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home / news releases / FXNC - First National Corporation Announces Second Quarter Earnings


FXNC - First National Corporation Announces Second Quarter Earnings

STRASBURG, Va., July 23, 2019 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (NASDAQ:FXNC) reported net income of $2.1 million, or $0.42 per diluted share, for the second quarter of 2019, compared to $2.5 million or $0.49 per diluted share for the second quarter of 2018. The decrease in net income resulted primarily from a $366 thousand increase in noninterest expense and a $200 thousand increase in the provision for loan losses, which were partially offset by a $134 thousand increase in net interest income.

Highlights for the second quarter of 2019:

  • Loan growth of $24.4 million during the quarter
  • Return on average equity of 11.76%
  • Return on average assets of 1.08%
  • Net interest margin of 3.88%
  • Nonperforming assets decreased to 0.23% of assets
  • Total assets reached $778.4 million

”We are pleased with second quarter results for the Company, specifically the pick-up in quality loan growth, the continued growth in wealth management assets and income, and the $19 million of deposit growth since year end,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “While the net interest margin improved compared to the same quarterly period in 2018, the margin decreased compared to the linked quarter. We are concerned about the impact of an inverted yield curve on earnings over an extended period. Expenses for the quarter were also impacted by legal fees and marketing expenses related to strategic initiatives, and additional costs related to listing the Company’s stock on Nasdaq."

BALANCE SHEET

Total assets of First National increased $15.0 million to $778.4 million, compared to $763.4 million at June 30, 2018. The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $44.1 million, or 8%, while securities and interest-bearing deposits in banks decreased $31.0 million, or 17%.

Total deposits increased to $689.8 million, up from $686.5 million at June 30, 2018. The deposit portfolio composition remained relatively stable as noninterest-bearing deposits were 27% and 29% of total deposits at June 30, 2019 and 2018, respectively.

Shareholders’ equity increased $11.2 million to $72.8 million at June 30, 2019, compared to $61.6 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $72.5 million at the end of the second quarter, an increase of 19% compared to $61.0 million at June 30, 2018. The Company’s wholly owned subsidiary, First Bank (the “Bank”), was considered well capitalized at June 30, 2019.

ANALYSIS OF THE THREE-MONTH PERIOD

Net interest income increased $134 thousand to $7.0 million for the quarter ended June 30, 2019, compared to $6.8 million for the second quarter of 2018. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 1%, and the net interest margin increased 2 basis points to 3.88% for the quarter ended June 30, 2019, compared to 3.86% for the same period in 2018. The increase in the net interest margin resulted from a 23 basis point increase in the yield on average earning assets, which was partially offset by a 21 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 11 basis point increase in the yield on loans and a 59 basis point increase in the yield on 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 30 basis points, which compared favorably to the 75 basis point increase in the target federal funds rate that occurred between the two periods.

Noninterest income decreased slightly to $2.0 million, compared to $2.1 million for the same period of 2018. The decrease was primarily attributable to a $69 thousand decrease in service charges on deposits and a $64 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. These decreases were partially offset by a $49 thousand, or 12%, increase in wealth management fees, and a $22 thousand increase in income from bank-owned life insurance.

Noninterest expense increased $366 thousand, or 6%, to $6.2 million, compared to the same period one year ago. The increase was primarily attributable to a $148 thousand, or 5%, increase in salaries and employee benefits, a $102 thousand increase in other operating expense, an $80 thousand increase in legal and professional fees, and a $78 thousand increase in marketing expense. The increase in other operating expense was attributable to additional costs of listing the Company’s common stock on the Nasdaq Capital Market stock exchange during the quarter, as well as higher education and training expenses. The increase in legal and professional fees resulted from legal costs related to strategic initiatives, and consulting expenses related to bank compliance testing and implementation of new accounting standards. The increase in marketing expense was also attributable to strategic initiatives. These increases were partially offset by a $40 thousand decrease in amortization expense and a $31 thousand decrease in FDIC assessments.   

