| | | Exhibit 99.1 |
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| | | |
| Contact: | | |
| | | |
| Harry S. Smith, President & CEO | | M. Shane Bell, EVP & CFO |
| (540) 465-9121 | | (540) 465-9121 |
| hsmith@therespowerinone.com | | sbell@therespowerinone.com |
| | | |
| News Release | | |
| October 22, 2010 | | |
FIRST NATIONAL CORPORATION REPORTS IMPROVEMENT IN CORE OPERATING RESULTS
Strasburg, Virginia (October 22, 2010) --- First National Corporation (OTCBB: FXNC) reported net income of $694 thousand and net income available to common shareholders of $473 thousand, or $0.16 per basic and diluted share, for the third quarter of 2010, compared to net income of $818 thousand and net income available to common shareholders of $598 thousand, or $0.20 per basic and diluted share, for the same quarter of 2009.
Core operating results increased 30% to $2.3 million for the third quarter of 2010, up from $1.7 million for the third quarter of 2009. “We are pleased to report solid earnings for the quarter,” said Harry Smith, President and Chief Executive Officer of First National Corporation. “The net interest margin and expense control efforts contributed to improved core operating results for the quarter. The Company is continuing to focus on improving profitability and asset quality.”
Core operating results are measured by net income before taxes, less non-recurring items, provision for loan losses and provision for other real estate owned.
Quarterly Performance
Third quarter 2010 net income was $124 thousand lower than the same quarter of 2009:
| § | Provision for loan losses was $806 thousand higher |
| § | Net interest income was $402 thousand higher |
| § | Noninterest income was $161 thousand higher |
| § | Noninterest expense was $56 thousand lower |
The decrease in third quarter 2010 earnings compared to third quarter 2009 was the result of higher provision for loan losses offset by an 8% increase in net interest income and a 12% increase in noninterest income. Noninterest expense decreased slightly when comparing the two periods. Return on assets and return on equity were 0.51% and 4.92%, respectively, for the third quarter of 2010, compared to 0.59% and 6.11% for the same quarter in 2009.
Net interest income increased 8% to $5.2 million for the third quarter of 2010 compared to $4.8 million for the same quarter of 2009. The net interest margin was 37 basis points higher and average interest-earning assets were $7.9 million lower when comparing the two periods. The margin was 4.10% for the quarter ended September 30, 2010 compared to 3.73% for the same period of 2009. The margin improvement was primarily the result of a decline in the cost of funding earning assets.
Noninterest income totaled $1.5 million for the third quarter of 2010, an increase of 12%, compared to $1.4 million for the same quarter of 2009. The increase in noninterest income resulted primarily from higher trust and investment advisory fees and ATM and check card fees. Noninterest expense decreased 1% to $4.5 million for the third quarter of 2010 compared to $4.6 million for the same period in 2009.
Net charge-offs were $240 thousand for both the third quarter of 2010 and for the third quarter of 2009. Nonperforming assets totaled $15.5 million compared to $16.3 million one year ago. The allowance for loan losses totaled $8.6 million or 1.96% of total loans at September 30, 2010, compared to $7.2 million or 1.60% of total loans at September 30, 2009. The loan loss provision totaled $1.2 million for the third quarter of 2010 compared to $394 thousand for the same period in 2009. The higher provision for loan losses was primarily attributable to allocating specific reserves on impaired loans during the quarter. The Company has focused on aggressively identifying and reserving for troubled loans.
Year-to-Date Performance
Net income was $1.4 million higher than the previous year:
| § | Net interest income was $1.8 million higher |
| § | Provision for loan losses was $557 thousand higher |
| § | Noninterest expense was $506 thousand lower |
| § | Noninterest income was $335 thousand higher |
For the nine months ended September 30, 2010, net income was $2.5 million compared to $1.1 million for the same period in 2009. After the effective dividend on preferred stock, net income available to common shareholders was $1.8 million, or $0.61 per basic and diluted share, compared to $608 thousand, or $0.21 per basic and diluted share, for the same period in 2009. Return on assets was 0.60% for the nine months ended September 30, 2010 compared to 0.27% for the same period in 2009, and return on equity was 5.91% for the nine months ended September 30, 2010 compared to 2.97% for the same period in 2009.
Net interest income increased 13% to $15.2 million for the nine months ended September 30, 2010 compared to $13.4 million for the same period in 2009. The net interest margin was 52 basis points higher while average interest-earning assets were $7.9 million lower when comparing the two periods. The net interest margin was 4.07% for the nine months ended September 30, 2010, compared to 3.55% for the same period in 2009.
