INVESTOR RELATIONS
Contact information
First National Corporation,
112 West King Street
Strasburg, VA 22657
(540) 465-9121

Investor Relations Contact
Mr. M. Shane Bell
(540) 465-6130
sbell@fbvirginia.com

Transfer Agent
Broadridge Corporate Issuer Solutions
P.O. Box 1342
Brentwood, NY 11717
Phone: 1-800-685-4509
Fax: 215-553-5402
shareholder@broadridge.com

First National Corporation Announces Fourth Quarter and Full Year Results

Company Release - 1/25/2017 5:50 PM ET

STRASBURG, Va., Jan. 25, 2017 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (OTC:FXNC) today reported net income available to common shareholders of $1.7 million and earnings per share of $0.34 for the fourth quarter ended December 31, 2016.  This was an $862 thousand increase when compared to earnings for the fourth quarter of 2015, which totaled $813 thousand or $0.17 per share.  The increase in net income available to common shareholders resulted primarily from an $867 thousand decrease in noninterest expenses, a $315 thousand increase in net interest income and a $128 thousand decrease in the effective dividend on preferred stock.  These changes were offset by a $377 thousand increase in income tax expense and a $71 thousand decrease in noninterest income.  

For the year ended December 31, 2016, net income available to common shareholders totaled $5.9 million or $1.20 per share.  This was an increase of $4.4 million compared to earnings for the prior year, which totaled $1.5 million or $0.31 per share.  The increase in earnings resulted primarily from a $2.5 million increase in net interest income, a $2.1 million decrease in noninterest expenses, a $151 thousand increase in noninterest income and a $1.1 million decrease in the effective dividend on preferred stock.  These changes were offset by a $1.4 million increase in income tax expense.

Select highlights for the fourth quarter include:

  • Return on equity increased to 13.08%, compared to 7.01% for fourth quarter of 2015
     
  • Net income available to common shareholders increased $862 thousand, or 106%, compared to the fourth quarter of 2015
     
  • The efficiency ratio improved to 67.17%, compared to 78.42% for the fourth quarter of 2015
     
  • Noninterest expense decreased for the sixth consecutive quarter, and decreased $867 thousand, or 13%, compared to the fourth quarter of 2015
     
  • Assets per employee increased to $4.5 million, compared to $3.6 million at the end of the fourth quarter of 2015
     
  • Net interest income increased $315 thousand, or 6%, compared to the fourth quarter of 2015
     
  • Net loans increased $15.5 million during the quarter, and increased $47.3 million, or 11%, over the prior year 
     
  • Noninterest-bearing demand deposits increased $11.0 million, or 7%, over the prior year.

“Since closing on the branch deposit acquisition in the second quarter of 2015, our banking team has successfully executed on two primary drivers of value of the transaction,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “The first driver was to deploy the newly acquired funds into loans. Loans, net of the allowance for loan losses, increased by $47.3 million during 2016, which followed total loan growth of $61.8 million in 2015. The second primary driver was to gain efficiencies from the larger balance sheet. For the year ended December 31, 2015, the year of the acquisition, the efficiency ratio was 80.92%. Our team was able to improve the efficiency ratio to 71.08% for the year ended December 31, 2016 by reducing non-interest expenses $2.1 million and by increasing revenues $2.7 million. Productivity improved with total assets per employee increasing 25% from $3.6 million to $4.5 million during the year as a result of right sizing our branch network, reducing staffing, and doing more with less by utilizing technology and improving processes.”

BRANCH ACQUISITION

On April 17, 2015, First Bank (the “Bank”), the Company’s banking subsidiary, completed the acquisition of six banking offices with approximately $186.8 million of deposits in the Shenandoah Valley and central Virginia regions from Bank of America, N.A. (the “Acquisition” or “Branch Acquisition”).  The Company incurred integration costs related to the Acquisition, including legal and professional fees, supplies, data processing and postage expenses that totaled $908 thousand for the year ended December 31, 2015.  The Company did not incur integration costs during 2016.

At December 31, 2016, deposits from the acquired branches totaled $174.8 million, which was 94% of the deposit balances assumed in the Acquisition.  The branch acquisition had a positive impact on the cost of funds for the Company.  The cost of funds for the fourth quarter of 2016 for acquired branches was 0.22%, compared to the total cost of funds of the Company of 0.31%.  The mix of deposits, which was comprised of a significant amount of noninterest-bearing deposits, remained consistent from the acquisition date through the end of 2016.  The Bank assembled an experienced lending team in its south region that made a meaningful contribution to loan growth during 2015 and 2016.

