First National Corporation Announces Third Quarter Earnings

STRASBURG, Va., Oct. 28, 2015 (GLOBE NEWSWIRE) — First National Corporation (the “Company”) (OTC:FXNC), the parent company of First Bank (the “Bank”), reported net income of $726 thousand, or $0.08 per basic and diluted share for the quarter ended September 30, 2015 compared to $1.2 million, or $0.19 per basic and diluted share for the same period of 2014.  The current year results were impacted by higher noninterest expenses from the Bank’s recent expansion.

Operating Highlights

  • Total assets increased $169.5 million from one year ago to $688.9 million
  • Net loan growth of $15.2 million for the quarter and $35.9 million over the last twelve months
  • Deposits increased $175.0 million to $613.9 million while the cost to fund earning assets decreased to 0.21%
  • Net interest income increased $675 thousand or 14%
  • Noninterest income increased $590 thousand or 36%
  • Substandard loans cut almost in half as balances decreased by $9.6 million or 48%
  • Began an efficiency initiative to streamline processes, improve customer service and reduce expenses

“We are pleased with the progress made during the quarter as we successfully deployed deposits assumed in the recent branch acquisition,” said Scott C. Harvard, President and CEO of the Company.  Harvard continued, “Our team was able to deploy recently acquired deposits into loans and securities during the quarter, making a positive impact on margin and net interest income. The new south region lending team under the leadership of Butch Smiley was a strong contributor to our success for the period. Moving forward, we will work to build on this loan momentum while focusing on streamlining processes and improving efficiency across the Company.”

Third Quarter Earnings

Net income totaled $726 thousand for the third quarter of 2015 compared to $1.2 million for the same period of 2014.  The return on average assets was 0.42% for the quarter compared to 0.95% for the same quarter one year ago, and the return on average equity was 4.80% compared to 8.64%.  Significant increases in total revenue (net interest income plus noninterest income) were offset by higher noninterest expenses that resulted from the recent expansion of the Bank’s branch network and the addition of seasoned commercial bankers in our southern region.  The new employees hired and the acquisition and operation of six additional banking offices increased expenses mostly in salaries and employee benefits, occupancy and equipment, as well as a core deposit intangible amortization expense. 

The Company experienced total revenue growth of $1.3 million or 20% compared to the same period one year ago.  Net interest income increased $675 thousand or 14% to $5.4 million for the third quarter compared to $4.8 million for the same period one year ago.  The increase in net interest income was driven primarily by net loan growth of $35.9 million, securities portfolio growth of $58.7 million, and a steady reduction in the cost to fund earning assets.  The benefit of the higher volume of earning assets outweighed the lower net interest margin of 3.40% for the quarter.  The net interest margin was 3.92% for the same quarter in 2014. The net interest margin was impacted by the second quarter branch acquisition which included the assumption of $186 million of deposits with no loans, resulting in higher balances of interest-bearing deposits in banks.

Noninterest income increased 36% or $590 thousand to $2.2 million for the period compared to $1.7 million for the same quarter one year ago. Included in the improved noninterest income categories were revenue from service charges on deposit accounts which increased $242 thousand or 37%, and ATM and check card fees which increased $162 thousand or 44%. The increases in revenue from service charges on deposit accounts and ATM and check card fees were driven by the increase in the number of transaction-based core deposit accounts assumed in the acquisition.

Noninterest expense increased to $6.7 million for the quarter compared to $4.8 million for the same period in the prior year as a result of the additional banking offices and bankers.  The new bankers and the six banking offices had a significant impact on salaries and employee benefits, occupancy and equipment, and the core deposit intangible amortization expense categories.  The Bank began an initiative in October 2015 to streamline processes, improve customer service, and reduce operating expenses with the intention of improving the efficiency ratio in future periods.  During the quarter, the Company eliminated the position of CEO of the mortgage division and began to adjust staffing based on production levels.

Asset quality continued to improve and economic indicators remained favorable in the Bank’s market area.  There was no provision for loan loss required during the quarter as the increase in the general reserve component of the allowance for loan losses was offset by the decrease in the specific reserve component.  The allowance for loan losses totaled $5.6 million, or 1.37% of total loans at September 30, 2015.  This compared to a recovery of loan losses of $100 thousand and an allowance for loan losses of $9.7 million, or 2.59% of total loans, at the end of the third quarter of 2014.

