• First National Corporation Reports Second Quarter 2023 Financial Results

    ソース: Nasdaq GlobeNewswire / 26 7 2023 07:00:01   America/New_York

    STRASBURG, Va., July 26, 2023 (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 $3.5 million and diluted earnings per common share of $0.56 for the three months ended June 30, 2023. This compared to net income of $3.8 million and diluted earnings per common share of $0.61 for the first quarter of 2023, and net income of $3.8 million and diluted earnings per common share of $0.61 for the second quarter of 2022.

    SECOND QUARTER HIGHLIGHTS

    Key highlights of the second quarter ended June 30, 2023, are as follows. Comparisons are to the linked quarterly period ended March 31, 2023, unless otherwise stated:

    • Tangible book value per common share totaled $17.55, up $2.01 from one year ago
    • Deposits were unchanged at $1.2 billion
    • Noninterest-bearing demand deposits comprised 32% of total deposits
    • Return on average assets was 1.02%
    • Return on average equity was 12.56%
    • Loans increased $12.2 million, or 5% annualized
    • Nonperforming assets improved to 0.05% of total assets

    “We are pleased with the Companys performance during the second quarter and for the first half of the year. Our team continued to deliver strong ROA and ROE in spite of rising costs of deposits resulting from the Federal Reserve actions of the last twelve months, while continuing to invest for the future, said Scott C. Harvard, president, and chief executive officer of First National. During the quarter, we announced the addition of Todd Ross to lead our Roanoke Valley team, began negotiations for a downtown Roanoke location, and negotiated enhancements to our technology delivery systems. First Bank is fortunate that over 30% of deposits reside in noninterest-bearing accounts that we believe are core customer relationships and help to mitigate the pressure on deposit costs. Asset quality remains excellent, with nonperforming assets at historically low levels and little evidence of credit deterioration. Loan growth picked up in the quarter resulting in net loan growth of $12.2 million. We will continue to remain vigilant around credit quality, as well as loan and deposit pricing, as we navigate the impact of Federal Reserve actions on the economy. 

    NET INTEREST INCOME

    Net interest income decreased by $431 thousand, or 4%, to $10.7 million for the second quarter of 2023, compared to $11.2 million in the first quarter of 2023. Total interest income increased by $758 thousand and was offset by an increase in total interest expense of $1.2 million.

    The increase in interest income was attributable to a $374 thousand, or 3%, increase in interest income and fees on loans, and a $415 thousand increase in interest income on deposits in other banks. The increases in interest income were attributable to higher yields on loans and interest-bearing deposits in banks, as well as higher average balances.

    The increase in interest expense was attributable to a $1.2 million, or 54%, increase in interest expense on deposits. The higher interest expense on deposits was attributable to a 51-basis point increase in the cost of interest-bearing deposits to 1.62%, and a $27.3 million increase in the average balance of interest-bearing deposits. The increase in deposit costs resulted from increases in the interest rates paid on deposit accounts, as well as a change in the composition of the deposit portfolio. During the second quarter, deposit balances shifted from noninterest-bearing accounts to interest-bearing accounts as average noninterest-bearing deposit balances decreased by $7.3 million during the second quarter, while average time deposit balances increased by $23.7 million.

    The net interest margin decreased by 24 basis points to 3.36% as the impact of a 36-basis point increase in the cost of funds was partially offset by a 11-basis point increase in the yield on earning assets. The rising interest rate environment continued to have an unfavorable impact on the net interest margin during the second quarter as the Company’s interest-bearing liabilities repriced greater than its earning assets during the period. The cost of funds increased to 1.13%, compared to 0.77% for the first quarter of 2023.

    Net accretion of discounts on purchased loans was included in interest income and fees on loans and totaled $194 thousand in the second quarter of 2023, compared to $145 thousand in the first quarter of 2023.  

    NONINTEREST INCOME

    Noninterest income totaled $2.9 million for the second quarter of 2023, which was a $106 thousand, or 4%, increase compared to the first quarter of 2023. Service charges on deposits, ATM and check card fees, fees for other customer services, and brokered mortgage fees, increased compared to the first quarter of 2023 and were partially offset by decreases in wealth management fees and income from bank-owned life insurance.

