 31, 2020 (dollars in thousands):

March 31, 2021

Less than 12 Months

10 unchanged sentences

The Company’s securities portfolio is primarily made up of fixed rate bonds, the prices of which move inversely with interest rates.

Any unrealized losses are considered by management to be driven by increases in market interest rates over the yields available at the time the underlying securities were purchased.

Any unrealized losses are considered by management to be driven by increases in market interest rates over the

yields available at the time the underlying securities were purchased.

The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline.

1 unchanged sentence

Management does not believe any of the securities in an unrealized loss position are impaired due to credit quality.

Accordingly, as of September 30, 2020, management believes the impairments detailed in the table above are temporary, and no impairment loss has been realized in the Company’s consolidated income statement.

Accordingly, as of March 31, 2021 , management believes the impairments detailed in the table above are temporary, and no impairment loss has been realized in the Company’s consolidated income statement.

An “other-than-temporary impairment” (“OTTI”) is considered to exist if either of the following conditions are met:

1 unchanged sentence

In the event that a security would suffer impairment for a reason that was “other than temporary,” the Company would be expected to write down the security’s value to its new fair value, and the amount of the write down would be included in earnings as a realized loss.

As of September 30, 2020, management has concluded that none of its investment securities have an OTTI based upon the information available.

As of March 31, 2021, management has concluded that none of its investment securities have an OTTI based upon the information available.

Additionally, management has the ability to hold any security with an unrealized loss until maturity or until such time as the value of the security has recovered from its unrealized loss position.

Securities having carrying values of $ 6.0 million at September 30, 2020 were pledged as collateral to secure public deposits and facilitate borrowing from the Federal Reserve Bank of Richmond (“FRB”).

Securities having carrying values of $ 5.9 million at March 31, 2021 were pledged as collateral to secure public deposits and facilitate borrowing from the Federal Reserve Bank of Richmond (“FRB”).

At December 31, 2020, securities having carrying values of $ 6.0 million were similarly pledged.

For the nine months ended September 30, 2020, proceeds from the sales of securities amounted to $ 62.2 million, with gross realized gains of $ 882 thousand and gross realized losses of $ 147 thousand, for a net realized gain of $ 734 thousand.

For the nine months ended September 30, 2019, proceeds from the sales of securities amounted to $ 21.1 million, with gross realized gains of $ 114 thousand and gross realized losses of $ 43 thousand, for a net realized gain of $ 71 thousand.

For the three months ended March 31, 2021, there were no sales of securities.

For the three months ended March 31, 2020, proceeds from the sales of securities amounted to $ 5.4 million, with realized gains of $ 53 thousand.

Restricted securities are securities with limited marketability and consist of stock in the FRB, the Federal Home Loan Bank of Atlanta (“FHLB”), and CBB Financial Corporation, the holding company for Community Bankers Bank.

These restricted securities, totaling $ 3.4 million and $ 1.7 million as of September 30, 2020 and December 31, 2019, are carried at cost.

The increase was attributed to the required purchase of additional FHLB stock with the advances made in the third quarter of 2020.

The composition of the loan portfolio by loan classification at September 30, 2020 and December 31, 2019 appears below (dollars in thousands).

September 30,

These restricted securities, totaling $ 2.7 million and $ 3.0 million as of March 31, 2021 and December 31, 2020, are carried at cost.

The composition of the loan portfolio by loan classification at March 31, 2021 and December 31, 2020 appears below (dollars in thousands).

Commercial and industrial - organic

23 unchanged sentences

Allowance for loan losses

During the nine months ended September 30, 2020, the Bank originated $ 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.

During the last three quarters of 2020, the Company 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.

During the three months ended March 31, 2021, the Company funded an additional $ 36.2 million in PPP loans.

The balances in the table above include unamortized premiums and net deferred loan costs (fees).

As of September 30, 2020 and December 31, 2019, unamortized premiums on loans purchased were $ 2.0 million and $ 2.5 million, respectively.

Net deferred loan costs (fees) totaled $( 2.1 ) million and $ 100 thousand as of September 30, 2020 and December 31, 2019.

The deferred fees increased $ 2.2 million due to the fees collected from the SBA for the PPP loans that are being amortized over the contractual life of the underlying loans, most of which are over a 24 -month period.

As of March 31, 2021 and December 31, 2020, unamortized premiums on loans purchased were $ 1.7 million and $ 1.8 million, respectively.