BALANCE SHEET

Total assets of First National increased $4.1 million during the quarter to $716.7 million at December 31, 2016, and increased $24.4 million compared to one year ago.  Loans, net of the allowance for loan losses, increased $15.5 million during the quarter to $480.7 million, and increased $47.3 million, or 11%, compared to December 31, 2015. While net loans increased over the prior periods, the total of securities and interest-bearing deposits in banks decreased $12.3 million during the quarter to $180.7 million, and decreased $23.8 million compared to one year ago. 

Total deposits increased $4.8 million during the quarter to $645.6 million, and were $18.5 million higher than one year ago.  When comparing the composition of the deposit portfolio at December 31, 2016 to one year ago, noninterest-bearing demand deposits increased from 25% to 26% of total deposits, while time deposits decreased from 22% to 20%. 

Shareholders’ equity totaled $50.7 million at December 31, 2016 compared to $46.0 million one year ago.  Tangible common equity totaled $49.2 million at the end of 2016, compared to $43.6 million at December 31, 2015.  The Company exceeded its target regulatory capital ratios at year-end. 

NET INTEREST INCOME

For the fourth quarter ended December 31, 2016, net interest income increased $315 thousand, or 6%, to $5.9 million, compared to $5.6 million for the fourth quarter of 2015. 

Total interest income increased $405 thousand, or 7%, to $6.4 million for the fourth quarter of 2016, compared to the same period of 2015.  Interest income increased from growth in total average earning assets and from a change in the composition of earning assets.  The change in asset mix resulted from an increase in average loan balances to 72% of average earning assets for the fourth quarter of 2016, up from 65% for the same quarter of 2015.  While loan balances increased, the average balance of interest-bearing deposits in banks and securities decreased to 28% of average earning assets, down from 35% when comparing the same periods.

Total interest expense increased $90 thousand, or 21%, to $513 thousand for the fourth quarter of 2016 compared to the same period of 2015.  The increase in interest expense resulted primarily from interest on deposits and interest on subordinated debt.  The Company had subordinated debt for only a portion of the fourth quarter of 2015, compared to a full quarter in 2016.   

For the year ended December 31, 2016, net interest income increased $2.5 million, or 12%, to $23.3 million, compared to $20.7 million for the year ended December 31, 2015. 

Total interest income increased $3.1 million, or 14%, to $25.2 million for the year ended December 31, 2016, compared to the same period of 2015.  Interest income increased from growth in total average earning assets and from a change in the composition of earning assets.  The change in asset mix resulted from an increase in average loan balances to 71% of average earning assets for year ended December 31, 2016, up from 67% one year ago.  While loan balances increased, the average balance of interest-bearing deposits in banks and securities decreased to 29% of average earning assets, down from 33% when comparing the same periods.

Total interest expense increased $541 thousand, or 38%, to $2.0 million for the year ended December 31, 2016 compared to the same period of 2015.  The increase in interest expense resulted primarily from a full year of interest on subordinated debt as well as higher interest expense on deposits.  The Company had subordinated debt for only a portion of the fourth quarter of 2015, compared to the full year of 2016.  

NONINTEREST INCOME

For the fourth quarter ended December 31, 2016, noninterest income decreased $71 thousand, or 3%, to $2.1 million, compared to $2.2 million for the fourth quarter of 2015.  There were no significant changes in revenue from service charges on deposit accounts or ATM and check card fees.  Wealth management fees decreased $143 thousand when comparing the same periods, while other operating income increased $39 thousand.  The decrease in wealth management fees resulted from the elimination of brokerage services on January 1, 2016. 

For the year ended December 31, 2016, noninterest income increased $151 thousand, or 2%, to $8.5 million, compared to $8.3 million for the year ended December 31, 2015.  Service charges on deposit accounts increased $470 thousand, or 15%, and ATM and check card fees increased $142 thousand, or 7%, over the prior year.  The increases were attributed to the increase in deposits when comparing the periods.  Wealth management fees decreased $613 thousand, or 31%, when comparing 2016 to 2015. 

