STRASBURG, Va., April 26, 2017 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (OTC:FXNC) today reported net income of $1.5 million and earnings per share of $0.31 for the first quarter ended March 31, 2017. This was a $444 thousand increase when compared to earnings for the first quarter of 2016, which totaled $1.1 million or $0.22 per share. The increase in net income resulted primarily from a $366 thousand decrease in noninterest expenses and a $293 thousand increase in net interest income.
Select highlights for the first quarter of 2017:
- Net income increased 40% over first quarter of 2016
- Return on equity of 11.78%
- Return on average assets of 0.88%
- The net interest margin increased to 3.70%
- Compared to first quarter of 2016, the efficiency ratio improved to 69.52%, from 77.32%
- Noninterest expenses decreased $366 thousand, or 6%
- Net interest income increased $293 thousand, or 5%
- Assets-per-employee increased to $4.6 million, compared to $3.8 million at March 31, 2016
“We are pleased with the performance in the first quarter of 2017 as the Company benefited from higher loan balances and expense reductions compared to last year’s first quarter. The results included a 40% increase in net income, a respectable net interest margin of 3.70%, and a significant improvement in the efficiency ratio,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “Loan growth drove a higher net interest margin and higher interest income on loans. Non-maturity deposit growth helped fund loans and we remain focused on deepening relationships to drive continued loan and deposit growth. We are also pleased with the substantial improvements in productivity, as demonstrated by the assets-per-employee ratio, which reached $4.6 million at the end of the quarter.”
BALANCE SHEET
Total assets of First National increased $11.3 million during the quarter to $727.3 million at March 31, 2017, and increased $26.3 million compared to one year ago. Loans, net of the allowance for loan losses, increased $11.6 million during the quarter to $492.3 million, and increased $43.8 million, or 10%, compared to March 31, 2016. The total of securities and interest-bearing deposits in banks was unchanged during the quarter at $180.9 million, and decreased $13.9 million compared to one year ago.
Total deposits increased $9.2 million during the quarter to $654.8 million, and were $21.7 million higher than total deposits at March 31, 2016. When comparing the composition of the deposit portfolio at March 31, 2017 to one year ago, noninterest-bearing demand deposits increased from 26% to 27% of total deposits, while time deposits decreased from 22% to 19%.
Shareholders’ equity totaled $54.0 million at March 31, 2017 compared to $47.7 million one year ago. Tangible common equity totaled $52.6 million at the end of the first quarter, compared to $45.6 million at March 31, 2016. The Company exceeded its target regulatory capital ratios at the end of the quarter.
NET INTEREST INCOME
Net interest income increased $293 thousand, or 5%, to $6.0 million for the quarter, compared to $5.7 million for the same period of 2016.
Total interest income increased $341 thousand, or 6%, to $6.5 million for the quarter, compared to the same period of 2016. The increase resulted from higher average earning asset balances and a higher yield on total earning assets. Earning asset yields increased 10 basis points, primarily from a change in asset composition as average loan balances increased to 74% of average earning assets for the first quarter, up from 69% for the same period of 2016. While loan balances increased, the average balance of securities decreased to 22% of average earning assets, down from 26%, comparing the periods.
Total interest expense increased $48 thousand, or 10%, to $540 thousand for the quarter, compared to the same period of 2016. The increase in interest expense resulted primarily from a 4 basis point increase in the cost of interest-bearing deposits.
NONINTEREST INCOME
Noninterest income was unchanged at $1.9 million for the quarter, compared to the same period of 2016. There were no significant changes in the noninterest income categories when comparing the periods.
NONINTEREST EXPENSE
Noninterest expense decreased $366 thousand, or 6%, to $5.8 million for the quarter, compared to the same period of 2016. Salaries and employee benefits expense decreased $202 thousand, or 6%, legal and professional fees decreased $114 thousand, or 37%, and occupancy expense decreased $57 thousand, or 13%.
Salaries and employee benefits decreased primarily from a decrease in salaries and wages, insurance expense, and retirement plan costs. A reduction in the number of employees had a favorable impact on each of these expense categories. Legal and professional fees decreased primarily from consulting expenses that were incurred from an efficiency initiative that occurred during the first quarter of 2016. The decrease in occupancy expense resulted primarily from lower repairs and maintenance expense when comparing the periods.
