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 |
News Release
October 23, 2007
FIRST NATIONAL CORPORATION REPORTS 14% INCREASE IN THIRD QUARTER EARNINGS
Strasburg, Virginia (October 23, 2007) --- First National Corporation (OTCBB: FXNC) reported third quarter earnings of $1.6 million, an increase of 13.8% when compared to earnings of $1.4 million for the third quarter of 2006. Harry S. Smith, President and CEO, stated “We are pleased to report that profitability improved during the third quarter. The net interest margin increased 11 basis points over the previous quarter. This represents a 22 basis point year-to-date improvement. The Company continues to seek opportunities for profitable balance sheet growth with a focus on leveraging branch capacity and maintaining high asset quality.”
Earnings for the third quarter of 2007 were $1.6 million, or $0.54 per basic and diluted share, compared to $1.4 million or $0.47 per basic and diluted share for the same period of 2006. The increase was the result of a 6.8% increase in net interest income, a 17.2% increase in noninterest income and no provision for loan losses, offset by a 10.3% increase in noninterest expense. Return on assets and return on equity were 1.18% and 17.81%, respectively, for the third quarter of 2007 compared to 1.07% and 17.23% for the same quarter in 2006. Total assets increased $11.8 million or 2.3% during the last 12 months to $533.7 million at September 30, 2007 compared to $521.9 million a year ago.
Net interest income increased 6.8% to $4.7 million for the third quarter of 2007 compared to $4.4 million for the same quarter of 2006. This increase was a result of a 14 basis point increase in the net interest margin and a $14.2 million increase in average interest-earning assets when comparing the two periods. The improvement in the net interest margin was due to increasing yields from the loan portfolio, decreasing yields on deposits and improvements in the balance sheet mix.
Noninterest income increased 17.2% to $1.5 million for the third quarter of 2007, compared to $1.3 million for the same quarter of 2006. Fees for other customer services increased 22.8% to $631 thousand for the third quarter of 2007, compared to $514 thousand for the same period in 2006. This increase resulted from an increase in ATM and check card fees, brokerage fees and fee income from trust and asset management services. Noninterest expense increased 10.3% to $3.8 million for the third quarter of 2007 compared to $3.5 million for the same period in 2006. 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 $21 thousand for the third quarter of 2007, compared to net recoveries of $5 thousand for the same period in 2006. Minimal loan growth resulted in no loan loss provision for the third quarter of 2007 compared to $109 thousand for the same period in 2006. The allowance for loan losses totaled $4.0 million or 0.92% of total loans at September 30, 2007, compared to $3.9 million or 0.91% of total loans at September 30, 2006.
For the nine months ended September 30, 2007, net income was $4.3 million or $1.46 per basic and diluted share. This is a 2.7% decrease compared to $4.4 million in net income or $1.50 per basic and diluted share for the same period in 2006. Return on assets was 1.09% for the first nine months of 2007 compared to 1.17% for the same period in 2006, and return on equity was 16.69% for the first nine months of 2007 compared to 18.90% for the same period in 2006.
Net interest income increased slightly to $13.4 million for the nine months ended September 30, 2007 compared to $13.2 million for the same period in 2006. This increase was the result of a 5.0% increase in average interest-earning assets offset by a lower net interest margin when comparing the two periods. The net interest margin decreased 11 basis points to 3.69% for the nine months ended September 30, 2007, compared to 3.80% for the same period in 2006.
