Attached files
| file | filename |
|---|---|
| 8-K - 8-K - FIRST NATIONAL CORP /VA/ | fxnc093020178-kearningsrel.htm |
Exhibit 99.1
First National Corporation Announces Increase in Third Quarter Net Income to $1.8 Million
STRASBURG, Va., October 25, 2017 --- First National Corporation (the “Company” or “First National”) (OTC: FXNC) today reported net income of $1.8 million and earnings per share of $0.37 for the third quarter ended September 30, 2017. This was a $138 thousand, or 8%, increase when compared to net income of $1.7 million and earnings per share of $0.34 for the third quarter of 2016. The increase in net income resulted primarily from an increase in net interest income and a decrease in noninterest expenses.
For the nine months ended September 30, 2017, net income increased $905 thousand, or 21%, to $5.1 million and $1.04 per share, compared to net income of $4.2 million and $0.86 per share for the same period of 2016. The increase in net income resulted primarily from an increase in net interest income and a decrease in noninterest expenses.
Select highlights for the third quarter of 2017:
• | Return on equity of 12.78% |
• | Return on average assets of 1.00% |
• | Net loans increased 9% annualized during the quarter |
• | Net interest income increased $573 thousand, or 10% |
• | Net interest margin increased for the fourth consecutive quarter to 3.79% |
• | Nonperforming assets to total assets of 0.32% |
• | Efficiency ratio improved to 66.38% |
• | Expanded to the Richmond, Virginia market with experienced banking team |
“We are pleased with the continued growth of earnings and profitability. Loan growth and disciplined pricing resulted in a $1.3 million increase in revenue from net interest income, while noninterest expenses decreased $590 thousand, when comparing the nine months ended September 30, 2017 to the same period in the prior year,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “Earlier this month, the Company expanded its franchise with the addition of an experienced banking team and a branch office located in the Westhampton neighborhood of Richmond. The recent expansion is expected to contribute to the continued growth of the Company, while diversifying our business into another attractive Virginia market.”
BALANCE SHEET
Total assets of First National increased $18.8 million to $731.5 million at September 30, 2017, compared to one year ago. While total assets increased, the composition of the balance sheet changed as loans, net of the allowance for loan losses, increased $44.2 million, or 9%, and securities and interest-bearing deposits in banks decreased $24.5 million, or 13%. The loan-to-asset ratio increased to 70% at September 30, 2017, up from 66% one year ago, and the loan-to-deposit ratio increased to 78% from 73%.
Total deposits increased $15.5 million, or 2%, to $656.3 million, compared to $640.7 million at September 30, 2016. When comparing the composition of the deposit portfolio at September 30, 2017 to one year ago, noninterest-bearing demand deposits increased $11.1 million, from 26% to 27% of total deposits, while time deposits decreased $5.6 million, from 21% to 19%.
Shareholders’ equity increased $6.6 million to $57.5 million at September 30, 2017 compared to $51.0 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $56.5 million at the end of the third quarter, compared to $49.2 million at September 30, 2016. The Company’s wholly-owned banking subsidiary, First Bank, was considered well-capitalized based on regulatory requirements at the end of the third quarter.
ANALYSIS OF THE THREE MONTH PERIOD
Net interest income increased $573 thousand, or 10%, to $6.4 million for the quarter ended September 30, 2017, compared to $5.8 million for the third quarter of 2016. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 3%, and the net interest margin increased 22 basis points to 3.79% for the quarter ended September 30, 2017, compared to 3.57% for the same period in 2016. The increase in the net interest margin resulted from a 28 basis point increase in the yield on total earning assets, which was partially offset by a 6 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 from all earning asset classes and a change in the composition of earning assets. Yields increased on loans, securities, and interest-bearing deposits in banks by 12 basis points, 17 basis points and 66 basis points, respectively. A change in the asset composition also favorably impacted the earning asset yield as average loan balances increased to 75% of average earning assets for the quarter ended September 30, 2017, compared to 71% of average earning assets for the same period in 2016.
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 17 basis point increase in the cost of interest-bearing checking accounts, when comparing the periods.