    NONINTEREST EXPENSE

    Noninterest expense was unchanged at $9.2 million for the second quarter of 2023, compared to the linked quarter. Increases in legal and professional fees, FDIC assessment, and other operating expenses were offset by decreases in salaries and employee benefits and other real estate owned (income) expenses. Other real estate owned income totaled $219 thousand during the second quarter of 2023 from a gain on the sale of a property, which decreased noninterest expense for the period.

    ASSET QUALITY

    Overview

    Nonperforming assets (“NPAs”) as a percentage of total assets improved to 0.05% at June 30, 2023, compared to 0.13% at March 31, 2023, and 0.15% one year ago at June 30, 2022. Loans past due greater than 30 days and still accruing interest as a percentage of total loans also improved to 0.13% at June 30, 2023, compared to 0.20% at March 31, 2023, and 0.19% at June 30, 2022. Net recoveries totaled $96 thousand in the second quarter of 2023, compared to net charge-offs of $915 thousand in the first quarter of 2023, and net charge offs of $26 thousand in the second quarter of 2022. The allowance for credit losses on loans increased to $8.9 million, or 0.95% of total loans at June 30, 2023, compared to $8.7 million, or 0.95% of total loans at March 31, 2023, and $6.2 million, or 0.70% of total loans at June 30, 2022.

    Nonperforming Assets

    NPAs decreased to $722 thousand at June 30, 2023, compared to $1.8 million at March 31, 2023, and $2.1 million at June 30, 2022, which represented 0.05%, 0.13%, and 0.15% of total assets, respectively. The decrease in NPAs during the second quarter of 2023 was related to the resolution of one impaired loan relationship and the sale of other real estate owned. The following table provides a detailed summary of NPA balances at the periods ended (dollars in thousands):

      June 30, 2023  March 31, 2023  June 30, 2022
    Nonaccrual loans $677  $1,591  $442
    Other real estate owned, net  45   185   1,665
    Total nonperforming assets $722  $1,776  $2,107


    Past Due Loans

    Loan past due greater than 30 days and still accruing interest decreased to $1.2 million, or 0.13% of total loans at June 30, 2023, compared to $1.9 million, or 0.20% of total loans at March 31, 2023, and $1.7 million, or 0.19%, of total loans at June 30, 2022. Of the total past due loans still accruing interest, $226 thousand was past due 90 days or more at June 30, 2023, compared to $47 thousand at March 31, 2023, and $91 thousand at June 30, 2022.

    Net Charge-offs (Recoveries)

    Net recoveries totaled $96 thousand for the second quarter of 2023, compared to net charge-offs of $915 thousand for the first quarter of 2023, and net charge-offs of $26 thousand for the second quarter of 2022. Net charge-offs for the first quarter of 2023 were primarily attributable to one customer relationship. 

    Provision for Credit Losses

    The Bank recorded a $100 thousand provision for credit losses in the second quarter of 2023, which was comprised of a $45 thousand provision for credit losses on loans, a $44 thousand provision on unfunded commitments, and an $11 thousand provision on held-to-maturity securities. The provision for credit losses on loans resulted primarily from growth of the loan portfolio. This compared to a provision for credit losses of $400 thousand for the same period of the prior year, which also resulted primarily from growth of the loan portfolio.

    Allowance for Credit Losses on Loans

    At June 30, 2023, the allowance for credit losses on loans totaled $8.9 million, which was a $141 thousand increase from $8.7 million at March 31, 2023. The increase resulted from an increase in the general reserve component of the allowance for credit losses on loans, while the specific reserve component of the allowance was unchanged at $0.

