Exhibit 99.1
| Contact: | | |
| | | |
| Dennis A. Dysart | | M. Shane Bell |
| Interim Chief Executive Officer | | Chief Financial Officer |
| (540) 465-9121 | | (540) 465-9121 |
| ddysart@therespowerinone.com | | sbell@therespowerinone.com |
| | | |
| News Release | | |
| January 31, 2011 | | |
FIRST NATIONAL CORPORATION ANNOUNCES $6.2 MILLION LOSS FOR THE FOURTH QUARTER FROM CREDIT-RELATED CHARGES
Strasburg, Virginia (January 31, 2011) --- First National Corporation (the “Company”) (OTCBB: FXNC) announced today that it recorded an $11.6 million pre-tax charge to earnings, which resulted in a net loss available to common shareholders of $6.2 million for the fourth quarter of 2010, or $2.12 per basic and diluted share. The Company took this action to proactively address problem loans and foreclosed properties that resulted from weak economic conditions in its market area. The charge to earnings was comprised of a $9.1 million provision for loan losses and a $2.5 million provision for other real estate owned. Net income available to commo n shareholders totaled $837 thousand, or $0.28 per basic and diluted share, for the same period in 2009.
“The Company is aggressively dealing with problem loans and foreclosed properties,” said Dennis A. Dysart, interim Chief Executive Officer of First National Corporation. “Despite this charge to earnings, both core operating earnings and capital levels remain strong. With the increase in provision for loan losses, the allowance for loan losses increased from 1.96% of gross loans at September 30, 2010, to 3.69% at December 31, 2010. We believe that the allowance has been raised to a level that provides prudent coverage of the risks in the loan portfolio, and that foreclosed properties have been charged-down to reflect current market conditions.”
Core operating results increased 26% to $2.4 million for the fourth quarter of 2010, up from $1.9 million for the fourth quarter of 2009. Dysart continued, “We are pleased with another quarter of solid core earnings. Revenues are 8% higher than the same quarter a year ago, driven by a strong net interest margin and higher fee income. Expense control efforts also contributed to financial performance as noninterest expenses were unchanged when compared to the fourth quarter of 2009, excluding the provision for other real estate owned for both periods.”
Core operating results are measured by income before taxes, less non-recurring items, provision for loan losses and provision for other real estate owned.
Quarterly Performance
Fourth quarter 2010 earnings were $7.1 million lower than the same quarter of 2009:
| | ● | Provision for loan losses was $8.9 million higher |
| | ● | Noninterest expense was $2.3 million higher |
| | ● | Net interest income was $366 thousand higher |
| | ● | Noninterest income was $151 thousand higher |
The decrease in fourth quarter 2010 earnings compared to fourth quarter 2009 resulted from a higher provision for loan losses and a higher provision for other real estate owned. Net interest income increased 8% and noninterest income increased 10% when comparing the two periods. Return on assets and return on equity were -4.37% and -43.93%, respectively, for the fourth quarter of 2010, compared to 0.76% and 7.75% for the same quarter in 2009.
Net interest income increased 8% to $5.3 million for the fourth quarter of 2010 compared to $4.9 million for the same quarter of 2009. The net interest margin was 29 basis points higher and average interest-earning assets were $4.0 million lower when comparing the two periods. The margin was 4.12% for the quarter ended December 31, 2010 compared to 3.83% 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 $1.7 million for the fourth quarter of 2010, an increase of 10%, compared to $1.6 million for the same quarter of 2009. The increase in noninterest income resulted primarily from higher ATM and check card fee income and net gains on sales of loans. Excluding the provision for other real estate owned, noninterest expense was unchanged for the fourth quarter of 2010 when compared to the same quarter of 2009.
Net charge-offs were $1.7 million for the fourth quarter of 2010 compared to $321 thousand for the same quarter of 2009. Nonperforming assets totaled $14.8 million compared to $14.5 million one year ago. The allowance for loan losses totaled $16.0 million or 3.69% of total loans at December 31, 2010, compared to $7.1 million or 1.60% of total loans at December 31, 2009. The loan loss provision totaled $9.1 million for the fourth quarter of 2010 compared to $246 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 problem loans.