Noninterest income totaled $2.0 million, compared to $2.3 million for the same period of 2016. This was primarily a result of decreases in service charges on deposits and other operating income. Service charges on deposits decreased $181 thousand, primarily from lower overdraft revenue. The $113 thousand decrease in other operating income was primarily attributable to a $102 thousand life insurance benefit recorded during the third quarter of the prior year. These decreases were partially offset by an increase in wealth management revenue.
Noninterest expense decreased $46 thousand, or 1%, to $5.8 million. Amortization expense decreased $36 thousand, supplies expense decreased $27 thousand, ATM and check card expense decreased $24 thousand, and FDIC assessment decreased $22 thousand. These decreases were partially offset by increases in salaries and employee benefits of $38 thousand, legal and professional fees of $37 thousand, and bank franchise tax of $22 thousand.
ANALYSIS OF THE NINE MONTH PERIOD
For the nine months ended September 30, 2017, net interest income increased $1.3 million, or 8%, to $18.7 million, compared to $17.3 million for the same period in 2016. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 4%, and the net interest margin increased 13 basis points to 3.74% for the nine months ended September 30, 2017, compared to 3.61% for the same period in 2016. The increase in the net interest margin resulted from a 17 basis point increase in the yield on total earning assets, which was partially offset by a 4 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 from all earning asset classes and a change in the composition of earning assets. Yields increased on loans, securities, and interest-bearing deposits in banks by 3 basis points, 14 basis points and 35 basis points, respectively. A change in the asset composition also favorably impacted the earning asset yield, as average loan balances increased to 74% of average earning assets for the nine months ended September 30, 2017, compared to 70% of average earning assets for the same period in 2016.
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 16 basis point increase in the cost of interest-bearing checking accounts, when comparing the periods.
Noninterest income totaled $5.9 million, compared to $6.4 million for the same period of 2016. This was primarily a result of decreases in service charges on deposits and other operating income. Service charges on deposits decreased $385 thousand, primarily from lower overdraft revenue. The decrease in other operating income was primarily attributable to a $102 thousand life insurance benefit recorded in the prior year. These decreases were partially offset by increases in wealth management revenue.
Noninterest expense decreased $590 thousand, or 3%, to $17.3 million. Salaries and employee benefits decreased $457 thousand, or 5%, FDIC assessment decreased $114 thousand, amortization expense decreased $112 thousand, and occupancy decreased $75 thousand. These decreases were partially offset by a $126 thousand increase in net other real estate owned expense and a $58 thousand increase in marketing expense. Other real estate owned expense totaled $6 thousand for the nine month period of 2017, compared to other real estate income of $120 thousand for the same period of 2016.
ASSET QUALITY/LOAN LOSS PROVISION
