First National Corporation Reports Annual and Fourth Quarter 2023 Financial Results
- None.
- The net loss for the fourth quarter of 2023 resulted from a $6.0 million provision for credit losses, primarily due to commercial and industrial loans originated to health care professionals through a third-party lender.
Insights
The reported financials of First National Corporation indicate a mixed performance with a year-over-year decrease in net income from $16.8 million to $9.6 million and a decline in diluted earnings per share from $2.68 to $1.53. This performance dip, particularly the net loss in the fourth quarter, is a critical concern for investors and analysts alike. The provision for credit losses of $6.0 million, driven by loan charge-offs and increased reserves, suggests potential weaknesses in the loan portfolio management, especially concerning commercial and industrial loans to health care professionals.
Despite the fourth quarter setback, the company's return on average assets (ROAA) of 0.71% and an 8% increase in tangible book value per share to $18.06 are positive indicators of underlying value. The efficiency ratio of 67.69%, although not exceptional, is within a reasonable range for the banking industry, indicating a moderate level of operational efficiency. The loan portfolio growth of 5% and the stable net interest margin in a rising interest rate environment are also noteworthy, as they may signal the company's resilience and strategic interest rate risk management.
From a market perspective, the dynamics reflected in First National's financials are indicative of broader trends in the banking sector. The increase in noninterest-bearing deposits to 31% of total deposits is a strong liquidity indicator and suggests customer confidence in the bank's stability. However, the substantial provision for credit losses raises questions about the risk profile of the bank's lending activities, particularly in niche markets like healthcare professional lending through third-party lenders.
It's essential to consider the impact of the Federal Reserve's interest rate hikes on the bank's interest income and expense. The ability to stabilize the net interest margin at 3.35% in this context is a testament to effective asset-liability management. The growth in the loan portfolio, despite economic headwinds, demonstrates the bank's competitive positioning and potential for market share gains. These factors could influence investor sentiment and the stock's performance in the medium to long term.
The financial outcomes for First National Corporation must be contextualized within the economic environment of 2023, marked by multiple Federal Reserve interest rate hikes. These monetary policy decisions typically aim to curb inflation but can also lead to a contraction in economic activity. The bank's ability to grow its loan portfolio in such a climate may suggest strong demand for credit, which could be a positive economic indicator.
The reported provision for credit losses reflects an anticipation of future loan defaults, which could be symptomatic of economic stress among borrowers, particularly in the healthcare sector. This development may have broader economic implications, signaling potential vulnerabilities in sectors that have been considered relatively recession-proof in the past. The long-term effects will depend on the bank's risk mitigation strategies and the broader economic recovery trajectory.
STRASBURG, Va., Feb. 01, 2024 (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
For the fourth quarter ended December 31, 2023, the Company reported unaudited consolidated net loss of
The net loss for the fourth quarter of 2023 resulted from a
2023 HIGHLIGHTS
Key highlights of the year ended December 31, 2023, are as follows. Comparisons are to the prior year ended December 31, 2022, unless otherwise stated:
- Net income totaled
$9.6 million - Return on average assets was
0.71% - Efficiency ratio (1) of
67.69% - Net interest margin was
3.41% - Loan portfolio increased
$48.9 million , or5% - Noninterest-bearing deposits comprised
31% of total deposits - Tangible book value per share increased by
8% to$18.06 - Provision for credit losses totaled
$6.2 million
“While the fourth quarter financial results were disappointing, we are pleased with the company’s overall performance in 2023. After absorbing a
NET INTEREST INCOME
