DEF: Virginia National Bankshares Schedules 2025 Annual Meeting, Seeks Shareholder Approval for Key Governance and Compensation Matters

Virginia National Bankshares Corporation has announced its 2025 Annual Meeting of Shareholders, where key proposals include the election of ten directors, advisory votes on executive compensation, and a significant increase in shares available under its 2022 Stock Incentive Plan.

Summary

• Virginia National Bankshares Corporation will hold its 2025 Annual Meeting of Shareholders on Thursday, July 24, 2025, at 10:00 AM Eastern Time, in Charlottesville, VA.
• Shareholders of record as of May 27, 2025, are entitled to vote, with 5,391,979 shares of common stock outstanding.
• Key proposals for the meeting include the election of ten directors, an advisory (non-binding) vote on executive compensation, and an advisory (non-binding) vote on the frequency of the executive compensation vote (with the Board recommending 'One Year').
• A significant proposal is the approval of an amendment to the Virginia National Bankshares Corporation 2022 Stock Incentive Plan to increase the number of shares available for issuance by 150,000, bringing the total to 300,000 shares, or 5.56% of outstanding common stock.
• The meeting will also cover the ratification of Yount, Hyde & Barbour, P.C. as the independent registered public accounting firm for 2025.
• The Board of Directors recommends a 'FOR' vote on all proposals.
• The company disclosed executive compensation for Glenn W. Rust (CEO), Virginia R. Bayes (Chief Banking Officer), and Tara Y. Harrison (CFO), with Glenn W. Rust's total compensation at $1,007,824 in 2024 and $1,005,762 in 2023.
• Net income for the company has declined from $23,437,900 in 2022 to $19,262,929 in 2023, and further to $16,966,385 in 2024.
• Non-employee directors received cash fees and stock awards in 2024, with total compensation ranging from $85,000 to $115,000.
• The company disclosed related party transactions, including lease payments of $720,097 from January 1, 2024, through April 28, 2025, to an entity managed by the non-executive chairman, William D. Dittmar, Jr.

Sentiment

Score: 4

Explanation: The document is primarily a procedural proxy statement for an annual meeting. While it highlights efforts to retain talent through an expanded stock incentive plan and adherence to some governance best practices, the disclosed financial metrics show a consistent decline in net income over the past three years. Additionally, minor governance concerns such as late insider trading reports and a non-independent chairman with significant related-party transactions are noted.

Positives

• The Board of Directors recommends 'FOR' all proposals, indicating internal alignment and confidence in the proposed actions.
• The company's compensation philosophy aims to align executive interests with long-term shareholder value creation through a combination of cash and stock incentives.
• The proposed amendment to the 2022 Stock Incentive Plan includes sound governance features such as a 95% minimum vesting requirement (at least one year), prohibition of liberal share recycling, no discounted stock options, and clawback provisions.
• The company offers a 401(k) plan with a 100% match on the first 6% of employee contributions, which are immediately fully vested, enhancing employee benefits.
• The positions of Chief Executive Officer and Chairman of the Board have been separated since 2007, promoting more objective Board oversight of management.
• All incumbent directors attended at least 75% of Board and committee meetings in 2024, demonstrating strong engagement.
• The Audit Committee is composed entirely of independent directors, and its chair, Mr. Keyser, is an audit committee financial expert, ensuring robust financial oversight.
• The company has adopted an Insider Trading Policy and a Code of Ethics, promoting ethical conduct and compliance with securities laws.
• Yount, Hyde & Barbour, P.C. has served as the independent registered public accounting firm since 1998, indicating a long-standing and stable audit relationship.

Negatives

• Net income has shown a consistent decline over the past three years, decreasing from $23,437,900 in 2022 to $16,966,385 in 2024.
• The limited number of shares (28,420) currently available for new awards under the 2022 Stock Incentive Plan necessitates the proposed increase, and failure to approve could lead to increased reliance on cash compensation, potentially misaligning interests and increasing cash expenses.
• William D. Dittmar, Jr., the non-executive chairman, is not considered independent due to significant lease payments made by the Bank to an entity he manages and indirectly owns, exceeding Nasdaq Standard limits.
• All ten directors failed to timely report a Form 4 in 2024, each being one day beyond the filing deadline, attributed to an administrative error.