There was no provision for loan loss during the three month and nine month periods ended September 30, 2017. Net charge-offs totaled $143 thousand for the third quarter of 2017. For the nine month period, net charge-offs totaled $20 thousand. Nonperforming assets totaled $2.4 million, or 0.32% of total assets at September 30, 2017, which was an improvement compared to $3.8 million, or 0.53% of total assets, one year ago. The allowance for loan losses totaled $5.3 million at September 30, 2017 and $5.6 million at September 30, 2016, representing 1.03% and 1.19% 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, 2016, 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 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 M. Shane Bell
President and CEO Executive Vice President and CFO
(540) 465-9121 (540) 465-9121
sharvard@fbvirginia.com sbell@fbvirginia.com
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Quarter Ended | |||||||||||||||||||
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Income Statement | |||||||||||||||||||
Interest income | |||||||||||||||||||
Interest and fees on loans | $ | 6,138 | $ | 5,933 | $ | 5,646 | $ | 5,556 | $ | 5,500 | |||||||||
Interest on deposits in banks | 92 | 86 | 61 | 55 | 73 | ||||||||||||||
Interest on securities | |||||||||||||||||||
Taxable interest | 637 | 634 | 662 | 655 | 613 | ||||||||||||||
Tax-exempt interest | 148 | 145 | 143 | 139 | 136 | ||||||||||||||
Dividends on restricted securities | 21 | 21 | 20 | 21 | 20 | ||||||||||||||
Total interest income | $ | 7,036 | $ | 6,819 | $ | 6,532 | $ | 6,426 | $ | 6,342 | |||||||||
Interest expense | |||||||||||||||||||
Interest on deposits | $ | 446 | $ | 405 | $ | 383 | $ | 353 | $ | 338 | |||||||||
Interest on subordinated debt | 91 | 89 | 89 | 91 | 91 | ||||||||||||||
Interest on junior subordinated debt | 79 | 76 | 68 | 69 | 65 | ||||||||||||||
Interest on other borrowings | — | — | — | — | 1 | ||||||||||||||
Total interest expense | $ | 616 | $ | 570 | $ | 540 | $ | 513 | $ | 495 | |||||||||
Net interest income | $ | 6,420 | $ | 6,249 | $ | 5,992 | $ | 5,913 | $ | 5,847 | |||||||||
Provision for loan losses | — | — | — | — | — | ||||||||||||||
Net interest income after provision for loan losses | $ | 6,420 | $ | 6,249 | $ | 5,992 | $ | 5,913 | $ | 5,847 | |||||||||
Noninterest income | |||||||||||||||||||
Service charges on deposit accounts | $ | 760 | $ | 735 | $ | 755 | $ | 877 | $ | 941 | |||||||||
ATM and check card fees | 516 | 527 | 501 | 505 | 529 | ||||||||||||||
Wealth management fees | 359 | 355 | 347 | 353 | 339 | ||||||||||||||
Fees for other customer services | 131 | 137 | 140 | 154 | 143 | ||||||||||||||
Income from bank owned life insurance | 117 | 102 | 85 | 109 | 123 | ||||||||||||||
Net gains (losses) on sales of securities | 11 | 13 | — | (2 | ) | 4 | |||||||||||||
Net gains on sale of loans | 54 | 34 | 33 | 42 | 50 | ||||||||||||||
Other operating income | 69 | 75 | 80 | 89 | 182 | ||||||||||||||
Total noninterest income | $ | 2,017 | $ | 1,978 | $ | 1,941 | $ | 2,127 | $ | 2,311 | |||||||||
Noninterest expense | |||||||||||||||||||
Salaries and employee benefits | $ | 3,221 | $ | 3,122 | $ | 3,242 | $ | 2,897 | $ | 3,183 | |||||||||
Occupancy | 379 | 348 | 367 | 364 | 380 | ||||||||||||||
Equipment | 400 | 400 | 408 | 402 | 406 | ||||||||||||||
Marketing | 138 | 136 | 136 | 210 | 125 | ||||||||||||||
Supplies | 81 | 105 | 91 | 138 | 108 | ||||||||||||||
Legal and professional fees | 216 | 245 | 197 | 238 | 179 | ||||||||||||||
ATM and check card fees | 205 | 229 | 162 | 211 | 229 | ||||||||||||||
FDIC assessment | 84 | 77 | 79 | 72 | 106 | ||||||||||||||
Bank franchise tax | 111 | 110 | 104 | 90 | 89 | ||||||||||||||
