STRASBURG, Va., Oct. 28, 2015 (GLOBE NEWSWIRE) -- First National Corporation (the “Company”) (OTC:FXNC), the parent company of First Bank (the “Bank”), reported net income of $726 thousand, or $0.08 per basic and diluted share for the quarter ended September 30, 2015 compared to $1.2 million, or $0.19 per basic and diluted share for the same period of 2014. The current year results were impacted by higher noninterest expenses from the Bank’s recent expansion.
Operating Highlights
- Total assets increased $169.5 million from one year ago to $688.9 million
- Net loan growth of $15.2 million for the quarter and $35.9 million over the last twelve months
- Deposits increased $175.0 million to $613.9 million while the cost to fund earning assets decreased to 0.21%
- Net interest income increased $675 thousand or 14%
- Noninterest income increased $590 thousand or 36%
- Substandard loans cut almost in half as balances decreased by $9.6 million or 48%
- Began an efficiency initiative to streamline processes, improve customer service and reduce expenses
“We are pleased with the progress made during the quarter as we successfully deployed deposits assumed in the recent branch acquisition,” said Scott C. Harvard, President and CEO of the Company. Harvard continued, “Our team was able to deploy recently acquired deposits into loans and securities during the quarter, making a positive impact on margin and net interest income. The new south region lending team under the leadership of Butch Smiley was a strong contributor to our success for the period. Moving forward, we will work to build on this loan momentum while focusing on streamlining processes and improving efficiency across the Company.”
Third Quarter Earnings
Net income totaled $726 thousand for the third quarter of 2015 compared to $1.2 million for the same period of 2014. The return on average assets was 0.42% for the quarter compared to 0.95% for the same quarter one year ago, and the return on average equity was 4.80% compared to 8.64%. Significant increases in total revenue (net interest income plus noninterest income) were offset by higher noninterest expenses that resulted from the recent expansion of the Bank’s branch network and the addition of seasoned commercial bankers in our southern region. The new employees hired and the acquisition and operation of six additional banking offices increased expenses mostly in salaries and employee benefits, occupancy and equipment, as well as a core deposit intangible amortization expense.
The Company experienced total revenue growth of $1.3 million or 20% compared to the same period one year ago. Net interest income increased $675 thousand or 14% to $5.4 million for the third quarter compared to $4.8 million for the same period one year ago. The increase in net interest income was driven primarily by net loan growth of $35.9 million, securities portfolio growth of $58.7 million, and a steady reduction in the cost to fund earning assets. The benefit of the higher volume of earning assets outweighed the lower net interest margin of 3.40% for the quarter. The net interest margin was 3.92% for the same quarter in 2014. The net interest margin was impacted by the second quarter branch acquisition which included the assumption of $186 million of deposits with no loans, resulting in higher balances of interest-bearing deposits in banks.
Noninterest income increased 36% or $590 thousand to $2.2 million for the period compared to $1.7 million for the same quarter one year ago. Included in the improved noninterest income categories were revenue from service charges on deposit accounts which increased $242 thousand or 37%, and ATM and check card fees which increased $162 thousand or 44%. The increases in revenue from service charges on deposit accounts and ATM and check card fees were driven by the increase in the number of transaction-based core deposit accounts assumed in the acquisition.
Noninterest expense increased to $6.7 million for the quarter compared to $4.8 million for the same period in the prior year as a result of the additional banking offices and bankers. The new bankers and the six banking offices had a significant impact on salaries and employee benefits, occupancy and equipment, and the core deposit intangible amortization expense categories. The Bank began an initiative in October 2015 to streamline processes, improve customer service, and reduce operating expenses with the intention of improving the efficiency ratio in future periods. During the quarter, the Company eliminated the position of CEO of the mortgage division and began to adjust staffing based on production levels.
Asset quality continued to improve and economic indicators remained favorable in the Bank’s market area. There was no provision for loan loss required during the quarter as the increase in the general reserve component of the allowance for loan losses was offset by the decrease in the specific reserve component. The allowance for loan losses totaled $5.6 million, or 1.37% of total loans at September 30, 2015. This compared to a recovery of loan losses of $100 thousand and an allowance for loan losses of $9.7 million, or 2.59% of total loans, at the end of the third quarter of 2014.
