• First National Corporation Reports First Quarter 2022 Financial Results

    المصدر: Nasdaq GlobeNewswire / 26 أبريل 2022 07:00:01   America/New_York

    STRASBURG, Va., April 26, 2022 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (NASDAQ: FXNC), the bank holding company of First Bank (the “Bank”), reported unaudited consolidated net income of $3.7 million, or $0.60 per basic and diluted share, for the first quarter of 2022. This compares to net income of $2.4 million, or $0.50 per basic and diluted share, for the first quarter of 2021, which included merger expenses of $405 thousand, or $320 thousand, net of tax. Merger expenses had a $0.07 per share impact to basic and diluted earnings per share in the first quarter of 2021.

    FIRST QUARTER HIGHLIGHTS

    Key highlights of the first quarter of 2022 are as follows. Comparisons are to the corresponding period in the prior year unless otherwise stated:

    • Return on average assets increased to 1.06%, up from 1.00%
    • Return on average equity increased to 13.40%, up from 11.53%
    • Total assets increased by $389.5 million, or 38%
    • Noninterest-bearing deposits increased $125.5 million, or 43%
    • Loans increased $198.2 million, or 31%
    • Loans, excluding PPP loans, increased $21.3 million, or 11% annualized, since December 31, 2021
    • Net interest income increased $3.0 million, or 40%
    • Wealth management revenue increased $160 thousand, or 25%
    • Service charges on deposits increased $167 thousand, or 38%

    “We are pleased with loan growth and profitability in the first quarter,” said Scott Harvard, president and chief executive officer of First National. “The Company is seeing benefits from its strategic expansion initiatives last year, including loan growth and noninterest income growth. The Banks wealth management division also contributed to higher profitability for the quarter with revenue that increased 25% over the same period one year ago. Loan demand continues to be steady in spite of rising rates, and our small business customers appear to have weathered the pandemic well and are now more focused on inflation and wage pressures.

    NET INTEREST INCOME

    Net interest income increased $3.0 million, or 40%, to $10.5 million for the first quarter of 2022, compared to the same period of 2021. The increase resulted from a $2.9 million, or 36% increase in total interest and dividend income and a $107 thousand, or 18%, decrease in total interest expense. Net interest income was favorably impacted by a $415.1 million, or 44%, increase in average earning assets, which was partially offset by an 8-basis point decrease in the net interest margin to 3.19% when comparing the periods.

    Accretion of PPP income, net of costs, and accretion of discounts on purchased loans, net of premiums, were included in interest and fees on loans. Accretion of PPP income totaled $323 thousand in the first quarter of 2022, compared to $599 thousand for the same period of 2021. Accretion of discounts on purchased loans totaled $367 thousand in the first quarter of 2022. There were no purchased loans in the first quarter of 2021, and as a result, there was no accretion of discounts on purchased loans during the period.

    PROVISION FOR LOAN LOSSES

    There was no provision for loan losses for the first quarter of 2022. During the quarter, an increase in the general reserve component of the allowance for losses was offset by net recoveries of loans previously charged off and a decrease in the specific reserve component of the allowance for loan losses. Net recoveries totaled $118 thousand for the quarter. There were no specific reserves on impaired loans at March 31, 2022, compared to $55 thousand of specific reserves at December 31, 2021. The allowance for loan losses totaled $5.8 million, or 0.70% of total loans at March 31, 2022, compared to 0.69% of total loans at December 31, 2021. There was no provision for loan losses for the same period of 2021.

    ASSET QUALITY

    Loans 30 to 89 days past due and accruing totaled $2.1 million, or 0.25% of total loans at March 31, 2022, compared to $906 thousand, or 0.14% of total loans one year ago. Accruing substandard loans decreased to $336 thousand at March 31, 2022, an improvement from $1.3 million one year ago. Nonperforming assets decreased to $3.9 million, or 0.27% of total assets at March 31, 2022, compared to $6.8 million, or 0.66% of total assets at March 31, 2021. Nonperforming assets were comprised of $2.1 million of nonaccrual loans and $1.8 million of other real estate owned. There were $1.5 million of commercial rental properties included in other real estate owned, which were acquired through the merger with The Bank of Fincastle (“Fincastle”) in 2021.

