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
FIRST NATIONAL CORPORATION ANNOUNCES FIRST QUARTER EARNINGS
Strasburg, Virginia (April 22, 2011) --- First National Corporation (the “Company”) (OTCBB: FXNC) announced first quarter 2011 earnings of $1.0 million. Net income available to common shareholders totaled $781 thousand for the first quarter of 2011, or $0.26 per basic and diluted share. Net income available to common shareholders totaled $794 thousand, or $0.27 per basic and diluted share, for the same period in 2010.
“We are pleased to report a profitable first quarter of 2011, after aggressively dealing with problem loans and writing down the values of foreclosed properties during the fourth quarter of 2010,” said Dennis A. Dysart, interim Chief Executive Officer of First National Corporation. “We have been implementing loan work out strategies to improve asset quality and maximize loan repayments. These strategies have been designed to protect shareholders’ equity.”
Core operating results remained steady when compared to the same quarter one year ago. Dysart continued, “I am proud of employee efforts to seek additional revenue opportunities and reduce expenses to stabilize profitability in the current operating environment.”
Core operating results are measured by income before taxes, plus the provision for loan losses and the provision for other real estate owned.
Quarterly Performance
First quarter 2011 earnings were consistent with the same quarter of 2010. Net interest income and noninterest income were relatively unchanged, while noninterest expense increased 4% when comparing the two periods. Return on assets and return on equity were 0.74% and 8.31%, respectively, for the first quarter of 2011, compared to 0.75% and 7.45% for the same quarter in 2010.
Net interest income remained relatively unchanged at $4.9 million for the first quarter of 2011 when compared to the same quarter of 2010. The net interest margin was 12 basis points lower and average interest-earning assets were $13.2 million higher when comparing the two periods. The margin was 3.89% for the quarter ended March 31, 2011 compared to 4.01% for the same period of 2010. The decline in the margin was the result of a change in the earning asset mix.
Noninterest income was $1.3 million for the first quarter of 2011, which was consistent with the same quarter of 2010. A decrease in overdraft fee income was offset by increases in ATM, check card and trust and investment advisory fees. Noninterest expense was slightly higher for the first quarter of 2011 when compared to the same quarter of 2010, primarily due to the provision for other real estate owned.
Net charge-offs were $3.1 million for the first quarter of 2011 compared to $352 thousand for the same quarter of 2010. The allowance for loan losses totaled $13.2 million or 3.09% of total loans at March 31, 2011, compared to $7.2 million or 1.62% of total loans at March 31, 2010. The loan loss provision totaled $270 thousand for the first quarter of 2011 compared to $411 thousand for the same period in 2010.
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, 2010, 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 10 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 | |
| Income Statement | | March 31, 2011 | | | March 31, 2010 | |
| Interest and dividend income | | | | | | |
| Interest and fees on loans | | $ | 5,833 | | | $ | 6,260 | |
| Interest on federal funds sold | | | 7 | | | | - | |
| Interest on deposits in banks | | | 7 | | | | 2 | |
| Interest and dividends on securities available for sale: | | | | | | | | |
| Taxable interest | | | 451 | | | | 468 | |
| Tax-exempt interest | | | 123 | | | | 145 | |
