UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[ X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended ___December 31, 2021___________________________________________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ____________________ to ___________________
Commission file number 000-50765
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
Virginia Bankers Association Defined Contribution Plan for Village Bank
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
Village Bank and Trust Financial Corp.
13319 Midlothian Turnpike
Midlothian, Virginia 23113
1
REQUIRED INFORMATION
The Virginia Bankers Association Defined Contribution Plan for Village Bank (the Plan) is subject to the Employee Retirement Income Security Act of 1974 (ERISA). Therefore, in lieu of the requirements of Items 1-3 of Form 11-K, the following financial statements and schedule of the Plan for the years ended December 31, 2021 and 2020, which have been prepared in accordance with the financial reporting requirements of ERISA, are provided:
| | |
| Pages | |
Report of Independent Registered Public Accounting Firm | 3 | |
Financial Statements: | | |
Statements of Net Assets Available for Benefits as of December 31, 2021 and 2020 | 4 | |
Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 2021 and 2020 | 5 | |
Notes to Financial Statements | 6 | |
Supplemental Schedule: | | |
Schedule of Assets (Held at End of Year) December 31, 2021 | 11 | |
Exhibit Index | 12 | |
Signatures | 12 | |
| |
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Plan Administrator
Virginia Bankers Association Defined Contribution
Plan for Village Bank
Midlothian, Virginia
Opinion on the Financial Statements
We have audited the accompanying statements of net assets available for benefits of the Virginia Bankers Association Defined Contribution Plan for Village Bank (the Plan) as of December 31, 2021, and 2020, the related statements of changes in net assets available for benefits for the year ended December 31, 2021 and 2020, and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2021 and 2020, and the changes in net assets available for benefits for the year ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Report on Supplemental Information
The supplemental information in the accompanying Schedule of Assets (Held at End of Year) as of December 31, 2021, have been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is presented for the purpose of additional analysis and is not a required part of the financial statements but includes supplemental information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information is the responsibility of the Plan's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information in the accompanying schedules, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information in the accompanying schedule is fairly stated in all material respects in relation to the financial statements as a whole.
We have served as the Plan’s auditor since 2018.
/s/ Yount, Hyde & Barbour, P.C.
Richmond, Virginia
June 29, 2022
3
VIRGINIA BANKERS ASSOCIATION DEFINED CONTRIBUTION PLAN
FOR VILLAGE BANK
Statements of Net Assets Available for Benefits
December 31, 2021 and 2020
|
| |
| | ||
|
| 2021 |
| 2020 | ||
Assets |
| |
|
| |
|
Investments, at fair value | | $ | 14,932,332 | | $ | 11,712,777 |
| | | | | | |
Notes from participants | |
| 261,967 | |
| 245,871 |
Receivable from plan sponsor | |
| 250,000 | |
| 250,000 |
| | | | | | |
Total Assets | | $ | 15,444,299 | | $ | 12,208,648 |
| | | | | | |
Total Liabilities | | $ | — | | $ | — |
| |
|
| |
|
|
Net assets available for benefits | | $ | 15,444,299 | | $ | 12,208,648 |
See Notes to Financial Statements.
4
VIRGINIA BANKERS ASSOCIATION DEFINED CONTRIBUTION PLAN
FOR VILLAGE BANK
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2021 and 2020
|
| |
| | ||
|
| 2021 |
| 2020 | ||
Additions to net assets attributed to: |
| |
|
| |
|
Investment income: | | | | | | |
Net appreciation in investments | | $ | 1,481,713 | | $ | 1,042,399 |
Loan interest | | | 10,955 | | | 9,802 |
Dividends | |
| 411,404 | |
| 260,140 |
Total investment income | |
| 1,904,072 | |
| 1,312,341 |
| |
| | |
| |
| | | | | | |
Contributions: | | | | | | |
Employer | | $ | 668,506 | | $ | 666,752 |
Participants | | | 1,050,882 | | | 1,010,426 |
Rollover contributions | | | 3,043 | | | 17,452 |
Total contributions | |
| 1,722,431 | |
| 1,694,630 |
| |
| | |
|
|
| |
| | |
| |
Total additions | |
| 3,626,503 | |
| 3,006,971 |
| | | | | | |
Deductions from net assets attributed to: | | | | | | |
Benefits paid to participants | | | 301,910 | | | 532,319 |
Administrative expenses | | | 88,942 | | | 36,526 |
Total deductions | | | 390,852 | | | 568,845 |
| | | | | | |
| | | | | | |
Net increase in net assets available for benefits | | | 3,235,651 | | | 2,438,126 |
| | | | | | |
Net assets available for benefits: | | | | | | |
Beginning of period | | | 12,208,648 | | | 9,770,522 |
| | | | | | |
End of period | | $ | 15,444,299 | | $ | 12,208,648 |
See Notes to Financial Statements.
