Virginia National Bankshares (VABK -1.92%), a regional community bank serving Virginia, reported its earnings for the second quarter of fiscal 2025 on July 24, 2025. The most important news from the release was that net interest income (GAAP) increased significantly, while asset quality metrics and fee-based revenues were mixed. Net income (GAAP) was $4.2 million ($0.78 per diluted share), essentially flat compared to the same period last year. There were no analyst estimates for direct comparison. Overall, the quarter showed improvement in core banking activities, with continued strength in loan growth and margin, but trends in fee income and credit quality require monitoring.
| Metric | Q2 2025 | Q2 2024 | Y/Y Change |
|---|---|---|---|
| EPS, Diluted (GAAP) | $0.78 | $0.77 | 1.3% |
| Net Income (GAAP) | $4.2 million | $4.2 million | 0.0% |
| Net Interest Income (GAAP) | $12.8 million | $11.2 million | 14.4% |
| Return on Average Assets | 1.05% | 1.05% | 0.0 pp |
| Efficiency Ratio (Non-GAAP) | 61.2% | 62.7% | (1.5) pp |
| Net Interest Margin (Non-GAAP) | 3.40% | 3.04% | 0.36 pp |
Business Overview and Key Focus Areas
Virginia National Bankshares operates as a community banking provider focused on deposit, lending, and wealth management services for individuals and businesses in core markets such as Charlottesville, Winchester, Manassas, and Richmond. Its main business lines include traditional banking as well as trust and estate management services, with an emphasis on local decision-making and a personalized approach to client service.
Recent strategic priorities have addressed compliance with regulatory requirements, operational efficiency, and expanding loan growth in local markets. Key success factors for Virginia National Bankshares include maintaining strong capital ratios, delivering competitive deposit and lending products, and investing in staff development. Its approach aims to foster client retention and build on strong community relationships, while also monitoring trends in credit quality and adapting to the competitive Virginia financial landscape.
Quarterly Review: Financial and Operating Performance
Net interest income (GAAP) rose 14.4%, driven by 7.2% loan book growth and improved cost management on deposits and borrowings. The net interest margin, which measures how much the bank earns from lending versus its funding costs, improved to 3.40% for the three months ended June 30, 2025. This margin expansion reflected lower costs on interest-bearing deposits, which offset a slight decline in loan yields.
Despite the growth in lending, noninterest income (GAAP) declined by 22.5% compared to Q2 2024. Fee revenue from wealth management, deposit accounts, and debit cards all showed decreases; for example, wealth management fee income dropped from $240,000 in Q2 2024 to $206,000 in Q2 2025.
Operating expenses, classified as noninterest expense, rose 6.9% compared to Q2 2024, largely due to higher franchise taxes and costs tied to special projects like data processing and legal fees. However, revenue grew more quickly than expenses, reflected in the efficiency ratio improving from 62.7% for the three months ended June 30, 2024 to 61.2% for the three months ended June 30, 2025.
Asset quality metrics showed that nonperforming assets reached $7.8 million or 0.48% of total assets, up from 0.25 % a year earlier. The bulk of the increase was in loans 90 days past due but still accruing, a category dominated by government-guaranteed balances with no immediate loss risk. Net charge-offs, which represent loan losses not expected to be recovered, remained low at $71,000, keeping the charge-off ratio stable at 0.02%.
Dividend, Capital, and Liquidity
Virginia National Bankshares declared a quarterly dividend of $0.36 per share. The dividend yield annualizes to roughly 3.78 %. About 54% of earnings were retained.
Capital ratios continued to exceed regulatory minimums, with the Tier 1 leverage ratio at 12.12% and total risk-based capital at 19.46%. Deposit balances were up a modest 1.1 % from the second quarter last year, but loan growth outpaced deposit gains. The company’s borrowings increased to $61.0 million from $30.0 million as of June 30, 2025, raising the loan-to-deposit ratio to 89.4%.
Product Lines and Operations
The bank’s main product groups are traditional banking services (deposits and loans), as well as trust services. Deposit products include personal and business checking, money market accounts, and certificates of deposit. Lending focuses on real estate, commercial, and consumer loans.
Within wealth management -- which encompasses investment management and financial advice for clients -- wealth management fee income fell to $206,000. Deposit account fees and debit card fees, driven by customer usage of bank accounts and payment services, also declined.
On the funding side, the bank emphasized its lack of brokered deposits (which are large, non-retail deposits) and maintained $172.0 million in unused borrowing capacity for liquidity purposes as of June 30, 2025.
The company also invested in maintaining and developing operational efficiency, emphasizing “exceptional service to depositors and borrowers” Chief executive Glenn W. Rust stated, “Our continuing focus on operating efficiencies and asset quality enables our lending and retail teams to provide exceptional service to depositors and borrowers alike.”
Looking Forward
Management did not offer explicit earnings or revenue guidance for the upcoming quarter or full year. The company did note that net income (GAAP) for the first half of 2025 was 12% ahead of the same period in 2024.
For the quarters ahead, investors and observers should watch trends in noninterest income, asset quality, and funding costs. The rise in nonperforming assets -- even with government guarantees -- and the increasing use of wholesale funding sources are risk factors to monitor.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