Third Quarter 2015 Earnings Compared to Second Quarter 2015

The Company experienced an improvement in several areas when comparing the third quarter to the second quarter of 2015. Net income, net interest income and the net interest margin all increased.  In addition, noninterest expense declined in the first full quarter following the branch acquisition.  Net income increased by $282 thousand to $726 thousand for the third quarter of 2015 compared to $444 thousand for the second quarter of 2015.  The return on average assets was 0.42% compared to 0.27%, and the return on average equity was 4.80% compared to 2.97%. 

Net interest income increased $358 thousand or 7% to $5.4 million for the third quarter 2015 compared to $5.1 million for the second quarter of 2015, which was driven by $15.2 million of net loan growth during the quarter.  The net interest margin improved to 3.40% from 3.29% as the Bank continued to deploy interest-bearing deposits in banks into loans and securities.

Total noninterest income was $2.2 million for the period compared to $2.3 million last quarter.  Revenue from service charges on deposits increased by $145 thousand, or 19%, due to increased checking account activity. Other operating income decreased by $227 thousand, which was attributable to a $201 thousand gain recorded during the second quarter from the branch acquisition.  Noninterest expense decreased to $6.7 million for the quarter compared to $6.9 million for the prior quarter. 

Year-to-Date Earnings

Net income totaled $1.7 million for the nine months ended September 30, 2015, compared to $3.9 million for the same period of 2014. The return on average assets was 0.37% for the period compared to 1.00% for the same period one year ago, and the return on average equity was 3.82% compared to 9.41% for the same period in 2014.

Net interest income increased $1.3 million, or 9%, to $15.1 million for the period, compared to $13.8 million for the same period one year ago. The increase was primarily attributable to higher loan balances and higher securities balances during the first nine months of 2015 compared to the same period of 2014.  The net interest margin was 3.52% compared to 3.82% for the same period of 2014. The lower net interest margin resulted from the significant increase in interest-bearing deposits in banks from cash received from the recent branch acquisition.

Noninterest income increased by $1.1 million, or 23% when comparing the periods. The increase resulted primarily from the recent branch acquisition which included the assumption of a significant amount of transaction-based core deposit accounts. Service charges on deposits increased by $268 thousand, or 14%, ATM and check card fees increased $308 thousand, or 29%, and fees for other customer services increased $156 thousand, or 51%. In addition, net gains on sale of loans increased $158 thousand, and other operating income increased by $209 thousand mostly from a $201 thousand gain recorded from the branch acquisition.

Noninterest expense increased $5.1 million, or 37%, to $19.0 million for the period compared to $13.9 million for the same period in the prior year. Branch acquisition expenses totaled $897 thousand during the nine months ended September 30, 2015.  Salaries and employee benefit costs increased by $2.6 million to $10.4 million, occupancy expense increased by $156 thousand to $1.1 million, and equipment expense increased by $205 thousand to $1.1 million for the period in order to accommodate the larger organization. Amortization expense increased $414 thousand related to the core deposit intangible recorded from the branch acquisition, and expenses from other real estate owned increased $322 thousand compared to the same period one year ago.

The Bank recorded a recovery of loan losses totaling $100 thousand for the period compared to a recovery of loan losses of $700 thousand for the same period one year ago. The recovery of loan losses for the first nine months of 2015 was primarily attributable to lower required general and specific reserves comprising the allowance for loan losses.

Balance Sheet

Total assets increased $169.5 million, or 33%, to $688.9 million at September 30, 2015 compared to one year ago and net loans increased $35.9 million, or 10%, to $400.8 million.  Loan growth occurred primarily in real estate loans secured by 1-4 family residential real estate and commercial real estate in both the legacy market and the new southern region.   Total deposits increased $175.0 million, or 40%, to $613.9 million, with noninterest-bearing demand deposits representing 26%, or $46.1 million of the increase, savings and interest-bearing demand deposits comprising 54%, or $93.9 million, and time deposits representing 20%, or $35.0 million of the increase.  The balance sheet growth contributed to a $1.3 million, or 9% increase in net interest income for the nine month period ended September 30, 2015 when compared to the same period of 2014.