Telecommunications expense | 95 | 108 | 110 | 112 | 110 | ||||||||||||||
Data processing expense | 153 | 152 | 150 | 159 | 160 | ||||||||||||||
Postage expense | 62 | 74 | 61 | 56 | 56 | ||||||||||||||
Amortization expense | 151 | 160 | 169 | 179 | 187 | ||||||||||||||
Other real estate owned expense (income), net | — | 4 | 2 | — | 1 | ||||||||||||||
Net loss on disposal of premises and equipment | — | — | — | — | 8 | ||||||||||||||
Other operating expense | 511 | 435 | 473 | 507 | 526 | ||||||||||||||
Total noninterest expense | $ | 5,807 | $ | 5,705 | $ | 5,751 | $ | 5,635 | $ | 5,853 | |||||||||
Income before income taxes | $ | 2,630 | $ | 2,522 | $ | 2,182 | $ | 2,405 | $ | 2,305 | |||||||||
Income tax expense | 798 | 766 | 639 | 724 | 611 | ||||||||||||||
Net income | $ | 1,832 | $ | 1,756 | $ | 1,543 | $ | 1,681 | $ | 1,694 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Quarter Ended | |||||||||||||||||||
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Common Share and Per Common Share Data | |||||||||||||||||||
Net income, basic | $ | 0.37 | $ | 0.36 | $ | 0.31 | $ | 0.34 | $ | 0.34 | |||||||||
Weighted average shares, basic | 4,943,301 | 4,940,904 | 4,935,421 | 4,927,728 | 4,925,753 | ||||||||||||||
Net income, diluted | $ | 0.37 | $ | 0.36 | $ | 0.31 | $ | 0.34 | $ | 0.34 | |||||||||
Weighted average shares, diluted | 4,946,128 | 4,942,726 | 4,937,625 | 4,933,572 | 4,929,922 | ||||||||||||||
Shares outstanding at period end | 4,945,056 | 4,941,604 | 4,940,766 | 4,929,403 | 4,926,546 | ||||||||||||||
Tangible book value at period end | $ | 11.42 | $ | 11.08 | $ | 10.64 | $ | 10.26 | $ | 9.99 | |||||||||
Cash dividends | $ | 0.035 | $ | 0.035 | $ | 0.035 | $ | 0.03 | $ | 0.03 | |||||||||
Key Performance Ratios | |||||||||||||||||||
Return on average assets | 1.00 | % | 0.96 | % | 0.88 | % | 0.94 | % | 0.95 | % | |||||||||
Return on average equity | 12.78 | % | 12.79 | % | 11.78 | % | 13.04 | % | 13.44 | % | |||||||||
Net interest margin | 3.79 | % | 3.73 | % | 3.70 | % | 3.60 | % | 3.57 | % | |||||||||
Efficiency ratio (1) | 66.38 | % | 66.71 | % | 69.52 | % | 67.05 | % | 68.57 | % | |||||||||
Average Balances | |||||||||||||||||||
Average assets | $ | 729,651 | $ | 730,838 | $ | 714,714 | $ | 711,834 | $ | 710,005 | |||||||||
Average earning assets | 681,800 | 682,132 | 667,184 | 663,982 | 661,624 | ||||||||||||||
Average shareholders’ equity | 56,857 | 55,068 | 53,132 | 51,295 | 50,160 | ||||||||||||||
Asset Quality | |||||||||||||||||||
Loan charge-offs | $ | 243 | $ | 161 | $ | 106 | $ | 337 | $ | 195 | |||||||||
Loan recoveries | 100 | 154 | 236 | 48 | 71 | ||||||||||||||
Net charge-offs (recoveries) | 143 | 7 | (130 | ) | 289 | 124 | |||||||||||||
Non-accrual loans | 2,121 | 1,913 | 1,596 | 1,520 | 3,521 | ||||||||||||||
Other real estate owned, net | 250 | 250 | 250 | 250 | 250 | ||||||||||||||
Nonperforming assets | 2,371 | 2,163 | 1,846 | 1,770 | 3,771 | ||||||||||||||
Loans 30 to 89 days past due, accruing | 1,960 | 1,368 | 2,606 | 2,583 | 2,036 | ||||||||||||||
Loans over 90 days past due, accruing | 89 | 151 | 119 | 116 | 59 | ||||||||||||||
Troubled debt restructurings, accruing | 287 | 291 | 296 | 300 | 392 | ||||||||||||||
Special mention loans | 9,677 | 10,378 | 12,896 | 13,073 | 14,238 | ||||||||||||||
Substandard loans, accruing | 9,218 | 9,295 | 7,877 | 8,056 | 8,273 | ||||||||||||||
Capital Ratios (2) | |||||||||||||||||||
Total capital | $ | 71,318 | $ | 69,325 | $ | 67,264 | $ | 65,590 | $ | 65,759 | |||||||||
Tier 1 capital | 66,017 | 63,881 | 61,813 | 60,269 | 60,149 | ||||||||||||||
