STRASBURG, Va., Jan. 23, 2019 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (OTC: FXNC) reported net income of $2.3 million, or $0.47 per diluted share, for the fourth quarter of 2018. This was a $1.0 million, or 76%, increase when compared to net income for the fourth quarter of 2017, which totaled $1.3 million or $0.27 per diluted share. The increase in net income resulted primarily from a $560 thousand, or 8%, increase in net interest income and a $981 thousand decrease in income tax expense, which were partially offset by a $400 thousand increase in provision for loan losses.
For the year ended December 31, 2018, the Company achieved record net income of $10.1 million or $2.05 per share. This was a $3.7 million, or 57%, increase compared to net income for the prior year, which totaled $6.4 million or $1.30 per share. The increase in net income resulted from a $2.4 million, or 9%, increase in net interest income, an $865 thousand, or 10%, increase in noninterest income, and a $1.4 million decrease in income tax expense, which were partially offset by a $500 thousand increase in the provision for loan losses and a $477 thousand, or 2%, increase in noninterest expense.
2018 Key Accomplishments:
- Record year of net income totaling $10.1 million
- Return on average equity of 16.36%
- Return on average assets of 1.34%
- Efficiency ratio improved for third consecutive year to 63.05%
- Net interest margin increased for third consecutive year to 3.93%
- Pre-provision pre-tax earnings increased 27%
“Last year’s earnings were an all-time record for our Company,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “We are extremely pleased with the Company’s performance for 2018 as pressure continued to build on funding costs while competitors engaged in aggressive lending structures at what we believe is late in the economic cycle. In the 2018 economic environment, we chose to forego overly ambitious growth in order to continue to manage interest margin and asset quality. We continue to focus on deepening relationships and growing non-interest and non-maturity deposits, while working hard to enhance the quality of life in the communities we serve.”
BALANCE SHEET
Total assets of First National increased $13.9 million to $753.0 million, compared to $739.1 million at December 31, 2017. The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $21.0 million, or 4%, while securities and interest-bearing deposits in banks decreased $7.5 million, or 4%, when comparing the periods.
Total deposits increased $5.6 million to $670.6 million, compared to $665.0 million at December 31, 2017. The deposit portfolio composition remained stable as noninterest-bearing deposits were unchanged at 27% of total deposits at December 31, 2018 and 2017.
Shareholders’ equity increased $8.5 million to $66.7 million at December 31, 2018, compared to $58.2 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $66.2 million at the end of the year, an increase of 16% compared to $57.2 million at December 31, 2017. The Company’s wholly-owned banking subsidiary, First Bank, was considered well-capitalized based on regulatory requirements at the end of the year.
ANALYSIS OF THE THREE MONTH PERIOD
Net interest income increased $560 thousand, or 8%, to $7.2 million for the quarter ended December 31, 2018, compared to $6.6 million for the fourth quarter of 2017. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 2%, and the net interest margin increased 19 basis points to 4.05% for the quarter ended December 31, 2018, compared to 3.86% for the same period in 2017. The increase in the net interest margin resulted from a 37 basis point increase in the yield on average earning assets, which was partially offset by an 18 basis point increase in interest expense as a percent of average earning assets.
The higher yield on average earning assets was primarily attributable to an increase in yields on loans, securities and interest-bearing deposits in banks. The increase in interest expense was primarily attributable to higher interest rates paid on deposits, as the cost of total interest-bearing deposits increased by 25 basis points, which compared favorably to increases of 100 basis points in the target federal funds rate during 2018.
Noninterest income decreased $77 thousand to $2.3 million, compared to $2.4 million for the same period of 2017. The decrease was primarily attributable to a $311 thousand decrease in bank owned life insurance. The decrease in bank owned life insurance revenue was a result of death benefits recorded in the fourth quarter of the prior year that totaled $305 thousand. The decrease in bank owned life insurance revenue was partially offset by a $36 thousand, or 5%, increase in service charges on deposits, a $46 thousand, or 8%, increase in ATM and check card revenue, and a $57 thousand, or 15%, increase in wealth management revenue.
Noninterest expense increased $60 thousand, or 1%, to $6.1 million for the fourth quarter, compared to the same period one year ago. Legal and professional fees increased $115 thousand, which resulted primarily from an increase in investment advisory costs of the wealth management department, and consulting and audit fees related to new requirements for internal controls over financial reporting. The increase in investment advisory expense correlated with the increase in wealth management revenue when comparing the periods. These increases were partially offset by decreases in expense categories, including amortization expense, salaries and employee benefits, ATM and check card expense, and telecommunications expense.
