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 First Quarter Earnings

Company Release - 4/23/2019 7:00 AM ET

STRASBURG, Va., April 23, 2019 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (NASDAQ:FXNC) reported net income of $2.3 million, or $0.46 per diluted share, for the first quarter of 2019, compared to $2.7 million or $0.54 per diluted share for the first quarter of 2018.  The decrease in net income resulted primarily from a $648 thousand decrease in noninterest income, which included a $456 thousand decrease in income from bank-owned life insurance. Net interest income increased by $352 thousand, or 5%, compared to the first quarter of 2018.  On April 18, 2019, the Company began trading on the Nasdaq Capital Market stock exchange under the symbol FXNC.

Key accomplishments in the first quarter of 2019:

  • Total assets reached $775 million
  • Return on average equity of 13.47%
  • Return on average assets of 1.21%
  • Net interest margin of 3.97%
  • Loan growth of $7.6 million for the quarter
  • Deposit growth of $13.7 million for the quarter

“The Company continued to deliver superior financial performance in the first quarter,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “We are pleased to report an increase in net interest income over the same quarter one year ago, which was driven by high quality loan growth and an improved net interest margin. While asset quality continues to be excellent, we are mindful of how late we may be in the current economic cycle and remain committed to adhering to consistent underwriting of today’s credits.”

BALANCE SHEET

Total assets of First National increased $7.2 million to $775.1 million, compared to $767.9 million at March 31, 2018. The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $29.9 million, or 6%, while securities and interest-bearing deposits in banks decreased $25.9 million, or 13%, when comparing the periods.

Total deposits decreased $8.6 million to $684.2 million, compared to $692.8 million at March 31, 2018. The deposit portfolio composition remained stable as noninterest-bearing deposits were 28% and 27% of total deposits at March 31, 2019 and 2018, respectively.

Shareholders’ equity increased $10.0 million to $69.7 million at March 31, 2019, compared to $59.7 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $69.3 million at the end of the first quarter, an increase of 18% compared to $58.9 million at March 31, 2018. 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 $352 thousand, or 5%, to $6.9 million for the quarter ended March 31, 2019, compared to $6.5 million for the first quarter of 2018. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 1%, and the net interest margin increased 18 basis points to 3.97% for the quarter ended March 31, 2019, compared to 3.79% for the same period in 2018. The increase in the net interest margin resulted from a 38 basis point increase in the yield on average earning assets, which was partially offset by a 20 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 28 basis points, which compared favorably to increases of 100 basis points in the target federal funds rate during 2018.

Noninterest income decreased $648 thousand to $2.0 million, compared to $2.6 million for the same period of 2018. The decrease was primarily attributable to a $456 thousand decrease in bank owned life insurance and a $194 thousand decrease in other income.  The decrease in bank owned life insurance revenue was a result of a death benefit recorded in the first quarter of 2018. The decrease in other operating income was primarily attributable to the termination of the Company’s pension plan and the subsequent distribution of plan assets in the prior year, which resulted in a one-time increase in other operating income of $126 thousand during the first quarter of 2018. The decreases were partially offset by a $30 thousand, or 7%, increase in wealth management fees.

Noninterest expense increased $232 thousand, or 4%, to $6.1 million for the first quarter, compared to the same period one year ago. Legal and professional fees increased $50 thousand, which resulted primarily from an increase in investment advisory costs of the wealth management department, 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. Telecommunications expense increased $47 thousand as a result of a refund of overbilled services that favorably impacted the first quarter of 2018. Occupancy expense increased $38 thousand primarily from expenses associated with closing of one branch office and improvements to an existing branch office. These increases were partially offset by decreases in expense categories, including amortization expense, postage expense and FDIC assessments.

ASSET QUALITY/LOAN LOSS PROVISION

There was no provision for loan losses recorded for the first quarter of 2019, compared to $100 thousand for the first quarter 2018. Net charge-offs totaled $63 thousand for the first quarter of 2019 compared to $154 thousand for the same period of 2018.  Nonperforming assets totaled $1.9 million, or 0.25% of total assets at March 31, 2019, compared to $682 thousand, or 0.09% of total assets, one year ago. The allowance for loan losses totaled $4.9 million, or 0.90% of total loans, and $5.3 million, or 1.01% of total loans, at March 31, 2019 and 2018, 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, 2018, and other filings with the Securities and Exchange Commission.

ABOUT FIRST NATIONAL CORPORATION

First National Corporation (NASDAQ: 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 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.