Noninterest income increased 11.6% to $4.2 million for the nine months ended September 30, 2007 from $3.8 million for the same period in 2006. Fees for other customer services increased 22.7% to $1.8 million for the nine months ended September
30, 2007, compared to $1.5 million for the same period in 2006. This increase was attributable to increases in fee income from trust and asset management services and ATM and check card fees. Noninterest expense increased 10.5% to $11.3 million for the nine months ended September 30, 2007, compared to $10.2 million for the same period in 2006. The increase in expenses was due to the addition of two branch locations during the second and third quarters of 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 Nine Months Ended |
Income Statement | September 30, 2007 | | September 30, 2006 | | September 30, 2007 | | September 30, 2006 |
Interest and dividend income | | | | | | | |
Interest and fees on loans | $ 8,315 | | $ 7,740 | | $ 24,333 | | $ 21,658 |
Interest on federal funds sold | 4 | | 7 | | 28 | | 9 |
Interest on deposits in banks | 31 | | 26 | | 81 | | 86 |
Interest and dividends on securities available for sale: | | | | | | | |
Taxable interest | 559 | | 604 | | 1,629 | | 1,891 |
Tax-exempt interest | 120 | | 103 | | 351 | | 315 |
Dividends | 52 | | 56 | | 147 | | 169 |
Total interest and dividend income | $ 9,081 | | $ 8,536 | | $ 26,569 | | $ 24,128 |
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Interest expense | | | | | | | |
Interest on deposits | $ 3,587 | | $ 3,225 | | $ 10,680 | | $ 8,085 |
Interest on federal funds purchased | 50 | | 51 | | 130 | | 219 |
Interest on company obligated mandatorily
redeemable capital securities | 242 | | 217 | | 716 | | 522 |
Interest on other borrowings | 541 | | 679 | | 1,629 | | 2,116 |
Total interest expense | $ 4,420 | | $ 4,172 | | $ 13,155 | | $ 10,942 |
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Net interest income | $ 4,661 | | $ 4,364 | | $ 13,414 | | $ 13,186 |
Provision for loan losses | - | | 109 | | 67 | | 278 |
Net interest income after provision for loan losses | $ 4,661 | | $ 4,255 | | $ 13,347 | | $ 12,908 |
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Noninterest income | | | | | | | |
Service charges | $ 769 | | $ 681 | | $ 2,160 | | $ 2,043 |
Fees for other customer services | 631 | | 514 | | 1,808 | | 1,474 |
Gains on sale of loans | 116 | | 44 | | 241 | | 141 |
Net gains (losses) on sale of securities | (19) | | - | | (19) | | 3 |
Net losses on sale of premises and equipment | (3) | | - | | (2) | | - |
Other operating income | 1 | | 37 | | 37 | | 124 |
Total noninterest income | $ 1,495 | | $ 1,276 | | $ 4,225 | | $ 3,785 |
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Noninterest expense | | | | | | | |
Salaries and employee benefits | $ 2,084 | | $ 1,906 | | $ 6,157 | | $ 5,545 |
Occupancy | 243 | | 204 | | 717 | | 593 |
Equipment | 327 | | 296 | | 955 | | 864 |
Other operating expense | 1,176 | | 1,067 | | 3,451 | | 3,205 |
Total noninterest expense | $ 3,830 | | $ 3,473 | | $ 11,280 | | $ 10,207 |
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Income before income taxes | $ 2,326 | | $ 2,058 | | $ 6,292 | | $ 6,486 |
Provision for income taxes | 755 | | 678 | | 2,038 | | 2,114 |
Net income | $ 1,571 | | $ 1,380 | | $ 4,254 | | $ 4,372 |
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Share and Per Share Data | | | | | | | |
Net income, basic and diluted | $ 0.54 | | $ 0.47 | | $ 1.46 | | $ 1.50 |
Shares outstanding at period end | 2,922,860 | | 2,922,860 | | 2,922,860 | | 2,922,860 |
Weighted average shares, basic and diluted | 2,907,232 | | 2,922,860 | | 2,905,610 | | 2,922,860 |
Book value at period end | $ 12.23 | | $ 11.20 | | $ 12.23 | | $ 11.20 |
Cash dividends | $ 0.13 | | $ 0.12 | | $ 0.39 | | $ 0.36 |
FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) | | | | | | | |
| (unaudited) For the Three Months Ended | | (unaudited) For the Nine Months Ended Ended |
| September 30, 2007 | | September 30, 2006 | | September 30, 2007 | | September 30, 2006 |
Key Performance Ratios | | | | | | | |
Return on average assets | 1.18% | | 1.07% | | 1.09% | | 1.17% |
