First National Corporation Announces Second Quarter Earnings
STRASBURG, Va., July 23, 2019 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (NASDAQ:FXNC) reported net income of $2.1 million, or $0.42 per diluted share, for the second quarter of 2019, compared to $2.5 million or $0.49 per diluted share for the second quarter of 2018. The decrease in net income resulted primarily from a $366 thousand increase in noninterest expense and a $200 thousand increase in the provision for loan losses, which were partially offset by a $134 thousand increase in net interest income.
Highlights for the second quarter of 2019:
- Loan growth of $24.4 million during the quarter
- Return on average equity of 11.76%
- Return on average assets of 1.08%
- Net interest margin of 3.88%
- Nonperforming assets decreased to 0.23% of assets
- Total assets reached $778.4 million
”We are pleased with second quarter results for the Company, specifically the pick-up in quality loan growth, the continued growth in wealth management assets and income, and the $19 million of deposit growth since year end,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “While the net interest margin improved compared to the same quarterly period in 2018, the margin decreased compared to the linked quarter. We are concerned about the impact of an inverted yield curve on earnings over an extended period. Expenses for the quarter were also impacted by legal fees and marketing expenses related to strategic initiatives, and additional costs related to listing the Company’s stock on Nasdaq."
BALANCE SHEET
Total assets of First National increased $15.0 million to $778.4 million, compared to $763.4 million at June 30, 2018. The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $44.1 million, or 8%, while securities and interest-bearing deposits in banks decreased $31.0 million, or 17%.
Total deposits increased to $689.8 million, up from $686.5 million at June 30, 2018. The deposit portfolio composition remained relatively stable as noninterest-bearing deposits were 27% and 29% of total deposits at June 30, 2019 and 2018, respectively.
Shareholders’ equity increased $11.2 million to $72.8 million at June 30, 2019, compared to $61.6 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $72.5 million at the end of the second quarter, an increase of 19% compared to $61.0 million at June 30, 2018. The Company’s wholly owned subsidiary, First Bank (the “Bank”), was considered well capitalized at June 30, 2019.
ANALYSIS OF THE THREE-MONTH PERIOD
Net interest income increased $134 thousand to $7.0 million for the quarter ended June 30, 2019, compared to $6.8 million for the second quarter of 2018. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 1%, and the net interest margin increased 2 basis points to 3.88% for the quarter ended June 30, 2019, compared to 3.86% for the same period in 2018. The increase in the net interest margin resulted from a 23 basis point increase in the yield on average earning assets, which was partially offset by a 21 basis point increase in interest expense as a percent of average earning assets.
The higher yield on average earning assets was primarily attributable to an 11 basis point increase in the yield on loans and a 59 basis point increase in the yield on interest-bearing deposits in banks. The increase in interest expense was primarily attributable to higher interest rates paid on deposits, as the cost of total interest-bearing deposits increased by 30 basis points, which compared favorably to the 75 basis point increase in the target federal funds rate that occurred between the two periods.
Noninterest income decreased slightly to $2.0 million, compared to $2.1 million for the same period of 2018. The decrease was primarily attributable to a $69 thousand decrease in service charges on deposits and a $64 thousand decrease in other operating income. Other operating income decreased primarily as a result of revenue earned during the prior year from a settlement and release agreement related to brokerage services, which is no longer being earned in the current year. These decreases were partially offset by a $49 thousand, or 12%, increase in wealth management fees, and a $22 thousand increase in income from bank-owned life insurance.
Noninterest expense increased $366 thousand, or 6%, to $6.2 million, compared to the same period one year ago. The increase was primarily attributable to a $148 thousand, or 5%, increase in salaries and employee benefits, a $102 thousand increase in other operating expense, an $80 thousand increase in legal and professional fees, and a $78 thousand increase in marketing expense. The increase in other operating expense was attributable to additional costs of listing the Company’s common stock on the Nasdaq Capital Market stock exchange during the quarter, as well as higher education and training expenses. The increase in legal and professional fees resulted from legal costs related to strategic initiatives, and consulting expenses related to bank compliance testing and implementation of new accounting standards. The increase in marketing expense was also attributable to strategic initiatives. These increases were partially offset by a $40 thousand decrease in amortization expense and a $31 thousand decrease in FDIC assessments.