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
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
Income Statement         
Interest income         
Interest and fees on loans$6,996  $7,106  $6,917  $6,546  $6,305 
Interest on deposits in banks110  105  88  186  160 
Interest on securities         
Taxable interest737  771  797  776  680 
Tax-exempt interest156  153  156  156  145 
Dividends on restricted securities24  24  23  22  22 
Total interest income$8,023  $8,159  $7,981  $7,686  $7,312 
Interest expense         
Interest on deposits$922  $798  $702  $665  $590 
Interest on subordinated debt89  91  91  89  89 
Interest on junior subordinated debt111  105  105  101  86 
Interest on other borrowings2         
Total interest expense$1,124  $994  $898  $855  $765 
Net interest income$6,899  $7,165  $7,083  $6,831  $6,547 
Provision for loan losses  500      100 
Net interest income after provision for loan losses$6,899  $6,665  $7,083  $6,831  $6,447 
Noninterest income         
Service charges on deposit accounts$701  $814  $818  $784  $762 
ATM and check card fees517  642  540  555  519 
Wealth management fees437  443  423  409  407 
Fees for other customer services175  154  143  151  153 
Income from bank owned life insurance103  97  107  77  559 
Net gains (losses) on securities  (1)      
Net gains on sale of loans22  23  39  15  9 
Other operating income30  107  108  76  224 
Total noninterest income$1,985  $2,279  $2,178  $2,067  $2,633 
Noninterest expense         
Salaries and employee benefits$3,443  $3,306  $3,371  $3,227  $3,383 
Occupancy438  424  387  387  400 
Equipment420  410  396  420  423 
Marketing141  155  123  161  109 
Supplies73  91  75  88  80 
Legal and professional fees241  343  229  223  191 
ATM and check card expense216  178  217  211  203 
FDIC assessment69  68  78  66  82 
Bank franchise tax130  117  118  118  115 
Telecommunications expense83  79  83  98  36 
Data processing expense173  173  168  170  162 
Postage expense48  51  42  42  61 
Amortization expense90  99  108  120  131 
Other real estate owned expense (income), net    2  1  (23)
Net loss on disposal of premises and equipment    2     
Other operating expense533  587  551  532  513 
Total noninterest expense$6,098  $6,081  $5,950  $5,864  $5,866 
Income before income taxes$2,786  $2,863  $3,311  $3,034  $3,214 
Income tax expense525  542  635  583  527 
Net income$2,261  $2,321  $2,676  $2,451  $2,687 


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

 (unaudited)
For the Quarter Ended
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
Common Share and Per Common Share Data         
Net income, basic$0.46  $0.47  $0.54  $0.49  $0.54 
Weighted average shares, basic4,960,264  4,957,055  4,955,162  4,952,712  4,949,112 
Net income, diluted$0.46  $0.47  $0.54  $0.49  $0.54 
Weighted average shares, diluted4,964,134  4,960,597  4,958,162  4,954,265  4,952,373 
Shares outstanding at period end4,963,487  4,957,694  4,956,925  4,953,356  4,952,575 
Tangible book value at period end$13.97  $13.35  $12.72  $12.31  $11.89 
Cash dividends$0.09  $0.05  $0.05  $0.05  $0.05 
          
Key Performance Ratios         
Return on average assets1.21% 1.22% 1.41% 1.29% 1.45%
Return on average equity13.47% 14.15% 16.89% 16.23% 18.47%
Net interest margin3.97% 4.05% 4.02% 3.86% 3.79%
Efficiency ratio (1)67.23% 62.99% 62.68% 64.17% 62.39%
          
Average Balances         
Average assets$757,910  $753,112  $750,619  $762,626  $751,164 
Average earning assets709,690  706,323  703,894  715,163  704,947 
Average shareholders’ equity68,089  65,077  62,882  60,592  58,979 
          
Asset Quality         
Loan charge-offs$228  $374  $295  $294  $206 
Loan recoveries165  82  57  61  52 
Net charge-offs63  292  238  233  154 
Non-accrual loans1,915  3,172  2,738  2,330  682 
Other real estate owned, net      68   
Nonperforming assets1,915  3,172  2,738  2,398  682 
Loans 30 to 89 days past due, accruing1,002  1,446  2,707  3,408  2,602 
Loans over 90 days past due, accruing133  235  261  549  773 
Troubled debt restructurings, accruing259  264  269  273  278 
Special mention loans1,910  2,078  2,718  3,988  5,365 
Substandard loans, accruing3,132  3,522  1,216  3,798  9,003 
          