Third Quarter 2015 Earnings Compared to Second Quarter 2015
The Company experienced an improvement in several areas when comparing the third quarter to the second quarter of 2015. Net income, net interest income and the net interest margin all increased. In addition, noninterest expense declined in the first full quarter following the branch acquisition. Net income increased by $282 thousand to $726 thousand for the third quarter of 2015 compared to $444 thousand for the second quarter of 2015. The return on average assets was 0.42% compared to 0.27%, and the return on average equity was 4.80% compared to 2.97%.
Net interest income increased $358 thousand or 7% to $5.4 million for the third quarter 2015 compared to $5.1 million for the second quarter of 2015, which was driven by $15.2 million of net loan growth during the quarter. The net interest margin improved to 3.40% from 3.29% as the Bank continued to deploy interest-bearing deposits in banks into loans and securities.
Total noninterest income was $2.2 million for the period compared to $2.3 million last quarter. Revenue from service charges on deposits increased by $145 thousand, or 19%, due to increased checking account activity. Other operating income decreased by $227 thousand, which was attributable to a $201 thousand gain recorded during the second quarter from the branch acquisition. Noninterest expense decreased to $6.7 million for the quarter compared to $6.9 million for the prior quarter.
Year-to-Date Earnings
Net income totaled $1.7 million for the nine months ended September 30, 2015, compared to $3.9 million for the same period of 2014. The return on average assets was 0.37% for the period compared to 1.00% for the same period one year ago, and the return on average equity was 3.82% compared to 9.41% for the same period in 2014.
Net interest income increased $1.3 million, or 9%, to $15.1 million for the period, compared to $13.8 million for the same period one year ago. The increase was primarily attributable to higher loan balances and higher securities balances during the first nine months of 2015 compared to the same period of 2014. The net interest margin was 3.52% compared to 3.82% for the same period of 2014. The lower net interest margin resulted from the significant increase in interest-bearing deposits in banks from cash received from the recent branch acquisition.
Noninterest income increased by $1.1 million, or 23% when comparing the periods. The increase resulted primarily from the recent branch acquisition which included the assumption of a significant amount of transaction-based core deposit accounts. Service charges on deposits increased by $268 thousand, or 14%, ATM and check card fees increased $308 thousand, or 29%, and fees for other customer services increased $156 thousand, or 51%. In addition, net gains on sale of loans increased $158 thousand, and other operating income increased by $209 thousand mostly from a $201 thousand gain recorded from the branch acquisition.
Noninterest expense increased $5.1 million, or 37%, to $19.0 million for the period compared to $13.9 million for the same period in the prior year. Branch acquisition expenses totaled $897 thousand during the nine months ended September 30, 2015. Salaries and employee benefit costs increased by $2.6 million to $10.4 million, occupancy expense increased by $156 thousand to $1.1 million, and equipment expense increased by $205 thousand to $1.1 million for the period in order to accommodate the larger organization. Amortization expense increased $414 thousand related to the core deposit intangible recorded from the branch acquisition, and expenses from other real estate owned increased $322 thousand compared to the same period one year ago.
The Bank recorded a recovery of loan losses totaling $100 thousand for the period compared to a recovery of loan losses of $700 thousand for the same period one year ago. The recovery of loan losses for the first nine months of 2015 was primarily attributable to lower required general and specific reserves comprising the allowance for loan losses.
Balance Sheet
Total assets increased $169.5 million, or 33%, to $688.9 million at September 30, 2015 compared to one year ago and net loans increased $35.9 million, or 10%, to $400.8 million. Loan growth occurred primarily in real estate loans secured by 1-4 family residential real estate and commercial real estate in both the legacy market and the new southern region. Total deposits increased $175.0 million, or 40%, to $613.9 million, with noninterest-bearing demand deposits representing 26%, or $46.1 million of the increase, savings and interest-bearing demand deposits comprising 54%, or $93.9 million, and time deposits representing 20%, or $35.0 million of the increase. The balance sheet growth contributed to a $1.3 million, or 9% increase in net interest income for the nine month period ended September 30, 2015 when compared to the same period of 2014.
Capital and Asset Quality
Asset quality continued to improve as substandard loans decreased by $9.6 million or 48%, to $10.5 million at the end of the third quarter compared to $20.1 million for the same quarter one year ago. Nonperforming assets, which includes other real estate owned, decreased 27% to $7.7 million at September 30, 2015 compared to $10.5 million one year ago.