Net deferred loan costs (fees) totaled $( 2.0 ) million and $( 931 ) thousand as of March 31, 2021 and December 31, 2020, respectively.

The deferred fees increased $ 1.1 million due to the fees collected from the SBA for the additional PPP loans funded during the three months ended March 31, 2021.

Net deferred fees on PPP loans are being amortized over the contractual life of the underlying loans, most of which are over a 60 -month period.

Accounting guidance requires certain disclosures about investments in impaired loans, the allowance for loan losses and interest income recognized on impaired loans.

1 unchanged sentence

Factors involved in determining impairment include, but are not limited to, expected future cash flows, financial condition of the borrower, and current economic conditions.

The following tables reflect the breakdown by class of the loans classified as impaired loans as of September 30, 2020 and December 31, 2019.

The following tables reflect the breakdown by class of the loans classified as impaired loans as of March 31, 2021 and December 31, 2020.

These loans are reported at their recorded investment, which is the carrying amount of the loan as reflected on the Company’s balance sheet, net of charge-offs and other amounts applied to reduce the net book balance.

Average recorded investment in impaired loans is computed using an average of month-end balances for these loans for either the nine months ended September 30, 2020 or the twelve months ended December 31, 2019.

Interest income recognized is for the nine months ended September 30, 2020 or the twelve months ended December 31, 2019 (dollars below reported in thousands).

September 30, 2020

Average recorded investment in impaired loans is computed using an average of month-end balances for these loans for either the three months ended March 31, 2021 or the twelve months ended December 31, 2020.

Interest income recognized is for the three months ended March 31, 2021 or the twelve months ended December 31, 2020 (dollars below reported in thousands).

March 31, 2021

Impaired loans without a valuation allowance:

1 unchanged sentence

1-4 family residential mortgages, junior lien

Commercial non-owner occupied real estate

Total impaired loans without a valuation allowance

6 unchanged sentences

Land and land development

1-4 family residential mortgages, first lien, owner occupied

1-4 family residential mortgages, junior lien

Commercial and industrial - organic

Commercial non-owner occupied real estate

5 unchanged sentences

Included in the impaired loans above are non-accrual loans.

Generally, loans are placed on non-accrual when a loan is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more.

Generally, a loan is placed on non-accrual when it is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more.

Any unpaid interest previously accrued on those loans is reversed from income.

3 unchanged sentences

The recorded investment in non-accrual loans is shown below by class (dollars in thousands):

September 30, 2020

March 31, 2021

December 31, 2020

Land and land development

Commercial and industrial - organic

Total non-accrual loans

Additionally, TDRs are considered impaired loans.

Additionally, troubled debt restructurings (“TDRs”) are considered impaired loans.

TDRs occur when the Company agrees to modify the original terms of a loan by granting a concession that it would not otherwise consider due to the deterioration in the financial condition of the borrower.

1 unchanged sentence

These concessions could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions.

In accordance with regulatory guidance, the Bank has approved for certain customers who have been adversely affected by COVID-19 to defer principal-only, or principal and interest, payments for a 90- to 180-day period.

In accordance with regulatory guidance, the Company has approved for certain customers who have been adversely affected by COVID-19 to defer principal-only, or principal and interest.

Such short-term modifications, which were made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs.

While interest will continue to accrue to income, in accordance with GAAP, if the Bank ultimately incurs a credit loss on these deferred payments, interest income would need to be reversed and therefore, interest income in future periods could be negatively impacted.

While interest will continue to accrue to income, in accordance with GAAP, if the Company ultimately incurs a credit loss on these deferred payments, interest income would need to be reversed and therefore, interest income in future periods could be negatively impacted.

A total of $ 59.0 million in loan deferments have been approved since the beginning of the pandemic.

As of September 30, 2020, $ 48.9 million, or 83.8 %, of the total loan deferments approved have returned to normal payment schedules and are now current.

Based on regulatory guidance on student lending, the Company has classified 81 of its student loans purchased as TDRs for a total of $ 1.2 million as of September 30, 2020.

These borrowers that should have been in repayment have requested and been granted payment extensions or reductions exceeding the maximum lifetime allowable payment forbearance of twelve months ( 36 months lifetime allowance for military service), as permitted under the regulatory guidance, and are therefore considered restructurings.

As of March 31, 2021, $ 57.5 million, or 97.4 %, of the total loan deferments approved have returned to normal payment schedules and are now current.

