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CST: 21/11/2019 06:10:43   

First National Corporation Announces First Quarter Earnings

211 Days ago

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

Key accomplishments in the first quarter of 2019:

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

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

BALANCE SHEET

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

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

Shareholders’ equity increased $10.0 million to $69.7 million at March 31, 2019, compared to $59.7 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $69.3 million at the end of the first quarter, an increase of 18% compared to $58.9 million at March 31, 2018. The Company’s wholly-owned banking subsidiary, First Bank, was considered well-capitalized based on regulatory requirements at the end of the year.

ANALYSIS OF THE THREE-MONTH PERIOD

Net interest income increased $352 thousand, or 5%, to $6.9 million for the quarter ended March 31, 2019, compared to $6.5 million for the first quarter of 2018. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 1%, and the net interest margin increased 18 basis points to 3.97% for the quarter ended March 31, 2019, compared to 3.79% for the same period in 2018. The increase in the net interest margin resulted from a 38 basis point increase in the yield on average earning assets, which was partially offset by a 20 basis point increase in interest expense as a percent of average earning assets.

The higher yield on average earning assets was primarily attributable to an increase in yields on loans, securities and interest-bearing deposits in banks.  The increase in interest expense was primarily attributable to higher interest rates paid on deposits, as the cost of total interest-bearing deposits increased by 28 basis points, which compared favorably to increases of 100 basis points in the target federal funds rate during 2018.

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

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

ASSET QUALITY/LOAN LOSS PROVISION

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

FORWARD-LOOKING STATEMENTS

Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company’s future operations and are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and other filings with the Securities and Exchange Commission.

ABOUT FIRST NATIONAL CORPORATION

First National Corporation (NASDAQ: FXNC) is the parent company and bank holding company of First Bank, a community bank that first opened for business in 1907 in Strasburg, Virginia. The Bank offers loan and deposit products and services through its website, www.fbvirginia.com, its mobile banking platform, a network of ATMs located throughout its market area, one loan production office, a customer service center in a retirement community, and 14 bank branch office locations located throughout the Shenandoah Valley and central regions of Virginia. In addition to providing traditional banking services, the Bank operates a wealth management division under the name First Bank Wealth Management.  First Bank also owns First Bank Financial Services, Inc., which invests in entities that provide investment services and title insurance.

CONTACTS

Scott C. Harvard
President and CEO
(540) 465-9121
sharvard@fbvirginia.com 

M. Shane Bell 
Executive Vice President and CFO 
(540) 465-9121 
sbell@fbvirginia.com 


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

  (unaudited)
For the Quarter Ended
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
Income Statement                  
Interest income                  
Interest and fees on loans $ 6,996     $ 7,106     $ 6,917     $ 6,546     $ 6,305  
Interest on deposits in banks 110     105     88     186     160  
Interest on securities                  
Taxable interest 737     771     797     776     680  
Tax-exempt interest 156     153     156     156     145  
Dividends on restricted securities 24     24     23     22     22  
Total interest income $ 8,023     $ 8,159     $ 7,981     $ 7,686     $ 7,312  
Interest expense                  
Interest on deposits $ 922     $ 798     $ 702     $ 665     $ 590  
Interest on subordinated debt 89     91     91     89     89  
Interest on junior subordinated debt 111     105     105     101     86  
Interest on other borrowings 2                  
Total interest expense $ 1,124     $ 994     $ 898     $ 855     $ 765  
Net interest income $ 6,899     $ 7,165     $ 7,083     $ 6,831     $ 6,547  
Provision for loan losses     500             100  
Net interest income after provision for loan losses $ 6,899     $ 6,665     $ 7,083     $ 6,831     $ 6,447  
Noninterest income                  
Service charges on deposit accounts $ 701     $ 814     $ 818     $ 784     $ 762  
ATM and check card fees 517     642     540     555     519  
Wealth management fees 437     443     423     409     407  
Fees for other customer services 175     154     143     151     153  
Income from bank owned life insurance 103     97     107     77     559  
Net gains (losses) on securities     (1 )            
Net gains on sale of loans 22     23     39     15     9  
Other operating income 30     107     108     76     224  
Total noninterest income $ 1,985     $ 2,279     $ 2,178     $ 2,067     $ 2,633  
Noninterest expense                  
Salaries and employee benefits $ 3,443     $ 3,306     $ 3,371     $ 3,227     $ 3,383  
Occupancy 438     424     387     387     400  
Equipment 420     410     396     420     423  
Marketing 141     155     123     161     109  
Supplies 73     91     75     88     80  
Legal and professional fees 241     343     229     223     191  
ATM and check card expense 216     178     217     211     203  
FDIC assessment 69     68     78     66     82  
Bank franchise tax 130     117     118     118     115  
Telecommunications expense 83     79     83     98     36  
Data processing expense 173     173     168     170     162  
Postage expense 48     51     42     42     61  
Amortization expense 90     99     108     120     131  
Other real estate owned expense (income), net         2     1     (23 )
Net loss on disposal of premises and equipment         2          
Other operating expense 533     587     551     532     513  
Total noninterest expense $ 6,098     $ 6,081     $ 5,950     $ 5,864     $ 5,866  
Income before income taxes $ 2,786     $ 2,863     $ 3,311     $ 3,034     $ 3,214  
Income tax expense 525     542     635     583     527  
Net income $ 2,261     $ 2,321     $ 2,676     $ 2,451     $ 2,687  