Total shareholders’ equity increased $2.8 million to $60.4 million at September 30, 2015, compared to $57.6 million one year ago. The book value per common share totaled $9.32 at the end of the third quarter. All regulatory capital ratios of the Bank met internal target levels and exceeded regulatory requirements to be considered well-capitalized.
About the Company
First National Corporation, headquartered in Strasburg, Virginia, is the bank holding company of First Bank, a community bank that first opened for business in 1907. The Bank offers loan, deposit, and wealth management products and services from 17 office locations located throughout the Shenandoah Valley and central regions of Virginia. Banking services are also accessed from the Bank’s website, www.fbvirginia.com, and from a network of ATMs located throughout its market area. The Bank operates a mortgage division and a wealth management division under the name First Bank Wealth Management. First Bank also owns First Bank Financial Services, Inc., which invests in entities that provide investment services and title insurance.
Caution about Forward Looking Statements
Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company’s future operations and are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, and other filings with the Securities and Exchange Commission.
| FIRST NATIONAL CORPORATION | |||||||||||||||||||
| Quarterly Performance Summary | |||||||||||||||||||
| (in thousands, except share and per share data) | |||||||||||||||||||
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| Income Statement | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | ||||||||||||||
| Interest income | |||||||||||||||||||
| Interest and fees on loans | $ | 4,854 | $ | 4,688 | $ | 4,540 | $ | 4,623 | $ | 4,536 | |||||||||
| Interest on deposits in banks | 61 | 68 | 5 | 5 | 3 | ||||||||||||||
| Interest on securities | 829 | 618 | 422 | 566 | 622 | ||||||||||||||
| Dividends on restricted securities | 20 | 18 | 21 | 20 | 20 | ||||||||||||||
| Total interest income | $ | 5,764 | $ | 5,392 | $ | 4,988 | $ | 5,214 | $ | 5,181 | |||||||||
| Interest expense | |||||||||||||||||||
| Interest on deposits | $ | 282 | $ | 266 | $ | 300 | $ | 327 | $ | 343 | |||||||||
| Interest on federal funds purchased | - | 1 | 1 | 1 | 2 | ||||||||||||||
| Interest on trust preferred capital notes | 56 | 55 | 54 | 55 | 55 | ||||||||||||||
| Interest on other borrowings | - | 2 | 1 | 26 | 30 | ||||||||||||||
| Total interest expense | $ | 338 | $ | 324 | $ | 356 | $ | 409 | $ | 430 | |||||||||
| Net interest income | $ | 5,426 | $ | 5,068 | $ | 4,632 | $ | 4,805 | $ | 4,751 | |||||||||
| Recovery of loan losses | - | (100 | ) | - | (3,150 | ) | (100 | ) | |||||||||||
| Net interest income after recovery of loan losses | $ | 5,426 | $ | 5,168 | $ | 4,632 | $ | 7,955 | $ | 4,851 | |||||||||
| Noninterest income | |||||||||||||||||||
| Service charges on deposit accounts | $ | 897 | $ | 752 | $ | 547 | $ | 644 | $ | 655 | |||||||||
| ATM and check card fees | 529 | 497 | 349 | 352 | 367 | ||||||||||||||
| Wealth management fees | 477 | 499 | 503 | 465 | 494 | ||||||||||||||
| Fees for other customer services | 172 | 184 | 107 | 90 | 94 | ||||||||||||||
| Income from bank owned life insurance | 106 | 90 | 74 | 101 | 103 | ||||||||||||||
| Net gains (losses) on sale of securities | - | - | (52 | ) | 765 | (91 | ) | ||||||||||||
| Net gains on sale of loans | 53 | 50 | 55 | 23 | - | ||||||||||||||
| Other operating income | 10 | 237 | 8 | 9 | 32 | ||||||||||||||
| Total noninterest income | $ | 2,244 | $ | 2,309 | $ | 1,591 | $ | 2,449 | $ | 1,654 | |||||||||