Based on regulatory guidance on student lending, the Company has classified 68 of its student loans purchased as TDRs for a total of $ 1.1 million as of March 31, 2021.

Student loan borrowers are allowed in-school deferments, plus an automatic six-month grace period post in-school status, before repayment is scheduled to begin, and these deferments do not count toward the maximum allowable forbearance.

4 unchanged sentences

Troubled debt restructurings

September 30, 2020

March 31, 2021

December 31, 2020

1 unchanged sentence

1-4 family residential mortgages, junior lien

Commercial non-owner occupied real estate

Student loans purchased

3 unchanged sentences

Total nonperforming TDRs

A summary of loans shown above that were modified under the terms of a TDR during the three and nine months ended September 30, 2020 and 2019 is shown below by class (dollars in thousands).

A summary of loans shown above that were modified under the terms of a TDR during the three months ended March 31, 2021 and 2020 is shown below by class (dollars in thousands).

The Post-Modification Recorded Balance reflects the period end balances, inclusive of any interest capitalized to principal, partial principal paydowns, and principal charge-offs since the modification date.

2 unchanged sentences

For three months ended

September 30, 2020

September 30, 2019

Student loans purchased

Total loans modified during the period

For the nine months ended

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Student loans purchased

Total loans modified during the period

During the nine months ended September 30, 2020, there were two loans modified as TDRs that subsequently defaulted which had been modified as TDRs during the twelve months prior to default.

These student loans had a balance of $ 7 thousand prior to being charged off.

There were three loans modified as a TDR that subsequently defaulted during the year ended December 31, 2019 which had been modified as a TDR during the twelve months prior to default.

During the three months ended March 31, 2021, there was one loan modified as a TDR that subsequently defaulted which had been modified as a TDR during the twelve months prior to default.

This student loan had a balance of $ 19 thousand prior to being charged off.

There were five loans modified as a TDR that subsequently defaulted during the year ended December 31, 2020 which had been modified as a TDR during the twelve months prior to default.

These student loans had balances totaling $ 48 thousand prior to being charged off.

There were no loans secured by 1-4 family residential property that were in the process of foreclosure at either September 30, 2020 or December 31, 2019.

There were no loans secured by 1-4 family residential property that were in the process of foreclosure at either March 31, 2021 or December 31, 2020.

Allowance for Loan Losses

69 unchanged sentences

These loans would be considered impaired and evaluated on an individual basis.

The following represents the loan portfolio designated by the internal risk ratings assigned to each credit as of September 30, 2020 and December 31, 2019 (dollars in thousands).

The following represents the loan portfolio designated by the internal risk ratings assigned to each credit as of March 31, 2021 and December 31, 2020 (dollars in thousands).

There were no loans rated “Doubtful” as of either period.

September 30, 2020

March 31, 2021

Commercial and industrial - organic

20 unchanged sentences

Commercial and industrial - organic

Commercial and industrial - Paycheck Protection Program

Commercial and industrial - government guaranteed

29 unchanged sentences

As of March 31, 2020 and June 30, 2020, the Company downgraded the economic qualitative factors within its ALLL model in light of the effects of COVID-19 on the economy.

No additional downgrades of such factors were taken during the quarter ended September 30, 2020.

No additional downgrades of such factors were taken during the quarters ended September 30, 2020, December 31, 2020 or March 31, 2021.

If economic conditions improve or worsen, the Company could experience changes in the required ALLL.

1 unchanged sentence

For each segment and class of loans, management must exercise significant judgment to determine the estimation method that fits the credit risk characteristics of its various segments.

Although this evaluation is inherently subjective, qualified management utilizes its significant knowledge and experience related to both the Company ’s market and the history of the Company’s loan losses.

Although this evaluation is inherently subjective, qualified management utilizes its significant knowledge and experience related to both the Company ’s market s and the history of the Company’s loan losses.

Impaired loans are individually evaluated and, if deemed appropriate, a specific allocation is made for these loans.

In reviewing the loans classified as impaired loans totaling $ 2.2 million at September 30, 2020, a specific valuation allowance was recognized after consideration was given for each borrowing as to the fair value of the collateral on the loan or the present value of expected future cash flows from the borrower.

The $ 4 thousand in the allowance total shown below as individually evaluated for impairment was attributed to the impaired student loans that required an allowance as of September 30, 2020 due to the loss of the insurance on this portfolio as discussed previously.