ANALYSIS OF THE SIX-MONTH PERIOD
Net interest income increased $486 thousand, or 4%, to $13.9 million for the six months ended June 30, 2019, compared to $13.4 million for the same period of 2018. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 1%, and the net interest margin increased 10 basis points to 3.93% for the six months ended June 30, 2019, compared to 3.83% for the same period in 2018. The increase in the net interest margin resulted from a 30 basis point increase in the yield on average earning assets, which was partially offset by a 21 basis point increase in interest expense as a percent of average earning assets.
The higher yield on average earning assets was primarily attributable to a 20 basis point increase in the yield on loans and a 65 basis point increase in the yield on interest-bearing deposits in banks. The increase in interest expense was primarily attributable to higher interest rates paid on deposits, as the cost of total interest-bearing deposits increased by 29 basis points, which compared favorably to the 75 basis point increase in the target federal funds rate that occurred between the two periods.
Noninterest income decreased to $4.0 million, compared to $4.7 million for the same period of 2018. The decrease was primarily attributable to a $434 thousand decrease in income from bank-owned life insurance, a $258 thousand decrease in other operating income, and a $130 thousand decrease in service charges on deposits. These decreases were partially offset by a $79 thousand increase in wealth management fees. The decrease in income from bank-owned life insurance resulted from a death benefit recorded in the first quarter of 2018. The decrease in other operating income was impacted by the termination of the Company’s pension plan and subsequent distribution of plan assets in the prior year, which resulted in a one-time increase in other operating income of $126 thousand during the first quarter of 2018, as well as revenue earned during the prior year from a settlement and release agreement related to brokerage services.
Noninterest expense increased $598 thousand, or 5%, to $12.3 million, compared to $11.7 million for the same period one year ago. The increase was primarily attributable to a $208 thousand, or 3%, increase in salaries and employee benefits, a $130 thousand increase in legal and professional fees, a $122 thousand increase in other operating expense, and a $110 thousand increase in marketing expense. The increase in legal and professional fees resulted primarily from legal costs related to an evaluation of strategic initiatives, an increase in investment advisory costs of the wealth management department, and consulting expenses related to bank compliance testing and implementation of new accounting standards. The increase in investment advisory expense correlated with the increase in wealth management revenue, when comparing the same periods. The increase in other operating expense was attributable to costs of listing the Company’s common stock on the Nasdaq Capital Market stock exchange, as well as higher education and training expenses. The increase in marketing expense was attributable to strategic initiatives. These increases were partially offset by an $81 thousand decrease in amortization expense and a $44 thousand decrease in FDIC assessments.
ASSET QUALITY/LOAN LOSS PROVISION
The provision for loan losses totaled $200 thousand for the second quarter of 2019, compared to no provision for loan losses for the second quarter 2018. Net charge-offs totaled $151 thousand for the second quarter of 2019 compared to $233 thousand for the same period of 2018. The provision for loan losses recorded in the second quarter of 2019 was primarily a result of loan growth during the period. Nonperforming assets totaled $1.8 million, or 0.23% of total assets at June 30, 2019, compared to $2.4 million, or 0.31% of total assets, one year ago. The allowance for loan losses totaled $5.0 million, or 0.87% of total loans, and $5.0 million, or 0.95% of total loans, at June 30, 2019 and 2018, respectively.
The provision for loan losses totaled $200 thousand for the six-month period ended June 30, 2019, compared to $100 thousand for the same period in 2018. Net charge-offs totaled $214 thousand for the six months ended June 30, 2019 compared to $387 thousand for the same period of 2018.
FORWARD-LOOKING STATEMENTS
Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company’s future operations and are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and other filings with the Securities and Exchange Commission.
