First National Corporation Announces Asset Quality Improvement and Second Quarter Earnings
STRASBURG, Va., Aug. 2, 2013 /PRNewswire/ -- First National Corporation (the "Company") (OTCBB: FXNC), the parent company of First Bank (the "Bank"), reported its sixth consecutive profitable quarter and significant asset quality improvement over prior year. Net income for the quarter ending June 30, 2013 was $261 thousand compared to $694 thousand for the same period in 2012. Non-performing assets decreased 18% compared to one year ago and substandard loans declined 35% compared to one year ago.
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Scott C. Harvard, President and CEO commented, "We are pleased to report sustained profitability and positive results from the Bank's classified asset reduction program. The Company has been laser-focused on improving asset quality while driving consistent revenues from our 106 year old community banking franchise. I am proud of how our team has remained true to our core values of personal banking built on great service and strong relationships, while strengthening our risk management practices across the organization. We are looking to the future with optimism and excitement."
Operating Highlights for the Second Quarter
- Sixth consecutive profitable quarter
- Non-performing assets decreased 18% compared to one year ago
- Substandard loans decreased 35% compared to one year ago
- Allowance for loan losses totaled 3.31% of loans
- Net interest margin for the quarter was 3.71%
Second Quarter Earnings
Net income was $261 thousand for the quarter ending June 30, 2013, compared to $694 thousand for the same period in 2012. This difference was primarily attributable to a $1.9 million increase in the provision for loan losses, which was driven by a charge-off of one large loan relationship during the quarter. Return on average assets was 0.19% compared to 0.53% for the second quarter of 2012. Return on average equity was 2.32% for the second quarter of 2013, compared to 7.21% for the second quarter of 2012. After the effective dividend on preferred stock, net income available to common shareholders totaled $31 thousand or $0.01 per basic and diluted share for the second quarter of 2013, compared to $467 thousand, or $0.16 per basic and diluted share for the same period of 2012.
The net interest margin was 3.71% compared to 3.88% for the same period in 2012, resulting in net interest income totaling $4.7 million for the second quarter of 2013, compared to $4.8 million for the same period one year ago. Noninterest income increased 39% to $2.0 million, compared to $1.5 million for the same period one year ago. The Company recorded a $543 thousand gain from the termination of a liability related to its split dollar life insurance plan during the quarter. Noninterest income, excluding the gain on termination of the split dollar liability, remained relatively unchanged at $1.5 million when comparing the periods. Revenue from bank owned life insurance increased while service charges on deposit accounts and ATM and check card fees decreased.
Noninterest expense increased 7% to $4.8 million for the second quarter of 2013, compared to $4.4 million for the same period in 2012. The increase in noninterest expense was primarily due to an increase in expenses related to other real estate owned (OREO) from $106 thousand for the second quarter of 2012 to $376 thousand for the second quarter of 2013. Income tax benefit totaled $830 thousand for the second quarter of 2013. This was impacted by the sale of OREO and loan charge-offs during the quarter.
Year-to-Date Performance
Net income totaled $1.2 million for the six months ended June 30, 2013 and for the same period one year ago. Return on average assets was 0.47% and return on average equity was 5.57% for the six months ended June 30, 2013, compared to 0.44% and 6.17%, respectively, for the same period in 2012.
Net interest income was $9.3 million compared to $9.9 million for same period in 2012. Noninterest income, excluding gains on sale of securities and the termination of the split dollar liability, increased 5% to $3.0 million compared to $2.9 million for the same period one year ago. Revenues from trust and investment advisory fees and bank owned life insurance increased while service charges on deposit accounts decreased.
Noninterest expense increased 6% to $9.9 million compared to $9.3 million for the same period in 2012. Salaries and employee benefits increased $320 thousand to $5.1 million for the second quarter of 2013, compared to $4.8 million for the same period of 2012. Other operating expenses increased $254 thousand to $1.4 million, compared to $1.2 million for the same period one year ago. Other operating expenses increased primarily from the decision to terminate a land lease for branch expansion that resulted in a one-time charge to earnings. The elimination of this lease payment is expected to improve efficiency in future periods. These increased expenses were partially offset by a decrease in OREO related expenses from $670 thousand for the six months ended June 30, 2012 to $483 thousand for the same period in 2013. Income tax benefit totaled $559 thousand for the six months ended June 30, 2013. This was impacted by the sale of OREO and loan charge-offs during the period.