    During the fourth quarter of 2020 and during the first half of 2021, the Bank modified terms of certain loans for customers negatively impacted by the pandemic. The modifications lowered borrower’s loan payments with interest only payments for periods ranging between 6 and 24 months. Modified loan balances decreased from $11.5 million at December 31, 2021, to $8.9 million at March 31, 2022. All modified loans were to businesses in the lodging sector, were included in the Bank’s commercial real estate loan portfolio and were performing under their modified terms at March 31, 2022.

    NONINTEREST INCOME

    Noninterest income increased $568 thousand, or 27%, to $2.7 million for the three-month period ended March 31, 2022, compared to the same period of 2021. Wealth management fees increased $160 thousand, or 25%, and was attributable to an increase in assets under management from growth in account values and from an increase in the number of clients served by the wealth management division. Service charges on deposits increased $167 thousand, or 38%, ATM and check card fees increased $149 thousand, or 25%, income from bank-owned life insurance increased $31 thousand, or 27%, and fees for other customer services increased $51 thousand, or 28%, comparing the same periods. The increases were primarily attributable to the acquisition of Fincastle.

    NONINTEREST EXPENSE

    Noninterest expense increased $2.0 million, or 30%, to $8.6 million for the three-month period ended March 31, 2022, compared to the same period one year ago. The increase was primarily attributable to a $1.6 million, or 44% increase in salaries and employee benefits, a $125 thousand, or 28%, increase in occupancy expense, a $128 thousand, or 30%, increase in equipment expense, and a $227 thousand, or 38%, increase in other operating expense. These increases were partially offset by a $404 thousand decrease in legal and professional fees. The increases were primarily attributable to the increase in the number of employees, branch offices and customers that resulted from the acquisition of Fincastle and the acquisition of the loan portfolio, branch assets and addition of the employees from SmartBank. Merger expenses totaled $20 thousand and $405 thousand for the three-month periods ending March 31, 2022, and 2021, respectively. The decrease in legal and professional fees was primarily attributable to merger related costs in the first quarter of 2021.

    BALANCE SHEET

    Total assets of First National increased $389.5 million, or 38%, to $1.4 billion at March 31, 2022, compared to $1.0 billion at March 31, 2021. Interest-bearing deposits in banks decreased $34.5 million, or 21%, while total securities increased $193.6 million, or 111%, and loans increased $198.2 million, or 31%. Loans, excluding Paycheck Protection Program (“PPP”) loans, increased $262.0 million, or 46%. PPP loans decreased by $63.8 million over the last twelve months and totaled $2.5 million at March 31, 2022. 

    Total liabilities increased $368.9 million, or 39%, to $1.3 billion at March 31, 2022, compared to $942.2 million one year ago. The increase in total liabilities was primarily attributable to significant growth in deposits. Total deposits increased $376.8 million, or 41%, to $1.3 billion. Noninterest-bearing demand deposits increased $125.5 million, or 43%, savings and interest-bearing demand deposits increased $208.0 million, or 40%, and time deposits increased $43.3 million, or 44%. Subordinated debt decreased to $5.0 million at March 31, 2022, compared to $10.0 million one year ago, from the redemption of subordinated debt with an interest rate of 6.75%.

    Shareholders’ equity increased $20.6 million, or 24%, to $106.6 million at March 31, 2022, compared to one year ago, from an $8.7 million increase in retained earnings and a $27.8 million combined increase in common stock and surplus. The increase in common stock and surplus was primarily attributable to the Company’s acquisition of Fincastle on July 1, 2021. These increases were partially offset by $15.9 million decrease in accumulated other comprehensive income, which resulted from a change in market interest rates that impacted securities available for sale reported at fair value. The Bank was considered well-capitalized at March 31, 2022.