A summary of the transactions in the Allowance for Loan Losses by loan portfolio segment for the nine months ended September 30, 2020 and the year ended December 31, 2019 appears below (dollars in thousands):

In reviewing the loans classified as impaired loans totaling $ 1.2 million at March 31, 2021, a specific valuation allowance was recognized after consideration was given for each borrowing as to the fair value of the collateral on the loan or the present value of expected future cash flows from the borrower.

The $ 6 thousand in the allowance total shown below as individually evaluated for impairment was attributed to the impaired student loans that required an allowance as of March 31, 2021 due to the loss of the insurance on this portfolio as discussed previously.

A summary of the transactions in the Allowance for Loan Losses by loan portfolio segment for the three months ended March 31, 2021 and the year ended December 31, 2020 appears below (dollars in thousands):

Allowance for Loan Losses Rollforward by Portfolio Segment

As of and for the period ended September 30, 2020

As of and for the period ended March 31, 2021

Allowance for Loan Losses:

22 unchanged sentences

For all classes of loans, the Company considers the entire balance of the loan to be contractually delinquent if the minimum payment is not received by the due date.

Interest and fees continue to accrue on past due loans until they are placed in nonaccrual or cha r ged off.

The following tables show the aging of past due loans as of September 30, 2020 and December 31, 2019 (dollars below reported in thousands).

Interest and fees continue to accrue on past due loans until they are placed in nonaccrual or charged off.

The following tables show the aging of past due loans as of March 31, 2021 and December 31, 2020 (dollars below reported in thousands).

Past Due Aging as of

September 30, 2020

March 31, 2021

Commercial loans

24 unchanged sentences

Commercial and industrial - organic

Commercial and industrial - Paycheck Protection Program

Commercial and industrial - government guaranteed

18 unchanged sentences

Net Income Per Share

On June 13, 2019 , the Board of Directors approved a stock dividend of five percent ( 5 %) on the outstanding shares of common stock of the Company (or .05 share for each share outstanding) which was issued on July 5, 2019 to all shareholders of record as of the close of business on June 26, 2019 , referred to as the “ 5 % Stock Dividend”.

Shareholders received cash in lieu of any fractional shares that they otherwise would have been entitled to receive in connection with the stock dividend.

The price paid for fractional shares was based on the volume-weighted average price of a share of common stock for the most recent three days prior to the record date during which a trade of the Company’s stock occurred.

For the following table, share and per share data have been adjusted to reflect the 5 % Stock Dividend.

The table shows the weighted average number of shares used in computing net income per common share and the effect of the weighted average number of shares of potential dilutive common stock for the three and nine months ended September 30, 2020 and 2019.

The table below shows the weighted average number of shares used in computing net income per common share and the effect of the weighted average number of shares of potential dilutive common stock for the three months ended March 31, 2021 and 2020.

Diluted net income per share is computed based on the weighted average number of shares of common stock equivalents outstanding, to the extent dilutive.

The Company’s common stock equivalents relate to outstanding common stock options.

Unvested restricted stock as noted in the Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 is included in the calculation of basic and diluted net income per share (dollars below reported in thousands except per share data).

Unvested restricted stock as noted in the Consolidated Balance Sheets as of March 31, 2021 and March 31, 2020 is included in the calculation of basic and diluted net income per share (dollars below reported in thousands except per share data).

Three Months Ended

September 30, 2020

September 30, 2019

Basic net income per share

Effect of dilutive stock options

Diluted net income per share

Nine Months Ended

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Basic net income per share

1 unchanged sentence

Diluted net income per share

For the nine months ended September 30, 2020, there were 145,404 option shares considered anti-dilutive and excluded from this calculation.

For the nine months ended September 30, 2019, there were 66,301 option shares, as adjusted, considered anti-dilutive and excluded from this calculation.

For the three months ended March 31, 2021, there were 78,301 option shares considered anti-dilutive and excluded from this calculation.

For the three months ended March 31, 2020, there were 104,301 option shares considered anti-dilutive and excluded from this calculation.

Stock Incentive Plans

At the Annual Shareholders Meeting on May 21, 2014, shareholders approved the Virginia National Bankshares Corporation 2014 Stock Incentive Plan (“2014 Plan”).

The 2014 Plan makes available up to 275,625 shares of the Company’s common stock, as adjusted by the 5 % Stock Dividend and prior stock dividends, to be issued to plan participants.

