8-K
First National Corp /Va/ (FXNC)
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--12-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 12, 2022
___________
FIRST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
| Virginia<br><br> <br>(State or other jurisdiction of incorporation) | 1-38874<br><br> <br>(Commission File Number) | 54-1232965<br><br> <br>(IRS Employer Identification No.) |
|---|---|---|
| 112 West King Street<br><br> <br>Strasburg , Virginia<br><br> <br>(Address of principal executive offices) | 22657<br><br> <br>(Zip Code) | |
| --- | --- |
Registrant’s telephone number, including area code: (540) 465-9121
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $1.25 per share | FXNC | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On October 25, 2022, First National Corporation (the Company) issued a press release reporting its financial results for the period ended September 30, 2022 and a stock repurchase plan. A copy of the press release is being furnished as an exhibit to this report and is incorporated by reference into this Item 2.02.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
|---|
On October 12, 2022, the Board of Directors of the Company amended Article II, Section A, of the Company’s By-laws by decreasing the size of the Board from 11 members to 10 members. The number of directors was reduced as a result of the death of one of the Company’s directors, Charles Ray Sprinkle, who passed away on August 23, 2022.
A copy of the By-laws, as amended to date, is attached to this Current Report on Form 8-K as Exhibit 3.1 and is incorporated by reference. The foregoing description of the By-laws amendment is qualified in its entirety by reference to the full text of the By-laws filed with this Current Report on Form 8-K.
| Item 9.01 | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits. |
| --- | --- |
| Exhibit No. | Description |
| --- | --- |
| 3.1 | By-laws of First National Corporation |
| 99.1 | Press Release dated October 25, 2022 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FIRST NATIONAL CORPORATION | ||
|---|---|---|
| (Registrant) | ||
| Date: October 26, 2022 | By: | /s/ M. Shane Bell |
| M. Shane Bell | ||
| Executive Vice President and Chief Financial Officer |
3
ex_436797.htm
Exhibit 3.1
BY-LAWS
OF
FIRST NATIONAL CORPORATION
(as amended October 12, 2022)
ARTICLE I
Stockholders’ Meetings
A. The annual meeting of the stockholders of the Corporation shall be held annually on a date to be fixed by the Board of Directors (beginning in 1984). If that day is a legal holiday, the annual meeting shall be held on the next succeeding day not a legal holiday.
B. All meetings of the stockholders shall be held at the time and place or, in the case of virtual-only meetings, at no physical place but solely by means of remote communication, in each case, as determined by the Board of Directors and stated in the notice of the meeting. Meetings of the stockholders shall be held whenever called by the Chairman of the Board, the President, or a majority of the Directors.
C. The holders of a majority of the outstanding shares of capital stock entitled to vote shall constitute a quorum at any meeting of the stockholders. Less than a quorum may adjourn the meeting to a fixed time and place (if any), no further notice of any adjourned meeting being required. Each stockholder shall be entitled to one vote in person or by proxy for each share entitled to vote then outstanding in his name on the books of the Corporation.
D. The transfer books for shares of capital stock of the Corporation may be closed by order of the Board of Directors for not exceeding fifty (50) days for the purpose of determining stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other purpose. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date to be not more than seventy (70) days preceding the date on which the particular action requiring such determination of the stockholders is to be taken.
E. The Chairman of the Board, if there be one, shall preside over all meetings of the stockholders. If he is not present, or there is none in office, the President shall preside. If neither the Chairman of the Board nor the President is present, a Vice President shall preside, or, if none be present, a Chairman shall be elected by the meeting. The Secretary of the Corporation shall act as Secretary of all the meetings, if he be present. If he is not present, the Chairman shall appoint a Secretary of the meeting. The Chairman of the meeting may appoint one or more inspectors of the election to determine the qualification of voters, the validity of proxies and the results of ballots.
F. At an annual meeting of the shareholders of the Corporation, only such business shall be conducted as shall have been properly brought before the meeting. To be brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than sixty (60) days nor more than ninety (90) days prior to the date of the scheduled annual meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that in the event that less than seventy (70) days’ notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by a shareholder, to be timely, must be so received not later than the close of business on the tenth (10^th^) day following the earlier of the day on which such notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made. A shareholder’s notice to the Secretary of the Corporation shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation’s books of the shareholder proposing such business and of any other person or entity who is the record or beneficial owner of any shares of the Corporation and who, to the knowledge of the shareholder proposing such business, supports such proposal, (c) the class and number of shares of the Corporation which are beneficially owned and owned of record by the shareholder proposing such business on the date of his notice to the Corporation and the number of shares so owned by any person or entity who, to the knowledge of the shareholder proposing such business, supports such proposal and (d) any material interest (financial or other) of such shareholder in such proposal. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section F. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section F and if the Chairman should so determine, the Chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
ARTICLE II
Board of Directors
A. The number of Directors shall be ten (10). This number may be increased or decreased at any time by amendment of these By-laws, but shall always be a number of not less than three. Directors must be stockholders. A majority of the Directors shall constitute a quorum. Less than a quorum may adjourn the meeting to a fixed time and place, no further notice of any adjourned meeting being required.
B. Any vacancy arising among the Directors, including a vacancy resulting from an increase by not more than three in the number of Directors, may be filled by the remaining Directors unless sooner filled by the stockholders in meeting.
C. Meetings of the Board of Directors shall be had at times fixed by resolution of the Board or upon the call of the Chairman of the Board, the President, or a majority of the members of the Board. Notice of any meeting not held at a time fixed by a resolution of the Board shall be given to each Director at least two days before the meeting at his residence or business address or by delivering such notice to him or by telephoning it to him at least one day before the meeting. Any such notice shall contain the time and place of the meeting.