Year Ending December 31, 2023 Compared to Year Ending December 31, 2022
Net interest income decreased
The increase in total interest income was primarily attributable to a
The increase in total interest expense was attributable to a
The net interest margin was
Fourth Quarter 2023 Compared to Linked Third Quarter 2023
Net interest income increased by
The
The
The net interest margin was unchanged at
NONINTEREST INCOME
Year Ending December 31, 2023 Compared to Year Ending December 31, 2022
Noninterest income totaled
Fourth Quarter 2023 Compared to Linked Third Quarter 2023
Noninterest income totaled
NONINTEREST EXPENSE
Year Ending December 31, 2023 Compared to Year Ending December 31, 2022
Noninterest expense increased
Fourth Quarter 2023 Compared to Linked Third Quarter 2023
Noninterest expense decreased
ASSET QUALITY
Overview
Nonperforming assets (“NPAs”) as a percentage of total assets increased to
Nonperforming Assets
NPAs increased to
Past Due Loans
Loan past due greater than 30 days and still accruing interest increased to
Net Charge-offs
Year Ending December 31, 2023 Compared to Year Ending December 31, 2022
Net charge-offs totaled
Fourth Quarter 2023 Compared to Linked Third Quarter 2023
Net charge-offs totaled
Provision for Credit Losses
Year Ending December 31, 2023 Compared to Year Ending December 31, 2022
Provision for credit losses totaled
Fourth Quarter 2023 Compared to Linked Third Quarter 2023
The Bank recorded a
Allowance for Credit Losses on Loans
On December 31, 2023, the allowance for credit losses on loans totaled
The following table provides the changes in the allowance for credit losses on loans for the three-month periods ended (dollars in thousands):
December 31, 2023 | September 30, 2023 | December 31, 2022 | ||||||||||
Allowance for credit losses on loans, beginning of period | $ | 8,896 | $ | 8,858 | $ | 5,710 | ||||||
Net charge-offs | (2,673 | ) | (83 | ) | (114 | ) | ||||||
Provision for credit losses on loans | 5,751 | 121 | 1,850 | |||||||||
Allowance for credit losses on loans, end of period | $ | 11,974 | $ | 8,896 | $ | 7,446 | ||||||
The allowance for credit losses on loans as a percentage of total loans totaled
Allowance for Credit Losses on Unfunded Commitments
The allowance for credit losses on unfunded commitments totaled
Allowance for Credit Losses on Securities
The allowance for credit losses on securities totaled
LIQUIDITY
Liquidity sources available to the Bank, including interest-bearing deposits in banks, unpledged securities available for sale, at fair value, unpledged securities held-to-maturity, at par, eligible to be pledged to the Federal Reserve Bank through its Bank Term Funding Program, and available lines of credit totaled
The Bank maintains liquidity to fund loan growth and to meet potential demand from deposit customers, including potential volatile deposits. The estimated amount of uninsured customer deposits totaled
BALANCE SHEET
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Assets totaled
Loans increased by
Deposits decreased by
Other borrowings increased
Shareholders’ equity totaled
Year Ended December 31, 2023 Compared to Linked Quarter Ended September 30, 2023
Assets totaled
Loans, net of the allowance for credit losses on loans, totaled
Deposits totaled
Other borrowings increased
Shareholders’ equity totaled
The following table provides capital ratios at the periods ended:
December 31, 2023 | September 30, 2023 | December 31, 2022 | ||||||||||
Total capital ratio (2) | 14.05 | % | 14.80 | % | 14.60 | % | ||||||
Tier 1 capital ratio (2) | 12.82 | % | 13.86 | % | 13.82 | % | ||||||
Common equity Tier 1 capital ratio (2) | 12.82 | % | 13.86 | % | 13.82 | % | ||||||
Leverage ratio (2) | 9.31 | % | 9.97 | % | 9.57 | % | ||||||
Common equity to total assets (5) | 8.19 | % | 8.20 | % | 7.91 | % | ||||||
Tangible common equity to tangible assets (5) (6) | 7.97 | % | 7.98 | % | 7.70 | % | ||||||
LOANS ORIGINATED THROUGH A THIRD-PARTY
The Bank purchased commercial and industrial loans between October 2021 and October 2023 from a third-party finance company that originated and serviced loans to health care professionals. The finance company operated a program that historically provided credit support to the Bank through, among other things, the repurchase of their loans and unamortized loan premiums when loans did not pay according to the loan agreements.