NONINTEREST EXPENSE

Noninterest expense decreased $867 thousand, or 13%, to $5.6 million for the fourth quarter of 2016 compared to the same period of 2015.  Several expense categories decreased when comparing the same periods, including salaries and employee benefits, which decreased $584 thousand, or 17%, and legal and professional fees, which decreased $212 thousand, or 47%.  The decrease in salaries and employee benefits resulted primarily from lower salaries and wages, insurance and pension expense, which decreased $213 thousand, $204 thousand and $159 thousand, respectively.  Salaries and wage expense was lower than the same period in 2015 from a reduction in the number of employees.  Insurance expense decreased as a result of changes to the Company’s health insurance plan for 2016 as expense was impacted by the actual amount of claims submitted by employees during the year, as opposed to a fixed cost of insurance for 2015.  Pension expense decreased when comparing the periods as a result of an amendment to the defined benefit pension plan and the Company’s intention to terminate the plan.  Under the amendment, benefit accruals ceased as of November 30, 2016.  Legal and professional fees were higher for the fourth quarter of 2015 primarily from consulting expenses incurred from an efficiency initiative that began during 2015. 

Noninterest expense decreased $2.1 million, or 8%, to $23.5 million for the year ended December 31, 2016, compared to $25.6 million for the same period of 2015.  Several expense categories decreased when comparing the same periods, including salaries and employee benefits, which decreased $901 thousand, or 7%, legal and professional fees, which decreased $452 thousand, or 34%, and supplies expense, which decreased $333 thousand, or 43%.  The decrease in salaries and employee benefits resulted primarily from lower salaries and wage expense, insurance expense and pension expense, which decreased $501 thousand, $314 thousand and $125 thousand, respectively.  Legal and professional fees were higher for the year ended December 31, 2015 primarily from legal fees related to integration costs incurred during the Branch Acquisition and consulting expenses incurred from an efficiency initiative.  Supplies expense was higher for the year ended December 31, 2015, primarily from integration costs incurred during the Branch Acquisition.

ASSET QUALITY/LOAN LOSS PROVISION

Nonperforming assets decreased to $1.8 million, or 0.25% of total assets, down from $6.5 million or 0.94% of total assets one year ago.  Loans past due between 30 and 89 days and still accruing was 0.53% of total loans, compared to 0.32% at December 31, 2015.  The allowance for loan losses totaled $5.3 million at December 31, 2016 and $5.5 million at December 31, 2015, representing 1.09% and 1.26% of total loans, respectively. 

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, 2015, 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, two loan production offices, a customer service center in a retirement community, and 14 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.


FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
 (unaudited)
For the Quarter Ended
Income StatementDecember 31,
 2016
 September 30,
 2016
  June 30,
 2016
 March 31,
 2016
 December 31,
2015
Interest income          
Interest and fees on loans$5,556  $5,500  $5,370  $5,236  $5,056 
Interest on deposits in banks 55   73   62   48   63 
Interest on securities 794   749   825   888   884 
Dividends on restricted securities 21   20   21   19   18 
Total interest income$6,426  $6,342  $6,278  $6,191  $6,021 
Interest expense                   
Interest on deposits$353  $338  $329  $333  $302 
Interest on federal funds purchased -   -   -   3   - 
Interest on subordinated debt 91   91   89   90   62 
Interest on junior subordinated debt 69   65   64   61   59 
Interest on other borrowings -   1   -   5   - 
Total interest expense$513  $495  $482  $492  $423 
Net interest income$5,913  $5,847  $5,796  $5,699  $5,598 
Provision for loan losses -   -   -   -   - 
Net interest income after provision for loan losses$5,913  $5,847  $5,796  $5,699  $5,598 
Noninterest income                   
Service charges on deposit accounts$877  $941  $914  $780  $846 
ATM and check card fees 505   529   515   488   520 
Wealth management fees 353   339   334   336   496 
Fees for other customer services 154   143   137   147   143 
Income from bank owned life insurance 109   123   107   86   103 
Net gains (losses) on sales of securities (2)  4   -   6   (3)
Net gains on sale of loans 42   50   31   21   43 
Other operating income 89   182   74   79   50 
Total noninterest income$2,127  $2,311  $2,112  $1,943  $2,198 
Noninterest expense                   
Salaries and employee benefits$2,907  $3,183  $3,415  $3,444  $3,491 
Occupancy 364   380   365   424   400 
Equipment 402   406   394   432   398 
Marketing 210   125   120   107   94 
Supplies 138   108   103   101   93 
Legal and professional fees 238   179   156   311   450 
ATM and check card fees 211   229   221   205   200 
FDIC assessment 72   106   126   122   119 
Bank franchise tax 90   89   90   103   130 
Telecommunications expense 112   110   115   114   120 
Data processing expense 159   160   146   128   157 
Postage expense 56   56   57   69   71 
Amortization expense 179   187   198   207   216 
Other real estate owned expense (income), net -   1   (49)  (72)  92 
Net loss on disposal of premises and equipment -   8   -   -   - 
Other operating expense 507   526   426   422   481 
Total noninterest expense$5,645  $5,853  $5,883  $6,117  $6,512 
Income before income taxes$2,395  $2,305  $2,025  $1,525  $1,284 
Income tax expense 720   611   592   426   343 
Net income$1,675  $1,694  $1,433  $1,099  $941 
Effective dividend on preferred stock -   -   -   -   128 
Net income available to common shareholders$1,675  $1,694  $1,433  $1,099  $813 
Common Share and Per Common Share Data                    
Net income, basic$0.34  $0.34  $0.29  $0.22  $0.17 
Weighted average shares, basic 4,927,728   4,925,753   4,924,702   4,920,315   4,913,985 
Net income, diluted$0.34  $0.34  $0.29  $0.22  $0.17 
Weighted average shares, diluted 4,933,572   4,929,922   4,926,859   4,923,117   4,916,804 
Shares outstanding at period end 4,929,403   4,926,546   4,925,599   4,924,539   4,916,130 
Tangible book value at period end$9.98  $9.99  $9.61  $9.25  $8.87 
Cash dividends$0.03  $0.03  $0.03  $0.03  $0.025 
                    


FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
   (unaudited)
  For the Quarter Ended
 December 31,
 2016
 September 30,
 2016
 June 30,
 2016
 March 31,
 2016
 December 31,
2015
Key Performance Ratios         
Return on average assets 0.94%  0.95%  0.82%  0.64%  0.54%
Return on average equity 13.08%  13.44%  11.90%  9.39%  7.01%
Net interest margin 3.60%  3.57%  3.62%  3.63%  3.53%
Efficiency ratio (1) 67.17%  68.57%  71.62%  77.32%  78.42%
          
Average Balances         
Average assets$711,507  $710,005  $705,707  $693,783  $692,263 
Average earning assets 663,982   661,624   654,535   643,358   640,880 
Average shareholders’ equity 50,944   50,160   48,443   47,066   53,264 
          
Asset Quality         
Loan charge-offs$337  $195  $136  $120  $418 
Loan recoveries 48   71   350   116   367 
Net charge-offs (recoveries) 289   124   (214)  4   51 
Non-accrual loans 1,520   3,521   4,057   4,258   3,854 
Other real estate owned, net 250   250   442   2,112   2,679 
Nonperforming assets 1,770   3,771   4,499   6,370   6,533 
Loans 30 to 89 days past due, accruing 2,583   2,036   1,979   1,743   1,418 
Loans over 90 days past due, accruing 116   59   11   124   92 
Troubled debt restructurings, accruing -   88   -   -   317 
Special mention loans 13,073   14,238   13,392   13,796   16,372 
Substandard loans, accruing 8,056   8,273   9,610   10,068   10,265 
          
Capital Ratios (2)         
Total capital$65,584  $65,759  $64,375  $62,440  $61,513 
Tier 1 capital 60,263   60,149   58,641   56,920   55,989 
Common equity tier 1 capital 60,263   60,149   58,641   56,920   55,989 
Total capital to risk-weighted assets 13.45%  13.90%  13.66%  13.50%  13.86%
Tier 1 capital to risk-weighted assets 12.36%  12.72%  12.45%  12.30%  12.62%
Common equity tier 1 capital to risk-weighted assets 12.36%  12.72%  12.45%  12.30%  12.62%
Leverage ratio 8.48%  8.48%  8.33%  8.22%  8.12%
          
