• First National Corporation Reports Third Quarter 2023 Financial Results

    ソース: Nasdaq GlobeNewswire / 26 10 2023 07:00:16   America/New_York

    STRASBURG, Va., Oct. 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 $3.1 million and diluted earnings per common share of $0.50 for the three-months ending September 30, 2023. This compared to net income of $3.5 million and diluted earnings per common share of $0.56 for the three-month period ending June 30, 2023, and net income of $4.5 million and diluted earnings per common share of $0.71 for the third quarter of 2022.

    THIRD QUARTER HIGHLIGHTS

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

    • Net interest margin stabilized at 3.35%
    • Noninterest-bearing demand deposits comprised 33% of total deposits
    • Deposits were stable at $1.2 billion
    • Loans increased $22.3 million, or 10% annualized
    • Efficiency ratio of 70.67%
    • Return on average equity of 10.96%
    • Return on average assets of 0.91%
    • Nonperforming assets increased to 0.23% of total assets
    • Tangible book value per common share totaled $17.38, up $2.07 from one year ago

    “We are pleased with the Company’s performance during the third quarter considering we operated in a challenging interest rate environment,” said Scott C. Harvard, president, and chief executive officer of First National. “The interest margin stabilized during the period as higher earning asset yields offset the higher cost of funds. The Bank’s deposit portfolio, which is comprised of a high percentage of noninterest-bearing deposits, also mitigated pressure on deposit costs during the period. Although nonaccrual loans increased during the quarter, we believe that asset quality remains excellent, with nonperforming assets remaining at historically low levels. Loan growth continued at an annualized pace of 10% during the third quarter, bolstered by the addition of new bankers. 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 $62 thousand, or 1%, to $10.7 million for the third quarter of 2023, compared to the linked second quarter of 2023. Total interest income increased by $345 thousand and was offset by an increase in total interest expense of $407 thousand.

    The $345 thousand increase in interest income was attributable to a $754 thousand, or 6%, increase in interest income and fees on loans, which was partially offset by a $421 thousand, or 55%, decrease in interest income on deposits in banks. The increase in interest income on loans was attributable to a 14-basis point increase in the yield on loans and a 2% increase in average loan balances compared to the linked quarter. The decrease in interest income on deposits in banks was attributable to a $31.9 million, or 56%, decrease in average balances of interest-bearing deposits in banks compared to the linked quarter.

    The $407 thousand increase in interest expense was attributable to a $408 thousand, or 12%, increase in interest expense on deposits. The higher interest expense on deposits was attributable to a 20-basis point increase in the cost of interest-bearing deposits to 1.82%, and was partially offset by an $8.3 million, or 1%, decrease in the average balance of interest-bearing deposits. The increase in the cost of deposits was primarily a result of changes in the composition of the deposit portfolio. During the third quarter, savings and interest-bearing demand deposits decreased, while time deposits increased.

    The net interest margin stabilized at 3.35% as the cost of funds increased 14-basis points, which was almost entirely offset by a 12-basis point increase in the yield on earning assets. Although the interest rate environment continued to be challenging during the period, the net interest margin stabilized as the rising cost of deposits slowed to a pace that was aligned with rising earning asset yields.

    Net accretion of discounts on loans acquired through business combinations was included in interest income and fees on loans and totaled $61 thousand in the third quarter of 2023, compared to $194 thousand in the second quarter of 2023.

    NONINTEREST INCOME

    Noninterest income totaled $3.1 million for the third quarter of 2023, which was a $169 thousand, or 6%, increase compared to the second quarter of 2023. Service charges on deposits, ATM and check card fees, wealth management fees, and income from bank-owned life insurance increased over the linked quarter and were partially offset by a decrease in fees for other customer services.
      
    NONINTEREST EXPENSE

    Noninterest expense increased $626 thousand, or 7%, in the third quarter of 2023, compared to the linked quarter. The increase was primarily attributable to a $316 thousand, or 6%, increase in salaries and employee benefits, a $106 thousand increase in other operating expenses, and a $234 thousand increase in other real estate owned (income) expense. While other real estate owned expense totaled only $15 thousand for the third quarter, the Bank recorded a gain on the sale of other real estate owned during the prior period, which resulted in $219 thousand of other real estate income for the prior period ending June 30, 2023.  The increase in salaries and employee benefits was attributable to an increase in the number of employees and higher variable compensation during the third quarter.