The Bank performed an evaluation of the purchased loans, which resulted in a loss classification for
On December 31, 2023, loans purchased from the finance company totaled
STOCK REPURCHASE PLAN
During the fourth quarter of 2022, the Board of Directors authorized a stock repurchase plan to purchase up to
NON-GAAP FINANCIAL MEASURES
In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this document include fully taxable equivalent interest income, the net interest margin, the efficiency ratio, and tangible common equity to tangible assets.
The Company believes certain non-GAAP financial measures enhance the understanding of its business and performance. Non-GAAP financial measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions. A reconciliation of tax-exempt net interest income is included at the end of this release.
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 owns an interest in an entity that provides title insurance services.
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 are subject to a number of risks and uncertainties. For details on factors that could affect expectations, future events or results, 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, 2022, 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 | ||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
2023 | 2023 | 2023 | 2023 | 2022 | ||||||||||||||||
Income Statement | ||||||||||||||||||||
Interest income | ||||||||||||||||||||
Interest and fees on loans | $ | 13,255 | $ | 12,640 | $ | 11,886 | $ | 11,512 | $ | 11,502 | ||||||||||
Interest on deposits in banks | 368 | 338 | 759 | 344 | 522 | |||||||||||||||
Interest on securities | ||||||||||||||||||||
Taxable interest | 1,318 | 1,323 | 1,306 | 1,339 | 1,381 | |||||||||||||||
Tax-exempt interest | 303 | 304 | 307 | 306 | 308 | |||||||||||||||
Dividends | 30 | 26 | 28 | 27 | 27 | |||||||||||||||
Total interest income | $ | 15,274 | $ | 14,631 | $ | 14,286 | $ | 13,528 | $ | 13,740 | ||||||||||
Interest expense | ||||||||||||||||||||
Interest on deposits | $ | 4,232 | $ | 3,810 | $ | 3,402 | $ | 2,216 | $ | 1,593 | ||||||||||
Interest on federal funds purchased | 1 | — | — | — | — | |||||||||||||||
Interest on subordinated debt | 70 | 69 | 69 | 69 | 69 | |||||||||||||||
Interest on junior subordinated debt | 68 | 69 | 67 | 67 | 68 | |||||||||||||||
Interest on other borrowings | 94 | — | 3 | — | — | |||||||||||||||
Total interest expense | $ | 4,465 | $ | 3,948 | $ | 3,541 | $ | 2,352 | $ | 1,730 | ||||||||||
Net interest income | $ | 10,809 | $ | 10,683 | $ | 10,745 | $ | 11,176 | $ | 12,010 | ||||||||||
Provision for credit losses | 5,950 | 100 | 100 | — | 1,250 | |||||||||||||||
Net interest income after provision for credit losses | $ | 4,859 | $ | 10,583 | $ | 10,645 | $ | 11,176 | $ | 10,760 | ||||||||||
Noninterest income | ||||||||||||||||||||
Service charges on deposit accounts | $ | 718 | $ | 733 | $ | 683 | $ | 646 | $ | 662 | ||||||||||
ATM and check card fees | 825 | 976 | 848 | 800 | 838 | |||||||||||||||
Wealth management fees | 784 | 811 | 749 | 776 | 706 | |||||||||||||||
Fees for other customer services | 232 | 122 | 220 | 196 | 238 | |||||||||||||||
Brokered mortgage fees | 46 | 38 | 35 | — | 21 | |||||||||||||||