ABOUT FIRST NATIONAL CORPORATION
First National Corporation (NASDAQ:FXNC) is the parent company and bank holding company of First Bank, a community bank that first opened for business in 1907 in Strasburg, Virginia. The Bank offers loan and deposit products and services through its website, , its mobile banking platform, a network of ATMs located throughout its market area, one loan production office, a customer service center in a retirement community, and 14 bank branch office locations located throughout the Shenandoah Valley and central regions of Virginia. In addition to providing traditional banking services, the Bank operates a wealth management division under the name First Bank Wealth Management. First Bank also owns First Bank Financial Services, Inc., which invests in entities that provide investment services and title insurance.
CONTACTS
| Scott C. Harvard | M. Shane Bell |
| President and CEO | Executive Vice President and CFO |
| (540) 465-9121 | (540) 465-9121 |
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | |||||||||||||||
| Income Statement | |||||||||||||||||||
| Interest income | |||||||||||||||||||
| Interest and fees on loans | $ | 7,200 | $ | 6,996 | $ | 7,106 | $ | 6,917 | $ | 6,546 | |||||||||
| Interest on deposits in banks | 133 | 110 | 105 | 88 | 186 | ||||||||||||||
| Interest on securities | |||||||||||||||||||
| Taxable interest | 696 | 737 | 771 | 797 | 776 | ||||||||||||||
| Tax-exempt interest | 159 | 156 | 153 | 156 | 156 | ||||||||||||||
| Dividends on restricted securities | 26 | 24 | 24 | 23 | 22 | ||||||||||||||
| Total interest income | $ | 8,214 | $ | 8,023 | $ | 8,159 | $ | 7,981 | $ | 7,686 | |||||||||
| Interest expense | |||||||||||||||||||
| Interest on deposits | $ | 1,051 | $ | 922 | $ | 798 | $ | 702 | $ | 665 | |||||||||
| Interest on subordinated debt | 90 | 89 | 91 | 91 | 89 | ||||||||||||||
| Interest on junior subordinated debt | 108 | 111 | 105 | 105 | 101 | ||||||||||||||
| Interest on other borrowings | — | 2 | — | — | — | ||||||||||||||
| Total interest expense | $ | 1,249 | $ | 1,124 | $ | 994 | $ | 898 | $ | 855 | |||||||||
| Net interest income | $ | 6,965 | $ | 6,899 | $ | 7,165 | $ | 7,083 | $ | 6,831 | |||||||||
| Provision for loan losses | 200 | — | 500 | — | — | ||||||||||||||
| Net interest income after provision for loan losses | $ | 6,765 | $ | 6,899 | $ | 6,665 | $ | 7,083 | $ | 6,831 | |||||||||
| Noninterest income | |||||||||||||||||||
| Service charges on deposit accounts | $ | 715 | $ | 701 | $ | 814 | $ | 818 | $ | 784 | |||||||||
| ATM and check card fees | 573 | 517 | 642 | 540 | 555 | ||||||||||||||
| Wealth management fees | 458 | 437 | 443 | 423 | 409 | ||||||||||||||
| Fees for other customer services | 153 | 175 | 154 | 143 | 151 | ||||||||||||||
| Income from bank owned life insurance | 99 | 103 | 97 | 107 | 77 | ||||||||||||||
| Net gains (losses) on securities | — | — | (1 | ) | — | — | |||||||||||||
| Net gains on sale of loans | 25 | 22 | 23 | 39 | 15 | ||||||||||||||
| Other operating income | 12 | 30 | 107 | 108 | 76 | ||||||||||||||
| Total noninterest income | $ | 2,035 | $ | 1,985 | $ | 2,279 | $ | 2,178 | $ | 2,067 | |||||||||
