STRASBURG, Va., Jan. 26, 2016 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (OTC:FXNC) today reported earnings of $813 thousand and earnings per share of $0.17 for the quarter ended December 31, 2015, compared to $398 thousand or $0.08 per share for the third quarter of 2015, and $3.4 million or $0.68 per share for the fourth quarter of 2014. Earnings in the fourth quarter of 2014 were impacted by a $3.2 million recovery of loan losses during the period. For the year ended December 31, 2015, reported earnings totaled $1.5 million or $0.31 per share, compared to $6.5 million or $1.32 per share for the year ended December 31, 2014. Earnings for 2014 were impacted by a $3.9 million recovery of loan losses.
“The Company had significant achievements during the quarter and reached a milestone for loan growth,” said Scott C. Harvard, president and chief executive officer of First National. “During the fourth quarter, we redeemed all $14.6 million of preferred stock, which lowered the cost of capital and had a significant positive impact on net income available to common shareholders. We also achieved record quarterly net loan growth of $33 million. We are especially pleased with the trends in net interest margin, noninterest expense, return on equity and loan growth. The surge in loan growth was attributed to the efforts of employees in the Bank’s legacy region in the northern Shenandoah Valley as well as those in its new south region led by Regional President Butch Smiley. We are also proud of our new employees who joined the Bank through the branch acquisition earlier in the year who have successfully retained 95% of the deposit balances since the acquisition date. We continue to work on our initiative to streamline, serve and save, which is being driven by a team of employees from across the Company who are diligently working to improve efficiency by updating processes, improving service to customers, and reducing costs. The goal of this initiative is to increase capacity for balance sheet growth and improve profitability.”
Select highlights for the fourth quarter include:
- Redeemed all $14.6 million of outstanding preferred stock on November 6, 2015
- Return on equity increased to 7.01% compared to 4.80% for the third quarter of 2015
- Net income available to common shareholders increased $415 thousand, or 104%, to $813 thousand compared to the third quarter of 2015 resulting from a $172 thousand increase in net interest income, a $189 thousand reduction in noninterest expense, and a $200 thousand decrease in the effective dividend on preferred stock
- Net interest margin increased to 3.53% compared to 3.40% for the third quarter of 2015
- Net loans increased $32.6 million or 8% during the quarter, and increased $61.8 million or 17% over the prior year
- Net interest income increased $172 thousand or 3% over the third quarter of 2015, and increased $793 thousand or 17% compared to the fourth quarter of 2014
- Noninterest income, excluding gains on sale of securities, decreased by $46 thousand compared to the third quarter of 2015, and increased $514 thousand compared to the fourth quarter of 2014
BRANCH ACQUISITION
On April 17, 2015, First Bank (the “Bank”), the Company’s banking subsidiary, completed the acquisition of six banking offices with approximately $186.8 million of deposits in the Shenandoah Valley and central Virginia region of Virginia from Bank of America, N.A. (the “Acquisition” or “Branch Acquisition”). The Company incurred integration costs related to the acquisition, including legal and professional fees, supplies, data processing and postage expenses that totaled $11 thousand for the fourth quarter of 2015 and $908 thousand for the year.
At December 31, 2015, the Bank retained 95% of the deposit balances assumed in the acquisition. The total cost of funds of the assumed deposits was 0.22% for the fourth quarter of 2015 compared to 0.19% at the acquisition date, excluding the impact of amortizing the time deposit valuation allowance during the quarter. The branch acquisition had a positive impact on the cost of funds for the Company, which was 0.26% for the quarter, compared to 0.35% for the same quarter in 2014. The mix of deposits, which consisted of a significant amount of noninterest-bearing deposits, remained consistent from acquisition date to December 31, 2015. In addition to the former Bank of America employees who joined the Bank through the acquisition, the Bank assembled an experienced lending team in its south region that made significant contributions to total loans at year end.
BALANCE SHEET
Total assets of First National increased $174.2 million, or 34%, to $692.3 million at December 31, 2015, compared to $518.2 million at December 31, 2014, primarily as a result of the acquisition. Loans, net of the allowance for loan losses increased $61.8 million, or 17%, over the prior year. During the fourth quarter, growth in loans, net of the allowance for loan losses was $32.6 million, an increase of 8% over the prior period.