Income tax expense decreased $981 thousand to $542 thousand for the fourth quarter, compared to $1.5 million for the same period of 2017. The decrease was attributable to a $752 thousand charge to income tax expense in the fourth quarter of 2017 for the re-measurement of net deferred tax assets, which resulted from the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act enacted in December 2017. Income tax expense also decreased when comparing the quarterly periods from the lower 21% federal corporate income tax rate that was effective for the fourth quarter of 2018, compared to the 34% income tax rate that was applicable for the fourth quarter of 2017.
ANALYSIS OF THE TWELVE MONTH PERIOD
For the year ended December 31, 2018, net interest income increased $2.4 million, or 9%, to $27.6 million, compared to $25.3 million for the same period in 2017. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 4%, and the net interest margin increased 16 basis points to 3.93% for the year ended December 31, 2018, compared to 3.77% for the same period in 2017. The increase in the net interest margin resulted from a 31 basis point increase in the yield on total earning assets, which was partially offset by a 15 basis point increase in interest expense as a percent of average earning assets.
The higher yield on earning assets was primarily attributable to an increase in yields on loans, securities and interest-bearing deposits in banks. The increase in interest expense was primarily attributable to higher interest rates paid on deposits, as the cost of total interest-bearing deposits increased by 20 basis points, which compared favorably to increases of 100 basis points in the target federal funds rate during the year.
Noninterest income increased $865 thousand, or 10%, to $9.2 million, compared to $8.3 million for the same period of 2017. This was primarily a result of a $235 thousand, or 16%, increase in wealth management fees, a $210 thousand increase in other operating income, a $150 thousand, or 5%, increase in service charges on deposits, and a $120 thousand increase in bank owned life insurance. These increases were partially offset by an $86 thousand decrease in net gains on sale of loans.
Noninterest expense increased $477 thousand, or 2%, to $23.8 million. This was primarily a result of a $364 thousand, or 3%, increase in salaries and employee benefits, a $258 thousand, or 13%, increase in other operating expenses, and a $116 thousand, or 8%, increase in occupancy expense. These increases were partially offset by a $250 thousand decrease in net loss on disposal of premises and equipment, a $163 thousand decrease in amortization expense, and a $120 thousand decrease in telecommunications expense.
Income tax expense decreased $1.4 million to $2.3 million for the year, compared to $3.7 million for the same period of 2017. The decrease in income tax expense was a result of a lower federal corporate income tax rate of 21% for the year ended December 31, 2018, compared to 34% for the prior year. There was also a $752 thousand charge to income tax expense in the fourth quarter of 2017 related to the re-measurement of net deferred tax assets, which resulted from the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act enacted in December 2017.
ASSET QUALITY/LOAN LOSS PROVISION
The provision for loan losses totaled $500 thousand for the fourth quarter of 2018, compared to $100 thousand for the fourth quarter 2017. Net charge-offs totaled $292 thousand for the fourth quarter of 2018 compared to $75 thousand for the same period of 2017. Nonperforming assets totaled $3.2 million, or 0.42% of total assets at year-end, compared to $1.3 million, or 0.17% of total assets, one year ago. The allowance for loan losses totaled $5.0 million, or 0.92% of total loans, and $5.3 million, or 1.02% of total loans, at December 31, 2018 and 2017, respectively.
The provision for loan losses totaled $600 thousand for the year ended December 31, 2018, compared to $100 thousand for the prior year. Net charge-offs totaled $917 thousand for 2018 compared to $95 thousand for 2017.
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, 2017, and other filings with the Securities and Exchange Commission.
ABOUT FIRST NATIONAL CORPORATION
First National Corporation (OTC: FXNC) is the parent company and bank holding company of First Bank, a community bank that first opened for business in 1907 in Strasburg, Virginia. The Bank offers loan and deposit products and services through its website, www.fbvirginia.com, its mobile banking platform, a network of ATMs located throughout its market area, one loan production office, a customer service center in a retirement community, and 15 bank branch office locations located throughout the Shenandoah Valley and central regions of Virginia. In addition to providing traditional banking services, the Bank operates 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.
