First National Corporation (the “Company” or “First National”)
(NASDAQ: FXNC), the bank holding company of First Bank (the
“Bank”), reported unaudited consolidated net income of $2.4
million, or $0.38 per diluted share for the third quarter of 2021,
which resulted in return on average assets of 0.71% and return on
average equity of 8.64%. This compares to net income of $1.8
million, or $0.36 per diluted share, and return on average assets
of 0.74% and return on average equity of 8.52% for the third
quarter of 2020.
Net income for the third quarter of 2021 included $1.3 million
of merger related expenses from the Company’s acquisition of The
Bank of Fincastle (the “Merger”), which was consummated on July 1,
2021. In addition, there was no provision for loan losses in the
third quarter of 2021, compared to provision for loan losses of
$1.5 million for the third quarter of 2020.
During the third quarter of 2021, First Bank also negotiated and
completed the acquisition of an $82.6 million loan portfolio
originated from SmartBank’s branch located in the Richmond,
Virginia market. In connection with the purchase of the loan
portfolio, the Bank hired a team of employees based out of the
branch. SmartBank decided to close their branch operation on
December 31, 2021. First Bank will continue to operate a loan
production office from this location.
President and Chief Executive Officer Scott C. Harvard
commented, “The third quarter may have been the most productive in
our company’s 114 year history as we completed the acquisition of
The Bank of Fincastle and also seized the opportunity for a team
lift and loan portfolio acquisition in the Richmond market. The
transactions boosted assets to $1.4 billion and increased loan
balances by $205.1 million, while extending the Bank’s reach into
the Roanoke market and bolstering the banking team in Richmond.
These transactions reflect our strategy of hiring talented bankers
to support organic growth, which in turn positions the company well
for strategic acquisitions. I am incredibly proud of our people,
not just for the level of work and effort it took to successfully
complete two transformative transactions concurrently, but for
their can-do attitude when asked to step up to the challenge. We
believe our banking company is well positioned to be a leader in
Virginia banking for years to come.”
Key highlights of the third quarter of 2021 are as follows.
Comparisons are to the corresponding period in the prior year
unless otherwise stated:
|
• |
Successful team lift and $83 million loan portfolio acquisition in
the Richmond market |
|
• |
Completed the acquisition of The Bank of Fincastle |
|
• |
Total assets increased 44% to $1.4 billion |
|
• |
Total loans, excluding PPP loans, increased 39% to $799.6
million |
|
• |
Noninterest-bearing deposits increased 60% to $411.5 million |
|
• |
Net interest income increased 29%, or $2.2 million |
|
• |
Noninterest income increased 20%, or $447 thousand |
|
• |
Merger related expenses totaled $1.3 million |
|
• |
Nonperforming assets totaled $4.0 million, or 0.30% of total
assets |
|
|
|
ACQUISITION OF THE BANK OF FINCASTLE
On July 1, 2021, the Company completed the acquisition of The
Bank of Fincastle (“Fincastle”) for an aggregate purchase price of
$33.8 million of cash and stock. Fincastle was merged with
and into First Bank. The former Fincastle branches continued
to operate as The Bank of Fincastle, a division of First Bank,
until the systems were converted on October 16, 2021. For the
three-month and nine-month periods ended September 30, 2021, the
Company recorded merger related expenses of $1.3 million and $2.0
million, respectively. The Company estimates it will incur an
additional $1.4 million of merger related costs throughout the
fourth quarter of 2021 and first quarter of 2022, which would
result in aggregate costs related to the Merger of $3.4
million.
ACQUISITION OF THE SMARTBANK LOAN PORTFOLIO
On September 30, 2021, the Bank acquired $82.6 million of loans
and certain fixed assets from SmartBank related to their Richmond
area branch. First Bank agreed to assume the facility lease of
SmartBank’s branch office located in Glen Allen, Virginia. First
Bank paid a premium based on a specific percentage of the loans
sold and certain fixed assets were acquired at SmartBank’s book
value. Additionally, an experienced team of bankers based out of
the SmartBank location have transitioned to become employees of
First Bank. First Bank did not assume any deposit liabilities from
SmartBank in connection with the transaction and SmartBank intends
to close their branch operation on December 31, 2021. First Bank
will continue to operate a loan production office from the location
after the SmartBank branch is closed. First Bank’s assumption of
the lease and acquisition of the remaining branch assets is
expected to be completed in the fourth quarter of 2021, subject to
customary closing conditions.
SMALL BUSINESS ADMINISTRATION'S PPP
The Bank participated as a lender in the U.S. Small Business
Administration’s (“SBA”) Paycheck Protection Program (“PPP”) to
support local small businesses and non-profit organizations by
providing forgivable loans. Loan fees received from the SBA are
accreted into income evenly over the life of the loans, net of loan
origination costs, through interest and fees on loans. PPP
loans totaled $22.8 million at September 30, 2021, with $1.3
million scheduled to mature in the second and third quarters of
2022, and $21.5 million scheduled to mature in the first and second
quarters of 2026.
