EXHIBIT 99.1
Contact: | |
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Harry S. Smith, President & CEO | M. Shane Bell, EVP & CFO |
(540) 465-9121 | (540) 465-9121 |
hsmith@firstbank-va.com | sbell@firstbank-va.com |
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News Release | |
July 19, 2007 | |
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FIRST NATIONAL CORPORATION REPORTS SECOND QUARTER EARNINGS
Strasburg, Virginia (July 19, 2007) --- First National Corporation (OTCBB: FXNC) reported second quarter earnings of $1.3 million, a decrease of 13.5% when compared to earnings of $1.5 million for the second quarter of 2006. Harry S. Smith, President and CEO, stated “We are optimistic about improved profitability in future periods. The net interest margin has rebounded 11 basis points so far this year after experiencing compression during the last half of 2006. The Company remains committed to profitable balance sheet growth, maintaining a high quality loan portfolio and properly timing branch expansion to maximize shareholder value."
Earnings for the second quarter of 2007 were $1.3 million, or $0.44 per basic and diluted share, compared to $1.5 million or $0.50 per basic and diluted share for the same period of 2006. The decrease was the result of a 12.5% increase in noninterest expense and a slight decrease in net interest income, offset by noninterest income that increased 11.9% and the provision for loan losses that decreased 20.2%. Return on assets and return on equity were 0.98% and 15.10%, respectively, for the second quarter of 2007 compared to 1.18% and 19.20% for the same quarter in 2006. Total assets increased $18.6 million or 3.6% during the last 12 months to $529.2 million at June 30, 2007 compared to $510.6 million a year ago. In addition, the Company’s wealth management group had assets under management that totaled $184.7 million at June 30, 2007.
Net interest income decreased slightly to $4.4 million for the second quarter of 2007 compared to $4.5 million for the same quarter of 2006. This decrease was a result of a lower net interest margin when comparing the two periods. The net interest margin was 17 basis points lower as a result of higher cost of funds caused by increased competition for deposits and price sensitive deposit customers. The Company first experienced the net interest margin compression during the third quarter of 2006 when the margin dropped 20 basis points from the previous quarter, and it fell another 8 basis points in the fourth quarter of 2006. The margin has improved in 2007, rebounding 8 basis points during the first quarter and another 3 basis points during the second quarter.
Noninterest income increased 11.9% to $1.4 million for the second quarter of 2007, compared to $1.3 million for the same quarter of 2006. Fees for other customer services increased 22.9% to $601 thousand for the second quarter of 2007, compared to $489 thousand for the same period in 2006. This resulted from an increase in fee income from trust and asset management services and ATM fees. Noninterest expense increased 12.5% to $3.9 million for the second quarter of 2007 compared to $3.5 million for the same period in 2006. Salaries and employee benefits, occupancy and equipment expenses increased over the comparable period in 2006 primarily due to the addition of two branch locations during the second and third quarters of 2006.
Net charge-offs were $32 thousand for the second quarter of 2007, compared to net recoveries of $16 thousand for the same period in 2006. Minimal loan growth during the second quarter resulted in a lower loan loss provision of $67 thousand for the second quarter of 2007 compared to $84 thousand for the same period in 2006. The allowance for loan losses totaled $4.0 million or 0.92% of total loans at June 30, 2007, compared to $3.8 million or 0.92% of total loans at June 30, 2006.
For the six months ended June 30, 2007, net income was $2.7 million or $0.92 per basic and diluted share. This is a 10.3% decrease compared to $3.0 million in net income or $1.02 per basic and diluted share for the same period in 2006. Return on assets was 1.04% for the first six months of 2007 compared to 1.23% for the same period in 2006, and return on equity was 16.13% for the first six months of 2007 compared to 19.81% for the same period in 2006.
Net interest income remained unchanged at $8.8 million for both the six months ended June 30, 2007 and 2006. This was the result of a lower net interest margin offset by moderate balance sheet growth when comparing the two periods. The net interest margin decreased 25 basis points to 3.64% for the six months ended June 30, 2007, compared to 3.89% for the same period in 2006.
Noninterest income increased 8.8% to $2.7 million for the six months ended June 30, 2007 from $2.5 million for the same period in 2006. Fees for other customer services increased 22.6% to $1.2 million for the six months ended June 30, 2007, compared to $960 thousand for the same period in 2006. This was attributable to increases in fee income from trust and asset management services and ATM fees. Noninterest expense increased 10.6% to $7.5 million for the six months ended June 30, 2007, compared to $6.7 million for the same period in 2006. The increase in noninterest expense was primarily the result of increases in salaries and employee benefits, occupancy and equipment expenses due to the addition of two branch locations during 2006.