Risks

• Approval of the 150,000 share increase for the stock incentive plan could lead to dilution for existing shareholders, although it is intended for talent attraction and retention.
• If the stock incentive plan amendment is not approved, the company may need to significantly increase the cash component of its compensation programs, which could misalign executive interests with shareholder value and increase cash expenses.
• The non-independence of the Chairman due to related party transactions and the late Section 16(a) filings could draw scrutiny from corporate governance advocates or institutional investors.
• For non-routine matters at the annual meeting (director election, executive compensation votes, stock plan amendment), broker non-votes may occur if beneficial owners do not provide specific voting instructions, potentially impacting vote outcomes.
• The actual value realized by recipients of stock options and restricted stock awards is tied to the appreciation of the company's common stock, meaning a decline in stock price would reduce the effectiveness of these incentives.

Future Outlook

The company aims to continue attracting, motivating, and retaining employees, directors, and consultants through an expanded stock and stock-based incentive plan. The Board recommends an annual advisory vote on executive compensation to ensure high accountability and communication. The document implies that failure to approve the stock incentive plan amendment could lead to increased reliance on cash compensation, potentially misaligning interests and increasing cash expenses.

Management Comments

• "We are pleased to invite you to attend the 2025 Annual Meeting of Shareholders of Virginia National Bankshares Corporation." Glenn W. Rust, President and Chief Executive Officer.
• "We appreciate your support as a shareholder and hope you will join us on July 24th." Glenn W. Rust, President and Chief Executive Officer.
• "The Board believes compensation of its executive officers should reflect and support the Companys strategic and financial performance goals, the primary goal being the creation of long-term value for the shareholders of the Company, while protecting the interests of the depositors of the Bank." Board of Directors.
• "The Board of Directors recommends that shareholders vote FOR approval of the named executive officers compensation." Board of Directors.
• "The Board of Directors recommends an advisory say on pay vote every year because such frequency provides the highest level of accountability and communication by having the shareholder vote correspond with the most recent compensation information presented in the proxy statement for the Companys annual meetings." Board of Directors.
• "The Board of Directors recommends that the shareholders vote FOR approval of the proposed amendment to the 2022 Plan." Board of Directors.
• "The Company believes that ownership of Companys common stock stimulates the efforts of those persons upon whose judgment, interest and efforts the Company depends for the successful conduct of its business, and furthers the alignment of those persons interests with the interests of the Companys shareholders." Board of Directors.
• "Based on the review and discussions described above, the Audit Committee recommended to the Board of Directors of the Company that the audited consolidated financial statements be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2024 for filing with the SEC." Audit and Compliance Committee.

Industry Context

This DEF 14A filing is a standard proxy statement for a bank holding company, Virginia National Bankshares Corporation, outlining proposals for its annual shareholder meeting. The agenda, including director elections, executive compensation votes, and stock incentive plan amendments, is typical for financial services firms. The emphasis on aligning executive compensation with shareholder value and long-term performance reflects common industry practices and compliance with regulations like the Dodd-Frank Act. The need to expand the stock incentive plan highlights the ongoing challenge across industries, including banking, to attract and retain talent in a competitive market. The detailed disclosure of related party transactions and director independence assessments aligns with the heightened corporate governance expectations within the financial sector.