ANALYSIS OF THE SIX-MONTH PERIOD

Net interest income increased $486 thousand, or 4%, to $13.9 million for the six months ended June 30, 2019, compared to $13.4 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 1%, and the net interest margin increased 10 basis points to 3.93% for the six months ended June 30, 2019, compared to 3.83% for the same period in 2018. The increase in the net interest margin resulted from a 30 basis point increase in the yield on average earning assets, which was partially offset by a 21 basis point increase in interest expense as a percent of average earning assets. 

The higher yield on average earning assets was primarily attributable to a 20 basis point increase in the yield on loans and a 65 basis point increase in the yield on 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 29 basis points, which compared favorably to the 75 basis point increase in the target federal funds rate that occurred between the two periods.

Noninterest income decreased to $4.0 million, compared to $4.7 million for the same period of 2018. The decrease was primarily attributable to a $434 thousand decrease in income from bank-owned life insurance, a $258 thousand decrease in other operating income, and a $130 thousand decrease in service charges on deposits. These decreases were partially offset by a $79 thousand increase in wealth management fees.  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 $598 thousand, or 5%, to $12.3 million, compared to $11.7 million for the same period one year ago. The increase was primarily attributable to a $208 thousand, or 3%, increase in salaries and employee benefits, a $130 thousand increase in legal and professional fees, a $122 thousand increase in other operating expense, and a $110 thousand increase in marketing expense. 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 expense correlated with the increase in wealth management revenue, when comparing the same periods.  The increase in other operating expense was attributable to costs of listing the Company’s common stock on the Nasdaq Capital Market stock exchange, as well as higher education and training expenses. The increase in marketing expense was attributable to strategic initiatives. These increases were partially offset by an $81 thousand decrease in amortization expense and a $44 thousand decrease in FDIC assessments.  

ASSET QUALITY/LOAN LOSS PROVISION

The provision for loan losses totaled $200 thousand for the second quarter of 2019, compared to no provision for loan losses for the second quarter 2018. Net charge-offs totaled $151 thousand for the second quarter of 2019 compared to $233 thousand for the same period of 2018. The provision for loan losses recorded in the second quarter of 2019 was primarily a result of loan growth during the period. Nonperforming assets totaled $1.8 million, or 0.23% of total assets at June 30, 2019, compared to $2.4 million, or 0.31% of total assets, one year ago. The allowance for loan losses totaled $5.0 million, or 0.87% of total loans, and $5.0 million, or 0.95% of total loans, at June 30, 2019 and 2018, respectively.

The provision for loan losses totaled $200 thousand for the six-month period ended June 30, 2019, compared to $100 thousand for the same period in 2018. Net charge-offs totaled $214 thousand for the six months ended June 30, 2019 compared to $387 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
sharvard@fbvirginia.com
sbell@fbvirginia.com


FIRST NATIONAL CORPORATION

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

 
(unaudited)
For the Quarter Ended
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Income Statement
 
 
 
 
 
 
 
 
 
Interest income
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
7,200
 
 
$
6,996
 
 
$
7,106
 
 
$
6,917
 
 
$
6,546
 
Interest on deposits in banks
133
 
 
110
 
 
105
 
 
88
 
 
186
 
Interest on securities
 
 
 
 
 
 
 
 
 
Taxable interest
696
 
 
737
 
 
771
 
 
797
 
 
776
 
Tax-exempt interest
159
 
 
156
 
 
153
 
 
156
 
 
156
 
Dividends on restricted securities
26
 
 
24
 
 
24
 
 
23
 
 
22
 
Total interest income
$
8,214
 
 
$
8,023
 
 
$
8,159
 
 
$
7,981
 
 
$
7,686
 
Interest expense
 
 
 
 
 
 
 
 
 
Interest on deposits
$
1,051
 
 
$
922
 
 
$
798
 
 
$
702
 
 
$
665
 
Interest on subordinated debt
90
 
 
89
 
 
91
 
 
91
 
 
89
 
Interest on junior subordinated debt
108
 
 
111
 
 
105
 
 
105
 
 
101
 
Interest on other borrowings
 
 
2
 
 
 