    The following table provides the changes in the allowance for credit losses on loans for the three-month periods ended (dollars in thousands):

      June 30, 2023  March 31, 2023  June 30, 2022 
    Allowance for credit losses on loans, beginning of period $8,717  $7,446  $5,828 
    Adoption of CECL on January 1, 2023  -   2,186   - 
    Adjusted allowance for credit losses on loans  8,717   9,632   5,828 
    Net (charge-offs) recoveries  96   (915)  (26)
    Provision for credit losses on loans  45   -   400 
    Allowance for credit losses on loans, end of period $8,858  $8,717  $6,202 


    The allowance for credit losses on loans as a percentage of total loans totaled 0.95% at June 30, 2023, compared to 0.95% at March 31, 2023, and 0.70% at June 30, 2022. Additionally, the net discount on purchased loans totaled $2.1 million at June 30, 2023, $2.4 million at March 31, 2023, and $2.9 million at June 30, 2022. The net discount on purchased loans was not included in the allowance for credit losses on loans.

    Allowance for Credit Losses on Unfunded Commitments

    The allowance for credit losses on unfunded commitments totaled $197 thousand at June 30, 2023, compared to $153 thousand at March 31, 2023. The provision for credit losses on unfunded commitments totaled $44 thousand for the second quarter of 2023 and was included in the $100 thousand provision for credit losses reported on the Company’s consolidated income statement.

    Allowance for Credit Losses on Securities

    The allowance for credit losses on securities totaled $144 thousand at June 30, 2023, compared to $133 thousand on March 31, 2023. Provision for credit losses on securities totaled $11 thousand for the second quarter of 2023 and was included in the $100 thousand provision for credit losses reported on the Company’s consolidated income statement.

    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 $561.7 million at June 30, 2023.

    The Bank maintains liquidity to fund loan growth and meet the potential demand from its deposit customers, including potential volatile deposits. The estimated amount of uninsured customer deposits totaled $343.0 million at June 30, 2023. Excluding municipal deposits, the estimated amount of uninsured customer deposits totaled $257.7 million at June 30, 2023.

    BALANCE SHEET

    At June 30, 2023, assets totaled $1.4 billion and were unchanged from the prior quarter ended March 31, 2023. Although total assets were unchanged during the second quarter of 2023, the asset composition changed slightly as interest bearing deposits in banks, and securities, available for sale, decreased by $5.5 million and $5.6 million, respectively, while loans increased by $12.2 million.

    Total assets decreased $40.5 million, or 3%, compared to the period ended June 30, 2022. Interest bearing deposits in banks and total securities decreased by $50.2 million and $33.5 million, respectively, and were partially offset by a $47.4 million increase in loans, net of the allowance for credit losses.

    Loans totaled $930.2 million at June 30, 2023, which was a $12.2 million, or 5% annualized, increase from March 31, 2023, and a $50.1 million, or 6%, increase over June 30, 2022. The growth in loans over the periods did not have a significant impact on the composition of the loan portfolio. The loan portfolio was primarily comprised of loans secured by one-to-four family residential real estate, loans secured by commercial real estate, and commercial and industrial loans, which totaled 36%, 45%, and 12% of the loan portfolio, respectively, at June 30, 2023.

    Deposits totaled $1.2 billion at June 30, 2023, and were unchanged compared to the prior quarter ended March 31, 2023. Although total deposits did not change during the second quarter, the deposit composition changed as noninterest-bearing demand deposits and savings and interest-bearing demand deposits decreased $13.9 million and $6.9 million, respectively, while time deposits increased by $21.6 million during the period. 

    Deposits decreased $53.8 million compared to the period ended June 30, 2022, and the deposit composition also changed over the prior year. Noninterest-bearing demand deposits decreased from 33% to 32% of total deposits, savings and interest-bearing deposits decreased from 57% to 54% of total deposits, and time deposits increased from 10% to 14% of total deposits over the one-year period.

    Shareholders’ equity totaled $112.9 million at June 30, 2023, which was an increase of $1.0 million from March 31, 2023. The increase in total shareholders’ equity was primarily attributable to a $2.6 million increase in retained earnings, which was partially offset by a $1.1 million increase in accumulated other comprehensive loss, net. The Company declared and paid cash dividends of $0.15 per common share during the second quarter of 2023, which was unchanged from the first quarter of 2023. The Company’s common equity to total assets ratio and its tangible common equity to tangible assets ratio increased as of June 30, 2023, compared to March 31, 2023, and June 30, 2022. The Bank is considered well-capitalized.

