Attached files
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| 8-K - FORM 8-K - FIRST NATIONAL CORP /VA/ | f8kfnc021012.htm |
Exhibit 99.1
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Contact:
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Scott C. Harvard
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M. Shane Bell
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President and CEO
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Executive Vice President and CFO
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(540) 465-9121
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(540) 465-9121
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sharvard@therespowerinone.com
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sbell@therespowerinone.com
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News Release
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February 10, 2012
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First National Corporation Announces Financial Results
Strasburg, Virginia (February 10, 2012) --- First National Corporation (the “Company”) (OTCBB: FXNC), the parent company of First Bank (the “Bank”), reported financial results for the quarter and year ending December 31, 2011. The core banking operation continued strong performance during the quarter. However, financial results were impacted by a one-time, non-cash charge to income tax expense, provisions for loan losses and charges related to other real estate owned (OREO). As a result, net loss was $7.8 million and net loss to common shareholders was $8.0 million, or $2.72 per basic and diluted share, for the
fourth quarter of 2011. For the same quarter of 2010, net loss was $6.1 million and net loss to common shareholders was $6.3 million, or $2.14 per basic and diluted share. The one-time, non-cash charge to income tax expense totaling $6.1 million in the fourth quarter of 2011 was due to the establishment of a valuation allowance on net deferred tax assets. Fourth quarter results also included a $3.0 million provision for loan losses and $1.4 million of OREO valuation adjustments and losses on OREO dispositions.
Scott C. Harvard, President and CEO of the Company and the Bank commented, “The fourth quarter of 2011 wrapped up a very challenging year for First National Corporation and our subsidiary, First Bank. During the year, we came to grips with our asset quality problems and we believe that we have taken prudent and appropriate actions to both recognize potential losses in the loan portfolio and to rebuild the credit function to support a stronger growth oriented banking company. Nonperforming assets improved by decreasing 36% in the fourth quarter as a result of aggressive marketing of OREO, charge offs of loans believed to be unsalvageable, and improvement in specific loans. During the year
the Bank maintained strong performance in its core banking functions while making an effective transition to new leadership. In spite of the losses we experienced during the quarter and the year, they were a necessary part of rebuilding our banking company for the future. Our net interest margin exceeded four percent for the fourth quarter and non-interest income continued to exceed peer banks. We are looking forward to providing banking services to our customers in 2012 and beyond, and delivering the level of customer service that can only be found in a strong bank committed to the communities it serves.”
Operating Highlights for the Fourth Quarter
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The core banking company continued to deliver strong performance supported by a net interest margin of 4.07%, total revenues of $6.7 million, and continued strong non-interest income from trust and investment advisory services.
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Nonperforming assets decreased $10.1 million or 36% during the fourth quarter to 3.38% of total assets at December 31, 2011.
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The Bank sold eight OREO properties with carrying values of $2.8 million and contracted to sell thirteen
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additional properties with carrying values just under $1.0 million. OREO charge-downs and losses from disposition totaled $1.4 million for the quarter.
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The Bank charged-off $8.5 million of impaired loans and added $3.0 million to the allowance for loan losses.
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The allowance for loan losses stood at 3.30% of loans, or $12.9 million, at December 31, 2011.
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The Company recorded a $6.1 million non-recurring charge to earnings by establishing a full valuation allowance on its net deferred tax asset.
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Capital levels continued to exceed regulatory requirements for well-capitalized financial institutions.
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Quarterly Performance
Fourth quarter 2011 results reflect a $6.1 million charge to income tax expense to establish a valuation allowance on net deferred tax assets. The provisions for loan losses and other real estate owned decreased $8.2 million when compared to the same prior year quarter. Net interest income was 1% lower and noninterest income was 8% lower while noninterest expense, excluding the provision for other real estate owned and net losses on sale of other real estate owned, was 8% higher when comparing the two periods.