NET INTEREST INCOME
Net interest income increased $2.2 million, or 29%, to $9.7
million for the third quarter of 2021, compared to the same period
of 2020. The increase resulted from a $2.0 million, or 24% increase
in total interest and dividend income and a $176 thousand, or 23%,
decrease in total interest expense. Net interest income was
favorably impacted by a $383.8 million, or 43%, increase in average
earning assets and was partially offset by the impact of a 35-basis
point decrease in the net interest margin to 3.06% when comparing
the periods.
PROVISION FOR LOAN LOSSES
There was no provision for loan losses for the third quarter of
2021. The allowance for loan losses totaled $5.4 million, or 0.66%
of total loans and there were no significant changes in the general
or specific reserve components of the allowance. The loans acquired
from Fincastle and SmartBank during the quarter did not require an
allowance for loan loss at September 30, 2021. Net
charge-offs totaled $31 thousand during the three-month period
ending September 30, 2021. The allowance for loan losses
totaled $5.4 million, or 0.89% of total loans at June 30, 2021, and
$7.8 million, or 1.20% of total loans at September 30, 2020.
Provision for loan losses totaled $1.5 million for the three-month
period ending September 30, 2020.
Loans 30 to 89 days past due and accruing totaled $3.3 million,
or 0.40% of total loans at September 30, 2021, compared to $885
thousand, or 0.14% of total loans one year ago. Accruing
substandard loans totaled $319 thousand at September 30, 2021 and
$3.8 million at September 30, 2020. Nonperforming assets totaled
$4.0 million, or 0.30% of total assets at September 30, 2021,
compared to $7.0 million, or 0.74% of total assets at September 30,
2020. Nonperforming assets were comprised of $2.2 million of
nonaccrual loans and $1.8 million of other real estate
owned. There were $1.5 million of commercial rental properties
included in other real estate owned that were acquired in the
Merger.
During the fourth quarter of 2020, and during the first half of
2021, the Bank modified terms of certain loans for customers that
continued to be negatively impacted by the pandemic by lowering
borrower’s loan payments with interest only payments for periods
ranging between 6 and 24 months. Modified loans totaled $13.3
million at September 30, 2021, with $13.2 million in the Bank’s
commercial real estate loan portfolio and $83 thousand in the
commercial and industrial loans portfolio. The loans were comprised
of $11.6 million in the lodging sector and $1.7 million in the
leisure sector. All modified loans were performing under their
modified terms as of September 30, 2021.
NONINTEREST INCOME
Noninterest income increased $447 thousand, or 20%, to $2.6
million compared to the same period of 2020. Service charges on
deposits increased $101 thousand, or 23%, ATM and check card fees
increased $84 thousand, or 13%, wealth management fees increased
$123 thousand, or 21%, and fees for other customer services
increased $111 thousand, or 34%. Service charges on deposits
benefited from an increase in overdraft fee income, the increase in
ATM and check card fees resulted from an increase in card use by
customers, wealth management revenue increased from a higher amount
of assets under management, and the increase in fees for other
customer services was impacted by an increase in mortgage fee
income.
NONINTEREST EXPENSE
Noninterest expense increased $3.3 million, or 54%, to $9.4
million, compared to the same period one year ago. The increase was
primarily attributable to a $1.9 million increase in salaries and
employee benefits, a $180 thousand increase in marketing expense, a
$324 thousand increase in legal and professional fees, a $274
thousand increase in data processing fees, and a $272 thousand
increase in other operating expenses. The increase in salaries and
employee benefits resulted primarily from merger related expenses
and the increase in the number of employees from the acquisition of
Fincastle. Marketing expenses increased from both merger related
expenses and timing of advertising campaigns. The increase in legal
and professional fees was attributable to merger related expenses.
Data processing expenses increased from merger related expenses and
from the impact of additional customer accounts from the merger
with Fincastle.
BALANCE SHEET
Total assets of First National increased $413.1 million, or 44%,
to $1.4 billion at September 30, 2021, compared to $942.7 million
at September 30, 2020. Loans, net of the allowance for loan losses
increased $176.4 million, or 28%, securities increased $144.4
million, or 109%, and interest-bearing deposits in banks and Fed
funds sold combined increased $67.2 million, or 62%. The increase
in loans was attributable to the acquisitions of Fincastle and the
SmartBank loan portfolio during the quarter, while the increases in
securities, interest-bearing deposits in banks and Fed funds sold
were attributable to the acquisition of Fincastle and growth in the
Bank’s deposit portfolio during the recent twelve-month period.
Total liabilities increased $378.4 million, or 44%, to $1.2
billion at September 30, 2021, compared to $860.5 million one year
ago. The increase in total liabilities was attributable to growth
in deposits. Total deposits increased $374.2 million, or 45%, to
$1.2 billion. Noninterest-bearing demand deposits increased $154.8
million, or 60%, savings and interest-bearing demand deposits
increased $172.6 million, or 36%, and time deposits increased $46.8
million, or 46%. Although the majority of the deposit portfolio
growth resulted from the acquisition of Fincastle, growth of the
Bank’s deposits over the prior twelve-month period also made a
meaningful contribution.
Shareholders’ equity increased $34.7 million, or 42%, to $116.9
million at September 30, 2021, compared to one year ago, from a
$27.5 million increase in common stock and surplus, primarily from
the issuance of common stock related to the Fincastle acquisition
and an $8.9 million increase in retained earnings. The Bank was
considered well-capitalized at September 30, 2021.