    The acquisition of Fincastle had a significant impact on balance sheet growth. On July 1, 2021, the acquisition date, Fincastle had total assets of $267.9 million, interest-bearing deposits in banks of $43.5 million, total securities of $12.0 million, loans, net of the allowance for loan losses, of $191.5 million, and total deposits of $236.3 million.

    The acquisition of the SmartBank loan portfolio impacted the composition of the balance sheet. On September 30, 2021, the acquisition date, SmartBank’s Richmond-area branch loan portfolio totaled $82.6 million. The Bank funded the acquisition of the loan portfolio with cash, which decreased interest-bearing deposits in banks during the third quarter.

    ACQUISITION OF THE BANK OF FINCASTLE

    On July 1, 2021, the Company completed the acquisition of The Bank of Fincastle for an aggregate purchase price of $33.8 million of cash and stock (the “Merger”). Fincastle was merged with and into First Bank. The former Fincastle branches operated as The Bank of Fincastle, a division of First Bank, until their systems were converted on October 16, 2021. The Company incurred merger expenses of $20 thousand and $405 thousand for the three-month periods ending March 31, 2022, and 2021, respectively. The Company does not expect to incur additional merger expenses in future periods.

    ACQUISITION OF THE SMARTBANK LOAN PORTFOLIO

    On September 30, 2021, the Bank acquired $82.6 million of loans and certain branch assets from SmartBank related to their Richmond area branch, located in Glen Allen, Virginia. Additionally, an experienced team of bankers based out of the SmartBank location transitioned to become employees of First Bank in the fourth quarter of 2021. First Bank did not assume any deposit liabilities from SmartBank in connection with the transaction and SmartBank closed their branch operation on December 31, 2021. The Bank continued to operate its loan production office from the former branch location.

    SMALL BUSINESS ADMINISTRATIONS PPP

    The Bank participated as a lender in the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program to support local small businesses and non-profit organizations by providing forgivable loans. The Bank accretes loan fees received from the SBA, net of loan origination costs, into income evenly over the life of the loans through interest and fees on loans. PPP loans totaled $2.5 million at March 31, 2022, with $52 thousand scheduled to mature in the second and third quarters of 2022, and $2.4 million scheduled to mature in the first and second quarters of 2026.

    ABOUT FIRST NATIONAL CORPORATION

    First National Corporation (NASDAQ: FXNC) is the parent company and bank holding company of First Bank, a community bank that first opened for business in 1907 in Strasburg, Virginia. The Bank offers loan and deposit products and services through its website, www.fbvirginia.com, its mobile banking platform, a network of ATMs located throughout its market area, a loan production office, a customer service center in a retirement community, and 20 bank branch office locations located throughout the Shenandoah Valley, the central regions of Virginia, the Roanoke Valley, and in the city of Richmond. In addition to providing traditional banking services, the Bank operates a wealth management division under the name First Bank Wealth Management. First Bank also owns First Bank Financial Services, Inc., which invests in entities that provide investment services and title insurance.

    FORWARD-LOOKING STATEMENTS

    Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company’s future operations and are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including the rapidly changing uncertainties related to the COVID-19 pandemic and its potential adverse effect on the economy, our employees and customers, and our financial performance. For details on other factors that could affect expectations, see the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and other filings with the Securities and Exchange Commission.