The investment securities portfolio increased $88.8 million to $172.1 million at December 31, 2015, up from $83.3 million at December 31, 2014. Deposit balances increased $182.8 million, or 41%, to $627.1 million from $444.3 million for these same periods, respectively. Noninterest-bearing demand deposit accounts increased $52.1 million to $157.1 million, which represented 25% of total deposits.
Total shareholders’ equity decreased $14.4 million during the fourth quarter as a result of the redemption of $14.6 million of preferred stock on November 6, 2015. The preferred stock redemption had a positive impact on net income available to common shareholders for the fourth quarter of 2015 by reducing the effective dividend on preferred stock to $128 thousand compared to $328 thousand in the third quarter of 2015. Tangible common equity totaled $43.6 million at December 31, 2015, compared to $43.2 million at September 30, 2015 and $44.9 million at December 31, 2014. The Bank maintained its target capital levels and continued to exceed requirements for a well-capitalized institution at the end of the year.
NET INTEREST INCOME
Net interest income increased $172 thousand, or 3%, to $5.6 million for the quarter compared to $5.4 million for the third quarter of 2015, and increased $793 thousand, or 17%, compared to $4.8 million for the fourth quarter of 2014.
Total interest income increased $257 thousand, or 4%, during the quarter compared to the third quarter of 2015 and increased $807 thousand, or 15%, compared to the fourth quarter of 2014. The growth in interest income compared to the prior quarter was principally due to increased levels of loan originations. Compared to the fourth quarter of 2014, the growth in interest income was primarily a result of higher loan and securities balances.
Total interest expense increased by $85 thousand during the quarter compared to the third quarter of 2015, and increased $14 thousand compared to the fourth quarter of 2014. Although deposit balances were $182.8 million, or 41%, higher at the end of the fourth quarter compared to one year ago, interest expense only increased 3% in the fourth quarter of 2015 when compared to the same quarter of 2014 from continued re-pricing of time deposits to lower rates.
NONINTEREST INCOME
Noninterest income, excluding net gains on sale of securities, was unchanged at $2.2 million compared to the third quarter of 2015, and increased $514 thousand, or 31%, compared to the fourth quarter of 2014. The increase in noninterest income compared to the same period one year ago was primarily attributable to the growth in deposit balances from the branch acquisition when comparing the periods. Service charges on deposits increased $202 thousand, or 31%, ATM and check card fees increased $168 thousand, or 48%, and fees for other customer services increased $53 thousand, or 59%.
NONINTEREST EXPENSE
Noninterest expense decreased $189 thousand, or 3%, to $6.5 million for the quarter compared to $6.7 million for the third quarter of 2015 and increased $1.6 million, or 34%, compared to the fourth quarter of 2014. The decrease in expenses when compared to the third quarter of 2015 was primarily attributable to a $146 thousand reduction in salaries and employee benefits, an $82 thousand decrease in marketing expense, and a $52 thousand reduction in other real estate owned expense. These decreases were partially offset by a $207 thousand increase in legal and professional expenses that resulted from consulting expenses related to the Company’s initiative to streamline processes, improve customer service, and reduce operating costs.
Comparing the current quarter results to the fourth quarter of 2014, the increase in noninterest expense was primarily attributable to the impact of the branch acquisition, which increased the number of bank branch locations from 10 to 16 and added a core deposit intangible. Expense categories that increased as a result of the acquisition included salaries and employee benefits, occupancy, equipment, legal and professional fees, and amortization of the core deposit intangible.
ASSET QUALITY/LOAN LOSS PROVISION
Credit quality continued to improve during the quarter as nonperforming assets decreased by $1.2 million to 0.94% of total assets, compared to 1.12% of total assets at September 30, 2015, and 1.91% of total assets at December 31, 2014. Nonperforming assets decreased by $1.2 million or 15%, compared to the prior quarter end and decreased by $3.4 million, or 34%, compared to one year ago. Loans past due between 30 and 89 days decreased to 0.32% of total loans, also an improvement from 0.51% at September 30, 2015 and 0.53% at December 31, 2014.
