EXHIBIT 99.1
FIRST NATIONAL
CORPORATION
Contact: M. Shane Bell, EVP/CFO
sbell@firstbank-va.com
News Release
(540) 465-9121
July 21, 2005
FIRST NATIONAL CORPORATION ANNOUNCES INCREASE IN 2ND QUARTER EARNINGS
FOR IMMEDIATE RELEASE (Strasburg, Virginia) --- First National Corporation (OTCBB: FXNC) reported second quarter 2005 earnings of $1.4 million or $0.47 per basic and diluted share. This is a 27.4% increase compared to earnings of $1.1 million or $0.37 per basic and diluted share for the second quarter of 2004. Net interest income increased 23.6% to $3.9 million for the second quarter of 2005 compared to $3.2 million for the second quarter of 2004.
Noninterest income decreased to $1.1 million for the quarter ended June 30, 2005 compared to $1.5 million for the same period in 2004 as a result of the sale of property in 2004 which generated a gain of $454 thousand. Noninterest expense increased slightly to $2.9 million for the quarter ended June 30, 2005 from $2.8 million for the same period in 2004.
For the six months ended June 30, 2005, net income was $2.3 million or $0.80 per basic and diluted share. This is a 19.4% increase over the $2.0 million in net income or $0.67 per basic and diluted share for the six months ended June 30, 2004. The annualized return on average equity and average assets were 17.70% and 1.11%, respectively, for the six months ended June 30, 2005, compared to 16.43% and 1.10%, respectively, for the six months ended June 30, 2004.
Net interest income increased 20.4% to $7.6 million for the six months ended June 30, 2005 from $6.3 million for the same period in 2004. The increase was primarily attributable to an 18.8% increase in average interest-earning assets over the same period. The net interest margin increased 6 basis points to 3.88% for the six months ended June 30, 2005, compared to 3.82% for the same period in 2004.
Noninterest income decreased to $2.0 million for the six months ended June 30, 2005, compared to $2.4 million for the same period in 2004 as a result of the sale of property in 2004 which generated a gain of $454 thousand. Service charges on deposit accounts, which included overdraft fees, decreased slightly to $1.2 million for the six months ended June 30, 2005 compared to $1.3 million for the same period in 2004. This decrease was offset by an increase in fees for other customer services which increased 28.0% to $630 thousand for the six months ended June 30, 2005, compared to $492 thousand for the same period
in 2004. Fees for other customer services include ATM and check card fees, trust and asset management fees and brokerage fees.
Noninterest expense increased 7.2% to $5.7 million for the six months ended June 30, 2005, compared to $5.4 million for the same period in 2004. Salaries and employee benefits increased over the comparable period in 2004 as a result of salary increases and hiring additional employees to support business growth. This increase was offset by a decrease in legal and professional fees for the six months ended June 30, 2005 compared to the same period in 2004.
Total assets increased 19.9% to $448.5 million at June 30, 2005 from $374.1 million at June 30, 2004. The majority of the asset growth occurred in the loan portfolio. Loans, net of the allowance for loan losses, increased 23.3% to $353.4 million at June 30, 2005 from $286.6 million at June 30, 2004. The allowance for loan losses totaled $3.2 million or 0.90% of total loans at June 30, 2005, compared to $2.8 million or 0.96% of total loans at June 30, 2004. Net charge-offs were $66 thousand for the six months ended June 30, 2005, compared to $228 thousand for the comparable period of 2004, resulting in a lower loan loss provision of $411 thousand for the six months ended June 30, 2005 compared to $448 thousand for the same period in 2004. The allowance for loan losses has increased over the last year, which is attributable to the growth of the loan portfolio. The overall quality of the loan portfolio has improved, which is reflected in the ratio of allowance for loan losses to total loans.
Total deposits increased 16.8% or $50.9 million to $354.6 million at June 30, 2005 from $303.7 million at June 30, 2004. The deposit mix remained consistent with prior periods as noninterest-bearing demand deposits, savings and interest-bearing demand deposits and time deposits comprised 22.6%, 40.3% and 37.1%, respectively, of total deposits at June 30, 2005, compared to 22.4%, 40.2% and 37.4% for the same period in 2004. Other borrowings, principally Federal Home Loan Bank advances, totaled $55.2 million at June 30, 2005, compared to $35.2 million at June 30, 2004.