D. Meetings may be held without notice if all of the Directors are present or those not present waive notice before or after the meeting.
E. The mandatory retirement age for Directors shall be age 75, meaning that a Director may not stand for reelection following December 31 of the year in which he or she turns 75.
F. Only persons who are nominated in accordance with the procedures set forth in this Section F shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made by or at the direction of the Board of Directors, or by any shareholder of the Corporation entitled to vote for the election of Directors who complies with the notice procedures set forth in this Section F. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporations not less than sixty (60) days nor more than ninety (90) days prior to the date of the scheduled annual meeting, regardless of postponements, deferrals, or adjournments of that meeting to a later date; provided, however, in the event that less than seventy (70) days’ notice or prior public disclosure of the date of the meeting is given or made, notice by the shareholder to be timely must be so received not later than the close of business on the 10^th^ day following the earlier of the day on which such notice of the date of the scheduled annual meeting was mailed or the day on which such public disclosure was made. Such shareholder’s notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election as a Director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as to the shareholder giving the notice (i) the name and address of such shareholder and of any other person or entity who is the record or beneficial owner of shares of the Corporation and who, to the knowledge of the shareholder giving notice, supports such nominee(s) and (ii) the class and number of shares of the Corporation which are beneficially owned and owned of record by such shareholder and by any other person or entity who is the record or beneficial owner of shares of the Corporation and who, to the knowledge of the shareholder giving the notice, supports such nominee(s). At the request of the Board of Directors any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation the information required to be set forth in a shareholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section F. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-laws, and if the Chairman should so determine, the Chairman shall so declare to the meeting and the defective nomination shall be disregarded.
ARTICLE III
Committees
A. The Board of Directors may designate by resolution adopted by a majority of all the Directors two or more of the Directors to constitute an Executive Committee. The Executive Committee, when the Board of Directors is not in session, may to the extent permitted by law exercise all of the powers of the Directors and authorize the seal of the Corporation to be affixed as required. The Executive Committee may make rules for the holding and conduct of its meetings, the notice thereof required, and the keeping of its records.
B. Other committees, consisting of two or more directors, may be designated by a resolution adopted by a majority of the Directors present at a meeting at which a quorum is present and shall have the powers and authority of the Board of Directors to the extent specified in the resolution of appointment and not prohibited by law.
ARTICLE IV
Officers
A. The Board of Directors, promptly after its election in each year, shall elect a President (who may be one of the Directors) and a Secretary; a Chairman of the Board and a Vice Chairman of the Board; and may appoint such other officers as it may deem proper. The Chairman of the Board shall serve at the pleasure of the Board and preside at all meetings of the Board of Directors. The Chairman shall have and may exercise such further powers and duties as from time to time may be conferred upon or assigned by the Board of Directors. The Vice Chairman of the Board shall also serve at the pleasure of the Board. The Vice Chairman shall carry out the functions of the Chairman in the absence of the Chairman. Any officer may hold more than one office except that the same person shall not be President and Secretary. The term of office shall be until the first meeting of the Board of Directors following the next annual meeting of the shareholders and until their respective successors is elected, but any officer may be removed at any time by the vote of the Board of Directors. Vacancies among the officers shall be filled by the Directors. The officers of the Corporation shall have such duties as generally pertain to their respective offices as well as such powers and duties as from time to time may be delegated to them by the Board of Directors.
ARTICLE V
Certificate of Stock
A. Each stockholder shall be entitled to a certificate or certificates of stock in such form as may be approved by the Board of Directors signed by the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or any Assistant Treasurer
B. All transfers of stock of the Corporation shall be made upon its books by surrender of the certificate for the shares transferred accompanied by an assignment in writing by the holder and may be accomplished either by the holder in person or by a duly authorized attorney in fact.
C. In case of the loss, mutilation or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms not in conflict with the law as the Board of Directors may prescribe.
D. The Board of Directors may also appoint one or more Transfer Agents and Registrars and may require stock certificates to be countersigned by a Transfer Agent or registered by a Registrar or may require stock certificates to be both countersigned by a Transfer Agent and registered by a Registrar. If certificates of capital stock of the Corporation are signed by a Transfer Agent or by a Registrar (other than the Corporation itself or one of its employees), the signature thereon of the officers of the Corporation and the seal of the Corporation thereon may be facsimiles, engraved or printed. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Corporation.
ARTICLE VI
Seal
A. The seal of the Corporation shall be a flat-faced circular die, of which there may be any number of counterparts, with the word “SEAL” and the name of the Corporation engraved thereon.
ARTICLE VII
Voting of Stock Held
A. Unless otherwise provided by a vote of the Board of Directors, the President or any Vice President may appoint attorneys to vote any stock in any other Corporation owned by this Corporation or may attend any meeting of the holders of stock of such Corporation and vote such shares in person.
Amended by unanimous vote of the Directors on this 12th day of October, 2022.
ex_418708.htm
Exhibit 99.1
First National Corporation Announces Third Quarter Results and Stock Repurchase Plan
STRASBURG, Va., October 25, 2022 --- 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 $4.5 million and basic and diluted earnings per common share of $0.71 for the third quarter ended September 30, 2022. This compares to net income of $3.8 million and basic and diluted earnings per common share of $0.61 for the second quarter of 2022.