ABOUT FIRST NATIONAL
First National Corporation (NASDAQ: FXNC) is the parent company
and bank holding company of First Bank, a community bank that first
opened for business in 1907 in Strasburg, Virginia. The Bank offers
loan and deposit products and services through its website,
www.fbvirginia.com, its mobile banking platform, a network of ATMs
located throughout its market area, one loan production office, a
customer service center in a retirement community, and 20 bank
branch office locations located throughout the Shenandoah Valley,
the central regions of Virginia, and the Richmond and Roanoke
market areas. In addition to providing traditional banking
services, the Bank operates a wealth management division under the
name First Bank Wealth Management. First Bank also owns First Bank
Financial Services, Inc., which invests in entities that provide
investment services and title insurance, and Bank of Fincastle
Services, Inc., which has an investment in a mortgage company.
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. Forward-looking statements involve a
number of risks and uncertainties, including the rapidly changing
uncertainties related to the COVID-19 pandemic and its potential
adverse effect on the economy, our employees and customers, and our
financial performance. For details on other 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, 2020, and other filings with the
Securities and Exchange Commission.
CONTACTS
Scott C. Harvard |
|
M. Shane Bell |
President and CEO |
|
Executive Vice President and CFO |
(540) 465-9121 |
|
(540) 465-9121 |
sharvard@fbvirginia.com |
|
sbell@fbvirginia.com |
|
|
|
FIRST NATIONAL CORPORATIONQuarterly
Performance Summary(in thousands, except share and per
share data)
|
|
(unaudited) |
|
|
|
For the Quarter Ended |
|
|
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
|
|
2021 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2020 |
|
Income Statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and fees on loans |
|
$ |
9,215 |
|
|
$ |
7,074 |
|
|
$ |
7,143 |
|
|
$ |
7,310 |
|
|
$ |
7,568 |
|
Interest on deposits in banks |
|
|
79 |
|
|
|
37 |
|
|
|
33 |
|
|
|
31 |
|
|
|
25 |
|
Interest on federal funds sold |
|
|
8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest on securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable interest |
|
|
766 |
|
|
|
697 |
|
|
|
717 |
|
|
|
567 |
|
|
|
575 |
|
Tax-exempt interest |
|
|
242 |
|
|
|
215 |
|
|
|
180 |
|
|
|
163 |
|
|
|
152 |
|
Dividends |
|
|
21 |
|
|
|
22 |
|
|
|
22 |
|
|
|
24 |
|
|
|
23 |
|
Total interest income |
|
$ |
10,331 |
|
|
$ |
8,045 |
|
|
$ |
8,095 |
|
|
$ |
8,095 |
|
|
$ |
8,343 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on deposits |
|
$ |
369 |
|
|
$ |
328 |
|
|
$ |
363 |
|
|
$ |
410 |
|
|
$ |
541 |
|
Interest on subordinated debt |
|
|
156 |
|
|
|
154 |
|
|
|
154 |
|
|
|
160 |
|
|
|
160 |
|
Interest on junior subordinated debt |
|
|
68 |
|
|
|
68 |
|
|
|
66 |
|
|
|
68 |
|
|
|
68 |
|
Total interest expense |
|
$ |
593 |
|
|
$ |
550 |
|
|
$ |
583 |
|
|
$ |
638 |
|
|
$ |
769 |
|
Net interest income |
|
$ |
9,738 |
|
|
$ |
7,495 |
|
|
$ |
7,512 |
|
|
$ |
7,457 |
|
|
$ |
7,574 |
|
Provision for (recovery of)
loan losses |
|
|
— |
|
|
|
(1,000 |
) |
|
|
— |
|
|
|
(200 |
) |
|
|
1,500 |
|
Net interest income after
provision for (recovery of) loan losses |
|
$ |
9,738 |
|
|
$ |
8,495 |
|
|
$ |
7,512 |
|
|
$ |
7,657 |
|
|
$ |
6,074 |
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
$ |
547 |
|
|
$ |
447 |
|
|
$ |
442 |
|
|
$ |
553 |
|
|
$ |
446 |
|
ATM and check card fees |
|
|
753 |
|
|
|
682 |
|
|
|
601 |
|
|
|
576 |
|
|
|
669 |
|
Wealth management fees |
|
|
696 |
|
|
|
657 |
|
|
|
643 |
|
|
|
598 |
|
|
|
573 |
|
Fees for other customer services |
|
|
434 |
|
|
|
307 |
|
|
|
286 |
|
|
|
216 |
|
