By STRASBURG, Va., Jan. 29, 2014 /PRNewswire/ -- 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.
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Operating Highlights for 2013
Earnings:
-- Net income of $10.0 million
-- Reversal of valuation allowance on net deferred tax assets decreased
income tax expense by $4.8 million
-- Return on average assets 1.87%
-- Return on average equity 22.16%
Asset Quality:
-- Substandard loans (accruing) decreased 49%
-- Recovery of loan losses totaled $425 thousand
Capital:
-- Total shareholders' equity increased $8.8 million to $53.7 million
-- Book value per share increased from $6.22 to $7.98
-- Total risk-based capital increased from 15.34% to 18.25%
"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)
(unaudited) (unaudited)
For the Three Months Ended For the Year Ended
Income Statement December 31, December 31, December 31, December 31,
2013 2012 2013 2012
---- ---- ---- ----
Interest and dividend income
Interest and fees on loans $4,422 $5,061 $18,844 $21,062
Interest on federal funds sold - - - 12
Interest on deposits in banks 16 11 61 30
Interest and dividends on securities
available for sale:
Taxable interest 557 382 1,870 1,924
Tax-exempt interest 79 99 307 327
Dividends 19 20 75 77
--- --- --- ---
Total interest and dividend
income $5,093 $5,573 $21,157 $23,432
------ ------ ------- -------
Interest expense
Interest on deposits $458 $833 $2,368 $3,707
Interest on trust preferred
capital notes 56 56 222 238
Interest on other borrowings 30 30 119 222
--- --- --- ---
Total interest expense $544 $919 $2,709 $4,167
---- ---- ------ ------
Net interest income $4,549 $4,654 $18,448 $19,265
Provision for (recovery of) loan
losses (2,950) 100 (425) 3,555
------ --- ---- -----
Net interest income after
provision for loan losses $7,499 $4,554 $18,873 $15,710
------ ------ ------- -------
Noninterest income
Service charges on deposit
accounts $654 $558 $2,204 $2,127
ATM and check card fees 354 352 1,425 1,481
Wealth management fees 463 371 1,696 1,450
Fees for other customer services 89 107 391 390
Gains on sale of loans 22 71 193 214
Gains on sale of securities
available for sale - - - 1,285
Losses on sale of premises and
equipment, net - - - 2
Other operating income 189 130 1,022 225
--- --- ----- ---
Total noninterest income $1,771 $1,589 $6,931 $7,174
------ ------ ------ ------
Noninterest expense
Salaries and employee benefits $2,938 $2,435 $10,426 $9,590
Occupancy 302 347 1,282 1,343
Equipment 319 301 1,208 1,208
Marketing 41 137 345 430
Stationery and supplies 66 74 288 308
Legal and professional fees 336 234 971 975
ATM and check card fees 166 169 668 649
FDIC assessment 174 176 884 709
Other real estate owned, net 288 607 1,023 1,355
Other operating expense 1,404 644 3,457 2,552
----- --- ----- -----
Total noninterest expense $6,034 $5,124 $20,552 $19,119
------ ------ ------- -------
Income before income taxes $3,236 $1,019 $5,252 $3,765
Income tax provision (benefit) (4,285) 76 (4,753) 965
------ --- ------ ---
Net income $7,521 $943 $10,005 $2,800
====== ==== ======= ======
Effective dividend and accretion
on preferred stock 228 226 912 903
--- --- --- ---
Net income available to common
shareholders $7,293 $717 $9,093 $1,897
====== ==== ====== ======
Common Share and Per Common Share Data
Net income, basic and diluted $1.49 $0.15 $1.85 $0.48
Shares outstanding at period end 4,901,464 4,901,464 4,901,464 4,901,464
Weighted average shares, basic
and diluted 4,901,464 4,901,464 4,901,464 3,944,506