Noninterest income increased 8% to $4.3 million for the nine months ended September 30, 2010 from $4.0 million for the same period in 2009. This increase was attributable to more overdraft and ATM and check card fee income. Noninterest expense decreased 4% to $13.5 million for the nine months ended September 30, 2010, compared to $14.0 million for the same period in 2009. The decrease in noninterest expense was primarily the result of lower provision for other real estate owned. The provision for other real estate owned totaled $151 thousand for the nine months ended September 30, 2010 compared to $818 thousand for the same period in 2009. The provision for loan losses increased to $2.6 million for the nine months ended September 30, 2010 compared to $2.1 million for the same period in 2009.
Cautionary Statements
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, 2009, which can be accessed from the Company’s website at www.therespowerinone.com, as filed with the Securities and Exchange Commission.
About the Company
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, 2010 | | | September 30, 2009 | | | September 30, 2010 | | | September 30, 2009 | |
| Interest and dividend income | | | | | | | | | | | | |
| Interest and fees on loans | | $ | 6,239 | | | $ | 6,239 | | | $ | 18,728 | | | $ | 18,374 | |
| Interest on federal funds sold | | | 1 | | | | - | | | | 1 | | | | 4 | |
| Interest on deposits in banks | | | 5 | | | | - | | | | 9 | | | | - | |
| Interest and dividends on securities available for sale: | | | | | | | | | | | | | | | | |
| Taxable interest | | | 398 | | | | 547 | | | | 1,298 | | | | 1,576 | |
| Tax-exempt interest | | | 132 | | | | 147 | | | | 419 | | | | 429 | |
| Dividends | | | 15 | | | | 16 | | | | 43 | | | | 32 | |
| Total interest and dividend income | | $ | 6,790 | | | $ | 6,949 | | | $ | 20,498 | | | $ | 20,415 | |
| | | | | | | | | | | | | | | | | |
| Interest expense | | | | | | | | | | | | | | | | |
| Interest on deposits | | $ | 1,397 | | | $ | 1,844 | | | $ | 4,574 | | | $ | 5,953 | |
| Interest on federal funds purchased | | | 1 | | | | 26 | | | | 12 | | | | 35 | |
| Interest on company obligated mandatorily redeemable capital securities | | | 112 | | | | 113 | | | | 329 | | | | 361 | |
| Interest on other borrowings | | | 104 | | | | 192 | | | | 356 | | | | 628 | |
| Total interest expense | | $ | 1,614 | | | $ | 2,175 | | | $ | 5,271 | | | $ | 6,977 | |
| | | | | | | | | | | | | | | | | |
| Net interest income | | $ | 5,176 | | | $ | 4,774 | | | $ | 15,227 | | | $ | 13,438 | |
| Provision for loan losses | | | 1,200 | | | | 394 | | | | 2,611 | | | | 2,054 | |
| Net interest income after provision for loan losses | | $ | 3,976 | | | $ | 4,380 | | | $ | 12,616 | | | $ | 11,384 | |
| | | | | | | | | | | | | | | | | |
| Noninterest income | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | $ | 668 | | | $ | 662 | | | $ | 1,959 | | | $ | 1,845 | |
| ATM and check card fees | | | 378 | | | | 312 | | | | 1,058 | | | | 887 | |
| Trust and investment advisory fees | | | 330 | | | | 263 | | | | 934 | | | | 852 | |
| Fees for other customer services | | | 75 | | | | 76 | | | | 239 | | | | 221 | |
| Gains on sale of loans | | | 76 | | | | 38 | | | | 141 | | | | 146 | |
| Gains (losses) on sale of securities available for sale | | | (9 | ) | | | - | | | | (7 | ) | | | 10 | |
| Gains on sale of premises and equipment | | | - | | | | - | | | | - | | | | 9 | |
| Gains (losses) on sale of other real estate owned, net | | | 29 | | | | - | | | | (23 | ) | | | - | |
| Other operating income (loss) | | | (10 | ) | | | 25 | | | | 46 | | | | 42 | |
| Total noninterest income | | $ | 1,537 | | | $ | 1,376 | | | $ | 4,347 | | | $ | 4,012 | |
| | | | | | | | | | | | | | | | | |
| Noninterest expense | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | $ | 2,239 | | | $ | 2,172 | | | $ | 6,756 | | | $ | 6,584 | |