Capital Ratios (2)         
Total capital$80,780  $74,697  $72,807  $71,026  $69,435 
Tier 1 capital75,834  69,688  68,006  65,987  64,163 
Common equity tier 1 capital75,834  69,688  68,006  65,987  64,163 
Total capital to risk-weighted assets14.49% 13.62% 13.25% 13.47% 13.52%
Tier 1 capital to risk-weighted assets13.60% 12.71% 12.38% 12.52% 12.50%
Common equity tier 1 capital to risk-weighted assets13.60% 12.71% 12.38% 12.52% 12.50%
Leverage ratio10.01% 9.26% 9.07% 8.66% 8.55%


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

 (unaudited)
For the Quarter Ended
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
Balance Sheet         
Cash and due from banks$10,862  $13,378  $11,370  $13,501  $11,185 
Interest-bearing deposits in banks31,833  15,240  10,068  27,762  58,092 
Securities available for sale, at fair value121,202  99,857  102,748  106,707  93,699 
Securities held to maturity, at amortized cost19,489  43,408  44,239  45,701  46,791 
Restricted securities, at cost1,701  1,688  1,590  1,590  1,590 
Loans held for sale200  419  516  1,195  68 
Loans, net of allowance for loan losses545,529  537,847  535,020  525,894  515,664 
Other real estate owned, net of valuation allowance      68   
Premises and equipment, net20,282  20,066  19,557  19,633  19,833 
Accrued interest receivable2,143  2,113  2,138  2,073  1,869 
Bank owned life insurance17,094  13,991  13,894  13,787  13,711 
Core deposit intangibles, net382  472  571  679  799 
Other assets4,361  4,490  4,743  4,774  4,553 
Total assets$775,078  $752,969  $746,454  $763,364  $767,854 
          
Noninterest-bearing demand deposits$189,261  $181,964  $186,293  $196,839  $189,460 
Savings and interest-bearing demand deposits377,673  369,383  360,988  367,399  378,330 
Time deposits117,290  119,219  119,823  122,291  125,035 
Total deposits$684,224  $670,566  $667,104  $686,529  $692,825 
Other borrowings5,000         
Subordinated debt4,969  4,965  4,961  4,956  4,952 
Junior subordinated debt9,279  9,279  9,279  9,279  9,279 
Accrued interest payable and other liabilities1,878  1,485  1,459  952  1,105 
Total liabilities$705,350  $686,295  $682,803  $701,716  $708,161 
          
Preferred stock$  $  $  $  $ 
Common stock6,204  6,197  6,196  6,192  6,191 
Surplus7,515  7,471  7,438  7,346  7,312 
Retained earnings56,629  54,814  52,741  50,313  48,109 
Accumulated other comprehensive loss, net(620) (1,808) (2,724) (2,203) (1,919)
Total shareholders’ equity$69,728  $66,674  $63,651  $61,648  $59,693 
Total liabilities and shareholders’ equity$775,078  $752,969  $746,454  $763,364  $767,854 
          
Loan Data         
Mortgage loans on real estate:         
Construction and land development$48,948  $45,867  $42,982  $37,350  $33,941 
Secured by farm land883  880  942  975  848 
Secured by 1-4 family residential217,527  215,945  211,938  211,101  208,338 
Other real estate loans220,513  218,673  223,961  223,387  221,504 
Loans to farmers (except those secured by real estate)806  1,035  937  476  403 
Commercial and industrial loans (except those secured by real estate)45,239  43,570  41,924  40,467  38,850 
Consumer installment loans11,890  12,061  12,301  12,315  12,140 
Deposit overdrafts204  275  249  231  222 
All other loans4,465  4,550  4,587  4,631  4,690 
Total loans$550,475  $542,856  $539,821  $530,933  $520,936 
Allowance for loan losses(4,946) (5,009) (4,801) (5,039) (5,272)
Loans, net$545,529  $537,847  $535,020  $525,894  $515,664 


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

 (unaudited)
For the Quarter Ended
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
Reconciliation of Tax-Equivalent Net Interest Income        
GAAP measures:         
Interest income – loans$6,996  $7,106  $6,917  $6,546  $6,305 
Interest income – investments and other1,027  1,053  1,064  1,140  1,007 
Interest expense – deposits(922) (798) (702) (665) (590)
Interest expense – subordinated debt(89) (91) (91) (89) (89)
Interest expense – junior subordinated debt(111) (105) (105) (101) (86)
Interest expense – other borrowings(2)        
Total net interest income$6,899  $7,165  $7,083  $6,831  $6,547 
Non-GAAP measures:         
Tax benefit realized on non-taxable interest income – loans$11  $11  $12  $11  $10 
Tax benefit realized on non-taxable interest income – municipal securities41  42  41  41  39 
Total tax benefit realized on non-taxable interest income$52  $53  $53  $52  $49 
Total tax-equivalent net interest income$6,951  $7,218  $7,136  $6,883  $6,596 

 (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%. 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. 

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Source: First National Corporation