Attached files
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| 8-K - FORM 8-K - FIRST NATIONAL CORP /VA/ | f8kfnc012914.htm |
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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@fbvirginia.com
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sbell@fbvirginia.com
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News Release
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January 29, 2014
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First National Corporation Announces Earnings
Strasburg, Virginia (January 29, 2014) --- First National Corporation (the “Company”) (OTCBB: FXNC), the parent company of First Bank (the “Bank”), reported record annual and quarterly earnings. Net income totaled $10.0 million, or $1.85 per basic and diluted share, for the year ended December 31, 2013. For the fourth quarter of 2013, net income totaled $7.5 million, or $1.49 per basic and diluted share.
Operating Highlights for 2013
Earnings:
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Net income of $10.0 million
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Reversal of valuation allowance on net deferred tax assets decreased income tax expense by $4.8 million
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Return on average assets 1.87%
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Return on average equity 22.16%
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Asset Quality:
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Substandard loans (accruing) decreased 49%
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Recovery of loan losses totaled $425 thousand
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Capital:
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Total shareholders’ equity increased $8.8 million to $53.7 million
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Book value per share increased from $6.22 to $7.98
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Total risk-based capital increased from 15.34% to 18.25%
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“We are pleased to announce record earnings for the year and the fourth quarter,” said Scott C. Harvard, President and CEO of the Company and the Bank. “Thanks to the hard work of our entire team, the financial condition of the Bank has improved to the point that we were able to reverse the valuation allowance on deferred tax assets, resulting in a boost to fourth quarter and annual earnings of $4.8 million.”
Fourth Quarter Earnings
Net income totaled $7.5 million for the fourth quarter of 2013, compared to $943 thousand for the same period of 2012. The significant increase in earnings was primarily a result of the reversal of the valuation allowance on net deferred tax assets which decreased income tax expense by $4.8 million. In addition, the Company recorded a recovery of loan losses totaling $3.0 million, compared to provision for loan losses of $100 thousand for the same quarter of 2012. Return on average assets was 5.65% compared to 0.72% for the fourth quarter of 2012. Return on average equity was 64.03% for the fourth quarter of 2013 compared to 8.37% for the fourth quarter of 2012.
Net interest income totaled $4.5 million for the quarter, compared to $4.7 million for the same period one year ago. Noninterest income increased $182 thousand, or 11% compared to the same period of 2012, primarily from a 17% increase in service charges on deposits and a 25% increase in wealth management fee income.
Noninterest expense totaled $6.0 million for the quarter compared to $5.1 million for the same period in the prior year. Noninterest expense, excluding lease termination costs of $655 thousand and pension settlement costs of $284 thousand, was unchanged at $5.1 million for the fourth quarter of 2013 compared to the same quarter in 2012. Other operating expenses increased $760 thousand compared to the same period of 2012, primarily from the decision to terminate a land lease, initially executed for branch expansion, which impacted current year earnings and eliminated expense in future periods. Salaries and employee benefits increased $503 thousand compared to the same period of 2012, primarily as a result of higher pension costs related to the retirement of several long time employees with years of service ranging up to 40 years. The reversal of the valuation allowance on net deferred tax assets resulted in income tax benefit totaling $4.3 million for the fourth quarter of 2013 compared to income tax expense of $76 thousand in the same period of 2012.
Pre-provision pre-tax earnings, excluding non-recurring items, increased 9% to $1.2 million for the quarter compared to $1.1 million for the same period in the prior year. Lease termination costs of $655 thousand and pension settlement costs of $284 thousand comprised the non-recurring items for the fourth quarter of 2013.
Annual Earnings
Net income totaled $10.0 million for year ended December 31, 2013 compared to $2.8 million for the same period one year ago. Return on average assets was 1.87% and return on average equity was 22.16% for the year ended December 31, 2013, compared to 0.53% and 6.80%, respectively, for the same period in 2012.
Net interest income totaled $18.4 million compared to $19.3 million for 2012. Noninterest income totaled $6.9 million for 2013 compared to $7.2 million for 2012. Noninterest income, excluding a gain on termination of a director retirement plan of $543 thousand in 2013, and gains on sale of securities of $1.3 million in 2012, increased 8% to $6.4 million compared to $5.9 million for the same period one year ago. The increase was primarily driven by wealth management fees and revenues from bank owned life insurance.