 
 
 
 
Total interest expense
$
1,249
 
 
$
1,124
 
 
$
994
 
 
$
898
 
 
$
855
 
Net interest income
$
6,965
 
 
$
6,899
 
 
$
7,165
 
 
$
7,083
 
 
$
6,831
 
Provision for loan losses
200
 
 
 
 
500
 
 
 
 
 
Net interest income after provision for loan losses
$
6,765
 
 
$
6,899
 
 
$
6,665
 
 
$
7,083
 
 
$
6,831
 
Noninterest income
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
$
715
 
 
$
701
 
 
$
814
 
 
$
818
 
 
$
784
 
ATM and check card fees
573
 
 
517
 
 
642
 
 
540
 
 
555
 
Wealth management fees
458
 
 
437
 
 
443
 
 
423
 
 
409
 
Fees for other customer services
153
 
 
175
 
 
154
 
 
143
 
 
151
 
Income from bank owned life insurance
99
 
 
103
 
 
97
 
 
107
 
 
77
 
Net gains (losses) on securities
 
 
 
 
(1
)
 
 
 
 
Net gains on sale of loans
25
 
 
22
 
 
23
 
 
39
 
 
15
 
Other operating income
12
 
 
30
 
 
107
 
 
108
 
 
76
 
Total noninterest income
$
2,035
 
 
$
1,985
 
 
$
2,279
 
 
$
2,178
 
 
$
2,067
 
Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
$
3,375
 
 
$
3,443
 
 
$
3,306
 
 
$
3,371
 
 
$
3,227
 
Occupancy
401
 
 
438
 
 
424
 
 
387
 
 
387
 
Equipment
409
 
 
420
 
 
410
 
 
396
 
 
420
 
Marketing
239
 
 
141
 
 
155
 
 
123
 
 
161
 
Supplies
91
 
 
73
 
 
91
 
 
75
 
 
88
 
Legal and professional fees
303
 
 
241
 
 
343
 
 
229
 
 
223
 
ATM and check card expense
225
 
 
216
 
 
178
 
 
217
 
 
211
 
FDIC assessment
35
 
 
69
 
 
68
 
 
78
 
 
66
 
Bank franchise tax
136
 
 
130
 
 
117
 
 
118
 
 
118
 
Telecommunications expense
79
 
 
83
 
 
79
 
 
83
 
 
98
 
Data processing expense
179
 
 
173
 
 
173
 
 
168
 
 
170
 
Postage expense
44
 
 
48
 
 
51
 
 
42
 
 
42
 
Amortization expense
80
 
 
90
 
 
99
 
 
108
 
 
120
 
Other real estate owned expense, net
 
 
 
 
 
 
2
 
 
1
 
Net loss on disposal of premises and equipment
 
 
 
 
 
 
2
 
 
 
Other operating expense
634
 
 
533
 
 
587
 
 
551
 
 
532
 
Total noninterest expense
$
6,230
 
 
$
6,098
 
 
$
6,081
 
 
$
5,950
 
 
$
5,864
 
Income before income taxes
$
2,570
 
 
$
2,786
 
 
$
2,863
 
 
$
3,311
 
 
$
3,034
 
Income tax expense
484
 
 
525
 
 
542
 
 
635
 
 
583
 
Net income
$
2,086
 
 
$
2,261
 
 
$
2,321
 
 
$
2,676
 
 
$
2,451
 

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

 
(unaudited)
For the Quarter Ended
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Common Share and Per Common Share Data
 
 
 
 
 
 
 
 
 