| Noninterest expense | |||||||||||||||||||
| Salaries and employee benefits | $ | 3,375 | $ | 3,443 | $ | 3,306 | $ | 3,371 | $ | 3,227 | |||||||||
| Occupancy | 401 | 438 | 424 | 387 | 387 | ||||||||||||||
| Equipment | 409 | 420 | 410 | 396 | 420 | ||||||||||||||
| Marketing | 239 | 141 | 155 | 123 | 161 | ||||||||||||||
| Supplies | 91 | 73 | 91 | 75 | 88 | ||||||||||||||
| Legal and professional fees | 303 | 241 | 343 | 229 | 223 | ||||||||||||||
| ATM and check card expense | 225 | 216 | 178 | 217 | 211 | ||||||||||||||
| FDIC assessment | 35 | 69 | 68 | 78 | 66 | ||||||||||||||
| Bank franchise tax | 136 | 130 | 117 | 118 | 118 | ||||||||||||||
| Telecommunications expense | 79 | 83 | 79 | 83 | 98 | ||||||||||||||
| Data processing expense | 179 | 173 | 173 | 168 | 170 | ||||||||||||||
| Postage expense | 44 | 48 | 51 | 42 | 42 | ||||||||||||||
| Amortization expense | 80 | 90 | 99 | 108 | 120 | ||||||||||||||
| Other real estate owned expense, net | — | — | — | 2 | 1 | ||||||||||||||
| Net loss on disposal of premises and equipment | — | — | — | 2 | — | ||||||||||||||
| Other operating expense | 634 | 533 | 587 | 551 | 532 | ||||||||||||||
| Total noninterest expense | $ | 6,230 | $ | 6,098 | $ | 6,081 | $ | 5,950 | $ | 5,864 | |||||||||
| Income before income taxes | $ | 2,570 | $ | 2,786 | $ | 2,863 | $ | 3,311 | $ | 3,034 | |||||||||
| Income tax expense | 484 | 525 | 542 | 635 | 583 | ||||||||||||||
| Net income | $ | 2,086 | $ | 2,261 | $ | 2,321 | $ | 2,676 | $ | 2,451 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | |||||||||||||||
| Common Share and Per Common Share Data | |||||||||||||||||||
| Net income, basic | $ | 0.42 | $ | 0.46 | $ | 0.47 | $ | 0.54 | $ | 0.49 | |||||||||
| Weighted average shares, basic | 4,963,737 | 4,960,264 | 4,957,055 | 4,955,162 | 4,952,712 | ||||||||||||||
| Net income, diluted | $ | 0.42 | $ | 0.46 | $ | 0.47 | $ | 0.54 | $ | 0.49 | |||||||||
| Weighted average shares, diluted | 4,965,822 | 4,964,134 | 4,960,597 | 4,958,162 | 4,954,265 | ||||||||||||||
| Shares outstanding at period end | 4,964,824 | 4,963,487 | 4,957,694 | 4,956,925 | 4,953,356 | ||||||||||||||
| Tangible book value at period end | $ | 14.60 | $ | 13.97 | $ | 13.35 | $ | 12.72 | $ | 12.31 | |||||||||
| Cash dividends | $ | 0.09 | $ | 0.09 | $ | 0.05 | $ | 0.05 | $ | 0.05 | |||||||||
| Key Performance Ratios | |||||||||||||||||||
| Return on average assets | 1.08 | % | 1.21 | % | 1.22 | % | 1.41 | % | 1.29 | % | |||||||||
| Return on average equity | 11.76 | % | 13.47 | % | 14.15 | % | 16.89 | % | 16.23 | % | |||||||||
| Net interest margin | 3.88 | % | 3.97 | % | 4.05 | % | 4.02 | % | 3.86 | % | |||||||||
| Efficiency ratio (1) | 67.94 | % | 67.23 | % | 62.99 | % | 62.68 | % | 64.17 | % | |||||||||
| Average Balances | |||||||||||||||||||
| Average assets | $ | 773,574 | $ | 757,910 | $ | 753,112 | $ | 750,619 | $ | 762,626 | |||||||||
| Average earning assets | 724,909 | 709,690 | 706,323 | 703,894 | 715,163 | ||||||||||||||
| Average shareholders’ equity | 71,124 | 68,089 | 65,077 | 62,882 | 60,592 | ||||||||||||||
| Asset Quality | |||||||||||||||||||
| Loan charge-offs | $ | 219 | $ | 228 | $ | 374 | $ | 295 | $ | 294 | |||||||||