Noninterest expense totaled $20.6 million for the year compared to $19.1 million for the prior year. Noninterest expense, excluding lease termination costs of $864 thousand and pension settlement costs of $284 thousand, increased 1% to $19.4 million for the year ended December 31, 2013, compared to $19.1 million for the same period in 2012. Salaries and employee benefits, including pension expense, increased $836 thousand compared to the prior year. Other operating expenses increased $905 thousand compared to the same period one year ago. This increase was primarily attributable to the Bank’s decision to terminate two land leases, initially executed for branch expansion, which impacted current year earnings and eliminated expense in future periods. Income tax benefit totaled $4.8 million for the year ended December 31, 2013, compared to income tax expense of $965 thousand for the prior year, primarily as a result of the reversal of the valuation allowance on the Company’s net deferred tax assets.
Pre-provision pre-tax earnings, excluding non-recurring items and gains on sale of securities, totaled $5.4 million for the year compared to $6.0 million for the prior year. Lease termination costs of $864 thousand, pension settlement costs of $284 thousand, and a gain on termination of a director retirement plan totaling $543 thousand comprised the non-recurring items for 2013. Gains on sale of securities totaled $1.3 million in 2012.
Caution about 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, 2012, and other filings with the Securities and Exchange Commission.
About the Company
First National Corporation, headquartered in Strasburg, Virginia, is the bank holding company of First Bank. First Bank offers loan, deposit, trust and investment products and services from 10 office locations located throughout the northern Shenandoah Valley region of Virginia, which includes Shenandoah County, Warren County, Frederick County and the City of Winchester. Banking services are also accessed from the Bank’s website, www.fbvirginia.com, and from a network of ATMs located throughout its market area. 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)
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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,
2013
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December 31,
2012
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December 31,
2013
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December 31,
2012
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Interest and dividend income
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Interest and fees on loans
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$ | 4,422 | $ | 5,061 | $ | 18,844 | $ | 21,062 | ||||||||
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Interest on federal funds sold
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- | - | - | 12 | ||||||||||||
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Interest on deposits in banks
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16 | 11 | 61 | 30 | ||||||||||||
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Interest and dividends on securities available for sale:
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Taxable interest
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557 | 382 | 1,870 | 1,924 | ||||||||||||
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Tax-exempt interest
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79 | 99 | 307 | 327 | ||||||||||||
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Dividends
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19 | 20 | 75 | 77 | ||||||||||||
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Total interest and dividend income
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$ | 5,093 | $ | 5,573 | $ | 21,157 | $ | 23,432 | ||||||||
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Interest expense
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Interest on deposits
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$ | 458 | $ | 833 | $ | 2,368 | $ | 3,707 | ||||||||
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Interest on trust preferred capital notes
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56 | 56 | 222 | 238 | ||||||||||||
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Interest on other borrowings
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30 | 30 | 119 | 222 | ||||||||||||
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Total interest expense
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$ | 544 | $ | 919 | $ | 2,709 | $ | 4,167 | ||||||||
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Net interest income
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$ | 4,549 | $ | 4,654 | $ | 18,448 | $ | 19,265 | ||||||||
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Provision for (recovery of) loan losses
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(2,950 | ) | 100 | (425 | ) | 3,555 | ||||||||||
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Net interest income after provision for loan losses
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$ | 7,499 | $ | 4,554 | $ | 18,873 | $ | 15,710 | ||||||||
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Noninterest income
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Service charges on deposit accounts
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$ | 654 | $ | 558 | $ | 2,204 | $ | 2,127 | ||||||||
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ATM and check card fees
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354 | 352 | 1,425 | 1,481 | ||||||||||||
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Wealth management fees
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463 | 371 | 1,696 | 1,450 | ||||||||||||
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Fees for other customer services
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89 | 107 | 391 | 390 | ||||||||||||
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Gains on sale of loans
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22 | 71 | 193 | 214 | ||||||||||||
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Gains on sale of securities available for sale
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- | - | - | 1,285 | ||||||||||||
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Losses on sale of premises and equipment, net
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- | - | - | 2 | ||||||||||||
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Other operating income
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189 | 130 | 1,022 | 225 | ||||||||||||
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Total noninterest income
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$ | 1,771 | $ | 1,589 | $ | 6,931 | $ | 7,174 | ||||||||
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Noninterest expense
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Salaries and employee benefits
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$ | 2,938 | $ | 2,435 | $ | 10,426 | $ | 9,590 | ||||||||
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Occupancy
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302 | 347 | 1,282 | 1,343 | ||||||||||||
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Equipment
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319 | 301 | 1,208 | 1,208 | ||||||||||||
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Marketing