The Bank did not record a provision for loan losses for the fourth quarter or the third quarter of 2015, and recorded a $3.2 million recovery of loan losses for the fourth quarter of 2014. Net charge-offs totaled $51 thousand in the fourth quarter of 2015, compared to $554 thousand in the third quarter of 2015 and net recoveries of $151 thousand for the fourth quarter of 2014. Provision for loan losses was not required for the fourth quarter due to improvements in the historical loss experience and qualitative factors that determine the general reserve component of the allowance for loan losses. The allowance for loan losses totaled $5.5 million at the end of the fourth quarter, $5.6 million at September 30, 2015 and $6.7 million at December 31, 2014, representing 1.26%, 1.37% and 1.78% of total loans, respectively.
FORWARD-LOOKING STATEMENTS
Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company’s future operations and are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, 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, deposit, and wealth management products and services through its mobile banking platform, its website, www.fbvirginia.com, a network of ATMs located throughout its market areas, a loan production office, a customer service center, and from 15 bank branch office locations located throughout the Shenandoah Valley and central regions of Virginia. In addition to its 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.
| FIRST NATIONAL CORPORATION | ||||||||||||||||||||
| Quarterly Performance Summary | ||||||||||||||||||||
| (in thousands, except share and per share data) | ||||||||||||||||||||
| (unaudited) For the Quarter Ended | ||||||||||||||||||||
| Income Statement | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||
| Interest income | ||||||||||||||||||||
| Interest and fees on loans | $ | 5,056 | $ | 4,854 | $ | 4,688 | $ | 4,540 | $ | 4,623 | ||||||||||
| Interest on deposits in banks | 63 | 61 | 68 | 5 | 5 | |||||||||||||||
| Interest on securities | 872 | 829 | 618 | 422 | 566 | |||||||||||||||
| Dividends on restricted securities | 30 | 20 | 18 | 21 | 20 | |||||||||||||||
| Total interest income | $ | 6,021 | $ | 5,764 | $ | 5,392 | $ | 4,988 | $ | 5,214 | ||||||||||
| Interest expense | ||||||||||||||||||||
| Interest on deposits | $ | 302 | $ | 282 | $ | 266 | $ | 300 | $ | 327 | ||||||||||
| Interest on federal funds purchased | - | - | 1 | 1 | 1 | |||||||||||||||
| Interest on subordinated debt | 62 | - | - | - | - | |||||||||||||||
| Interest on junior subordinated debt | 59 | 56 | 55 | 54 | 55 | |||||||||||||||
| Interest on other borrowings | - | - | 2 | 1 | 26 | |||||||||||||||
| Total interest expense | $ | 423 | $ | 338 | $ | 324 | $ | 356 | $ | 409 | ||||||||||
| Net interest income | $ | 5,598 | $ | 5,426 | $ | 5,068 | $ | 4,632 | $ | 4,805 | ||||||||||
| Recovery of loan losses | - | - | (100 | ) | - | (3,150 | ) | |||||||||||||
| Net interest income after recovery of loan losses | $ | 5,598 | $ | 5,426 | $ | 5,168 | $ | 4,632 | $ | 7,955 | ||||||||||
| Noninterest income | ||||||||||||||||||||
| Service charges on deposit accounts | $ | 846 | $ | 897 | $ | 752 | $ | 547 | $ | 644 | ||||||||||
| ATM and check card fees | 520 | 529 | 497 | 349 | 352 | |||||||||||||||
| Wealth management fees | 496 | 477 | 499 | 503 | 465 | |||||||||||||||
| Fees for other customer services | 143 | 172 | 184 | 107 | 90 | |||||||||||||||
| Income from bank owned life insurance | 103 | 106 | 90 | 74 | 101 | |||||||||||||||