The Company notes to investors that past results of operations do not necessarily indicate future results. Certain factors that affect the Company’s operations and business environment are subject to uncertainties that could in turn affect future results. These factors are identified in the Annual Report on Form 10-K for the year ended December 31, 2006, which can be accessed from the Company’s website at www.firstbank-va.com, as filed with the Securities and Exchange Commission.
First National Corporation, headquartered in Strasburg, Virginia, is the financial holding company of First Bank. First Bank offers loan, deposit, trust and investment products and services from 11 branch offices 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.
FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) | | | | | | | |
| (unaudited) For the Three Months Ended | | (unaudited) For the Six Months Ended |
Income Statement | June 30,
2007 | | June 30,
2006 | | June 30,
2007 | | June 30,
2006 |
Interest and dividend income | | | | | | | |
Interest and fees on loans | $ 8,065 | | $ 7,282 | | $ 16,018 | | $ 13,918 |
Interest on federal funds sold | 10 | | 1 | | 24 | | 2 |
Interest on deposits in banks | 25 | | 32 | | 50 | | 60 |
Interest and dividends on securities available for sale: | | | | | | |
Taxable interest | 535 | | 633 | | 1,070 | | 1,287 |
Tax-exempt interest | 116 | | 106 | | 231 | | 212 |
Dividends | 48 | | 60 | | 95 | | 113 |
Total interest and dividend income | $ 8,799 | | $ 8,114 | | $ 17,488 | | $ 15,592 |
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Interest expense | | | | | | | |
Interest on deposits | $ 3,551 | | $ 2,623 | | $ 7,093 | | $ 4,860 |
Interest on federal funds purchased | 41 | | 91 | | 80 | | 168 |
Interest on company obligated mandatorily redeemable capital securities | 238 | | 158 | | 474 | | 305 |
Interest on other borrowings | 538 | | 779 | | 1,088 | | 1,437 |
Total interest expense | $ 4,368 | | $ 3,651 | | $ 8,735 | | $ 6,770 |
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Net interest income | $ 4,431 | | $ 4,463 | | $ 8,753 | | $ 8,822 |
Provision for loan losses | 67 | | 84 | | 67 | | 169 |
Net interest income after provision for loan losses | $ 4,364 | | $ 4,379 | | $ 8,686 | | $ 8,653 |
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Noninterest income | | | | | | | |
Service charges | $ 772 | | $ 699 | | $ 1,391 | | $ 1,362 |
Fees for other customer services | 601 | | 489 | | 1,177 | | 960 |
Gains on sale of loans | 52 | | 52 | | 125 | | 97 |
Net gains on sale of securities | - | | 3 | | - | | 3 |
Net gains on sale of premises and equipment | 1 | | - | | 1 | | - |
Other operating income | 14 | | 44 | | 36 | | 87 |
Total noninterest income | $ 1,440 | | $ 1,287 | | $ 2,730 | | $ 2,509 |
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Noninterest expense | | | | | | | |
Salaries and employee benefits | $ 2,207 | | $ 1,855 | | $ 4,073 | | $ 3,639 |
Occupancy | 228 | | 190 | | 474 | | 389 |
Equipment | 310 | | 298 | | 628 | | 568 |
Other operating expense | 1,166 | | 1,134 | | 2,275 | | 2,138 |
Total noninterest expense | $ 3,911 | | $ 3,477 | | $ 7,450 | | $ 6,734 |
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Income before income taxes | $ 1,893 | | $ 2,189 | | $ 3,966 | | $ 4,428 |
Provision for income taxes | 613 | | 709 | | 1,283 | | 1,436 |
Net income | $ 1,280 | | $ 1,480 | | $ 2,683 | | $ 2,992 |
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Share and Per Share Data | | | | | | | |
Net income, basic and diluted | $ 0.44 | | $ 0.50 | | $ 0.92 | | $ 1.02 |
Shares outstanding at period end | 2,922,860 | | 2,922,860 | | 2,922,860 | | 2,922,860 |
Weighted average shares, basic and diluted | 2,905,574 | | 2,922,860 | | 2,904,786 | | 2,922,860 |
Book value at period end | $ 11.64 | | $ 10.61 | | $ 11.64 | | $ 10.61 |
Cash dividends | $ 0.13 | | $ 0.12 | | $ 0.26 | | $ 0.24 |
FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) | | | | | | |
| (unaudited) For the Three Months Ended | | (unaudited) At or for the Six Months Ended |
| June 30,
2007 | | June 30,
2006 | | June 30,
2007 | | June 30,
2006 |
Key Performance Ratios | | | | | | | |
Return on average assets | 0.98% | | 1.18% | | 1.04% | | 1.23% |
Return on average equity | 15.10% | | 19.20% | | 16.13% | | 19.81% |