Common equity tier 1 capital | 66,017 | 63,881 | 61,813 | 60,269 | 60,149 | ||||||||||||||
Total capital to risk-weighted assets | 13.91 | % | 13.82 | % | 13.53 | % | 13.47 | % | 13.90 | % | |||||||||
Tier 1 capital to risk-weighted assets | 12.87 | % | 12.73 | % | 12.43 | % | 12.38 | % | 12.72 | % | |||||||||
Common equity tier 1 capital to risk-weighted assets | 12.87 | % | 12.73 | % | 12.43 | % | 12.38 | % | 12.72 | % | |||||||||
Leverage ratio | 9.06 | % | 8.76 | % | 8.66 | % | 8.48 | % | 8.48 | % | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Quarter Ended | |||||||||||||||||||
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Balance Sheet | |||||||||||||||||||
Cash and due from banks | $ | 9,162 | $ | 9,801 | $ | 10,593 | $ | 10,106 | $ | 8,955 | |||||||||
Interest-bearing deposits in banks | 24,480 | 40,937 | 35,246 | 30,986 | 47,902 | ||||||||||||||
Securities available for sale, at fair value | 93,102 | 89,741 | 91,907 | 94,802 | 88,323 | ||||||||||||||
Securities held to maturity, at carrying value | 49,376 | 50,824 | 51,999 | 53,398 | 55,263 | ||||||||||||||
Restricted securities, at cost | 1,570 | 1,570 | 1,570 | 1,548 | 1,548 | ||||||||||||||
Loans held for sale | 660 | 999 | — | 337 | 1,053 | ||||||||||||||
Loans, net of allowance for loan losses | 509,406 | 498,389 | 492,319 | 480,746 | 465,224 | ||||||||||||||
Other real estate owned, net of valuation allowance | 250 | 250 | 250 | 250 | 250 | ||||||||||||||
Premises and equipment, net | 20,510 | 20,501 | 20,709 | 20,785 | 20,852 | ||||||||||||||
Accrued interest receivable | 1,886 | 1,728 | 1,753 | 1,746 | 1,631 | ||||||||||||||
Bank owned life insurance | 14,232 | 14,115 | 14,013 | 13,928 | 13,808 | ||||||||||||||
Core deposit intangibles, net | 1,071 | 1,222 | 1,382 | 1,551 | 1,730 | ||||||||||||||
Other assets | 5,798 | 5,580 | 5,555 | 5,817 | 6,133 | ||||||||||||||
Total assets | $ | 731,503 | $ | 735,657 | $ | 727,296 | $ | 716,000 | $ | 712,672 | |||||||||
Noninterest-bearing demand deposits | $ | 179,351 | $ | 176,780 | $ | 173,963 | $ | 168,076 | $ | 168,204 | |||||||||
Savings and interest-bearing demand deposits | 350,879 | 362,128 | 353,958 | 349,067 | 340,884 | ||||||||||||||
Time deposits | 126,032 | 122,920 | 126,848 | 128,427 | 131,654 | ||||||||||||||
Total deposits | $ | 656,262 | $ | 661,828 | $ | 654,769 | $ | 645,570 | $ | 640,742 | |||||||||
Other borrowings | — | — | — | — | — | ||||||||||||||
Subordinated debt | 4,943 | 4,939 | 4,934 | 4,930 | 4,926 | ||||||||||||||
Junior subordinated debt | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | ||||||||||||||
Accrued interest payable and other liabilities | 3,485 | 3,644 | 4,336 | 4,070 | 6,742 | ||||||||||||||
Total liabilities | $ | 673,969 | $ | 679,690 | $ | 673,318 | $ | 663,849 | $ | 661,689 | |||||||||
Preferred stock | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Common stock | 6,181 | 6,177 | 6,176 | 6,162 | 6,158 | ||||||||||||||
Surplus | 7,238 | 7,177 | 7,155 | 7,093 | 7,046 | ||||||||||||||
Retained earnings | 44,368 | 42,709 | 41,126 | 39,756 | 38,223 | ||||||||||||||
Accumulated other comprehensive loss, net | (253 | ) | (96 | ) | (479 | ) | (860 | ) | (444 | ) | |||||||||
Total shareholders’ equity | $ | 57,534 | $ | 55,967 | $ | 53,978 | $ | 52,151 | $ | 50,983 | |||||||||
Total liabilities and shareholders’ equity | $ | 731,503 | $ | 735,657 | $ | 727,296 | $ | 716,000 | $ | 712,672 | |||||||||
Loan Data | |||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||