Capital and Asset Quality

Asset quality continued to improve as substandard loans decreased by $9.6 million or 48%, to $10.5 million at the end of the third quarter compared to $20.1 million for the same quarter one year ago.  Nonperforming assets, which includes other real estate owned, decreased 27% to $7.7 million at September 30, 2015 compared to $10.5 million one year ago. 

Total shareholders’ equity increased $2.8 million to $60.4 million at September 30, 2015, compared to $57.6 million one year ago.  The book value per common share totaled $9.32 at the end of the third quarter. All regulatory capital ratios of the Bank met internal target levels and exceeded regulatory requirements to be considered well-capitalized.

About the Company

First National Corporation, headquartered in Strasburg, Virginia, is the bank holding company of First Bank, a community bank that first opened for business in 1907.  The Bank offers loan, deposit, and wealth management products and services from 17 office locations located throughout the Shenandoah Valley and central regions of Virginia. Banking services are also accessed from the Bank’s website, www.fbvirginia.com, and from a network of ATMs located throughout its market area.  The Bank operates a mortgage division and 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.

Caution about 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. For details on 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, 2014, and other filings with the Securities and Exchange Commission.

 
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
  (unaudited)
For the Quarter Ended
Income Statement September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
  September 30,
2014
Interest income                  
Interest and fees on loans $ 4,854     $ 4,688     $ 4,540     $ 4,623     $ 4,536  
Interest on deposits in banks   61       68       5       5       3  
Interest on securities   829       618       422       566       622  
Dividends on restricted securities     20         18         21         20          20  
Total interest income $ 5,764     $ 5,392     $ 4,988     $ 5,214     $ 5,181  
                                       
Interest expense                                      
Interest on deposits $ 282     $ 266     $ 300     $ 327     $ 343  
Interest on federal funds purchased         1       1       1       2  
Interest on trust preferred capital notes   56       55       54       55       55  
Interest on other borrowings     –          2          1          26          30  
Total interest expense $   338     $    324     $    356     $    409     $    430  
                                       
Net interest income $ 5,426     $ 5,068     $ 4,632     $ 4,805     $ 4,751  
Recovery of loan losses      –          (100 )        –          (3,150 )        (100 )
Net interest income after recovery of loan losses $ 5,426     $ 5,168     $ 4,632     $ 7,955     $ 4,851  
                                       
Noninterest income                                      
Service charges on deposit accounts $ 897     $ 752     $ 547     $ 644     $ 655  
ATM and check card fees   529       497       349       352       367  
Wealth management fees   477       499       503       465       494  
Fees for other customer services   172       184       107       90       94  
Income from bank owned life insurance   106       90       74       101       103  
Net gains (losses) on sale of securities               (52 )     765       (91 )
Net gains on sale of loans   53       50       55       23        
Other operating income     10          237          8          9          32   
Total noninterest income $   2,244     $    2,309     $    1,591     $    2,449     $    1,654  
                                       
Noninterest expense                                      
Salaries and employee benefits $ 3,637     $ 3,597     $ 3,125     $ 2,855     $ 2,668  
Occupancy   396       339       317       315       303  
Equipment   400       422       281       293       299  
Marketing   176       163       97       77       114  
Stationery and supplies   116       229       345       75       84  
Legal and professional fees   243       431       212       320       250  
ATM and check card fees   236       190       155       168       167  
FDIC assessment   134       64       67       70       90  
Bank franchise tax   131       130       122       105       106  
Telecommunications expense   131       100       85       81       75  
Data processing expense   130       226       187       140       129  
Postage expense   73       80       117       51       50  
Amortization expense   226       196       4       4       4  
Other real estate owned, net   144       152       (36 )     (151 )     (23 )
Other operating expense     528         536         409         468         437  
Total noninterest expense $   6,701     $    6,855     $    5,487     $    4,871     $    4,753  
                                       
Income before income taxes $ 969     $ 622     $ 736     $ 5,533     $ 1,752  
Income tax expense     243          178          192          1,837          505  
Net income $   726     $    444     $    544     $    3,696     $    1,247  
Effective dividend and accretion on preferred stock   328       328       329        328       329  
Net income available to common shareholders $ 398     $ 116     $ 215     $ 3,368     $ 918  
                                       