Net income, basic
$
0.42
 
 
$
0.46
 
 
$
0.47
 
 
$
0.54
 
 
$
0.49
 
Weighted average shares, basic
4,963,737
 
 
4,960,264
 
 
4,957,055
 
 
4,955,162
 
 
4,952,712
 
Net income, diluted
$
0.42
 
 
$
0.46
 
 
$
0.47
 
 
$
0.54
 
 
$
0.49
 
Weighted average shares, diluted
4,965,822
 
 
4,964,134
 
 
4,960,597
 
 
4,958,162
 
 
4,954,265
 
Shares outstanding at period end
4,964,824
 
 
4,963,487
 
 
4,957,694
 
 
4,956,925
 
 
4,953,356
 
Tangible book value at period end
$
14.60
 
 
$
13.97
 
 
$
13.35
 
 
$
12.72
 
 
$
12.31
 
Cash dividends
$
0.09
 
 
$
0.09
 
 
$
0.05
 
 
$
0.05
 
 
$
0.05
 
 
 
 
 
 
 
 
 
 
 
Key Performance Ratios
 
 
 
 
 
 
 
 
 
Return on average assets
1.08
%
 
1.21
%
 
1.22
%
 
1.41
%
 
1.29
%
Return on average equity
11.76
%
 
13.47
%
 
14.15
%
 
16.89
%
 
16.23
%
Net interest margin
3.88
%
 
3.97
%
 
4.05
%
 
4.02
%
 
3.86
%
Efficiency ratio (1)
67.94
%
 
67.23
%
 
62.99
%
 
62.68
%
 
64.17
%
 
 
 
 
 
 
 
 
 
 
Average Balances
 
 
 
 
 
 
 
 
 
Average assets
$
773,574
 
 
$
757,910
 
 
$
753,112
 
 
$
750,619
 
 
$
762,626
 
Average earning assets
724,909
 
 
709,690
 
 
706,323
 
 
703,894
 
 
715,163
 
Average shareholders’ equity
71,124
 
 
68,089
 
 
65,077
 
 
62,882
 
 
60,592
 
 
 
 
 
 
 
 
 
 
 
Asset Quality
 
 
 
 
 
 
 
 
 
Loan charge-offs
$
219
 
 
$
228
 
 
$
374
 
 
$
295
 
 
$
294
 
Loan recoveries
68
 
 
165
 
 
82
 
 
57
 
 
61
 
Net charge-offs
151
 
 
63
 
 
292
 
 
238
 
 
233
 
Non-accrual loans
1,775
 
 
1,915
 
 
3,172
 
 
2,738
 
 
2,330
 
Other real estate owned, net
 
 
 
 
 
 
 
 
68
 
Nonperforming assets
1,775
 
 
1,915
 
 
3,172
 
 
2,738
 
 
2,398
 
Loans 30 to 89 days past due, accruing
792
 
 
1,002
 
 
1,446
 
 
2,707
 
 
3,408
 
Loans over 90 days past due, accruing
19
 
 
133
 
 
235
 
 
261
 
 
549
 
Troubled debt restructurings, accruing
 
 
259
 
 
264
 
 
269
 
 
273
 
Special mention loans
2,610
 
 
1,910
 
 
2,078
 
 
2,718
 
 
3,988
 
Substandard loans, accruing
2,825
 
 
3,132
 
 
3,522
 
 
1,216
 
 
3,798
 
 
 
 
 
 
 
 
 
 
 
Capital Ratios (2)
 
 
 
 
 
 
 
 
 
Total capital
$
82,078
 
 
$
80,780
 
 
$
74,697
 
 
$
72,807
 
 
$
71,026
 
Tier 1 capital
77,083
 
 
75,834
 
 
69,688
 
 
68,006
 
 
65,987
 
Common equity tier 1 capital
77,083
 
 
75,834
 
 
69,688
 
 
68,006
 
 
65,987
 
Total capital to risk-weighted assets
14.24
%
 
14.49
%
 
13.62
%
 
13.25
%
 
13.47
%
Tier 1 capital to risk-weighted assets
13.37
%
 
13.60
%
 
12.71
%
 
12.38
%
 
12.52
%
Common equity tier 1 capital to risk-weighted assets
13.37
%
 
13.60
%
 
12.71
%
 
12.38
%
 
12.52
%
Leverage ratio
9.96
%
 
10.01
%
 
9.26
%
 
9.07
%
 
8.66
%

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

 
(unaudited)
For the Quarter Ended
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Balance Sheet
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
12,354
 
