Executive Summary

Q2 2024 delivered sequential improvement: EPS rose to $0.77 from $0.68 in Q1 and $0.59 in Q4 on higher net interest income and lower noninterest expense, though EPS fell year over year versus $1.05 in Q2 2023 .
Core banking metrics improved: NIM (FTE) expanded to 3.04% (from 2.93% in Q1 and 2.89% in Q4), ROAA increased to 1.05%, and the efficiency ratio (FTE) improved to 62.7% as right-sizing benefits persisted .
Balance sheet actions continued: loans grew to $1.16B (+6% YTD) with ongoing purchases of government‑guaranteed USDA/SBA loans; borrowings were reduced materially YTD; deposit costs appear stabilized; no brokered deposits .
Capital return intact: $0.33 dividend paid in Q2 and again declared for Q3; 19,476 shares repurchased in Q2 at $27.32 average price (20,350 YTD) .
Potential stock catalysts: continued NIM expansion/cost‑of‑funds stability, outsized loan growth in government‑guaranteed assets, improved operating efficiency, and index inclusion (Russell 2000) to enhance liquidity .

What Went Well and What Went Wrong

What Went Well
- NIM (FTE) expanded to 3.04% from 2.93% in Q1 and 2.89% in Q4; ROAA improved to 1.05% and ROAE to 11.07%, reflecting better asset yields and cost control .
- Expense discipline: noninterest expense fell to $8.12MM (from $8.82MM in Q1), driven by lower compensation, occupancy, data processing, and marketing as branch network right‑sizing benefits carried through .
- Management emphasized durable loan growth with strong credit quality: “Loan balances continued to increase…with organic growth and continued purchases of the government‑guaranteed portions of USDA and SBA loans…our credit quality metrics remain solid” – Glenn W. Rust, CEO .
What Went Wrong
- Year-over-year earnings pressure: net interest income declined 18.4% YoY as higher deposit and borrowing costs outweighed asset yield gains; EPS fell to $0.77 vs. $1.05 in Q2 2023 .
- Noninterest income contracted YoY (-17.3%) on lower wealth management, deposit account, and card/ATM fees .
- Credit metrics remain sound but NPAs increased: NPA/Assets rose to 0.25% vs. 0.19% in Q1 and 0.17% in Q4; nonaccrual loans and 90+ day accruing balances increased (largely government‑guaranteed) .

Financial Results

Income Statement Summary (oldest → newest)

Metric (USD)	Q4 2023	Q1 2024	Q2 2024
Total interest & dividend income ($MM)	$18.07	$18.56	$18.66
Net interest income ($MM)	$10.75	$10.94	$11.18
Noninterest income ($MM)	$2.14	$2.18	$1.69
Noninterest expense ($MM)	$8.30	$8.82	$8.12
Provision for (recovery of) credit losses ($MM)	$0.79	$(0.02)	$(0.34)
Net income ($MM)	$3.17	$3.65	$4.16
Diluted EPS ($)	$0.59	$0.68	$0.77
Effective tax rate (%)	16.6%	15.5%	18.3%

Observations:

Sequential EPS and net income improved on higher NII and lower expenses; YoY declines reflect higher cost of funds and lower credit mark accretion versus Q2’23 .
Noninterest income softness persisted as fees declined YoY .

Margins and Profitability (oldest → newest)

Metric	Q4 2023	Q1 2024	Q2 2024
NIM (FTE) (%)	2.89%	2.93%	3.04%
ROAA (%)	0.79%	0.91%	1.05%
ROAE (%)	9.03%	9.57%	11.07%
Efficiency ratio (FTE) (%)	64.0%	66.8%	62.7%
Cost of funds (%)	2.01%	2.11%	2.10%
Yield on loans (%)	5.47%	5.64%	5.71%
Avg. earning assets ($MM)	$1,487.91	$1,513.92	$1,491.82

Balance Sheet and Credit (period-end unless noted; oldest → newest)

Metric (USD)	Q4 2023	Q1 2024	Q2 2024
Gross loans (“Loans, net of deferred fees & costs”) ($MM)	$1,092.67	$1,128.17	$1,158.21
Total deposits ($MM)	$1,409.10	$1,431.97	$1,373.84
Borrowings ($MM)	$66.50	$20.00	$30.00
Loan-to-deposit ratio (%)	77.5%	78.8%	84.3%
NPA as % total assets (%)	0.17%	0.19%	0.25%
ACL to gross loans (%)	0.77%	0.73%	0.69%
ICS balances ($MM)	$151.6	$144.0	$144.8
Unused borrowing facilities ($MM)	$119.5	$189.2	$196.7

Segment breakdown: Not applicable (single community banking franchise) .