Shareholders’ equity totaled $27.5 million at June 30, 2005, an increase of 14.5% over the June 30, 2004 balance of $24.1 million. The book value of the Corporation was $9.42 per share and total common shares outstanding were 2,922,860 at June 30, 2005. Cash dividends paid during the six months ended June 30, 2005 and 2004 were $0.22 per share and $0.20 per share, respectively. As announced earlier, the Corporation declared a two-for-one stock split on March 16, 2005 with respect to shares of its common stock payable on April 29, 2005 to shareholders of record as of March 30, 2005.
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 Annual Report on Form 10-K for the year ended December 31, 2004, 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 is a full service community bank offering traditional banking, trust and investment services from 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.
QUARTERLY PERFORMANCE SUMMARY First National Corporation (OTCBB: FXNC) (in thousands, except share and per share data) | ||||
For the Three Months Ended | For the Six Months Ended | |||
INCOME STATEMENT | 6/30/2005 | 6/30/2004 | 6/30/2005 | 6/30/2004 |
Interest and dividend income | ||||
Interest and fees on loans | $ 5,581 | $ 4,246 | $ 10,712 | $ 8,327 |
Interest on federal funds sold | 2 | 2 | 9 | 4 |
Interest on deposits in banks | 19 | 5 | 35 | 10 |
Interest and dividends on securities available for sale: | ||||
Taxable interest | 526 | 557 | 1,022 | 1,144 |
Nontaxable interest | 102 | 96 | 208 | 196 |
Dividends | 43 | 17 | 74 | 34 |
Total interest and dividend income | $ 6,273 | $ 4,923 | $ 12,060 | $ 9,715 |
Interest expense | ||||
Interest on deposits | $ 1,632 | $ 1,233 | $ 3,081 | $ 2,393 |
Interest on federal funds purchased | 39 | 11 | 66 | 25 |
Interest on company obligated mandatorily redeemable securities | 119 | 40 | 227 | 74 |
Interest on other borrowings | 540 | 449 | 1,104 | 924 |
Total interest expense | $ 2,330 | $ 1,733 | $ 4,478 | $ 3,416 |
Net interest income | $ 3,943 | $ 3,190 | $ 7,582 | $ 6,299 |
Provision for loan losses | 166 | 285 | 411 | 448 |
Net interest income after provision for loan losses | $ 3,777 | $ 2,905 | $ 7,171 | $ 5,851 |
Noninterest income | ||||
Service charges | $ 661 | $ 689 | $ 1,246 | $ 1,322 |
Fees for other customer services | 361 | 256 | 630 | 492 |
Gains (losses) on sale of premises and equipment | (11) | 441 | (11) | 435 |
Gains on sale of loans | 55 | 72 | 111 | 97 |
Gains on sale of securities | 18 | -- | 18 | -- |
Other | 37 | 34 | 26 | 24 |
Total noninterest income | $ 1,121 | $ 1,492 | $ 2,020 | $ 2,370 |
Noninterest expense | ||||
Salaries and employee benefits | $ 1,586 | $ 1,332 | $ 3,111 | $ 2,535 |
Occupancy | 182 | 178 | 357 | 357 |
Equipment | 225 | 217 | 447 | 428 |
Advertising | 69 | 104 | 145 | 200 |
Stationery and supplies | 86 | 73 | 190 | 182 |
Other | 732 | 924 | 1,488 | 1,649 |
Total noninterest expense | $ 2,880 | $ 2,828 | $ 5,738 | $ 5,351 |
Income before income taxes | $ 2,018 | $ 1,569 | $ 3,453 | $ 2,870 |
Provision for income taxes | 656 | 500 | 1,106 | 904 |
Net income | $ 1,362 | $ 1,069 | $ 2,347 | $ 1,966 |
SHARE AND PER SHARE DATA(1) | ||||
Net income, basic and diluted | $ 0.47 | $ 0.37 | $ 0.80 | $ 0.67 |
Shares outstanding at period end | 2,922,860 | 2,924,124 | 2,922,860 | 2,924,124 |
Weighted average shares, basic and diluted | 2,923,791 | 2,924,124 | 2,923,956 | 2,924,124 |