Common Share and Per Common Share Data                                      
Net income, basic $ 0.08     $ 0.02     $ 0.04     $ 0.68     $ 0.19  
Weighted average shares, basic   4,911,604       4,909,775       4,906,981       4,903,748       4,902,716  
Net income, diluted $ 0.08     $ 0.02     $ 0.04     $ 0.68     $ 0.19  
Weighted average shares, diluted   4,913,461       4,911,298       4,911,044       4,903,748       4,902,716  
Shares outstanding at period end   4,912,662       4,910,826       4,909,714       4,904,577       4,903,612  
Book value at period end $ 9.32     $ 9.13     $ 9.31     $ 9.17     $ 8.77  
Cash dividends $ 0.025     $ 0.025     $ 0.025     $ 0.025     $ 0.025  

 
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
 
  (unaudited)
For the Quarter Ended
  September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
  September 30,
2014
Key Performance Ratios                  
Return on average assets   0.42 %     0.27 %     0.43 %     2.81 %     0.95 %
Return on average equity   4.80 %     2.97 %     3.67 %     25.03 %     8.64 %
Net interest margin   3.40 %     3.29 %     3.96 %     3.96 %     3.92 %
Efficiency ratio (1)   84.55 %     92.54 %     87.20 %     76.61 %     72.74 %
                                       
Average Balances                                      
Average assets $ 691,121     $ 671,199     $ 516,259     $ 521,889     $ 521,622  
Average earning assets   642,234       625,197       480,490       487,591       487,541  
Average shareholders’ equity   60,043       59,957       60,040       58,583       57,217  
                           
Asset Quality                          
Loan charge-offs $ 637     $ 671     $ 112     $ 80     $ 302  
Loan recoveries   83       129       165       231       112  
Net charge-offs (recoveries)   554       542       (53 )     (151 )     190  
Non-accrual loans   4,930       6,666       7,170       8,000       8,673  
Other real estate owned, net   2,760       2,407       1,949       1,888       1,807  
Nonperforming assets   7,690       9,073       9,119       9,888       10,480  
Loans over 90 days past due, still accruing   147       600       71             2,148  
Troubled debt restructurings, accruing   321       324       782       790       796  
Special mention loans   15,706       21,278       22,550       23,259       18,411  
Substandard loans, accruing   10,496       10,927       15,741       15,792       20,088  
Doubtful loans                            
                                       
Capital Ratios (2)                                      
Total capital $ 60,232     $ 72,362     $ 72,764     $ 71,941     $ 66,445  
Tier 1 capital   55,066       67,400       67,918       67,217       61,693  
Common equity tier 1 capital   55,066       67,400       67,918       67,217       61,693  
Total capital to risk-weighted assets   14.59 %     18.28 %     18.86 %     19.14 %     17.71 %
Tier 1 capital to risk-weighted assets   13.34 %     17.03 %     17.61 %     17.88 %     16.44 %
Common equity tier 1 capital to risk-weighted assets   13.34 %     17.03 %     17.61 %     17.88 %     16.44 %
Leverage ratio   7.99 %     10.06 %     13.17 %     12.90 %     11.85 %
                                     
Balance Sheet                                    
Cash and due from banks $ 9,890     $ 11,870     $ 7,529     $ 6,043     $ 6,862  
Interest-bearing deposits in banks   66,956       99,274       1,645       18,802       3,885  
Securities available for sale, at fair value   109,166       112,468       90,855       83,292       104,710  
Securities held to maturity, at carrying value   54,276       37,343                    
Restricted securities, at cost   1,391       1,391       1,999       1,366       1,636  
Loans held for sale   471       1,978             328       181  
Loans, net of allowance for loan losses   400,838       385,592       391,746       371,692       364,974  
Other real estate owned, net of valuation allowance   2,760       2,407       1,949       1,888       1,807  
Premises and equipment, net   21,493       21,277       16,298       16,126       16,175  
Accrued interest receivable   1,543       1,423       1,256       1,261       1,327  
Bank owned life insurance   11,627       11,521       11,431       11,357       11,244  
Core deposit intangibles, net   2,539       2,765       51       55       59  
Other assets      5,945          6,518         5,650         5,955          6,550  
Total assets $    688,895     $    695,827     $    530,409     $    518,165     $    519,410  
                                       
