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| 8-K - 8-K - FIRST NATIONAL CORP /VA/ | fxnc93020188-kearningsrele.htm |
Exhibit 99.1
First National Corporation Announces 46% Increase in Third Quarter Net Income
STRASBURG, Va., October 24, 2018 --- 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 third quarter ended September 30, 2018. This was an $844 thousand, or 46%, increase when compared to net income of $1.8 million and earnings per share of $0.37 for the third quarter of 2017. The increase in net income resulted primarily from a $663 thousand, or 10%, increase in net interest income.
Select highlights for the third quarter of 2018:
• | Return on average equity of 16.89% |
• | Return on average assets of 1.41% |
• | Net interest income increased $663 thousand, or 10% |
• | Net loans increased $25.6 million, or 5%, compared to one year ago |
• | Net interest margin of 4.02% |
• | Efficiency ratio of 62.68% |
“We were delighted with the Company’s third quarter financial performance,” said Scott C. Harvard, president and chief executive officer of First National. Harvard added, “Moderate loan growth for the period and rising interest rates helped drive the increase in net income over the second quarter of 2018 and third quarter of 2017. We continue to remain disciplined in our loan underwriting at this point in the economic cycle while working hard to deepen existing relationships with our best customers. The company’s profitability ratios were excellent and compared favorably to prior periods thanks to a continued focus on efficiency and customer service.”
BALANCE SHEET
Total assets of First National increased $15.0 million to $746.5 million at September 30, 2018, compared to one year ago. The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $25.6 million, or 5%, while securities and interest-bearing deposits in banks decreased $9.9 million, or 6%, when comparing the periods.
Total deposits increased $10.8 million, or 2%, to $667.1 million, compared to $656.3 million one year ago. The deposit portfolio composition also changed favorably as noninterest-bearing deposits increased $6.9 million, or 4%, savings and interest-bearing deposits increased $10.1 million, and time deposits decreased $6.2 million. Noninterest-bearing deposits increased to 28% of total deposits compared to 27% one year ago.
Shareholders’ equity increased $6.1 million to $63.7 million, compared to $57.5 million one year ago from retained earnings. Tangible common equity increased $6.6 million, or 12%, to $63.1 million, compared to $56.5 million at September 30, 2017. The Company’s wholly-owned banking subsidiary, First Bank, was considered well-capitalized based on regulatory requirements at the end of the quarter.
ANALYSIS OF THE THREE-MONTH PERIOD
Net interest income increased $663 thousand, or 10%, to $7.1 million, compared to $6.4 million for the same period in 2017. The increase resulted from a higher net interest margin and higher average earning assets. Average earning assets increased 3%, and the net interest margin increased 23 basis points to 4.02%, compared to 3.79% for the same period in 2017. The increase in the net interest margin resulted from a 38 basis point increase in the yield on total earning assets, which was partially offset by a 15 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, which all benefited from increases in market rates. Yields increased on loans, securities, and interest-bearing deposits in banks by 33 basis points, 26 basis points, and 84 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 increased $161 thousand, or 8%, to $2.2 million, compared to $2.0 million for the same period of 2017. Wealth management revenue increased $64 thousand, or 18%, and service charges on deposits increased $58 thousand, or 8%, compared to the same period one year ago.
Noninterest expense increased $143 thousand, or 2%, to $6.0 million, compared to $5.8 million for the same period one year ago. This was primarily attributable to a $150 thousand, or 5%, increase in salaries and employee benefits and a $40 thousand increase in other operating expenses. The increases in salaries and employee benefits 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 $43 thousand decrease in amortization expense.
Income before taxes increased by $681 thousand, or 26%, to $3.3 million, compared to the same period one year ago. Although income before taxes increased, income tax expense decreased by $163 thousand because of the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act enacted in December 2017.