|
|
323 |
|
Income from bank owned life insurance |
|
|
161 |
|
|
|
100 |
|
|
|
113 |
|
|
|
124 |
|
|
|
131 |
|
Net gains on securities |
|
|
— |
|
|
|
— |
|
|
|
37 |
|
|
|
2 |
|
|
|
38 |
|
Net gains on sale of loans |
|
|
— |
|
|
|
18 |
|
|
|
7 |
|
|
|
10 |
|
|
|
3 |
|
Other operating income |
|
|
57 |
|
|
|
224 |
|
|
|
14 |
|
|
|
73 |
|
|
|
18 |
|
Total noninterest income |
|
$ |
2,648 |
|
|
$ |
2,435 |
|
|
$ |
2,143 |
|
|
$ |
2,152 |
|
|
$ |
2,201 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
$ |
5,446 |
|
|
$ |
3,693 |
|
|
$ |
3,555 |
|
|
$ |
3,212 |
|
|
$ |
3,498 |
|
Occupancy |
|
|
500 |
|
|
|
399 |
|
|
|
447 |
|
|
|
422 |
|
|
|
433 |
|
Equipment |
|
|
519 |
|
|
|
433 |
|
|
|
431 |
|
|
|
440 |
|
|
|
439 |
|
Marketing |
|
|
243 |
|
|
|
138 |
|
|
|
106 |
|
|
|
112 |
|
|
|
63 |
|
Supplies |
|
|
176 |
|
|
|
77 |
|
|
|
88 |
|
|
|
90 |
|
|
|
112 |
|
Legal and professional fees |
|
|
586 |
|
|
|
483 |
|
|
|
737 |
|
|
|
310 |
|
|
|
262 |
|
ATM and check card expense |
|
|
329 |
|
|
|
268 |
|
|
|
231 |
|
|
|
253 |
|
|
|
259 |
|
FDIC assessment |
|
|
87 |
|
|
|
78 |
|
|
|
69 |
|
|
|
105 |
|
|
|
52 |
|
Bank franchise tax |
|
|
153 |
|
|
|
172 |
|
|
|
168 |
|
|
|
161 |
|
|
|
162 |
|
Data processing expense |
|
|
465 |
|
|
|
216 |
|
|
|
204 |
|
|
|
196 |
|
|
|
191 |
|
Amortization expense |
|
|
5 |
|
|
|
5 |
|
|
|
14 |
|
|
|
24 |
|
|
|
33 |
|
Other real estate owned expense (income), net |
|
|
14 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other operating expense |
|
|
903 |
|
|
|
668 |
|
|
|
600 |
|
|
|
569 |
|
|
|
631 |
|
Total noninterest expense |
|
$ |
9,426 |
|
|
$ |
6,630 |
|
|
$ |
6,650 |
|
|
$ |
5,894 |
|
|
$ |
6,135 |
|
Income before income
taxes |
|
$ |
2,960 |
|
|
$ |
4,300 |
|
|
$ |
3,005 |
|
|
$ |
3,915 |
|
|
$ |
2,140 |
|
Income tax expense |
|
|
562 |
|
|
|
958 |
|
|
|
569 |
|
|
|
759 |
|
|
|
386 |
|
Net income |
|
$ |
2,398 |
|
|
$ |
3,342 |
|
|
$ |
2,436 |
|
|
$ |
3,156 |
|
|
$ |
1,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST NATIONAL CORPORATIONQuarterly
Performance Summary(in thousands, except share and per
share data)
|
|
(unaudited) |
|
|
|
For the Quarter Ended |
|
|
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
|
|
2021 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2020 |
|
Common Share and Per Common Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, basic |
|
$ |
0.39 |
|
|
$ |
0.69 |
|
|
$ |
0.50 |
|
|
$ |
0.65 |
|
|
$ |
0.36 |
|
Weighted average shares,
basic |
|
|
6,220,456 |
|
|
|
4,868,901 |
|
|
|
4,863,823 |
|
|
|
4,858,288 |
|
|
|
4,854,144 |
|
Net income, diluted |
|
$ |
0.38 |
|
|
$ |
0.69 |
|
|
$ |
0.50 |
|
|
$ |
0.65 |
|
|
$ |
0.36 |
|
Weighted average shares,
diluted |
|
|
6,229,525 |
|
|
|
4,873,286 |
|
|
|
4,872,097 |
|
|
|
4,861,208 |
|
|
|
4,854,649 |
|
Shares outstanding at period
end |
|
|
6,226,418 |
|
|
|
4,870,459 |
|
|
|
4,868,462 |
|
|
|
4,860,399 |
|
|
|
4,858,217 |
|
Tangible book value at period
end |
|
$ |
18.11 |
|
|
$ |
18.21 |
|
|
$ |
17.65 |
|
|
$ |
17.47 |
|
|
$ |
16.92 |
|
Cash dividends |
|
$ |
0.12 |
|
|
$ |
0.12 |
|
|
$ |
0.12 |
|
|
$ |
0.11 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
|
0.71 |
% |
|
|
1.31 |
% |
|
|
1.00 |
% |
|
|
1.31 |
% |
|
|
0.74 |
% |
Return on average equity |
|
|
8.64 |
% |
|
|
15.33 |
% |
|
|
11.53 |
% |
|
|
15.03 |
% |
|
|
8.52 |
% |
Net interest margin |
|
|
3.06 |
% |
|
|
3.10 |
% |
|
|
3.27 |
% |
|
|
3.30 |
% |
|
|
3.41 |
% |
Efficiency ratio (1) |
|
|
64.82 |
% |
|
|
63.65 |
% |
|
|
64.53 |
% |
|
|
61.00 |
% |
|
|
62.35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets |
|
$ |
1,337,247 |
|
|
$ |
1,026,583 |
|
|
$ |
988,324 |
|
|
$ |
954,810 |
|
|
$ |
944,390 |
|
Average earning assets |
|
|
1,272,969 |
|
|
|
976,842 |
|
|
|
937,199 |
|
|
|
904,511 |
|
|
|
889,127 |
|
Average shareholders’
