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CST: 21/11/2019 06:10:11   

First National Corporation Announces Fourth Quarter and Full Year Results

301 Days ago

STRASBURG, Va., Jan. 23, 2019 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (OTC: FXNC) reported net income of $2.3 million, or $0.47 per diluted share, for the fourth quarter of 2018.  This was a $1.0 million, or 76%, increase when compared to net income for the fourth quarter of 2017, which totaled $1.3 million or $0.27 per diluted share.  The increase in net income resulted primarily from a $560 thousand, or 8%, increase in net interest income and a $981 thousand decrease in income tax expense, which were partially offset by a $400 thousand increase in provision for loan losses.

For the year ended December 31, 2018, the Company achieved record net income of $10.1 million or $2.05 per share.  This was a $3.7 million, or 57%, increase compared to net income for the prior year, which totaled $6.4 million or $1.30 per share.  The increase in net income resulted from a $2.4 million, or 9%, increase in net interest income, an $865 thousand, or 10%, increase in noninterest income, and a $1.4 million decrease in income tax expense, which were partially offset by a $500 thousand increase in the provision for loan losses and a $477 thousand, or 2%, increase in noninterest expense.

2018 Key Accomplishments:

  • Record year of net income totaling $10.1 million
  • Return on average equity of 16.36%
  • Return on average assets of 1.34%
  • Efficiency ratio improved for third consecutive year to 63.05%
  • Net interest margin increased for third consecutive year to 3.93%
  • Pre-provision pre-tax earnings increased 27%

“Last year’s earnings were an all-time record for our Company,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “We are extremely pleased with the Company’s performance for 2018 as pressure continued to build on funding costs while competitors engaged in aggressive lending structures at what we believe is late in the economic cycle. In the 2018 economic environment, we chose to forego overly ambitious growth in order to continue to manage interest margin and asset quality. We continue to focus on deepening relationships and growing non-interest and non-maturity deposits, while working hard to enhance the quality of life in the communities we serve.”

BALANCE SHEET

Total assets of First National increased $13.9 million to $753.0 million, compared to $739.1 million at December 31, 2017. The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $21.0 million, or 4%, while securities and interest-bearing deposits in banks decreased $7.5 million, or 4%, when comparing the periods.

Total deposits increased $5.6 million to $670.6 million, compared to $665.0 million at December 31, 2017. The deposit portfolio composition remained stable as noninterest-bearing deposits were unchanged at 27% of total deposits at December 31, 2018 and 2017.

Shareholders’ equity increased $8.5 million to $66.7 million at December 31, 2018, compared to $58.2 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $66.2 million at the end of the year, an increase of 16% compared to $57.2 million at December 31, 2017. 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 $560 thousand, or 8%, to $7.2 million for the quarter ended December 31, 2018, compared to $6.6 million for the fourth quarter of 2017. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 2%, and the net interest margin increased 19 basis points to 4.05% for the quarter ended December 31, 2018, compared to 3.86% for the same period in 2017. The increase in the net interest margin resulted from a 37 basis point increase in the yield on average earning assets, which was partially offset by an 18 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 25 basis points, which compared favorably to increases of 100 basis points in the target federal funds rate during 2018.

Noninterest income decreased $77 thousand to $2.3 million, compared to $2.4 million for the same period of 2017. The decrease was primarily attributable to a $311 thousand decrease in bank owned life insurance.  The decrease in bank owned life insurance revenue was a result of death benefits recorded in the fourth quarter of the prior year that totaled $305 thousand. The decrease in bank owned life insurance revenue was partially offset by a $36 thousand, or 5%, increase in service charges on deposits, a $46 thousand, or 8%, increase in ATM and check card revenue, and a $57 thousand, or 15%, increase in wealth management revenue.

Noninterest expense increased $60 thousand, or 1%, to $6.1 million for the fourth quarter, compared to the same period one year ago.  Legal and professional fees increased $115 thousand, which resulted primarily from an increase in investment advisory costs of the wealth management department, and consulting 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. These increases were partially offset by decreases in expense categories, including amortization expense, salaries and employee benefits, ATM and check card expense, and telecommunications expense.