Income from bank owned life insurance | 168 | 175 | 135 | 149 | 155 | |||||||||||||||
Net losses on securities available for sale | — | — | — | — | (2,004 | ) | ||||||||||||||
Gain on sale of other investment | 186 | — | — | — | 2,885 | |||||||||||||||
Other operating income | 110 | 198 | 214 | 211 | 631 | |||||||||||||||
Total noninterest income | $ | 3,069 | $ | 3,053 | $ | 2,884 | $ | 2,778 | $ | 4,132 | ||||||||||
Noninterest expense | ||||||||||||||||||||
Salaries and employee benefits | $ | 4,999 | $ | 5,505 | $ | 5,189 | $ | 5,346 | $ | 5,325 | ||||||||||
Occupancy | 568 | 534 | 524 | 528 | 562 | |||||||||||||||
Equipment | 621 | 598 | 571 | 587 | 575 | |||||||||||||||
Marketing | 190 | 204 | 248 | 268 | 228 | |||||||||||||||
Supplies | 153 | 128 | 147 | 148 | 144 | |||||||||||||||
Legal and professional fees | 443 | 439 | 422 | 343 | 339 | |||||||||||||||
ATM and check card expense | 313 | 440 | 425 | 400 | 388 | |||||||||||||||
FDIC assessment | 154 | 161 | 212 | 106 | 70 | |||||||||||||||
Bank franchise tax | 262 | 262 | 262 | 254 | 238 | |||||||||||||||
Data processing expense | 327 | 266 | 252 | 202 | 289 | |||||||||||||||
Amortization expense | 4 | 5 | 4 | 5 | 4 | |||||||||||||||
Other real estate owned (income) expense, net | 2 | 15 | (219 | ) | 3 | (189 | ) | |||||||||||||
Other operating expense | 1,064 | 1,227 | 1,121 | 1,010 | 1,007 | |||||||||||||||
Total noninterest expense | $ | 9,100 | $ | 9,784 | $ | 9,158 | $ | 9,200 | $ | 8,980 | ||||||||||
Income (loss) before income taxes | $ | (1,172 | ) | $ | 3,852 | $ | 4,371 | $ | 4,754 | $ | 5,912 | |||||||||
Income tax expense (benefit) | (321 | ) | 731 | 866 | 905 | 1,132 | ||||||||||||||
Net income (loss) | $ | (851 | ) | $ | 3,121 | $ | 3,505 | $ | 3,849 | $ | 4,780 | |||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) | ||||||||||||||||||||
For the Quarter Ended | ||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
2023 | 2023 | 2023 | 2023 | 2022 | ||||||||||||||||
Common Share and Per Common Share Data | ||||||||||||||||||||
Earnings (loss) per common share, basic | $ | (0.14 | ) | $ | 0.50 | $ | 0.56 | $ | 0.61 | $ | 0.76 | |||||||||
Weighted average shares, basic | 6,261,500 | 6,256,663 | 6,269,668 | 6,273,913 | 6,262,821 | |||||||||||||||
Earnings (loss) per common share, diluted | $ | (0.14 | ) | $ | 0.50 | $ | 0.56 | $ | 0.61 | $ | 0.76 | |||||||||
Weighted average shares, diluted | 6,282,815 | 6,271,351 | 6,277,161 | 6,281,116 | 6,272,409 | |||||||||||||||
Shares outstanding at period end | 6,263,102 | 6,260,934 | 6,250,613 | 6,281,935 | 6,264,912 | |||||||||||||||
Tangible book value at period end (4) | $ | 18.06 | $ | 17.38 | $ | 17.55 | $ | 17.30 | $ | 16.79 | ||||||||||
Cash dividends | $ | 0.15 | $ | 0.15 | $ | 0.15 | $ | 0.15 | $ | 0.14 | ||||||||||
Key Performance Ratios | ||||||||||||||||||||
Return on average assets | (0.25 | %) | 0.91 | % | 1.02 | % | 1.15 | % | 1.37 | % | ||||||||||
Return on average equity | (2.97 | %) | 10.96 | % | 12.56 | % | 14.20 | % | 18.38 | % | ||||||||||
Net interest margin | 3.35 | % | 3.35 | % | 3.36 | % | 3.60 | % | 3.70 | % | ||||||||||
Efficiency ratio (1) | 66.23 | % | 70.67 | % | 68.37 | % | 65.50 | % | 59.56 | % | ||||||||||
Average Balances | ||||||||||||||||||||