equity |
|
|
110,153 |
|
|
|
87,442 |
|
|
|
85,708 |
|
|
|
83,545 |
|
|
|
81,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
Quality |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan charge-offs |
|
$ |
111 |
|
|
$ |
1,085 |
|
|
$ |
66 |
|
|
$ |
165 |
|
|
$ |
115 |
|
Loan recoveries |
|
|
80 |
|
|
|
64 |
|
|
|
67 |
|
|
|
73 |
|
|
|
96 |
|
Net charge-offs
(recoveries) |
|
|
31 |
|
|
|
1,021 |
|
|
|
(1 |
) |
|
|
92 |
|
|
|
19 |
|
Non-accrual loans |
|
|
2,158 |
|
|
|
2,102 |
|
|
|
6,814 |
|
|
|
6,714 |
|
|
|
6,974 |
|
Other real estate owned,
net |
|
|
1,848 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Nonperforming assets |
|
|
4,006 |
|
|
|
2,102 |
|
|
|
6,814 |
|
|
|
6,714 |
|
|
|
6,974 |
|
Loans 30 to 89 days past due,
accruing |
|
|
3,276 |
|
|
|
550 |
|
|
|
906 |
|
|
|
996 |
|
|
|
885 |
|
Loans over 90 days past due,
accruing |
|
|
7 |
|
|
|
5 |
|
|
|
— |
|
|
|
302 |
|
|
|
6 |
|
Troubled debt restructurings,
accruing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Special mention loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
510 |
|
Substandard loans,
accruing |
|
|
319 |
|
|
|
322 |
|
|
|
1,343 |
|
|
|
1,394 |
|
|
|
3,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital |
|
$ |
128,197 |
|
|
$ |
95,856 |
|
|
$ |
94,044 |
|
|
$ |
91,243 |
|
|
$ |
89,155 |
|
Tier 1 capital |
|
|
122,763 |
|
|
|
90,391 |
|
|
|
86,717 |
|
|
|
84,032 |
|
|
|
81,883 |
|
Common equity tier 1
capital |
|
|
122,763 |
|
|
|
90,391 |
|
|
|
86,717 |
|
|
|
84,032 |
|
|
|
81,883 |
|
Total capital to risk-weighted
assets |
|
|
14.42 |
% |
|
|
16.25 |
% |
|
|
16.05 |
% |
|
|
15.82 |
% |
|
|
15.34 |
% |
Tier 1 capital to
risk-weighted assets |
|
|
13.81 |
% |
|
|
15.32 |
% |
|
|
14.80 |
% |
|
|
14.57 |
% |
|
|
14.09 |
% |
Common equity tier 1 capital
to risk-weighted assets |
|
|
13.81 |
% |
|
|
15.32 |
% |
|
|
14.80 |
% |
|
|
14.57 |
% |
|
|
14.09 |
% |
Leverage ratio |
|
|
9.22 |
% |
|
|
8.78 |
% |
|
|
8.78 |
% |
|
|
8.80 |
% |
|
|
8.67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST NATIONAL CORPORATIONQuarterly
Performance Summary(in thousands, except share and per
share data)
|
|
(unaudited) |
|
|
|
For the Quarter Ended |
|
|
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
|
|
2021 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2020 |
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
19,182 |
|
|
$ |
13,913 |
|
|
$ |
11,940 |
|
|
$ |
13,115 |
|
|
$ |
13,349 |
|
Interest-bearing deposits in
banks |
|
|
95,459 |
|
|
|
114,334 |
|
|
|
164,322 |
|
|
|
114,182 |
|
|
|
108,857 |
|
Federal funds sold |
|
|
80,589 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Securities available for sale,
at fair value |
|
|
266,600 |
|
|
|
222,236 |
|
|
|
159,742 |
|
|
|
140,225 |
|
|
|
117,132 |
|
Securities held to maturity,
at amortized cost |
|
|
10,046 |
|
|
|
10,898 |
|
|
|
13,424 |
|
|
|
14,234 |
|
|
|
15,101 |
|
Restricted securities, at
cost |
|
|
1,813 |
|
|
|
1,631 |
|
|
|
1,631 |
|
|
|
1,875 |
|
|
|
1,848 |
|
Loans held for sale |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
245 |
|
|
|
— |
|
Loans, net of allowance for
loan losses |
|
|
816,977 |
|
|
|
611,883 |
|
|
|
630,716 |
|
|
|
622,429 |
|
|
|
640,591 |
|
Other real estate owned |
|
|
1,848 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Premises and equipment,
net |
|
|
22,401 |
|
|
|
18,876 |
|
|
|
19,087 |
|
|
|
19,319 |
|
|
|
19,548 |
|
Accrued interest
receivable |
|
|
3,823 |
|
|
|
2,662 |
|
|
|
2,609 |
|
|
|
2,717 |
|
|
|
3,156 |
|
Bank owned life insurance |
|
|
24,141 |
|
|
|
18,128 |
|
|
|
18,029 |
|
|
|
17,916 |
|
|
|
17,792 |
|
Goodwill |
|
|
4,011 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Core deposit intangibles,
net |
|
|
159 |
|
|
|
— |
|
|
|
5 |
|
|
|
19 |
|
|
|
43 |
|
Other assets |
|
|
8,740 |
|
|
|
10,032 |