    ASSET QUALITY

    Overview

    Nonperforming assets (“NPAs”) as a percentage of total assets increased to 0.23% on September 30, 2023, compared to 0.05% on June 30, 2023, and 0.15% one year ago on September 30, 2022. Loans past due greater than 30 days and still accruing interest as a percentage of total loans also increased to 0.19% at September 30, 2023, compared to 0.13% at June 30, 2023, and 0.27% at September 30, 2022. Net charge-offs totaled $83 thousand in the third quarter of 2023, compared to net recoveries of $96 thousand in the second quarter of 2023, and net charge offs of $111 thousand in the third quarter of 2022. The allowance for credit losses on loans totaled $8.9 million, or 0.93% of total loans at September 30, 2023, compared to $8.9 million, or 0.95% of total loans at June 30, 2023, and $6.3 million, or 0.69% of total loans at September 30, 2022.

    Nonperforming Assets

    NPAs increased to $3.1 million at September 30, 2023, compared to $722 thousand at June 30, 2023, and $2.1 million at September 30, 2022, which represented 0.23%, 0.05%, and 0.15% of total assets, respectively. The increase in NPAs during the third quarter of 2023 was related to two individually evaluated loan relationships. The following table provides a detailed summary of NPA balances at the periods ended (dollars in thousands):

      September 30, 2023  June 30, 2023  September 30, 2022 
    Nonaccrual loans $3,116  $677  $566 
    Other real estate owned, net  -   45   1,578 
    Total nonperforming assets $3,116  $722  $2,144 

    Past Due Loans

    Loan past due greater than 30 days and still accruing interest increased to $1.8 million, or 0.19% of total loans at September 30, 2023, compared to $1.2 million, or 0.13% of total loans at June 30, 2023, and $2.4 million, or 0.27%, of total loans at September 30, 2022. Of the total past due loans still accruing interest, $370 thousand was past due 90 days or more at September 30, 2023, compared to $226 thousand at June 30, 2023, and $306 thousand at September 30, 2022.

    Net Charge-offs (Recoveries)

    Net charge-offs totaled $83 thousand for the third quarter of 2023, compared to net recoveries of $96 thousand for the second quarter of 2023, and net charge-offs of $111 thousand for the third quarter of 2022. 

    Provision for Credit Losses

    The Bank recorded a $100 thousand provision for credit losses in the third quarter of 2023, which was comprised of a $121 thousand provision for credit losses on loans, an $8 thousand recovery of credit losses on unfunded commitments, and an $13 thousand recovery of credit losses on held-to-maturity securities. This compared to a provision for credit losses of $100 thousand for the linked second quarter of 2023, and a provision for loan losses of $200 thousand for the third quarter of 2022.

    Allowance for Credit Losses on Loans

    At September 30, 2023, the allowance for credit losses on loans totaled $8.9 million, which was unchanged from the allowance on June 30, 2023, and an increase of $2.6 million over the allowance totaling $6.3 million on September 30, 2022. The allowance was unchanged compared to the linked quarter as an increase in the specific reserve component was offset by a decrease in the general reserve component. The specific reserve increased from two new individually evaluated loan relationships, while the general reserve decreased from lower expected losses and from an improvement to a qualitative factor.  The Bank improved the portfolio nature and volume qualitative factor, which was initially used to recognize the inherent risk of loans acquired in the third quarter of 2021 through business combinations. The Bank determined this qualitative adjustment was no longer considered necessary as of September 30, 2023.

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

      September 30, 2023  June 30, 2023  September 30, 2022 
    Allowance for credit losses on loans, beginning of period $8,858  $8,717  $6,202 
    Net (charge-offs) recoveries  (83)  96   (110)
    Provision for credit losses on loans  121   45   200 
    Allowance for credit losses on loans, end of period $8,896  $8,858  $6,292 

    The allowance for credit losses on loans as a percentage of total loans totaled 0.93% on September 30, 2023, compared to 0.95% at June 30, 2023, and 0.69% at September 30, 2022. Additionally, the net discount on loans acquired through business combinations totaled $2.0 million at September 30, 2023, $2.1 million at June 30, 2023, and $2.7 million at September 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 $189 thousand at September 30, 2023, compared to $197 thousand at June 30, 2023. The recovery of credit losses on unfunded commitments totaled $8 thousand for the third 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 $131 thousand at September 30, 2023, compared to $144 thousand on June 30, 2023. Recovery of credit losses on securities totaled $13 thousand for the third 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 $532.1 million at September 30, 2023, and $561.7 million at June 30, 2023.