Average assets | $ | 1,372,365 | $ | 1,355,113 | $ | 1,372,781 | $ | 1,351,630 | $ | 1,386,841 | ||||||||||
Average earning assets | 1,290,231 | 1,275,112 | 1,290,828 | 1,267,830 | 1,297,223 | |||||||||||||||
Average shareholders’ equity | 113,614 | 112,987 | 111,917 | 109,924 | 103,132 | |||||||||||||||
Asset Quality | ||||||||||||||||||||
Loan charge-offs | $ | 2,765 | $ | 143 | $ | 110 | $ | 975 | $ | 135 | ||||||||||
Loan recoveries | 92 | 60 | 206 | 60 | 40 | |||||||||||||||
Net charge-offs (recoveries) | 2,673 | 83 | (96 | ) | 915 | 95 | ||||||||||||||
Non-accrual loans | 6,763 | 3,116 | 677 | 1,591 | 2,673 | |||||||||||||||
Other real estate owned, net | — | — | 45 | 185 | 185 | |||||||||||||||
Nonperforming assets (3) | 6,763 | 3,116 | 722 | 1,776 | 2,858 | |||||||||||||||
Loans 30 to 89 days past due, accruing | 2,484 | 1,395 | 970 | 1,816 | 1,532 | |||||||||||||||
Loans over 90 days past due, accruing | 524 | 370 | 226 | 47 | — | |||||||||||||||
Special mention loans | — | — | 2,754 | — | 1,959 | |||||||||||||||
Substandard loans, accruing | 287 | 1,683 | 418 | 296 | 301 | |||||||||||||||
Capital Ratios (2) | ||||||||||||||||||||
Total capital | $ | 142,333 | $ | 146,163 | $ | 144,278 | $ | 141,501 | $ | 139,549 | ||||||||||
Tier 1 capital | 129,840 | 136,947 | 135,079 | 132,784 | 132,103 | |||||||||||||||
Common equity tier 1 capital | 129,840 | 136,947 | 135,079 | 132,784 | 132,103 | |||||||||||||||
Total capital to risk-weighted assets | 14.05 | % | 14.80 | % | 14.88 | % | 14.85 | % | 14.60 | % | ||||||||||
Tier 1 capital to risk-weighted assets | 12.82 | % | 13.86 | % | 13.93 | % | 13.94 | % | 13.82 | % | ||||||||||
Common equity tier 1 capital to risk-weighted assets | 12.82 | % | 13.86 | % | 13.93 | % | 13.94 | % | 13.82 | % | ||||||||||
Leverage ratio | 9.31 | % | 9.96 | % | 9.72 | % | 9.70 | % | 9.57 | % | ||||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) | ||||||||||||||||||||
For the Quarter Ended | ||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
2023 | 2023 | 2023 | 2023 | 2022 | ||||||||||||||||
Balance Sheet | ||||||||||||||||||||
Cash and due from banks | $ | 17,194 | $ | 17,168 | $ | 17,697 | $ | 17,950 | $ | 20,784 | ||||||||||
Interest-bearing deposits in banks | 69,967 | 32,931 | 54,379 | 59,851 | 46,130 | |||||||||||||||
Securities available for sale, at fair value | 152,857 | 148,175 | 156,745 | 162,355 | 162,907 | |||||||||||||||
Securities held to maturity, at amortized cost (net of allowance for credit losses) | 148,244 | 149,948 | 151,677 | 151,301 | 153,158 | |||||||||||||||
Restricted securities, at cost | 2,078 | 2,077 | 1,803 | 1,803 | 1,908 | |||||||||||||||
Loans, net of allowance for credit losses | 957,456 | 943,603 | 921,336 | 909,250 | 913,076 | |||||||||||||||
Other real estate owned, net | — | — | 45 | 185 | 185 | |||||||||||||||
Premises and equipment, net | 22,142 | 21,363 | 21,556 | 21,637 | 21,876 | |||||||||||||||
Accrued interest receivable | 4,655 | 4,502 | 4,248 | 4,389 | 4,543 | |||||||||||||||
Bank owned life insurance | 24,902 | 24,734 | 24,559 | 24,424 | 24,531 | |||||||||||||||
Goodwill | 3,030 | 3,030 | 3,030 | 3,030 | 3,030 | |||||||||||||||
Core deposit intangibles, net | 117 | 122 | 127 | 131 | 136 | |||||||||||||||
Other assets | 16,653 | 18,567 | 17,022 | 16,026 | 17,119 | |||||||||||||||