THIRD QUARTER HIGHLIGHTS
Key highlights of the third quarter ending September 30, 2022, are as follows. Comparisons are to the linked quarterly period ending June 30, 2022, unless otherwise stated:
| ● | Net income increased $619 thousand, or 16%, to $4.5 million |
|---|---|
| ● | Return on average assets was 1.27% |
| --- | --- |
| ● | Return on average equity was 17.27% |
| --- | --- |
| ● | Net interest margin improved to 3.58% from 3.42% |
| --- | --- |
| ● | Efficiency ratio improved to 61.10% from 62.69% |
| --- | --- |
| ● | Loans increased $26.4 million, or 12%, annualized |
| --- | --- |
| ● | Net interest income increased $437 thousand, or 15% annualized |
| --- | --- |
| ● | Non-performing assets were unchanged at 0.15% of total assets |
| --- | --- |
“First National Corporation delivered excellent third quarter results with 12% annualized loan growth, strong credit metrics, and an improved net interest margin and efficiency ratio,” said Scott C. Harvard, president and chief executive officer of First National. “The Company benefited from recent strategic expansion initiatives, loan growth and a higher net interest margin. We believe diversifying with employees and customers in attractive Virginia markets is building long term value for our shareholders. As we move forward, the Company will remain mindful of current economic uncertainties as our team continues to be disciplined in underwriting loans and managing to our long-term risk appetite.”
STOCK REPURCHASE PLAN
The Company also announced today that its board of directors authorized a stock repurchase plan on October 12, 2022, pursuant to which First National may repurchase up to $5.0 million of the Company’s common stock. First National intends to purchase shares periodically through privately negotiated transactions or in the open market in accordance with Securities and Exchange Commission rules. The Company’s board of directors authorized the purchase plan to run through December 31, 2023, unless the entire amount authorized to be repurchased has been acquired before that date. First National intends to fund the repurchase plan with a combination of cash on hand and cash generated from ongoing operations.
There is no guarantee as to the exact number of, or value of, shares that may be repurchased by First National, and First National may discontinue repurchases at any time that management determines additional repurchases are not warranted. The timing and amount of share repurchases under the stock repurchase plan will depend on a number of factors, including First National’s stock price performance, ongoing capital planning considerations, general market conditions, and applicable legal requirements.
NET INTEREST INCOME
For the third quarter of 2022, net interest income totaled $11.7 million, an increase of $437 thousand from $11.3 million for the second quarter of 2022 and was positively impacted by a higher interest rate environment and a continued change in the Company’s earning asset composition. The increase in net interest income was primarily driven by higher interest income from loan growth during the third quarter and increases in loan yields due to higher market interest rates. The favorable impact of the increase in loan yields was partially offset by an increase in deposit costs. The net interest margin expanded by 16 basis points during the third quarter to 3.58% from the previous quarter due to a 4% increase in net interest income and a 2% decrease in average earning assets. The impact of net interest margin expansion was greater than the impact of lower average earning assets in the third quarter. The yield on earning assets increased 32-basis points, which exceeded the 16-basis point increase in the cost of funds. A change in the composition of average earning assets also contributed to the increase in net interest income as average loans to average earning assets increased from 64% to 68%, while average interest-bearing deposits in banks to total average assets decreased from 9% to 6%.
Net accretion of discounts on purchased loans was included in interest and fees on loans and totaled $295 thousand in the third quarter of 2022 compared to $351 thousand in the second quarter of 2022. Accretion of Paycheck Protection Program (“PPP”) loan income, net of costs are also included in interest and fees on loans. Net accretion of PPP income totaled $0 in the third quarter of 2022 compared to $35 thousand in the second quarter of 2022.
ASSET QUALITY
Overview
During the third quarter of 2022, nonperforming assets (“NPAs”) as a percentage of total assets remained low at 0.15% at September 30, 2022. Accruing past due loan levels as a percentage of total loans totaled 0.27% at September 30, 2022, which was an 8-basis point increase as compared to June 30, 2022 and was 6 basis points lower than at September 30, 2021. Net charge-off levels remained low at 0.01% of total average loans for the third quarter of 2022. The allowance for loan losses totaled $6.3 million at September 30, 2022, which was a slight increase from $6.2 million at June 30, 2022.
Nonperforming Assets
NPAs totaled $2.1 million at September 30, 2022 and June 30, 2022, compared to $4.0 million at September 30, 2021. The following table shows a summary of NPA balances at the quarter ended (dollars in thousands):
| Sept. 30, 2022 | June 30,<br><br> <br>2022 | Sept. 30, 2021 | |
|---|---|---|---|
| Nonaccrual loans | $ 566 | $ 442 | $ 2,158 |
| Other real estate owned, net | 1,578 | 1,665 | 1,848 |
| Total nonperforming assets | $ 2,144 | $ 2,107 | $ 4,006 |
Past Due Loans
Past due loans still accruing interest totaled $2.4 million or 0.27% of total loans at September 30, 2022, compared to $1.7 million or 0.19% of total loans at June 30, 2022, and $2.7 million or 0.33% of total loans at September 30, 2021. Of the total past due loans still accruing interest, $306 thousand or 0.03% of total loans were loans past due 90 days or more at September 30, 2022, compared to $91 thousand or 0.01% of total loans at June 30, 2022, and $7 thousand or 0.00% of total loans at September 30, 2021.
Net Charge-offs
Net charge-offs were $111 thousand or 0.05% of total average loans on an annualized basis for the quarter ended September 30, 2022, compared to net charge-offs of 0.01% for the second quarter of 2022 and 0.02% for the third quarter of 2021. On a year-to-date basis through September 30, 2022, net charge-offs were $19 thousand or 0.00% of total average loans (annualized).
Provision for Loan Losses
For the quarter ended September 30, 2022, the Company recorded a provision for loan losses of $200 thousand, compared to a provision for loan losses of $400 thousand in the previous quarter, and a no provision for loan losses during the third quarter of 2021. The provision for loan losses for the third quarter of 2022 resulted from the impact of loan growth on the general reserve component of the allowance for loan losses and net charge-offs of $111 thousand.
