Exhibit 99.1
FIRST NATIONAL CORPORATION
Earnings Release: Third Quarter 2004
October 21, 2004
First National Corporation (OTCBB: FXNC) reported net income of $3.0 million or $2.03 per basic and diluted share for the nine months ended September 30, 2004. This is a 23.8% increase over the $2.4 million net income for the nine months ended September 30, 2003 and a 25.3% increase over the $1.62 per basic and diluted share for the nine months ended September 30, 2003. The annualized return on average equity and average assets were 16.14% and 1.08%, respectively, for the nine months ended September 30, 2004, compared to 14.04% and 1.04%, respectively, for the nine months ended September 30, 2003.
For the three months ended September 30, 2004, net income was $1.0 million or $0.69 per basic and diluted share. This is a 16.3% increase over the $865 thousand net income and a 17.0% increase over the $0.59 per basic and diluted share for the three months ended September 30, 2003.
Net interest income increased 21.2% from $8.1 million for the nine months ended September 30, 2003 to $9.8 million for the same period in 2004. The 1.0% decline in interest expense and a 13.0% increase in interest and dividend income generated an increase in net interest income of $1.7 million. The net interest margin remained unchanged at 3.83% for the nine months ended September 30, 2004 compared to the same period in 2003.
Noninterest income increased 26.4% to $3.4 million for the nine months ended September 30, 2004 compared to $2.7 million for the same period in 2003. The majority of this increase was related to the sale of property in April 2004 that generated a gain of $454 thousand. Service charges increased 18.2% to $2.0 million for the nine months ended September 30, 2004 compared to $1.7 million for 2003. This increase was attributable to growth in the number of noninterest-bearing demand deposits and related overdraft fees. Fees for other customer services increased 31.6% to $771 thousand for the nine months ended September 30, 2004 compared to $586 thousand for the same period in 2003. Brokerage fees, ATM fees and other transaction fees contributed to this increase.
(in thousands) Noninterest income (unaudited) | Nine Months Ended 9/30/04 9/30/03 |
Service charges | $ 2,010 | $ 1,700 |
Fees for other customer services | 771 | 586 |
Gains on sale of securities | - | 16 |
Gains on sale of premises and equipment | 435 | 1 |
Gains on sale of loans | 134 | 350 |
Other | 52 | 11 |
Noninterest income | $ 3,402 | $ 2,664 |
(in thousands) Noninterest Income (unaudited) | Three Months Ended 9/30/04 9/30/03 |
Service charges | $ 688 | $ 593 |
Fees for other customer services | 279 | 257 |
Gains on sale of loans | 37 | 137 |
Other | 28 | (40) |
Noninterest income | $ 1,032 | $ 947 |
Noninterest expense increased 20.8% to $8.1 million for the nine months ended September 30, 2004 compared to $6.7 million for the same period in 2003. Salaries and employee benefits increased over the comparable period in 2003 as a result of salary increases and hiring additional employees to support business growth. Occupancy and equipment costs increased over the comparable period in 2003 as a result of retail branch expansions in Shenandoah County and the City of Winchester. Other expenses increased due to operating costs related to business growth.
(in thousands) Noninterest Expense (unaudited) | Nine Months Ended 9/30/04 9/30/03 |
Salaries and employee benefits | $ 3,872 | $ 3,431 |
Occupancy | 543 | 377 |
Equipment | 651 | 573 |
Advertising | 293 | 249 |
Stationery and supplies | 281 | 247 |
Telecommunications | 191 | 153 |
Legal and professional fees | 327 | 140 |
Other | 1,926 | 1,522 |
Noninterest expense | $ 8,084 | $ 6,692 |
(in thousands) Noninterest Expense (unaudited) | Three Months Ended 9/30/04 9/30/03 |
Salaries and employee benefits | $ 1,337 | $ 1,226 |
Occupancy | 186 | 126 |
Equipment | 223 | 211 |
Advertising | 94 | 92 |
Stationery and supplies | 113 | 111 |
Telecommunications | 58 | 52 |
Legal and professional fees | 73 | 53 |
Other | 649 | 518 |
Noninterest expense | $ 2,733 | $ 2,389 |
Total assets increased 23.2% to $393.0 million at September 30, 2004 from $319.1 million at September 30, 2003. The majority of the asset growth occurred in the loan portfolio. Loans, net of the allowance for loan losses, increased 33.0% from $228.1 million at September 30, 2003 to $303.3 million at September 30, 2004. The allowance for loan losses totaled $2.9 million or 0.94% of total loans at September 30, 2004 compared to $2.5 million or 1.08% of total loans at September 30, 2003. Net charge-offs were $335 thousand for the nine months ended September 30, 2004 compared to $186 thousand for the comparable period of 2003. The loan loss provision was $668 thousand for the nine months ended September 30, 2004 and $518 thousand for the comparable period of 2003. The allowance for loan losses has increased over the last year, which is primarily attributable to the growth in the loan portfolio. The overall quality of the loan portfolio has improved, which is reflective in the ratio of allowance for loan losses to total loans at September 30, 2004.
