STRASBURG, Va., April 23, 2014 /PRNewswire/ -- First National Corporation (the "Company") (OTCBB: FXNC), the parent company of First Bank (the "Bank"), reported a 17% increase in first quarter earnings. Net income totaled $1.1 million, or $0.19 per basic and diluted share, for the three months ended March 31, 2014, compared to $983 thousand, or $0.15 per basic and diluted share, for the same period in 2013. The Company's earnings for the three-month period resulted in a return on average assets of 0.88% and a return on average equity of 8.53%.
First Quarter Highlights
Earnings:
- Net income increased 17% to $1.1 million
- Noninterest income increased 8% to $1.6 million
- Noninterest expenses decreased 10% to $4.6 million
- Return on average assets was 0.88%
Capital and Asset Quality:
- Book value per share increased from $6.35 to $8.24 per common share
- Total risk-based capital increased from 15.82% to 18.49%
- Substandard loans decreased by $19.5 million, or 47%
"We began the year with solid earnings as the Bank made good progress improving profitability and growing the loan and deposit portfolios," said Scott C. Harvard, President and CEO of the Company and the Bank. "Results for the first quarter reflected the team's efforts to improve both efficiency and asset quality, while expanding customer relationships. We are pleased with the continued progress of our banking company."
First Quarter Earnings
Net income totaled $1.1 million for the first quarter of 2014, compared to $983 thousand for the same period of 2013. The return on average assets was 0.88% for the first quarter compared to 0.75% for the same quarter one year ago, and the return on average equity was 8.53% compared to 8.84% for the same period in 2013.
Net interest income totaled $4.4 million for the quarter, compared to $4.6 million for the same period one year ago. The net interest margin was 3.72% compared to 3.80% for the first quarter of 2013. Noninterest income increased $118 thousand, or 8% compared to the same period of 2013, primarily from a 37% increase in revenue from service charges on deposits and a 7% increase in wealth management revenues. Assets under management of the wealth management division increased by $41.8 million to $289.4 million at March 31, 2014 compared to $247.6 million one year ago.
Noninterest expense decreased $497 thousand, or 10%, to $4.6 million for the quarter compared to $5.1 million for the same period in the prior year. Salaries and employee benefits decreased $125 thousand, occupancy decreased $63 thousand, FDIC assessment decreased $169 thousand, other real estate owned expense decreased $76 thousand, and net loss on disposal of premises and equipment decreased $203 thousand, compared to the same period in 2013. During the first quarter of 2013, the Company made the decision to terminate a land lease for branch expansion that resulted in a one-time charge to earnings totaling $209 thousand that was included in net loss on disposal of premises and equipment. The decrease in expenses, when comparing the first quarter of 2014 to the same period one year ago, reflected the Company's efforts to improve efficiency by diligently managing its operating expenses.
The Bank recorded a recovery of loan losses of $200 thousand during the first quarter, which resulted in a total allowance for loan losses of $10.3 million or 2.86% of total loans at March 31, 2014. The recovery of loan losses was primarily a result of a decrease in the general allocation from an improvement in the historical loss experience. This compared to a recovery of loan losses of $250 thousand and an allowance for loan losses of $12.8 million, or 3.34% of total loans, at the end of the first quarter of 2013.
Capital and Asset Quality
Nonperforming assets decreased slightly to $14.7 million at March 31, 2014 compared to $14.9 million one year ago, and troubled debt restructurings decreased to $1.0 million from $4.1 million, comparing the same periods. Substandard loans decreased 47% to $21.9 million at the end of the first quarter compared to $41.5 million for the same period one year ago.
Total shareholders' equity increased $9.4 million to $55.0 million at March 31, 2014, compared to $45.6 million one year ago. The book value per common share was $8.24 at the end of the first quarter. Regulatory capital ratios were higher than previous periods, with the total risk-based capital ratio at 18.49% at March 31, 2014.