| Occupancy | | | 358 | | | | 338 | | | | 1,053 | | | | 989 | |
| Equipment | | | 344 | | | | 355 | | | | 1,035 | | | | 1,052 | |
| Marketing | | | 142 | | | | 122 | | | | 394 | | | | 391 | |
Stationery and supplies Legal and professional fees | | | 110 210 | | | | 103 228 | | | | 292 630 | | | | 398 619 | |
| ATM and check card fees | | | 219 | | | | 181 | | | | 605 | | | | 552 | |
| FDIC assessment | | | 177 | | | | 173 | | | | 548 | | | | 603 | |
| Provision for other real estate owned | | | 111 | | | | 182 | | | | 151 | | | | 818 | |
| Other operating expense | | | 625 | | | | 737 | | | | 1,993 | | | | 1,957 | |
| Total noninterest expense | | $ | 4,535 | | | $ | 4,591 | | | $ | 13,457 | | | $ | 13,963 | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | $ | 978 | | | $ | 1,165 | | | $ | 3,506 | | | $ | 1,433 | |
| Income tax provision | | | 284 | | | | 347 | | | | 1,044 | | | | 341 | |
| Net income | | $ | 694 | | | $ | 818 | | | $ | 2,462 | | | $ | 1,092 | |
| Effective dividend and accretion on preferred stock | | | 221 | | | | 220 | | | | 664 | | | | 484 | |
| Net income available to common shareholders | | $ | 473 | | | $ | 598 | | | $ | 1,798 | | | $ | 608 | |
| | | | | | | | | | | | | | | | | |
| Common Share and Per Common Share Data | | | | | | | | | | | | | | | | |
| Net income, basic and diluted | | $ | 0.16 | | | $ | 0.20 | | | $ | 0.61 | | | $ | 0.21 | |
| Shares outstanding at period end | | | 2,945,044 | | | | 2,926,552 | | | | 2,945,044 | | | | 2,926,552 | |
| Weighted average shares, basic and diluted | | | 2,941,750 | | | | 2,921,309 | | | | 2,937,402 | | | | 2,919,123 | |
| Book value at period end | | $ | 14.25 | | | $ | 13.52 | | | $ | 14.25 | | | $ | 13.52 | |
| Cash dividends | | $ | 0.14 | | | $ | 0.14 | | | $ | 0.42 | | | $ | 0.42 | |
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 | |
| | | September 30, 2010 | | | September 30, 2009 | | | September 30, 2010 | | | September 30, 2009 | |
| Key Performance Ratios | | | | | | | | | | | | |
| Return on average assets | | | 0.51 | % | | | 0.59 | % | | | 0.60 | % | | | 0.27 | % |
| Return on average equity | | | 4.92 | % | | | 6.11 | % | | | 5.91 | % | | | 2.97 | % |
| Net interest margin | | | 4.10 | % | | | 3.73 | % | | | 4.07 | % | | | 3.55 | % |
Efficiency ratio (1) | | | 65.30 | % | | | 70.70 | % | | | 67.64 | % | | | 74.34 | % |
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| Asset Quality | | | | | | | | | | | | | | | | |
| Loan charge-offs | | $ | 303 | | | $ | 320 | | | $ | 1,320 | | | $ | 773 | |
| Loan recoveries | | | 63 | | | | 80 | | | | 197 | | | | 250 | |
| Net charge-offs | | | 240 | | | | 240 | | | | 1,123 | | | | 523 | |
| Non-accrual loans | | | 8,842 | | | | 10,719 | | | | 8,842 | | | | 10,719 | |
| Other real estate owned, net | | | 6,599 | | | | 5,623 | | | | 6,599 | | | | 5,623 | |
Repossessed assets Restructured loans Nonperforming assets | | | 30 - 15,471 | | | | 321 - 16,342 | | | | 30 - 15,471 | | | | 321 - 16,342 | |
| | | | | | | | | | | | | | | | | |
| Average Balances | | | | | | | | | | | | | | | | |
| Average assets | | $ | 545,217 | | | $ | 550,239 | | | $ | 545,553 | | | $ | 549,279 | |
| Average earning assets | | | 508,913 | | | | 516,766 | | | | 508,221 | | | | 516,074 | |
| Average shareholders’ equity | | | 56,060 | | | | 53,075 | | | | 55,707 | | | | 49,108 | |
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| | | (unaudited) | |
| | | September 30, 2010 | | | September 30, 2009 | |
| Capital Ratios | | | | | | |
| Tier 1 capital | | $ | 63,930 | | | $ | 62,916 | |
| Total capital | | | 69,651 | | | | 68,757 | |
| Total capital to risk-weighted assets | | | 15.32 | % | | | 14.76 | % |
| Tier 1 capital to risk-weighted assets | | | 14.06 | % | | | 13.50 | % |
| Leverage ratio | | | 11.73 | % | | | 11.44 | % |
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| Balance Sheet | | | | | | | | |