| Net gains (losses) on sale of securities | (3 | ) | - | - | (52 | ) | 765 | |||||||||||||
| Net gains on sale of loans | 43 | 53 | 50 | 55 | 23 | |||||||||||||||
| Other operating income | 50 | 10 | 237 | 8 | 9 | |||||||||||||||
| Total noninterest income | $ | 2,198 | $ | 2,244 | $ | 2,309 | $ | 1,591 | $ | 2,449 | ||||||||||
| Noninterest expense | ||||||||||||||||||||
| Salaries and employee benefits | $ | 3,491 | $ | 3,637 | $ | 3,597 | $ | 3,125 | $ | 2,855 | ||||||||||
| Occupancy | 400 | 396 | 339 | 317 | 315 | |||||||||||||||
| Equipment | 398 | 400 | 422 | 281 | 293 | |||||||||||||||
| Marketing | 94 | 176 | 163 | 97 | 77 | |||||||||||||||
| Stationery and supplies | 93 | 116 | 229 | 345 | 75 | |||||||||||||||
| Legal and professional fees | 450 | 243 | 431 | 212 | 320 | |||||||||||||||
| ATM and check card fees | 200 | 236 | 190 | 155 | 168 | |||||||||||||||
| FDIC assessment | 119 | 134 | 64 | 67 | 70 | |||||||||||||||
| Bank franchise tax | 130 | 131 | 130 | 122 | 105 | |||||||||||||||
| Telecommunications expense | 120 | 131 | 100 | 85 | 81 | |||||||||||||||
| Data processing expense | 157 | 130 | 226 | 187 | 140 | |||||||||||||||
| Postage expense | 71 | 73 | 80 | 117 | 51 | |||||||||||||||
| Amortization expense | 216 | 226 | 196 | 4 | 4 | |||||||||||||||
| Other real estate owned, net | 92 | 144 | 152 | (36 | ) | (151 | ) | |||||||||||||
| Other operating expense | 481 | 528 | 536 | 409 | 468 | |||||||||||||||
| Total noninterest expense | $ | 6,512 | $ | 6,701 | $ | 6,855 | $ | 5,487 | $ | 4,871 | ||||||||||
| Income before income taxes | $ | 1,284 | $ | 969 | $ | 622 | $ | 736 | $ | 5,533 | ||||||||||
| Income tax expense | 343 | 243 | 178 | 192 | 1,837 | |||||||||||||||
| Net income | $ | 941 | $ | 726 | $ | 444 | $ | 544 | $ | 3,696 | ||||||||||
| Effective dividend and accretion on preferred stock | 128 | 328 | 328 | 329 | 328 | |||||||||||||||
| Net income available to common shareholders | $ | 813 | $ | 398 | $ | 116 | $ | 215 | $ | 3,368 | ||||||||||
| Common Share and Per Common Share Data | ||||||||||||||||||||
| Net income, basic | $ | 0.17 | $ | 0.08 | $ | 0.02 | $ | 0.04 | $ | 0.68 | ||||||||||
| Weighted average shares, basic | 4,913,985 | 4,911,604 | 4,909,775 | 4,906,981 | 4,903,748 | |||||||||||||||
| Net income, diluted | $ | 0.17 | $ | 0.08 | $ | 0.02 | $ | 0.04 | $ | 0.68 | ||||||||||
| Weighted average shares, diluted | 4,916,804 | 4,913,461 | 4,911,298 | 4,911,044 | 4,903,748 | |||||||||||||||
| Shares outstanding at period end | 4,916,130 | 4,912,662 | 4,910,826 | 4,909,714 | 4,904,577 | |||||||||||||||
| Book value at period end | $ | 9.35 | $ | 9.32 | $ | 9.13 | $ | 9.31 | $ | 9.17 | ||||||||||
| Cash dividends | $ | 0.025 | $ | 0.025 | $ | 0.025 | $ | 0.025 | $ | 0.025 | ||||||||||
| FIRST NATIONAL CORPORATION | |||||||||||||||||||||||||||
| Quarterly Performance Summary | |||||||||||||||||||||||||||
| (in thousands, except share and per share data) | |||||||||||||||||||||||||||
| (unaudited) For the Quarter Ended | |||||||||||||||||||||||||||
| December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||||||||||
| Key Performance Ratios | |||||||||||||||||||||||||||
| Return on average assets | 0.54 | % | 0.42 | % | 0.27 | % | 0.43 | % | 2.81 | % | |||||||||||||||||
| Return on average equity | 7.01 | % | 4.80 | % | 2.97 | % | 3.67 | % | 25.03 | % | |||||||||||||||||
| Net interest margin | 3.53 | % | 3.40 | % | 3.29 | % | 3.96 | % | 3.96 | % | |||||||||||||||||