ASSET QUALITY/LOAN LOSS PROVISION
There was no provision for loan loss during the quarter. Net recoveries on loans previously charged-off offset the impact of loan growth on the general reserve during the period. Asset quality improved as nonperforming assets totaled $1.8 million, or 0.25% of total assets at March 31, 2017, which was an improvement when compared to $6.4 million, or 0.91% of total assets, one year ago. The allowance for loan losses totaled $5.5 million at March 31, 2017 and $5.5 million at March 31, 2016, representing 1.10% and 1.22% 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, 2016, 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, two loan production offices, 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.
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | |||||||||||||||||
| Income Statement | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||||||||||
| Interest income | |||||||||||||||||
| Interest and fees on loans | $ | 5,646 | $ | 5,556 | $ | 5,500 | $ | 5,370 | $ | 5,236 | |||||||
| Interest on deposits in banks | 61 | 55 | 73 | 62 | 48 | ||||||||||||
| Interest on securities | 805 | 794 | 749 | 825 | 888 | ||||||||||||
| Dividends on restricted securities | 20 | 21 | 20 | 21 | 19 | ||||||||||||
| Total interest income | $ | 6,532 | $ | 6,426 | $ | 6,342 | $ | 6,278 | $ | 6,191 | |||||||
| Interest expense | |||||||||||||||||
| Interest on deposits | $ | 383 | $ | 353 | $ | 338 | $ | 329 | $ | 333 | |||||||
| Interest on federal funds purchased | - | - | - | - | 3 | ||||||||||||
| Interest on subordinated debt | 89 | 91 | 91 | 89 | 90 | ||||||||||||
| Interest on junior subordinated debt | 68 | 69 | 65 | 64 | 61 | ||||||||||||
| Interest on other borrowings | - | - | 1 | - | 5 | ||||||||||||
| Total interest expense | $ | 540 | $ | 513 | $ | 495 | $ | 482 | $ | 492 | |||||||
| Net interest income | $ | 5,992 | $ | 5,913 | $ | 5,847 | $ | 5,796 | $ | 5,699 | |||||||
| Provision for loan losses | - | - | - | - | - | ||||||||||||
| Net interest income after provision for loan losses | $ | 5,992 | $ | 5,913 | $ | 5,847 | $ | 5,796 | $ | 5,699 | |||||||
| Noninterest income | |||||||||||||||||
| Service charges on deposit accounts | $ | 755 | $ | 877 | $ | 941 | $ | 914 | $ | 780 | |||||||
| ATM and check card fees | 501 | 505 | 529 | 515 | 488 | ||||||||||||
| Wealth management fees | 347 | 353 | 339 | 334 | 336 | ||||||||||||
| Fees for other customer services | 140 | 154 | 143 | 137 | 147 | ||||||||||||
| Income from bank owned life insurance | 85 | 109 | 123 | 107 | 86 | ||||||||||||
| Net gains (losses) on sales of securities | - | (2 | ) | 4 | - | 6 | |||||||||||
| Net gains on sale of loans | 33 | 42 | 50 | 31 | 21 | ||||||||||||
| Other operating income | 80 | 89 | 182 | 74 | 79 | ||||||||||||
| Total noninterest income | $ | 1,941 | $ | 2,127 | $ | 2,311 | $ | 2,112 | $ | 1,943 | |||||||
| Noninterest expense | |||||||||||||||||
| Salaries and employee benefits | $ | 3,242 | $ | 2,897 | $ | 3,183 | $ | 3,415 | $ | 3,444 | |||||||
| Occupancy | 367 | 364 | 380 | 365 | 424 | ||||||||||||
| Equipment | 408 | 402 | 406 | 394 | 432 | ||||||||||||
| Marketing | 136 | 210 | 125 | 120 | 107 | ||||||||||||
| Supplies | 91 | 138 | 108 | 103 | 101 | ||||||||||||
| Legal and professional fees | 197 | 238 | 179 | 156 | 311 | ||||||||||||
| ATM and check card fees | 162 | 211 | 229 | 221 | 205 | ||||||||||||
| FDIC assessment | 79 | 72 | 106 | 126 | 122 | ||||||||||||
| Bank franchise tax | 104 | 90 | 89 | 90 | 103 | ||||||||||||