Comparison to Industry Standards

• The company's executive compensation structure, combining base salary, cash bonuses, and stock incentives, aligns with common practices in the financial services industry, aiming to link pay to performance.
• The 'say on pay' vote and the Board's recommendation for an annual frequency are direct responses to Dodd-Frank Act requirements, demonstrating adherence to contemporary shareholder engagement standards prevalent among publicly traded banks.
• The proposed increase in shares for the 2022 Stock Incentive Plan (to 5.56% of outstanding shares) is within typical ranges for equity compensation plans in financial institutions, which utilize such plans for talent retention and alignment of interests.
• The inclusion of robust governance features within the stock incentive plan, such as a 95% minimum one-year vesting, no liberal share recycling, no discounted options, and clawback provisions, reflects adherence to modern corporate governance best practices, often seen in more mature and well-regulated financial institutions.
• The separation of the CEO and Chairman roles since 2007 is a governance practice increasingly adopted by companies, including banks, to enhance independent oversight and is considered a positive governance trend.
• The Audit Committee's composition of independent directors and the identification of an audit committee financial expert (Mr. Keyser) align with strong governance frameworks and regulatory expectations for financial institutions.
• The consistent decline in net income from $23.4 million in 2022 to $16.9 million in 2024 (a 27.6% decrease) is a notable negative trend that would typically warrant a detailed comparison to the performance of peer banks of similar asset size and market focus (e.g., regional banks in the Mid-Atlantic) to assess relative financial health.
• The non-independence of the Chairman due to significant related party lease payments, while disclosed, could be viewed as a deviation from best-in-class corporate governance standards, where efforts are made to minimize such relationships for key leadership roles to ensure objective decision-making.

Management Changes

Corporate Governance

Related Party Transactions

• The Bank made lease and other payments of $720,097 to or for the benefit of Pantops Park, LLC, from January 1, 2024, through April 28, 2025. Pantops Park, LLC is managed and indirectly owned by William D. Dittmar, Jr., the non-executive chairman of the Company's Board.
• During 2023, the Bank made lease and other payments of $543,165 for the benefit of Pantops Park, LLC.
• All such banking and non-banking transactions are stated to be on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons, and did not involve more than a normal risk of collection or present any unfavorable features for the Bank.

Stakeholder Impact

• **Shareholders**: Will directly vote on key governance matters, including director elections, executive compensation, and the expansion of the stock incentive plan, which could lead to share dilution. The declining net income trend may impact future dividends and share price appreciation.
• **Employees/Directors/Consultants**: Stand to benefit from the expanded 2022 Stock Incentive Plan, which aims to enhance talent attraction, motivation, and retention through equity awards. Executive officers have management continuity agreements providing severance benefits in case of a change in control.
• **Customers/Depositors**: The company's financial performance and stability, as a bank holding company, indirectly affect the security of deposits and the quality of banking services. The stated philosophy of protecting depositors' interests is a positive.
• **Creditors**: The company's declining net income trend could be a factor in assessing its creditworthiness, although the document does not provide specific details on debt or liquidity.

Next Steps

• Shareholders are invited to attend and vote at the 2025 Annual Meeting on July 24, 2025.
• Shareholders will vote on the election of ten directors to serve until the next annual meeting.
• Shareholders will cast an advisory (non-binding) vote to approve the company's executive compensation.
• Shareholders will cast an advisory (non-binding) vote to approve the frequency of the advisory vote on executive compensation.
• Shareholders will vote on the approval of an amendment to the 2022 Stock Incentive Plan to increase available shares by 150,000.
• Shareholders will vote on the ratification of Yount, Hyde & Barbour, P.C. as the independent registered public accounting firm for 2025.
• Donna G. Shewmake, General Counsel and Executive Vice President, will retire effective December 31, 2025.
• Shareholders wishing to submit a proposal for inclusion in the 2026 annual meeting proxy materials must do so by February 6, 2026.
• Shareholders wishing to nominate a director or propose other business for the 2026 annual meeting must provide written notice by April 25, 2026.

Key Dates

Keywords

Virginia National Bankshares Corporation, SEC Filing, Proxy Statement, Annual Meeting, Executive Compensation, Stock Incentive Plan, Corporate Governance, Director Election, Financial Performance, Shareholder Vote, Banking Industry, Equity Awards, Risk Management, Charlottesville