Note 9. Segment Reporting

Beginning in 2019, the Company has four reportable segments. Each reportable segment is a strategic business unit that offers different products and services. They are managed separately, because each segment appeals to different markets and, accordingly, require different technology and marketing strategies. The accounting policies of the segments are the same as those described in the summary of significant accounting policies provided earlier in this report.

The four reportable segments are:

●	Bank - The commercial banking segment involves making loans and generating deposits from individuals, businesses and charitable organizations. Loan fee income, service charges from deposit accounts, and other non- interest-related fees, such as fees for debit cards and ATM usage and fees for treasury management services, generate additional income for the Bank segment.

●	VNB Investment Services - VNB Investment Services offers wealth management and investment advisory services. Revenue for this segment is generated primarily from investment advisory and financial planning fees, with a small and decreasing portion attributable to brokerage commissions.

●	VNB Trust & Estate Services – VNB Trust & Estate Services offers corporate trustee services, trust and estate administration, IRA administration and custody services. Revenue for this segment is generated from administration, service and custody fees, as well as management fees which are derived from Assets Under Management and incentive income which is based on the investment returns generated on performance-based Assets Under Management. Investment management services currently are offered through in-house and third-party managers. In addition, royalty income, in the form of fixed and incentive fees, from the sale of Swift Run Capital Management, LLC in 2013 is reported as income of VNB Trust & Estate Services. More information on royalty income and the related sale can be found under Summary of Significant Accounting Policies in Note 1 of the notes to consolidated financial statements, which is found in Item 8. Financial Statements and Supplementary Data, in the Company’s Form 10-K Report for December 31, 2018.

●	Masonry Capital - Masonry Capital offers investment management services for separately managed accounts and a private investment fund employing a value-based, catalyst-driven investment strategy. Revenue for this segment is generated from management fees which are derived from Assets Under Management and incentive income which is based on the investment returns generated on performance-based Assets Under Management.

A management fee for administrative and technology support services provided by the Bank is allocated to the other three lines of business previously combined under VNB Wealth. For both the six months ended June 30, 2019 and 2018, management fees totaling $50 thousand were charged by the Bank and eliminated in consolidated totals.

Segment information for the three months and six months ended June 30, 2019 and 2018 is shown in the following tables (dollars in thousands).

				VNB		VNB Trust &
				Investment		Estate		Masonry
Three months ended June 30, 2019	Bank			Services		Services		Capital			Consolidated
Net interest income	$	5,461		$	-	$	-	$	-		$	5,461
Provision for (recovery of) loan losses		(64	)		-		-		-			(64	)
Noninterest income		1,137			156		348		59			1,700
Noninterest expense		4,073			147		303		162			4,685
Income before income taxes		2,589			9		45		(103	)		2,540
Provision for income taxes		435			2		10		(22	)		425
Net income	$	2,154		$	7	$	35	$	(81	)	$	2,115
Total assets	$	633,573			NR*		NR*	$	200		$	633,773

				VNB		VNB Trust &
				Investment		Estate		Masonry
Six months ended June 30, 2019	Bank			Services		Services		Capital			Consolidated
Net interest income	$	11,029		$	-	$	-	$	-		$	11,029
Provision for loan losses		620			-		-		-			620
Noninterest income		1,710			292		694		63			2,759
Noninterest expense		7,872			283		610		331			9,096
Income before income taxes		4,247			9		84		(268	)		4,072
Provision for income taxes		747			2		18		(56	)		711
Net income	$	3,500		$	7	$	66	$	(212	)	$	3,361

* Not reportable. Asset information is not reported for these segments, as the assets previously allocated to VNB Wealth are reported at the Bank level subsequent to the merger of VNBTrust into the Bank effective July 1, 2018; also, assets specifically allocated to these VNB Wealth lines of business are insignificant and are no longer provided to the chief operating decision maker.

Prior to January 1, 2019, Virginia National Bankshares Corporation had two reportable segments, the Bank and VNB Wealth.

Three months ended June 30, 2018	Bank		VNB Wealth		Consolidated
Net interest income	$	5,653	$	39	$	5,692
Provision for loan losses		701		-		701
Noninterest income		703		604		1,307
Noninterest expense		3,513		514		4,027
Income before income taxes		2,142		129		2,271
Provision for income taxes		412		27		439
Net income	$	1,730	$	102	$	1,832
Total assets	$	644,221	$	10,436	$	654,657

Six months ended June 30, 2018	Bank		VNB Wealth		Consolidated
Net interest income	$	11,315	$	73	$	11,388
Provision for loan losses		605		-		605
Noninterest income		1,346		1,675		3,021
Noninterest expense		7,005		1,039		8,044
Income before income taxes		5,051		709		5,760
Provision for income taxes		983		149		1,132
Net income	$	4,068	$	560	$	4,628