ANALYSIS OF THE NINE MONTH PERIOD
Net interest income increased $1.8 million, or 10%, to $20.5 million, compared to $18.7 million for the same period in 2017. The increase resulted from a higher net interest margin and higher average earning assets. Average earning assets increased 5%, and the net interest margin increased 15 basis points to 3.89%, compared to 3.74% for the same period in 2017. The increase in the net interest margin resulted from a 29 basis point increase in the yield on total earning assets, which was partially offset by a 14 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, which all benefited from increases in market rates. Yields increased on loans, securities, and interest-bearing deposits in banks by 28 basis points, 20 basis points, and 64 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 51 basis point increase in the cost of money market accounts, when comparing the periods.
Noninterest income increased $942 thousand, or 16%, to $6.9 million, compared to $5.9 million for the same period of 2017. This was primarily a result of a $431 thousand increase in income from bank owned life insurance, a $178 thousand increase in wealth management revenue, and a $192 thousand increase in other operating income. 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 $417 thousand, or 2%, to $17.7 million, compared to $17.3 million for the same period one year ago. This was primarily attributable to a $396 thousand, or 4%, increase in salaries and employee benefits, an $80 thousand increase in occupancy expense, and a $177 thousand increase in other operating expenses. The increases in salaries and employee benefits and occupancy resulted primarily from the expansion of First Bank into the Richmond market during the fourth quarter of 2017. The increases in expenses were partially offset by a $96 thousand decrease in
telecommunications expense and a $121 thousand decrease in amortization expense. Telecommunication expense decreased primarily from a refund received in the first quarter of 2018 from over-billed services in prior periods.
Income before taxes increased by $2.2 million, or 30%, to $9.6 million, compared to the same period one year ago. Although income before taxes increased, income tax expense decreased by $458 thousand because 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
There was no provision for loan losses for the three months ended September 30, 2018 and 2017. Net charge-offs totaled $238 thousand compared to $143 thousand for the same period one year ago.
The provision for loan losses totaled $100 thousand for the nine months ended September 30, 2018, compared to no provision for loan losses for the same period one year ago. Net charge-offs totaled $625 thousand for the nine months ended September 30, 2018, compared to net charge-offs of $20 thousand for the same period one year ago.
Nonperforming assets totaled $2.7 million, or 0.37% of total assets at September 30, 2018, compared to $2.4 million, or 0.32% of total assets, one year ago. The allowance for loan losses totaled $4.8 million at September 30, 2018 and $5.3 million at September 30, 2017, representing 0.89% and 1.03% 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 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, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||