Return on average equity | 17.81% | | 17.23% | | 16.69% | | 18.90% |
Net interest margin | 3.77% | | 3.63% | | 3.69% | | 3.80% |
Efficiency ratio (1) | 61.32% | | 60.85% | | 63.11% | | 59.44% |
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Asset Quality | | | | | | | |
Loan charge-offs | $ 79 | | $ 60 | | $ 232 | | $ 174 |
Loan recoveries | 58 | | 65 | | 163 | | 252 |
Net charge-offs (recoveries) | 21 | | (5) | | 69 | | (78) |
Nonaccrual loans | 237 | | 214 | | 237 | | 214 |
Nonperforming assets | 1,599 | | 678 | | 1,599 | | 678 |
Repossessed assets | 78 | | 5 | | 78 | | 5 |
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Average Balances | | | | | | | |
Average assets | $ 528,899 | | $ 511,945 | | $ 523,651 | | $ 497,853 |
Average shareholders’ equity | 34,968 | | 31,779 | | 34,075 | | 30,934 |
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| | | | | (unaudited) |
| | | | | September 30, 2007 | | September 30, 2006 |
Capital Ratios | | | | | | | |
Tier 1 capital | | | | | $ 49,630 | | $ 44,364 |
Total capital | | | | | 53,607 | | 48,248 |
Total capital to risk-weighted assets | | | | | 11.86% | | 11.01% |
Tier 1 capital to risk-weighted assets | | | | | 10.98% | | 10.13% |
Leverage ratio | | | | | 9.38% | | 8.67% |
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Balance Sheet | | | | | | | |
Cash and due from banks | | | | | $ 14,653 | | $ 9,255 |
Interest-bearing deposits in banks | | | | | 1,965 | | 1,899 |
Securities available for sale, at fair value | | | | | 59,669 | | 63,946 |
Loans held for sale | | | | | 424 | | 672 |
Loans, net of allowance for loan losses | | | | | 430,616 | | 423,179 |
Premises and equipment, net | | | | | 19,341 | | 17,331 |
Interest receivable | | | | | 2,145 | | 2,009 |
Other assets | | | | | 4,860 | | 3,599 |
Total assets | | | | | $ 533,673 | | $ 521,890 |
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Noninterest-bearing demand deposits | | | | | $ 87,629 | | $ 81,890 |
Savings and interest-bearing demand deposits | | | | | 173,003 | | 141,252 |
Time deposits | | | | | 175,817 | | 196,763 |
Total deposits | | | | | $ 436,449 | | $ 419,905 |
Federal funds purchased | | | | | 4,586 | | 4,562 |
Other borrowings | | | | | 40,660 | | 50,779 |
Company obligated mandatorily redeemable capital securities | | | | | 12,372 | | 12,372 |
Accrued expenses and other liabilities | | | | | 3,850 | | 1,536 |
Total liabilities | | | | | $ 497,917 | | $ 489,154 |
FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) | | | |
| (unaudited) |
| September 30, 2007 | | September 30, 2006 |
Balance Sheet (continued) | | | |
Common stock | $ 3,653 | | $ 3,653 |
Surplus | 1,459 | | 1,465 |
Retained earnings | 32,222 | | 28,055 |
Unearned ESOP shares | (470) | | - |
Accumulated other comprehensive loss, net | (1,108) | | (437) |
Total shareholders’ equity | $ 35,756 | | $ 32,736 |
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Total liabilities and shareholders’ equity | $ 533,673 | | $ 521,890 |
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Loan Data | | | |
Mortgage loans on real estate: | | | |
Construction | $ 73,148 | | $ 64,195 |
Secured by farm land | 1,740 | | 2,506 |
Secured by 1-4 family residential | 106,059 | | 108,936 |
Other real estate loans | 178,813 | | 167,526 |
Loans to farmers (except those secured by real estate) | 2,223 | | 1,951 |
Commercial and industrial loans (except those secured by real estate) | 52,155 | | 50,197 |
Consumer installment loans | 19,285 | | 25,887 |
Deposit overdrafts | 378 | | 173 |
All other loans | 792 | | 5,692 |
Total loans | $ 434,593 | | $ 427,063 |
Allowance for loan losses | 3,977 | | 3,884 |
Loans, net | $ 430,616 | | $ 423,179 |
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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 $4,733 and $4,432 for the three months ended September 30, 2007 and 2006, respectively, and $13,629 and $13,390 for the nine months ended September 30, 2007 and 2006, respectively. Noninterest income excluding securities gains and losses was $1,514 and $1,276 for the three months ended September 30, 2007 and 2006, respectively, and $4,244 and $3,782 for the nine months ended September 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. | | | |