CONTACTS
| Scott C. Harvard President and CEO (540) 465-9121 sharvard@fbvirginia.com | M. Shane Bell Executive Vice President and CFO (540) 465-9121 sbell@fbvirginia.com | |
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||||||||||
| Income Statement | |||||||||||||||||||
| Interest income | |||||||||||||||||||
| Interest and fees on loans | $ | 7,106 | $ | 6,917 | $ | 6,546 | $ | 6,305 | $ | 6,365 | |||||||||
| Interest on deposits in banks | 105 | 88 | 186 | 160 | 96 | ||||||||||||||
| Interest on securities | |||||||||||||||||||
| Taxable interest | 771 | 797 | 776 | 680 | 636 | ||||||||||||||
| Tax-exempt interest | 153 | 156 | 156 | 145 | 147 | ||||||||||||||
| Dividends on restricted securities | 24 | 23 | 22 | 22 | 21 | ||||||||||||||
| Total interest income | $ | 8,159 | $ | 7,981 | $ | 7,686 | $ | 7,312 | $ | 7,265 | |||||||||
| Interest expense | |||||||||||||||||||
| Interest on deposits | $ | 798 | $ | 702 | $ | 665 | $ | 590 | $ | 489 | |||||||||
| Interest on subordinated debt | 91 | 91 | 89 | 89 | 91 | ||||||||||||||
| Interest on junior subordinated debt | 105 | 105 | 101 | 86 | 80 | ||||||||||||||
| Total interest expense | $ | 994 | $ | 898 | $ | 855 | $ | 765 | $ | 660 | |||||||||
| Net interest income | $ | 7,165 | $ | 7,083 | $ | 6,831 | $ | 6,547 | $ | 6,605 | |||||||||
| Provision for loan losses | 500 | — | — | 100 | 100 | ||||||||||||||
| Net interest income after provision for loan losses | $ | 6,665 | $ | 7,083 | $ | 6,831 | $ | 6,447 | $ | 6,505 | |||||||||
| Noninterest income | |||||||||||||||||||
| Service charges on deposit accounts | $ | 814 | $ | 818 | $ | 784 | $ | 762 | $ | 778 | |||||||||
| ATM and check card fees | 642 | 540 | 555 | 519 | 596 | ||||||||||||||
| Wealth management fees | 443 | 423 | 409 | 407 | 386 | ||||||||||||||
| Fees for other customer services | 154 | 143 | 151 | 153 | 162 | ||||||||||||||
| Income from bank owned life insurance | 97 | 107 | 77 | 559 | 408 | ||||||||||||||
| Net gains (losses) on sales of securities | (1 | ) | — | — | — | (114 | ) | ||||||||||||
| Net gains on sale of loans | 23 | 39 | 15 | 9 | 51 | ||||||||||||||
| Other operating income | 107 | 108 | 76 | 224 | 89 | ||||||||||||||
| Total noninterest income | $ | 2,279 | $ | 2,178 | $ | 2,067 | $ | 2,633 | $ | 2,356 | |||||||||
| Noninterest expense | |||||||||||||||||||
| Salaries and employee benefits | $ | 3,306 | $ | 3,371 | $ | 3,227 | $ | 3,383 | $ | 3,338 | |||||||||
| Occupancy | 424 | 387 | 387 | 400 | 388 | ||||||||||||||
| Equipment | 410 | 396 | 420 | 423 | 428 | ||||||||||||||
| Marketing | 155 | 123 | 161 | 109 | 166 | ||||||||||||||
| Supplies | 91 | 75 | 88 | 80 | 88 | ||||||||||||||
| Legal and professional fees | 343 | 229 | 223 | 191 | 228 | ||||||||||||||
| ATM and check card expense | 178 | 217 | 211 | 203 | 209 | ||||||||||||||
| FDIC assessment | 68 | 78 | 66 | 82 | 76 | ||||||||||||||
| Bank franchise tax | 117 | 118 | 118 | 115 | 111 | ||||||||||||||
| Telecommunications expense | 79 | 83 | 98 | 36 | 103 | ||||||||||||||
| Data processing expense | 173 | 168 | 170 | 162 | 165 | ||||||||||||||
| Postage expense | 51 | 42 | 42 | 61 | 14 | ||||||||||||||
| Amortization expense | 99 | 108 | 120 | 131 | 141 | ||||||||||||||
| Other real estate owned expense (income), net | — | 2 | 1 | (23 | ) | (192 | ) | ||||||||||||
| Net loss on disposal of premises and equipment | — | 2 | — | — | 252 | ||||||||||||||
| Other operating expense | 587 | 551 | 532 | 513 | 506 | ||||||||||||||