Construction and land development | $ | 37,182 | $ | 36,783 | $ | 36,024 | $ | 34,699 | $ | 34,518 | |||||||||
Secured by farm land | 657 | 666 | 676 | 688 | 695 | ||||||||||||||
Secured by 1-4 family residential | 203,896 | 205,114 | 205,623 | 198,763 | 196,492 | ||||||||||||||
Other real estate loans | 221,497 | 215,076 | 215,915 | 210,522 | 202,148 | ||||||||||||||
Loans to farmers (except those secured by real estate) | 525 | 511 | 461 | 1,316 | 737 | ||||||||||||||
Commercial and industrial loans (except those secured by real estate) | 33,922 | 30,690 | 28,731 | 28,665 | 25,114 | ||||||||||||||
Consumer installment loans | 12,047 | 9,938 | 5,279 | 4,611 | 4,283 | ||||||||||||||
Deposit overdrafts | 196 | 245 | 199 | 264 | 260 | ||||||||||||||
All other loans | 4,785 | 4,810 | 4,862 | 6,539 | 6,587 | ||||||||||||||
Total loans | $ | 514,707 | $ | 503,833 | $ | 497,770 | $ | 486,067 | $ | 470,834 | |||||||||
Allowance for loan losses | (5,301 | ) | (5,444 | ) | (5,451 | ) | (5,321 | ) | (5,610 | ) | |||||||||
Loans, net | $ | 509,406 | $ | 498,389 | $ | 492,319 | $ | 480,746 | $ | 465,224 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Quarter Ended | |||||||||||||||||||
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||
Reconciliation of Tax-Equivalent Net Interest Income | |||||||||||||||||||
GAAP measures: | |||||||||||||||||||
Interest income – loans | $ | 6,138 | $ | 5,933 | $ | 5,646 | $ | 5,556 | $ | 5,500 | |||||||||
Interest income – investments and other | 898 | 886 | 886 | 870 | 842 | ||||||||||||||
Interest expense – deposits | (446 | ) | (405 | ) | (383 | ) | (353 | ) | (338 | ) | |||||||||
Interest expense – subordinated debt | (91 | ) | (89 | ) | (89 | ) | (91 | ) | (91 | ) | |||||||||
Interest expense – junior subordinated debt | (79 | ) | (76 | ) | (68 | ) | (69 | ) | (65 | ) | |||||||||
Interest expense – other borrowings | — | — | — | — | (1 | ) | |||||||||||||
Total net interest income | $ | 6,420 | $ | 6,249 | $ | 5,992 | $ | 5,913 | $ | 5,847 | |||||||||
Non-GAAP measures: | |||||||||||||||||||
Tax benefit realized on non-taxable interest income – loans | $ | 18 | $ | 18 | $ | 19 | $ | 25 | $ | 26 | |||||||||
Tax benefit realized on non-taxable interest income – municipal securities | 76 | 74 | 74 | 71 | 70 | ||||||||||||||
Total tax benefit realized on non-taxable interest income | $ | 94 | $ | 92 | $ | 93 | $ | 96 | $ | 96 | |||||||||
Total tax-equivalent net interest income | $ | 6,514 | $ | 6,341 | $ | 6,085 | $ | 6,009 | $ | 5,943 | |||||||||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Nine Months Ended | |||||||
September 30, 2017 | September 30, 2016 | ||||||
Income Statement | |||||||
Interest income | |||||||
Interest and fees on loans | $ | 17,717 | $ | 16,106 | |||
Interest on deposits in banks | 239 | 183 | |||||
Interest on securities | |||||||
Taxable interest | 1,933 | 2,037 | |||||
Tax-exempt interest | 436 | 425 | |||||
Dividends on restricted securities | 62 | 60 | |||||
Total interest income | $ | 20,387 | $ | 18,811 | |||
Interest expense | |||||||
Interest on deposits | $ | 1,234 | $ | 1,000 | |||
Interest on federal funds purchased | — | 3 | |||||
Interest on subordinated debt | 269 | 270 | |||||
Interest on junior subordinated debt | 223 | 190 | |||||
Interest on other borrowings | — | 6 | |||||
Total interest expense | $ | 1,726 | $ | 1,469 | |||
Net interest income | $ | 18,661 | $ | 17,342 | |||
Provision for loan losses | — | — | |||||
Net interest income after provision for loan losses | $ | 18,661 | $ | 17,342 | |||
Noninterest income | |||||||