Year-to-Date Performance
Net income was $5.7 million lower than the previous year:
| | ● | Provision for loan losses was $9.4 million higher |
| | ● | Net interest income was $2.2 million higher |
| | ● | Noninterest expense was $1.8 million higher |
| | ● | Noninterest income was $486 thousand higher |
For the year ended December 31, 2010, net loss totaled $3.5 million compared to $2.1 million in net income for the same period in 2009. After the effective dividend on preferred stock, net loss available to common shareholders was $4.4 million, or $1.51 per basic and diluted share, compared to $1.4 million, or $0.49 per basic and diluted share, for the same period in 2009. Return on assets was -0.65% for the year ended December 31, 2010 compared to 0.39% for the same period in 2009, and return on equity was -6.42% for the year ended December 31, 2010 compared to 4.27% for the same period in 2009.
Net interest income increased 12% to $20.5 million for the year ended December 31, 2010 compared to $18.3 million for the same period in 2009. The net interest margin was 47 basis points higher while average interest-earning assets were $6.9 million lower when comparing the two periods. The net interest margin was 4.09% for the year ended December 31, 2010, compared to 3.62% for the same period in 2009. The provision for loan losses totaled $11.7 million for the year ended December 31, 2010 compared to $2.3 million for the same period in 2009.
Noninterest income increased 9% to $6.1 million for the year ended December 31, 2010 from $5.6 million for the same period in 2009. This increase was attributable to higher ATM and check card and trust and investment advisory fee income. Noninterest expense was relatively unchanged for the year ended December 31, 2010, compared to the same period in 2009, when excluding the provision for other real estate owned. The provision for other real estate owned totaled $2.6 million for the year ended December 31, 2010 compared to $994 thousand 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 Year Ended |
| Income Statement | | December 31, 2010 | | | December 31, 2009 | | | December 31, 2010 | | | December 31, 2009 |
| Interest and dividend income | | | | | | | | | | | |
| Interest and fees on loans | | $ | 6,230 | | | $ | 6,317 | | | $ | 24,958 | | | $ | 24,691 | |
| Interest on federal funds sold | | | 1 | | | | 1 | | | | 2 | | | | 5 | |
| Interest on deposits in banks | | | 6 | | | | 1 | | | | 15 | | | | 1 | |
| Interest and dividends on securities available for sale: | | | | | | | | | | | | | |
| Taxable interest | | | 424 | | | | 516 | | | | 1,722 | | | | 2,092 | |
| Tax-exempt interest | | | 122 | | | | 147 | | | | 541 | | | | 576 | |
| Dividends | | | 18 | | | | 17 | | | | 61 | | | | 49 | |
| Total interest and dividend income | | $ | 6,801 | | | $ | 6,999 | | | $ | 27,299 | | | $ | 27,414 | |
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| Interest expense | | | | | | | | | | | | | | | | |
| Interest on deposits | | $ | 1,329 | | | $ | 1,800 | | | $ | 5,903 | | | $ | 7,753 | |
| Interest on federal funds purchased | | | - | | | | 2 | | | | 12 | | | | 37 | |
| Interest on company obligated mandatorily redeemable capital securities | | | 110 | | | | 109 | | | | 439 | | | | 470 | |
| Interest on other borrowings | | | 104 | | | | 196 | | | | 460 | | | | 824 | |
| Total interest expense | | $ | 1,543 | | | $ | 2,107 | | | $ | 6,814 | | | $ | 9,084 | |
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| Net interest income | | $ | 5,258 | | | $ | 4,892 | | | $ | 20,485 | | | $ | 18,330 | |
| Provision for loan losses | | | 9,120 | | | | 246 | | | | 11,731 | | | | 2,300 | |
| Net interest income (loss) after provision for loan losses | $ | (3,862 | ) | | $ | 4,646 | | | $ | 8,754 | | | $ | 16,030 | |
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| Noninterest income | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | $ | 659 | | | $ | 694 | | | $ | 2,618 | | | $ | 2,539 | |
| ATM and check card fees | | | 374 | | | | 309 | | | | 1,432 | | | | 1,196 | |
| Trust and investment advisory fees | | | 310 | | | | 274 | | | | 1,244 | | | | 1,126 | |