    The following table provides capital ratios at the periods ended:

      June 30, 2023  March 31, 2023  June 30, 2022 
    Total capital ratio (2)  14.88%  14.85%  14.23%
    Tier 1 capital ratio (2)  13.93%  13.94%  13.56%
    Common equity Tier 1 capital ratio (2)  13.93%  13.94%  13.56%
    Leverage ratio (2)  9.72%  9.70%  8.87%
    Common equity to total assets (5)  8.21%  8.15%  7.09%
    Tangible common equity to tangible assets (5) (6)  8.00%  7.94%  6.88%


    STOCK REPURCHASE PLAN

    The Board of Directors authorized a stock repurchase plan to purchase up to $5.0 million of its common stock during the fourth quarter of 2022. During the three months ended June 30, 2023, the Company repurchased 32,301 shares of its common stock for a total of $481 thousand at a weighted average price of $14.91 per share. For the six months ended June 30, 2023, the Company repurchased 33,858 shares of its common stock for a total of $506 thousand at a weighted average price of $14.96 per share. There were no stock repurchases during the year ended December 31, 2022.

    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 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, 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 
      June 30,  March 31,  December 31,  September 30,  June 30, 
      2023  2023  2022  2022  2022 
    Income Statement                    
    Interest income                    
    Interest and fees on loans $11,886  $11,512  $11,502  $10,759  $9,963 
    Interest on deposits in banks  759   344   522   380   251 
    Interest on securities                    
    Taxable interest  1,306   1,339   1,381   1,323   1295 
    Tax-exempt interest  307   306   308   307   309 
    Dividends  28   27   27   23   21 
    Total interest income $14,286  $13,528  $13,740  $12,792  $11,839 
    Interest expense                    
    Interest on deposits $3,402  $2,216  $1,593  $927  $413 
    Interest on subordinated debt  69   69   69   70   69 
    Interest on junior subordinated debt  67   67   68   68   67 
    Interest on other borrowings  3             
    Total interest expense $3,541  $2,352  $1,730  $1,065  $549 
    Net interest income $10,745  $11,176  $12,010  $11,727  $11,290 
    Provision for credit losses  100      1,250   200   400 
    Net interest income after provision for credit losses $10,645  $11,176  $10,760  $11,527  $10,890 
    Noninterest income                    
    Service charges on deposit accounts $683  $646  $662  $708  $698 
    ATM and check card fees  848   800   838   915   797 
    Wealth management fees  749   776   706   739   760 
    Fees for other customer services  220   196   238   180   188 
    Brokered mortgage fees  35      21   72   58 
    Income from bank owned life insurance  135   149   155   166   131 
    Net losses on securities available for sale        (2,004)      
    Gain on sale of other investment        2,885       
    Other operating income  214   211   631   247   148 
    Total noninterest income $2,884  $2,778  $4,132  $3,027  $2,780 
    Noninterest expense                    
    Salaries and employee benefits $5,189  $5,346  $5,325  $5,174  $5,086 
    Occupancy  524   528   562   539   545 
    Equipment  571   587   575   546   620 
    Marketing  248   268   228   211   223 
    Supplies  147   148   144   117   131 
    Legal and professional fees  422   343   339   361   381 
    ATM and check card expense  425   400   388   332   347 
    FDIC assessment  212   106   70   109   132 
    Bank franchise tax  262   254   238   238   238 
    Data processing expense  252   202   289   243   221 
    Amortization expense  4   5   4   5   5 
    Other real estate owned (income) expense, net  (219)  3   (189)  14   41 
    Other operating expense  1,121   1,010   1,007   1,194   948 
    Total noninterest expense $9,158  $9,200  $8,980  $9,083  $8,918 
    Income before income taxes $4,371  $4,754  $5,912  $5,471  $4,752 
    Income tax expense  866   905   1,132   1,017   917 
    Net income $3,505  $3,849  $4,780  $4,454  $3,835 