The net interest margin increased to 4.07% for the quarter ended December 31, 2011 compared to 4.05% for the same period of 2010. Net interest income was flat for the quarter compared to the same quarter of 2010. Net interest income totaled $5.1 million. Average interest-earning assets were $507.3 million for the quarter, representing a slight decline of $4.9 million when comparing the two periods. Total deposits ended the quarter at $469.2 million, a slight increase over $463.5 million at the end of the fourth quarter of 2010. Noninterest-bearing deposits, savings, and interest-bearing demand deposits increased $22.3 million or 9% to $279.9 million compared to
$257.6 million at the end of the fourth quarter of 2010.
Noninterest income was $1.6 million for the fourth quarter of 2011 compared to $1.7 million for the same quarter of 2010. The decrease in noninterest income was primarily the result of declines in net gains on sale of loans and other operating income. These decreases were partially offset by higher trust and investment advisory income and fees for other customer services.
Noninterest expense, excluding the provision for other real estate owned and net losses on sale of other real estate owned, was $5.0 million for the fourth quarter of 2011, compared to $4.6 million for the same quarter of 2010, resulting in an efficiency ratio of 73.48% compared to 66.20% for the prior year period. The increase in expense was primarily attributable to a one-time pension charge that increased salaries and employee benefit expense in the fourth quarter of 2011. The charge to pension expense resulted primarily from a former executive officer that terminated employment during 2011.
Net charge-offs were $8.5 million for the fourth quarter of 2011 compared to $1.7 million for the same quarter of 2010. The provision for loan losses was $3.0 million which resulted in a total allowance for loan losses of $12.9 million or 3.30% of total loans at December 31, 2011, compared to a provision of $9.1 million and an allowance of $16.0 million or 3.69% of total loans at December 31, 2010.
Year-to-Date Performance
For the year ended December 31, 2011, net loss totaled $10.6 million compared to net loss of $3.6 million for the same period in 2010. After the effective dividend on preferred stock, net loss to common shareholders was $11.5 million, or $3.91 per basic and diluted share, compared to net loss to common shareholders of $4.5 million, or $1.53 per basic and diluted share, for the same period in 2010. The increase in the net loss for 2011 compared to 2010 was primarily a result of establishing a $6.1 million valuation allowance on net deferred tax assets.
Net interest income was $20.2 million for the year ended December 31, 2011 compared to $20.4 million for the same period in 2010. The net interest margin was 3.98% for the year ended December 31, 2011, compared to 4.07% for the same period in 2010. The provision for loan losses totaled $12.4 million for the year ended December 31, 2011 compared to $11.7 million for the same period in 2010.
Noninterest income totaled $5.9 million for the year ended December 31, 2011 compared to $6.1 million for the same period in 2010. Decreases in overdraft fee income and gains on sales of loans were partially offset by increases in trust and investment advisory income and ATM and check card income. Noninterest expense, excluding the provision for other real estate owned and loss on sale of other real estate owned, increased $445 thousand or 2%, to $18.3 million for the fourth quarter of 2011, compared to $17.9 million for the same period in 2010. The provision for other real estate owned totaled $1.6 million for the year ended December 31, 2011 compared to $2.6 million for the same period in
2010. Net losses on sale of other real estate owned totaled $910 thousand for the year ended December 31, 2011 compared to $19 thousand for the same period in 2010.
Cautionary Statements
The Company notes to investors that past results of operations do not necessarily indicate future results. Certain factors that affect the Company’s operations and business environment are subject to uncertainties that could in turn affect future results. These factors are identified in the Annual Report on Form 10-K for the year ended December 31, 2010, which can be accessed from the Company’s website at www.therespowerinone.com, as filed with the Securities and Exchange Commission.
About the Company
First National Corporation, headquartered in Strasburg, Virginia, is the financial holding company of First Bank. First Bank offers loan, deposit, trust and investment products and services from 10 branch offices in the northern Shenandoah Valley region of Virginia, including Shenandoah County, Warren County, Frederick County and the City of Winchester. First Bank also owns First Bank Financial Services, Inc., which invests in entities that provide investment services and title insurance.