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41 | 137 | 345 | 430 | ||||||||||||
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Stationery and supplies
Legal and professional fees
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66
336
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74
234
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288
971
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308
975
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ATM and check card fees
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166 | 169 | 668 | 649 | ||||||||||||
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FDIC assessment
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174 | 176 | 884 | 709 | ||||||||||||
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Other real estate owned, net
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288 | 607 | 1,023 | 1,355 | ||||||||||||
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Other operating expense
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1,404 | 644 | 3,457 | 2,552 | ||||||||||||
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Total noninterest expense
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$ | 6,034 | $ | 5,124 | $ | 20,552 | $ | 19,119 | ||||||||
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Income before income taxes
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$ | 3,236 | $ | 1,019 | $ | 5,252 | $ | 3,765 | ||||||||
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Income tax provision (benefit)
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(4,285 | ) | 76 | (4,753 | ) | 965 | ||||||||||
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Net income
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$ | 7,521 | $ | 943 | $ | 10,005 | $ | 2,800 | ||||||||
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Effective dividend and accretion on preferred stock
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228 | 226 | 912 | 903 | ||||||||||||
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Net income available to common shareholders
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$ | 7,293 | $ | 717 | $ | 9,093 | $ | 1,897 | ||||||||
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Common Share and Per Common Share Data
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Net income, basic and diluted
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$ | 1.49 | $ | 0.15 | $ | 1.85 | $ | 0.48 | ||||||||
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Shares outstanding at period end
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4,901,464 | 4,901,464 | 4,901,464 | 4,901,464 | ||||||||||||
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Weighted average shares, basic and diluted
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4,901,464 | 4,901,464 | 4,901,464 | 3,944,506 | ||||||||||||
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Book value at period end
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$ | 7.98 | $ | 6.22 | $ | 7.98 | $ | 6.22 | ||||||||
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Cash dividends
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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,
2013
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December 31,
2012
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December 31,
2013
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December 31,
2012
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Key Performance Ratios
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Return on average assets
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5.65 | % | 0.72 | % | 1.87 | % | 0.53 | % | ||||||||
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Return on average equity
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64.03 | % | 8.37 | % | 22.16 | % | 6.80 | % | ||||||||
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Net interest margin
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3.68 | % | 3.75 | % | 3.72 | % | 3.89 | % | ||||||||
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Efficiency ratio (1)
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79.76 | % | 71.68 | % | 74.43 | % | 70.07 | % | ||||||||
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Average Balances
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Average assets
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$ | 528,508 | $ | 524,409 | $ | 533,732 | $ | 527,256 | ||||||||
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Average earning assets
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496,619 | 500,075 | 502,736 | 500,895 | ||||||||||||
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Average shareholders’ equity
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46,601 | 44,828 | 45,149 | 41,201 | ||||||||||||
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Asset Quality
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Loan charge-offs
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$ | 193 | $ | 1,210 | $ | 4,493 | $ | 3,793 | ||||||||
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Loan recoveries
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1,911 | 136 | 2,486 | 376 | ||||||||||||
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Net charge-offs (recoveries)
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(1,718 | ) | 1,074 | 2,007 | 3,417 | |||||||||||
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Non-accrual loans
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11,678 | 8,393 | 11,678 | 8,393 | ||||||||||||
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Other real estate owned, net
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3,122 | 5,590 | 3,122 | 5,590 | ||||||||||||
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Nonperforming assets
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14,800 | 13,983 | 14,800 | 13,983 | ||||||||||||
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Loans over 90 days past due, still accruing
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49 | 228 | 49 | 228 | ||||||||||||
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Troubled debt restructurings (accruing)
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829 | 1,570 | 829 | 1,570 | ||||||||||||
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Special mention loans
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20,240 | 26,614 | 20,240 | 26,614 | ||||||||||||
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Substandard loans (accruing)
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22,909 | 44,620 | 22,909 | 44,620 | ||||||||||||
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Doubtful loans
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- | - | - | - | ||||||||||||
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December 31,
2013
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December 31,
2012
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Tier 1 capital
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$ | 61,962 | $ | 54,897 | ||||
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Total capital
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66,599 | 59,876 | ||||||
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Total capital to risk-weighted assets
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18.25 | % | 15.34 | % | ||||
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Tier 1 capital to risk-weighted assets