Net interest margin | 3.66% | | 3.83% | | 3.64% | | 3.89% |
Efficiency ratio (1) | 65.81% | | 59.79% | | 64.08% | | 58.74% |
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Asset Quality | | | | | | | |
Loan charge-offs | $ 81 | | $ 55 | | $ 153 | | $ 114 |
Loan recoveries | 49 | | 71 | | 105 | | 187 |
Net charge-offs (recoveries) | 32 | | (16) | | 48 | | (73) |
Nonaccrual loans | 186 | | 185 | | 186 | | 185 |
Nonperforming assets | 1,618 | | 397 | | 1,618 | | 397 |
Repossessed assets | 61 | | 47 | | 61 | | 47 |
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Average Balances | | | | | | | |
Average assets | $ 522,334 | | $ 501,570 | | $ 521,440 | | $ 490,646 |
Average shareholders’ equity | 34,013 | | 30,908 | | 33,558 | | 30,460 |
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| | | | | (unaudited) |
| | | | | June 30,
2007 | | June 30,
2006 |
Capital Ratios | | | | | | | |
Tier 1 capital | | | | | $ 48,127 | | $ 40,059 |
Total capital | | | | | 52,124 | | 43,829 |
Total capital to risk-weighted assets | | | | | 11.92% | | 10.30% |
Tier 1 capital to risk-weighted assets | | | | | 11.01% | | 9.42% |
Leverage ratio | | | | | 9.22% | | 7.99% |
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Balance Sheet | | | | | | | |
Cash and due from banks | | | | | $ 8,583 | | $ 13,232 |
Interest-bearing deposits in banks | | | | | 3,811 | | 2,472 |
Securities available for sale, at fair value | | | | 60,564 | | 66,864 |
Loans held for sale | | | | | 398 | | 858 |
Loans, net of allowance for loan losses | | | | | 430,250 | | 405,239 |
Premises and equipment, net | | | | | 18,646 | | 16,307 |
Interest receivable | | | | | 2,064 | | 1,679 |
Other assets | | | | | 4,919 | | 3,981 |
Total assets | | | | | $ 529,235 | | $ 510,632 |
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Noninterest-bearing demand deposits | | | | | $ 82,561 | | $ 83,725 |
Savings and interest-bearing demand deposits | | | | 178,852 | | 131,824 |
Time deposits | | | | | 172,818 | | 188,914 |
Total deposits | | | | | $ 434,231 | | $ 404,463 |
Federal funds purchased | | | | | 5,260 | | 220 |
Other borrowings | | | | | 40,690 | | 65,214 |
Company obligated mandatorily redeemable capital securities | | | 12,372 | | 8,248 |
Accrued expenses and other liabilities | | | | | 2,652 | | 1,489 |
Total liabilities | | | | | $ 495,205 | | $ 479,634 |
FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) | | | |
| (unaudited) |
| June 30,
2007 | | June 30,
2006 |
Balance Sheet (continued) | | | |
Common stock | $ 3,653 | | $ 3,653 |
Surplus | 1,464 | | 1,465 |
Retained earnings | 31,032 | | 27,025 |
Unearned ESOP shares | (495) | | - |
Accumulated other comprehensive loss, net | (1,624) | | (1,145) |
Total shareholders’ equity | $ 34,030 | | $ 30,998 |
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Total liabilities and shareholders’ equity | $ 529,235 | | $ 510,632 |
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Loan Data | | | |
Mortgage loans on real estate: | | | |
Construction | $ 69,938 | | $ 60,600 |
Secured by farm land | 1,763 | | 2,533 |
Secured by 1-4 family residential | 108,565 | | 103,931 |
Other real estate loans | 174,687 | | 162,938 |
Loans to farmers (except those secured by real estate) | 2,198 | | 2,303 |
Commercial and industrial loans (except those secured by real estate) | 50,684 | | 44,142 |
Consumer installment loans | 20,993 | | 27,683 |
Deposit overdrafts | 493 | | 178 |
All other loans | 4,926 | | 4,701 |
Total loans | $ 434,247 | | $ 409,009 |
Allowance for loan losses | 3,997 | | 3,770 |
Loans, net | $ 430,250 | | $ 405,239 |
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(1) 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. 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 2007 and 2006 is 34%. Net interest income on a tax equivalent basis was $4,503 and $4,531 for the three months ended June 30, 2007 and 2006, respectively, and $8,896 and $8,957 for the six months ended June 30, 2007 and 2006, respectively. Noninterest income excluding securities gains and losses was $1,440 and $1,284 for the three months ended June 30, 2007 and 2006, respectively, and $2,730 and $2,506 for the six months ended June 30, 2007 and 2006, 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. |