| Noninterest expense | |||||||||||||||||||
| Salaries and employee benefits | $ | 3,637 | $ | 3,597 | $ | 3,125 | $ | 2,855 | $ | 2,668 | |||||||||
| Occupancy | 396 | 339 | 317 | 315 | 303 | ||||||||||||||
| Equipment | 400 | 422 | 281 | 293 | 299 | ||||||||||||||
| Marketing | 176 | 163 | 97 | 77 | 114 | ||||||||||||||
| Stationery and supplies | 116 | 229 | 345 | 75 | 84 | ||||||||||||||
| Legal and professional fees | 243 | 431 | 212 | 320 | 250 | ||||||||||||||
| ATM and check card fees | 236 | 190 | 155 | 168 | 167 | ||||||||||||||
| FDIC assessment | 134 | 64 | 67 | 70 | 90 | ||||||||||||||
| Bank franchise tax | 131 | 130 | 122 | 105 | 106 | ||||||||||||||
| Telecommunications expense | 131 | 100 | 85 | 81 | 75 | ||||||||||||||
| Data processing expense | 130 | 226 | 187 | 140 | 129 | ||||||||||||||
| Postage expense | 73 | 80 | 117 | 51 | 50 | ||||||||||||||
| Amortization expense | 226 | 196 | 4 | 4 | 4 | ||||||||||||||
| Other real estate owned, net | 144 | 152 | (36 | ) | (151 | ) | (23 | ) | |||||||||||
| Other operating expense | 528 | 536 | 409 | 468 | 437 | ||||||||||||||
| Total noninterest expense | $ | 6,701 | $ | 6,855 | $ | 5,487 | $ | 4,871 | $ | 4,753 | |||||||||
| Income before income taxes | $ | 969 | $ | 622 | $ | 736 | $ | 5,533 | $ | 1,752 | |||||||||
| Income tax expense | 243 | 178 | 192 | 1,837 | 505 | ||||||||||||||
| Net income | $ | 726 | $ | 444 | $ | 544 | $ | 3,696 | $ | 1,247 | |||||||||
| Effective dividend and accretion on preferred stock | 328 | 328 | 329 | 328 | 329 | ||||||||||||||
| Net income available to common shareholders | $ | 398 | $ | 116 | $ | 215 | $ | 3,368 | $ | 918 | |||||||||
| Common Share and Per Common Share Data | |||||||||||||||||||
| Net income, basic | $ | 0.08 | $ | 0.02 | $ | 0.04 | $ | 0.68 | $ | 0.19 | |||||||||
| Weighted average shares, basic | 4,911,604 | 4,909,775 | 4,906,981 | 4,903,748 | 4,902,716 | ||||||||||||||
| Net income, diluted | $ | 0.08 | $ | 0.02 | $ | 0.04 | $ | 0.68 | $ | 0.19 | |||||||||
| Weighted average shares, diluted | 4,913,461 | 4,911,298 | 4,911,044 | 4,903,748 | 4,902,716 | ||||||||||||||
| Shares outstanding at period end | 4,912,662 | 4,910,826 | 4,909,714 | 4,904,577 | 4,903,612 | ||||||||||||||
| Book value at period end | $ | 9.32 | $ | 9.13 | $ | 9.31 | $ | 9.17 | $ | 8.77 | |||||||||
| Cash dividends | $ | 0.025 | $ | 0.025 | $ | 0.025 | $ | 0.025 | $ | 0.025 | |||||||||
| FIRST NATIONAL CORPORATION | |||||||||||||||||||||||||||||||||
| Quarterly Performance Summary | |||||||||||||||||||||||||||||||||
| (in thousands, except share and per share data) | |||||||||||||||||||||||||||||||||
| (unaudited) For the Quarter Ended | |||||||||||||||||||||||||||||||||
| September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | |||||||||||||||||||||||||||||
| Key Performance Ratios | |||||||||||||||||||||||||||||||||
| Return on average assets | 0.42 | % | 0.27 | % | 0.43 | % | 2.81 | % | 0.95 | % | |||||||||||||||||||||||
| Return on average equity | 4.80 | % | 2.97 | % | 3.67 | % | 25.03 | % | 8.64 | % | |||||||||||||||||||||||
| Net interest margin | 3.40 | % | 3.29 | % | 3.96 | % | 3.96 | % | 3.92 | % | |||||||||||||||||||||||
| Efficiency ratio (1) | 84.55 | % | 92.54 | % | 87.20 | % | 76.61 | % | 72.74 | % | |||||||||||||||||||||||
| Average Balances | |||||||||||||||||||||||||||||||||
| Average assets | $ | 691,121 | $ | 671,199 | $ | 516,259 | $ | 521,889 | $ | 521,622 | |||||||||||||||||||||||
| Average earning assets | 642,234 | 625,197 | 480,490 | 487,591 | 487,541 | ||||||||||||||||||||||||||||