| Dividends | | | 17 | | | | 12 | |
| Total interest and dividend income | | $ | 6,438 | | | $ | 6,887 | |
| | | | | | | | | |
| Interest expense | | | | | | | | |
| Interest on deposits | | $ | 1,303 | | | $ | 1,676 | |
| Interest on federal funds purchased | | | - | | | | 5 | |
| Interest on company obligated mandatorily redeemable capital securities | | | 109 | | | | 108 | |
| Interest on other borrowings | | | 91 | | | | 149 | |
| Total interest expense | | $ | 1,503 | | | $ | 1,938 | |
| | | | | | | | | |
| Net interest income | | $ | 4,935 | | | $ | 4,949 | |
| Provision for loan losses | | | 270 | | | | 411 | |
| Net interest income after provision for loan losses | | $ | 4,665 | | | $ | 4,538 | |
| | | | | | | | | |
| Noninterest income | | | | | | | | |
| Service charges on deposit accounts | | $ | 501 | | | $ | 609 | |
| ATM and check card fees | | | 371 | | | | 314 | |
| Trust and investment advisory fees | | | 342 | | | | 310 | |
| Fees for other customer services | | | 73 | | | | 73 | |
| Gains on sale of loans | | | 47 | | | | 40 | |
| Gains on sale of securities available for sale | | | - | | | | 2 | |
| Gains (losses) on sale of other real estate owned, net | | | - | | | | (52 | ) |
| Other operating income | | | 6 | | | | 25 | |
| Total noninterest income | | $ | 1,340 | | | $ | 1,321 | |
| | | | | | | | | |
| Noninterest expense | | | | | | | | |
| Salaries and employee benefits | | $ | 2,288 | | | $ | 2,227 | |
| Occupancy | | | 341 | | | | 344 | |
| Equipment | | | 325 | | | | 348 | |
| Marketing | | | 105 | | | | 124 | |
Stationery and supplies Legal and professional fees | | | 79 201 | | | | 97 226 | |
| ATM and check card fees | | | 171 | | | | 177 | |
| FDIC assessment | | | 190 | | | | 187 | |
| Provision for other real estate owned | | | 130 | | | | - | |
| Other operating expense | | | 725 | | | | 667 | |
| Total noninterest expense | | $ | 4,555 | | | $ | 4,397 | |
| | | | | | | | | |
| Income before income taxes | | $ | 1,450 | | | $ | 1,462 | |
| Income tax provision | | | 447 | | | | 447 | |
| Net income | | $ | 1,003 | | | $ | 1,015 | |
| Effective dividend and accretion on preferred stock | | | 222 | | | | 221 | |
| Net income available to common shareholders | | $ | 781 | | | $ | 794 | |
| | | | | | | | | |
| Common Share and Per Common Share Data | | | | | | | | |
| Net income, basic and diluted | | $ | 0.26 | | | $ | 0.27 | |
| Shares outstanding at period end | | | 2,952,303 | | | | 2,936,931 | |
| Weighted average shares, basic and diluted | | | 2,949,166 | | | | 2,932,879 | |
| Book value at period end | | $ | 11.86 | | | $ | 14.11 | |
| Cash dividends | | $ | 0.10 | | | $ | 0.14 | |
FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) | | | | | | |
| | | (unaudited) For the Three Months Ended | |
| | | March 31, 2011 | | | March 31, 2010 | |
| Key Performance Ratios | | | | | | |
| Return on average assets | | | 0.74 | % | | | 0.75 | % |
| Return on average equity | | | 8.31 | % | | | 7.45 | % |
| Net interest margin | | | 3.89 | % | | | 4.01 | % |
Efficiency ratio (1) | | | 69.67 | % | | | 68.65 | % |
| | | | | | | | | |
| Asset Quality | | | | | | | | |
| Loan charge-offs | | $ | 3,225 | | | $ | 432 | |
| Loan recoveries | | | 88 | | | | 80 | |
| Net charge-offs | | | 3,137 | | | | 352 | |
| Non-accrual loans | | | 11,016 | | | | 8,546 | |
| Other real estate owned, net | | | 5,428 | | | | 6,554 | |
Repossessed assets Nonperforming assets | | | 14 16,458 | | | | 23 15,123 | |
| | | | | | | | | |
| Average Balances | | | | | | | | |
| Average assets | | $ | 552,939 | | | $ | 546,780 | |
| Average earning assets | | | 522,432 | | | | 509,259 | |
| Average shareholders’ equity | | | 48,931 | | | | 55,246 | |
| | | | |