Cautionary Statements
The Company notes to investors that past results of operations do not necessarily indicate future results. Certain factors that affect the Company's operations and business environment are subject to uncertainties that could in turn affect future results. These factors are identified in the Annual Report on Form 10-K for the year ended December 31, 2012, which can be accessed from the Company's website at www.fbvirginia.com, as filed with the Securities and Exchange Commission.
About the Company
First National Corporation, headquartered in Strasburg, Virginia, is the bank holding company of First Bank. First Bank offers loan, deposit, trust and investment products and services from 10 office locations located throughout the northern Shenandoah Valley region of Virginia, which includes Shenandoah County, Warren County, Frederick County and the City of Winchester. Banking services are also accessed from the Bank's website, www.fbvirginia.com, and from a network of ATMs located throughout its market area. First Bank also owns First Bank Financial Services, Inc., which invests in entities that provide investment services and title insurance.
| FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) |
|||||||
| (unaudited) For the Three Months Ended |
(unaudited) For the Six Months Ended |
||||||
| Income Statement |
June 30, 2013 |
June 30, 2012 |
June 30, 2013 |
June 30, 2012 |
|||
| Interest and dividend income |
|||||||
| Interest and fees on loans |
$ 4,816 |
$ 5,265 |
$ 9,749 |
$ 10,812 |
|||
| Interest on federal funds sold |
- |
6 |
- |
9 |
|||
| Interest on deposits in banks |
17 |
5 |
27 |
8 |
|||
| Interest and dividends on securities available for sale: |
|||||||
| Taxable interest |
443 |
514 |
815 |
1,048 |
|||
| Tax-exempt interest |
76 |
71 |
149 |
173 |
|||
| Dividends |
19 |
19 |
38 |
38 |
|||
| Total interest and dividend income |
$ 5,371 |
$ 5,880 |
$ 10,778 |
$ 12,088 |
|||
| Interest expense |
|||||||
| Interest on deposits |
$ 632 |
$ 959 |
$ 1,338 |
$ 1,945 |
|||
| Interest on trust preferred capital notes |
55 |
60 |
111 |
122 |
|||
| Interest on other borrowings |
30 |
66 |
59 |
146 |
|||
| Total interest expense |
$ 717 |
$ 1,085 |
$ 1,508 |
$ 2,213 |
|||
| Net interest income |
$ 4,654 |
$ 4,795 |
$ 9,270 |
$ 9,875 |
|||
| Provision for loan losses |
2,500 |
650 |
2,250 |
2,650 |
|||
| Net interest income after provision for loan losses |
$ 2,154 |
$ 4,145 |
$ 7,020 |
$ 7,225 |
|||
| Noninterest income |
|||||||
| Service charges on deposit accounts |
$ 464 |
$ 523 |
$ 923 |
$ 1,025 |
|||
| ATM and check card fees |
365 |
387 |
698 |
760 |
|||
| Trust and investment advisory fees |
375 |
368 |
827 |
714 |
|||
| Fees for other customer services |
128 |
107 |
216 |
205 |
|||
| Gains on sale of loans |
65 |
49 |
124 |
92 |
|||
| Gains on sale of securities available for sale |
- |
1 |
- |
1,118 |
|||
| Losses on sale of premises and equipment, net |
(3) |
- |
- |
- |
|||
| Other operating income |
640 |
27 |
747 |
62 |
|||
| Total noninterest income |
$ 2,034 |
$ 1,462 |
$ 3,535 |
$ 3,976 |
|||
| Noninterest expense |
|||||||
| Salaries and employee benefits |
$ 2,443 |
$ 2,388 |
$ 5,077 |
$ 4,757 |
|||
| Occupancy |
296 |
337 |
674 |
663 |
|||
| Equipment |
288 |
307 |
587 |
613 |
|||
| Marketing |
113 |
95 |
223 |