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

  (unaudited)
For the Quarter Ended
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
Common Share and Per Common Share Data                  
Net income, basic $ 0.46     $ 0.47     $ 0.54     $ 0.49     $ 0.54  
Weighted average shares, basic 4,960,264     4,957,055     4,955,162     4,952,712     4,949,112  
Net income, diluted $ 0.46     $ 0.47     $ 0.54     $ 0.49     $ 0.54  
Weighted average shares, diluted 4,964,134     4,960,597     4,958,162     4,954,265     4,952,373  
Shares outstanding at period end 4,963,487     4,957,694     4,956,925     4,953,356     4,952,575  
Tangible book value at period end $ 13.97     $ 13.35     $ 12.72     $ 12.31     $ 11.89  
Cash dividends $ 0.09     $ 0.05     $ 0.05     $ 0.05     $ 0.05  
                   
Key Performance Ratios                  
Return on average assets 1.21 %   1.22 %   1.41 %   1.29 %   1.45 %
Return on average equity 13.47 %   14.15 %   16.89 %   16.23 %   18.47 %
Net interest margin 3.97 %   4.05 %   4.02 %   3.86 %   3.79 %
Efficiency ratio (1) 67.23 %   62.99 %   62.68 %   64.17 %   62.39 %
                   
Average Balances                  
Average assets $ 757,910     $ 753,112     $ 750,619     $ 762,626     $ 751,164  
Average earning assets 709,690     706,323     703,894     715,163     704,947  
Average shareholders’ equity 68,089     65,077     62,882     60,592     58,979  
                   
Asset Quality                  
Loan charge-offs $ 228     $ 374     $ 295     $ 294     $ 206  
Loan recoveries 165     82     57     61     52  
Net charge-offs 63     292     238     233     154  
Non-accrual loans 1,915     3,172     2,738     2,330     682  
Other real estate owned, net             68      
Nonperforming assets 1,915     3,172     2,738     2,398     682  
Loans 30 to 89 days past due, accruing 1,002     1,446     2,707     3,408     2,602  
Loans over 90 days past due, accruing 133     235     261     549     773  
Troubled debt restructurings, accruing 259     264     269     273     278  
Special mention loans 1,910     2,078     2,718     3,988     5,365  
Substandard loans, accruing 3,132     3,522     1,216     3,798     9,003  
                   
Capital Ratios (2)                  
Total capital $ 80,780     $ 74,697     $ 72,807     $ 71,026     $ 69,435  
Tier 1 capital 75,834     69,688     68,006     65,987     64,163  
Common equity tier 1 capital 75,834     69,688     68,006     65,987     64,163  
Total capital to risk-weighted assets 14.49 %   13.62 %   13.25 %   13.47 %   13.52 %
Tier 1 capital to risk-weighted assets 13.60 %   12.71 %   12.38 %   12.52 %   12.50 %
Common equity tier 1 capital to risk-weighted assets 13.60 %   12.71 %   12.38 %   12.52 %   12.50 %
Leverage ratio 10.01 %   9.26 %   9.07 %   8.66 %   8.55 %