5
VIRGINIA BANKERS ASSOCIATION DEFINED CONTRIBUTION PLAN
FOR VILLAGE BANK
Notes to Financial Statements
Note 1. Description of the Plan
The following description of the Virginia Bankers Association Defined Contribution Plan for Village Bank (the “Plan”) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions
General
The Plan is a defined contribution plan covering eligible employees of Village Bank and Trust Financial Corp. (the “Company”). The Company is responsible for oversight of the Plan. The Plan’s management determines the appropriateness of the Plan’s investment offerings, monitors investment performance and reports to the Plan’s Trustees. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Plan was originally established July 1, 2000 and was most recently amended January 1, 2017.
Contributions
Each year, participants may contribute an amount up to the maximum percentage allowed by the Internal Revenue Service, as defined by the Plan. Participants who have attained age 50 before the end of the Plan year are eligible to make catch-up contributions. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans. A participant may opt out at any time. As of January 1, 2017, the Company amended the Plan document to include safe harbor matching contribution equal to 100% of the pre-tax or Roth contributions made to the Plan of the first 1% of covered compensation for the plan year and 50% of the pre-tax or Roth contributions of the next 5% of covered compensation to the Plan. Additional profit sharing amounts may be contributed at the option of the Company’s Board of Directors. There was a $250,000 in profit sharing contributions made for the year ended December 31, 2021 and 2020. The Plan also includes an automatic enrollment feature, whereby employees will automatically contribute to the Plan upon eligibility unless they elect out. Participants are considered eligible after 1 year (1,000 hours) of service.
Participants’ Accounts
Each participant’s account is credited with the participant’s contributions and allocation of (a) the Company’s contribution and (b) plan earnings and charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined by the Plan. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Forfeitures
Forfeitures represent the non-vested portion of the participant’s accounts plus earnings thereon that are not fully distributable to participants who terminated employment before they are 100% vested. Forfeitures may be used as future employer contributions to the Plan. As of December 31, 2021 and 2020, $15,839 and $13,569 forfeitures were available for allocation, respectively. For the Plan year ended December 31, 2021, $15,532 of forfeitures were used to reduce employer contributions.
Vesting
Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company’s contribution portion of their accounts plus actual earnings thereon is based on years of continued service according to the following schedule:
6
Years of Service |
| Vesting Percentage |
| | |
Less than 2 | | 0% |
2 or more | | 100% |
Investment Options
All assets in the Plan are directed by individual participants. Participants are given the option to direct account balances and all contributions made into any of 30 separate investment funds, including a stock fund consisting of the Company’s common stock.
Payment of Benefits
On termination of service due to resignation, death, disability, or retirement, a participant may elect to receive a lump-sum amount equal to the value of the participant’s vested interest in his or her account or roll over his or her distribution into an Individual Retirement Account or another qualified plan. In certain situations, participants may receive in-service hardship withdrawals.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Maximum loan terms are limited to 30 years for the purchase of a primary residence or 5 years for all other purposes. The loans are fully secured by the balance in the participant’s account and bear interest at the prime rate at the time the loan is made. Principal and interest is paid ratably through monthly payroll deductions.
Note 2. Summary of Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of accounting.
Investment Valuation and Income Recognition
Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Plan’s management determines the Plan’s valuation policies utilizing information provided by the investment advisors, custodians, and insurance company. See Note 3 for discussion of fair value measurements.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date. Net appreciation includes the Plan’s gains and losses on investments bought and sold as well as held during the year.
Payment of Benefits
Benefit payments are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Accordingly, actual results could differ from those estimates.
7
Risk and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.
Administrative Expenses
Certain expenses of maintaining the Plan are paid directly by the Company and are excluded from these financial statements. Other expenses of maintaining the Plan are paid through participant accounts and are presented in the aggregate in the Statement of Changes in Net Assets Available for Benefits. Investment related expense are included in the net appreciation of fair value of investments.
Note 3. Fair Value Measurements
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under Accounting Standards Codification Topic 820 are described as follows:
Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access. |
Level 2 | Inputs to the valuation methodology include: ● Quoted prices for similar assets or liabilities in active markets; ● Quoted prices for identical or similar assets or liabilities in inactive markets; ● Inputs other than quoted prices that are observable for the asset or liability; ● Inputs that are derived principally from or corroborated by observable market data, by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. |
Level 3 | Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2021 and 2020.