    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 $346.9 million at September 30, 2023, and $343.0 million at June 30, 2023. Excluding municipal deposits, the estimated amount of uninsured customer deposits totaled $268.4 million at September 30, 2023, and $257.7 million at June 30, 2023.

    BALANCE SHEET

    At September 30, 2023, assets totaled $1.4 billion, which was an $8.0 million decrease from the linked quarter ended June 30, 2023. The asset composition changed slightly as interest bearing deposits in banks and securities decreased $21.4 million and $10.3 million, respectively, while loans, net of the allowance for credit losses, increased $22.3 million.

    Total assets decreased $17.4 million, or 1%, compared to total assets at September 30, 2022. Interest bearing deposits in banks and total securities decreased by $20.0 million and $33.2 million, respectively, and were partially offset by a $43.4 million increase in loans, net of the allowance for credit losses.

    Loans, net of the allowance for credit losses, totaled $943.6 million at September 30, 2023, which was a $22.3 million, or 10% annualized, increase from June 30, 2023, and a $43.4 million, or 5%, increase over September 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 September 30, 2023.

    Deposits totaled $1.2 billion at September 30, 2023, and decreased $7.2 million from the linked quarter ended June 30, 2023. The deposit composition changed as noninterest-bearing demand deposits increased $7.6 million, and time deposits increased $8.2 million, while savings and interest-bearing demand deposits decreased $23.0 million during the period. 

    Deposits decreased $30.9 million when compared to deposits one year ago as of September 30, 2022. The deposit composition changed over the prior year as noninterest-bearing demand deposits decreased from 34% to 33% of total deposits, savings and interest-bearing deposits decreased from 55% to 52% of total deposits, and time deposits increased from 11% to 15% of total deposits over the period.

    Shareholders’ equity totaled $112.0 million at September 30, 2023, which was a decrease of $881 thousand from June 30, 2023. The decrease in total shareholders’ equity was primarily attributable to a $2.2 million increase in retained earnings, which was offset by a $3.3 million increase in accumulated other comprehensive loss, net. The Company declared and paid cash dividends of $0.15 per common share during the third quarter of 2023, which was unchanged from the first and second quarters of 2023. The Company’s common equity to total assets ratio and its tangible common equity to tangible assets ratio decreased slightly at September 30, 2023, compared to June 30, 2023, and increased compared to the capital ratios at September 30, 2022. The Bank is considered well-capitalized.

    The following table provides capital ratios at the periods ended:

      September 30, 2023  June 30, 2023  September 30, 2022 
    Total capital ratio (2)  14.80%  14.85%  14.18%
    Tier 1 capital ratio (2)  13.86%  13.93%  13.52%
    Common equity Tier 1 capital ratio (2)  13.86%  13.93%  13.52%
    Leverage ratio (2)  9.97%  9.72%  9.27%
    Common equity to total assets (5)  8.20%  8.21%  7.19%
    Tangible common equity to tangible assets (5) (6)  7.98%  8.00%  6.95%