Service charges on deposit accounts | $ | 2,250 | $ | 2,635 | |||
ATM and check card fees | 1,544 | 1,532 | |||||
Wealth management fees | 1,061 | 1,009 | |||||
Fees for other customer services | 408 | 427 | |||||
Income from bank owned life insurance | 304 | 316 | |||||
Net gains (losses) on sales of securities | 24 | 10 | |||||
Net gains on sale of loans | 121 | 102 | |||||
Other operating income | 224 | 335 | |||||
Total noninterest income | $ | 5,936 | $ | 6,366 | |||
Noninterest expense | |||||||
Salaries and employee benefits | $ | 9,585 | $ | 10,042 | |||
Occupancy | 1,094 | 1,169 | |||||
Equipment | 1,208 | 1,232 | |||||
Marketing | 410 | 352 | |||||
Supplies | 277 | 312 | |||||
Legal and professional fees | 658 | 646 | |||||
ATM and check card fees | 596 | 655 | |||||
FDIC assessment | 240 | 354 | |||||
Bank franchise tax | 325 | 282 | |||||
Telecommunications expense | 313 | 339 | |||||
Data processing expense | 455 | 434 | |||||
Postage expense | 197 | 182 | |||||
Amortization expense | 480 | 592 | |||||
Other real estate owned expense (income), net | 6 | (120 | ) | ||||
Other operating expense | 1,419 | 1,374 | |||||
Total noninterest expense | $ | 17,263 | $ | 17,853 | |||
Income before income taxes | $ | 7,334 | $ | 5,855 | |||
Income tax expense | 2,203 | 1,629 | |||||
Net income | $ | 5,131 | $ | 4,226 | |||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Nine Months Ended | |||||||
September 30, 2017 | September 30, 2016 | ||||||
Common Share and Per Common Share Data | |||||||
Net income, basic | $ | 1.04 | $ | 0.86 | |||
Weighted average shares, basic | 4,939,905 | 4,923,598 | |||||
Net income, diluted | $ | 1.04 | $ | 0.86 | |||
Weighted average shares, diluted | 4,942,189 | 4,926,380 | |||||
Shares outstanding at period end | 4,945,056 | 4,926,546 | |||||
Tangible book value at period end | $ | 11.42 | $ | 9.99 | |||
Cash dividends | $ | 0.105 | $ | 0.09 | |||
Key Performance Ratios | |||||||
Return on average assets | 0.95 | % | 0.80 | % | |||
Return on average equity | 12.47 | % | 11.62 | % | |||
Net interest margin | 3.74 | % | 3.61 | % | |||
Efficiency ratio (1) | 67.51 | % | 72.41 | % | |||
Average Balances | |||||||
Average assets | $ | 725,106 | $ | 703,173 | |||
Average earning assets | 677,092 | 653,203 | |||||
Average shareholders’ equity | 55,029 | 48,572 | |||||
Asset Quality | |||||||
Loan charge-offs | $ | 510 | $ | 451 | |||
Loan recoveries | 490 | 537 | |||||
Net charge-offs (recoveries) | 20 | (86 | ) | ||||
Reconciliation of Tax-Equivalent Net Interest Income | |||||||
GAAP measures: | |||||||
Interest income – loans | $ | 17,717 | $ | 16,106 | |||
Interest income – investments and other | 2,670 | 2,705 | |||||
Interest expense – deposits | (1,234 | ) | (1,000 | ) | |||
Interest expense – federal funds purchased | — | (3 | ) | ||||
Interest expense – subordinated debt | (269 | ) | (270 | ) | |||
Interest expense – junior subordinated debt | (223 | ) | (190 | ) | |||
Interest expense – other borrowings | — | (6 | ) | ||||
Total net interest income | $ | 18,661 | $ | 17,342 | |||
Non-GAAP measures: | |||||||
Tax benefit realized on non-taxable interest income – loans | $ | 55 | $ | 76 | |||
Tax benefit realized on non-taxable interest income – municipal securities | 224 | 219 | |||||
Total tax benefit realized on non-taxable interest income | $ | 279 | $ | 295 | |||
Total tax-equivalent net interest income | $ | 18,940 | $ | 17,637 | |||
(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 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 First Bank.