| Fees for other customer services | | | 88 | | | | 112 | | | | 327 | | | | 333 | |
| Gains on sale of loans | | | 122 | | | | 64 | | | | 263 | | | | 210 | |
Gains (losses) on sale of securities available for sale | - | | | | - | | | | (7 | ) | | | 10 | |
| Gains on sale of premises and equipment | | | - | | | | - | | | | - | | | | 9 | |
Gains (losses) on sale of other real estate owned, net | 4 | | | | - | | | | (19 | ) | | | - | |
| Other operating income | | | 159 | | | | 112 | | | | 205 | | | | 154 | |
| Total noninterest income | | $ | 1,716 | | | $ | 1,565 | | | $ | 6,063 | | | $ | 5,577 | |
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| Noninterest expense | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | $ | 2,324 | | | $ | 2,113 | | | $ | 9,080 | | | $ | 8,697 | |
| Occupancy | | | 336 | | | | 359 | | | | 1,389 | | | | 1,348 | |
| Equipment | | | 337 | | | | 364 | | | | 1,372 | | | | 1,416 | |
| Marketing | | | 109 | | | | 141 | | | | 503 | | | | 532 | |
Stationery and supplies Legal and professional fees | | | 83 172 | | | | 109 261 | | | | 375 802 | | | | 507 880 | |
| ATM and check card fees | | | 222 | | | | 182 | | | | 827 | | | | 734 | |
| FDIC assessment | | | 182 | | | | 370 | | | | 730 | | | | 973 | |
| Provision for other real estate owned | | | 2,489 | | | | 176 | | | | 2,640 | | | | 994 | |
| Other operating expense | | | 831 | | | | 665 | | | | 2,824 | | | | 2,622 | |
| Total noninterest expense | | $ | 7,085 | | | $ | 4,740 | | | $ | 20,542 | | | $ | 18,703 | |
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| Income (loss) before income taxes | | $ | (9,231 | ) | | $ | 1,471 | | | $ | (5,725 | ) | | $ | 2,904 | |
| Income tax provision (benefit) | | | (3,221 | ) | | | 414 | | | | (2,177 | ) | | | 755 | |
| Net income (loss) | | $ | (6,010 | ) | | $ | 1,057 | | | $ | (3,548 | ) | | $ | 2,149 | |
| Effective dividend and accretion on preferred stock | | | 222 | | | | 220 | | | | 886 | | | | 704 | |
| Net income (loss) available to common shareholders | | $ | (6,232 | ) | | $ | 837 | | | $ | (4,434 | ) | | $ | 1,445 | |
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| Common Share and Per Common Share Data | | | | | | | | | | | | | | | | |
| Net income (loss), basic and diluted | | $ | (2.12 | ) | | $ | 0.28 | | | $ | (1.51 | ) | | $ | 0.49 | |
| Shares outstanding at period end | | | 2,948,901 | | | | 2,931,721 | | | | 2,948,901 | | | | 2,931,721 | |
| Weighted average shares, basic and diluted | | | 2,945,966 | | | | 2,927,079 | | | | 2,939,561 | | | | 2,921,129 | |
| Book value at period end | | $ | 11.67 | | | $ | 13.92 | | | $ | 11.67 | | | $ | 13.92 | |
| Cash dividends | | $ | 0.14 | | | $ | 0.14 | | | $ | 0.56 | | | $ | 0.56 | |
FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) |
| | | (unaudited) For the Three Months Ended | | | (unaudited) For the Year Ended | |
| | | December 31, 2010 | | | December 31, 2009 | | | December 31, 2010 | | | December 31, 2009 | |
| Key Performance Ratios | | | | | | | | | | | | |
| Return on average assets | | | (4.37 | %) | | | 0.76 | % | | | (0.65 | %) | | | 0.39 | % |
| Return on average equity | | | (43.93 | %) | | | 7.75 | % | | | (6.42 | %) | | | 4.27 | % |
| Net interest margin | | | 4.12 | % | | | 3.83 | % | | | 4.09 | % | | | 3.62 | % |
Efficiency ratio (1) | | | 65.41 | % | | | 69.74 | % | | | 66.56 | % | | | 73.10 | % |
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| Asset Quality | | | | | | | | | | | | | | | | |
| Loan charge-offs | | $ | 1,743 | | | $ | 369 | | | $ | 3,063 | | | $ | 1,142 | |
| Loan recoveries | | | 64 | | | | 48 | | | | 261 | | | | 298 | |
| Net charge-offs | | | 1,679 | | | | 321 | | | | 2,802 | | | | 844 | |
| Non-accrual loans | | | 10,817 | | | | 8,273 | | | | 10,817 | | | | 8,273 | |
| Other real estate owned, net | | | 3,961 | | | | 6,261 | | | | 3,961 | | | | 6,261 | |
| Repossessed assets | | | 30 | | | | 8 | | | | 30 | | | | 8 | |
| Nonperforming assets | | | 14,808 | | | | 14,542 | | | | 14,808 | | | | 14,542 | |
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| Average Balances | | | | | | | | | | | | | | | | |
| Average assets | | $ | 545,438 | | | $ | 549,094 | | | $ | 545,144 | | | $ | 549,598 | |