 
$
10,862
 
 
$
13,378
 
 
$
11,370
 
 
$
13,501
 
Interest-bearing deposits in banks
10,716
 
 
31,833
 
 
15,240
 
 
10,068
 
 
27,762
 
Securities available for sale, at fair value
119,510
 
 
121,202
 
 
99,857
 
 
102,748
 
 
106,707
 
Securities held to maturity, at amortized cost
18,828
 
 
19,489
 
 
43,408
 
 
44,239
 
 
45,701
 
Restricted securities, at cost
1,701
 
 
1,701
 
 
1,688
 
 
1,590
 
 
1,590
 
Loans held for sale
675
 
 
200
 
 
419
 
 
516
 
 
1,195
 
Loans, net of allowance for loan losses
569,959
 
 
545,529
 
 
537,847
 
 
535,020
 
 
525,894
 
Other real estate owned, net of valuation allowance
 
 
 
 
 
 
 
 
68
 
Premises and equipment, net
20,182
 
 
20,282
 
 
20,066
 
 
19,557
 
 
19,633
 
Accrued interest receivable
2,163
 
 
2,143
 
 
2,113
 
 
2,138
 
 
2,073
 
Bank owned life insurance
17,193
 
 
17,094
 
 
13,991
 
 
13,894
 
 
13,787
 
Core deposit intangibles, net
302
 
 
382
 
 
472
 
 
571
 
 
679
 
Other assets
4,801
 
 
4,361
 
 
4,490
 
 
4,743
 
 
4,774
 
Total assets
$
778,384
 
 
$
775,078
 
 
$
752,969
 
 
$
746,454
 
 
$
763,364
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand deposits
$
186,553
 
 
$
189,261
 
 
$
181,964
 
 
$
186,293
 
 
$
196,839
 
Savings and interest-bearing demand deposits
385,399
 
 
377,673
 
 
369,383
 
 
360,988
 
 
367,399
 
Time deposits
117,863
 
 
117,290
 
 
119,219
 
 
119,823
 
 
122,291
 
Total deposits
$
689,815
 
 
$
684,224
 
 
$
670,566
 
 
$
667,104
 
 
$
686,529
 
Other borrowings
 
 
5,000
 
 
 
 
 
 
 
Subordinated debt
4,974
 
 
4,969
 
 
4,965
 
 
4,961
 
 
4,956
 
Junior subordinated debt
9,279
 
 
9,279
 
 
9,279
 
 
9,279
 
 
9,279
 
Accrued interest payable and other liabilities
1,507
 
 
1,878
 
 
1,485
 
 
1,459
 
 
952
 
Total liabilities
$
705,575
 
 
$
705,350
 
 
$
686,295
 
 
$
682,803
 
 
$
701,716
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
$
 
 
$
 
 
$
 
 
$
 
 
$
 
Common stock
6,206
 
 
6,204
 
 
6,197
 
 
6,196
 
 
6,192
 
Surplus
7,566
 
 
7,515
 
 
7,471
 
 
7,438
 
 
7,346
 
Retained earnings
58,268
 
 
56,629
 
 
54,814
 
 
52,741
 
 
50,313
 
Accumulated other comprehensive income (loss), net
769
 
 
(620
)
 
(1,808
)
 
(2,724
)
 
(2,203
)
Total shareholders’ equity
$
72,809
 
 
$
69,728
 
 
$
66,674
 
 
$
63,651
 
 
$
61,648
 
Total liabilities and shareholders’ equity
$
778,384
 
 
$
775,078
 
 
$
752,969
 
 
$
746,454
 
 
$
763,364
 
 
 
 
 
 
 
 
 
 
 
Loan Data
 
 
 
 
 
 
 
 
 
Mortgage loans on real estate:
 
 
 
 
 
 
 
 
 