| Average shareholders’ equity | 60,043 | 59,957 | 60,040 | 58,583 | 57,217 | ||||||||||||||||||||||||||||
| Asset Quality | |||||||||||||||||||||||||||||||||
| Loan charge-offs | $ | 637 | $ | 671 | $ | 112 | $ | 80 | $ | 302 | |||||||||||||||||||||||
| Loan recoveries | 83 | 129 | 165 | 231 | 112 | ||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | 554 | 542 | (53 | ) | (151 | ) | 190 | ||||||||||||||||||||||||||
| Non-accrual loans | 4,930 | 6,666 | 7,170 | 8,000 | 8,673 | ||||||||||||||||||||||||||||
| Other real estate owned, net | 2,760 | 2,407 | 1,949 | 1,888 | 1,807 | ||||||||||||||||||||||||||||
| Nonperforming assets | 7,690 | 9,073 | 9,119 | 9,888 | 10,480 | ||||||||||||||||||||||||||||
| Loans over 90 days past due, still accruing | 147 | 600 | 71 | - | 2,148 | ||||||||||||||||||||||||||||
| Troubled debt restructurings, accruing | 321 | 324 | 782 | 790 | 796 | ||||||||||||||||||||||||||||
| Special mention loans | 15,706 | 21,278 | 22,550 | 23,259 | 18,411 | ||||||||||||||||||||||||||||
| Substandard loans, accruing | 10,496 | 10,927 | 15,741 | 15,792 | 20,088 | ||||||||||||||||||||||||||||
| Doubtful loans | - | - | - | - | - | ||||||||||||||||||||||||||||
| Capital Ratios (2) | |||||||||||||||||||||||||||||||||
| Total capital | $ | 60,232 | $ | 72,362 | $ | 72,764 | $ | 71,941 | $ | 66,445 | |||||||||||||||||||||||
| Tier 1 capital | 55,066 | 67,400 | 67,918 | 67,217 | 61,693 | ||||||||||||||||||||||||||||
| Common equity tier 1 capital | 55,066 | 67,400 | 67,918 | 67,217 | 61,693 | ||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | 14.59 | % | 18.28 | % | 18.86 | % | 19.14 | % | 17.71 | % | |||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | 13.34 | % | 17.03 | % | 17.61 | % | 17.88 | % | 16.44 | % | |||||||||||||||||||||||
| Common equity tier 1 capital to risk-weighted assets | 13.34 | % | 17.03 | % | 17.61 | % | 17.88 | % | 16.44 | % | |||||||||||||||||||||||
| Leverage ratio | 7.99 | % | 10.06 | % | 13.17 | % | 12.90 | % | 11.85 | % | |||||||||||||||||||||||
| Balance Sheet | |||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 9,890 | $ | 11,870 | $ | 7,529 | $ | 6,043 | $ | 6,862 | |||||||||||||||||||||||
| Interest-bearing deposits in banks | 66,956 | 99,274 | 1,645 | 18,802 | 3,885 | ||||||||||||||||||||||||||||
| Securities available for sale, at fair value | 109,166 | 112,468 | 90,855 | 83,292 | 104,710 | ||||||||||||||||||||||||||||
| Securities held to maturity, at carrying value | 54,276 | 37,343 | - | - | - | ||||||||||||||||||||||||||||
| Restricted securities, at cost | 1,391 | 1,391 | 1,999 | 1,366 | 1,636 | ||||||||||||||||||||||||||||
| Loans held for sale | 471 | 1,978 | - | 328 | 181 | ||||||||||||||||||||||||||||
| Loans, net of allowance for loan losses | 400,838 | 385,592 | 391,746 | 371,692 | 364,974 | ||||||||||||||||||||||||||||
| Other real estate owned, net of valuation allowance | 2,760 | 2,407 | 1,949 | 1,888 | 1,807 | ||||||||||||||||||||||||||||
| Premises and equipment, net | 21,493 | 21,277 | 16,298 | 16,126 | 16,175 | ||||||||||||||||||||||||||||
| Accrued interest receivable | 1,543 | 1,423 | 1,256 | 1,261 | 1,327 | ||||||||||||||||||||||||||||
| Bank owned life insurance | 11,627 | 11,521 | 11,431 | 11,357 | 11,244 | ||||||||||||||||||||||||||||
| Core deposit intangibles, net | 2,539 | 2,765 | 51 | 55 | 59 | ||||||||||||||||||||||||||||
| Other assets | 5,945 | 6,518 | 5,650 | 5,955 | 6,550 | ||||||||||||||||||||||||||||
| Total assets | $ | 688,895 | $ | 695,827 | $ | 530,409 | $ | 518,165 | $ | 519,410 | |||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 149,178 | $ | 147,790 | $ | 109,927 | $ | 104,986 | $ | 103,019 | |||||||||||||||||||||||