| Loan recoveries | 68 | 165 | 82 | 57 | 61 | ||||||||||||||
| Net charge-offs | 151 | 63 | 292 | 238 | 233 | ||||||||||||||
| Non-accrual loans | 1,775 | 1,915 | 3,172 | 2,738 | 2,330 | ||||||||||||||
| Other real estate owned, net | — | — | — | — | 68 | ||||||||||||||
| Nonperforming assets | 1,775 | 1,915 | 3,172 | 2,738 | 2,398 | ||||||||||||||
| Loans 30 to 89 days past due, accruing | 792 | 1,002 | 1,446 | 2,707 | 3,408 | ||||||||||||||
| Loans over 90 days past due, accruing | 19 | 133 | 235 | 261 | 549 | ||||||||||||||
| Troubled debt restructurings, accruing | — | 259 | 264 | 269 | 273 | ||||||||||||||
| Special mention loans | 2,610 | 1,910 | 2,078 | 2,718 | 3,988 | ||||||||||||||
| Substandard loans, accruing | 2,825 | 3,132 | 3,522 | 1,216 | 3,798 | ||||||||||||||
| Capital Ratios (2) | |||||||||||||||||||
| Total capital | $ | 82,078 | $ | 80,780 | $ | 74,697 | $ | 72,807 | $ | 71,026 | |||||||||
| Tier 1 capital | 77,083 | 75,834 | 69,688 | 68,006 | 65,987 | ||||||||||||||
| Common equity tier 1 capital | 77,083 | 75,834 | 69,688 | 68,006 | 65,987 | ||||||||||||||
| Total capital to risk-weighted assets | 14.24 | % | 14.49 | % | 13.62 | % | 13.25 | % | 13.47 | % | |||||||||
| Tier 1 capital to risk-weighted assets | 13.37 | % | 13.60 | % | 12.71 | % | 12.38 | % | 12.52 | % | |||||||||
| Common equity tier 1 capital to risk-weighted assets | 13.37 | % | 13.60 | % | 12.71 | % | 12.38 | % | 12.52 | % | |||||||||
| Leverage ratio | 9.96 | % | 10.01 | % | 9.26 | % | 9.07 | % | 8.66 | % | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | |||||||||||||||
| Balance Sheet | |||||||||||||||||||
| Cash and due from banks | $ | 12,354 | $ | 10,862 | $ | 13,378 | $ | 11,370 | $ | 13,501 | |||||||||
| Interest-bearing deposits in banks | 10,716 | 31,833 | 15,240 | 10,068 | 27,762 | ||||||||||||||
| Securities available for sale, at fair value | 119,510 | 121,202 | 99,857 | 102,748 | 106,707 | ||||||||||||||
| Securities held to maturity, at amortized cost | 18,828 | 19,489 | 43,408 | 44,239 | 45,701 | ||||||||||||||
| Restricted securities, at cost | 1,701 | 1,701 | 1,688 | 1,590 | 1,590 | ||||||||||||||
| Loans held for sale | 675 | 200 | 419 | 516 | 1,195 | ||||||||||||||
| Loans, net of allowance for loan losses | 569,959 | 545,529 | 537,847 | 535,020 | 525,894 | ||||||||||||||
| Other real estate owned, net of valuation allowance | — | — | — | — | 68 | ||||||||||||||
| Premises and equipment, net | 20,182 | 20,282 | 20,066 | 19,557 | 19,633 | ||||||||||||||
| Accrued interest receivable | 2,163 | 2,143 | 2,113 | 2,138 | 2,073 | ||||||||||||||
| Bank owned life insurance | 17,193 | 17,094 | 13,991 | 13,894 | 13,787 | ||||||||||||||
| Core deposit intangibles, net | 302 | 382 | 472 | 571 | 679 | ||||||||||||||
| Other assets | 4,801 | 4,361 | 4,490 | 4,743 | 4,774 | ||||||||||||||
| Total assets | $ | 778,384 | $ | 775,078 | $ | 752,969 | $ | 746,454 | $ | 763,364 | |||||||||
| Noninterest-bearing demand deposits | $ | 186,553 | $ | 189,261 | $ | 181,964 | $ | 186,293 | $ | 196,839 | |||||||||
| Savings and interest-bearing demand deposits | 385,399 | 377,673 | 369,383 | 360,988 | 367,399 | ||||||||||||||