The 2014 Plan provides for granting of both incentive and nonqualified stock options, as well as restricted stock and other stock-based awards.

The 2014 Plan makes available up to 275,625 shares of the Company’s common stock, as adjusted by prior issued stock dividends, to be issued to plan participants.

The 2014 Plan provides for granting of both incentive and nonqualified stock options, as well as restricted stock, unrestricted stock and other stock based awards.

No new grants will be issued under the 2005 Stock Incentive Plan (“2005 Plan”) as this plan has expired .

3 unchanged sentences

Stock options generally vest by the fourth or fifth anniversary of the date of the grant.

A summary of the shares issued and available under each of the Plans is shown below as of September 30, 2020.

Share data and exercise price range per share have been adjusted to reflect the 5 % Stock Dividend and prior stock dividends.

A summary of the shares issued and available under each of the Plans is shown below as of March 31, 2021.

Share data and exercise price range per share have been adjusted to reflect prior issued stock dividends.

Although the 2005 Plan has expired and no new grants will be issued under this plan, there were options issued before the plan expired that are still outstanding as shown below.

5 unchanged sentences

Remaining available for grant

Grants issued and outstanding:

Stock grants issued and outstanding:

Total vested and unvested shares

Fully vested shares

Option grants issued and outstanding:

Total vested and unvested shares

Fully vested shares

Exercise price range

6 unchanged sentences

Changes in the stock options outstanding related to the Plans are summarized below (dollars in thousands except per share data):

September 30, 2020

March 31, 2021

Number of Options

3 unchanged sentences

Outstanding at January 1, 2021

Outstanding at September 30, 2020

Options exercisable at September 30, 2020

For the nine months ended September 30, 2020 and 2019, the Company recognized $ 88 thousand and $ 71 thousand, respectively, in compensation expense for stock options.

As of September 30, 2020, there was $ 432 thousand in unrecognized compensation expense remaining to be recognized in future reporting periods through 2025 .

Outstanding at March 31, 2021

Options exercisable at March 31, 2021

For the three months ended March 31, 2021 and 2020, the Company recognized $ 34 thousand and $ 24 thousand, respectively, in compensation expense for stock options.

As of March 31, 2021, there was $ 361 thousand in unrecognized compensation expense remaining to be recognized in future reporting periods through 2025 .

The fair value of any stock option grant is estimated at the grant date using the Black-Scholes pricing model.

Stock option grants for 40,000 shares were issued during the three months ended September 30, 2020 and no stock option grants were issued during the three months ended September 30, 2019.

Stock option grants for 66,000 shares were issued during the nine months ended September 30, 2020, and stock option grants for 420 shares were issued during the nine months ended September 30, 2019.

The fair value of each option granted in 2020 was estimated based on the assumptions noted in the following table:

For the nine months ended

September 30, 2020

No stock option grants were issued during the three months ended March 31, 2021.

Stock option grants for 26,000 shares were issued during the three months ended March 31, 2020.

The fair value of each option granted in the first three months of 2021 and 2020 was estimated based on the assumptions noted in the following table:

For the three months ended

March 31, 2021

March 31, 2020

Expected volatility 1

7 unchanged sentences

Treasury yield curve interest rate that corresponds to the contractual life of the option, in effect at the time of the grant.

Summary information pertaining to options outstanding at September 30, 2020 is shown below.

Share and per share data have been adjusted to reflect the 5 % Stock Dividend and prior stock dividends.

Summary information pertaining to options outstanding at March 31, 2021 is shown below.

Share and per share data have been adjusted to reflect the prior stock dividends issued.

Options Outstanding

6 unchanged sentences

$40.01 to $42.62

Unrestricted stock grants - No unrestricted stock grants were issued in the nine months ended September 30, 2020.

On February 20, 2019, a total of 11,535 shares of unrestricted stock, as adjusted for the 5 % Stock Dividend, were granted to non-employee directors and certain members of executive management for services to be provided during the year ended December 31, 2019.

Based on the market price on February 20, 2019 of $ 38.65 , the total expense for these shares of $ 424 thousand was expensed in 2019 as those services were provided.

As of September 30, 2019, $ 318 thousand of this total had been realized in stock grant expense.

Restricted stock grants – In September 2019, 4,000 restricted shares were granted to certain members of executive management, vesting over a four-year period.