KPIs and Notes:

Management noted deposit cost stabilization through 1H24; overall cost of funds 2.10% in Q2 (flat vs Q1) .
Securities runoff repurposed to higher‑yielding loans and borrowing reduction; no brokered deposits .
Government‑guaranteed loans grew sharply (+$42.4MM in Q2; +$130.2MM YoY), lowering ACL ratio given 100% guarantees .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Financial guidance (revenue/margins/OpEx)	2024/Q3+	None provided	None provided	N/A (no formal guidance)
Dividend per share	Q2 2024	$0.33 (Q1 paid)	$0.33 paid in Q2; $0.33 declared for Q3 (pay 9/20/24)	Maintained
Share repurchases	Q2 2024	Plan in place	19,476 shares at $27.32 avg in Q2; 20,350 YTD at $27.42	Executed (no change to plan disclosed)
Brokered deposits	Q2 2024	N/A	None held	Maintained none

No numerical forward guidance was issued in Q2 materials; management commentary focused on balance sheet/liquidity positioning, cost of funds stabilization, and credit quality .

Earnings Call Themes & Trends

Note: No earnings call transcript found for Q2 2024; themes below reflect management disclosures across Q4 2023 and Q1–Q2 2024 press materials.

Topic	Previous Mentions (Q4 2023, Q1 2024)	Current Period (Q2 2024)	Trend
Cost of funds	Q4: cost of funds rose to 201 bps; Q1: mgmt believed stabilization in Q1 (211 bps)	Cost of funds 210 bps; mgmt believes stabilization continued in 1H24	Stabilizing
NIM trajectory	Q4 NIM (FTE) 2.89%; Q1 2.93%	NIM (FTE) 3.04%	Improving
Loan growth strategy	Q4 loan growth strong; Q1 continued growth (20% YoY)	Loans +6% YTD; continued USDA/SBA guaranteed purchases	Strong; mix shifting to guaranteed
Liquidity/borrowings	Q4 unused facilities ~$119.5MM; Q1 $189.2MM; borrowings down Q1	Unused facilities ~$196.7MM; borrowings down ~55% YTD	Liquidity improving; lower debt
Securities repositioning	Q1 securities -$80.9MM to fund loans	Further -$137.6MM H1; redeployed to loans and debt reduction	Ongoing shift to higher‑yielding assets
Asset quality	Q4 NPAs 0.17%; Q1 0.19%	NPAs 0.25%; increases largely government‑guaranteed; net recovery in Q2	Slightly weaker but still sound
Capital return	Q4 dividend $0.33; Q1 dividend $0.33; buyback started Q1	Q2 dividend $0.33; continued buybacks	Ongoing

Management Commentary

CEO Glenn W. Rust: “Loan balances continued to increase…with organic growth and continued purchases of the government‑guaranteed portions of USDA and SBA loans…Our capital and liquidity positions continue to be strong and stable…[We were] included again in the Russell 2000, which…will likely enhance stock liquidity” .
Cost of funds: “Management believes that the Bank’s cost of funds has stabilized during the first half of 2024” .
Strategic repositioning: Securities maturities were redeployed to higher yielding loans and to reduce borrowings, aligning mix toward income‑producing assets .
Credit: Net recovery of $338K in Q2; ACL ratio moved lower due to growth in 100% guaranteed loans .

Q&A Highlights

No Q2 2024 earnings call transcript was available; as such, no Q&A themes or clarifications could be reviewed (no transcript found in the document set).

Estimates Context

S&P Global consensus estimates were not retrievable at this time (service limit exceeded). As a result, we cannot assess beats/misses versus Street for Q2 on EPS or revenue/interest income; the company did not provide estimate comparisons in its materials .
Actuals: Diluted EPS $0.77; net interest income $11.18MM; NIM (FTE) 3.04% .

Key Takeaways for Investors

Sequential operating momentum: EPS, NIM, ROAA, and efficiency all improved versus Q1, suggesting earnings traction even as deposit costs plateau .
Balance sheet repositioning is working: securities runoff is funding loan growth and lowering borrowings; with no brokered deposits and ample contingent liquidity, the funding profile remains conservative .
Mix shift to government‑guaranteed loans supports growth with lower loss content, but also moderates ACL ratio and can influence loan yield/accretion dynamics quarter to quarter .
Watch fee income softness: noninterest income fell YoY; sustained progress here would enhance operating leverage alongside expense control .
Credit still a tailwind: Net recovery in Q2 and low NPAs (0.25%) underpin earnings quality; monitor rising NPAs (albeit largely guaranteed) for any signs of broader stress .
Capital return ongoing: steady $0.33 dividend and opportunistic buybacks provide downside support; index inclusion (Russell 2000) may improve liquidity and investor awareness .
With no formal guidance and no available Street estimates, the near‑term narrative hinges on sustaining NIM expansion, disciplined funding costs, and continued growth in high‑quality, guaranteed credits .

Appendix: Additional Q2‑Relevant Press Releases

Quarterly cash dividend of $0.33 declared on July 24, 2024 (payable Sept 20, 2024) .
Quarterly cash dividend of $0.33 declared on May 22, 2024 (paid June 28, 2024) .

Virginia National Bankshares Corp (VABK)·Q2 2024 Earnings Summary