| Time deposits | 117,863 | 117,290 | 119,219 | 119,823 | 122,291 | ||||||||||||||
| Total deposits | $ | 689,815 | $ | 684,224 | $ | 670,566 | $ | 667,104 | $ | 686,529 | |||||||||
| Other borrowings | — | 5,000 | — | — | — | ||||||||||||||
| Subordinated debt | 4,974 | 4,969 | 4,965 | 4,961 | 4,956 | ||||||||||||||
| Junior subordinated debt | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | ||||||||||||||
| Accrued interest payable and other liabilities | 1,507 | 1,878 | 1,485 | 1,459 | 952 | ||||||||||||||
| Total liabilities | $ | 705,575 | $ | 705,350 | $ | 686,295 | $ | 682,803 | $ | 701,716 | |||||||||
| Preferred stock | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
| Common stock | 6,206 | 6,204 | 6,197 | 6,196 | 6,192 | ||||||||||||||
| Surplus | 7,566 | 7,515 | 7,471 | 7,438 | 7,346 | ||||||||||||||
| Retained earnings | 58,268 | 56,629 | 54,814 | 52,741 | 50,313 | ||||||||||||||
| Accumulated other comprehensive income (loss), net | 769 | (620 | ) | (1,808 | ) | (2,724 | ) | (2,203 | ) | ||||||||||
| Total shareholders’ equity | $ | 72,809 | $ | 69,728 | $ | 66,674 | $ | 63,651 | $ | 61,648 | |||||||||
| Total liabilities and shareholders’ equity | $ | 778,384 | $ | 775,078 | $ | 752,969 | $ | 746,454 | $ | 763,364 | |||||||||
| Loan Data | |||||||||||||||||||
| Mortgage loans on real estate: | |||||||||||||||||||
| Construction and land development | $ | 46,281 | $ | 48,948 | $ | 45,867 | $ | 42,982 | $ | 37,350 | |||||||||
| Secured by farmland | 855 | 883 | 880 | 942 | 975 | ||||||||||||||
| Secured by 1-4 family residential | 225,820 | 217,527 | 215,945 | 211,938 | 211,101 | ||||||||||||||
| Other real estate loans | 236,515 | 220,513 | 218,673 | 223,961 | 223,387 | ||||||||||||||
| Loans to farmers (except those secured by real estate) | 1,006 | 806 | 1,035 | 937 | 476 | ||||||||||||||
| Commercial and industrial loans (except those secured by real estate) | 48,347 | 45,239 | 43,570 | 41,924 | 40,467 | ||||||||||||||
| Consumer installment loans | 11,572 | 11,890 | 12,061 | 12,301 | 12,315 | ||||||||||||||
| Deposit overdrafts | 208 | 204 | 275 | 249 | 231 | ||||||||||||||
| All other loans | 4,350 | 4,465 | 4,550 | 4,587 | 4,631 | ||||||||||||||
| Total loans | $ | 574,954 | $ | 550,475 | $ | 542,856 | $ | 539,821 | $ | 530,933 | |||||||||
| Allowance for loan losses | (4,995 | ) | (4,946 | ) | (5,009 | ) | (4,801 | ) | (5,039 | ) | |||||||||
| Loans, net | $ | 569,959 | $ | 545,529 | $ | 537,847 | $ | 535,020 | $ | 525,894 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||||
| June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | |||||||||||||||
| Reconciliation of Tax-Equivalent Net Interest Income | |||||||||||||||||||
| GAAP measures: | |||||||||||||||||||
| Interest income – loans | $ | 7,200 | $ | 6,996 | $ | 7,106 | $ | 6,917 | $ | 6,546 | |||||||||
| Interest income – investments and other | 1,014 | 1,027 | 1,053 | 1,064 | 1,140 | ||||||||||||||
| Interest expense – deposits | (1,051 | ) | (922 | ) | (798 | ) | (702 | ) | (665 | ) | |||||||||
| Interest expense – subordinated debt | (90 | ) | (89 | ) | (91 | ) | (91 | ) | (89 | ) | |||||||||