Book value at period end | $ 9.42 | $ 8.23 | $ 9.42 | $ 8.23 |
Cash dividends | $ 0.11 | $ 0.10 | $ 0.22 | $ 0.20 |
QUARTERLY PERFORMANCE SUMMARY First National Corporation (OTCBB: FXNC) (in thousands, except share and per share data) | ||
6/30/2005 | 6/30/2004 | |
KEY PERFORMANCE RATIOS (YTD) | ||
Return on average assets | 1.11% | 1.10% |
Return on average equity | 17.70% | 16.43% |
Net interest margin | 3.88% | 3.82% |
Efficiency ratio(2) | 58.98% | 60.77% |
ASSET QUALITY (YTD) | ||
Loan charge-offs | $ 177 | $ 262 |
Loan recoveries | 111 | 34 |
Net charge-offs | 66 | 228 |
Nonaccrual loans | 318 | 289 |
Nonperforming loans | 318 | 289 |
Repossessed assets | 59 | 142 |
CAPITAL RATIOS | ||
Tier 1 Capital | $ 35,388 | $ 32,182 |
Total Capital | 38,609 | 34,949 |
Total Capital to Risk Weighted Assets | 10.71% | 11.73% |
Tier 1 Capital to Risk Weighted Assets | 9.82% | 10.78% |
Leverage Ratio | 8.16% | 8.77% |
BALANCE SHEET | ||
Cash and due from banks | $ 9,726 | $ 8,799 |
Interest-bearing deposits in banks | 752 | 1,120 |
Securities available for sale, at fair value | 66,277 | 61,250 |
Loans held for sale | 459 | 121 |
Loans, net of allowance for loan losses | 353,365 | 286,599 |
Premises and equipment, net | 12,696 | 11,404 |
Interest receivable | 1,520 | 1,297 |
Other assets | 3,689 | 3,495 |
Total assets | $ 448,484 | $ 374,085 |
Noninterest-bearing demand deposits | $ 80,041 | $ 67,974 |
Savings and interest-bearing demand deposits | 142,876 | 122,221 |
Time deposits | 131,721 | 113,515 |
Total deposits | $ 354,638 | $ 303,710 |
Federal funds purchased | $ 994 | $ 1,484 |
Other borrowings | 55,232 | 35,249 |
Company obligated mandatorily redeemable capital securities | 8,248 | 8,248 |
Accrued expenses and other liabilities | 1,840 | 1,342 |
Total liabilities | $ 420,952 | $ 350,033 |
QUARTERLY PERFORMANCE SUMMARY First National Corporation (OTCBB: FXNC) (in thousands, except share and per share data) | ||
6/30/2005 | 6/30/2004 | |
BALANCE SHEET(continued) | ||
Common stock | $ 3,653 | $ 3,655 |
Surplus | 1,465 | 1,465 |
Retained earnings | 22,365 | 19,062 |
Accumulated other comprehensive income (loss), net | 49 | (130) |
Total shareholders’ equity | $ 27,532 | $ 24,052 |
Total liabilities and shareholders’ equity | $ 448,484 | $ 374,085 |
Average balances | ||
Total assets | $ 425,108 | $ 359,466 |
Total shareholders’ equity | $ 26,740 | $ 24,066 |
LOAN DATA | ||
Mortgage loans on real estate: | ||
Construction | $ 43,320 | $ 36,235 |
Secured by farm land | 2,211 | 2,344 |
Secured by 1-4 family residential | 96,024 | 86,981 |
Other real estate loans | 139,097 | 93,057 |
Loans to farmers (except those secured by real estate) | 673 | 323 |
Commercial and industrial loans (except those secured by real estate) | 41,074 | 35,929 |
Consumer installment loans | 31,027 | 32,398 |
Deposit overdrafts | 249 | 244 |
All other loans | 2,911 | 1,855 |
Total loans | $ 356,586 | $ 289,366 |
Allowance for loan losses | 3,221 | 2,767 |
Loans, net | $ 353,365 | $ 286,599 |
(1) Share and per share data for prior periods have been restated to give retroactive effect of the Company’s two-for-one stock split declared March 18, 2005. The stock split was payable on April 29, 2005 to shareholders of record March 30, 2005. | ||