| Savings and interest-bearing demand deposits | 318,510 | 322,239 | 231,885 | 237,618 | 224,655 | ||||||||||||||||||||||||||||
| Time deposits | 146,219 | 150,853 | 96,974 | 101,734 | 111,245 | ||||||||||||||||||||||||||||
| Total deposits | $ | 613,907 | $ | 620,882 | $ | 438,786 | $ | 444,338 | $ | 438,919 | |||||||||||||||||||||||
| Federal funds purchased | - | - | 1,955 | 52 | 5,325 | ||||||||||||||||||||||||||||
| Other borrowings | 7 | 13 | 15,020 | 26 | 6,033 | ||||||||||||||||||||||||||||
| Trust preferred capital notes | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | ||||||||||||||||||||||||||||
| Accrued interest payable and other liabilities | 5,303 | 6,214 | 5,057 | 4,906 | 2,232 | ||||||||||||||||||||||||||||
| Total liabilities | $ | 628,496 | $ | 636,388 | $ | 470,097 | $ | 458,601 | $ | 461,788 | |||||||||||||||||||||||
FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) | |||||||||||||||||||||||||||||||||
| | |||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||||||||||||||
| September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | |||||||||||||||||||||||||||||
| Balance Sheet (continued) | |||||||||||||||||||||||||||||||||
| Preferred stock | $ | 14,595 | $ | 14,595 | $ | 14,595 | $ | 14,595 | $ | 14,595 | |||||||||||||||||||||||
| Common stock | 6,141 | 6,139 | 6,137 | 6,131 | 6,130 | ||||||||||||||||||||||||||||
| Surplus | 6,922 | 6,899 | 6,881 | 6,835 | 6,828 | ||||||||||||||||||||||||||||
| Retained earnings | 33,917 | 33,642 | 33,649 | 33,557 | 30,312 | ||||||||||||||||||||||||||||
| Accumulated other comprehensive loss, net | (1,176 | ) | (1,836 | ) | (950 | ) | (1,554 | ) | (243 | ) | |||||||||||||||||||||||
| Total shareholders’ equity | $ | 60,399 | $ | 59,439 | $ | 60,312 | $ | 59,564 | $ | 57,622 | |||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 688,895 | $ | 695,827 | $ | 530,409 | $ | 518,165 | $ | 519,410 | |||||||||||||||||||||||
| Loan Data | |||||||||||||||||||||||||||||||||
| Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||
| Construction and land development | $ | 29,935 | $ | 32,009 | $ | 33,344 | $ | 29,475 | $ | 29,862 | |||||||||||||||||||||||
| Secured by farm land | 984 | 1,025 | 1,067 | 1,129 | 1,193 | ||||||||||||||||||||||||||||
| Secured by 1-4 family residential | 179,419 | 173,265 | 172,874 | 163,727 | 155,298 | ||||||||||||||||||||||||||||
| Other real estate loans | 164,677 | 154,371 | 157,829 | 150,673 | 153,576 | ||||||||||||||||||||||||||||
| Loans to farmers (except those secured by real estate) | 3,014 | 2,645 | 2,760 | 2,975 | 2,905 | ||||||||||||||||||||||||||||
| Commercial and industrial loans (except those secured by real estate) | 16,936 | 16,674 | 18,660 | 18,191 | 20,038 | ||||||||||||||||||||||||||||
| Consumer installment loans | 4,165 | 4,341 | 4,713 | 4,785 | 4,881 | ||||||||||||||||||||||||||||
| Deposit overdrafts | 421 | 419 | 194 | 285 | 248 | ||||||||||||||||||||||||||||
| All other loans | 6,862 | 6,972 | 7,076 | 7,170 | 6,689 | ||||||||||||||||||||||||||||
| Total loans | $ | 406,413 | $ | 391,721 | $ | 398,517 | $ | 378,410 | $ | 374,690 | |||||||||||||||||||||||
| Allowance for loan losses | (5,575 | ) | (6,129 | ) | (6,771 | ) | (6,718 | ) | (9,716 | ) | |||||||||||||||||||||||
| Loans, net | $ | 400,838 | $ | 385,592 | $ | 391,746 | $ | 371,692 | $ | 364,974 | |||||||||||||||||||||||
| Reconciliation of Tax-Equivalent Net Interest Income | |||||||||||||||||||||||||||||||||
| GAAP measures: | |||||||||||||||||||||||||||||||||
| Interest income – loans | $ | 4,854 | $ | 4,688 | $ | 4,540 | $ | 4,623 | $ | 4,536 | |||||||||||||||||||||||