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16.98 | % | 14.07 | % | ||||
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Leverage ratio
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11.78 | % | 10.47 | % | ||||
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Balance Sheet
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Cash and due from banks
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$ | 5,767 | $ | 7,266 | ||||
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Interest-bearing deposits in banks
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25,741 | 23,762 | ||||||
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Securities available for sale, at fair value
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103,301 | 89,456 | ||||||
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Restricted securities, at cost
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1,804 | 1,974 | ||||||
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Loans held for sale
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- | 503 | ||||||
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Loans, net of allowance for loan losses
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346,449 | 370,519 | ||||||
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Premises and equipment, net
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16,642 | 18,589 | ||||||
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Interest receivable
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1,302 | 1,459 | ||||||
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Other assets
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21,909 | 19,169 | ||||||
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Total assets
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$ | 522,915 | $ | 532,697 | ||||
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Noninterest-bearing demand deposits
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$ | 92,901 | $ | 85,118 | ||||
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Savings and interest-bearing demand deposits
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234,054 | 221,601 | ||||||
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Time deposits
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123,756 | 160,198 | ||||||
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Total deposits
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$ | 450,711 | $ | 466,917 | ||||
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Other borrowings
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6,052 | 6,076 | ||||||
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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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3,182 | 5,536 | ||||||
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Total liabilities
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$ | 469,224 | $ | 487,808 | ||||
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,
2013
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December 31,
2012
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Balance Sheet (continued)
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Preferred stock
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$ | 14,564 | $ | 14,409 | ||||
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Common stock
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6,127 | 6,127 | ||||||
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Surplus
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6,813 | 6,813 | ||||||
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Retained earnings
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27,492 | 18,399 | ||||||
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Accumulated other comprehensive loss, net
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(1,305 | ) | (859 | ) | ||||
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Total shareholders’ equity
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$ | 53,691 | $ | 44,889 | ||||
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Total liabilities and shareholders’ equity
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$ | 522,915 | $ | 532,697 | ||||
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Loan Data
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Mortgage loans on real estate:
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Construction and land development
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$ | 34,060 | $ | 43,524 | ||||
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Secured by farm land
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1,264 | 5,795 | ||||||
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Secured by 1-4 family residential
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141,961 | 134,964 | ||||||
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Other real estate loans
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144,704 | 168,425 | ||||||
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Loans to farmers (except those secured by real estate)
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3,418 | 2,238 | ||||||
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Commercial and industrial loans (except those secured by real estate)
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19,385 | 20,833 | ||||||
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Consumer installment loans
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4,935 | 6,991 | ||||||
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Deposit overdrafts
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279 | 153 | ||||||
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All other loans
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7,087 | 671 | ||||||
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Total loans
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$ | 357,093 | $ | 383,594 | ||||
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Allowance for loan losses
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10,644 | 13,075 | ||||||
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Loans, net
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$ | 346,449 | $ | 370,519 | ||||
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(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned expenses and the loss on land lease termination by the sum of net interest income on a tax equivalent basis and noninterest income excluding gains and losses on sales of securities and premises and equipment and the gain on termination of the split dollar liability. 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 2013 and 2012 was 34%. Net interest income on a tax equivalent basis was $4,612 and $4,713 for the three months ended December 31, 2013 and 2012, respectively, and $18,688 and $19,463 for the year ended December 31, 2013 and 2012, respectively. Adjusted noninterest income was $1,771 and $1,589 for the three months ended December 31, 2013 and 2012, respectively, and $6,388 and $5,887 for the year ended December 31, 2013 and 2012, respectively. Adjusted noninterest expense was $5,091 and $4,517 for the three months ended December 31, 2013 and 2012, respectively, and $18,665 and $17,764 for the year ended December 31, 2013 and 2012, 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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