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 Increase in First Quarter Net Income

Company Release - 4/18/2018 4:30 PM ET

STRASBURG, Va., April 18, 2018 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (OTC:FXNC) today reported net income of $2.7 million and earnings per share of $0.54 for the first quarter ended March 31, 2018. This was a $1.1 million, or 74%, increase when compared to net income of $1.5 million and earnings per share of $0.31 for the first quarter of 2017. The increase in net income resulted primarily from increases in net interest income and noninterest income.

Select highlights for the first quarter of 2018:

  • Return on average equity of 18.47%
  • Return on average assets of 1.45%
  • Efficiency ratio improved to 62.39%
  • Net interest income increased $555 thousand, or 9%
  • Net loans increased $23.3 million, or 5%, compared to one year ago
  • Total deposits increased $38.1 million, or 6%, compared to one year ago
  • Nonperforming assets to total assets decreased to 0.09%

“We had a good start to the year with outstanding financial performance in the first quarter,” said Scott Harvard, president and chief executive officer of First National.  Harvard added, “Despite the lack of loan growth in the quarter, we were pleased with the profitability metrics.  Net interest income increased 9% and was positively impacted by higher market rates.  Revenue from wealth management benefited from a strong market, which translated into higher balances of assets under management.  We were also pleased with the ability to control non-interest expenses to an increase of only 2% compared to the same period one year ago.  The Bank plans to maintain its credit underwriting standards in spite of softening loan demand and will continue to focus on the efficiency ratio as a driver of value."

BALANCE SHEET

Total assets of First National increased $40.6 million to $767.9 million at March 31, 2018, compared to one year ago.  Loans, net of the allowance for loan losses, increased $23.3 million, or 5%, and securities and interest-bearing deposits in banks increased $19.5 million, or 11%, when comparing the periods.

Total deposits increased $38.1 million, or 6%, to $692.8 million, compared to $654.8 million at March 31, 2017.  When comparing the composition of the deposit portfolio at March 31, 2018 to one year ago, noninterest-bearing demand deposits increased $15.5 million, remaining at 27% of total deposits, savings and interest-bearing demand deposits increased $24.4 million, from 54% to 55% of total deposits, while time deposits decreased $1.8 million, from 19% to 18% of total deposits.

Shareholders’ equity increased $5.7 million to $59.7 million at March 31, 2018 compared to $54.0 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $58.9 million at the end of the first quarter, compared to $52.6 million at March 31, 2017. The Company’s wholly-owned banking subsidiary, First Bank, was considered well-capitalized based on regulatory requirements at the end of the first quarter.

ANALYSIS OF THE THREE MONTH PERIOD

Net interest income increased $555 thousand, or 9%, to $6.5 million for the quarter ended March 31, 2018, compared to $6.0 million for the first quarter of 2017. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 6%, and the net interest margin increased 9 basis points to 3.79% for the quarter ended March 31, 2018, compared to 3.70% for the same period in 2017. The increase in the net interest margin resulted from a 20 basis point increase in the yield on total earning assets, which was partially offset by an 11 basis point increase in interest expense as a percent of average earning assets.

The higher yield on earning assets was attributable to an increase in yields on loans, securities, and interest-bearing deposits in banks. Yields increased on loans, securities, and interest-bearing deposits in banks by 24 basis points, 10 basis points, and 60 basis points, respectively.

The increase in interest expense as a percent of average earning assets was primarily attributable to higher interest rates paid on interest-bearing deposits, with the largest impact coming from a 49 basis point increase in the cost of money market accounts, when comparing the periods.

Noninterest income totaled $2.6 million, compared to $1.9 million for the same period of 2017. This was primarily a result of a $466 thousand increase in income from bank owned life insurance, a $152 thousand increase in other operating income, and a $60 thousand increase in wealth management revenue. The increase in income from bank owned life insurance was attributable to a $469 thousand life insurance benefit recorded during the first quarter of 2018. The increase in other operating income was primarily attributable to the termination of the pension plan and the subsequent distribution of plan assets, which increased other operating income by $126 thousand.

Noninterest expense increased $115 thousand, or 2%, to $5.9 million for the first quarter, compared to the same period one year ago. This was attributable to a $141 thousand, or 4%, increase in salaries and employee benefits, a $33 thousand increase in occupancy expense, a $41 thousand increase in ATM and check card fees, and a $40 thousand increase in other operating expenses. The increases in salaries and employee benefits and occupancy expense resulted primarily from the expansion of the Company's banking subsidiary, First Bank, into the Richmond, Virginia market during the fourth quarter of 2017. The increases in expenses were partially offset by a $27 thousand decrease in marketing expense, a $74 thousand decrease in telecommunications expense, and a $38 thousand decrease in amortization expense. The decrease in telecommunications expense resulted primarily from a refund of over-billed services in prior periods.