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, 2013, and other filings 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 Quarter Ended |
Income Statement | March 31,
2014 |
| December 31,
2013 |
| September 30,
2013 |
| June 30,
2013 |
| March 31,
2013 |
Interest income |
|
|
|
|
|
|
|
|
|
Interest and fees on loans | $ 4,215 |
| $ 4,422 |
| $ 4,673 |
| $ 4,816 |
| $ 4,933 |
Interest on deposits in banks | 16 |
| 16 |
| 18 |
| 17 |
| 10 |
Interest on securities available for sale | 657 |
| 636 |
| 577 |
| 519 |
| 445 |
Dividends on restricted securities | 21 |
| 19 |
| 18 |
| 19 |
| 19 |
Total interest income | $ 4,909 |
| $ 5,093 |
| $ 5,286 |
| $ 5,371 |
| $ 5,407 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
Interest on deposits | $ 400 |
| $ 458 |
| $ 572 |
| $ 632 |
| $ 706 |
Interest on trust preferred capital notes | 54 |
| 56 |
| 55 |
| 55 |
| 56 |
Interest on other borrowings | 29 |
| 30 |
| 30 |
| 30 |
| 29 |
Total interest expense | $ 483 |
| $ 544 |
| $ 657 |
| $ 717 |
| $ 791 |
|
|
|
|
|
|
|
|
|
|
Net interest income | $ 4,426 |
| $ 4,549 |
| $ 4,629 |
| $ 4,654 |
| $ 4,616 |
Provision for (recovery of) loan losses | (200) |
| (2,950) |
| 275 |
| 2,500 |
| (250) |
Net interest income after provision for
(recovery of) loan losses | $ 4,626 |
| $ 7,499 |
| $ 4,354 |
| $ 2,154 |
| $ 4,866 |
|
|
|
|
|
|
|
|
|
|
Noninterest income |
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts | $ 630 |
| $ 654 |
| $ 627 |
| $ 464 |
| $ 459 |
ATM and check card fees | 335 |
| 354 |
| 373 |
| 365 |
| 333 |
Wealth management fees | 484 |
| 463 |
| 406 |
| 375 |
| 452 |
Fees for other customer services | 87 |
| 89 |
| 86 |
| 128 |
| 88 |
Gains on sale of loans | 3 |
| 22 |
| 47 |
| 65 |
| 59 |
Gain on termination of postretirement
benefit | - |
| - |
| - |
| 543 |
| - |
Other operating income | 77 |
| 189 |
| 86 |
| 97 |
| 107 |
Total noninterest income | $ 1,616 |
| $ 1,771 |
| $ 1,625 |
| $ 2,037 |
| $ 1,498 |
|
|
|
|
|
|
|
|
|
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
Salaries and employee benefits | $ 2,509 |
| $ 3,040 |
| $ 2,411 |
| $ 2,443 |
| $ 2,634 |
Occupancy | 315 |
| 302 |
| 306 |
| 296 |
| 378 |
Equipment | 304 |
| 319 |
| 302 |
| 288 |
| 299 |
Marketing | 109 |
| 41 |
| 81 |
| 113 |
| 110 |
Stationery and supplies Legal and professional fees | 80 202 |
| 66 340 |
| 66 237 |
| 81 219 |
| 75 179 |
ATM and check card fees | 163 |
| 166 |
| 176 |
| 168 |
| 158 |
FDIC assessment | 172 |
| 174 |
| 189 |
| 180 |
| 341 |
Other real estate owned, net | 31 |
| 380 |
| 252 |
| 376 |
| 107 |
Net losses on disposal of premises and
equipment | 2 |
| 393 |
| - |
| 3 |
| 205 |
Loss on lease termination | - |
| 263 |
| - |
| - |
| - |
Other operating expense | 726 |
| 748 |
| 628 |
| 593 |
| 624 |
Total noninterest expense | $ 4,613 |
| $ 6,232 |
| $ 4,648 |
| $ 4,760 |
| $ 5,110 |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes | $ 1,629 |
| $ 3,038 |
| $ 1,331 |
| $ (569) |
| $ 1,254 |
Income tax provision (benefit) | 483 |
| (4,352) |
| 91 |
| (830) |
| 271 |
Net income | $ 1,146 |
| $ 7,390 |
| $ 1,240 |
| $ 261 |
| $ 983 |
Effective dividend and accretion on preferred stock | 221 |
| 228 |
| 229 |
| 230 |
| 226 |
Net income available to common shareholders | $ 925 |
| $ 7,162 |
| $ 1,011 |
| $ 31 |
| $ 757 |
|
|
|
|
|
|
|
|
|
|
Common Share and Per Common Share Data |
|
|
|
|
|
|
|
|
Net income, basic and diluted | $ 0.19 |
| $ 1.46 |
| $ 0.21 |
| $ 0.01 |
| $ 0.15 |
Shares outstanding at period end | 4,901,464 |
| 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 |
| 4,901,464 |
| 4,901,464 |
Book value at period end | $ 8.24 |
| $ 7.96 |