| Interest expense – junior subordinated debt | (108 | ) | (111 | ) | (105 | ) | (105 | ) | (101 | ) | |||||||||
| Interest expense – other borrowings | — | (2 | ) | — | — | — | |||||||||||||
| Total net interest income | $ | 6,965 | $ | 6,899 | $ | 7,165 | $ | 7,083 | $ | 6,831 | |||||||||
| Non-GAAP measures: | |||||||||||||||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 10 | $ | 11 | $ | 11 | $ | 12 | $ | 11 | |||||||||
| Tax benefit realized on non-taxable interest income – municipal securities | 42 | 41 | 42 | 41 | 41 | ||||||||||||||
| Total tax benefit realized on non-taxable interest income | $ | 52 | $ | 52 | $ | 53 | $ | 53 | $ | 52 | |||||||||
| Total tax-equivalent net interest income | $ | 7,017 | $ | 6,951 | $ | 7,218 | $ | 7,136 | $ | 6,883 | |||||||||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Six Months Ended | |||||||
| June 30, 2019 | June 30, 2018 | ||||||
| Income Statement | |||||||
| Interest income | |||||||
| Interest and fees on loans | $ | 14,196 | $ | 12,851 | |||
| Interest on deposits in banks | 243 | 346 | |||||
| Interest on securities | |||||||
| Taxable interest | 1,433 | 1,456 | |||||
| Tax-exempt interest | 315 | 301 | |||||
| Dividends on restricted securities | 50 | 44 | |||||
| Total interest income | $ | 16,237 | $ | 14,998 | |||
| Interest expense | |||||||
| Interest on deposits | $ | 1,973 | $ | 1,255 | |||
| Interest on subordinated debt | 179 | 178 | |||||
| Interest on junior subordinated debt | 219 | 187 | |||||
| Interest on other borrowings | 2 | — | |||||
| Total interest expense | $ | 2,373 | $ | 1,620 | |||
| Net interest income | $ | 13,864 | $ | 13,378 | |||
| Provision for loan losses | 200 | 100 | |||||
| Net interest income after provision for loan losses | $ | 13,664 | $ | 13,278 | |||
| Noninterest income | |||||||
| Service charges on deposit accounts | $ | 1,416 | $ | 1,546 | |||
| ATM and check card fees | 1,090 | 1,074 | |||||
| Wealth management fees | 895 | 816 | |||||
| Fees for other customer services | 328 | 304 | |||||
| Income from bank owned life insurance | 202 | 636 | |||||
| Net gains on sale of loans | 47 | 24 | |||||
| Other operating income | 42 | 300 | |||||
| Total noninterest income | $ | 4,020 | $ | 4,700 | |||
| Noninterest expense | |||||||
| Salaries and employee benefits | $ | 6,818 | $ | 6,610 | |||
| Occupancy | 839 | 787 | |||||
| Equipment | 829 | 843 | |||||
| Marketing | 380 | 270 | |||||
| Supplies | 164 | 168 | |||||
| Legal and professional fees | 544 | 414 | |||||
| ATM and check card expense | 441 | 414 | |||||
| FDIC assessment | 104 | 148 | |||||
| Bank franchise tax | 266 | 233 | |||||
| Telecommunications expense | 162 | 134 | |||||
| Data processing expense | 352 | 332 | |||||
| Postage expense | 92 | 103 | |||||
| Amortization expense | 170 | 251 | |||||
| Other real estate owned expense (income), net | — | (22 | ) | ||||
| Other operating expense | 1,167 | 1,045 | |||||
| Total noninterest expense | $ | 12,328 | $ | 11,730 | |||
| Income before income taxes | $ | 5,356 | $ | 6,248 | |||
| Income tax expense | 1,009 | 1,110 | |||||
| Net income | $ | 4,347 | $ | 5,138 | |||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Six Months Ended | |||||||