173 |
|||
| Stationery and supplies |
81 |
86 |
156 |
167 |
|||
| Legal and professional fees |
219 |
198 |
398 |
448 |
|||
| ATM and check card fees |
168 |
163 |
326 |
319 |
|||
| FDIC assessment |
180 |
179 |
521 |
357 |
|||
| Other real estate owned, net |
376 |
106 |
483 |
670 |
|||
| Other operating expense |
593 |
575 |
1,425 |
1,171 |
|||
| Total noninterest expense |
$ 4,757 |
$ 4,434 |
$ 9,870 |
$ 9,338 |
|||
| Income (loss) before income taxes |
$ (569) |
$ 1,173 |
$ 685 |
$ 1,863 |
|||
| Income tax provision (benefit) |
(830) |
479 |
(559) |
694 |
|||
| Net income |
$ 261 |
694 |
$ 1,244 |
1,169 |
|||
| Effective dividend and accretion on preferred stock |
230 |
227 |
456 |
451 |
|||
| Net income available to common shareholders |
$ 31 |
$ 467 |
$ 788 |
$ 718 |
|||
| Common Share and Per Common Share Data |
|||||||
| Net income, basic and diluted |
$ 0.01 |
$ 0.16 |
$ 0.16 |
$ 0.24 |
|||
| Shares outstanding at period end |
4,901,464 |
4,901,464 |
4,901,464 |
4,901,464 |
|||
| Weighted average shares, basic and diluted |
4,901,464 |
2,998,414 |
4,901,464 |
2,977,032 |
|||
| Book value at period end |
$ 5.83 |
$ 6.19 |
$ 5.83 |
$ 6.19 |
|||
| Cash dividends |
$ - |
$ - |
$ - |
$ - |
|||
| FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) |
||||||||
| (unaudited) For the Three Months Ended |
(unaudited) For the Six Months Ended |
|||||||
| June 30, 2013 |
June 30, 2012 |
June 30, 2013 |
June 30, 2012 |
|||||
| Key Performance Ratios |
||||||||
| Return on average assets |
0.19% |
0.53% |
0.47% |
0.44% |
||||
| Return on average equity |
2.32% |
7.21% |
5.57% |
6.17% |
||||
| Net interest margin |
3.71% |
3.88% |
3.75% |
4.01% |
||||
| Efficiency ratio (1) |
70.54% |
68.70% |
74.14% |
67.52% |
||||
| Average Balances |
||||||||
| Average assets |
$ 540,081 |
$ 529,222 |
$ 534,854 |
$ 528,998 |
||||
| Average earning assets |
509,940 |
501,558 |
504,242 |
500,617 |
||||
| Average shareholders' equity |
45,096 |
38,700 |
45,028 |
38,083 |
||||
| Asset Quality |
||||||||
| Loan charge-offs |
$ 3,067 |
$ 358 |
$ 3,345 |
$ 1,784 |
||||
| Loan recoveries |
289 |
71 |
498 |
196 |
||||
| Net charge-offs |
2,778 |
287 |
2,847 |
1,588 |
||||
| Non-accrual loans |
9,091 |
10,639 |
9,091 |
10,639 |
||||
| Other real estate owned, net |
4,084 |
5,420 |
4,084 |
5,420 |
||||
| Nonperforming assets |
13,175 |
16,059 |
13,175 |
16,059 |
||||
| Loans over 90 days past due, still accruing |
1,889 |
1,229 |
1,889 |
1,229 |
||||
| Troubled debt restructurings (accruing) |
838 |
1,402 |
838 |
1,402 |
||||
| Special mention loans |
26,432 |
16,438 |
26,432 |
16,438 |
||||
| Substandard loans (accruing) |
34,466 |
53,402 |
34,466 |
53,402 |
||||
| Doubtful loans |
- |
44 |
- |
44 |
||||
| June 30, 2013 |
June 30, 2012 |
|||||||
| Capital Ratios |
||||||||
| Tier 1 capital |
$ 55,773 |
$ 53,633 |
||||||
| Total capital |
60,623 |
58,608 |
||||||
| Total capital to risk-weighted assets |
15.94% |
15.07% |
||||||
| Tier 1 capital to risk-weighted assets |
14.66% |
13.79% |
||||||
| Leverage ratio |
10.33% |
10.14% |
||||||
| Balance Sheet |
||||||||
| Cash and due from banks |
$ 8,104 |
$ 7,684 |
||||||
| Interest-bearing deposits in banks |
23,045 |
29,901 |
||||||
| Securities available for sale, at fair value |
105,163 |
87,267 |
||||||
| Restricted securities, at cost |