Income tax expense decreased $981 thousand to $542 thousand for the fourth quarter, compared to $1.5 million for the same period of 2017.  The decrease was attributable to a $752 thousand charge to income tax expense in the fourth quarter of 2017 for the re-measurement of net deferred tax assets, which resulted from the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act enacted in December 2017.  Income tax expense also decreased when comparing the quarterly periods from the lower 21% federal corporate income tax rate that was effective for the fourth quarter of 2018, compared to the 34% income tax rate that was applicable for the fourth quarter of 2017.

ANALYSIS OF THE TWELVE MONTH PERIOD

For the year ended December 31, 2018, net interest income increased $2.4 million, or 9%, to $27.6 million, compared to $25.3 million for the same period in 2017. 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 16 basis points to 3.93% for the year ended December 31, 2018, compared to 3.77% for the same period in 2017. The increase in the net interest margin resulted from a 31 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 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 20 basis points, which compared favorably to increases of 100 basis points in the target federal funds rate during the year.

Noninterest income increased $865 thousand, or 10%, to $9.2 million, compared to $8.3 million for the same period of 2017. This was primarily a result of a $235 thousand, or 16%, increase in wealth management fees, a $210 thousand increase in other operating income, a $150 thousand, or 5%, increase in service charges on deposits, and a $120 thousand increase in bank owned life insurance.  These increases were partially offset by an $86 thousand decrease in net gains on sale of loans.

Noninterest expense increased $477 thousand, or 2%, to $23.8 million. This was primarily a result of a $364 thousand, or 3%, increase in salaries and employee benefits, a $258 thousand, or 13%, increase in other operating expenses, and a $116 thousand, or 8%, increase in occupancy expense.  These increases were partially offset by a $250 thousand decrease in net loss on disposal of premises and equipment, a $163 thousand decrease in amortization expense, and a $120 thousand decrease in telecommunications expense.

Income tax expense decreased $1.4 million to $2.3 million for the year, compared to $3.7 million for the same period of 2017.  The decrease in income tax expense was a result of a lower federal corporate income tax rate of 21% for the year ended December 31, 2018, compared to 34% for the prior year.  There was also a $752 thousand charge to income tax expense in the fourth quarter of 2017 related to the re-measurement of net deferred tax assets, which resulted from 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

The provision for loan losses totaled $500 thousand for the fourth quarter of 2018, compared to $100 thousand for the fourth quarter 2017.  Net charge-offs totaled $292 thousand for the fourth quarter of 2018 compared to $75 thousand for the same period of 2017.  Nonperforming assets totaled $3.2 million, or 0.42% of total assets at year-end, compared to $1.3 million, or 0.17% of total assets, one year ago. The allowance for loan losses totaled $5.0 million, or 0.92% of total loans, and $5.3 million, or 1.02% of total loans, at December 31, 2018 and 2017, respectively.

The provision for loan losses totaled $600 thousand for the year ended December 31, 2018, compared to $100 thousand for the prior year.  Net charge-offs totaled $917 thousand for 2018 compared to $95 thousand for 2017.

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, one 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
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
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
 2017
Income Statement                  
Interest income                  
Interest and fees on loans $ 7,106     $ 6,917     $ 6,546     $ 6,305     $ 6,365  
Interest on deposits in banks 105     88     186     160     96  
Interest on securities                  
Taxable interest 771     797     776     680     636  
Tax-exempt interest 153     156     156     145     147  
Dividends on restricted securities 24     23     22     22     21  
Total interest income $ 8,159     $ 7,981     $ 7,686     $ 7,312     $ 7,265  
Interest expense                  
Interest on deposits $ 798     $ 702     $ 665     $ 590     $ 489  
Interest on subordinated debt 91     91     89     89     91  
Interest on junior subordinated debt 105     105     101     86     80  
Total interest expense $ 994     $ 898     $ 855     $ 765     $ 660  
Net interest income $ 7,165     $ 7,083     $ 6,831     $ 6,547     $ 6,605  
Provision for loan losses 500             100     100  
Net interest income after provision for loan losses $ 6,665     $ 7,083     $ 6,831     $ 6,447     $ 6,505  
Noninterest income                  
Service charges on deposit accounts $ 814     $ 818     $ 784     $ 762     $ 778  
ATM and check card fees 642     540     555     519     596  
Wealth management fees 443     423     409     407     386  
Fees for other customer services 154     143     151     153     162  
Income from bank owned life insurance 97     107     77     559     408  
Net gains (losses) on sales of securities (1 )               (114 )
Net gains on sale of loans 23     39     15     9     51  
Other operating income 107     108     76     224     89  
Total noninterest income $ 2,279     $ 2,178     $ 2,067     $ 2,633     $ 2,356  
Noninterest expense                  
Salaries and employee benefits $ 3,306     $ 3,371     $ 3,227     $ 3,383     $ 3,338  
Occupancy 424     387     387     400     388  
Equipment 410     396     420     423     428  
Marketing 155     123     161     109     166  
Supplies 91     75     88     80     88  
Legal and professional fees 343     229     223     191     228  
ATM and check card expense 178     217     211     203     209  
FDIC assessment 68     78     66     82     76  
Bank franchise tax 117     118     118     115     111  
Telecommunications expense 79     83     98     36     103  
Data processing expense 173     168     170     162     165  
Postage expense 51     42     42     61     14  
Amortization expense 99     108     120     131     141  
Other real estate owned expense (income), net     2     1     (23 )   (192 )
Net loss on disposal of premises and equipment     2             252  
Other operating expense 587     551     532     513     506  
Total noninterest expense $ 6,081     $ 5,950     $ 5,864     $ 5,866     $ 6,021  
Income before income taxes $ 2,863     $ 3,311     $ 3,034     $ 3,214     $ 2,840  
Income tax expense 542     635     583     527     1,523  
Net income $ 2,321     $ 2,676     $ 2,451     $ 2,687     $ 1,317  
                                       