Income before taxes for the first quarter of 2018 increased by $1.0 million, or 47%, to $3.2 million, compared to the same period one year ago. Although income before taxes increased, income tax expense decreased by $112 thousand, or 18%, as a result of 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 $100 thousand for the quarter ended March 31, 2018. Net charge-offs totaled $154 thousand for the first quarter of 2018. Nonperforming assets totaled $682 thousand, or 0.09% of total assets at March 31, 2018, which was an improvement compared to $1.8 million, or 0.25% of total assets, one year ago. The allowance for loan losses totaled $5.3 million at March 31, 2018 and $5.5 million at March 31, 2017, representing 1.01% and 1.10% 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, 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, a 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 
 M. Shane Bell
Executive Vice President and CFO
(540) 465-9121
                                             
   
   

                                                                  


FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)

 (unaudited)
For the Quarter Ended
 March 31,
2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
 March 31,
2017
Income Statement         
Interest income         
Interest and fees on loans$6,305  $6,365  $6,138  $5,933  $5,646 
Interest on deposits in banks160  96  92  86  61 
Interest on securities         
Taxable interest680  636  637  634  662 
Tax-exempt interest145  147  148  145  143 
Dividends on restricted securities22  21  21  21  20 
Total interest income$7,312  $7,265  $7,036  $     6,819  $    6,532 
Interest expense         
Interest on deposits$590  $489  $446  $405  $383 
Interest on subordinated debt89  91  91  89  89 
Interest on junior subordinated debt86  80  79  76  68 
Total interest expense$765  $660  $616  $570  $540 
Net interest income$6,547  $6,605  $6,420  $6,249  $5,992 
Provision for loan losses100  100       
Net interest income after provision for loan losses$     6,447  $6,505  $6,420  $6,249  $5,992 
Noninterest income         
Service charges on deposit accounts$762  $778  $760  $735  $755 
ATM and check card fees519  596  516  527  501 
Wealth management fees407  386  359  355  347 
Fees for other customer services153  162  131  137  140 
Income from bank owned life insurance559  408  117  102  93 
Net gains (losses) on sales of securities  (114) 11  13   
Net gains on sale of loans9  51  54  34  33 
Other operating income224  89  69  75  72 
Total noninterest income$2,633  $2,356  $2,017  $1,978  $1,941 
Noninterest expense         
Salaries and employee benefits$3,383  $3,338  $3,221  $3,122  $3,242 
Occupancy400  388  379  348  367 
Equipment423  428  400  400  408 
Marketing109  166    138    136    136 
Supplies80    88  81  105  91 
Legal and professional fees191  228  216  245  197 
ATM and check card fees203  209  205  229  162 
FDIC assessment82  76  84  77  79 
Bank franchise tax115  111  111  110  104 
Telecommunications expense36  103  95  108  110 
Data processing expense162  165  153  152  150 
Postage expense61  14  62  74  61 
Amortization expense131  141  151  160  169 
Other real estate owned expense (income), net(23) (192)   4  2 
Net loss on disposal of premises and equipment  252       
Other operating expense513  506  511  435  473 
Total noninterest expense$5,866  $6,021  $5,807  $5,705  $5,751 
Income before income taxes$3,214  $2,840  $2,630  $2,522  $2,182 
Income tax expense527  1,523  798  766  639 
Net income$2,687  $1,317  $1,832  $1,756  $1,543 
 
 
 

FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)

 (unaudited)
For the Quarter Ended
 March 31,
2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
 March 31,
2017
Common Share and Per Common Share Data                 
Net income, basic$0.54  $0.27  $0.37  $0.36  $0.31 
Weighted average shares, basic4,949,112  4,945,175  4,943,301  4,940,904  4,935,421 
Net income, diluted$0.54  $0.27  $0.37  $0.36  $0.31 
Weighted average shares, diluted4,952,373  4,948,981  4,946,128  4,942,726  4,937,625 
Shares outstanding at period end4,952,575  4,945,702  4,945,056  4,941,604  4,940,766 
Tangible book value at period end$11.89  $11.57  $11.42  $11.08  $10.64 
Cash dividends$0.05  $0.035  $0.035  $0.035  $0.035 
          
Key Performance Ratios         
Return on average assets1.45% 0.71% 1.00% 0.96% 0.88%
Return on average equity18.47% 9.01% 12.78% 12.79% 11.78%
Net interest margin3.79% 3.86% 3.79% 3.73% 3.70%
Efficiency ratio (1)62.39% 63.48% 66.38% 66.71% 69.52%
          
Average Balances         
Average assets$751,164  $736,745  $729,651  $730,838  $714,714 
Average earning assets704,947  689,338  681,800  682,132  667,184 
Average shareholders’ equity58,979  57,973  56,857  55,068  53,132 
          
Asset Quality         
Loan charge-offs$206  $223  $243  $161  $106 
Loan recoveries52  148  100  154  236 
Net charge-offs (recoveries)154  75  143  7  (130)
Non-accrual loans682  937  2,121  1,913  1,596 
Other real estate owned, net  326  250  250  250 
Nonperforming assets682  1,263  2,371  2,163  1,846 
Loans 30 to 89 days past due, accruing2,602  4,223  1,960  1,368  2,606 
Loans over 90 days past due, accruing773  183  89  151  119 
Troubled debt restructurings, accruing278  282  287  291  296 
Special mention loans5,365  5,225  9,677  10,378  12,896 
Substandard loans, accruing9,003  8,863  9,218  9,295  7,877 
          