1,805 |
2,408 |
||||||
| Loans, net of allowance for loan losses |
365,035 |
370,136 |
||||||
| Premises and equipment, net |
17,992 |
19,312 |
||||||
| Interest receivable |
1,425 |
1,536 |
||||||
| Other assets |
18,170 |
12,986 |
||||||
| Total assets |
$ 540,739 |
$ 531,230 |
||||||
| Noninterest-bearing demand deposits |
$ 91,946 |
$ 82,868 |
||||||
| Savings and interest-bearing demand deposits |
232,763 |
208,004 |
||||||
| Time deposits |
151,249 |
167,822 |
||||||
| Total deposits |
$ 475,958 |
$ 458,694 |
||||||
| Other borrowings |
6,064 |
14,088 |
||||||
| Trust preferred capital notes |
9,279 |
9,279 |
||||||
| Other liabilities |
6,377 |
4,473 |
||||||
| Total liabilities |
$ 497,678 |
$ 486,534 |
||||||
| (unaudited) |
||||
| June 30, 2013 |
June 30, 2012 |
|||
| Balance Sheet (continued) |
||||
| Preferred stock |
$ 14,485 |
$ 14,335 |
||
| Common stock |
6,127 |
6,127 |
||
| Surplus |
6,813 |
6,813 |
||
| Retained earnings |
19,188 |
17,221 |
||
| Accumulated other comprehensive income (loss), net |
(3,552) |
200 |
||
| Total shareholders' equity |
$ 43,061 |
$ 44,696 |
||
| Total liabilities and shareholders' equity |
$ 540,739 |
$ 531,230 |
||
| Loan Data |
||||
| Mortgage loans on real estate: |
||||
| Construction and land development |
$ 44,305 |
$ 47,843 |
||
| Secured by farm land |
1,318 |
6,105 |
||
| Secured by 1-4 family residential |
145,628 |
128,229 |
||
| Other real estate loans |
158,516 |
168,107 |
||
| Loans to farmers (except those secured by real estate) |
2,093 |
2,117 |
||
| Commercial and industrial loans (except those secured by real estate) |
17,608 |
22,820 |
||
| Consumer installment loans |
5,973 |
7,823 |
||
| Deposit overdrafts |
99 |
87 |
||
| All other loans |
1,973 |
1,004 |
||
| Total loans |
$ 377,513 |
$ 384,135 |
||
| Allowance for loan losses |
12,478 |
13,999 |
||
| Loans, net |
$ 365,035 |
$ 370,136 |
||
| (1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned expenses and the loss on land lease termination by the sum of net interest income on a tax equivalent basis and noninterest income excluding gains and losses on sales of securities and premises and equipment and the gain on termination of the split dollar liability. 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 for 2013 and 2012 was 34%. Net interest income on a tax equivalent basis was $4,717 and $4,839 for the three months ended June 30, 2013 and 2012, respectively, and $9,384 and $9,979 for the six months ended June 30, 2013 and 2012, respectively. Adjusted noninterest income was $2,037 and $1,461 for the three months ended June 30, 2013 and 2012, respectively, and $3,535 and $2,858 for the six months ended June 30, 2013 and 2012, respectively. The efficiency ratio is a non-GAAP financial measure that management believes provides investors with important information regarding operational efficiency. Such information is not in accordance with generally accepted accounting principles (GAAP) and should not be construed as such. Management believes 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. |
| Contact:
|
|
| Scott C. Harvard M. |
Shane Bell |
| President and CEO |
Executive Vice President and CFO |
| (540) 465-9121 |
(540) 465-9121 |
SOURCE First National Corporation
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