Restricted stock grants – In February 2021, 13,503 restricted shares were granted to employee and non-employee directors, vesting over a four-year period.

In March 2020, 10,368 restricted shares were granted to non-employee directors, vesting over a four-year period.

In April 2020, 1,900 shares were issued to lenders in accordance with an internal lender incentive plan, vesting over a five-year period, and in May 2020, 10,000 restricted shares were granted to certain members of executive management, vesting over a four-year period.

For the three and nine months ended September 30, 2020, $ 42 thousand and $ 96 thousand, respectively, was expensed as a result of restricted stock grants.

As of September 30, 2020, there was $ 599 thousand in unrecognized compensation expense for restricted stock grants remaining to be recognized in future reporting periods through 2025 .

For the three and nine months ended September 30, 2019, $ 3 thousand in expense was incurred.

Changes in the restricted stock grants outstanding during the nine months ended September 30, 2020 are summarized below (dollars in thousands except per share data):

September 30, 2020

For the three months ended March 31, 2021, $ 61 thousand was expensed as a result of restricted stock grants.

As of March 31, 2021, there was $ 898 thousand in unrecognized compensation expense for restricted stock grants remaining to be recognized in future reporting periods through 2025 .

For the three months ended March 31, 2020, $ 15 thousand in expense was incurred.

Changes in the restricted stock grants outstanding during the three months ended March 31, 2021 are summarized below (dollars in thousands except per share data):

March 31, 2021

Number of Shares

2 unchanged sentences

Nonvested as of January 1, 2021

Nonvested at September 30, 2020

Nonvested at March 31, 2021

Fair Value Measurements

22 unchanged sentences

Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2).

The following tables present the balances measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 (dollars in thousands):

Fair Value Measurements at September 30, 2020 Using:

The following tables present the balances measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 (dollars in thousands):

Fair Value Measurements at March 31, 2021 Using:

Quoted Prices

8 unchanged sentences

Government agencies

Corporate bonds

Mortgage-backed securities/CMOs

10 unchanged sentences

Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest expense on the Consolidated Statements of Income.

As of September 30, 2020 and December 31, 2019, the Company had no OREO property.

As of March 31, 2021 and December 31, 2020, the Company had no OREO property.

Impaired Loans

3 unchanged sentences

The vast majority of the collateral is real estate.

The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2).

However, if the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3.

4 unchanged sentences

Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

The Company had impaired loans of $ 2.2 million as of September 30, 2020 and $ 2.5 million as of December 31, 2019.

The Company had impaired loans of $ 1.2 million as of March 31, 2021 and $ 1.3 million as of December 31, 2020.

All impaired loans were measured based on expected future cash flows discounted at the loan’s effective interest rate, or fair value of collateral, as noted above.

2 unchanged sentences

The Company uses the exit price notion in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

The carrying values and estimated fair values of the Company's financial instruments as of September 30, 2020 and December 31, 2019 are as follows (dollars in thousands):

Fair Value Measurements at September 30, 2020 Using:

The carrying values and estimated fair values of the Company's financial instruments as of March 31, 2021 and December 31, 2020 are as follows (dollars in thousands):

Fair Value Measurements at March 31, 2021 Using:

Quoted Prices

30 unchanged sentences

Reclassifications of realized gains and losses on available for sale securities are reported in the income statement as “Gains on sales of securities” with the corresponding income tax effect reflected as a component of income tax expense.

Amounts reclassified out of accumulated other comprehensive income are presented below for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands)

There were no sales of securities in the first quarter of 2021.

Amounts reclassified out of accumulated other comprehensive income are presented below for the three months ended March 31, 2021 and 2020 (dollars in thousands)

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Available for sale securities

2 unchanged sentences

Segment Reporting

Beginning in 2019, the Company has four reportable segments.

The Company has four reportable segments.

Each reportable segment is a strategic business unit that offers different products and services.

15 unchanged sentences

A management fee for administrative and technology support services provided by the Bank is allocated to the other three lines of business.

For both the three months ended September 30, 2020 and 2019, management fees totaling $ 25 thousand were charged by the Bank and eliminated in consolidated totals.

For both the nine months ended September 30, 2020 and 2019, management fees totaling $ 75 thousand were charged by the Bank and eliminated in consolidated totals.

Segment information for the three and nine months ended September 30, 2020 and 2019 is shown in the following tables (dollars in thousands).

