First National Corporation Reports 80% Increase in Net Income
STRASBURG, Va., Oct. 23, 2013 /PRNewswire/ -- First National Corporation (the "Company") (OTCBB: FXNC), the parent company of First Bank (the "Bank"), reported earnings of $1.2 million, or $0.21 per basic and diluted share, for the quarter ended September 30, 2013.
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Selected Financial Highlights
- Strong financial results:
- Net income of $1.2 million, up 80% from third quarter 2012
- Return on average assets (ROA) of 0.92%
- Return on average equity (ROE) of 11.44%
- Continued improvement in asset quality:
- Nonperforming assets down 17%
- Classified loans down 29%
- Provision for loan losses down $530 thousand
- Strong capital levels:
- Total risk-based capital of 16.57%
- Tier 1 capital of 15.30%
- Leverage ratio of 10.61%
"We are extremely pleased with our strong financial performance in the third quarter," said Scott Harvard, President and CEO. "ROA of 0.92% is closer to historical norms, thanks to continued improvement in asset quality, strong revenues and expense management. Our renewed focus on being a trusted advisor for customers has resulted in significant new and expanded relationships in our markets. We believe that community banking remains a business where people and relationships still matter."
Third Quarter Earnings
Net income was $1.2 million for the third quarter of 2013, compared to $688 thousand for the same period of 2012. The increase in earnings for the third quarter was primarily due to lower provision for loan losses from improving asset quality, combined with stable revenues and noninterest expenses. The provision for loan losses decreased $530 thousand compared to third quarter 2012. Return on average assets was 0.92% compared to 0.52% for the third quarter of 2012. Return on average equity was 11.44% for the third quarter of 2013 compared to 6.11% for the third quarter of 2012. After the effective dividend on preferred stock, net income available to common shareholders totaled $1.0 million or $0.21 per basic and diluted share, for the third quarter of 2013, compared to $462 thousand, or $0.09 per basic and diluted share, for the same period of 2012.
Net interest income totaled $4.6 million for the third quarter of 2013, compared to $4.7 million for the same period one year ago. The net interest margin decreased to 3.68%, while average earning assets increased by $3.5 million. Excluding gains on sales of securities, noninterest income was up 13% compared to the same period of 2012, primarily from an increase in service charges on deposits. Including gains on sales of securities, noninterest income remained relatively unchanged at $1.6 million when comparing the two periods.
Noninterest expense remained essentially unchanged at $4.6 million when comparing the third quarter of 2013 to the same quarter in 2012. Marketing, legal and professional, and other operating expenses decreased $204 thousand while expenses related to other real estate owned increased $174 thousand.
Year-to-Date Earnings
Net income totaled $2.5 million for the nine months ended September 30, 2013 compared to $1.9 million for the same period one year ago. Return on average assets was 0.62% and return on average equity was 7.48% for the nine months ended September 30, 2013, compared to 0.47% and 6.18%, respectively, for the same period in 2012.
Net interest income was $13.9 million compared to $14.6 million for same period in 2012. Noninterest income, excluding gains on sale of securities and a one-time gain on termination of a post-retirement obligation, increased 7% to $4.6 million compared to $4.3 million for the same period one year ago. The increase in noninterest income was primarily driven by revenues from bank owned life insurance and trust and investment advisory fees.
Noninterest expense increased 4% to $14.5 million for the nine months ended September 30, 2013 compared to $14.0 million for the same period in 2012. Salaries and employee benefits increased $333 thousand to $7.5 million compared to $7.2 million. Other operating expenses increased $145 thousand to $2.1 million, compared to $1.9 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. Income tax benefit totaled $468 thousand for the nine months ended September 30, 2013. The income tax benefit was impacted by the sale of other real estate owned 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 Nine Months Ended |
