First National Corporation Announces Fourth Quarter and Annual Profit

Jan 29, 2013, 17:33 ET from First National Corporation

STRASBURG, Va., Jan. 29, 2013 /PRNewswire/ -- First National Corporation (the "Company") (OTCBB: FXNC), the parent company of First Bank (the "Bank"), announced today fourth quarter and annual profits, both significant improvements over the comparable periods of 2011.  Net income for the fourth quarter of 2012 totaled $966 thousand, compared to a net loss of $8.1 million for the same period in 2011. For the year ended December 31, 2012, net income totaled $2.8 million, which was a dramatic improvement compared to a net loss of $11.0 million for the same period in 2011.  After the effective dividend on preferred stock, net income available to common shareholders totaled $740 thousand or $0.15 per basic and diluted share for the fourth quarter of 2012, compared to a net loss available to common shareholders of $8.4 million or $2.82 per basic and diluted share for the same period of 2011.  For the year ended December 31, 2012, net income available to common shareholders totaled $1.9 million or $0.49 per basic and diluted share, compared to net loss available to common shareholders of $11.9 million or $4.01 per basic and diluted share for the same period of 2011.

(Logo: http://photos.prnewswire.com/prnh/20120213/PH52225LOGO )

Scott C. Harvard, President and CEO of the Company and the Bank commented, "We are pleased to report a profitable 2012, in what was clearly a turnaround year for our banking company. The year 2012 was a rebuilding year across all areas of the company and we met our goals of being profitable each quarter, raising capital to add financial strength, lowering non-performing asset levels, and focusing on our core strength of delivering exceptional customer service. We are pleased that through the hard work of our dedicated staff, we achieved these goals, and in the fourth quarter we grew the loan portfolio for the first time in over two years. As one of the few independent banks in our communities, we remain excited about the prospects for the future."

Operating Highlights for 2012

  • Significant earnings improvement
  • Nonperforming assets decreased 23% from prior year end
  • Raised $7.8 million of additional capital in June
  • Exited TARP program in August
  • Strengthened management with the addition of James Youngblood, Senior Lending Officer
  • Stable revenues
  • Provision for loan losses was $8.8 million lower
  • Allowance for loan losses totaled $13.1 million or 3.41% of total loans
  • Bank capital ratios continued to exceed well capitalized guidelines

Fourth Quarter Earnings

Net income was $9.1 million higher for the fourth quarter of 2012, compared to the same period one year ago.  Improved asset quality contributed to the $2.9 million decrease in the provision for loan losses, which totaled $100 thousand in the fourth quarter of 2012 compared to $3.0 million for the same period of 2011.  In addition, expenses related to OREO decreased $971 thousand to $669 thousand for the fourth quarter of 2012 compared to $1.6 million for the same period of 2011. Return on average assets was 0.73% and return on average equity was 8.57% for the fourth quarter of 2012, compared to -6.03% and -73.99%, respectively, for the fourth quarter of 2011.

Net interest income totaled $4.7 million for the fourth quarter of 2012 compared to $5.1 million for the same period one year ago.  The net interest margin was 3.75% compared to 4.07% for the same period one year ago.  Noninterest income increased 6% to $1.6 million compared to the same period one year ago.   Revenues from gains on sales of loans and trust and investment advisory fees increased while service charges on deposit accounts and fees for other customer services decreased.

Noninterest expense decreased 19% to $5.1 million for the fourth quarter of 2012 compared to $6.3 million for the same period in 2011, primarily from reduced expenses related to OREO.  OREO related expenses totaled $669 thousand in the fourth quarter of 2012, a decline of 59%, compared to $1.6 million for the same period in 2011.

Asset Quality

Nonperforming assets decreased 23% to $14.0 million at December 31, 2012 compared to $18.2 million at December 31, 2011. The reduction was primarily attributable to non-accrual loans decreasing from $11.8 million at the end of the fourth quarter of 2011 to $8.4 million at the end of the fourth quarter of 2012. Other real estate owned decreased by $782 thousand to $5.6 million. Net charge-offs for the period decreased $7.4 million to $1.1 million compared to $8.5 million in the fourth quarter of 2011. The allowance for loan losses totaled $13.1 million or 3.41% of total loans at December 31, 2012.  This compared to an allowance for loan losses of $12.9 million, or 3.30% of total loans, at December 31, 2011.