Income Statement | |||||||||||||||||||
Interest income | |||||||||||||||||||
Interest and fees on loans | $ | 6,917 | $ | 6,546 | $ | 6,305 | $ | 6,365 | $ | 6,138 | |||||||||
Interest on deposits in banks | 88 | 186 | 160 | 96 | 92 | ||||||||||||||
Interest on securities | |||||||||||||||||||
Taxable interest | 797 | 776 | 680 | 636 | 637 | ||||||||||||||
Tax-exempt interest | 156 | 156 | 145 | 147 | 148 | ||||||||||||||
Dividends on restricted securities | 23 | 22 | 22 | 21 | 21 | ||||||||||||||
Total interest income | $ | 7,981 | $ | 7,686 | $ | 7,312 | $ | 7,265 | $ | 7,036 | |||||||||
Interest expense | |||||||||||||||||||
Interest on deposits | $ | 702 | $ | 665 | $ | 590 | $ | 489 | $ | 446 | |||||||||
Interest on subordinated debt | 91 | 89 | 89 | 91 | 91 | ||||||||||||||
Interest on junior subordinated debt | 105 | 101 | 86 | 80 | 79 | ||||||||||||||
Total interest expense | $ | 898 | $ | 855 | $ | 765 | $ | 660 | $ | 616 | |||||||||
Net interest income | $ | 7,083 | $ | 6,831 | $ | 6,547 | $ | 6,605 | $ | 6,420 | |||||||||
Provision for loan losses | — | — | 100 | 100 | — | ||||||||||||||
Net interest income after provision for loan losses | $ | 7,083 | $ | 6,831 | $ | 6,447 | $ | 6,505 | $ | 6,420 | |||||||||
Noninterest income | |||||||||||||||||||
Service charges on deposit accounts | $ | 818 | $ | 784 | $ | 762 | $ | 778 | $ | 760 | |||||||||
ATM and check card fees | 540 | 555 | 519 | 596 | 516 | ||||||||||||||
Wealth management fees | 423 | 409 | 407 | 386 | 359 | ||||||||||||||
Fees for other customer services | 143 | 151 | 153 | 162 | 131 | ||||||||||||||
Income from bank owned life insurance | 107 | 77 | 559 | 408 | 117 | ||||||||||||||
Net gains (losses) on securities | — | — | — | (114 | ) | 11 | |||||||||||||
Net gains on sale of loans | 39 | 15 | 9 | 51 | 54 | ||||||||||||||
Other operating income | 108 | 76 | 224 | 89 | 69 | ||||||||||||||
Total noninterest income | $ | 2,178 | $ | 2,067 | $ | 2,633 | $ | 2,356 | $ | 2,017 | |||||||||
Noninterest expense | |||||||||||||||||||
Salaries and employee benefits | $ | 3,371 | $ | 3,227 | $ | 3,383 | $ | 3,338 | $ | 3,221 | |||||||||
Occupancy | 387 | 387 | 400 | 388 | 379 | ||||||||||||||
Equipment | 396 | 420 | 423 | 428 | 400 | ||||||||||||||
Marketing | 123 | 161 | 109 | 166 | 138 | ||||||||||||||
Supplies | 75 | 88 | 80 | 88 | 81 | ||||||||||||||
Legal and professional fees | 229 | 223 | 191 | 228 | 216 | ||||||||||||||
ATM and check card expense | 217 | 211 | 203 | 209 | 205 | ||||||||||||||
FDIC assessment | 78 | 66 | 82 | 76 | 84 | ||||||||||||||
Bank franchise tax | 118 | 118 | 115 | 111 | 111 | ||||||||||||||
Telecommunications expense | 83 | 98 | 36 | 103 | 95 | ||||||||||||||
Data processing expense | 168 | 170 | 162 | 165 | 153 | ||||||||||||||
Postage expense | 42 | 42 | 61 | 14 | 62 | ||||||||||||||
Amortization expense | 108 | 120 | 131 | 141 | 151 | ||||||||||||||
Other real estate owned expense (income), net | 2 | 1 | (23 | ) | (192 | ) | — | ||||||||||||
Net loss on disposal of premises and equipment | 2 | — | — | 252 | — | ||||||||||||||
Other operating expense | 551 | 532 | 513 | 506 | 511 | ||||||||||||||
Total noninterest expense | $ | 5,950 | $ | 5,864 | $ | 5,866 | $ | 6,021 | $ | 5,807 | |||||||||