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

  (unaudited)
For the Quarter Ended
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
 2017
Common Share and Per Common Share Data                  
Net income, basic $ 0.47     $ 0.54     $ 0.49     $ 0.54     $ 0.27  
Weighted average shares, basic 4,957,055     4,955,162     4,952,712     4,949,112     4,945,175  
Net income, diluted $ 0.47     $ 0.54     $ 0.49     $ 0.54     $ 0.27  
Weighted average shares, diluted 4,960,597     4,958,162     4,954,265     4,952,373     4,948,981  
Shares outstanding at period end 4,957,694     4,956,925     4,953,356     4,952,575     4,945,702  
Tangible book value at period end $ 13.35     $ 12.72     $ 12.31     $ 11.89     $ 11.57  
Cash dividends $ 0.05     $ 0.05     $ 0.05     $ 0.05     $ 0.035  
                   
Key Performance Ratios                  
Return on average assets 1.22 %   1.41 %   1.29 %   1.45 %   0.71 %
Return on average equity 14.15 %   16.89 %   16.23 %   18.47 %   9.01 %
Net interest margin 4.05 %   4.02 %   3.86 %   3.79 %   3.86 %
Efficiency ratio (1) 62.99 %   62.68 %   64.17 %   62.39 %   63.48 %
                   
Average Balances                  
Average assets $ 753,112     $ 750,619     $ 762,626     $ 751,164     $ 736,745  
Average earning assets 706,323     703,894     715,163     704,947     689,338  
Average shareholders’ equity 65,077     62,882     60,592     58,979     57,973  
                   
Asset Quality                  
Loan charge-offs $ 374     $ 295     $ 294     $ 206     $ 223  
Loan recoveries 82     57     61     52     148  
Net charge-offs 292     238     233     154     75  
Non-accrual loans 3,172     2,738     2,330     682     937  
Other real estate owned, net         68         326  
Nonperforming assets 3,172     2,738     2,398     682     1,263  
Loans 30 to 89 days past due, accruing 1,446     2,707     3,408     2,602     4,223  
Loans over 90 days past due, accruing 235     261     549     773     183  
Troubled debt restructurings, accruing 264     269     273     278     282  
Special mention loans 2,078     2,718     3,988     5,365     5,225  
Substandard loans, accruing 3,522     1,216     3,798     9,003     8,863  
                   
Capital Ratios (2)                  
Total capital $ 74,697     $ 72,807     $ 71,026     $ 69,435     $ 67,624  
Tier 1 capital 69,688     68,006     65,987     64,163     62,298  
Common equity tier 1 capital 69,688     68,006     65,987     64,163     62,298  
Total capital to risk-weighted assets 13.62 %   13.25 %   13.47 %   13.52 %   13.12 %
Tier 1 capital to risk-weighted assets 12.71 %   12.38 %   12.52 %   12.50 %   12.09 %
Common equity tier 1 capital to risk-weighted assets 12.71 %   12.38 %   12.52 %   12.50 %   12.09 %
Leverage ratio 9.26 %   9.07 %   8.66 %   8.55 %   8.46 %
                             