Total assets | $ | 1,419,295 | $ | 1,366,220 | $ | 1,374,224 | $ | 1,372,332 | $ | 1,369,383 | ||||||||||
Noninterest-bearing demand deposits | $ | 379,208 | $ | 403,774 | $ | 396,137 | $ | 410,019 | $ | 427,344 | ||||||||||
Savings and interest-bearing demand deposits | 662,169 | 646,980 | 670,005 | 676,875 | 677,139 | |||||||||||||||
Time deposits | 192,349 | 184,419 | 176,226 | 154,631 | 136,849 | |||||||||||||||
Total deposits | $ | 1,233,726 | $ | 1,235,173 | $ | 1,242,368 | $ | 1,241,525 | $ | 1,241,332 | ||||||||||
Other borrowings | $ | 50,000 | $ | — | $ | — | $ | — | $ | - | ||||||||||
Subordinated debt, net | 4,997 | 4,997 | 4,996 | 4,996 | 4,995 | |||||||||||||||
Junior subordinated debt | 9,279 | 9,279 | 9,279 | 9,279 | 9,279 | |||||||||||||||
Accrued interest payable and other liabilities | 5,022 | 4,792 | 4,721 | 4,675 | 5,417 | |||||||||||||||
Total liabilities | $ | 1,303,024 | $ | 1,254,241 | $ | 1,261,364 | $ | 1,260,475 | $ | 1,261,023 | ||||||||||
Preferred stock | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Common stock | 7,829 | 7,826 | 7,813 | 7,842 | 7,831 | |||||||||||||||
Surplus | 32,950 | 32,840 | 32,601 | 32,992 | 32,716 | |||||||||||||||
Retained earnings | 94,198 | 95,988 | 93,805 | 91,239 | 90,284 | |||||||||||||||
Accumulated other comprehensive (loss), net | (18,706 | ) | (24,675 | ) | (21,359 | ) | (20,216 | ) | (22,471 | ) | ||||||||||
Total shareholders’ equity | $ | 116,271 | $ | 111,979 | $ | 112,860 | $ | 111,857 | $ | 108,360 | ||||||||||
Total liabilities and shareholders’ equity | $ | 1,419,295 | $ | 1,366,220 | $ | 1,374,224 | $ | 1,372,332 | $ | 1,369,383 | ||||||||||
Loan Data | ||||||||||||||||||||
Mortgage real estate loans: | ||||||||||||||||||||
Construction and land development | $ | 52,680 | $ | 50,405 | $ | 49,282 | $ | 48,610 | $ | 51,840 | ||||||||||
Secured by farmland | 9,154 | 7,113 | 3,563 | 3,150 | 3343 | |||||||||||||||
Secured by 1-4 family residential | 344,369 | 340,773 | 337,601 | 334,302 | 331,421 | |||||||||||||||
Other real estate loans | 438,118 | 426,065 | 418,409 | 412,851 | 415,112 | |||||||||||||||
Loans to farmers (except those secured by real estate) | 455 | 667 | 714 | 739 | 900 | |||||||||||||||
Commercial and industrial loans (except those secured by real estate) | 112,619 | 116,463 | 112,088 | 110,198 | 110,325 | |||||||||||||||
Consumer installment loans | 4,753 | 4,596 | 4,505 | 4,206 | 4,128 | |||||||||||||||
Deposit overdrafts | 222 | 368 | 251 | 179 | 197 | |||||||||||||||
All other loans | 7,060 | 6,049 | 3,781 | 3,732 | 3,256 | |||||||||||||||
Total loans | $ | 969,430 | $ | 952,499 | $ | 930,194 | $ | 917,967 | $ | 920,522 | ||||||||||
Allowance for credit losses | (11,974 | ) | (8,896 | ) | (8,858 | ) | (8,717 | ) | (7,446 | ) | ||||||||||
Loans, net | $ | 957,456 | $ | 943,603 | $ | 921,336 | $ | 909,250 | $ | 913,076 | ||||||||||
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
(unaudited) | ||||||||||||||||||||
For the Quarter Ended | ||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
2023 | 2023 | 2023 | 2023 | 2022 | ||||||||||||||||
Reconciliation of Tax-Equivalent Net Interest Income (7) | ||||||||||||||||||||
GAAP measures: | ||||||||||||||||||||