Allowance for Loan Losses
At September 30, 2022, the allowance for loan losses totaled $6.3 million, which was a $90 thousand increase from $6.2 million as of June 30, 2022. The increase in the allowance for loan losses resulted from the impact of loan growth in during the quarter and was partially offset by the impact of improved qualitative factors related to the reduction of modified loans. The Bank modified terms of certain loans for customers negatively impacted by the pandemic during the fourth quarter of 2020 and the first half of 2021. The modifications lowered borrower’s loan payments by providing interest only payments for periods ranging between 6 and 24 months. As borrowers resumed regular principal and interest loan payments, modified loan balances decreased to $0 at September 30, 2022, compared to $4.7 million at June 30, 2022, and $13.3 million at September 30, 2021.
The allowance for loan losses as a percentage of total loans decreased slightly to 0.69% at September 30, 2022, compared to 0.70% at June 30, 2022, and increased slightly from 0.66% at September 30, 2021. The net discount on purchased loans totaled $2.7 million at September 30, 2022, compared to $2.9 million at June 30, 2022, and $3.8 million at September 30, 2021. The net discount on purchased loans is not included in the allowance for loan losses.
NONINTEREST INCOME
Noninterest income increased $247 thousand, or 9%, to $3.0 million in the third quarter of 2022 compared to the second quarter of 2022 primarily from higher ATM and check card fee income, bank-owned life insurance income and other operating income. ATM and check card fees increased $118 thousand, or 15%, from an annual payment received from the Bank’s check card vendor in during the quarter. Other operating income increased $99 thousand, primarily from a death benefit payment received during the quarter from a life insurance policy.
NONINTEREST EXPENSE
Noninterest expense increased $165 thousand, or 2%, to $9.1 million in the third quarter of 2022, compared to the second quarter of 2022 primarily from higher other operating expense, which was partially offset by lower equipment expense. Other operating expense was higher in the third quarter primarily from an increase in director fees related to annual equity compensation as well as an increase in losses related to customer account fraud. Equipment expense was lower in the third quarter when compared to the prior quarter primarily from higher costs incurred in the second quarter of 2022 from expenses related to the transition of The Bank of Fincastle customer accounts to First Bank’s operating systems.
BALANCE SHEET
At September 30, 2022, assets totaled $1.4 billion, which was a decrease of $31.1 million, or 9% (annualized) from June 30, 2022, and an increase of $27.8 million, or 2%, from September 30, 2021. Total assets declined from the prior quarter primarily due to a $51.5 million decrease in interest-bearing deposits in banks and a $10.6 million decrease in total securities. The decreases were partially offset by a $26.3 million increase in loans, net of the allowance for loan losses.
At September 30, 2022, loans totaled $906.5 million, an increase of $26.4 million or 12% (annualized) from $880.1 million at June 30, 2022. Average loans totaled $890.7 million for the third quarter of 2022, an increase of $32.7 million or 15% (annualized) from the prior quarter. At September 30, 2022, loans increased $84.1 million, or 10%, from the prior year as of September 30, 2021, and quarterly average loans increased $124.7 million, or 16%, from the same period in the prior year.
At September 30, 2022, total deposits were $1.3 billion, a decrease of $30.1 million or 9% (annualized) from June 30, 2022. Average deposits totaled $1.3 billion for the third quarter of 2022, a decrease of $27.2 million, or 8%, (annualized) from the prior quarter. The decline in deposits was primarily the result of a decrease in the balance of an internal money market account used by the Bank’s wealth management department for its clients. At September 30, 2022, deposits increased $53.5 million, or 4%, from the prior year as of September 30, 2021, and quarterly average deposits increased $69.2 million, or 6%, from the same period in the prior year.
The following table provides capital ratios at the quarters ended:
| Sept. 30,<br><br> <br>2022 | June 30,<br><br> <br>2022 | Sept. 30,<br><br> <br>2021 | |
|---|---|---|---|
| Total capital ratio ^(2)^ | 14.18% | 14.23% | 14.42% |
| Tier 1 capital ratio ^(2)^ | 13.52% | 13.56% | 13.81% |
| Common equity Tier 1 capital ratio ^(2)^ | 13.52% | 13.56% | 13.81% |
| Leverage ratio ^(2)^ | 9.27% | 8.87% | 9.22% |
| Common equity to total assets ^(5)^ | 7.16% | 7.09% | 8.62% |
| Tangible common equity to tangible assets ^(5) (6)^ | 6.95% | 6.88% | 8.34% |
For the quarter ended September 30, 2022, the Company’s common equity to total assets capital ratio and the tangible common equity to tangible assets capital ratio increased from the prior quarter, but decreased from the prior year, primarily due to the unrealized losses on the available-for-sale securities portfolio recorded in other comprehensive loss due to market interest rate increases during 2022.
During the third quarter of 2022, the Company declared and paid cash dividends of $0.14 per common share, consistent with the second quarter of 2022, and represented an increase of $0.02 per common share compared to cash dividends of $0.12 per share for the third quarter of 2021. The Bank was considered well-capitalized at September 30, 2022.
TRANSFER OF SECURITIES FROM AVAILABLE FOR SALE TO HELD TO MATURITY
On September 1, 2022, the Bank transferred 24 securities designated as available for sale with a combined book value of $82.2 million, market value of $74.4 million, and unrealized loss of $7.8 million, to securities designated held to maturity. The unrealized loss is being amortized monthly over the life of the securities with an increase to the carrying value of securities and a decrease to the related accumulated other comprehensive loss, which is included in the shareholders’ equity section of the Company’s balance sheet. The amortization of the unrealized loss on the transferred securities totaled $157 thousand, or $124 thousand net of tax, for the third quarter of 2022. The securities selected for transfer had larger potential decreases in their fair market values in higher interest rate environments than most of the other securities in the available-for-sale portfolio and included U.S. Treasury, agency, municipal and commercial mortgage-backed securities. The securities were transferred to mitigate the potential unfavorable impact that higher market interest rates may have on the carrying value of the securities and on the related accumulated other comprehensive loss. Securities designated as held to maturity are carried on the balance sheet at amortized cost, while securities designated as available for sale are carried at fair market value.
