Exhibit 99.1
FIRST NATIONAL CORPORATION
Earnings Release
Fourth Quarter and Year Ended December 31, 2004
January 21, 2005
First National Corporation (OTCBB: FXNC) reported net income of $4.2 million or $2.88 per basic and diluted share for the year ended December 31, 2004. This is a 27.4% increase over the $3.3 million net income for the year ended December 31, 2003 and a 29.1% increase over the $2.23 per basic and diluted share for the year ended December 31, 2003. The annualized return on average equity and average assets were 17.01% and 1.12%, respectively, for the year ended December 31, 2004, compared to 14.37% and 1.05%, respectively, for the year ended December 31, 2003.
For the quarter ended December 31, 2004, net income was $1.2 million or $0.85 per basic and diluted share. This is a 37.1% increase over the $900 thousand net income and a 39.3% increase over the $0.61 per basic and diluted share for the three months ended December 31, 2003.
Net interest income increased 21.2% from $11.0 million for the year ended December 31, 2003 to $13.3 million for the same period in 2004. The increase was directly related to a 21.1% increase in interest earning assets over the same period. The net interest margin increased to 3.84% for the year ended December 31, 2004 compared to 3.83% for the same period in 2003.
Noninterest income increased 22.2% to $4.4 million for the year ended December 31, 2004 compared to $3.6 million for the same period in 2003. Service charges increased 14.7% to $2.7 million for the year ended December 31, 2004 compared to $2.3 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 40.5% to $1.1 million for the year ended December 31, 2004 compared to $769 thousand for the same period in 2003. Transaction fees such as Visa check card, brokerage, and ATM fees contributed to this increase. Net gains on sale of premises and equipment totaled $387 thousand for the year ended December 31, 2004. The majority of this gain was comprised of a property sale in April 2004.
(in thousands) Noninterest income (unaudited) | Year Ended 12/31/04 12/31/03 |
Service charges | $ 2,664 | $ 2,323 |
Fees for other customer services | 1,081 | 769 |
Gains on sale of securities | - | 69 |
Gains (losses) on sale of premises and equipment | 387 | (49) |
Gains on sale of loans | 172 | 372 |
Other | 127 | 141 |
Noninterest income | $ 4,431 | $ 3,625 |
(in thousands) Noninterest Income (unaudited) | Quarter Ended 12/31/04 12/31/03 |
Service charges | $ 654 | $ 623 |
Fees for other customer services | 310 | 183 |
Gains on sale of securities | - | 53 |
(Losses) on sale of premises and equipment | (48) | (50) |
Gains on sale of loans | 38 | 22 |
Other | 75 | 130 |
Noninterest income | $ 1,029 | $ 961 |
Noninterest expense increased 18.7% to $10.8 million for the year ended December 31, 2004 compared to $9.1 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) | Year Ended 12/31/04 12/31/03 |
Salaries and employee benefits | $ 5,224 | $ 4,538 |
Occupancy | 714 | 518 |
Equipment | 888 | 771 |
Advertising | 380 | 340 |
Stationery and supplies | 367 | 324 |
Telecommunications | 235 | 217 |
Legal and professional fees | 395 | 216 |
Other | 2,580 | 2,161 |
Noninterest expense | $ 10,783 | $ 9,085 |
(in thousands) Noninterest Expense (unaudited) | Quarter Ended 12/31/04 12/31/03 |
Salaries and employee benefits | $ 1,352 | $ 1,107 |
Occupancy | 171 | 141 |
Equipment | 237 | 198 |
Advertising | 87 | 91 |
Stationery and supplies | 86 | 77 |
Telecommunications | 44 | 64 |
Legal and professional fees | 68 | 76 |
Other | 654 | 639 |
Noninterest expense | $ 2,699 | $ 2,393 |
Total assets increased 18.9% to $408.6 million at December 31, 2004 from $343.6 million at December 31, 2003. The majority of the asset growth occurred in the loan portfolio. Loans, net of the allowance for loan losses, increased 30.4% from $245.6 million at December 31, 2003 to $320.2 million at December 31, 2004. The allowance for loan losses totaled $2.9 million or 0.89% of total loans at December 31, 2004 compared to $2.5 million or 1.03% of total loans at December 31, 2003. Net charge-offs were $480 thousand for the year ended December 31, 2004 compared to $320 thousand for the comparable period of 2003. The loan loss provision was $810 thousand for the year ended December 31, 2004 and $705 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 December 31, 2004.
Total deposits increased 15.5% or $43.1 million to $320.9 million at December 31, 2004 from $277.8 million at December 31, 2003. Noninterest-bearing demand deposits increased $12.9 million or 23.1% to $68.9 million at December 31, 2004 from $56.0 million at December 31, 2003, which contributed to 30.0% of the growth in total deposits. Other borrowings totaled $45.2 million at December 31, 2004 compared to $36.6 million at December 31, 2003.
Shareholders’ equity totaled $26.1 million at December 31, 2004, an increase of 11.1% over the December 31, 2003 balance of $23.5 million. The book value of the Corporation was $17.85 per share and the total common shares outstanding were 1,462,062 at December 31, 2004. Cash dividends paid during the year ended December 31, 2004 and 2003 were $0.82 per share and $0.77 per share, respectively.
Selected Financial Information:
(in thousands, except per share data) Selected Ratios (unaudited) | Year Ended 12/31/04 12/31/03 |
Book value per share | $ 17.85 | $ 16.08 |
Dividends per share | $ 0.82 | $ 0.77 |
Return on average equity | 17.01% | 14.37% |
Return on average assets | 1.12% | 1.05% |
Net interest margin | 3.84% | 3.83% |
(in thousands) Balance Sheets (unaudited) | 12/31/04 12/31/03 |
Securities available for sale, at fair value | $ 63,366 | $ 70,895 |
Loans held for sale | 190 | 118 |
Loans, net | 320,197 | 245,591 |
Total assets | 408,577 | 343,557 |
Deposits | 320,945 | 277,828 |
Other borrowings | 45,240 | 36,555 |
Company obligated mandatorily redeemable capital securities |
8,000 |
3,000 |
Shareholders’ equity | 26,100 | 23,503 |
(in thousands, except per share data) Statements of Income (unaudited) | Year Ended 12/31/04 12/31/03 |
Interest and dividend income | $ 20,520 | $ 17,738 |
Interest expense | 7,220 | 6,769 |
Provision for loan losses | 810 | 705 |
Noninterest income | 4,431 | 3,625 |
Noninterest expense | 10,783 | 9,085 |
Provision for income taxes | 1,932 | 1,503 |
Net income | $ 4,206 | $ 3,301 |
Earnings per share, basic and diluted | $ 2.88 | $ 2.23 |
(in thousands, except per share data) Statements of Income (unaudited) | Quarter Ended 12/31/04 12/31/03 |
Interest and dividend income | $ 5,552 | $ 4,489 |
Interest expense | 1,972 | 1,572 |
Provision for loan losses | 142 | 187 |
Noninterest income | 1,029 | 961 |
Noninterest expense | 2,699 | 2,393 |
Provision for income taxes | 534 | 398 |
Net income | $ 1,234 | $ 900 |
Earnings per share, basic and diluted | $ 0.85 | $ 0.61 |
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