Interest income – loans | $ | 13,255 | $ | 12,640 | $ | 11,886 | $ | 11,512 | $ | 11,502 | ||||||||||
Interest income – investments and other | 2,019 | 1,991 | 2,400 | 2,016 | 2,238 | |||||||||||||||
Interest expense – deposits | (4,232 | ) | (3,810 | ) | (3,402 | ) | (2,216 | ) | (1,593 | ) | ||||||||||
Interest expense – federal funds purchased | (1 | ) | — | — | — | — | ||||||||||||||
Interest expense – subordinated debt | (70 | ) | (69 | ) | (69 | ) | (69 | ) | (69 | ) | ||||||||||
Interest expense – junior subordinated debt | (68 | ) | (69 | ) | (67 | ) | (67 | ) | (68 | ) | ||||||||||
Interest expense – other borrowings | (94 | ) | — | (3 | ) | — | — | |||||||||||||
Total net interest income | $ | 10,809 | $ | 10,683 | $ | 10,745 | $ | 11,176 | $ | 12,010 | ||||||||||
Non-GAAP measures: | ||||||||||||||||||||
Tax benefit realized on non-taxable interest income – municipal securities | $ | 80 | $ | 81 | $ | 81 | $ | 82 | $ | 82 | ||||||||||
Total tax benefit realized on non-taxable interest income | 80 | 81 | 81 | 82 | 82 | |||||||||||||||
Total tax-equivalent net interest income | $ | 10,889 | $ | 10,764 | $ | 10,826 | $ | 11,258 | $ | 12,092 | ||||||||||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
(unaudited) | ||||||||
For the Year Ended | ||||||||
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
Income Statement | ||||||||
Interest income | ||||||||
Interest and fees on loans | $ | 49,293 | $ | 41,720 | ||||
Interest on deposits in banks | 1,809 | 1,223 | ||||||
Interest on securities | ||||||||
Taxable interest | 5,286 | 5,131 | ||||||
Tax-exempt interest | 1,220 | 1,229 | ||||||
Dividends | 111 | 92 | ||||||
Total interest income | $ | 57,719 | $ | 49,395 | ||||
Interest expense | ||||||||
Interest on deposits | $ | 13,660 | $ | 3,273 | ||||
Interest on federal funds purchased | 1 | — | ||||||
Interest on subordinated debt | 277 | 277 | ||||||
Interest on junior subordinated debt | 271 | 270 | ||||||
Interest on other borrowings | 97 | — | ||||||
Total interest expense | $ | 14,306 | $ | 3,820 | ||||
Net interest income | $ | 43,413 | $ | 45,575 | ||||
Provision for credit losses | 6,150 | 1,850 | ||||||
Net interest income after provision for credit losses | $ | 37,263 | $ | 43,725 | ||||
Noninterest income | ||||||||
Service charges on deposit accounts | $ | 2,780 | $ | 2,677 | ||||
ATM and check card fees | 3,449 | 3,300 | ||||||
Wealth management fees | 3,120 | 3,008 | ||||||
Fees for other customer services | 770 | 839 | ||||||
Brokered mortgage fees | 119 | 245 | ||||||
Income from bank owned life insurance | 627 | 596 | ||||||
Net losses on securities available for sale | — | (2,004 | ) | |||||
Gain on sale of other investment | 186 | 2,885 | ||||||
Other operating income | 733 | 1,104 | ||||||
Total noninterest income | $ | 11,784 | $ | 12,650 | ||||
Noninterest expense | ||||||||
Salaries and employee benefits | $ | 21,039 | $ | 20,709 | ||||
Occupancy | 2,154 | 2,218 | ||||||
Equipment | 2,377 | 2,300 | ||||||
Marketing | 910 | 813 | ||||||
Supplies | 576 | 528 | ||||||
Legal and professional fees | 1,647 | 1,414 | ||||||
ATM and check card expense | 1,578 | 1,370 | ||||||
FDIC assessment | 633 | 463 | ||||||
Bank franchise tax | 1,040 | 930 | ||||||
Data processing expense | 1,047 | 989 | ||||||