SUBSEQUENT EVENT
On October 3, 2022, First Bank Financial Services, Inc., a wholly owned subsidiary of the Bank, received proceeds totaling $3.0 million from the sale of its interest in a broker-dealer of investments. First Bank Financial Services, Inc. recorded a gain on the sale of the investment totaling $2.9 million in the fourth quarter of 2022. The gain has not been reflected on the Company’s income statements for three or nine months ended September 30, 2022.
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.
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. There were no merger expenses in the third or second quarters of 2022, compared to merger expenses of $1.3 million in the third quarter of 2021.
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 | ||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | ||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | ||||||
| Income Statement | ||||||||||
| Interest income | ||||||||||
| Interest and fees on loans | $ | 10,759 | $ | 9,963 | $ | 9,496 | $ | 9,365 | $ | 9,215 |
| Interest on deposits in banks | 380 | 251 | 70 | 64 | 79 | |||||
| Interest on federal funds sold | — | — | — | 2 | 8 | |||||
| Interest on securities | ||||||||||
| Taxable interest | 1,323 | 1,295 | 1,132 | 920 | 766 | |||||
| Tax-exempt interest | 307 | 309 | 305 | 299 | 242 | |||||
| Dividends | 23 | 21 | 21 | 23 | 21 | |||||
| Total interest income | $ | 12,792 | $ | 11,839 | $ | 11,024 | $ | 10,673 | $ | 10,331 |
| Interest expense | ||||||||||
| Interest on deposits | $ | 927 | $ | 413 | $ | 340 | $ | 355 | $ | 369 |
| Interest on subordinated debt | 70 | 69 | 69 | 155 | 156 | |||||
| Interest on junior subordinated debt | 68 | 67 | 67 | 68 | 68 | |||||
| Total interest expense | $ | 1,065 | $ | 549 | $ | 476 | $ | 578 | $ | 593 |
| Net interest income | $ | 11,727 | $ | 11,290 | $ | 10,548 | $ | 10,095 | $ | 9,738 |
| Provision for loan losses | 200 | 400 | — | 350 | — | |||||
| Net interest income after provision for loan losses | $ | 11,527 | $ | 10,890 | $ | 10,548 | $ | 9,745 | $ | 9,738 |
| Noninterest income | ||||||||||
| Service charges on deposit accounts | $ | 708 | $ | 698 | $ | 609 | $ | 625 | $ | 547 |
| ATM and check card fees | 915 | 797 | 750 | 894 | 753 | |||||
| Wealth management fees | 739 | 760 | 803 | 716 | 696 | |||||
| Fees for other customer services | 180 | 188 | 233 | 176 | 279 | |||||
| Brokered mortgage fees | 72 | 58 | 94 | 123 | 155 | |||||
| Income from bank owned life insurance | 166 | 131 | 144 | 152 | 161 | |||||
| Other operating income | 247 | 148 | 78 | 275 | 57 | |||||
| Total noninterest income | $ | 3,027 | $ | 2,780 | $ | 2,711 | $ | 2,961 | $ | 2,648 |
| Noninterest expense | ||||||||||
| Salaries and employee benefits | $ | 5,174 | $ | 5,086 | $ | 5,124 | $ | 5,099 | $ | 5,446 |
| Occupancy | 539 | 545 | 572 | 510 | 500 | |||||
| Equipment | 546 | 620 | 559 | 527 | 519 | |||||
| Marketing | 211 | 223 | 151 | 179 | 243 | |||||
| Supplies | 117 | 131 | 136 | 168 | 176 | |||||
| Legal and professional fees | 361 | 381 | 333 | 731 | 586 | |||||
| ATM and check card expense | 332 | 347 | 303 | 317 | 329 | |||||
| FDIC assessment | 109 | 132 | 152 | 112 | 87 | |||||
| Bank franchise tax | 238 | 238 | 216 | 172 | 153 | |||||
| Data processing expense | 243 | 221 | 236 | 1,271 | 465 | |||||
| Amortization expense | 5 | 5 | 5 | 4 | 5 | |||||
| Other real estate owned expense, net | 14 | 41 | 28 | 12 | 14 | |||||
| Other operating expense | 1,194 | 948 | 829 | 924 | 903 | |||||
| Total noninterest expense | $ | 9,083 | $ | 8,918 | $ | 8,644 | $ | 10,026 | $ | 9,426 |
| Income before income taxes | $ | 5,471 | $ | 4,752 | $ | 4,615 | $ | 2,680 | $ | 2,960 |
| Income tax expense | 1,017 | 917 | 886 | 497 | 562 | |||||
| Net income | $ | 4,454 | $ | 3,835 | $ | 3,729 | $ | 2,183 | $ | 2,398 |
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the Quarter Ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||
| Common Share and Per Common Share Data | **** | **** | **** | **** | **** | ||||||||||
| Earnings per common share, basic | $ | 0.71 | $ | 0.61 | $ | 0.60 | $ | 0.35 | $ | 0.39 | |||||
| Weighted average shares, basic | 6,257,040 | 6,250,329 | 6,238,973 | 6,226,838 | 6,220,456 | ||||||||||
| Earnings per common share, diluted | $ | 0.71 | $ | 0.61 | $ | 0.60 | $ | 0.35 | $ | 0.38 | |||||
| Weighted average shares, diluted | 6,264,107 | 6,257,479 | 6,245,704 | 6,235,907 | 6,229,524 | ||||||||||