Noninterest-bearing demand deposits $ 149,178     $ 147,790     $ 109,927     $ 104,986     $ 103,019  
Savings and interest-bearing demand deposits   318,510       322,239       231,885       237,618       224,655  
Time deposits      146,219          150,853          96,974          101,734          111,245  
Total deposits $ 613,907     $ 620,882     $ 438,786     $ 444,338     $ 438,919  
Federal funds purchased               1,955       52       5,325  
Other borrowings   7       13       15,020       26       6,033  
Trust preferred capital notes   9,279       9,279       9,279       9,279       9,279  
Accrued interest payable and other liabilities      5,303          6,214          5,057          4,906          2,232  
Total liabilities $    628,496     $    636,388     $    470,097     $    458,601     $    461,788  
                                                           
FIRST NATIONAL CORPORATION
Quarterly Performance Summary
(in thousands, except share and per share data)
                                   
                   
    (unaudited)
  For the Quarter Ended
  September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
  September 30,
2014
                   
Balance Sheet (continued)                  
Preferred stock $    14,595     $  14,595     $    14,595     $    14,595     $    14,595  
Common stock   6,141       6,139       6,137       6,131       6,130  
Surplus   6,922       6,899       6,881       6,835       6,828  
Retained earnings   33,917       33,642       33,649       33,557       30,312  
Accumulated other comprehensive loss, net      (1,176 )        (1,836 )        (950 )        (1,554 )        (243 )
Total shareholders’ equity $    60,399     $    59,439     $    60,312     $    59,564     $    57,622  
Total liabilities and shareholders’ equity $  688,895     $  695,827     $  530,409     $  518,165     $  519,410  
                   
Loan Data                  
Mortgage loans on real estate:                  
Construction and land development $    29,935     $  32,009     $   33,344     $    29,475     $   29,862  
Secured by farm land   984       1,025       1,067       1,129       1,193  
Secured by 1-4 family residential   179,419       173,265       172,874       163,727       155,298  
Other real estate loans   164,677       154,371       157,829       150,673       153,576  
Loans to farmers (except those secured by real estate)   3,014       2,645       2,760       2,975       2,905  
Commercial and industrial loans (except those secured by real estate)   16,936       16,674       18,660       18,191       20,038  
Consumer installment loans   4,165       4,341       4,713       4,785       4,881  
Deposit overdrafts   421       419       194       285       248  
All other loans      6,862          6,972         7,076         7,170         6,689  
Total loans $    406,413     $  391,721     $    398,517     $    378,410     $    374,690  
Allowance for loan losses      (5,575 )        (6,129 )        (6,771 )        (6,718 )        (9,716 )
Loans, net $  400,838     $  385,592     $  391,746     $  371,692     $  364,974  
                   
Reconciliation of Tax-Equivalent Net Interest Income                
GAAP measures:                  
Interest income – loans $  4,854      $    4,688     $   4,540     $   4,623     $   4,536  
Interest income – investments and other   910       704       448       591       645  
Interest expense – deposits   (282 )     (266 )     (300 )     (327 )     (343 )
Interest expense – other borrowings         (2 )     (1 )     (26 )     (30 )
Interest expense – trust preferred capital notes   (56  )       (55 )       (54 )       (55 )       (55 )
Interest expense – other     –          (1 )        (1 )        (1 )       (2 )
Total net interest income $   5,426      $    5,068     $   4,632     $   4,805     $   4,751  
Non-GAAP measures:                  
Tax benefit realized on non-taxable interest income – loans $   26     $    27     $   26     $   24     $   27  
Tax benefit realized on non-taxable interest income – municipal securities     60          40         33          42         44  
Total tax benefit realized on non-taxable interest income $   86     $    67     $   59     $   66     $   71  
Total tax-equivalent net interest income $   5,512     $  5,135     $   4,691     $   4,871     $   4,822  
               

 

 
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
 
  (unaudited)
For the Nine Months Ended
Income Statement September 30, 2015   September 30, 2014
Interest income      
Interest and fees on loans $    14,082     $    13,154  
Interest on deposits in banks   134       33  
Interest on securities   1,869       1,936  
Dividends on restricted securities      59          62  
Total interest income  $  16,144     $  15,185  
       