| $ 5.93 |
| $ 5.83 |
| $ 6.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST NATIONAL CORPORATION |
Quarterly Performance Summary |
|
(in thousands, except share and per share data) |
|
| (unaudited) For the Quarter Ended |
| March 31,
2014 |
| December 31,
2013 |
| September 30,
2013 |
| June 30,
2013 |
| March 31,
2013 |
Key Performance Ratios |
|
|
|
|
|
|
|
|
|
Return on average assets | 0.88% |
| 5.55% |
| 0.92% |
| 0.19% |
| 0.75% |
Return on average equity | 8.53% |
| 62.92% |
| 11.44% |
| 2.32% |
| 8.84% |
Net interest margin | 3.72% |
| 3.68% |
| 3.68% |
| 3.71% |
| 3.80% |
Efficiency ratio (1) | 74.85% |
| 81.40% |
| 69.60% |
| 70.54% |
| 78.61% |
|
|
|
|
|
|
|
|
|
|
Average Balances |
|
|
|
|
|
|
|
|
|
Average assets | $ 525,337 |
| $ 528,475 |
| $ 535,885 |
| $ 540,081 |
| $ 529,827 |
Average earning assets | 490,521 |
| 496,619 |
| 505,888 |
| 509,940 |
| 498,462 |
Average shareholders' equity | 54,460 |
| 46,569 |
| 43,001 |
| 45,096 |
| 45,090 |
|
|
|
|
|
|
|
|
|
|
Asset Quality |
|
|
|
|
|
|
|
|
|
Loan charge-offs | $ 239 |
| $ 192 |
| $ 955 |
| $ 3,067 |
| $ 278 |
Loan recoveries | 79 |
| 1,911 |
| 77 |
| 289 |
| 209 |
Net charge-offs (recoveries) | 160 |
| (1,719) |
| 878 |
| 2,778 |
| 69 |
Non-accrual loans | 11,697 |
| 11,678 |
| 8,000 |
| 9,091 |
| 9,715 |
Other real estate owned, net | 2,991 |
| 3,030 |
| 3,833 |
| 4,084 |
| 5,173 |
Nonperforming assets | 14,688 |
| 14,708 |
| 11,833 |
| 13,175 |
| 14,888 |
Loans over 90 days past due, still accruing | 111 |
| 49 |
| 2,150 |
| 1,889 |
| - |
Troubled debt restructurings, accruing | 986 |
| 829 |
| 834 |
| 838 |
| 4,096 |
Special mention loans | 20,606 |
| 19,660 |
| 23,226 |
| 26,432 |
| 26,685 |
Substandard loans, accruing | 21,917 |
| 22,909 |
| 31,119 |
| 34,466 |
| 41,460 |
Doubtful loans | - |
| - |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
Capital Ratios |
|
|
|
|
|
|
|
|
|
Tier 1 capital | $ 63,041 |
| $ 61,800 |
| $ 56,830 |
| $ 55,773 |
| $ 55,696 |
Total capital | 67,687 |
| 66,437 |
| 61,565 |
| 60,623 |
| 60,580 |
Total capital to risk-weighted assets | 18.49% |
| 18.21% |
| 16.57% |
| 15.94% |
| 15.82% |
Tier 1 capital to risk-weighted assets | 17.22% |
| 16.94% |
| 15.29% |
| 14.66% |
| 14.55% |
Leverage ratio | 12.05% |
| 11.75% |
| 10.61% |
| 10.33% |
| 10.51% |
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
Cash and due from banks | $ 7,106 |
| $ 5,767 |
| $ 8,649 |
| $ 8,104 |
| $ 7,678 |
Interest-bearing deposits in banks | 27,017 |
| 25,741 |
| 29,221 |
| 23,045 |
| 31,859 |
Securities available for sale, at fair value | 110,561 |
| 103,301 |
| 105,321 |
| 105,163 |
| 89,089 |
Restricted securities, at cost | 1,636 |
| 1,804 |
| 1,804 |
| 1,805 |
| 1,805 |
Loans, net of allowance for loan losses | 349,250 |
| 346,449 |
| 354,952 |
| 365,035 |
| 369,583 |
Premises and equipment, net | 16,470 |
| 16,642 |
| 17,417 |
| 17,992 |
| 18,130 |
Accrued interest receivable | 1,305 |
| 1,302 |
| 1,339 |
| 1,425 |
| 1,430 |
Other assets | 21,250 |
| 21,884 |
| 17,752 |
| 18,170 |
| 17,955 |
Total assets | $ 534,595 |
| $ 522,890 |
| $ 536,455 |
| $ 540,739 |
| $ 537,529 |
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits | $ 101,813 |
| $ 92,901 |
| $ 95,609 |
| $ 91,946 |
| $ 90,789 |
Savings and interest-bearing demand
deposits | 239,725 |
| 234,054 |
| 229,990 |
| 232,763 |
| 224,150 |
Time deposits | 120,151 |
| 123,756 |
| 145,664 |
| 151,249 |
| 155,041 |
Total deposits | $ 461,689 |
| $ 450,711 |
| $ 471,263 |
| $ 475,958 |
| $ 469,980 |
Other borrowings | 6,046 |
| 6,052 |
| 6,058 |
| 6,064 |
| 6,070 |
Trust preferred capital notes | 9,279 |
| 9,279 |
| 9,279 |
| 9,279 |