| Telecommunications expense | 110 | 112 | 110 | 115 | 114 | ||||||||||||
| Data processing expense | 150 | 159 | 160 | 146 | 128 | ||||||||||||
| Postage expense | 61 | 56 | 56 | 57 | 69 | ||||||||||||
| Amortization expense | 169 | 179 | 187 | 198 | 207 | ||||||||||||
| Other real estate owned expense (income), net | 2 | - | 1 | (49 | ) | (72 | ) | ||||||||||
| Net loss on disposal of premises and equipment | - | - | 8 | - | - | ||||||||||||
| Other operating expense | 473 | 507 | 526 | 426 | 422 | ||||||||||||
| Total noninterest expense | $ | 5,751 | $ | 5,635 | $ | 5,853 | $ | 5,883 | $ | 6,117 | |||||||
| Income before income taxes | $ | 2,182 | $ | 2,405 | $ | 2,305 | $ | 2,025 | $ | 1,525 | |||||||
| Income tax expense | 639 | 724 | 611 | 592 | 426 | ||||||||||||
| Net income | $ | 1,543 | $ | 1,681 | $ | 1,694 | $ | 1,433 | $ | 1,099 | |||||||
| Common Share and Per Common Share Data | |||||||||||||||||
| Net income, basic | $ | 0.31 | $ | 0.34 | $ | 0.34 | $ | 0.29 | $ | 0.22 | |||||||
| Weighted average shares, basic | 4,935,421 | 4,927,728 | 4,925,753 | 4,924,702 | 4,920,315 | ||||||||||||
| Net income, diluted | $ | 0.31 | $ | 0.34 | $ | 0.34 | $ | 0.29 | $ | 0.22 | |||||||
| Weighted average shares, diluted | 4,937,625 | 4,933,572 | 4,929,922 | 4,926,859 | 4,923,117 | ||||||||||||
| Shares outstanding at period end | 4,940,766 | 4,929,403 | 4,926,546 | 4,925,599 | 4,924,539 | ||||||||||||
| Tangible book value at period end | $ | 10.64 | $ | 10.26 | $ | 9.99 | $ | 9.61 | $ | 9.25 | |||||||
| Cash dividends | $ | 0.035 | $ | 0.03 | $ | 0.03 | $ | 0.03 | $ | 0.03 | |||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) For the Quarter Ended | ||||||||||||||||||||
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||||||||||||||
| Key Performance Ratios | ||||||||||||||||||||
| Return on average assets | 0.88 | % | 0.94 | % | 0.95 | % | 0.82 | % | 0.64 | % | ||||||||||
| Return on average equity | 11.78 | % | 13.04 | % | 13.44 | % | 11.90 | % | 9.39 | % | ||||||||||
| Net interest margin | 3.70 | % | 3.60 | % | 3.57 | % | 3.62 | % | 3.62 | % | ||||||||||
| Efficiency ratio (1) | 69.52 | % | 67.05 | % | 68.57 | % | 71.62 | % | 77.32 | % | ||||||||||
| Average Balances | ||||||||||||||||||||
| Average assets | $ | 714,714 | $ | 711,834 | $ | 710,005 | $ | 705,707 | $ | 693,783 | ||||||||||
| Average earning assets | 667,358 | 664,156 | 661,798 | 654,709 | 643,531 | |||||||||||||||
| Average shareholders’ equity | 53,132 | 51,295 | 50,160 | 48,443 | 47,066 | |||||||||||||||
| Asset Quality | ||||||||||||||||||||
| Loan charge-offs | $ | 106 | $ | 337 | $ | 195 | $ | 136 | $ | 120 | ||||||||||
| Loan recoveries | 236 | 48 | 71 | 350 | 116 | |||||||||||||||
| Net charge-offs (recoveries) | (130 | ) | 289 | 124 | (214 | ) | 4 | |||||||||||||
| Non-accrual loans | 1,596 | 1,520 | 3,521 | 4,057 | 4,258 | |||||||||||||||
| Other real estate owned, net | 250 | 250 | 250 | 442 | 2,112 | |||||||||||||||
| Nonperforming assets | 1,846 | 1,770 | 3,771 | 4,499 | 6,370 | |||||||||||||||
| Loans 30 to 89 days past due, accruing | 2,606 | 2,583 | 2,036 | 1,979 | 1,743 | |||||||||||||||
| Loans over 90 days past due, accruing | 119 | 116 | 59 | 11 | 124 | |||||||||||||||
| Troubled debt restructurings, accruing | 296 | 300 | 392 | 308 | 313 | |||||||||||||||
| Special mention loans | 12,896 | 13,073 | 14,238 | 13,392 | 13,796 | |||||||||||||||
| Substandard loans, accruing | 7,877 | 8,056 | 8,273 | 9,610 | 10,068 | |||||||||||||||