| Efficiency ratio (1) | 81.30 | % | 84.55 | % | 92.54 | % | 87.20 | % | 76.61 | % | |||||||||||||||||
| Average Balances | |||||||||||||||||||||||||||
| Average assets | $ | 692,263 | $ | 691,121 | $ | 671,199 | $ | 516,259 | $ | 521,889 | |||||||||||||||||
| Average earning assets | 640,880 | 642,234 | 625,197 | 480,490 | 487,591 | ||||||||||||||||||||||
| Average shareholders’ equity | 53,264 | 60,043 | 59,957 | 60,040 | 58,583 | ||||||||||||||||||||||
| Asset Quality | |||||||||||||||||||||||||||
| Loan charge-offs | $ | 418 | $ | 637 | $ | 671 | $ | 112 | $ | 80 | |||||||||||||||||
| Loan recoveries | 367 | 83 | 129 | 165 | 231 | ||||||||||||||||||||||
| Net charge-offs (recoveries) | 51 | 554 | 542 | (53 | ) | (151 | ) | ||||||||||||||||||||
| Non-accrual loans | 3,854 | 4,930 | 6,666 | 7,170 | 8,000 | ||||||||||||||||||||||
| Other real estate owned, net | 2,679 | 2,760 | 2,407 | 1,949 | 1,888 | ||||||||||||||||||||||
| Nonperforming assets | 6,533 | 7,690 | 9,073 | 9,119 | 9,888 | ||||||||||||||||||||||
| Loans 30 to 89 days past due, accruing | 1,418 | 2,084 | 1,487 | 1,763 | 1,990 | ||||||||||||||||||||||
| Loans over 90 days past due, accruing | 92 | 147 | 600 | 71 | - | ||||||||||||||||||||||
| Troubled debt restructurings, accruing | 317 | 321 | 324 | 782 | 790 | ||||||||||||||||||||||
| Special mention loans | 15,863 | 15,706 | 21,278 | 22,550 | 23,259 | ||||||||||||||||||||||
| Substandard loans, accruing | 10,265 | 10,496 | 10,927 | 15,741 | 15,792 | ||||||||||||||||||||||
| Capital Ratios (2) | |||||||||||||||||||||||||||
| Total capital | $ | 61,513 | $ | 60,232 | $ | 72,362 | $ | 72,764 | $ | 71,941 | |||||||||||||||||
| Tier 1 capital | 55,989 | 55,066 | 67,400 | 67,918 | 67,217 | ||||||||||||||||||||||
| Common equity tier 1 capital | 55,989 | 55,066 | 67,400 | 67,918 | 67,217 | ||||||||||||||||||||||
| Total capital to risk-weighted assets | 13.86 | % | 14.59 | % | 18.28 | % | 18.86 | % | 19.14 | % | |||||||||||||||||
| Tier 1 capital to risk-weighted assets | 12.62 | % | 13.34 | % | 17.03 | % | 17.61 | % | 17.88 | % | |||||||||||||||||
| Common equity tier 1 capital to risk-weighted assets | 12.62 | % | 13.34 | % | 17.03 | % | 17.61 | % | 17.88 | % | |||||||||||||||||
| Leverage ratio | 8.12 | % | 7.99 | % | 10.06 | % | 13.17 | % | 12.90 | % | |||||||||||||||||
| Balance Sheet | |||||||||||||||||||||||||||
| Cash and due from banks | $ | 8,247 | $ | 9,890 | $ | 11,870 | $ | 7,529 | $ | 6,043 | |||||||||||||||||
| Interest-bearing deposits in banks | 31,087 | 66,956 | 99,274 | 1,645 | 18,802 | ||||||||||||||||||||||
| Securities available for sale, at fair value | 105,559 | 109,166 | 112,468 | 90,855 | 83,292 | ||||||||||||||||||||||
| Securities held to maturity, at carrying value | 66,519 | 54,276 | 37,343 | - | - | ||||||||||||||||||||||
| Restricted securities, at cost | 1,391 | 1,391 | 1,391 | 1,999 | 1,366 | ||||||||||||||||||||||
| Loans held for sale | 323 | 471 | 1,978 | - | 328 | ||||||||||||||||||||||
| Loans, net of allowance for loan losses | 433,475 | 400,838 | 385,592 | 391,746 | 371,692 | ||||||||||||||||||||||
| Other real estate owned, net of valuation allowance | 2,679 | 2,760 | 2,407 | 1,949 | 1,888 | ||||||||||||||||||||||
| Premises and equipment, net | 21,389 | 21,493 | 21,277 | 16,298 | 16,126 | ||||||||||||||||||||||
| Accrued interest receivable | 1,661 | 1,543 | 1,423 | 1,256 | 1,261 | ||||||||||||||||||||||