|||||||
| Income Statement |
September 30, |
September 30, |
September 30, |
September 30, |
||||
| Interest and dividend income |
||||||||
| Interest and fees on loans |
$ 4,673 |
$ 5,189 |
$ 14,422 |
$ 16,001 |
||||
| Interest on federal funds sold |
- |
3 |
- |
12 |
||||
| Interest on deposits in banks |
18 |
11 |
45 |
19 |
||||
| Interest and dividends on securities available for sale: |
||||||||
| Taxable interest |
498 |
494 |
1,313 |
1,542 |
||||
| Tax-exempt interest |
79 |
55 |
228 |
228 |
||||
| Dividends |
18 |
19 |
56 |
57 |
||||
| Total interest and dividend income |
$ 5,286 |
$ 5,771 |
$ 16,064 |
$ 17,859 |
||||
| Interest expense |
||||||||
| Interest on deposits |
$ 572 |
$ 928 |
$ 1,910 |
$ 2,874 |
||||
| Interest on trust preferred capital notes |
55 |
60 |
166 |
182 |
||||
| Interest on other borrowings |
30 |
47 |
89 |
192 |
||||
| Total interest expense |
$ 657 |
$ 1,035 |
$ 2,165 |
$ 3,248 |
||||
| Net interest income |
$ 4,629 |
$ 4,736 |
$ 13,899 |
$ 14,611 |
||||
| Provision for loan losses |
275 |
805 |
2,525 |
3,455 |
||||
| Net interest income after provision for loan losses |
$ 4,354 |
$ 3,931 |
$ 11,374 |
$ 11,156 |
||||
| Noninterest income |
||||||||
| Service charges on deposit accounts |
$ 627 |
$ 544 |
$ 1,550 |
$ 1,569 |
||||
| ATM and check card fees |
373 |
369 |
1,071 |
1,129 |
||||
| Trust and investment advisory fees |
406 |
365 |
1,233 |
1,079 |
||||
| Fees for other customer services |
86 |
78 |
302 |
283 |
||||
| Gains on sale of loans |
47 |
51 |
171 |
143 |
||||
| Gains on sale of securities available for sale |
- |
167 |
- |
1,285 |
||||
| Losses on sale of premises and equipment, net |
- |
2 |
- |
2 |
||||
| Other operating income |
86 |
33 |
833 |
95 |
||||
| Total noninterest income |
$ 1,625 |
$ 1,609 |
$ 5,160 |
$ 5,585 |
||||
| Noninterest expense |
||||||||
| Salaries and employee benefits |
$ 2,411 |
$ 2,398 |
$ 7,488 |
$ 7,155 |
||||
| Occupancy |
306 |
333 |
980 |
996 |
||||
| Equipment |
302 |
294 |
889 |
907 |
||||
| Marketing |
81 |
120 |
304 |
293 |
||||
| Stationery and supplies |
66 |
67 |
222 |
234 |
||||
| Legal and professional fees |
237 |
293 |
635 |
741 |
||||
| ATM and check card fees |
176 |
161 |
502 |
480 |
||||
| FDIC assessment |
189 |
176 |
710 |
533 |
||||
| Other real estate owned, net |
252 |
78 |
735 |
748 |
||||
| Other operating expense |
628 |
737 |
2,053 |
1,908 |
||||
| Total noninterest expense |
$ 4,648 |
$ 4,657 |
$ 14,518 |
$ 13,995 |
||||
| Income before income taxes |
$ 1,331 |
$ 883 |
$ 2,016 |
$ 2,746 |
||||
| Income tax provision (benefit) |
91 |
195 |
(468) |
889 |
||||
| Net income |
$ 1,240 |
$ 688 |
$ 2,484 |
$ 1,857 |
||||
| Effective dividend and accretion on preferred stock |
229 |
226 |
684 |
677 |
||||
| Net income available to common shareholders |
$ 1,011 |
$ 462 |
$ 1,800 |
$ 1,180 |
||||
| Common Share and Per Common Share Data |
||||||||
| Net income, basic and diluted |
$ 0.21 |
$ 0.09 |
$ 0.37 |
$ 0.33 |
||||
| 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 |
4,901,464 |
4,901,464 |
3,623,191 |
||||
| Book value at period end |
$ 5.93 |
$ 6.21 |
$ 5.93 |
$ 6.21 |
||||
| 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 Nine Months Ended |
|||||||||
| September 30, |
September 30, |
September 30, |
September 30, |
|||||||
| Key Performance Ratios |
||||||||||
| Return on average assets |
0.92% |
0.52% |
0.62% |
0.47% |
||||||
| Return on average equity |
11.44% |
6.11% |
7.48% |
6.18% |
||||||
| Net interest margin |
3.68% |
3.78% |
3.73% |
3.93% |
||||||
| Efficiency ratio (1) |
69.60% |
75.31% |
72.62% |
71.91% |
||||||
| Average Balances |
||||||||||
| Average assets |
$ 535,885 |
$ 526,908 |
$ 535,258 |
$ 528,239 |
||||||
| Average earning assets |
505,888 |
502,418 |
504,797 |
501,268 |
||||||
| Average shareholders' equity |
43,001 |
44,816 |
44,414 |
40,115 |
||||||
| Asset Quality |