| Total noninterest expense | $ | 6,081 | $ | 5,950 | $ | 5,864 | $ | 5,866 | $ | 6,021 | |||||||||
| Income before income taxes | $ | 2,863 | $ | 3,311 | $ | 3,034 | $ | 3,214 | $ | 2,840 | |||||||||
| Income tax expense | 542 | 635 | 583 | 527 | 1,523 | ||||||||||||||
| Net income | $ | 2,321 | $ | 2,676 | $ | 2,451 | $ | 2,687 | $ | 1,317 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||||||||||
| Common Share and Per Common Share Data | |||||||||||||||||||
| Net income, basic | $ | 0.47 | $ | 0.54 | $ | 0.49 | $ | 0.54 | $ | 0.27 | |||||||||
| Weighted average shares, basic | 4,957,055 | 4,955,162 | 4,952,712 | 4,949,112 | 4,945,175 | ||||||||||||||
| Net income, diluted | $ | 0.47 | $ | 0.54 | $ | 0.49 | $ | 0.54 | $ | 0.27 | |||||||||
| Weighted average shares, diluted | 4,960,597 | 4,958,162 | 4,954,265 | 4,952,373 | 4,948,981 | ||||||||||||||
| Shares outstanding at period end | 4,957,694 | 4,956,925 | 4,953,356 | 4,952,575 | 4,945,702 | ||||||||||||||
| Tangible book value at period end | $ | 13.35 | $ | 12.72 | $ | 12.31 | $ | 11.89 | $ | 11.57 | |||||||||
| Cash dividends | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.035 | |||||||||
| Key Performance Ratios | |||||||||||||||||||
| Return on average assets | 1.22 | % | 1.41 | % | 1.29 | % | 1.45 | % | 0.71 | % | |||||||||
| Return on average equity | 14.15 | % | 16.89 | % | 16.23 | % | 18.47 | % | 9.01 | % | |||||||||
| Net interest margin | 4.05 | % | 4.02 | % | 3.86 | % | 3.79 | % | 3.86 | % | |||||||||
| Efficiency ratio (1) | 62.99 | % | 62.68 | % | 64.17 | % | 62.39 | % | 63.48 | % | |||||||||
| Average Balances | |||||||||||||||||||
| Average assets | $ | 753,112 | $ | 750,619 | $ | 762,626 | $ | 751,164 | $ | 736,745 | |||||||||
| Average earning assets | 706,323 | 703,894 | 715,163 | 704,947 | 689,338 | ||||||||||||||
| Average shareholders’ equity | 65,077 | 62,882 | 60,592 | 58,979 | 57,973 | ||||||||||||||
| Asset Quality | |||||||||||||||||||
| Loan charge-offs | $ | 374 | $ | 295 | $ | 294 | $ | 206 | $ | 223 | |||||||||
| Loan recoveries | 82 | 57 | 61 | 52 | 148 | ||||||||||||||
| Net charge-offs | 292 | 238 | 233 | 154 | 75 | ||||||||||||||
| Non-accrual loans | 3,172 | 2,738 | 2,330 | 682 | 937 | ||||||||||||||
| Other real estate owned, net | — | — | 68 | — | 326 | ||||||||||||||
| Nonperforming assets | 3,172 | 2,738 | 2,398 | 682 | 1,263 | ||||||||||||||
| Loans 30 to 89 days past due, accruing | 1,446 | 2,707 | 3,408 | 2,602 | 4,223 | ||||||||||||||
| Loans over 90 days past due, accruing | 235 | 261 | 549 | 773 | 183 | ||||||||||||||
| Troubled debt restructurings, accruing | 264 | 269 | 273 | 278 | 282 | ||||||||||||||
| Special mention loans | 2,078 | 2,718 | 3,988 | 5,365 | 5,225 | ||||||||||||||
| Substandard loans, accruing | 3,522 | 1,216 | 3,798 | 9,003 | 8,863 | ||||||||||||||
| Capital Ratios (2) | |||||||||||||||||||
| Total capital | $ | 74,697 | $ | 72,807 | $ | 71,026 | $ | 69,435 | $ | 67,624 | |||||||||
| Tier 1 capital | 69,688 | 68,006 | 65,987 | 64,163 | 62,298 | ||||||||||||||
| Common equity tier 1 capital | 69,688 | 68,006 | 65,987 | 64,163 | 62,298 | ||||||||||||||
| Total capital to risk-weighted assets | 13.62 | % | 13.25 | % | 13.47 | % | 13.52 | % | 13.12 | % | |||||||||
| Tier 1 capital to risk-weighted assets | 12.71 | % | 12.38 | % | 12.52 | % | 12.50 | % | 12.09 | % | |||||||||