| Bank owned life insurance | 11,742 | 11,627 | 11,521 | 11,431 | 11,357 | ||||||||||||||||||||||
| Core deposit intangibles, net | 2,322 | 2,539 | 2,765 | 51 | 55 | ||||||||||||||||||||||
| Other assets | 5,927 | 5,945 | 6,518 | 5,650 | 5,955 | ||||||||||||||||||||||
| Total assets | $ | 692,321 | $ | 688,895 | $ | 695,827 | $ | 530,409 | $ | 518,165 | |||||||||||||||||
| Noninterest-bearing demand deposits | $ | 157,070 | $ | 149,178 | $ | 147,790 | $ | 109,927 | $ | 104,986 | |||||||||||||||||
| Savings and interest-bearing demand deposits | 328,945 | 318,510 | 322,239 | 231,885 | 237,618 | ||||||||||||||||||||||
| Time deposits | 141,101 | 146,219 | 150,853 | 96,974 | 101,734 | ||||||||||||||||||||||
| Total deposits | $ | 627,116 | $ | 613,907 | $ | 620,882 | $ | 438,786 | $ | 444,338 | |||||||||||||||||
| Federal funds purchased | - | - | - | 1,955 | 52 | ||||||||||||||||||||||
| Other borrowings | - | 7 | 13 | 15,020 | 26 | ||||||||||||||||||||||
| Subordinated debt | 4,913 | - | - | - | - | ||||||||||||||||||||||
| Junior subordinated debt | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | ||||||||||||||||||||||
| Accrued interest payable and other liabilities | 5,060 | 5,303 | 6,214 | 5,057 | 4,906 | ||||||||||||||||||||||
| Total liabilities | $ | 646,368 | $ | 628,496 | $ | 636,388 | $ | 470,097 | $ | 458,601 | |||||||||||||||||
| FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) | |||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||||||||
| December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||||||||||||||||
| Balance Sheet (continued) | |||||||||||||||||||||||||||
| Preferred stock | $ | - | $ | 14,595 | $ | 14,595 | $ | 14,595 | $ | 14,595 | |||||||||||||||||
| Common stock | 6,145 | 6,141 | 6,139 | 6,137 | 6,131 | ||||||||||||||||||||||
| Surplus | 6,956 | 6,922 | 6,899 | 6,881 | 6,835 | ||||||||||||||||||||||
| Retained earnings | 34,440 | 33,917 | 33,642 | 33,649 | 33,557 | ||||||||||||||||||||||
| Accumulated other comprehensive loss, net | (1,588 | ) | (1,176 | ) | (1,836 | ) | (950 | ) | (1,554 | ) | |||||||||||||||||
| Total shareholders’ equity | $ | 45,953 | $ | 60,399 | $ | 59,439 | $ | 60,312 | $ | 59,564 | |||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 692,321 | $ | 688,895 | $ | 695,827 | $ | 530,409 | $ | 518,165 | |||||||||||||||||
| Loan Data | |||||||||||||||||||||||||||
| Mortgage loans on real estate: | |||||||||||||||||||||||||||
| Construction and land development | $ | 33,135 | $ | 29,935 | $ | 32,009 | $ | 33,344 | $ | 29,475 | |||||||||||||||||
| Secured by farm land | 963 | 984 | 1,025 | 1,067 | 1,129 | ||||||||||||||||||||||
| Secured by 1-4 family residential | 189,287 | 179,419 | 173,265 | 172,874 | 163,727 | ||||||||||||||||||||||
| Other real estate loans | 180,483 | 164,677 | 154,371 | 157,829 | 150,673 | ||||||||||||||||||||||
| Loans to farmers (except those secured by real estate) | 3,056 | 3,014 | 2,645 | 2,760 | 2,975 | ||||||||||||||||||||||
| Commercial and industrial loans (except those secured by real estate) | 20,992 | 16,936 | 16,674 | 18,660 | 18,191 | ||||||||||||||||||||||
| Consumer installment loans | 4,055 | 4,165 | 4,341 | 4,713 | 4,785 | ||||||||||||||||||||||
| Deposit overdrafts | 257 | 421 | 419 | 194 | 285 | ||||||||||||||||||||||
| All other loans | 6,771 | 6,862 | 6,972 | 7,076 | 7,170 | ||||||||||||||||||||||
| Total loans | $ | 438,999 | $ | 406,413 | $ | 391,721 | $ | 398,517 | $ | 378,410 | |||||||||||||||||
