First National Corporation Reports 80% Increase in Net Income

PR Newswire

STRASBURG, Va., Oct. 23, 2013 /PRNewswire/ -- First National Corporation (the "Company") (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,
2013


September 30,
2012


September 30,
2013


September 30,
2012


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,
2013


September 30,
2012


September 30,
2013


September 30,
2012


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,
2013


September 30,
2012


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

sharvard@fbvirginia.com


sbell@fbvirginia.com

 

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