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CST: 21/11/2019 06:09:59   

First National Corporation Announces Third Quarter Earnings

28 Days ago

STRASBURG, Va., Oct. 23, 2019 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (NASDAQ:FXNC) reported net income of $2.5 million, or $0.50 per diluted share, for the third quarter of 2019, which resulted in a return on average assets of 1.27% and a return on average equity of 13.31%. This compared to $2.7 million or $0.54 per diluted share, and a return on average assets of 1.41% and a return on average equity of 16.89% for the third quarter of 2018.

Highlights for the third quarter of 2019:

  • Return on average equity of 13.31%
  • Return on average assets of 1.27%
  • Wealth management revenue increased 13%
  • Net interest margin of 3.87%
  • Nonperforming assets decreased to 0.20% of assets

“While our company delivered another quarter of excellent financial performance for our shareholders, the challenges of lower interest rates with a flat or inverted yield curve continue to put pressure on the net interest margin,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “We are pleased with loan growth of five percent year-to-date, while underlying asset quality remains very good based on all metrics. Management has seen no trends that would indicate forward deterioration in the underlying businesses in our portfolio.”

BALANCE SHEET

Total assets of First National increased $30.7 million, or 4%, to $777.2 million at September 30, 2019, compared to $746.5 million at September 30, 2018. The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $31.3 million, or 6%, while securities and interest-bearing deposits in banks decreased $5.6 million, or 4%.

Total deposits increased $18.5 million, or 3%, to $685.6 million at September 30, 2019, compared to $667.1 million at September 30, 2018. There was a slight change in the deposit composition as noninterest-bearing deposits was unchanged at 28% of total deposits, while savings and interest-bearing demand deposits increased from 54% to 55% of total deposits and time deposits decreased from 18% to 17% of total deposits.

Shareholders’ equity increased $11.7 million to $75.3 million at September 30, 2019, compared to $63.7 million one year ago, primarily from a $7.6 million increase in retained earnings and a $3.9 million increase in accumulated other comprehensive income. Tangible common equity totaled $75.1 million at the end of the third quarter, an increase of 19% compared to $63.1 million at September 30, 2018. The Company’s wholly owned subsidiary, First Bank (the “Bank”), was considered well capitalized at September 30, 2019.

ANALYSIS OF THE THREE-MONTH PERIOD

Net interest income was unchanged at $7.1 million for the quarter ended September 30, 2019, compared to the third quarter of 2018. Average earning asset balances increased 4%, while the net interest margin decreased 15 basis points to 3.87%, compared to 4.02% for the same period in 2018. The decrease in the net interest margin resulted from an 18 basis point increase in interest expense as a percent of average earning assets, which was partially offset by a 3 basis point increase in the yield on average earning assets.

The higher yield on average earning assets was attributable to the change in the earning asset composition, as loans increased from 76% to 79% of average earning assets, while interest-bearing deposits in banks and securities decreased from 24% to 21% of average earning assets. The increase in interest expense was primarily attributable to higher interest rates paid on deposits, as the cost of total interest-bearing deposits increased 29 basis points.

Noninterest income was unchanged at $2.2 million, compared to the same period of 2018. Wealth management fees increased $54 thousand, or 13%, ATM and check card fees increased $46 thousand, or 8%, fees for other customer services increased $34 thousand, or 24%, and income from bank owned life insurance increased $24 thousand, or 22%. These increases were partially offset by a $61 thousand, or 7%, decrease in service charges on deposits and a $79 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.

Noninterest expense increased $236 thousand, or 4%, to $6.2 million, compared to the same period one year ago. The increase was primarily attributable to a $185 thousand, or 6%, increase in salaries and employee benefits, an $86 thousand, or 16%, increase in other operating expense, a $20 thousand, or 16%, increase in marketing expense, and an $18 thousand, or 15%, increase in bank franchise tax expense. The increase in other operating expense was attributable to an increase in fraud losses on ATM and debit card transactions. These increases were partially offset by an $84 thousand decrease in FDIC assessments.

ANALYSIS OF THE NINE-MONTH PERIOD

Net interest income increased $474 thousand, or 2%, to $20.9 million for the nine months ended September 30, 2019, compared to $20.5 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 2%, and the net interest margin increased 2 basis points to 3.91%. The increase in the net interest margin resulted from a 21 basis point increase in the yield on average earning assets, which was partially offset by a 19 basis point increase in interest expense as a percent of average earning assets. 