| Allowance for loan losses | (5,524 | ) | (5,575 | ) | (6,129 | ) | (6,771 | ) | (6,718 | ) | |||||||||||||||||
| Loans, net | $ | 433,475 | $ | 400,838 | $ | 385,592 | $ | 391,746 | $ | 371,692 | |||||||||||||||||
| Reconciliation of Tax-Equivalent Net Interest Income | |||||||||||||||||||||||||||
| GAAP measures: | |||||||||||||||||||||||||||
| Interest income – loans | $ | 5,056 | $ | 4,854 | $ | 4,688 | $ | 4,540 | $ | 4,623 | |||||||||||||||||
| Interest income – investments and other | 965 | 910 | 704 | 448 | 591 | ||||||||||||||||||||||
| Interest expense – deposits | (302 | ) | (282 | ) | (266 | ) | (300 | ) | (327 | ) | |||||||||||||||||
| Interest expense – other borrowings | - | - | (2 | ) | (1 | ) | (26 | ) | |||||||||||||||||||
| Interest expense – subordinated debt | (62 | ) | - | - | - | - | |||||||||||||||||||||
| Interest expense – junior subordinated debt | (59 | ) | (56 | ) | (55 | ) | (54 | ) | (55 | ) | |||||||||||||||||
| Interest expense – other | - | - | (1 | ) | (1 | ) | (1 | ) | |||||||||||||||||||
| Total net interest income | $ | 5,598 | $ | 5,426 | $ | 5,068 | $ | 4,632 | $ | 4,805 | |||||||||||||||||
| Non-GAAP measures: | |||||||||||||||||||||||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 26 | $ | 26 | $ | 27 | $ | 26 | $ | 24 | |||||||||||||||||
| Tax benefit realized on non-taxable interest income – municipal securities | 71 | 60 | 40 | 33 | 42 | ||||||||||||||||||||||
| Total tax benefit realized on non-taxable interest income | $ | 97 | $ | 86 | $ | 67 | $ | 59 | $ | 66 | |||||||||||||||||
| Total tax-equivalent net interest income | $ | 5,695 | $ | 5,512 | $ | 5,135 | $ | 4,691 | $ | 4,871 | |||||||||||||||||
| FIRST NATIONAL CORPORATION | |||||||
| Year-to-Date Performance Summary | |||||||
| (in thousands, except share and per share data) | |||||||
| (unaudited) For the Year Ended | |||||||
| Income Statement | December 31, 2015 | December 31, 2014 | |||||
| Interest income | |||||||
| Interest and fees on loans | $ | 19,138 | $ | 17,777 | |||
| Interest on deposits in banks | 197 | 38 | |||||
| Interest on securities | 2,741 | 2,502 | |||||
| Dividends on restricted securities | 89 | 82 | |||||
| Total interest income | $ | 22,165 | $ | 20,399 | |||
| Interest expense | |||||||
| Interest on deposits | $ | 1,150 | $ | 1,442 | |||
| Interest on federal funds purchased | 2 | 3 | |||||
| Interest on subordinated debt | 62 | - | |||||
| Interest on junior subordinated debt | 224 | 218 | |||||
| Interest on other borrowings | 3 | 115 | |||||
| Total interest expense | $ | 1,441 | $ | 1,778 | |||
| Net interest income | $ | 20,724 | $ | 18,621 | |||
| Recovery of loan losses | (100 | ) | (3,850 | ) | |||
| Net interest income after recovery of loan losses | $ | 20,824 | $ | 22,471 | |||
| Noninterest income | |||||||
| Service charges on deposit accounts | $ | 3,042 | $ | 2,572 | |||
| ATM and check card fees | 1,895 | 1,419 | |||||
| Wealth management fees | 1,975 | 1,915 | |||||
| Fees for other customer services | 606 | 397 | |||||
| Income from bank owned life insurance | 373 | 367 | |||||
| Net gains (losses) on sale of securities | (55 | ) | 696 | ||||
| Net gains on sale of loans | 201 | 20 | |||||
| Other operating income | 305 | 58 | |||||
| Total noninterest income | $ | 8,342 | $ | 7,444 | |||
| Noninterest expense | |||||||
| Salaries and employee benefits | $ | 13,850 | $ | 10,586 | |||
| Occupancy | 1,452 | 1,211 | |||||
| Equipment | 1,501 | 1,191 | |||||
| Marketing | 530 | 426 | |||||
| Stationery and supplies | 783 | 333 | |||||