||||||||||
| Loan charge-offs |
$ 955 |
$ 799 |
$ 4,300 |
$ 2,583 |
||||||
| Loan recoveries |
77 |
44 |
575 |
240 |
||||||
| Net charge-offs |
878 |
755 |
3,725 |
2,343 |
||||||
| Non-accrual loans |
8,000 |
8,998 |
8,000 |
8,998 |
||||||
| Other real estate owned, net |
3,833 |
5,323 |
3,833 |
5,323 |
||||||
| Nonperforming assets |
11,833 |
14,321 |
11,833 |
14,321 |
||||||
| Loans over 90 days past due, still accruing |
2,150 |
2,176 |
2,150 |
2,176 |
||||||
| Troubled debt restructurings (accruing) |
834 |
1,578 |
834 |
1,578 |
||||||
| Special mention loans |
23,226 |
21,719 |
23,226 |
21,719 |
||||||
| Substandard loans (accruing) |
31,119 |
46,308 |
31,119 |
46,308 |
||||||
| Doubtful loans |
- |
- |
- |
- |
||||||
| September 30, |
September 30, |
|||||||||
| Capital Ratios |
||||||||||
| Tier 1 capital |
$ 56,830 |
$ 54,138 |
||||||||
| Total capital |
61,562 |
59,050 |
||||||||
| Total capital to risk-weighted assets |
16.57% |
15.39% |
||||||||
| Tier 1 capital to risk-weighted assets |
15.30% |
14.11% |
||||||||
| Leverage ratio |
10.61% |
10.28% |
||||||||
| Balance Sheet |
||||||||||
| Cash and due from banks |
$ 8,649 |
$ 6,655 |
||||||||
| Interest-bearing deposits in banks |
29,221 |
19,564 |
||||||||
| Securities available for sale, at fair value |
105,321 |
95,839 |
||||||||
| Restricted securities, at cost |
1,804 |
1,973 |
||||||||
| Loans, net of allowance for loan losses |
354,952 |
366,703 |
||||||||
| Premises and equipment, net |
17,417 |
19,181 |
||||||||
| Interest receivable |
1,339 |
1,581 |
||||||||
| Other assets |
17,752 |
10,186 |
||||||||
| Total assets |
$ 536,455 |
$ 521,682 |
||||||||
| Noninterest-bearing demand deposits |
$ 95,609 |
$ 83,916 |
||||||||
| Savings and interest-bearing demand deposits |
229,990 |
207,058 |
||||||||
| Time deposits |
145,664 |
165,984 |
||||||||
| Total deposits |
$ 471,263 |
$ 456,958 |
||||||||
| Other borrowings |
6,058 |
6,082 |
||||||||
| Trust preferred capital notes |
9,279 |
9,279 |
||||||||
| Other liabilities |
6,244 |
4,540 |
||||||||
| Total liabilities |
$ 492,844 |
$ 476,859 |
||||||||
| FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) |
||||||||
| (unaudited) |
||||||||
| September 30, 2013 |
September 30, 2012 |
|||||||
| Balance Sheet (continued) |
||||||||
| Preferred stock |
$ 14,525 |
$ 14,372 |
||||||
| Common stock |
6,127 |
6,127 |
||||||
| Surplus |
6,813 |
6,813 |
||||||
| Retained earnings |
20,199 |
17,683 |
||||||
| Accumulated other comprehensive loss, net |
(4,053) |
(172) |
||||||
| Total shareholders' equity |
$ 43,611 |
$ 44,823 |
||||||
| Total liabilities and shareholders' equity |
$ 536,455 |
$ 521,682 |
||||||
| Loan Data |
||||||||
| Mortgage loans on real estate: |
||||||||
| Construction and land development |
$ 34,404 |
$ 44,725 |
||||||
| Secured by farm land |
1,302 |
5,924 |
||||||
| Secured by 1-4 family residential |
142,446 |
128,354 |
||||||
| Other real estate loans |
155,389 |
169,198 |
||||||
| Loans to farmers (except those secured by real estate) |
2,130 |
2,067 |
||||||
| Commercial and industrial loans (except those secured by real estate) |
19,186 |
22,149 |
||||||
| Consumer installment loans |
5,420 |
7,452 |
||||||
| Deposit overdrafts |
187 |
109 |
||||||
| All other loans |
6,363 |
774 |
||||||
| Total loans |
$ 366,827 |
$ 380,752 |
||||||
| Allowance for loan losses |
11,875 |
14,049 |
||||||
| Loans, net |
$ 354,952 |
$ 366,703 |
||||||
| (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 $4,691 and $4,772 for the three months ended September 30, 2013 and 2012, respectively, and $14,076 and $14,750 for the nine months ended September 30, 2013 and 2012, respectively. Adjusted noninterest income was $1,625 and $1,440 for the three months ended September 30, 2013 and 2012, respectively, and $4,617 and $4,298 for the nine months ended September 30, 2013 and 2012, respectively. Adjusted noninterest expense was $4,396 and $4,579 for the three months ended September 30, 2013 and 2012, respectively, and $13,574 and $13,247 for the nine months ended September 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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