Income before income taxes | $ | 3,311 | $ | 3,034 | $ | 3,214 | $ | 2,840 | $ | 2,630 | |||||||||
Income tax expense | 635 | 583 | 527 | 1,523 | 798 | ||||||||||||||
Net income | $ | 2,676 | $ | 2,451 | $ | 2,687 | $ | 1,317 | $ | 1,832 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Quarter Ended | |||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||
Common Share and Per Common Share Data | |||||||||||||||||||
Net income, basic | $ | 0.54 | $ | 0.49 | $ | 0.54 | $ | 0.27 | $ | 0.37 | |||||||||
Weighted average shares, basic | 4,955,162 | 4,952,712 | 4,949,112 | 4,945,175 | 4,943,301 | ||||||||||||||
Net income, diluted | $ | 0.54 | $ | 0.49 | $ | 0.54 | $ | 0.27 | $ | 0.37 | |||||||||
Weighted average shares, diluted | 4,958,162 | 4,954,265 | 4,952,373 | 4,948,981 | 4,946,128 | ||||||||||||||
Shares outstanding at period end | 4,956,925 | 4,953,356 | 4,952,575 | 4,945,702 | 4,945,056 | ||||||||||||||
Tangible book value at period end | $ | 12.72 | $ | 12.31 | $ | 11.89 | $ | 11.57 | $ | 11.42 | |||||||||
Cash dividends | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.035 | $ | 0.035 | |||||||||
Key Performance Ratios | |||||||||||||||||||
Return on average assets | 1.41 | % | 1.29 | % | 1.45 | % | 0.71 | % | 1.00 | % | |||||||||
Return on average equity | 16.89 | % | 16.23 | % | 18.47 | % | 9.01 | % | 12.78 | % | |||||||||
Net interest margin | 4.02 | % | 3.86 | % | 3.79 | % | 3.86 | % | 3.79 | % | |||||||||
Efficiency ratio (1) | 62.68 | % | 64.17 | % | 62.39 | % | 63.48 | % | 66.38 | % | |||||||||
Average Balances | |||||||||||||||||||
Average assets | $ | 750,619 | $ | 762,626 | $ | 751,164 | $ | 736,745 | $ | 729,651 | |||||||||
Average earning assets | 703,894 | 715,163 | 704,947 | 689,338 | 681,800 | ||||||||||||||
Average shareholders’ equity | 62,882 | 60,592 | 58,979 | 57,973 | 56,857 | ||||||||||||||
Asset Quality | |||||||||||||||||||
Loan charge-offs | $ | 295 | $ | 294 | $ | 206 | $ | 223 | $ | 243 | |||||||||
Loan recoveries | 57 | 61 | 52 | 148 | 100 | ||||||||||||||
Net charge-offs | 238 | 233 | 154 | 75 | 143 | ||||||||||||||
Non-accrual loans | 2,738 | 2,330 | 682 | 937 | 2,121 | ||||||||||||||
Other real estate owned, net | — | 68 | — | 326 | 250 | ||||||||||||||
Nonperforming assets | 2,738 | 2,398 | 682 | 1,263 | 2,371 | ||||||||||||||
Loans 30 to 89 days past due, accruing | 2,707 | 3,408 | 2,602 | 4,223 | 1,960 | ||||||||||||||
Loans over 90 days past due, accruing | 261 | 549 | 773 | 183 | 89 | ||||||||||||||
Troubled debt restructurings, accruing | 269 | 273 | 278 | 282 | 287 | ||||||||||||||
Special mention loans | 2,718 | 3,988 | 5,365 | 5,225 | 9,677 | ||||||||||||||
Substandard loans, accruing | 1,216 | 3,798 | 9,003 | 8,863 | 9,218 | ||||||||||||||
Capital Ratios (2) | |||||||||||||||||||
Total capital | $ | 72,807 | $ | 71,026 | $ | 69,435 | $ | 67,624 | $ | 71,318 | |||||||||
Tier 1 capital | 68,006 | 65,987 | 64,163 | 62,298 | 66,017 | ||||||||||||||
Common equity tier 1 capital | 68,006 | 65,987 | 64,163 | 62,298 | 66,017 | ||||||||||||||
Total capital to risk-weighted assets | 13.20 | % | 13.47 | % | 13.52 | % | 13.12 | % | 13.91 | % | |||||||||
Tier 1 capital to risk-weighted assets | 12.33 | % | 12.52 | % | 12.50 | % | 12.09 | % | 12.87 | % | |||||||||
Common equity tier 1 capital to risk-weighted assets | 12.33 | % | 12.52 | % | 12.50 | % | 12.09 | % | 12.87 | % | |||||||||