| Common equity tier 1 capital to risk-weighted assets | 12.71 | % | 12.38 | % | 12.52 | % | 12.50 | % | 12.09 | % | |||||||||
| Leverage ratio | 9.26 | % | 9.07 | % | 8.66 | % | 8.55 | % | 8.46 | % | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||||||||||
| Balance Sheet | |||||||||||||||||||
| Cash and due from banks | $ | 13,378 | $ | 11,370 | $ | 13,501 | $ | 11,185 | $ | 11,358 | |||||||||
| Interest-bearing deposits in banks | 15,240 | 10,068 | 27,762 | 58,092 | 28,628 | ||||||||||||||
| Securities available for sale, at fair value | 99,857 | 102,748 | 106,707 | 93,699 | 89,255 | ||||||||||||||
| Securities held to maturity, at carrying value | 43,408 | 44,239 | 45,701 | 46,791 | 48,208 | ||||||||||||||
| Restricted securities, at cost | 1,688 | 1,590 | 1,590 | 1,590 | 1,570 | ||||||||||||||
| Loans held for sale | 419 | 516 | 1,195 | 68 | 438 | ||||||||||||||
| Loans, net of allowance for loan losses | 537,847 | 535,020 | 525,894 | 515,664 | 516,875 | ||||||||||||||
| Other real estate owned, net of valuation allowance | — | — | 68 | — | 326 | ||||||||||||||
| Premises and equipment, net | 20,066 | 19,557 | 19,633 | 19,833 | 19,891 | ||||||||||||||
| Accrued interest receivable | 2,113 | 2,138 | 2,073 | 1,869 | 1,916 | ||||||||||||||
| Bank owned life insurance | 13,991 | 13,894 | 13,787 | 13,711 | 13,967 | ||||||||||||||
| Core deposit intangibles, net | 472 | 571 | 679 | 799 | 930 | ||||||||||||||
| Other assets | 4,490 | 4,743 | 4,774 | 4,553 | 5,748 | ||||||||||||||
| Total assets | $ | 752,969 | $ | 746,454 | $ | 763,364 | $ | 767,854 | $ | 739,110 | |||||||||
| Noninterest-bearing demand deposits | $ | 181,964 | $ | 186,293 | $ | 196,839 | $ | 189,460 | $ | 180,912 | |||||||||
| Savings and interest-bearing demand deposits | 369,383 | 360,988 | 367,399 | 378,330 | 361,417 | ||||||||||||||
| Time deposits | 119,219 | 119,823 | 122,291 | 125,035 | 122,651 | ||||||||||||||
| Total deposits | $ | 670,566 | $ | 667,104 | $ | 686,529 | $ | 692,825 | $ | 664,980 | |||||||||
| Subordinated debt | 4,965 | 4,961 | 4,956 | 4,952 | 4,948 | ||||||||||||||
| Junior subordinated debt | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | ||||||||||||||
| Accrued interest payable and other liabilities | 1,485 | 1,459 | 952 | 1,105 | 1,749 | ||||||||||||||
| Total liabilities | $ | 686,295 | $ | 682,803 | $ | 701,716 | $ | 708,161 | $ | 680,956 | |||||||||
| Preferred stock | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
| Common stock | 6,197 | 6,196 | 6,192 | 6,191 | 6,182 | ||||||||||||||
| Surplus | 7,471 | 7,438 | 7,346 | 7,312 | 7,260 | ||||||||||||||
| Retained earnings | 54,814 | 52,741 | 50,313 | 48,109 | 45,670 | ||||||||||||||
| Accumulated other comprehensive loss, net | (1,808 | ) | (2,724 | ) | (2,203 | ) | (1,919 | ) | (958 | ) | |||||||||
| Total shareholders’ equity | $ | 66,674 | $ | 63,651 | $ | 61,648 | $ | 59,693 | $ | 58,154 | |||||||||
| Total liabilities and shareholders’ equity | $ | 752,969 | $ | 746,454 | $ | 763,364 | $ | 767,854 | $ | 739,110 | |||||||||
| Loan Data | |||||||||||||||||||
| Mortgage loans on real estate: | |||||||||||||||||||
| Construction and land development | $ | 45,867 | $ | 42,982 | $ | 37,350 | $ | 33,941 | $ | 35,927 | |||||||||
| Secured by farm land | 880 | 942 | 975 | 848 | 646 | ||||||||||||||
| Secured by 1-4 family residential | 215,945 | 211,938 | 211,101 | 208,338 | 208,177 | ||||||||||||||
| Other real estate loans | 218,673 | 223,961 | 223,387 | 221,504 | 221,610 | ||||||||||||||