Balance Sheet         
Cash and due from banks$10,106  $8,955  $10,518  $10,250  $8,247 
Interest-bearing deposits in banks 30,986   47,902   40,225   29,077   31,087 
Securities available for sale, at fair value 94,802   88,323   94,566   99,019   105,559 
Securities held to maturity, at carrying value 53,398   55,263   57,401   64,963   66,519 
Restricted securities, at cost 1,548   1,548   2,058   1,548   1,391 
Loans held for sale 337   1,053   1,819   523   323 
Loans, net of allowance for loan losses 480,746   465,224   459,812   448,556   433,475 
Other real estate owned, net of valuation allowance 250   250   442   2,112   2,679 
Premises and equipment, net 20,785   20,852   21,126   21,366   21,389 
Accrued interest receivable 1,746   1,631   1,612   1,741   1,661 
Bank owned life insurance 13,928   13,808   13,935   13,828   11,742 
Core deposit intangibles, net 1,551   1,730   1,917   2,115   2,322 
Other assets    6,539       6,133      5,917      5,945       5,927  
Total assets$  716,722  $   712,672  $  711,348  $  701,043  $   692,321 
                     
Noninterest-bearing demand deposits$168,076  $168,204  $159,278  $161,783  $157,070 
Savings and interest-bearing demand deposits 349,067   340,884   337,589   334,599   328,945 
Time deposits   128,427      131,654     133,479     136,736      141,101 
Total deposits$645,570  $640,742  $630,346  $633,118  $627,116 
Other borrowings -   -   12,000   -   - 
Subordinated debt 4,930   4,926   4,921   4,917   4,913 
Junior subordinated debt 9,279   9,279   9,279   9,279   9,279 
Accrued interest payable and other liabilities   6,195      6,742     5,544     6,029      5,060 
Total liabilities$  665,974  $   661,689  $  662,090  $  653,343  $   646,368 
                    



FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
   (unaudited)
 For the Quarter Ended
 December 31,
 2016
 September 30,
 2016
 June 30,
 2016
 March 31,
 2016
 December 31,
2015

                              
Balance Sheet (continued)                             
Preferred stock$-  $-  $-  $-  $- 
Common stock 6,162   6,158   6,157   6,156   6,145 
Surplus 7,093   7,046   7,021   6,996   6,956 
Retained earnings 39,749   38,223   36,676   35,391   34,440 
Accumulated other comprehensive loss, net   (2,256)     (444)    (596)    (843)     (1,588)
Total shareholders’ equity$  50,748  $   50,983  $  49,258  $  47,700  $   45,953 
Total liabilities and shareholders’ equity$  716,722  $   712,672  $  711,348  $  701,043  $   692,321 
                              
Loan Data                             
Mortgage loans on real estate:                             
Construction and land development$34,699  $34,518  $33,232  $31,505  $33,135 
Secured by farm land 688   695   706   931   964 
Secured by 1-4 family residential 198,763   196,492   196,295   196,165   189,286 
Other real estate loans 210,522   202,148   199,456   190,375   180,483 
Loans to farmers (except those secured by real estate) 1,316   737   492   473   3,056 
Commercial and industrial loans (except those secured by real estate) 28,665   25,114   24,229   23,742   20,992 
Consumer installment loans 4,611   4,283   4,083   3,854   4,055 
Deposit overdrafts 264   260   334   312   257 
All other loans   6,539      6,587     6,719     6,719      6,771 
Total loans$486,067  $470,834  $465,546  $454,076  $438,999 
Allowance for loan losses   (5,321)     (5,610)    (5,734)    (5,520)     (5,524)
Loans, net$  480,746  $   465,224  $  459,812  $  448,556  $   433,475 
                              
Reconciliation of Tax-Equivalent Net Interest Income                             
GAAP measures:                         
Interest income – loans$5,556  $5,500  $5,370  $5,236  $5,056 
Interest income – investments and other 870   842   908   955   965 
Interest expense – deposits (353)  (338)  (329)  (333)  (302)
Interest expense – other borrowings -   (1)  -   (5)  - 
Interest expense – subordinated debt (91)  (91)  (89)  (90)  (62)
Interest expense – junior subordinated debt (69)  (65)  (64)  (61)  (59)
Interest expense – federal funds purchased   - 
      -       -      (3 )     -  
Total net interest income$5,913
  $   5,847  $ 5,796  $   5,699  $ 5,598 
Non-GAAP measures:                             
Tax benefit realized on non-taxable interest income – loans$24  $26  $25  $25  $26 
Tax benefit realized on non-taxable interest income – municipal securities 72
      70      73      76      71 
Total tax benefit realized on non-taxable interest income$96
  $   96  $   98  $   101  $ 97 
Total tax-equivalent net interest income$6,009
  $   5,943  $   5,894  $   5,800  $ 5,695 
                              


FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
 
 (unaudited)
 For the Year Ended
Income StatementDecember 31,
 2016
 December 31,
 2015
Interest income   
Interest and fees on loans$21,662  $19,138 
Interest on deposits in banks 238   197 
Interest on securities 3,256   2,753 
Dividends on restricted securities 81   77 
Total interest income$25,237  $22,165 
Interest expense       
Interest on deposits 1,353   1,150 
Interest on federal funds purchased 3   2 
Interest on subordinated debt 361   62 
Interest on junior subordinated debt 259   224 
Interest on other borrowings 6   3 
Total interest expense$1,982  $1,441 
Net interest income$23,255  $20,724 
Recovery of loan losses -   (100)
Net interest income after recovery of loan losses$23,255  $20,824 
Noninterest income       
Service charges on deposit accounts 3,512   3,042 
ATM and check card fees 2,037   1,895 
Wealth management fees 1,362   1,975 
Fees for other customer services 581   606 
Income from bank owned life insurance 425   373 
Net gains (losses) on sales of securities 8   (55)
Net gains on sale of loans 144   201 
Other operating income 424   305 
Total noninterest income$8,493  $8,342 
Noninterest expense       
Salaries and employee benefits$12,949  $13,850 
Occupancy 1,533   1,452 
Equipment 1,634   1,501 
Marketing 562   530 
Supplies 450   783 
Legal and professional fees 884   1,336 
ATM and check card fees 866   781 
FDIC assessment 426   384 
Bank franchise tax 372   513 
Telecommunications expense 451   436 
Data processing expense 593   700 
Postage expense 238   341 
Amortization expense 771   642 
Other real estate owned (income) expense, net (120)  352 
Net loss on disposal of premises and equipment 8   - 
Other operating expense 1,881   1,954 
Total noninterest expense$23,498  $25,555 
        
Income before income taxes$8,250  $3,611 
Income tax expense 2,349   956 
Net income$5,901  $2,655 
Effective dividend on preferred stock -   1,113 
Net income available to common shareholders$5,901  $1,542 
        
Net income, basic$1.20  $0.31 
Weighted average shares, basic 4,924,636   4,910,608 
Net income, diluted$1.20  $0.31 
Weighted average shares, diluted 4,928,184   4,913,174 
Shares outstanding at period end 4,929,403   4,916,130 
Tangible book value at period end$9.98  $8.87 
Cash dividends$0.12  $0.10 
        


FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
 
 (unaudited)
 For the Year Ended
 December 31,
 2016
 December 31,
2015
Key Performance Ratios   
Return on average assets 0.84%  0.41%
Return on average equity 12.01%  4.58%
Net interest margin 3.61%  3.52%
Efficiency ratio (1) 71.08%  80.92%
             
Average Balances            
Average assets$705,170  $642,978 
Average earning assets 655,913   597,763 
Average shareholders’ equity 49,117   57,928 
             
Asset Quality            
Loan charge-offs$788  $1,838 
Loan recoveries 585   744 
Net charge-offs 203   1,094 
           
Reconciliation of Tax-Equivalent Net Interest Income            
GAAP measures:            
Interest income – loans$21,662  $19,138 
Interest income – investments and other 3,575   3,027 
Interest expense – deposits (1,353)  (1,150)
Interest expense – other borrowings (6)  (3)
Interest expense – subordinated debt (361)  (62)
Interest expense – junior subordinated debt (259)  (224)
Interest expense – federal funds purchased (3
)  (2)
Total net interest income$23,255
  $20,724 
Non-GAAP measures:       
Tax benefit realized on non-taxable interest income – loans$100  $105 
Tax benefit realized on non-taxable interest income – municipal securities 291
   204 
Total tax benefit realized on non-taxable interest income$391
  $309 
Total tax-equivalent net interest income$23,646  $21,033 
         

(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense, amortization of intangibles, acquisition and integration related expenses, 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 and bargain purchase gain.  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 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 the Bank.

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

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Source: First National Corporation