Year-to-Date Performance

Net income was $13.8 million higher for the year ended December 31, 2012 compared to prior year. Improved asset quality contributed to the $8.8 million decrease in the provision for loan losses, which totaled $3.6 million in 2012 and $12.4 million in 2011.  In addition, expenses related to OREO decreased $1.6 million to $1.4 million for the year ended December 31, 2012 compared to $3.0 million for 2011. Return on average assets was 0.54% and return on average equity was 6.85% for 2012, compared to -1.96% and -22.46%, respectively, for 2011.

Net interest income was $19.3 million compared to $20.2 million for same period in 2011.  Noninterest income, excluding gains on sale of securities, increased 3% to $5.9 million compared to $5.7 million for the same period one year ago. Revenues from gains on sales of loans and trust and investment advisory fees increased while service charges on deposit accounts and ATM and check card income decreased.

Noninterest expense decreased 8% to $19.1 million compared to the same period in 2011, primarily from reduced expenses related to OREO.  OREO related expenses totaled $1.4 million for 2012, a decline of 53%, compared to $3.0 million for the same period in 2011.

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, 2011, which can be accessed from the Company's website at www.fbvirginia.com, as filed 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 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.


 

FIRST NATIONAL CORPORATION

Quarterly Performance Summary

 (in thousands, except share and per share data)

 


(unaudited)

For the Three Months Ended


(unaudited)

For the Year Ended

Income Statement

12/31/2012


12/31/2011


12/31/2012


12/31/2011

Interest and dividend income








  Interest and fees on loans

$         5,061


$        5,590


$         21,062


$       22,907

  Interest on federal funds sold

-


5


12


18

  Interest on deposits in banks

11


3


30


18

  Interest and dividends on securities available for sale:








    Taxable interest

434


534


1,976


2,152

    Tax-exempt interest

47


118


275


483

    Dividends

20


20


77


70

Total interest and dividend income

$         5,573


$        6,270


$         23,432


$       25,648









Interest expense








  Interest on deposits

$            833


$        1,033


$           3,707


$         4,843

  Interest on trust preferred capital notes

56


59


238


386

  Interest on other borrowings

30


46


222


221

Total interest expense

$            919


$        1,138


$           4,167


$         5,450









Net interest income

$         4,654


$        5,132


$         19,265


$       20,198

Provision for loan losses

100


2,985


3,555


12,380

Net interest income after provision for loan losses

$         4,554


$        2,147


$         15,710


$         7,818









Noninterest income








  Service charges on deposit accounts

$            558


$          611


$           2,127


$         2,237

  ATM and check card fees

352


363


1,481


1,535

  Trust and investment advisory fees

371


331


1,450


1,407

  Fees for other customer services

107


138


390


369

  Gains on sale of loans

71


37


214


131

  Gains on sale of securities available for sale

-


18


1,285


59

  Gains on sale of premises and equipment

-


-


2


-

  Other operating income

130


3


225


61

Total noninterest income

$         1,589


$        1,501


$           7,174


$         5,799









Noninterest expense








  Salaries and employee benefits

$         2,402


$        2,593


$           9,557


$         9,460

  Occupancy

347


335


1,343


1,354

  Equipment         

301


299


1,208


1,272

  Marketing

137


111


430


425

  Stationery and supplies 

74


69


308


323

 Legal and professional fees

227


223


968


969

  ATM and check card fees

169


169


649


661

  FDIC assessment

176


180


709


768

  (Gains) losses on sale of other real estate owned, net

19


938


(278)


910

  Provision for other real estate owned

657


455


1,252


1,558

  Other real estate owned expense (income)

(7)


247


443


572

  Other operating expense

582


665


2,490


2,471

Total noninterest expense

$         5,084


$        6,284


$         19,079


$       20,743









Income (loss) before income taxes

$         1,059


$     (2,636)


$           3,805


$       (7,126)

Income tax provision

93


5,497


982


3,835

Net income (loss)

$            966


$     (8,133)


$           2,823


$     (10,961)

Effective dividend and accretion on preferred stock

226


224


903


894

Net income (loss) available to common shareholders

$            740


$     (8,357)


$           1,920


$     (11,855)









Common Share and Per Common Share Data








Net income (loss), basic and diluted

$        0.15


$       (2.82)


$             0.49


$         (4.01)

Shares outstanding at period end

4,901,464


2,955,649


4,901,464


2,955,649

Weighted average shares, basic and diluted

4,901,464


2,955,649


3,944,506


2,953,344

Book value at period end

$         6.22


$          7.72


$             6.22


$           7.72

Cash dividends

$              -


$               -


$                   -


$           0.20


























 