| Loans to farmers (except those secured by real estate) | 1,035 | 937 | 476 | 403 | 822 | ||||||||||||||
| Commercial and industrial loans (except those secured by real estate) | 43,570 | 41,924 | 40,467 | 38,850 | 37,941 | ||||||||||||||
| Consumer installment loans | 12,061 | 12,301 | 12,315 | 12,140 | 12,101 | ||||||||||||||
| Deposit overdrafts | 275 | 249 | 231 | 222 | 232 | ||||||||||||||
| All other loans | 4,550 | 4,587 | 4,631 | 4,690 | 4,745 | ||||||||||||||
| Total loans | $ | 542,856 | $ | 539,821 | $ | 530,933 | $ | 520,936 | $ | 522,201 | |||||||||
| Allowance for loan losses | (5,009 | ) | (4,801 | ) | (5,039 | ) | (5,272 | ) | (5,326 | ) | |||||||||
| Loans, net | $ | 537,847 | $ | 535,020 | $ | 525,894 | $ | 515,664 | $ | 516,875 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||||||||||
| Reconciliation of Tax-Equivalent Net Interest Income | |||||||||||||||||||
| GAAP measures: | |||||||||||||||||||
| Interest income – loans | $ | 7,106 | $ | 6,917 | $ | 6,546 | $ | 6,305 | $ | 6,365 | |||||||||
| Interest income – investments and other | 1,053 | 1,064 | 1,140 | 1,007 | 900 | ||||||||||||||
| Interest expense – deposits | (798 | ) | (702 | ) | (665 | ) | (590 | ) | (489 | ) | |||||||||
| Interest expense – subordinated debt | (91 | ) | (91 | ) | (89 | ) | (89 | ) | (91 | ) | |||||||||
| Interest expense – junior subordinated debt | (105 | ) | (105 | ) | (101 | ) | (86 | ) | (80 | ) | |||||||||
| Total net interest income | $ | 7,165 | $ | 7,083 | $ | 6,831 | $ | 6,547 | $ | 6,605 | |||||||||
| Non-GAAP measures: | |||||||||||||||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 11 | $ | 12 | $ | 11 | $ | 10 | $ | 17 | |||||||||
| Tax benefit realized on non-taxable interest income – municipal securities | 42 | 41 | 41 | 39 | 76 | ||||||||||||||
| Total tax benefit realized on non-taxable interest income | $ | 53 | $ | 53 | $ | 52 | $ | 49 | $ | 93 | |||||||||
| Total tax-equivalent net interest income | $ | 7,218 | $ | 7,136 | $ | 6,883 | $ | 6,596 | $ | 6,698 | |||||||||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Year Ended | |||||||
| December 31, 2018 | December 31, 2017 | ||||||
| Income Statement | |||||||
| Interest income | |||||||
| Interest and fees on loans | $ | 26,874 | $ | 24,082 | |||
| Interest on deposits in banks | 539 | 335 | |||||
| Interest on securities | |||||||
| Taxable interest | 3,024 | 2,569 | |||||
| Tax-exempt interest | 610 | 583 | |||||
| Dividends on restricted securities | 91 | 83 | |||||
| Total interest income | $ | 31,138 | $ | 27,652 | |||
| Interest expense | |||||||
| Interest on deposits | $ | 2,755 | $ | 1,723 | |||
| Interest on subordinated debt | 360 | 360 | |||||
| Interest on junior subordinated debt | 397 | 303 | |||||
| Total interest expense | $ | 3,512 | $ | 2,386 | |||
| Net interest income | $ | 27,626 | $ | 25,266 | |||
| Provision for loan losses | 600 | 100 | |||||
| Net interest income after provision for loan losses | $ | 27,026 | $ | 25,166 | |||
| Noninterest income | |||||||
| Service charges on deposit accounts | $ | 3,178 | $ | 3,028 | |||
| ATM and check card fees | 2,256 | 2,140 | |||||
| Wealth management fees | 1,682 | 1,447 | |||||
| Fees for other customer services | 601 | 570 | |||||
| Income from bank owned life insurance | 840 | 720 | |||||
| Net gains (losses) on sales of securities | (1 | ) | (90 | ) | |||
| Net gains on sale of loans | 86 | 172 | |||||
| Other operating income | 515 | 305 | |||||