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FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
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(unaudited)
For the Three Months Ended
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(unaudited)
For the Year Ended
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Income Statement
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December 31,
2011
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December 31,
2010
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December 31,
2011
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December 31,
2010
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Interest and dividend income
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Interest and fees on loans
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$ | 5,590 | $ | 6,146 | $ | 22,907 | $ | 24,874 | |||||||||
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Interest on federal funds sold
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5 | 1 | 18 | 2 | |||||||||||||
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Interest on deposits in banks
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3 | 6 | 18 | 15 | |||||||||||||
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Interest and dividends on securities available for sale:
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Taxable interest
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534 | 424 | 2,152 | 1,722 | |||||||||||||
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Tax-exempt interest
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118 | 122 | 483 | 541 | |||||||||||||
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Dividends
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20 | 18 | 70 | 61 | |||||||||||||
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Total interest and dividend income
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$ | 6,270 | $ | 6,717 | $ | 25,648 | $ | 27,215 | |||||||||
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Interest expense
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Interest on deposits
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$ | 1,033 | $ | 1,329 | $ | 4,843 | $ | 5,903 | |||||||||
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Interest on federal funds purchased
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- | - | - | 12 | |||||||||||||
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Interest on trust preferred capital notes
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59 | 110 | 386 | 439 | |||||||||||||
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Interest on other borrowings
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46 | 104 | 221 | 460 | |||||||||||||
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Total interest expense
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$ | 1,138 | $ | 1,543 | $ | 5,450 | $ | 6,814 | |||||||||
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Net interest income
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$ | 5,132 | $ | 5,174 | $ | 20,198 | $ | 20,401 | |||||||||
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Provision for loan losses
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2,985 | 9,120 | 12,380 | 11,731 | |||||||||||||
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Net interest income (loss) after provision for loan losses
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$ | 2,147 | $ | (3,946 | ) | $ | 7,818 | $ | 8,670 | ||||||||
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Noninterest income
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Service charges on deposit accounts
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$ | 611 | $ | 659 | $ | 2,237 | $ | 2,618 | |||||||||
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ATM and check card fees
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363 | 374 | 1,535 | 1,432 | |||||||||||||
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Trust and investment advisory fees
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331 | 310 | 1,407 | 1,244 | |||||||||||||
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Fees for other customer services
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138 | 88 | 369 | 327 | |||||||||||||
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Gains on sale of loans
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37 | 122 | 131 | 263 | |||||||||||||
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Gains (losses) on sale of securities available for sale
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18 | - | 59 | (7 | ) | ||||||||||||
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Other operating income
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76 | 159 | 134 | 205 | |||||||||||||
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Total noninterest income
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$ | 1,574 | $ | 1,712 | $ | 5,872 | $ | 6,082 | |||||||||
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Noninterest expense
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Salaries and employee benefits
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$ | 2,593 | $ | 2,324 | $ | 9,460 | $ | 9,080 | |||||||||
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Occupancy
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335 | 336 | 1,354 | 1,389 | |||||||||||||
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Equipment
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299 | 337 | 1,272 | 1,372 | |||||||||||||
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Marketing
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111 | 109 | 425 | 503 | |||||||||||||
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Stationery and supplies
Legal and professional fees
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69 223 | 83 172 | 323 969 | 375 802 | |||||||||||||
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ATM and check card fees
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169 | 222 | 661 | 827 | |||||||||||||
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FDIC assessment
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180 | 182 | 768 | 730 | |||||||||||||
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(Gains) losses on sale of other real estate owned, net
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938 | (4 | ) | 910 | 19 | ||||||||||||
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Provision for other real estate owned
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455 | 2,489 | 1,558 | 2,640 | |||||||||||||
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Other operating expense
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984 | 831 | 3,115 | 2,824 | |||||||||||||
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Total noninterest expense
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$ | 6,356 | $ | 7,081 | $ | 20,815 | $ | 20,561 | |||||||||
