Business Context and Reporting Period
Company: Virginia National Bankshares Corp (Virginia National)
Filing Date: April 1, 2021
Event: Completion of the acquisition and merger of Fauquier Bankshares, Inc. (Fauquier) and its subsidiary, The Fauquier Bank, into Virginia National and Virginia National Bank.
Key Financial Metrics and Obligations
Merger Consideration: Former Fauquier shareholders received 0.6750 shares of Virginia National common stock for each share of Fauquier common stock held, with cash paid in lieu of fractional shares.
Debt Assumption: Virginia National assumed Fauquier's Floating Rate Junior Subordinated Deferrable Interest Debentures due 2036.
Debt Principal: Approximately $4.1 million (as of December 31, 2020).
Debt Terms: Interest rate resets quarterly at 1.70% above three-month LIBOR; securities are callable at any time and are unsecured, junior obligations.
Stock Listing: Common stock approved for listing on the Nasdaq Capital Market under ticker symbol "VABK", trading commencing April 5, 2021.
Material Changes
- Corporate Structure: Fauquier Bank merged into Virginia National Bank; Fauquier Bankshares merged into Virginia National Bankshares.
- Board Composition: Board size increased to 13 directors. Six former Fauquier directors were appointed to the board, while three existing Virginia National directors (H. K. Benham, III, Susan K. Payne, and Bryan D. Wright) resigned.
- Executive Leadership: Marc J. Bogan appointed President and CEO of Virginia National Bank. Glenn W. Rust remains President and CEO of Virginia National Bankshares.
- Financial Statements: Pro forma financial information and financial statements of the acquired business are not included in this filing and will be filed by amendment within 71 days.
Management Commentary, Risks, and Contingencies
Executive Compensation Contingencies: Marc J. Bogan's employment agreement includes specific severance provisions. If not promoted to CEO of Virginia National by the first anniversary of the merger, he is entitled to a lump sum payment of $475,000. If terminated without "cause" or resigns for "good reason" prior to promotion, he is entitled to severance equal to 2.99 times the sum of his base salary and highest annual cash bonus from the two most recent completed years, plus accrued benefits.
Bylaw Amendments: New bylaws establish a two-year period where board vacancies must be filled by nominees proposed by the respective majority of the original Virginia National directors or the Continuing Fauquier directors.
Risk Factors: The filing notes that the description of the merger and employment agreements is qualified by reference to the full text of the agreements filed as exhibits.
Investor Verification Checklist
- Verify the final trading price and volume of "VABK" on the Nasdaq Capital Market starting April 5, 2021.
- Review the upcoming amendment to this 8-K (due within 71 days) for pro forma financial data and the financial statements of Fauquier Bankshares.
- Confirm the exact number of shares issued to Fauquier shareholders and the total cash paid for fractional shares in the final merger accounting.
- Monitor the board composition and committee assignments following the 2021 annual meeting of shareholders.
- Assess the impact of the assumed $4.1 million junior subordinated debentures on the company's capital structure and liquidity.