| Shares outstanding at period end | 6,262,381 | 6,252,147 | 6,249,784 | 6,228,176 | 6,226,418 | ||||||||||
| Tangible book value at period end (4) | $ | 15.31 | $ | 15.54 | $ | 16.54 | $ | 18.28 | $ | 18.11 | |||||
| Cash dividends | $ | 0.14 | $ | 0.14 | $ | 0.14 | $ | 0.12 | $ | 0.12 | |||||
| Key Performance Ratios | **** | **** | **** | **** | **** | ||||||||||
| Return on average assets | 1.27 | % | 1.08 | % | 1.06 | % | 0.63 | % | 0.71 | % | |||||
| Return on average equity | 17.27 | % | 15.04 | % | 13.40 | % | 7.44 | % | 8.64 | % | |||||
| Net interest margin | 3.58 | % | 3.42 | % | 3.19 | % | 3.13 | % | 3.06 | % | |||||
| Efficiency ratio (1) | 61.10 | % | 62.69 | % | 64.36 | % | 64.69 | % | 64.86 | % | |||||
| Average Balances | **** | **** | **** | **** | **** | ||||||||||
| Average assets | $ | 1,393,308 | $ | 1,419,878 | $ | 1,430,524 | $ | 1,366,855 | $ | 1,337,247 | |||||
| Average earning assets | 1,309,794 | 1,334,976 | 1,352,311 | 1,289,977 | 1,272,969 | ||||||||||
| Average shareholders’ equity | 102,341 | 102,269 | 112,822 | 116,511 | 110,153 | ||||||||||
| Asset Quality | **** | **** | **** | **** | **** | ||||||||||
| Loan charge-offs | $ | 181 | $ | 107 | $ | 106 | $ | 185 | $ | 111 | |||||
| Loan recoveries | 70 | 81 | 224 | 111 | 80 | ||||||||||
| Net charge-offs (recoveries) | 111 | 26 | (118 | ) | 74 | 31 | |||||||||
| Non-accrual loans | 566 | 442 | 2,130 | 2,304 | 2,158 | ||||||||||
| Other real estate owned, net | 1,578 | 1,665 | 1,767 | 1,848 | 1,848 | ||||||||||
| Nonperforming assets (3) | 2,144 | 2,107 | 3,897 | 4,152 | 4,006 | ||||||||||
| Loans 30 to 89 days past due, accruing | 2,117 | 1,572 | 2,105 | 3,235 | 2,707 | ||||||||||
| Loans over 90 days past due, accruing | 306 | 91 | 52 | — | 7 | ||||||||||
| Troubled debt restructurings, accruing | — | — | — | — | — | ||||||||||
| Special mention loans | 3,183 | — | — | — | — | ||||||||||
| Substandard loans, accruing | 304 | 308 | 311 | 315 | 319 | ||||||||||
| Capital Ratios (2) | **** | **** | **** | **** | **** | ||||||||||
| Total capital | $ | 134,882 | $ | 131,624 | $ | 128,567 | $ | 125,934 | $ | 128,197 | |||||
| Tier 1 capital | 128,590 | 125,422 | 122,739 | 120,224 | 122,763 | ||||||||||
| Common equity tier 1 capital | 128,590 | 125,422 | 122,739 | 120,224 | 122,763 | ||||||||||
| Total capital to risk-weighted assets | 14.18 | % | 14.23 | % | 14.44 | % | 14.76 | % | 14.42 | % | |||||
| Tier 1 capital to risk-weighted assets | 13.52 | % | 13.56 | % | 13.79 | % | 14.09 | % | 13.81 | % | |||||
| Common equity tier 1 capital to risk-weighted assets | 13.52 | % | 13.56 | % | 13.79 | % | 14.09 | % | 13.81 | % | |||||
| Leverage ratio | 9.27 | % | 8.87 | % | 8.61 | % | 8.82 | % | 9.22 | % |
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the Quarter Ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||
| Balance Sheet | **** | **** | **** | **** | **** | ||||||||||
| Cash and due from banks | $ | 22,809 | $ | 19,886 | $ | 19,989 | $ | 18,725 | $ | 19,182 | |||||
| Interest-bearing deposits in banks | 52,976 | 104,529 | 129,801 | 157,281 | 95,459 | ||||||||||
| Federal funds sold | — | — | — | — | 80,589 | ||||||||||
| Securities available for sale, at fair value | 176,403 | 264,750 | 284,893 | 289,495 | 266,600 | ||||||||||
| Securities held to maturity, at amortized cost | 154,894 | 77,151 | 81,640 | 33,441 | 10,046 | ||||||||||
| Restricted securities, at cost | 1,908 | 1,908 | 1,908 | 1,813 | 1,813 | ||||||||||
| Loans, net of allowance for loan losses | 900,222 | 873,887 | 830,595 | 819,408 | 816,977 | ||||||||||
| Other real estate owned, net | 1,578 | 1,665 | 1,767 | 1,848 | 1,848 | ||||||||||
| Premises and equipment, net | 21,693 | 22,118 | 22,278 | 22,403 | 22,401 | ||||||||||
| Accrued interest receivable | 4,247 | 4,154 | 4,056 | 3,903 | 3,823 | ||||||||||
| Bank owned life insurance | 24,375 | 24,569 | 24,438 | 24,294 | 24,141 | ||||||||||
| Goodwill | 3,030 | 3,030 | 3,030 | 3,030 | 4,011 | ||||||||||
| Core deposit intangibles, net | 140 | 145 | 150 | 154 | 159 | ||||||||||
| Other assets | 19,320 | 16,898 | 13,117 | 13,641 | 8,740 | ||||||||||
| Total assets | $ | 1,383,595 | $ | 1,414,690 | $ | 1,417,662 | $ | 1,389,436 | $ | 1,355,789 | |||||
| Noninterest-bearing demand deposits | $ | 438,306 | $ | 431,292 | $ | 417,776 | $ | 413,188 | $ | 411,527 | |||||
| Savings and interest-bearing demand deposits | 693,970 | 731,125 | 734,051 | 689,998 | 652,624 | ||||||||||
| Time deposits | 133,770 | 133,733 | 141,065 | 145,566 | 148,419 | ||||||||||
