STRASBURG, Va., April 23, 2019 (GLOBE NEWSWIRE) -- First National Corporation (NASDAQ:FXNC) reported net income of $2.3 million, or $0.46 per diluted share, for the first quarter of 2019, compared to $2.7 million or $0.54 per diluted share for the first quarter of 2018. The decrease in net income resulted primarily from a $648 thousand decrease in noninterest income, which included a $456 thousand decrease in income from bank-owned life insurance. Net interest income increased by $352 thousand, or 5%, compared to the first quarter of 2018. On April 18, 2019, the Company began trading on the Nasdaq Capital Market stock exchange under the symbol FXNC.
Key accomplishments in the first quarter of 2019:
- Total assets reached $775 million
- Return on average equity of 13.47%
- Return on average assets of 1.21%
- Net interest margin of 3.97%
- Loan growth of $7.6 million for the quarter
- Deposit growth of $13.7 million for the quarter
“The Company continued to deliver superior financial performance in the first quarter,” said Scott Harvard, president and chief executive officer of First National. Harvard added, “We are pleased to report an increase in net interest income over the same quarter one year ago, which was driven by high quality loan growth and an improved net interest margin. While asset quality continues to be excellent, we are mindful of how late we may be in the current economic cycle and remain committed to adhering to consistent underwriting of today’s credits.”
BALANCE SHEET
Total assets of First National increased $7.2 million to $775.1 million, compared to $767.9 million at March 31, 2018. The earning asset composition changed favorably as loans, net of the allowance for loan losses, increased $29.9 million, or 6%, while securities and interest-bearing deposits in banks decreased $25.9 million, or 13%, when comparing the periods.
Total deposits decreased $8.6 million to $684.2 million, compared to $692.8 million at March 31, 2018. The deposit portfolio composition remained stable as noninterest-bearing deposits were 28% and 27% of total deposits at March 31, 2019 and 2018, respectively.
Shareholders’ equity increased $10.0 million to $69.7 million at March 31, 2019, compared to $59.7 million one year ago, primarily from an increase in retained earnings. Tangible common equity totaled $69.3 million at the end of the first quarter, an increase of 18% compared to $58.9 million at March 31, 2018. The Company’s wholly-owned banking subsidiary, First Bank, was considered well-capitalized based on regulatory requirements at the end of the year.
ANALYSIS OF THE THREE-MONTH PERIOD
Net interest income increased $352 thousand, or 5%, to $6.9 million for the quarter ended March 31, 2019, compared to $6.5 million for the first quarter of 2018. The increase resulted from a higher net interest margin and higher average earning asset balances. Average earning asset balances increased 1%, and the net interest margin increased 18 basis points to 3.97% for the quarter ended March 31, 2019, compared to 3.79% for the same period in 2018. The increase in the net interest margin resulted from a 38 basis point increase in the yield on average earning assets, which was partially offset by a 20 basis point increase in interest expense as a percent of average earning assets.
The higher yield on average earning assets was primarily attributable to an increase in yields on loans, securities and interest-bearing deposits in banks. The increase in interest expense was primarily attributable to higher interest rates paid on deposits, as the cost of total interest-bearing deposits increased by 28 basis points, which compared favorably to increases of 100 basis points in the target federal funds rate during 2018.
Noninterest income decreased $648 thousand to $2.0 million, compared to $2.6 million for the same period of 2018. The decrease was primarily attributable to a $456 thousand decrease in bank owned life insurance and a $194 thousand decrease in other income. The decrease in bank owned life insurance revenue was a result of a death benefit recorded in the first quarter of 2018. The decrease in other operating income was primarily attributable to the termination of the Company’s pension plan and the subsequent distribution of plan assets in the prior year, which resulted in a one-time increase in other operating income of $126 thousand during the first quarter of 2018. The decreases were partially offset by a $30 thousand, or 7%, increase in wealth management fees.
Noninterest expense increased $232 thousand, or 4%, to $6.1 million for the first quarter, compared to the same period one year ago. Legal and professional fees increased $50 thousand, which resulted primarily from an increase in investment advisory costs of the wealth management department, and audit fees related to new requirements for internal controls over financial reporting. The increase in investment advisory expense correlated with the increase in wealth management revenue when comparing the periods. Telecommunications expense increased $47 thousand as a result of a refund of overbilled services that favorably impacted the first quarter of 2018. Occupancy expense increased $38 thousand primarily from expenses associated with closing of one branch office and improvements to an existing branch office. These increases were partially offset by decreases in expense categories, including amortization expense, postage expense and FDIC assessments.
ASSET QUALITY/LOAN LOSS PROVISION
There was no provision for loan losses recorded for the first quarter of 2019, compared to $100 thousand for the first quarter 2018. Net charge-offs totaled $63 thousand for the first quarter of 2019 compared to $154 thousand for the same period of 2018. Nonperforming assets totaled $1.9 million, or 0.25% of total assets at March 31, 2019, compared to $682 thousand, or 0.09% of total assets, one year ago. The allowance for loan losses totaled $4.9 million, or 0.90% of total loans, and $5.3 million, or 1.01% of total loans, at March 31, 2019 and 2018, respectively.
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, one loan production office, a customer service center in a retirement community, and 14 bank branch office locations located throughout the Shenandoah Valley and central regions of Virginia. In addition to providing traditional banking services, the Bank operates a wealth management division under the name First Bank Wealth Management. First Bank also owns First Bank Financial Services, Inc., which invests in entities that provide investment services and title insurance.