    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 third quarter of 2023, the Company repurchased 3,674 shares of its common stock for a total of $62 thousand at a weighted average price of $16.78 per share. For the nine months ended September 30, 2023, the Company repurchased 37,532 shares of its common stock for a total of $568 thousand at a weighted average price of $15.14 per share. There were no stock repurchases during the prior year ending 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 
      September 30,  June 30,  March 31,  December 31,  September 30, 
      2023  2023  2023  2022  2022 
    Income Statement                    
    Interest income                    
    Interest and fees on loans $12,640  $11,886  $11,512  $11,502  $10,759 
    Interest on deposits in banks  338   759   344   522   380 
    Interest on securities                    
    Taxable interest  1,323   1,306   1,339   1,381   1,323 
    Tax-exempt interest  304   307   306   308   307 
    Dividends  26   28   27   27   23 
    Total interest income $14,631  $14,286  $13,528  $13,740  $12,792 
    Interest expense                    
    Interest on deposits $3,810  $3,402  $2,216  $1,593  $927 
    Interest on subordinated debt  69   69   69   69   70 
    Interest on junior subordinated debt  69   67   67   68   68 
    Interest on other borrowings  —   3   —   —   — 
    Total interest expense $3,948  $3,541  $2,352  $1,730  $1,065 
    Net interest income $10,683  $10,745  $11,176  $12,010  $11,727 
    Provision for credit losses  100   100   —   1,250   200 
    Net interest income after provision for credit losses $10,583  $10,645  $11,176  $10,760  $11,527 
    Noninterest income                    
    Service charges on deposit accounts $733  $683  $646  $662  $708 
    ATM and check card fees  976   848   800   838   915 
    Wealth management fees  811   749   776   706   739 
    Fees for other customer services  122   220   196   238   180 
    Brokered mortgage fees  38   35   —   21   72 
    Income from bank owned life insurance  175   135   149   155   166 
    Net losses on securities available for sale  —   —   —   (2,004)  — 
    Gain on sale of other investment  —   —   —   2,885   — 
    Other operating income  198   214   211   631   247 
    Total noninterest income $3,053  $2,884  $2,778  $4,132  $3,027 
    Noninterest expense                    
    Salaries and employee benefits $5,505  $5,189  $5,346  $5,325  $5,174 
    Occupancy  534   524   528   562   539 
    Equipment  598   571   587   575   546 
    Marketing  204   248   268   228   211 
    Supplies  128   147   148   144   117 
    Legal and professional fees  439   422   343   339   361 
    ATM and check card expense  440   425   400   388   332 
    FDIC assessment  161   212   106   70   109 
    Bank franchise tax  262   262   254   238   238 
    Data processing expense  266   252   202   289   243 
    Amortization expense  5   4   5   4   5 
    Other real estate owned (income) expense, net  15   (219)  3   (189)  14 
    Other operating expense  1,227   1,121   1,010   1,007   1,194 
    Total noninterest expense $9,784  $9,158  $9,200  $8,980  $9,083 
    Income before income taxes $3,852  $4,371  $4,754  $5,912  $5,471 
    Income tax expense  731   866   905   1,132   1,017 
    Net income $3,121  $3,505  $3,849  $4,780  $4,454 
                         

    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, 
      2023  2023  2023  2022  2022 
    Common Share and Per Common Share Data                    
    Earnings per common share, basic $0.50  $0.56  $0.61  $0.76  $0.71 
    Weighted average shares, basic  6,256,663   6,269,668   6,273,913   6,262,821   6,257,040 
    Earnings per common share, diluted $0.50  $0.56  $0.61  $0.76  $0.71 
    Weighted average shares, diluted  6,271,351   6,277,161   6,281,116   6,272,409   6,264,107 
    Shares outstanding at period end  6,260,934   6,250,613   6,281,935   6,264,912   6,262,381 
    Tangible book value at period end (4) $17.38  $17.55  $17.30  $16.79  $15.31 
    Cash dividends $0.15  $0.15  $0.15  $0.14  $0.14 
                         
    Key Performance Ratios                    
    Return on average assets  0.91%  1.02%  1.15%  1.37%  1.27%
    Return on average equity  10.96%  12.56%  14.20%  18.38%  17.27%
    Net interest margin  3.35%  3.36%  3.60%  3.70%  3.58%
    Efficiency ratio (1)  70.67%  68.37%  65.50%  59.56%  61.10%
                         
    Average Balances                    
    Average assets $1,355,113  $1,372,781  $1,351,630  $1,386,841  $1,393,308 
    Average earning assets  1,275,112   1,290,828   1,267,830   1,297,223   1,309,794 
    Average shareholders’ equity  112,987   111,917   109,924   103,132   102,341 
                         
    Asset Quality                    
    Loan charge-offs $143  $110  $975  $135  $181 
    Loan recoveries  60   206   60   40   70 
    Net charge-offs (recoveries)  83   (96)  915   95   111 
    Non-accrual loans  3,116   677   1,591   2,673   566 
    Other real estate owned, net  —   45   185   185   1,578 
    Nonperforming assets (3)  3,116   722   1,776   2,858   2,144 
    Loans 30 to 89 days past due, accruing  1,395   970   1,816   1,532   2,117 
    Loans over 90 days past due, accruing  370   226   47   —   306 
    Special mention loans  —   2,754   —   1,959   3,183 
    Substandard loans, accruing  1,683   418   296   301   304 
                         
    Capital Ratios (2)                    
    Total capital $146,163  $144,278  $141,501  $139,549  $134,882 
    Tier 1 capital  136,947   135,079   132,784   132,103   128,590 
    Common equity tier 1 capital  136,947   135,079   132,784   132,103   128,590 
    Total capital to risk-weighted assets  14.80%  14.88%  14.85%  14.60%  14.18%
    Tier 1 capital to risk-weighted assets  13.86%  13.93%  13.94%  13.82%  13.52%
    Common equity tier 1 capital to risk-weighted assets  13.86%  13.93%  13.94%  13.82%  13.52%
    Leverage ratio  9.97%  9.72%  9.70%  9.57%  9.27%
                         