| Average earning assets | | | 512,199 | | | | 516,174 | | | | 509,224 | | | | 516,147 | |
| Average shareholders’ equity | | | 54,282 | | | | 53,938 | | | | 55,246 | | | | 50,311 | |
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| | | (unaudited) | |
| | | December 31, 2010 | | | December 31, 2009 | |
| Capital Ratios | | | | | | |
| Tier 1 capital | | $ | 57,522 | | | $ | 63,118 | |
| Total capital | | | 63,213 | | | | 68,892 | |
| Total capital to risk-weighted assets | | | 14.21 | % | | | 14.96 | % |
| Tier 1 capital to risk-weighted assets | | | 12.93 | % | | | 13.70 | % |
| Leverage ratio | | | 10.55 | % | | | 11.50 | % |
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| Balance Sheet | | | | | | | | |
| Cash and due from banks | | $ | 5,048 | | | $ | 6,100 | |
| Interest-bearing deposits in banks | | | 10,949 | | | | 8,877 | |
| Federal funds sold | | | 7,500 | | | | - | |
| Securities available for sale, at fair value | | | 60,420 | | | | 60,129 | |
| Restricted securities, at cost | | | 3,153 | | | | 3,426 | |
| Loans held for sale | | | 271 | | | | 210 | |
| Loans, net of allowance for loan losses | | | 418,994 | | | | 436,129 | |
| Premises and equipment, net | | | 20,302 | | | | 21,148 | |
| Interest receivable | | | 1,751 | | | | 1,710 | |
| Other assets | | | 16,296 | | | | 14,945 | |
| �� Total assets | | $ | 544,684 | | | $ | 552,674 | |
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| Noninterest-bearing demand deposits | | $ | 78,964 | | | $ | 81,101 | |
| Savings and interest-bearing demand deposits | | | 178,685 | | | | 146,056 | |
| Time deposits | | | 205,851 | | | | 236,729 | |
| Total deposits | | $ | 463,500 | | | $ | 463,886 | |
| Other borrowings | | | 20,122 | | | | 20,186 | |
Company obligated mandatorily redeemable capital securities | | | 9,279 | | | | 9,279 | |
| Accrued expenses and other liabilities | | | 3,230 | | | | 4,516 | |
| Total liabilities | | $ | 496,131 | | | $ | 497,867 | |
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FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) |
| | | (unaudited) | |
| | | December 31, 2010 | | | December 31, 2009 | |
Balance Sheet (continued) | | | | | | |
| Preferred stock | | $ | 14,127 | | | $ | 13,998 | |
| Common stock | | | 3,686 | | | | 3,664 | |
| Surplus | | | 1,582 | | | | 1,418 | |
| Retained earnings | | | 29,024 | | | | 35,104 | |
| Unearned ESOP shares | | | - | | | | (42 | ) |
| Accumulated other comprehensive income, net | | | 134 | | | | 665 | |
| Total shareholders’ equity | | $ | 48,553 | | | $ | 54,807 | |
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| Total liabilities and shareholders’ equity | | $ | 544,684 | | | $ | 552,674 | |
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| Loan Data | | | | | | | | |
| Mortgage loans on real estate: | | | | | | | | |
| Construction | | $ | 52,591 | | | $ | 55,057 | |
| Secured by farm land | | | 6,207 | | | | 1,281 | |
| Secured by 1-4 family residential | | | 121,506 | | | | 118,675 | |
| Other real estate loans | | | 201,164 | | | | 200,001 | |
| Loans to farmers (except those secured by real estate) | | | 2,421 | | | | 3,530 | |
| Commercial and industrial loans (except those secured by real estate) | | | 37,375 | | | | 48,746 | |
| Consumer installment loans | | | 12,648 | | | | 13,619 | |
| Deposit overdrafts | | | 231 | | | | 157 | |
| All other loans | | | 887 | | | | 2,169 | |
Total loans | | $ | 435,030 | | | $ | 443,235 | |
| Allowance for loan losses | | | 16,036 | | | | 7,106 | |
| Loans, net | | $ | 418,994 | | | $ | 436,129 | |
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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 $5,316 and $4,978 for the three m onths ended December 31, 2010 and 2009, respectively, and $20,806 and $18,668 for the year ended December 31, 2010 and 2009, respectively. Noninterest income excluding securities, premises and equipment and other real estate owned gains and losses was $1,712 and $1,565 for the three months ended December 31, 2010 and 2009, respectively, and $6,089 and $5,558 for the year ended December 31, 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. | |