Capital Ratios (2)         
Total capital$69,435  $67,624  $71,318  $69,325  $67,264 
Tier 1 capital64,163  62,298  66,017  63,881  61,813 
Common equity tier 1 capital64,163  62,298  66,017  63,881  61,813 
Total capital to risk-weighted assets13.52% 13.12% 13.91% 13.82% 13.53%
Tier 1 capital to risk-weighted assets12.50% 12.09% 12.87% 12.73% 12.43%
Common equity tier 1 capital to risk-weighted assets12.50% 12.09% 12.87% 12.73% 12.43%
Leverage ratio8.55% 8.46% 9.06% 8.76% 8.66%
               
               
               

FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)

 (unaudited)
For the Quarter Ended
 March 31,
2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
 March 31,
2017
Balance Sheet                 
Cash and due from banks$11,185  $11,358  $9,162  $9,801  $10,593 
Interest-bearing deposits in banks58,092  28,628  24,480  40,937  35,246 
Securities available for sale, at fair value93,699  89,255  93,102  89,741  91,907 
Securities held to maturity, at carrying value46,791  48,208  49,376  50,824  51,999 
Restricted securities, at cost1,590  1,570  1,570  1,570  1,570 
Loans held for sale68  438  660  999   
Loans, net of allowance for loan losses515,664  516,875  509,406  498,389  492,319 
Other real estate owned, net of valuation allowance  326  250  250  250 
Premises and equipment, net19,833  19,891  20,510  20,501  20,709 
Accrued interest receivable1,869  1,916  1,886  1,728  1,753 
Bank owned life insurance13,711  13,967  14,232  14,115  14,013 
Core deposit intangibles, net799  930  1,071  1,222  1,382 
Other assets4,553  5,748  5,798  5,580  5,555 
Total assets$767,854  $739,110  $731,503  $735,657  $727,296 
          
Noninterest-bearing demand deposits$189,460  $180,912  $179,351  $176,780  $173,963 
Savings and interest-bearing demand deposits378,330  361,417  350,879  362,128  353,958 
Time deposits125,035  122,651  126,032  122,920  126,848 
Total deposits$692,825  $664,980  $656,262  $661,828  $654,769 
Subordinated debt4,952  4,948  4,943  4,939  4,934 
Junior subordinated debt9,279  9,279  9,279  9,279  9,279 
Accrued interest payable and other liabilities1,105  1,749  3,485  3,644  4,336 
Total liabilities$708,161  $680,956  $673,969  $679,690  $673,318 
          
Preferred stock$  $  $  $  $ 
Common stock6,191  6,182  6,181  6,177  6,176 
Surplus7,312  7,260  7,238  7,177  7,155 
Retained earnings48,109  45,670  44,368  42,709  41,126 
Accumulated other comprehensive loss, net(1,919) (958) (253) (96) (479)
Total shareholders’ equity$59,693  $58,154  $57,534  $55,967  $53,978 
Total liabilities and shareholders’ equity$767,854  $739,110  $731,503  $735,657  $727,296 
          
Loan Data         
Mortgage loans on real estate:         
Construction and land development$33,941  $35,927  $37,182  $36,783  $36,024 
Secured by farm land848  646  657  666  676 
Secured by 1-4 family residential208,338  208,177  203,896  205,114  205,623 
Other real estate loans221,504  221,610  221,497  215,076  215,915 
Loans to farmers (except those secured by real estate)403  822  525  511  461 
Commercial and industrial loans (except those secured by real estate)38,850  37,941  33,922  30,690  28,731 
Consumer installment loans12,140  12,101  12,047  9,938  5,279 
Deposit overdrafts222  232  196  245  199 
All other loans4,690  4,745  4,785  4,810  4,862 
Total loans$   520,936  $522,201  $514,707  $503,833  $497,770 
Allowance for loan losses(5,272) (5,326) (5,301) (5,444) (5,451)
Loans, net$515,664  $516,875  $509,406  $498,389  $492,319 
 
 
 

FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)

 (unaudited)
For the Quarter Ended
 March 31,
2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
   March 31,
2017
Reconciliation of Tax-Equivalent Net Interest Income            
GAAP measures:           
Interest income – loans$6,305  $6,365  $6,138  $      5,933  $5,646 
Interest income – investments and other1,007  900  898  886  886 
Interest expense – deposits(590) (489) (446) (405) (383)
Interest expense – subordinated debt(89) (91) (91) (89) (89)
Interest expense – junior subordinated debt(86) (80) (79) (76) (68)
Total net interest income$       6,547  $6,605  $6,420  $6,249  $      5,992 
Non-GAAP measures:         
Tax benefit realized on non-taxable interest income – loans$10  $17  $18  $18  $19 
Tax benefit realized on non-taxable interest income – municipal
securities
39  76  76  74  74 
Total tax benefit realized on non-taxable interest income$49  $93  $94  $92  $93 
Total tax-equivalent net interest income$6,596  $6,698  $6,514  $6,341  $6,085 
 

(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. 

Primary Logo

Source: First National Corporation