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

      (unaudited) 
      For the Quarter Ended 
      June 30,  March 31,  December 31,  September 30,  June 30, 
      2023  2023  2022  2022  2022 
    Common Share and Per Common Share Data                    
    Earnings per common share, basic $0.56  $0.61  $0.76  $0.71  $0.61 
    Weighted average shares, basic  6,269,668   6,273,913   6,262,821   6,257,040   6,250,329 
    Earnings per common share, diluted $0.56  $0.61  $0.76  $0.71  $0.61 
    Weighted average shares, diluted  6,277,161   6,281,116   6,272,409   6,264,107   6,257,479 
    Shares outstanding at period end  6,250,613   6,281,935   6,264,912   6,262,381   6,252,147 
    Tangible book value at period end (4) $17.55  $17.30  $16.79  $15.31  $15.54 
    Cash dividends $0.15  $0.15  $0.14  $0.14  $0.14 
                         
    Key Performance Ratios                    
    Return on average assets  1.02%  1.15%  1.37%  1.27%  1.08%
    Return on average equity  12.56%  14.20%  18.38%  17.27%  15.04%
    Net interest margin  3.36%  3.60%  3.70%  3.58%  3.42%
    Efficiency ratio (1)  68.37%  65.50%  59.56%  61.10%  62.69%
                         
    Average Balances                    
    Average assets $1,372,781  $1,351,630  $1,386,841  $1,393,308  $1,419,878 
    Average earning assets  1,290,828   1,267,830   1,297,223   1,309,794   1,334,976 
    Average shareholders’ equity  111,917   109,924   103,132   102,341   102,269 
                         
    Asset Quality                    
    Loan charge-offs $110  $975  $135  $181  $107 
    Loan recoveries  206   60   40   70   81 
    Net charge-offs (recoveries)  (96)  915   95   111   26 
    Non-accrual loans  677   1,591   2,673   566   442 
    Other real estate owned, net  45   185   185   1,578   1,665 
    Nonperforming assets (3)  722   1,776   2,858   2,144   2,107 
    Loans 30 to 89 days past due, accruing  970   1,816   1,532   2,117   1,572 
    Loans over 90 days past due, accruing  226   47      306   91 
    Special mention loans  2,754      1,959   3,183    
    Substandard loans, accruing  418   296   301   304   308 
                         
    Capital Ratios (2)                    
    Total capital $144,278  $141,501  $139,549  $134,882  $131,624 
    Tier 1 capital  135,079   132,784   132,103   128,590   125,422 
    Common equity tier 1 capital  135,079   132,784   132,103   128,590   125,422 
    Total capital to risk-weighted assets  14.88%  14.85%  14.60%  14.18%  14.23%
    Tier 1 capital to risk-weighted assets  13.93%  13.94%  13.82%  13.52%  13.56%
    Common equity tier 1 capital to risk-weighted assets  13.93%  13.94%  13.82%  13.52%  13.56%
    Leverage ratio  9.72%  9.70%  9.57%  9.27%  8.87%


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

      (unaudited) 
      For the Quarter Ended 
      June 30,  March 31,  December 31,  September 30,  June 30, 
      2023  2023  2022  2022  2022 
    Balance Sheet                    
    Cash and due from banks $17,697  $17,950  $20,784  $22,809  $19,886 
    Interest-bearing deposits in banks  54,379   59,851   46,130   52,976   104,529 
    Securities available for sale, at fair value  156,745   162,355   162,907   176,403   264,750 
    Securities held to maturity, at amortized cost (net of allowance for credit losses)  151,677   151,301   153,158   154,894   77,151 
    Restricted securities, at cost  1,803   1,803   1,908   1,908   1,908 
    Loans, net of allowance for credit losses  921,336   909,250   913,076   900,222   873,887 
    Other real estate owned, net  45   185   185   1,578   1,665 
    Premises and equipment, net  21,556   21,637   21,876   21,693   22,118 
    Accrued interest receivable  4,248   4,389   4,543   4,247   4,154 
    Bank owned life insurance  24,559   24,424   24,531   24,375   24,569 
    Goodwill  3,030   3,030   3,030   3,030   3,030 
    Core deposit intangibles, net  127   131   136   140   145 
    Other assets  17,022   16,026   17,119   19,320   16,898 
    Total assets $1,374,224  $1,372,332  $1,369,383  $1,383,595  $1,414,690 
                         