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

  (unaudited)
For the Quarter Ended
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
Balance Sheet                  
Cash and due from banks $ 10,862     $ 13,378     $ 11,370     $ 13,501     $ 11,185  
Interest-bearing deposits in banks 31,833     15,240     10,068     27,762     58,092  
Securities available for sale, at fair value 121,202     99,857     102,748     106,707     93,699  
Securities held to maturity, at amortized cost 19,489     43,408     44,239     45,701     46,791  
Restricted securities, at cost 1,701     1,688     1,590     1,590     1,590  
Loans held for sale 200     419     516     1,195     68  
Loans, net of allowance for loan losses 545,529     537,847     535,020     525,894     515,664  
Other real estate owned, net of valuation allowance             68      
Premises and equipment, net 20,282     20,066     19,557     19,633     19,833  
Accrued interest receivable 2,143     2,113     2,138     2,073     1,869  
Bank owned life insurance 17,094     13,991     13,894     13,787     13,711  
Core deposit intangibles, net 382     472     571     679     799  
Other assets 4,361     4,490     4,743     4,774     4,553  
Total assets $ 775,078     $ 752,969     $ 746,454     $ 763,364     $ 767,854  
                   
Noninterest-bearing demand deposits $ 189,261     $ 181,964     $ 186,293     $ 196,839     $ 189,460  
Savings and interest-bearing demand deposits 377,673     369,383     360,988     367,399     378,330  
Time deposits 117,290     119,219     119,823     122,291     125,035  
Total deposits $ 684,224     $ 670,566     $ 667,104     $ 686,529     $ 692,825  
Other borrowings 5,000                  
Subordinated debt 4,969     4,965     4,961     4,956     4,952  
Junior subordinated debt 9,279     9,279     9,279     9,279     9,279  
Accrued interest payable and other liabilities 1,878     1,485     1,459     952     1,105  
Total liabilities $ 705,350     $ 686,295     $ 682,803     $ 701,716     $ 708,161  
                   
Preferred stock $     $     $     $     $  
Common stock 6,204     6,197     6,196     6,192     6,191  
Surplus 7,515     7,471     7,438     7,346     7,312  
Retained earnings 56,629     54,814     52,741     50,313     48,109  
Accumulated other comprehensive loss, net (620 )   (1,808 )   (2,724 )   (2,203 )   (1,919 )
Total shareholders’ equity $ 69,728     $ 66,674     $ 63,651     $ 61,648     $ 59,693  
Total liabilities and shareholders’ equity $ 775,078     $ 752,969     $ 746,454     $ 763,364     $ 767,854  
                   
Loan Data                  
Mortgage loans on real estate:                  
Construction and land development $ 48,948     $ 45,867     $ 42,982     $ 37,350     $ 33,941  
Secured by farm land 883     880     942     975     848  
Secured by 1-4 family residential 217,527     215,945     211,938     211,101     208,338  
Other real estate loans 220,513     218,673     223,961     223,387     221,504  
Loans to farmers (except those secured by real estate) 806     1,035     937     476     403  
Commercial and industrial loans (except those secured by real estate) 45,239     43,570     41,924     40,467     38,850  
Consumer installment loans 11,890     12,061     12,301     12,315     12,140  
Deposit overdrafts 204     275     249     231     222  
All other loans 4,465     4,550     4,587     4,631     4,690  
Total loans $ 550,475     $ 542,856     $ 539,821     $ 530,933     $ 520,936  
Allowance for loan losses (4,946 )   (5,009 )   (4,801 )   (5,039 )   (5,272 )
Loans, net $ 545,529     $ 537,847     $ 535,020     $ 525,894     $ 515,664  


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

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

 (1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense, amortization of intangibles, and gains and losses on disposal of premises and equipment by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains and losses on sales of securities.  Tax-equivalent net interest income is calculated by adding the tax benefit realized from interest income that is nontaxable to total interest income then subtracting total interest expense. The tax rate utilized in calculating the tax benefit is 21%. See the tables above for tax-equivalent net interest income and reconciliations of net interest income to tax-equivalent net interest income.  The efficiency ratio is a non-GAAP financial measure that management believes provides investors with important information regarding operational efficiency.  Such information is not prepared in accordance with U.S. generally accepted accounting principles (GAAP) and should not be construed as such.  Management believes, however, such financial information is meaningful to the reader in understanding operational performance, but cautions that such information not be viewed as a substitute for GAAP.

(2) All capital ratios reported are for First Bank. 

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