    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, 
      2023  2023  2023  2022  2022 
    Balance Sheet                    
    Cash and due from banks $17,168  $17,697  $17,950  $20,784  $22,809 
    Interest-bearing deposits in banks  32,931   54,379   59,851   46,130   52,976 
    Securities available for sale, at fair value  148,175   156,745   162,355   162,907   176,403 
    Securities held to maturity, at amortized cost (net of allowance for credit losses)  149,948   151,677   151,301   153,158   154,894 
    Restricted securities, at cost  2,077   1,803   1,803   1,908   1,908 
    Loans, net of allowance for credit losses  943,603   921,336   909,250   913,076   900,222 
    Other real estate owned, net  —   45   185   185   1,578 
    Premises and equipment, net  21,363   21,556   21,637   21,876   21,693 
    Accrued interest receivable  4,502   4,248   4,389   4,543   4,247 
    Bank owned life insurance  24,734   24,559   24,424   24,531   24,375 
    Goodwill  3,030   3,030   3,030   3,030   3,030 
    Core deposit intangibles, net  122   127   131   136   140 
    Other assets  18,567   17,022   16,026   17,119   19,320 
    Total assets $1,366,220  $1,374,224  $1,372,332  $1,369,383  $1,383,595 
                         
    Noninterest-bearing demand deposits $403,774  $396,137  $410,019  $427,344  $438,306 
    Savings and interest-bearing demand deposits  646,980   670,005   676,875   677,139   693,970 
    Time deposits  184,419   176,226   154,631   136,849   133,770 
    Total deposits $1,235,173  $1,242,368  $1,241,525  $1,241,332  $1,266,046 
    Subordinated debt, net  4,997   4,996   4,996   4,995   4,995 
    Junior subordinated debt  9,279   9,279   9,279   9,279   9,279 
    Accrued interest payable and other liabilities  4,792   4,721   4,675   5,417   4,198 
    Total liabilities $1,254,241  $1,261,364  $1,260,475  $1,261,023  $1,284,518 
                         
    Preferred stock $—  $—  $—  $—  $— 
    Common stock  7,826   7,813   7,842   7,831   7,828 
    Surplus  32,840   32,601   32,992   32,716   32,620 
    Retained earnings  95,988   93,805   91,239   90,284   86,382 
    Accumulated other comprehensive (loss), net  (24,675)  (21,359)  (20,216)  (22,471)  (27,753)
    Total shareholders’ equity $111,979  $112,860  $111,857  $108,360  $99,077 
    Total liabilities and shareholders’ equity $1,366,220  $1,374,224  $1,372,332  $1,369,383  $1,383,595 
                         
    Loan Data                    
    Mortgage real estate loans:                    
    Construction and land development $50,405  $49,282  $48,610  $51,840  $51,352 
    Secured by farmland  7,113   3,563   3,150   3,343   3,432 
    Secured by 1-4 family residential  340,773   337,601   334,302   331,421   317,414 
    Other real estate loans  426,065   418,409   412,851   415,112   414,072 
    Loans to farmers (except those secured by real estate)  667   714   739   900   745 
    Commercial and industrial loans (except those secured by real estate)  116,463   112,088   110,198   110,325   111,400 
    Consumer installment loans  4,596   4,505   4,206   4,128   4,192 
    Deposit overdrafts  368   251   179   197   163 
    All other loans  6,049   3,781   3,732   3,256   3,744 
    Total loans $952,499  $930,194  $917,967  $920,522  $906,514 
    Allowance for credit losses  (8,896)  (8,858)  (8,717)  (7,446)  (6,292)
    Loans, net $943,603  $921,336  $909,250  $913,076  $900,222 
                         

