First National Corporation Announces Fourth Quarter and Full Year Results
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 Statement | December 31, 2016 |
September 30, 2016 |
June 30, 2016 |
March 31, 2016 |
December 31, 2015 |
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| 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 |
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| December 31, 2016 |
September 30, 2016 |
June 30, 2016 |
March 31, 2016 |
December 31, 2015 |
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| 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 |
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| 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 Statement | December 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 [email protected] M. Shane Bell Executive Vice President and CFO (540) 465-9121 [email protected]