Book value at period end $7.98 $6.22 $7.98 $6.22
Cash dividends $ - $ - $ - $ -
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) (unaudited)
For the Three Months Ended For the Year Ended
December 31, December 31, December 31, December 31,
2013 2013
2012 2012
----
Key Performance Ratios
Return on average assets 5.65% 0.72% 1.87% 0.53%
Return on average equity 64.03% 8.37% 22.16% 6.80%
Net interest margin 3.68% 3.75% 3.72% 3.89%
Efficiency ratio (1) 79.76% 71.68% 74.43% 70.07%
Average Balances
Average assets $528,508 $524,409 $533,732 $527,256
Average earning assets 496,619 500,075 502,736 500,895
Average shareholders' equity 46,601 44,828 45,149 41,201
Asset Quality
Loan charge-offs $193 $1,210 $4,493 $3,793
Loan recoveries 1,911 136 2,486 376
Net charge-offs (recoveries) (1,718) 1,074 2,007 3,417
Non-accrual loans 11,678 8,393 11,678 8,393
Other real estate owned, net 3,122 5,590 3,122 5,590
Nonperforming assets 14,800 13,983 14,800 13,983
Loans over 90 days past due,
still accruing 49 228 49 228
Troubled debt restructurings
(accruing) 829 1,570 829 1,570
Special mention loans 20,240 26,614 20,240 26,614
Substandard loans (accruing) 22,909 44,620 22,909 44,620
Doubtful loans - - - -
December 31,
December 31, 2012
2013
----
Capital Ratios
Tier 1 capital $61,962 $54,897
Total capital 66,599 59,876
Total capital to risk-weighted assets 18.25% 15.34%
Tier 1 capital to risk-weighted assets 16.98% 14.07%
Leverage ratio 11.78% 10.47%
Balance Sheet
Cash and due from banks $5,767 $7,266
Interest-bearing deposits in banks 25,741 23,762
Securities available for sale, at fair value 103,301 89,456
Restricted securities, at cost 1,804 1,974
Loans held for sale - 503
Loans, net of allowance for loan losses 346,449 370,519
Premises and equipment, net 16,642 18,589
Interest receivable 1,302 1,459
Other assets 21,909 19,169
------ ------
Total assets $522,915 $532,697
======== ========
Noninterest-bearing demand deposits $92,901 $85,118
Savings and interest-bearing demand deposits 234,054 221,601
Time deposits 123,756 160,198
------- -------
Total deposits $450,711 $466,917
Other borrowings 6,052 6,076
Trust preferred capital notes 9,279 9,279
Other liabilities 3,182 5,536
----- -----
Total liabilities $469,224 $487,808
-------- --------
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited)
December 31, December 31,
2013 2012
---- ----
Balance Sheet (continued)
Preferred stock $14,564 $14,409
Common stock 6,127 6,127
Surplus 6,813 6,813
Retained earnings 27,492 18,399
Accumulated other
comprehensive loss,
net (1,305) (859)
------ ----
Total shareholders'
equity $53,691 $44,889
------- -------
Total liabilities and
shareholders' equity $522,915 $532,697
======== ========
Loan Data
Mortgage loans on real estate:
Construction and land
development $34,060 $43,524
Secured by farm land 1,264 5,795
Secured by 1-4 family
residential 141,961 134,964
Other real estate loans 144,704 168,425
Loans to farmers
(except those secured
by real estate) 3,418 2,238
Commercial and
industrial loans
(except those secured
by real estate) 19,385 20,833
Consumer installment
loans 4,935 6,991
Deposit overdrafts 279 153
All other loans 7,087 671
----- ---
Total loans $357,093 $383,594
Allowance for loan
losses 10,644 13,075
------ ------
Loans, net $346,449 $370,519
======== ========
(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.
Contact:
Scott C. Harvard
President and CEO
(540) 465-9121
sharvard@fbvirginia.com
M. Shane Bell
Executive Vice President and CFO
(540) 465-9121
sbell@fbvirginia.com
SOURCE First National Corporation