| Interest income – investments and other | 910 | 704 | 448 | 591 | 645 | ||||||||||||||||||||||||||||
| Interest expense – deposits | (282 | ) | (266 | ) | (300 | ) | (327 | ) | (343 | ) | |||||||||||||||||||||||
| Interest expense – other borrowings | - | (2 | ) | (1 | ) | (26 | ) | (30 | ) | ||||||||||||||||||||||||
| Interest expense – trust preferred capital notes | (56 | ) | (55 | ) | (54 | ) | (55 | ) | (55 | ) | |||||||||||||||||||||||
| Interest expense – other | - | (1 | ) | (1 | ) | (1 | ) | (2 | ) | ||||||||||||||||||||||||
| Total net interest income | $ | 5,426 | $ | 5,068 | $ | 4,632 | $ | 4,805 | $ | 4,751 | |||||||||||||||||||||||
| Non-GAAP measures: | |||||||||||||||||||||||||||||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 26 | $ | 27 | $ | 26 | $ | 24 | $ | 27 | |||||||||||||||||||||||
| Tax benefit realized on non-taxable interest income – municipal securities | 60 | 40 | 33 | 42 | 44 | ||||||||||||||||||||||||||||
| Total tax benefit realized on non-taxable interest income | $ | 86 | $ | 67 | $ | 59 | $ | 66 | $ | 71 | |||||||||||||||||||||||
| Total tax-equivalent net interest income | $ | 5,512 | $ | 5,135 | $ | 4,691 | $ | 4,871 | $ | 4,822 | |||||||||||||||||||||||
| FIRST NATIONAL CORPORATION | |||||||
| Year-to-Date Performance Summary | |||||||
| (in thousands, except share and per share data) | |||||||
| (unaudited) For the Nine Months Ended | |||||||
| Income Statement | September 30, 2015 | September 30, 2014 | |||||
| Interest income | |||||||
| Interest and fees on loans | $ | 14,082 | $ | 13,154 | |||
| Interest on deposits in banks | 134 | 33 | |||||
| Interest on securities | 1,869 | 1,936 | |||||
| Dividends on restricted securities | 59 | 62 | |||||
| Total interest income | $ | 16,144 | $ | 15,185 | |||
| Interest expense | |||||||
| Interest on deposits | $ | 848 | $ | 1,115 | |||
| Interest on federal funds purchased | 2 | 2 | |||||
| Interest on trust preferred capital notes | 165 | 163 | |||||
| Interest on other borrowings | 3 | 89 | |||||
| Total interest expense | $ | 1,018 | $ | 1,369 | |||
| Net interest income | $ | 15,126 | $ | 13,816 | |||
| Recovery of loan losses | (100 | ) | (700 | ) | |||
| Net interest income after recovery of loan losses | $ | 15,226 | $ | 14,516 | |||
| Noninterest income | |||||||
| Service charges on deposit accounts | $ | 2,196 | $ | 1,928 | |||
| ATM and check card fees | 1,375 | 1,067 | |||||
| Wealth management fees | 1,479 | 1,450 | |||||
| Fees for other customer services | 463 | 307 | |||||
| Income from bank owned life insurance | 270 | 266 | |||||
| Net gains (losses) on sale of securities | (52 | ) | (69 | ) | |||
| Net gains on sale of loans | 158 | - | |||||
| Other operating income | 255 | 46 | |||||
| Total noninterest income | $ | 6,144 | $ | 4,995 | |||
| Noninterest expense | |||||||
| Salaries and employee benefits | $ | 10,359 | $ | 7,731 | |||
| Occupancy | 1,052 | 896 | |||||
| Equipment | 1,103 | 898 | |||||
| Marketing | 436 | 349 | |||||
| Stationery and supplies | 690 | 258 | |||||
| Legal and professional fees | 886 | 699 | |||||
| ATM and check card fees | 581 | 493 | |||||
| FDIC assessment | 265 | 384 | |||||
| Bank franchise tax | 383 | 305 | |||||
| Telecommunications expense | 316 | 219 | |||||
| Data processing expense | 543 | 378 | |||||
| Postage expense | 270 | 138 | |||||
| Amortization expense | 426 | 12 | |||||
| Other real estate owned, net | 260 | (62 | ) | ||||
| Net loss on disposal of premises and equipment | - | 2 | |||||
| Other operating expense | 1,473 | 1,214 | |||||
| Total noninterest expense | $ | 19,043 | $ | 13,914 | |||