|
|
|
6,625 |
|
|
|
4,656 |
|
|
|
5,316 |
|
Total assets |
|
$ |
1,355,789 |
|
|
$ |
1,024,593 |
|
|
$ |
1,028,130 |
|
|
$ |
950,932 |
|
|
$ |
942,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand
deposits |
|
$ |
411,527 |
|
|
$ |
290,571 |
|
|
$ |
292,280 |
|
|
$ |
263,229 |
|
|
$ |
256,733 |
|
Savings and interest-bearing
demand deposits |
|
|
652,624 |
|
|
|
528,002 |
|
|
|
526,012 |
|
|
|
479,035 |
|
|
|
480,017 |
|
Time deposits |
|
|
148,419 |
|
|
|
95,732 |
|
|
|
97,765 |
|
|
|
100,197 |
|
|
|
101,645 |
|
Total deposits |
|
$ |
1,212,570 |
|
|
$ |
914,305 |
|
|
$ |
916,057 |
|
|
$ |
842,461 |
|
|
$ |
838,395 |
|
Subordinated debt |
|
|
9,993 |
|
|
|
9,992 |
|
|
|
9,992 |
|
|
|
9,991 |
|
|
|
9,987 |
|
Junior subordinated debt |
|
|
9,279 |
|
|
|
9,279 |
|
|
|
9,279 |
|
|
|
9,279 |
|
|
|
9,279 |
|
Accrued interest payable and
other liabilities |
|
|
7,041 |
|
|
|
2,335 |
|
|
|
6,876 |
|
|
|
4,285 |
|
|
|
2,816 |
|
Total liabilities |
|
$ |
1,238,883 |
|
|
$ |
935,911 |
|
|
$ |
942,204 |
|
|
$ |
866,016 |
|
|
$ |
860,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Common stock |
|
|
7,783 |
|
|
|
6,088 |
|
|
|
6,086 |
|
|
|
6,075 |
|
|
|
6,073 |
|
Surplus |
|
|
31,889 |
|
|
|
6,295 |
|
|
|
6,214 |
|
|
|
6,151 |
|
|
|
6,081 |
|
Retained earnings |
|
|
75,554 |
|
|
|
73,901 |
|
|
|
71,144 |
|
|
|
69,292 |
|
|
|
66,670 |
|
Accumulated other
comprehensive income, net |
|
|
1,680 |
|
|
|
2,398 |
|
|
|
2,482 |
|
|
|
3,398 |
|
|
|
3,432 |
|
Total shareholders’
equity |
|
$ |
116,906 |
|
|
$ |
88,682 |
|
|
$ |
85,926 |
|
|
$ |
84,916 |
|
|
$ |
82,256 |
|
Total liabilities and
shareholders’ equity |
|
$ |
1,355,789 |
|
|
$ |
1,024,593 |
|
|
$ |
1,028,130 |
|
|
$ |
950,932 |
|
|
$ |
942,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan
Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans on real
estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development |
|
$ |
45,194 |
|
|
$ |
25,035 |
|
|
$ |
25,720 |
|
|
$ |
27,328 |
|
|
$ |
27,472 |
|
Secured by farmland |
|
|
3,748 |
|
|
|
495 |
|
|
|
507 |
|
|
|
521 |
|
|
|
533 |
|
Secured by 1-4 family residential |
|
|
294,216 |
|
|
|
235,158 |
|
|
|
236,870 |
|
|
|
235,814 |
|
|
|
234,198 |
|
Other real estate loans |
|
|
358,821 |
|
|
|
244,960 |
|
|
|
248,357 |
|
|
|
246,362 |
|
|
|
249,786 |
|
Loans to farmers (except those
secured by real estate) |
|
|
857 |
|
|
|
232 |
|
|
|
436 |
|
|
|
637 |
|
|
|
1,120 |
|
Commercial and industrial
loans (except those secured by real estate) |
|
|
104,807 |
|
|
|
102,734 |
|
|
|
117,109 |
|
|
|
109,201 |
|
|
|
124,157 |
|
Consumer installment
loans |
|
|
6,577 |
|
|
|
5,179 |
|
|
|
5,684 |
|
|
|
6,458 |
|
|
|
7,378 |
|
Deposit overdrafts |
|
|
172 |
|
|
|
174 |
|
|
|
112 |
|
|
|
143 |
|
|
|
194 |
|
All other loans |
|
|
8,019 |
|
|
|
3,381 |
|
|
|
3,407 |
|
|
|
3,450 |
|
|
|
3,530 |
|
Total loans |
|
$ |
822,411 |
|
|
$ |
617,348 |
|
|
$ |
638,202 |
|
|
$ |
629,914 |
|
|
$ |
648,368 |
|
Allowance for loan losses |
|
|
(5,434 |
) |
|
|
(5,465 |
) |
|
|
(7,486 |
) |
|
|
(7,485 |
) |
|
|
(7,777 |
) |
Loans, net |
|
$ |
816,977 |
|
|
$ |
611,883 |
|
|
$ |
630,716 |
|
|
$ |
622,429 |
|
|
$ |
640,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST NATIONAL CORPORATIONQuarterly
Performance Summary(in thousands, except share and per
share data)
|
|
(unaudited) |
|
|
|
For the Quarter Ended |
|
|
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
|
|
2021 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2020 |
|
Reconciliation of Tax-Equivalent Net Interest
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP measures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income – loans |
|
$ |
9,215 |
|
|
$ |
7,074 |
|
|
$ |
7,143 |
|
|
$ |
7,310 |
|
|
$ |
7,568 |
|
Interest income – investments and other |
|
|
1,116 |
|
|