| 9,279 |
Other liabilities | 2,614 |
| 3,288 |
| 6,244 |
| 6,377 |
| 6,649 |
Total liabilities | $ 479,628 |
| $ 469,330 |
| $ 492,844 |
| $ 497,678 |
| $ 491,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST NATIONAL CORPORATION |
Quarterly Performance Summary |
|
(in thousands, except share and per share data) |
| (unaudited) |
| March 31, 2014 |
| December 31,
2013 |
| September 30,
2013 |
| June 30, 2013 |
| March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet (continued) |
|
|
|
|
|
|
|
|
|
Preferred stock | $ 14,595 |
| $ 14,564 |
| $ 14,525 |
| $ 14,485 |
| $ 14,446 |
Common stock | 6,127 |
| 6,127 |
| 6,127 |
| 6,127 |
| 6,127 |
Surplus | 6,813 |
| 6,813 |
| 6,813 |
| 6,813 |
| 6,813 |
Retained earnings | 28,286 |
| 27,360 |
| 20,199 |
| 19,188 |
| 19,156 |
Accumulated other comprehensive loss, net | (854) |
| (1,304) |
| (4,053) |
| (3,552) |
| (991) |
Total shareholders' equity | $ 54,967 |
| $ 53,560 |
| $ 43,611 |
| $ 43,061 |
| $ 45,551 |
Total liabilities and shareholders' equity | $ 534,595 |
| $ 522,890 |
| $ 536,455 |
| $ 540,739 |
| $ 537,529 |
|
|
|
|
|
|
|
|
|
|
Loan Data |
|
|
|
|
|
|
|
|
|
Mortgage loans on real estate: |
|
|
|
|
|
|
|
|
|
Construction and land development | $ 33,876 |
| $ 34,060 |
| $ 34,404 |
| $ 44,305 |
| $ 45,783 |
Secured by farm land | 1,257 |
| 1,264 |
| 1,302 |
| 1,318 |
| 1,344 |
Secured by 1-4 family residential | 147,541 |
| 141,961 |
| 142,446 |
| 145,628 |
| 143,765 |
Other real estate loans | 141,462 |
| 144,704 |
| 155,389 |
| 158,516 |
| 161,398 |
Loans to farmers (except those secured by
real estate) | 3,060 |
| 3,418 |
| 2,130 |
| 2,093 |
| 2,173 |
Commercial and industrial loans (except
those secured by real estate) | 20,321 |
| 19,385 |
| 19,186 |
| 17,608 |
| 20,570 |
Consumer installment loans | 4,816 |
| 4,935 |
| 5,420 |
| 5,973 |
| 6,408 |
Deposit overdrafts | 213 |
| 279 |
| 187 |
| 99 |
| 71 |
All other loans | 6,987 |
| 7,087 |
| 6,363 |
| 1,973 |
| 827 |
Total loans | $ 359,533 |
| $ 357,093 |
| $ 366,827 |
| $ 377,513 |
| $ 382,339 |
Allowance for loan losses | (10,283) |
| (10,644) |
| (11,875) |
| (12,478) |
| (12,756) |
Loans, net | $ 349,250 |
| $ 346,449 |
| $ 354,952 |
| $ 365,035 |
| $ 369,583 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of Tax-Equivalent Net Interest Income |
|
|
|
|
|
|
|
|
GAAP measures: |
|
|
|
|
|
|
|
|
|
Interest income – loans | $ 4,215 |
| $ 4,422 |
| $ 4,673 |
| $ 4,816 |
| $ 4,933 |
Interest income – investments and other | 694 |
| 671 |
| 613 |
| 555 |
| 474 |
Interest expense – deposits | 400 |
| 458 |
| 572 |
| 632 |
| 706 |
Interest expense – other borrowings | 29 |
| 30 |
| 30 |
| 30 |
| 29 |
Interest expense – trust preferred capital notes | 54 |
| 56 |
| 55 |
| 55 |
| 56 |
Total net interest income | $ 4,426 |
| $ 4,549 |
| $ 4,629 |
| $ 4,654 |
| $ 4,616 |
Non-GAAP measures: |
|
|
|
|
|
|
|
|
|
Tax benefit realized on non-taxable interest income – loans | $ 29 |
| $ 21 |
| $ 23 |
| $ 24 |
| $ 14 |
Tax benefit realized on non-taxable interest income – municipal securities | 49 |
| 43 |
| 39 |
| 39 |
| 37 |
Total tax benefit realized on non-taxable interest income | $ 78 |
| $ 64 |
| $ 62 |
| $ 63 |
| $ 51 |
Total tax-equivalent net interest income | $ 4,504 |
| $ 4,613 |
| $ 4,691 |
| $ 4,717 |
| $ 4,667 |
|
|
(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned expense, loss on land lease termination and net 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 and gain on termination of postretirement benefit. 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 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. |
|
SOURCE First National Corporation