Mutual Funds: Valued at the daily closing price as reported by the fund. Mutual funds held by the Plan are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value (“NAV”) and to transact purchases and sales at that price. The mutual funds held by the Plan are deemed to be actively traded.
Common Trust Funds: Valued based on the NAV of units of the common collective trust. The NAV, as provided by the trustee, is used as a practical expedient to estimating fair value. The NAV is based upon the fair value of the underlying investments comprising the trust less its liabilities. This practical expedient is not used when it is determined to be probable
8
that the fund will sell the investment for an amount different than the reported NAV. Investments in common trust funds valued at NAV as a practical expedient can generally be redeemed daily.
Employer Common Stock: Valued at the closing price reported on the active market on which the Company’s common stock is traded.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following table sets forth by level, within the fair value hierarchy, the Plan’s investments at fair value as of December 31, 2021 and 2020:
| | Assets at Fair Value as of December 31, 2021 | ||||||||||
| | Level 1 | | Level 2 | | Level 3 | | Total | ||||
| | | | | | | | | | | | |
Mutual Funds | | $ | 13,530,695 | | $ | — | | $ | — | | $ | 13,530,695 |
Village Bank and Trust Financial Corp. stock fund | |
| — | |
| 644,998 | |
| — | |
| 644,998 |
Total Investments Measured at Fair Value | | $ | 13,530,695 | | $ | 644,998 | | $ | — | | $ | 14,175,693 |
Common Trust Funds, Measured at Net Asset Value | |
| | |
| | |
| | |
| 756,639 |
| | | | | | | | | | | | |
Total Investments, at Fair Value | | | | | | | | | | | $ | 14,932,332 |
| | Assets at Fair Value as of December 31, 2020 | ||||||||||
| | Level 1 | | Level 2 | | Level 3 | | Total | ||||
| | | | | | | | | | | | |
Mutual Funds | | $ | 10,971,026 | | $ | — | | $ | — | | $ | 10,971,026 |
Village Bank and Trust Financial Corp. stock fund | |
| — | |
| 299,434 | |
| — | |
| 299,434 |
Total Investments Measured at Fair Value | | $ | 10,971,026 | | $ | 299,434 | | $ | — | | $ | 11,270,460 |
Common Trust Funds, Measured at Net Asset Value | |
| | |
| | |
| | |
| 442,317 |
| | | | | | | | | | | | |
Total Investments, at Fair Value | | | | | | | | | | | $ | 11,712,777 |
*In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this tale are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of net assets.
The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another.
We evaluated the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total net assets available for benefits. For the year ended December 31, 2021, there were no significant transfers in or out of different levels.
9
Note 4. Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their accounts.
Note 5. Tax Status
The Internal Revenue Service has determined and informed the Company that the Plan and related trust, as then designed, were in compliance with applicable requirements of the Internal Revenue Code (“IRC”). The Plan has not been amended since receiving the opinion letter dated June 30, 2020. However, the plan administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC and, therefore, believe that the Plan is qualified, and the related trust is tax-exempt.
Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the plan and recognize a tax liability (or asset) if the organization has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service or the U.S. Department of Labor. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
Note 6. Related-Party and Party-In-Interest Transactions
The Plan allows funds to be invested in the common stock of the Company, the parent company of the Plan Sponsor. Therefore, the Company is a party-in-interest. Investment in employer securities is allowed by ERISA and the United States Department of Labor’s Rules and Regulations, and the fair value of the Company’s common stock is based on quotes from an active market.
Certain Plan investments are managed by Voya Institutional Trust Company, the custodians and record keeper for the Plan and, therefore, these transactions qualify as party-in-interest transactions.
The custodians provide certain administrative services to the Plan pursuant to an agreement between the Company and custodians. The custodians receive revenue from mutual fund and collective trust fund service providers for services provided to the funds. This revenue is used to offset certain amounts owed to the custodians for its administrative services to the Plan. If the revenue received by the custodians from such mutual fund or common trust fund service providers exceeds the amount owed under the agreement, the custodians remit the excess to the Plan’s trust. Such amounts may be applied to pay Plan administrative expenses or allocated to the accounts of the participants. During 2021, there were no excess amounts. The Plan or Plan Sponsor may make a payment to the custodians for administrative expenses not covered by revenue sharing.
Administrative fees paid to the VBA Benefits Corporation, transactions related to notes receivable, participants, and investments in the Village Bank and Trust Financial Corp. Stock Fund also qualify as exempt party-in interest transactions.