    Noninterest-bearing demand deposits $396,137  $410,019  $427,344  $438,306  $431,292 
    Savings and interest-bearing demand deposits  670,005   676,875   677,139   693,970   731,125 
    Time deposits  176,226   154,631   136,849   133,770   133,733 
    Total deposits $1,242,368  $1,241,525  $1,241,332  $1,266,046  $1,296,150 
    Subordinated debt, net  4,996   4,996   4,995   4,995   4,994 
    Junior subordinated debt  9,279   9,279   9,279   9,279   9,279 
    Accrued interest payable and other liabilities  4,721   4,675   5,417   4,198   3,952 
    Total liabilities $1,261,364  $1,260,475  $1,261,023  $1,284,518  $1,314,375 
                         
    Preferred stock $  $  $  $  $ 
    Common stock  7,813   7,842   7,831   7,828   7,815 
    Surplus  32,601   32,992   32,716   32,620   32,398 
    Retained earnings  93,805   91,239   90,284   86,382   82,804 
    Accumulated other comprehensive (loss), net  (21,359)  (20,216)  (22,471)  (27,753)  (22,702)
    Total shareholders’ equity $112,860  $111,857  $108,360  $99,077  $100,315 
    Total liabilities and shareholders’ equity $1,374,224  $1,372,332  $1,369,383  $1,383,595  $1,414,690 
                         
    Loan Data                    
    Mortgage real estate loans:                    
    Construction and land development $49,282  $48,610  $51,840  $51,352  $49,118 
    Secured by farmland  3,563   3,150   3,343   3,432   3169 
    Secured by 1-4 family residential  337,601   334,302   331,421   317,414   312,082 
    Other real estate loans  418,409   412,851   415,112   414,072   397,868 
    Loans to farmers (except those secured by real estate)  714   739   900   745   769 
    Commercial and industrial loans (except those secured by real estate)  112,088   110,198   110,325   111,400   108,780 
    Consumer installment loans  4,505   4,206   4,128   4,192   4,230 
    Deposit overdrafts  251   179   197   163   292 
    All other loans  3,781   3,732   3,256   3,744   3,781 
    Total loans $930,194  $917,967  $920,522  $906,514  $880,089 
    Allowance for credit losses  (8,858)  (8,717)  (7,446)  (6,292)  (6,202)
    Loans, net $921,336  $909,250  $913,076  $900,222  $873,887 


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

      (unaudited) 
      For the Quarter Ended 
      June 30,  March 31,  December 31,  September 30,  June 30, 
      2023  2023  2022  2022  2022 
    Reconciliation of Tax-Equivalent Net Interest Income (7)                    
    GAAP measures:                    
    Interest income – loans $11,886  $11,512  $11,502  $10,759  $9,963 
    Interest income – investments and other  2,400   2,016   2,238   2,033   1,876 
    Interest expense – deposits  (3,402)  (2,216)  (1,593)  (927)  (413)
    Interest expense – subordinated debt  (69)  (69)  (69)  (70)  (69)
    Interest expense – junior subordinated debt  (67)  (67)  (68)  (68)  (67)
    Interest expense – other borrowings  (3)            
    Total net interest income $10,745  $11,176  $12,010  $11,727  $11,290 
    Non-GAAP measures:                    
    Tax benefit realized on non-taxable interest income – municipal securities $81  $82  $82  $82  $82 
    Total tax benefit realized on non-taxable interest income  81   82   82   82   82 
    Total tax-equivalent net interest income $10,826  $11,258  $12,092  $11,809  $11,372 


    FIRST NATIONAL CORPORATION
    Year-to-Date Performance Summary
    (in thousands, except share and per share data)