| Capital Ratios (2) | ||||||||||||||||||||
| Total capital | $ | 67,264 | $ | 65,590 | $ | 65,759 | $ | 64,375 | $ | 62,440 | ||||||||||
| Tier 1 capital | 61,813 | 60,269 | 60,149 | 58,641 | 56,920 | |||||||||||||||
| Common equity tier 1 capital | 61,813 | 60,269 | 60,149 | 58,641 | 56,920 | |||||||||||||||
| Total capital to risk-weighted assets | 13.51 | % | 13.47 | % | 13.90 | % | 13.66 | % | 13.50 | % | ||||||||||
| Tier 1 capital to risk-weighted assets | 12.41 | % | 12.38 | % | 12.72 | % | 12.45 | % | 12.30 | % | ||||||||||
| Common equity tier 1 capital to risk-weighted assets | 12.41 | % | 12.38 | % | 12.72 | % | 12.45 | % | 12.30 | % | ||||||||||
| Leverage ratio | 8.66 | % | 8.48 | % | 8.48 | % | 8.33 | % | 8.22 | % | ||||||||||
| Balance Sheet | ||||||||||||||||||||
| Cash and due from banks | $ | 10,593 | $ | 10,106 | $ | 8,955 | $ | 10,518 | $ | 10,250 | ||||||||||
| Interest-bearing deposits in banks | 35,246 | 30,986 | 47,902 | 40,225 | 29,077 | |||||||||||||||
| Securities available for sale, at fair value | 92,081 | 94,976 | 88,497 | 94,740 | 99,193 | |||||||||||||||
| Securities held to maturity, at carrying value | 51,999 | 53,398 | 55,263 | 57,401 | 64,963 | |||||||||||||||
| Restricted securities, at cost | 1,570 | 1,548 | 1,548 | 2,058 | 1,548 | |||||||||||||||
| Loans held for sale | - | 337 | 1,053 | 1,819 | 523 | |||||||||||||||
| Loans, net of allowance for loan losses | 492,319 | 480,746 | 465,224 | 459,812 | 448,556 | |||||||||||||||
| Other real estate owned, net of valuation allowance | 250 | 250 | 250 | 442 | 2,112 | |||||||||||||||
| Premises and equipment, net | 20,709 | 20,785 | 20,852 | 21,126 | 21,366 | |||||||||||||||
| Accrued interest receivable | 1,753 | 1,746 | 1,631 | 1,612 | 1,741 | |||||||||||||||
| Bank owned life insurance | 14,013 | 13,928 | 13,808 | 13,935 | 13,828 | |||||||||||||||
| Core deposit intangibles, net | 1,382 | 1,551 | 1,730 | 1,917 | 2,115 | |||||||||||||||
| Other assets | 5,381 | 5,643 | 5,959 | 5,743 | 5,771 | |||||||||||||||
| Total assets | $ | 727,296 | $ | 716,000 | $ | 712,672 | $ | 711,348 | $ | 701,043 | ||||||||||
| Noninterest-bearing demand deposits | $ | 173,963 | $ | 168,076 | $ | 168,204 | $ | 159,278 | $ | 161,783 | ||||||||||
| Savings and interest-bearing demand deposits | 353,958 | 349,067 | 340,884 | 337,589 | 334,599 | |||||||||||||||
| Time deposits | 126,848 | 128,427 | 131,654 | 133,479 | 136,736 | |||||||||||||||
| Total deposits | $ | 654,769 | $ | 645,570 | $ | 640,742 | $ | 630,346 | $ | 633,118 | ||||||||||
| Other borrowings | - | - | - | 12,000 | - | |||||||||||||||
| Subordinated debt | 4,934 | 4,930 | 4,926 | 4,921 | 4,917 | |||||||||||||||
| Junior subordinated debt | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | |||||||||||||||
| Accrued interest payable and other liabilities | 4,336 | 4,070 | 6,742 | 5,544 | 6,029 | |||||||||||||||
| Total liabilities | $ | 673,318 | $ | 663,849 | $ | 661,689 | $ | 662,090 | $ | 653,343 | ||||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) | ||||||||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||||||||||||||||||||||||||
| Balance Sheet (continued) | ||||||||||||||||||||||||||||||||
| Preferred stock | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||
| Common stock | 6,176 | 6,162 | 6,158 | 6,157 | 6,156 | |||||||||||||||||||||||||||
| Surplus | 7,155 | 7,093 | 7,046 | 7,021 | 6,996 | |||||||||||||||||||||||||||
| Retained earnings | 41,126 | 39,756 | 38,223 | 36,676 | 35,391 | |||||||||||||||||||||||||||