    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, 
      2023  2023  2023  2022  2022 
    Reconciliation of Tax-Equivalent Net Interest Income (7)                    
    GAAP measures:                    
    Interest income – loans $12,640  $11,886  $11,512  $11,502  $10,759 
    Interest income – investments and other  1,991   2,400   2,016   2,238   2,033 
    Interest expense – deposits  (3,810)  (3,402)  (2,216)  (1,593)  (927)
    Interest expense – subordinated debt  (69)  (69)  (69)  (69)  (70)
    Interest expense – junior subordinated debt  (69)  (67)  (67)  (68)  (68)
    Interest expense – other borrowings  —   (3)  —   —   — 
    Total net interest income $10,683  $10,745  $11,176  $12,010  $11,727 
    Non-GAAP measures:                    
    Tax benefit realized on non-taxable interest income – municipal securities $81  $81  $82  $82  $82 
    Total tax benefit realized on non-taxable interest income  81   81   82   82   82 
    Total tax-equivalent net interest income $10,764  $10,826  $11,258  $12,092  $11,809 
                         

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

      (unaudited) 
      For the Nine Months Ended 
      September 30,  September 30, 
      2023  2022 
    Income Statement        
    Interest income        
    Interest and fees on loans $36,038  $30,218 
    Interest on deposits in banks  1,441   701 
    Interest on securities        
    Taxable interest  3,968   3,750 
    Tax-exempt interest  917   921 
    Dividends  81   65 
    Total interest income $42,445  $35,655 
    Interest expense        
    Interest on deposits $9,428  $1,680 
    Interest on subordinated debt  207   208 
    Interest on junior subordinated debt  203   202 
    Interest on other borrowings  3   — 
    Total interest expense $9,841  $2,090 
    Net interest income $32,604  $33,565 
    Provision for credit losses  200   600 
    Net interest income after provision for credit losses $32,404  $32,965 
    Noninterest income        
    Service charges on deposit accounts $2,062  $2,015 
    ATM and check card fees  2,624   2,462 
    Wealth management fees  2,336   2,302 
    Fees for other customer services  538   601 
    Brokered mortgage fees  73   224 
    Income from bank owned life insurance  459   441 
    Other operating income  623   473 
    Total noninterest income $8,715  $8,518 
    Noninterest expense        
    Salaries and employee benefits $16,040  $15,384 
    Occupancy  1,586   1,656 
    Equipment  1,756   1,725 
    Marketing  720   585 
    Supplies  423   384 
    Legal and professional fees  1,204   1,075 
    ATM and check card expense  1,265   982 
    FDIC assessment  479   393 
    Bank franchise tax  778   692 
    Data processing expense  720   700 
    Amortization expense  14   15 
    Other real estate owned (income) expense, net  (201)  83 
    Net losses on disposal of premises and equipment  —   — 
    Other operating expense  3,358   2,971 
    Total noninterest expense $28,142  $26,645 
    Income before income taxes $12,977  $14,838 
    Income tax expense  2,502   2,820 
    Net income $10,475  $12,018 
             

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

      (unaudited) 
      For the Nine Months Ended 
      September 30,  September 30, 
      2023  2022 
    Common Share and Per Common Share Data        
    Net income, basic $1.67  $1.92 
    Weighted average shares, basic  6,266,707   6,248,847 
    Net income, diluted $1.67  $1.92 
    Weighted average shares, diluted  6,276,502   6,254,968 
    Shares outstanding at period end  6,260,934   6,262,381 
    Tangible book value at period end (4) $17.38  $15.31 
    Cash dividends $0.45  $0.42 
             
    Key Performance Ratios        
    Return on average assets  1.03%  1.14%
    Return on average equity  12.57%  15.12%
    Net interest margin  3.44%  3.57%
    Efficiency ratio (1)  68.17%  62.66%
             
    Average Balances        
    Average assets $1,360,154  $1,415,169 
    Average earning assets  1,278,136   1,265,509 
    Average shareholders’ equity  111,460   106,285 
             
    Asset Quality        
    Loan charge-offs $1,228  $394 
    Loan recoveries  326   375 
    Net charge-offs  902   19 
             
    Reconciliation of Tax-Equivalent Net Interest Income (7)        
    GAAP measures:        
    Interest income – loans $36,038  $30,218 
    Interest income – investments and other  6,407   5,437 
    Interest expense – deposits  (9,428)  (1,680)
    Interest expense – subordinated debt  (207)  (208)
    Interest expense – junior subordinated debt  (203)  (202)
    Interest expense – other borrowings  (3)  — 
    Total net interest income $32,604  $33,565 
    Non-GAAP measures:        
    Tax benefit realized on non-taxable interest income – loans $—  $8 
    Tax benefit realized on non-taxable interest income – municipal securities  244   245 
    Total tax benefit realized on non-taxable interest income $244  $253 
    Total tax-equivalent net interest income $32,848  $33,818 

    (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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