(2) The efficiency ratio is computed by dividing noninterest expense by the sum of net interest income on a tax equivalent basis and noninterest income excluding securities gains and losses. This is a non-GAAP financial measure that we believe 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. Net interest income on a tax equivalent basis was $7,728 and $6,435 for the period ended June 30, 2005 and 2004, respectively. Noninterest income excluding securities gains and losses was $2,001 and $1,492 for the period ended June 30, 2005 and 2004, respectively. 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. |
FIRST NATIONAL CORPORATION
Consolidated Average Balances, Yields and Rates
Six Months Ended June 30, 2005 and 2004
(dollars in thousands)
Six months ended June 30, | ||||||||
2005 | 2004 | |||||||
Interest | Interest | |||||||
ASSETS | Average Balance | Income/ Expense | Yield/ Rate (3) | Average Balance | Income/ Expense | Yield/ Rate (3) | ||
Balances at correspondent | ||||||||
banks – interest-bearing | $ 821 | $ 36 | 8.75% | $ 1,140 | $ 10 | 1.83% | ||
Securities: | ||||||||
Taxable | 53,766 | 1,096 | 4.11% | 58,654 | 1,178 | 4.04% | ||
Tax-exempt (1) | 9,724 | 314 | 6.52% | 9,022 | 297 | 6.61% | ||
Total securities | 63,490 | 1,410 | 4.48% | 67,676 | 1,475 | 4.38% | ||
Loans: (2) | ||||||||
Taxable | 335,525 | 10,636 | 6.43% | 265,396 | 8,259 | 6.26% | ||
Tax-exempt (1) | 3,610 | 115 | 6.40% | 3,293 | 102 | 6.24% | ||
Total loans | 337,135 | 10,751 | 6.43% | 268,689 | 8,361 | 6.26% | ||
Federal funds sold | 507 | 9 | 3.60% | 882 | 4 | 0.91% | ||
Total earning assets | 401,953 | 12,206 | 6.12% | 338,387 | 9,850 | 5.85% | ||
Less: allowance for loan losses | (3,054) | (2,623) | ||||||
Total nonearning assets | 26,209 | 23,702 | ||||||
Total assets | $ 425,108 | $ 359,466 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Interest-bearing deposits: | ||||||||
Checking | $ 62,591 | $ 526 | 1.69% | $ 63,286 | $ 378 | 1.20% | ||
Money market savings | 13,176 | 77 | 1.19% | 10,541 | 31 | 0.59% | ||
Regular savings | 62,427 | 545 | 1.76% | 43,775 | 148 | 0.68% | ||
Certificates of deposit: | ||||||||
Less than $100,000 | 74,509 | 1,154 | 3.12% | 72,106 | 1,196 | 3.33% | ||
Greater than $100,000 | 47,338 | 780 | 3.32% | 38,292 | 639 | 3.36% | ||
Total interest-bearing deposits | 260,041 | 3,082 | 2.39% | 228,000 | 2,392 | 2.11% | ||
Federal funds purchased | 4,060 | 66 | 3.27% | 3,204 | 25 | 1.57% | ||
Company obligated mandatorily | ||||||||
redeemable capital securities | 8,248 | 227 | 5.56% | 3,490 | 74 | 4.25% | ||
Other borrowings | 50,689 | 1,103 | 4.39% | 38,391 | 924 | 4.84% | ||
Total interest-bearing liabilities | 323,038 | 4,478 | 2.80% | 273,085 | 3,415 | 2.52% | ||
Noninterest-bearing liabilities | ||||||||
Demand deposits | 73,367 | 60,442 | ||||||
Other liabilities | 1,963 | 1,873 | ||||||
Total liabilities | 398,368 | 335,400 | ||||||
Shareholders’ equity | 26,740 | 24,066 | ||||||
Total liabilities and | ||||||||
shareholders’ equity | $ 425,108 | $ 359,466 | ||||||
Net interest income | $ 7,728 | $ 6,435 | ||||||
Interest rate spread | 3.32% | 3.33% | ||||||
Interest expense as a percent of | ||||||||
average earning assets | 2.25% | 2.03% | ||||||
Net interest margin | 3.88% | 3.82% | ||||||
(1) Income and yields are reported on a taxable-equivalent basis assuming a federal tax rate of 34%. The tax-equivalent adjustment was $146 thousand and $136 thousand for 2005 and 2004, respectively. | ||||||||
(2) Loans placed on nonaccrual status are reflected in the balances. | ||||||||
(3) Annualized |