| Cash and due from banks | | $ | 8,129 | | | $ | 5,903 | |
| Interest-bearing deposits in banks | | | 4,681 | | | | 2,086 | |
| Securities available for sale, at fair value | | | 57,468 | | | | 64,571 | |
| Restricted securities, at cost | | | 3,242 | | | | 3,426 | |
| Loans held for sale | | | 927 | | | | 200 | |
| Loans, net of allowance for loan losses | | | 429,642 | | | | 442,570 | |
| Premises and equipment, net | | | 19,969 | | | | 20,893 | |
| Interest receivable | | | 1,672 | | | | 1,699 | |
| Other assets | | | 15,733 | | | | 11,525 | |
| Total assets | | $ | 541,463 | | | $ | 552,873 | |
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| Noninterest-bearing demand deposits | | $ | 79,998 | | | $ | 75,737 | |
| Savings and interest-bearing demand deposits | | | 164,351 | | | | 134,086 | |
| Time deposits | | | 208,774 | | | | 237,258 | |
| Total deposits | | $ | 453,123 | | | $ | 447,081 | |
| Federal funds purchased | | | - | | | | 2,795 | |
| Other borrowings | | | 20,128 | | | | 35,264 | |
Company obligated mandatorily redeemable capital securities | | | 9,279 | | | | 9,279 | |
| Accrued expenses and other liabilities | | | 2,934 | | | | 4,920 | |
| Total liabilities | | $ | 485,464 | | | $ | 499,339 | |
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FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) |
| | | (unaudited) | |
| | | September 30, 2010 | | | September 30, 2009 | |
Balance Sheet (continued) | | | | | | |
| Preferred stock | | $ | 14,094 | | | $ | 13,967 | |
| Common stock | | | 3,681 | | | | 3,658 | |
| Surplus | | | 1,536 | | | | 1,399 | |
| Retained earnings | | | 35,669 | | | | 34,676 | |
| Unearned ESOP shares | | | - | | | | (114 | ) |
| Accumulated other comprehensive income (loss), net | | | 1,019 | | | | (52 | ) |
| Total shareholders’ equity | | $ | 55,999 | | | $ | 53,534 | |
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| Total liabilities and shareholders’ equity | | $ | 541,463 | | | $ | 552,873 | |
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| Loan Data | | | | | | | | |
| Mortgage loans on real estate: | | | | | | | | |
| Construction | | $ | 54,175 | | | $ | 55,632 | |
| Secured by farm land | | | 6,234 | | | | 1,665 | |
| Secured by 1-4 family residential | | | 120,897 | | | | 120,718 | |
| Other real estate loans | | | 201,954 | | | | 200,643 | |
| Loans to farmers (except those secured by real estate) | | | 3,449 | | | | 3,285 | |
| Commercial and industrial loans (except those secured by real estate) | | | 37,030 | | | | 52,412 | |
| Consumer installment loans | | | 13,157 | | | | 13,207 | |
| Deposit overdrafts | | | 396 | | | | 325 | |
| All other loans | | | 944 | | | | 1,864 | |
Total loans | | $ | 438,236 | | | $ | 449,751 | |
| Allowance for loan losses | | | 8,594 | | | | 7,181 | |
| Loans, net | | $ | 429,642 | | | $ | 442,570 | |
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(1) The efficiency ratio is computed by dividing noninterest expense excluding the provision for other real estate owned by the sum of net interest income on a tax equivalent basis and noninterest income excluding gains and losses on securities, premises and equipment and other real estate owned. 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 2010 and 2009 was 34%. Net interest income on a tax equivalent basis was $5,258 and $4,860 for the three months ended September 30, 2010 and 2009, respectively, and $15,476 and $13,690 for the nine months ended September 30, 2010 and 2009, respectively. Noninterest income excluding securities, premises and equipment and other real estate owned gains and losses was $1,517 and $1,376 for the three months ended September 30, 2010 and 2009, respectively, and $4,377 and $3,993 for the nine months ended September 30, 2010 and 2009, 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. | |