| Total noninterest income | $ | 9,157 | $ | 8,292 | |||
| Noninterest expense | |||||||
| Salaries and employee benefits | $ | 13,287 | $ | 12,923 | |||
| Occupancy | 1,598 | 1,482 | |||||
| Equipment | 1,649 | 1,636 | |||||
| Marketing | 548 | 576 | |||||
| Supplies | 334 | 365 | |||||
| Legal and professional fees | 986 | 886 | |||||
| ATM and check card expense | 809 | 805 | |||||
| FDIC assessment | 294 | 316 | |||||
| Bank franchise tax | 468 | 436 | |||||
| Telecommunications expense | 296 | 416 | |||||
| Data processing expense | 673 | 620 | |||||
| Postage expense | 196 | 211 | |||||
| Amortization expense | 458 | 621 | |||||
| Other real estate owned expense (income), net | (20 | ) | (186 | ) | |||
| Net loss on disposal of premises and equipment | 2 | 252 | |||||
| Other operating expense | 2,183 | 1,925 | |||||
| Total noninterest expense | $ | 23,761 | $ | 23,284 | |||
| Income before income taxes | $ | 12,422 | $ | 10,174 | |||
| Income tax expense | 2,287 | 3,726 | |||||
| Net income | $ | 10,135 | $ | 6,448 | |||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Year Ended | |||||||
| December 31, 2018 | December 31, 2017 | ||||||
| Common Share and Per Common Share Data | |||||||
| Net income, basic | $ | 2.05 | $ | 1.30 | |||
| Weighted average shares, basic | 4,953,537 | 4,941,233 | |||||
| Net income, diluted | $ | 2.04 | $ | 1.30 | |||
| Weighted average shares, diluted | 4,956,375 | 4,943,898 | |||||
| Shares outstanding at period end | 4,957,694 | 4,945,702 | |||||
| Tangible book value at period end | $ | 13.35 | $ | 11.57 | |||
| Cash dividends | $ | 0.20 | $ | 0.14 | |||
| Key Performance Ratios | |||||||
| Return on average assets | 1.34 | % | 0.89 | % | |||
| Return on average equity | 16.36 | % | 11.57 | % | |||
| Net interest margin | 3.93 | % | 3.77 | % | |||
| Efficiency ratio (1) | 63.05 | % | 66.42 | % | |||
| Average Balances | |||||||
| Average assets | $ | 754,457 | $ | 727,932 | |||
| Average earning assets | 707,575 | 680,178 | |||||
| Average shareholders’ equity | 61,933 | 55,742 | |||||
| Asset Quality | |||||||
| Loan charge-offs | $ | 1,169 | $ | 733 | |||
| Loan recoveries | 252 | 638 | |||||
| Net charge-offs | 917 | 95 | |||||
| Reconciliation of Tax-Equivalent Net Interest Income | |||||||
| GAAP measures: | |||||||
| Interest income – loans | $ | 26,874 | $ | 24,082 | |||
| Interest income – investments and other | 4,264 | 3,570 | |||||
| Interest expense – deposits | (2,755 | ) | (1,723 | ) | |||
| Interest expense – subordinated debt | (360 | ) | (360 | ) | |||
| Interest expense – junior subordinated debt | (397 | ) | (303 | ) | |||
| Total net interest income | $ | 27,626 | $ | 25,266 | |||
| Non-GAAP measures: | |||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 44 | $ | 72 | |||
| Tax benefit realized on non-taxable interest income – municipal securities | 163 | 300 | |||||
| Total tax benefit realized on non-taxable interest income | $ | 207 | $ | 372 | |||
| Total tax-equivalent net interest income | $ | 27,833 | $ | 25,638 | |||
(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense, amortization of intangibles, and gains and losses 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. 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 21% for 2018 and 34% for 2017. See the tables above for tax-equivalent net interest income and reconciliations 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 First Bank.