| Legal and professional fees | 1,336 | 1,019 | |||||
| ATM and check card fees | 781 | 661 | |||||
| FDIC assessment | 384 | 454 | |||||
| Bank franchise tax | 513 | 410 | |||||
| Telecommunications expense | 436 | 300 | |||||
| Data processing expense | 700 | 518 | |||||
| Postage expense | 341 | 189 | |||||
| Amortization expense | 642 | 16 | |||||
| Other real estate owned, net | 352 | (213 | ) | ||||
| Net loss on disposal of premises and equipment | - | 2 | |||||
| Other operating expense | 1,954 | 1,682 | |||||
| Total noninterest expense | $ | 25,555 | $ | 18,785 | |||
| Income before income taxes | $ | 3,611 | $ | 11,130 | |||
| Income tax expense | 956 | 3,499 | |||||
| Net income | $ | 2,655 | $ | 7,631 | |||
| Effective dividend and accretion on preferred stock | 1,113 | 1,138 | |||||
| Net income available to common shareholders | $ | 1,542 | $ | 6,493 | |||
| Common Share and Per Common Share Data | |||||||
| Net income, basic | $ | 0.31 | $ | 1.32 | |||
| Weighted average shares, basic | 4,910,608 | 4,902,389 | |||||
| Net income, diluted | $ | 0.31 | $ | 1.32 | |||
| Weighted average shares, diluted | 4,913,174 | 4,902,389 | |||||
| Shares outstanding at period end | 4,916,130 | 4,904,577 | |||||
| Book value at period end | $ | 9.35 | $ | 9.17 | |||
| Cash dividends | $ | 0.10 | $ | 0.075 | |||
| FIRST NATIONAL CORPORATION | |||||||
| Year-to-Date Performance Summary | |||||||
| (in thousands, except share and per share data) | |||||||
| (unaudited) For the Year Ended | |||||||
| December 31, 2015 | December 31, 2014 | ||||||
| Key Performance Ratios | |||||||
| Return on average assets | 0.41 | % | 1.45 | % | |||
| Return on average equity | 4.58 | % | 13.49 | % | |||
| Net interest margin | 3.52 | % | 3.86 | % | |||
| Efficiency ratio (1) | 86.23 | % | 74.03 | % | |||
| Average Balances | |||||||
| Average assets | $ | 642,978 | $ | 525,028 | |||
| Average earning assets | 597,763 | 490,472 | |||||
| Average shareholders’ equity | 57,928 | 56,579 | |||||
| Asset Quality | |||||||
| Loan charge-offs | $ | 1,838 | $ | 927 | |||
| Loan recoveries | 744 | 851 | |||||
| Net charge-offs | 1,094 | 76 | |||||
| Reconciliation of Tax-Equivalent Net Interest Income | |||||||
| GAAP measures: | |||||||
| Interest income – loans | $ | 19,138 | $ | 17,777 | |||
| Interest income – investments and other | 3,027 | 2,622 | |||||
| Interest expense – deposits | (1,150 | ) | (1,442 | ) | |||
| Interest expense – other borrowings | (3 | ) | (115 | ) | |||
| Interest expense – subordinated debt | (62 | ) | - | ||||
| Interest expense – junior subordinated debt | (224 | ) | (218 | ) | |||
| Interest expense – other | (2 | ) | (3 | ) | |||
| Total net interest income | $ | 20,724 | $ | 18,621 | |||
| Non-GAAP measures: | |||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 105 | $ | 108 | |||
| Tax benefit realized on non-taxable interest income – municipal securities | 204 | 184 | |||||
| Total tax benefit realized on non-taxable interest income | $ | 309 | $ | 292 | |||
| Total tax-equivalent net interest income | $ | 21,033 | $ | 18,913 | |||
(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense and net loss 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 and bargain purchase gain. 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 34%. See the table above for the quarterly tax-equivalent net interest income and a reconciliation 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 the Bank.