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

  (unaudited)
For the Quarter Ended
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
 2017
Balance Sheet                  
Cash and due from banks $ 13,378     $ 11,370     $ 13,501     $ 11,185     $ 11,358  
Interest-bearing deposits in banks 15,240     10,068     27,762     58,092     28,628  
Securities available for sale, at fair value 99,857     102,748     106,707     93,699     89,255  
Securities held to maturity, at carrying value 43,408     44,239     45,701     46,791     48,208  
Restricted securities, at cost 1,688     1,590     1,590     1,590     1,570  
Loans held for sale 419     516     1,195     68     438  
Loans, net of allowance for loan losses 537,847     535,020     525,894     515,664     516,875  
Other real estate owned, net of valuation allowance         68         326  
Premises and equipment, net 20,066     19,557     19,633     19,833     19,891  
Accrued interest receivable 2,113     2,138     2,073     1,869     1,916  
Bank owned life insurance 13,991     13,894     13,787     13,711     13,967  
Core deposit intangibles, net 472     571     679     799     930  
Other assets 4,490     4,743     4,774     4,553     5,748  
Total assets $ 752,969     $ 746,454     $ 763,364     $ 767,854     $ 739,110  
                   
Noninterest-bearing demand deposits $ 181,964     $ 186,293     $ 196,839     $ 189,460     $ 180,912  
Savings and interest-bearing demand deposits 369,383     360,988     367,399     378,330     361,417  
Time deposits 119,219     119,823     122,291     125,035     122,651  
Total deposits $ 670,566     $ 667,104     $ 686,529     $ 692,825     $ 664,980  
Subordinated debt 4,965     4,961     4,956     4,952     4,948  
Junior subordinated debt 9,279     9,279     9,279     9,279     9,279  
Accrued interest payable and other liabilities 1,485     1,459     952     1,105     1,749  
Total liabilities $ 686,295     $ 682,803     $ 701,716     $ 708,161     $ 680,956  
                   
Preferred stock $     $     $     $     $  
Common stock 6,197     6,196     6,192     6,191     6,182  
Surplus 7,471     7,438     7,346     7,312     7,260  
Retained earnings 54,814     52,741     50,313     48,109     45,670  
Accumulated other comprehensive loss, net (1,808 )   (2,724 )   (2,203 )   (1,919 )   (958 )
Total shareholders’ equity $ 66,674     $ 63,651     $ 61,648     $ 59,693     $ 58,154  
Total liabilities and shareholders’ equity $ 752,969     $ 746,454     $ 763,364     $ 767,854     $ 739,110  
                   
Loan Data                  
Mortgage loans on real estate:                  
Construction and land development $ 45,867     $ 42,982     $ 37,350     $ 33,941     $ 35,927  
Secured by farm land 880     942     975     848     646  
Secured by 1-4 family residential 215,945     211,938     211,101     208,338     208,177  
Other real estate loans 218,673     223,961     223,387     221,504     221,610  
Loans to farmers (except those secured by real estate) 1,035     937     476     403     822  
Commercial and industrial loans (except those secured by real estate) 43,570     41,924     40,467     38,850     37,941  
Consumer installment loans 12,061     12,301     12,315     12,140     12,101  
Deposit overdrafts 275     249     231     222     232  
All other loans 4,550     4,587     4,631     4,690     4,745  
Total loans $ 542,856     $ 539,821     $ 530,933     $ 520,936     $ 522,201  
Allowance for loan losses (5,009 )   (4,801 )   (5,039 )   (5,272 )   (5,326 )
Loans, net $ 537,847     $ 535,020     $ 525,894     $ 515,664     $ 516,875  
                                       

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

  (unaudited)
For the Quarter Ended
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
 2017
Reconciliation of Tax-Equivalent Net Interest Income                
GAAP measures:                  
Interest income – loans $ 7,106     $ 6,917     $ 6,546     $ 6,305     $ 6,365  
Interest income – investments and other 1,053     1,064     1,140     1,007     900  
Interest expense – deposits (798 )   (702 )   (665 )   (590 )   (489 )
Interest expense – subordinated debt (91 )   (91 )   (89 )   (89 )   (91 )
Interest expense – junior subordinated debt (105 )   (105 )   (101 )   (86 )   (80 )
Total net interest income $ 7,165     $ 7,083     $ 6,831     $ 6,547     $ 6,605  
Non-GAAP measures:                  
Tax benefit realized on non-taxable interest income – loans $ 11     $ 12     $ 11     $ 10     $ 17  
Tax benefit realized on non-taxable interest income – municipal securities 42     41     41     39     76  
Total tax benefit realized on non-taxable interest income $ 53     $ 53     $ 52     $ 49     $ 93  
Total tax-equivalent net interest income $ 7,218     $ 7,136     $ 6,883     $ 6,596     $ 6,698  
                                       

FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)

  (unaudited)
For the Year Ended
  December 31, 2018   December 31, 2017
Income Statement      
Interest income      
Interest and fees on loans $ 26,874     $ 24,082  
Interest on deposits in banks 539     335  
Interest on securities      
Taxable interest 3,024     2,569  
Tax-exempt interest 610     583  
Dividends on restricted securities 91     83  
Total interest income $ 31,138     $ 27,652  
Interest expense      
Interest on deposits $ 2,755     $ 1,723  
Interest on subordinated debt 360     360  
Interest on junior subordinated debt 397     303  
Total interest expense $ 3,512     $ 2,386  
Net interest income $ 27,626     $ 25,266  
Provision for loan losses 600     100  
Net interest income after provision for loan losses $ 27,026     $ 25,166  
Noninterest income      
Service charges on deposit accounts $ 3,178     $ 3,028  
ATM and check card fees 2,256     2,140  
Wealth management fees 1,682     1,447  
Fees for other customer services 601     570  
Income from bank owned life insurance 840     720  
Net gains (losses) on sales of securities (1 )   (90 )
Net gains on sale of loans 86     172  
Other operating income 515     305  
Total noninterest income $ 9,157     $ 8,292  
Noninterest expense      
Salaries and employee benefits $ 13,287     $ 12,923  
Occupancy 1,598     1,482  
Equipment 1,649     1,636  
Marketing 548     576  
Supplies 334     365  
Legal and professional fees 986     886  
ATM and check card expense 809     805  
FDIC assessment 294     316  
Bank franchise tax 468     436  
Telecommunications expense 296     416  
Data processing expense 673     620  
Postage expense 196     211  
Amortization expense 458     621  
Other real estate owned expense (income), net (20 )   (186 )
Net loss on disposal of premises and equipment 2     252  
Other operating expense 2,183     1,925  
Total noninterest expense $ 23,761     $ 23,284  
Income before income taxes $ 12,422     $ 10,174  
Income tax expense 2,287     3,726  
Net income $ 10,135     $ 6,448  
               

FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)         

  (unaudited)
For the Year Ended
  December 31, 2018   December 31, 2017
Common Share and Per Common Share Data      
Net income, basic $ 2.05     $ 1.30  
Weighted average shares, basic 4,953,537     4,941,233  
Net income, diluted $ 2.04     $ 1.30  
Weighted average shares, diluted 4,956,375     4,943,898  
Shares outstanding at period end 4,957,694     4,945,702  
Tangible book value at period end $ 13.35     $ 11.57  
Cash dividends $ 0.20     $ 0.14  
       
Key Performance Ratios      
Return on average assets 1.34 %   0.89 %
Return on average equity 16.36 %   11.57 %
Net interest margin 3.93 %   3.77 %
Efficiency ratio (1) 63.05 %   66.42 %
       
Average Balances      
Average assets $ 754,457     $ 727,932  
Average earning assets 707,575     680,178  
Average shareholders’ equity 61,933     55,742  
       
Asset Quality      
Loan charge-offs $ 1,169     $ 733  
Loan recoveries 252     638  
Net charge-offs 917     95  
       
Reconciliation of Tax-Equivalent Net Interest Income    
GAAP measures:      
Interest income – loans $ 26,874     $ 24,082  
Interest income – investments and other 4,264     3,570  
Interest expense – deposits (2,755 )   (1,723 )
Interest expense – subordinated debt (360 )   (360 )
Interest expense – junior subordinated debt (397 )   (303 )
Total net interest income $ 27,626     $ 25,266  
Non-GAAP measures:      
Tax benefit realized on non-taxable interest income – loans $ 44     $ 72  
Tax benefit realized on non-taxable interest income – municipal securities 163     300  
Total tax benefit realized on non-taxable interest income $ 207     $ 372  
Total tax-equivalent net interest income $ 27,833     $ 25,638  
               

(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.

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