| Total deposits | $ | 1,266,046 | $ | 1,296,150 | $ | 1,292,892 | $ | 1,248,752 | $ | 1,212,570 | |||||
| Subordinated debt, net | 4,995 | 4,994 | 4,994 | 9,993 | 9,993 | ||||||||||
| Junior subordinated debt | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | ||||||||||
| Accrued interest payable and other liabilities | 4,198 | 3,952 | 3,934 | 4,373 | 7,041 | ||||||||||
| Total liabilities | $ | 1,284,518 | $ | 1,314,375 | $ | 1,311,099 | $ | 1,272,397 | $ | 1,238,883 | |||||
| Preferred stock | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
| Common stock | 7,828 | 7,815 | 7,812 | 7,785 | 7,783 | ||||||||||
| Surplus | 32,620 | 32,398 | 32,298 | 31,966 | 31,889 | ||||||||||
| Retained earnings | 86,382 | 82,804 | 79,845 | 76,990 | 75,554 | ||||||||||
| Accumulated other comprehensive (loss) income, net | (27,753 | ) | (22,702 | ) | (13,392 | ) | 298 | 1,680 | |||||||
| Total shareholders’ equity | $ | 99,077 | $ | 100,315 | $ | 106,563 | $ | 117,039 | $ | 116,906 | |||||
| Total liabilities and shareholders’ equity | $ | 1,383,595 | $ | 1,414,690 | $ | 1,417,662 | $ | 1,389,436 | $ | 1,355,789 | |||||
| Loan Data | **** | **** | **** | **** | **** | ||||||||||
| Mortgage real estate loans: | |||||||||||||||
| Construction and land development | $ | 51,352 | $ | 49,118 | $ | 49,308 | $ | 55,721 | $ | 45,120 | |||||
| Secured by farmland | 3,432 | 3,169 | 3,555 | 3,708 | 3748 | ||||||||||
| Secured by 1-4 family residential | 317,414 | 312,082 | 290,408 | 291,990 | 294,216 | ||||||||||
| Other real estate loans | 414,072 | 397,868 | 380,635 | 361,213 | 358,895 | ||||||||||
| Loans to farmers (except those secured by real estate) | 745 | 769 | 937 | 985 | 857 | ||||||||||
| Commercial and industrial loans (except those secured by real estate) | 111,400 | 108,780 | 102,745 | 98,820 | 104,807 | ||||||||||
| Consumer installment loans | 4,192 | 4,230 | 4,602 | 4,963 | 6,577 | ||||||||||
| Deposit overdrafts | 163 | 292 | 205 | 175 | 172 | ||||||||||
| All other loans | 3,744 | 3,781 | 4,028 | 7,543 | 8,019 | ||||||||||
| Total loans | $ | 906,514 | $ | 880,089 | $ | 836,423 | $ | 825,118 | $ | 822,411 | |||||
| Allowance for loan losses | (6,292 | ) | (6,202 | ) | (5,828 | ) | (5,710 | ) | (5,434 | ) | |||||
| Loans, net | $ | 900,222 | $ | 873,887 | $ | 830,595 | $ | 819,408 | $ | 816,977 |
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
| (unaudited) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the Quarter Ended | |||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
| 2022 | 2022 | 2022 | 2021 | 2021 | |||||||||||
| Reconciliation of Tax-Equivalent Net Interest Income ^(1)^ | **** | **** | **** | **** | **** | ||||||||||
| GAAP measures: | |||||||||||||||
| Interest income – loans | $ | 10,759 | $ | 9,963 | $ | 9,496 | $ | 9,365 | $ | 9,215 | |||||
| Interest income – investments and other | 2,033 | 1,876 | 1,528 | 1,308 | 1,116 | ||||||||||
| Interest expense – deposits | (927 | ) | (413 | ) | (340 | ) | (355 | ) | (369 | ) | |||||
| Interest expense – subordinated debt | (70 | ) | (69 | ) | (69 | ) | (155 | ) | (156 | ) | |||||
| Interest expense – junior subordinated debt | (68 | ) | (67 | ) | (67 | ) | (68 | ) | (68 | ) | |||||
| Total net interest income | $ | 11,727 | $ | 11,290 | $ | 10,548 | $ | 10,095 | $ | 9,738 | |||||
| Non-GAAP measures: | |||||||||||||||
| Tax benefit realized on non-taxable interest income – loans | $ | — | $ | — | $ | 8 | $ | 8 | $ | 8 | |||||
| Tax benefit realized on non-taxable interest income – municipal securities | 82 | 82 | 81 | 80 | 64 | ||||||||||
| Total tax benefit realized on non-taxable interest income | $ | 82 | $ | 82 | $ | 89 | $ | 88 | $ | 72 | |||||
| Total tax-equivalent net interest income | $ | 11,809 | $ | 11,372 | $ | 10,637 | $ | 10,183 | $ | 9,810 |
FIRST NATIONAL CORPORATIONYear-to-Date Performance Summary
(in thousands, except share and per share data)
| (unaudited) | |||||
|---|---|---|---|---|---|
| For the Nine Months Ended | |||||
| September 30, | September 30, | ||||
| 2022 | 2021 | ||||
| Income Statement | **** | ||||
| Interest income | |||||
| Interest and fees on loans | $ | 30,218 | $ | 23,432 | |
| Interest on deposits in banks | 701 | 149 | |||
| Interest on securities | |||||
| Taxable interest | 3,750 | 2,180 | |||
| Tax-exempt interest | 921 | 637 | |||
| Dividends | 65 | 65 | |||
| Total interest income | $ | 35,655 | $ | 26,471 | |
| Interest expense | |||||
| Interest on deposits | $ | 1,680 | $ | 1,060 | |
| Interest on subordinated debt | 208 | 464 | |||