Construction and land development
$
46,281
 
 
$
48,948
 
 
$
45,867
 
 
$
42,982
 
 
$
37,350
 
Secured by farmland
855
 
 
883
 
 
880
 
 
942
 
 
975
 
Secured by 1-4 family residential
225,820
 
 
217,527
 
 
215,945
 
 
211,938
 
 
211,101
 
Other real estate loans
236,515
 
 
220,513
 
 
218,673
 
 
223,961
 
 
223,387
 
Loans to farmers (except those secured by real estate)
1,006
 
 
806
 
 
1,035
 
 
937
 
 
476
 
Commercial and industrial loans (except those secured by real estate)
48,347
 
 
45,239
 
 
43,570
 
 
41,924
 
 
40,467
 
Consumer installment loans
11,572
 
 
11,890
 
 
12,061
 
 
12,301
 
 
12,315
 
Deposit overdrafts
208
 
 
204
 
 
275
 
 
249
 
 
231
 
All other loans
4,350
 
 
4,465
 
 
4,550
 
 
4,587
 
 
4,631
 
Total loans
$
574,954
 
 
$
550,475
 
 
$
542,856
 
 
$
539,821
 
 
$
530,933
 
Allowance for loan losses
(4,995
)
 
(4,946
)
 
(5,009
)
 
(4,801
)
 
(5,039
)
Loans, net
$
569,959
 
 
$
545,529
 
 
$
537,847
 
 
$
535,020
 
 
$
525,894
 

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

 
(unaudited)
For the Quarter Ended
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Reconciliation of Tax-Equivalent Net Interest Income
 
 
 
 
 
 
 
 
GAAP measures:
 
 
 
 
 
 
 
 
 
Interest income – loans
$
7,200
 
 
$
6,996
 
 
$
7,106
 
 
$
6,917
 
 
$
6,546
 
Interest income – investments and other
1,014
 
 
1,027
 
 
1,053
 
 
1,064
 
 
1,140
 
Interest expense – deposits
(1,051
)
 
(922
)
 
(798
)
 
(702
)
 
(665
)
Interest expense – subordinated debt
(90
)
 
(89
)
 
(91
)
 
(91
)
 
(89
)
Interest expense – junior subordinated debt
(108
)
 
(111
)
 
(105
)
 
(105
)
 
(101
)
Interest expense – other borrowings
 
 
(2
)
 
 
 
 
 
 
Total net interest income
$
6,965
 
 
$
6,899
 
 
$
7,165
 
 
$
7,083
 
 
$
6,831
 
Non-GAAP measures:
 
 
 
 
 
 
 
 
 
Tax benefit realized on non-taxable interest income – loans
$
10
 
 
$
11
 
 
$
11
 
 
$
12
 
 
$
11
 
Tax benefit realized on non-taxable interest income – municipal securities
42
 
 
41
 
 
42
 
 
41
 
 
41
 
Total tax benefit realized on non-taxable interest income
$
52
 
 
$
52
 
 
$
53
 
 
$
53
 
 
$
52
 
Total tax-equivalent net interest income
$
7,017
 
 
$
6,951
 
 
$
7,218
 
 
$
7,136
 
 
$
6,883
 



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

 
(unaudited)
For the Six Months Ended
 
June 30,
2019
 
June 30,
2018
Income Statement
 
 
 
Interest income
 
 
 
Interest and fees on loans
$
14,196
 
 
$
12,851
 
Interest on deposits in banks
243
 
 
346
 
Interest on securities
 
 
 
Taxable interest
1,433
 
 
1,456
 
Tax-exempt interest
315
 
 
301
 
Dividends on restricted securities
50
 
 
44
 
Total interest income
$
16,237
 
 
$
14,998
 
Interest expense
 
 
 
Interest on deposits
$
1,973
 
 
$
1,255
 
Interest on subordinated debt
179
 
 
178
 
Interest on junior subordinated debt
219
 
 
187
 
Interest on other borrowings
2
 
 
 