| Income before income taxes | $ | 2,327 | $ | 5,597 | |||
| Income tax expense | 613 | 1,662 | |||||
| Net income | $ | 1,714 | $ | 3,935 | |||
| Effective dividend and accretion on preferred stock | 985 | 810 | |||||
| Net income available to common shareholders | $ | 729 | $ | 3,125 | |||
| Common Share and Per Common Share Data | |||||||
| Net income, basic | $ | 0.15 | $ | 0.64 | |||
| Weighted average shares, basic | 4,909,470 | 4,901,931 | |||||
| Net income, diluted | $ | 0.15 | $ | 0.64 | |||
| Weighted average shares, diluted | 4,911,951 | 4,901,931 | |||||
| Shares outstanding at period end | 4,912,662 | 4,903,612 | |||||
| Book value at period end | $ | 9.32 | $ | 8.77 | |||
| Cash dividends | $ | 0.075 | $ | 0.05 | |||
| FIRST NATIONAL CORPORATION | |||||||
| Year-to-Date Performance Summary | |||||||
| (in thousands, except share and per share data) | |||||||
| (unaudited) For the Nine Months Ended | |||||||
| September 30, 2015 | September 30, 2014 | ||||||
| Key Performance Ratios | |||||||
| Return on average assets | 0.37 | % | 1.00 | % | |||
| Return on average equity | 3.82 | % | 9.41 | % | |||
| Net interest margin | 3.52 | % | 3.82 | % | |||
| Efficiency ratio (1) | 88.05 | % | 73.15 | % | |||
| Average Balances | |||||||
| Average assets | $ | 626,909 | $ | 526,048 | |||
| Average earning assets | 583,233 | 491,443 | |||||
| Average shareholders’ equity | 60,041 | 55,881 | |||||
| Asset Quality | |||||||
| Loan charge-offs | $ | 1,420 | $ | 847 | |||
| Loan recoveries | 377 | 619 | |||||
| Net charge-offs (recoveries) | 1,043 | 228 | |||||
| Reconciliation of Tax-Equivalent Net Interest Income | |||||||
| GAAP measures: | |||||||
| Interest income – loans | $ | 14,082 | $ | 13,154 | |||
| Interest income – investments and other | 2,062 | 2,031 | |||||
| Interest expense – deposits | (848 | ) | (1,115 | ) | |||
| Interest expense – other borrowings | (3 | ) | (89 | ) | |||
| Interest expense – trust preferred capital notes | (165 | ) | (163 | ) | |||
| Interest expense – other | (2 | ) | (2 | ) | |||
| Total net interest income | $ | 15,126 | $ | 13,816 | |||
| Non-GAAP measures: | |||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 79 | $ | 83 | |||
| Tax benefit realized on non-taxable interest income – municipal securities | 133 | 142 | |||||
| Total tax benefit realized on non-taxable interest income | $ | 212 | $ | 225 | |||
| Total tax-equivalent net interest income | $ | 15,338 | $ | 14,041 | |||
(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense and net loss on disposal of premises and equipment by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains and losses on sales of securities and bargain purchase gain. Tax-equivalent net interest income is calculated by adding the tax benefit realized from interest income that is nontaxable to total interest income then subtracting total interest expense. The tax rate utilized in calculating the tax benefit is 34%. See the table above for the quarterly tax-equivalent net interest income and a reconciliation of net interest income to tax-equivalent net interest income. The efficiency ratio is a non-GAAP financial measure that management believes provides investors with important information regarding operational efficiency. Such information is not prepared in accordance with U.S. generally accepted accounting principles (GAAP) and should not be construed as such. Management believes, however, such financial information is meaningful to the reader in understanding operational performance, but cautions that such information not be viewed as a substitute for GAAP.
(2) All capital ratios reported are for the Bank.