Total deposits increased 18.0% or $47.6 million to $312.6 million at September 30, 2004 from $265.0 million at September 30, 2003. Noninterest-bearing demand deposits increased $19.9 million or 36.6% to $74.2 million at September 30, 2004 from $54.3 million at September 30, 2003, which contributed to 41.7% of the growth in total deposits. Other borrowings totaled $45.2 million at September 30, 2004 compared to $26.6 million at September 30, 2003.
Shareholders’ equity totaled $25.4 million at September 30, 2004, an increase of 11.4% over the September 30, 2003 balance of $22.8 million. The book value of the Corporation was $17.37 per share and the total common shares outstanding were 1,462,062 at September 30, 2004. Cash dividends paid during the nine months ended September 30, 2004 and 2003 were $0.60 per share and $0.56 per share, respectively.
Selected Financial Information:
(in thousands, except per share data) Selected Ratios (unaudited) | Nine Months Ended 9/30/04 9/30/03 |
Book value per share | $ 17.37 | $ 15.58 |
Dividends per share | $ 0.60 | $ 0.56 |
Return on average equity | 16.14% | 14.04% |
Return on average assets | 1.08% | 1.04% |
Net interest margin | 3.83% | 3.83% |
(in thousands) Balance Sheets (unaudited) | 9/30/04 9/30/03 |
Securities available for sale, at fair value | $ 58,034 | $ 60,852 |
Loans held for sale | - | 995 |
Loans, net | 303,263 | 228,061 |
Total assets | 393,020 | 319,128 |
Deposits | 312,625 | 264,995 |
Other borrowings | 45,245 | 26,568 |
Company obligated manditorily redeemable capital securities |
8,000 |
3,000 |
Shareholders’ equity | 25,391 | 22,785 |
(in thousands, except per share data) Statements of Income (unaudited) | Nine Months Ended 9/30/04 9/30/03 |
Interest and dividend income | $ 14,968 | $ 13,249 |
Interest expense | 5,248 | 5,197 |
Provision for loan losses | 668 | 518 |
Noninterest income | 3,402 | 2,664 |
Noninterest expense | 8,084 | 6,692 |
Provision for income taxes | 1,398 | 1,105 |
Net income | $ 2,972 | $ 2,401 |
Earnings per share, basic and diluted | $ 2.03 | $ 1.62 |
(in thousands, except per share data) Statements of Income (unaudited) | Three Months Ended 9/30/04 9/30/03 |
Interest and dividend income | $ 5,253 | $ 4,470 |
Interest expense | 1,832 | 1,633 |
Provision for loan losses | 220 | 188 |
Noninterest income | 1,032 | 947 |
Noninterest expense | 2,733 | 2,389 |
Provision for income taxes | 494 | 342 |
Net income | $ 1,006 | $ 865 |
Earnings per share, basic and diluted | $ 0.69 | $ 0.59 |
Certain information in this discussion may include forward looking statements that are subject to risks and uncertainties. These forward looking statements include statements regarding our profitability, liquidity, allowance for loan losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals. The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements.
These forward looking statements are subject to significant uncertainties because they are based upon or are affected by certain factors. We have identified factors in our December 31, 2003 Annual Report on Form 10-KSB, which can be accessed from our website atwww.firstbank-va.com.
Because of these uncertainties, our actual future results may be materially different from the results indicated by these forward looking statements. In addition, our past results of operations do not necessarily indicate our future results.
First National Corporation, headquartered in Strasburg, Virginia, is the financial holding company of First Bank. First Bank operates nine retail bank branches 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 partnerships that provide investment services and title insurance.
Contact:
First National Corporation
M. Shane Bell
Senior Vice President & CFO
sbell@firstbank-va.com
(540) 465-9121