FIRST NATIONAL CORPORATION

Quarterly Performance Summary

(in thousands, except share and per share data)



(unaudited)

For the Three Months Ended


(unaudited)

For the Year Ended



12/31/2012


12/31/2011


12/31/2012


12/31/2011


Key Performance Ratios









Return on average assets

0.73%


(6.03%)


0.54%


(1.96%)


Return on average equity

8.57%


(73.99%)


6.85%


(22.46%)


Net interest margin

3.75%


4.07%


3.89%


3.98%


Efficiency ratio (1)

69.96%


76.49%


71.41%


69.66%











Average Balances









Average assets

$         524,408


$    535,358


$        527,258


$    544,338


Average earning assets

500,075


507,340


500,895


514,688


Average shareholders' equity

44,827


43,612


41,203


47,416











Asset Quality









Loan charge-offs

$             1,210


$       8,652


$         3,793


$      15,789


Loan recoveries

136


103


376


310


Net charge-offs

1,074


8,549


3,417


15,479


Non-accrual loans

8,393


11,841


8,393


11,841


Other real estate owned, net

5,592


6,374


5,592


6,374


Nonperforming assets

13,985


18,215


13,985


18,215


Loans over 90 days past due, still accruing

228


459


228


459


Troubled debt restructurings (accruing)

1,570


4,775


1,570


4,775


Special mention loans

26,614


31,300


26,614


31,300


Substandard loans (accruing)

44,620


45,023


44,620


45,032


Doubtful loans

-


3,922


-


3,922














12/31/2012


12/31/2011


Capital Ratios








Tier 1 capital




$      54,920


$      45,231


Total capital




59,898


50,359


Total capital to risk-weighted assets




15.35%


12.51%


Tier 1 capital to risk-weighted assets




14.08%


11.24%


Leverage ratio




10.48%


8.45%











Balance Sheet








Cash and due from banks




$        7,266


$        6,314


Interest-bearing deposits in banks




23,762


23,210


Securities available for sale, at fair value




89,457


91,665


Restricted securities, at cost




1,973


2,775


Loans held for sale




503


274


Loans, net of allowance for loan losses




370,519


379,503


Premises and equipment, net




18,587


19,598


Interest receivable




1,459


1,620


Other assets




19,153


14,105


  Total assets




$    532,679


$    539,064











Noninterest-bearing demand deposits




$      85,118


$      81,714


Savings and interest-bearing demand deposits




221,601


198,194


Time deposits




160,198


189,264


  Total deposits




$    466,917


$    469,172


Other borrowings




6,076


19,100


Trust preferred capital notes




9,279


9,279


Other liabilities




5,495


4,417


  Total liabilities




$    487,767


$    501,968











 

FIRST NATIONAL CORPORATION

Quarterly Performance Summary

(in thousands, except share and per share data)



(unaudited)



12/31/2012


12/31/2011


Balance Sheet (continued)





Preferred stock

$           14,409


$          14,263


Common stock

6,127


3,695


Surplus

6,813


1,644


Retained earnings

18,422


16,503


Accumulated other comprehensive income (loss), net

(859)


991


  Total shareholders' equity

$           44,912


$          37,096







  Total liabilities and shareholders' equity

$         532,679


$        539,064







Loan Data





Mortgage loans on real estate:





  Construction and land development

$           43,524


$          48,363


  Secured by farm land

5,795


6,161


  Secured by 1-4 family residential

134,964


122,339


  Other real estate loans

168,425


174,980


Loans to farmers (except those secured by real estate)

2,238


2,224


Commercial and industrial loans (except those secured by real estate)

20,833


27,222


Consumer installment loans

6,991


9,760


Deposit overdrafts

153


325


All other loans

671


1,066


  Total loans

$         383,594


$        392,440


Allowance for loan losses

13,075


12,937


Loans, net

$         370,519


$        379,503


















(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 sales of 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 2012 and 2011 was 34%.  Net interest income on a tax equivalent basis was $4,713 and $5,198 for the three months ended December 31, 2012 and 2011, respectively, and $19,463 and $20,496 for the year ended December 31, 2012 and 2011.  Noninterest income excluding gains and losses on sales of securities and premises and equipment was $1,589 and $1,483 for the three months ended December 31, 2012 and 2011, respectively, and $5,887 and $5,740 for the year ended December 31, 2012 and 2011, 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.













Contact:




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

SOURCE First National Corporation



RELATED LINKS

http://www.fbvirginia.com