| Accumulated other comprehensive loss, net | (479 | ) | (860 | ) | (444 | ) | (596 | ) | (843 | ) | ||||||||||||||||||||||
| Total shareholders’ equity | $ | 53,978 | $ | 52,151 | $ | 50,983 | $ | 49,258 | $ | 47,700 | ||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 727,296 | $ | 716,000 | $ | 712,672 | $ | 711,348 | $ | 701,043 | ||||||||||||||||||||||
| Loan Data | ||||||||||||||||||||||||||||||||
| Mortgage loans on real estate: | ||||||||||||||||||||||||||||||||
| Construction and land development | $ | 36,024 | $ | 34,699 | $ | 34,518 | $ | 33,232 | $ | 31,505 | ||||||||||||||||||||||
| Secured by farm land | 676 | 688 | 695 | 706 | 931 | |||||||||||||||||||||||||||
| Secured by 1-4 family residential | 205,623 | 198,763 | 196,492 | 196,295 | 196,165 | |||||||||||||||||||||||||||
| Other real estate loans | 215,915 | 210,522 | 202,148 | 199,456 | 190,375 | |||||||||||||||||||||||||||
| Loans to farmers (except those secured by real estate) | 461 | 1,316 | 737 | 492 | 473 | |||||||||||||||||||||||||||
| Commercial and industrial loans (except those secured by real estate) | 28,731 | 28,665 | 25,114 | 24,229 | 23,742 | |||||||||||||||||||||||||||
| Consumer installment loans | 5,279 | 4,611 | 4,283 | 4,083 | 3,854 | |||||||||||||||||||||||||||
| Deposit overdrafts | 199 | 264 | 260 | 334 | 312 | |||||||||||||||||||||||||||
| All other loans | 4,862 | 6,539 | 6,587 | 6,719 | 6,719 | |||||||||||||||||||||||||||
| Total loans | $ | 497,770 | $ | 486,067 | $ | 470,834 | $ | 465,546 | $ | 454,076 | ||||||||||||||||||||||
| Allowance for loan losses | (5,451 | ) | (5,321 | ) | (5,610 | ) | (5,734 | ) | (5,520 | ) | ||||||||||||||||||||||
| Loans, net | $ | 492,319 | $ | 480,746 | $ | 465,224 | $ | 459,812 | $ | 448,556 | ||||||||||||||||||||||
| Reconciliation of Tax-Equivalent Net Interest Income | ||||||||||||||||||||||||||||||||
| GAAP measures: | ||||||||||||||||||||||||||||||||
| Interest income – loans | $ | 5,646 | $ | 5,556 | $ | 5,500 | $ | 5,370 | $ | 5,236 | ||||||||||||||||||||||
| Interest income – investments and other | 886 | 870 | 842 | 908 | 955 | |||||||||||||||||||||||||||
| Interest expense – deposits | (383 | ) | (353 | ) | (338 | ) | (329 | ) | (333 | ) | ||||||||||||||||||||||
| Interest expense – other borrowings | - | - | (1 | ) | - | (5 | ) | |||||||||||||||||||||||||
| Interest expense – subordinated debt | (89 | ) | (91 | ) | (91 | ) | (89 | ) | (90 | ) | ||||||||||||||||||||||
| Interest expense – junior subordinated debt | (68 | ) | (69 | ) | (65 | ) | (64 | ) | (61 | ) | ||||||||||||||||||||||
| Interest expense – federal funds purchased | - | - | - | - | (3 | ) | ||||||||||||||||||||||||||
| Total net interest income | $ | 5,992 | $ | 5,913 | $ | 5,847 | $ | 5,796 | $ | 5,699 | ||||||||||||||||||||||
| Non-GAAP measures: | ||||||||||||||||||||||||||||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 19 | $ | 25 | $ | 26 | $ | 25 | $ | 25 | ||||||||||||||||||||||
| Tax benefit realized on non-taxable interest income – municipal securities | 74 | 71 | 70 | 73 | 76 | |||||||||||||||||||||||||||
| Total tax benefit realized on non-taxable interest income | $ | 93 | $ | 96 | $ | 96 | $ | 98 | $ | 101 | ||||||||||||||||||||||
| Total tax-equivalent net interest income | $ | 6,085 | $ | 6,009 | $ | 5,943 | $ | 5,894 | $ | 5,800 | ||||||||||||||||||||||
(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 34%. 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 the Bank.