      (unaudited) 
      For the Six Months Ended 
      June 30,  June 30, 
      2023  2022 
    Income Statement        
    Interest income        
    Interest and fees on loans $23,398  $19,459 
    Interest on deposits in banks  1,103   321 
    Interest on securities        
    Taxable interest  2,645   2,427 
    Tax-exempt interest  613   614 
    Dividends  55   42 
    Total interest income $27,814  $22,863 
    Interest expense        
    Interest on deposits $5,618  $753 
    Interest on subordinated debt  138   138 
    Interest on junior subordinated debt  134   134 
    Interest on other borrowings  3    
    Total interest expense $5,893  $1,025 
    Net interest income $21,921  $21,838 
    Provision for credit losses  100   400 
    Net interest income after provision for credit losses $21,821  $21,438 
    Noninterest income        
    Service charges on deposit accounts $1,329  $1,307 
    ATM and check card fees  1,648   1,547 
    Wealth management fees  1,525   1,563 
    Fees for other customer services  416   421 
    Brokered mortgage fees  35   152 
    Income from bank owned life insurance  284   275 
    Other operating income  425   226 
    Total noninterest income $5,662  $5,491 
    Noninterest expense        
    Salaries and employee benefits $10,535  $10,210 
    Occupancy  1,052   1,117 
    Equipment  1,158   1,179 
    Marketing  516   374 
    Supplies  295   267 
    Legal and professional fees  765   714 
    ATM and check card expense  825   650 
    FDIC assessment  318   284 
    Bank franchise tax  516   454 
    Data processing expense  454   457 
    Amortization expense  9   9 
    Other real estate owned (income) expense, net  (216)  69 
    Net losses on disposal of premises and equipment     2 
    Other operating expense  2,131   1,776 
    Total noninterest expense $18,358  $17,562 
    Income before income taxes $9,125  $9,367 
    Income tax expense  1,771   1,803 
    Net income $7,354  $7,564 


      
    FIRST NATIONAL CORPORATION
    Year-to-Date Performance Summary
    (in thousands, except share and per share data)

      (unaudited) 
      For the Six Months Ended 
      June 30,  June 30, 
      2023  2022 
    Common Share and Per Common Share Data        
    Net income, basic $1.17  $1.21 
    Weighted average shares, basic  6,271,779   6,244,682 
    Net income, diluted $1.17  $1.21 
    Weighted average shares, diluted  6,279,127   6,250,674 
    Shares outstanding at period end  6,250,613   6,252,147 
    Tangible book value at period end (4) $17.55  $15.54 
    Cash dividends $0.30  $0.28 
             
    Key Performance Ratios        
    Return on average assets  1.09%  1.07%
    Return on average equity  13.39%  14.16%
    Net interest margin  3.48%  3.39%
    Efficiency ratio (1)  66.92%  63.50%
             
    Average Balances        
    Average assets $1,362,526  $1,425,581 
    Average earning assets  1,279,357   1,310,977 
    Average shareholders’ equity  110,787   107,686 
             
    Asset Quality        
    Loan charge-offs $1,085  $213 
    Loan recoveries  266   305 
    Net charge-offs  819   (92)
             
    Reconciliation of Tax-Equivalent Net Interest Income (7)        
    GAAP measures:        
    Interest income – loans $23,398  $19,459 
    Interest income – investments and other  4,416   3,404 
    Interest expense – deposits  (5,618)  (753)
    Interest expense – subordinated debt  (138)  (138)
    Interest expense – junior subordinated debt  (134)  (134)
    Interest expense – other borrowings  (3)   
    Total net interest income $21,921  $21,838 
    Non-GAAP measures:        
    Tax benefit realized on non-taxable interest income – loans $  $8 
    Tax benefit realized on non-taxable interest income – municipal securities  163   163 
    Total tax benefit realized on non-taxable interest income $163  $171 
    Total tax-equivalent net interest income $22,084  $22,009 


    (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 21%. See the tables above for tax-equivalent net interest income and reconciliations of net interest income to tax-equivalent net interest income. 

     


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