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Loss before income taxes
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$ | (2,635 | ) | $ | (9,315 | ) | $ | (7,125 | ) | $ | (5,809 | ) | |||||
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Income tax provision (benefit)
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5,180 | (3,250 | ) | 3,518 | (2,206 | ) | |||||||||||
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Net loss
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$ | (7,815 | ) | $ | (6,065 | ) | $ | (10,643 | ) | $ | (3,603 | ) | |||||
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Effective dividend and accretion on preferred stock
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224 | 224 | 894 | 887 | |||||||||||||
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Net loss available to common shareholders
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$ | (8,039 | ) | $ | (6,289 | ) | $ | (11,537 | ) | $ | (4,490 | ) | |||||
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Common Share and Per Common Share Data
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Net loss, basic and diluted
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$ | (2.72 | ) | $ | (2.14 | ) | $ | (3.91 | ) | $ | (1.53 | ) | |||||
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Shares outstanding at period end
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2,955,649 | 2,948,901 | 2,955,649 | 2,948,901 | |||||||||||||
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Weighted average shares, basic and diluted
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2,955,649 | 2,945,966 | 2,953,344 | 2,939,561 | |||||||||||||
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Book value at period end
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$ | 7.72 | $ | 11.66 | $ | 7.72 | $ | 11.66 | |||||||||
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Cash dividends
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$ | 0.00 | $ | 0.14 | $ | 0.20 | $ | 0.56 | |||||||||
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FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
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(unaudited)
For the Three Months Ended
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(unaudited)
For the Year Ended
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December 31,
2011
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December 31,
2010
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December 31,
2011
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December 31,
2010
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Key Performance Ratios
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Return on average assets
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(5.79 | %) | (4.41 | %) | (1.96 | %) | (0.66 | %) | ||||||||
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Return on average equity
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(71.10 | %) | (44.34 | %) | (22.45 | %) | (6.52 | %) | ||||||||
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Net interest margin
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4.07 | % | 4.05 | % | 3.98 | % | 4.07 | % | ||||||||
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Efficiency ratio (1)
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73.48 | % | 66.20 | % | 69.75 | % | 66.77 | % | ||||||||
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Asset Quality
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Loan charge-offs
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$ | 8,652 | $ | 1,743 | $ | 15,789 | $ | 3,063 | ||||||||
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Loan recoveries
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103 | 64 | 311 | 261 | ||||||||||||
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Net charge-offs
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8,549 | 1,679 | 15,478 | 2,802 | ||||||||||||
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Non-accrual loans
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11,841 | 10,817 | 11,841 | 10,817 | ||||||||||||
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Other real estate owned, net
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6,374 | 3,961 | 6,374 | 3,961 | ||||||||||||
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Repossessed assets
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- | 30 | - | 30 | ||||||||||||
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Nonperforming assets
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18,215 | 14,808 | 18,215 | 14,808 | ||||||||||||
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Average Balances
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Average assets
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$ | 535,358 | $ | 545,424 | $ | 544,338 | $ | 545,144 | ||||||||
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Average earning assets
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507,340 | 512,199 | 514,526 | 509,224 | ||||||||||||
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Average shareholders’ equity
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43,612 | 54,268 | 47,416 | 55,246 | ||||||||||||
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(unaudited)
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December 31,
2011
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December 31,
2010
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Capital Ratios
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Tier 1 capital
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$ | 45,548 | $ | 57,467 | ||||
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Total capital
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50,676 | 63,163 | ||||||
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Total capital to risk-weighted assets
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12.59 | % | 14.18 | % | ||||
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Tier 1 capital to risk-weighted assets
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11.32 | % | 12.91 | % | ||||
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Leverage ratio
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8.51 | % | 10.54 | % | ||||
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Balance Sheet
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Cash and due from banks
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$ | 6,314 | $ | 5,048 | ||||
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Interest-bearing deposits in banks
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23,210 | 10,949 | ||||||
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Federal funds sold
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- | 7,500 | ||||||
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Securities available for sale, at fair value
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91,665 | 60,420 | ||||||
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Restricted securities, at cost