|
971 |
|
|
|
952 |
|
|
|
785 |
|
|
|
775 |
|
Interest expense – deposits |
|
|
(369 |
) |
|
|
(328 |
) |
|
|
(363 |
) |
|
|
(410 |
) |
|
|
(541 |
) |
Interest expense – subordinated debt |
|
|
(156 |
) |
|
|
(154 |
) |
|
|
(154 |
) |
|
|
(160 |
) |
|
|
(160 |
) |
Interest expense – junior subordinated debt |
|
|
(68 |
) |
|
|
(68 |
) |
|
|
(66 |
) |
|
|
(68 |
) |
|
|
(68 |
) |
Total net interest income |
|
$ |
9,738 |
|
|
$ |
7,495 |
|
|
$ |
7,512 |
|
|
$ |
7,457 |
|
|
$ |
7,574 |
|
Non-GAAP measures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit realized on non-taxable interest income – loans |
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
8 |
|
Tax benefit realized on non-taxable interest income – municipal
securities |
|
|
64 |
|
|
|
57 |
|
|
|
48 |
|
|
|
43 |
|
|
|
41 |
|
Total tax benefit realized on
non-taxable interest income |
|
$ |
72 |
|
|
$ |
65 |
|
|
$ |
56 |
|
|
$ |
51 |
|
|
$ |
49 |
|
Total tax-equivalent net
interest income |
|
$ |
9,810 |
|
|
$ |
7,560 |
|
|
$ |
7,568 |
|
|
$ |
7,508 |
|
|
$ |
7,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST NATIONAL CORPORATIONYear-to-Date
Performance Summary(in thousands, except share and per
share data)
|
|
(unaudited) |
|
|
|
For the Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
Income Statement |
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
Interest and fees on loans |
|
$ |
23,432 |
|
|
$ |
22,187 |
|
Interest on deposits in banks |
|
|
149 |
|
|
|
159 |
|
Interest on federal funds
sold |
|
|
8 |
|
|
|
— |
|
Interest on securities |
|
|
|
|
|
|
|
|
Taxable interest |
|
|
2,180 |
|
|
|
1,881 |
|
Tax-exempt interest |
|
|
637 |
|
|
|
454 |
|
Dividends |
|
|
65 |
|
|
|
75 |
|
Total interest income |
|
$ |
26,471 |
|
|
$ |
24,756 |
|
Interest expense |
|
|
|
|
|
|
|
|
Interest on deposits |
|
$ |
1,060 |
|
|
$ |
2,179 |
|
Interest on federal funds purchased |
|
|
— |
|
|
|
— |
|
Interest on subordinated debt |
|
|
464 |
|
|
|
341 |
|
Interest on junior subordinated debt |
|
|
202 |
|
|
|
225 |
|
Interest on other borrowings |
|
|
— |
|
|
|
— |
|
Total interest expense |
|
$ |
1,726 |
|
|
$ |
2,745 |
|
Net interest income |
|
$ |
24,745 |
|
|
$ |
22,011 |
|
Provision for (recovery of)
loan losses |
|
|
(1,000 |
) |
|
|
3,200 |
|
Net interest income after
provision for loan losses |
|
$ |
25,745 |
|
|
$ |
18,811 |
|
Noninterest income |
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
$ |
1,436 |
|
|
$ |
1,475 |
|
ATM and check card fees |
|
|
2,036 |
|
|
|
1,738 |
|
Wealth management fees |
|
|
1,996 |
|
|
|
1,610 |
|
Fees for other customer services |
|
|
1,027 |
|
|
|
767 |
|
Income from bank owned life insurance |
|
|
374 |
|
|
|
345 |
|
Net gains (losses) on securities |
|
|
37 |
|
|
|
38 |
|
Net gains on sale of loans |
|
|
25 |
|
|
|
60 |
|
Other operating income |
|
|
295 |
|
|
|
40 |
|
Total noninterest income |
|
$ |
7,226 |
|
|
$ |
6,073 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
$ |
12,694 |
|
|
$ |
10,109 |
|
Occupancy |
|
|
1,346 |
|
|
|
1,244 |
|
Equipment |
|
|
1,383 |
|
|
|
1,267 |
|
Marketing |
|
|
487 |
|
|
|
243 |
|
Supplies |
|
|
341 |
|
|
|
304 |
|
Legal and professional fees |
|
|
1,806 |
|
|
|
842 |
|
ATM and check card expense |
|
|
828 |
|
|
|
727 |
|
FDIC assessment |
|
|
234 |
|
|
|
142 |
|
Bank franchise tax |
|
|
493 |
|
|
|
476 |
|
Data processing expense |
|
|
885 |
|
|
|
563 |
|
Amortization expense |
|
|
24 |
|
|
|
127 |
|
Other real estate owned expense (income), net |
|
|
14 |
|
|
|
(9 |
) |
Other operating expense |
|
|
2,171 |
|
|
|
1,857 |
|
Total noninterest expense |
|
$ |
22,706 |
|
|
$ |
17,892 |
|
Income before income
taxes |
|
$ |
10,265 |
|
|
$ |
6,992 |
|
Income tax expense |
|
|
2,089 |
|
|
|
1,290 |
|
Net income |
|
$ |
8,176 |
|
|
$ |
5,702 |
|
|
|
|
|
|
|
|
|
|
FIRST NATIONAL CORPORATIONYear-to-Date