    CONTACTS

    Scott C. Harvard M. Shane Bell
    President and CEO Executive Vice President and CFO
    (540) 465-9121 (540) 465-9121
    sharvard@fbvirginia.com sbell@fbvirginia.com
       


    FIRST NATIONAL CORPORATION
    Quarterly Performance Summary
    (in thousands, except share and per share data)

      (unaudited) 
      For the Quarter Ended 
      March 31,  December 31,  September 30,  June 30,  March 31, 
      2022  2021  2021  2021  2021 
    Income Statement                    
    Interest income                    
    Interest and fees on loans $9,496  $9,365  $9,215  $7,074  $7,143 
    Interest on deposits in banks  70   64   79   37   33 
    Interest on federal funds sold     2   8       
    Interest on securities                    
    Taxable interest  1,132   920   766   697   717 
    Tax-exempt interest  305   299   242   215   180 
    Dividends  21   23   21   22   22 
    Total interest income $11,024  $10,673  $10,331  $8,045  $8,095 
    Interest expense                    
    Interest on deposits $340  $355  $369  $328  $363 
    Interest on subordinated debt  69   155   156   154   154 
    Interest on junior subordinated debt  67   68   68   68   66 
    Total interest expense $476  $578  $593  $550  $583 
    Net interest income $10,548  $10,095  $9,738  $7,495  $7,512 
    Provision for (recovery of) loan losses     350      (1,000)   
    Net interest income after provision for (recovery of) loan losses $10,548  $9,745  $9,738  $8,495  $7,512 
    Noninterest income                    
    Service charges on deposit accounts $609  $625  $547  $447  $442 
    ATM and check card fees  750   894   753   682   601 
    Wealth management fees  803   716   696   657   643 
    Fees for other customer services  233   176   279   150   182 
    Brokered mortgage fees  94   123   155   157   104 
    Income from bank owned life insurance  144   152   161   100   113 
    Net gains on securities available for sale              37 
    Net gains on sale of loans held for sale           18   7 
    Net gains on disposal of premises and equipment     15          
    Other operating income  78   260   57   224   14 
    Total noninterest income $2,711  $2,961  $2,648  $2,435  $2,143 
    Noninterest expense                    
    Salaries and employee benefits $5,124  $5,099  $5,446  $3,693  $3,555 
    Occupancy  572   510   500   399   447 
    Equipment  559   527   519   433   431 
    Marketing  151   179   243   138   106 
    Supplies  136   168   176   77   88 
    Legal and professional fees  333   731   586   483   737 
    ATM and check card expense  303   317   329   268   231 
    FDIC assessment  152   112   87   78   69 
    Bank franchise tax  216   172   153   172   168 
    Data processing expense  236   1,271   465   216   204 
    Amortization expense  5   4   5   5   14 
    Other real estate owned expense, net  28   12   14       
    Net losses on disposal of premises and equipment  2             
    Other operating expense  827   924   903   668   600 
    Total noninterest expense $8,644  $10,026  $9,426  $6,630  $6,650 
    Income before income taxes $4,615  $2,680  $2,960  $4,300  $3,005 
    Income tax expense  886   497   562   958   569 
    Net income $3,729  $2,183  $2,398  $3,342  $2,436 


    FIRST NATIONAL CORPORATION
    Quarterly Performance Summary
    (in thousands, except share and per share data)

      (unaudited) 
      For the Quarter Ended 
      March 31,  December 31,  September 30,  June 30,  March 31, 
      2022  2021  2021  2021  2021 
    Common Share and Per Common Share Data                    
    Earnings per common share, basic $0.60  $0.35  $0.39  $0.69  $0.50 
    Weighted average shares, basic  6,238,973   6,226,838   6,220,456   4,868,901   4,863,823 
    Earnings per common share, diluted $0.60  $0.35  $0.38  $0.69  $0.50 
    Weighted average shares, diluted  6,245,704   6,235,907   6,229,524   4,873,286   4,872,097 
    Shares outstanding at period end  6,249,784   6,228,176   6,226,418   4,870,459   4,868,462 
    Tangible book value at period end (4) $16.54  $18.28  $18.11  $18.21  $17.65 
    Cash dividends $0.14  $0.12  $0.12  $0.12  $0.12 
                         