| | | (unaudited) | |
| | | March 31, 2011 | | | March 31, 2010 | |
| Capital Ratios | | | | | | |
| Tier 1 capital | | $ | 58,027 | | | $ | 63,566 | |
| Total capital | | | 63,641 | | | | 69,330 | |
| Total capital to risk-weighted assets | | | 14.41 | % | | | 15.08 | % |
| Tier 1 capital to risk-weighted assets | | | 13.14 | % | | | 13.83 | % |
| Leverage ratio | | | 10.50 | % | | | 11.63 | % |
| | | | | | | | | |
| Balance Sheet | | | | | | | | |
| Cash and due from banks | | $ | 7,329 | | | $ | 6,241 | |
| Interest-bearing deposits in banks | | | 14,912 | | | | 2,248 | |
| Federal funds sold | | | 15,000 | | | | 2,220 | |
| Securities available for sale, at fair value | | | 66,660 | | | | 57,664 | |
| Restricted securities, at cost | | | 3,153 | | | | 3,426 | |
| Loans held for sale | | | 150 | | | | 125 | |
| Loans, net of allowance for loan losses | | | 413,148 | | | | 435,243 | |
| Premises and equipment, net | | | 20,020 | | | | 20,377 | |
| Interest receivable | | | 1,632 | | | | 1,720 | |
| Other assets | | | 18,231 | | | | 15,876 | |
| Total assets | | $ | 560,235 | | | $ | 545,140 | |
| | | | | | | | | |
| Noninterest-bearing demand deposits | | $ | 82,226 | | | $ | 81,603 | |
| Savings and interest-bearing demand deposits | | | 185,076 | | | | 149,597 | |
| Time deposits | | | 210,421 | | | | 224,947 | |
| Total deposits | | $ | 477,723 | | | $ | 456,147 | |
| Other borrowings | | | 20,117 | | | | 20,147 | |
Company obligated mandatorily redeemable capital securities | | | 9,279 | | | | 9,279 | |
| Accrued expenses and other liabilities | | | 3,937 | | | | 4,089 | |
| Total liabilities | | $ | 511,056 | | | $ | 489,662 | |
| | | | | | | | | |
FIRST NATIONAL CORPORATION Quarterly Performance Summary (in thousands, except share and per share data) | | | | |
| | | (unaudited) | |
| | | March 31, 2011 | | | March 31, 2010 | |
Balance Sheet (continued) | | | | | | |
| Preferred stock | | $ | 14,160 | | | $ | 14,029 | |
| Common stock | | | 3,690 | | | | 3,671 | |
| Surplus | | | 1,613 | | | | 1,439 | |
| Retained earnings | | | 29,455 | | | | 35,488 | |
| Unearned ESOP shares | | | - | | | | (8 | ) |
| Accumulated other comprehensive income, net | | | 261 | | | | 859 | |
| Total shareholders’ equity | | $ | 49,179 | | | $ | 55,478 | |
| | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 560,235 | | | $ | 545,140 | |
| | | | | | | | | |
| Loan Data | | | | | | | | |
| Mortgage loans on real estate: | | | | | | | | |
| Construction | | $ | 50,655 | | | $ | 52,605 | |
| Secured by farm land | | | 6,018 | | | | 6,305 | |
| Secured by 1-4 family residential | | | 120,863 | | | | 120,125 | |
| Other real estate loans | | | 196,190 | | | | 203,769 | |
| Loans to farmers (except those secured by real estate) | | | 2,341 | | | | 3,422 | |
| Commercial and industrial loans (except those secured by real estate) | | | 37,318 | | | | 40,307 | |
| Consumer installment loans | | | 11,881 | | | | 12,930 | |
| Deposit overdrafts | | | 128 | | | | 391 | |
| All other loans | | | 922 | | | | 2,554 | |
Total loans | | $ | 426,316 | | | $ | 442,408 | |
| Allowance for loan losses | | | 13,168 | | | | 7,165 | |
| Loans, net | | $ | 413,148 | | | $ | 435,243 | |
| | | | | | | | | |
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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 2011 and 2010 was 34%. Net interest income on a tax equivalent basis was $5,011 and $5,033 for the three months ended March 31, 2011 and 2010, respectively. Noninterest income excluding securities, premises and equipment and other real estate owned gains and losses was $1,340 and $1,371 for the three months ended March 31, 2011 and 2010, 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. |