Leverage ratio | 9.07 | % | 8.66 | % | 8.55 | % | 8.46 | % | 9.06 | % | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Quarter Ended | |||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||
Balance Sheet | |||||||||||||||||||
Cash and due from banks | $ | 11,370 | $ | 13,501 | $ | 11,185 | $ | 11,358 | $ | 9,162 | |||||||||
Interest-bearing deposits in banks | 10,068 | 27,762 | 58,092 | 28,628 | 24,480 | ||||||||||||||
Securities available for sale, at fair value | 102,748 | 106,707 | 93,699 | 89,255 | 93,102 | ||||||||||||||
Securities held to maturity, at carrying value | 44,239 | 45,701 | 46,791 | 48,208 | 49,376 | ||||||||||||||
Restricted securities, at cost | 1,590 | 1,590 | 1,590 | 1,570 | 1,570 | ||||||||||||||
Loans held for sale | 516 | 1,195 | 68 | 438 | 660 | ||||||||||||||
Loans, net of allowance for loan losses | 535,020 | 525,894 | 515,664 | 516,875 | 509,406 | ||||||||||||||
Other real estate owned, net of valuation allowance | — | 68 | — | 326 | 250 | ||||||||||||||
Premises and equipment, net | 19,557 | 19,633 | 19,833 | 19,891 | 20,510 | ||||||||||||||
Accrued interest receivable | 2,138 | 2,073 | 1,869 | 1,916 | 1,886 | ||||||||||||||
Bank owned life insurance | 13,894 | 13,787 | 13,711 | 13,967 | 14,232 | ||||||||||||||
Core deposit intangibles, net | 571 | 679 | 799 | 930 | 1,071 | ||||||||||||||
Other assets | 4,743 | 4,774 | 4,553 | 5,748 | 5,798 | ||||||||||||||
Total assets | $ | 746,454 | $ | 763,364 | $ | 767,854 | $ | 739,110 | $ | 731,503 | |||||||||
Noninterest-bearing demand deposits | $ | 186,293 | $ | 196,839 | $ | 189,460 | $ | 180,912 | $ | 179,351 | |||||||||
Savings and interest-bearing demand deposits | 360,988 | 367,399 | 378,330 | 361,417 | 350,879 | ||||||||||||||
Time deposits | 119,823 | 122,291 | 125,035 | 122,651 | 126,032 | ||||||||||||||
Total deposits | $ | 667,104 | $ | 686,529 | $ | 692,825 | $ | 664,980 | $ | 656,262 | |||||||||
Subordinated debt | 4,961 | 4,956 | 4,952 | 4,948 | 4,943 | ||||||||||||||
Junior subordinated debt | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | ||||||||||||||
Accrued interest payable and other liabilities | 1,459 | 952 | 1,105 | 1,749 | 3,485 | ||||||||||||||
Total liabilities | $ | 682,803 | $ | 701,716 | $ | 708,161 | $ | 680,956 | $ | 673,969 | |||||||||
Preferred stock | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Common stock | 6,196 | 6,192 | 6,191 | 6,182 | 6,181 | ||||||||||||||
Surplus | 7,438 | 7,346 | 7,312 | 7,260 | 7,238 | ||||||||||||||
Retained earnings | 52,741 | 50,313 | 48,109 | 45,670 | 44,368 | ||||||||||||||
Accumulated other comprehensive loss, net | (2,724 | ) | (2,203 | ) | (1,919 | ) | (958 | ) | (253 | ) | |||||||||
Total shareholders’ equity | $ | 63,651 | $ | 61,648 | $ | 59,693 | $ | 58,154 | $ | 57,534 | |||||||||
Total liabilities and shareholders’ equity | $ | 746,454 | $ | 763,364 | $ | 767,854 | $ | 739,110 | $ | 731,503 | |||||||||
Loan Data | |||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||
Construction and land development | $ | 42,982 | $ | 37,350 | $ | 33,941 | $ | 35,927 | $ | 37,182 | |||||||||
Secured by farm land | 942 | 975 | 848 | 646 | 657 | ||||||||||||||
Secured by 1-4 family residential | 211,938 | 211,101 | 208,338 | 208,177 | 203,896 | ||||||||||||||