For both the three months ended March 31, 2021 and 2020, management fees totaling $ 25 thousand were charged by the Bank and eliminated in consolidated totals.

Segment information for the three months ended March 31, 2021 and 2020 is shown in the following tables (dollars in thousands).

Note that asset information is not reported below, as the assets of Sturman Wealth Advisors and VNB Trust & Estate Services are reported at the Bank level;

also, assets specifically allocated to the lines of business other than the Bank are insignificant and are no longer provided to the chief operating decision maker.

Three months ended September 30, 2020

Sturman Wealth Advisors

Net interest income

Provision for loan losses

Noninterest income

Noninterest expense

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

Nine months ended September 30, 2020

Three months ended March 31, 2021

Sturman Wealth Advisors

4 unchanged sentences

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

Three months ended September 30, 2019

Sturman Wealth Advisors

Net interest income

Provision for (recovery of) loan losses

Noninterest income

Noninterest expense

Income (loss) before income taxes

Provision for income taxes

Provision for (benefit from) income taxes

Net income (loss)

Nine months ended September 30, 2019

Three months ended March 31, 2020

Sturman Wealth Advisors

4 unchanged sentences

Income (loss) before income taxes

Provision for income taxes

Provision for (benefit from) income taxes

Net income (loss)

On January 1, 2019, the Company adopted ASU No.

2016-02 “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842.

The Company elected the prospective application approach provided by ASU 2018-11 and did not adjust prior periods for ASC 842.

The Company also elected certain practical expedients within the standard and consistent with such elections did not reassess whether any expired or existing contracts are or contain leases, did not reassess the lease classification for any expired or existing leases, and did not reassess any initial direct costs for existing leases.

Lease payments for short-term leases are recognized as lease expense on a straight-line basis over the lease term.

Payments for leases with terms longer than twelve months are included in the determination of the lease liability.

The right-of-use asset and lease liability are included in other assets and other liabilities, respectively, in the Consolidated Balance Sheets.

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows.

1 unchanged sentence

Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

Lease payments for short-term leases are recognized as lease expense on a straight-line basis over the lease term.

Payments for leases with terms longer than twelve months are included in the determination of the lease liability.

The right-of-use asset and lease liability are included in other assets and other liabilities, respectively, in the Consolidated Balance Sheets.

Each of the Company’s long-term lease agreements are classified as operating leases.

2 unchanged sentences

The following tables present information about the Company’s leases (dollars in thousands):

September 30, 2020

March 31, 2021

March 31, 2020

Lease liability

2 unchanged sentences

Weighted average discount rate

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Lease Expense

5 unchanged sentences

Undiscounted Cash Flow

September 30, 2020

Three months ending December 31, 2020

March 31, 2021

Nine months ending December 31, 2021

Twelve months ending December 31, 2022

5 unchanged sentences

Lease liability

Subsequent Event

On October 1, 2020, the Company announced the signing of a definitive merger agreement with Fauquier Bankshares, Inc.

(“Fauquier”), pursuant to which the companies will combine in an all-stock merger with the Company as the surviving company.

At or immediately following consummation of the merger, The Fauquier Bank, the wholly owned banking subsidiary of Fauquier, will be merged with and into the Bank, with the Bank as the surviving bank.

Under the terms of the merger agreement, Fauquier shareholders will receive 0.675 shares of Company stock for each share of Fauquier common stock they own.

Shareholders of the Company will own approximately 51.4 % and Fauquier shareholders will own approximately 48.6 % of the combined company.

The combined company will operate under the Virginia National Bankshares name and the combined bank will operate under the Virginia National Bank name.

Additional information on the merger can be found in the Company’s 8-Ks filed with the SEC on October 1, 2020 and October 2, 2020 .

Mergers and Acquisitions

On April 1, 2021, the Company completed the Merger with Fauquier, a bank holding company based in Warrenton, Virginia, in an all-stock transaction.

Fauquier shareholders received 0.675 shares of Company common stock for each share of Fauquier common stock they own, resulting in the Company issuing 2,571,213 shares of common stock at a fair value of $ 78.0 million.

As a result of the transaction and on the same date, Fauquier’s former bank subsidiary, The Fauquier Bank, merged with and into the Company’s wholly-owned bank subsidiary, Virginia National Bank.

The Company’s balance sheet and results of operations as of and for the period ended March 31, 2021 do not include the impact of Fauquier’s financial position and results of operations for the first quarter of 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements