First National Corporation Announces Fourth Quarter and Annual Profit

    First National Corporation Announces Fourth Quarter and Annual Profit

PR Newswire

STRASBURG, Va., Jan. 29, 2013

STRASBURG, Va., Jan. 29, 2013 /PRNewswire/ --First National Corporation (the
"Company") (OTCBB: FXNC), the parent company of First Bank (the "Bank"),
announced today fourth quarter and annual profits, both significant
improvements over the comparable periods of 2011. Net income for the fourth
quarter of 2012 totaled $966 thousand, compared to a net loss of $8.1 million
for the same period in 2011. For the year ended December 31, 2012, net income
totaled $2.8 million, which was a dramatic improvement compared to a net loss
of $11.0 million for the same period in 2011. After the effective dividend on
preferred stock, net income available to common shareholders totaled $740
thousand or $0.15 per basic and diluted share for the fourth quarter of 2012,
compared to a net loss available to common shareholders of $8.4 million or
$2.82 per basic and diluted share for the same period of 2011. For the year
ended December 31, 2012, net income available to common shareholders totaled
$1.9 million or $0.49 per basic and diluted share, compared to net loss
available to common shareholders of $11.9 million or $4.01 per basic and
diluted share for the same period of 2011.

(Logo: http://photos.prnewswire.com/prnh/20120213/PH52225LOGO )

Scott C. Harvard, President and CEO of the Company and the Bank commented, "We
are pleased to report a profitable 2012, in what was clearly a turnaround year
for our banking company. The year 2012 was a rebuilding year across all areas
of the company and we met our goals of being profitable each quarter, raising
capital to add financial strength, lowering non-performing asset levels, and
focusing on our core strength of delivering exceptional customer service. We
are pleased that through the hard work of our dedicated staff, we achieved
these goals, and in the fourth quarter we grew the loan portfolio for the
first time in over two years. As one of the few independent banks in our
communities, we remain excited about the prospects for the future."

Operating Highlights for 2012

  oSignificant earnings improvement
  oNonperforming assets decreased 23% from prior year end
  oRaised $7.8 million of additional capital in June
  oExited TARP program in August
  oStrengthened management with the addition of James Youngblood, Senior
    Lending Officer
  oStable revenues
  oProvision for loan losses was $8.8 million lower
  oAllowance for loan losses totaled $13.1 million or 3.41% of total loans
  oBank capital ratios continued to exceed well capitalized guidelines

Fourth Quarter Earnings

Net income was $9.1 million higher for the fourth quarter of 2012, compared to
the same period one year ago. Improved asset quality contributed to the $2.9
million decrease in the provision for loan losses, which totaled $100 thousand
in the fourth quarter of 2012 compared to $3.0 million for the same period of
2011. In addition, expenses related to OREO decreased $971 thousand to $669
thousand for the fourth quarter of 2012 compared to $1.6 million for the same
period of 2011. Return on average assets was 0.73% and return on average
equity was 8.57% for the fourth quarter of 2012, compared to -6.03% and
-73.99%, respectively, for the fourth quarter of 2011.

Net interest income totaled $4.7 million for the fourth quarter of 2012
compared to $5.1 million for the same period one year ago. The net interest
margin was 3.75% compared to 4.07% for the same period one year ago.
Noninterest income increased 6% to $1.6 million compared to the same period
one year ago. Revenues from gains on sales of loans and trust and investment
advisory fees increased while service charges on deposit accounts and fees for
other customer services decreased.

Noninterest expense decreased 19% to $5.1 million for the fourth quarter of
2012 compared to $6.3 million for the same period in 2011, primarily from
reduced expenses related to OREO. OREO related expenses totaled $669 thousand
in the fourth quarter of 2012, a decline of 59%, compared to $1.6 million for
the same period in 2011.

Asset Quality

Nonperforming assets decreased 23% to $14.0 million at December 31, 2012
compared to $18.2 million at December 31, 2011. The reduction was primarily
attributable to non-accrual loans decreasing from $11.8 million at the end of
the fourth quarter of 2011 to $8.4 million at the end of the fourth quarter of
2012. Other real estate owned decreased by $782 thousand to $5.6 million.  Net
charge-offs for the period decreased $7.4 million to $1.1 million compared to
$8.5 million in the fourth quarter of 2011. The allowance for loan losses
totaled $13.1 million or 3.41% of total loans at December 31, 2012. This
compared to an allowance for loan losses of $12.9 million, or 3.30% of total
loans, at December 31, 2011.

Year-to-Date Performance

Net income was $13.8 million higher for the year ended December 31, 2012
compared to prior year. Improved asset quality contributed to the $8.8 million
decrease in the provision for loan losses, which totaled $3.6 million in 2012
and $12.4 million in 2011. In addition, expenses related to OREO decreased
$1.6 million to $1.4 million for the year ended December 31, 2012 compared to
$3.0 million for 2011. Return on average assets was 0.54% and return on
average equity was 6.85% for 2012, compared to -1.96% and -22.46%,
respectively, for 2011.

Net interest income was $19.3 million compared to $20.2 million for same
period in 2011. Noninterest income, excluding gains on sale of securities,
increased 3% to $5.9 million compared to $5.7 million for the same period one
year ago. Revenues from gains on sales of loans and trust and investment
advisory fees increased while service charges on deposit accounts and ATM and
check card income decreased.

Noninterest expense decreased 8% to $19.1 million compared to the same period
in 2011, primarily from reduced expenses related to OREO. OREO related
expenses totaled $1.4 million for 2012, a decline of 53%, compared to $3.0
million for the same period in 2011.

Cautionary Statements

The Company notes to investors that past results of operations do not
necessarily indicate future results. Certain factors that affect the
Company's operations and business environment are subject to uncertainties
that could in turn affect future results. These factors are identified in the
Annual Report on Form 10-K for the year ended December 31, 2011, which can be
accessed from the Company's website at www.fbvirginia.com, as filed with the
Securities and Exchange Commission.

About the Company

First National Corporation, headquartered in Strasburg, Virginia, is the bank
holding company of First Bank. First Bank offers loan, deposit, trust and
investment products and services from 10 office locations in the northern
Shenandoah Valley region of Virginia, including Shenandoah County, Warren
County, Frederick County and the City of Winchester.  First Bank also owns
First Bank Financial Services, Inc., which invests in entities that provide
investment services and title insurance.



FIRST NATIONAL CORPORATION

Quarterly Performance Summary

(in thousands, except share and per share data)


                     (unaudited)                  (unaudited)

                     For the Three Months Ended   For the Year Ended
Income Statement     12/31/2012     12/31/2011    12/31/2012       12/31/2011
Interest and
dividend income
 Interest and fees  $          $          $            $   
on loans             5,061          5,590        21,062           22,907
 Interest on        -              5             12               18
federal funds sold
 Interest on        11             3             30               18
deposits in banks
 Interest and
dividends on
securities available
for sale:
 Taxable interest 434            534           1,976            2,152
 Tax-exempt       47             118           275              483
interest
 Dividends        20             20            77               70
Total interest and   $          $          $            $   
dividend income      5,573          6,270        23,432           25,648
Interest expense
 Interest on        $         $          $           $    
deposits             833           1,033        3,707            4,843
 Interest on trust
preferred capital    56             59            238              386
notes
 Interest on other  30             46            222              221
borrowings
Total interest       $         $          $           $    
expense              919           1,138        4,167            5,450
Net interest income  $          $          $            $   
                     4,654          5,132        19,265           20,198
Provision for loan   100            2,985         3,555            12,380
losses
Net interest income  $          $          $            $    
after provision for  4,554          2,147        15,710           7,818
loan losses
Noninterest income
 Service charges on $         $         $           $    
deposit accounts     558           611          2,127            2,237
 ATM and check card 352            363           1,481            1,535
fees
 Trust and
investment advisory  371            331           1,450            1,407
fees
 Fees for other     107            138           390              369
customer services
 Gains on sale of   71             37            214              131
loans
 Gains on sale of
securities available -              18            1,285            59
for sale
 Gains on sale of
premises and         -              -             2                -
equipment
 Other operating    130            3             225              61
income
Total noninterest    $          $          $           $    
income               1,589          1,501        7,174            5,799
Noninterest expense
 Salaries and       $          $          $           $    
employee benefits    2,402          2,593        9,557            9,460
 Occupancy          347            335           1,343            1,354
 Equipment 301            299           1,208            1,272
 Marketing          137            111           430              425
 Stationery and     74             69            308              323
supplies
Legal and           227            223           968              969
professional fees
 ATM and check card 169            169           649              661
fees
 FDIC assessment    176            180           709              768
 (Gains) losses on
sale of other real   19             938           (278)            910
estate owned, net
 Provision for
other real estate    657            455           1,252            1,558
owned
 Other real estate
owned expense        (7)            247           443              572
(income)
 Other operating    582            665           2,490            2,471
expense
Total noninterest    $          $          $            $   
expense              5,084          6,284        19,079           20,743
Income (loss) before $          $           $           $   
income taxes         1,059          (2,636)       3,805            (7,126)
Income tax provision 93             5,497         982              3,835
Net income (loss)    $         $           $           $  
                     966           (8,133)       2,823            (10,961)
Effective dividend
and accretion on     226            224           903              894
preferred stock
Net income (loss)    $         $           $           $  
available to common  740           (8,357)       1,920            (11,855)
shareholders
Common Share and Per
Common Share Data
Net income (loss),   $    0.15  $          $          $    
basic and diluted                   (2.82)        0.49             (4.01)
Shares outstanding   4,901,464      2,955,649     4,901,464        2,955,649
at period end
Weighted average
shares, basic and    4,901,464      2,955,649     3,944,506        2,953,344
diluted
Book value at period $          $         $          $     
end                  6.22           7.72         6.22             7.72
Cash dividends       $        $        $         $     
                     -               -           -            0.20



FIRST NATIONAL CORPORATION

Quarterly Performance Summary

(in thousands, except share and per share data)
                   (unaudited)              (unaudited)

                   For the Three Months     For the Year Ended
                   Ended
                   12/31/2012   12/31/2011  12/31/2012      12/31/2011
Key Performance
Ratios
Return on average  0.73%        (6.03%)     0.54%           (1.96%)
assets
Return on average  8.57%        (73.99%)    6.85%           (22.46%)
equity
Net interest       3.75%        4.07%       3.89%           3.98%
margin
Efficiency ratio   69.96%       76.49%      71.41%          69.66%
^(1)
Average Balances
Average assets     $        $          $            $  544,338
                   524,408      535,358    527,258
Average earning    500,075      507,340     500,895         514,688
assets
Average
shareholders'      44,827       43,612      41,203          47,416
equity
Asset Quality
Loan charge-offs   $        $        $           $  
                     1,210    8,652       3,793           15,789
Loan recoveries    136          103         376             310
Net charge-offs    1,074        8,549       3,417           15,479
Non-accrual loans  8,393        11,841      8,393           11,841
Other real estate  5,592        6,374       5,592           6,374
owned, net
Nonperforming      13,985       18,215      13,985          18,215
assets
Loans over 90 days
past due, still    228          459         228             459
accruing
Troubled debt
restructurings     1,570        4,775       1,570           4,775
(accruing)
Special mention    26,614       31,300      26,614          31,300
loans
Substandard loans  44,620       45,023      44,620          45,032
(accruing)
Doubtful loans     -            3,922       -               3,922
                                                  12/31/2012      12/31/2011
Capital Ratios
Tier 1 capital                                    $             $  
                                                  54,920         45,231
Total capital                                     59,898          50,359
Total capital to                                  15.35%          12.51%
risk-weighted assets
Tier 1 capital to                                 14.08%          11.24%
risk-weighted assets
Leverage ratio                                    10.48%          8.45%
Balance Sheet
Cash and due from                                 $            $   
banks                                             7,266          6,314
Interest-bearing                                  23,762          23,210
deposits in banks
Securities available
for sale, at fair                                 89,457          91,665
value
Restricted securities,                            1,973           2,775
at cost
Loans held for sale                               503             274
Loans, net of
allowance for loan                                370,519         379,503
losses
Premises and                                      18,587          19,598
equipment, net
Interest receivable                               1,459           1,620
Other assets                                      19,153          14,105
 Total assets                                    $  532,679    $ 
                                                                  539,064
Noninterest-bearing                               $             $  
demand deposits                                   85,118         81,714
Savings and
interest-bearing                                  221,601         198,194
demand deposits
Time deposits                                     160,198         189,264
 Total deposits                                  $  466,917    $ 
                                                                  469,172
Other borrowings                                  6,076           19,100
Trust preferred                                   9,279           9,279
capital notes
Other liabilities                                 5,495           4,417
 Total liabilities                               $  487,767    $ 
                                                                  501,968



FIRST NATIONAL CORPORATION

Quarterly Performance Summary

(in thousands, except share and per share data)
                                (unaudited)
                                12/31/2012             12/31/2011
Balance Sheet (continued)
Preferred stock                 $      14,409     $     14,263
Common stock                    6,127                  3,695
Surplus                         6,813                  1,644
Retained earnings               18,422                 16,503
Accumulated other comprehensive (859)                  991
income (loss), net
 Total shareholders' equity    $      44,912     $     37,096
 Total liabilities and         $     532,679      $    539,064
shareholders' equity
Loan Data
Mortgage loans on real estate:
 Construction and land         $      43,524     $     48,363
development
 Secured by farm land          5,795                  6,161
 Secured by 1-4 family         134,964                122,339
residential
 Other real estate loans       168,425                174,980
Loans to farmers (except those  2,238                  2,224
secured by real estate)
Commercial and industrial loans
(except those secured by real   20,833                 27,222
estate)
Consumer installment loans      6,991                  9,760
Deposit overdrafts              153                    325
All other loans                 671                    1,066
 Total loans                   $     383,594      $    392,440
Allowance for loan losses       13,075                 12,937
Loans, net                      $     370,519      $    379,503
^(1) The efficiency ratio is computed by dividing noninterest expense
excluding the provision for other real estate owned and gains and losses on
other real estate owned by the sum of net interest income on a tax
equivalent basis and noninterest income excluding gains and losses on sales
of securities and premises and equipment. 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 for
2012 and 2011 was 34%. Net interest income on a tax equivalent basis was
$4,713 and $5,198 for the three months ended December 31, 2012 and 2011,
respectively, and $19,463 and $20,496 for the year ended December 31, 2012
and 2011. Noninterest income excluding gains and losses on sales of
securities and premises and equipment was $1,589 and $1,483 for the three
months ended December 31, 2012 and 2011, respectively, and $5,887 and
$5,740 for the year ended December 31, 2012 and 2011, respectively. The
efficiency ratio is a non-GAAP financial measure that management believes
provides investors with important information regarding operational
efficiency. Such information is not in accordance with generally accepted
accounting principles (GAAP) and should not be construed as such.
Management believes 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.

Contact:
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

SOURCE First National Corporation

Website: http://www.fbvirginia.com
 
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