Amortization expense | 18 | 19 | ||||||
Other real estate owned income, net | (199 | ) | (106 | ) | ||||
Other operating expense | 4,422 | 3,978 | ||||||
Total noninterest expense | $ | 37,242 | $ | 35,625 | ||||
Income before income taxes | $ | 11,805 | $ | 20,750 | ||||
Income tax expense | 2,181 | 3,952 | ||||||
Net income | $ | 9,624 | $ | 16,798 | ||||
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
(unaudited) | ||||||||
For the Year Ended | ||||||||
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
Common Share and Per Common Share Data | ||||||||
Net income, basic | $ | 1.54 | $ | 2.69 | ||||
Weighted average shares, basic | 6,265,394 | 6,252,369 | ||||||
Net income, diluted | $ | 1.53 | $ | 2.68 | ||||
Weighted average shares, diluted | 6,279,106 | 6,259,357 | ||||||
Shares outstanding at period end | 6,263,102 | 6,264,912 | ||||||
Tangible book value at period end (4) | $ | 18.06 | $ | 16.79 | ||||
Cash dividends | $ | 0.60 | $ | 0.56 | ||||
Key Performance Ratios | ||||||||
Return on average assets | 0.71 | % | 1.19 | % | ||||
Return on average equity | 8.59 | % | 15.87 | % | ||||
Net interest margin | 3.41 | % | 3.71 | % | ||||
Efficiency ratio (1) | 67.69 | % | 61.75 | % | ||||
Average Balances | ||||||||
Average assets | $ | 1,363,339 | $ | 1,408,710 | ||||
Average earning assets | 1,280,980 | 1,237,635 | ||||||
Average shareholders’ equity | 112,083 | 105,869 | ||||||
Asset Quality | ||||||||
Loan charge-offs | $ | 3,993 | $ | 529 | ||||
Loan recoveries | 418 | 415 | ||||||
Net charge-offs | 3,575 | 114 | ||||||
Reconciliation of Tax-Equivalent Net Interest Income (7) | ||||||||
GAAP measures: | ||||||||
Interest income – loans | $ | 49,293 | $ | 41,720 | ||||
Interest income – investments and other | 8,426 | 7,675 | ||||||
Interest expense – deposits | (13,660 | ) | (3,273 | ) | ||||
Interest expense – federal funds purchased | (1 | ) | — | |||||
Interest expense – subordinated debt | (277 | ) | (277 | ) | ||||
Interest expense – junior subordinated debt | (271 | ) | (270 | ) | ||||
Interest expense – other borrowings | (97 | ) | — | |||||
Total net interest income | $ | 43,413 | $ | 45,575 | ||||
Non-GAAP measures: | ||||||||
Tax benefit realized on non-taxable interest income – loans | $ | — | $ | 8 | ||||
Tax benefit realized on non-taxable interest income – municipal securities | 324 | 327 | ||||||
Total tax benefit realized on non-taxable interest income | $ | 324 | $ | 335 | ||||
Total tax-equivalent net interest income | $ | 43,737 | $ | 45,910 | ||||
(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 on sales of securities and gains on other investments. 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) Capital ratios are for First Bank.
(3) Nonperforming assets are comprised of nonaccrual loans and other real estate owned.
(4) Tangible book value is calculated by subtracting goodwill and other intangibles from total shareholders' equity. Tangible book value is a non-GAAP financial measure that management believes provides investors with important information that may be related to the valuation of common stock.
(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.
(7) 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
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