Total interest expense
$
2,373
 
 
$
1,620
 
Net interest income
$
13,864
 
 
$
13,378
 
Provision for loan losses
200
 
 
100
 
Net interest income after provision for loan losses
$
13,664
 
 
$
13,278
 
Noninterest income
 
 
 
Service charges on deposit accounts
$
1,416
 
 
$
1,546
 
ATM and check card fees
1,090
 
 
1,074
 
Wealth management fees
895
 
 
816
 
Fees for other customer services
328
 
 
304
 
Income from bank owned life insurance
202
 
 
636
 
Net gains on sale of loans
47
 
 
24
 
Other operating income
42
 
 
300
 
Total noninterest income
$
4,020
 
 
$
4,700
 
Noninterest expense
 
 
 
Salaries and employee benefits
$
6,818
 
 
$
6,610
 
Occupancy
839
 
 
787
 
Equipment
829
 
 
843
 
Marketing
380
 
 
270
 
Supplies
164
 
 
168
 
Legal and professional fees
544
 
 
414
 
ATM and check card expense
441
 
 
414
 
FDIC assessment
104
 
 
148
 
Bank franchise tax
266
 
 
233
 
Telecommunications expense
162
 
 
134
 
Data processing expense
352
 
 
332
 
Postage expense
92
 
 
103
 
Amortization expense
170
 
 
251
 
Other real estate owned expense (income), net
 
 
(22
)
Other operating expense
1,167
 
 
1,045
 
Total noninterest expense
$
12,328
 
 
$
11,730
 
Income before income taxes
$
5,356
 
 
$
6,248
 
Income tax expense
1,009
 
 
1,110
 
Net income
$
4,347
 
 
$
5,138
 

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

 
(unaudited)
For the Six Months Ended
 
June 30,
2019
 
June 30,
2018
Common Share and Per Common Share Data
 
 
 
Net income, basic
$
0.88
 
 
$
1.04
 
Weighted average shares, basic
4,962,010
 
 
4,950,922
 
Net income, diluted
$
0.88
 
 
$
1.04
 
Weighted average shares, diluted
4,964,988
 
 
4,953,328
 
Shares outstanding at period end
4,964,824
 
 
4,953,356
 
Tangible book value at period end
$
14.60
 
 
$
12.31
 
Cash dividends
$
0.18
 
 
$
0.10
 
 
 
 
 
Key Performance Ratios
 
 
 
Return on average assets
1.14
%
 
1.37
%
Return on average equity
12.60
%
 
17.33
%
Net interest margin
3.93
%
 
3.83
%
Efficiency ratio (1)
67.59
%
 
63.27
%
 
 
 
 
Average Balances
 
 
 
Average assets
$
766,054
 
 
$
756,959
 
Average earning assets
717,341
 
 
710,083
 
Average shareholders’ equity
69,589
 
 
59,799
 
 
 
 
 
Asset Quality
 
 
 
Loan charge-offs
$
447
 
 
$
500
 
Loan recoveries
233
 
 
113
 
Net charge-offs
214
 
 
387
 
 
 
 
 
Reconciliation of Tax-Equivalent Net Interest Income
 
 
GAAP measures:
 
 
 
Interest income – loans
$
14,196
 
 
$
12,851
 
Interest income – investments and other
2,041
 
 
2,147
 
Interest expense – deposits
(1,973
)
 
(1,255
)
Interest expense – subordinated debt
(179
)
 
(178
)
Interest expense – junior subordinated debt
(219
)
 
(187
)
Interest expense – other borrowings
(2
)
 
 
Total net interest income
$
13,864
 
 
$
13,378
 
Non-GAAP measures:
 
 
 
Tax benefit realized on non-taxable interest income – loans
$
21
 
 
$
21
 
Tax benefit realized on non-taxable interest income – municipal securities
83
 
 
80
 
Total tax benefit realized on non-taxable interest income
$
104
 
 
$
101
 
Total tax-equivalent net interest income
$
13,968
 
 
$
13,479
 

(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. 

Stock Information

Company Name: First National Corporation
Stock Symbol: FXNC
Market: OTC
Website: fbvirginia.com

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