Other real estate loans | 223,961 | 223,387 | 221,504 | 221,610 | 221,497 | ||||||||||||||
Loans to farmers (except those secured by real estate) | 937 | 476 | 403 | 822 | 525 | ||||||||||||||
Commercial and industrial loans (except those secured by real estate) | 41,924 | 40,467 | 38,850 | 37,941 | 33,922 | ||||||||||||||
Consumer installment loans | 12,301 | 12,315 | 12,140 | 12,101 | 12,047 | ||||||||||||||
Deposit overdrafts | 249 | 231 | 222 | 232 | 196 | ||||||||||||||
All other loans | 4,587 | 4,631 | 4,690 | 4,745 | 4,785 | ||||||||||||||
Total loans | $ | 539,821 | $ | 530,933 | $ | 520,936 | $ | 522,201 | $ | 514,707 | |||||||||
Allowance for loan losses | (4,801 | ) | (5,039 | ) | (5,272 | ) | (5,326 | ) | (5,301 | ) | |||||||||
Loans, net | $ | 535,020 | $ | 525,894 | $ | 515,664 | $ | 516,875 | $ | 509,406 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Quarter Ended | |||||||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | |||||||||||||||
Reconciliation of Tax-Equivalent Net Interest Income | |||||||||||||||||||
GAAP measures: | |||||||||||||||||||
Interest income – loans | $ | 6,917 | $ | 6,546 | $ | 6,305 | $ | 6,365 | $ | 6,138 | |||||||||
Interest income – investments and other | 1,064 | 1,140 | 1,007 | 900 | 898 | ||||||||||||||
Interest expense – deposits | (702 | ) | (665 | ) | (590 | ) | (489 | ) | (446 | ) | |||||||||
Interest expense – subordinated debt | (91 | ) | (89 | ) | (89 | ) | (91 | ) | (91 | ) | |||||||||
Interest expense – junior subordinated debt | (105 | ) | (101 | ) | (86 | ) | (80 | ) | (79 | ) | |||||||||
Total net interest income | $ | 7,083 | $ | 6,831 | $ | 6,547 | $ | 6,605 | $ | 6,420 | |||||||||
Non-GAAP measures: | |||||||||||||||||||
Tax benefit realized on non-taxable interest income – loans | $ | 12 | $ | 11 | $ | 10 | $ | 17 | $ | 18 | |||||||||
Tax benefit realized on non-taxable interest income – municipal securities | 41 | 41 | 39 | 76 | 76 | ||||||||||||||
Total tax benefit realized on non-taxable interest income | $ | 53 | $ | 52 | $ | 49 | $ | 93 | $ | 94 | |||||||||
Total tax-equivalent net interest income | $ | 7,136 | $ | 6,883 | $ | 6,596 | $ | 6,698 | $ | 6,514 | |||||||||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Nine Months Ended | |||||||
September 30, 2018 | September 30, 2017 | ||||||
Income Statement | |||||||
Interest income | |||||||
Interest and fees on loans | $ | 19,768 | $ | 17,717 | |||
Interest on deposits in banks | 434 | 239 | |||||
Interest on securities | |||||||
Taxable interest | 2,253 | 1,933 | |||||
Tax-exempt interest | 457 | 436 | |||||
Dividends on restricted securities | 67 | 62 | |||||
Total interest income | $ | 22,979 | $ | 20,387 | |||
Interest expense | |||||||
Interest on deposits | $ | 1,957 | $ | 1,234 | |||
Interest on subordinated debt | 269 | 269 | |||||
Interest on junior subordinated debt | 292 | 223 | |||||
Total interest expense | $ | 2,518 | $ | 1,726 | |||
Net interest income | $ | 20,461 | $ | 18,661 | |||
Provision for loan losses | 100 | — | |||||
Net interest income after provision for loan losses | $ | 20,361 | $ | 18,661 | |||
Noninterest income | |||||||
Service charges on deposit accounts | $ | 2,364 | $ | 2,250 | |||
ATM and check card fees | 1,614 | 1,544 | |||||
Wealth management fees | 1,239 | 1,061 | |||||