| June 30, 2019 | June 30, 2018 | ||||||
| Common Share and Per Common Share Data | |||||||
| Net income, basic | $ | 0.88 | $ | 1.04 | |||
| Weighted average shares, basic | 4,962,010 | 4,950,922 | |||||
| Net income, diluted | $ | 0.88 | $ | 1.04 | |||
| Weighted average shares, diluted | 4,964,988 | 4,953,328 | |||||
| Shares outstanding at period end | 4,964,824 | 4,953,356 | |||||
| Tangible book value at period end | $ | 14.60 | $ | 12.31 | |||
| Cash dividends | $ | 0.18 | $ | 0.10 | |||
| Key Performance Ratios | |||||||
| Return on average assets | 1.14 | % | 1.37 | % | |||
| Return on average equity | 12.60 | % | 17.33 | % | |||
| Net interest margin | 3.93 | % | 3.83 | % | |||
| Efficiency ratio (1) | 67.59 | % | 63.27 | % | |||
| Average Balances | |||||||
| Average assets | $ | 766,054 | $ | 756,959 | |||
| Average earning assets | 717,341 | 710,083 | |||||
| Average shareholders’ equity | 69,589 | 59,799 | |||||
| Asset Quality | |||||||
| Loan charge-offs | $ | 447 | $ | 500 | |||
| Loan recoveries | 233 | 113 | |||||
| Net charge-offs | 214 | 387 | |||||
| Reconciliation of Tax-Equivalent Net Interest Income | |||||||
| GAAP measures: | |||||||
| Interest income – loans | $ | 14,196 | $ | 12,851 | |||
| Interest income – investments and other | 2,041 | 2,147 | |||||
| Interest expense – deposits | (1,973 | ) | (1,255 | ) | |||
| Interest expense – subordinated debt | (179 | ) | (178 | ) | |||
| Interest expense – junior subordinated debt | (219 | ) | (187 | ) | |||
| Interest expense – other borrowings | (2 | ) | — | ||||
| Total net interest income | $ | 13,864 | $ | 13,378 | |||
| Non-GAAP measures: | |||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 21 | $ | 21 | |||
| Tax benefit realized on non-taxable interest income – municipal securities | 83 | 80 | |||||
| Total tax benefit realized on non-taxable interest income | $ | 104 | $ | 101 | |||
| Total tax-equivalent net interest income | $ | 13,968 | $ | 13,479 | |||
(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense, amortization of intangibles, and gains and losses on disposal of premises and equipment by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains and losses on sales of securities. Tax-equivalent net interest income is calculated by adding the tax benefit realized from interest income that is nontaxable to total interest income then subtracting total interest expense. The tax rate utilized in calculating the tax benefit is 21%. See the tables above for tax-equivalent net interest income and reconciliations of net interest income to tax-equivalent net interest income. The efficiency ratio is a non-GAAP financial measure that management believes provides investors with important information regarding operational efficiency. Such information is not prepared in accordance with U.S. generally accepted accounting principles (GAAP) and should not be construed as such. Management believes; however, such financial information is meaningful to the reader in understanding operational performance, but cautions that such information not be viewed as a substitute for GAAP.
(2) All capital ratios reported are for First Bank.