Note 7. Subsequent Events
There are two types of subsequent events: (1) recognized events, which are events that provide additional evidence about conditions that existed at the date of the financial statements, including the estimates inherent in the process of preparing the financial statements, and (2) nonrecognized events, which are events that provide evidence about conditions that did not exist at the date of the financial statements but arose after that date.
The Plan has evaluated subsequent events through June 29, 2022, the date the financial statements were issued. Based on this evaluation, the Plan did not identify any recognized or nonrecognized subsequent events that would have required adjustment to or disclosure in the Plan financial statements.
10
VIRGINIA BANKERS ASSOCIATION DEFINED CONTRIBUTION PLAN
FOR VILLAGE BANK
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
EIN: 16-1694602
December 31, 2021
| | | Description of Investment, | | | |
| | | Including Maturity Date, | | | |
| | | Rate of Interest, Collateral, | | | |
Identity of Issuer, Borrower, Lessor or Similar Party |
| | Par or Maturity Value |
| | Value |
| | | | | | |
Registered Investment Companies | | | | | | |
| | | | | | |
American Funds Euro Pacific Growth R6 Fund | |
| Mutual Fund | | $ | 97,401 |
JPMorgan Emerging Market Equity Fund R6 | | | Mutual Fund | | | 98,897 |
Fidelity Total International Index Fund | | | Mutual Fund | | | 116,491 |
Cohen & Steers Real Estate Securities Z Fund | | | Mutual Fund | | | 117,532 |
Janus Henderson Small Cap Value N Fund | | | Mutual Fund | | | 32,240 |
Victory Sycamore Established Value F | | | Mutual Fund | | | 84,316 |
T. RowePrc Mid-Cap Growth Fund I | | | Mutual Fund | | | 386,292 |
Wasatch Core Growth Fund Inst | | | Mutual Fund | | | 77,732 |
Fidelity Extended Market Index Fund | | | Mutual Fund | | | 16,169 |
MFS Growth Fund R6 | | | Mutual Fund | | | 472,637 |
Vanguard Equity Income Fund Adm | | | Mutual Fund | | | 584,966 |
Fidelity 500 Index Fund | | | Mutual Fund | | | 634,118 |
Vanguard Institutional Target Retirement 2015 Fund | | | Mutual Fund | | | 13,773 |
Vanguard Institutional Target Retirement 2020 Fund | | | Mutual Fund | | | 859,839 |
Vanguard Institutional Target Retirement 2025 Fund | | | Mutual Fund | | | 1,904,948 |
Vanguard Institutional Target Retirement 2030 Fund | | | Mutual Fund | | | 2,109,907 |
Vanguard Institutional Target Retirement 2035 Fund | | | Mutual Fund | | | 1,695,036 |
Vanguard Institutional Target Retirement 2040 Fund | | | Mutual Fund | | | 1,744,428 |
Vanguard Institutional Target Retirement 2045 Fund | | | Mutual Fund | | | 1,260,629 |
Vanguard Institutional Target Retirement 2050 Fund | | | Mutual Fund | | | 407,542 |
Vanguard Institutional Target Retirement 2055 Fund | | | Mutual Fund | | | 412,990 |
Vanguard Institutional Target Retirement 2060 Fund | | | Mutual Fund | | | 49,953 |
Vanguard Institutional Target Retirement Inc Fund | | | Mutual Fund | | | 71,540 |
Vanguard Institutional Target Retirement 2065 Fund | | | Mutual Fund | | | 26,266 |
Voya Intermediate Bond Fund R6 | | | Mutual Fund | | | 166,172 |
Fidelity US Bond Index Fund | | | Mutual Fund | | | 72,995 |
Voya Govt Money Market Fund A (Hold Acct) | | | Mutual Fund | | | 15,886 |
| | | | | | 13,530,695 |
Collective Trust Funds | | | | | | |
Goldman Sachs Stable Value Institutional I Fund | | | Collective Trust | | | 756,639 |
| | | | | | |
Common Stock | | | | | | |
*Village Bank and Trust Financial Corp. | | | Employer Common Stock | | | 644,998 |
| | | | | | |
Loans | |
| | | | |
*Participant Notes | | | Variable interest rates and maturities | |
| 261,967 |
| | | | | | |
Total | | | | | $ | 15,194,299 |
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| | | | | | |
EXHIBIT INDEX
Exhibit
23 Consent of Independent Registered Public Accounting Firm
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the administrator of the Plan has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized, in the Town of Midlothian, Commonwealth of Virginia, on June 29, 2022.
VBA DEFINED CONTRIBUTION PLAN FOR
VILLAGE BANK
By: /s/ Lindsay Cheatham
Lindsay Cheatham
Senior Vice President and Director of Human Resources
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