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2,775 | 3,153 | ||||||
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Loans held for sale
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274 | 271 | ||||||
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Loans, net of allowance for loan losses
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379,503 | 418,994 | ||||||
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Premises and equipment, net
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19,598 | 20,302 | ||||||
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Interest receivable
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1,620 | 1,667 | ||||||
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Other assets
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14,105 | 16,325 | ||||||
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Total assets
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$ | 539,064 | $ | 544,629 | ||||
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Noninterest-bearing demand deposits
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$ | 81,714 | $ | 78,964 | ||||
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Savings and interest-bearing demand deposits
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198,194 | 178,685 | ||||||
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Time deposits
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189,264 | 205,851 | ||||||
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Total deposits
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$ | 469,172 | $ | 463,500 | ||||
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Other borrowings
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19,100 | 20,122 | ||||||
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Trust preferred capital notes
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9,279 | 9,279 | ||||||
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Other liabilities
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4,417 | 3,230 | ||||||
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Total liabilities
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$ | 501,968 | $ | 496,131 | ||||
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FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
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(unaudited)
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December 31,
2011
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December 31,
2010
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Balance Sheet (continued)
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Preferred stock
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$ | 14,263 | $ | 14,127 | ||||
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Common stock
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3,695 | 3,686 | ||||||
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Surplus
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1,644 | 1,582 | ||||||
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Retained earnings
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16,820 | 28,969 | ||||||
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Accumulated other comprehensive income, net
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674 | 134 | ||||||
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Total shareholders’ equity
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$ | 37,096 | $ | 48,498 | ||||
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Total liabilities and shareholders’ equity
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$ | 539,064 | $ | 544,629 | ||||
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Loan Data
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Mortgage loans on real estate:
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Construction
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$ | 48,363 | $ | 52,591 | ||||
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Secured by farm land
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6,161 | 6,207 | ||||||
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Secured by 1-4 family residential
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122,339 | 121,506 | ||||||
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Other real estate loans
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174,980 | 201,164 | ||||||
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Loans to farmers (except those secured by real estate)
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2,224 | 2,421 | ||||||
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Commercial and industrial loans (except those secured by real estate)
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27,222 | 37,375 | ||||||
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Consumer installment loans
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9,760 | 12,648 | ||||||
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Deposit overdrafts
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325 | 231 | ||||||
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All other loans
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1,066 | 887 | ||||||
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Total loans
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$ | 392,440 | $ | 435,030 | ||||
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Allowance for loan losses
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12,937 | 16,036 | ||||||
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Loans, net
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$ | 379,503 | $ | 418,994 | ||||
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(1) The efficiency ratio is computed by dividing noninterest expense excluding the provision for other real estate owned and gains and losses on other real estate owned by the sum of net interest income on a tax equivalent basis and noninterest income excluding gains and losses on securities and premises and equipment. 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 for 2011 and 2010 was 34%. Net interest income on a tax equivalent basis was
$5,198 and $5,232 for the three months ended December 31, 2011 and 2010, respectively, and $20,492 and $20,723 for the years ended December 31, 2011 and 2010, respectively. Noninterest income excluding securities and premises and equipment was $1,556 and $1,712 for the three months ended December 31, 2011 and 2010, respectively, and $5,813 and $6,089 for the year ended December 31, 2011 and 2010, respectively. The efficiency ratio is a non-GAAP financial measure that management believes provides investors with important information regarding operational efficiency. Such information is not in accordance with generally accepted accounting principles (GAAP) and should not be construed as such. Management believes 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.
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