Interest expense      
Interest on deposits $    848     $    1,115  
Interest on federal funds purchased   2       2  
Interest on trust preferred capital notes   165       163  
Interest on other borrowings      3          89  
Total interest expense $   1,018     $    1,369  
       
Net interest income $    15,126     $    13,816  
Recovery of loan losses      (100 )        (700 )
Net interest income after recovery of loan losses $   15,226     $   14,516  
       
Noninterest income      
Service charges on deposit accounts $    2,196     $    1,928  
ATM and check card fees   1,375       1,067  
Wealth management fees   1,479       1,450  
Fees for other customer services   463       307  
Income from bank owned life insurance   270       266  
Net gains (losses) on sale of securities   (52 )     (69 )
Net gains on sale of loans   158        
Other operating income     255          46  
Total noninterest income $    6,144     $    4,995  
       
Noninterest expense      
Salaries and employee benefits $    10,359     $    7,731  
Occupancy   1,052       896  
Equipment    1,103       898  
Marketing   436       349  
Stationery and supplies   690       258  
Legal and professional fees   886       699  
ATM and check card fees   581       493  
FDIC assessment   265       384  
Bank franchise tax   383       305  
Telecommunications expense   316       219  
Data processing expense   543       378  
Postage expense   270       138  
Amortization expense   426       12  
Other real estate owned, net   260       (62 )
Net loss on disposal of premises and equipment         2  
Other operating expense      1,473         1,214  
Total noninterest expense $    19,043     $    13,914  
       
Income before income taxes $    2,327     $    5,597  
Income tax expense      613          1,662  
Net income $    1,714     $    3,935  
Effective dividend and accretion on preferred stock      985          810  
Net income available to common shareholders $    729     $    3,125  
       
Common Share and Per Common Share Data    
Net income, basic $    0.15     $    0.64  
Weighted average shares, basic   4,909,470       4,901,931  
Net income, diluted $    0.15     $    0.64  
Weighted average shares, diluted   4,911,951       4,901,931  
Shares outstanding at period end   4,912,662       4,903,612  
Book value at period end $    9.32      $    8.77  
Cash dividends $    0.075     $    0.05  

 

 
FIRST NATIONAL CORPORATION
Year-to-Date Performance Summary
(in thousands, except share and per share data)
 
  (unaudited)
For the Nine Months Ended
  September 30,
2015
  September 30,
2014
Key Performance Ratios      
Return on average assets   0.37 %     1.00 %
Return on average equity   3.82 %     9.41 %
Net interest margin   3.52 %     3.82 %
Efficiency ratio (1)   88.05 %     73.15 %
       
Average Balances      
Average assets $  626,909     $  526,048  
Average earning assets   583,233       491,443  
Average shareholders’ equity   60,041       55,881  
       
Asset Quality      
Loan charge-offs $    1,420     $    847  
Loan recoveries   377       619  
Net charge-offs (recoveries)   1,043       228  

 

     
Reconciliation of Tax-Equivalent Net Interest Income    
GAAP measures:      
Interest income – loans $    14,082     $   13,154  
Interest income – investments and other   2,062       2,031  
Interest expense – deposits   (848 )     (1,115 )
Interest expense – other borrowings   (3 )     (89 )
Interest expense – trust preferred capital notes     (165 )       (163 )
Interest expense – other      (2 )        (2 )
Total net interest income $    15,126     $   13,816  
Non-GAAP measures:      
Tax benefit realized on non-taxable interest income – loans $    79     $    83  
Tax benefit realized on non-taxable interest income – municipal securities     133         142  
Total tax benefit realized on non-taxable interest income $    212     $    225  
Total tax-equivalent net interest income $    15,338     $   14,041  

 

(1) The efficiency ratio is computed by dividing noninterest expense excluding other real estate owned income/expense and net loss on disposal of premises and equipment by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains and losses on sales of securities and bargain purchase gain.  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 34%. See the table above for the quarterly tax-equivalent net interest income and a reconciliation of net interest income to tax-equivalent net interest income.  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) All capital ratios reported are for the Bank.

CONTACT: Contact:

Scott C. Harvard
President and CEO
(540) 465-9121
sharvard@fbvirginia.com


M. Shane Bell
Executive Vice President and CFO
(540) 465-9121
sbell@fbvirginia.com

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