Fees for other customer services | 447 | 408 | |||||
Income from bank owned life insurance | 743 | 312 | |||||
Net gains (losses) on securities | — | 24 | |||||
Net gains on sale of loans | 63 | 121 | |||||
Other operating income | 408 | 216 | |||||
Total noninterest income | $ | 6,878 | $ | 5,936 | |||
Noninterest expense | |||||||
Salaries and employee benefits | $ | 9,981 | $ | 9,585 | |||
Occupancy | 1,174 | 1,094 | |||||
Equipment | 1,239 | 1,208 | |||||
Marketing | 393 | 410 | |||||
Supplies | 243 | 277 | |||||
Legal and professional fees | 643 | 658 | |||||
ATM and check card expense | 631 | 596 | |||||
FDIC assessment | 226 | 240 | |||||
Bank franchise tax | 351 | 325 | |||||
Telecommunications expense | 217 | 313 | |||||
Data processing expense | 500 | 455 | |||||
Postage expense | 145 | 197 | |||||
Amortization expense | 359 | 480 | |||||
Other real estate owned expense (income), net | (20 | ) | 6 | ||||
Net loss on disposal of premises and equipment | 2 | — | |||||
Other operating expense | 1,596 | 1,419 | |||||
Total noninterest expense | $ | 17,680 | $ | 17,263 | |||
Income before income taxes | $ | 9,559 | $ | 7,334 | |||
Income tax expense | 1,745 | 2,203 | |||||
Net income | $ | 7,814 | $ | 5,131 | |||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
(unaudited) For the Nine Months Ended | |||||||
September 30, 2018 | September 30, 2017 | ||||||
Common Share and Per Common Share Data | |||||||
Net income, basic | $ | 1.58 | $ | 1.04 | |||
Weighted average shares, basic | 4,952,351 | 4,939,905 | |||||
Net income, diluted | $ | 1.58 | $ | 1.04 | |||
Weighted average shares, diluted | 4,954,955 | 4,942,189 | |||||
Shares outstanding at period end | 4,956,925 | 4,945,056 | |||||
Tangible book value at period end | $ | 12.72 | $ | 11.42 | |||
Cash dividends | $ | 0.15 | $ | 0.105 | |||
Key Performance Ratios | |||||||
Return on average assets | 1.38 | % | 0.95 | % | |||
Return on average equity | 17.17 | % | 12.47 | % | |||
Net interest margin | 3.89 | % | 3.74 | % | |||
Efficiency ratio (1) | 63.07 | % | 67.51 | % | |||
Average Balances | |||||||
Average assets | $ | 754,856 | $ | 725,106 | |||
Average earning assets | 707,998 | 677,092 | |||||
Average shareholders’ equity | 60,848 | 55,029 | |||||
Asset Quality | |||||||
Loan charge-offs | $ | 795 | $ | 510 | |||
Loan recoveries | 170 | 490 | |||||
Net charge-offs (recoveries) | 625 | 20 | |||||
Reconciliation of Tax-Equivalent Net Interest Income | |||||||
GAAP measures: | |||||||
Interest income – loans | $ | 19,768 | $ | 17,717 | |||
Interest income – investments and other | 3,211 | 2,670 | |||||
Interest expense – deposits | (1,957 | ) | (1,234 | ) | |||
Interest expense – subordinated debt | (269 | ) | (269 | ) | |||
Interest expense – junior subordinated debt | (292 | ) | (223 | ) | |||
Total net interest income | $ | 20,461 | $ | 18,661 | |||
Non-GAAP measures: | |||||||
Tax benefit realized on non-taxable interest income – loans | $ | 33 | $ | 55 | |||
Tax benefit realized on non-taxable interest income – municipal securities | 121 | 224 | |||||
Total tax benefit realized on non-taxable interest income | $ | 154 | $ | 279 | |||
Total tax-equivalent net interest income | $ | 20,615 | $ | 18,940 | |||
(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.