| Interest on junior subordinated debt | 202 | 202 | |||
| Total interest expense | $ | 2,090 | $ | 1,726 | |
| Net interest income | $ | 33,565 | $ | 24,745 | |
| Provision for (recovery of) loan losses | 600 | (1,000 | ) | ||
| Net interest income after provision for (recovery of) loan losses | $ | 32,965 | $ | 25,745 | |
| Noninterest income | |||||
| Service charges on deposit accounts | $ | 2,015 | $ | 1,436 | |
| ATM and check card fees | 2,462 | 2,036 | |||
| Wealth management fees | 2,302 | 1,996 | |||
| Fees for other customer services | 601 | 611 | |||
| Brokered mortgage fees | 224 | 416 | |||
| Income from bank owned life insurance | 441 | 374 | |||
| Net gains on securities available for sale | — | 37 | |||
| Net gains on sale of loans | — | 25 | |||
| Other operating income | 473 | 295 | |||
| Total noninterest income | $ | 8,518 | $ | 7,226 | |
| Noninterest expense | |||||
| Salaries and employee benefits | $ | 15,384 | $ | 12,694 | |
| Occupancy | 1,656 | 1,346 | |||
| Equipment | 1,725 | 1,383 | |||
| Marketing | 585 | 487 | |||
| Supplies | 384 | 341 | |||
| Legal and professional fees | 1,075 | 1,806 | |||
| ATM and check card expense | 982 | 828 | |||
| FDIC assessment | 393 | 234 | |||
| Bank franchise tax | 692 | 493 | |||
| Data processing expense | 700 | 885 | |||
| Amortization expense | 15 | 24 | |||
| Other real estate owned expense, net | 83 | 14 | |||
| Other operating expense | 2,971 | 2,171 | |||
| Total noninterest expense | $ | 26,645 | $ | 22,706 | |
| Income before income taxes | $ | 14,838 | $ | 10,265 | |
| Income tax expense | 2,820 | 2,089 | |||
| Net income | $ | 12,018 | $ | 8,176 |
FIRST NATIONAL CORPORATIONYear-to-Date Performance Summary
(in thousands, except share and per share data)
| (unaudited) | ||||||
|---|---|---|---|---|---|---|
| For the Nine Months Ended | ||||||
| September 30, | September 30, | |||||
| 2022 | 2021 | |||||
| Common Share and Per Common Share Data | **** | **** | ||||
| Net income, basic | $ | 1.92 | $ | 1.54 | ||
| Weighted average shares, basic | 6,248,847 | 5,322,696 | ||||
| Net income, diluted | $ | 1.92 | $ | 1.53 | ||
| Weighted average shares, diluted | 6,254,968 | 5,329,939 | ||||
| Shares outstanding at period end | 6,262,381 | 6,226,418 | ||||
| Tangible book value at period end | $ | 15.31 | $ | 18.11 | ||
| Cash dividends | $ | 0.42 | $ | 0.36 | ||
| Key Performance Ratios | **** | **** | ||||
| Return on average assets | 1.14 | % | 0.97 | % | ||
| Return on average equity | 15.12 | % | 11.40 | % | ||
| Net interest margin | 3.57 | % | 3.13 | % | ||
| Efficiency ratio ^(1)^ | 62.66 | % | 64.34 | % | ||
| Average Balances | **** | **** | ||||
| Average assets | $ | 1,415,169 | $ | 1,121,225 | ||
| Average earning assets | 1,265,509 | 1,063,597 | ||||
| Average shareholders’ equity | 106,285 | 95,861 | ||||
| Asset Quality | **** | **** | ||||
| Loan charge-offs | $ | 394 | $ | 1,262 | ||
| Loan recoveries | 375 | 211 | ||||
| Net charge-offs | 19 | 1,051 | ||||
| Reconciliation of Tax-Equivalent Net Interest Income ^(1)^ | **** | **** | ||||
| GAAP measures: | ||||||
| Interest income – loans | $ | 30,218 | $ | 23,432 | ||
| Interest income – investments and other | 5,437 | 3,039 | ||||
| Interest expense – deposits | (1,680 | ) | (1,060 | ) | ||
| Interest expense – subordinated debt | (208 | ) | (464 | ) | ||
| Interest expense – junior subordinated debt | (202 | ) | (202 | ) | ||
| Total net interest income | $ | 33,565 | $ | 24,745 | ||
| Non-GAAP measures: | ||||||
| Tax benefit realized on non-taxable interest income – loans | $ | 8 | $ | 24 | ||
| Tax benefit realized on non-taxable interest income – municipal securities | 245 | 169 | ||||
| Total tax benefit realized on non-taxable interest income | $ | 253 | $ | 193 | ||
| Total tax-equivalent net interest income | $ | 33,818 | $ | 24,938 |
^(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.
(5) Capital ratios presented are for First National Corporation.
(6) The ratio of tangible common equity to tangible assets, or TCE ratio, is calculated by dividing consolidated total common shareholders’ equity by consolidated total assets, after reducing both amounts by goodwill and other intangible assets. The TCE ratio is not required by GAAP or by bank regulations, but is a metric used by management to evaluate the adequacy of the Company’s capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and tangible assets are non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.