The higher yield on average earning assets was attributable to a change in the earning asset composition, a 13 basis point increase in the yield on loans, and a 53 basis point increase in the yield on interest-bearing deposits in banks. The change in the earning asset composition favorably impacted the yield on average earning assets as loans increased from 74% to 78% of average earning assets, while interest-bearing deposits in banks and securities decreased from 26% to 22% of average earning assets. 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.

Noninterest income decreased to $6.2 million, compared to $6.9 million for the same period of 2018. The decrease was primarily attributable to a $410 thousand decrease in income from bank-owned life insurance, a $337 thousand decrease in other operating income, and a $191 thousand, or 8%, decrease in service charges on deposits. These decreases were partially offset by a $133 thousand, or 11%, increase in wealth management fees, a $62 thousand, or 4%, increase in ATM and check card fees, and a $58 thousand, or 13%, increase in fees for other customer services. 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 $834 thousand, or 5%, to $18.5 million, compared to $17.7 million for the same period one year ago. The increase was primarily attributable to a $393 thousand, or 4%, increase in salaries and employee benefits, a $208 thousand increase in other operating expense, a $132 thousand, or 21%, increase in legal and professional fees, a $130 thousand, or 33%, increase in marketing expense, a $63 thousand, or 5%, increase in occupancy expense, and a $51 thousand, or 15%, increase in bank franchise tax. The increase in other operating expense was attributable to fraud losses on ATM and debit card transactions, costs of listing the Company’s common stock on the Nasdaq Capital Market stock exchange, and higher education and training expenses. 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 costs correlated with the increase in wealth management revenue, when comparing the same periods. The increase in marketing expense was attributable to strategic initiatives. These increases were partially offset by a $128 thousand decrease in FDIC assessments.

ASSET QUALITY/LOAN LOSS PROVISION

There was no provision for loan losses recorded during the third quarters of 2019 and 2018. Net charge-offs totaled $83 thousand for the third quarter of 2019 compared to $238 thousand for the same period of 2018. Nonperforming assets totaled $1.6 million, or 0.20% of total assets at September 30, 2019, compared to $2.7 million, or 0.37% of total assets, one year ago. The allowance for loan losses totaled $4.9 million, or 0.86% of total loans, and $4.8 million, or 0.89% of total loans, at September 30, 2019 and 2018, respectively.

The provision for loan losses totaled $200 thousand for the nine-month period ended September 30, 2019, compared to $100 thousand for the same period in 2018. Net charge-offs totaled $297 thousand for the nine months ended September 30, 2019 compared to $625 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, 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   M. Shane Bell
President and CEO   Executive Vice President and CFO
(540) 465-9121   (540) 465-9121
shavard@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,   June 30,   March 31,   December 31,   September 30,
    2019   2019   2019   2018   2018
Income Statement                                        
Interest income                                        
Interest and fees on loans   $ 7,429     $ 7,200     $ 6,996     $ 7,106     $ 6,917  
Interest on deposits in banks     97       133       110       105       88  
Interest on securities                                        
Taxable interest     645       696       737       771       797  
Tax-exempt interest     157       159       156       153       156  
Dividends     26       26       24       24       23  
Total interest income   $ 8,354     $ 8,214     $ 8,023     $ 8,159     $ 7,981  
Interest expense                                        
Interest on deposits   $ 1,089     $ 1,051     $ 922     $ 798     $ 702  
Interest on federal funds purchased     1                          
Interest on subordinated debt     90       90       89       91       91  
Interest on junior subordinated debt     103       108       111       105       105  
Interest on other borrowings                 2              
Total interest expense   $ 1,283     $ 1,249     $ 1,124     $ 994     $ 898  
Net interest income   $ 7,071     $ 6,965     $ 6,899     $ 7,165     $ 7,083  
Provision for loan losses           200             500        
Net interest income after provision for loan losses   $ 7,071     $ 6,765     $ 6,899     $ 6,665     $ 7,083  
Noninterest income                                        
Service charges on deposit accounts   $ 757     $ 715     $ 701     $ 814     $ 818  
ATM and check card fees     586       573       517       642       540  
Wealth management fees     477       458       437       443       423  
Fees for other customer services     177       153       175       154       143  
Income from bank owned life insurance     131       99       103       97       107  
Net gains (losses) on securities                       (1 )      
Net gains on sale of loans     34       25       22       23       39  
Other operating income     29       12       30       107       108  
Total noninterest income   $ 2,191     $ 2,035     $ 1,985     $ 2,279     $ 2,178  
Noninterest expense                                        
Salaries and employee benefits   $ 3,556     $ 3,375     $ 3,443     $ 3,306     $ 3,371  
Occupancy     398       401       438       424       387  
Equipment     410       409       420       410       396  
Marketing     143       239       141       155       123  
Supplies     86       91       73       91       75  
Legal and professional fees     231       303       241       343       229  
ATM and check card expense     225       225       216       178       217  
FDIC assessment     (6 )     35       69       68       78  
Bank franchise tax     136       136       130       117       118  
Telecommunications expense     82       79       83       79       83  
Data processing expense     174       179       173       173       168  
Postage expense     43       44       48       51       42  
Amortization expense     71       80       90       99       108  
Other real estate owned expense (income), net                             2  
Net loss on disposal of premises and equipment                             2  
Other operating expense     637       634       533       587       551  
Total noninterest expense   $ 6,186     $ 6,230     $ 6,098     $ 6,081     $ 5,950  
Income before income taxes   $ 3,076     $ 2,570     $ 2,786     $ 2,863     $ 3,311  
Income tax expense     583       484       525       542       635  
Net income   $ 2,493     $ 2,086     $ 2,261     $ 2,321     $ 2,676  


FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
    (unaudited)
    For the Quarter Ended
    September 30,   June 30,   March 31,   December 31,   September 30,
    2019   2019   2019   2018   2018
Common Share and Per Common Share Data                                
Net income, basic   $ 0.50     $ 0.42     $ 0.46     $ 0.47     $ 0.54  
Weighted average shares, basic     4,966,641       4,963,737       4,960,264       4,957,055       4,955,162  
Net income, diluted   $ 0.50     $ 0.42     $ 0.46     $ 0.47     $ 0.54  
Weighted average shares, diluted     4,969,126       4,965,822       4,964,134       4,960,597       4,958,162  
Shares outstanding at period end     4,968,277       4,964,824       4,963,487       4,957,694       4,956,925  
Tangible book value at period end   $ 15.11     $ 14.60     $ 13.97     $ 13.35     $ 12.72  
Cash dividends   $ 0.09     $ 0.09     $ 0.09     $ 0.05     $ 0.05  
                                         
Key Performance Ratios                                        
Return on average assets     1.27 %     1.08 %     1.21 %     1.22 %     1.41 %
Return on average equity     13.31 %     11.76 %     13.47 %     14.15 %     16.89 %
Net interest margin     3.87 %     3.88 %     3.97 %     4.05 %     4.02 %
Efficiency ratio (1)     65.65 %     67.94 %     67.23 %     62.99 %     62.68 %
                                         
Average Balances                                        
Average assets   $ 780,376     $ 773,574     $ 757,910     $ 753,112     $ 750,619  
Average earning assets     730,865       724,909       709,690       706,323       703,894  
Average shareholders’ equity     74,291       71,124       68,089       65,077       62,882  
                                         
Asset Quality                                        
Loan charge-offs   $ 156     $ 219     $ 228     $ 374     $ 295  
Loan recoveries     73       68       165       82       57  
Net charge-offs     83       151       63       292       238  
Non-accrual loans     1,566       1,775       1,915       3,172       2,738  
Other real estate owned, net                              
Nonperforming assets     1,566       1,775       1,915       3,172       2,738  
Loans 30 to 89 days past due, accruing     902       792       1,002       1,446       2,707  
Loans over 90 days past due, accruing     113       19       133       235       261  
Troubled debt restructurings, accruing                 259       264       269  
Special mention loans     1,458       2,610       1,910       2,078       2,718  
Substandard loans, accruing     3,758       2,825       3,132       3,522       1,216  
                                         
Capital Ratios (2)                                        
Total capital   $ 83,591     $ 82,078     $ 80,780     $ 74,697     $ 72,807  
Tier 1 capital     78,679       77,083       75,834       69,688       68,006  
Common equity tier 1 capital     78,679       77,083       75,834       69,688       68,006  
Total capital to risk-weighted assets     14.57 %     14.24 %     14.49 %     13.62 %     13.25 %
Tier 1 capital to risk-weighted assets     13.71 %     13.37 %     13.60 %     12.71 %     12.38 %
Common equity tier 1 capital to risk-weighted assets     13.71 %     13.37 %     13.60 %     12.71 %     12.38 %
Leverage ratio     10.09 %     9.96 %     10.01 %     9.26 %     9.07 %


FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
    (unaudited)
    For the Quarter Ended
    September 30,   June 30,   March 31,   December 31,   September 30,
    2019   2019   2019   2018   2018
Balance Sheet                                        
Cash and due from banks   $ 11,885     $ 12,354     $ 10,862     $ 13,378     $ 11,370  
Interest-bearing deposits in banks     18,488       10,716       31,833       15,240       10,068  
Securities available for sale, at fair value     114,568       119,510       121,202       99,857       102,748  
Securities held to maturity, at amortized cost     18,222       18,828       19,489       43,408       44,239  
Restricted securities, at cost     1,806       1,701       1,701       1,688       1,590  
Loans held for sale     1,098       675       200       419       516  
Loans, net of allowance for loan losses     566,341       569,959       545,529       537,847       535,020  
Premises and equipment, net     19,946       20,182       20,282       20,066       19,557  
Accrued interest receivable     2,053       2,163       2,143       2,113       2,138  
Bank owned life insurance     17,324       17,193       17,094       13,991       13,894  
Core deposit intangibles, net     231       302       382       472       571  
Other assets     5,231       4,801       4,361       4,490       4,743  
Total assets   $ 777,193     $ 778,384     $ 775,078     $ 752,969     $ 746,454  
                                         
Noninterest-bearing demand deposits   $ 189,797     $ 186,553     $ 189,261     $ 181,964     $ 186,293  
Savings and interest-bearing demand deposits     376,047       385,399       377,673       369,383       360,988  
Time deposits     119,777       117,863       117,290       119,219       119,823  
Total deposits   $ 685,621     $ 689,815     $ 684,224     $ 670,566     $ 667,104  
Other borrowings                 5,000              
Subordinated debt     4,978       4,974       4,969       4,965       4,961  
Junior subordinated debt     9,279       9,279       9,279       9,279       9,279  
Accrued interest payable and other liabilities     1,999       1,507       1,878       1,485       1,459  
Total liabilities   $ 701,877     $ 705,575     $ 705,350     $ 686,295     $ 682,803  
                                         
Preferred stock   $     $     $     $     $  
Common stock     6,210       6,206       6,204       6,197       6,196  
Surplus     7,648       7,566       7,515       7,471       7,438  
Retained earnings     60,314       58,268       56,629       54,814       52,741  
Accumulated other comprehensive income (loss), net     1,144       769       (620 )     (1,808 )     (2,724 )
Total shareholders’ equity   $ 75,316     $ 72,809     $ 69,728     $ 66,674     $ 63,651  
Total liabilities and shareholders’ equity   $ 777,193     $ 778,384     $ 775,078     $ 752,969     $ 746,454  
                                         
Loan Data                                        
Mortgage loans on real estate:                                        
Construction and land development   $ 45,193     $ 46,281     $ 48,948     $ 45,867     $ 42,982  
Secured by farmland     916       855       883       880       942  
Secured by 1-4 family residential     226,828       225,820       217,527       215,945       211,938  
Other real estate loans     232,151       236,515       220,513       218,673       223,961  
Loans to farmers (except those secured by real estate)     1,461       1,006       806       1,035       937  
Commercial and industrial loans (except those secured by real estate)     49,096       48,347       45,239       43,570       41,924  
Consumer installment loans     11,040       11,572       11,890       12,061       12,301  
Deposit overdrafts     263       208       204       275       249  
All other loans     4,305       4,350       4,465       4,550       4,587  
Total loans   $ 571,253     $ 574,954     $ 550,475     $ 542,856     $ 539,821  
Allowance for loan losses     (4,912 )     (4,995 )     (4,946 )     (5,009 )     (4,801 )
Loans, net   $ 566,341     $ 569,959     $ 545,529     $ 537,847     $ 535,020  


FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
    (unaudited)
    For the Quarter Ended
    September 30,   June 30,   March 31,   December 31,   September 30,
    2019   2019   2019   2018   2018
Reconciliation of Tax-Equivalent Net Interest Income                                  
GAAP measures:                                        
Interest income – loans   $ 7,429     $ 7,200     $ 6,996     $ 7,106     $ 6,917  
Interest income – investments and other     925       1,014       1,027       1,053       1,064  
Interest expense – deposits     (1,089 )     (1,051 )     (922 )     (798 )     (702 )
Interest expense – federal funds purchased     (1 )                        
Interest expense – subordinated debt     (90 )     (90 )     (89 )     (91 )     (91 )
Interest expense – junior subordinated debt     (103 )     (108 )     (111 )     (105 )     (105 )
Interest expense – other borrowings                 (2 )            
Total net interest income   $ 7,071     $ 6,965     $ 6,899     $ 7,165     $ 7,083  
Non-GAAP measures:                                        
Tax benefit realized on non-taxable interest income – loans   $ 9     $ 10     $ 11     $ 11     $ 12  
Tax benefit realized on non-taxable interest income – municipal securities     43       42       41       42       41  
Total tax benefit realized on non-taxable interest income   $ 52     $ 52     $ 52     $ 53     $ 53  
Total tax-equivalent net interest income   $ 7,123     $ 7,017     $ 6,951     $ 7,218     $ 7,136  


FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
 
    (unaudited)
    For the Nine Months Ended
    September 30,   September 30,
    2019   2018
Income Statement                
Interest income                
Interest and fees on loans   $ 21,625     $ 19,768  
Interest on deposits in banks     340       434  
Interest on securities                
Taxable interest     2,078       2,253  
Tax-exempt interest     472       457  
Dividends     76       67  
Total interest income   $ 24,591     $ 22,979  
Interest expense                
Interest on deposits   $ 3,062     $ 1,957  
Interest on federal funds purchased     1        
Interest on subordinated debt     269       269  
Interest on junior subordinated debt     322       292  
Interest on other borrowings     2        
Total interest expense   $ 3,656     $ 2,518  
Net interest income   $ 20,935     $ 20,461  
Provision for loan losses     200       100  
Net interest income after provision for loan losses   $ 20,735     $ 20,361  
Noninterest income                
Service charges on deposit accounts   $ 2,173     $ 2,364  
ATM and check card fees     1,676       1,614  
Wealth management fees     1,372       1,239  
Fees for other customer services     505       447  
Income from bank owned life insurance     333       743  
Net gains on sale of loans     81       63  
Other operating income     71       408  
Total noninterest income   $ 6,211     $ 6,878  
Noninterest expense                
Salaries and employee benefits   $ 10,374     $ 9,981  
Occupancy     1,237       1,174  
Equipment     1,239       1,239  
Marketing     523       393  
Supplies     250       243  
Legal and professional fees     775       643  
ATM and check card expense     666       631  
FDIC assessment     98       226  
Bank franchise tax     402       351  
Telecommunications expense     244       217  
Data processing expense     526       500  
Postage expense     135       145  
Amortization expense     241       359  
Other real estate owned expense (income), net           (20 )
Net loss on disposal of premises and equipment           2  
Other operating expense     1,804       1,596  
Total noninterest expense   $ 18,514     $ 17,680  
Income before income taxes   $ 8,432     $ 9,559  
Income tax expense     1,592       1,745  
Net income   $ 6,840     $ 7,814  


FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
 
    (unaudited)
    For the Nine Months Ended
    September 30,   September 30,
    2019   2018
Common Share and Per Common Share Data                
Net income, basic   $ 1.38     $ 1.58  
Weighted average shares, basic     4,963,571       4,952,351  
Net income, diluted   $ 1.38     $ 1.58  
Weighted average shares, diluted     4,966,384       4,954,955  
Shares outstanding at period end     4,968,277       4,956,925  
Tangible book value at period end   $ 15.11     $ 12.72  
Cash dividends   $ 0.27     $ 0.15  
                 
Key Performance Ratios                
Return on average assets     1.19 %     1.38 %
Return on average equity     12.85 %     17.17 %
Net interest margin     3.91 %     3.89 %
Efficiency ratio (1)     66.93 %     63.07 %
                 
Average Balances                
Average assets   $ 770,777     $ 754,856  
Average earning assets     721,899       707,998  
Average shareholders’ equity     71,148       60,848  
                 
Asset Quality                
Loan charge-offs   $ 603     $ 795  
Loan recoveries     306       170  
Net charge-offs     297       625  
                 
Reconciliation of Tax-Equivalent Net Interest Income                
GAAP measures:                
Interest income – loans   $ 21,625     $ 19,768  
Interest income – investments and other     2,966       3,211  
Interest expense – deposits     (3,062 )     (1,957 )
Interest expense – federal funds purchased     (1 )      
Interest expense – subordinated debt     (269 )     (269 )
Interest expense – junior subordinated debt     (322 )     (292 )
Interest expense – other borrowings     (2 )      
Total net interest income   $ 20,935     $ 20,461  
Non-GAAP measures:                
Tax benefit realized on non-taxable interest income – loans   $ 30     $ 33  
Tax benefit realized on non-taxable interest income – municipal securities     126       121  
Total tax benefit realized on non-taxable interest income   $ 156     $ 154  
Total tax-equivalent net interest income   $ 21,091     $ 20,615  
 
(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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