Performance Summary(in thousands, except share and per
share data)
|
|
(unaudited) |
|
|
|
For the Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
Common Share and Per Common Share Data |
|
|
|
|
|
|
|
|
Net income, basic |
|
$ |
1.54 |
|
|
$ |
1.17 |
|
Weighted average shares,
basic |
|
|
5,322,696 |
|
|
|
4,884,805 |
|
Net income, diluted |
|
$ |
1.53 |
|
|
$ |
1.17 |
|
Weighted average shares,
diluted |
|
|
5,329,939 |
|
|
|
4,886,668 |
|
Shares outstanding at period
end |
|
|
6,226,418 |
|
|
|
4,858,217 |
|
Tangible book value at period
end |
|
$ |
18.11 |
|
|
$ |
16.92 |
|
Cash dividends |
|
$ |
0.36 |
|
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|
Key Performance
Ratios |
|
|
|
|
|
|
|
|
Return on average assets |
|
|
0.97 |
% |
|
|
0.86 |
% |
Return on average equity |
|
|
11.40 |
% |
|
|
9.49 |
% |
Net interest margin |
|
|
3.13 |
% |
|
|
3.58 |
% |
Efficiency ratio (1) |
|
|
64.34 |
% |
|
|
63.04 |
% |
|
|
|
|
|
|
|
|
|
Average
Balances |
|
|
|
|
|
|
|
|
Average assets |
|
$ |
1,121,225 |
|
|
$ |
883,741 |
|
Average earning assets |
|
|
1,063,597 |
|
|
|
827,240 |
|
Average shareholders’
equity |
|
|
95,861 |
|
|
|
80,228 |
|
|
|
|
|
|
|
|
|
|
Asset
Quality |
|
|
|
|
|
|
|
|
Loan charge-offs |
|
$ |
1,262 |
|
|
$ |
619 |
|
Loan recoveries |
|
|
211 |
|
|
|
262 |
|
Net charge-offs |
|
|
1,051 |
|
|
|
357 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Tax-Equivalent Net Interest Income |
|
|
|
|
|
|
|
|
GAAP measures: |
|
|
|
|
|
|
|
|
Interest income – loans |
|
$ |
23,432 |
|
|
$ |
22,187 |
|
Interest income – investments and other |
|
|
3,039 |
|
|
|
2,569 |
|
Interest expense – deposits |
|
|
(1,060 |
) |
|
|
(2,179 |
) |
Interest expense – federal funds purchased |
|
|
— |
|
|
|
— |
|
Interest expense – subordinated debt |
|
|
(464 |
) |
|
|
(341 |
) |
Interest expense – junior subordinated debt |
|
|
(202 |
) |
|
|
(225 |
) |
Interest expense – other borrowings |
|
|
— |
|
|
|
— |
|
Total net interest income |
|
$ |
24,745 |
|
|
$ |
22,011 |
|
Non-GAAP measures: |
|
|
|
|
|
|
|
|
Tax benefit realized on non-taxable interest income – loans |
|
$ |
24 |
|
|
$ |
26 |
|
Tax benefit realized on non-taxable interest income – municipal
securities |
|
|
169 |
|
|
|
121 |
|
Total tax benefit realized on
non-taxable interest income |
|
$ |
193 |
|
|
$ |
147 |
|
Total tax-equivalent net
interest income |
|
$ |
24,938 |
|
|
$ |
22,158 |
|
|
|
|
|
|
|
|
|
|
(1) The efficiency ratio is computed by dividing
noninterest expense excluding other real estate owned
income/expense, amortization of intangibles, gains and losses on
disposal of premises and equipment, and merger related
expenses by the sum of net interest income on a tax-equivalent
basis and noninterest income, excluding gains and losses on sales
of securities. Tax-equivalent net interest income is
calculated by adding the tax benefit realized from interest income
that is nontaxable to total interest income then subtracting total
interest expense. The tax rate utilized in calculating the tax
benefit is 21%. See the tables above for tax-equivalent net
interest income and reconciliations of net interest income to
tax-equivalent net interest income. The efficiency ratio is a
non-GAAP financial measure that management believes provides
investors with important information regarding operational
efficiency. Such information is not prepared in accordance
with U.S. generally accepted accounting principles (GAAP) and
should not be construed as such. Management believes;
however, such financial information is meaningful to the reader in
understanding operational performance, but cautions that such
information not be viewed as a substitute for GAAP.
(2) All capital ratios reported are for First Bank.
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