    Key Performance Ratios                    
    Return on average assets  1.06%  0.63%  0.71%  1.31%  1.00%
    Return on average equity  13.40%  7.44%  8.64%  15.33%  11.53%
    Net interest margin  3.19%  3.13%  3.06%  3.10%  3.27%
    Efficiency ratio (1)  64.36%  64.69%  64.86%  63.65%  64.53%
                         
    Average Balances                    
    Average assets $1,430,524  $1,366,855  $1,337,247  $1,026,583  $988,324 
    Average earning assets  1,352,311   1,289,977   1,272,969   976,842   937,199 
    Average shareholders’ equity  112,822   116,511   110,153   87,442   85,708 
                         
    Asset Quality                    
    Loan charge-offs $106  $185  $111  $1,085  $66 
    Loan recoveries  224   111   80   64   67 
    Net charge-offs (recoveries)  (118)  74   31   1,021   (1)
    Non-accrual loans  2,130   2,304   2,158   2,102   6,814 
    Other real estate owned, net  1,767   1,848   1,848       
    Nonperforming assets (3)  3,897   4,152   4,006   2,102   6,814 
    Loans 30 to 89 days past due, accruing  2,105   3,235   2,707   550   906 
    Loans over 90 days past due, accruing  52      7   5    
    Troubled debt restructurings, accruing               
    Special mention loans               
    Substandard loans, accruing  311   315   319   322   1,343 
                         
    Capital Ratios (2)                    
    Total capital $128,567  $125,934  $128,197  $95,856  $94,044 
    Tier 1 capital  122,739   120,224   122,763   90,391   86,717 
    Common equity tier 1 capital  122,739   120,224   122,763   90,391   86,717 
    Total capital to risk-weighted assets  14.44%  14.76%  14.42%  16.25%  16.05%
    Tier 1 capital to risk-weighted assets  13.79%  14.09%  13.81%  15.32%  14.80%
    Common equity tier 1 capital to risk-weighted assets  13.79%  14.09%  13.81%  15.32%  14.80%
    Leverage ratio  8.61%  8.82%  9.22%  8.78%  8.78%


    FIRST NATIONAL CORPORATION
    Quarterly Performance Summary
    (in thousands, except share and per share data)

      (unaudited) 
      For the Quarter Ended 
      March 31,  December 31,  September 30,  June 30,  March 31, 
      2022  2021  2021  2021  2021 
    Balance Sheet                    
    Cash and due from banks $19,989  $18,725  $19,182  $13,913  $11,940 
    Interest-bearing deposits in banks  129,801   157,281   95,459   114,334   164,322 
    Federal funds sold        80,589       
    Securities available for sale, at fair value  284,893   289,495   266,600   222,236   159,742 
    Securities held to maturity, at amortized cost  81,640   33,441   10,046   10,898   13,424 
    Restricted securities, at cost  1,908   1,813   1,813   1,631   1,631 
    Loans, net of allowance for loan losses  830,595   819,408   816,977   611,883   630,716 
    Other real estate owned, net  1,767   1,848   1,848       
    Premises and equipment, net  22,278   22,403   22,401   18,876   19,087 
    Accrued interest receivable  4,056   3,903   3,823   2,662   2,609 
    Bank owned life insurance  24,438   24,294   24,141   18,128   18,029 
    Goodwill  3,030   3,030   4,011       
    Core deposit intangibles, net  150   154   159      5 
    Other assets  13,117   13,641   8,740   10,032   6,625 
    Total assets $1,417,662  $1,389,436  $1,355,789  $1,024,593  $1,028,130 
                         
    Noninterest-bearing demand deposits $417,776  $413,188  $411,527  $290,571  $292,280 
    Savings and interest-bearing demand deposits  734,051   689,998   652,624   528,002   526,012 
    Time deposits  141,065   145,566   148,419   95,732   97,765 
    Total deposits $1,292,892  $1,248,752  $1,212,570  $914,305  $916,057 
    Subordinated debt  4,994   9,993   9,993   9,992   9,992 
    Junior subordinated debt  9,279   9,279   9,279   9,279   9,279 
    Accrued interest payable and other liabilities  3,934   4,373   7,041   2,335   6,876 
    Total liabilities $1,311,099  $1,272,397  $1,238,883  $935,911  $942,204 
                         
