Business Description

” In addition, information regarding the Company’s risk-based capital at December 31, 2025 and December 31, 2024 is presented in Note 15 – Capital Requirements of the Notes to Consolidated Financial Statements, contained in Item 8. Financial Statements and Supplementary Data. Using the most recent capital requirements, the Bank’s capital ratios remain above the levels designated by bank regulators as "well capitalized" at December 31, 2025. 53 Impact of Inflation and Changing Prices The Company’s financial statements included herein have been prepared in accordance with GAAP, which requires the financial position and operating results to be measured principally in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. Inflation affects the Company’s results of operations mainly through increased operating costs, but since nearly all of the Company’s assets and liabilities are monetary in nature, changes in interest rates affect the financial condition of the Company to a greater degree than changes in the rate of inflation. Although interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. The Company’s management reviews pricing of its products and services, in light of current and expected costs due to inflation, to mitigate the inflationary impact on financial performance. Off-Balance Sheet Arrangements The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit and standby letters of credit. Additional information concerning the Company’s off-balance sheet arrangements is contained in Note 13 of the Notes to Consolidated Financial Statements , found in Item 8. Financial Statements and Supplementary Data. Related Party Transactions The Company and its subsidiaries have business dealings with companies owned by directors and beneficial shareholders of the Company . In 2025 and 2024, leasing/rental expenditures of $595 thousand and $5 62 thousand respectively, (including reimbursements for taxes, insurance, and other expenses) were paid to an entity indirectly owned by a director of the Company. Contractual Commitments In the normal course of business, the Company and its subsidiaries enter into contractual obligations, including obligations on lease arrangements, contractual commitments for capital expenditures, and service contracts. The significant contractual obligations include the leasing of certain of its banking and operations offices under operating lease agreements on terms ranging from 1 to 10 years, most with renewal options. During the second quarter of 2025, the Company extended the ground lease associated with the Pantops headquarters for an additional five-year period. Following is a schedule of future minimum rental payments under non-cancelable operating leases that have initial or remaining terms in excess of one year as of December 31, 2025: (Dollars in thousands) 1 year or less 1-3 years 3-5 years After 5 years Total Operating lease obligations $ 1,642 $ 3,000 $ 1,662 $ 480 $ 6,784 Item 7A. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK. Not required for smaller reporting company. 54 Item 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA. Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Virginia National Bankshares Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Virginia National Bankshares Corporation and Subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.…