    Preferred stock $  $  $  $  $ 
    Common stock  7,812   7,785   7,783   6,088   6,086 
    Surplus  32,298   31,966   31,889   6,295   6,214 
    Retained earnings  79,845   76,990   75,554   73,901   71,144 
    Accumulated other comprehensive (loss) income, net  (13,392)  298   1,680   2,398   2,482 
    Total shareholders’ equity $106,563  $117,039  $116,906  $88,682  $85,926 
    Total liabilities and shareholders’ equity $1,417,662  $1,389,436  $1,355,789  $1,024,593  $1,028,130 
                         
    Loan Data                    
    Mortgage real estate loans:                    
    Construction and land development $49,308  $55,721  $45,120  $25,035  $25,720 
    Secured by farmland  3,555   3,708   3,748   495   507 
    Secured by 1-4 family residential  290,408   291,990   294,216   235,158   236,870 
    Other real estate loans  380,635   361,213   358,895   244,960   248,357 
    Loans to farmers (except those secured by real estate)  937   985   857   232   436 
    Commercial and industrial loans (except those secured by real estate)  102,745   98,820   104,807   102,734   117,109 
    Consumer installment loans  4,602   4,963   6,577   5,179   5,684 
    Deposit overdrafts  205   175   172   174   112 
    All other loans  4,028   7,543   8,019   3,381   3,407 
    Total loans $836,423  $825,118  $822,411  $617,348  $638,202 
    Allowance for loan losses  (5,828)  (5,710)  (5,434)  (5,465)  (7,486)
    Loans, net $830,595  $819,408  $816,977  $611,883  $630,716 


    FIRST NATIONAL CORPORATION
    Quarterly Performance Summary
    (in thousands, except share and per share data)

      (unaudited) 
      For the Quarter Ended 
      March 31,  December 31,  September 30,  June 30,  March 31, 
      2022  2021  2021  2021  2021 
    Reconciliation of Tax-Equivalent Net Interest Income                    
    GAAP measures:                    
    Interest income – loans $9,496  $9,365  $9,215  $7,074  $7,143 
    Interest income – investments and other  1,528   1,308   1,116   971   952 
    Interest expense – deposits  (340)  (355)  (369)  (328)  (363)
    Interest expense – subordinated debt  (69)  (155)  (156)  (154)  (154)
    Interest expense – junior subordinated debt  (67)  (68)  (68)  (68)  (66)
    Total net interest income $10,548  $10,095  $9,738  $7,495  $7,512 
    Non-GAAP measures:                    
    Tax benefit realized on non-taxable interest income – loans $5  $8  $8  $8  $8 
    Tax benefit realized on non-taxable interest income – municipal securities  81   80   64   57   48 
    Total tax benefit realized on non-taxable interest income $86  $88  $72  $65  $56 
    Total tax-equivalent net interest income $10,634  $10,183  $9,810  $7,560  $7,568 


    (1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense, amortization of intangibles, gains and losses on disposal of premises and equipment, and merger related expenses by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains and losses on sales of securities. 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 is 21%. See the tables above for tax-equivalent net interest income and reconciliations of net interest income to tax-equivalent net interest income. The efficiency ratio is a non-GAAP financial measure that management believes provides investors with important information regarding operational efficiency. Such information is not prepared in accordance with U.S. generally accepted accounting principles (GAAP) and should not be construed as such. Management believes; however, 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.

    (2) All capital ratios reported are for First Bank.

    (3) Nonperforming assets are comprised of nonaccrual loans and other real estate owned, net of selling costs.

    (4) Tangible book value is calculated by subtracting goodwill and other intangibles from total shareholders’ equity.

     


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